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

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Ryan L. Lampe
Petra Moser

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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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15061.

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Date of creation: Jun 2009
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Handle: RePEc:nbr:nberwo:15061

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Find related papers by JEL classification:
D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
K0 - Law and Economics - - General
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
L4 - Industrial Organization - - Antitrust Issues and Policies
N11 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - U.S.; Canada: Pre-1913
N4 - Economic History - - Government, War, Law, and Regulation
N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy

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