Abstract: The Unintended and Enduring Consequences of Antitrust Enforcement on Knowledge-Dependent Companies, 1938-1982

Margaret B. W. Graham


From 1938, when he was appointed head of the Antitrust Division of the Justice Department, to 1943 when he accepted an appointment to the Federal Court of Appeals, Thurman Arnold carried out a startlingly effective enforcement campaign against numerous industries that he deemed to be either inhibiting the flow of goods at reasonable prices to consumers or hurting the war effort by colluding with foreign cartels to restrict the flow of technology. Scholars remain divided as to whether his vigorous and innovative enforcement program reflected a change of economic policy away from planning and toward competition on the part of Franklin Roosevelt. Either way, Arnold left a lasting legacy that endured in the Justice Department for more than a generation, and part of that legacy was a new emphasis on the misuse of patents and on ways to control their misuse. One of the key features of Arnold's program was to come down hard on the practices of technology sharing, especially international technology sharing, that had previously been widely tolerated on the grounds that companies needed scale to conduct expensive Research and Development. Certainly the companies that signed consent decrees and paid unprecedented fines did get the point that they would no longer be able to withhold key technologies from competitors; nor would they be permitted to use their control of certain patents to divide up markets, nationally or internationally.