18 - The Treatment of Patent Pools: Economic Underpinnings and Comparative Developments

Summary

Patent pools are a well-known mechanism to facilitate multi-party licensing of technologies in circumstances in which competing firms own multiple overlapping patents that could, in the absence of a pool or similar arrangement, impede efficient competition and production. Such situations, often referred to as ‘patent thickets’, exist in an array of industries, including consumer electronics, telecommunications and pharmaceuticals.¹ In such situations, a pool or similar arrangement (e.g. a cross-licensing agreement or agreements) potentially provides an efficient solution.² Pools provide a ‘one-stop shop’ by which two or more patent owners agree to license their patents to each other and/or to third parties.³ Licensors allocate the charged licensing fees to each member in proportion to the value of each patent,⁴ and in turn the licensees welcome the pool as an instrument which reduces transaction costs and resolves other issues such as royalty stacking or double marginalization through the cooperative determination of royalties.⁵ Though patent pools have existed since the nineteenth century, their importance for the commercialization of intellectual property (IP) has increased significantly in the context of the emerging knowledge-based global economy.⁶