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

Working Paper No. 12-W05

Eric Bond and Kamal Saggi


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.

Keywords and Phrases: Patented Goods, Compulsory Licensing, Price Controls, Quality, Welfare.

JEL Classification Numbers: F13, F53, O34

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