Patent Trawling

The first patent Trading Exchange - Economist:

On May 7th the first round of a three-part fight between Oracle and Google over patent and copyright claims relating to the Java programming language ended in a decision that denied outright victory to either firm. Apple, Samsung and others are fighting over smartphone patents. Facebook and Yahoo! are at loggerheads over internet patents. Accusations abound that innovation is taking a back seat to litigation. Only the lawyers are smiling.

All of which makes this a good time to launch a new approach to trading intellectual property, says Gerard Pannekoek, the boss of IPXI, a new financial exchange that lets companies buy, sell and hedge patent rights, just like any other asset. The idea is to offer a patent or group of patents as “unit licence rights” (ULRs), which can be bought and sold like shares. A ULR grants a one-time right to use a particular technology in a single product: a new type of airbag sensor in a car, say. If a company wants to use the technology in 100,000 cars, it buys 100,000 ULRs at the market price. ULRs are also expected to be traded on secondary markets.

This is simpler, faster and cheaper than the lawyer-intensive process of negotiating bilateral licences for intellectual property, the high cost of which discriminates against small companies, leaves patents unused on the shelf and hampers innovation.

As our Patent expert, Paul Lancefield predicted quite a few years ago, this would be a natural evolution - it reduces the transaction costs of trading in a valuable yet fungible good which up to now has been traded more like a medieval princess's chastity. Lets hope that this shows a way out of the game theory impasse that is the current patent morass - more trawling than trolling.