July 8, 2002. James Love's presentation at the 14th Annual AIDS
Conference in Barcelona.
An Essential Health Care Patent Pool.
What is a Patent Pool?
A patent pool is an agreement between two or more patent owners to license one or more of
their patents to one another or third parties.
Patent Pool Examples
A patent pool may also be defined as “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 pool.” See Joel I. Klein,
An Address to the American Intellectual
Property Law Association, on the Subject of Cross-Licensing and Antitrust Law (May 2, 1997),
(noting that United States v. Line Materials , 333 U.S. 287, 313 n.24 (1948) states that the term “patent pool” is not a term of art.)
Historically, to protect the public good, governments have created collective rights organizations: mandating compulsory licensing of patents at established fees, creating and managing public
patent pools, directly purchasing key enabling technology patents and placing them into
the public domain, and even creating mergers between firms. Private
institutions or industry-led consortia have also organized private patent pools
including small contract-based patent pools, large industry-wide patent pools,
and technology standard-setting patent pools.
Institutions For Intellectual Property Transactions: The Case for Patent Pools (August
1999), Robert P. Merges writes:
A patent pool is an arrangement among multiple patent holders to aggregate their patents.
A typical pool makes all pooled patents available to each member of the pool. Pools also
usually offer standard licensing terms to licensees who are not members of the pool.
In addition, the typical patent pool allocates a portion of the licensing fees to each member
according to a pre-set formula or procedure [...] Of course, there is one major difference between private collectives and conventional, statutory compulsory licenses: in these organizations, the members, and not
Congress or a court, set the price. This almost always involves extensive negotiations;
sometimes, ongoing adjustments are carried out via a permanent administrative structure.
The point is, however, that the collective organizations present a simple, coherent menu of
prices and other terms to licensees – and that they do so after extensive internal
In 1856, the Sewing Machine Combination formed one of the first patent pools
consisting of sewing machine patents. See Robert P. Merges, Institutions For Intellectual Property Transactions: The Case for Patent Pools (August 1999).
In 1908, Armat, Biograph, Edison and Vitagraph entered an agreement under which the four firms
assigned "all the patents in the early-day motion picture industry." The agreement
also specified the royalties that were to be paid into the pool by licensees of the pool patents
such as movie exhibitors. More on the history at: The Edison Movie Monopoly: The Motion
Picture Patents Company vs.the Independent Outlaws by J. A. Aberdeen,
First Studios by Marc Wanamakert, Archives of Universal Studios: Carl Laemmle and the Early
Years of Universal and The Business of the Movies by Rich Warms.
In 1916, the owners of various patents related to folding beds and other similar devices
entered into an agreement providing exclusive license to the Seng Company to manufacture and sell under
the pool patents. Of the total royalties, 33 percent was alloted to the Pullman Couch Company. The license
contract was signed by the Davoplane Bed Company (7 patents), the Pullman Couch Company (13 patents) and two inventors.
The Seng Company paid a fixed percentage to the pool. Pool members split the royalty according to a formula in the pooling agreement.
In 1917, as a result of a recommendation of a committee formed by the Assistant Secretary of the Navy (The
Honorable Franklin D. Roosevelt), an aircraft patent pool was privately formed encompassing
almost all aircraft manufacturers in the United States. The creation of the Manufacturer’s
Aircraft Association was crucial to the U.S. government because the two major patent holders,
the Wright Company and the Curtiss Company, had effectively blocked the building of any new
airplanes, which were desperately needed as the United States was entering World War I.
See Harry T. Dykman, Patent Licensing within The Manufacturer’s Aircraft Association (MAA), 46 J. PAT. OFF.
SOC’Y 646, 648 (1964).
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
standards. See The
Radio Manufacturers Association (August 5, 1998).
A 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 standard. The MPEG -2 Standard patent pool comprises a number of essential patents
put into the hands of a common licensing administrator empowered to grant licenses on a non-discriminating basis, collect royalties and distribute them
on a pro-rata allocation based on each Licensor's contribution. The terms of the arrangement
were negotiated with and approved by the US Department of Justice.
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.
