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Economics of Patent Pools When Some (but not all) Patents are Essential

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  • Daniel Quint

    (Stanford University)

Abstract

Patent 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.

Suggested Citation

  • Daniel Quint, 2006. "Economics of Patent Pools When Some (but not all) Patents are Essential," Discussion Papers 06-028, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:06-028
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    patent pool; technology; innovation; essential patent; nonessential patent;
    All these keywords.

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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