Panel Discussion on Technological Innovation, International Trade and Competition Policy

The Japan Fair Trade Commission, 50th Anniversary Symposium

Tokyo, Japan

Date:
By: 
Mary L. Azcuenaga, Former Commissioner

The views expressed are those of the commissioner and do not necessarily reflect those of the Federal Trade Commission or any other commissioner.

I am delighted to be here with you this morning to help celebrate the 50th Anniversary of the passage of Japan's Antimonopoly Act and of the establishment of the Fair Trade Commission of Japan. It is a special pleasure that my first visit to Japan should come on such an auspicious occasion. As a courtesy to my colleagues on the Federal Trade Commission, I would like to note that the views I express here today are my own and not necessarily those of the Commission or any other Commissioner. But I am confident that I speak for all my colleagues on the Commission in conveying our warm congratulations and best wishes for the future of the Fair Trade Commission of Japan.

Like my agency, the Federal Trade Commission, the JFTC belongs to the older generation of competition authorities.(1) The Act of April 14, 1947, Concerning Prohibition of Private Monopoly and Maintenance of Fair Trade is one of the world's oldest competition laws.(2)Our hosts can look back on a long history of accomplishments, and in the years ahead, I anticipate that the JFTC will play an increasingly important role in the Japanese economy. The Japanese Diet recognized the JFTC's significance in June of last year, when it elevated the Fair Trade Commission from an Executive Office (Jimu-Kyoku) to General Secretariat (Jimu-Sokyoku).(3)

This panel on "Technological Innovation, International Trade, and Competition Policy" is particularly appropriate in light of the advances in technology in the last 50 years. In that time, transportation and communication technologies have changed in ways and by means that once were unimaginable, even to writers of science fiction. And what else but technology can explain the fact that trade has continually grown faster than the global economy? Since 1960, world exports have grown at an annual rate of 6.1 percent a year, while the world's output of goods and services grew at only 3.8 percent.(4) Growth rates tell one part of the story, but the absolute numbers are also staggering. In 1960, total world exports amounted to $620 billion, in 1995 dollars.(5) In 1995, the total world-wide trade in merchandise had skyrocketed to $4.9 trillion and trade in services reached $1.2 trillion.(6)

The growth in trade over the last 50 years has been remarkable, but equally remarkable has been the shift in the products produced by our economies. According to a recent study, the products of digital technology -- computing services, telecommunications, and consumer electronic products -- now constitute the largest industry in the United States, ahead of construction, food products, and automotive manufacturing. In 1996, digital technology businesses generated 6.2 percent of the nation's output of goods and services and employed nearly 4.3 million people. Sales in the field grew in the first six years of the 1990s by 57 percent, to a total value of $866 billion.(7)

Nothing embodies the transformations being wrought by digital electronic technology more than the Internet. Last summer, President Clinton announced the "Framework for Global Electronic Commerce," which outlines the U.S. Government's program for fostering increased business and consumer use of electronic networks for commerce. Naturally, the document can be downloaded from the World Wide Web.(8) As the Framework makes clear, the United States is committed to competitive markets and therefore will be advocating in the World Trade Organization (WTO) and other international fora that the Internet be declared a tariff-free environment whenever it is used in the sale of products or services.

Patent systems that encourage and protect patentable inventions are important to the success of technological innovations. The Uruguay Round of trade negotiations brought a new international standard to intellectual property protection. The traditional intellectual property treaties incorporated minimum standards of protection that had to be satisfied by a member nation's intellectual property system. The new Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) establishes more stringent standards.(9)

The Information Technology Agreement (or "ITA") concluded by members of the WTO in March 1997, should lead to the removal of tariffs on almost all types of information technology.(10) Building on this success, the Administration has announced that it is developing plans for ITA II, in which it will seek to remove remaining tariffs and non-tariff barriers to trade in information technology goods and services.