In 1999, another patent pool was formed 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 DVD-ROM and DVD-Video formats. See Letter from Joel I. Klein, Assistant Attorney General, Department of Justice, Antitrust Division, to Carey R. Ramos, Esq. (June 10, 1999)
DVD Patent Pool:
DVD Licensing Site. DVD6C Licensing Agency.
There are presently 80 U. S. Patents for DVD-ROM drives, DVD-Video players and DVD decoders, and 96
U. S. Patents for DVD-ROM discs and DVD-Video discs. The royalties under the joint license
for DVD-Video players and DVD-ROM drives are 4% of the net selling price of the product or
U.S. $4.00 per product, whichever is higher. Royalties for DVD decoders are 4% of
the net selling price of the product or U.S. $1.00 per product, whichever is higher (more information).
an argument from Bruce Perens for Linux to have a patent pool as a means of defense.
The basic idea behind OpenPatents.org
is to change the rules of the patent game such that it is to the advantage
of participants to help solve the problems of software patents.
December 1999. Katherine Moore, Ph.D., Ethics Advisory Committee. Sharing Genetic
Research Tools, The Ethical Considerations.
Patent Pool and Antitrust Laws
June 9-12, 20002. Panel: A Solution: Can Patent Pooling Uncork the Technology Transfer Bottle
Neck and Create Value? (International Biotechnology Convention & Exhibition. Toronto, Ontario, Canada).
February 8, 2002. Lawrence M. Sung. Greater Predictability May Result in Patent Pools.
This article refers to biotechnology inventions to include isolated genetic molecules, such as DNA or RNA, and biologics produced through recombinant
At its core, biotechnology is the exploitation of nature’s design, standing on the
shoulders of the biological templates of DNA and RNA. For biotechnology, genetic
information represents an “industry standard” analogous to those described above in the
electronics and telecommunications areas. Accordingly, the landscape of increasing
patent protection to this genetic material favors the voluntary entry of biotechnology
industry members into patent pooling arrangements.
Indeed, the vast amount of genetic information, and its significance as a
fundamental research tool even absent functional knowledge, can give rise to an almost
overwhelming number of patents, the true value of which may be unascertainable without
the cooperative efforts of other companies. In any event, the overall transactional costs
associated with risk assessments based upon this relatively uninformed valuation of patent rights may alone outweigh any perceived benefit to the maintenance of an
isolationist business strategy.[SNIP]
The fundamental features of a patent pool include the integration of
complementary technologies, the reduction of transaction costs, the clearance of blocking
patent positions and the avoidance of costly infringement litigation. Its effectiveness
springs principally from a consensus among the participants that individual patent rights
will be made available to other members on fair, reasonable and nondiscriminatory terms.
In any event, the ability to obtain a straightforward, reliable freedom to operate in an
otherwise complex arena of intellectual property will be a dominant appeal of a
biotechnology patent pool for prospective participants and nonmember licensees alike.
Given the dynamics of biotechnology research and development, the reliance by
the industry on cooperative market-based technology transfer strategies through patent
pools or other CROs may be inevitable. If so, the prospects for future success will likely
depend on the swift acceptance and implementation of such collective rights programs.
In the early 1900’s, US courts gave sweeping deference to the licensing of patents and
such activities were practicably immune from the Sherman Act. Patent pools’ freedom
from any scrutiny under the US antitrust laws ended in 1912 with the US Supreme Court’s
decision in Standard Sanitary Manufacturing Co. v. United States which dissolved a
patent pool because of antitrust violations.
Selected Documents and Links on Patent Pool
In 1945, the US Supreme Court dissolved one of the most notorious
patent pools in Hartford-Empire Co. v. United States.
This patent pool of major glass manufacturers covered ninety-four percent
of all the glass made in the United
States, which allowed its members to sustain glass prices at unreasonably high levels.
In the 1960s, the US Department of Justice closely evaluated all patent pools and
created a list of nine patent licensing practices that were per se antitrust violations
(known as the “Nine No-Nos).
Recently, the US Department of Justice and the US
Federal Trade Commission (“FTC”) have recognized that patent pools can have
significant procompetitive effects and may improve a business’ ability to survive this
era of rapid technological innovation in a global economy.
