Compulsory licensing and innovation – Historical evidence from German patents after WWI

Joerg Baten, Nicola Bianchi, Petra Moser*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

Compulsory licensing allows governments to license patented inventions without the consent of patent owners. Intended to mitigate the potential welfare losses from enforcing foreign-owned patents, many developing countries use this policy to improve access to drugs that are covered by foreign-owned patents. The effects of compulsory licensing on access to new drugs, however, are theoretically ambiguous: Compulsory licensing may encourage innovation by increasing competition or discourage innovation by reducing expected returns to R&D. Empirical evidence is rare, primarily because contemporary settings offer little exogenous variation in compulsory licensing. We address this empirical challenge by exploiting an event of compulsory licensing as a result of World War I when the US Trading with the Enemy Act made all German-owned patents available for licensing to US firms. Firm-level data on German patents indicate that compulsory licensing was associated with a 30 percent increase in invention by German firms whose inventions were licensed.

Original languageEnglish (US)
Pages (from-to)231-242
Number of pages12
JournalJournal of Development Economics
Volume126
DOIs
StatePublished - May 1 2017

Keywords

  • Compulsory licensing
  • Economic history
  • Innovation
  • Intellectual property
  • Patents
  • TRIPS

ASJC Scopus subject areas

  • Development
  • Economics and Econometrics

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