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< | Seizure as a solution to the tragedy of the anticommmons in patent law |
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> | Forced pooling as a solution to the tragedy of the anticommmons in patent law |
| | The anticommons and its tragedy
An anticommons occurs when multiple owners each have a right to exclude others from a scarce resource and no one has an effective privilege of use. The “tragedy of the anticommons”, coined by Michael Heller, is when the right to exclude is exercised by some of the right holders, with the result that the resource becomes under-utilized. Heller has discussed this occurrence in post soviet regimes [4] and in biomedical research with Rebecca S. Eisenberg [5]. In the particular case of patents the under-utilization is the suppression of innovation due to the cost of using upstream resources. This problem becomes magnified because the rights holders have monopolies on the resource - the innovator cannot find an alternate supply of the resources they need. |
| | The standard argument for granting patent holders the right to exclude is that it is an incentive to innovate. Thus, the argument goes, removing that right will chill innovation as patents will become less valuable because of the taking of rights. Our solution tries to walk the line between ensuring incentives for innovation and decreasing the hurdles and tolls that an innovator needs to take advantage of the protected ideas in downstream research.
Seizure through a forced pooling scheme |
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< | A patent pool has been a solution to encourage innovation in the past. Upon entering World War I the US government brokered the creation of a patent pool to encourage aviation, which was stagnating due to disagreements between the Wright company and their competitors [2]. In the realm of copyright, collectives for authors and musicians exist to lessen the transaction costs of licensing [3]. |
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> | Patent pools have been a used to stop under-utilization if patents in the past. Upon entering World War I the US government brokered the creation of a patent pool to encourage aviation, which was stagnating due to disagreements between the Wright company and their competitors [2]. In the realm of copyright, collectives for authors and musicians exist to lessen the transaction costs of licensing [3]. |
| | Our concept of forced pooling is simple: when an anticommons in a particular resource or group of resources is found to be deterring innovation the government can step in and seize the right to exclude from the patent holders, and place these patents into a patent pool. This effectively overcomes the three problems of transaction costs, conflicting goals and overvaluing of patents: the actors have no right as to how their property is used in the pool. Note that we do not discuss here who decides what 'deterring innovation' means - it is an important question beyond the scope of this paper. |
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< | The question then becomes what constitutes 'fair compensation'. We propose a mandatory licensing scheme to reward the patent holder. When an entity wishes to use the pool they must detail what patents they wish to use and devote some capped percentage of the gross income to the members of the pool whose patents were used. This scheme is detailed in figure 1. Thus, we retain some semblance of market in that the 'better' patents get used more and thus produce more income, ensuring that the patent holders will receive some form of fair compensation based on the worth of the use of their research. |
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> | The question then becomes what constitutes 'fair compensation'. We propose a mandatory licensing scheme to reward the patent holder. When an entity wishes to use the pool they must devote some capped percentage of the gross income to the members of the pool whose patents were used. This scheme is detailed in figure 1. Thus, we retain some semblance of market in that the 'better' patents get used more and thus produce more income, ensuring that the patent holders will receive some form of fair compensation based on the worth of the use of their research. |
| | Benefits of the forced pooling scheme
The forced pooling scheme is not very different from the liability scheme proposed by Bar-Gill and Parchomovsky [1]. In both schemes the right to exclude is taken and replaced with some monetary compensation. The major differences, and benefits of our forced pooling scheme, are the lower transaction costs, greater predictability of damages and the greater incentive for the industry to consolidate their rights independent of government interference.
Lower transaction costs and greater predictability |
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< | The liability scheme relies on courts to set the price of the patent to the infringer ex post. Presumably, the threat of lawsuit would then lead to negotiations about how valuable the patent was to the new invention. However, this could open the infringer to crippling litigation. Imagine a the manufacturer of a dvd player, which uses thousands of patents. Under the liability scheme, the manufacturer will need to anticipate hundreds of negotiations and lawsuits to bring their product to market, an unpredictable task and a deterrent to innovation. |
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> | The liability scheme relies on courts to set the price of the patent to the infringer ex post. Presumably, the threat of lawsuit would then lead to negotiations about how valuable the patent was to the new invention. However, this could open the infringer to crippling litigation. Imagine a the manufacturer of a dvd player, which uses thousands of patents. Under the liability scheme, the manufacturer would need to anticipate hundreds of negotiations and lawsuits to bring their product to market, an unpredictable task and a deterrent to innovation. |
| | The forced pooling scheme, on the other hand, has a known capped percentage of gross income to go back to the pool, so the liability is predictable, and there is no need to go to the courts or bargain with different rights holders. |