Patent pool

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In patent law, a patent pool is a consortium of at least two companies agreeing to cross-license patents relating to a particular technology. The creation of a patent pool can save patentees and licensees time and money, and, in case of blocking patents, it may also be the only reasonable method for making the invention available to the public.[1] Competition law issues are usually important when a large consortium is formed.

Contents

History [edit]

One of the first patent pools was formed in 1856, by sewing machine manufacturers Grover, Baker, Singer, and Wheeler & Wilson, all accusing the others of patent infringement. They met in Albany, New York to pursue their suits. Orlando B. Potter, a lawyer and president of the Grover and Baker Company, proposed that, rather than sue their profits out of existence, they pool their patents (See also: Isaac Singer/I. M. Singer & Co).

In 1917, the two major patent holders for airplanes, the Wright Company and the Curtiss Company, had effectively blocked the building of new airplanes, which were desperately needed as the United States was entering World War I. The U.S. government, as a result of a recommendation of a committee formed by Franklin D. Roosevelt, then Assistant Secretary of the Navy, pressured the industry to form a patent pool, the Manufacturer's Aircraft Association.[2][3][4]

In a more modern example in August 2005, a patent pool was formed by about 20 companies active in the Radio Frequency Identification (RFID) domain.[5][6] The RFID Consortium picked Via Licensing to administer its patent pool in September 2006.[7]

Risk mitigation [edit]

As in these examples many industries could not function without patent pools since the coordination costs (risk, negotiation, etc.) would otherwise be too high. Patent pools are only one example of cases where members of an otherwise competitive industry join in common cause to create some resource that is to their collective benefit. For example the insurance industry pools claims data to collectively reduce risk; the catalog sales industry pools sales data to better model their customers; the auto industry collaborates to standardize components; and in the software industry some companies actively contribute to open-source projects.

Patent pools do not eliminate risk, they only temper it. Patent holders (including other patent pools) outside the pool can still create cost and risk for the industry. While it is rare for a patent pool to indemnify licensees,[citation needed] a pool does help to assure a common interest will emerge should one member be accused of infringement by a third party. Flaws in the design of the pool's governance can create the risk that one member can break the common cause of the group. Examples of well-known[citation needed] such cases include the MPEG-2, MPEG-4 Part 2 and H.264 video coding standards, and the DVD6C pool.[citation needed]

National jurisdictions [edit]

United States [edit]

Since the 1990s, patent pools have been viewed by U.S. regulatory authorities in a positive light. In 1995, the U.S. Department of Justice (DOJ) and U.S. Federal Trade Commission (FTC) released the “Antitrust Guidelines for the Licensing of Intellectual Property” [8] which stated that the pooling of patents may have “…pro-competitive benefits”.[9] The Antitrust Division of the DOJ later issued a letter in support of the MPEG-2 pool.[8] However, stipulations exist to ensure pools do not function anti-competitively. As required by the DOJ, patents in the pool must be essential, non-substitutable and the owners must maintain the right to individually license their patents.[8] In addition, the DOJ may monitor the royalty rates collected by the firm.[8]

See also [edit]

References [edit]

  1. ^ "The pooling of the patents, licensing all patents in the pool collectively, and sharing royalties is not necessarily an antitrust violation. In a case involving blocking patents such an arrangement is the only reasonable method for making the invention available to the public." - International Mfg. Co. v. Landon, 336 F.2d 723, 729 (9th Cir. 1964)
  2. ^ "Patent thickets and the Wright Brothers". ipbiz.blogspot.com. 2006-07-01. Retrieved 2009-03-07. "In 1917, as a result of a recommendation of a committee formed by the Assistant Secretary of the Navy (The Honorable Franklin D. Roosevelt), an aircraft patent pool was privately formed encompassing almost all aircraft manufacturers in the United States. The creation of the Manufacturer's Aircraft Association was crucial to the U.S. government because the two major patent holders, the Wright Company and the Curtiss Company, had effectively blocked the building of any new airplanes, which were desperately needed as the United States was entering World War I." 
  3. ^ "The Wright Brothers, Patents, and Technological Innovation". buckeyeinstitute.org. Retrieved 2009-03-07. 
  4. ^ "THE CROSS-LICENSING AGREEMENT". history.nasa.gov. Retrieved 2009-03-07. 
  5. ^ Mark Roberti (August 10, 2005). "The RFID Patent Pool: Next Steps". RFID Journal. Retrieved July 7, 2012. 
  6. ^ "RFID 'patent pool' consortium forms". Linux Devices. August 12, 2005. Retrieved July 7, 2012. 
  7. ^ Mary Catherine O'Connor (September 7, 2006). "RFID Consortium Names Patent-Pool Administrator". RFID Journal. Retrieved July 7, 2012. 
  8. ^ a b c d Antitrust Guidelines for the Licensing of Intellectual Property. U.S. Department of Justice and Federal Trade Commission, April 6, 1995.
  9. ^ Tirole, Josh Lerner and Jean. "Public Policy toward Patent Pools." Innovation Policy and the Economy , 2007: 157-186.

Further reading [edit]

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