How antitrust enforcement can spur innovation: Bell Labs and the 1956 Consent Decree
There is growing concern that dominant companies use patents strategically to keep competitors from entering their market. This column uses the landmark 1956 Consent Decree against Bell Labs to explore whether antitrust enforcement is an effective remedy to the problem. Results show that patents can indeed be used as an entry barrier for start-up firms, and that the compulsory licensing of patents can foster market entry and innovation. However, compulsory licensing is found to be ineffective in markets where dominant firms have other means of market foreclosure.
Martin Watzinger, Thomas Fackler, Markus Nagler, and Monika Schnitzer