Patent Pools and Dynamic R&D Incentives

Documents De Travail Working Paper No. 07-03

29 Pages Posted: 24 May 2007 Last revised: 9 May 2013

Vianney Dequiedt

National Institute for Agricultural Research (INRA) - GAEL

Bruno P. A. Versaevel

emlyon business school; GATE (Groupe d'Analyse et de Théorie Economique)

Multiple version iconThere are 2 versions of this paper

Date Written: June 30, 2012

Abstract

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.

Keywords: R&D races, Innovation, Licensing, Competition policy

JEL Classification: L24, L51, O3

Suggested Citation

Dequiedt, Vianney and Versaevel, Bruno P. A., Patent Pools and Dynamic R&D Incentives (June 30, 2012). Documents De Travail Working Paper No. 07-03. Available at SSRN: https://ssrn.com/abstract=988303 or http://dx.doi.org/10.2139/ssrn.988303

Vianney Dequiedt (Contact Author)

National Institute for Agricultural Research (INRA) - GAEL ( email )

BP 47
38040 Grenoble
France

Bruno P. A. Versaevel

emlyon business school ( email )

23, avenue Guy de Collongue
Economics, Finance, Control
Ecully, 69130
France

GATE (Groupe d'Analyse et de Théorie Economique) ( email )

93, chemin des Mouilles
Ecully, 69130
France

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