Patent pools and innovation in substitute technologies—evidence from the 19th-century sewing machine industry

Ryan Lampe and Petra Moser

RAND Journal of Economics, 2013, vol. 44, issue 4, 757-778

Abstract: type="main">

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 article 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. 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 toward an inferior substitute technology by creating differential license fees and litigation risks.

Date: 2013
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