Patent Pools – A Poolside Chat

I have been meaning to write this article for a few years, maybe longer. But I always put it off, primarily based on the notion that, as a consultant, why would one give away any of one's competitive advantage publicly? What changed that is, well, really just frustration.

There are lots of new people running and marketing patent pools and even some new patent pools. And I have, frankly, grown tired of repeating the same arguments to them, over and over again. So, my selfish motivation for this article is to simply use it as a reference point and, being lazy, send it to people rather than talking through these issues in detail, yet again. And you can benefit from my laziness here...

1. The More Ancient Past

Patent pools are nothing new, quite the opposite. The first entity commonly considered a patent pool was formed in 1856 in Albany, US, and was called the "Sewing Machine Combination". The business model then mainly laid low, fairly dormant, for about a century. But was unexpectedly resurrected, out of the blue really, in the mid 1990s through the MPEG-2 patent pool. While I was not part of setting up that pool, as it just predates my start in the world of IP, I know for fact that the founding companies never expected it for to become the success it became. It had a fairly juicy running royalty level and no royalty caps. Implementers, who took licenses from the pool, did certainly not envision the high volumes of MPEG-2 compliant devices they'd ship later. The pool made billions and billions in licensing revenue. But that was not really the plan, which is not uncommon.

Subsequently, the US DoJ issued a positive letter supporting the business model of patent pools, or here particularly, the MPEG-2 patent pool, subject to certain rather demanding and strict requirements. This one sort of opened the floodgates for the business model, challenging as it is from anti-trust perspective as it entails deep collaboration between holders of essential patents commonly being competitors having set industry wide standards together. It's telling that the success of MPEG-2 with billions in royalties has never been, and probably never will be, replicated since. Though there have been dozens of attempts to replicate its success. So the failure is not for lack of trying.

2. Regulatory Excitement

Quite recently, regulators such as the European Commission have made many positive endorsements for patent pools. Commonly premised on the, really false, notions of transparency and lower transaction costs over weighing other concerns around and adverse impact of competitors bundling together their essential patents and so on. To me this is the final validation that the patent pool business model is essentially toast, sorry to be blunt. My experience is that, once the regulators, and frankly also the academics, get excited about something, your best bet is that the phenomenon peaked at least 20-30 years ago in real life. Just as patent pools did peak in the era from about 1996 to about 2004, or roughly so.

3. The über Point: Dealing with Patent Pools is Voluntary

When a patent pool approaches your company, the most important thing to understand is that, as almost all patent pools license patents (allegedly) essential for various industry standards ("SEPs"), those patents are generally subject to obligations to license them on (fair) reasonable and non-discriminatory ("(F)RAND") terms. Now, importantly, those obligations cannot be discharged to a third party, such as a patent pool, or some other intermediary, such as a licensing agent. Instead, they are binding on the patent owner itself. Meaning that dealing with patent pools is generally optional. Remember that.

Admittedly, some pools are decent enough to emphasize this when they approach companies. Whether they do or not, your company should still understand that the patent pool should be able to convince you that you should deal with them specifically, rather than bilaterally with the patent holders themselves. Looking at what has been happening in the industry over the past 20 years or so, the patent pools are overwhelmingly failing at this with at least the savvier, more knowledgeable companies. Like yours should be.

4. Issues with Patent Pools

Oh boy, where to start from? There are dozens. I will try to group them as follows: i) game theory and organizational psychology; ii) financial and patent related; and iii) regulatory.

4.1 Failure on Game Theory

Patent pools are fraught with very conflicting interests. They rarely seem to achieve a good balance between the interests, on one hand, of the patent holders and, on the other hand, the implementers. Not saying that achieving that would ever be easy. Having attended many, many pool formation meetings, I have witnessed this friction personally. This tends to lead to the emergence of two types of pools, namely: i) those optimizing for very high royalty rates for the patent holders; and ii) those optimizing for very low patent royalties for the implementers, if for no other reason then at least to set, in their mind, a low bench mark for future (F)RAND licensing and litigation purposes.

