Introduction

Anti-commons-

Competition for freely available common resources has always been part of the growth and survival of all entities including living beings. When the resources are finite, the competition stiffens and the fittest obtains maximum benefits. However, continuous exploitation in furtherance of self-interests results in the exhaustion of the resources, harming the community as a whole and resulting in what is popularly known as the ‘tragedy of the commons’.^[1] Doctrines such as those of ‘sustainable development’ and ‘common heritage of mankind’ came in response to identification of this problem and

propose limited exploitation and equitable distribution of resources anti-commons. Overuse is to be rectified by limiting access.

Quite opposite to this is the theory of tragedy of the anti-commons. When a scarce resource is subject to multiple ownerships, none has the exclusive privilege to use it and each has the right to exclude others from using it, the most likely result is underuse of the resource, another very undesirable event. This is analogous to a situation in which every member in a group has a veto (but not a privilege to use)

whereby he can reject every proposal brought by the others. None can alone do anything. Nothing will be done if one objects. The theory emerge and acquire significance in relation to land property but was soon adopt in other areas as well.

The Theory of Anti-commons and IP Rights

Professor Michael Heller, a professor at Columbia Law School in his book ‘The Gridlock Economy’ propounds that one of the probable results of the anti-commons is a ‘gridlock economy’, a situation in which over-fragmentation of rights over any kind of resource results in its under-exploitation, thereby deterring innovation, hampering competition , anti-commons

and negatively affecting the market; all of this being ultimately detrimental to the public interest.

The theory has been expound in relation to intellectual property rights, particularly patents. The phenomenon of granting patents to emerging technologies and other nascent inventions which are products of research has become very common lately. This process of patenting in the cradle is unavoidable, once the product or process satisfies

every requirement of our patent law.

Patent Thickets

However, these patented inventions in the upstream are beneficial to none but the patent owner himself, unless it is used in furtherance of a more innovative and gainful product in the downstream. As more and more research results get privatize and unavailable in the public domain, it becomes increasingly difficult for those interested in product development in the downstream to access them. Adding to this is the problem of multiple or fragmented ownership of patent rights. Consolidating this proliferated bundle of rights to be able to access the patented product is a herculean task to those at the downstream. This phenomenon has been popularly known as the problem of ‘patent thickets’. As Shapiro puts it, 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.”^[2]

He also underlined the problems associated with a patent thicket by stating that patent rights can stifle innovation instead of encouraging, when

there exists cumulative innovation and multiple blocking patents.^[3] Patent thickets can take form in the following three ways as identified by the United Kingdom Intellectual Property Office:

When multiple organizations each own individual patents that are collectively necessary for a particular technology, their competing intellectual property rights form a patent thicket.
Sets of overlapping property rights occurring in fragmented technology markets.
When too many patents covering individual elements of a commercial product are separately owned by different entities.

Such multiple patent rights give rise to the dilemma of multiple royalty obligations or

what is popularly known as royalty stacking.

Contributing Factors

A variety of factors including royalty stacking, high transaction costs, divergent interests of patent holders and personal biases are being project as the primary reasons for how a patent thicket affects innovation by creating entry barriers. The costs and delays associated with the process of identifying every patent holder of a particular product or process and negotiating with each of them are huge disincentives. Along with these, patent hold-outs have been allege to have the effect of intensifying a patent thicket and accelerating the ‘anti-commons’ tragedy.

The refusal of upstream patent holders to license their product until an exorbitant royalty is agreed to be paid – a nightmare for every person seeking to make a new product. While it is irrefutable that patent hold-outs lead to delays in innovation and product development, its contribution towards affecting an anti-commons tragedy is questionable. For a product requiring license for use for multiple patented components,

each from different patent holders, it becomes difficult when all but two of them have granted the license at an affordable price and

the other two refuses to grant it or demands an unreasonably high price for the same. The leverage of the latter two increases

when the product is an essential one and the licensee has high stakes

when it comes to abandonment of the project. Negotiation can be extremely difficult in such a situation due to the difference in their bargaining power.

What is a way out?

It cannot be said that the licensee would eventually have to yield to the demands of the patent holder or abandon the idea to use those two components. Patent is not an evergreen right. In India, patents are grant for a period of twenty years from the date of filing the patent application, irrespective of whether it is filed with provisional or complete specification. In case of applications filed under the Patent Cooperative Treaty (PCT), the term is twenty years from the priority date^[4]. It then becomes freely available in the public domain. It is unreasonable to assume that any prudent patent-holder would hold-out his patent in expectation of

an unrealistic amount rather than utilizing it as much as possible to

his benefit during his limited patent period.

Possiblities

It is however, possible that these patent hold-outs continue to persist and the product manufacturers seeking the license resort to infringing use of the held-out patent. Although this might lead to litigation and settlements, non-use of the resource is avoide. There is also the possibility of private enterprises paying-off the patent holders and acquiring the licenses. Public institutions, which lack the required resources to pay the demanded royalty or

absorb the high transaction costs associated with patent thickets,

are thereby deprive of access to such patents. This would ultimately be harmful to the public, who would end up paying an exorbitant price for the end-product; a price that is reflective of the expenses incurre by the manufacturer.

Solutions to these are available in the form of compulsory licensing and patent pooling. In a patent pool, multiple or fragment patent rights are consolidate under one roof. Licenses for the pool patents are then grant to member and non-member licensees and

a portion of the licensing fees that the pool collects is allocate

to each member in proportion to the value of each patent.^[5] Patent pools offer a viable solution to the high transaction costs associated with patent thickets and help reduce royalty stacking. Compulsory licensing carries the twin benefits of granting accessibility over upstream patents to innovative manufacturers

while ensuring that the manufactured process is affordable to the public. They help tackle the possibility of under-use and prevent the tragedy from occurring.

Conclusion

In conclusion, the theory of tragedy of anti-commons takes into account the various unappealing trends in the patent system and foresees the possibility of these giving rise to a situation where patents, rather than being a necessary evil, becomes an undesirable evil. It raises pertinent questions regarding the current system of patenting and licensing and

it creates a space where problems such as those relating to patent thickets, royalty stacking and patent hold-outs can be addressed.

The theory presents a tragedy of limited and unsatisfactory use of patents. The theory is understand to be in line with the utilitarian model which proposes that every action be orientat generating maximum happiness for the maximum number of people. It weighs the benefits of individual monopoly granted through patents against the disadvantage it causes to the public at large. The theory reflects not only the pressing need to resort to measures such as compulsory licensing and

patent pooling, but also to revamp the existing regime relating

to them, making them more efficient and user-friendly.

^[1] Garrett Hardin, The Tragedy of The Commons, 162 Science 1243, 1244-45 (1968); Elinor Ostrom, Governing the Commons: The Evolution of Institutions for Collective Action 182-84 (1990).

^[2] G. Clarkson, ‘Objective Identification of Patent Thickets: A Network Analytic Approach’ v.3.9, at 2.

^[3] Id.

^[4] The Patents Act 1970 Sec. 53 cl. 1.

^[5] Robert P. Merges, Institutions for Intellectual Property Transactions: The Case of Patent Pools, in Expanding the Boundaries of Intellectual Property, Innovation Policy for the Knowledge Society, 123, 129 (Rochelle Cooper Dreyfuss et al. eds., 2001).