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July 30, 2013

Congress Investigates Patent Pools

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Over the last several years the U.S. patent system has received a great deal of attention. However, patent pools, one area that was previously largely ignored, are now coming under greater scrutiny.

A “patent pool,” is just what it sounds like: A group of companies agreeing to cross-license patents relating to a particular technology, a sort of a co-op managing specific intellectual property. They have been used in the U.S. at various times for well over 150 years. Patent pools, by design, were intended to create efficiencies, by reducing the required investment of time and money of chasing down and striking agreements for each piece of technology that together creates a broader technology, such as video streaming technology.

To avoid charges of collusion—that is, companies working together to the detriment of the consumer—the Department of Justice (DoJ) must approve of the pool and agree not to pursue the usual antitrust enforcement related to concerns brought on by the arrangement. In return the pool agrees to abide to the conditions set by DoJ and to continue to meet the intent of patent pools, that is, economic efficiencies.

Now the U.S. Congress, because of the actions of MPEG LA, is taking a harder look at patent pools and whether they do serve a broader public interest. The for-profit patent pool management firm MPEG LA has, since 1997 when the DoJ approved it, licensed the use of DVD and video streaming technology. A letter of inquiry from Congressmen Bachus and Farenthold to the Department of Justice pointing out MPEG LA specifically asks whether patent pools inhibit innovation and whether it is true that, “MPEG LA’s manipulative price structures are not only standing in the way of consumers being afforded access to these new innovations, they are also driving up prices on devices that are currently available.”

In essence, MPEG LA has been accused of charging excessive rates for access to technology which is no longer even protected by patent. That is, charging a fee for technology that is freely available to the public without any license.

The Congressmen have asked for the DoJ to inform them of any ongoing oversight that they conduct or interaction with the pool administrators, and whether the DoJ is aware of any complaints by businesses or consumers about patent pools.

Patent’s, and the patent pool’s, contribution to creativity should and can be appreciated, even as we work to secure the system in a way that allows it to continue to protect IP and ensure that innovation flourishes. For the sake of the next generation of creativity in technology—and for consumers’ wallets— bad business practices must be put to rest. The future for technological continues to burn bright but only if bad actors in the patent pool world are eliminated and the patent pool structure is allowed to thrive.

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