Some of the funniest examples include situations, where two patent pools have been simultaneously formed for the same exact technology, one aligned with the interests of the patent holders and the other with those of the implementers. And the price levels are entirely different, obviously so. The most famous example of this perhaps being the two AVC H.264 patent pools back in the day. So, suffice to say that the imaginary benefits with patent pools seen by the regulators tend to disappear when the rubber meets the road, and people behave rationally in accordance with their own self-interest, aka game theory.

EDIT: It was brought to my attention that there are altogether no less than three competing purported "one-stop shop" patent pools for the successor of H.264 AVC, namely H.265 HEVC (The MPEG LA one, Velos Media and HEVC Advance, which looks like a Dolby project to me). Not only are the pricing levels wildly different, but there is a big overlap with the patent holders and, therefore, patents between at least two of them. Quite telling, and certainly amusing, or sad, depending on the point-of-view.

The old poker adage also applies to negotiations towards forming and operating pools: "If you do not know, who the sucker is, it is you." Then again, the same tends to apply to all multi-party negotiations. Further, these conflicts and friction never go away. I have seen them impact pool administration and decision making for a decade, until the pool was ultimately discontinued. Operating patent pools are definetly generally not "big happy families", but rather conflicted and dysfunctional ones, based on what I have seen.

4.2 Organizational Psychology

Organizational psychology also poses a huge problem for patent pools. I have personally never understood, why patents should be subject to forced "communist" uniformity in that their prices should be exactly the same, despite the context and genuine differences between the licensees. As I do not get it, I suppose it must be an "anti-trust thing", perhaps arising out of the DoJ consent letter. Anyhow, no other commodity or staple article used for products is subject to forced uniform "communist" pricing. Note that I am not saying that baseless discrimination against similarly situated licensees should be allowed either.

Now, when an implementer company is interfacing with a patent licensor, such as a patent pool, the organization doing that, commonly the IP function, of course seeks to add value and justify its own existence. Leave its mark, if you will. This then obviously calls for them wanting a deal, which is at a minimum suitable for their particular context specifically and ideally somehow better (or that can at least be portrayed to the management as being better) than that of the guys across the street. Those things are commonly not available from patent pools with their forced "communist" uniform pricing. And the greatest irony in this regard perhaps being that companies from communist countries, like China, have been especially adverse to sign up to forced uniform "communist" pricing. That may be telling, more on that below.

One solution to this is rarely discussed, but may exist in the form of side deals and the like. If some big companies really push, who can guarantee they cannot get especially low effective rates and other advantageous conditions through side deals or other like arrangements, such as an annual cap only benefiting a giant corporation? Which is why savvy smaller companies realize that sometimes "some animals may be more equal than others", to quote the Animal Farm, and that the purportedly uniform forced "communist" pricing may not apply to all equally. In particular, right or wrong, many Chinese companies do not buy the notion that the pricing is truly uniform. Maybe they can better smell issues with "all is uniform for all" approach, as they have grown up with that, who knows? And then, as said above, should the pricing even forced to be exactly the same for all? Again, without similarly situated companies being discriminated against either.

EDIT: It was brought to my attention that in some pools there are major companies as licensors, i.e expecting others to pay them through the pool, who still themselves refuse to join the very same pool as licensees despite selling high volumes of relevant products in their name. Classic case of: "Do as I say, don't do as I do." Curiously, the pools allowing such double standards do not seem to list their licensees. Sometimes called "in-FRAND" vs. "out-FRAND" conduct and licensing. In other words, not willing to obey the same rules both ways.

Finally, and this is more of a personal rant, anyone having ever attended a patent pool meeting will recognize this. They are a lot like the UN General Assembly. Big table, lots of big companies with conflicting interests around the table. Everyone gets to speak and the mic rotates around the table very slowly. I recall a few times when someone (usually French, if I recall right) person stands up with the mic to render a fuming, emotional view on something, only to realize that he or she was forgotten what the topic is. After a 60 second rant, the person slows down and asks, what the question again was. Very UN General Assembly and very human, as that question may have been posed an hour ago. Based on this alone, I think that the human thing is not to send IP people to suffer through patent pool meetings (just kidding, obviously, but they can really be a pain).

