Patent Pools and Innovation in the Automobile Industry, Research Paper Example

Introduction

Patent pools help teams collaborate on research and development projects or share the expertise of scientists who have developed innovative technologies. Since they attempt to reduce the owners’ litigation risks, transaction expenses, and license fees for the businesses licensing the package, patent pools are typically preferred. In technologically advanced sectors like telecommunications and the automotive industry, patent pools are particularly common and important. In addition to inter-industry patent pools (between businesses in various industries connected by a common patent technology), intra-industry patent pools (between businesses in the same industry) are also a possibility (World Intellectual Property Organization [WIPO], 2014). The initial idea behind the advantage of patent pools was that they increased incentives for businesses to spend on R&D due to decreased litigation costs brought on by the ability to sue infringers collectively. There isn’t much empirical evidence to back up that advantage. However, the author uses a set of statistics to evaluate the automotive industry from its infancy to its maturity. The author can also consider how patent pools have affected innovation in the long run. This study examines how patent pools affect the development of automobiles.

Literature Review

In any situation, asking what role patents have in reducing or strengthening competition within the industrial arts typically elicits a cacophony of conflicting answers. However, the history of the car industry may hold the key to one of the most remarkable patent situations in the realm of modern technology. The American economy has been referred to as a transportation experiment. Space has therefore altered many aspects of how the nation lives and develops, had an impact on where and how its businesses are organized and has given transportation a key role in the growth and ongoing functioning of the economy. The development and operation of the automotive industry are thus most clearly understood in light of this idea. Although true in many ways, the phrase “the economy’s dependence on vehicle transport” only really describes a small portion of where the sector stands. Of all the manufacturing sectors in the US economy, the automotive sector is currently the most distinctive. When most talks about the American industrial power, the millions of American cars seem to be the most obvious demonstration of that productive power, as the industries that produce cars, the roads they travel on, the numerous service stations and garages, and the millions of people whose operations, prosperity, and pleasures appear to be closely related to the automobile represent to the rest of the world a distinctive sign of the US material advancement, productive capacity, and natural resources.

Communities of intellectual property owners that interact with one another frequently have occasionally created organizations to lower the expenses associated with transactions involving bundling many permits. For example, in the music industry, copyright collectives have emerged to facilitate licensing agreements, making it simpler for producers and broadcasters to obtain permission to use a variety of copyrighted compositions that are the property of other musicians. Likewise, when licenses operating under various patent rights were necessary to create vital new products, patent pools emerged in the automobile sector with the assistance of the government. Whenever the contextual legal laws threaten to waste resources to create and assist order through seclusion, people typically restructure rights rationally. As licensees and licensors gain expertise with intellectual property rights and organizations form to help proprietors and users agree, some difficulties brought on by the proliferation of upriver patent rights in biomedical research may disappear. Suppose fragmented privatization enables upstream research to cover its own expenses and maintains its long-term viability. In that case, the tiny costs associated with delayed progress of a novel sickness treatment may be worth maintaining. Patent restrictions on product growth may be transient rather than a permanent catastrophe.

An inventor may be granted a patent by the federal government. This privilege entitles the owner to bar others from making, offering, or using the invention for a predetermined period during the duration of the patent. The patent system is designed to encourage unique and advantageous societal advances. The investor must demonstrate that the innovation has real-world uses when applying for a utility patent. The innovation must be usable and capable of being used. A machine that cannot operate effectively to provide the intended outcomes cannot be deemed useful and, as a result, cannot be patented. An innovation must either fit into one of the following five categories to be eligible for a utility patent: a method, a machine, a manufacturing process, a composition of matter, or an improvement of one of these (Intarakumnerd & Charoenporn, 2015).

