Antitrust, Innovation, and Competitiveness

By Thomas M. Jorde; David J. Teece | Go to book overview
approach that seems best to balance the various concerns apt to be raised by such coordination. In this process consortia, joint ventures, and even mergers of firms with substantial current market shares in high technology industries can be judged to be conducive to dynamic efficiency--more so than in industries that are less driven technologically.
E. Antitrust policy should not exacerbate contractual problems in the dissemination of information. Firms should be permitted great latitude in their patent licensing policies in order to increase returns to innovative effort and facilitate dissemination. Consequently, licensing schemes employed by patent holders must not be subject to more stringent antitrust constraints than those that attach to exploitation of other property rights. Indeed, when the licensor is not vertically integrated into the downstream market, its choice of licensing scheme should be virtually free from antitrust scrutiny, with only two provisos: that the licensing scheme not erect undue barriers to entry into the upstream market; and that the license not be used as a collusion-facilitating mechanism in the downstream market.

The preceding discussion does not pretend to be a coherent and exhaustive program for the future directions of antitrust activities. It does, however, show that consideration of the connection between antitrust and the goals of static and intertemporal efficiency does suggest concrete directions that promise to contribute to the public welfare and which, at the very least, merit further and more careful examination.


NOTES

The authors are grateful to the C. V. Starr Center for Applied Economics at NYU for its support. They also want to thank Professor Joseph F. Brodley and other commentators, at the conference at which this paper was presented, for their very valuable comments. We obviously did not agree with all of these comments, but they all merited serious consideration, and certainly led to modifications in our text.

1.
The evidence on the relationship between firm size and innovativeness is inconclusive. The most plausible relationship is probably U-shaped. See Baldwin and Scott ( 1987).
2.
In this context, see, e.g., Ordover ( 1984), and Ordover and Baumol ( 1988) for a discussion of restrictions on patent licensing agreements.
3.
We leave for another occasion a more complete discussion of the idea of contestability in technology-driven industries.
4.
In offering this hypothesis we do not mean to imply that the antitrust agencies consider potential entry to be a constraint upon market power or monopolization that is as powerful as the actual presence of current competitors. We are merely speaking of the theoretical state of perfect contestability as the (unattainable) performance goal toward which the authorities implicitly aspire, given the impossibility of achievement and survival of any number of firms approaching that required for perfect competition in those realms where scale economies are present--the very realms that are most likely to attract the attention of those authorities.
5.
Thus, the 1969 dissolution plan worked out between the government and United Shoe still left the firm with one third of its market share. In the Alcoa case, structural remedy was not granted by the district court judge despite Alcoa's large share of domestically produced virgin ingot. See the classic article by Hale ( 1940), for a discus

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Antitrust, Innovation, and Competitiveness
Table of contents

Table of contents

  • Title Page iii
  • Preface vii
  • Notes viii
  • Contents ix
  • Contributors xi
  • 1 - Introduction 3
  • Notes 25
  • References 27
  • 2 - Antitrust Law as Industrial Policy: Should Judges and Juries Make It? 29
  • Notes 45
  • 3 - Innovation, Cooperation, and Antitrust 47
  • Notes 63
  • References 68
  • Appendix: National Cooperative Research and Commercialization Act (ncrca) 71
  • 4 - Antitrust: Source of Dynamic and Static Inefficiencies? 82
  • Notes 95
  • References 96
  • 5 - Agreements Between Competitors 98
  • Notes 114
  • 6 - Ignorance and Antithrust 119
  • Notes 132
  • 7 - Antitrust Lenses and the Uses of Transaction Cost Economics Reasoning 137
  • Notes 158
  • References 161
  • 8 - Monopoly Conduct, Especially Leveraging Power from One Product or Market to Another 165
  • 9 - Market Structure and Technical Advance: The Role of Patent Scope Decisions 185
  • Notes 219
  • 10 - Conclusion 233
  • Index 235
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