Tech founder: U.S. licensing system is 'totally broken'

US licensing system totally broken: Jay Walker

The legal battle between Apple and Samsung outlined the major problems within the U.S. patent system, but those pale in comparison to the licensing structure attached to them, the founder of told CNBC on Monday.

Jay Walker, an entrepreneur and inventor who holds more than 700 U.S. patents, contends that the vast majority of patents hasn't generated one dollar of licensing revenue, and that trillions of dollars have been spent in patent disputes over the past 20 years. Patent licenses protect holders from being sued for infringement, but the process remains cumbersome for smaller businesses, Walker said.

While Samsung and Apple fight over billions of dollars, the "totally broken" licensing system freezes out regular businesses, Walker said. Last week, a jury ordered Samsung to pay Apple $120 million after finding that the Korean smartphone maker infringed on two Apple patents. The damages were much less than what Apple had sought.

"It's serious slap on the wrist there," Walker said on "Squawk on the Street." "At the end of the day those giants are going to play in court for strategic reasons. The rest of America, though, is sitting on the sidelines."

Read MoreUS jury orders Samsung to pay Apple $120 million

Walker wants to solve the problem through his intellectual property company, Patent Properties. He wants to bundle "no-fault licenses" and sell 100 at a time to smaller and mid-sized companies that have trouble with the licensing process. That would create an alternative to time-consuming and expensive lawsuits, Walker said.

"The big guys bundle, but the small guys are left out of the equation," Walker said. "Small and medium size companies literally cannot begin to license."

Walker said stronger patent protections lead to more innovation and job growth.

—By CNBC's Jeff Morganteen. Reuters contributed to this report.