| Summary: | The United States Patent and Trademark Office (USPTO) is overburdened with a large volume of patent applications while having limited resources to conduct patent examina-tions. The patent examination process is too long and the quality of issued patents is questioned by the public. I propose to alleviate these problems by setting up predic-tion markets for each pending patent. In these prediction markets, traders buy and sell bets for the outcome of the patent examinations. These proposed prediction markets can create social value in two ways. First, they generate forecasts about the likelihood of the pending patents be-ing granted. Before the USPTO completes the examina-tion, decision makers in need of information about the out-come of the patent examination can use these forecasts to make strategic decisions about research and development plans, or investments in the technologies being patented. Second, our proposal creates explicit incentives for public participation in the patent examination process. The pro-posed prediction markets reward traders with insights into the pending patent, potentially motivating traders to inde-pendently perform prior art search — a central task in eval-uating patentability. The USPTO can then collect these prior art for reference by giving small rewards to traders who submit relevant prior art.
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