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

Martin Watzinger | Zendy; Thomas Fackler | Zendy; Markus Nagler | Zendy; Monika Schnitzer | Zendy

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

Author(s) -

Martin Watzinger,

Thomas Fackler,

Markus Nagler,

Monika Schnitzer

Publication year - 2020

Publication title -

american economic journal economic policy

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.868

H-Index - 62

eISSN - 1945-7731

pISSN - 1945-774X

DOI - 10.1257/pol.20190086

Subject(s) - decree , license , lawsuit , consent decree , enforcement , business , law , law and economics , economics , political science

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. (JEL D45, K21, L12, L24, L63, O31, O34)

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