I think patents would work better if they could only be enforced against entities with at least a certain percentage of the revenue of the enforcing corporation. In other words, if Foo Corporation has $1 billion annually in revenue then it could press patent infringement claims against other organizations (or individuals) with at least $500 million in annual revenue. The percentage threshold for action could be used by the government as a policy tool, much like the Federal Reserve manipulates interest rates.

This has the nice effect of actually promoting more innovation than the current system. While it preserves existing protections for large firms against their competitors it also reduces barriers to entry for small firms by allowing them to piggyback on the research efforts of others.

If the small firms are successful, however, they will pass the infringement threshold for the patent holder and will suddenly be subject to the whims and desires of their biggest competitor. This will provide strong incentive to them to have proactively licensed the technology as they grow--or face the daunting prospect of having Bill Gates categorically deny them a license regardless of remuneration.

This proposal also scales well across the entire range of possible organizational sizes. It protects Microsoft from Oracle, but not from Uncle Joe's Bait Shop and Web Design Boutique. Uncle Joe, obviously, can sue the hell out of Microsoft and Oracle if necessary.

Of course, this will never work. It requires a slight reduction in the amount of protection corporations enjoy.