4.3 Financial and Patent Related Issues

I touched on this a little already. The financial terms are normally at least purportedly of forced uniform "communist" type and supposedly not subject to exceptions, save perhaps for side deals with the really big companies, who knows?

4.3.1 Counter-Intuitive Royalty Models

One of the classic oddities with pools is that licenses for computing products like computers and laptops can be openly capped to a lowish annual royalty cap, while computing products like smartphones and tablets do not enjoy such cap and must pay royalties even for tens or hundreds of millions of devices annually. Strangely, this at least used to be particularly common with video compression technologies, which are clearly the more valuable and important the larger the screen size is. As the picture quality actually matters. Yet, the effect is exactly the opposite: makers of devices with smaller screen sizes must normally paid much more due to the absence of annual caps. I do not think that there is any economist in the world, who could objectively justify that. There are many similar oddities with pool pricing, but space is limited here. I will not even go into some of the truly bizarre service/transaction based royalty models we have seen be attempted in the past, as they have all failed.

4.3.2 Volume Discounts

Another challenge is commonly with volume discounts. I have seen discounts so large that you only pay 1/10 of the start royalties, if the volumes are really high. And the curve is not even remotely linear, but very much of an "inverse hockey stick" only benefiting the giants. Now, surely everything in commerce deserves some benefits of scale, even patents, but sometimes the volume discounts seem too harsh for the companies that can never realistically benefit from the same. The mirror image of this is, in a way, the concept recently introduced by some pools, whereby very small volumes are entirely royalty free. This too sounds better than it is.

There now even are some pools with inverted royalty volume "punishments" such that your royalties grow as a function of your unit sales, which seems non-sensical and very counter-intuitive, at best. Yet, they exist currently. I know several large companies, who will immediately balk at this and say that the pricing discriminates against them, as it indeed seems to do. I anticipate that this concept will soon disappear. When you see a patent pool pricing presented to you, please do not shy away from questioning the logic behind it beyond mere "it was what everyone agreed to". A circular answer like that should not convince you.

4.3.3 Patent Counting

Economically speaking, the pools basically always use a simplistic mathematical formula to apportion the royalty income between patent holders. In its crudest form, it constitutes simple patent counting, i.e. two patents get the value twice that of a single patent, when money is shared. Another common, and almost as crude, approach is to reward patents with increasingly small weighing, i.e. first patents gets 1/1 (full) weighing, the second ? (half) weighing and the 1/3 (one third) weighing, when royalties are shared. While a bit more sophisticated than the first mentioned formula, they both fail to even trying to account for patent quality.

Now, patent quality is of course is sensitive topic, as everyone thinks that their patents are special – at least unless and until proved otherwise in courts, which often happens. To my knowledge, no patent pool is even trying to address the issue of patent quality really at all in their royalty apportionment models. And you should be suspicious, if someone tries, given the inherent complexities with that. What any such attempt would likely entail would be some arbitrary qualitative metric such as "patent citations".

But these crude mathematical formulas also achieve something even more regrettable. They strongly encourage gaming the patent system through filing for divisionals, continuations, continuations-in-part and what have you. Slicing your patentable inventions in every which way doable. This is why you see the exceedingly complex and, frankly downright tortured, patent landscapes with technologies such as HEVC. Thousands of patents where a few dozen should exist. Companies have been exploiting weaknesses and loopholes in the patent system so as to maximize the sheer number of their patent assets for patent counting purposes, in a manner truly divorced from patent quality. And the reward for them is to be overcompensated through the way patent pool royalty sharing formulas work.

4.3.4 Monolithic T&Cs

Patent pools often set their pricing such that the prices stay the same, no matter how many companies join – or leave – the pool as patent holders and, correspondingly, how many patents are in the pool. While it may sound attractive and is admittedly a practical solution, it does not necessarily make much economic sense. Why should the pricing stay the same, if a giant patent holder leaves? Conversely, why should the pricing stay the same, if a giant patent holder joins? In fact, the latter problem often prevents large patent holders from joining pools.

