Licensing in uncertain times

2009-04-15T20:20:00.000-07:00

Much has changed in the world of licensing. We started out with technologies developed or invented by individuals and gave out basic patent licenses from a single entity (inventor or company). Years later moved on to licensing other IP along with it, such as know how and/or trademarks. Later yet the world migrated to technologies developed and adopted by standards organizations (ISO, MPEG, ITU, etc, etc), resulting in patent "thickets" (many patents owned by a variety of entities pertaining to a single standard technology). We solved that problem by forming IP committees and patent pools. Patent pools are collections of patents owned by many entities, but available from a "one-stop-shop" licensing administrator. Examples of those still active today are MPEG LA and Via Licensing, among others. Patent pools had their value in their heyday, simplifying access and easing time-to-market issues. They also had (and have) their detractors who claim patent pools are nothing but "officially sanctioned" extortion mechanisms.

Then we developed systems so complicated that several standards needed to be developed in order for interoperability to function. Video standards, audio standards, systems standards, carrier standards, interconnect standards, transport standards, etc., ad infinitum...We now have a "pool thicket" - multiple standards incorporated into a final consumer product, each with its own patent pool, often with its own patent pool administrator, all license agreements with different definitions, terms, conditions, payment and reporting requirements, etc.

While we were all busy traveling the globe to yet another patent pool meeting somewhere, the world of inventions, market developments and incredible market phenomena had been quietly accelerating to an absolutely breathtaking pace. The Internet and the free flow of information has changed everything.

Patents, patent pools, and the associated licensing processes largely still in use today are all based on time frames carried over from the last century or even before. It takes months and many thousands of dollars to develop and idea into something that can be filed with the patent office. It then takes several more years (and many more dollars) for a patent to finally issue, let alone wind its way through all the foreign patent offices where equivalent patent protection is sought. Patents have a typical life time of 20 years, and often continuations and "add-on" inventions carry this charade on even longer.

In this day of "instant" or near-instant requirements for good ideas to get to market and be used and exploited, there simply isn't enough time (nor enough free cash) to go through all that, particularly for small to medium sized concerns..

It is our view today that the best and most valuable way for a small entity or a start-up to exploit an invention is to simply license its know-how (maybe coupled with some branding for future sustainability), and get out there and start the business. Once cash starts flowing in (and the invention has not been disclosed such that it would constitute a "disclosure" under patent law), there is still time to file a few patents if it looks like there will be some longevity in the application (i.e. >10 years).