Posts Tagged: "patent pool"

The latest statistics show that the cumulative value of U.S. intellectual property is approximately $5.8 trillion (or 48.4% of GDP), and each year over half a million patent applications are filed, over a quarter million patents are issued, over 4000 patent infringement suits are filed and IP verdicts total over $4.6 billion with a median patent damage award of approximately $4 million. Against this backdrop, I now present an updated taxonomy containing 19 IP-related business models. The business models are in addition to the “traditional” operating companies and their “traditional” IP law firms. Further, while not pretending to be all-inclusive, a directory of players implementing one or more of these 19 IP business models is available for download at the end of this post.

Unlike NPEs, defensive patent pools entities do not (at least initially) seek to generate revenues. Rather, they charge admission fees into the pool to fund IP acquisitions and the administrative costs to operate the pool. In sum, defensive patent pool aggregation is analogous to an insurance policy. But, where classic insurance lowers a company’s costs when accidents happen, patent pools are designed to reduce the likelihood of accidents (i.e., being sued for patent infringement) from happening at all.

When the media paints images of all patents being bad they are doing a disservice to the industry and ignoring the good that has come from patented innovation and the sharing of such innovation via patent pools and other cross-licensing arrangements. Patent pooling is one example of a proven, effective tool that is helping industry better manage its licensing programs. By “pooling” patents from many license holders, licensors generally are able to lower transaction costs and administrative overhead, and benefit from a centralized model that encourages patent bundling and fair play. Licensees likewise enjoy advantages in the form of lower royalty fees and a single point of contact that eliminates the need to negotiate separately with multiple license holders.

The story of the invention and development of the sewing machine challenges these two assumptions insofar as it is a story of a patent thicket in an extremely old technology, but, more important, it is a story of the successful resolution of this thicket through a private-ordering mechanism. The Sewing Machine War was not brought to an end by new federal laws, lawsuits by public interest organizations, or new regulations at the Patent Office, but rather by the patent owners exercising their rights of use and disposition in their property. In so doing, they created the Sewing Machine Combination, which successfully coordinated their overlapping property claims until its last patent expired in 1877. Moreover, the Sewing Machine War is a salient case study because this mid- nineteenth-century patent thicket also included many related issues that are often intertwined today with concerns about modern patent thickets, such as a non- practicing entity (i.e., a “patent troll”) suing infringers after his demands for royalty payments were rejected, massive litigation between multiple parties and in multiple venues, costly prior art searches, and even a hard-fought priority battle over who was the first inventor of the lockstitch.

There is an important role that open source could play moving forward, and that role is to set the foundation of innovation and technology, which is no small task in terms of importance and seems to perfectly fit with open sources strengths. But too many open source regimes are like the Borg of Star Trek fame, or a little like the Mafia. Once you are a member you simply cannot get out. With too many open source regimes once you join and take then anything that you produce must be free to be taken by other members of the consortium. It really is akin to a patent deal with the devil, and ignores human tendencies. Ingrained in almost everyone is a feeling they should be able to profit from their own work, and most would feel injured if they worked and others were allowed to take without some kind of in kind return.