Examining the Various Dimensions of Patent Thickets
Patent thickets: An overview
In his paper titled ‘Navigating the patent thicket: Cross licenses, patent pools, and standard setting’, Carl Shapiro defines patent thickets as “a dense web of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology”. Essentially, a patent thicket can be defined as a culmination of a group of overlapping patents (that are similar in nature or otherwise) pertaining to a specific industry. Normally, in patent thickets, the overlapping patents are owned by different companies. Most often than not, patent thickets may negatively impact innovation by restricting companies from creating inventions that are similar to each other’s patented innovations. Thus, in sum, it can be said that patent thickets are superimposed patent rights, which require inventors to license the technologies for multiple patents from different sources.
The origin of patent thickets can be traced back to the late 1800s wherein several sewing machine companies created a patent thicket. The creation of this patent thicket is also popularly known as the ‘sewing machine war’. Patents that were awarded for several components of the sewing machine had largely restricted sewing companies from obtaining patents for their innovations. Thus, a patent pool was created in 1856 by some of the most prominent sewing companies (which included Grover and Baker, I.M Singer and Co., Wheeler, and Wilson). This patent pool was active until 1877. Similarly, in 1917, a patent thicket was formed due to the fact that several airplane companies had filed multiple patent applications for airplanes and its related components. Consequently, a patent pool was created by the Wright Company and the Curtiss Company in order to reduce the patent lawsuits that were continuously filed by airplane manufacturers against each other. However, the recent popularity surrounding patent thickets can be linked to the case of SCM Corp v. Xerox Corp. In SCM Corp, the plaintiff contended that Xerox had created a patent thicket by protecting common components that are linked to their inventions in order to restrict competition. Typically, patent thickets are prevalent in industries such as computer software, telecommunications, biotechnology, semiconductors, and pharmaceuticals.
The formation of patent thickets and its impact
Technologies and innovation consists of certain components. When multiple innovators own patents over such components (that are cumulatively required for creating such technologies), patents thickets are formed. The creation of patent thickets is also due to the presence of competing Intellectual Property rights. Moreover, in recent years, patent offices have experienced an influx in the number of patent applications. In the year 2014, the United States Patent and Trademark Office (USPTO) received approximately 580,000 applications. Whereas, China’s patent offices received a whopping number of 1 million patent applications. Several studies have also noted that most patent applications in the last couple of years are related to digital communication and internet-related inventions. However, this may translate to a discouraging effect in several industries due to the fact that most patent applications are linked to the common components used in digital communication and internet-related inventions. This may, in turn, create an overlapping effect that leads to the creation of patent thickets, thus impeding innovation.
Disadvantages and issues pertaining to patent thickets
The presence of patent thickets can often translate into negative outcomes. For one, patent thickets may discourage companies or individuals, particularly small businesses from venturing into a particular industry. In a digitalized world like today wherein innovation has taken the forefront, certain domains are bound to accommodate an extremely high density of patents. Aggressive patent filings and the consequent formation of patent thickets have time and again prevented inventors from filing patent applications in various industries. Secondly, companies and individuals may have to incur heavy transactional costs due to patent thickets. In order to patent inventions in a particular domain (especially, if it is a domain that comprises a high-density patent thicket), the applicant may have to incur costs such as filing fees, attorney charges and other costs in order to procure information on related inventions that form the patent thicket. This may also severely impact the profit margins of companies, especially small companies that have only begun to venture into a particular industry. Thus, it can be inferred that large organizations often partake in aggressive patent filings in order to garner a monopoly over a particular type of technology or invention. Thirdly, patent thickets may also facilitate ‘patent trolling’ or ‘patent hoarding’. Patent trolling occurs when an individual or a company attempts to enforce patent rights against accused infringing parties without patenting or manufacturing the invention. An overlapping of patent rights in patent thickets may often increase the chances of patent trolling in commercial environments. Lastly, several studies have also reported that patent thickets may increase the chances of frivolous patent litigation due to the presence of overlapping patent rights related to similar inventions or technologies that are bestowed upon different individuals or companies.
Solution to combat patent thickets: Patent pooling
Patent pools can be credited as one of the most efficient ways to combat patent thickets. Patent pools can be simply defined as an agreement between multiple individuals or companies that are patent holders, wherein their patent rights are aggregated for cross-licensing purposes. Patent pools may decrease the chances of competitors in similar domains taking legal actions against each other. Patent pools may also potentially help reduce the transactional costs that one may have to incur in order to obtain information regarding a competitor’s patent. Patent pools have also been efficient at removing any IP-related barriers that may impede access to essential technologies such as pharmaceuticals and medical products. Apart from patent pools, stringent conditions for the granting of a patent can be imposed by amended patent laws across the world. This will ensure that inventors are incentivized with the help of IP systems, whereas, trivial inventions or inventions that are too generic in nature will be restricted from being awarded a patent. Thus, it can be inferred that patent pools and stringent laws for granting a patent can significantly reduce the creation of patent thickets, which may consequently result in the fostering and encouragement of innovation, research, and development.