DO PATENT POOLS ENCOURAGE INNOVATION? EVIDENCE ...

not include any patents that were included in a pool:
(1) Patents ct = + 1 Pool t * Pool Patents c
+ t * Pool Subclass c + t 2 * Pool Subclass c + f c + t + ct
where pool patents ct counts patent applications in subclass c and year t; pool t
equals 1 for period after the pool forms. 14 The variable pool subclass c equals 1 for
subclasses that include one or more pool patents. Subclasses without pool patents
in the same main class form the control. For example, pool subclass c equals 1 for
the Philips screw pool subclass 411/403; other subclasses in main class 411 form
the control.
Under the identifying assumption that – in the absence of a pool – changes
in the number of patents per year would be comparable in subclasses with pool
patents and other subclasses in the same main class, the coefficient for the
difference-in-differences estimator pool t *pool patents c measures the causal effect
of the pool. Interaction terms t * pool subclass c and t 2 * pool subclass c control for
separate linear and quadratic trends for subclasses with pool patents. f c are
subclass fixed-effects and t are filing year fixed effects to control for variation in
the intensity of patenting across technologies and over time. 15
OLS estimates indicate that subclasses with one additional pool patent
produce 0.45 fewer patents per year after the creation of a pool (significant at 1
14 For five pools, the pool years include a small number of years after the pool had been dissolved.
We include these years as pool years to estimate the pool effects in the most conservative ways
(creating a bias towards zero. The pools are for fuel injection, pharmaceuticals, railroad springs,
lecithin, and aircraft instruments.
15 For example, some subclasses may include a disproportionate number of patents because they
are especially hot areas of research activity, or inventors may be more likely to patent innovations
in a specific subclass, if alternative mechanisms are ineffective (Moser, 2012). The number of
patents in pool subclasses ranges from 1 to 57; the average per pool subclass is 3.0.
14