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Patent Pools and the Dynamic Incentives to R&D

  • Bruno Versaevel


    (EM Lyon, GATE CNRS)

  • Vianney Dequiedt



Patent pools are cooperative agreements between several patent owners to bundle the sale of their respective licenses. In this paper we analyze their consequences on the speed of the innovation process. We adopt an ex ante perspective and study the impact of possible pool formation on the incentives to innovate. Because participation in the creation of a pool acts as a bonus reward on R&D activity, we show that a firm’s investment pattern is upward sloping over time before pool formation. The smaller the set of initial contributors, the higher this effect. A pool formation mechanism based on a proposal by the industry and acceptance/refusal by the competition authority may induce overinvestment in early innovations. It also leads a forward looking regulator to delay the clearance date of the pool. This may result in a pool size that is suboptimal from an ex ante viewpoint.

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Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0703.

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Length: 34 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:gat:wpaper:0703
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  1. Aoki, Reiko & Nagaoka, Sadao, 2004. "The Consortium Standard and Patent Pools," Discussion Paper 222, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  2. 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.
  3. Reinganum, Jennifer F., . "Dynamic Games of Innovation," Working Papers 287, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Carl Shapiro, 2003. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting," Law and Economics 0303005, EconWPA.
  5. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
  6. 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.
  7. Josh Lerner & Jean Tirole, 2002. "Efficient Patent Pools," NBER Working Papers 9175, National Bureau of Economic Research, Inc.
  8. d'Aspremont, Claude & Jacquemin, Alexis, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum," American Economic Review, American Economic Association, vol. 80(3), pages 641-42, June.
  9. 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.
  10. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-71, September.
  11. 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.
  12. 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.
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