Patent intermediaries (companies that facilitate patent transactions within the IP market) are frequently portrayed as a relatively recent development, and a questionable one at that. But in fact, as a recent academic paper shows, the secondary market for invention grew out of necessity for America’s early inventors and patent-holders.

Historical Perspective on the Patent Market

Published earlier this year in Harvard’s Business History Review and cited in the recent report released by the White House Task Force on High-Tech Patent Issues, “Patent Alchemy: The Market for Technology in U.S. History,” takes the long view on the patent industry from the 19th century to present to show that: “There is actually nothing new about the practice of extracting economic value from patents by selling off or licensing the rights. During most periods of U.S. history it was as common for inventors to profit from their creativity in this way as by starting their own firms or working as salaried employees in R&D labs. … Inventors can be more productive if they are able to specialize in generating new technological ideas and then transfer the work of commercializing those ideas to others.”

The authors Naomi Lamoreaux (Yale University), Kenneth Sokoloff (formerly of UCLA), and Dhanoos Sutthisphisal (Assumption University) also found that over the last 20 years, a huge proportion of U.S. innovation has shifted from large corporations back to independent inventors and small companies. And while “only a small number of inventors have ever achieved great riches by selling off or licensing the rights to their intellectual property, their example has encouraged untold thousands to follow in their footsteps, shifting out the economy’s technological frontier in the process.”

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