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Proceedings of the National Academy of Sciences of the United States of America
of antitrust law.s The fact remains, however, that the courts cannot impose a duty to deal without inevitably delving into the terms and conditions on which the monopolist must deal.t This is a typically a hugely complex undertaking. The first case in the United States that ordered compulsory access, United States v. Terminal R.R. Ass’n, 224 U.S. 383 (1912) and 236 U.S. 194 (1915), required a return visit to the Supreme Court to wrestle with the terms and conditions that should govern such access (26).u The dimensions of access are typically so complex that ensuring equal access carries the burden of a regulatory proceeding. F.Warren-Boulton, J.Woodbury, G.Woroch (unpublished work) and P.Joskow (unpublished work) consider alternative institutional arrangements for markets with essential facilities, such as structural divestiture and common ownership of bottleneck facilities. However, none of these institutional alternatives is without significant transaction and governance costs that are difficult to address even in a regulated environment.
With specific reference to intellectual property, the future battleground over a firm’s obligation to deal with an actual or potential competitor is likely to concentrate in the domain of computer software. This is where competitive issues have surfaced, issues such as access to diagnostic tools that are necessary to service computers,v access to software for telecommunications switching,w and access to interface codes that are necessary to achieve interoperability.x This debate is more likely to focus on what is protect able under the copyright laws than on what protectable elements are candidates for compulsory licensing. In a utilitarian work such as software, it is particularly difficult to ascertain the boundaries between creative expression that is protectable under copyright law and other, functional, elements. Thus, it is more likely that essential facilities will give way to the prior issue of determining the scope of property over which firms may claim valid intellectual property rights. This seems the more sensible direction for public policy. Our analysis has not demonstrated a clear understanding of the conditions that lead to the conclusion that the owner of any type of property should, for reasons of economic efficiency, be compelled to share that property with others. A more productive channel of inquiry appears to us to focus on the types of products that justify intellectual property protection and the appropriate scope of that protection.
We are grateful for comments by Joe Farrell and seminar participants at the University of California at Berkeley.
Of course, many monopolists, such as local telephone companies, face price regulation, but not under antitrust law.
For example, in D&H Railway Co. v. Conrail, 902 F.2d 174 (2nd Cir. 1990), the Second Circuit Court of Appeals found that Conrail’s 800% increase in certain joint rates raised a genuine issue supporting a finding of unreasonable conduct amounting to a denial of access by Conrail. Compare this, however, with Laurel Sand & Gravel, Inc. v. CSX Transp., Inc., 924 F.2d 539 (4th Cir. 1991), in which the plaintiff, a shortline railroad, received an offer from CSX for trackage rights but alleged that the rate quoted was so high as to amount to a refusal to make those trackage rights available. The Fourth Circuit found on these facts that there could be no showing that the essential facility was indeed denied to the competitor.
The Terminal Railroad Association was a joint venture of companies that controlled the major bridges, railroad terminals, and ferries along a 100-mile stretch of the Mississippi River leading to St. Louis. Reiffen and Kleit (31) argue that the antitrust issue in Terminal R.R. was not the denial of access but rather the horizontal combination of competitors in the joint venture.
See, for example, Data General, discussed above, and Image Technical Services, Inc. v. Eastman Kodak Company, 504 U.S. 541 (1992).
The MCI case is an example.
See, for example, Atari Games Corp. v. Nintendo of America, Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990).
1. Nordhaus, W. (1969) Invention, Growth and Welfare: A Theoretical Treatment of Technological Change (MIT Press, Cambridge, MA).
2. Gilbert, R.J. & Shapiro, C. (1990) Rand J. Econ.21, 106–112.
3. Klemperer, P. (1990) Rand J. Econ.21, 113–130.
4. Kitch, E. (1977) J. Law Econ.20, 265–290.
5. Scotchmer, S. (1991) J. Econ. Perspect., Winter, 5, 29–41.
6. Scotchmer, S. & Green, J. (1990) Rand J. Econ.21, 131–146.
7. Merges, R.P. & Nelson, R.R. (1990) Columbia Law Rev.90, 839–916.