*NEWS*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.

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April 4, 2006 at 1:20 PM