DO PATENT POOLS ENCOURAGE INNOVATION? EVIDENCE ...

States in 1938. The Supreme Court argued that Hartford Empire had discouraged
invention and suppressed competition by imposing production quotas on its
licensees and prevented them from adopting competing technologies (Harford
Empire Co. v. U.S. 323 U.S. 386, 400 (Jan., 1945)).
Courts then began to become more proactive forcing pools to license their
patents (Vaughan, 1956, p. 50). In 1948, the Supreme Court argued that the
ultimate question was whether
“Two or more patentees in the same patent field may legally combine their
valid patent monopolies to secure mutual benefits for themselves through
contractual agreements, between themselves and other licensees, for control of
the sale price of the patented devices” (United States v. Line Material Co., 333
U.S. 287, 305 (1948)).
At that time, the Court’s answer had become:
“No case of this Court has construed the patent and antimonopoly statutes to
permit separate owners of separate patents by cross-licenses or other
arrangements to fix the prices to be charged by them and their licensees for
their respective products. Where two or more patentees with competitive noninfringing
patents combine them and fix prices on all devices produced under
any of the patents, competition is impeded to a greater degree than were a
single patentee fixes prices for his licensees. The struggle for profit is less
acute. …The merging of the benefits of price-fixing under the patents restrains
trade in violation of the Sherman Act in the same way as would the fixing of
prices between producers of non-patentable goods” (United States v. Line
Material Co. (1948), p. 311, emphasis added).
After this, pools became uncommon until the Department of Justice approved the
MPEG and DVD standards pools in 1997 and 1999.
In the window of regulatory tolerance between the Great Depression and
World War II, many patent pools formed, similar to today. The 20 pools in our
sample extend through a broad range of industries including Phillips screws,
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