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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. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper 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. The pool’s effect on patenting is especially pronounced for members, which stood to gain most from the pool. Results from patent data are confirmed by data on improvements in sewing speeds, as an alternative, objectively quantifiable measure of innovation. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.

Patent Pools, Innovation, Patents, Intellectual Property, Economic History

Abstract:
This paper argues that the ability to keep innovations secret may be a key determinant of patenting. To test this hypothesis, the paper examines a newly-collected data set of more than 7,000 American and British innovations at four world's fairs between 1851 and 1915. Exhibition data show that the industry where an innovation is made is the single most important determinant of patenting. Urbanization, high innovative quality, and low costs of patenting also encourage patenting, but these influences are small compared with industry effects. If the effectiveness of secrecy is an important factor in inventors' patenting decisions, scientific breakthroughs, which facilitate reverse-engineering, should increase inventors' propensity to patent. The discovery of the periodic table in 1869 offers an opportunity to test this idea. Exhibition data show that patenting rates for chemical innovations increased substantially after the introduction of the periodic table, both over time and relative to other industries.

Abstract:
A lack of data on innovations without patents has made it impossible to determine whether patenting rates vary systematically across industries and over time. This issue, however, is essential to our understanding of theoretical and empirical analyses of innovation, which typically use patents as a proxy for innovation. This paper takes advantage of a newly-collected data set of more than 8,000 historical innovations to provide the first quantitative estimates of the patenting rates – the share of innovations that are patented. The data indicate that only a fraction of innovations (about 12 to 15 percent) are patented, and that patenting rates vary substantially across industries (from less than 5 to more than 50 percent of all innovations). Patenting rates are lowest in industries where innovations can be easily kept secret and highest in industries where they can be easily reverse-engineered. Such variation suggests that the effectiveness of secrecy, as an alternative to patents, is a key determinant of inventors’ patenting decisions. Comparisons over time confirm this hypothesis: Patenting rates increase in response to scientific breakthroughs that lower the effectiveness of secrecy, both over time and relative to other industries.

Innovation, Invention, Patents, Intellectual Property, Economic History

Abstract:
Studies of innovation have focused on the effects of patent laws on the number of innovations but ignored effects on the direction of technological change. This paper introduces a new data set of close to fifteen thousand innovations at the Crystal Palace World's Fair in 1851 and at the Centennial Exhibition in 1876 to examine the effects of patent laws on the direction of innovation. The paper tests the following argument: if innovative activity is motivated by expected profits, and if the effectiveness of patent protection varies across industries, then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective. Analyses of exhibition data for twelve countries in 1851 and ten countries in 1876 indicate that inventors in countries without patent laws focus on a small set of industries where patents were less important, while innovation in countries with patent laws appears to be much more diversified. These findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries.

Innovation, Patent Laws, Technical Change

Abstract:
This paper examines whether patents weaken the tendency of innovations to localize geographically as they encourage inventors to publicize their ideas. The empirical analysis introduces a newly-collected data set of more than 5,000 British and American innovations at four world’s fairs between 1851 and 1915. The data show that innovations tend to be less localized in industries where patenting rates are high, even controlling for the geographic concentration of production. Evidence from the 19th-century chemical industry suggests that innovations tend to become less localized in response to exogenous increases in patenting.

Innovation, Patents, Knowledge Spillovers, Localization, Economic History

Abstract:
This paper identifies taste-based discrimination through a two-part empirical test. First, it constructs quantitative measures of revealed preferences, which establish that World War I created a persistent change in ethnic preferences that switched the status of German Americans from a mainstream ethnicity to an ethnic minority until the late 1920s. Second, the paper uses this shock to preferences to identify the effects of taste-based discrimination at the example of traders at the New York Stock Exchange (NYSE). A new data set of more than 5,000 applications for membership in the NYSE reveals that changes in ethnic preferences after the war more than doubled the probability that applicants with German-sounding names would be rejected.

