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This chapter begins by exploring the essential element to constructing the market for patents: knowledge. Although knowledge is considered one of the most important factors of production—along with the classical factors of land, capital, and labor—it has specific properties that differentiate it substantially from the other factors. The chapter discusses these distinguishing characteristics. After exploring this most basic element for the construction of the market for patents, the chapter goes on to introduce the concept of innovation. Since knowledge is the most important factor in the production of innovation, we must explore the kind of knowledge specific to companies, namely, intellectual assets. The chapter then explores the transition from intellectual assets to IP, which became a pressing issue in knowledge-based economies. Finally, the chapter examines the boom in patents and the side effects of this boom.