The simplest definition of a patent pool is a partnership between two or more companies that come together to share a patent for either intellectual property or a particular technology. Once the companies have the patent pool, they are free to develop and sell their products without worrying that anyone else in the market will copy them and put them out of business. Companies can form patent pools for various reasons. One of the most common is when two companies come up with intellectual property or technology at the same time. Instead of fighting over who has the right to develop a product they can take out a patent pool. Another common reason for patent pools is business strategy when it makes sense that the companies work together to develop the product or idea.
A good example of when it was necessary to form patent pools was in the Second World War when there was a race to develop better and better planes for the war effort. Some companies were coming up with similar technologies simultaneously and a patent war followed. The government, in a bid to get out new planes as fast as possible had to get them to form a patent pool. Manufacturers who wanted to use the patent then had to pay a fee for it. Because of this patent pool development, aircraft technology was soon standardized.
The Risk Of Patent Pools
According to Wikipedia, 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. Additionally, Flaws in the design of the pool’s governance can create the risk that one member can break the common cause of the group.
What this means is that as much as patent pools enable different entities to share technologies or ideas, they also create some risk. If one of the members is in disagreement with a third party about the rights of the patent it is in the interest of the other member of the patent pool to offer their support to resolve disagreement. It is also very important that the members of the patent pool agree on how they will govern the patent pool. They should get a legally drafted document that clearly outlines what everyone’s role is, to ensure that in the case of one member violating the agreement, the rest of the members of the patent can have legal recourse.
A patent licensing administrator is critical to a patent pool. They are the ones who are in charge of the day to day maintenance of the patent pool. Their job is to find viable licensees and to make sure that there is no patent infringement.
It is important to consider how long it takes to create a patent pool: usually between 6 months and two years. This is because of incomplete specifications. The members of the patent pool normally need time to ensure that the market for their technology is growing. Even when the products are already in the market it is still important for the companies involved to make sure that there is a demand for their products, thereby justifying their investment. Another reason why it takes so long is that companies can take a long time to come to a consensus on the structure of a licensing program.
Are there disadvantages of patent pools?
If properly constituted, patent pools will not present any problems at all. That said, it is not uncommon to find concerns over monopolies when it comes to patent pools. It is easy to see how monopolies would form once several companies own the patent to a particular technology they can easily stifle others in the industry and slowly squeeze them out of business. To stop this from happening in the United States, the Department of Justice does a Business Review Procedure where the members of the patent pool have to submit their proposed plan for assessment as to whether they will be in breach of anti-trust laws.