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

Abstract

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Patent pools and innovation in substitute technologies—evidence from the 19th‐century sewing machine industry

“…Analyses of patent data indicate that, for every $1 in fee differences, chain stitch subclasses produced 30% additional patents. The pool also appears to have increased the threat of litigation for outside firms (Lampe and Moser, ), even as it reduced litigation risks for members, just as theory predicts (e.g., Gilbert, ).…”

“…At the aggregate level, existing empirical tests indicate a decline, or at best a modest increase in innovation, after the creation of the pool. An analysis of aggregate levels of innovation in the 19th‐century sewing machine industry suggests that the creation of a pool discouraged patenting and slowed the speed of technical improvements (Lampe and Moser, ), even as it helped resolve a patent thicket among the industry's dominant firms (Mossoff, ) . Qualitative evidence also reveals a decline in innovation in response to a late 20th‐century pool for DVDs but suggests an increase for CDs (Flamm, ).…”

Liability Rules in Patent Law

“…Moreover, patent pools can facilitate collusion 202 and lower competition because information is exchanged that would otherwise be kept secret. 206 Empirical evidence from the nineteenth century sewing machine industry suggests that this may actually be the case: Lampe and Moser (2009), pp. Negative effects on competition in the product market could raise prices for consumers because patent pools with a significant degree of market power would be able to charge high licensing fees to third parties.…”

“…A liability rule mechanism (or something coming close to that) may only exist, as is often the case, between the patent owner and the pool and not between the pool and the licensees, meaning especially those who are not pool members. 209 Lampe and Moser (2009), p. 26. 204 The problems caused by uncertainty about the boundaries of patents and patent thickets would then be made even worse because a pool often has greater financial resources available for initiating such proceedings than a single patent owner.…”

Prizes, Publicity and Patents: Non‐Monetary Awards as a Mechanism to Encourage Innovation

“…The timing of patenting is measured at the issue date, rather than application date, because application dates are only available for patent issues after 1873. Grant lags, however, were substantially smaller in the 19 th century than they are today; for example, 100 patents in a random sample of sewing machine inventions between 1873 and 1875 were granted with an average lag of 140 days after the application date (Lampe and Moser []). The USPTO's current system includes 151,719 subclasses in 473 main classes; 1,167 of these subclasses in 282 main classes were in use in 1840 .…”