Working Paper: NBER ID: w15061
Authors: Ryan L. Lampe; Petra Moser
Abstract: Members of a patent pool agree to use a set of patents as if they were jointly owned by all members and license them as a package to other firms. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856-1877) to perform the first empirical test of the effects of a patent pool on innovation. Contrary to theoretical predictions, the sewing machine pool appears to have discouraged patenting and innovation, in particular for the members of the pool. Data on stitches per minute, as an objectively quantifiable measure of innovation, confirm these findings. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.
Keywords: patent pools; innovation; sewing machine industry; litigation risks; historical analysis
JEL Codes: D02; K00; K21; L24; L4; N11; N4; N7; O3; O31; O32; O34; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Establishment of the sewing machine patent pool (O34) | Perception of litigation risks that deterred members from pursuing new patents (K41) |
| Establishment of the sewing machine patent pool (O34) | Shift in research and development efforts towards substitute technologies not covered by the pool (O38) |
| Sewing machine patent pool (O34) | Increase in litigation risks for outside firms (K41) |
| Increase in litigation risks for outside firms (K41) | Discouragement of their innovation efforts (O31) |
| Sewing machine patent pool (O34) | Spike in non-member patenting immediately after the pool's establishment (O36) |
| Establishment of the sewing machine patent pool (O34) | Discouragement of patenting among its members (O34) |
| Sewing machine patent pool (O34) | Decline in innovation measured by the number of stitches per minute produced by sewing machines (O39) |