Can universal online marketplace clear the patent thicket?

(IPRinfo 1/2008)

Jarkko Vuorinen
Doctoral candidate, LL.M (IPR)
University of Turku

The 2008 Open-IP Symposium
February 7-9, 2008
Colorado Springs, Colorado, USA.

For years academics have discussed patent thickets. According to Carl Shapiro a patent thicket is ”a dense web of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology”.

Open-IP proclaims to have a solution to patent thickets or at least means to limit its adverse effects. It aims to be a universal online marketplace for intellectual property. Their objective is to link as many intellectual property portals as possible. The attempt is highly ambitious: it can totally change the intellectual property rights market.

Currently, technology is fragmented in dozens of different portals throughout the world. Consequently, patent searches are time-consuming. Open IP provides a search engine that connects patent sellers and buyers of different portals. Thus, it resembles Amazon.com’s model in which sellers are connected with buyers by the central search engine. Open-IP utilizes the same model to intellectual property. It can also be compared to an online match-making service, since it is not designed to transact deals: it is always up to patent holders and interested buyers to close the deal. If Open-IP succeeds there will be massive savings in transaction costs.

One advantage is that the system allows the presentations of technology in pictures – a function that may benefit small inventors. Added information about patents is likely to make issues more transparent and help to set a just price. The biggest obstacle to Open IP is possibly the resistance to change. However, practically everyone agrees that the current state of affaires with dozens of different portals is not optimal. Consequently, the Open IP initiative is promising.

The initiative can teach something to academics. For some reason, academics have overlooked the invisible hand solution and promoted a visible hand solution to patent thickets, namely governmental intervention. However, as Robert Merges has said, ”I find it curious that scholars who have studied legal issues arising out of innovations and other creative works have failed to realize that transactional difficulties are no less capable of calling fort new responses than technological or creative impasses. Perhaps it is an example of Oliver Williamson’s point that organizational innovations are understudied and underappreciated.”

Indeed, as Robert Merges has also said, it is worth waiting for market solutions to develop rather than speed up to governmental solutions, which often are not as efficient as market solutions. It is certain that at some point global IP markets will emerge, but before that markets will evolve and we just have to wait. Consequently, it remains to be seen whether Open-IP will succeed or if some other arrangement replaces it.

Open-IP.org is an industry-wide consortium of intellectual property stakeholders created to ensure the establishment of a thriving online patent market.

References:
Merges, Robert P.: Of Property Rules, Coase, and Intellectual Property, 94 Columbia Law Review
2655. 1994.
Merges, Robert P.: Compulsory Licensing vs. the Three ”Golden Oldies” Property Rights,
Contracts, and Markets. Policy Analysis, No 508. January 15, 2004.
Nutter, Art & Troyer, Matt: A New Kind of Online Marketplace for IP. Intellectual Asset
Management Magazine, February/March, Issue 28, 2008, pp. 37-41.
Shapiro, Carl: Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting
(March 2001). Available at SSRN: or
DOI: 10.2139/ssrn.273550.