The Competitive Impact of Patent Pooling Arrangements

Transcription

1 MATERIALS / MATÉRIAUX 2012 Competition Law Fall Conference Conférence annuelle d'automne 2012 en droit de la concurrence The Competitive Impact of Patent Pooling Arrangements Andrea Agathoklis Murino (Washington) September 20-21, et 21 septembre, 2012 Hilton Lac-Leamy Gatineau, Québec Presented by the Canadian Bar Association s (CBA) National Competition Law Section and the Professional Development Committee of the CBA Présentée par la Section nationale du droit de la concurrence de l Association du Barreau canadien (ABC) et le Comité du développement professionnel de l ABC

2 The Competitive Impact of Patent Pooling Arrangements Andrea Agathoklis Murino Presentation to the Canadian Bar Association s 2012 Annual Competition Law Fall Conference September 21, 2012

3 The Impact of Princo II Sony Lagadec and Philips Raaymakers patents covered CD encoding technologies. Raaymakers was incorporated into the industry standard, but Sony and Philips only offered a pool license including both sets of patents. Princo licensed the bundle, ceased payments, and was sued for infringing the Raaymakers (but not the Lagadec) patents.

4 The Impact of Princo II The court rejected Princo s patent misuse defense to infringement. Patent misuse is generally not available unless scope of patents is enlarged. The court found no connection between any anticompetitive attempt to suppress Lagadec and the alleged misuse of the Raaymakers patents. Applying the rule of reason, the court found that Lagadec was an inferior technology.

5 Procompetitive Justifications for Patent Pools Pools containing complementary patents can clear blocking positions. One stop shopping may reduce transaction costs. Group licenses can help solidify technological standards and encourage technology transfer. FRAND licensing may be a requirement of pool membership.

6 Anticompetitive Risks: Exclusionary Conduct The Summit / VISX pool for vision correcting surgery clearly demonstrates the potential for even pools that clear blocking positions to act as vehicles for collusion. The collective strength of the pool members can be used to exclude technologies competing with the pool. E.g., Allied Tube & Conduit Corp. v. Indian Head, Inc.

7 Anticompetitive Risks: Suppressing Innovation (Pool Members) Professors Lampe and Moser have found that the mid-1800s sewing machine patent pool lead to decreased patenting activity among pool members. Grantback provisions force firms to share the reward of follow-on innovations.

8 Anticompetitive Risks: Suppressing Innovation (Outside Firms) A litigious pool can draw on the collective strength of its members to discourage outside firms from undertaking research into the technologies covered by the pool. Pools that require membership as a condition of license may deter entry. Evaluating the infringement risk for a pool license is substantially more costly than for a targeted license.

9 Prior Agency Guidance on Patent Pools The DOJ has approved pools that take measures to ensure that only patents essential to practice the covered technology are included. Although the Summit / VISX pool arguably would have brought new technologies to market, it was dissolved by the FTC. By contrast, the proposed MPEG-LA VP8 pool is aimed at eliminating rival technologies. The DOJ opened an investigation in March 2011.

10 What do modern patent pools look like? Modern pools are large and growing. Patent Pool Size, at Formation Today Date Patent Pool MPEG-2 DVD-3 Summit & VISX DVD-6 3G AVC/H.264 Pool DVD-6 No. of Patents N/A 1,700+ 1,400+ Grantback clauses allow pools to grow quickly after creation.

11 MPEG-LA s Patent Pools The H.264 pool contains over 1700 patents. Is it realistic that all of these patents are complementary? Is it realistic that all of these patents are essential? Large pools blunt the incentive for pool members to actively screen for substitute or non-essential patents. MPEG-LA administers multiple pools covering substitute technologies. Can MPEG-LA still be considered an independent administrator?

12 Reflections Princo II set a high bar for patent misuse, increasing the need for regulatory review of patent pooling arrangements. Modern patent pools are substantially more complex than the past pools approved by the DOJ. Pools like those administered by MPEG-LA have rarely come before antitrust regulators in the past. The antitrust agencies, particularly in light of Princo II, must avoid overreliance on the analysis of prior pools. Prior agency guidance should not be taken as acquiescence that pools are generally procompetitive. Agencies must undertake a holistic inquiry into each pool. But query whether the resources are in place to do so.