Author: Hans Smit**
Published: July 2007
Categories of Disputes
Description: In the rapidly spreading technological revolution, products put on the market increasingly embody patents owned by different patent owners. Not atypically, these owners also are competitors. In fact, a product may embody patents by more than two patent owners. In those situations, no producer can put its product on the market without a license by one or more or even a fair number of its competitors. The pressing problem then is to devise an arrangement, under which a producer can obtain a license under its competitors’ patents. In a typical case, the producer seeks not only a license under its competitors’ patents, but also grants a cross license under its patents to its competitors. Of course, the relevant significance of the contribution of a particular license to the end product may vary. This further contributes to the difficulty of putting an appropriate price on a license and cross license in the case of a particular producer.
The mobile phone industry presents an excellent example. Patents covering the production of mobile phones are held by the large players in the field, such as Ericsson, Nokia, Motorola, Qualcomm, and Samsung. The MP3 audio format, in the development of which Microsoft, Apple, and Thomson played significant parts, provides another.
Of course, each producer could refuse to license its competitor. But this is no solution, since the competitor can also refuse a cross license. And the antitrust authorities would be likely to get involved when competition and progress were stifled in this manner. Efforts have therefore been made to create arrangements, under which each patent owner agrees to grant a license on appropriate terms to each producer. The mobile phone producers have created such an arrangement. Under this agreement, ratified by all patent holders, each patent holder agrees to…
*Notes and Comments
**Stanley H. Fuld Professor of Law, Columbia University.