Patent buyout mechanisms rely on the success of the current patent structure and collusion/other ways to manipulate an auction market reduce chance for success

An alternative approach, or perhaps sometimes a complementary one, is to use a market mechanism to estimate the value of intellectual property forfeited by its owner in exchange for a buyout price. Of course, such a system can function only as an adjunct to the existing intellectual property system. The mechanism in the literature that has received the most attention is offered by Kremer (1998), who suggests allowing an optional system in which an inventor can submit an invention for an auction to the public. With some small probability, the auction is consummated; the rest of the time, the invention is placed in the public domain. (p. 1147) The virtue of this system is that the government can harness private information. The government pays the patent owner an amount based on the bids when the auction is not consummated. The system, however, invites a number of objections. A patentee might make side payments to bidders. Collusion can even include implicitly; a company might bid often on another company’s intellectual property in the hope of reciprocation. Kremer suggests combating this by paying some multiple of the third-highest bid. (p. 1158) The effectiveness of this solution depends on the number of plausible bidders. More generally, an auction might not be competitive, especially for exceptionally valuable intellectual property. It may not be worthwhile to undertake the expense of researching the value of intellectual property if there is only a small probability that the sale will be consummated. Clancy & Moschini (2013, p. 229) notes also that potential bidders must have sufficient information to make meaningful evaluations. In addition, truly random assignment will lead to some patents being kept in private hands. “The government must be willing to allow the cure for AIDS to remain in private hands if random chance would have it.” (Duffy 2004a, p. 48)