Compulsory licensing, price controls, and access to patented foreign products

Posted by D. Daniel Sokol

Eric Bond (Department of Economics, Vanderbilt University) and Kamal Saggi (Department of Economics, Vanderbilt University) analyze Compulsory licensing, price controls, and access to patented foreign products.

ABSTRACT: Motivated by existing multilateral rules regarding intellectual property, we develop a North-South model to highlight the dual roles price controls and compulsory licensing play in determining Southern access to a patented Northern product. The Northern patent-holder chooses whether and how to work its patent in the South (either via entry or voluntarily licensing) while the South determines the price control and whether to issue a compulsory license. The threat of compulsory licensing benefits the South and also increases global welfare when the North-South technology gap is significant. The price control and compulsory licensing are complementary instruments from the Southern perspective.