Uncertainty and the market for patents

Modern societies regard knowledge as a production factor in its own right. The market is the prevailing governance mode of their economies, and it is supposed to be the most appropriate mode of trading and allocating knowledge assets, too. But socio-economic research has revealed that knowledge markets are far from functioning smoothly. Building on ongoing qualitative research into patent trading we suggest that the emergence of a well-functioning market for patented new technological knowledge is confronted with several obstacles, which can be characterized as different facets of uncertainty. They are included in the process of creation of innovative knowledge, in its transformation into a fictitious knowledge commodity (patent), in its uniqueness, in the strategy of transaction partners, in the estimation of the future market potential of final products (based on the patent), and generally in the problem of incomplete and asymmetric information. Also a commonly accepted method of determining a patent's value is missing. We analyze structural and organizational responses to the problem of uncertainty. Potential traders often rely on contractual options, especially licensing agreements, and complementary procedural principles facilitating the trade of patents.