"As our own common sense tells us, Armstrong had discovered a
vastly superior radio technology. But at the time of his
invention, Armstrong was working for RCA. RCA was the dominant
player in the then dominant AM radio market. By 1935, there were
a thousand radio stations across the United States, but the
stations in large cities were all owned by a handful of networks.

RCA’s president, David Sarnoff, a friend of Armstrong’s, was
eager that Armstrong discover a way to remove static from AM
radio. So Sarnoff was quite excited when Armstrong told him he
had a device that removed static from “radio.” But when Armstrong
demonstrated his invention, Sarnoff was not pleased.

“I thought Armstrong would invent some kind of a filter to remove
static from our AM radio. I didn’t think he’d start a
revolution—start up a whole damn new industry to compete with
RCA.” [4]

Armstrong’s invention threatened RCA’s AM empire, so the company
launched a campaign to smother FM radio. While FM may have been a
superior technology, Sarnoff was a superior tactician. As one
author described,

“The forces for FM, largely engineering, could not overcome the
weight of strategy devised by the sales, patent, and legal
offices to subdue this threat to corporate position. For FM, if
allowed to develop unrestrained, posed ... a complete reordering
of radio power ... and the eventual overthrow of the carefully
restricted AM system on which RCA had grown to power.” [5]

RCA at first kept the technology in house, insisting that further
tests were needed. When, after two years of testing, Armstrong
grew impatient, RCA began to use its power with the government to
stall FM radio’s deployment generally. In 1936, RCA hired the
former head of the FCC and assigned him the task of assuring that
the FCC assign spectrum in a way that would castrate
FM—principally by moving FM radio to a different band of
spectrum. At first, these efforts failed. But when Armstrong and
the nation were distracted by World War II, RCA’s work began to
be more successful. Soon after the war ended, the FCC announced a
set of policies that would have one clear effect: FM radio would
be crippled. As Lawrence Lessing described it,

“The series of body blows that FM radio received right after the
war, in a series of rulings manipulated through the FCC by the
big radio interests, were almost incredible in their force and
deviousness.” [6]

To make room in the spectrum for RCA’s latest gamble, television,
FM radio users were to be moved to a totally new spectrum
band. The power of FM radio stations was also cut, meaning FM
could no longer be used to beam programs from one part of the
country to another. (This change was strongly supported by AT&T,
because the loss of FM relaying stations would mean radio
stations would have to buy wired links from AT&T.) The spread of
FM radio was thus choked, at least temporarily.

Armstrong resisted RCA’s efforts. In response, RCA resisted
Armstrong’s patents. After incorporating FM technology into the
emerging standard for television, RCA declared the patents
invalid—baselessly, and almost fifteen years after they were
issued. It thus refused to pay him royalties. For six years,
Armstrong fought an expensive war of litigation to defend the
patents. Finally, just as the patents expired, RCA offered a
settlement so low that it would not even cover Armstrong’s
lawyers’ fees. Defeated, broken, and now broke, in 1954 Armstrong
wrote a short note to his wife and then stepped out of a
thirteenth- story window to his death.

This is how the law sometimes works. Not often this tragically,
and rarely with heroic drama, but sometimes, this is how it
works. From the beginning, government and government agencies
have been subject to capture. They are more likely captured when
a powerful interest is threatened by either a legal or technical
change. That powerful interest too often exerts its influence
within the government to get the government to protect it. The
rhetoric of this protection is of course always public spirited;
the reality is something different. Ideas that were as solid as
rock in one age, but that, left to themselves, would crumble in
another, are sustained through this subtle corruption of our
political process. RCA had what the Causbys did not: the power to
stifle the effect of technological change." -- http://www.free-culture.cc