By Clay Wyatt
Published: 7 June 2012
Imagine that you work at a pharmaceutical company. You are one of the key players on a team that has designed a new drug that cures the common cold. Your company is set to make hundreds of millions of dollars of this in the future, possibly more. From now on, whenever someone gets a cold, they’ll have something that will actually cure it – not just mask it – and they’ll be paying your company to get it. Better yet, you’ll be getting a big promotion and you feel like you’ve made a great difference in your field.
What you may not have thought about at this point is the question of what is going to stop another company from taking this idea and directly competing with yours? Are you going to rely on the honesty and integrity of everyone else out there? Of course not. Your new drug will be protected by a patent that your company files for. A patent gives the holder the right to prevent others from using an invention and allows the holder to license it out to others for a fee. Once you file a patent, anyone who steals the idea that your company invented may be sued for violating that patent.
This brings us to a hot topic in the business world today: patent enforcement companies. Some patent enforcement companies are accused of hoarding patents that they do not intend to use just to sue violators down the line. While this may be true, the benefits that such companies offer to society outweigh the costs.
Patents encourage invention. Think about it this way: Why have countries in North America and Europe enjoyed so much more economic success than others across the globe? Is it because they naturally spawn smarter citizens or does it have to do with the systems they use?
The answer, in part, has to do with their economic systems, such as relatively free markets and laws that encourage innovation, including patent laws. Would you take the risks and spend the time necessary to make a new product if you thought there was a good chance that the idea would be copied by someone soon after you brought it to market?
For a demonstration, let’s take a look at the following rankings:
|Country||Rank – Patents in Force||Rank – Size of Economy|
Obviously, there is more to economic output than patent rights, but it is a major component that drives invention and innovation – both of which are crucial to economic success. With the exception of Hong Kong, every country in the top 10 in patents in force is in the top 15 in economic size. However, with just over 7 million people (ranked 100th in the world in population size), they still are in the top 40 in terms of economic size and edge out nations like Egypt (over 80 million people), Nigeria (over 158 million people) and Pakistan (over 177 million people) and many others. Needless to say, the economy – including patent rights of Hong Kong – is far better than any of those countries.
Now that we’ve established the relevance and importance of patents, how does this all relate to patent enforcement companies? Patent enforcement companies create a secondary market for patents. This increases the benefits of successfully patenting something, as the patent itself may be sold down the line. Thus, the incentive to invent and innovate is increased, leading to greater economic benefits for all.
Patent enforcement companies are also a last resort for small inventors. An inventor who wishes to enforce his or her patent is virtually at the mercy of larger competitors. That is to say, he or she must rely on the ethics and good intentions of big businesses. Let’s put this into perspective: say you’ve patented a great new software program and, a few months later, you see a very similar program on the market from a large software company. You notify them of your patent and are ignored. In practical terms, you have very little chance of successfully enforcing the patent due to the costs and risks of doing so, which are often out of the realm of possibility for a small inventor. So, you and similar inventors are left with virtually nothing for such inventions. Why would you or someone in a similar situation go through with the hassle of inventing things in the first place? That is unless, of course, you could sell your patent for a profit to an entity that could actually enforce it, like a patent enforcement company.
In the end, patent enforcement companies represent a necessary equalizer to balance out the inequities in our society, similar to how patents themselves operate. Patents give monopolies to inventors for a set amount of years in order to provide incentives to invent in the first place. Patent enforcement companies help keep that incentive alive for the little guy, who is otherwise out of his league when trying to enforce his patent rights. With a relatively healthy patent system in place, economies can spur the innovation and inventions that they rely on to remain competitive. After all, where would you rather do business – and thereby provide employment, contribute to the tax base, and engage in other economic activity – a country where your ideas and inventions will be protected or a country where your work will go down the drain as soon as someone else can replicate it?