A unique brand of monopoly

A patent is a deal with the U.S. government. In exchange for elevating the knowledge of the public in general by publishing a description of an invention, the government gives, in return, a "monopoly."

But the monopoly in the patent world is a different animal than what most would consider a true monopoly. When most people think about a monopoly, they think of the ability of one person or company to assert dominance in a certain market by being the only seller of a product. That is not the case in the patent world. A patent does not guarantee any dominance in any market whatsoever; in fact, it does not even give the patent holder the right to make the patented product at all.

While seemingly counterintuitive, this is the way the patent system has to work because of the nature of patentable inventions. Sir Isaac Newton, arguably one of the greatest scientists and inventors of all time, perfectly but unintentionally characterized the patent system when he said, "If I have seen further it is by standing on ye shoulders of Giants."

That quote fits the patent system because there are rarely, if ever, inventions that are not improvements of what is already known. In fact, most patents begin by telling how the "prior art" failed to address a problem that the present invention solves.

Hopefully an example will clarify this issue: say for instance, Inventor A patents a method of making a doohickey by conducting steps a, b and c. Later, Inventor B comes along and discovers that if you add an additional step d to that method, the doohickey is even better. Inventor B then gets a patent on making the better doohickey by conducting steps a, b, c and d.

This is where the weird brand of monopoly takes shape, Inventor B cannot practice the method of making the better doohickey because doing so, necessarily, requires practicing steps a, b and c - an act of infringement of Inventor A's patent.

What that patent system actually gives to Inventor B is the ability to stop anyone else from making the better doohickey by practicing steps a, b, c and d. This situation reveals one way in which Inventors make money in the patent world - licensing. In order for Inventor B to practice the better doohickey invention, Inventor A has to give Inventor B permission to practice steps a, b and c, which comes in the form of a license. And as soon as Inventor C comes along and adds step e to steps a, b, c and d, Inventor B will be able to make a little scratch from his patent by licensing it to Inventor C.

So, if you are inventor and you are climbing up onto the shoulders of the giants that came before you to come up with your invention, be prepared to drop a little change into those giants' pockets on your way up if you want to actually practice your invention.