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Patent Pools and Product Development

Thomas Jeitschko () and Nanyun Zhang

No 2011-02, Working Papers from Towson University, Department of Economics

Abstract: The conventional wisdom is that the formation of patent pools is welfare enhancing when patents are complementary, since the pool avoids a double-marginalization problem associated with independent licensing. The focus of this paper is on (downstream) product development and commercialization on the basis of perfectly complementary patents. We consider development technologies that entail spillovers between rivals, and assume that nal demand products are imperfect substitutes. If pool formation either increases spillovers in development or decreases the degree of product di erentiation, pool formation can actually adversely a ect overall welfare by reducing incentives towards product development and product market competition|even with perfectly complementary patents. This significantly modifies and possibly even negates the conventional wisdom for many settings. The paper provides insights into why patent pools are uncommon in science-based industries such as biotech, despite there being strong policy advocacy for them.

Keywords: Patent Pools; Research and Development; Innovation; BioTechnology; Electronics. (search for similar items in EconPapers)
JEL-codes: L1 L2 L4 L6 D2 D4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino, nep-ipr, nep-pr~ and nep-tid
Date: 2011-02, Revised 2011-02
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http://webapps.towson.edu/cbe/economics/workingpapers/2011-02.pdf First version, 2011 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:tow:wpaper:2011-02

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