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Patent Pool Licensing Project (view source)
Revision as of 14:38, 3 August 2012
, 14:38, 3 August 2012→To Do
The project members are: Ed Egan, David Teece, and Ed Sherry. Access to this page and all sub-pages are restricted to project members.
=Literature Review=
As a first-step towards this project, Ed Egan did a reasonably thorough lit-review. The results are sorted by topic and listed as BibTeX entries on the [[Patent Pool Literature Review]] page.
=Research Question=
#A theory paper, where we outline each of the arguments and provide formal modelling that captures at least the major thrust of the arguments.
In all cases, we would need a literature review done - so I will do a . A solid first pass at this nextone is here: [[Patent Pool Literature Review]]. Likewise, in all cases we will need to get the basic economics down. Please read the section below and start fixing and adding material (or email it to me and I'll do it, if you aren't comfortable with the wiki).
The case-based paper is quick and easy, but isn't going to place into a good journal. The empirical paper, if done well (see the product-based sample, below), could place very well. A theory paper is only worthwhile if there is something sufficiently interesting going on to merit a model (most likely in the interaction between complements and network effects, etc).
=Discussion=
On the 3rd of August we discussed the project.
==Data==
Data availability is hugely problematic. The only paper with data inside and outside of a pool, Layne-Farrar and Lerner (2011), doesn't have data on licensing incidences or rates.
We dicussed the possibility of getting data from users and contributors directly. David suggested trying Dolby (his MBA student is their licensing manager).
There are further problems:
*Generally we won't know the distribution of royalties among the pool participants.
**Probably a metric based on number and value of patents. Often a simple proportionality.
*A license to the pool isn't a license to the actually essential patents
**Not all patents declared standard essential are actually essential. E.g. 30 declared, 15 actually essential... Which are essential isn't disclosed. This is a method to avoid antitrust scrutiny. I.e., they don't want to license substitutes/competing-patents.
**Patents are vetted by independent tech expert as 'essential'. This is probably not disclosed.
*SSOs provide lists of Dec'd Ess. But they won say if this is actually correct. (They don't want liability.)
**Even those without Dec'd Ess. patents, could still say that they have a patent that bears that on the patent - especially those that are not a part of the SSO. They could sue years later.
**Within the SSO, some firms make blanket declarations
**Some firms leave the SSO. E.g., RAMBUS quit SSO. Didn't make a RAND committment, made one declaration.
*The highest participation rate in a pool is estimated at 50%...
=Basic Economics=
##Network effects
##Substitution protection
##'Show-how'
These reasons may apply more or less in 'robust' versus 'fragile' pools. Each is currently a sketch outline - please add or fix each point as appropriate! Likewise, we should consider if there are reasons why patents held in pools might charge higher rates. Possibilities include:
The choice to participate in a patent pool is clearly endogenous. An entity opts to include a patent in a pool (subject to the pool's approval) if and only if this leads to higher profits.
The marginal cost (to a patent holder) of issuing an additional license is effectively zero in a patent pool, as the cost is incurred by the pool administrator (Is there a pass-back of costs?). Note that this excludes 'strategic costs' in the form of lost future rents from the license. On the other hand the marginal cost of issuing a licence to a non-pool patent can be considerable (again ignoring strategic costs). Therefore, in equilibrium, firms will be will to gain less marginal benefit from a patent pool license than a non-patent-pool license, and patents with lower marginal benefits will select into the pool.
===Exogenously-given sharing rules===
The value of a technology depends on its adoption. A patent pool may aid adoption by allowing developers access to all needed complementary technologies and by assuring consumers that the technology is here to stay (particulary when a pool is linked to a standard). As such a firm may earn higher total rents from including a patent in a pool, even if its marginal rents from each unit are lower.
Furthermore, a firm may gain more rents from the sale of a product that uses a patent than from licensing revenues from the patent itself. With complex products (requiring many diversely-held patents), a patent holder may be better off promoting adoption in order to secure upstream/downstream rents.
===Substitution Protection===
Particularly when pools are linked to standards, there is the possibility of later substitution. Standards undergo revision, and substituted patents might not be removed from the pool (this is an empirical question). As such, a firm with a weak patent that will be suffer from substitution in the next generation of the technology may have a strong incentive to join the pool. The firm can choose between higher rents for a short duration, or lower rents for the duration of the patent term (or the pool). ==='Show-how'=== Another reason why rates may be lower in pools concerns the need for 'show-how' with certain patents. Although a patent may embody the 'know-how' of a technology, the implementation of a patent can require technology-specific knowledge that is difficult (and hence costly) to transfer. Patent licenses in pools do not make provision for the transfer of show-how (right?), so patents which require costly knowledge transfer will be more likely to be licensed seperately, and at a rate that compenses the patent-holder for its show-how transfer.
=Empirics=
