6- ANÁLISIS LEGAL
7.10 CONCLUSIONES FINANCIERAS Y EVALUACIÓN DE VIABILIDAD
Where bargaining and negotiation costs are so overwhelming that they make transactions unattainable, then asset specificity lingers and chances for opportunism loom. One major manifestation of asset specificity in cases of patent thickets is royalty stacking.178 Royalty stacking, as defined by Lemley and Shapiro,
embraces ‘situations in which a single product potentially infringes on many patents, and thus may bear multiple royalty burdens’.179 The reason for this
is that several patents have to be bundled together to make a product, each requiring its own licensing contract to be drawn up. Where royalty stacking occurs, two market drawbacks tend to arise: double marginalization and Cournot monopolies/oligopoly. Double marginalization results when the high costs of procuring inputs ultimately leads to expensive final products.180 If the costs of
patent licensing were high, the producer would have to sell the final product at a high price to recoup the cost of production.
On the other hand, Cournot monopolies/oligopoly arise when complimentary inputs are needed to be conjunctively used but one or more of the input owners (threaten to) hold out in a bid to secure a higher reward on their input.181 Amir
and Gama describe Cournot monopolies/oligopoly as arising where ‘n firms sells n different products that are useless unless they are used together…’ These products (or inputs) would need to be combined together by the buyer to create a finished product. Mossoff provides insight into the thicket experiences of the US sewing machine industry of the 1850s, particularly how serious transaction
178 Keith Jones, Keith Jones, Michael Whitham and Philana Handler, ‘Problems with Royalty Rates,
Royalty Stacking and Royalty Packing Issues’ in Anatole Krattiger and Richard T. Mahoney, eds., Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (Oxford, 2007) 1121-1123.
179 Mark Lemley and Carl Shapiro, ‘Patent Holdup and Royalty Stacking’ (2007) 85 Texas Review
1993-2049.
180 Yann Meniere ‘Patent Law and Complementary Innovations’ (2008) 52 European Economic
Review 1125; see also, Carl Shapiro, ‘Navigating the Patent Thicket: Cross-licenses, Patent-pools, and Standard-setting’ (2001) 1 Innovation Policy and the Economy 119–150.
181 Yossie Feinberg and Morton Kamien, ‘Highway Robbery: Complementary Monopoly and the
Hold-Up Problem’ (2001) 19 International Journal of Industrial Organization 1603-1601; see also, Klaus Schmidt ‘Complementary Patents and Market Structure’ (2014) 23 Journal of Economics and Management Strategy 68-88.
breakdowns resulting from the thickets led to innovation stagnation in the sewing machine industry of that era.182
The tendency for the royalty-stacking problem to arise can be illustrated using the following hypothetical situation. If Element A and Element B were to be combined in order to make a device, let it be assumed that the prevailing market price of both elements is similar. If a contract is concluded over access to Element A, the owner of Element B may choose not to conclude a contract with a view to holding out until the manufacturer of the device agrees to a higher price for Element B. If contracts are not concluded due to patent thickets, either of the following is likely to arise: patents are likely to remain unused because of the fear of infringing and legal implications of infringing;183 or manufacturers who are in need of the
patented technologies but are unable to obtain legitimate access through licensing contract wilfully infringe those patents.184 In these circumstances, where patents
are infringed detection and monitoring are often difficult to attain.185 In other
cases, patent thickets may cause manufacturers to innocently infringe patents due to the non-optimal search costs that accompany them.186 These possibilities could
spell asset specificity problems for both holders and users of patented technologies.
It is believed that a proper market for patents, in the neoclassical sense of the concept ‘market’, cannot be said to exist due to information costs that beset patents.187 According to this belief, a true market is one wherein common
182 Adam Mossoff, ‘The Rise and Fall of the First American Patent Thicket: The Sewing Machine
War of the 1850s’ (2011) 53 Arizona Law Review 165-211.
183 James Buchanan and Yong Yoon, ‘Symmetric Tragedies: Commons and Anticommons’ (2000)
43 Journal of Law and Economics 1-13.
184 See Kimberlee Moore, ‘Empirical Statistics on Willful Patent Infringement’ (2004) Federal
Circuit Bar Journal 227; see also Stu Woolman, ‘Evidence of Patent Thickets in Complex Biopharmaceutical Technologies’ (2013) 52 IDEA-The Intellectual Property Law Review 1-39.
185 See Rebecca Eisenberg, ‘Patent Costs and Unlicensed Use of Patented Inventions’ (2011) 78
The University of Chicago Law Review 53-69.
186 David Conrad, ‘Mining the Patent Thicket: The Supreme Court’s Rejection of the Automatic
Injunction Rule in eBay v. MercExchange’ (2007) 26 Review of Litigation 120-154.
187 Irene Troy and Raymund Werle, ‘Uncertainty and Markets for Patents’ (2008) Max Planck
Institute for the Study of Societies, available at http://www.mpifg.de/pu/workpap/wp08-2.pdf (last assessed on 02/04/2016).
practices, rules, standards and conventions govern conduct and transactions.188
This uniformity in factors is only likely to be found in the market of homogeneous goods, where complete information and transparency is likely.189 These factors
cannot be easily located in the patent market or other markets of informational goods. It is for this reason that transactions over patents would naturally be mired in bargaining and negotiation costs.
On this basis, it seems fair to conclude that the microscopic conditions of transaction costs will only end up obfuscating a patent market that is already inherently beleaguered by information costs. The implication is that the patent market will inherently be illiquid and dysfunctional and, as such, likely to expose parties to asset specificity.190