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What are patent pools?
In today’s world, launching a new electronic end-user product is close to impossible without infringement of an existing patent. The situation is the same across many other industries. This has led to the rise of patent pools. As per WIPO, patent pools are “an agreement between two or more patent owners to license one or more of their patents to one another or to third parties.”
Patent pools prevent competitors from suing each other over a technology. Over time, they have become more popular with both small and large companies due to their ability to reduce licensing costs and increase the technology reach to a wider customer base.
Types of patent pools
There are two types of patent pools: open and closed pools. Open patent pools are outsourced to professional management companies such as joint ventures. They add new eligible patent owners and coordinate with them regarding licensing fees for a third party.
In closed patent pools, there are several patent owners. Out of these, usually only one can license the pooled patents to third parties on everyone’s behalf.
Examples of well-known patent pools include:
- Moving Pictures Expert Group 2(MPEG2) patent portfolio license
This license provides access to patents that are essential to the MPEG-2 Video and Systems coding standards used in set-top boxes, DVD players, recorders, TVs, personal computers, game machines, cameras, and other products. Widespread acceptance of the MPEG-2 Patent Portfolio License has helped establish the most commonly employed standard in consumer electronics history.
- DVD6C pool
The DVD6C Group licenses all patents owned by group members that are “essential” to make, use or sell DVD products.
Pros and cons of patent pools
A patent pool is a double-edged sword for third parties who acquire technology from it. On one hand, it allows third parties to acquire and use technology without any significant arbitration costs or dealings with individual patent owners. On the other hand, it sometimes becomes mandatory for third parties to license the technology as they are unable to negotiate royalties due to a lack of alternatives.
Patent pools still provide several benefits like:
- Prevention of abusive activities such as hoarding patents or filing frivolous lawsuits
- Knowledge sharing between companies in the same industry
- Reduced litigation costs in case companies go head-to-head against each other over patent rights
- Easier, more affordable access to key patents for smaller players (like startups)
Functioning of a patent pool
Major corporations are keen to participate in patent pools to facilitate innovation and minimize IP-related legal issues. A patent pool usually begins when dominant companies holding key IP positions in a technology area come together and act as representatives to form a patent pool instead of counter-suing each other in patent lawsuits. These representative companies (the core group) may also call upon other large companies or SMEs that hold key patents in the technology space to join the pool as core members. Independent third-party examiners are hired at this stage to evaluate if the patents submitted by the core group to the pool are substantial or not and this further leads to negotiations on how the licensing revenue is to be distributed. Once all these details are worked out, a licensing administrator (appointed by the core companies) establishes the revenue generation system to decide the royalty rate structure for licensee companies.
Impact of patent pools
Let’s take a recent example to see how patent pooling has created a positive impact in society. The MedicinesPatent Pool (MPP) is a United Nations-backed public health organization that helps in developing and providing life-saving medicines to low and middle-income countries.Here is how they’ve increased accessibility to medical care:
- Pfizer and the MPP have signed a voluntary licensing agreement for COVID-19 oral antiviral treatment candidate PF-07321332that is administered with ritonavir. This agreementwill benefit around 53% of the world’s population.
- Natco Pharma has signed a non-exclusive license agreement with the MPP, Switzerland to manufacture and sell molnupiravir200 mg capsules in the Indian market for treating severe cases of COVID-19.
