Abstract

In the early decades of the 20th century, newer technologies, along with war, depression, and the rise of big business, challenged the U.S. patent system. In particular, the radio industry existed in a state of constant litigation over conflicting patent claims, and patent concerns led directly to formation of the Radio Corporation of America (RCA), which became the dominant company in radio production. Almost from its founding after World War I, RCA drew charges of antitrust violations for the way it used patents to bolster its market position. In the late 1920s, the U.S. Department of Justice began an antitrust investigation of RCA and filed a lawsuit in 1930. The lawsuit, however, was settled in a negotiated agreement, a consent decree, before the case reached trial.
In this paper, I use the Department of Justice investigation and the consent decree as a window on the larger concerns about patents and the patent system, particularly as patents could become tools of illegal monopoly as well as the legal monopoly inherent in any patent. In 1919 and 1920, when General Electric, Westinghouse, and AT&T wrote up the patent cross-licensing agreements that accompanied the creation of RCA, they included several provisions that generated not only legal concern but also growing complaints from rivals in the radio industry. Indeed, during their investigation, the lawyers in the Department of Justice maintained a steady correspondence with a range of people in the radio industry, including lawyers who had done battle with the "Radio Trust." Reached after considerable negotiation and the ongoing threat of a full-blown trial, the consent decree required annulment or revision of many parts of the agreement among RCA and its partners. The consent decree also contained an international component, requiring RCA to modify its many foreign agreements, too, along similar lines.
As other scholars have noted, government regulators, as well as entrepreneurs, need to understand the nature of capitalism, competition, and markets in order to regulate. The correspondence and thinking of the Department of Justice lawyers reflected deep and often conflicted visions of "fair competition" in the depths of the Great Depression--and the consequent multiplicity of views on patents.