Abstract

http://ssrn.com/abstract=2417532
 


 



Does Compulsory Licensing Discourage Invention? Evidence from German Patents after the US Trading-with-the-Enemy Act


Joerg Baten


University of Tuebingen

Nicola Bianchi


Stanford University - Department of Economics

Petra Moser


Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

April 15, 2014


Abstract:     
Compulsory licensing – which allows patents to be licensed without the consent of patent owners – is a prominent mechanism to improve access to essential innovations, such as medicines to combat HIV. Critics have argued that compulsory licensing discourages innovation by weakening the intellectual property of foreign inventors. This paper exploits the 1918 US Trading-with-the-Enemy Act (TWEA) as an empirical setting to investigate the effects of compulsory licensing on patenting in Germany, the country whose patents were violated. Difference-in-differences regressions of new data on nearly 80,000 German patents compare changes in patenting by German inventors after 1918 for fields in which German-owned patents were violated with other fields. This analysis reveals a 38 percent increase in invention for fields with licensing. Regressions with renewed patents as a proxy for high-quality patents imply a 25 percent increase. Intent-to-treat regressions, which use German-owned US patents to measure exposure to licensing, imply a 30 percent increase. Firm-level analyses reveal that firms whose patents had been licensed under the TWEA began to patent more in research fields with licensing. Firm-level data also indicate an increase in the number of research-active firms in research fields with licensing. These results suggest that compulsory licensing may encourage, rather than discourage innovation by increasing competition.

Number of Pages in PDF File: 41

Keywords: Patents, intellectual property, compulsory licensing

JEL Classification: O3, O34, O38, N44, N42, K21

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Date posted: March 30, 2014 ; Last revised: April 16, 2014

Suggested Citation

Baten, Joerg and Bianchi, Nicola and Moser, Petra, Does Compulsory Licensing Discourage Invention? Evidence from German Patents after the US Trading-with-the-Enemy Act (April 15, 2014). Available at SSRN: http://ssrn.com/abstract=2417532 or http://dx.doi.org/10.2139/ssrn.2417532

Contact Information

Joerg Baten
University of Tuebingen ( email )
Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany
Nicola Bianchi
Stanford University - Department of Economics ( email )
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
Petra Moser (Contact Author)
Stanford University - Department of Economics ( email )
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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