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Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry

  • Ryan L. Lampe
  • Petra Moser

Members of a patent pool agree to use a set of patents as if they were jointly owned by all members and license them as a package to other firms. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856-1877) to perform the first empirical test of the effects of a patent pool on innovation. Contrary to theoretical predictions, the sewing machine pool appears to have discouraged patenting and innovation, in particular for the members of the pool. Data on stitches per minute, as an objectively quantifiable measure of innovation, confirm these findings. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.

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File URL: http://www.nber.org/papers/w15061.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15061.

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Date of creation: Jun 2009
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Publication status: published as “Patent Pools and Innovation in Substitute Technologies – Evidence from the U.S. Sewing Machine Industry” (with Ryan Lampe) http://ssrn.com/abstract=1468062 . RAND Journal of Economics , 2014, V olume 44, Issue 4 , pp. 757 - 778 .
Handle: RePEc:nbr:nberwo:15061
Note: DAE LE PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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