Patent Policy, Patent Pools, And The Accumulation Of Claims In Sequential Innovation

The authors present a dynamic model where the accumulation of patents generates an increasing number of claims on sequential innovation. They study the equilibrium innovation activity under three regimes: patents, no-patents and patent pools. Patent pools increase the probability of innovation with respect to patents, but they also find that: their outcome can be replicated by a licensing scheme in which innovators sell complete patent rights, and they are dynamically unstable. They find that none of the above regimes can reach the first or second best. Finally, they consider patents of finite duration and determine the optimal patent length.