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Archived updates for Wednesday, March 01, 2006

US SCt: No Presumption of Market Power in Patent Tying Cases

In Illinois Tool Works, Inc. v. Independent Ink, Inc., Supreme Court No. 04­1329 (March 1, 2006; Stevens, J.), the U.S. Supreme Court held that in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product:

In Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S. 2 (1984), we repeated the well-settled proposition that .if the Government has granted the seller a patent or
similar monopoly over a product, it is fair to presume that the inability to buy the product elsewhere gives the seller market power.. Id., at 16. This presumption of market power, applicable in the antitrust context when a seller conditions its sale of a patented product (the "tying" product) on the purchase of a second product (the "tied" product), has its foundation in the judicially created patent misuse doctrine. See United States v. Loew.s Inc., 371 U. S. 38, 46 (1962). In 1988, Congress substantially undermined that foundation, amending the Patent Act to eliminate the market power presumption in patent misuse cases. See 102 Stat. 4674, codified at 35 U. S. C. ยง271(d). The question presented to us today is whether the presumption
of market power in a patented product should survive as a matter of antitrust law despite its demise in patent law. We conclude that the mere fact that a tying
product is patented does not support such a presumption.

. . . 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. Today, we reach the same conclusion, and therefore hold that, in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.

According to Professor Wegner, "The decision was anticipated by the Federal Circuit itself (which did deferred to existing precedent that it viewed as outdated) and the United States as amicus curiae. If there is any surprise at all, it is that the decision was unanimous -- and that the opinion was issued by John Paul Stevens, the leading disciple of Justice Douglas and an antitrust scholar before joining the Court."

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