More onerous is perhaps the fact that many pools, such as the DVD and MPEG-2 related ones, try to turn a blind eye to the fact that the statutory patent term is 20 years, after which they expire. There are many examples of patent pools, which stubbornly insist on the same royalty rate or only marginally reduced royalty rates through the era when their licensable patents start to expire, until the last one of them expire. Strangely, sometimes this results in drastic and random over-compensation for the patent holders, who just happen to have the last expiring patents in the pool. This is hardly defensible from the economic or legal perspective. To be fair, I suppose this type of behavior may be more driven by the pool administrators seeking to perpetuate their businesses. In economics, that kind of behavior would be called the "agency problem".

EDIT: It was brought to my attention that, even though MPEG-2 was standardized way more than 20 years ago, the MPEG-2 patent pool, still today, demands royalties from their licensee based on few companies (GE, Sony and Thomson) having, for some obscure local law reason probably, patents still in force in Malaysia and Philippines. Then again, the sales in those countries must be modest. Anyhow, what an administrative nightmare to comply with that for the licensees, even way after 20 years have passed from the MPEG-2 standard being frozen.

4.3.5 Value Allocated for Patents without Value

The value of any patent ultimately lies in the ability to litigate it. Correspondingly, a patent license is nothing, but an agreement to refrain from suing for patent infringement. Now, patent pools are full of patents, commonly from academic entities, with no ability, means or desire to ever litigate a patent. If so, the value of their patents is, in real life, essentially zero, as patents are contextual and their value largely depends on who owns them. And the only way they can monetize the same is hitching their wagons, so to speak, to those of the companies that actually do have the ability, means and desire to litigate patents, where needed. Economically speaking, this leads to such academic actors being over compensated. I personally believe that it would often be better for them to sell patents to someone with the means and skills to monetize them. Then again, the public financing they use to finance their operations may prevent the same. But that's a topic for a different article.

Want validation for these views? Non-academic NPEs/patent trolls (pick a term you like to use for them) generally never want to join patent pools. They are in the business of asserting and litigating patents, meaning that they do not want to share the results from the same with entities unwilling to do the same. Logical, really. Trying to avoid free riding. Sometimes patent pools try to address this by forming litigation funds or other mechanisms for compensating the litigating pool members. But based on what I have seen, litigation in a patent pool context remains incredibly rare. And also rather questionable from anti-trust perspective, to add to that.

4.3.6 The Value of an Exclusive Right Available from Two Sources Approaches Zero

If you own a patent, you should understand that its value vests in it being a right to exclude, or in the case of SEPs, the right to exclude or get (F)RAND compensation, depending on circumstances that I will not dwell on here. Anyhow, if coverage for the patent, commonly a license, can be obtained from two or more sources, given game theory, it should drive its value towards zero. This because, if two parties can "sell you the same product", they will obviously try to undercut each other's prices. Or should at least, assuming rational behavior.

To make this more concrete, consider the following. A company is being approached for the same patents both bilaterally by their owner and also collectively by a patent pool. Some companies may be tempted to accept the risk of being sued by the patent holder, rolling the dice and seeing what happens and then being comfortable that they have a "get out of jail card" in the form of a pool license always available to them. The same dynamics may reduce the likelihood of them being sued in the first place, again assuming rational behavior. So, as a patent holder, be very, very careful when committing patents to a patent pool. In my personal view, it should be normally seen as the very last option, best suited for those, for whom no other options are available, such as academic entities perhaps.

4.3.7 Complications for Your Own Licensing

You should also make sure to understand that, if you take a license from a patent pool, you essentially voluntarily agree to address patents in a compartmentalized, siloed manner with the patent holders in the pool. If you want grant back value for your own patents being SEPs for the same standard, you generally have to join the pool also as a licensor and the pool administrator levies its fees on both the money you pay to the pool for the patents of others as well as on their payments for your patents put into the pool. The pool's mathematical distribution formulas also conclusively dictate what the net effect of that will be between you and those other companies, you have no say.

