Wednesday, March 01, 2006

SUPREME COURT OVERTURNS PRESUMPTION OF MARKET POWER FOR PATENTS:

Illinois Tool Works v. Independent Ink, 04-1329

The U.S. Supreme Court limited the scope of antitrust suits against patent holders by providing them with more leeway in bundling products for sale to customers. In the case of Illinois Tool Works Inc., the Court overturned a lawsuit seeking to bar the company from forcing purchasers of its patented industrial printheads to buy its ink as well. The unanimous decision stated that lower courts should not presume that patents given to a company necessarily confer "market power,'' which under federal antitrust law would limit a company's ability to bundle products. The case was vacated and remanded to the lower court to give Independent Ink a chance, without the benefit of a presumption, to show that Illinois Tool Works has market power in the printhead field:

Because a patent does not necessarily confer market power upon the patentee, in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.

Over the years, this Court’s strong disapproval of tying arrangements has substantially diminished, as the Court has moved from relying on assumptions to requiring a showing of market power in the tying product. The assumption in earlier decisions that such “arrangements serve hardly any purpose beyond the suppression of competition," . . . Nothing in [the caselaw] suggested a rebuttable presumption of market power applicable to tying arrangements involving a patent on the tying good.

The presumption that a patent confers market power arose outside the antitrust context as part of the patent misuse doctrine, and migrated to antitrust law . . . [W]hen Congress codified the patent laws for the first time, it initiated the untwining of the patent misuse doctrine and antitrust jurisprudence. At the same time that this Court’s antitrust jurisprudence continued to rely on the assumption that tying arrangements generally serve no legitimate business purpose, Congress began chipping away at that assumption in the patent misuse context from whence it came . . . Congress amended the Patent Code to eliminate it in the patent misuse context.

[A]fter considering the congressional judgment reflected in the amendment, this Court concludes that tying arrangements involving patented products should be evaluated under the standards of cases like Fortner II and Jefferson Parish rather than the per se rule in Morton Salt and Loew’s. Any conclusion that an arrangement is unlawful must be supported by proof of power in the relevant market rather than by a mere presumption thereof.

[B]ecause respondent reasonably relied on this Court’s prior opinions in moving for summary judgment without offering evidence of the relevant market or proving petitioners’ power within that market, respondent should be given a fair opportunity to develop and introduce evidence on that issue, as well as other relevant issues, when the case returns to the District Court.

The decision continues the trend toward a more market-based approach in U.S. antitrust law, effectively overturning a pair of decades-old precedents. This decision is considered a victory for businesses that rely heavily on patents, including technology companies and drug makers.

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