IDEAS home Printed from https://ideas.repec.org/a/eee/irlaec/v36y2013icp59-69.html
   My bibliography  Save this article

Patent pools and dynamic R&D incentives

Author

Listed:
  • Dequiedt, Vianney
  • Versaevel, Bruno

Abstract

Patent pools are cooperative agreements between two or more firms to license their related patents as a bundle. In a continuous-time model of multistage innovations, we characterize firms’ incentives to perform R&D when they anticipate the possibility of starting a pool of complementary patents, which can be essential or nonessential. A coalition formation protocol leads the first innovators to start the pool immediately after they patent the essential technologies. The firms invest more than in the no-pool case and increase the speed of R&D for essential technologies as the number of patents progresses to the anticipated endogenous pool size, to the benefit of consumers. There is overinvestment in R&D compared to a joint profit-maximization benchmark. If firms anticipate the addition of nonessential patents to the pool they reduce their R&D efforts for the essential patents at each point in time, resulting in a slower time to market for the pooled technologies.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:irlaec:v:36:y:2013:i:c:p:59-69
    DOI: 10.1016/j.irle.2013.04.009
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0144818813000355
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Josh Lerner & Marcin Strojwas & Jean Tirole, 2007. "The design of patent pools: the determinants of licensing rules," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 610-625, September.
    2. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
    3. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
    4. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 119-150, National Bureau of Economic Research, Inc.
    5. Gene M. Grossman & Carl Shapiro, 1986. "Optimal Dynamic R&D Programs," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 581-593, Winter.
    6. 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.
    7. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
    8. Josh Lerner & Jean Tirole, 2008. "Public Policy toward Patent Pools," NBER Chapters, in: Innovation Policy and the Economy, Volume 8, pages 157-186, National Bureau of Economic Research, Inc.
    9. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January.
    10. Klaus M. Schmidt, 2014. "Complementary Patents and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 68-88, March.
    11. 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.
    12. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-31, January.
    13. Justus Baron & Henry Delcamp, 2010. "Strategic inputs into patent pools," Post-Print hal-00488272, HAL.
    14. Kato, Atsushi, 2004. "Patent pool enhances market competition," International Review of Law and Economics, Elsevier, vol. 24(2), pages 255-268, June.
    15. Vincenzo Denicolo, 2002. "Sequential innovation and the patent-antitrust conflict," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 649-668, October.
    16. Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 429-436.
    17. 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.
    18. 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.
    19. 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.
    20. Gilbert, Richard J. & Katz, Michael L., 2011. "Efficient division of profits from complementary innovations," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 443-454, July.
    21. 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.
    22. 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.
    23. Steffen Brenner, 2009. "Optimal formation rules for patent pools," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(3), pages 373-388, September.
    24. Richard Schmalensee, 2009. "Standard‐Setting, Innovation Specialists And Competition Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 526-552, September.
    25. Layne-Farrar, Anne & Lerner, Josh, 2011. "To join or not to join: Examining patent pool participation and rent sharing rules," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 294-303, March.
    26. 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.
    27. Aoki, Reiko & Nagaoka, Sadao, 2005. "Coalition Formation for a Consortium Standard Through a Standard Body and a Patent Pool: Theory and Evidence from MPEG2, DVD and 3G," IIR Working Paper 05-01, Institute of Innovation Research, Hitotsubashi University.
    28. Sung-Hwan Kim, 2004. "Vertical Structure and Patent Pools," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 231-250, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gallini, Nancy, 2015. "Promoting Competition by Coordinating Prices: When Rivals Share Intellectual Property," Economics working papers nancy_gallini-2015-22, Vancouver School of Economics, revised 07 Dec 2015.
    2. Justus Baron & Henry Delcamp, 2015. "The strategies of patent introduction into patent pools," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 24(8), pages 776-800, November.
    3. Tesoriere, Antonio, 2019. "Stable sharing rules and participation in pools of essential patents," Games and Economic Behavior, Elsevier, vol. 117(C), pages 40-58.