If you, instead, have patents valuable for other technologies than those covered by the pool, then you will have no recourse through the pool to get compensated for those by the pool members. Rather, you must raise the issue outside the pool with each of them, whatever that may entail in terms of licensing, litigation etc. You will remain a net payer towards them due to you having joined the pool, even if they should objectively be net payers towards you across a broader range of technologies, unless you manage to somehow get them licensed for your other patents outside the pool, if ever. Again, this problem arises out of your choice to join the pool as a licensee.

Further, if you join a pool as a licensor even just for a brief while and later decide to exit, the likely rather arbitrary valuation for your patents by the pool will be used against you in both licensing and litigation, possibly many years later. If you try to argue that the value that the pool's crude apportionment formulas does not properly compensate you for your patents and that, instead, the value of your patents outside the pool should be higher, people will still say that, well, you voluntarily joined the pool and knowingly accepted such lower pricing. Live with the consequences in perpetuity, pursuant to (F)RAND requiring you to refrain from discriminating. So, much of the damage may be permanent.

4.3.8 Essentiality Certifications

Patent pools also like to tout their essentiality certifications meaning that all the patents accepted for their pools have been assessed by a third party law firm and certified to be essential (in the abstract). Now, these law firms are commonly working closely together with the patent pool, with all that it entails. To make a long story short, I have not always been impressed with their essentiality analyses. And I am not the only one.

But that is sort of beside the point. The mere assessment of abstract essentiality means next to nothing in real life. A patent can be essential for a standard in the abstract, but it only means that two pieces of paper can be mapped against each other with at least some degree of confidence. What is more important commonly in real life is whether the abstractly essential patent is: i) actually used and, absent a license, infringed; ii) valid and enforceable; and ii) perhaps already licensed or otherwise covered for you. While I cannot to these in too much detail here, I will try to provide a concise summary next.

4.3.9 Actual Use (Infringement Absent a License)

Standards are commonly full of optional features. Taking video codecs as an example, they commonly entail many different types of profiles, some used by all devices, some by only certain devices (say, large screen HD TVs) and some by no devices really at all. Then there are also notionally mandatory features that are in real life redundant and never used. A classic example being downright over-engineering such as the RACH or MBMS in 3G UMTS, both never used in real life. Yet, thoroughly patented by dozens of companies.

What happens is that the patent pools commonly bundle all these together and forcibly license them all. So, when you take a license from a patent pool, you are commonly forced to take licenses to vast amounts of patents you do not and maybe even cannot use, even if you wanted to. And in many cases patents that nobody uses anywhere, despite them being abstractly essential for a standard. Conversely, patent pools apportion royalties, at grand scale, for patents involving optional or downright redundant features not used out on the market at all. You may say that this problem exists in other forms of licensing also, but the scale of the problem with patent pools is uniquely large and, therefore, distorting at industry wide scale.

4.3.10 Validity and Enforceability

Then there is validity and enforceability, everybody's favorite topics. All I will say on this here is that according to public studies, some 90% of US patents are not valid as granted. The figure must be higher than that in over-patented areas such as video codecs. The patent pools do not attempt and, in real life, cannot even try to account for this. While the assessment of abstract essentiality entails a mere paper-to-paper comparison taking perhaps an hour or two, a thorough assessment of validity can take months or years. And is not realistic in a patent pool context. Hence, patent holders with above average problems with validity are over compensated by pools. Again, you may say that this problem exists in other forms of licensing also, but the scale of the problem with patent pools is uniquely large and, therefore, distorting at industry wide scale.

4.3.11 Existing Licenses and Other Encumbrances

And then we get to the most complex issue, namely that of already existing coverage and other encumbrances. This is even more esoteric. If you take a license from a patent pool, the odds are that you are already covered for some or maybe a big part of the patents through your own existing bilateral patent licenses or more indirectly perhaps. This is a problem with pools, as they offer no perfect solutions for addressing this.

