Discuss the uses of cross-licensing agreements by large software manufacturers and how their use can place smaller companies at a disadvantage

Answer 1

Many large software companies have cross-licensing agreements in which each agrees not to sue the other over patent infringements. For example, Apple and HTC battled for several years over various mobile phone-related patents, which eventually led to the U.S. International Trade Committee banning imports of two models of the HTC mobile phone. The two companies eventually agreed to a 10-year cross­licensing agreement that permits each party to license the other's current and future patents.

Major IT firms usually have little interest in cross-licensing with smaller firms. As a result, small businesses must pay an additional cost from which many larger companies are exempt. Furthermore, small businesses are generally unsuccessful in enforcing their patents against larger companies. Should a small business bring a patent infringement suit against a large firm, the larger firm can overwhelm the small business with multiple patent suits, whether they have merit or not. Considering that the average patent lawsuit costs $3 to $10 million and takes two to three years to litigate, a small firm often simply cannot afford to fight; instead, it usually settles and licenses its patents to the large company.