How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We study the 1956 consent decree against the Bell System to investigate whether patents held by a dominant firm are harmful for innovation and if so, whether compulsory licensing can provide an effective remedy. The consent decree settled an antitrust lawsuit that charged Bell with having foreclosed the market for telecommunications equipment. The decree forced Bell to license all its existing patents royalty-free. The compulsory licensing increased follow-on innovation building on Bell patents by 17%. This effect is driven mainly by young and small companies. Yet, innovation increased only outside the telecommunications equipment industry, suggesting that compulsory licensing without structural remedies is ineffective in ending market foreclosure. Terms of use: Documents inJEL-Codes: O300, O330, O340, K210, L400.

Science and research policy at the end of Moore’s law

“…The stringent requirements of military applications -for example, miniaturization of circuits, low power consumption and high reliability in rugged, high-temperature environments -served to elevate silicon over germanium as the industry's material of choice. Building on Bell Labs' core theoretical and technological advancements, subsequent contributions to the art of semiconductor manufacturing came from both large, established companies and small, young firms, which recent research indicates uniquely benefited from access to Bell Labs' technology made possible by the consent decree 5 . By the close of the 1950s, even as semiconductor shipments averaged annual growth rates of over 50%, some researchers began to project limits to progress in BJT transistors and their applications, at best two orders of magnitude away [6][7][8][9] .…”

Bargaining Failure and Freedom to Operate: Re-Evaluating the Effect of Patents on Cumulative Innovation

“…For these cases, our findings are in line with other studies that exploit large-scale variation in IP rights based on historic as well as more recent case studies. Moser and Voena (2012) and Watzinger et al (2017) Galasso and Schankerman (2015) obtain somewhat different results despite a similar identification strategy. In their regression results, the invalidation of patents in discrete technologies by the CAFC does not result in an increase of forward citations, while they do find such an effect for patents in complex technologies.…”

Innovation: Market Failures and Public Policies

“…unstudied. Two exceptions are Marshall and Parra (2019) and Watzinger, Fackler, Nagler, and Schnitzer (2020). The former considers how competition affects innovation when firms are competing both to invent and in the product market.…”