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The FTC's Challenge to Intel's Cross-Licensing Practices

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  • Carl Shapiro

    (Haas School of Business, University of California, Berkeley)

Abstract

After an investigation lasting several months, in June 1998 the Federal Trade Commission brought an antitrust lawsuit against Intel Corporation based on Intel's conduct towards Intergraph, and similar conduct towards Digital Equipment Corporation and Compaq, all in the context of disputes where Intel was accused of patent infringement. The FTC charged that Intel's practices were an abuse of Intel's monopoly position in microprocessors. Is Intel's conduct anti-competitive and thus illegal under the antitrust laws? That is the central question explored in this paper. An introductory section provides some background for the case by discussing the tension between intellectual property rights and antitrust law, a tension that is evident in the FTC's dispute with Intel, and by describing the role of patents in the semiconductor industry. Section 3 provides a succinct summary of the facts surrounding Intel's conduct in each of the three patent disputes identified by the FTC. Section 4 explains the FTC's theory of how Intel's conduct was anti-competitive. Section 5 presents Intel's response. Section 6 describes the settlement reached between the FTC and Intel. The final section discusses legal and economic developments since the case was settled and remarks on the lasting implications of the Intel case.

Suggested Citation

  • Carl Shapiro, 2003. "The FTC's Challenge to Intel's Cross-Licensing Practices," Development and Comp Systems 0303006, EconWPA.
  • Handle: RePEc:wpa:wuwpdc:0303006
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    References listed on IDEAS

    as
    1. Gilbert, Richard & Tom, Willard K, 2001. "Is Innovation King at the Antitrust Agencies? The Intellectual Property Guidelines Five Years Later," Department of Economics, Working Paper Series qt4mf5t2bm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Kortum, Samuel & Lerner, Josh, 1998. "Stronger protection or technological revolution: what is behind the recent surge in patenting?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 247-304, June.
    3. Carl Shapiro, 2001. "Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard Setting," NBER Chapters,in: Innovation Policy and the Economy, Volume 1, pages 119-150 National Bureau of Economic Research, Inc.
    4. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    5. Richard Gilbert & Carl Shapiro, 1997. "Antitrust Issues in the Licensing of Intellectual Property: The Nine No-No's Meet the Nineties," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 283-349.
    6. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1988. "Appropriating the Returns from Industrial R&D," Cowles Foundation Discussion Papers 862, Cowles Foundation for Research in Economics, Yale University.
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    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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