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

32 Pages Posted: 1 Dec 2008 Last revised: 8 Jun 2014

Ryan Lampe

California State University, East Bay - Department of Economics

Petra Moser

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: June 8, 2010

Abstract

Members of a patent pool agree to use a set of patents as if they were jointly owned by all members and license them as a package to other firms. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856-1877) to perform the first empirical test of the effects of a patent pool on innovation. Contrary to theoretical predictions, the sewing machine pool appears to have discouraged patenting and innovation, in particular for the members of the pool. Data on stitches per minute, as an objectively quantifiable measure of performance, confirm these findings. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.

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

JEL Classification: K00, N00, N41, 031

Suggested Citation

Lampe, Ryan and Moser, Petra, Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry (June 8, 2010). Available at SSRN: https://ssrn.com/abstract=1308997 or http://dx.doi.org/10.2139/ssrn.1308997

Ryan Lampe

California State University, East Bay - Department of Economics ( email )

25800 Carlos Bee Blvd.
Hayward, CA 94542
United States

Petra Moser (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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