Study: Patent Pools May Discourage Innovation
Stanford University's Ryan Lampe and Petra Moser saw that regulators favor patent pools as a means to encourage innovation in industries where overlapping patents and excessive litigation cause problems. While the theory appears sound in principle, does the aggregation of patent rights actually spur innovation? Lampe and Moser decided to look at this issue in their recently published paper titled "Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine"
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.
Read the entire paper here (link).
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The authors spend most of the paper discussing rate of patenting, not the rate of innovation.
Decreased patenting by pool members is to be expected regardless of the rate of innovation -- free rider effect. No reason to patent every small improvement anymore. You don't need a huge patent portfolio, just enough to stay in the pool.
What little the authors say about stitching speed (used as an indicator of rate of innovation) is a bit confusing. They say that stitching speed rose from 200-2000 in eleven years before the pool, stayed constant, then rose in the 12 years after the pool to 2500. Personally, my take would be that 2000 stitches per minute was getting pretty close to the max performance (all the low hanging fruit was harvested). We're talking 30-40 stitches per second. How fast can you make metal move with 1870 metalurgy and machine tooling? The ten-fold increase before the pool overwhelms any incremental increase over the next 25 years. 2,000 or 2,500 -- are they really that different when you just increased from 200? Minor refinements, not breakthroughs.
In other words, a fair reading of the data may simply be "sewing machine manufacuturers formed a patent pool on a mature technology."
And FN24 says "basic least square estimations confirm that improvements in speed accelerated during the pool years." ????
Shocking, just shocking. Patents holding up innovation. Who would have EVER believed it?
The fellow above me makes excuses and alternate interpretations, but the rate of innovation can be measured by looking at those few patents issued right after the pool was established and look to see if they're all "major" breakthroughs, or just tiny improvements. My bet is that they're just minor improvements. After your incentive to disclose to the public all your knowledge is gone because further patenting will not help you (you already block the whole industry) you will cease to disclose your knowledge until the patent pool you have starts to run dry. Then you'll build another and repeat the cycle. It would only make sense.
1:14 a.m. --
If you believe patents hold up innovation, then you should applaude patent pools. The authors show that patenting *slows* when patent pools exist.
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