Compulsory Licensing and Innovation. Historical Evidence From German Patents After WWI
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.
Baten, Joerg, Nicola Bianchi and Petra Moser. 2017. Compulsory Licensing and Innovation. Historical Evidence From German Patents After WWI. Journal of Development Economics. 126: 231-242.