The Great Patent Grab

Abstract

Abstract From the late 1930s through the 1970s, the US innovation economy operated under a weak patent regime. This patent-skeptical climate was best illustrated by antitrust enforcement actions resulting in the compulsory licensing of leading US firms’ patent portfolios. Concurrently, the federal government instituted an implicit compulsory licensing regime through a dramatic infusion of R&D funding into the private sector, accompanied by constraints on firms’ legal exclusivity over technology developed using those funds. The US economy exhibited robust innovation activity for part of this period, followed by a slowdown commencing in the mid-1960s. During this period, R&D funding flowed mostly to large firms, market concentration remained high, and firms targeted by compulsory licensing generally maintained market leadership. The postwar regime of weak patents and public subsidies favored larger firms that could capture returns on innovation through vertically integrated structures and access to government funding. Case studies of two firms targeted by compulsory licensing suggest that this regime may have distorted organizational structures and the mix of innovation projects that were undertaken.

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