Ethnic Discrimination, Taste-Based Discrimination, NYSE, Economic History, World War I

Abstract:
This paper introduces a new internationally comparable data set that permits an empirical investigation of the effects of patent law on innovation. The data have been constructed from the catalogues of two 19th century world fairs: the Crystal Palace Exhibition in London, 1851, and the Centennial Exhibition in Philadelphia, 1876. They include innovations that were not patented, as well as those that were, and innovations from countries both with and without patent laws. I find no evidence that patent laws increased levels of innovative activity but strong evidence that patent systems influenced the distribution of innovative activity across industries. Inventors in countries without patent laws concentrated in industries where secrecy was effective relative to patents, e.g., food processing and scientific instruments. These results suggest that introducing strong and effective patent laws in countries without patents may have stronger effects on changing the direction of innovative activity than on raising the number of innovations.

Abstract:
This paper uses historical patent citation data to test whether electricity, as the canonical example of a General Purpose Technology (GPT), matches the current citations-based criteria of GPTs. We use a sample of 1,867 American patents assigned to publicly traded companies in the 1920s and 3,400 forward citations to these patents to check which of four industry categories - electricity, chemicals, mechanical and other - most closely matches the key elements of GPTs. Our results suggest that electricity patents were broader in scope than other categories of patents at their grant date, and that they were more "original" than their counterparts. However, we also show that electricity patents had lower generality scores, fewer citations per patent (a measure of technological importance), and shorter citation lags (i.e., faster rates of knowledge depreciation). We argue that technological change, even in the 1920's, was much broader than has previously been considered.

Innovation, Patents, General Purpose Technology, U.S. Economic History

Abstract:
Compulsory licensing, which is permissible under the Trade Related Intellectual Property Rights (TRIPS) agreement, allows domestic firms to produce inventions that are patented by foreign nationals, without the consent of patent owners. As an emergency measure, compulsory licensing offers clear benefits, as it helps deliver life-saving drugs to millions of patients. The long run effects of compulsory licensing, however, are unclear. This paper uses an exogenous event of compulsory licensing after World War I to measure the long-run effects of compulsory licensing on domestic invention in the licensing country. Specifically, we compare changes in patents by domestic inventors across U.S. chemical inventions that were differentially affected by compulsory licensing under the Trading with the Enemy Act (TWEA) of World War I. Our data suggest that compulsory licensing has a large positive effect on domestic invention. The data also show that the full effects of compulsory licensing take up to ten years to materialize, suggesting that they will be missed in analyses of contemporary data.

Compulsory licensing, licensing, patent law, innovation, invention, TRIPS

Abstract:
Patent pools, which allow a group of firms to combine their patents as if they were a single firm, are feared to stifle innovation in substitutes for pool technologies. This paper uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856 to 1877) to examine empirically whether patent pools discourage innovation in substitute technologies. In the case of the sewing machine industry, the introduction of a pool encouraged, rather than discouraged innovation in substitute technologies, both in terms of annual patents and product introductions. Firms that focused on substitute technologies were, however, more likely to fail and exit the industry.

Patent Pools, Innovation, Patents, Intellectual Property, Economic History

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. Regulators favor pools as a means to encourage innovation: Pools are expected to reduce litigation risks for their members and lower license fees and transactions costs for other firms. This paper 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, as an objectively quantifiable measure of innovation, confirm these findings. Innovation for both members and outside firms slowed as soon as the pool had been established and resumed only after it had dissolved.

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Abstract:
A significant challenge to empirically testing theories of discrimination has been the difficulty of identifying taste-based discrimination and of distinguishing it clearly from statistical discrimination. This paper addresses this problem through a two-part empirical test of taste-based discrimination. First, it constructs measures of revealed preferences, which establish that World War I created a strong and persistent shock to ethnic preferences that effectively switched the status of German Americans to an ethnic minority. Second, the paper uses this shock to ethnic preferences to identify the effects of taste-based discrimination at the example of traders at the New York Stock Exchange (NYSE). A new data set of more than 4,000 applications for seats on the NYSE reveals that the War more than doubled the probability that German applicants would be rejected (relative to Anglo-Saxons). The mechanism of taste-based discrimination is surprising: Prices are unaffected by ethnic preferences, and discrimination operates instead entirely through admissions.