Devil's advocate: A secondary market for patents incentivizes investors to fund innovation, in the hopes of re-selling when/if the IP becomes valuable.
That's the story, anyway. In the real world, I think patents are vastly net-negative towards genuine innovation, and in most cases, morally repugnant besides.
A secondary market for patents is fantastic. There are secondary markets for everything. The banking/venture system is designed to allocate scarce resources as efficiently as possible - why wouldn't the same thing exist for inventions?
The real problem IMO is that patents are being issued for frivolous ideas. If patents really represented inventions of value, then the secondary market should be correctly allocating those patents to the right people. Unfortunately, patents do not represent inventions of value, because what we see is the secondary market identifying "infringements" everywhere, so it's more profitable to extort.
If there are so many infringements, how is the patent possibly novel?
I agree that the practical problem with the current patent system is in implementation: the granting and enforcement of broad, poorly-defined patents, and the costs of litigation. Whether it's possible for a good implementation to exist, particularly in a long-lived form that copes well with radically new technologies, is debatable.
My moral objection to patents can be concisely summed up by John Carmack:
"The idea that I can be presented with a problem, set out to logically solve it with the tools at hand, and wind up with a program that could not be legally used because someone else followed the same logical steps some years ago and filed for a patent on it is horrifying."
Anything that is so specific that it could not be reproduced by an independent human in a clean room (ie, the full text of Harry Potter) is well protected by copyright. Anything which can be reproduced through simple problem-solving can not be said to be "owned" by its creator. Patents outlaw thinking itself.
Without an excellent argument, I don't think I can agree. Many members of the public believe patents are a bad thing for society because 99% of all reporting on them is about the negative aspects; you rarely hear about the good that has come from them. It's the same reason people in the US feel less safe than ever from violent crimes even though the rates have dropped significantly. the norm is boring and the exceptions are newsworthy.
In practice, the efficacy of patents probably varies by industry. For software patents, I have a hard time thinking of a single instance where they benefitted innovation. Does anyone really think that Amazon wouldn't have 1-Click, or Apple wouldn't have rubber-banding, without patent protection?
In other domains, I'm sure there are instances where patents did genuine good, benefitting both their creators and society. (It's worth noting that patents are specified in the Constitution as intended for the public good.)
However, I still contend that the net effect is, on average, a drag on innovation, even if it's closer to 60/40 than 99/1. The system incentivizes a "mutually assured destruction" of big companies and patent portfolios, and blocks out small players who can't afford a legal team. It moves market competition into the domain of a flawed justice system, where even a victory can destroy a creator through millions in legal fees and years of lost productivity. It creates a vacuum filled by companies like IV who sit on their laurels and milk patent licenses, often for inventions never realized, rather than actually make anything.
That's the story, anyway. In the real world, I think patents are vastly net-negative towards genuine innovation, and in most cases, morally repugnant besides.