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Intellectual Property, Antitrust, and Strategic Behavior

In: Innovation Policy and the Economy, Volume 3

  • Dennis W. Carlton
  • Robert H. Gertner

Economic growth depends in large part on technological change. Laws governing intellectual property rights protect inventors from competition in order to create incentives for them to innovate. Antitrust laws constrain how a monopolist can act in order to maintain its monopoly in an attempt to foster competition. There is a fundamental tension between these two different types of laws. Attempts to adapt static antitrust analysis to a setting of dynamic R&D competition through the use of 'innovation markets' are likely to lead to error. Applying standard antitrust doctrines such as tying and exclusivity to R&D settings is likely to be complicated. Only detailed study of the industry of concern has the possibility of uncovering reliable relationships between innovation and industry behavior. One important form of competition, especially in certain network industries, is between open and closed systems. We have presented an example to illustrate how there is a tendency for systems to close even though an open system is socially more desirable. Rather than trying to use the antitrust laws to attack the maintenance of closed systems, an alternative approach would be to use intellectual property laws and regulations to promote open systems and the standard setting organizations that they require. Recognition that optimal policy toward R&D requires coordination between the antitrust and intellectual property laws is needed.

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This chapter was published in:
  • Adam B. Jaffe & Josh Lerner & Scott Stern, 2003. "Innovation Policy and the Economy, Volume 3," NBER Books, National Bureau of Economic Research, Inc, number jaff03-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10792.
    Handle: RePEc:nbr:nberch:10792
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.orgEmail:


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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    1. Dennis W. Carlton & Michael Waldman, 1998. "The Strategic Use Of Tying To Preserve And Create Market Power In Evolving Industries," University of Chicago - George G. Stigler Center for Study of Economy and State 145, Chicago - Center for Study of Economy and State.
    2. Michael Kremer, 1997. "Patent Buy-Outs: A Mechanism for Encouraging Innovation," NBER Working Papers 6304, National Bureau of Economic Research, Inc.
    3. Joseph Farrell and Garth Saloner., 1989. "Converters, Compatibility, and the Control of Interfaces," Economics Working Papers 89-130, University of California at Berkeley.
    4. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
    5. Economides, Nicholas & White, Lawrence J., 1994. "Networks and compatibility: Implications for antitrust," European Economic Review, Elsevier, vol. 38(3-4), pages 651-662, April.
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    7. David S. Evans & Richard Schmalensee, 2002. "Some Economic Aspects of Antitrust Analysis in Dynamically Competitive Industries," NBER Chapters, in: Innovation Policy and the Economy, Volume 2, pages 1-50 National Bureau of Economic Research, Inc.
    8. Charles I. Jones & John C. Williams, 1998. "Measuring The Social Return To R&D," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1119-1135, November.
    9. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
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    13. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
    14. Barry Nalebuff, 2000. "Competing Against Bundles," Yale School of Management Working Papers ysm157, Yale School of Management.
    15. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
    16. Dennis W. Carlton & Steven C. Salop, 1995. "You Keep On Knocking But You Can't Come In: Evaluating Restrictions On Access To Input Joint Ventures," University of Chicago - George G. Stigler Center for Study of Economy and State 111, Chicago - Center for Study of Economy and State.
    17. Tether, B. S., 1998. "Small and large firms: sources of unequal innovations?," Research Policy, Elsevier, vol. 27(7), pages 725-745, November.
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    19. Bronwyn H. Hall, 1987. "The Effect of Takeover Activity on Corporate Research and Development," NBER Working Papers 2191, National Bureau of Economic Research, Inc.
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