ID INK ,PRESUMPTION OF MARKET POWER ?

[Anonymous]

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.

[Author]

April 4, 2006 at 1:21 PM