ID INK ,PRESUMPTION OF MARKET POWER ?

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ID INK ,PRESUMPTION OF MARKET POWER ?

 user 2006-04-04 at 1:21:00 pm Views: 58
  • #15197

    United States: Patent on Tied Product Does Not Give Rise to Presumption of Market Power
    APRIL 
    2006 The U.S. Supreme Court unanimously ruled that companies
    challenging the sale of a patented product tied to another product must
    affirmatively show that the defendant has market power in the patented
    product. Illinois Tool Works Inc. v. Independent Ink Inc., 126 S. Ct.
    1281 (Mar. 1, 2006) (Stevens, J.).
    Trident, a wholly owned
    subsidiary of Illinois Tool Works, held a patent covering its ink-jet
    printing device. Trident required licensees of its patents who made,
    used or sold Trident’s ink-jet printing devices to also purchase ink
    from Trident for the device’s print heads. Independent Ink wanted to
    sell its own refills for print heads and sued Trident under Sherman Act
    section 1, claiming that Trident had unlawfully tied its patented
    device to its unpatented ink. The U.S. Court of Appeals for the Federal
    Circuit reversed a district court decision, which had dismissed the
    case on summary judgment, and determined that Trident’s patents created
    a rebuttable presumption that Trident’s patents alone constituted
    sufficient market power to coerce customers to purchase Trident’s
    unpatented ink.
    As in prior tying arrangement cases involving
    patented products, the Federal Circuit relied upon Supreme Court
    precedent (International Salt Co.; Dawson Chemical Co.) to find that
    Trident’s patent automatically conferred market power. The Supreme
    Court granted certiorari to re-examine the judicial and legislative
    treatment of tying arrangements in light of scholarly and economic
    analysis of the competitive benefits of tying arrangements as well as a
    shift in enforcement agencies’ treatment of them. While precedent
    suggested that a patent presumptively conveyed market power, the
    antitrust enforcement agencies had issued guidelines stating that, in
    their respective prosecutorial discretion, they would “not presume that
    a patent, copyright, or trade secret necessarily confers market power
    upon its owner.”
    The Supreme Court decision overturns the Federal
    Circuit’s determination that a patent in the tying product creates a
    presumption of market power in tying cases. “Congress, the antitrust
    enforcement agencies and most economists have all reached the
    conclusion that a patent does not necessarily confer market power upon
    the patentee,” Justice John Paul Stevens wrote. “Today we reach the
    same conclusion.” In rendering its decision, the Supreme Court
    recognized the connection between antitrust jurisprudence and the
    patent misuse doctrine, an equitable defense to patent infringement
    that prevents a patent holder from asserting his patent rights when
    conditioning the purchase of unpatented goods to the sale of its
    patented goods effectively restrains competition. Relying in part upon
    Congress’ amendment of the Patent Code to eliminate the presumption of
    market power in the patent misuse context, the Supreme Court found that
    “Congress did not intend the mere existence of a patent to constitute
    the requisite ‘market power.’”
    The Court’s decision requires a
    plaintiff challenging any tying arrangement, including those related to
    patented products, to prove the defendant has market power. The Court
    remanded the case to the district court to allow Independent Ink to
    develop facts and prove, if it can, that Trident has market power in
    the market for its print heads.
    Practice Note
    The decision is
    favorable for parties defending tying claims because claimants can no
    longer presume market power only on the basis that the tying product is
    patented. As a result, claimants challenging any tying arrangement must
    define a relevant market for both the tying and tied products and
    allege and prove market power in the tying product market, which will
    include all reasonable substitutes for the tying product. Defendants
    can defeat tying claims by showing the presence of alternative and
    competing technologies and products and proving the tying product lacks
    market power.