Patent Pools and the Direction of Innovation-Evidence from the 19th-century Sewing Machine Industry (original) (raw)
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Do Patent Pools Encourage Innovation? Evidence from the Nineteenth-Century Sewing Machine Industry
The Journal of Economic History, 2010
Members of a patent pool agree to use a set of patents as if they were jointly owned by all members and license them as a package to other firms. This article uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856–1877) to perform the first empirical test of the effects of a patent pool on innovation. Contrary to theoretical predictions, the sewing machine pool appears to have discouraged patenting and innovation, in particular for the members of the pool. Data on stitches per minute, an objectively quantifiable measure of innovation, confirm these findings.
Do patent pools encourage innovation? Evidence from the 19th-century sewing machine industry
2010
Patent pools, which allow competing firms to combine their patents, have emerged as a prominent mechanism to resolve litigation when multiple firms own patents for the same technology. This paper takes advantage of a window of regulatory tolerance under the New Deal to investigate the effects of pools on innovation within 20 industries. Difference-indifferences regressions imply a 16 percent decline in patenting in response to the creation of a pool. This decline is driven by technology fields in which a pool combined patents for substitute technologies by competing firms, suggesting that unregulated pools may discourage innovation by weakening competition to improve substitutes.
Patent Pools and Innovation in Substitutes - Evidence from the 19th Century Sewing Machine Industry
SSRN Electronic Journal, 2012
Patent pools, which combine complementary patents of competing firms, are expected to increase overall welfare-but potentially discourage innovation in substitutes for the pool technology. This paper exploits a new historical data set on changes in patenting and firm entry for a clearly defined pool technology and substitutes in the 19 th century sewing machine industry to investigate the effects of a pool on innovation in substitutes. This analysis reveals a substantial increase in innovation for an-albeit technologically inferior-substitute technology. Historical evidence suggests that the creation of a pool diverted innovation towards an inferior substitute by creating differential license fees and litigation risks, which made it more difficult for outside firms to compete directly with the pool technology.
The RAND Journal of Economics, 2013
Patent pools, which combine complementary patents of competing firms, are expected to increase overall welfare but potentially discourage innovation in substitutes for the pool technology. This article exploits a new historical data set on changes in patenting and firm entry for a clearly defined pool technology and substitutes in the 19th-century sewing machine industry. This analysis reveals a substantial increase in innovation for an-albeit technologically inferior-substitute technology. Historical evidence suggests that the creation of a pool-diverted innovation toward an inferior substitute technology by creating differential license fees and litigation risks.
Do Patent Pools Encourage Innovation? Evidence from 20 U.S. Industries under the New Deal
2012
Patent pools, which allow competing firms to combine their patents, have emerged as a prominent mechanism to resolve litigation when multiple firms own patents for the same technology. This paper takes advantage of a window of regulatory tolerance under the New Deal to investigate the effects of pools on innovation within 20 industries. Difference-indifferences regressions imply a 16 percent decline in patenting in response to the creation of a pool. This decline is driven by technology fields in which a pool combined patents for substitute technologies by competing firms, suggesting that unregulated pools may discourage innovation by weakening competition to improve substitutes.
Patent Pools, Competition, and Innovation—Evidence from 20 US Industries under the New Deal
Journal of Law, Economics, and Organization, 2015
Patent pools, which allow competing firms to combine their patents as if they are a single firm, have become a prominent mechanism to address problems with the current patent system. Pools are expected to encourage innovation by limiting litigation risks for pool members and by lowering transaction costs and license fees for outside firms. But pools may also have important anti-competitive effects, as they encourage cooperation among competing firms. Today and nearly always since the Sherman Act in 1890, antitrust regulation is in place to prevent such anti-competitive effects, making it impossible to observe what would happen if pools were left free reign. New Deal policies in the 1930s, which aimed to encourage economic recovery, relaxed antitrust regulation and allowed anticompetitive pools to form. This paper examines the effects of such pools on innovation. Difference-indifference estimates that compare changes in patent applications in pool technologies with a control group of related technologies in the same industry indicate a 16 percent decline in innovation after the formation of a pool. This decline is strongest for technologies that pool members competed to improve before the creation of a pool.
Effects Of Patent Pools On Innovation Investment Ex Ante Perspectives
Journal of Business & Economics Research (JBER), 2011
Recently Patent Pooling has a fast growing interest as a good alternative means to decrease transaction costs between IPRs owners and promote technology commercialization and diffusion. In this paper we attempt to shed light on the effects of patent pooling on the ex-ante innovation investment or incentive using the game theoretical economic model. We generalize the model by including many vertical integrated firms, research laboratories, and specialized manufacturing firms. Main results of this paper are: 1) Patent Pools can affect on the innovation incentives of vertically integrated firms(I-firms) and of research laboratories(R-firms) differently, and the effect depends on the number of I-firms owning essential patents and the number of specially manufacturing firms(M-firms). But in the presence of many I-firms owning essential patents, the instruction of patent pooling increases I-firms’ ex-ante innovation incentive or investments with independence of M-firms. 2) There is stra...
Patent pools, litigation, and innovation
The RAND Journal of Economics, 2015
This paper analyzes patent pools and their effects on innovation incentives. It is shown that the pro-competitive effects of patent pools for complementary patents naturally extend for dynamic innovation incentives. However, this simple conclusion may not hold if we entertain the possibility that patents are probabilistic and can be invalidated in court. In such a case, the licensing fees reflect the strength of patents. Patent pools of complementary patents can be used to discourage litigation by depriving potential licensees of the ability to selectively challenge patents and making them committed to a proposition of all-or-nothing in patent litigation. We show that if patents are sufficiently weak, patent pools with complementary patents reduce social welfare as they charge higher licensing fees and chill subsequent innovation incentives.
Adverse Effects of Patent Pools on Product Development and Commercialization
2011
Abstract: The conventional wisdom is that the formation of patent pools is welfare enhancing when patents are complementary, since the pool avoids a double-marginalization problem associated with independent licensing. This conventional wisdom relies on the effects that pooling has on downstream prices. However, it does not account for the potentially significant role of the effect of pooling on innovation.
Patent Pools and Product Development: Perfect Complements Revisited
2011
The conventional wisdom is that the formation of patent pools is welfare enhancing when patents are complementary, since the pool avoids a double-marginalization problem associated with independent licensing. The focus of this paper is on (downstream) product development and commercialization on the basis of perfectly complementary patents. We consider development technologies that entail spillovers between rivals, and assume that final demand products are imperfect substitutes. If pool formation either increases spillovers in development or decreases the degree of product differentiation, patent pools can actually adversely affect overall welfare by reducing incentives towards product development and product market competition-even with perfectly complementary patents. This significantly modifies and possibly even negates the conventional wisdom for many settings. The paper provides insights into why patent pools are uncommon in science-based industries such as biotech, despite there being strong policy advocacy for them.