Patenting for Inventors Ep.164: Patent Pools: Cooperation That Looks Like Competition

Ever wondered how your smartphone manages to use hundreds of patented technologies without companies drowning in lawsuits? The answer lies in patent pools—one of the tech industry's most powerful yet least understood tools.

In Episode 164 of Patenting for Inventors, host Adam Diament, a registered patent attorney and partner at Nolan Heimann, explains how patent pools work, why they're essential for modern technology, and what companies need to know before joining one.

What Is a Patent Pool?

A patent pool is an agreement between patent holders to license their patents as a package deal. Instead of negotiating dozens or hundreds of individual licenses, companies can access an entire portfolio in one transaction. Think of it as the Costco of intellectual property—one stop, all the essentials you need.

This model is particularly valuable in industries where products require numerous patents to function, like smartphones, Wi-Fi routers, and video streaming devices.

Why They Matter

Patent pools solve critical problems for both manufacturers and patent holders. They reduce legal risk, prevent "royalty stacking" where fees pile up and make products unprofitable, and provide predictable revenue streams. For industries built on standards like 5G or MPEG video compression, pools also help manage FRAND (fair, reasonable, and non-discriminatory) licensing obligations.

But patent pools aren't without challenges. Some companies prefer to license individually, pool structures can be contentious, and antitrust concerns are always lurking in the background.

Should You Join?

Whether you're an inventor with a potentially essential patent or a manufacturer building complex products, understanding patent pools is crucial for navigating today's IP landscape. Adam breaks down when joining makes sense, how pools are administered, and what to watch out for.

Listen to the full episode to learn how these behind-the-scenes tools keep innovation moving and products reaching market faster.

Need help filing a patent application or navigating intellectual property issues? Contact Adam Diament at 424-281-0162.

Patenting for Inventors Ep. 164:

Podcast Transcript:

Hello, and welcome to the Patenting for Inventors podcast. I’m your host, Adam Diament, a registered patent attorney and partner at the law firm of Nolan Heimann in Los Angeles, California. This episode is “Patent Pools: Cooperation That Looks Like Competition.”

Have you ever tried to watch a movie on a new streaming platform, only to realize you need to subscribe to three other services to see everything you want? It’s kind of like the frustration companies feel when they’re trying to build a product that requires dozens, maybe hundreds, of patents just to make it work. That’s where patent pools come in. They’re like the all-you-can-stream buffet for intellectual property. So today, we’re going to break down what patent pools are, why they exist, and why they’re such a big deal in the tech world.

Now, you might be thinking, “Wait, what exactly is a patent pool?” Let’s start there. A patent pool is basically an agreement between two or more patent holders to license a bunch of patents to each other, or to third parties, as a package. Instead of having to go door-to-door negotiating individual patent licenses, you get access to a whole portfolio in one shot. It’s like Costco, but for patents.

This kind of thing is super common in industries where a lot of different patents are needed to make a single product work. Think smartphones, Wi-Fi routers, video codecs, or even things like DVD players. Let’s take the example of a smartphone. Your phone probably uses hundreds of patented technologies, from wireless communication standards to touchscreens to data encryption. If companies had to negotiate every single patent license separately, it would be a nightmare, not to mention super expensive and time-consuming. So patent pools help simplify the mess.

Here’s the basic idea. Imagine you’re Company A, and you hold a bunch of patents on wireless communication. Company B holds some patents on video compression. Company C has patents related to screen resolution. Instead of everyone sending out legal teams and trying to cut deals one by one, all three companies agree to pool their patents related to a specific standard, say 5G. Then they offer licenses to other companies as a bundle. That bundle is the patent pool. Anyone who wants to make a 5G-enabled product can pay a single licensing fee to use the whole set of patents.

Why do companies like this? Well, for starters, it reduces the risk of getting sued. If you’re a manufacturer using a patent pool, you’re less likely to get hit with a patent infringement lawsuit because you’ve already licensed the relevant patents. It also helps companies avoid something called “royalty stacking.” That’s when a company has to pay multiple separate royalties to multiple patent owners, and those fees stack up so high that they make the product unprofitable. Patent pools usually offer a reasonable bundled fee that’s way easier to manage.

And on the flip side, if you’re a patent owner, being in a patent pool gives you more predictable income. You don’t have to go chase down individual licensees and try to squeeze money out of them one at a time. You just let the pool administrator do that for you and collect your share of the revenue. It’s not always the most lucrative option, but it’s steady, and sometimes that’s the name of the game.

Another big reason patent pools exist is because of industry standards. When a new tech standard comes along, like MPEG for video compression or LTE for mobile networks, there are usually tons of patents that cover different pieces of the puzzle. Standards-setting organizations sometimes encourage or even require that essential patents be licensed in a fair, reasonable, and non-discriminatory way, what you’ll often hear called FRAND licensing. Pools are a great way to handle FRAND obligations because they make sure the licensing process is streamlined and fair, or at least more transparent.

Now, of course, this all sounds like sunshine and rainbows, but there are some downsides too. For one, not every patent holder wants to join a pool. Some big companies would rather license their patents individually because they think they can make more money that way. Others might disagree with how the pool is run or how the licensing fees are set. And when you’ve got some essential patents outside the pool, you’re back to that piecemeal licensing headache. Also, if a pool isn’t managed well, it could lead to antitrust concerns because a few big players could use it to squeeze out smaller competitors or set unfair licensing rates. So there’s definitely a balance to strike.

