The patent system is built on the premise that patents provide an incentive for innovation by offering a limited monopoly to patentees. The inverse assumption that removing patent protection will hurt innovation has largely prevented the widespread use of compulsory licensing-the practice of allowing third parties to use patented inventions without patentee permission. In this Article, I empirically test this assumption. I compare rates of patenting and other measures of inventive activity before and after six compulsory licenses over drug patents issued in the 1980s and 1990s. As reported below, observe no uniform decline in innovation by companies affected by compulsory licenses and find very little evidence of a negative impact, which is consistent with earlier empirical work. While anecdotal, these findings suggest that the assertion that licensing categorically harms innovation is probably wrong. Based on the data, I comment on the use of compulsory licensing to reduce the price of AIDS and other drugs for developing countries. I suggest that, based on past experience, compulsory licenses need not result in a decline in innovation and that this policy option for increasing access to medicines deserves greater exploration.
18 Berkeley Tech. L. J. 853 (2003)