In theory, the patent system allows firms to treat their inventions as liquid assets that can be transferred to others better positioned to use them via a thick secondary market that indirectly matches inventors and implementers. 1 In this way, ideas (like capital) can flow to their highest and best use, guided by the invisible hand of the market. But reality falls short of this ideal. Unlike stocks, bonds, and other securities, there is to date no generally accepted methodology for evaluating patents. Consequently, rather than exhibiting robust liquidity, the market for patents is thin, opaque, and based largely on the value of ex post assertion against independent inventors, rather than ex ante licensing to eager commercializers. 2

The result is a patent system all too often plagued by strategic behavior. For example, a lack of reliable methods for measuring patent scope and quality contributed to the rise of" patent assertion entities"(PAEs)-patent monetization specialists that are uniquely able to wield various forms of" holdup" power over the parties they sue in order to extract set-