The exponential growth both in technology-facilitated trade and investment and in new high-tech products has required those of us responsible for enforcing competition laws to recognize that we really are operating in a different world. It is a world in which, increasingly, the valuable products and assets of businesses are innovations. Innovative firms in fields as diverse as computers, software, pharmaceuticals, aerospace, and biotechnology generate wealth and employment opportunities by developing new products and new ideas. The companies in these industries range from small research boutiques to giant multinational corporations, but all depend importantly on laws that protect competitive markets in which innovators can profit from their ideas and inventions.

To approach the broad topic of this morning's session, I plan to speak about what I know best -- the way we approach these issues in the United States. In the United States, the intellectual property statutes secure for limited times to authors and inventors the exclusive right to their respective writings and discoveries. A second set of statutes, the antitrust laws, ensure that markets are open and competitive. Both the competition policies in the antitrust laws and the intellectual property statutes seek to foster an economic environment that is conducive to technological change and innovation. Antitrust enforcement permits innovators to exploit the value of their inventions by eliminating private restraints of trade that bar new entry into markets or diminish rivalry. Antitrust enforcement should complement the value embodied in an intellectual property right.

In recent years the claim has been made that antitrust is irrelevant to high-tech industries and that antitrust enforcement agencies should step aside to permit innovators to innovate. Implicitly, this position assumes that high-tech markets are competitive, a precondition for innovators to profit from their efforts. But anticompetitive conduct can and does occur in high-tech markets, and antitrust enforcement can and does extend beyond traditional so-called smokestack industries to markets characterized by technology and innovation. One strength of antitrust analysis in the United States, I think, is that we devote substantial time and effort to learning how particular markets work and do not apply rote formulas to every case. Instead, we engage in highly fact-intensive analysis that takes into account the variations in new situations.

In the United States, our antitrust analysis generally falls into one of three separate forms of inquiry: (1) determining whether an agreement constitutes a restraint of trade; (2) determining whether a firm is monopolizing or attempting to monopolize a market; or (3) determining whether a merger or acquisition is likely substantially to lessen competition. Although our antitrust doctrines were developed in conjunction with more traditional markets, each of these three broad areas of antitrust analysis applies to present day, high-tech, innovative industries.

Antitrust issues involving joint ventures or licensing intellectual property are likely to arise in connection with companies in innovative markets. Some licenses to intellectual property constitute agreements in restraint of trade. The Department of Justice and Federal Trade Commission in April 1995 adopted the "Antitrust Guidelines for the Licensing of Intellectual Property," which describes our analysis of intellectual property licensing. Without delving into the arcane specifics of this analysis, a general observation is that most such agreements are analyzed under the rule of reason, which entails an evaluation whether the licensing agreement is likely to have any anticompetitive effect, and if so, whether the agreement is needed to achieve procompetitive benefits that outweigh the anticompetitive effects.

Companies in innovative industries may need to assemble technologies or resources from a number of sources in order to bring a project to fruition. To accomplish this, they may team up with one or more other firms. Such an endeavor can take a variety of forms, such as a joint venture or a strategic alliance. Research joint ventures also are generally analyzed under the rule of reason.(11) As in the analysis of licensing, this entails an examination whether the agreement is likely to have anticompetitive effects in any relevant market, and if so, whether it is reasonably needed to achieve procompetitive benefits that outweigh the anticompetitive effects.

Although the licensing of intellectual property and formation of joint ventures are important subjects that merit full discussion, the antitrust analysis of licensing is described in the guidelines, and the Commission is currently reexamining joint venture analysis through a series of hearings and round table discussions. So today, I would like to take up in more detail some theories that may arise in monopolization cases in high-tech industries. The offense of monopolization under our law has two elements: first, the possession of monopoly power in the relevant market and second, the willful acquisition or maintenance of that power as distinguished from its development as a result of a superior product, business acumen or a historic accident.(12) Monopoly power is generally defined as the power to control prices or exclude competition.(13) A firm's share of a well defined market is important evidence relating to the question of monopoly power, although market share alone is not determinative. In general, a share of over 70 percent would be important evidence supporting a finding of monopoly power, and a share of under 50 percent would be important evidence against such a finding.(14)

