Freedom to operate is always major concern in developing high technology companies. Every day a Patent Troll somewhere threatens horrible patent infringement litigation unless a company licenses the Troll's portfolio of obscure patents. So far the choices have been to stand and fight in court or make a deal with the Troll. However there may be a third option - collaborate with others in the field as part of a patent pool and grow the market together.
Historically the first patent pool was set up in the mid-nineteenth century with a group of sewing machine manufacturers after Elias Howe, the sewing-machine inventor, sued the companies making sewing machines. Howe and the three main sewing machine manufacturers subsequently made a deal to share their patents and license them to outsiders.
The threat of the First World War was instrumental in forming two patent pools for strategic purposes by the US Navy. In the first instance, Wilbur Wright had tied up the aircraft industry with infringement litigation against the Herring-Curtis Corporation, so the Navy co-opted all the patents. Also radio technology development had been stalled for 10 years over vacuum tube patent disputes, so in this case the Navy enforced a patent pool for US defense advantage in 1919.
For many years murky, conflicted and crowded patent situations in the electronics and computer fields have been resolved by arrangements of cross licensing by industry giants such as Motorola, IBM, Microsoft and INTEL - all noted for making enormous revenue through licensing deals. Strategic licensing decisions accelerated R&D and sold lots of products, many of which became dominant industry solutions in the marketplace.
The most successful formal patent pools have been the DVD technology patent pool of Sony, Philips and Pioneer and the pool for MPEG data compression technology. These pools based upon industry standards managed to pass the test of the US Federal Antitrust Guidelines for Licensing of Intellectual Property. The stated objectives of the US policy is for ".integrating complementary technologies, reducing transaction costs, clearing blocking positions and avoiding costly infringement litigation." Examples of violations are obvious price fixing or market division.
Some patent pools have run afoul of US antitrust legislation. In 1998 VISX and Summit Technology were forced by the FTC to dissolve their patent pool for laser eye surgery equipment. The FTC claimed they restricted others from using their patents, drove up prices and reduced competition. In 2003 the Philips Corp. was found guilty by the International Trade Commission of "patent misuse" in tying licensing arrangements of unrelated patents to its portfolio of CD-R patents.
The field of biotechnology would seem to be a place where patent pools would work to the public good, generate income, and unleash research by providing freedom to operate, given the thousands of overlapping genetic sequence patents issued or pending.
Dr. Jorge Goldstein of Sterne, Kessler, Goldstein & Fox P.L.L.C. in his presentation at a recent Licensing Executives Society meeting in Seattle stated that a developing a diagnostic lab tool such as a gene chip array to scan human tissue samples for a single genetic disease would become a licensing nightmare. For instance a tool for detection of cystic fibrosis would require a stack of licenses from patentees covering the 25 mutations that would be part of a standard test.
Defining the scope of the situation, he made the point that there are an estimated 1.4 million single nucleotide polymorphisms in the human genome which could link to genetic diseases and approximately 650 genetic diseases tests exist or are under development.
While a few genetic diseases such as Huntington 's involve a single mutation, many such as Alzheimer's and hereditary breast and ovarian cancers are polygenic (involving multiple genetic variations) and would be good candidates for patent pools.
Dr. Goldstein in his paper cited below proposes a structure for patent pooling of genetic tools, involving standards to be set by the American College of Medical Genetics. A key element would be an independent arbitration system to allocate royalties and make decisions on patents to be included the pool. He made the case that a collaboration of patent holders would be mutually profitable and encourage rather than retard further research.
The reduction in financial risk and guarantee of revenue provided by patent pools might make certain areas of biotechnology a more attractive investment. Certainly, freedom to operate problems for technologies such as PCR, stem cells, and gene therapy could benefit from patent pools. The ugly alternative might be legislation to enforce compulsory licensing for certain kinds of patents.
Certainly the USPTO thinks something should be done, since they issued a white paper (cited below) to the effect that patent pools might resolve the problem of private companies benefiting from government funded genome projects through their patent portfolios.
There is a great deal of precedent for licensing collectives in the media industry, such as ASCAP, BMI, the Copyright Clearinghouse Center , and AccessCopyright that collect royalties on behalf of copyright holders. Why not a Biotechnology Patent Licensing Collective?
Clark, Jeanne et al. "Patent pools: A solution to the problem of access in biotechnology patents?" US Patent and Trademark Office, Dec.,5, 2000 .
Ebersole, Ted J., Marvin C. Guthrie and Jorge A. Goldstein. "Patent Pools as a Solution to the Licensing Problems of Diagnostic Genetics." Intellectual Property & Technology Law Journal , Jan. 2005.
Fields, Scott. "Patent Pools: A Solution to Biotech Patents Access." Intellectual Property Law , Feb. 12, 2001 .
Goldstein, Jorge A. "Patent pools and standard setting in the biotechnology industry." Paper presented at CASRIP, Seattle , July 11, 2005 .
Levang, Bradley J. "Evaluating the Use of Patent Pools for Biotechnology: A Refutation to the USPTO White Paper Concerning Biotechnology Patent Pools" Santa Clara Computer and High Technology Law Journal, Dec. 2002
Resnik, David B and J.D. Resnik. "A Biotechnology Patent Pool: An Idea Whose Time Has Come?" Journal of Philosophy, Science and Law , v. 3, Jan 2003.
Sainte Antoine, Paul H. "Is Yo ur Patent Pool Clean?" The Computer Industry Newsletter, Spring 1999.
Shapiro, Carl. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting." In Innovation Policy and the Economy . Wash. , DC, National Bureau of Economic Research, May 4, 2000 .