This article is written by P. Rajnandini of Capital Law College, Bhubaneswar, an intern under Legal Vidhiya
Abstract
This paper examines the impact of patent pools on litigation incentives, royalty rates, and social welfare in the context of probabilistic patent rights that are subject to invalidation in court. In cases of probabilistic patents, licensing fees are determined by the strength of the patents. It is demonstrated that patent pools consisting of complementary patents can deter infringement by preventing potential licensees from selectively challenging patents, thereby forcing them to fully commit to patent litigation. However, when patents are relatively weak, patent pools with complementary patents may decrease social welfare by imposing higher licensing fees and dampening incentives for future innovation.
Keywords
Innovations, patent pools, India, patent, technology, Licensing
Introduction
Joining a patent pool allows multiple patent owners to collaborate and share their patents with external parties. It is often used in complex technologies that require multiple patents for effective solutions. There is ongoing debate about the legal and economic implications of patent pools. On one hand, they can promote competition and innovation by allowing companies to develop new products and reduce costs. However, there is also a risk of anti-competitive behavior, as collaboration among competitors can lead to collusion.
Patent pools are commonly used to establish industry standards that enable companies to create compatible products and services, particularly in areas like mobile communications, data encoding, and public health.
In essence, patent pooling is a way for inventors to access complementary patents owned by others to fully utilize complex technologies. Tech companies are always coming up with new ideas, but dealing with patents can be difficult. They have to deal with lawsuits and expensive fees. Patent pools help them by allowing them to share patents and avoid these problems. This way, companies can focus on what they do best: creating new technology.
Patent pool refers to an arrangement in which numerous patent holders consolidate their patents into a single portfolio. This portfolio is then available to others, including competitors, under a collective licensing agreement. It’s like a group of explorers sharing their maps and tools to navigate unknown areas. In patent pools, companies share their innovations, reducing the risk of legal disputes and creating a more collaborative environment.
Patent pools are incredibly important in the tech industry. With new inventions coming out all the time, the threat of patent infringement can slow down innovation. Patent pools help by pooling resources and knowledge, protecting against legal battles.
This approach speeds up development and makes it more cost-effective, ensuring that innovative products reach the market and consumers quickly and efficiently. patent pools are crucial in the tech world. They help facilitate innovation and protect against legal disputes. They are not just a legal mechanism, but a strategic tool that helps guide technology development towards progress and discovery. In the world of intellectual property rights, patent pools are a collaborative way of licensing and using patented technologies. This approach enables different companies to combine their coffers, patents, and knowledge, creating a single platform for developing and dealing new products or services. By working together, these associations encourage invention, simplify legal matters, and cover against the adding issue of patent pixies in the patent assiduity.
What’s a Patent pool in Innovation or Technology?
A patent pool involves an agreement between two or further patent holders to certify their patents to one another or to third parties. generally, patent pools are linked to intricate technologies that bear reciprocal patents to offer effective specialized results.
The conception of patent pools dates back numerous times, with one of the foremost cases being in 1856 for sewing machines. In contemporary times, patent pools frequently serve as the foundation for assiduity norms that give companies with essential technologies to produce compatible products and services, similar to mobile dispatches, information coding, and public health.
These pools may involve technologies that are still in the process of being completely developed. While there’s wide agreement on the positive impact and effectiveness advancements brought about by patent pools, there are situations where establishing a patent pool could potentially transgress competition or antitrust regulations.[1]
Background
In 1856, three sewing machine manufacturers, Grover & Baker, Singer, and Wheeler & Wilson, gathered in Albany, New York to address their allegations of patent violation against each other. Orlando B. Potter, the chairman of Grover & Baker and a counsel, proposed an indispensable result to their legal battles. rather than wasting their gains on action, he suggested that they combine their patents. [2]
This marked the establishment of the first patent pool, a cooperative process that allowed for the production of complex machines without the need for patent rights controversies. Fast forward to 1917, during World War I, the Wright Company and the Curtiss Company, the two major patent holders for airplanes had effectively hindered the development of new aircraft. Feting the critical need for further airplanes as the United States entered the war, the U.S. government, upon the recommendation of a commission led by Franklin D. Roosevelt, who was also Assistant Secretary of the Navy, wielded pressure on the assiduity to form a patent pool. This resulted in the creation of the Manufacturer’s Aircraft Association. Moving ahead to August 2005, roughly 20 companies involved in the Radiofrequency Identification (RFID) sphere came together to establish a patent pool. The RFID Consortium named Via Licensing to oversee the administration of this patent pool in September 2006.
