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

62 Pages Posted: 23 Mar 2017

See all articles by Martin Watzinger

Martin Watzinger

Ludwig Maximilian University of Munich (LMU)

Thomas A. Fackler

Ludwig Maximilian University of Munich (LMU)

Markus Nagler

Ludwig Maximilian University of Munich (LMU)

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 27, 2017

Abstract

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.

Keywords: innovation, antitrust, intellectual property, compulsory licensing

JEL Classification: O300, O330, O340, K210, L400

Suggested Citation

Watzinger, Martin and Fackler, Thomas A. and Nagler, Markus and Schnitzer, Monika, How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree (February 27, 2017). CESifo Working Paper Series No. 6351. Available at SSRN: https://ssrn.com/abstract=2938960

Martin Watzinger

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Thomas A. Fackler

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Markus Nagler

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Monika Schnitzer (Contact Author)

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
67
Abstract Views
466
rank
360,733
PlumX Metrics