Is compulsory licensing an effective antitrust remedy to increase innovation? To answer this question, we analyze the 1956 consent decree that settled an antitrust lawsuit against Bell, a vertically integrated monopolist charged with foreclosing the telecommunications equipment market. Bell was forced to license all its existing patents royalty-free, including those not related to telecommunications. We identify the effect of the consent decree on follow-on innovations building on Bell patents by using exactly matched non-Bell patents as control group. We show that the consent decree led to a lasting increase in innovation but only in markets outside the telecommunications sector.
Watzinger, Martin, Thomas A. Fackler, Markus Nagler, and Monika Schnitzer.
"How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree."
American Economic Journal: Economic Policy,
Monopoly; Monopolization Strategies
Contracting Out; Joint Ventures; Technology Licensing
Microelectronics; Computers; Communications Equipment
Innovation and Invention: Processes and Incentives
Intellectual Property and Intellectual Capital