Wednesday, April 19, 2006, 12:55 PM

Supreme Court Rejects Presumption Of Market Power In Patent Tying Cases

On March 1, 2006, the Supreme Court issued its much anticipated opinion in Illinois Tool Works, Inc. v. Independent Ink, Inc. The Court reversed several vintage Supreme Court cases, United States v. Loew's, Inc., 371 U.S. 38 (1962) and International Salt Co. v. United States, 332 U.S. 392 (1947), which established a presumption of market power in tying cases from the mere ownership of patent or copyright. In abrogating this market power presumption, the Supreme Court noted: "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."

The Court dismissed Loew's and International Salt as "a vestige of the Court's historical distrust of tying arrangements," which distrust has "substantially diminished" over time. In addition to relying on economic and scholarly criticism, the Court also relied on the Patent Misuse Reform Act and the Department of Justice/Federal Trade Commission's Guidelines for the Licensing of Intellectual Property. Although the Patent Misuse Reform Act was not directly applicable to the antitrust claims at issue, the Court found that the Act "invites the reappraisal of" antitrust doctrine, and that "it would be absurd to assume that" Congress did away with the market power presumption in the patent misuse context but intended the same conduct to constitute a felony under the antitrust laws. The Court's reliance on the Guidelines is also noteworthy because the Guidelines are merely the DOJ/FTC's enforcement policy.

Independent Ink is not likely to have an immediate effect in antitrust law because many of the regional circuits had already rejected the market power presumption. The opinion, however, may highlight the Court's willingness to reverse decades-old precedent when not consistent with a modern view of economics and/or the government's enforcement policies.

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