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17 N.Y.U. L. Q. Rev. 406 (1939-1940)
The Economics of American Patent Law Part II

handle is hein.journals/nylr17 and id is 414 raw text is: THE ECONOMICS OF AMERICAN PATENT LAW Part II MORRIS D. FORKOSCH x THE monopolists' primary desire is to control the output of a commodity for which there is an effective demand and thus fix prices at will, subject only to consumer reaction.280 Competition of sub- stitutes is a threat, but within the field of his demand, he rules un- disturbed. Patents, as an absolute legal monopoly, are strikingly effective for such production control and price fixing,28' and even if allegedly not so used, the power nevertheless exists.282 This power policy maintains a price but is claimed to be wielded solely to pre- vent the ruinous competition'283 of actual loss sales.284 This direct price fixing through a patent monopoly is equalled by the indirect price fixing through patent improvements or sub- stitutes which, through cheaper costs, threaten large and small capital investments. General Motors, for example, would be in a very bad position if a competitor suddenly appeared with a revo- lutionary improvement or invention;285 the little man is subject to a host of other extreme pressures as well as this. The disruption of industry and the dislocation of employment caused by this sud- 2SoCarman F. Randolph, Federal Trust Legislation, POL. SCL Q. (p. 623, Dec., 1897). See also TNEC 275/2, Supp. 8/1, 517/1. 281EDWni' J. PMIDLw, PATENTS AS A FACTOR 3N MAwurAcrumxG (N. Y., Eni- neering Press, 1908), p. 14ff. See also the argument before the House Comm. on Patents to amend §§ 4886 and 4887, (H. R. 8102, House 59:1) on May 16, 1906, at p. 4. Cf. however TNEC 156/1, and argument of the unimportance of patents in natural monopolies (486/1-2) as against others (213/1, 511/2) especially during the introduction stage (445/3). With respect to cartelization see 505/1. 282TNEC 215/3, 210/3. See also the statement of Mr. Farnsworth, of tele- vision, that: There is no attempt to fix prices. Rates are made small because we believe in that, and there is no restriction in an attempt to control the industry. (498/2) But if they did not believe in that? See further 260/2, the testimony of Smith, of the glass industry, as digested by the Chairman, that the purpose of managing the patents was to prevent the ups and downs in the industry, to prevent depressions... !' Also 259/1. 2831bid. 213/3, 260/2, 448/2, 518/2. 284Ibid. 210/3, 287/1, where prices over a seventeen-year period are set forth which, subject to certain qualifications, reveal a remarkable steadiness and inflex- i bility. Since steel, etc. are not included in this analysis, figures thereof are not given here but judicial knowledge of other such extraordinary inflexibilities is presumed. 285Ibid. 154/1 Imaged with the Permission of N.Y.U. Law Review

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