Abstract: Abstract: The problem involving the innovation incentive effect of patent pools based on a vertical structure was studied by introducing the essential patent output function of the patent pool members. A three-stage dynamic game model was considered: in the first stage, the patent pool members select R&D inputs; in the second stage, the patent pool sets up the unit pool royalty rate; in the third stage, the patent pool members conduct Cournot competition to determine their quantities in the downstream final goods market. In conclusion, under the condition dividing the royalty income according to the numeric proportional rules, the patent pool based on the vertical structure encourages its members to engage research and development; it has an incentive effect on the innovation.

Key words: vertical structure, patent pool, innovation incentive, Cournot competition