Indian viewpoint on Patent Pools
In India, the concept of patent pools is relatively new and has always been associated with the proposed solution for affordable healthcare. The patent pool is seen as a means to gather a collection of patents held by different companies, to promote the development and accessibility of medicines that impact impoverished individuals in developing nations.
According to a survey conducted by TERI, after the amendment of the Patents Act in 1970, it will become challenging for most companies that solely focus on biogenerics to survive. Additionally, there are doubts regarding whether valuable and beneficial new patents will be included in the pool.
The Indian Patent Act of 1970 does not provide specific provisions or guidelines for the formation of patent pools, but it also does not prohibit their creation. Many individuals interpret section 102 of the Patents Act as a facilitative provision for establishing a patent pool that is administered and managed by the government in the interest of the public. One potential barrier to patent pools could be anti-competitive policies governed by the Competition Act of 2002, which prohibits any agreements or licenses that are anti-competitive. Patent pools can be considered anti-competitive when pool members agree not to grant licenses to third parties and simultaneously fix pricing and quotas.[3]
Recently, an Indian generic drug manufacturer, Aurobindo Pharma Limited, and Med Chem joined the Medicines Patent Pool (MPP) for the production of various antiretroviral medicines. This partnership will enable Aurobindo Pharma to access the patented drugs recently introduced into the pool by Gilead. As a result, Aurobindo can now manufacture and sell tenofovir in a larger number of countries without paying any royalties.
What is the Operational Process of a patent Pool?
A patent pool operates by aggregating patent rights from multiple patent holders and making them available to both member and non-member licensees. The pool distributes a portion of the licensing fees it collects to each member based on the value of their respective patents.
A collaborative approach to consolidating patents involves the establishment of a joint venture, wherein multiple patent holders unite to mutually exchange their intellectual property rights.
The main functions of the patent pool agent are as follows:
- Gathering or collecting essential patents owned by multiple licensors.
- Users or implementers of a standard can acquire licenses for all the patents in the pool via the agent.
- Calculating the license fee to be paid by the licensee and distributing the payments to each licensor in proportion to the number of their patents.
Determining Eligible Innovations for Patents
What Meets the Requirements for Patent Protection?
To be eligible for patent protection according to the Patents Act, an innovation must meet the criteria of being novel, involving an inventive step, and having an industrial application.
Standards: Novelty, Inventiveness, And Industrial Applicability
These standards are outlined in the Act, where ‘novelty’ means the innovation is not previously known, ‘inventiveness’ signifies a substantial creative leap, and ‘industrial applicability’ guarantees practical use across various industries.[4]
Strategies for Executing a Prosperous Patent Pool
To create a successful patent pool, meticulous planning, and precise execution are essential. Here are some fundamental guidelines to keep in mind:
- Recognize patents that work well together: A patent pool should be comprised of patents that complement each other, forming a comprehensive technological solution or a collection of patents that address a specific issue.
- Promote transparency and trust: It is vital to establish clear policies and procedures within the patent pool structure. Defining the rights and responsibilities of participating members is crucial to ensure fair and impartial treatment for all stakeholders.
- Simplify the licensing process: The licensing procedure should be straightforward and easily comprehensible. Transparent licensing terms and royalty structures will motivate potential licensees to join, ultimately leading to the widespread adoption of pooled patents.
- Encourage broad participation: Seek participation from a diverse range of companies that possess complementary patent portfolios. The value and appeal of a patent pool to potential licensees are enhanced by a greater number of patents available within the pool.
Advantages of Patent Pools
Patent pools present numerous benefits in the battle against patent trolls. Initially, they enable the exchange of intellectual property, thereby diminishing the likelihood of legal disputes among
pool participants. Additionally, patent pools serve as a cost-efficient means for companies to acquire a wider array of technologies, fostering collaboration and innovation. Lastly, patent pools act as a deterrent to patent trolls by presenting a consolidated front of shared resources and patents, thereby reducing the appeal of targeting individual members.[5]
Disadvantages of Patent Pools
There are several potential drawbacks associated with patent pools, including the following.[6]
- Time and Financial Investment: Although patent pools can help reduce the costs associated with developing new products, they come with significant initial costs. Creating a patent pool can be a time-consuming process that may require the involvement of an independent expert to analyze the patents held by the members.
