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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: For example, does the existence of strong patent laws encourage innovation? What proportion of innovations is patented? Is this share constant across industries and over time? How does patenting affect the diffusion of knowledge? How effective are prominent mechanisms, such as patent pools and compulsory licensing, that have been proposed to address problems with the patent system? This essay summarizes results of existing research and highlights promising areas for future research.

Historical accounts suggest that Jewish émigrés from Nazi Germany revolutionized US science. To analyze the émigrés' effects on chemical innovation in the United States, we compare changes in patenting by US inventors in research fields of émigrés with fields of other German chemists. Patenting by US inventors increased by 31 percent in émigré fields. Regressions which instrument for émigré fields with pre-1933 fields of dismissed German chemists confirm a substantial increase in US invention. Inventor-level data indicate that émigrés encouraged innovation by attracting new researchers to their fields, rather than by increasing the productivity of incumbent inventors.

A strong tradition in economic history, which relies primarily on qualitative evidence and statistical correlations, has emphasized the importance of patents as a primary driver of innovation. Recent improvements in empirical methodology-through the creation of new datasets and advances in identification-have produced research that challenges this traditional view. The findings of this literature provide a more nuanced view of the effects of intellectual property and suggest that when patent rights have been too broad or too strong, they have actually discouraged innovation. This review summarizes the major results from this research and presents open questions.

Patent pools have become a prominent mechanism to reduce litigation risks and facilitate the commercialization of new technologies. This article takes advantage of a window of regulatory tolerance under the New Deal to investigate the effects of pools that would form in the absence of effective antitrust. Differencein-differences regressions of patents and patent citations across 20 industries imply a 14% decline in patenting for each additional patent that is included in a pool. An analysis of the mechanism by which pools discourage innovation indicates that this decline is driven by technologies for which the creation of a pool weakened competition in R&D.

Research in psychology and medicine has linked mental health disorders, and particularly bipolar disorder (BD), to employment in creative professions. Little is known, however, about the mechanisms for this link, which could be due to biology (primarily through a person’s genes) or environmental (through socioeconomic status). Using administrative data on mental health diagnoses and occupations for the population of Denmark, we find that people with BD are more likely to be musicians than the population, but less likely to hold other creative jobs. Yet, we also show that healthy siblings of people with BD are significantly more likely to work in creative professions. Notably, people from wealthy families are consistently more likely to work in creative professions, and access to family wealth amplifies the likelihood that siblings of people with BD pursue creative occupations. Nevertheless, family wealth explains only a small share of the correlation between BD and creative employment.

Patent pools, which combine complementary patents of competing firms, are expected to increase overall welfare but potentially discourage innovation in substitutes for the pool technology. This article exploits a new historical data set on changes in patenting and firm entry for a clearly defined pool technology and substitutes in the 19th-century sewing machine industry. This analysis reveals a substantial increase in innovation for an—albeit technologically inferior—substitute technology. Historical evidence suggests that the creation of a pool-diverted innovation toward an inferior substitute technology by creating differential license fees and litigation risks.

Members of a patent pool agree to use a set of patents as if they were jointly owned by all members and license them as a package to other firms. This article uses the example of the first patent pool in U.S. history, the Sewing Machine Combination (1856–1877) to perform the first empirical test of the effects of a patent pool on innovation. Contrary to theoretical predictions, the sewing machine pool appears to have discouraged patenting and innovation, in particular for the members of the pool. Data on stitches per minute, an objectively quantifiable measure of innovation, confirm these findings.

Studies of innovation have focused on the effects of patent laws on the number of innovations, but have ignored effects on the direction of technological change. This paper introduces a new dataset of close to fifteen thousand innovations at the Crystal Palace World's Fair in 1851 and at the Centennial Exhibition in 1876 to examine the effects of patent laws on the direction of innovation. The paper tests the following argument: if innovative activity is motivated by expected profits, and if the effectiveness of patent protection varies across industries, then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective. Analyses of exhibition data for 12 countries in 1851 and 10 countries in 1876 indicate that inventors in countries without patent laws focused on a small set of industries where patents were less important, while innovation in countries with patent laws appears to be much more diversified. These findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries.

This paper introduces a unique historical data set of more than 8,000 British and American innovations at world’s fairs between 1851 and 1915 to explore the relationship between patents and innovations. The data indicate that the majority of innovations—89 percent of British exhibits in 1851—were not patented. Comparisons across British and U.S. data also show that patenting decisions were unresponsive to differences in patent laws. Cross-sectional evidence suggests that high-quality and urban exhibits were more likely to be patented. The most significant differences, however, occurred across industries: inventors were most likely to use patents in industries in which innovations are easy to reverse engineer and secrecy is ineffective relative to patents. In the late nineteenth century, scientific breakthroughs, including the publication of the periodic table, reduced the effectiveness of secrecy in the chemical industry. Difference-in-differences regressions suggest that this change resulted in a significant shift toward patenting.