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Adverse Effects of Patent Pooling on Product Development and Commercialization

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  • Thomas D. Jeitschko

    (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)

  • Nanyun Zhang

    (Economic Analysis Group, Antitrust Division, U.S. Department of Justice)

Abstract

The conventional antitrust wisdom is that the formation of patent pools is welfare en- hancing when patents are complementary, since the pool avoids a double-marginalization problem associated with independent licensing. The focus of this paper is on (down- stream) product development and commercialization on the basis of perfectly comple- mentary patents. We consider development technologies that entail spillovers between rivals, and assume that nal demand products are imperfect substitutes. When pool formation facilitates information sharing and either increases spillovers in development or decreases the degree of product di erentiation, patent pools can adversely a ect welfare by reducing the incentives towards product development and product mar- ket competition|even with perfectly complementary patents. This modi es and even negates the conventional wisdom for some settings and suggests why patent pools are uncommon in science-based industries such as biotech and pharmaceuticals, despite there being frequent policy advocacy for them.

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Bibliographic Info

Paper provided by Department of Justice, Antitrust Division in its series EAG Discussions Papers with number 201205.

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Length: 43 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:doj:eagpap:201205

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Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530
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Web page: http://www.justice.gov/atr/
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Keywords: Patent Pools; Research and Development; Innovation; BioTechnology; Electronics;

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  1. Ghosh, Arghya & Morita, Hodaka, 2012. "Competitor collaboration and product distinctiveness," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 137-152.
  2. M. Bourreau & P. Dogan, . "Cooperation in Product Development and Process R&D Between Competitors," Working Paper 33645, Harvard University OpenScholar.
  3. Nisvan Erkal & Deborah Minehart, 2008. "Optimal Sharing Strategies in Dynamic Games of Research and Development," Department of Economics - Working Papers Series 1038, The University of Melbourne.
  4. Patrick Gaulé, 2006. "Towards Patent Pools in Biotechnology?," CEMI Working Papers cemi-report-2006-010, Ecole Polytechnique Fédérale de Lausanne, Collège du Management de la Technologie, Management of Technology and Entrepreneurship Institute, Chaire en Economie et Management de l'Innovation.
  5. Gastón Llanes & Stefano Trento, 2012. "Patent policy, patent pools, and the accumulation of claims in sequential innovation," Economic Theory, Springer, vol. 50(3), pages 703-725, August.
  6. Sung-Hwan Kim, 2004. "Vertical Structure and Patent Pools," Review of Industrial Organization, Springer, vol. 25(3), pages 231-250, 07.
  7. María José Gil Moltó & Nikolaos Georgantzís & Vicente Orts, 2005. "Cooperative R&D with Endogenous Technology Differentiation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 461-476, 06.
  8. Choi, Jay Pil, 2009. "Patent Pools and Cross-Licensing in the Shadow of Patent Litigation," PIE/CIS Discussion Paper 417, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  9. Dequiedt, Vianney & Versaevel, Bruno, 2013. "Patent pools and dynamic R&D incentives," International Review of Law and Economics, Elsevier, vol. 36(C), pages 59-69.
  10. Steffen Brenner, 2009. "Optimal formation rules for patent pools," Economic Theory, Springer, vol. 40(3), pages 373-388, September.
  11. Ryan L. Lampe & Petra Moser, 2009. "Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry," NBER Working Papers 15061, National Bureau of Economic Research, Inc.
  12. Ryan L. Lampe & Petra Moser, 2012. "Do Patent Pools Encourage Innovation? Evidence from 20 U.S. Industries under the New Deal," NBER Working Papers 18316, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ryan L. Lampe & Petra Moser, 2012. "Do Patent Pools Encourage Innovation? Evidence from 20 U.S. Industries under the New Deal," NBER Working Papers 18316, National Bureau of Economic Research, Inc.
  2. Jeitschko, Thomas D. & Jung, Yeonjei & Kim, Jaesoo, 2014. "Bundling and joint marketing by rival firms," DICE Discussion Papers 144, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  3. Dequiedt, Vianney & Versaevel, Bruno, 2013. "Patent pools and dynamic R&D incentives," International Review of Law and Economics, Elsevier, vol. 36(C), pages 59-69.

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