Intellectual Property Law

As you can tell from the title, Lampe and Moser had to go quite a ways back to see how innovation was affected - after all, it takes decades, if not a century, to determine the effects of patent pooling on an entire industry. More specifically, the authors looked at the first patent pool in U.S. history, the Sewing Machine Combination (1856-1877) to see and analyze the final result.

So what did they find?

Our data confirm that pools reduce litigation risks for members and that pool members patent more in the years leading up to the pool. Pool members, however, patent less as soon as the pool is established and only resume patenting after the pool dissolves. We construct objective measures of performance to examine whether such changes reflect changes in strategic patenting or actual effects on innovation. Performance data suggest that innovation slowed as soon as the pool had been established and resumed only after the pool had been dissolved. Why might patent pools discourage innovation? Our data indicate that pools may discourage innovation by increasing litigation risks for outside firms and by diverting research by outside firms to inferior technologies.