Friday, March 04, 2005

THE AFTERMATH OF INDEPENDENT INK v. ILLINOIS TOOL WORKS: The decision in this case, decided last month in the Federal Circuit, increased the risk of antitrust tying claims against patent holders who condition the purchase of a patented product on the purchase of an unpatented product. As summarized in Dennis Crouch's Patently-O Blog, Trident, a wholly-owned subsidiary of Illinois Tool Works, manufactures printheads and owns U.S. Patent No. 5,343,226 covering the technology. The ‘226 patent discloses an ink jet device and a supply system with a hand actuated peristaltic pump. Trident also manufactures ink for use with the patented printheads. Although the ink is not protected by any of Trident’s patents, their standard license agreements grant the right to “manufacture, use and sell… ink jet printing devices…” to other printer manufacturers only “when used in combination with ink and ink supply systems supplied by Trident.”

The Federal Circuit held that Illinois Tool's patent covering its printheads "presumptively defines the relevant market as the nationwide market for the patented product itself" and "creates a presumption of power within this market." The court further held that Illinois Tool failed to rebut the presumption because it did not present sufficient evidence (e.g., expert testimony) that the boundaries of the relevant market extended beyond its patented printhead. In doing so, the court specifically rejected the notion that a patent creates an irrebuttable presumption of market power.

So what's a patentee to do? Danielle Fitzpatrick provides three considerations for businesses that are considering tying non-patented products to their patented products:

  1. The court indicated that the presumption arises "when the tying product is patented or copyrighted." Therefore, both patent holders and copyright holders should take stock of sales practices.
  2. The decision makes it easier to bring an antitrust tying claim where a patent or copyright holder links the sale of patented and unpatented goods. This may result in more tying claims under Section 1 of the Sherman Act, although the litigation of those claims will likely not change significantly.
  3. Presumption or not, all patent and copyright holders who condition the sale of a patented product on the sale of an unpatented product (or are considering doing so) should undertake at least a preliminary analysis of the relevant market. A decision to tie products or services to patent rights or patented products raises serious antitrust concerns and should always be carefully reviewed by antitrust counsel. Even if the patent holder does not enjoy market power, it must nevertheless weigh the risk of antitrust litigation (which is widely recognized as one of the most expensive and time-consuming types of litigation) against the benefits of the sales practice.

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