- Membership and Regulatory Challenges: For a patent pool to function effectively, all key participants must agree to join the pool and reach a consensus on governance issues. Additionally, a dedicated and unbiased administrator is essential to manage the relationships between the pool’s participants.
- Antitrust Concerns: One of the most significant disadvantages of patent pools is the potential for regulatory issues and the perception that they distort competition. While their
the purpose is to promote innovation, they can inadvertently hinder it, especially in industries where smaller, independent enterprises are excluded from the pool.
Overall, while patent pools offer certain advantages, it is important to consider these potential disadvantages before deciding to participate in or establish a patent pool.
Mitigating the Risks of Patent Litigation
The presence of patent litigation can pose a significant obstacle to innovation, diverting valuable resources away from research and development efforts. Particularly concerning are patent trolls, which are entities that acquire patents solely to file lawsuits and extract licensing fees. These trolls pose a specific threat to companies that are actively seeking to innovate. However, there is a solution in the form of patent pools, which serve as a defense mechanism against patent trolls by creating a unified front of patent holders.
By pooling their patents together, companies within the patent pool can effectively protect themselves against potential litigation threats. This discourages patent trolls from targeting them, allowing these companies to focus their efforts on innovation rather than being burdened by legal battles. As a result, a more conducive environment for collaboration and progress is fostered.[7]
Standards-based Patent Pools in Innovations
It has become increasingly common in recent years. These pools are formed to facilitate access to patents that are essential for implementing technology standards and to reward companies that have contributed their patented technologies to these standards.
A standard-based patent pool involves multiple patent holders coming together to combine their standard essential patents (SEPs) and offer them as a single package under standard terms and conditions to parties who are implementing the relevant standard.
Licensors who are part of the pool may also be implementers of the standard, and they are often required to obtain a license from the pool as well. The pool establishes a method for distributing the revenue collected from licensees, ensuring that it is allocated to the licensors appropriately.
To ensure the quality and relevance of the patents included in the pool, patent pools typically require an independent evaluation of the patents submitted by the licensors. This evaluation determines whether the patents are essential and are often referred to as “certified patents.” Some pools allow licensors to decide how many patents they want to submit for certification, while others require licensors to submit all patents, they believe to be essential for evaluation. Licensors have an incentive to have their patents certified because the revenue sharing methodology in most cases depends on the number of certified patents they have.[8]
The independent evaluation process also provides licensees with more confidence in the essentiality of the licensed patents, as compared to evaluations conducted by the licensors themselves. Regardless of the number of certified patents a licensor has in the pool, the license offered by the pool grants rights to the licensor’s entire portfolio of essential patents for the standard, regardless of whether the patents have been certified or not.
Fostering Innovation and Encouraging Competition through Collaborative Efforts
Patent pools play a crucial role in promoting innovation by creating a conducive environment for companies to easily obtain and license essential technologies. Through collective management of patent portfolios, firms can simplify licensing procedures, reduce transaction expenses, and avoid intricate negotiations that could impede technological advancements. Rather than engaging in individual negotiations for separate licensing deals, patent pools simplify the process by providing a centralized platform for accessing a wide array of pertinent patents. This strategy promotes the widespread availability of critical technologies, leading to the creation of more inventive products and a more competitive marketplace.
The Influence on Innovation
The detrimental effect of patent trolls on innovation is a major concern. These trolls acquire patents and aggressively enforce them against companies, creating an atmosphere of fear and uncertainty. This hinders the progress and implementation of new technologies. Startups and small businesses are especially susceptible to these trolls due to their limited financial resources. They often cannot afford lengthy legal battles, which may result in the abandonment of innovative ideas or expensive settlements.[9]
Encouraging Collaboration through Innovation or Technologies and Cross-Licensing Opportunities
In addition to mitigating the risks associated with patent litigation, patent pools also play a crucial role in fostering collaboration and cross-licensing opportunities among industry players. By participating in a patent pool, companies can access a collective pool of patents and benefit from the expertise and knowledge of fellow members. This creates avenues for collaboration, enabling companies to leverage each other’s strengths and collectively develop new technologies.[10]
Through the promotion of cross-licensing, patent pools actively encourage a culture of cooperation and knowledge sharing within the industry. This, in turn, accelerates innovation and drives advancements across various sectors. By embracing the concept of patent pools, companies can not only protect themselves from patent trolls but also unlock the potential for collaborative breakthroughs that can shape the future of their respective industries.
