|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.
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.
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).
In this context, see, e.g., Ordover ( 1984), and Ordover and Baumol ( 1988) for a
discussion of restrictions on patent licensing agreements.
We leave for another occasion a more complete discussion of the idea of contestability
in technology-driven industries.
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.
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-