An Organizational Perspective on Patenting and Partnering: Unpacking Capacities to Manage Participation in Patent Pools

• Date: 01 September 2019
• Published date: 01 September 2019
• Author: Jamal‐Eddine Azzam
• DOI: http://doi.org/10.1111/emre.12188

An Organizational Perspective on Patenting

and Partnering: Unpacking Capacities to

Manage Participation in Patent Pools

JAMAL-EDDINE AZZAM

TSM-Research, Université Toulouse Capitole, CNRS, Toulouse, France

In this research, we investigate how firms manage their participation in patent pools, which are private

interorganizationalarrangements for sharingpatents on a large scale.Drawing on the licensing andopen innovation

literature,we develop a conceptual framework to analyze theorganizational capacities thatenable firms to manage

their participation in patent pools. We illustrate and enrich this conceptual framework through anin-depth study of

Technicolor. Our findings show that the company develops and leverages its patent portfolio to strengthen its

positions both as a licenseeand licensor vis-à-vis the pools’membersthrough two articulatedcapacities: absorptive

and desorptive.We also revealhow the company assesses opportunities to join patentpools and continues to integrate

more patents. The organizational perspective articulated in this paper enhances the understanding of patent pools

and expands the literature on licensing and open innovation.

Keywords: patent pools; organizational capacities;licensing; open innovation

Introduction

Firms increasingly use patents to develop and sustain

competitive advantages in a knowledge-based economy

(Grindley and Teece, 1997; Pitkethly, 2001; Somaya,

2012). Early research rooted in economics and law showed

the relative inefficiency of patents as an appropriation

mechanism (Levin et al., 1987; Cohen et al., 2002).

Management research has revealed that patents are

valuable not only as resources for achieving strategic goals

beyond simple protection but also as sources of

organizational capacities that affect firm performance (Hall

and Ziedonis, 2001; Blind et al., 2006; Somaya et al.,

2007; Gambardella et al., 2008; Reitzig and Puranam,

2009; Reitzig and Wagner, 2010; Greenberg, 2013; Hsu

and Ziedonis, 2013; Korkeamäki and Takalo, 2013).

Management scholars have highlighted that many firms

evolve in multi-invention contexts characterized by

technologically complex standards and products with

multiple components that have been individually patented

by independent actors (Teece et al., 2011; Granstrand and

Holgersson, 2013). Developing complex innovative

products thus requires managing the tension between

technology integration (i.e., the use of many different

technologies from different domains) and patent

fragmentation (i.e., a dense web of overlapping patents that

are individually owned) while avoiding the risk of patent

infringement (Somaya, 2012; Di Minin and Faems,

2013). Managing this tension involves collaborative

arrangements among the patent holders regarding all the

elements involved in standards and products (Shapiro,

2001; Lerner and Tirole, 2004; Vakili, 2016).

Firms increasingly use patent pools as collaborative

arrangements to a ddress patent fragm entation challenges.

A patent pool is an agreement between two or more

patent holders to cross-license their patents in a specific

field and to license all pooled patents to third parties.

Patent pools are ‘one-stop shops’that facilitate the

large-scale licensing and promotion of a technological

standard (Joshi and Nerkar, 2011; Rayna and Striukova,

2010; Vakili, 2016). Competition authorities encourage

the use of modern patent pools to promote both

innovation and competition (United States Department

of Justice (U.S. DOJ) and Federal Trade Commission

(FTC), 2007); patent pools have spread to many sectors,

thereby establishing economic significance (Lerner

et al., 2007; WIPO, 2011;de Uijl et al., 2013).

1

Empirical

evidence showsthat the formation of patent pools reduces

Correspondence: Jamal-Eddine Azzam, TSM-Research, University

ToulouseCapitole, 2,rue du Doyen Gabriel MartyFrance,31000Toulouse,

France. E-mailjamal-eddine.azzam@tsm-education.fr

1

In the mid-2000s, the income generated in the United States from sales of

products incorporating technologiesrelated to patent pools exceeded US$100

billion peryear (Clarkson & Dekorte, 2006).

DOI: 10.1111/emre.12188

©2018 European Academy of Management

European Management Review, Vol. 16, 699–, (2019)

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both technological and appropriation uncertainties for

firms and increases the rate of follow-on innovations

based on pooled patents (Vakili, 2016).

