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Patent Pools and Product Development

Author

Listed:
  • Thomas Jeitschko

    (Antitrust Division, U.S. Department of Justice and Department of Economics, Michigan State University)

  • Nanyun Zhang

    (Department of Economics, Towson University)

Abstract

The conventional wisdom is that the formation of patent pools is welfare enhancing when patents are complementary, since the pool avoids a double-marginalization problem associated with independent licensing. The focus of this paper is on (downstream) product development and commercialization on the basis of perfectly complementary patents. We consider development technologies that entail spillovers between rivals, and assume that nal demand products are imperfect substitutes. If pool formation either increases spillovers in development or decreases the degree of product di erentiation, pool formation can actually adversely a ect overall welfare by reducing incentives towards product development and product market competition|even with perfectly complementary patents. This significantly modifies and possibly even negates the conventional wisdom for many settings. The paper provides insights into why patent pools are uncommon in science-based industries such as biotech, despite there being strong policy advocacy for them.

Suggested Citation

  • Thomas Jeitschko & Nanyun Zhang, 2011. "Patent Pools and Product Development," Working Papers 2011-02, Towson University, Department of Economics, revised Feb 2011.
    • Handle: RePEc:tow:wpaper:2011-02
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    File URL: http://webapps.towson.edu/cbe/economics/workingpapers/2011-02.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jeitschko Thomas D. & Zhang Nanyun, 2014. "Adverse Effects of Patent Pooling on Product Development and Commercialization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 27-57, January.

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    More about this item

    Keywords

    Patent Pools; Research and Development; Innovation; BioTechnology; Electronics.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • D2 - Microeconomics - - Production and Organizations
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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