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Issue Involves Ink and Ink Printers
The U.S. Supreme Court will be hearing a case this fall that could have a dramatic impact on the imaging supplies industry. The case, Independent Ink v. Illinois Tool Works and Trident Inc., is about tying arrangements and patents, two subjects that have great import for all aftermarket competition.Trident (now owned by Illinois Tool Works) manufactures its patented print heads and print delivery systems that are used to print barcodes on boxes. Independent ink manufactures ink that is used in such applications. Trident tried to lock up its replacement ink business for those products through the terms of the license agreement it has with its customers. Under the terms of that agreement, all those who purchase and all those who use Trident’s print heads are required to purchase all of their ink from Trident.
Independent Ink sued Trident and initially lost at the District Court, but that decision was reversed on appeal. Now the Supreme Court has granted the case an audience, signaling that it is considering changing the law that has kept tying arrangements in check for 58 years.
The seminal question is whether a patent holder of a product (e.g., a printer) that is used to force the purchase of another product (the cartridge) is deemed to have “market power” sufficient to make the case that they have therefore engaged in an unlawful tying arrangement. For more than half a century, a patent conferred a presumption that its owner has market power in that product’s marketplace.
This makes sense. The fact that one has a patent means that he is protected from others who might wish to copy his product. And if he uses that product to force the customer to purchase an unprotected product from him as well, then that appears to be an illegal tying arrangement—an anti-competitive act.
Take away that presumption of market power, and the consequences in the printer industry could be immense. In this market, there is no company that has monopoly power, as a half-dozen companies divide up the pie. Such an arrangement is defined as an oligopoly. The loss of the presumption could lead the OEMs to tie their supplies to their printers, and the aftermarket would be helpless to stop them.
“The OEMs see this as a golden opportunity to now do something which they have been unable to do for the last 58 years,” said Independent Ink’s attorney Edward O’Connor of O’Connor Christensen & McLaughlin LLP. “That is why they are pushing so hard to have the doctrine reversed.”
This case presents daunting consequences if decided the wrong way. Even more alarming is the weight of organizations that have backed Trident’s position, including Pfizer, a major pharmaceutical manufacturer and the American Bar Association. “It appears to me that the American Bar Association’s involvement in this case is on behalf of big businesses engaged in an anti-consumer scheme,” O’Connor wrote in a letter of outrage to the ABA president. “This, I believe, is completely contrary to the fundamental values of the American Bar Association.”
Independent Ink has sought the support of the International Imaging Technology Council in this matter to assist in getting the word out about the dangers of this case and the lop-sided, wrong-headed information that is being fed to the U.S. Supreme Court. “People are not aware of this case, because we’ve always won on this issue,” O’Connor said. “But now that settled doctrine is in jeopardy.”
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