Earlier today, I typed "patent war" into Google Search News and I hereby present you the most recent news: HTC settles patent dispute with Nokia, signs cross-licensing agreement
As far as I gather, these two smartphone companies have agreed on some form of settlement called cross-licensing. In other words, giving HTC and Nokia's layers a rare vacation from the slew of patent law suits between them. The deal is as close to collaboration as it gets when two companies head-butt over intellectual property.
What is a cross-licensing agreement?
This legal agreement grants company A's the right to use company B's patents and vice versa. Essentially both companies win because they can perform R&D and sell new products without worrying about infringing each other's patents. This can a multi-lateral agreement between multiple companies.
Implications
This leads to a couple of implications. Company can forgo royalties mandated by standard patent licenses BUT gives up its right to collect royalties on its own patents too. So, companies now weigh the cost of a lawsuit in the absence of cross-licensing to the cost of giving up its royalty income. Usually cross-licensing is most valuable for large corporations because a smaller firm will not have enough products to license to the other firm as incentive.
What I found most interesting was how regulators view cross-licensing agreements to be a form of antitrust- think of it as several people teaming up to monopolize the markets and one up their rivals. When tech giants in the industry sign cross-licensing agreements, they agree not to sue each other but can continue to sue new competitors.
HTC, Apple, and Nokia
HTC has not only shaken hands with Nokia about its LTE patents as of today (February 7), but also made a similar cross-license with Apple to settle litigation between them. The details are pretty confidential to the average college observer like myself, but it would fascinating to study how cross-licensing as a strategy changes the inflows and outflows of cash within these participating smartphone giants.
Very informative post! It seems that there is a growing trend in cross-licensing agreements and we are seeing less of the formal patent litigation. I also wanted to point out a sentence that you wrote: "think of it as several people teaming up to monopolize the markets and one up their rivals." I completely agree! These patent wars with or without these cross-licensing agreements are becoming a major barrier to entry for potential new players in the industry.
ReplyDeleteThanks for your comment Osama! I was surprised I did not think of cross-licensing as a kind of cartel behavior before but it's interesting how alike the two practices are.
DeleteI also believe in the effectiveness of cross-licensing between two companies, rather than the plaintiff simply seeking remediation for the defendant's patent infringement. However, in the case of HTC, this company has been sued left and right from larger and stronger companies, and unable to fight head on. I wonder what other strategies weaker companies like HTC may have other than settling when it comes to battling it out with market share leaders.
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