The main rationale for patent pools in the age of IoT’s is to solve the stickiness problem of licensing (eg, by saving transaction costs for both licensors and licensees). Considering that connectivity standards such as 4G/5G, Wi-Fi or video codecs will be used across multiple industries by a much larger number of companies (compared to the smartphone industry), transaction costs will inevitably increase. Here the goal of patent pools is to simplify licensing (eg, by providing a single contract for all licensors and eliminating the discussion about patent quality as all patent pool members will have to agree and commit to the pool’s terms and conditions). These terms and conditions define, for example, how royalty will be shared among patent owners. When the industry agrees to these terms and conditions, stickiness can be reduced.
The success of a patent pool thus greatly depends on the number and size of patent owners that join and the licensees that take a license. However, joining a patent pool can be subject to a chicken and egg-type problem, as companies might be hesitant to join if no one else has yet. Further, pools should be attractive for licensees with a differentiated pricing model. As pool administrators promote the principle of a one-stop license, some patent owners are hesitant. Even as a member of a patent pool, some sort of stickiness remains – especially when licensors do not agree to the terms and conditions of the pool license yielding litigation in patent courts. Being a member of a patent pool but not being involved in the ongoing litigation of other members can create situations that are not always transparent and thus will not benefit the licensing strategy of all patent owners. There will likely be different models of aggregation on both sides of the table. On the one hand, patent pools aggregate patent owners but, on the other hand, there are defensive patent aggregators, which aggregate companies that need to license-in patented technologies.
At this year’s 2021 IIPLA a panel of industry experts discussed the topic of patent pools in the age of IoTs, including matters such as FRAND determination, the value of standards and standard essential patents (SEPs), patent litigation as well as patent regulation.