Frequently Asked Questions Regarding Patent Pools and Standard Setting Organizations

Q.  What is a Standard Setting Organization?

A.  A Standard Setting Organization (SSO) is an industry group that sets a common standard for particular industry in order to ensure compatibility and interoperability of devices manufactured by different entities.  A SSO is sometimes referred to as a Standards Development Organization (SDO).

Q.  What is a Patent Pool?

A.  A patent pool is formed by two or more companies agreeing to license their patents related to a particular technology.  Patent pools typically require the patents being licensed to be essential to the practice of a standard.

Q.  What is an essential patent? 

A.  The specific requirements of an essential patent may vary, depending on the organization and rules of the patent pool.  An “essential patent” to a pool is specifically defined by that pool, but generally is any patent necessarily infringed in implementing a standard.  Some pools include patents claim technology which may not be absolutely necessary to the practice of the standard, but which is commercially necessary to implement the technology, meaning all consumers demand the technology to be in a certain product.  As an example, suppose a fast forward function was not part of a DVD standard, no manufacturer would make a DVD player without a fast forward function, so a patent to fast forward technology may not be technically necessary, but would be commercially necessary to the practice of the standard.

Q.  How is a patent determined to be essential?

A.  The process for determining essentiality will be defined by the patent pool.  Generally, a patent is deemed essential if an independent evaluator concludes that the patent is essential to the practice of a technical standard.

Q.  Why do patent pools exist?

A.  Patent pools are designed to promote efficiencies by allowing users of the technology protected by the patents in the pool to have one-stop shopping for licenses to the essential patents.  The single license offered by a patent pool constitutes an efficient and pro-competitive alternative to negotiating individual licenses from individual patent holders.  If a patent is essential to the standard, there is no way to design around the patent and still practice the complete industry standard.  Essential patents owned by several different entities may create barriers to the industry standard from being widely deployed.  Licensing the entire package of the essential patents in the pool is simpler, reduces transaction costs, and prevents blocking patents included in the licensing package from being enforced by diverse entities.

Q.  Do patent pools violate U.S. antitrust laws?

A.  A properly established patent pool will not violate U.S. antitrust laws.   The Department of Justice (DOJ), through its Business Review Procedure, allows an organization to submit a proposed plan to the Antitrust Division and to receive a statement as to whether the Antitrust Division will challenge the action under the antitrust laws, and many patent pools have been approved by the DOJ.  With respect to the MPEG-2 patent pool, the DOJ indicated that it would not pursue an antitrust action because:

the licensing program was well designed to capture all the efficiencies that can come from joint licensing of complementary technologies, while incorporating many facets that should minimize the possibility of competitive harm.  In addition to the benefits from the information the portfolio license will convey to licensees, the use of the independent-expert mechanism will help ensure that the portfolio will contain only patents that are truly essential to the MPEG-2 standard, weeding out patents that are competitive alternatives to each other.

Q.  If I join a patent pool as a licensor, must I license all my patents that are essential to the standard?

A.  Generally, the answer is yes.  A licensor may have to agree to submit any and all patents it believes in good faith to be essential, which are owned by it or its affiliates, for an evaluation to determine essentiality. 

However, unique situations may arise where a licensor does not have to license all of their essential patents.  Whether a participant in a patent pool can avoid an obligation to include essential patents through the use of an irrevocable trust is an interesting issue.

Q.  If I decide to join a patent pool, under what terms am I agreeing to license my essential patents?

A.  The patent pool license will control the specific terms.  Generally, licensors agree to license any and all of their essential patents on fair, reasonable, and non-discriminatory terms. This is referred to as FRAND or RAND.  In light of guidance by the DOJ, this obligation is included in patent pools as a means of enhancing the pro-competitive character of the patent pool.  The exact licensing rates will be defined in the patent pool documents.

Q.  What is a patent pool Licensing Administrator?

A.  The patent pool Licensing Administrator oversees the operation of the patent pool.  The Licensing Administrator’s primary duties are to use commercially reasonable best efforts to identify potential licensees (i.e., monitor infringement), and to collect and distribute royalties.  The licensors of the patent pool will usually grant a license for the essential patents to the Licensing Administrator, and then the Licensing Administrator will issue portfolio sublicenses.  While the Licensing Administrator may monitor for infringement, any law suits are filed by the patent owners. 

Q.  If I decided to become a licensee to a patent pool, do I have any obligations with respect to my essential patents?

A.  Many patent pools include a grant back provision, which may require a non-exclusive license on fair, reasonable and non-discriminatory terms to license any and all of their patents that are deemed essential to the practice of the standard.

Q.  If I am a Licensor in a patent pool, what are my options if I am a sued for patent infringement by a patent pool sublicensee or prospective patent pool sublicensee?

A.  A licensor may have a right to instruct the Licensing Administrator to terminate a particular sublicense under any of the Licensor’s patents as to any sublicensee that has brought a claim for patent infringement against the Licensor.

Q.  If I join a patent pool as a licensee, will I owe back royalties?

A. It is common for patent pools to collect back royalties from licensees. 

Q. How do I know if my invention would be a good fit for a patent pool?

A.  Inventions related to industry standards are usually a good fit for patent pools, provided the patent is essential to the practice of the standard.  Where there is not a standard or other document defining what is required to implement a compliant product, it may be challenging to have the patent included in a patent pool.

Q. Who makes the determination if my invention is eligible for a patent pool?

A.  An independent evaluator is used by patent pools to determine whether a patent is essential to an industry standard and therefore may be included in a corresponding patent pool. 

Q. What should I do in prosecution to help my chances of getting into a patent pool?

A.  Depending on the technology and the specific patent pool:

  • Data structure claims - Could be the strongest type of claims
  • Avoid unnecessary “determining” step or means
  • Avoid the word “each”
  • Draft a claim chart comparing claim element with standard during prosecution
  • It is acceptable to write very detailed claims, as long as all claims features are from standard
  • Draft claims which use the exact same terminology as the standard
  • File diverse claims