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

Abstract

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. This article 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, an objectively quantifiable measure of innovation, confirm these findings.