Volume Title: Innovation Policy and the Economy, Volume 1 Volume Author/Editor: Adam B. Jaffe, Josh Lerner and Scott Stern, editors Volume Publisher: MIT Press Volume ISBN: 0-262-60041-2 Volume URL: http://www.nber.org/books/jaff01-1 Publication Date: January 2001
Chapter Title: Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting Chapter Author: Carl Shapiro Chapter URL: http://www.nber.org/chapters/c10778 Chapter pages in book: (p. 119 - 150)
Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting
Carl Shapiro, University of Ca4fornia at Berkeley
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 holdup, 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 holdup 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 in-
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 toward insuring that antitrust will help solve the problems caused by the patent thicket and by holdup rather than exacerbating
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