In addition, a monopolization claim requires proof of deliberate conduct that can be characterized as predatory, anticompetitive, or exclusionary. In characterizing conduct as predatory, it is important to consider whether it has an adverse impact on consumers, not just on competing firms, whether it has impaired competition in an unnecessarily restrictive way, and whether a firm is attempting to exclude its rivals on some basis other than efficiency.(15) The legal offense of an attempt to monopolize requires proof that the defendant engaged in predatory or anticompetitive conduct with a specific intent to monopolize and with a dangerous probability of success.(16)

At first blush, it may seem curious even to mention monopolization in connection with technologically driven, innovative markets because products in these markets change rapidly, and shares of some of these markets shift rapidly as one firm's innovation supersedes another's. In a market in which new, innovative products leapfrog over their predecessors, one monopolist may rapidly be displaced by another. Market share measurements over a period of time in such an industry could be markedly different from the market share measurement at one instant in time. But as we all know, there are numerous examples of companies with large market shares in various high-tech industries. When firms attain a high market share, their conduct often comes under antitrust scrutiny.

Several economists have argued that once a firm attains a high market share in certain markets, it cannot be dislodged even by a superior product. The critical path theory, or path dependence, as it is sometimes called, holds that as a technology product is accepted by large numbers of users who invest time, effort, and money in learning to use that technology, the users become captives of the technology.(17)

Path dependence is not a proposition that has been established by empirical proof, and its proponents have relied on anecdotes to give it credibility. One such anecdote involves the QWERTY keyboard, the familiar keyboard used for typewriters and PC's in the United States and other countries that use the Roman alphabet. The positioning of the letters is always the same on the QWERTY keyboard. The theory goes that although the QWERTY keyboard was designed to slow typists to speeds that mechanical typewriters could handle, users remain locked into that inefficient pattern instead of the superior Dvorak keyboard design, despite the development of electric typewriters and computers that do not have the same speed constraints as mechanical keyboards.

Although a body of literature supports the path dependence theory, and it sounds reasonable, strong counter arguments have been advanced.(18) Critics of the theory point out that new technologies in fact do supplant old ones. The VHS videotape supplanted the beta format, eight-track cassette tapes have disappeared, and CDS have virtually replaced vinyl records. The critics of path dependence conclude that whatever lock-in effect may arise is not strong enough to overcome the lure of a superior product. The critics also have attacked the anecdotal underpinnings of the theory. For example, they question the premise that the Dvorak keyboard is superior to QWERTY, pointing to controlled studies conducted by the United States General Services Administration, the results of which contradict the superiority claims made by Dvorak proponents.(19)

The disagreement about the legitimacy and utility of path dependence in antitrust analysis remains unresolved, but the lock-in theory has been argued in monopolization cases involving markets characterized by rapid innovation. Indeed, the lock-in theory has appeared in some recent judicial opinions.(20)

The second element of a monopolization case, once it has been established that a firm has a dominant market share, is a showing of predatory or anticompetitive conduct. Certain theories of predatory conduct seem to arise with particular frequency in connection with technologically innovative industries.

If a dominant firm controls some bottleneck facility to which competitors must have access, the "essential facilities" doctrine may be argued. For example, MCI successfully argued that interconnection with AT&T's telephone network was essential for it to compete in the long distance telephone market, that it was technically and economically feasible for AT&T to provide the interconnection, and that the refusal to do so constituted an act of monopolization.(21) Although AT&T's pre-MFJ telephone network was an imposing facility, other cases may be much less clear. Parties seeking interconnection may simply be seeking a way to free ride on a competitor's hard earned assets. The problem is how to define what is essential: is it something that cannot be replicated at any cost, or is it simply something that is difficult and expensive to replicate?

