Introduction
In the patent law field, ‘pooling’ is defined as the practice by two or more parties to license their patents as a bundle. Patent pools are not a new concept. Registers of them date back to the 19th century, whereas prominent pools emerged for the automobile and aircraft industries in the early 20th century. Numerous patent pools have been formed since, evolving over the years on the way they operate. Nonetheless, despite being in the market for such a long time, pools continue to be closely monitored by regulators, academia, and industry, mainly due to their potential (positive and negative) impact on competition.
In the past decades, patent pools have been used to license standard essential patents (SEPs), i.e., patents that protect technologies essential to the implementation of a certain technical standard. Standards are key for the innovation ecosystem, as they ensure the adoption of a high-quality, safe, and interoperable technology, incentivizing new businesses and increasing consumer surplus. The most predominant example can be found in 2G, 3G, 4G and 5G cellular standards, each generation (G) being an improvement over the previous one. When offering a joint license, the licensors in the pools still need to comply with their commitments to standard bodies to make their SEPs available under fair, reasonable, and non-discriminatory (FRAND) terms.
The purpose of the FRAND commitment is to provide a balance between SEP owners and SEP users. On the one hand, FRAND guarantees access to the standardized technology under reasonable terms, promoting wide dissemination of the standard. On the other hand, FRAND offers a fair reward to innovators willing to share their cutting-edge technologies with others thus encouraging investment in the next generation of the standard. Although discussions about pooling non-essential patents exist, this practice undoubtedly raises some antitrust concerns. Thus, this article focuses on those pools most used in practice, i.e., those including only SEPs.
Over the years, patent pools have played an important role in the SEP licensing scenario because they have the potential to overcome general obstacles of the patent market, such as the perceived lack of transparency, asymmetric information, and high transaction costs. Pools may facilitate the licensing process by acting as a one-stop-shop for the SEP portfolios in the pool to the benefit of implementers, and by providing greater transparency by sharing relevant information about the license. Information shared may include the list of the evaluated SEPs, the names of the SEP licensors, the licensing terms offered to all implementers and, in some cases, the names of the current licensees.
In 2021, with the deployment of the 5G standard, patent pools are again in the spotlight. The 5G standard is key for the Internet of Things (IoT) to achieve its full potential, thus increasingly attracting multiple stakeholders from different sectors. Mobility, healthcare, security, automotive and home appliances are only a few examples of IoT systems that are growing in popularity. Research estimates that IoT applications will have an economic potential of EUR nine trillion per year by 2025 in developed countries. The multiplicity of stakeholders, however, makes the licensing process more challenging. Many new implementers are entering the licensing scenario with no experience and expertise in identifying the strength of SEP portfolios and/or in FRAND determination.
Against this background, governmental authorities such as the European Commission (EC), the U.S. Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) have repeatedly spoken in favor of patent pools. For instance, the EC is considering measures to encourage the setting of pools for key standardized technologies, a point of view that has been supported by some stakeholders in the market. The argument is that patent pools can offer a smoother and more transparent licensing process for “a large number of implementers in the IoT environment (especially SMEs),” creating a trust environment amongst participants and therefore contributing to the innovation ecosystem.
It is generally understood that there is no one-size-fits-all model for a patent pool. Patent pools are born out of contractual negotiations. Thus, they have the shape their stakeholders choose as most beneficial according to their individual circumstances, as long as they remain within the FRAND framework and competition law requirements. There are, however, some commonalities among pools. This paper, divided into two parts, analyzes how these licensing platforms work in practice, pros and cons for SEP users and SEP holders, and real-life experiences when dealing with a patent pool. This first part gives a brief overview of SEP licensing models, covers the main reasons why SEP owners may decide to create and/or join a patent pool, and explain some of the challenges they face when doing so, such as essentiality assessments and gathering the relevant portfolio.
