Report: Patent pools may stifle competition

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Patent pools, designed to spur innovation and reduce the cost of litigation, may actually be having anticompetitive effects according to a report released by the former competition policy director for the Federal Trade Commission.

According to the report, “Barriers to Competition on the Innovation Superhighway: How the Lack of Antitrust Scrutiny of Patent Pools Deters Competition,” patent pools — which allow companies to group and cross-license patents of certain technologies instead of filing individual competing patent claims — are having adverse effects.

“While patent pools may generate some efficiencies and benefits, they may also cause anticompetitive effects like price fixing, collusion and thwarting innovation,” said David A. Balto, who is now a Washington-based public interest antitrust attorney, in a statement announcing the results of the study.

While the pools foster innovation with greater speed and efficiency for patent holders and consumers, they also have the potential to drive innovators who are not in the pool out of the market, primarily because (1) pool members may be incentivized to eliminate competition from outside the pool, and (2) pools can exercise market power through the inclusion of non-essential and/or invalid patents, the report found.

Regulations have been put in place by the Justice Department and other federal agencies to prevent pools from stifling competition. But because of a lack of enforcement, Balto said, “some pools are becoming the tollbooth on the high-tech superhighway, causing consumers to pay more for less innovation.”

Based on the findings, the report urges the FTC, Justice Department and other antitrust groups to increase oversight of the system, including conducting more rigorous follow-up on existing pools to ensure their pro-competitive purposes for the benefit of licensors, licensees and consumers.