Analyzing various categories of Patent Pools
- Standard Essential Patent (SEP) Pools:
A prevalent form of patent pool is the Standard Essential Patent (SEP) pool. These pools are established when companies possessing patents crucial to a specific industry or technology collaborate to collectively license their patents to other entities. SEP pools are commonly found in sectors like telecommunications, where multiple companies require access to essential patents for the development and production of interoperable products. An illustrative instance of a SEP pool is the establishment of the MPEG-2 patent pool, enabling companies to utilize the MPEG-2 video compression technology.
- Defensive patent pools:
It serves as a strategic measure to safeguard member companies against patent infringement lawsuits. These pools enable companies to combine their patents, forming a united front against potential patent trolls or other entities seeking to assert their patents against the members. By participating in a defensive patent pool, companies can effectively discourage patent trolls from targeting them individually, as the collective power of the pool poses a greater challenge for trolls to enforce their patents. The Open Invention Network (OIN) is a notable example of a defensive patent pool, established specifically to shield Linux and other open-source software from patent litigation.
- Research and Development (R&D) Pools:
R&D patent pools foster cooperation and creativity among businesses within a particular sector. By sharing patented technologies and research discoveries, companies can collaborate on developing innovations and enhancing current technologies collectively. These pools typically bring together companies from various industries like pharmaceuticals, electronics, or automotive to exchange knowledge and resources. An illustration of an R&D patent pool is the Eco-Patent Commons, where companies can share eco-friendly patents to encourage sustainable innovation.
- Industry-specific patent pools:
These are established by companies within a particular industry to collectively license their Patents. The pools are designed to streamline the licensing process and reduce the complexity and costs associated with negotiating separate licenses for each patent. These socialized patent pools can be observed in different sectors, including biotechnology, where companies collaborate to pool their patents related to specific drug therapies or medical devices. A prominent illustration of this is the Human Genome Project, which resulted in the formation of the SNP Consortium, an industry-specific patent pool dedicated to genetic research.
- Geographic patent pools:
Companies in a particular region or country collaborate to collectively license their patents through geographic patent pools. These pools aim to boost regional innovation and economic development by enabling the sharing of patented technologies among local businesses. For example, the Japan Patent Pool (JPP) was established to promote cooperation and patent licensing among Japanese companies, particularly in the electronics and telecommunications sectors.
In summary, patent pools provide advantages such as lowering transaction costs, encouraging innovation and cooperation, and preventing patent trolls. By examining the various types of patent pools accessible, companies can make well-informed choices on whether to participate in existing pools or establish new ones to safeguard their intellectual property and stimulate innovation in their industries.[11]
Case Study
- The first license of the [12]Medicine Patent Pool: The U.S. National Institute of Health.
On September 30, 2010, the White House announced that the National Institutes of Health (NIH) had granted a license for NIH-owned patents on darunavir, marking the acquisition of the first license by the MPP. This move by the NIH was in line with the President’s commitment to supporting humanitarian licensing policies, ensuring that medicines developed using U.S. taxpayer funds are accessible in developing countries once off-patent. The license, about the NIH’s patents on the important protease inhibitor darunavir, was non-exclusive and royalty-free.
The license had a broad geographic reach, following the World Bank’s definition of low and middle-income nations. It allowed for the treatment and prevention of medical conditions in humans. This inaugural license for the MPP received praise from a significant portion of the public health community. The objectives of the MPP were well-matched with the terms of the license, which made it non-exclusive, royalty-free, and applicable to all low and middle-income nations.