Monopoly leveraging is another doctrine that arises in some cases involving technology markets. As one court stated: "a firm violates [the law against monopolization] by using its monopoly power in one market to gain a competitive advantage in another, albeit without an attempt to monopolize the second market."(22) Monopoly leveraging may sound similar to tying, but it is not the same under the law. To establish a tying violation requires four-part proof of: (1) the existence of two products; (2) the conditioning of the availability of one on purchase of the other; (3) economic power in the tying product; and (4) a not insubstantial amount of commerce in the tied product.(23)The monopoly leveraging doctrine requires less rigorous proof. For example, a volume rebate program that conditioned a rebate on the purchase of specified minimum quantities of both patented and unpatented pharmaceuticals was held to be unlawful monopolization, although the court found no tying.(24) Since a few aggressive early court opinions endorsing the doctrine, a number of Courts of Appeals have rejected the monopoly leveraging theory(25), and commentators disagree about whether it retains vitality.(26)

Leveraging or tying allegations have been made about many innovative firms. If a firm is truly innovative, it may offer cutting-edge products in high demand, as well as other less advanced products that face significant competition. In introductory periods when the cutting-edge products are in short supply, the innovative firm may allocate more of the highly demanded products to customers who purchase its full line of products. That conduct may prompt a claim that the innovative firm is using sales of the cutting edge product to gain an unfair advantage in sales of older or less desirable products. Alternatively, an innovative firm that develops a product so popular that it becomes a de facto industry standard may be faced with accusations of unlawful leveraging or tying if it bundles the popular product with other related products.

It may be difficult for smaller firms to compete with large, technology-driven, innovative firms that frequently introduce new products. If a dominant firm's new product must interconnect with the products of other firms, and if the introduction of that new product makes the interconnection more difficult for the competitor, the question arises whether the product introduction constitutes unlawful monopolization.

One theory is that the deliberate creation of product incompatibilities to injure a competitor without enhancing performance or reducing cost may constitute predatory conduct, which is one element of a monopolization violation.(27) This theory places judges in the difficult position of second guessing the design choices of engineers. An obvious danger is that imposing antitrust liability for product improvements has the potential to chill innovation and deprive consumers of its benefits. If a change in a product improves performance, reduces cost or is otherwise attractive to consumers, many courts have found the change lawful regardless of whether the change rendered competitors' products incompatible.(28) In one case, a district court found that a design change had been adopted primarily to preclude competition, but the court was not willing to impose liability for bad intent alone because the new design was superior and the design change had a negligible adverse effect on competition.(29)

A variation on the same theme is a theory that a dominant firm violates the law if it fails to predisclose to competitors a change in a product that renders competitors' products incompatible. Even the Court of Appeals that aggressively adopted the monopoly leveraging doctrine was not willing to impose a duty to predisclose innovations to competitors.(30) Imposition of a duty to predisclose details of a new product could well chill innovation because one important benefit of innovation is that the innovative firm enjoys a certain period when it alone leads the pack of competitors.

Product preannouncement, or "vaporware" as it is called in the software industry, is still another issue that may raise monopolization concerns. The theory is that an entrenched dominant firm may be able to freeze competition from a rival that has introduced an innovative new product by preannouncing its own version of the innovative new product, which may be different or better, thereby inducing customers to withhold purchases until the product of the dominant firm reaches the market.(31) Some argue that only knowingly false or deceptive product preannouncements can be the basis for liability.(32) If a preannouncement is truthful, it is difficult to quantify the harm to consumers who choose to wait for the competitive product before making their selection, even if the preannouncement harms a competitor.

