patent law A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an enabling disclosure of the invention."A p ...

, a patent pool is a consortium of at least two

companies A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared ...

agreeing to cross-license patents relating to a particular

technology Technology is the application of knowledge to reach practical goals in a specifiable and reproducible way. The word ''technology'' may also mean the product of such an endeavor. The use of technology is widely prevalent in medicine, scie ...

. 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. Competition law issues are usually important when a large consortium is formed.

History

In 1856,

sewing machine A sewing machine is a machine used to sew fabric and materials together with Thread (yarn), thread. Sewing machines were invented during the first Industrial Revolution to decrease the amount of manual sewing work performed in clothing companies. ...

manufacturers

Grover & Baker Grover is a blue Muppet character on the popular PBS/HBO children's television show ''Sesame Street''. Self-described as lovable, cute and furry, he is a blue monster who rarely uses contractions when he speaks or sings. Grover was originally ...

Singer Singing is the act of creating musical sounds with the voice. A person who sings is called a singer, artist or vocalist (in jazz and/or popular music). Singers perform music (arias, recitatives, songs, etc.) that can be sung with or witho ...

, and Wheeler & Wilson, all accusing each other of patent infringement, met in

Albany, New York Albany ( ) is the capital of the U.S. state of New York, also the seat and largest city of Albany County. Albany is on the west bank of the Hudson River, about south of its confluence with the Mohawk River, and about north of New York Ci ...

to pursue their suits. Orlando B. Potter, a lawyer and president of Grover & Baker, proposed that, rather than squander their profits on litigation, they pool their patents. This was the first patent pool, a process which enables the production of complicated machines without legal battles over patent rights. In 1917, the two major patent holders for airplanes, the

Wright Wright is an occupational surname originating in England. The term 'Wright' comes from the circa 700 AD Old English word 'wryhta' or 'wyrhta', meaning worker or shaper of wood. Later it became any occupational worker (for example, a shipwright is ...

Company and the

Curtiss Curtiss Aeroplane and Motor Company (1909 – 1929) was an American aircraft manufacturer originally founded by Glenn Hammond Curtiss and Augustus Moore Herring in Hammondsport, New York. After significant commercial success in its first decades ...

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 Assistant Secretary of the Navy (ASN) is the title given to certain civilian senior officials in the United States Department of the Navy. From 1861 to 1954, the Assistant Secretary of the Navy was the second-highest civilian office in the Depa ...

, pressured the industry to form a patent pool, the Manufacturer's Aircraft Association. 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. The RFID Consortium picked Via Licensing to administer its patent pool in September 2006.

Risk mitigation

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 Open source is source code that is made freely available for possible modification and redistribution. Products include permission to use the source code, design documents, or content of the product. The open-source model is a decentralized sof ...

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, 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 such cases include the

MPEG-2 MPEG-2 (a.k.a. H.222/H.262 as was defined by the ITU) is a standard for "the generic coding of moving pictures and associated audio information". It describes a combination of lossy video compression and lossy audio data compression methods, w ...

MPEG-4 Part 2 MPEG-4 Part 2, MPEG-4 Visual (formally ISO/ IEC 14496-2) is a video compression format developed by the Moving Picture Experts Group (MPEG). It belongs to the MPEG-4 ISO/IEC standards. It uses block-wise motion compensation and a discrete cosi ...

and H.264 video coding standards, and the DVD6C pool. The MPEG-2 patent pool has also been criticized because by 2015 more than 90% of the MPEG-2 patents will have expired but as long as there are one or more active patents in the MPEG-2 patent pool in either the country of manufacture or the country of sale the MPEG-2 license agreement requires that licensees pay a license fee that does not change based on the number of patents that have expired.

National jurisdictions

United States

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”Antitrust Guidelines for the Licensing of Intellectual Property
U.S. Department of Justice and Federal Trade Commission, April 6, 1995. which stated that the pooling of patents may have “…pro-competitive benefits”.Tirole, Josh Lerner and Jean. "Public Policy toward Patent Pools." Innovation Policy and the Economy , 2007: 157-186. The Antitrust Division of the DOJ later issued a letter in support of the MPEG-2 pool. 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. In addition, the DOJ may monitor the royalty rates collected by the firm.

History

Risk mitigation

National jurisdictions

United States

See also

References

Further reading