Intellectual Property Law

The Blawg report today covers breaking news: The U.S. Supreme Court?s decision ? announced a few hours ago ? holding that ownership of a patent does not automatically confer market power on the owner when an illegal tying arrangement is alleged. According to the unanimous ruling (with Justice Alito not participating) in Illinois Tool Works Inc. v. Independent Ink, Inc., market power cannot be presumed simply because the tying product is the subject of a patent, but must be proven.

The facts of the case are straightforward. A subsidiary of Illinois Tool Works (?ITW?) makes and sells printing systems that consist of a patented ink jet printhead, a patented ink container and an unpatented but specially designed ink. ITW requires its customers to purchase ink for its systems exclusively from ITW. Independent Ink (?II?), which developed an ink with the same composition as that in ITW?s systems, successfully defeated on jurisdictional grounds a claim of infringement brought by ITW. II subsequently sued ITW for a declaratory judgment that ITW?s patents were not infringed and are invalid based upon ITW?s alleged illegal monopolization and tying arrangements. The district court granted summary judgment for ITW, and the Federal Circuit reversed.

Justice Stevens, writing for the Court, noted that the concept of per se illegality of tying arrangements when the tying product was protected by a patent had ?migrated? from the court-created patent misuse doctrine to the antitrust laws. He also commented that after several court decisions had held that ownership of a patent created a presumption of market power, 35 U.S.C. § 271(d) had been added to the patent laws. That section provides in part that it shall not constitute patent misuse for the patent owner to condition the sale of the patented product on the purchase of a separate product unless ?the patent owner has market power in the relevant market.? In addition, Justice Stevens pointed out ?the virtual consensus among economists? that ownership of a patent does not create market power. Accordingly, the Court held that market power cannot be presumed in a tying case against the owner of a patent, but that the plaintiff must prove market power.

Does the Supreme Court?s decision square with the realities of the economics of technology licensing? Will there be any unintended consequences from this decision? We want to know what you think.

Today's Blogger:  Bob Sloss