Efficient Patent Pools

45 Pages Posted: 25 Sep 2002

See all articles by Jean Tirole

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI); University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ); Centre for Economic Policy Research (CEPR)

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Private Capital Research Institute

Multiple version iconThere are 2 versions of this paper

Date Written: August 5, 2002

Abstract

The paper builds a tractable model of a patent pool, an agreement among patent owners to license a set of their patents to one another or to third parties. It first provides a necessary and sufficient condition for a patent pool to enhance welfare. It shows that requiring pool members to be able to independently license patents matters if and only if the pool is otherwise welfare reducing, a property that allows the antitrust authorities to use this requirement to screen out unattractive pools.

The paper then undertakes a number of extensions. It evaluates the "external test," according to which patents with substitutes should not be included in a pool; analyzes the welfare implications of the reductionin the members' incentives to invent around or challenge the validity of each other's patents; looks at the rationale for the (common) provision of automatic assignment of future related patents to the pool; and, last, studies the intellectual property owners' incentives to form a pool or to cross-license when they themselves are users of the patents in the pool.

Keywords: Intellectual property, open and closed pools, essential patents, independent licensing, bogus patents

JEL Classification: K11, L41, M2

Suggested Citation

Tirole, Jean and Lerner, Josh, Efficient Patent Pools (August 5, 2002). Available at SSRN: https://ssrn.com/abstract=322000 or http://dx.doi.org/10.2139/ssrn.322000

Jean Tirole

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

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University of Toulouse 1 - Groupe de Recherche en Economie Mathématique et Quantitative (GREMAQ) ( email )

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Centre for Economic Policy Research (CEPR)

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