But overall, for most tech companies, especially those trying to manufacture products at scale, patent pools can be a lifesaver. They simplify licensing, reduce legal risk, and help products get to market faster. And at the end of the day, faster time to market often means more revenue, which is what companies are really after.

So where do these patent pools actually come from? Who organizes them? It’s usually a third-party administrator or sometimes a group of companies that form a joint venture. These administrators handle the logistics, who gets what slice of the pie, how licensing fees are collected, and so on. And they’re supposed to be neutral, though let’s be honest, politics always find their way in.

Let’s say you’re developing a smart TV. You’re sourcing parts from a bunch of vendors, trying to get the user interface just right, and you finally get the whole thing working. But then, surprise, you get a letter saying you’re infringing on a video codec patent. And a few days later, another one. Now you’re trying to sell a product that might be tied up in lawsuits. That’s exactly the kind of mess patent pools are designed to avoid.

Now, some people worry that joining a pool means giving up too much control. Like, what if your patent is way more valuable than everyone else’s in the pool? Do you get the same share as someone with just one patent that barely gets used? That depends on how the pool is structured. Most have formulas based on things like how many patents you contribute, how often those patents get licensed, and even how essential your patents are to the tech being used. It’s not perfect, but most companies find it better than trying to go solo.

Sometimes, companies set up multiple pools for the same type of technology, and that’s where things can get messy. Let’s take the example of HEVC, a video compression standard. There are actually several different pools for HEVC, each with slightly different terms and different members. It’s kind of like having multiple gym memberships, and each one covers a different set of equipment. That defeats some of the purpose of simplifying licensing, but hey, it’s still better than having to negotiate with dozens of companies individually.

One question I get a lot is whether joining a patent pool is mandatory if you have a patent that’s part of a standard. And the answer is no, it’s voluntary. But depending on the standards organization and the pressure from the market, it might feel mandatory. If all your competitors are in the pool and you’re not, that can make licensing your patent a lot harder. People might just avoid your tech altogether.

And if you’re on the other side, if you’re trying to license technology, it’s often smarter to go through a pool than to deal with a dozen licensing teams and lawyers. That’s especially true if you’re a smaller company. Pools help level the playing field a bit. You’re paying fair fees, you’re reducing risk, and you’re getting access to major technologies without having to knock on a hundred doors. For startups and mid-size companies, that’s a big win.

Let’s switch gears and talk about the role of government for a second. Because when you start pooling patents together and licensing them out as a package, you’re definitely entering antitrust territory. Nobody wants a situation where three big companies use a pool to control an entire industry and keep others out. That’s why patent pools often get reviewed by agencies like the U.S. Department of Justice. If they’re structured well, with non-exclusive licensing, transparent fees, and open membership, they usually get the green light. But if the pool starts to look like a cartel, that’s where regulators might step in.

Now, you might be wondering, do patent pools work outside of tech? They do, but they’re just not as common. The model really shines in places where interoperability is key, where different devices and systems need to talk to each other using the same language, like in telecom, semiconductors, or digital media. In other fields, like pharmaceuticals, patents tend to be more stand-alone. A single patent might cover a specific drug compound, and there’s not as much of a need for cross-licensing bundles. So patent pools aren’t a great fit there.

Okay, so you’re a company with a new patent on something that might be part of a growing standard. What should you do? First, check if there’s an existing pool related to your technology. If there is, see what their requirements are. Do they evaluate your patents before accepting them? Most do. They’ll have a technical board or outside experts assess whether your patent is actually essential to the standard. And “essential” doesn’t just mean useful. It usually means that there’s no way to implement the standard without using your patented invention.

If your patent gets accepted, great, you’re in. If not, you can still license it out on your own, but you’ll be swimming upstream. Some companies even end up litigating just to prove their patents should be included in the pool. It’s rare, but it happens.

The other side of the coin is if you’re building a product and wondering whether you need to license from a pool. That usually depends on whether your product uses a standardized technology. For example, if your product includes Wi-Fi, Bluetooth, or H.264 video playback, odds are high you need to license from a pool, or from several. The good news is these pools usually have websites where you can find fee schedules, member lists, and sometimes even a calculator to estimate your licensing costs. So do your homework.

Also, don’t confuse a patent pool with something like a cross-licensing agreement. Pools are generally open to many companies and administered by a third party. Cross-licensing deals are usually between two companies that agree not to sue each other. It’s kind of like a mutual truce, whereas a pool is more like a public library of patents you can pay to access.

At the end of the day, patent pools are one of those behind-the-scenes tools that make modern tech possible. You don’t hear about them on product launch day, but without them, we’d be stuck in a web of licensing gridlock. They help push innovation forward by keeping things practical. And in the fast-moving world of tech, anything that cuts down on legal hurdles and gets products to market faster is a good thing.

That’s it for today’s episode. I’m Adam Diament, and if you need help filing a patent application or other intellectual property, give me a call at 424-281-0162. Until next time, I’m Adam Diament, and keep on inventing!