    4. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-31, January.
    5. 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.
    6. Petra Moser, 2012. "Patent Laws and Innovation: Evidence from Economic History," NBER Working Papers 18631, National Bureau of Economic Research, Inc.
    7. Ryan Lampe & Petra Moser, 2012. "Do Patent Pools Encourage Innovation? Evidence from 20 Industries in the 1930s," NBER Chapters, in: Standards, Patents and Innovations, National Bureau of Economic Research, Inc.
    8. 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.
    9. Gilbert, Richard J. & Katz, Michael L., 2011. "Efficient division of profits from complementary innovations," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 443-454, July.
    10. Daniel Quint, 2014. "Pooling with Essential and Nonessential Patents," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 23-57, February.
    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. SHIMBO Tomoyuki & NAGAOKA Sadao & TSUKADA Naotoshi, 2015. "Dynamic Effects of Patent Pools: Evidence from inter-generational competition in optical disk industry," Discussion papers 15132, Research Institute of Economy, Trade and Industry (RIETI).
    13. 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.
    14. Ryan Lampe & Petra Moser, 2013. "Patent pools and innovation in substitute technologies—evidence from the 19th-century sewing machine industry," RAND Journal of Economics, RAND Corporation, vol. 44(4), pages 757-778, December.
    15. Jay Pil Choi & Heiko Gerlach, 2015. "Patent pools, litigation, and innovation," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 499-523, September.
    16. Petra Moser, 2013. "Patents and Innovation: Evidence from Economic History," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 23-44, Winter.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dequiedt, V. & Versaevel, B., 2004. "Patent pools and the dynamic incentives to R&D," Working Papers 200412, Grenoble Applied Economics Laboratory (GAEL).
    2. Gilbert, Richard J. & Katz, Michael L., 2011. "Efficient division of profits from complementary innovations," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 443-454, July.
    3. Lampert, Hodaya & Wettstein, David, 2020. "Patents and pools in pyramidal innovation structures," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    4. Tesoriere, Antonio, 2019. "Stable sharing rules and participation in pools of essential patents," Games and Economic Behavior, Elsevier, vol. 117(C), pages 40-58.
    5. Ishihara, Akifumi & Yanagawa, Noriyuki, 2018. "Dark sides of patent pools with independent licensing," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 1-34.
    6. Gallini, Nancy, 2014. "Cooperating with competitors: Patent pooling and choice of a new standard," International Journal of Industrial Organization, Elsevier, vol. 36(C), pages 4-21.
    7. Spulber, Daniel F., 2016. "Patent licensing and bargaining with innovative complements and substitutes," Research in Economics, Elsevier, vol. 70(4), pages 693-713.
    8. Nancy Gallini, 2017. "Do patents work? Thickets, trolls and antibiotic resistance," Canadian Journal of Economics, Canadian Economics Association, vol. 50(4), pages 893-926, November.
    9. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 51-78, National Bureau of Economic Research, Inc.
    10. Miao, Chun-Hui, 2016. "Licensing a technology standard," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 33-61.
    11. Klaus M. Schmidt, 2014. "Complementary Patents and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 68-88, March.
    12. Rockett, Katharine, 2010. "Property Rights and Invention," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 315-380, Elsevier.
    13. Arijit Mukherjee, 2013. "Patent pool under endogenous technology choice," Discussion Paper Series 2013_07, Department of Economics, Loughborough University, revised Jul 2013.
    14. 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.
    15. Gastón Llanes & Stefano Trento, 2012. "Patent policy, patent pools, and the accumulation of claims in sequential innovation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(3), pages 703-725, August.
    16. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-31, January.
    17. Erkal, Nisvan, 2005. "The decision to patent, cumulative innovation, and optimal policy," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 535-562, September.
    18. Turner, John L., 2018. "Input complementarity, patent trolls and unproductive entrepreneurship," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 168-203.
    19. Kim, Bongsun & Kim, Eonsoo & Miller, Douglas J. & Mahoney, Joseph T., 2016. "The impact of the timing of patents on innovation performance," Research Policy, Elsevier, vol. 45(4), pages 914-928.
    20. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.

    More about this item

    Keywords

    R&D races; Innovation; Licensing; Competition policy;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:36:y:2013:i:c:p:59-69. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nithya Sathishkumar). General contact details of provider: http://www.elsevier.com/locate/irle .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.