- On 12th July 2018 [13]“Koninklijke Philips Electronics N.V vs Rajesh Bansal Sole proprietor” in this case the plaintiff asserts that they are not obligated to charge a license fee solely based on the value of the patented decoding device, but rather on the overall sales of the DVD player. It is undeniable that the claim in the patent suit IN-184753 is specifically limited to the decoding device, yet it is an essential component of the DVD player, without which the player would be unable to function. Previous rulings by this Court have established that the issue of patent pool abuse, which involves the aggregation of multiple patents, cannot be determined in the current lawsuit. Therefore, it cannot be deemed unreasonable for the plaintiff to claim rights to the entire patent pool within the DVD player.
- On 5th March 2013 [14]“Manoj Hirasingh Pardeshi vs Gilead Sciences Inc., USA” in this case the individual identified as a treatment advocate, dedicated to advancing the cause of universal access to first, second, and third-line treatments for HIV and other related infections, as well as promoting treatment literacy among individuals living with HIV and affected communities. The company under discussion is a pharmaceutical entity based in the United States, primarily involved in the production of medications. The Medicines Patent Pool (MPP), a non-profit organization headquartered in Geneva, Switzerland, was established with the specific goal of creating a patent pool for pharmaceuticals. Tenofovir (TDF), emtricitabine (FTC), cobicistat (COBI), elvitegravir (EVG), and a combination of these components known as ‘Quad’ are antiretroviral drugs utilized in the management of HIV infections. The Active Pharmaceutical Ingredient (API) serves as the fundamental material for the synthesis of pharmaceuticals. The informant alleged that the company in question is currently manufacturing TDF and FTC in various locations, while EVG, COBI, and Quad are still in the developmental phase and await approval for utilization in HIV treatment.
- On 28 May 2016 [15]“Satinder Pal Singh Patheja and Ors vs Gobinderpal Singh Patheja Etc” in this case despite the law regarding blending individual property in a joint family being well-established and clear, the trial court determined that respondent No.1 had indeed blended the suit property into the joint pool. However, the lower appellate court made a significant error in law by reaching its conclusion that the property was self-acquired by respondent No.1, disregarding the abundant and conclusive evidence on record.
Enhancing Innovation and Collaboration through Patent Pools
- Pooling Resources:
The Role of Patent Pools in Driving Innovation and Collaboration
In today’s rapidly evolving and fiercely competitive business environment, innovation is paramount to maintaining a competitive edge. Companies across various sectors invest substantial time and resources in research and development to create groundbreaking technologies and products. However, the intricate realm of patents can sometimes impede innovation, resulting in costly legal disputes and a lack of cooperation. This is where patent pools come into play, offering a solution that fosters innovation and collaboration among industry players. In this section, we will delve into the mechanics of patent pools and the advantages they bring to the table.
- Facilitating Licensing and Enhancing Access:
One of the primary ways in which patent pools promote innovation is by facilitating licensing and enhancing access to patented technologies. Patent pools are formed by multiple patent holders who agree to collectively license their patents to others within the pool. This eliminates the need for individual negotiations and streamlines the licensing process, making it more convenient for companies to access and utilize patented technologies.[16] By reducing transaction costs and simplifying licensing arrangements, patent pools encourage wider adoption of innovative technologies, thereby fostering collaboration and propelling industry advancement.
Conclusion
Patent pools are a powerful tool in the tech industry, offering a range of benefits that can boost a company’s strategic position and operational efficiency. The shared risk model helps avoid costly patent litigation, promoting fiscal responsibility among top executives. Standardization is key for success, ensuring seamless integration of diverse technologies. Additionally, streamlined licensing processes and reduced transaction costs lead to significant savings. However, challenges like antitrust concerns must be carefully considered. To make the most of patent pools, a thorough analysis of benefits and risks, legal understanding, and strategic alignment with business goals are essential. With a thoughtful approach, companies can effectively manage intellectual property, foster innovation, and stay ahead in the competitive tech landscape.
