Patent Pooling and IP

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Patent Pool have been an ongoing subject discussion from both legal and economic point of view. Pool in simple terms means Accumulation. A Patent Pool is defined as an agreement between two or more patent owners to license their patents to one another or to third parties. Patent pool mostly come into play when an inventor gets stuck in complex technology that requires a complementary patent in order to achieve efficiency however such complementary patent belongs to another patent holder. Patent Pool is somewhat similar to a joint Venture with an object of sharing one’s Intellectual property rights.

The invention of Sewing Machine is the first ever example of Patent Pool and lasted until its last patent expired in 1877. The sole purpose of this Patent pool was to reduce the litigation cost and licensing cost been imposed during that period.

In 1917, U.S. government with the help of Patent Pool merged Wright Company and the Curtiss Company, the major patent holders in airplane industry, in order to satisfy demands of aircrafts in World War I, called as Manufacturer’s Aircraft Association.

Later on, many Pharmaceutical manufacturers took over the option of patent Pool in order to make avail their drugs at an affordable price by reducing the Research and Development cost amounting to affect cost of selling.

However, Patent Pool has got its two sides i.e. For and Against. The patent pools may have positive effects on competition and innovation by way of increasing efficiency of the developing technology in the concerned field, reducing litigation costs and reducing transactional cost occurred otherwise.

Patent Pool on the other hand, under specific circumstances, patent pools may provide an opportunity for a possible anti-competitive, by distortion of competition. In case of SUMMIT vs. VISX, where the two US firms engaged in a patent pool and developed their own technology for performing laser eye surgery. However according to the terms of agreement of the pooling, Federal Trade Commission (FTC) found that the patent pool restricted competition that would have existed otherwise in the absence of the patent pool.

Thus a valid Patent Pool shall consist and fulfil following three steps. Firstly, it should be examined that the technology is competing (complimentary or substitutes) and are not defeating object of any anti-competition laws. Secondly, examination of the Pool agreement with regard to licensing i.e. it should provide a worldwide and non-exclusive license and should be non-discriminatory. Lastly, examining whether the pooling arrangement increases the risk of collusive behaviour outside the pool and whether the pooling arrangement provides for safeguards to reduce this risk.

Conclusively, the viability of patent pools as a concept, in the endeavour to create better, cheaper means to achieve innovations, is quite sound keeping in mind such pool doesn’t raise any competitive concerns in future.

Author:  Jenil Shah, Legal Intern at Global Patent Filing. In case of any queries please contact/write back to us at support@globalpatentfiling.com.