Patent Thickets in the Software Industry

Introduction

In his paper titled ‘Navigating the patent thicket: Cross licenses, patent pools, and standard setting’, US Economist and Professor Carl Shapiro defines patent thickets as “a dense web of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology”. Essentially, a patent thicket can be defined as a culmination of a group of overlapping patents (that are similar in nature or otherwise) pertaining to a specific industry. The origin of patent thickets can be traced back to the late 1800s wherein several sewing machine companies created a patent thicket. The creation of this patent thicket is also popularly known as the ‘sewing machine war’. Patents that were awarded for several components of the sewing machine had largely restricted sewing companies from obtaining patents for their innovations.

Patent Thickets in Tech

Technologies and innovations are often composed of multiple components, each of which may be protected by patents held by different inventors or entities. When numerous innovators own patents covering these essential components—each of which is necessary to develop or implement a particular technology—a situation known as a “patent thicket” arises. This phenomenon occurs when overlapping or interrelated patents make it challenging for a single entity to commercialize a product or advance technological development without navigating through a complex web of licensing agreements or potential legal disputes.

Patent thickets are further exacerbated by the presence of competing intellectual property rights, where multiple stakeholders hold exclusive rights over similar or complementary inventions. This can lead to a fragmented landscape in which securing necessary permissions becomes time-consuming and costly, potentially hindering innovation and delaying market entry for new products. As a result, businesses and inventors must often engage in cross-licensing, patent pooling, or negotiations to overcome these barriers and facilitate the development of new technologies. One such example of patent thickets is in the smartphone industry, which is an industry where you require many patent-protected technologies to manufacture a single product. the LCD screen, antennas, Wi-Fi standards, processors, batteries, and so forth. There is a similar situation with computational tools like audio or video codecs and with anything that relies on semiconductors—integrated circuits, memory chips, even light emitting diodes. Companies often acquire licenses for parts of the end product that are patented by others.

Software patent thickets primarily emerge due to two broad categories of issues: overlapping patent rights and the sheer volume of patents granted in the software industry. These challenges are closely interlinked and can arise at different stages throughout the lifespan of software-related patents, often complicating technological progress and innovation.

The first category, overlapping patent issues, stems from concerns regarding the quality and scope of patents. Many software patents have broad, ambiguous, or overly general claims, leading to situations where multiple patents cover similar or identical functionalities. This results in uncertainty for innovators, as they may inadvertently infringe upon existing patents despite developing original solutions. The complexity of software systems further exacerbates this issue, as various components and processes within a single program can be subject to numerous patents, making it difficult to determine clear ownership.

The second issue, which arises as a consequence of the first, is the overwhelming number of software patents being granted. Because software-related innovations often rely on incremental improvements and modular designs, a vast number of patents are issued for small technological advancements. As more patents accumulate over time, the risk of litigation, licensing disputes, and legal roadblocks increases, making it more challenging for developers and businesses to bring new software products to market without facing legal complications.

Importantly, the proliferation of patents is directly influenced by the issue of overlapping patent rights. The broad and sometimes vague nature of software patents encourages a surge in patent applications, as companies seek to secure legal protections for their developments, even when those patents may be questionable in quality. This self-perpetuating cycle leads to an increasingly dense and intricate network of patents—commonly referred to as a patent thicket, which stifles competition, increases costs for developers, and slows down innovation within the software industry.

Disadvantages

Patent thickets often lead to negative consequences, particularly discouraging small businesses from entering industries with dense patent landscapes. In today’s digital era, where innovation is paramount, aggressive patent filings have frequently deterred inventors from seeking patents in competitive fields.

Additionally, patent thickets impose high transactional costs, as applicants must cover filing fees, legal expenses, and research costs to navigate overlapping patents. This financial burden can significantly impact profit margins, especially for startups. Large corporations often engage in aggressive patent filings to establish monopolies over specific technologies, further limiting market access for smaller players.

Patent thickets also facilitate patent trolling, where entities enforce patent rights without producing or utilizing the invention, exploiting the complexity of overlapping patents. Furthermore, they contribute to increased frivolous litigation, as multiple patents covering similar technologies heighten legal disputes.

Conclusion:

A patent thicket is the result of a collection of overlapping patents related to a certain industry, whether or not they are comparable in nature. However it can have negative effects

In many areas, but especially in technology and software development, patent thickets pose serious problems. Patents that are overly granted and overlap hinder innovation, raise expenses, and make it more difficult to commercialize emerging innovations. While larger organizations use aggressive patent filings to create monopolies, small businesses and startups frequently find it difficult to negotiate these complex patent environments. Furthermore, patent thickets hinder advancement by encouraging frivolous litigation and patent trolling. Reforms in patent quality requirements, effective licensing procedures, and industry cooperation are necessary to address these problems and strike a balance between intellectual property rights, innovation, and accessibility.

Author: Antas Deep, Legal Intern at PA Legal.

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