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Patent pools under pressure

Emma Barraclough

Do patent pools ultimately benefit consumers or the companies that agree to package their IP rights as part of a technical standard? That’s a question antitrust officials must grapple with, but it’s one that raises questions of both theory and practice.

Drawing the right line between the end of monopoly rights and the start of competition has always been tricky, but the development of globally deployed, mind-bogglingly complex technology poses a growing challenge.

Owners of patents deemed to be essential to the standards that ensure the compatibility and standardisation of technology say that patent pools cut costs and make the business of licensing far more efficient. But antitrust officials are now paying attention to the downsides.

Joaquin AlmuniaLast week EU Competition Commissioner Joaquín Almunia (right) underlined the Commission’s increasingly dim view of industry practices relating to standard-essential patents when he issued a statement of objections to Motorola Mobility over its efforts to injunct Apple in a row over FRAND licensing.

In doing so, he indicated where the Commission may be going to draw that line between patent rights and competition wrongs. “The protection of intellectual property is a cornerstone of innovation and growth. But so is competition,” he said.

There’s growing pressure for antitrust watchdogs on the other side of the Atlantic to get tougher on patent pooling practices too. This week David Balto, a former policy director at the FTC, urged his ex-colleagues to ensure that patent pools are not used as a pretext for naked price fixing, that the arrangements create efficiencies that could not be achieved in their absence, and that pro-competitive benefits outweigh anticompetitive effects.

There are few people who would disagree with the theory. Putting it into practice, however, is more difficult. The aim of antitrust law is ultimately to protect consumers, but that means different things to different people: if patent pools provide the companies participating with more cash to use for innovation and developing new products, is that better than reducing barriers to entry or cutting prices in the short-term?

David BaltoOne option is to ask economists to unearth data and develop their analysis. Another, as Robin Jacob suggested earlier this year, is simply to look at industry outcomes. In a swipe at economists’ attempts to value patents and intervene in IP competition policy, he said that the mobile telecoms sector had seen “astonishing and rapid” innovation despite (or perhaps even because of) the use of patents in the sector. But perhaps another is to ensure that antitrust officials have access to resources needed to hold patent owners to the promises that they make about their IP.

Balto says that in recent years, some high-tech companies have acquired large patent portfolios subject to antitrust conditions designed to ensure they do not suppress competition by the way they use and license the IP. “Many observers, however, remain skeptical that the parties’ commitments will be fulfilled,” he concludes.

Giving competition officials the resources they need to hold patent owners to their promises sounds an inherently sensible middle way. It’s not just IP opponents or capitalism conspiracy theorists who should exercise healthy scepticism about the way patent pools work. After all, Adam Smith himself had a few doubts about the intentions of people of the same trade meeting together.


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