Economics of Patent Pools When Some (but not all) Patents are Essential
AbstractPatent pools are agreements by multiple patent owners to license certain patents to third parties as a package, and often in conjunction with the development of a technological standard. A key distinction made by regulators—between patents essential to a standard and patents that are suitable substitutes—has not been captured in existing economic models. I present a model of competition among differentiated technologies, in which some patents are essential and some are not. I show that pools of essential patents are Pareto-improving whenever they occur, while pools of nonessential patents can be welfare-negative, even when the included patents are all complements. I discuss conditions under which certain pools are likely to form, the “outsider problem” which makes some pools inefficiently small, and the effects of compulsory individual licensing.
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Bibliographic InfoPaper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 06-028.
Date of creation: Nov 2006
Date of revision:
patent pool; technology; innovation; essential patent; nonessential patent;
Find related papers by JEL classification:
- 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
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