Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry
AbstractMembers 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. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper 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, as an objectively quantifiable measure of innovation, confirm these findings. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.
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Date of creation: Jun 2009
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Find related papers by JEL classification:
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- K0 - Law and Economics - - General
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L4 - Industrial Organization - - Antitrust Issues and Policies
- N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
- N4 - Economic History - - Government, War, Law, International Relations, and Regulation
- N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O34 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-06-17 (All new papers)
- NEP-HIS-2009-06-17 (Business, Economic & Financial History)
- NEP-INO-2009-06-17 (Innovation)
- NEP-IPR-2009-06-17 (Intellectual Property Rights)
- NEP-TID-2009-06-17 (Technology & Industrial Dynamics)
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