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Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting

Author

Listed:
  • Carl Shapiro

    (University of California, Berkeley)

Abstract
In several key industries, including semiconductors, biotechnology, computer software, and the Internet, our patent system is creating a patent thicket: an overlapping set of patent rights requiring that those seeking to commercialize new technology obtain licenses from multiple patentees. The patent thicket is especially thorny when combined with the risk of hold-up, namely the danger that new products will inadvertently infringe on patents issued after these products were designed. The need to navigate the patent thicket and hold-up is especially pronounced in industries such as telecommunications and computing in which formal standard-setting is a core part of bringing new technologies to market. Cross-licenses and patent pools are two natural and effective methods used by market participants to cut through the patent thicket, but each involves some transaction costs. Antitrust law and enforcement, with its historical hostility to cooperation among horizontal rivals, can easily add to these transaction costs. Yet a few relatively simple principles, such as the desirability package licensing for complementary patents but not for substitute patents, can go a long way towards insuring that antitrust will help solve the problems caused by the patent thicket and by hold-up rather than exacerbating them.

Suggested Citation

  • Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwple:0303005
    Note: 34 pages, Adobe.pdf
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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