What If You Could Invest Directly In Shares Of Intellectual Property?
from the bad-bad-incentives dept
We’re always interested in alternative proposals to the current mess with intellectual property, and Dr. James Lyons-Weiler, Director of the Bioinformatics Analysis Core at the University of Pittsburgh, recently asked for our thoughts on his proposal (for which he forgot to send us the link!) about creating an IP share market. The basic idea is that rather than just letting people invest in companies that own certain IP, you would create shares in the IP itself — so you could buy a piece of a patent, and potentially receive dividends if the patent were licensed. The benefits that he notes are that companies would receive immediate revenue for certain patents, while also getting a clear sense of which patents the market thinks are most valuable. In fact, he notes that this could help organizations invest more wisely in R&D, getting a better sense of which concepts are most likely to be monetizable.
Lyons-Weiler has certainly put a lot of thought into this, and is clearly open to understanding what the downsides of such a proposal might be, so I’m hoping he doesn’t mind my criticism of the idea. While the “pros” he list sound reasonably accurate, I would think that the cons greatly outweigh the pros. Most specifically, they focus the investment on the patent (i.e., the invention) rather than the actual innovation that is necessary to make it work in the market place. That’s the distortionary effect of patents (putting too much emphasis on the invention over the innovation), and such a market would likely increase that. It overvalues the idea and undervalues the execution. On top of that it would damage one of the areas where many patent system supporters insist patents are most necessary: long-term investing in inventions. Such a market would undoubtedly favor ideas closer to monetization, but supposedly the reason for granting such long patent terms is to give inventors a longer time horizon in which to monetize. So, while it’s nice to see new ideas suggested, I don’t find this one particularly compelling.