Patent Laws and Innovation: Evidence from Economic History

What is the optimal system of intellectual property rights to encourage innovation? Empirical evidence from economic history can help to inform important policy questions that have been difficult to answer with modern data: 1) Does the existence of strong patent laws encourage innovation? And 2) May patent laws influence the direction -as opposed to the rate -of technical change? Economic history can also help to shed light on the effectiveness of policy tools that are intended to address problems with the current patent system: 3) How do patent pools, as a mechanism to mitigate litigation risks, influence the creation of new technologies? 4) Will compulsory licensing, as a mechanism to improve access to essential innovations in developing countries, discourage innovation in the developing countries? This essay summarizes results of existing research and highlights promising areas for future research.