It has potential to grow, reduce transaction costs

M. Somasekhar

A Patent Pool is an agreement between two or more patent holders to cross license patents and other IPR relating to a particular technology.

HyderabadFeb. 13Patent Pools could well be the next step forward for corporates and institutes intending to maximise their effort and investments in both protection of intellectual property and its utilisation. A Patent Pool is an agreement between two or more patent holders or a consortium of at least two companies, which agree to cross-licence patents and other IPR relating to a particular technology.

Though, a new concept for India and most developing countries, essentially because of the comparatively low level of patent activities as well as the yet to be established strong link between patents and trade, it has the potential to grow, says the Patent Facility Centre (PFC), under the Union Department of Science and Technology.

MPEG-2 Standard

In the US, a patent pool was formed in 1997 with respect to the MPEG-2 standards. The standard defines how to represent a digital video data stream used in digital cable television systems, digital satellite for televisions and DVD players. If a company wants to sell equipment that is capable of decoding a digital video stream on a DVD, it must make its product compliant with MPEG-2 standard.

By 2002, at least 14 companies owning 75 US patents have been identified to be essential to the MPEG-2 Standard. If a new entrant wants to start manufacturing MPEG-2 compliant systems, the chances of infringing on the above patents would be high, because they would virtually cover all aspects of the technology. Further, the transaction and patent licensing costs would be high.

Low Prices

In this background, patent pools provide a better comfort zone to the licensee and help keep the transaction costs low. Small or new manufacturers can enter the DVD player market without performing any research and development in respect of MPEG-2 and DVD technology. The effect of such an arrangement can be seen in the low prices at which they are available in the market even after royalties are paid, the PFC said in a study.

The RFID Consortium has formed a patent pool in 2005, with MPEG LA acting as the administrator for the licensing purposes. Alien Technology, Applied Wireless Identifications Group, Avery Dennison, ThingMagic, Tyco Fire & Security and Zebra Technologies became the members. The pool would manage the IPR required for UHF RFID standards.

While electronics, telecom and IT with global standards have shown the formation of patent pools, the scope was also good in new technology areas like nanotech and biotech as well as drugs, once they have more universal standards, the PFC, part of the Technology Information Forecasting Assessment Council said.The Study stressed the need to guard against monopoly situations, proper regulatory mechanisms in place to ensure that such pools benefit both the innovative companies and the consumers. Once patent pools grow in number it would also become easy for licensing of early stage inventions and technologies. Research and academic institutions may become part of the pools through their researches and inventions, which are made around agreed standards.

(This article was published in the Business Line print edition dated February 14, 2007)
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