Sometimes they allow you to pay less, reflecting your existing coverage outside pools. But often the default is that you must pay full rate to the patent pool and try to get those amounts reimbursed under your own bilateral deal with the patent holder. One problem is that not all cross licenses and other patent licenses anticipate patent pool returns and, thus, contain no mechanisms for the same. Second is that the patent pool administrator commonly keeps its about 10-15% fee levied on the royalties and your licensing partner does not get that money. And, hence, cannot reimburse you for the same. Finally, there is the tax man. Your licensing partner will get taxed on its patent pool income and is very unlikely to refund you the amounts paid in taxes.

Now, you may think that this type of existing coverage is a rare exception, an aberration, if you will. That is not the case though. Taking the cellular SEPs as an example, almost all of them globally are subject to something called "Qualcomm pass-through" rights meaning that by using Qualcomm chipsets for your devices, you are automatically covered for them, often quite broadly. And this gets truly bizarre in a patent pool context, where you may learn that the companies in the patent pool having granted such "pass-through" rights to Qualcomm may deny ever having granted them or at least take an overly limiting view on their scope. This is a classic example of an issue that might be unsolvable in a patent pool context risking you to pay twice for the same patents. Then what you basically get through joining the pool is a dispute about, whether you are already covered or not for many of the pooled patents, which may require litigation.

In fact, I strongly suspect that certain patent pools have been formed mainly to "blow smoke" over already existing licenses and other coverage, so as to be able to "double dip" on the value of already licensed patents. Patent holders are getting regularly apportioned royalties for patents they in fact have already licensed to companies paying the royalties. Again, existing license coverage and other encumbrances are vastly easier to address outside the pools and practically always an issue to at least some degree.

4.3.12 Conclusion

So, to make a really, really long and complex story short: patent pools are often the place, where "bad patents go to hide". That is to say patents that, for one reason or the other, cannot be monetized at scale. The reasons for that can vary a lot.

Want a very famous example? OK, here you go. Google paid like BUSD 12,5 to buy Motorola, largely due to its portfolio of cellular SEPs. Now, as is commonly known and as most companies (other than Google as a cellular industry outsider) knew back then, those SEPs are, or least were, subject to some form of Qualcomm "pass-through" rights massively limiting the value of them being monetized, litigated or otherwise used. So, where did that notionally valuable portfolio with its own set of issues end up? Drum roll … in the Via Licensing's 4G LTE patent pool. I rest my case, as that's what my logic would expect to happen. Just park the patents somewhere, out of daylight. "Bury your dead."

5. Regulatory

I will not go into details here. Suffice to say that the benefits assumed by the regulators, such as lower transaction costs and purported transparency, may not always be present or at least can be overshadowed by other, negative effects. These are not seen, unless you have been exposed to the world of patent pools through forming, administering, running, participating in and, ultimately, discontinuing or leaving them.

In particular, I am convinced that there are other, vastly better options for reducing transaction costs, such as simplified license agreements, more pricing transparency in bilateral deals etc. Also, if the patent pool administration fee is commonly at around 10-15% of the incoming royalties, then I do not think that the transaction costs in the form of licensing costs, even factoring in both the licensor and the licensee, ever really approach that level. And if they do, then the licensable business is probably so trivial that there are better things to do that try to license said business at all.

It is only maybe the litigation costs that can approach that 10-15% level regularly. But, if anything, litigation is the ultimate tool to increase transparency through public litigation outcomes. I generally consider litigation to be a good investment, when done right, not only for the company itself, whether a patent holder or implementer, but for the broader society and industry. Surely something that is not only contemplated by the patent system, but also something benefits the broader industry through increasing transparency.

Net net, I believe that the recent, but belated, regulatory excitement around patent pools is based on bad data, gross misunderstandings, lack of experience and good lobbying on the part of pool administrators. But then again, I am not a regulator, just an old licensing hand.

6. Conclusion

Disagree with what I say? OK, let's follow the money. Are things working out? The public data I have is a admittedly bit old, from 2016. But it supports the following, the audio/video codec patent pools have seen declining revenues since about 2012. After MPEG-2, none of them have made meaningful money, normally only tens of millions or at least not beyond the 100-200 MUSD range annually. Take the pool administration fees from that and share there rest with dozens of patent holders and you will be left with single digit, normally low single digit million dollars annually per patent holder. While this may sound like a lot, it is chump change in the context of the total licensing market for the computing, cellular and consumer electronics devices out there.

