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Patent Pools and Innovation in Substitutes - Evidence from the 19th Century Sewing Machine Industry

48 Pages Posted: 6 Sep 2009 Last revised: 28 Feb 2013

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)

Date Written: February 28, 2013

Abstract

Patent pools, which combine complementary patents of competing firms, are expected to increase overall welfare – but potentially discourage innovation in substitutes for the pool technology. This paper exploits a new historical data set on changes in patenting and firm entry for a clearly defined pool technology and substitutes in the 19th century sewing machine industry to investigate the effects of a pool on innovation in substitutes. This analysis reveals a substantial increase in innovation for an – albeit technologically inferior – substitute technology. Historical evidence suggests that the creation of a pool diverted innovation towards an inferior substitute by creating differential license fees and litigation risks, which made it more difficult for outside firms to compete directly with the pool technology.

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

JEL Classification: K00, N00, N41, 031

Suggested Citation

Lampe, Ryan and Moser, Petra, Patent Pools and Innovation in Substitutes - Evidence from the 19th Century Sewing Machine Industry (February 28, 2013). Available at SSRN: https://ssrn.com/abstract=1468062 or http://dx.doi.org/10.2139/ssrn.1468062

Ryan Lampe (Contact Author)

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

25800 Carlos Bee Blvd.
Hayward, CA 94542
United States

Petra Moser

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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