Of the many alternative innovation mechanisms that have been aired, patent pools are among one of the more prevalent. It has several obvious benefits. It works within the patent system and doesn’t require a massive shift to another type of innovation system. It reduces transaction costs by requiring cross-licensing to all members of the pool, and these reduced costs also increase incentives to develop such drugs. It also of course, clears blocking patents. However, there are also several questions which arise. What exactly are the incentives for companies to join these patent pools? Or more specifically, what incentives are there for companies to throw in their patents into these pools, when they could otherwise make monopoly profits off of it? Maybe they couldn’t make monopoly profits off of it, but then, how much is such a patent worth? (I admit though, there could be instances of patents being valuable in themselves, yet unusable by the company due to various reasons)
Perhaps, membership to a patent pool would be on the condition that companies add their patent portfolio to the pool. This however, raises more questions. Would it be more optimal to make companies put in a few selected ones (where a company could then put in their least successful patents), or would it be more optimal to make companies add their whole patent portfolio? Putting in the whole portfolio seems like a condition no established company would agree to for obvious reasons, yet allowing companies to choose which patents they put in also seems self-defeating.
Or perhaps companies are just paid for particular sought after patents, which are then shared to all members of the pool? This would then raise the question of ownership of patents, since effectively it would be the patent pool buying the patent, (or a license to the patent), rather than allowing cross licensing between member companies. One word – Troll. The only thing stopping a patent aggregation body from becoming a troll, seems to be a good conscience.
Thirdly, if patent pools require companies to add patents into their patent pools, they would be indirectly encouraging patenting. If patent pools are acting as ‘alternatives’ to the normal patent situation (which is evidently creating innovation problems), isn’t it problematic to use a method which encourages the making of more patents, possibly even leading to patent thickets?
No doubt, as much as we’d like to believe otherwise, big companies are not always evil. There are plenty of instances of big companies making considerably generous donations to ‘good’ causes, and perhaps, that’s how the necessary patents will come into a patent pool. However, I find it hard to base a innovation model simply on goodwill. Especially when common business sense tells companies that profit is the main objective, and goodwill can be incidental.
Not having much information about the mechanics of patent pools, I can’t shed light on some of the questions that you have raised. However, I would add that a company’s participation in a patent pool, such as one set up to facilitate the distribution of AIDS medications, has the potential to drastically improve that company’s public image and goodwill. But I agree with your point that altruism and goodwill are not enough. Though I love the idea of patent pools — one area in which patent law works for the public good — nevertheless I can’t imagine that they will last, unless a proper incentivizing structure is established. In other words, big pharma and other large companies need to know that they will financially profit from patent pools. Otherwise, I don’t see any way that they can possibly be sustained in the long term.