Patent pooling is an effective and proven tool for helping companies manage their product and technology licensing programs. For licensees, pools of patents from multiple licensors generally carry lower royalty fees than the total for licenses secured from the licensors individually. Patent pooling also saves valuable time that licensees would otherwise spend negotiating with multiple patent holders -time better spent delivering products to market. Licensors likewise benefit from a central point of contact that encourages patent bundling and fair play. Both parties enjoy lower transaction costs.
One-Blue, LLC, the one-stop shop for patent licenses from the leading providers of Blu-ray Disc technology, operates a pool of a large number of licensors and more than ten thousand BD product patents that are essential to upholding BD, DVD, and CD standards. One-Blue offers licenses for various BD products including: players, recorders, playback drives, recorder drives, software, PCs, pre-recorded discs, and recordable discs. As a result of this considerable undertaking, One-Blue has developed a series of best practices for other industries to consider as they create their own patent pools. By following these steps, companies can ensure that their patent pool is governed fairly, offers a level playing field for licensors and licensees, lowers costs for all parties, and is able to take swift enforcement action when required.
The power of independence. Fifteen patent owners are licensors in the pool operated by One-Blue, namely Cyberlink, Dell, Fujitsu, Hewlett- Packard, Hitachi, JVC Kenwood, LG, Panasonic, Philips, Pioneer, Samsung, Sharp, Sony, Taiyo Yuden, and Yamaha. Five of these companies are also shareholders in One-Blue, LLC, but One-Blue operates the pool as an independent licensing entity. For complex markets with diverse patent environments, this model allows a pool to more equitably manage the licensing process and removes possible points of contention between licensors. Also, by moving licensors away from the front lines of enforcement action, an independent entity has the autonomy to aggressively enforce patent rights anywhere and against any party.
Required participation in enforcement. In the event an enforcement action is warranted, all members of the pool agree to participate by making their patents available for use by legal counsel. This prevents some members from opting out of enforcing their patents, while at the same time enjoying the pool’s benefits.
Per-batch licensing. All too often, companies sign a license agreement but fail to abide by its terms. A company that refuses to pay royalties increases the cost of business for all other parties while giving itself an unfair advantage. Per-batch licensing closes this loophole by licensing only the products shipped, not the company itself. Each product shipment carries licensing documentation and registration logos with serial numbers that can be verified by customs officials, distributors and retailers. While it may seem like an extra step, per-batch licensing ensures licensees pay for what they ship.
Pre-netting. In many cases, licensees hold pre-existing patent licenses with various patent pool licensors. Pre-netting takes these pre-existing licenses into account and subtracts what would be due licensors that have the granted pre-existing licenses when calculating royalty payments. This step ensures that licensees pay only for what they use and encourages broader participation in the pool.
Patent weighting. Not all patents are created equal. One mistake patent pools often make is to ignore this fact and assign the same worth to each patent in the pool. Not only does this approach reward licensors whose essential patents may be more valuable, it also discourages a patent arms race in which licensors are incentivized to roll as many less valuable patents into the pool as possible in order to inflate their royalty share.