Patent Pools and Dynamic R&D Incentives
National Institute for Agricultural Research (INRA) - GAEL
Bruno P. A. Versaevel
EM LYON (Ecole de Management de Lyon); University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)
June 30, 2012
Documents De Travail Working Paper No. 07-03
Patent pools are cooperative agreements between two or more firms to license their related patents as a bundle. In a continuous-time model of multi-stage innovations we characterize firms' incentives to perform R\&D when they anticipate the possibility of starting a pool of complementary patents, which can be essential or nonessential. A coalition formation protocol leads the first innovators to start the pool immediately after they patent the essential technologies. The firms invest more than in the no-pool case and increase the\ speed of R\&D for essential technologies as the number of patents progresses to the anticipated endogenous pool size, to the benefit of consumers. There is overinvestment in R\&D compared to a joint profit-maximization benchmark. If firms anticipate the addition of nonessential patents to the pool they reduce their R\&D efforts for the essential patents at each point in time, resulting in a slower time to market for the pooled technologies.
Number of Pages in PDF File: 29
Keywords: R&D races, Innovation, Licensing, Competition policy
JEL Classification: L24, L51, O3
Date posted: May 24, 2007 ; Last revised: May 9, 2013
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