A Theoretical And Empirical Research On The Formation Of Patent Pool

A patent pool is a joint licensing arrangement among patent holders, through which patent holders license their patents in a package to third parties or to one another. It has been widely accepted that patent pool can help to resolve the"patent thickets problem"which is becoming serious in these years. As a result, the antitrust authorities in the United States, Japan and Europe have taken more positive attitudes to patent pool than one decade ago. However, patent pool did not emerge massively as people anticipate. Recent patent pools mainly emerged in electronic and telecommunication industry while rarely emerged in other areas which also meet patent thicket problems, such as biotechnology industry. Regarding the Paradox, this paper argues that even forming a patent pool is not only Pareto efficient to patent holders but also to society, but it is difficult to be formed. The reason is that every patent holder, no matter specialized research firm or vertically integrated manufacturing firm, has incentive to stay outside a pool and license its patents independently. That is, cooperating and forming a patent pool is not a Nash Equilibrium. However, in dynamic repeated games, the prisoners'dilemma could be overcome by credible threats and promises. That is, being compelled by the authorities or standard setting organization, threat of antitrust litigation and competition from competitors of substitute or new generation technology could help to compel patent holders to cooperate and form a pool.This paper also analyses some factors including transaction cost, downstream market structure, technology standardization and antitrust regulations which impact upon the formation of patent pool. This paper argues that recent patent pools mainly emerging in electronic and telecommunication industry while rarely existing in biotechnology field is due to the difference in the downstream market structure and technology standardization. While patent holders join a patent pool, the transaction cost of related entities will be reduced. In addition, the more patents the patent holder owns, the efficiency of saving transaction cost is lower, especially when the patent holder has already had a patent licensing department. While the downstream market is monopolistic, especially when the monopolistic maker also owns massive patents, it is difficult to form a patent pool. Technology standardization can promote the formation of pools. The antitrust regulation on patent pool can restrict patentee's will to pool their patents and could affect the independent evaluation of necessary patents as well as patent licensing items. Finally, this paper researches the impact of patent pool on the innovation and competition in China. When considering the impact of patent pool on market competition in China, in my opinion, we should focus on the different issues comparing to that in western countries for China has different situations from that in the west. At present, China should mainly focus on two kinds of antitrust actions of patent pool: One is charging excessively high licensing fees by virtue of its market power; the other is actually excluding its members to licensing their patents independently. As a result, this paper suggests that we should focus on the pro-competition impact of patent pool and welcome the formation of it. On the other hand, we still need to improve our IPR antitrust system and to restrict the anti-competition impact of patent pool.