Centre for Development Economics
Department of Economics, Delhi School of Economics


Compulsory Licensing and Patent Protection: A North-South Perspective


Kamal Saggi

Vanderbilt University, Nashville

Tuesday,  21st October 2014 at 3:00 PM

Venue : Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited

In a stylized model involving two agents –a developing country (called South) and a foreign patent-holder –we analyze how the incidence and social value of compulsory licensing (CL) as a policy tool depends upon the South’s patent protection policy. We show that if the South is free to deny patent protection, not only does CL fail to arise in equilibrium, the option to use it makes both parties worse off. Furthermore, being able to use CL reduces the South’s incentive for patent protection. However, if the South is obligated to o¤er patent protection (say due to its membership in an international organization such as the WTO), CL occurs in equilibrium and can even make both parties better off. CL is more likely to occur if price is negotiated between the two parties compared to when it is set unilaterally by the patent-holder. If the South can impose a rice control, the patent-holder is willing to sell at a lower price if its patent is protected relative to when it is not. Thus, the ability to dictate price makes patent protection more attractive to the South while the option to use CL has the opposite effect.


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