Patent Pools, Competition, and Innovation—Evidence from 20 US Industries under the New Deal

Abstract

Patent pools have become a prominent mechanism to reduce litigation risks and facilitate the commercialization of new technologies. This article takes advantage of a window of regulatory tolerance under the New Deal to investigate the effects of pools that would form in the absence of effective antitrust. Difference-in-differences regressions of patents and patent citations across 20 industries imply a 14% decline in patenting for each additional patent that is included in a pool. An analysis of the mechanism by which pools discourage innovation indicates that this decline is driven by technologies for which the creation of a pool weakened competition in R&D. ( JEL K21, L24, L41, O31)