1 / 21

Cross-Licensing

Cross-Licensing. Technology Agreements Spring 2005 Pete Perlegos pperlegos@scu.edu. Outline. Introduction Motivations Offense, Defense Negotiations Dangers Types of Licenses Benefits over Unilateral Licensing Limitation of Cross-Licensing Benefits. Introduction.

damita
Download Presentation

Cross-Licensing

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Cross-Licensing Technology Agreements Spring 2005 Pete Perlegos pperlegos@scu.edu

  2. Outline • Introduction • Motivations • Offense, Defense • Negotiations • Dangers • Types of Licenses • Benefits over Unilateral Licensing • Limitation of Cross-Licensing Benefits

  3. Introduction • What is cross licensing? • Businesses share patent rights through licensing agreements so that they can use each others’ inventions

  4. I think this Patent is relevant • Do not want to initially precipitate a lawsuit • If the other Party says no: • The only remedy is to file a lawsuit • Intel v. Via: Before Intel filed the lawsuit, Via did not come to the negotiating table Introduction • How does such a relationship begin?

  5. Motivations to Cross License • Litigation is Expensive • David v. Goliath • Can a small company afford to litigate? • Normal case cost $2-5Mn from start to end of trial. Large case can cost $10Mn/quarter • Dangers of Litigation • Patent might be held invalid (attacker) • This can cripple your business • Judgment might be huge (target) • Can put you out of business • Access to complementary patents

  6. Offense • How strong is the patent? • Previously Litigated • How easy is it to design around? • Fundamental v. Improvement • A fundamental patent can be Blocking and is worth more money • Process Patents • Cut across entire product lines • More valuable in negotiation • Injunction – can put target out of business

  7. Offense • Everyone is licensing • “…interest in licensing our…patent is an important validation of the value this patent holds within the industry and of the technology we create…” • US courts (CAFC) more favorable to patent holders • Treble damages and attorneys’ fees for willful infringement • Do not want to risk injunction • An injunction can shut down your business • Patents have become much more important to business (major assets)

  8. Defenses • Design Around • If you can design around the patent you can still make the product • Value of the patent is only the cost of designing around and implementing the design around • Legal Defenses • Previous Art: if not disclosed at the time of the patent, patent can be invalidated • Pay less: the payment should be proportional to chances of the patent not being invalidated and found to be infringing

  9. Negotiations • Look at accused products • How many are sold? • What is the prevailing party going to get in damages if they win? • Settle • Not prohibitively expensive • As long as you are not out of market • Margins might be thin • Can I still pay the fee and make money?

  10. Same Patent -> Different Result • Wang v. Msft • Microsoft bought $84Mn of Wang stock • Kodak v. Sun • Kodak won on Patents bought from Wang • Sun paid Eastman Kodak $90Mn

  11. Dangers • Agere v. Atmel • Agere sued Atmel on manufacturing process patents (Bell Labs) • Agere sued Atmel for $100Mn • Agere had licensed these patents to other companies • Result? • Three patents were found invalid because previous work was not disclosed • Fourth patent was found non-infringing

  12. Types of Licenses • Fixed Cost – Straight Fee • “paid up fee”, “fully paid fee” • Per Item • Running Royalty per item: flat fee, % • Volume discount • Declining prices over time • Straight Cross License • Very common in the 1980s-90s • Broad cross license

  13. Benefits over Unilateral Licensing • Cross-license to reduce fee • Might not be able to fully utilize patent • Monopoly deadweight loss • Use patent to barter with • Cross-license results in future collaborative relationship • Complementary inventions

  14. Benefits over Unilateral Licensing • Added knowledge flow between cross-licensing parties for post-licensing innovations • Cross-licensing is a forward-looking alliance, not merely a barter of patents • Duopoly profit attained through cross-licensing can be greater than expected monopoly profit (both technologies) • Firms prefer cross-licensing if they can assure higher profit • Allows for design freedom by leveraging access to other firms’ technologies

  15. Benefits over Unilateral Licensing • Large companies want to avoid litigation when launching new products (Sony & Samsung) • companies don't want to be surprised by litigation for patent infringement of non-ground-breaking products • there may be too many patents to look at practically • to not pay any money, they have to be roughly equal in the harm they could do to each other

  16. Benefits over Unilateral Licensing • Technologies such as semiconductors are distributed among many firms • A single merger or license is not likely to fulfill all technological requirements for the industry participants • Firms need to have access to other firms’ technological assets through contract • Semiconductor patents are highly complementary • Cumulative Innovation • Accelerated innovation • Higher Appropriability • Exchange of future innovation possibilities

  17. Intel v. Via • Intel sued Via over patents used in chipsets for Intel/AMD processors • Via countersued on patents used in P4 • Settlement: • Cross-license of Intel, Via patents • Via pays royalties to Intel on some products

  18. Benefits over Unilateral Licensing • Cross-licensing transforms the transaction into “mutual reliance relation” • Unilateral Licensing – Appropriability Problem • Follow-up innovations and patents are captured by the licensee against the intention of the original patent holder • Cross-Licensing • Can mitigate hazards of appropriability problem • A’s license to B is tied with B’s license to A • Safeguarding mechanism for transfer of knowledge

  19. Limitation of Cross-Licensing Benefit • Core patent has broad innovation potential • Produces many follow-up innovations • Core technology has greater hazards • Continuing innovation is a key asset for the licensor and blocking innovation jeopardizes the competence • Companies are reluctant to license core technologies • Selective cross-licensing of non-core patents

  20. Conclusions • Cross license can bolster both companies’ patent portfolio • Decrease risk of litigation • Cumulative innovation • Complementary inventions • Mitigate appropriability problem • Be reasonable • Gambling to win big is a huge risk • Everyone makes money => Everyone wins

  21. Questions/Comments

More Related