If a firm has monopoly power, then its sales and pricing practices, as well as its product introductions, are likely to be scrutinized for predatory or anticompetitive conduct. Long-term, vertical, exclusive contracts with customers may amount to predatory conduct sufficient to satisfy this element of a monopolization claim. A classic example of such a contract arose in a case involving a ten-year lease of shoe manufacturing equipment that imposed significant penalties on lessees who terminated the lease. The court observed that the lease discouraged customers from switching to competitors' products during the ten-year term.(33) In the low-tech business of trash hauling, the Justice Department accepted consent decrees for monopolization on the basis of three-year exclusive contracts that were automatically renewed for a second term unless canceled, that required notice of competing offers, and that had a liquidated damages provision for cancellation in mid-term.(34) Some argue that in a high-tech, innovative industry a contract with a relatively short duration should be regarded as "long-term" because the industry moves quickly.

In a panel discussion of "Technological Innovation, International Trade and Competition Policy," I would be remiss to neglect the topic of innovation markets, which has been discussed extensively in the U.S. antitrust enforcement community. In the 1970's and 1980's, the potential competition theory was used to challenge an incumbent firm's acquisition of a likely entrant into the market. In 1990, the Federal Trade Commission used the theory of potential competition in challenging a merger of two pharmaceutical manufacturers pursuing research and development to achieve the same therapeutic result.(35) At the Commission, the term "innovation market" was not even used before 1995, when the Commission and the Department of Justice jointly announced the "Antitrust Guidelines for the Licensing of Intellectual Property." In mergers that would combine parallel research efforts to develop the same drug, the Commission began to allege elimination of competition in a "research and development" market for a specified product around the same time the guidelines were issued.(36)

The "Intellectual Property Guidelines" endorse the use of an innovation market, defined as the "research and development directed to particular new or improved goods or processes and the close substitutes for that research and development." The guidelines add the caveat that such a market can be defined only when the capability to do the research "is associated with the specialized assets or characteristics of specific firms." Although the guidelines endorse the use of innovation markets in antitrust analysis, they provide little specific guidance on how the analysis is to be done and instead invite consideration of "all relevant evidence." Despite the endorsement of the concept of a so-called innovation market in the guidelines, the Commission has not applied the new term in merger cases, instead continuing to allege a diminution of competition in research and development markets for specific products.

Innovation markets have attracted strong criticism. A fundamental criticism is that we have no theoretical or empirical showing for the proposition that increased concentration yields decreased innovation. One economist pointed out that innovation is not bought and sold in any marketplace and we cannot measure it.(37) We can measure spending on research and development, but spending is an input and is not necessarily a reliable predictor of the amount of innovation that the spending will yield. This critic argues that firm size and market concentration do not appear to be determinative of innovation. He points out that although it may be possible to monopolize a particular technology, it would be very difficult to do so for innovation because the components of a research and development program, such as laboratories, scientists, computers, engineers, and so forth, can be replicated or hired.(38) Other economists have argued that successful innovation requires cooperation among firms.(39) Cooperation can spread the risk of failure, can provide access to complementary technologies and can facilitate the achievement of economies of scale and scope. This favorable view of collective research efforts seems inconsistent with the view that increased concentration in research leads to diminished innovation.

In light of these criticisms, it is fair to question how far the innovation market theory should be pushed. Nonetheless, the criticisms do not address the antitrust concern that has been at the center of the Commission's complaints, namely a concern about future competition in a specific product that is currently under development by several firms. The Commission's cases have almost all involved future competition in a particular pharmaceutical that is already subject to review by the U.S. Food and Drug Administration ("FDA"). The general level of research in the overall pharmaceutical industry has not been an issue in these cases.

The pharmaceutical industry is particularly suitable for antitrust analysis of future product development because of the extensive FDA regulatory review process that must be favorably completed before a pharmaceutical is offered for sale in the United States. Because new drugs must win approval through a multiphase testing process that can take from five to ten years, it is unlikely that a breakthrough will come from an unexpected quarter to make the research efforts under analysis obsolete. Once clinical trials of a drug are underway, the product in question is well identified, and the potential competing products that are also in clinical trials can be identified. When a pharmaceutical firm acquires another firm with a parallel research and development project underway, the Commission has attempted to evaluate the likely impact of the transaction on future competition in the market for the particular pharmaceuticals under development. That is quite different from attempting to measure the effect of the merger on innovation.

