Patent pools in 5G: The principles for facilitating pool licensing

Patent pools collect patents from multiple patentees and license them out as a package. They offer one-stop-shop licensing efficiencies, reduce transaction costs, and increase the predictability of the licensing environment for the benefit of innovation diffusion. However, pools failed to take off for previous cellular standards. This article analyses both retrospectively the reasons for such failures and prospectively what makes the 5G environment more conductive to pool formation and licensing. Avanci, a patent pool for licensing cellular standards in the Internet of Things (IoT), is a significant development but has limited licensing coverage so far. The article then recommends five policy principles to facilitate pool licensing in the IoT. They include recognising that only enough upstream SEP owners need to join the 5G pool to create a market signalling effect. Some vertically integrated SEP owners may remain outsiders, and some bilateral licensing may co-exist without damaging the pool's success. To encourage upstream SEP owners to join the pool, they should be allowed to set ‘high enough’ royalty rates and divide pools' royalties among members under value proportionality rules. 5G pools must also be flexible and adopt different licensing programs that consider the specificities of each IoT market. Finally, pool administrators should consult with IoT implementers before establishing licensing programs for them and have infringement legal standing if everything else fails. These principles would go a long way in spurring the broader use of 5G pool licensing for a more efficient, straightforward, and predictable IoT licensing environment.