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

Carl Shapiro

University of California, Berkeley - Haas School of Business

March 2001

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.

Number of Pages in PDF File: 34

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Date posted: June 14, 2001  

Suggested Citation

Shapiro, Carl, Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting (March 2001). Available at SSRN: http://ssrn.com/abstract=273550 or http://dx.doi.org/10.2139/ssrn.273550

Contact Information

Carl Shapiro (Contact Author)
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-5905 (Phone)
HOME PAGE: http://faculty.haas.berkeley.edu
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References:  23
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