Today’s world sees IPR as the most stringent weapon of the competition. Companies spend a lot of their time and energy in developing technologies, protecting their patents and inventions from rivals. However, some of the companies tend to take another route to the same destination by sharing their patents known as patent pool.
Concepts like patent pools are more relevant in sectors where products are relied upon hundreds or thousands of intertwined technologies. In addition to this, the patent pool helps companies to reduce legal conflicts, lower their costs and accelerate their innovation from smartphones and Wi-Fi to video streaming and pharmaceuticals. However, on the other hand they also potentially increase concerns about market power and competition law.
This blog aims to explore what patent pools are, how they work and how they continue to shape our future world of innovation.
What is a patent pool?
A patent pool is a sort of agreement between 2 or more patent holders to combine their patents. Instead of separately licensing patents, the patent pool offers companies a one stop arrangement for businesses who want to make use of that technology.
Patent pools are mostly common where a single product needs multiple patents to comply with standards. In situations like these, companies need approval from multiple patent holders to manufacture or sell its own product. However, without this coordination this process can become expensive and time consuming.
By the process of patent pool, owners seem to simplify their access to technology. Licensee is expected to pay a single fee which is then further divided among patent holders onto their agreed amount.
Licensing Framework of patent pool
Patent pool work through a strategic and structured licensing framework which involves following steps:
- Identifying relevant patents: Patent holders firstly determine which all patents are relevant for the technical standard.
- Creation of pool: The participants agree to enter into an agreement that further outlines terms of licensing, royalty distribution, dispute resolution and governance.
- Getting licensing done: An administrator or licensing body takes care of managing and granting licenses to 3rd parties.
- Distribution of royalty: Royalties collected through license are distributed among patent holders based on the importance of patents.
Contribution of Patent pool
1. Reducing Thickets of patents:
Contemporary worlds involve overlapping patent rights by different companies. When businesses struggle to navigate multiple licensing requirements, this is called patent thicket. Patent pools help in reducing this complexity by consolidating patent rights into one platform. This is crucial in industries like digital media, telecom and consumer electronics.
For instance, technologies involving video compression (like MPEG) include numerous patent holders from different companies. This way instead of the hassle of getting separate licenses from different patent holders, manufacturers can get access through one single pool.
2. Reducing Litigation concerns
Disputes related to patents can lead to huge losses and sufficient delay in technological development. Rivalry firms often get involved in lengthy and costly infringement battles, mostly in technology heavy industries. The concept of Patent pool helps in reducing litigation by promoting harmony and cooperation among patent holders. Since, mostly participants cross license their technology and patents, this way industries can focus more on innovation instead of litigation and lengthy battles.
3. Promoting uniformity
Patent pools help in crucial development in the field of technological standards. These standards further ensure compatibility between services and devices. For example, technologies like wi-fi, Bluetooth and 5g technologies depend on standardized systems which involve numerous patent inventions. Patent pools help manufactures by approving their access to these essential technologies efficiently.
4. Encourage innovation and market entry
By making the licensing procedure simpler, patent pools help in lowering the barrier to entry for other small industries, companies or startups. Businesses can now directly access technology without negotiating to multiple patent holders individually. This helps in creating a more competitive environment and promotes development of new services and products.
Patent pools: Historical development
Patent pools are not products of the contemporary world. One of the examples lies in the 19th century’s sewing machine industry where rival manufacturers frequently sued each other for different parts of the sewing machines.
In order to resolve these disputes, they formed first patent pool i.e. Sewing machine combination in 1856. This arrangement helped manufacturers to expand productively and helped them get more focused on innovations.
Another crucial example emerged in the aviation industry during World War 1. Manufacturers of US held critical patents that restricted large scale production of airplanes. The government further then encouraged formation of patent pools to provide support to wartime needs.
Patent pools in other sectors: Technology & Healthcare
Sectors like technology rely heavily on patent pools because the majority of the modern digital products involve numerous patented components.
1. Video compression: One of the well-known patent pools is MPEG pool, which further grants patent licenses for video compression. Companies that produce DVDs, streaming services, TVs, smartphones often need approval before accessing these technologies.
Without the concept of patent pool, manufacturers would require to enter into negotiations for separate licenses with multiple patent holders increasing costs and delays.
2. 5G and Telecommunication: The rollout of 5G depends on multiple patents owned by major telecom industries around the globe. Patent pools further also help in streamlining licensing procedures for network providers and device manufacturers. Patent pools help streamline licensing for device manufacturers and network providers.
With ongoing expansion of IOT and connected devices patent pools are becoming important in ensuring technological interoperability.
Patent Pools in Healthcare and Pharmaceuticals
Patent pools are also equally relevant in other sectors like healthcare, aiming to improve access to medicines.
A public health initiative supported by the US is one of the prominent examples of a medicines patent pool. This organization further negotiates licensing with pharmaceutical companies to make patented medicines accessible at reasonable rates.
The medicine patent pool also played an important role during crises like HIV & AIDS and further expanded for treatment of hepatitis C, tuberculosis and covid-19. By this pooling generic manufacturers get sufficient help in producing affordable medicines while patent owners benefit by earning royalties.
This showcases how patent pools have played a significant role in balancing intellectual property rights with all other sectors like healthcare & technology.
Conclusion
Patent pools challenge the idea that IPR is always fiercely exclusive. By permitting competitors to use and share license technologies collectively patent pools attempt to reduce legal restraints, barriers and promote standardization and innovation.
From digital systems to life saving meds patent pools have significantly transformed industries and their complex technology management systems. Whereas issues regarding fairness and competition law remain significant, well-regulated patent pools can increase benefits for business, consumers and society.
In the modern world industries and sectors are increasingly dependent on collaborative innovation. Patent pools become not just an exception but a necessity for competition and technological progress.
Author: Aarushi. In case of any queries please contact/write back to us via email to [email protected] or at IIPRD.
References:
- https://www.researchgate.net/publication/246482548_Institutions_for_Intellectual_Property_ Transactions_The_Case_of_Patent_Pools
- https://www.elgaronline.com/edcollchap/book/9781803927855/chapter2.pdf
- https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3716569
- https://medicinespatentpool.org/
- https://www.oecd.org/en/publications/competition-policy-and-intellectual-property rights_49d5957f-en.html