The Great Patent Grab

Abstract: From the late 1930s through the 1970s, the U.S. innovation economy operated under a weak property rights regime. Courts and regulators were largely unsympathetic toward patents and expansively interpreted antitrust constraints on patent licensing. This patent-skeptical climate was illustrated by a sequence of antitrust enforcement actions that resulted in the compulsory licensing of patent portfolios held by some of the largest U.S. firms. Concurrently, the federal government instituted an implicit compulsory licensing regime through the infusion of R&D funding into the private sector, accompanied by legal constraints on firms’ control over technology developed using those funds. The postwar period exhibited robust innovation for a substantial but limited period, followed by a noticeable slowdown commencing in the mid-1960s. R&D investment was concentrated among a small group of large firms that received extensive government funding, market concentration did not decline, and incumbents targeted by compulsory licensing orders mostly maintained their market positions. The postwar weak-IP regime may have skewed organizational structures for undertaking innovation and commercialization activities, necessitated substantial supplemental public funding, and does not provide a generalizable model of a self-sustaining innovation system.