Patent Pools are Bad For You: Tragedy of the Anti-Anti-Commons

Patent pools curb innovation, at least as evidenced by data on stitches per minute in the sewing machine industry from 1856-1877. Contrary to tragedy of the anti-commons theorizing — the idea that too many people with rights to exclude others from a market will cause less innovation — it seems that, in this case, eliminating market ticket-takers meant that the resulting economic show was worse.

Do Patent Pools Encourage Innovation? Evidence from the 19th-Century Sewing Machine Industry

Ryan L. Lampe, Petra Moser

Members of a patent pool agree to use a set of patents as if they were jointly owned by all members and license them as a package to other firms. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856-1877) to perform the first empirical test of the effects of a patent pool on innovation. Contrary to theoretical predictions, the sewing machine pool appears to have discouraged patenting and innovation, in particular for the members of the pool. Data on stitches per minute, as an objectively quantifiable measure of innovation, confirm these findings. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.

This is one case, of course, and there are plenty of others that could be examined, so it doesn’t exactly sew things up. (You knew that was coming.)