The benefits of patents to society
Patents are steadily becoming a more important, if not necessary, strategy for businesses and an ever-increasing emphasis on the value of intangible assets has occurred over the past two decades.

As the EPO states, “Patents are sometimes considered as a contract between the inventor and society. The inventor is interested in benefiting (personally) from his invention. Society is interested in: encouraging innovation so that better products can be made and better production methods can be used for the benefit of all; protecting new innovative companies so that they can compete with large established companies, in order to maintain a competitive economy; learning the details of new inventions so that other engineers and scientists can further improve them; promoting technology transfer (i.e. from universities to industry)”. An alternative to patents is trade secrets. In the absence of patents, inventors might well opt to hide the insights behind what makes their technologies work. In that case, collaboration would be discouraged and the spread of knowledge would be slow and fraught with redundancy. Andrew Schwartz describes a famous example in his article The Corporate Preference for Trade Secret: “The forceps offers an infamous example of a patent-eligible invention that was kept as a trade secret “for more than a century.” This aid in childbirth, the first that could save both mother and baby, was invented in the seventeenth century by Peter Chamberlen. The forceps was passed down as a family secret for three generations, and the secret did not get out to the public until the mid-eighteenth century. During its tenure as a trade secret, the forceps surely helped save hundreds of lives. Had it been patented, it could have saved thousands or even millions.”

The ability to acquire a short term (20 years in the US) monopoly on a technology through patent is often enough incentive to convince inventors to disclose their inventions to the public. The success of startups founded on a patent is evidence enough. On average, tech startups receive $535,000 more in investment per patent and startups with patents are 35 times more likely to experience “high growth”. [link] Startups are a risky investment for lower cost financing options such as bank loans and often require venture capital to get started. This is because startups tend to be asset poor, cashflow negative, and may not have proven product-market fit. The short-term monopoly patents endow lowers the risk of investment enough for venture capitalists to take the gamble. Startups also often require a lot of capital to bring their product to market. This is most evident in the pharmaceutical industry where it is not uncommon for a drug to cost over a billion dollars to get through FDA trials. Once the drug is approved, it generally becomes easier for others to bring the same or similar drugs through FDA approval with less stringent and therefore less costly approval, e.g., through 510k. Without the grant of that short term monopoly, another company could easily come swooping in after approval to manufacture that drug and sell it at a fraction of the cost since they do not need to recoup the large sum of money required to get through the original FDA approval. This free rider problem occurs any time a large investment is needed to develop a technology. Small firms need this short-term monopoly to charge a premium for their product in order to compete with larger firms that have: economies of scale, existing customers, brand recognition, marketing, capital, suppliers, distribution, networks, etc. Those large firms might be less inclined to innovate if they are currently making sufficient profits and can use the aforementioned advantages rather than invest in innovation.

So, if the patent system is so helpful to our society, why reimagine it?
In practice and in recent years, the patent system has struggled to evolve with ever increasingly complicated issues of patentability, accusations of infringement, and legal costs.  When James Madison envisioned the patent system, he did so with the intention that society, which was a majority poor at the time, could benefit from their creativity through intellectual property protected by law. In the modern world, large companies and more wealthy and sophisticated inventors might find it more advantageous to attempt to circumvent a patent rather than license the invention. They have the means to hire the best attorneys that may be able to find a loophole in the less advantaged inventor’s claims or to have those claims invalidated, or to simply draw out litigation until the infringed gives up or goes out of business. The case of Robert Kearns versus Ford and Chrysler over his patent of the automatic windshield wiper is a famous example. Ford and Chrysler were able to draw out lawsuits for over a decade. Kearns was fortunate enough to win the case, but not everyone has enough money to fight with such large companies and win.

The ambiguity of patents
Patent law is an ever-increasing number of complex rules and decisions. There is a certain amount of subjectivity in interpreting the meaning of those rules and decisions which makes deciphering of them more difficult and prone to error. As Senator Chris Coons stated, “The Supreme Court has cut back significantly on what it deems patent eligible, particularly in such areas as biotechnology, computer-implemented inventions, and software… …These rulings have created uncertainty about the validity of previously issued patents, many of which companies have already relied upon to justify significant research and development investments. Whether or not one gets a patent or that patent survives in court should not depend on which patent examiner your case is assigned to, or what judge you appear in front of”. There is also a lack of cohesion between the USPTO and Federal Circuit courts on patent eligibility. The Federal Circuit stated in Cleveland Clinic Found. v. True Health Diagnostics LLC, “While we greatly respect the PTO’s expertise on all matters relating to patentability, including patent eligibility, we are not bound by its guidance.” And in Rudy, 956 F.3d 1379 (Fed. Cir. 2020), “To the extent the Office Guidance contradicts or does not fully accord with [Federal Circuit] case law, it is [Federal Circuit] case law, and the Supreme Court precedent it is based upon, that must control.”[link]

