The ramifications of such an agreement on the relevant IP rights of Twitter (or any subsequent assignee) can be assessed from different angles. In terms of monetary value, Twitter is giving away its legal right to some extent for opposing any infringement on the subject patents – a risky gamble in their IP strategy. Without such an agreement, Twitter would have the right to seek compensation and retribution for damages caused by another entity’s illegal infringement of Twitter’s patents, providing its IP management team with carrot/stick enforcement options. However, the IPA seriously limits such rights, allowing the patent owner to only litigate for “defensive purposes” against an entity that threatens (or is involved in) patent litigation against Twitter, against an entity that has been involved in a patent infringement lawsuit against another in the past ten years (for non-defensive purposes), or for purposes of deterring threats of such lawsuits.
It should be noted that Twitter maintains the right to sue infringing entities that do not fall under the mentioned categories, if the inventors provide written permission (but not through additional consideration or threat). This could mean that legitimate patent litigation against an infringing party is likely to be permissible if the inventors believe that their invention is being “stepped on” – reasonable, proactive IP management. However, the inventors have the right to deny such permission, if they decide to use their invention, or to allow others to take advantage of the innovation in a broader IP strategy context.
Moreover, this requirement of obtaining the inventors’ permission, which continues with the patent for as long as it is in force, would create a barrier to those who wish to use the patent as a weapon in patent wars or as a patent monetization scheme that relies solely on litigation-based valuation models. In effect, it would create a “no-troll zone” for the subject patents.
Another effect of the IPA is to considerably reduce the monetary value of the patent in a pure IP transaction, as any potential buyer or licensee would have to be bound by the same limitations associated with the patent through the IPA, and thus largely subject to the inventors’ control in deciding to assert a patent in court against infringers for the duration of the patent term. On the other hand, the IPA provides for an “NPE-free market” in which any entity may utilize the invention freely (unless the patent owner and all the inventors agree to go against the infringer in costly patent litigation) without the constant fear that the rights to every little feature of a software application may belong to another, thereby reducing unnecessary costs associated with payment of royalties, and eventually passing the benefit of lower prices on to the consumers.
Economists are well-versed in the rationale behind the famous “tragedy of the commons” (proposed by ecologist Garrett Hardin in 1968) in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource, even when it is clear that it is not in anyone’s long-term interest for this to occur.
The “tragedy of the anticommons” (published by Columbia law professor Michael Heller in 1998) is a coordination breakdown where the existence of numerous rightsholders frustrates the achievement of a socially-desirable outcome. It is akin to the coordination breakdowns arising from insufficient rightsholders in the tragedy of the commons. Such coordination failures have hampered the emergence of a true IP marketplace. From an institutional-economics perspective, clearly defining property rights, reducing transaction costs, and eliminating principal-agent problems are essential for such a market to be realized, optimizing the process of IP management.
Twitter’s IPA is at best a patch solution to a much larger and neglected problem. Without a uniform basis for such contracts, IP holders who agree to such terms will be disadvantaged in relation to the ones who opt out. While patent regimes and legal systems have provided similar localized measures to deals with patent thickets, submarine patents, and nail houses, speculators and opportunists alike will always look to exploit cracks in the system (as with the short-lived spate of false patent-marking cases in the US).
Eminent domain (such as through compulsory license), the doctrine of laches, covenants not to sue (CNS), strategic patent pools, or other licensing pacts as part of an overall IP strategy can all be utilized to overcome such obstacles, but a cohesive framework is still necessary to prevent the shortcomings of the economic imbalance for IP haves and have-nots.