Due to the economic significance and widespread

diffusion of patent pools, economics and management

scholars have investigated the antecedents and

consequences of their formation (Lerner and Tirole,

2004, 2007; Lerner et al., 2007; Baron and Pohlman,

2011; Layne-Farrar and Lerner, 2011; Lévêque and

Ménière, 2011; Joshi and Nerkar, 2011; Vakili, 2016).

To date, few scholars have thoroughly examined how

firms manage their participation in patent pools. To the

best of our knowledge, de Uijl et al. (2013) were the first

to investigate the management of patent pools when

technologies become increasingly complex. However,

their unit of analysis was the pool, notparticipating firms,

thus their findings do not indicatehow firms manage their

participation. Such participation can be challenging since

firms must balance the tradeoff between value creation

and value capture(Vakili, 2016). Therefore,it is important

to understand which capacities firms need to successfully

manage their participation in patent pools. Thus, we ask

the following:which capacities do firms deployto manage

participation in patent pools, and how do these capacities

interact? Addressing this issue can expand the existing

literature on patent pools and help both scholars and

managers better understand patent management in

situations of ownership fragmentation and technological

complexity (Teece et al., 2011; Di Minin and Faems,

2013; Somaya, 2012).

First, we develop a conceptual framework of the

capacities involved in managing patent pool participation

by building on related but disconnected research streams

connected with licensing and open innovation. Then, we

enrich this framework with findings from qualitative

fieldwork at Technic olor, a worldwide technolo gy leader

in the media and entertainment industries. Since the

company has participated in several patent pools since

2002, it provides an appropriate context for a case study

aimed at refining the conceptual framework. Using a

qualitative designto analyze firms’participation in patent

pools is consistent with recent calls in the literature

encouraging the use of case study research to understand

the mechanisms and processes by which firms develop

and deploy patent management capacities (Candelin-

Plamqvist et al., 2012; Somaya, 2012).

The core contributionof this paper is the elaboration of

a framework that clarifies how firms could manage their

participation in patent pools. The framework highlights

two organizational capacities (absorptive and desorptive)

and shows how they are deployed as well as how they

interact to manage different aspects of participation in

patent pools (e.g., by developingand defending the firm’s

patent portfolioand supporting its interestsas a licensee as

well as a licensor). In addition to addressing an

unexplored facet of patent pools, our paper adds two

insights tothe existing studies that analyzethe antecedents

and consequences of pools’formation. On the one hand,

the paper reveals an unidentified parameter affecting

firms’decisions to join pools and thus completes the

understanding of fac tors that influence firms’participation

in pools. On the other hand, the paper reveals the

organizationaldynamics that explain when andhow firms

integrate more patents in pools. Furthermore, the paper

contributes to the literature on licensing and open

innovation by showing how licensing-out and licensing-

in capacities interact and mutually reinforce each other.

Literature review

Patent pools are private collaborative arrangements

through which firms share their patents and collectively

license them to third parties (Lerner and Tirole, 2004;

Lerner et al., 2007). Patent pools represent multilateral

licensing agreements involving multiple firms (patents

holders and other licensees) and are explicitly approved

by regulators to avoid the tragedy of the anticommons,

accelerate the adoption of technological standards, and

facilitate interactions between licensors and licensees (de

Uijl et al., 2013). Figure 1 illustrates how patent pools

function.

Patent pools foster the development of nascent

technological standards and subsequent innovation by

promoting access to essential patents under fair,

reasonable and non-discriminant (FRAND) conditions

(Vakili, 2016). Patents for inventions that comprise

technological standards and are important for developing

standards-compliant products are considered ‘standard-

essential’(Shapiro, 2001; Lerner and Tirole, 2007;

Bekkers et al., 2012;Baron and Delcamp, 2015). A patent

is standard-essential when there are no technological

alternatives to the invention it protects, meaning that it is

not possible to develop standards-compliant products

without patent infringement. Hence, patent pools offer

advantages by providing both licensors and licensees

collective access to essential patents, thereby reducing

transaction costs, improving rent collection, reducing the

risk of hold-ups, etc.

Figure 1 Operatingmode of a patent pool.

700 J.-E. Azzam

©2018 European Academy of Management