Patent Licensing and Secondary Markets in the Nineteenth Century

Abstract

The selling, buying and licensing of patents is controversial today. Inventors, companies, and universities who license their patents are labeled with the “patent troll” epithet, and academics, judges, lobbyists and others have decried this commercial activity as a new, harmful phenomenon. This historical claim, though, is profoundly mistaken. This essay contributes to the ongoing academic and policy debates by presenting new historical data and summarizing preexisting historical scholarship on the hoary practice in America’s innovation economy of both patent licensing and the buying and selling of patents in what economists call a “secondary market.” Famous inventors, such as Thomas Edison and Charles Goodyear, used this business model, as did many other inventors and companies. In sum, patent licensing and secondary markets have long been a key part of America’s innovation economy since the early nineteenth century.

Keywords: Elias Howe, sewing machine, patent war, patent assertion entity, PAE, non practicing entity, NPE, patent agent, aggregator, manufacturing, Scientific American, Richard Posner, Zorina Khan, Kenneth Sokoloff, Naomi Lamoreaux, Dhanoos Sutthiphisal, Christopher Beauchamp

JEL Classification: K11