Report of the Expert Group on Patent Aggregation Research and Innovation EUROPEAN COMMISSION Directorate-General for Research and Innovation Directorate B – Innovation and European Research Area Unit B.3 – SMEs, financial instruments and State aid Contact: Peter Droell E-mail: [email protected] [email protected] European Commission B-1049 Brussels EUROPEAN COMMISSION Report of the Expert Group on Patent Aggregation Paola Giuri Denise Hirsch Krystyna Szepanowska-Kozlowska Hannes Selhofer John Temple Lang Nikolaus Thumm 2015 Directorate-General for Research and Innovation Europe Direct is a service to help you find answers to your questions about the European Union Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the following information. The views expressed in this publication are the sole responsibility of the author and do not necessarily reflect the views of the European Commission. More information on the European Union is available on the Internet (http://europa.eu). Luxembourg: Publications Office of the European Union, 2015 ISBN 978-92-79-41182-3 doi:10.2777/96371 © European Union, 2015 Reproduction is authorised provided the source is acknowledged. CONTENTS 1. EXECUTIVE SUMMARY ............................................................................ 5 1.1 Introduction .................................................................................... 5 1.2 General problems in patent markets ................................................... 5 1.3 Patent pools.................................................................................... 6 1.4 Patent funds and other forms of intermediation .................................... 7 1.5 Recommendations ........................................................................... 8 2. INTRODUCTION ................................................................................... 10 2.1 Background and objectives ............................................................. 11 2.1.1 Background ........................................................................................ 11 2.1.2 Objectives .......................................................................................... 12 2.2 Working method ............................................................................ 14 3. ASSESSMENT OF PROBLEMS IN PATENT MARKETS .................................... 17 3.1 General problems in the patent market ............................................. 18 3.1.1 The underlying concern: potentially valuable patents that remain unused .. 18 3.1.2 Lack of transparency ........................................................................... 20 3.1.3 Asymmetric information ....................................................................... 22 3.1.4 High transaction costs ......................................................................... 22 3.1.5 Difficulties in enforcing patents ............................................................. 23 3.2 Problems relevant for both owners and users ..................................... 23 3.2.1 Difficulties in patent valuation .............................................................. 23 3.2.2 Problems with patent quality ................................................................ 24 3.2.3 Problems due to patent owners' technology being incomplete or "immature"25 3.2.4 Negotiating mutually satisfactory licence terms ...................................... 25 3.3 Specific problems for patent owners ................................................. 26 3.3.1 Lack of finance ................................................................................... 26 3.3.2 Difficulties in securitisation ................................................................... 26 3.4 Specific problems for potential users of patents .................................. 27 3.4.1 Too many patents due to the rising complexity of technologies ................. 28 3.4.2 Costs & effort for obtaining licences ...................................................... 28 3.4.3 Growing number of standards ............................................................... 28 3.5 SME-specific challenges .................................................................. 29 3.5.1 Difficulties to conclude contracts with large firms on patent-related issues . 29 3.5.2 Lack of awareness for IPR issues .......................................................... 30 3.5.3 A lack of finance for legally protecting their IPR ...................................... 30 3.5.4 A lack of patent-related support services from intermediaries ................... 30 3.6 Conclusions on challenges in patent markets ..................................... 31 4. EVIDENCE ON PATENT POOLS ................................................................ 33 4.1 Definition and main types of patent pools .......................................... 33 4.2 Considerations on patent pools ........................................................ 35 4.2.1 General principles for patent pools ........................................................ 35 4.2.2 Opportunities ..................................................................................... 37 4.2.3 Challenges and concerns ...................................................................... 38 4.3 Conclusions on patent pools ............................................................ 42 5. EVIDENCE ON PATENT FUNDS AND OTHER FORMS OF AGGREGATION AND INTERMEDIATION ......................................................................... 43 5.1 Definition ..................................................................................... 43 5.2 Patent funds – types and evidence ................................................... 44 5.3 The case for / against state-supported patent funds ........................... 46 5.3.1 International examples of state-supported patent funds .......................... 46 5.3.2 European examples ............................................................................. 47 5.3.3 Assessment of the opportunities and risks .............................................. 49 5.4 Other forms of intermediation ......................................................... 50 5.5 Opportunities and challenges related to funds and other forms of intermediation ............................................................................... 53 5.5.1 Opportunities ..................................................................................... 53 5.5.2 Challenges ......................................................................................... 54 5.6 Conclusions on patent funds ............................................................ 55 6. RECOMMENDATIONS ............................................................................ 57 6.1 Recommendations for improving the framework conditions for patent markets ....................................................................................... 57 6.2 Specific recommendations with regard to pools, funds and other types of intermediation ............................................................................... 60 7. ANNEXES ............................................................................................ 63 7.1 Annex I: Members of the expert group and meetings held ................... 63 7.2 Annex II: Experts interviewed ......................................................... 65 7.2.1 Experts who participated in the hearings ................................................ 65 7.2.2 Reviewers .......................................................................................... 67 7.3 Annex III: Questionnaire used in interviews and hearings .................... 68 7.4 Annex IV: Mandate of the Expert Group ............................................ 74 1. EXECUTIVE SUMMARY 1.1 Introduction Background and objectives This report was produced by the expert group on patent aggregation. This group was convened by the European Commission to investigate whether there is a need for EU level intervention to foster the development of patent markets, in particular through aggregation of patents, with a focus on patent pools and funds. The work of the expert group builds on the publication of the Commission Staff Working Document "Towards enhanced patent valorisation for growth and jobs”1, the outcome of reflections of an earlier expert group on options for patent valorisation, as well as on a number of recent specific studies. The premise is that some patents would be more valuable, or would be more likely to be used, if they were aggregated, that is, if patents belonging to different owners were gathered together in such a way that single entities or groups could act as licensors of all the patents, or of as many of them as licensees might want to obtain licences for. Working method and schedule The expert group consisted of a core group of eight members, whose deliberations were complemented by invited experts (37 in total), each of whom was asked to attend one specific meeting for exchanges with the group. The group met seven times in Brussels between 17 October 2013 and 6 March 2014. Most meetings consisted of panel hearings of invited experts. In addition, further hearings with invited experts were conducted in February 2014 in Brussels, Munich