Does Compulsory Licensing Discourage Invention? Evidence from German Patents after World War I

Authors: Joerg Baten, Nicola Bianchi, and Petra Moser

Abstract: This paper investigates whether compulsory licensing – which allows governments to license patents without the consent of patent-owners – discourages invention. Our analysis exploits new historical data on German patents to examine the effects of compulsory licensing under the US Trading-with-the-Enemy Act on invention in Germany. We find that compulsory licensing was associated with a 28 percent increase in invention. Historical evidence indicates that, as a result of war-related demands, fields with licensing were negatively selected, so OLS estimates may underestimate the positive effects of compulsory licensing on future inventions.

Citation: Baten, Joerg and Bianchi, Nicola and Moser, Petra, Does Compulsory Licensing Discourage Invention? Evidence From German Patents After WWI (June 4, 2015).

Full paper on SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2417532

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