References
- Page White Farrer, https://www.pagewhite.com/news/what-is-a-patent-pool-and-how-does-it-operate
- Wikipedia, https://en.wikipedia.org/wiki/Patent_pool#:~:text=Orlando%20B
- Priyanka Rastogi, India: Patent Pool, Mondaq, https://www.mondaq.com/india/patent/325602/patent-pool
- Oxyzo, https://www.oxyzo.in/blogs/patents-act-of-india-1970-a-business-guide-for-innovation-protection/106040
- Fater Capital, https://fastercapital.com/content/Patent-pool–Pooling-Resources–How-Patent-Pools-Can-Deter-Patent-Trolls.html
- PA Legal, https://thepalaw.com/patent/how-do-patent-pools-affect-innovation/
- Choi H.Gerlach, Patent Pools Litigation and Innovations, Semantic Scholar, https://www.semanticscholar.org/paper/Patent-Pools,-Litigation-and-Innovation-Choi-Gerlach/5e220da1ab1d9c0254f4a709308ed431a2c10cc8
- Prepared by the Secretariat, PATENT POOLS AND ANTITRUST – A COMPARATIVE ANALYSIS, WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO),
- https://www.wipo.int/export/sites/www/competition-policy/en/docs/patent_pools_report.pdf
- Innovationrptsummary.pdf,https://www.ftc.gov/sites/default/files/documents/reports/promote-innovation-proper-balance-competition-and-patent-law-and-policy/innovationrptsummary.pdf
- Saisruthi B, Cross Licensing of Patents, Mondaq, https://www.mondaq.com/india/patent/741158/cross-licensing-of-patents
- Case Law, https://www.ashdin.com/articles/patent-pools-opportunities-for-innovation-and-access-to-essential-medicine-for-underserved-populations-in-the-21st-century-106205.html
- Case Law, patent pooling (indiankanoon.org)
[1] Page White Farrer, https://www.pagewhite.com/news/what-is-a-patent-pool-and-how-does-it-operate (Last visited March 24, 2024)
[2] Wikipedia, https://en.wikipedia.org/wiki/Patent_pool#:~:text=Orlando%20B (Last visited March 24, 2024)
[3] Priyanka Rastogi, India: Patent Pool, Mondaq, (March 24, 2024, 8:11 PM) https://www.mondaq.com/india/patent/325602/patent-pool
[4] Oxyzo, https://www.oxyzo.in/blogs/patents-act-of-india-1970-a-business-guide-for-innovation-protection/106040 (Last visited March 24, 2024)
[5] Fater Capital, https://fastercapital.com/content/Patent-pool–Pooling-Resources–How-Patent-Pools-Can-Deter-Patent-Trolls.html (Last visited March 24, 2024)
[6] PA Legal, https://thepalaw.com/patent/how-do-patent-pools-affect-innovation/ (Last visited March 24, 2024)
[7] Choi H.Gerlach, Patent Pools Litigation and Innovations, Semantic Scholar, (March 24, 2024, 8:25 PM) https://www.semanticscholar.org/paper/Patent-Pools,-Litigation-and-Innovation-Choi-Gerlach/5e220da1ab1d9c0254f4a709308ed431a2c10cc8
[8] Prepared by the Secretariat, PATENT POOLS AND ANTITRUST – A COMPARATIVE ANALYSIS, WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO), ( March 24, 2024, 8:31 PM) https://www.wipo.int/export/sites/www/competition-policy/en/docs/patent_pools_report.pdf
[9]Innovationrptsummary.pdf,https://www.ftc.gov/sites/default/files/documents/reports/promote-innovation-proper-balance-competition-and-patent-law-and-policy/innovationrptsummary.pdf (Last visited March 24, 2024)
[10] Saisruthi B, Cross Licensing of Patents, Mondaq (March 24, 2024, 8:44 PM ) https://www.mondaq.com/india/patent/741158/cross-licensing-of-patents
[11] Faster Capital, https://fastercapital.com/content/Patent-pool–Pooling-Resources–How-Patent-Pools-Can-Deter-Patent-Trolls.html#Exploring-Different-Types-of-Patent-Pools (Last visited March 24, 2024)
[12] Medicine Patent Pool vs. the US National Institute Of Health, (2010)
[13] Koninklijke Philips Electronics N.V vs Rajesh Bansal Sole proprietor, 12th July (2018)
[14] Manoj Hirasingh Pardeshi vs Gilead Sciences Inc., USA, 5th March (2013)
[15] Satinder Pal Singh Patheja and Ors vs Gobinderpal Singh Patheja Etc, 28th May (2016)
[16] Faster Capital, https://fastercapital.com/content/Patent-pool–Pooling-Resources–How-Patent-Pools-Can-Deter-Patent-Trolls.html#How-Patent-Pools-Promote-Innovation-and-Collaboration- (Last visited, March 24, 2024)
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