I think patents would work better if they could only
be enforced against entities with at least a certain
percentage of the revenue of the enforcing corporation.
In other words, if Foo Corporation has $1 billion annually
in revenue then it could press patent infringement claims
against other organizations (or individuals) with at least
$500 million in annual revenue. The percentage threshold
for action could be used by the government as a policy tool,
much like the Federal Reserve manipulates interest rates.
This has the nice effect of actually promoting more innovation
than the current system. While it preserves existing protections
for large firms against their competitors it also reduces barriers
to entry for small firms by allowing them to piggyback on the research
efforts of others.
If the small firms are successful, however,
they will pass the infringement threshold for the patent holder
and will suddenly be subject to the whims and desires of their
biggest competitor. This will provide strong incentive to them
to have proactively licensed the technology as they grow--or face
the daunting prospect of having Bill Gates categorically deny them a license
regardless of remuneration.
This proposal also scales well across the entire range of possible
organizational sizes. It protects Microsoft from Oracle, but not
from Uncle Joe's Bait Shop and Web Design Boutique. Uncle Joe, obviously, can sue the hell out of Microsoft and
Oracle if necessary.
Of course, this will never work. It requires a slight reduction
in the amount of protection corporations enjoy.