Compulsory Licensing and Innovation - Historical Evidence from German Patents after WWI

64 Pages Posted: 30 Mar 2014 Last revised: 24 Sep 2016

Joerg Baten

University of Tuebingen

Nicola Bianchi

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Petra Moser

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 23, 2016

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.

Keywords: Innovation, patents, compulsory licensing, TRIPS, intellectual property, economic history

JEL Classification: O3, O34, O38, N3

Suggested Citation

Baten, Joerg and Bianchi, Nicola and Moser, Petra, Compulsory Licensing and Innovation - Historical Evidence from German Patents after WWI (September 23, 2016). Available at SSRN: https://ssrn.com/abstract=2417532 or http://dx.doi.org/10.2139/ssrn.2417532

Joerg Baten

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

Nicola Bianchi

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

HOME PAGE: http://www.bianchinicola.com

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Petra Moser (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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