Recently, the FTC has given some indication that it may define innovation markets even more broadly. Last year's $63 billion merger between the Swiss pharmaceutical firms Ciba-Geigy and Sandoz was an enormous transaction involving numerous products. The Commission identified horizontal competition issues in several markets for existing products and in several markets for the research and development of specified products.(40)

But one product market alleged in the complaint was "gene therapy technology and research and development of gene therapies, including ex vivo and in vivo gene therapy." The breadth of that research and development market and the fact that it does not apply to a particular product make it novel.

The case raises some important questions. For example, how far should a competition agency pursue the concept of innovation markets in high technology? How far removed from an actual product may an alleged market for innovation be? And to what extent should a competition agency be willing to limit lawfully obtained intellectual property rights in order to encourage follow-on invention? These are all difficult, important and as yet unresolved questions. The theoretical critiques of the innovation market may provide a useful starting point for resolving some of these issues.

Although companies in dynamic, technologically driven industries can act anticompetitively and can restrict competition, the rapid pace of change in these markets raises challenges to traditional antitrust analysis. Our greatest mutual challenge for the next 50 years will be to refine antitrust to keep pace with technological innovation in the marketplace.

Endnotes

1. The Federal Trade Commission was established by Section 1 of the Federal Trade Commission Act (Act of Sept. 26, 1914), 15 U.S.C. § 41, as amended.

2. Act No. 54 of 1947.

3. The Act for Partial Amendment of the Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade (June 18, 1997).

4. Economic Report of the President, 243 (Feb. 1997).

5. Id.

6. "Overview of World Trade in 1996 and the Outlook for 1997," Table 1, World Trade Organization (Apr. 7, 1997).

7. Study sponsored by the American Electronics Association and the Nasdaq stock market, reported on in "A Nation of Nerds," Washington Post, Sec. 3, Nov. 23, 1997, p.2.

8. http://www.iitf.nist.gov/eleccomm.

9. "Agreement on Trade-Related Aspects of Intellectual Property Rights Including Trade in Counterfeit Goods in General Agreement on Tariffs and Trade: Multilateral Trade Negotiation, Final Act," (Apr. 15, 1994), reprinted in 33 I.L.M. 1125, 1197 (1994).

10. But see, "ITA Finalized But U.S. Warns EU on Tariff Classification Disputes," 15 Inside U.S. Trade, No. 13, p. 1 (March 28, 1997).

11. 15 U.S.C.A. § 4302.

12. 12 United States v. Grinell Corp., 384 U.S. 563, 570-71 (1966).

13. 13 United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956).

14. 14 ABA, Antitrust Law Developments 235 n.38, 236 n.40 (4th ed. 1996)(citing cases).

15. 15 See Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985).

16. 16 Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993).

17. 17 W. Brian Arthur, "Competing Technologies, Increasing Returns, and Lock-in by Historical Events," 99 Econ. J. 116 (1989).

18. 18 Liebowitz and Margolis, "Should Technology Choice be a Concern of Antitrust Policy?," 9 Harv. J of Law and Tech. 283 (1996); Lopatka and Page, "Microsoft, monopolization and network externalities: some uses and abuses of economic theory in antitrust decision making," 40 Antitrust Bulletin 317 (1995).

19. 19 Liebowitz and Margolis, supra note 10, at 313-14.

20. 20 Lotus Development Corp. v. Borland International, Inc., 49 F.3d 807, 821 (1st Cir. 1995)(Judge Boudin, concurring), aff'd by an equally divided Court, __ U.S. __ (1996); United States v. Microsoft Corp., 159 F.R.D. 318 (D.D.C.), rev'd and remanded, 56 F.3d 1448 (D.C. Cir. 1995).

