"Fundamental Patents, Industry Control, and the Rise of the Giant American Corporation"

This paper seeks to explore the role of “fundamental”, or “broad” patents in the genesis of the U.S. corporation during the late nineteenth and early twentieth centuries. While the restriction of competition is widely regarded as having been an important motive behind the rise of the modern American corporation, the processes by which this was achieved are not fully explored - partly owing to limited availability of data for many companies and sectors (compounded by anti-trust concerns). In particular, the key importance of industry control through “fundamental” or “broad” patents, remains a neglected area of research.
“Broad” or “fundamental” patents protect technology essential to the production of a viable product and can thus potentially block or control competition. We examine the importance of control over fundamental patents and restrictive practices underpinned by patent licensing (or exclusivity), to the creation of monopoly power and the growth of giant corporations. We use evidence from the House of Representatives’ “Oldfield hearings” before the Committee on Patents (1912) and a series of investigations conducted by the Federal Trade Commission (FTC) from 1921 to 1925. Both sources provide detailed information regarding patent pools and patent licensing; key companies and industry structure; and trade associations. Moreover, the ‘Oldfield hearings’ and the FTC reports had the power to subpoena witness testimony and thus shed rare light on the presence and nature of anti-competitive practices.
Our paper, which is still in progress, surveys the sectors covered by the Oldfield Hearings and the FTC reports, i.e. household durables. We will also provide a detailed analysis of a number of case-study sectors, selected to show typical ways by which patents could be used to restrict competition and corporate control was implemented – such as market sharing agreements; price controls; product characteristics controls; and restrictions on distribution methods.