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Patent pools and dynamic R&D incentives

Author

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  • Vianney Dequiedt

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique)

  • Bruno Versaevel

    (GATE - Groupe d'analyse et de théorie économique - UL2 - Université Lumière - Lyon 2 - ENS LSH - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique, EM - EMLyon Business School)

Abstract

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

Suggested Citation

  • Vianney Dequiedt & Bruno Versaevel, 2013. "Patent pools and dynamic R&D incentives," Post-Print halshs-00833828, HAL.
    • Handle: RePEc:hal:journl:halshs-00833828
    DOI: 10.1016/j.irle.2013.04.009
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    as
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    Cited by:

    1. 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.
    2. 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 27-57, January.
    3. Daniel Quint, 2014. "Pooling with Essential and Nonessential Patents," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 23-57, February.
    4. Etienne Billette de Villemeur & Vianney Dequiedt & Bruno Versaevel, 2021. "Covid-19: Should intellectual property rights be challenged? [Covid-19 : doit-on remettre en question les droits de propriété intellectuelle?]," Post-Print hal-03212246, HAL.
    5. Gastón Llanes & Joaquín Poblete, 2020. "Technology Choice and Coalition Formation in Standards Wars," Journal of Industrial Economics, Wiley Blackwell, vol. 68(2), pages 270-297, June.
    6. 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.
    7. 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.
    8. Han, Tien-Der & Mukherjee, Arijit, 2023. "Mergers of complements, endogenous product differentiation and welfare," Mathematical Social Sciences, Elsevier, vol. 126(C), pages 30-41.
    9. 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.
    10. Tomoyuki Shimbo & Sadao Nagaoka & Naotoshi Tsukada, 2024. "Dynamic Effects of Patent Pools: Evidence from Inter-Generational Competition in the Optical Disc Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(3), pages 383-419, May.
    11. 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.
    12. Petra Moser, 2013. "Patents and Innovation: Evidence from Economic History," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 23-44, Winter.
    13. Jay Pil Choi & Heiko Gerlach, 2015. "Patent pools, litigation, and innovation," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 499-523, September.
    14. Petra Moser, 2012. "Patent Laws and Innovation: Evidence from Economic History," NBER Working Papers 18631, National Bureau of Economic Research, Inc.
    15. 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.
    16. Huang, Kenneth Guang-Lih & Huang, Can & Shen, Huijun & Mao, Hao, 2021. "Assessing the value of China's patented inventions," Technological Forecasting and Social Change, Elsevier, vol. 170(C).
    17. Tesoriere, Antonio, 2019. "Stable sharing rules and participation in pools of essential patents," Games and Economic Behavior, Elsevier, vol. 117(C), pages 40-58.
    18. 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.
    19. 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.
    20. 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.
    21. 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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    More about this item

    Keywords

    R&D races; Competition policy; Licensing; Innovation;
    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

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