Patent Thickets

 PATENT THICKETS

Scholars have used the term “patent thicket” to describe the problem of multiple overlapping rights that can hamper innovation by creating transaction barriers. Patent Thicket is where there are a number of patented inventions that is required for the production of a product. These multiple patents are in many circumstances owned by different individuals and extremely difficult to negotiate license. The problem of patent thickets and troll made it extremely difficult for many products to be put into market without the threat of infringement suits. Much of this thicket of overlapping patent rights results from the nature of the technology; computer hardware and software contain an incredibly large number of incremental innovations. Furthermore, as more patents are issued on incremental inventions, firms seek more patents in order to have enough bargaining chips to gain access to overlapping patents held by others. Questionable patents contribute to the patent thicket. Questionable patents can generate new types of licensing challenges, such as royalties layered on top of royalties, and can increase ambiguity about the patent environment, making business planning more difficult. Questionable patents in patent thickets can frustrate competition by current manufacturers as well as potential entrants. Because a company needs a license to all of the patents that cover its product, it can employ questionable patents to obtain excessive royalties or threaten to sue. For example, a questionable patent claiming a single routine in a software program could be used to hinder the production of the entire software program. This process can deter follow-on innovation and unjustifiably raise costs to businesses and, ultimately, to consumers.

Over the past twenty-five years, however, the scope of patentable subject matter has expanded significantly. For example, the Supreme Court, through two landmark decisions in 1980, held that both man-made, living organisms and computer software constitute patentable subject matter pursuant to Section 101. In 1999, the Federal Circuit ruled that business methods can be patented. Some Hearings participants claimed that patents on computer software and business methods are not necessary to spur the invention, commercial development, or public disclosure of software or business methods. Others disagreed. Some Hearings participants contended that software and business method patents can raise significant competitive concerns and deter innovation, especially because so much of the innovation in those fields builds incrementally on preceding work. This may raise the potential for thickets of patents to hinder, rather than accelerate, innovation and commercial development.

Patent Thickets are not granted merely to enable patentees to enjoy a monopoly for the importation of a patented article. A grant of stronger patents for early generations can weaken the incentives for later generations, who would want to invest in research and development. An excessive emphasis on patenting rather than innovating tends to create anticompetitive practices as a result of the rationale that develops from a fully protected patent system. Therefore the strategy draws on the mala fide use of patent rights to counter market competition, leading to patent thickets which hinder the entry of new firms and the elixir of innovations, which powers the economic engine of growth. The malaise of patent thickets exists in crucial industries comprising of semiconductors, biotechnology, computer software, and the Internet, patent system is creating a patent thicket. The issue of patent thickets tends to arise in industries, which survive, on constant innovation, leading to an intricate construction of patents, which deter and defeat the objective of consumer welfare and innovation. Patent thickets can be strong or weak dependent upon the criterion of difficulty in obtaining the licenses. In the former scenario, the licensing process is tedious, whilst ease in the grant of licenses proscribes the limits in the case of weak patent thickets. The patent thicket in combination with the risk of holdup and formal standard setting turns prickly to the entire gamut of mechanisms espoused to regulate the vices of the patent system and its exploitation. The remedies identified to ‘cut through the patent thicket’ involve cross-licenses and patent pools, which involve transaction costs for their implementation.

Patent Thickets by Velanati Jyothirmai @ Lex Cliq