Author(s)
Source
Stanford Technology Law Review 3, April 2004
Summary
This paper looks at regulation of patents to protect competition.
Policy Relevance
Competition regulators should be willing to intervene to prevent harm from patent pools, but the cases are complex and pools often benefit consumers.
Main Points
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Firms sometimes agree to license each others’ patents in “patent pools.” Courts and the Department of Justice (DOJ) are more willing to allow some patent pools today, especially if they grant non-exclusive licenses.
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So long as the patents are for potentially competing technology, pools can help make consumers better off. Key factors include whether the patents are “blocking,”or if they involve competing technologies.
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Pools with patents on competing technologies can harm consumers, especially if they have the effect of fixing prices by assigning exclusive territories.
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Pools for two-way blocking patents often help consumers. Without the pool, each firm’s patents blocks the other from making a useful product. If only one firm is blocked, pools are more controversial.
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Some pools provide for joint patent defense against outsiders. These offer most benefits to the firm when patents are for competing technologies. Regulators should be skeptical of pools that shelter patents from challenges to their validity, because these challenges often help consumers.
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The history of patent pool cases shows that some were really cartels. These should not be allowed even when the patents are not substitutes.