Patent Pools as a Solution to Efficient Licensing of Complementary Patents? Some Experimental Evidence

Abstract

Production requiring licensing groups of complementary patents implements a coordination game among patent holders, who can price patents by choosing among combinations of fixed and royalty fees. Summed across patents, these fees become the total producer cost of the package of patents. Royalties, because they function as excise taxes, add to marginal costs, resulting in higher prices and reduced quantities of the downstream product and lower payoffs to the patent holders. Using fixed fees eliminates this inefficiency but yields a more complex coordination game in which there are multiple equilibria, which are very fragile in that small mistakes can lead the downstream firm to not license the technology, resulting in inefficient outcomes. We report on a laboratory market investigation of the efficiency effects of coordinated pricing of patents in a patent pool. We find that pool-like pricing agreements can yield fewer coordination failures in the pricing of complementary patents. (c) 2010 by The University of Chicago. All rights reserved..

To ally or not to ally: Enterprises' preferences for technology alliance modes in transnational cooperation

“…They also demonstrate that the standards' overall patent contributions are key factors influencing the enterprise's determinant of joining. Similar work can be seen in Kato (2004), Aoki and Schiff (2008), Santore et al (2010), and Vakili (2016).…”

Intellectual property and competition

“…Historical rationales for pooling focused on the differences between complements and substitutes (Gilbert, 2004;Santore, 2010). Pooling or cross licensing among different producers in the same industry was thought to be procompetitive if the shared patents were complements with one another, but more likely to be anticompetitive if they were substitutes (e.g., Shapiro, 2001).…”

Patent Pools and Related Technology Sharing

“…In that case crosslicensing of the patents is more suspicious and may facilitate price fixing. (Gilbert, 2004;Santore, 2010).…”