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Patent Holdups

 |  October 8, 2015

Posted by Social Science Research Network

Patent Holdups Daryl Lim (The John Marshall Law School)

Abstract: Holdups have gained infamy from the image of knuckled-under implementers forced to pay patentees a premium because they are locked-in. Like shark attacks, holdups are real but their actual occurrence is sporadic enough to be treated as aberrations rather than a systematic failure in the patent system. A higher price may also reflect the premium associated with calculated convenience and certainty, a premium anyone who choses Uber’s taxi service rather than the public bus system knows. At the same time while holdups, like crimes, are not widespread, laws must still exist to deter them before they occur and address them when they do.

Patent ambushes are rare, less because of disclosure obligations and more due to the sting of possible antitrust enforcement. With FRAND disputes, patentees know injunctions are hard to come by and courts will likely map reward to technical contribution. Evidence showing intent can be useful here, as is direct or circumstantial evidence of harm. In the event negotiations fail, agreeing to submit the dispute to third party adjudication would be the clearest evidence of good faith. Harmful PAE conduct stems from features of the patent system, so the solution is to raise the bar of software patents, make it harder to initiate a suit, and punish those who bring frivolous suits.

Protagonists and antagonists exist on a spectrum that can appear flipped, depending on one ideological point of view, much like how one man’s terrorist and is another man’s freedom fighter. As with many things in life, the truth can be complicated and each choice come with its own set of tradeoffs. Deterring brinkmanship could deter innovators who would otherwise invest more heavily in new technologies or participate as intermediaries in facilitating licensing. Despite this complexity, the law must set down the ground rules for engagement. Those whose everyday lives depend on the law finding a proper balance between competing interests deserve no less.