A corporation may find it beneficial or required to join a patent pool if it is creating technologies that must follow industry standards. India is not yet a major player when it comes to patent pools, but the situation is changing, especially when it comes to emerging technologies, and they could represent a valuable opportunity for Indian rights holders.
Understanding patent pools
A patent pool is an agreement between two or more patent owners to license some or all of their patents to third parties or to one another. One of the first sewing machine patent pools was founded in 1856, beginning a lengthy history of patent pools.
In the modern business world, patent pools are frequently the starting point for industry standards that provide companies with the technology necessary to develop complementary products and services, such as those in the public health, information coding, mobile communications, etc. Patent pools are often associated with advanced technologies that require complementary patents to provide practical technological solutions.
In a patent pool, multiple patent holders pool their rights so that licensees, whether members or not, can access them. Typically, the licensing fees received by the pool are split equally among its members based on the respective patent values. One kind of patent pool is a joint venture established by two or more patent holders with the goal of sharing their intellectual property rights. All of the patents in the patent pool may be licensed for use by a licensee, who is a standard user or implementer. The licence fee that the licensee must pay is determined by the patent pool agent, who also pays each licensor according to the quantity of patents that each licensor has. The pool agent gathers or collects essential patents, which may be held by several holders (the licensors).
In recent times, several patent pools focused on technology standards have been formed, mainly to make it easier to obtain the patents required to implement the standards and to pay companies that provided their patented technologies to the standards. A standard-based patent pool is an arrangement among multiple patent holders to pool their standard essential patents (SEPs) and grant standard terms and conditions of licence to parties implementing the applicable standard.
In addition to being standard implementers, participating licensors in the pool have the option and often the obligation to obtain a licence from the pool. The revenue distribution method established by the pool provides the licensors with a portion of the revenue collected from licensees in the pool.
Patent pools usually demand an independent evaluation of the licensors’ submitted patents to determine whether the patents often referred to as ‘certified patents’ are necessary before listing a patent as essential. Regardless of how many certified patents the licensor owns in the pool, the pool offers a licence that grants rights under the entire portfolio of essential patents for the standard held by the licensor. This holds true whether or not the patents have been identified or assessed by the pool.
Patent pools are typically created so that technology owned by third parties can be used without costing money for research and development. Furthermore, patent pools speed up research, reduce the risk of patent infringement and minimise the cost of patent licensing.
Advantages of pooling
Third parties benefit from patent pools in a number of ways, including the development and creation of new technologies, a reduction in the transaction costs involved in getting these inventions ready, the elimination of patent blocking positions and the avoidance of costly infringement lawsuits. Rather than having to apply for licences from each patent owner individually, patent licensees can obtain all the necessary patents from one location to use a particular technology.
Prominent corporations have declared their intent to partake in patent pools. There will be a new pool created. Because patent pools are widely used in many different industries, such as electronics, wireless technology and biotechnology, they have attracted a lot of attention lately. There are literally tens of thousands of patents for consumer experiences in modern wireless systems.
Numerous of these patents make very specific claims about the overall communication system that, in the absence of the technology mentioned in other patents, would be meaningless. Leaders in the high-tech and telecommunications sectors have, nevertheless, given it a lot of attention. Biotech businesses also create patent pools, which assist in resolving issues with licence duplication and patent blocking.
Both the commercialisation and the advancement of new technologies may be hampered by the difficulty in obtaining licences for various patented technologies. ‘Patent pooling’ is a concept that could prevent these issues.
Indian scenario
The idea of patent pools is relatively new in India, where it has always been linked to ideas for obtaining inexpensive healthcare. Patent pools are thought to build up patent counts for various businesses in an effort to promote the creation and accessibility of medications that help the underprivileged in developing nations. The creation of patent pools is not limited by the Indian Patents Act 1970, nor does it contain any rules or guidelines pertaining to the process. According to popular interpretation, section 102 of the Patents Act makes it easier to create patent pools that the government manages and oversees for the benefit of the general public.
Nonetheless, the Competition Act 2002 governs it as an anti-competition policy. Any type of licence or agreement that restricts competition is forbidden. If participants in patent pools agree not to grant licences to third parties when determining prices and allocations, the pool may turn anticompetitive.
In India, the growth of the industry sector depends critically on having access to patent knowledge. To advance technology and medicine, all inventors from now on must understand the idea of patent pools. However, it is unclear how these patent pools will operate within the Indian patent system or if there will be additional legal obstacles to overcome.
