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Innovation is very important for economic growth and, often, small start-ups are a key generator of innovation. For this, access to patents is essential for innovative start-ups. However, a few dominant companies often hold these patents in a market field and refuse to license their technology to others, as MONIKA SCHNITZER explains in this video. She has investigated whether antitrust measures, such as compulsory licensing, are an effective tool to deal with this problem. Using the 1956 consent decree as a case study, her team examined whether the compulsory licensing measures imposed on the Bell System – a monopolistic provider of telecommunications services in the United States in the 1950s – promoted follow-on innovation. Indeed, the researchers found that it worked in fields outside of telecommunications, but not so much inside Bell’s own market field. Analyzing the reasons for this, this empirical study demonstrates that compulsory licensing can be an effective antitrust remedy under certain conditions.
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How Antitrust Enforcement Can Spur Innovation: Bell Labs and the 1956 Consent Decree
CEPR Discussion Paper No. DP11793Published in 2017