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Pooling with Essential and Nonessential Patents

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  • Daniel Quint

Abstract

Several recent technological standards were accompanied by patent pools?arrangements to license relevant intellectual property as a package. A key distinction made by regulators?between patents essential to a standard and patents with substitutes?has not been addressed in the theoretical literature. I show that pools of essential patents are always welfare increasing, while pools which include nonessential patents can be welfare reducing?even pools limited to complementary patents and stable under compulsory individual licensing. If pools gain commitment power and price as Stackelberg leaders, this reduces, and can reverse, the gains from welfare increasing pools.

Suggested Citation

  • Daniel Quint, 2014. "Pooling with Essential and Nonessential Patents," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 23-57, February.
    • Handle: RePEc:aea:aejmic:v:6:y:2014:i:1:p:23-57
    Note: DOI: 10.1257/mic.6.1.23
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    References listed on IDEAS

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    Cited by:

    1. Lampert, Hodaya & Wettstein, David, 2020. "Patents and pools in pyramidal innovation structures," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    2. Brachtendorf, Lorenz & Gaessler, Fabian & Harhoff, Dietmar, 2020. "Truly Standard-Essential Patents? A Semantics-Based Analysis," Rationality and Competition Discussion Paper Series 265, CRC TRR 190 Rationality and Competition.
    3. Fu, Xiao & Tan, Guofu & Wang, Jin, 2023. "Policy orientations and technology choices in standards wars," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    4. Lorenz Brachtendorf & Fabian Gaessler & Dietmar Harhoff, 2023. "Truly standard‐essential patents? A semantics‐based analysis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 132-157, January.
    5. Ishihara, Akifumi & Yanagawa, Noriyuki, 2018. "Dark sides of patent pools with independent licensing," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 1-34.
    6. Layne-Farrar, Anne & Salinger, Michael A., 2016. "Bundling of RAND-committed patents," Research Policy, Elsevier, vol. 45(6), pages 1155-1164.
    7. Schankerman, Mark & Galasso, Alberto, 2020. "Licensing Life-Saving Drugs for Developing Countries: Evidence from the Medicines Patent Pool," CEPR Discussion Papers 15544, C.E.P.R. Discussion Papers.
    8. Quint, Daniel, 2014. "Imperfect competition with complements and substitutes," Journal of Economic Theory, Elsevier, vol. 152(C), pages 266-290.
    9. Gerard Llobet & Jorge Padilla, 2023. "Royalty Stacking and Validity Challenges: The Inverse Cournot Effect," Journal of Industrial Economics, Wiley Blackwell, vol. 71(3), pages 593-625, September.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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