This week on IPWatchdog Unleashed, I sat down with Matteo Sabattini to examine a set of issues that continue to define—and increasingly strain—the global innovation economy. Sabattini, who recently rejoined Sisvel, operates at the intersection of technology, licensing and policy. Our conversation covered the structural imbalance between innovators and implementers, the economic consequences of delayed licensing, and the growing importance of market-based mechanisms like patent pools. The recurring theme throughout our conversation was clear: the system has drifted out of equilibrium, and unless it is recalibrated, long-term investment in foundational technologies will suffer.

An Asymmetry and Numerosity Problem

At the heart of our discussion was the persistent asymmetry between those who are primarily innovators and those who are primarily implementers. As I explained, many patent owners historically assumed the system would take care of itself—that “cooler heads would prevail.” That assumption has proven misguided. Over the last two decades, implementers—many of them large, consumer-facing companies—have engaged in sustained and coordinated advocacy. Innovators, by contrast, have as a group been slower to mobilize. Sabattini agreed with the diagnosis but added an important nuance. The imbalance, he argued, is not simply a failure of engagement; it is structural. “There is a numerosity problem,” he told me. “The companies investing in developing new technologies are inevitably outnumbered by companies who actually use these technologies.”

That numerical disadvantage is compounded by a communications gap. Companies that develop foundational technologies—firms like Ericsson or InterDigital—are often not consumer-facing. They lack the direct channels that allow implementers to shape public narratives and, by extension, regulatory priorities. As Sabattini put it, policy advocacy functions much like marketing; you notice it when it’s gone, but not when it’s working. The implication is straightforward. When innovators scale back engagement—whether due to cost constraints or strategic miscalculation—they cede ground that is quickly occupied by others.

The Anticompetitive Nature of Free-Riding

From there, our conversation turned to the economics of licensing behavior, where the consequences of this imbalance become tangible. I pointed out that the debate is often framed as a binary conflict between patent owners and implementers who resist payment. But that framing misses a critical layer: the competitive distortion created when some market participants pay for licenses while others do not. Sabattini offered a simple but powerful illustration. If a licensing program sets a royalty of $1 per unit, but only half the market takes a license, the effective rate drops to $0.50. That means half the market is free-riding and competing unfairly with those who do pay.

This is not a theoretical concern. In markets built around standardized technologies—5G, Wi-Fi, connected vehicles—the number of participants is large, but revenue concentration is often skewed toward a handful of dominant players. When those players delay or avoid licensing, the burden shifts disproportionately to smaller firms that lack the resources to litigate for years. As I explained, that dynamic is fundamentally anti-competitive. It is not simply a dispute over royalties; it is a distortion of market pricing and competition itself. And it probably isn’t 50% of the market that is free-riding, in terms of market share and revenue it is probably closer to 80% or more of the market that is free-riding.

Rational Hold Out and Litigation Funding

The conversation inevitably led to enforcement. Without credible consequences for infringement, licensing becomes optional rather than obligatory. Sabattini was direct on this point: Without the availability of injunctions, it is very difficult for any rational player to willingly negotiate a license. In other words, the absence of meaningful enforcement mechanisms incentivizes delay. Companies can use patented technology, defer payment, and force innovators into protracted litigation with uncertain outcomes. The result is a system that rewards holdout behavior and penalizes those who comply.

I have long argued that this dynamic reflects a broader failure to maintain the integrity of patents as property rights. As I said during our discussion, if ownership cannot be meaningfully enforced, it is difficult to describe the asset as “property” in any traditional sense. Sabattini agreed, emphasizing that intellectual property lacks the self-enforcing characteristics of physical assets. “You can’t put fences around it,” he noted. Enforcement, therefore, is not ancillary—it must be foundational.

We also addressed the role of litigation funding and patent assertion entities, both of which are frequently criticized in policy debates. I explained that these mechanisms are often misunderstood. In many cases, they provide the only viable path for smaller innovators to enforce their rights against well-capitalized infringers. Sabatinni echoed that view, pointing out that, without such tools, “a smaller company will not have the means to go into court with a large company.” The alternative is not a more efficient system; it is one in which infringement goes effectively unchecked for those without the resources to fight back.

Patent Pools: A More Efficient Way to Monetize

Against this backdrop, patent pools emerged in our conversation as a rare example of a market-based solution that works. At a high level, pools aggregate patents—often standard essential patents owned by multiple parties—and offer a single license to implementers. The model reduces transaction costs, simplifies negotiations, and provides clarity on pricing. As Sabattini explained, “instead of having to negotiate with multiple parties… an implementer can simply come to a patent pool and take a single license.”

I described patent pools as the functional opposite of the fragmentation that characterizes much of the patent system today. Where litigation introduces complexity and uncertainty, pools offer transparency and predictability. Rates are established, terms are published, and participants know what they are getting. That clarity benefits both sides of the market. Innovators receive a more efficient path to monetization, while implementers gain access to essential technologies without the need for protracted negotiations.

Patent pools have also been recognized by antitrust authorities as pro-competitive. They reduce friction, lower barriers to entry, and facilitate broader adoption of standardized technologies. Yet, as Sabattini noted, they remain underutilized. He suggested that regulators should move beyond passive acceptance and actively endorse pools as a preferred mechanism for licensing in standardized markets.

Enhancing Transparency & Access

The conversation also touched on efforts to enhance transparency and accessibility in the patent ecosystem. Sisvel’s collaboration with the World Intellectual Property Organization (WIPO) to integrate data into PATENTSCOPE is one such initiative. The goal is to make information about standard essential patents more searchable and accessible, reducing information asymmetry for potential licensees. As I observed, transparency is only valuable if it is usable. Making data available in a structured, accessible format is a meaningful step toward a more efficient market.

We closed by discussing initiatives aimed at small and medium-sized enterprises (SMEs). Sabattini highlighted Sisvel’s IoT fund, which allows qualifying SMEs to access licenses for a defined period without upfront cost. The concept is straightforward: reduce barriers to entry, allow companies to test technologies, and align payment with demonstrated success. It is a pragmatic approach that recognizes both the constraints and the potential of smaller market participants.

Market Distortions Prevent Repetitive Innovation

Stepping back, the themes that emerged from our conversation are not new, but they are increasingly urgent. The patent system sits at the foundation of the innovation economy, yet its effectiveness depends on a delicate balance between incentives, enforcement, and access. When that balance is disrupted—whether through policy misalignment, enforcement gaps, or market distortions—the consequences ripple across industries.

What Sabattini articulated, and what I have observed over decades in this field, is that markets will adapt—but not always in ways that promote innovation. And while innovation is still happening what is missing is the cycle of “rinse and repeat innovation” where an individual or company innovates, protects and then successfully monetizes so they can reinvest and start all over again.

In a world where giant corporations are allowed to take without paying that necessarily limits the ability of innovators to innovate again. Indeed, many innovate and lose everything because what they pioneered gets taken without any remuneration. And it is axiomatic that if innovators cannot reliably capture value from their investments, capital will shift elsewhere.

More IPWatchdog Unleashed

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