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Patent Pool - An Effective System to Share the Technologies!

A patent pool is a contract between two or more patent owners to licence one or more of their patents to each other or to third parties. Patent pools are frequently connected with complex technologies that necessitate supplementary patents to give effective technological solutions. From a legal and economic standpoint, patent pools have been the topic of ongoing debate. Patent pools, on the one hand, may have a good impact on competition and innovation. Companies can develop new goods and lower transaction costs by pooling intellectual property assets. On the other side, patent pools may give a chance for anti-competitive action in some circumstances: like any kind of cooperation among competitors, they carry the danger of collusive behaviour.

Patent pools are now widely used as the foundation for industry standards that provide companies with the technologies, they need to build compatible products and services, such as in the fields of mobile communications, information coding, and public health.

Generally speaking, when an inventor gets in a position wherein a complex technology requires a complementary patent to obtain an efficient form, but that complementary patent belongs to another patent holder, patent pooling comes into play. A patent Pool is similar to a joint venture created to share intellectual property rights.

What is the Albany Agreement that gave the First Patent Pool?

On October 24, 1856, history was made through the Albany Agreement, resulting in the first patent pool in US history called the ‘Sewing Machine Combination’ or ‘The Sewing Machine Trust’. Elias Howe invented the sewing machine (Patent Model. Patent No. 4,750, issued September 10, 1846) charging expensive licence fees to anyone who attempted to make and sell something similar. However, Singer discovered a few methods to improve Howe's concept, including incorporating a thread controller and combining a vertical needle with a horizontal stitching surface. Singer patented his version of the machine in 1851 and founded I.M. Singer & Co., although by that time, a number of other innovators had added barbed needles and continuous feeding devices to Howe's original invention, among other modifications.

Prior to the Sewing Machine Combination, firms could buy Elias Howe's rights for a royalty rate of $25 per machine sold. Orlando B. Potter, president of Grover & Baker, collaborated with Howe, Wheeler & Wilson and Isaac Singer's I. M. Singer and Company in 1856 to pool patents and agree on terms of usage. The stipulations were that at least 24 manufacturers be licenced, that the founding businesses share earnings equally, and that Howe get a $5 fee for each machine sold in the United States and $1 for devices exported. Only interests were pooled, prices were not set, and the market was open to fair competition, allowing businesses to focus on machine building and marketing rather than litigation.

Thus, Grover, Baker, Singer, Wheeler & Wilson founded the first patent pool for sewing machines. They were all battling it out over patent infringement, but patent pooling saved their time, money and efforts.

One of the most noteworthy pooling events of 1971 occurred when the US government became aware of the patent struggle in the aircraft industry, which stifles the development of new planes. A patent dispute between Wright and Curtiss hampered the development of better and newer aviation technology in the United States.

A committee appointed by Franklin D. Roosevelt proposed patent pooling as a solution to the problem. Unlike sewing machines or folding bed manufacturers, the proposed recommendation was not made voluntarily. Later on, many pharmaceutical companies used the patent pooling option in order to make their products more accessible by lowering research and development costs, which in turn affected the cost of selling.

What is taken into consideration in a valid patent pool?

The following three processes must be included in a valid Patent Pool.

  • It should be determined whether technology is competitive (complementary or substitute) and does not defeat the purpose of any anti-competition laws.

  • The Pool agreement should be examined in terms of licencing, i.e., it should grant a worldwide, non-exclusive, and non-discriminatory licence.