Patent Pools, Competition, and Innovation - Evidence from 20 U.S. Industries under the New Deal

Abstract:     
Patent pools, which allow competing firms to combine their patents, have emerged as a promising mechanism to resolve litigation risks that paralyze critical parts of the world economy. Although pools facilitate production, their effects on the rate and direction of technical change are poorly understood, and empirical evidence is limited to case studies of individual industries. This paper takes advantage of a window of regulatory tolerance under the New Deal to systematically investigate patent pools across a broad range of industries. Difference-in-differences regressions of new historical data on patents and patent citations in 20 industries imply a 14 percent decline in patenting for the pool technology compared with related technologies within the same industry. An analysis of the mechanism, by which pools may discourage innovation, indicates that the relative decline is driven almost entirely by technologies for which the creation of a pool weakens competition.

Number of Pages in PDF File: 47

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

JEL Classification: K00, N00, N42, 031

Accepted Paper Series