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

Author

Listed:
  • Watzinger, Martin
  • Fackler, Thomas A.
  • Nagler, Markus
  • Schnitzer, Monika

Abstract

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.

Suggested Citation

  • Watzinger, Martin & Fackler, Thomas A. & Nagler, Markus & Schnitzer, Monika, 2020. "How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree," Munich Reprints in Economics 84713, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:84713
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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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