The Existence and Need for Patent Pools

Over the past three decades, patent owners have established many patent pools and cooperative licensing schemes. Groups of legal rights owners provide their inventions with a uniform license to be sold. Lai and Zhang (2020), for example, used the MPEG LA example, which contains 12 patent pools totalling 2,340 US patents for the use of the MPEG-2, MPEG-4, IEEE 1394, VC-1, ATSC, MVC, MPEG-2 Systems, AVC/H.264, and HEVC standards. By allowing thousands of consenting licenses not influenced by litigation, pools enable the mass adoption of valuable, breakthrough technologies (Pourrahim, 2021). Access Advance, MPEG LA, and Sisvel, three of the largest patent pool administrators in the world, have joined forces to offer 39 licensing options to more than 5,200 licensees (Brito & Contreas, 2021). Not only do pools ensure access to cutting-edge technology, but they also stimulate future creation in at least two ways. The first approach, supported by the findings of Wang and Peng (2020), is to stimulate greater research and development after pooling the incomes of inventors.

Anti-Commons as a Potential Justification for Patent Tools

In contrast to providing a basis for a legislative change, the anti-common theory is crucial for comprehending the impact of the change. The anti-common strategy entails managing common resources from various angles, such as by stressing what the commons are not. The regulatory system, in which many individuals govern how resources are used, is the main target of the anti-commons movement. Due to the overuse privilege and non-excludability of the current resources for specific projects in the vehicle sector, the theory thus offers growth concerns to expanding the patent pool in that industry (Barnett, 2015). The hypothesis holds in situations with a range of interests, but the accrued costs of misuse may prevent the effective use of resources. In addition, it’s crucial to understand how a law reform will affect society and how it will be justified when it results in concomitant fragmentations.

Impacts of Patent Pools

According to Barnett (2016), patent pools are one method companies use to encourage innovation through larger economies of scale successfully. There is a good chance that other parties won’t be able to obtain these advancements when companies individually license their patents because they adhere to intellectual property regulations. Participants in an industry frequently use the same or similar technologies for various operational tasks. Knowledge creation is necessary for economic development. Scientific gifts serve as a driving force behind knowledge creation. Thus, this essay will examine how winning an award affects the future output. To report this, the output of the top math award winners is contrasted with that of the same inventors who have not received a prize but possess a comparable talent level. The findings showed that until the date of the award, the group’s publication rates were the same. However, after receiving the prize, the publication rate of the winner decreased, especially for those who started researching unrelated subjects rather than writing more papers, suggesting that awards may have a greater impact on where knowledge producers focus their efforts.

The patent pool facilitates the swift transfer of patterns between teams, among other things. It speeds up the transfer of patents between teams. For instance, all teams can complete their assignment and achieve a precise grade if given a specific time to research and innovate. Since individual teams share research and development, individuals will lose some of their competitive advantages. However, it enables different types of strategic partnerships to develop amongst teams, allowing them to work together and accelerate research and development. The core elements of a patent pool are a single team, a few separate teams, and a pool coordinator. In this game variation, a player may merge with three different teams.

Patent Pools and Innovations

According to Cano-Kollmann et al. (2018), patent pools are essential for organizations to cooperate on innovation to ensure that they are updated with relevant technology designed to enhance customer experiences. Patent pools have been around for centuries and one of the most popular and encouraged by the United States government in the second world war to amalgamate intellectual property due to royalty stacking and holdout, stopping manufacturers from manufacturing sufficient aeroplane engines to fix into military aircraft. Thus, the solution to this holdup and royalty stacking issue is not new. The current patent pool has conveyed a far more sophisticated approach than it had been traditionally (concerning antitrust and competitional rules) about competitors merging and having their assets under one basket. Patent pools usually solve these problems by holding out effort. For instance, an individual going to a patent pool knows it is gaining the rights it requires in a single transaction. Also, in the healthcare sector, patent pooling has the desired result of encouraging innovativeness and the diffusion of drugs. According to Wang (2021), patent pools for the licensure of generic drugs lead to improved research and development and an increased supply of drugs purchased worldwide, signifying enhancements in the innovations associated with the patented drugs. The author made this observation after investigating the impact of the joint licensing of patented drugs through the Medicines Patent Pool. Wang found that the generic firms that licensed their drug bundles cheaply had enhanced capacities to develop new drug formulations and find innovative ways to produce and sell drugs in various countries.

