In principle, patents open up innovations in two ways. First, they confer only temporary rights; once patents expire or are abandoned, the intellectual property they are designed to protect passes into the public domain. Second, they require the details of the invention to be disclosed so they can be replicated. This permits follow-on innovation, which is essential for industrial progress.
More recently, as the patent system has evolved, it has been seen to provide other benefits. It leads to a degree of economic specialisation that makes business more efficient. Patents are transferable assets, and by the early 20th century they had made it possible to separate the person who makes an invention from the one who commercialises it. This recognised the fact that someone who is good at coming up with ideas is not necessarily the best person to bring those ideas to market.
…As the patent system has matured and licensing has become much more widespread, these transfers are turning business relationships on their head. Some economists argue that the growth of patent transactions is establishing a proper “market for technology”…just as the banking system created a market for capital and the insurance industry created a market for risk, the growth of the patent system may be creating a market for innovation.