Economics of Patent Pools When Some (but not all) Patents are Essential
Patent pools are agreements by multiple patent owners to license certain patents to third parties as a package, and often in conjunction with the development of a technological standard. A key distinction made by regulators—between patents essential to a standard and patents that are suitable substitutes—has not been captured in existing economic models. I present a model of competition among differentiated technologies, in which some patents are essential and some are not. I show that pools of essential patents are Pareto-improving whenever they occur, while pools of nonessential patents can be welfare-negative, even when the included patents are all complements. I discuss conditions under which certain pools are likely to form, the “outsider problem” which makes some pools inefficiently small, and the effects of compulsory individual licensing.
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- Josh Lerner & Jean Tirole, 2004.
"Efficient Patent Pools,"
American Economic Review,
American Economic Association, vol. 94(3), pages 691-711, June.
- Josh Lerner & Jean Tirole, 2002. "Efficient Patent Pools," NBER Working Papers 9175, National Bureau of Economic Research, Inc.
- Lerner, Josh & Tirole, Jean, 2003. "Efficient Patent Pools," IDEI Working Papers 211, Institut d'Économie Industrielle (IDEI), Toulouse.
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- Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-1277, November.
- 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.
- Monderer, Dov & Shapley, Lloyd S., 1996. "Potential Games," Games and Economic Behavior, Elsevier, vol. 14(1), pages 124-143, May. Full references (including those not matched with items on IDEAS)
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