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Cross-licensing

Cross-licensing

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A cross-licensing agreement is a contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

 between two or more parties where each party grants rights to their intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...

 to the other parties.

Patent law



In patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....

 law, a cross-licensing agreement is an agreement according to which two or more parties grant a license to each other for the exploitation of the subject-matter claim
Claim (patent)
Patent claims are the part of a patent or patent application that defines the scope of protection granted by the patent. The claims define, in technical terms, the extent of the protection conferred by a patent, or the protection sought in a patent application...

ed in one or more of the patents each owns. Very often, the patents that each party owns covers different essential aspects of a given commercial product. Thus by cross licensing, each party maintains their freedom to bring the commercial product to market. The term "cross licensing" implies that neither party pays monetary royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...

 to the other party, however, this may be the case.

For example, Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...

 and JVC
JVC
, usually referred to as JVC, is a Japanese international consumer and professional electronics corporation based in Yokohama, Japan which was founded in 1927...

 entered into a cross license agreement in January 2008. Each party, therefore, is able to practice the inventions covered by the patents included in the agreement. This benefits competition by allowing each more freedom to design products covered by the others patents without provoking a patent infringement
Patent infringement
Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder. Permission may typically be granted in the form of a license. The definition of patent infringement may vary by jurisdiction, but it typically includes using or...

 lawsuit.

Parties that enter into cross-licensing agreements must be careful not to violate antitrust
Antitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...

 laws and regulations. This can easily become a complex issue, involving (as far as the European Union is concerned) Art. 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), previously Art. 81 and 82 of the EC Treaty, (abuse of dominant position, etc) as well as licensing directives, cartels, etc.

Some companies file patent applications primarily to be able to cross license the resulting patents, as opposed to trying to stop a competitor from bringing a product to market. In the early 1990s, for example, Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...

ese original design manufacturers
Original Design Manufacturer
An original design manufacturer is a company which designs and manufactures a product which is specified and eventually branded by another firm for sale. Such companies allow the brand firm to produce without having to engage in the organization or running of a factory...

, such as Hon Hai, rapidly increased their patent filings after their US competitors brought patent infringement lawsuits against them. They used the patents to cross license.

One of the limitations of cross licensing is that it is ineffective against patent holding companies. The primary business of a patent holding company is to license patents in exchange for a monetary royalty. Thus, they have no need for rights to practice other companies' patents. These companies are often referred to pejoratively as patent troll
Patent troll
Patent troll is a pejorative but questioned term used for a person or company who is a non-practicing inventor, and buys and enforces patents against one or more alleged infringers in a manner considered by the target or observers as unduly aggressive or opportunistic, often with no intention to...

s.

Non patent law


Other non-patent intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...

 such as copyright
Copyright
Copyright is a legal concept, enacted by most governments, giving the creator of an original work exclusive rights to it, usually for a limited time...

 and trademark
Trademark
A trademark, trade mark, or trade-mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or...

 can also be cross-licensed. For example, a literary work and an anthology that includes that literary work may be cross-licensed between two publishers. A cross-license for computer software may involve a combination of patent, copyright, and trademark licensing.

See also

  • Defensive termination
    Defensive termination
    Defensive termination is a form of implicit cross licensing of patent or other intellectual property rights. Consider a case where company A licenses patent A to company B. One of the conditions of the license agreement is that if company B should ever sue company A for infringing one of company...

  • Licensing (strategic alliance)
  • Licensing Executives Society International
    Licensing Executives Society International
    The Licensing Executives Society International, or LES International, is a not for profit, non-political, umbrella organisation having 32 national and regional member societies, interested in technology transfers or licensing of intellectual property rights. It was founded in 1965 in the United...

  • Patent pool
    Patent pool
    In patent law, a patent pool is a consortium of at least two companies agreeing to cross-license patents relating to a particular technology. The creation of a patent pool can save patentees and licensees time and money, and, in case of blocking patents, it may also be the only reasonable method...

  • Patent thicket
    Patent thicket
    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," or, in other words, "“an overlapping set of patent rights” which require innovators to reach licensing deals for multiple patents...


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