Hanlon and Jaworski, 2022, Effects of patent protection

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Walter Hanlon; Taylor Jaworski. Spillover effects of IP protection in the inter-war aircraft industry. NBER working paper 26490. Nov 2019. 76 pages. Published version, 2022: Economic Journal, 132:645, pp 1824-1851, [1]

The version presented at WAEH was dated March 20, 2019, and these notes come from that version, with >60 pages. An earlier version is linked from here.

In the U.S., "Airframe designs had little IP protection before 1926" in the U.S. but a legal change then gave "airframe manufacturers with enhanced property rights over the new designs they produced. We show that [this] increased innovation in airframes, but slowed down innovation in aero-engines, a complementary good . . ."[1] Airframes made in the U.S. improved more slowly than in comparison countries before 1926 and faster than in those countries afterward; and they show performance improvements of new U.S.-made aero-engines went slowly after 1926 (and possibly in other countries too.) (page 2-3)

Again: patent protection for airframes increased the rate of innovation/improvement for airframes, but lowered it for aero engines which are complementary.

The data appears to be U.S. only, for military aircraft only, from 1919-1938.

They have a substantial and detailed list of U.S. aero-engine makers as of 1920, worth citing to more completely cover the subject here.

Advance overall in typical military aircraft (from page 1):

  • As of 1920, "a single-engine biplane made of wood and fabric with a top speed of 150 miles per hour."
  • "By the late 1930s, . . . [an] all-metal monoplane aircraft with up to four engines and top speeds exceeding 300 miles per hour."

Effect of MAA patent pool: (page 1)

  • As of 1920, "American airframe producers had essentially no intellectual property rights over new designs of military aircraft. For example, when the Glenn L. Martin Company designed the MB-3 bomber and the War Department decided to purchase 200 versions of this plane, the production contract was put out for competitive bidding and the contract was won by Curtiss, Martins's competitor. . . [T]his environment provided little incentive for firms to produce new designs. Under pressure from the military and aircraft producers, Congress altered this policy in 1926 so that a firm that produced a new design accepted by the military also ended up with the production order for that design."
  • Throughout the period engine producers had IP (patent) rights; it is implied they were not much affected by the MAA patent pool. (pages 1-2)
  • a colleague suggests to me that the MAA only affected military planes; need to check on that.

Combinations of airframes and aero-engines: (page 1)

  • At that time, and now, these elements were purchased separately and produced by different companies, because they are made in completely different ways.

The authors gathered or calculated data measuring airframe properties and performance: wing load, gross weight per wing area. For aero engines: hp per unit of engine displacement. Thus they measure innovation, or improvement in the two categories of technology.

Separation of countries for military acquisition: "In each country, the military purchased aircraft and engines almost exclusively from domestic producers" which faced "different institutional environments."

They put together histories of companies in these industries, and show that mergers between military airframe makers and aero-engine makers increased in this time in the U.S but not in other countries and not for civilian aircraft, consistent with the proposition that patent protection added market control value to the airframe companies.

In the MAA, "firms outside the [patent pool] had free access to the pool patents when working on government contracts", including military ones. (page 5) The MAA eliminated the earlier ability of airframe manufacturers to exercise control with patents. (p6) The patent pool was formed to overcome disputes and patent blocking between the Wright (Wright-Martin) and Curtiss companies notably for aileron/control patents and increase production during wartime. The "Wright [company] held the most important patent and [resisted joining] the pool but was essentially forced to join by the government." The government used its monopsony power and also passed a new law that would have "condemned" (nationalized) the patents. (Sources: page 6 here, Bigglingmayer 1988; Katznelson and Howells, 2014) "The pool covered aircraft structural technology but not engines or instruments. (page 6)

The authors cite I.B. Holley (1964) on U.S. military aircraft purchases in and after WWI. Profits were enormous; there was a public backlash against this; Congress responded by requiring military aircraft procurement to be done by competitive bidding after the war until the 1926 reform. The main production orders, $19 million of the $22 million spent by the U.S. military on aircraft from 1920 to 1924, was allocated by competitive bidding. Only the remaining $3 million was spent on negotiated contracts for experimental designs. (page 6 here; Holley 1964, pp 83-84)