The Department of Justice’s and the Federal
Trade Commission’s Antitrust Guidelines for the Licensing of Intellectual
Property (the “Guidelines”) recognize that [l]icensing, cross-licensing,
or otherwise transferring intellectual property … can facilitate integration
of the licensed property with complementary factors of production” and
that such integration can “benefit consumers through the reduction of
costs and the introduction of new products.” (Guidelines, §2.3.) The
Guidelines also caution, however, that “[w]hile intellectual property
licensing arrangements are typically welfare-enhancing and
procompetitive, antitrust concerns may nonetheless arise” particularly
“when a licensing arrangement harms competition among entities that
would have been actual or likely potential competitors in a relevant market
in the absence of the license (entities in a ‘horizontal relationship’).” (Id.
February 8, 2002. Scott A. Chambers. Patenting Procedures Foundational Issues in Patents and Antitrust. See: FTC/DOJ Public Hearing.
June 6-7, 2002. George G. Gordon. American Bar Association's Antitrust
Section. Analyzing IP License Restrictions Under the Antitrust Laws: A
General Outline of Issues.
April 17, 2002. James J. Kulbaski. Comments On Patent Pools and Standards For Federal Trade Commission Hearings Regarding Competition & Intellectual Property
March 19, 2002. James P. Love. Perspectives on Competition and
Intellectual Property Law and Policy in the Knowledge-Based Economy.
March 2002. David Perkins. The Role of Alternative Dispute Resolution in Patent Disputes
February 20, 2002. Josh Lerner. Patent Pools: Some Policy Considerations (presentation)
February 6, 2002. Charles James. Opening Day Comments for FTC/DOJ
Public Hearings on the
implications of antitrust and patent law and policy for innovation and other aspects of consumer welfare.
In the late 1990s, the Division examined through the Business Review process three different
proposals to jointly license patents to other companies, an MPEG patent pool (a video compression technology)
and two DVD patent pools. In all three cases, the Division concluded that the proposed arrangements did not
appear to pose antitrust concerns.
December 2001. Joseph A. Yosick. Compulsory Patent Licensing for Efficient Use.
The Division's decisions rested on a number of factors, including the fact that the pools license only those
patents essential for a manufacturer to comply with an established standard. The pools were designed to capture
the efficiencies that may come from licensing complementary technologies. Concomitantly, they were designed
to limit the anticompetitive effect that can arise from pooling technology, such as the elimination of competition
or the increase in prices that could arise if substitute technologies (that is, technologies that could compete
against each other) were placed in a pool.
In these hearings, we will encourage exploration of a number of broad questions about patents pools, such as
whether pools actually result in the competitive problems they are hypothesized to cause and whether the
antitrust authorities have focused on the right criteria when evaluating patent pools.
The paper compares compulsory patent licensing provisions in the United States and
modern, foreign nations.
October 6, 2001. Richard Gilbert. Economics, Law, and History of Patent Pools and Cross- Licensing Agreements
September 2001.James Love and Michael Palmedo. Examples of Compulsory Licensing of Intellectual Property in the United States.
March 2001. Carl Shapiro. Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting
March 2001. Barbara T. Sicalides & Kathleen A. Mullen.
The Plane Lands on Patent Pooling.
January 19, 2001. USPTO. White Paper on Patent Pooling
The white paper suggests that patent pools can be used to create a number of social and economic benefits.
These benefits include the elimination of problems caused by "blocking" patents or "stacking" licenses, reducing licensing
transaction costs, sharing the risks in research and development, and facilitating the exchange of technical information or know-how not covered by
patents. The use of patent pools in the biotechnology industry could be beneficial for both the public and
private sector. The public would benefit by having ready access due to streamlined licensing
conditions to a greater amount of proprietary subject matter. Patent holders would also
benefit: they would gain greater access to proprietary subject matter of other patent
holders and they would have access to affordable prepackaged patent "stacks" that
could be easily licensed. Patent holders could also derive additional revenue sources for inventions that might not otherwise be
Winter 2000. Sheila F. Anthony. Antitrust and Intellectual Property Law: from Adversaries to Partners
December 5, 2000. Jeanne Clark, Joe Piccolo, Brian Stanton, and Karin Tyson. Patent Pools:
A Solution to the Problem of Access in Biotechnology Patents?
