Inefficiencies in Essential Patent Pool Formation. Are Pool Administrators also involved?
Technology standards are becoming increasingly important in economic extent. Facilitating and building patent pools for technology standards is a crucial part for their success, which is done by pool administrators. Practitioners believe that political economy of pool formation has lead to inefficiencies such as failures in launching new pools and inclusion of non-essential patents (pool inflation). However, the potential role of expert pool administering party on the efficiencies has not been studied yet. This paper develops a simple model of pool formation which determines the optimal strategies of a rent seeking "pool administrator". The results show that pool forming strategies by the pool administrator may contribute to failures in patent pool formation process. Also, in the environments where the essentiality claims are difficult to assess or in industries with higher pace of technology, the pool administrator may find it optimal to include the patents in the pool regardless of the essentially evaluation (pool inflation) and launch the patent pool faster.