Bell was under incredible antitrust scrutiny already when they invented transistor. Fear of antitrust was the reason for semiconductor industry getting flying start. Not only in the US but also in Japan, Europe and elsewhere.
Imagine Bell getting patent and then manufacturing their own transistors with maybe 1-2 licensed manufacturers for next 25 years or so.
>In April 1952, over 100 representatives from 40 companies that had paid a $25,000 patent-licensing fee came for a nine-day Transistor Technology Symposium, including a visit to Western Electric's ultramodern transistor manufacturing plant in Allentown, PA. There were participants from such electronics titans as GE and RCA, as well as from then-small firms like Texas Instruments and Sony. Published by Bell Labs and subsequently by D. Van Nostrand in a revised edition, the proceedings of the first symposium - The Transistor fondly recognized as "Ma Bell's Cookbook" - became the bible of the dynamic semiconductor industry that emerged in the 1950s.
Antitrust historically exists because the market was working to well.
The first Antitrust act in the US was about local butcher being disrupted by 'centralized' slaughterhouses (refrigerated train cars). Antitrust was literally created to attempted to prevent that. This was on state level.
On the federal level mostly the same thing happened. It was a political tool and it was used by politicians who tried to defend the losing competitors against innovated companies.
Standard Oil is the poster-boy for 'look how great anti-trust is' but if you look at what politics was behind it its clear that the losers in the market were pushing it. Despite in reality Standard Oil simply standardizing and improving quality, using innovative logistics system and lowering prices.
Of course the losers were pushing it. They were losers because they couldn't compete against a company that controlled pricing and critical infrastructure across multiple strategic sectors - not just oil.
SO's "innovations" were mostly just efforts to game the system. The federal courts took a clear-eyed view on this and did not see it kindly.
> SO's "innovations" were mostly just efforts to game the system.
That a very reductive view on innovation. Most innovations are not some fancy new technology. They are new way to do deals and partnerships and improve overall process efficiently. That doesn't change the fact that they are real.
Interdicting standardized testing and quality control, is an innovation. Making deals with railroads to have an overall more efficient and cheaper distribution model is an innovation. The railroads agree to it as it allowed them to have higher utilization.
Would you say for example slaughter houses using refrigerated rail-cars is not a real innovation? Its just evil slaughter houses trying to 'game' the system?
At some point in time, doing things a certain way is just more efficient and those companies that can not adopt new processes will be less successful. Had all such innovations been prevented we would be much worse of overall.
Often it actually makes sense for most companies to go out of business, as for overall efficiency it doesn't really make sense to be differentiated into 100s of companies.
> The federal courts took a clear-eyed view on this and did not see it kindly.
No they didn't. Courts didn't create these laws, politicians did. And the enforcement was often very selective and politically driven.
The whole history of Anti-Trust went very strongly along with political interest in it until the 70s.
Anti-Trust lacked a clear definition and eventually the courts, lead by jurist Richard Posner, created a Anti-Trust definition that requires showing that consumers were harmed. Not only some vague accusations of 'market power'. Under that definition things like Standard Oil would not have gone threw.
> SO's "innovations" were mostly just efforts to game the system.
Rockefeller put together the trust in 1882. Within 3 years, the consumer cost of a gallon dropped 70%. If it was gaming the system, the consumers of oil were primary beneficiaries.
> clear-eyed view
Throughout the time of litigation of the anti-trust case against Standard Oil, SO was losing market share because Rockefeller's competitors had figured out to compete with him.
Standard Oil did things like demanding a kickback from railroads on oil shipments, including their competitors' shipments. That's quite a bit more than "simply standardizing and improving quality, using innovative logistics systems and lowering prices". That's flat-out unfair competition. (The railroads went along because of the threat of losing Standard Oil's shipments, which was a really large amount of business.)
I mean, yes, Standard Oil did do a fair amount of standardizing and improving quality, and innovative logistics, and lowering prices. It also did unfair competition.
I'm not sure the interpretation of the headline is the best here. Going from the abstract, this seems to be a compelling example of patents harming innovation.
The big picture story here is firstly to grant a patent to give Bell a monopoly on an idea. Then recognise that giving it a monopoly on an idea slows progress, so remove the monopoly.
If patents do exactly what they are intended to do, they damage periods of rapid, cheap progress. They allow the people who were there first to capture the value.
b) Patents allow separation of innovation from manufacturing.