From appendix A, the UK aircraft industry
  • "The UK aircraft industry had a slow start." Government demand was minimal before WWI, and private demand was small. The Air Ministry and Royal Air Force were founded in 1917. Demand fell sharply after WWI. Many aircraft manufacturers went under or merged. "In 1924, only 503 airframes were produced" in Britain. (p42)
  • The Air Ministry arranged "ring system" of airframe and aero-engine producers which kept them afloat; this seems to refer to allocating contracts to a few firms and to rotate among them so they all survived. It forced them to standardize some, and they tended not to innovate only cautiously in this environment. (p42)
  • Boom in rearmament starting mid-1930s lifted the British firms (p43)
  • The two main centers of govt research on aircraft were the National Physical Laboratory (NPL) at Teddington, and the Royal Aeronautical Establishment (RAE) at Farnborough. "The NPL operated a wind tunnel and was active in aerodynamic testing" and the RAE "focused on testing components such as engines and propellers." (p43)
From appendix A, the Japanese aircraft industry
  • Drawn largely from Mikesh and Abe (1990) -- just ordered this book
  • The major aircraft producers were Mitsubishi, Kawasaki, and Nakajima. They all began during WWI. Mitsubishi and Kawasaki were part of large conglomerates; Nakajima was not, and was "independent." "A French delegation in 19191 trained pilots for the Japanese Army and introduced French Bréguet, Salmson, Nieuport, Caudron, and SPAD aircraft." A 1921 British delegation trained Japanese naval aviators, bringing Avro, Short, Gloster, Sopwith, Blackburn, and Supermarine aircraft. There was other interchange of technical people with other countries, but mainly FR, GB, DE, and US. "The first wind tunnel in Japan" was set up in 1921. (page 43)
  • In the 1920s Kawasaki licensed a design for engines from BMW. Much other interchange with Europe.
French aircraft industry
  • sources: Chapman (1991) and Higham (2003)
  • French military air arm was the largest in the world and the industry was at the top technologically (p44)
  • It employed around 200K workers near the end of the war, but just 5200 in 1920. Cites Chapman, (1991) on this.
  • Chapman reports there were 23 airframe-makers in France in the late 1920s, notably Bréguet, Potez, Farman, and Liore et Olivier. There were 10 aero engine producers, notably Hispano-Suiza and Gnome-Rhône. (p44)
  • In the 1920s most demand came from the military, and as in Britain the military spread the orders around, "sharing" them, to keep manufacturers going. It meant orders were small but the firms survived. The manufacturers tended not to adopt modern mass production methods, instead using craft methods. (p44)
  • The government started an Air Ministry in 1928 "to manage the industry." (p44)
U.S. military demand
  • Generally the U.S. military would choose advanced aircraft, that is, those at the technological frontier. Congressional evaluators tended to want to have more aircraft and thus put pressure perhaps indirectly, to buy cheaper older ones, but this did not usually happen. (p28, citing Holley, 1964, p76)
NACA in US
  • NACA was founded in 1915, modeled on aeronautical research centers in GB and FR mainly. It focused on basic research, leaving testing and improving aircraft to the Army and Navy. For more see Bilstein, 1989 (p46) and Rowland, 1985
  • NACA employed research engineers at Langley airfield in Virginia in the early 1920s; Bilstein said there were 100 in 1925.[2] "NACA constructed a small variable density wind tunnel" there which began operating in 1922. By 1925 the Langley operation included an experimental engine lab and 19 test aircraft. (p46) A propeller research wind tunnel started in 1927 and a "full scale" wind tunnel in 1931.
  • Shows the NACA budget from 1922-1936! about $200K/year in 1922 and increasing slowly (p46-47)
  • cites many sources, pages 46-48
measures of airframe performance
  • wing load ; cruising speed; take-off climb rate; range; altitude ceiling; maximum speed. The authors find that these performance measures were strongly correlated. (p49-50)
  • shows estimates of wing load levels 1918-1920 for French-made military aircraft, page 61
Firms identified as of 1920, from pages 58-59
  • US: Wright/Curtiss-Wright; Lawrence -- these make military aero-engines
  • US: Aero-marine and Curtiss, which were "integrated firms"
  • US: Allison (GM) and Packard were "affiliates of auto companies"
  • US: Hall-Scott was "unaffiliated"
  • UK engine producers: ABC; ADC; Napier; Bentley; Rolls-Royce; Sunbeam; Wollsley; Armstrong-Siddeley
  • UK integrated: Beardmore; Bristol; de Havilland
  • US airframe makers: Blackburn/General Air.; Gloucester; Hawker; Armstrong; Vickers; Supermarine; Avro; Fairey; Handley-Page; Martinsyde Ltd.; Nieuport; Parnell & Sons; Sort; Westland

From another table of firms on page 36 (Fig 3):

  • engine producers: Wright Aeronautical
Airframe makers

References

  1. ↑ Abstract, on page 0
  2. ↑ Bilstein, 1989


Original title Spillover effects of IP protection in the inter-war aircraft industry
Simple title Effects of U.S. patent protection for airframes, 1919-1938
Authors Walter Hanlon, Taylor Jaworski
Date November 2019
Countries US
Languages en
Keywords
Journal Working paper
Related to aircraft? 1
Page count 63?
Word count
Wikidata id
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