Private agreements for coordinating patent rights: the case of patent pools

Inventors and users of technology often enter into cooperative agreements for sharing their intellectual property in order to implement a standard or to avoid costly litigation. Over the past two decades, U.S. antitrust authorities have viewed pooling arrangements that integrate complementary, valid and essential patents as having pro-competitive benefits in reducing prices, transactions costs, and the incidence of legal suits. Since patent pools are cooperative agreements, they also have the potential of suppressing competition if, for example, they harbor weak or invalid patents, dampen incentives to conduct research on innovations that compete with the pooled patents, foreclose competition from downstream product or upstream input markets, or soften competition with outside substitutes that do not rely on the pooled patents. In synthesizing the ideas advanced in the economic literature, this paper explores whether these antitrust concerns apply to pools with complementary patents and, if they do, the implications for competition policy to constrain them.