> If patents do exactly what they are intended to do, they damage periods of rapid, cheap progress.
Maybe you are right, and George Washington and James Madison were wrong, but you need to make better argument considering all aspects, not just state your opinion as a fact.
To convince us from your viewpoint explain what Bell would have done differently without patents. Using only trade secrets. Would Bell Labs have done so extensive basic research? Secondly explain how you allow small inventors to exist without patent system.
To convince us from your viewpoint explain what Bell would have done differently without patents. Using only trade secrets. Would Bell Labs have done so extensive basic research? Secondly explain how you allow small inventors to exist without patent system.
Small inventors are already squished by the patent system, because they're used by larger players to squish inventors.
Plus, big players can basically start a lab and patent ALL the innovations and inventions. There's no guarantee that these corporations will commercialize the technologies for the benefit of humanity.
For example, 3D printing was stymied by initial innovators. It was only when expiration of patents that allowed the open source 3d printing ecosystem to flourish. In any case, we missed at least a decade of development in 3d printing technology.
Not as much as you think. They would be squished completely without patent system. Because current patent system is not perfect you are advocating something worse.
A small and micro entities can file patents very cheaply. In the US fees are cut 60 to 75 percent.
Without patents, you can't small or medium sized R&D companies that file patents would go extinct.
(Btw. I strongly favor mandatory licensing for patents. Mandatory licensing might be immediate or after a year or something).
>For example, 3D printing was stymied by initial innovators.
Can you make argument that it would not be stymied the same way or worse without patents (trade secret).
> How would you know that the patent system works better than nothing?
Comparative analysis between regiments and across the history. For crude overview, consider the US vs China.
Also see SpaceX case below.
Also my original point: separating manufacturing and innovation. Small inventor rarely is the same as manufacturer. Without patent, inventor has nothing to sell. They can only give away.
>Maybe you have to consider that an idea is fundamentally flawed in the first place.
I am. I'm researching and learning the subject and I am hoping good counterarguments. So far people just come up with ad hoc arguments on the spot. Normative and ideological blanket statements are not very good.
>SpaceX deliberately didn't patent their technologies, and yet they succeeded brilliantly.
yes: trade secrets.
SpaceX is interesting case and their reasoning is interesting. SpaceX has started filing patents (Starlink Project), but not very aggressively in their core rocket technology. They choose to keep their core technology trade secret. Their reason for keeping trade secrets is very interesting: “We have essentially no patents in SpaceX. Our primary long-term competition is in China. If we published patents, it would be farcical, because the Chinese would just use them as a recipe book.” – Elon Musk
Bureaucratic systems don't help the small inventors. Bureaucratic systems, without fail, are going to benefit people who can hire lots of lawyers. People with more lawyers and deeper pockets have a structural advantage in legal fights.
Sticking to the case study at hand, the patent system set up Bell to do a bunch of basic research, patent it, then lock out small competition. I'm cool if you're cool with that, but the antitrust isn't the reason growth was enabled, it was that the patent system was functioning as expected and the government disabled it.
When they wanted growth, they revoked the patents. Which is sensible. And revoking the patents allowed faster growth. You may not like how they treated Bell and changing the rules on half way through is indeed unfair, but them's the outcomes.
Also I have tried to get a patent for a silly thing I made. If I wanted the real deal and not patent pending it would cost like 10k minimum. A lo for a single person but nothing for a company.
> Maybe you are right, and George Washington and James Madison were wrong, but you need to make better argument considering all aspects, not just state your opinion as a fact.
The US constitution reads [The Congress shall have power] “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”
Sounds very similar to the “opinion” of the parent comment.
That reads to me as if the framers of the Constitution were in favor of patents* (limited time exclusive rights) as being supportive of progress in science and technology.
Are you arguing otherwise? (I can’t tell exactly what you’re referring to as “parent”.)
* (and copyright, but patents are the subject here)
By parent I’m referring to the comment you get to if you press the “parent” link on the comment I replied to.
To me it seems like
> If patents do exactly what they are intended to do, they damage periods of rapid, cheap progress.
is very much in line with the wording of the constitution. I guess in order to see that you have to also believe that monopolies hurt rapid, cheap progress. I think most reasonable people do.
Right. The question was parent link on your comment or parent link on parent link of your comment.
The counter argument is “if you can’t make a return on investment in innovation, you tend to get less investment in innovation”. Whether that return comes from monopoly in corporate behavior or legal protection from patents, somehow you want to allow some (but limited) profit to be made from investments in R&D.
