Licensing Acquired Patents
Villanova University Charles Widger School of Law
George Mason Law Review, vol. 21, p. 979
Villanova Law/Public Policy Research Paper No. 2014-1003
Patents have always been licensed. Patents have always been acquired. Patents have even been acquired for the purpose of licensing new entrants. In short, there have always been secondary markets. But licensing acquired patents is a fairly recent business model. To be sure, there have been some historical exceptions but, for the most part, historical licensing and secondary markets primarily involved inventors (and their companies) and producers of products and services. While some of the same costs and benefits might apply to licensing of non-acquired patents by individuals or producing companies, examining the acquisition model improves analytical rigor.
This essay, presented at the “New Business Models and New Opportunities” panel of the Commercial Function of Patents in Today’s Innovation Economy conference, explores acquired patent licensing in two ways. First, it makes the case that the business model is new while presenting and gleaning knowledge from historic exceptions. Second, it suggests ways that acquired patent licensing can have a commercial benefit, even though it is the least socially beneficial type of licensing, and even if the licensed patents are likely to be invalid if tested in litigation.
Potential benefits are three-fold. Benefits are maximized with good faith negotiation and pricing that does not overvalue patents given their likely validity. Even so, some of the benefits might occur even if licensing fails and litigation ensues. First, the cost of finding relevant patents implies that patent owners are in a better position to communicate information than are producers. Second, patent licenses can provide operating freedom, especially as opposed to competitors who have not licensed. Third, patent licensing can improve the marketplace and incentivize earlier technology transfer -- eventually even cutting out the acquiring intermediary if it is efficient to do so.
Number of Pages in PDF File: 35
Keywords: patent, licensing, acquisition, NPE, trolls, PAE, technology transfer
Date posted: December 11, 2013 ; Last revised: December 31, 2014