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Tags Legal SystemMonopoly and Competition

Some companies are engaging in very creative maneuvering around the omnipresent threat of patents. The Open Invention Network (OIN), for example (Wiki entry), is a type of patent pooling arrangement which seeks to defend the Linux System from patents. It does this by first purchasing patents, and then offering them to anyone, on a royalty-free basis, so long as the licensee "agrees not to assert its patents against Linux." If the pool grows big enough—and it's funded by "a diverse group of companies including IBM, Novell, Philips, Red Hat, Sony and NEC"—then many companies fearing liability from one of the patents owned by OIN may enter into this arrangement for defensive purposes. OIN does "not anticipate[] that there will be any royalty streams." Its purpose is simply to force companies not to sue "programmers, independent software vendors, distributors and businesses" who use Linux.

Nice, creative idea. But note a few things. First, the OIN patent pooling approach relies on the patent monopoly to work, since the potential threat of a patent infringement lawsuit is what induces third parties to enter into the OIN license (on the other hand, without the patent monopoly, there would be no reason for OIN to exist).

Second, let's assume this works: the size of the OIN pool snowballs and pretty soon there are no companies left who can afford to assert their patents against Linux, because the pool has so many potential patents that can be asserted against this company. What it means is millions of dollars have been spent: to pay salaries of OIN employees; to purchase patents in the pool; to acquire the patents in the first place; and by third parties who acquired their own patents that they now agree not to assert. So we have tens of millions of dollars of investment, and thousands of companies holding patents that they have all agreed not to use against each other.

In other words, it's similar to the situation that would exist in the absence of IP—without all the effort and waste to get a bunch of flaccid scraps of paper.

Author:

Stephan Kinsella

Stephan Kinsella is an attorney in Houston, director of the Center for the Study of Innovative Freedom, and editor of Libertarian Papers.

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