Patent on Tied Product Does Not Give Rise to Presumption of Market Power.The U.S. Supreme Court unanimously ruled that companies challenging the sale of a patented product tied to another product must affirmatively show that the defendant has market power in the patented product. Illinois Tool Works Illinois Tool Works or ITW (NYSE: ITW) is a Fortune 500 company that produces engineered fasteners and components, equipment and consumable systems, and specialty products. It was founded in 1912 by Byron L. Smith, and three other men Frank W. England, Paul B. Inc. v. Independent Ink Inc., 126 S. Ct. 1281 (Mar. 1, 2006) (Stevens, J.). Trident, a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Illinois Tool Works, held a patent covering its ink-jet printing device. Trident required licensees of its patents who made, used or sold Trident's ink-jet printing devices to also purchase ink from Trident for the device's print heads. Independent Ink wanted to sell its own refills for print heads and sued Trident under Sherman Act section 1, claiming that Trident had unlawfully tied its patented device to its unpatented ink. The U.S. Court of Appeals for the Federal Circuit reversed a district court decision, which had dismissed the case on summary judgment, and determined that Trident's patents created a rebuttable presumption A conclusion as to the existence or nonexistence of a fact that a judge or jury must draw when certain evidence has been introduced and admitted as true in a lawsuit but that can be contradicted by evidence to the contrary. that Trident's patents alone constituted sufficient market power to coerce customers to purchase Trident's unpatented ink. As in prior tying arrangement An agreement in which a vendor conditions the sale of a particular product on a vendee's promise to purchase an additional, unrelated product. In a tying arrangement, the product that the vendee actually wants to purchase is known as the "tying product," while the cases involving patented products, the Federal Circuit relied upon Supreme Court precedent (International Salt Co.; Dawson Chemical Co.) to find that Trident's patent automatically conferred market power. The Supreme Court granted certiorari certiorari In law, a writ issued by a superior court for the reexamination of an action of a lower court. The writ of certiorari was originally a writ from England's Court of Queen's (King's) Bench to the judges of an inferior court; it was later expanded to include writs to re-examine re·ex·am·ine also re-ex·am·ine tr.v. re·ex·am·ined, re·ex·am·in·ing, re·ex·am·ines 1. To examine again or anew; review. 2. Law To question (a witness) again after cross-examination. the judicial and legislative treatment of tying arrangements in light of scholarly and economic analysis of the competitive benefits of tying arrangements as well as a shift in enforcement agencies' treatment of them. While precedent suggested that a patent presumptively pre·sump·tive adj. 1. Providing a reasonable basis for belief or acceptance. 2. Founded on probability or presumption. pre·sump conveyed market power, the antitrust enforcement agencies had issued guidelines stating that, in their respective prosecutorial pros·e·cu·to·ri·al adj. Of, relating to, or concerned with prosecution: "a huge investigative and prosecutorial effort" Lucian K. Truscott IV. discretion, they would "not presume that a patent, copyright, or trade secret necessarily confers market power upon its owner." The Supreme Court decision overturns the Federal Circuit's determination that a patent in the tying product creates a presumption of market power in tying cases. "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 PATENTEE. He to whom a patent has been granted. The term is usually applied to one who has obtained letters-patent for a new invention. 2. His rights are, 1. ," Justice John Paul Stevens John Paul Stevens (born April 20, 1920) is currently the most senior Associate Justice of the Supreme Court of the United States. He joined the Court in 1975 and is the oldest and longest serving incumbent member of the Court. wrote. "Today we reach the same conclusion." In rendering its decision, the Supreme Court recognized the connection between antitrust jurisprudence and the patent misuse doctrine, an equitable defense to patent infringement patent infringement n. the manufacture and/or use of an invention or improvement for which someone else owns a patent issued by the government, without obtaining permission of the owner of the patent by contract, license or waiver. that prevents a patent holder from asserting his patent rights when conditioning the purchase of unpatented goods to the sale of its patented goods effectively restrains competition. Relying in part upon Congress' amendment of the Patent Code to eliminate the presumption of market power in the patent misuse context, the Supreme Court found that "Congress did not intend the mere existence of a patent to constitute the requisite 'market power.'" The Court's decision requires a plaintiff challenging any tying arrangement, including those related to patented products, to prove the defendant has market power. The Court remanded the case to the district court to allow Independent Ink to develop facts and prove, if it can, that Trident has market power in the market for its print heads. Practice Note The decision is favorable for parties defending tying claims because claimants can no longer presume market power only on the basis that the tying product is patented. As a result, claimants challenging any tying arrangement must define a relevant market for both the tying and tied products and allege and prove market power in the tying product market, which will include all reasonable substitutes for the tying product. Defendants can defeat tying claims by showing the presence of alternative and competing technologies and products and proving the tying product lacks market power. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Mr Stefan Meisner McDermott Will & Emery 600 13th Street N.W. Washington, DC 20005-3096 UNITED STATES E-mail: pdevinsky@mwe.com URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. : www.mwe.com Click Here for related articles (c) Mondaq Ltd, 2006 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com |
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