(NAS Colloquium) Science, Technology and the Economy (1996) / Chapter Skim
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An economic analysis of unilateral refusals to license intellectual property
An economic analysis of unilateral refusals to license intellectual property
Pages 95-101
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From page 95... ...
However, the antitrust laws constrain the use of property, including intellectual property, by a firm with market power and may place limitations on the licensing of intellectual property. This paper focuses on one aspect of antitrust law, the so-called "essential facilities doctrine," which may impose a duty upon firms controlling an "essential facility" to make that facility available to their rivals.
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From page 96... ...
This paper focuses on one aspect of antitrust law, the so-called "essential facilities doctrine," which may impose a duty upon firms controlling an "essential facility" to make that facility available to their rivals. The essential facilities doctrine has profound consequences for intellectual property protection and for competition in markets where firms own important inputs that are protected by patent, copyright, or trade secret.
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From page 97... ...
(25~. Firms 1 and 2 compete to sell a homogeneous product with initial constant marginal costs al and a2 and zero fixed costs.
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From page 98... ...
In the Nash-Cournot case with constant marginal costs, if licensing is privately rational, it is also welfare-enhancing. Licensing is privately rational when it increases industry profits.
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From page 99... ...
effect pays firm 2 to exit the industry.r In more general circumstances with increasing marginal costs, both firms may produce at positive levels in a coordinated licensing arrangement. A joint profit-maximizing license may increase economic welfare in the short run by achieving more efficient production.
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From page 100... ...
The court's analysis in Data General failed to address the central economic question, which is whether a policy that requires Data General to license its software to independent service organizations would enhance economic welfare. Moreover, a focus on preserving the competitive process raises obvious difficulties that have been emphasized by several authors.
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From page 101... ...
consider alternative institutional arrangements for markets with essential facilities, such as structural divestiture and common ownership of bottlenecl: facilities. However none of these institutional alternatives is without significant transaction and governance costs that are difficult to address even in a regulated environment.
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