On the cellular and Wi-Fi side of things, the picture is even more grim. All the attempts to launch a 3G patent pool failed non-stop for 20 years in row, and were really driven by people with golden memories from the success with MPEG-2 trying to replicate the same. Did not ever happen. What it really was the Japanese mega operator NTT DoCoMo driving the pool project blindly for all the time and forcing, as they do in Japan, the rest of Japan Inc. (Sharp, Mitsubishi, Panasonic, Fujitsu and NEC) to remain on board for all that time, together with a few European hang around members with, at best, very marginal 3G portfolios (Siemens, France Telecom and KPN). Query how pro-competitive it was to have a dominant local operator try to force its views on the world for like two decades? Well, sort of does not matter, as it failed.

The 4G and Wi-Fi patent pools have all, to my knowledge, also failed to get off the ground. Yet, a ton of licensing has and continues to happen in the 3G, 4G and Wi-Fi space. Just that patent pools have had little to do with it. I am sure a few 5G pools will pop up, probably one centered in the Dallas area and another one centered in the Bay Area. And that they, too, will fail. And there's nothing to blame them for, after all pool administration is their business. But I am certain that if you actually wanted to make a patent pool work in a technology as sensitive and central to the humankind as 5G, it would need be something globally endorsed by governments, perhaps through international treaties, and maybe based in somewhere like Switzerland under the ITU/ISO/ETSI/3GPP umbrella. With the way geopolitics is going, very unlikely to happen though.

If you have joined a patent pool as a patent holder, the odds are that it was, economically speaking, a mistake and you would have done better outside the pool. Unless your portfolio is clearly sub-par and/or you have no ambition, means, willingness or skills to monetize/litigate patents outside pools. Oh, and to that to add, the damage might well be permanent, as explained above. Even selling the patents outright might have been a better deal. Then again, the good news is that nobody may ever find about that, given the mystery and complexities around patent pools.

If you have joined a patent pool as a licensee, the odds are that you are disadvantaged relative to your large peers. This is probably mainly because of the bilateral deals they have in place, which you can assume are an order or several orders of magnitude more advantageous in the aggregate than the pool rates you are paying. Or maybe when the licensing administrator said that your huge competitor was licensed and paying at pool rates, maybe he or she "forgot" to say that such is the case only for, say, the laptops that competitor sells only few million of annually, but is definetly not the case for the more than two hundred million other products also sold by that competitor in direct competition with your products, again, who knows? But you can rest assured that, unless it is one of those odd pools with "inverted pricing" for small volumes, you are most likely pricing wise not even remotely competitive with your huge competitors. Really because of you having joined the pool. But again, nobody may never find out, as these patent pools are so mythical.

What about supporting technology adoption then, you may ask? Are pools not conducive to quicker, more straightforward technology adoption and deployment? I seriously doubt it. Here's one example. I was the Nokia representative setting up the RFID (NFC) standardization consortium and patent pool already in early 2004, together with people from Sony and Philips. You know that technology you today use for contact free payments with your credit cards, phones, train tickets and what have you. With that logo that has those radiating things coming out of that dot. Did us setting up the pool, with massive work and agony, in early 2004 expedite the deployment of contactless RFID? Not really. It happened at scale some 10-15 years later, when the big guys (Apple, Google, Visa, the banks etc.) chose to deploy it. Doubt that patents mattered much for that decision, and the pool was around for ages before that.

So, to make a long story short, it does appear that after its brief, highly successful reincarnation with the MPEG-2 patent pool, the patent pool seems to remain a rare aberration, with the real life licensing done mostly outside pools. But do not just read this conclusion, please make sure to read the above points to understand, why this may really be an inevitable and expected result, rather than some random, flawed outcome.

Finally, remember that dealing with pools, whether joining or taking a license, is always optional.

Over and out. More to come.

Niklas ?stman, [email protected]