August, 1999. Robert P. Merges, University of California School of Law.
Institutions for Intellectual Property Transactions:
The Case of Patent Pools.
November 27, 1995. John H. Barton. Patent Breadth and Antitrust: A Rethinking
1988. Donald A. Hicks. Is New Technology Enough?: Making and Remaking U.S. Basic Industries at 31.
1989. Ross Thomson. Invention, Markets, and the Scope of the Firm: The Nineteenth Century
U.S. Shoe Machinery Industry, 18 Bus. & Econ. Hist. 140, 143 (“Patent control further
strengthened [the] competitive positions [of the three largest firms] via pooling for the three major
dry-thread firms (in conjunction with Elias Howe) . . . .).
1988. George Bittlingmayer. Property Rights, Progress, and the Aircraft Patent Agreement,
31 J. L. & Econ. 227 (describing accounting system for aircraft pool).
1961. William Greenleaf. Monopoly on Wheels. (describing automobile patent pool administration).
Summit Tech., Inc. & VISX, Inc., No. 9286 (FTC Mar. 24, 1998)
In March 1998, the FTC announced charges against Summit Technology, Inc. and VISX, Inc. regarding
their pooling of patents related to photorefractive keratectomy ("PRK"). PRK is a form of
eye surgery that uses lasers to reshape the cornea and frees many people from the need to wear
glasses or contact lenses. They were the only firms with the US Food and Drug Administration ("FDA")
approval to market PRK equipment. They licensed most of their PRK patents to a
shell entity named Pillar Point Partnership.(61) This partnership then licensed the
full portfolio of patents back to Summit and VISX, and only to Summit and VISX.
Summit and VISX sold or leased PRK equipment to eye doctors and sublicensed the
doctors to perform PRK procedures. The patent pooling arrangement required Summit
and VISX to pay the Partnership a $250 fee each time a PRK procedure was performed.
Summit and VISX, in turn, charged each of their respective sublicensees a $250
per-procedure fee. Neither Summit nor VISX had an incentive to reduce
this fee because the patent pooling agreement obligated each firm to pay this amount to the pool.
See for more details.
UNITED STATES v. GLAXO GROUP LTD. ET AL. 410 U.S. 52 (1973)
SUMMARY: A British drug manufacturer held an American patent on the dosage form of
griseofulvin, a fungicide, and another British drug manufacturer held an American patent on a
microsize dosage form of griseofulvin. The two manufacturers made a patent pooling agreement
containing certain restrictions on the sale of bulk-form griseofulvin. Similar bulk-sale restrictions
were contained in sublicensing agreements made by the two manufacturers with three American
drug companies. In a civil antitrust action in the United States District Court for the District of
Columbia, the United States Government sought to enjoin enforcement of the bulk-sale
restrictions on the ground that they involved unreasonable restraints of trade, in violation of 1 of
the Sherman Act. Also, the government challenged the validity of the American patents which had
been obtained by the British manufacturers. The District Court held that the bulk-sales restrictions
constituted per se violations of 1 of the Sherman Act, but that since the manufacturers were not
relying on the patents in defense of the government's antitrust claims, the government could not
challenge the validity of the patents (302 F Supp 1). Although the District Court granted the
government's request for injunctive relief against future violations, the District Court denied the
government's request that the manufacturers be ordered (1) to make bulk sales on reasonable and
nondiscriminatory terms and prices to all bona fide applicants, and (2) to grant reasonable-royalty
licenses for the manufacture of griseofulvin (328 F Supp 709).
Foreign patent pool case. Certiorari to the US Court of Appeals for the seventh Circuit.
No. 49. Argued January 22, 1969 -- Decided May 19, 1969.
ZENITH RADIO CORP. v. HAZELTINE RESEARCH, INC., ET AL. 395 U.S. 100.
