Comment by Merrill | Hacker News Reader

Comment by Merrill | Hacker News Reader

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The Bell System, IBM and Xerox, which all had corporate research labs were all monopolies in effect - the Bell System by regulation and the '56 Consent Decree, IBM by overwhelming market dominance, and Xerox by patent protections. This gave all three corporations excess monopoly profits, some of which could be devoted to research. Although the antitrust suit against IBM was settled, it did modify IBM's behavior and it ultimately failed to compete well with mini and microcomputer companies. In Xerox case, the expiration of patents allowed competitors into the market.

Without a monopoly a corporation will find it very difficult to justify research that can be used by other businesses.

The transistor was a disaster for the Bell System. It was not particularly useful in the telephony system of the day, which used high voltages in tube transmission equipment and high, intermittent currents in electromagnetic switching equipment. On the other hand, the 1956 Consent Decree forced the Bell System out of other businesses (audio, computer, consumer electronics, etc.) and out of other countries (Canada, Caribbean). So the Bell System could not use it's new transistor to expand in the businesses where it fit, and having a fundamental patent on it exposed the Bell System to great anti-trust scrutiny and greater regulatory duress, such as the FCC Computer Inquiries.

>having a fundamental patent on it exposed the Bell System to great anti-trust scrutiny

I don't understand how this follows, having fundamental patents should lead to the breakup of basically every large US company by the government by this logic.

AT&T licensed the transistor to a number of companies, so even if the Bell system didn't have a use for the device (it did in fact, in order to reduce the size of telephone exchanges) so they derived revenue from the invention. How this translates into a 'disaster' for the Bell System is unclear since it was eventually broken up because of the decision that long distance and local service should be different markets long after the patent on the transistor had expired.

The argument is that, if I invent the Telephone 2.0, I can pretty confidently predict I won't be allowed to capture so much of the profit from it. This provides an incentive for companies to shift their R&D spending towards product development rather than foundational research.

If you invent anything related to cell phone standards and it gets adopted by whatever committee sets the standard, you can become a part of the patent pool, agree to license under FRAND and make money from your research.

Subsequent to '56, the prior transistor patents were royalty free, as were all Bell System patents prior to '56. Patents subsequent to '56 had to be licensed on a "reasonable" and "non-discriminatory" basis. So the patent output of Bell Labs was largely useful only for internal Bell System use, for leverage in cross-licensing agreement, and for a minimal royalty revenue compared with the value of the patents to other industries.

Long distance and local service are not really different markets from a customer point of view, at least no one thinks of them as such today. All calls have become flat-rate nationwide. They were different markets from a supplier point of view for a couple decades, since long distance required analog frequency division microwave transmission equipment that had to be engineered end-to-end and switching systems able to translate NPA and NNX into trunk group selections. The latter was expensive and distinguished "toll" from "local" switching systems. However, by the time of the breakup, digital fiber optics and large memory computer-controlled switches already were making those supplier distinctions rapidly obsolete.

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