Similarly, Galasso and Schankerman (2021), in a study on the licensure of life-saving drugs from the same patent pool, found that patent pools promote technology diffusion, particularly when the associated drugs are developed and sold in developing countries. Their investigation of the licensing of HIV, hepatitis C, and tuberculosis drugs revealed that the adoption of various types of intellectual property protection for upstream findings and patent pools may fortify incentives to cover risky research projects and might lead to a more uniform circulation of profits throughout all stages of research and development (Galasso & Schankerman, 2021). The case of the Medicines Patent Pool presents a good example of how patent pooling can inspire individual players in a particular industry to be innovative once they gain access to the patented technologies. However, not every patent pool will always result in new inventions. According to Flamm (2013), the results achieved through patent pools are contingent on the strategies businesses use to organize the pools and the licensing policies they put into place.

On the other hand, Hall and Helmers (2013) presented an analysis of the diffusion of patented technologies to third parties; they examined the Eco-Patent Commons, to which multinational innovators pledged 238 patents on 90 related inventions to green technologies. Unlike many patent pools, Eco-Patent Commons provided third parties with royalty-free access to the patented innovations. They found that the availability of patented technologies to third parties does not automatically lead to the spread of the protected technologies to the third parties, with no significant observable increase in diffusion.

Negative Impacts of Patent Pool

Conversely, patent pools have come under fire for the likelihood that businesses may abuse the pools. Competitors of patent pooling claim that patent pools hinder free and fair market competition, which stifles industry innovation (Barnett, 2016). Patent pools, according to their detractors, create oligopolies by boosting the economies of scale of the pool members, creating barriers to entry for smaller industry participants interested in employing or utilizing the technology. According to other academics, pools limit innovation by stifling firm-to-firm rivalry in R&D. Lampe, and Moser (2016) examined 75,396 patents issued between 1921 and 1948 in 20 industries, including automotive stamped metal wheels. They found patent pools are declining research and development spending among pool members (Lampe & Moser, 2016). Pooling enables businesses to share technology, decreasing their incentive to spend on ongoing research and development.

Welsh (1948) uses haptics data and does an empirical experiment to examine how patent pools affect innovation. In the case of the haptics example, the patent pool tended to have a negative effect on innovation and patents, particularly for the owners of the patents included in the pool. As a result, the author used data on haptics technology on the number of vehicles with sensory feedback to quantify performance. The results showed that outside firms and their members negatively impacted innovation. When the production of innovative technology is halted by competition on many patents, patent pools may appear helpful.

Lampe and Moser (2016) claim that mutually beneficial rivals who fairly compete in other areas of the industry commonly create patent pools in the automobile industry. Barnett (2016) continues by stating that individual businesses pursuing desirable goals can choose to participate in patent pools at their discretion. Additionally, according to Clarkson and Newberg (2017), patent pools allow pool members to reduce operating expenses (particularly those associated with research, development, and patent maintenance). As a result, clients receive patented inventions at a lower cost than they would if the technologies were each separately patented. As a result, patent pools enable mutually beneficial industry collaboration while lowering the cost of inventions for car manufacturers (Clarkson & Newberg, 2017). Martinelli et al. (2021) assert that patent pooling increases competitiveness, particularly in the pharmaceutical sector. The authors looked into how the Medicine Patent Pool affected the markets for generic medications. They discovered that the patent pool promotes consumer access to medications by increasing competition among generics manufacturers.

Patent Pools in the Automobile Industry

Numerous patents cover the creative and technical sides of the automotive business. Patents are often owned by firms that produce automobiles and those who provide those manufacturers, but other businesses worldwide also have them. Utility patents are frequently available for functional components of automobiles, such as an original and non-obvious air conditioning system. The design of a car’s grill or other aesthetically pleasing features that are not constrained by functional requirements are frequently eligible for a design patent. Most market analysts predict that the auto industry will undergo significant changes soon due to evolving consumer preferences, fresh company strategies, and expanding markets. Additionally, it appears that recent changes in sustainability and environmental policy, as well as upcoming legislation related to security issues, will substantially impact the sector. These processes are expected to give rise to technological advancements that will fundamentally alter society, such as driverless vehicles, electrification, and enhanced interconnectivity.