You can't have clear idea of what what the constitution means without knowing what was the terminology and context when it was written.
George Washington and James Madison wrote and promoted patent system extensively outside what is written in the constitution. Examples: Madison Federalist No. 43 etc. President Washington called on Congress to create a patent system in the first the State of the Union address ever. It resulted the Patent Act of 1790.
When I worked for Avaya labs in the early 2000s, it was also well known internally that the split made more money. Hence the subsequent voluntary splits
Innovation can harm efficiency by creating needless competition which is wasteful.
That's why innovation should be in the hands of corporations. The government should introduce laws to require innovation permits to prevent wateful competition.
These permits should be expensive, that way only big corporations could afford them so that will ensure maximum efficiency.
It certainly does in EU countries. The political will is there. Maybe even too much of it sometimes, meaning that politicians expect antitrust regulators to object to market activity that regulators pretty clearly don‘t consider an issue.
The US government has mostly retreated from corporate oversight.
1) Mergers are often denied in the US, but once a company is large enough, there's no breakup.
The Bell breakup didn't really help, as some of the Baby Bells later merged into AT&T, though alernate equipment mfgs. and long-distance providers emerged.
2) The US govt. is reluctant to assess serious penalities against large companies because of the layoffs at Arthur Andersen in 2002 due to the Enron scandal.
Also, the SEC will only initiate cases where the trial is affordable and predictable, partly because of the Countrywide scandal where the founder had comparable resources to the US govt., and ended up settling. The case went on from 2008 to 2016.
(The SEC has actually sent letters to large companies asking them to not pay legal fees for executives - pretty desperate.)
3) As banks become bigger, they become "too big to fail." Wells Fargo should have been shutdown after admitting millions of counts of fraud against account holders in a systemic effort to increase fees to move their stock price.
> The Bell breakup didn't really help, as some of the Baby Bells later merged into AT&T, though alernate equipment mfgs. and long-distance providers emerged.
Breakups work when they separate a vertically integrated monopoly. You separate Unix from AT&T and it thrives. Netflix is better than Cable TV specifically because it isn't the cable company, and separating TV service from the last mile provider would be useful. In general, prohibiting a monopolist from operating in any vertical markets is useful, because it prevents the monopoly from being extended into the other markets.
The baby bells were separated horizontally -- and they each still had a regional phone monopoly. That doesn't work.
All those points could just as well explain how corporations have adapted to an otherwise consistently enforced set of oversight mechanisms and policies.
I don't disagree that the government has stepped back in many ways, but part of the problem (such as it is) is that the enforcement people ostensibly want would require far more dynamism from regulators, which is not something the American system is tuned for, especially at the federal level. Moreover, given the current political factionalism, we're increasingly less likely to see the necessary legislative dynamism. And finally, there's a creeping judicial activism that is beginning to upturn decades of administrative agency law, throwing a wrench into everything but on balance reducing agency flexibility even more. Just look at what happened to the Consumer Financial Protection Bureau.
I think the only practical way forward is to rely on individual states, permitting states like New York and California to extend their roles. But that, too, would require some acquiescence from all three branches of the Federal government to even approach the kinds of changes people seem to expect to see. Contemporary politics similarly disfavors that approach; in some ways even more vehemently--conservatives know that they would lose their obstructive powers, while liberals tend to only accept federal-level policies as legitimate and efficacious. For example, take the Federal Arbitration Act--conservatives would fight repeal tooth & nail, while liberals can't even contemplate the thought, preoccupied as they are with enacting positive regulations federally.
Imagine Bell getting patent and then manufacturing their own transistors with maybe 1-2 licensed manufacturers for next 25 years or so.
https://www.computerhistory.org/siliconengine/bell-labs-lice...
>In April 1952, over 100 representatives from 40 companies that had paid a $25,000 patent-licensing fee came for a nine-day Transistor Technology Symposium, including a visit to Western Electric's ultramodern transistor manufacturing plant in Allentown, PA. There were participants from such electronics titans as GE and RCA, as well as from then-small firms like Texas Instruments and Sony. Published by Bell Labs and subsequently by D. Van Nostrand in a revised edition, the proceedings of the first symposium - The Transistor fondly recognized as "Ma Bell's Cookbook" - became the bible of the dynamic semiconductor industry that emerged in the 1950s.