Empirics prove patent pools prevent litigation and increase innovation

This paper explores empirically the interplay between patent pooling and litigations using data on 1564 United States patents belonging to eight modern I.C.T. pools and to a control database with patents having the same characteristics. First, our analysis makes it possible to highlight that pool patents are more litigated than non-pool patents presenting the same characteristics. Second, we underline that the difference in the likelihood to be involved in an infringement case, with the patent holder as plaintiff, is due to a pool effect per se, on top of the impact of the pool on the market size of the patent. Third, we explore several tracks that could explain this positive pool effect on litigations. We underscore that the patent inclusion in a pool, by reducing the uncertainty on the patent essentiality, facilitates dispute resolution by settlement. We also show that the pools’ size, as measured by the number of members, has a positive effect on the number of cases which could be due to a transmission of information between members. We emphasize and discuss such other factors that affect the incentives to litigate as the size of the firm and whether the patent holder is vertically integrated. From a public policy standpoint, our results underscore the need for a higher scrutiny of the real functioning of modern I.C.T. pools by the antitrust authorities.