Patent Trolls
In today’s patent assertion market, entities that do not make products use litigation as a profit-generating weapon, often relying on a company’s fear of the high costs and risks of patent litigation to encourage settlements. The percentage of patent lawsuits filed by those who do not make products has increased dramatically from roughly 25% in 2007 to almost 60% in 2012. Scholars have estimated that patent assertion by monetizers (or “trolls”) cost U.S. companies $29 billion in 2011 alone. [link]

An alternative to patents
Wouldn’t it be great if we could get all the benefits of the patent system without the pitfalls? The advent of technological advances like the internet, crowdsourcing, and cryptocurrency/blockchain have lowered the transaction costs on activities performed by our patent system. Those activities are: 1) Documenting and making publicly available detailed information about inventions, 2) Establishing inventorship and ownership of inventions, 3) Providing a short-term monopoly to the inventors, 4) Establishing a method of recourse to stop infringers. How can technology perform each of these tasks? For point #1, documenting an invention is obviously easily reproduced on the internet albeit not in standard legal form/language. Through journal articles, blogs, podcasts, YouTube videos, GitHub type repositories, online forums, etc. information is disseminated with ease. Point #2 is a little more difficult to reproduce but could be possible through crowdsourcing and artificial intelligence. Crowdsourcing the documentation and verification of information has been shown to be effective and efficient most notably in the online encyclopedia, Wikipedia. An inventor could stake their claim on an invention, and people in a community (with support of AI search engines) could provide evidence of inventorship and vote on the validity of the claimed inventorship. Some type of blockchain technology could be used to verify votes, the voter’s identity, and weigh the voter’s fairness and expertise (based on historical decisions). Payment through cryptocurrency could be used to incentivize the community to do the investigation and hold in escrow payments from sales of any technology under investigation. Note, online sites and timestamps of information are most likely not secure enough currently to be used as evidence of invention. Unless all websites are being archived periodically, they could most likely be manipulated. Therefore, a single secure repository where inventors disclose inventions would still be ideal. Points #3 & #4: if the technologies that are being investigated are also being bought, sold, or licensed through an online marketplace that is also controlled by the community, then the community could apportion the percentage of revenues from those sales as it deems fair. For instance, if a company starts building one of the technologies disclosed to the community, the community could decide that company had no right to produce the technology and block sales and capture illegitimate revenues through their marketplace. Or in another example, if a company built and sold a product where they only invented a portion of the product, the community could determine a fair percentage of the revenues to go to the other inventors that contributed to the inventions in that product. The risk involved here is that a company might sell a product outside the marketplace to circumvent the community’s ruling. We cannot currently track everyone’s purchases and doing so seems like a terrible and dystopia causing idea. Instead of resorting to the liberty-risking ventures, the community may instead simply ask for open books accounting of the companies in the community. If there is evidence of sales outside the community, they could be barred from the community or have their sales taxed by the community. There is an added benefit in using such a system. For those inventions that would typically not be patentable, such as someone discovering a law of physics, they would not get the financial benefit of products that were made from disclosing that law in the current system. For instance, E=mc^2 would not be patentable, but that law may be the insight needed to create the first nuclear reactor. In the proposed crowdsourced system, the community might want to compensate the discovery and dissemination of E=mc^2 through the revenues of the nuclear reactor sales. The community would need to be fair about the payment percentage to ensure someone is still willing to manufacture the product. A similar benefit is to those people currently giving away products for free such as opensource software. Some of the products developed are of great value and those contributors should be compensated for their work.

Implementation
The proposed system would no doubt be very difficult to implement. The community would need to reach a certain number of users before the benefits of such a system would be apparent. In practice, those inventors with inventions that are unsure if their technology is worth the investment to patent would have the most to gain since they would most likely be wasting their money filing for a patent in the legacy system. Indeed, around 97% of all patents never recoup the cost of filing them, and around 50% of patents expire prematurely because their owners decline to pay the required maintenance fees. [link]

Flies in the ointment
Unfortunately, the practicality of creating such a system would be nearly impossible through grassroots efforts since the value only becomes present once a critical number of the population subscribes to the system. Before critical mass is achieved, there is too much incentive and capability to circumvent the system, and not enough detectability of bad actors or penalty to dissuade stealing intellectual property. Further, in a perfect world, we could assume people would attribute inventorship and value fairly. But, in practice, people can lack subject matter understanding, and we’ve seen in the past entire groups can do harm on grand scales when persuaded by the malevolent or ignorant. Also, as the failed communist states have shown us, divvying out revenue is a real issue. As described earlier, it would be too risky to invest in manufacturing if there was no guarantee that you could keep a worthwhile portion of the revenues. This is less of an issue if you can keep costs lower; for instance, if people had 3D printers to manufacture products. But we are a long way from most things being 3D printable or manufactured by some similarly inexpensive method.