Patent Licensing Is Too Opaque

Article By : Rick Merritt, EE Times

Someone needs to shine a light on the tech industry's practices with patent royalties, but the latest EU effort takes the wrong angle.

Someone needs to shine a light on the tech industry’s practices with patent royalties, but the latest EU effort takes the wrong angle.

The patent system is too opaque for many reasons. For example, it’s an incredible challenge for patent examiners to determine prior art given the breadth, depth and fragmented nature of the existing pools of granted patents around the world.

On the other side of the patent business, companies are free to negotiate whatever deals they wish when licensing their portfolios. Because licensing is conducted in strict secrecy, small groups of experts determine the market value of patents and keep that information to themselves.

Only when push comes to shove and one company drags another into court is there any sort of public discussion of the value of a patent. The wide swings among cases and even in appeals of a single case such as Apple v. Samsung show this field is as complex and muddy as it is vital.  

So, I applaud the European Union for its efforts to set public guidelines for patent royalties. An EU official said voluntary guidelines should be complete by the end of the year and could become the basis for future rule making, according to a Reuters report.

The EU has a long history of being proactive in patent and antitrust matters. By contrast the U.S. generally takes a more laissez faire stance, letting the market set standards while the courts settle individual disputes.

I think there’s a better idea somewhere in the middle.

Attempts at patent reform in the U.S. have shown patents play wildly different roles in different industries. I doubt the EU can define any singal set of guidelines that is fair to players as diverse as individual inventors and big companies in tech and pharmaceuticals.

So rather than try to set a single standard for all industries, require each industry to report what it does. For example, publicly traded companies could be required to report more aspects of their patent licensing transactions just like they need to report profits and revenues.

As such information is made public it can be studied in the open. Practitioners and investors could make better informed decisions.

The patent system is all about making innovation open for others to use. In a similar spirit, governments should require companies to be more transparent about how they license their patents.

Given adequate light, different players and industries will find their way. They just need to be liberated from the dark arts of licensing as practiced in today’s secret negotiations.

— Rick Merritt, Silicon Valley Bureau Chief, EE Times

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