I didn't realize that having a bad business model gave you a valid case.
As a libertarian I think we should seek a smaller role for government in people's lives. But I also think if something is in fact a function of government, we would be better off to admit it and formally finance it as such, than bring it in the back door by dishonest means.
The fact that giant corporations are involved with progress in our society is not proof that progress would cease without the involvement of giant corporations.
Actually, it somewhat ironic to use the X Prize as an example here. Burt Rutan's Scaled Composites won the X Prize, with Spaceship One. Spaceship One was a joint venture between Rutan and Microsoft's Paul Allen. The investment vehicle was Mojave Aerospace Ventures (http://en.wikipedia.org/wiki/Mojave_Aerospace_Ventures) which is basically an IP holding company that controls commercialization of the patented Spaceship One technology through licensing agreements.
Scaled Composites itself is actually a great example of the kind of separation of concerns that patents enable. They don't make end-user products really. They're a small engineering outfit that does mostly R&D. They make money by consulting, contracting to build specialized components, and licensing their substantial patent portfolio. The company doesn't have a ton of big factories, etc. The value of the company that Rutan spent 30 years building is engineers that could walk away at any moment and a pile of IP.
Furthermore, the probability of not winning exists in all R&D: A lot of it fails, or they're beaten to the punch by competitors. Whether the potential payoff comes from revenue from patent encumbered products, or from a government prize fund is irrelevant.
Investors can further correct for the risks of the failure of any one company involved in a prize attempt like that by spreading their investments over multiple participants. It's not like these kind of investment scenarios are unfamiliar to the financial markets.
> Furthermore, the probability of not winning exists in all R&D: A lot of it fails, or they're beaten to the punch by competitors. Whether the potential payoff comes from revenue from patent encumbered products, or from a government prize fund is irrelevant.
You have to read your two points in conjunction. Sure, the prizes could be raised until they were big enough to recoup the R&D costs weighted for the probability of failure. This is basically what happens anyway--a company will engage in half a dozen R&D projects with the assumption that only one or two will be successful and the revenues from that will recoup the R&D investment on the other ones.
But to actually get anything done in fields like aerospace, medicine, etc, you'd be talking about billion-dollar range prizes. You'd also be talking about a very different allocation of the R&D burden. Right now, the people that use say a drug for diabetes are the ones that pay for the R&D, by virtue of their paying high prices for the patented drugs. But with government-funded projects, everyone would bear the costs of these innovations equally. Also, it puts government in the position of deciding what innovations are valuable by its choice of what to offer prizes for.
People are rightfully skeptical of the idea of the government handing out billions in taxpayer dollars for "innovation" that some bureaucrat thinks is necessary. I don't think it's a clear win over the patent regime.
I have no quarrel with those who bring new airplanes, soybeans, or medicines to market. I do quarrel with those who want to undermine the rule of law in society to make those efforts more profitable. For millennia farmers have replanted seeds; the activity is the basis of agriculture. Monsanto didn't own the beans this farmer planted, nor did they own the plants that bore those beans nor the elevators that stored them. They might have sold him Roundup, but if they felt they should be better rewarded for that then they should have charged him more. The court system does not exist to salve the butthurt that Monsanto executives get when their schemes of control and coercion go awry. There's entirely too much control and coercion in modern agriculture in the USA already.
If as a result of these proceedings Monsanto were to find that it couldn't charge a premium for its bean varieties, it might very well decide to charge a premium for its Roundup herbicide. That would change incentives in modern agriculture for the better. Instead of committing every year to excessive sunk costs for the purchase of patented seeds, which later in the season induce additional purchase of Roundup to protect that investment, farmers would be more willing to "wait and see" and try different combinations of weed control methods. Roundup use wouldn't cease, but it would be seen more accurately as a more expensive option and so its use would probably decrease a bit. Monsanto would be welcome to bump prices even more if they thought that would help.
I don't support the government even having access to billions of dollars, let alone handing them out to anyone, and I struggle to see how my initial comment could have left such an impression. I do see the extant patent regime as a pillar of modern state capitalism, which tends to reinforce the power of state bureaucrats rather than undermining it.
Still, what I suggest isn't unfathomable. The company doesn't even have to be altruistic...even if their sole goal is profit, I think there should be some affordances to protect them.
We allow people to get limited liability for joint enterprises. This is a privilege. Either we put real people in jail, or we start revoking charters.
Protecting unaccountable institutions because their greed might result in good things is a complete abdication of governance and simple common sense.