Patent pools and the case of high license fees 4/4

Patent pools offer licenses for technologies at a fair fee. This system seems like an effective solution until the patent begins to expire. That means the patents lose their power that brings the value, so the price should go down. But now some pools lock in licensors for long terms and the conditions don’t reflect the worth of the patents. For large corporations is it not a problem to pay these fees, but for small and medium sized startups they erect barriers.
Causers are not the Google’s or HP’s of the world; causers are patent pools like MPEG LA. More than 90 percent of MPEG-2 patents are subject to expire by 2015. The number of licensors and patents in this pool continues to decrease, but not royalties! This is the strategy pursued by Larry Horn, CEO of MPEG LA. This is the same Larry Horn who also is one of the main owners of MobileMedia Idea LLC, one of the big patent trolls, which become famous because they sued Apple.
In 1997 the Department of Justice sent a business review letter inter alia to MPEG LA, which includes:
• Licensors’ commitments to the International Organization for Standards and/or the International Telecommunications Union-Telecommunications Sector to license their patents on fair, reasonable and non-discriminatory (FRAND) terms
• Limitation of the pool to technically essential patents
• The use of an independent expert to assess patent essentiality
• Confidentiality provisions prohibiting the transmission of competitively sensitive information among licensors or licensees
• A “most-favored-nation” clause and 25 percent cap on royalty
The current MPEG-2 pool violates the spirit of this business review letter and MPEG LA has changed from a public interest utility into a profit-maximizing corporation. For example, MPAG LA expanded up to 5000 patents in 70 countries with over 130 licensors and 5000 licensees and the MPEG-2 pool include 818 patents which all begin to expire (400 are expired 1. April 2012), but the license fee is with still $2 high.
If companies like MPEG LA do not amend this scrupulous business practice, the Department of Justice’s intervention will inevitably slow down innovation and stop a fast-moving market place. Also, these are manipulative price structures bad for startups (which create jobs and fuel innovation in the USA), that means: No new jobs and slow innovation!