Patent Markets: An Opportunity for Technology Diffusion and FRAND Licensing?

INTRODUCTION I. LICENSING AND TECHNOLOGY DIFFUSION A. Why Patent Licensing Enhances Technology Diffusion B. Standard Setting and FRAND Terms II. THE EMERGENCE OF A PATENTS MARKET III. A MARKET ILLUSTRATION: IPXI AND UNIT LICENSE RIGHTS IV. PATENT MARKETS: TOOLS TOWARDS ENHANCED TECHNOLOGY DIFFUSION AND FULFILLMENT OF FRAND LICENSING COMMITMENTS? A. Features Favoring Technology Diffusion 1. Time Efficiency 2. Transparent Access 3. Equitable and Non-Exclusive Access to Technologies 4. Fair Pricing and Reduction of Legal Costs in Licensing Process 5. Inclusion of Patented Technology or Application Necessary to a Unit in ULR Contracts B. Market-Established Prices as Criteria in Interpreting FRAND Licensing Terms CONCLUSION INTRODUCTION The increased complexity of technological features and a growing pace of innovation are forcing the innovation industry to adopt new research and development (R&D) strategies. Indeed, the production of most of today's technologies requires a variety of machines and processes that are significantly more diverse than those available in any single firm. In addition, the nature of firms is changing and as firms have a tendency to become smaller, there is a greater need for access to technologies that small firms cannot develop themselves. An increase in technology diffusion is also needed to address global challenges such as climate change and human health. For these reasons, there is a need for strategic alliances and innovative licensing agreements among industries. (1) At a time when technology diffusion is thus more needed than ever before, new solutions are required. However, in the absence of efficient forums, licensors, and licensees miss important opportunities in valuing intellectual property assets and diffusing technology. The emergence of patent markets where patents have become tradable assets can therefore present a unique opportunity, as these markets appear to be a relevant way of getting around the anti-commons. Furthermore, patent markets are of interest in the current fair, reasonable, and non-discriminatory (FRAND) licensing debate. (2) As flagged by the recent amicus curiae submission presented by the Federal Trade Commission (FTC) in Apple v. Motorola, (3) FRAND licensing commitments are central to the fight against anticompetitive practices in the much needed, but highly complex, standard setting processes. In our interconnected society ruled by technology intensive devices, industry has come together to institute standard-setting organizations (SSOs), which are industry groups establishing technical models, rules, and principles authoritative in a particular industry. These organizations have become increasingly important and promote innovation as well as interoperability of products. (4) Standard setting and standard-essential patents can nevertheless be problematic from an antitrust point of view. This issue has been receiving a lot of attention lately, notably because of numerous litigations in the high-tech industry. Illustrative of these debates surrounding standard setting processes is the Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights' hearing on "Standard Essential Patent Disputes and Antitrust Law" held on July 30, 2013. (5) Conscious of the competition issues caused by standard-essential patents, SSOs have adopted rules that control the disclosure and licensing of such patents. One of these rules is the requirement of FRAND licensing commitments by standard-essential patent owners. (6) These commitments have however proved difficult to enforce. Innovative implementation tools are therefore needed and patent markets may be relevant in establishing FRAND terms. The aim of this article is to analyze the legal opportunities presented by patent markets for technology diffusion, as well as the role of patent markets as tools in establishing and fulfilling FRAND terms. …