Subject: mandatory patent auctions
From: Seth Gordon <sethg@ropine.com>
Date: Wed, 04 Oct 2006 09:23:42 -0400

I have seen a proposal floated around that the government should reform
the patent system as follows:

(1) When a patent is issued, the owner must put it up for auction.  (You
can bid on your own patent in the auction.)

(1.5) [my friendly amendment:] When putting the patent up for auction,
the owner may specify nondiscriminatory terms under which the
auction-winner and all successive owners must license the patent.

(2) After the auction is over, the government flips a coin, and if it
comes up heads, the government buys the patent for 150% of the winning
bid, and releases the patent into the public domain.

The author of this proposal was concerned about the pharmaceutical
industry, but it seems to me that such a system might ameliorate the
effect of software patents.  A company that gets a patent will have to
weigh the benefit of cashing in to the highest bidder against the risk
that the highest bidder will be a direct competitor; it can hedge
against that risk by, for example, specifying that all open-source
software that practices the patent may do so without paying a licensing
fee.  At the same time, patents with high market values (e.g., RSA
encryption) will get high bids.  And the government buy-out ensures that
even some of the high-market-value innovations will be broadly used,
while still compensating the inventor.

(If that proposal is too radical, maybe we could have the auction occur
five years after the patent is issued, so that everyone has a chance to
see how useful it really is.)

Comments?