India: Patent Pool

INTRODUCTION

Patent pool is an association of two or more companies to cross license their patents in respect to a particular technology. In other words this is an agreement between companies to license or permit one another or any third party to use the patents owned by them.

"The aggregation of intellectual property rights which are the subject of cross-licensing, whether they are transferred directly by patentee to licensee or through some medium, such as a joint venture, set up specifically to administer the patent pool1"

Patent pools are basically originated as most of the technologies involve various patents and owners and it is impossible to adopt such technology without infringing any ones technology or without an effective means to obtain necessary license to use the various patents. Other reason for origination of patent pools was to avoid the competitors suing each other in order to keep out each other from the technology.

Patent pools are generally created to use the technology of others without incurring any cost related to research and development. Patent pools also helps in reducing the cost of licensing patents, risk of infringing patents and saves time in research.

The interest in the patent pool can be seen in the emerging industrial or electronic technologies, examples including airplanes, radios, MPEG-2 audio and video, etc.

Patent pools recently have begun to be the subject of interest in the genomics or biotechnology community also.

HISTORY

Patent pools are contributing an important role in shaping the face of the industry, over the last hundred years. Looking back the first patent pool was formed by Grover, Baker, Singer, and Wheeler & Wilson in 1856 for sewing machine. All of them were fighting with each other in respect of patent infringement. In Albany, during one of the Court proceeding, Orlando B. Potter, a lawyer and president of the Grover and Baker Company, proposed all of them to settle the dispute by allowing each other to use the technology by pooling rather than to run out of profits.

At the beginning of the twentieth century one of the patent pools was formed with the intervention of the US Government. The two major airplane manufacturers at that time the Wright Company and the Curtiss Company indulged in patent wars with each other resulting in non production of airplanes. The US Govt. which was in need of airplanes as the World War I is approaching pressurized both the companies to form a Patent Pool in order to use technology of each other to manufacture airplanes.

In 1924, an organization first-named the Associated Radio Manufacturers, and later the Radio Corporation of America, merged the radio interests of American Marconi, General Electric, American Telephone and Telegraph (AT&T) and Westinghouse, leading to the establishment of standardization of radio parts, airway's frequency locations and television transmission standards2.

Other examples of patent pools formed in the industry are as below. A more recent patent pool was formed in 1997, by the Trustees of Columbia University, Fujitsu Limited, General Instrument Corp., Lucent Technologies Inc., Matsushita Electric Industrial Co., Ltd., Mitsubishi Electric Corp., Philips Electronics N.V. (Philips), Scientific Atlanta, Inc., and Sony Corp. (Sony) to jointly share royalties from patents that are essential to compliance with the MPEG-2 compression technology standards3.

In 1998, Sony, Philips and Pioneer formed a patent pool for inventions that are essential to comply with certain DVD-Video and DVD-ROM standard specifications yet in another patent pool was formed in 1999, this time by Toshiba Corporation, Hitachi Ltd., Matsushita Electric Industrial Co., Ltd., Mitsubishi Electric Corporation, Time Warner Inc., and Victor Company of Japan, Ltd. For products manufactured in compliance with the DVDROM and DVD-Video formats4.

TYPES OF PATENT POOL

Basically patent pool are classified on the fact that how the patents are exploited and by whom. It can be done by cross-license agreement in which common licensing is done by the two partners to third party or which can be done by providing the separate legal entity which becomes the owner of the patents to be licensed.

Moreover patent pool can be divided into two basic parts namely an open pool and a closed pool. There are several patent owners in the closed pool, out of these members one of the member is selected to license the pooled patents on behalf of the all the members to the third party.

While in the open patent pools are usually outsourced to professional management companies, such as a joint venture, set up particularly to manage the patent pool. These management companies handle the upholding of the patent pool by adding new patent owners who meet the criteria, coordinate among the patent owners, and consult license fees with third-party licensees.

ADVANTAGE AND DISADVANTAGES OF PATENT POOL

As Patent pools impart several benefits to third parties which includes in improvement and establishment of new technologies, reduction in the transaction costs to prepare these new technologies, clearing blocking positions of the patents, and escaping the costly infringement litigation. Particularly, patent pools allows interested third parties "one-stop shopping," for patent licensees to assemble all the necessary patents for using a certain technology from one place rather than procuring licenses from all patent owners individually. On the other hand, sometimes patent pools are considered as a barrier for third parties who are not part of the pool, more particularly in the export manufacturing company, where a domestic player who is not member of a patent pool and cannot enter foreign market without paying royalties. Normally the patent pool controls all the patents at an internationally adopted standard and always asks for huge royalty. As the patent pool is the only source for the license rights, the manufacturing third parties are left with no choice other than to negotiate for higher royalties. For example where the licensee is lowest cost producer but has to pay the same royalties as a higher cost companies in another countries.

