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Dynamic Effects of Patent Pools: Evidence from inter-generational competition in optical disk industry

Listed author(s):
  • SHIMBO Tomoyuki
  • NAGAOKA Sadao
  • TSUKADA Naotoshi

This paper examines empirically how patent pools affect the research and development (R&D) for a next-generation standard and for improving and exploiting the current standard, based on panel data from the optical disk industry. Our analysis explicitly recognizes the inter-generational competition among standards and the timing difference between the standard agreement and the pool formation for the standard. The major findings are as follows. Both the agreement for the current standard (DVD) and the formation of the pools were followed by more R&D by the pool licensors for a next-generation standard (BD and HDDVD), relative to the nonparticipants of the pools. Furthermore, the formation of the pools was followed by intensified R&D efforts by the pool licensors for improving and exploiting the current standard. Thus, there is no evidence for negative effects of the pools on the innovations by the pool licensors. The R&D of the pool licensees for the next-generation standard also increased with some lag after the pool, suggesting the positive effect of open pool licensing for their learning and innovations toward the next-generation technology. Lower response of the 6C licensors, relative to that of the 3C licensors, may reflect the former's larger sunk cost in the DVD technology. After the formation of the pools, the patenting propensity by the licensors increased with deteriorating patent quality, and such tendency is larger for the 6C patent pool, presumably reflecting their royalty distribution policy based on simple patent counts.

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File URL: http://www.rieti.go.jp/jp/publications/dp/15e132.pdf
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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 15132.

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Length: 34 pages
Date of creation: Nov 2015
Handle: RePEc:eti:dpaper:15132
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  1. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
  2. Manuel Trajtenberg, 1990. "A Penny for Your Quotes: Patent Citations and the Value of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 172-187, Spring.
  3. Kenneth Flamm, 2013. "A Tale of Two Standards: Patent Pools and Innovation in the Optical Disk Drive Industry," NBER Working Papers 18931, National Bureau of Economic Research, Inc.
  4. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
  5. Lampe, Ryan & Moser, Petra, 2010. "Do Patent Pools Encourage Innovation? Evidence from the Nineteenth-Century Sewing Machine Industry," The Journal of Economic History, Cambridge University Press, vol. 70(04), pages 898-920, December.
  6. Nagaoka, Sadao & Shimbo, Tomoyuki & Tsukada, Naotoshi, 2006. "The structure and the evolution of essential patents for standards: Lessons from three IT standards," IIR Working Paper 06-08, Institute of Innovation Research, Hitotsubashi University.
  7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, July.
  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. Dr Chiara Rosazza Bondibene, 2012. "A Study of Patent Thickets," NIESR Discussion Papers 401, National Institute of Economic and Social Research.
  10. 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.
  11. 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.
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