A central fact about the information technology sector is the multiplicity of patents that innovators must deal with. Indeed, hundreds of thousands of patents cover semiconductor, software, telecommunications, and Internet inventions. Because of the nature of information technology, innovation often requires the combination of a number of different patents. Currently, various features of the patent system facilitate holdup, particularly in the standard-setting context. These features include insufficient discounting in damages for patent infringement and the resultant inflated demands for royalties, the low standard of proof for willful infringement, which allows patentees to recover treble damages, and the threat of injunctive relief. Frequently, innovators make irreversible investments in their development of new technology, only to have those investments used against them as a bargaining chip by existing patent holders. This Article suggests five steps that standardsetting organizations may take to reduce the problem of patent holdup and five ways the law should change to deal with the problem.
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