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Are ‘Patent Thickets’ Killing Innovation?

As technology grows increasingly complex, companies must navigate a web of intellectual property protections. Professor Stefan Wagner of the European School of Management and Technology spoke with Yale Insights about the consequences of “patent thickets.”

“The idea of the thicket comes from situations where there are so many patents potentially held by different owners—and they may overlap in their protective scope—that it’s not even clear which people you need to talk to get all the necessary licenses.”

Said Wagner:

“If companies are in the situation where they need to negotiate with other companies—and potentially competitors—to get access to technologies or patents, there is mutual dependence. Samsung needs licenses from Motorola and Apple to manufacture a smartphone. Since the other companies also need licenses, they end up granting cross licenses; however, if one company has a bigger patent portfolio, it can demand payment to make the deal work.”

“It’s a prisoner’s dilemma. Everyone has an incentive to have the biggest patent portfolio.”

“When Google came up with the Android operating system, they had a fairly small patent portfolio. They were facing competitors like Apple, which has a huge portfolio. There was always the threat of Apple pulling access to the patents or taking them to court, so Google acquired Motorola, not for the hardware business, which they sold to Lenovo, but for the patent portfolio—to be an equal player at the table.”

Wagner spoke about the “patent thicket” in a video on the European School of Management and Technology website: