Friday, March 03, 2006

More on the Supreme Court decision in Illinois Tool v. Independent Ink

The Supreme Court spoke favorably of Justice O'Connor in the Illinois Tool case.

From Illinois Tool v. Independent Ink, 2006 U.S. LEXIS 2024,

American courts first encountered tying arrangements in the course
of patent infringement litigation. See, e.g., Heaton-Peninsular Button-Fastening
Co. v. Eureka Specialty Co., 77 F. 288, 1897 Dec. Comm'r Pat. 216 (CA6 1896).


Two years later, Congress endorsed Chief Justice White's disapproval of tying arrangements, enacting § 3 of the Clayton Act. See 38 Stat. 731 (applying to "patented or unpatented" products); see also Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 517-518, 37 S. Ct. 416, 61 L. Ed. 871, 1917 Dec. Comm'r Pat. 391 (1917) (explaining that, in light of § 3 of the Clayton Act, A. B. Dick "must be regarded as overruled").

And in this Court's subsequent cases reviewing the legality of tying
arrangements we, too, embraced Chief Justice White's disapproval of those
arrangements. See, e.g., Standard Oil Co. of Cal. v. United States, 337
U.S. 293, 305-306, 69 S. Ct. 1051, 93 L. Ed. 1371 (1949); Mercoid Corp. v.
Mid-Continent Investment Co., 320 U.S. 661, 664-665, 64 S. Ct. 268, 88
L. Ed. 376, 1944 Dec. Comm'r Pat. 641 (1944).

Over the years, however, this Court's strong disapproval of tying
arrangements has substantially diminished.
Rather than relying on
assumptions, in its more recent opinions the Court has required a showing of
market power in the tying product. Our early opinions consistently assumed
that "tying arrangements serve hardly any purpose beyond the suppression of
competition." Standard Oil Co., 337 U.S., at 305-306, 69 S. Ct. 1051, 93 L. Ed. 1371.

The assumption that "tying arrangements serve hardly any purpose
beyond the suppression of competition," rejected in Fortner II, has not been
endorsed in any opinion since. Instead, it was again rejected just seven years
later in Jefferson Parish, where, as in Fortner II, we unanimously reversed a
Court of Appeals judgment holding that an alleged tying arrangement constituted
a per se violation of § 1 of the Sherman Act. 466 U.S., at 5, 104 S. Ct. 1551,
80 L. Ed. 2d 2. Like the product at issue in the Fortner cases, the tying product
in Jefferson Parish -- hospital services -- was unpatented,
and our
holding again rested on the conclusion that the plaintiff had failed to prove
sufficient power in the tying product market
to restrain competition in the market for the tied product -- services of anesthesiologists. 466 U.S., at 28-29, 104 S. Ct. 1551, 80 L. Ed. 2d 2.

Notably, nothing in our opinion suggested a rebuttable presumption
of market power applicable to tying arrangements involving a patent on the tying
good. See infra, at 14; cf. 396 F.3d at 1352. Instead, it described the rule that
a contract to sell a patented product on condition that the purchaser buy
unpatented goods exclusively from the patentee is a per se violation of
§ 1 of the Sherman Act.

Justice O'Connor wrote separately in Jefferson Parish, concurring in
the judgment on the ground that the case did not involve a true tying
arrangement because, in her view, surgical services and anesthesia were not
separate products. 466 U.S., at 43, 104 S. Ct. 1551, 80 L. Ed. 2d 2. In her
opinion, she questioned not only the propriety of treating any tying arrangement as
a per se violation of the Sherman Act, id., at 35, 104 S. Ct. 1551, 80 L. Ed. 2d
2, but also the validity of the presumption that a patent always gives the
patentee significant market power, observing that the presumption was actually a
product of our patent misuse cases rather than our antitrust jurisprudence
id., at 37-38, n. 7, 104 S. Ct. 1551, 80 L. Ed. 2d 2. It is that presumption, a
vestige of the Court's historical distrust of tying arrangements, that
we address squarely today.


Justice O'Connor was, of course, correct in her assertion that the
presumption that a patent confers market power arose outside the
antitrust context as part of the patent misuse doctrine. That doctrine had its
origins in Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 37
S. Ct. 416, 61 L. Ed. 871, 1917 Dec. Comm'r Pat. 391 (1917), which found no
support in the patent laws for the proposition that a patentee may "prescribe by
notice attached to a patented machine the conditions of its use and the
supplies which must be used in the operation of it, under pain of infringement of the patent," id., at 509, 37 S. Ct. 416, 61 L. Ed. 871, 1917 Dec. Comm'r Pat. 391.
Although Motion Picture Patents Co. simply narrowed the scope of possible patent
infringement claims, it formed the basis for the Court's subsequent
decisions creating a patent misuse defense to infringement claims when a patentee
uses its patent "as the effective means of restraining competition with its sale
of an unpatented article." Morton Salt Co. v. G. S. Suppiger Co., 314 U.S.
488, 490, 62 S. Ct. 402, 86 L. Ed. 363, 1942 Dec. Comm'r Pat. 733 (1942); see
also, e.g., Carbice Corp. of America v. American Patents Development Corp., 283
U.S. 27, 31, 51 S. Ct. 334, 75 L. Ed. 819, 1931 Dec. Comm'r Pat. 727 (1931).


The presumption that a patent confers market power migrated from
patent law to antitrust law in International Salt Co. v. United States, 332 U.S.
392, 68 S. Ct. 12, 92 L. Ed. 20 (1947).


It is Congress' most recent narrowing of the patent misuse defense,
however, that is directly relevant to this case. Four years after our decision
in Jefferson Parish repeated the patent-equals-market-power presumption,
466 U.S., at 16, 104 S. Ct. 1551, 80 L. Ed. 2d 2, Congress amended the Patent
Code to eliminate that presumption in the patent misuse context, 102 Stat.
4674. The relevant provision reads:

[35 U.S.C. § 271(d)(5)]


While the 1988 amendment does not expressly refer to the antitrust
laws, it certainly invites a reappraisal of the per se rule announced in
International Salt. n3 A rule denying a patentee the right to enjoin an infringer is significantly less severe than a rule that makes the conduct at issue a
federal crime punishable by up to 10 years in prison.
See 15 U.S.C. § 1. It
would be absurd to assume that Congress intended to provide that the use of a
patent that merited punishment as a felony would not constitute "misuse." Moreover,
given the fact that the patent misuse doctrine provided the basis for the
market power presumption, it would be anomalous to preserve the presumption in
antitrust after Congress has eliminated its foundation. Cf. 10 P. Areeda, H.
Hovenkamp, & E. Elhauge, Antitrust Law P1737c (2d ed. 2004) (hereinafter

CONCLUSION: In this case, respondent reasonably relied on our prior opinions in
moving for summary judgment without offering evidence defining the relevant
market or proving that petitioners possess power within it. When the case returns
to the District Court, respondent should therefore be given a fair opportunity
to develop and introduce evidence on that issue, as well as any other
issues that are relevant to its remaining § 1 claims.


Post a Comment

<< Home