Adverse Effects of Patent Pooling on Product Development and Commercialization

The conventional antitrust wisdom is that the formation of patent pools is welfare en- hancing when patents are complementary, since the pool avoids a double-marginalization problem associated with independent licensing. The focus of this paper is on (down- stream) product development and commercialization on the basis of perfectly comple- mentary patents. We consider development technologies that entail spillovers between rivals, and assume that nal demand products are imperfect substitutes. When pool formation facilitates information sharing and either increases spillovers in development or decreases the degree of product di erentiation, patent pools can adversely a ect welfare by reducing the incentives towards product development and product mar- ket competition