The co-existence of patent-pools

Abstract

Many industries, in particular high-tech industries, have experienced the (re-)emergence of patent pools that potentially co-exist with each other. In this paper, we provide a theoretical framework which allows us to understand the main determinants of co-existing patent pools. In this framework, we discuss the decision to create competing patent pools against the background of the trade-off between decreasing returns to patent pool size and a profit-reducing competition effect. We show that co-existence which allows to serve vertically segmented markets is more likely to be observed with a larger patent universe, with substantial technological dispersion as well as stronger concave patent value functions. Furthermore, we show that if the co-existence of pools emerges in equilibrium, then welfare always dominates a common pool and sometimes even in the absence of pools altogether.

Keywords: patents, pools, co-existence, welfare, vertical segmentation

JEL Classification: L12, L13, D61