With so many benefits of cross-licensing agreements, you may be wondering what the negatives are. There are several drawbacks: the progress and development of each sector depends on how industry players interact with each other by sharing knowledge. Cross-licensing agreements aim to create superior developed products by guaranteeing the protection of the parties` respective patent rights. However, with the increasing number of these agreements and the possible training in patent pools, it becomes relevant to ensure that they do not promote anti-competitive practices that eroded the entire purpose of ip sharing networks. Last week, a jury ruled against Google in a federal court in Texas and for a company called SimpleAir, which is seeking $125 million in damages, stemming from what it claims are violations of a patent dealing with push notification technology for smartphones. Because of these potential drawbacks, it is considered unwise for a company to add its critical technology patents to cross-licensing agreements. It is possible to add clauses that reduce direct competition between cross-licensing partners. In addition to the general benefits, some cross-licensing contracts are based on an unlicensed state, saving even more money. While the benefits far outweigh the costs, these agreements are legal contracts that companies enter into with their competitors. For this reason, companies considering this type of contract should always consult a qualified lawyer in order to preserve their own interests.
A cross-licensing agreement between the two parties is an agreement in which they grant each other patent licenses. Such agreements essentially involve the exchange of substantial patented knowledge between two parties trying to advance their own technological progress. In some sectors, cross-licensing is an important part of all IP management and licensing agreements. For example, according to a recent study by the Toulouse School of Economics, cross-licensing accounts for 50% of all licensing agreements in the telecommunications and broadcasting industries, 25% for electronic components and 23% in the pharmaceutical industry. The cost of licensing a cross-licensed intellectual property is unaffordable for most start-ups. Antitrust authorities are not interested in cross-licensing portfolios that contain provisions that could lead to competition-related agreements, such as market allocation or pricing. Patent pools are also subject to extensive scrutiny to ensure that they do not unfairly compromise competition or reduce incentives for innovation. Finally, Smith-Nephew has agreed to pay $10.5 million to enter into a cross-licensing agreement with Confor MIS, Inc.5 The best players in all fields, particularly in the automotive, telecommunications, broadcasting and pharmacy sectors, are engaged with each other through cross-licensing contracts. Cross-licensing agreements are unlicensed, which means the company can save extra money.
The benefits generally predominate over the negative aspects of costs, but it is important to remember that these are legally binding contracts that you enter into with your competitor.