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Patent Pools and the Dynamic Incentives to R&D

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Author Info

  • Bruno Versaevel

    ()
    (EM Lyon, GATE CNRS)

  • Vianney Dequiedt

    ()
    (INRA GAEL)

Abstract

Patent pools are cooperative agreements between several patent owners to bundle the sale of their respective licenses. In this paper we analyze their consequences on the speed of the innovation process. We adopt an ex ante perspective and study the impact of possible pool formation on the incentives to innovate. Because participation in the creation of a pool acts as a bonus reward on R&D activity, we show that a firm’s investment pattern is upward sloping over time before pool formation. The smaller the set of initial contributors, the higher this effect. A pool formation mechanism based on a proposal by the industry and acceptance/refusal by the competition authority may induce overinvestment in early innovations. It also leads a forward looking regulator to delay the clearance date of the pool. This may result in a pool size that is suboptimal from an ex ante viewpoint.

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Bibliographic Info

Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0703.

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Length: 34 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:gat:wpaper:0703

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Keywords: competition policy; licensing; R&D races; research and development;

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References

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  1. Gilbert, Richard, 2004. "Converging Doctrines? US and EU Antitrust Policy for the Licensing of Intellectual Property," Competition Policy Center, Working Paper Series qt7j60d3r2, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  2. Aoki, Reiko & Nagaoka, Sadao, 2004. "The Consortium Standard and Patent Pools," Discussion Paper 222, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  3. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
  4. Gene M. Grossman & Carl Shapiro, 1985. "Optimal Dynamic R&D Programs," NBER Working Papers 1658, National Bureau of Economic Research, Inc.
  5. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
  6. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
  7. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  8. Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, EconWPA.
  9. Carmen Matutes & Pierre Regibeau & Katharine Rockett, 1996. "Optimal Patent Design and the Diffusion of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 60-83, Spring.
  10. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
  11. Howard F. Chang, 1995. "Patent Scope, Antitrust Policy, and Cumulative Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 34-57, Spring.
  12. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers: Erratum," CORE Discussion Papers RP -892, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Citations

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Cited by:
  1. Ryan L. Lampe & Petra Moser, 2011. "Patent Pools and the Direction of Innovation - Evidence from the 19th-century Sewing Machine Industry," NBER Working Papers 17573, National Bureau of Economic Research, Inc.
  2. Schmidt, Klaus M., 2010. "Standards, Innovation Incentives, and the Formation of Patent Pools," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 342, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Nancy Gallini, 2011. "Private agreements for coordinating patent rights: the case of patent pools," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2011(3), pages 5-30.
  4. Gilbert, Richard J & Katz, Michael L, 2009. "Efficient Division of Profits from Complementary Innovations," Competition Policy Center, Working Paper Series qt5mr0s11v, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  5. Daniel Quint, 2014. "Pooling with Essential and Nonessential Patents," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 23-57, February.
  6. Jay Pil Choi & Heiko Gerlach, 2013. "Patent Pools, Litigation and Innovation," CESifo Working Paper Series 4429, CESifo Group Munich.

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