Emerging technologies may embrace the concept and opportunity of patent pooling, including cleantech and renewable energy, electronics and telecommunications, materials science, mechanical engineering, software patents and artificial intelligence. Patent pools can produce a great deal of efficiency, which is absurd in the absence of collective agreements, but they also have the potential to seriously impair competition. Agreements made merely to permit price fixing, collective output restrictions or any other exclusionary conducts are prohibited by the Competition Act 2002.
The Patents Act 1970, section 68, states that a patent may be assigned or licensed. All of the terms and conditions of the licence, including the royalty rate and duration, must be included in the written and duly signed agreement to transfer. Section 69 requires that a transmission or licence agreement be registered and added to the patent register. If a party is not able to secure a licence voluntarily, section 84 permits the patents to be compulsorily licensed under certain circumstances, facilitating the formation of a pool. Conversely, section 140 enumerates prerequisites that cannot be added to a licence agreement and imposes restrictions on the parties.
The promotion of technology diffusion, the integration of complementary technologies, the decrease in transaction costs, the removal of blocking positions, etc, are some of the pro-competitive effects of pooling. Although patent holders have the right to establish patent pools, this right is commonly viewed as a hindrance to market competition because it prevents parties outside the pool from entering the market without having to pay sizable royalties.
Intellectual property is the vault in the tech industry, where patent pools are increasingly important differentiators and innovation is the currency. Patent pools are essentially contracts between two or more companies for the cross-licensing of patents related to specific technologies.
This arrangement expedites the licensing process and lowers transaction costs. This means fewer legal barriers, less red tape and a simpler process for companies and executives to acquire the patents needed for their innovative endeavours.
Even though the advantages of joining a patent pool appear obvious, there might be drawbacks. Serious antitrust concerns are raised by the prospect of coordinated output restrictions or price fixing among competitors. Furthermore, adding replacement or non-essential patents to the pool could stifle innovation. Furthermore, issues pertaining to fair, reasonable and non-discriminatory (FRAND) licensing could surface, especially in the process of determining royalty rates.
Understanding patent pools involves more than just the concept itself. It entails conducting a careful examination and comprehending the strategic, legal and operational repercussions of joining a patent pool.
Savings on costs
Finally, patent pools can save a lot of money by reducing transaction costs and expediting the process of obtaining licences to multiple patents. Particularly in the technology industry where there may be a large number of relevant patents, individual licence negotiations and acquisitions can be costly and time-consuming. Patent pools, which provide a single licensing point for multiple patents while reducing transaction costs and saving a significant amount of time, simplify this process. Executives may discover that by freeing up resources that would be better utilised for core business operations, this efficiency gain boosts the company’s bottom line and operational effectiveness.
With the aid of patent pools, tech companies can strategically manage their intellectual property rights. They provide benefits in terms of standardisation, shared risk, and cost and efficiency. Tech executives need to know these benefits to utilise patent pools efficiently and make educated choices about their company’s patent strategy.
Essentials in the industry
First and foremost, businesses need to do a comprehensive cost-benefit analysis. This means striking a balance between potential benefits such as standardisation, cost savings and risk sharing, and potential drawbacks such as intellectual property rights infringement, innovation stifling and issues with FRAND licensing. For C-suite executives, this analysis should be predicated on a deep comprehension of the organisation’s strategic objectives and how intellectual property rights contribute to them.
It is crucial to go over the details of the patent pool agreement in detail. A company’s rights and obligations could be significantly impacted by these circumstances, which could have an effect on anything from its ability to enforce patents to its financial obligations. To ensure that the agreement serves the company’s interests and does not place it at unnecessary risk, executives must understand these terms.
Owing to the possibility of violations, companies must ensure that their participation in a patent pool complies with applicable antitrust laws. This means having a thorough understanding of these rules and taking a proactive approach to compliance, such as conducting regular audits and reviews to ensure that the patent pool’s operations continue to comply with the law.
Conclusion
The formation of patent pools in the tech sector is primarily driven by the growing interdependence of technologies and the growing need for standardisation. The rapid advancement of digital technologies has resulted in an increasing need for a unified strategy to manage overlapping patent rights. Patent pools offer a solution to this issue for tech companies by promoting a standardisation-friendly environment and reducing the likelihood of costly lawsuits alleging patent infringement.
Multiple patents covering the same product have become more common as a result of improved innovation and current technological advancements. The best example are smartphones, which not only make communication easier but also enable data storage, email, web browsing, business computations, audio and video entertainment, and photography.
