Investors Need a Patent Tax

NEW YORK (TheStreet) -- Here is something patent owners may not know.

When software patent holders are sued, they lose 90% of the time. James Besson, author of the book Patent Failure, says patents have become a disincentive to innovation.

At the heart of the problem is money. The patent office is understaffed and overworked, says Gregory Aharonian, whose Web site is called BustPatents.com. It can cost hundreds of thousands to research a single software patent and there are 40,000 new ones approved each year.

Last year's America Invests Act gave the patent office some more money, but it didn't address the key problem -- standards for issuing patents. And it didn't provide enough money to blow through the backlog, nor did it assure that courts will uphold patents because they were rightly given in the first place.

Patent holders aren't getting the services they need to profit from their inventions. So I'd like to join Besson with a modest proposal.

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A patent tax.

I know. Whenever this kind of thing even gets mentioned, anywhere in the world, the knee-jerk reaction is no. Make that hell, no. Why, you'll destroy incentive, we're told.

So here's what I suggest. A 1% tax on the royalties of all patents, with current patent filing fees waived. The money would not go to the government, but to a corporation controlled by the Patent Office.

That's plenty of money to do all that needs to be done.

Investigate patents thoroughly before they are issued

Define clear standards, regularly updated, on what can and can't be patented

Publicize and market new patents so inventors have a chance to profit from them

Defend new patents in court

I know this will be condemned as socialism. It's just the opposite. I'm talking about putting a firm thumb on the side of the patent holder, once a patent is issued, with all the resources needed to monetize a patent, and all the assurance possible that said patent is valid.

Once a patent is registered, and only if the patent is registered, it becomes subject to the tax. But it also becomes subject to these benefits.

You don't think that's worth 1% of your proceeds? That's less than any credit-card discount rate you pay Visa or MasterCard. It's one-tenth of what many states charge poor people in sales tax. And it's not going to the general fund. It's money that's directed toward increasing the return on granted patents.

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