> If they do it by actually out-innovating you, your patents don't really protect you, but if they just take what you're doing, the patent is there so you can claim the fruits of your labor regardless.
The trouble is there are ways to nominally do the first one without really doing anybody any good.
You invent a way to improve efficiency by 10 points, they need to do the same to be competitive, so they come up with a different, incompatible way to do the same thing. Now your product isn't any better than theirs so you can't charge higher prices or increase your market share any more than you could without the patent. But now we've collectively had to pay to invent the wheel twice in exchange for no benefit.
Worse, suppose that the different ways of improving the product are compatible with each other. So now your product is 10 points better than what's in the public domain, but Megacorp's product is 20 points better because they invented two things. If you could combine all of them together it would be 30 points better and give you an advantage over them, but you can't use their patents. And you also can't profit from selling your product yourself, because 10 is less than 20 so everybody wants theirs instead of yours. Meanwhile they don't really need your patent for the same reason since they're going to get the customers either way, so they have you over a barrel in negotiations.
Then they get to underpay to buy your patent because they don't actually need it, but selling it is your only option to get anything out of it. Which in turn makes their product 30 points better than what's in the public domain and makes it even worse for the next little guy, who now can't compete even if they made a contribution worth 25 points.
The trouble is there are ways to nominally do the first one without really doing anybody any good.
You invent a way to improve efficiency by 10 points, they need to do the same to be competitive, so they come up with a different, incompatible way to do the same thing. Now your product isn't any better than theirs so you can't charge higher prices or increase your market share any more than you could without the patent. But now we've collectively had to pay to invent the wheel twice in exchange for no benefit.
Worse, suppose that the different ways of improving the product are compatible with each other. So now your product is 10 points better than what's in the public domain, but Megacorp's product is 20 points better because they invented two things. If you could combine all of them together it would be 30 points better and give you an advantage over them, but you can't use their patents. And you also can't profit from selling your product yourself, because 10 is less than 20 so everybody wants theirs instead of yours. Meanwhile they don't really need your patent for the same reason since they're going to get the customers either way, so they have you over a barrel in negotiations.
Then they get to underpay to buy your patent because they don't actually need it, but selling it is your only option to get anything out of it. Which in turn makes their product 30 points better than what's in the public domain and makes it even worse for the next little guy, who now can't compete even if they made a contribution worth 25 points.