Patent pools as a possible route to reduce barriers to standards diffusion and technology transfer

Rudi BEKKERS

1/01/2005
(Original Publish Date: 2000)

In the last decade, the relation between standardisation and IPRs has proven to be a problematic but also challenging area. In the 1990s, serious problems with essential patents (i.e. patents that are necessary for any product implementation) were observed for the European GSM standard, among others. Attempts of standards bodies in order to develop policies to prevent such problems failed. There is evidence that in the few last years there has been a strong increase in the number of essential patents in such technical standards. This causes three problems. First, the number of license holders increases to a level making transaction costs prohibitive. Second, the cumulative license fees for the necessary essential IPR might become a serious obstacle for the large-scale adoption of the standard in question. Third, the behaviour of one single license holder might block an entire market (e.g. when this license holder refuses to license all interested parties on fair, reasonable and non-discriminatory terms). In the context of European research programmes as well as that of standardisation activities, the consequences could be severe. Patent pools are an organisational approach that may reduce the possible negative consequences brought along by these problems. In a patent pool, holders of essential IPR agree to let a third party bundle and exploit their licenses. In addition to their pro-competitive effects, patent pools can also have a number of anti-competitive effects. Competition authorities need to look closely at the exact conditions set by such organisations. In the US, a number of patent pools seem to be functioning successfully, including those for DVD technology and for the MPEG video and audio compression protocol (which includes the popular 'MP3' protocol). In Europe, however, there are signals that a recent attempt to set up a patent pool for the third-generation mobile telecommunications technology UMTS is about to fail. This could have large consequences for the further development of a market in which many European actors invested substantial sums of money. The usability of patent pools is, however, not yet fully understood. The aim of this study in progress to gain further understanding in this phenomenon, and in particular how it can prevent barriers to adoption, under what conditions it has chances of success, and what policy implications this development has.