Cross-licensing occurs when businesses share patent rights through licensing
agreements so that they can use each others’ inventions. Unilateral license here means
that a licensor unilaterally licenses to a licensee with no payment of a license in return,
and cross-license means that the licensee pays by cross-licensing at least partly. Such a
relationship usually begins when one company sends another company a letter saying that
the sender has a patent that may be relevant to the recipient’s business. This is done
because the sender does not want to initially precipitate a lawsuit. If the other party does
not respond or replies that it does not infringe on any of the sender’s patents, the only
remedy is to file a lawsuit. In the recent case of Intel v. Via, before Intel filed the
lawsuit, Via did not come to the negotiating table . Typically the company that is sued
will countersue that the attacking company is violating its patents or that the attacking
company’s patents are invalid.
This paper will cover motivations to license, offensive and defensive tactics,
negotiations, the dangers of not licensing, and some types of licensing. I will then
discuss the benefits of cross-licensing over unilateral licensing and also the limitation of
the benefits of cross-licensing. Finally, I will conclude and provide some
Motivations to License
The expense and dangers of litigation are potent motivations for both companies
to enter into a licensing arrangement.
Litigation is expensive and can be much like a competition between David and
Goliath. A small company may not be able to afford to litigate. A normal case can cost
$2-5Mn from start to end of trial, while a large case can cost $10Mn/quarter .
Litigation is also a distraction from a company’s focus on...