Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry

Ryan L. Lampe, Petra Moser

NBER Working Paper No. 15061
Issued in June 2009
NBER Program(s):   DAE   LE   PR

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.

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Document Object Identifier (DOI): 10.3386/w15061

Published: “Patent Pools and Innovation in Substitute Technologies – Evidence from the U.S. Sewing Machine Industry” (with Ryan Lampe) . RAND Journal of Economics , 2014, V olume 44, Issue 4 , pp. 757 - 778 .

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