Patent pool is indeed a double edged sword for third parties who acquire the technology from the pool. On one side, it facilitates third parties to acquire and use the technology without incurring any significant negotiation costs while dealing with the individual patent owners. While on the other side, sometimes third parties are left with no choice to implement the technology wherein he may have little or no power to negotiate for the royalty due to lack of alternatives than to use that technology.

GLOBAL SCENARIO RELATED TO PATENT POOL

Major corporations have announced their participation in patent pool. There is a formation of new pools. Patent pools have gained attention recently because of their prominent use in several industries, whether is it for the electronics, or wireless or biotechnology.

In modern wireless systems, there are literally tens of thousands of patents involved in what the consumer experiences as a 'communication system.' Many of these patents make claims on very particular aspects of the overall communications system that are useless without the technology claimed in other patents. As a result, we see heavy use of patent pools in the wireless industry.5

They are, however, receiving greater attention from telecom and high tech industry leaders. Moreover companies related to the biotechnology field are also forming the patent pools which helps in eradicating the problem related to blocking of patents or stacking of licenses.

PATENT POOL- INDIAN PERSPECTIVE

In India, the concept of patent pools is fairly new and has been always linked to the proposed solution to the affordable health care. The patent pool is being viewed as one of the ways to accumulate number of patents held by different companies, so as to promote development and access to medicines affecting the poor people in the developing countries.

According to the survey conducted by TERI, that after the amendment of Patents Act, 1970, survival for most of the companies with only biogenerics will be difficult. Moreover many are doubtful about good and useful new patents will be part of pool. Indian Patent Act, 1970 does not provides for any provisions for formation or patent pools or any guidelines for the same however the same neither restrain for creation of the same. Many people are interpreting section 102 of the Patents Act as facilitative provision for setting up patent pool which is administered and managed by Government in public interest. One barrier could be anticipated in the way of patent pools i.e. anti competitive policies governed by Competition Act, 2002. It prohibits any kind of license or agreements which are anti-competitive. Patent pools can be anti competitive when the members of the pool agrees for not to grant license to third parties and the same time by fixing pricing and quota.

Recently one Indian generic drug manufacture Aurobindo Pharma Limited and MedChem, joined the Medicines Patent Pool (MPP) for manufacturing of several anti-retroviral medicines. This will facilitate Aurobindo Pharma to have access the patented drugs of that Gilead recently introduced into the pool. Now Aurobindo can manufacture and sell tenofovir in larger number of countries without paying any royalty.

CONCLUSION

In view of the above, patent pool definitely helps in attaining the great advantages in the development of the new technologies and new products. This in addition helps in saving money and time and moreover helps in providing the greater access to the information for its pool members. Patent pools will be going to help in accessing life saving drugs to the poor people of developing and least developed countries.

In India for the development of commerce industry access to the patented knowledge have become most important. Henceforth the knowledge regarding the concept of patent pooling should be known to every inventor so as to get good progress in the field of technology or pharmaceuticals. Nonetheless it is to be seen that how will these patent pools operate in the context of Indian patent regime or any other legal barrier will come in their way.

Footnotes

1. JOEL I. KLEIN, "CROSS-LICENSING AND ANTITRUST LAW", American Intellectual Property Law Association, May 2, 1997, http://www.justice.gov/atr/public/speeches/1118.htm , last accessed on 07/06/2014

2. Clark, Jeanne, PATENT POOLS: A SOLUTION TO THE PROBLEM OF ACCESS IN BIOTECHNOLOGY PATENTS?, December 5, 2000 http://www.uspto.gov/web/offices/pac/dapp/opla/patentpool.pdf , last accessed on 07/06/2014

3. Ibid

4. Ibid

5. Closson Kevin, SPIE Professional October 2009 | Bonus, Webonly content, Patent Pools: Are they right for your business? A Nerac analyst discusses the pros and cons, http://spie.org/x37543.xmllast accessed on 10/06/2014

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