Blunt Machetes in the Patent Thicket: Modern Lessons from the History of Patent Pool Litigation in the United States between 1900 and 1970

When organizations in technology industries attempt to advance their innovative activities, they must be cognizant of the intellectual property rights of others. Patent thickets can thwart ongoing innovation, however, and throughout the last 150 years, firms have stumbled into a number of patent thickets. Occasionally those firms responded by constructing patent pools, which are organizational structures where multiple firms collectively aggregate patent rights into a package for licensing, either among themselves or to any potential licensees irrespective of membership in the pool. Such collaboration among technologically competing firms, however, has often encountered difficulty from an antitrust standpoint, even if the formation of the pool is pro-competitive. The legal history of patent pool litigation in the United States throughout most of the twentieth century was arguably clumsy with judges and justices often destroying potentially pro-competitive patent pooling structures without a detailed examination of the patents within the pool. This article argues, however, that such blunt machete approach was unnecessary and empirically demonstrates that when the judicial examination of the pool analyzed the underlying patent thicket, the pool was much more likely to survive. We also propose that, for judicial examination of patent pools outside of the standards-based context, any such examination must apply the rule of reason and, in the absence of a technology standard to guide a determination of essentialness, must thoroughly examine the technological and economic interrelationships among and between the pooled patents. This article argues that such a rule will facilitate the formation of pro-competitive patent pools to solve the problem of patent thickets in industries without dominant technology standards.