MARCH 3, 2009

Patent Pools, Innovation Puzzles

Stanford University academics Ryan Lampe and Petra Moser have recently been intensely debating the merits of patent pools.  A patent pool is basically a form of intellectual sharing.  It’s the result of two or more companies putting their competitive agendas aside and agreeing instead to cross-license various “patent pieces” that are required to build a single technology.  While the idea makes sense, the jury is still out as to whether patent pools actually encourage or hinder innovation.

As TechDirt’s Mike Masnic explains, “Patent pools tend to come about when you have a lot of patents in and around a particular product, creating ‘patent thickets’ where a bunch of different patent holders all hold onto important pieces of the puzzle.  The worst case scenario, then, is that nothing can get done, as it’s impossible for anyone to innovate without being hit by a ridiculous number of lawsuits.”

Professor Eric Maskin from the School of Social Science at the Institute for Advanced Study offers an equally compelling insight on patents and innovation.  Maskin argues that, when discoveries are “sequential,” (each successive invention building essentially on a preceding invention), patent protection is not as useful for encouraging innovation.  Not only does Maskin believe that society and the inventors themselves could be better off without such patent protection, but he also claims that an inventor’s prospective profit may actually be enhanced by competition and imitation.

Regulators and antitrust authorities in Washington tend to favor patent pools that encourage innovation in industries where overlapping patents and excessive litigation suppress innovation, such as the biotechnology arena.  Lampe and Moser, on the other hand, would argue that patent pools are not always the best solution.  Sometimes, it seems, pool members patent less as soon as the patent pool is established and only resume patenting after the pool dissolves.  Professor Maskin may then insist that it would be better to throw out such patents if they’re clearly hindering, rather than enabling, innovation.

So, when are patent pools a good solution?  Well, last June, six WiMAX firms teamed together to create the Open Patent Alliance, a group whose goal is to jointly license WiMAX patents so they can keep royalty rates in check and make the telecommunications technology more affordable.  The companies involved in the formation of the OPA included Cisco Systems, Intel Corp., Alcatel-Lucent, Clearwire, Sprint and Samsung.

In addition, according to a recent post from PatentHawk, patent pools for the SARS vaccines and HIV/AIDS drugs have risen lately.  That’s a good thing, right?  On February 13, in a speech to Harvard Medical School, GlaxoSmithKline CEO Andrew Witty announced that his company would contribute its own patents for technologies that might aid research into malaria, cholera and more than a dozen other diseases.

This type of approach is a refreshing mix of social responsibility and good business strategy.  I wonder: how many companies and industries will follow this model?