Patent Pools and the Direction of Technical Change: Evidence from the 19th-Century Sewing Machine Industry

Abstract:     
Patent pools, which allow a group of firms to combine their patents as if they were a single firm, are feared to stifle innovation in substitutes for pool technologies. This paper uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856 to 1877) to examine empirically whether patent pools discourage innovation in substitute technologies. In the case of the sewing machine industry, the introduction of a pool encouraged, rather than discouraged innovation in substitute technologies, both in terms of annual patents and product introductions. Firms that focused on substitute technologies were, however, more likely to fail and exit the industry.

Keywords: Patent Pools, Innovation, Patents, Intellectual Property, Economic History

JEL Classifications: K00, N00, N41, 031

Working Paper Series