21. 21 MCI Communications Corp. v. AT&T, 708 F.2d 1081, 1132 (7th Cir.), cert. denied, 464 U.S. 891 (1983).

22. 22 Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 275 (2d Cir. 1979), cert. denied, 444 U.S. 1093 (1980).

23. 23 Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1984).

24. 24 SmithKline Corp. v. Eli Lilly and Co., 575 F.2d 1056 (3d Cir.), cert. denied, 439 U.S. 838 (1978).

25. 25 E.g., Fineman v. Armstrong World Industries, 980 F.2d 171 (3d Cir. 1992), cert. denied, 507 U.S. 921 (1993); Alaska Airlines v. United Airlines, 948 F.2d 536 (9th Cir. 1991), cert. denied, 503 U.S. 977 (1992).

26. 26 Compare Kattan, "The Decline of the Monopoly Leveraging Doctrine," 9 Antitrust 41 (1994), with Blair and Esquibel, "Some remarks on monopoly leveraging," 40 Antitrust Bulletin 371 (1995).

27. 27 See In re IBM Peripheral EDP Devices Antitrust Litigation, 481 F. Supp. 965, 1002-5 (N.D. Cal. 1979), aff'd, Transamerica Computer Co. v. IBM, 698 F.2d 1377 (9th Cir.), cert. denied, 464 U.S. 955 (1983).

28. 28 E.g., Memorex Corp. v. IBM, 636 F.2d 1188 (9th Cir. 1980), cert. denied, 452 U.S. 1972 (1981); California Computer Products, Inc. v. IBM, 613 F.2d 727, 744 (9th Cir. 1979).

29. 29 In re IBM Peripheral EDP Devices Antitrust Litigation, 481 F. Supp. 965, 1005 (N.D. Cal. 1979).

30. 30 Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 281-83 (2d Cir. 1979), cert. denied, 444 U.S. 1093 (1980).

31. 31 United States v. AT&T, 524 F. Supp. 1336, 1356 (D.D.C. 1981); see also United States v. Microsoft Corp., 159 F.R.D. 318, 356 (D.D.C.), rev'd and remanded, 56 F.3d 1448 (D.C. Cir. 1995).

32. 32 ILC Peripherals Leasing Corp. v. IBM, 458 F. Supp. 423, 442 (N.D. Cal. 1978), aff'd sub nom. Memorex Corp. v. IBM, 636 F.2d 1188 (9th Cir. 1980), cert. denied, 452 U.S. 972 (1981).

33. 33 United States v. United Shoe Machinery Corp., 110 F. Supp. 295 (D. Mass. 1953), aff'd per curiam, 347 U.S. 521 (1954).

34. 34 United States v. Waste Management of Georgia, Inc., 1996-2 Trade Cas. ¶ 71,455 (S.D. Ga. 1996); United States v. Browning-Ferris of Iowa, Inc., 1996-2 Trade Cas. ¶ 71,456 (D.D.C. 1996).

35. 35 Roche Holding Ltd., 113 F.T.C. 1086 (1990)(Commissioner Owen, in dissent, questioning this use of the theory).

36. 36 E.g., Wright Medical Technology, Inc., Dkt. No. C-3564 (Mar. 23, 1995); American Home Products Corp., Dkt. No. C-3557 (Feb. 14, 1995)(Commissioner Azcuenaga, concurring).

37. 37 Rapp, "The Misapplication of the Innovation Market Approach to Merger Analysis," 64 Antitrust L.J. 19 (1995).

38. 38 Id. at 36.

39. 39 Jorde and Teece, "Innovation, Cooperation and Antitrust," 4 High Technology L.J. 1 (1989).

40. Ciba-Geigy Ltd., et al., FTC Docket No. C-3725 (consent order issued, Mar. 24, 1997), reported in 5 Trade Reg. Rep. (CCH) ¶ 24,182.