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The fundamental idea of granting a time-limited monopoly (via a patent) to the inventor/assignee to use the invention is to encourage research and development expenses by the company. These expenses are now like an investment/return in exchange for benefits to the entire society after the patent expires. If use of a patent in a product gives the company competitive advantage, they may recover their R&D expense with it.

An interesting / novel way to curb the issues with the patent system would be to cap the maximum monetary benefit a company may get out of a patent based on the R&D expense involved in coming up with the patent. For example, if the expenses involved in coming up with invention is X (including filing fees?), the patent may be set to expire once the company makes say 10X out of it. If it takes $2 to come up with an idea, then the maximum worth of that patent under this example would be $20, which would still be a good return on the investment.

Of course, tracking this would be painful, but so is the current state of the patent system! On the very least, this may be applied to limit awarded damages during litigation.

how do you judge what the cost of development was? it is a very manipulatable number - looking at what holywood movie studios do already tells me that this method can't possibly work due to many who would game the system.

Agreed, generally. I am not familiar with how the calculation is currently done for calculating the damages, and so am not sure if the latter is any easier. Most probably, tracking the cost of development would have to be made a legal requirement just like other things that companies need to track (for taxes, immigration, etc.)

Another complication comes from the number of patents involved in a single product. How to tell how much revenue maps to each patent?

On the other hand, this does capture the intent of the patent system well -- Encourage research and development investment while avoiding frivolous cases.

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