Companies looking to incorporate new technology into their products to enhance customer experiences are the main drivers behind the formation of patent pools in the automotive sector. This trend encourages the industry’s technologies to converge with those of other technology sectors, like telecommunications. With the need to develop and keep up with new technology, the car industries have comparable innovations to meet the consumer base’s needs. At the same time, automobile patenting is gaining traction among consumer electronics manufacturers (Hashmi & Biesebroeck, 2016). Demand for factory-installed gadgets like entertainment systems will rise as more new cars are sold. According to Lampe and Moser (2016), consumer electronics companies produce solutions for crucial contemporary automotive technologies, including vehicle navigation, propulsion, and inter-car communications, and sell parts and systems to the automobile industry. Therefore, technological overlap exists between the automotive and consumer electronics industries. Patent pools are one method to prevent patent lawsuits and encourage cooperation between manufacturers of consumer gadgets and vehicles (Cano-Kollmann et al., 2018). This kind of cooperation results in the exchange of ideas across industries, which spurs innovation in the automotive industry (Vakili, 2016).

Gaps in the Literature

The empirical consequences of patent pools on innovation across various businesses dealing with technical products are unclear, claims Flamm (2013). Making patents available to third parties does not always result in a large rise in the diffusion of innovations, according to research by Hall and Helmers (2013) on the diffusion of innovation from patent commons in the environmental domain. However, green technology was the foundation for Hall and Helmers’ (2013) research. The outcomes can differ dramatically from those of the players in the automotive and consumer electronics industries. Similar findings were made by Wang (2021), who discovered that the pooling of patents for the production of generic medications encourages different pharmaceutical companies to be creative in creating novel formulations and new medications. The study’s support for the effectiveness of patent pooling, however, was limited to the pharmaceutical sector, which is distinct from the automobile sector. Additionally, existing research highlights two key ways patent pooling might spur innovation, including fostering R&D and facilitating open access to intellectual property across implementers (Wang & Peng, 2020; Brito & Contreas, 2021). Furthermore, Hashmi and Biesebroeck (2016) suggested that the standardization of particular technology in the automotive sector raises the demand for comparable products from many manufacturers, spurring the inventiveness of those firms.

Research Questions

Q1. How do patent pools facilitate innovation in the automobile industry, and how do they influence production?

Flamm (2013) claims that the patent pool’s historical and institutional characteristics frequently determine innovativeness and does the greatest job of illuminating the research gap. However, the effect I expect to see is the growth or expansion of the automobile since the collaborating forces of companies due to the patent pool. The process allows the application of related patents in the pool via the signatories of a specific contract without the requirement of personal assignment and licences. The patent pools work as planned to promote the organization’s innovation and reduce the possible legal concerns linked with using other protected ideas. Also, it increases the efficiency of an organization while introducing new products to the available market. The limitation of the production expenses facilitated by the patent pool helps support innovation positively as it eliminates the need to negotiate personal license arrangements for a single deal engagement. The patent pools help in covering many useful technologies within the automobile industry. Besides, the patent pools assist in establishing the sharing of patent technology while paying less research and development costs. Kind of innovation talking about in the implementation of new environmental sustainability machines that reduces the carbon footprint. The introduction of electric and smart cars in the current age of digital technology would be a milestone in the innovation in the automobile industry. Measuring the technology would include different methods, such as qualitative and quantitative data analysis. Collecting data from the corresponds and the customer feedback enables the organization development team to know the industry’s growth trajectory. Moreover, the data collected from the customers buying different products from the company is another technique of knowing how the organization’s performance moves.

The research question must check on the existing problem in the study and suggest the rectification for the problem. It is not widely known how patent pools, notably those in the electronics and automotive industries, affect the innovativeness of individual participants. Since most research has concentrated on the computer, medical, environmental, and pharmaceutical industries, the inventiveness of patent pools utilized in the vehicle industry has gotten less attention (Martinelli et al., 2021; Hall & Helmers, 2013; Galasso & Schankerman, 2021). A qualitative collective case study approach will be used to investigate the research question empirically. The primary objective of this investigation is to determine how patent pools impact the developing automobile industry.

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