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Industrial Organization: Contemporary Theory and Empirical Applications, 5th Edition by George Norman, Dan Richards, Lynne Pepall

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21

Patents and Patent Policy

In 1769, an English inventor, Richard Arkwright, patented a spinning frame that would revolutionize the production of cotton cloth. Two years later, in 1771, Englishman James Hargreaves introduced another invention, the spinning jenny. With these inventions, Britain entered the Industrial Revolution. Equally important, the inventions allowed Arkwright and Hargreaves to establish a commanding position in the production of cloths and, more generally, textile products. This allowed the inventors to reap large profits and to sell at a high price in the American colonies even after these became independent states.

The British energetically protected their monopoly position. Westbound ships out of London were searched thoroughly to make sure that no passenger was a former Arkwright or Hargeaves employee or had a copy of the design plans for the Arkwright–Hargreaves machines that firms outside of Britain might copy. Such restrictions along with the high textile price for British textiles vexed many Americans. Consumers did not like paying the monopoly prices and firms were eager to get some version of the machines that would permit them to compete with the British producers. Some firms offered “bounties” for English apprentices who would be able to obtain the necessary information. Finally, in 1789, an enterprising young Englishman and former Arkwright partner, Samuel Slater, responded to just such a bounty offer. After completely memorizing the engineering ...

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