Patent licences – good or bad?

Patent licenses can be carrot (voluntary) licenses or stick (compulsory).

IBM is said to derive one billion dollars in licensing revenues annually.

A patent is a monopoly and be it carrot or stick the only reason for a monopoly is to assert it. The patent system exists to encourage inventors to disclose their inventions. An unpractised invention is useless to society but why should an inventor be compelled to manufacture a product he invented when others are likely to be better suited to entrepeneurship.

A patent is different to an invention and very different to a product, and whether or not the patent is practiced by the inventor is irrelevant to the inventor right to assert the patent. Essentially a patent is a right to sue.

A patent is a property right and you would not let a squatter move into your house when you go on holiday. A patent is a bargain between the public and an inventor wherein the inventor discloses his or her invention to the public in exchange for a limited monopoly.

Licensing the patent provides revenue streams to inventors, and in fact companies who buy patents for exploitation (patent trolls). These patent trolls play their part in promoting the importance of innovation. Innovation is incentivised by patents perhaps, or merely innovators are given a reason to step out of the shadow and form the general knowledge. And in return a tax is payable in the form of royalties.

But the argument goes, patents are not a tax on innovation (as it is not the inventor or the public who is taxed) they are a tax on the exploitation of the innovation of others.

(With a proviso -when it comes to pharma industry the situation may be more morally complex.)

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