United States v. Birdsboro Steel Foundry & Mach. Co., Inc., 139 F.Supp. 244, 108
U.S.P.Q. 428 (W.D. Pa. 1956) (defendants were justified in entering into agreement to cross-license patents for cooling beds used in steel mills, where, in absence of such agreement, cooling beds embodying
the best features of both defendant’s patents could not lawfully be made, and neither the defendants nor
the public could obtain any benefit without agreement); International Mfg. Co., Inc. v. Landon, Inc., 336
F.2d 723, 142 U.S.P.Q. 421 (9th Cir. 1964) (“No commercially feasible [swimming pool cleaning and
filtering] device could be manufactured under one of the patents without infringing the other. For this
reason, Cavenah and Pace were found to be blocking, or interlocking, patents.).
BESSER MANUFACTURING CO. ET AL. v. UNITED STATES 343 U.S. 444; 72 (1952)
SUMMARY: The validity of provisions of a decree in an anti-trust suit in which patent abuses
were proved, for compulsory licensing of the use of the patented inventions, giving lessees an
option to purchase leased machines, and the action of the trial judge in leaving the matter of
royalties to a committee, reserving to himself the casting vote in case of deadlock, are approved
by eight members of the Court in an opinion by Jackson, J.
HARTFORD-EMPIRE CO. ET AL. v. UNITED STATES 323 U.S. 386 (1945)
The difference between legitimate use and prohibited abuse of the restrictions incident to the
ownership of patents by the pooling of them is discussed in Standard Oil Co. v. United States,
283 U.S. 163 (1931).
Bayh-Dole Act, 35 U.S.C. §§ 200-211 and the Federal Technology Transfer Act of
1986, 15 U.S.C. 1301 et seq. - provide the statutory basis and framework for federal
technology transfer activities
Uniform Biological Material Transfer Agreement
(UBMTA) developed by the academic community and NIH.
Report of the National Institutes of
Health (NIH) Working Group on Research Tools.
1935 US Congressional Patent pooling hearings:
Patent Pool in the News
These various institutions [industry-wide pools] have differed materially in the
type of organization
created by the agreements. Perhaps the loosest of all is the automobile
manufacturers agreement, and obvious [sic] the most severe restrictions are
imposed where the patents pass into the hands of a single owner, yet all these
agreements have in common the principle that within the industry, the individual
monopoly created by patents is abolished in the form it is provided by statute and
a different system is substituted more in harmony with the needs of that industry.
[I]n the airplane cross-licensing agreement, after completely abolishing the
monopoly of the individual inventor and opening every patent to every member of
the association, it provides that a board of arbitrators may decide in any case what
reward should be paid to individual patent owners and this is based not upon the
official determination of patentability by the Patent Office, but upon the unofficial
determination of the importance of the invention by a board of arbitrators (quoted by Merges 19).
Competition and Intellectual
Property Law and Policy in the Knowledge-Based Economy FTC/DOJ Public Hearings February-May 2002.
Patent Strategies of Japanese Company.
CPTech Page on IP and Health
CPTech Page on Compulsory Licensing
CHI Legal & Intellectual property glossary
April 18, 2002. Maureen Sirhal. Intellectual Property: Experts Weigh Value Of Patent Pools, Cross Licensing
April 11, 2002. Microsoft Attacks Free Software Developers with New License
March 14, 2002. Holly J. Wagner. MPEG-4 License Fee Under Attack. More on
On2 Technologies web site.
March 6, 2002. Damien Cave. Stop. Pay Toll. Download.
December 2001. Lisa Mueller. Patent Pools: Should the biotech industry jump in?
July 13, 2001. Rochelle K. Seide & Michelle LeCointe. Trendspotter: Just Say No to Patent Pooling for Genomics
February 12, 2001. Scott Fields.
Patent Pools: A Solution to Biotechnology Patents Access.
October 16, 2000. Paul Meller. EU says yes to DVD manufacturers' patent pool.
September 1998. Dana J. Parker.
Everybody Into the (Patent) Pool!
November 24, 1998. Junko Yoshida. Digital-TV patent pool draws fire in Europe.
1997. Junko Yoshida and Mark Carroll China flexes standards muscle