Patent Pools and Cross-Licensing in the Shadow of Patent Litigation

Patents, Intellectual Property and Competition Policy and Antitrust

Article Snapshot


Jay Pil Choi


International Economic Review, Vol. 51, No. 2, pp. 441-460, 2010


Usually, firms are uncertain whether patents are valid or invalid, and how the patents will be interpreted. This uncertainty affects firms’ willingness to license patents or form patent pools. Patent pools shelter invalid patents from challenges.

Policy Relevance

Antitrust authorities should disallow patent pools before courts have ruled on the validity of the pooled patents.

Main Points

  • The validity of patents is subject to dispute, and the breadth of protection that a patent will extend to a given invention is unclear; patents are uncertain.
  • Patent pools based on certain, valid (“ironclad”) patents benefit consumers when the patents cover complementary inventions (inventions likely to be used together).
  • If patent pools are not allowed, and Firm A challenges Firm B’s complementary patent, Firm B will often challenge Firm A’s patent.
    • A firm is most likely to sue if its patents are strong and the other’s patents are weak.
    • If both firms’ patents are weak, firms have little reason to litigate.
  • Society benefits when patents are invalidated in court, making the technology freely available; society benefits from litigation of weak patents, but firms often litigate strong patents.
  • Consumers are harmed if invalid patents are pooled, because it raises the price of the technology; patent pools should not be allowed until all patents are validated by a court.
  • Patent pools should not be allowed for substitute (competing) technologies.
    • With substitute patents, only one patent can be valid.
    • Pooling would raise prices because invalid patents would be pooled.
  • Antitrust authorities should allow pooling of patents of uncertain validity for complementary technologies if litigation costs are high.


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