• Supreme Court: Patents Do Not Establish a Presumption of Market Power for Per Se Tying Claims
  • March 8, 2006
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • Intellectual property owners have been anticipating the Supreme Court's decision in Illinois Tool Works, Inc. v. Independent Ink, Inc., No. 04-1329. On March 1, 2006, in Illinois Tool Works, the Supreme Court removed the last vestiges of precedent holding that the mere existence of a patent creates a presumption of market power to support a per se tying claim.

    The Court noted that the foundation for the rule that the existence of a patent supports a presumption of market power in antitrust tying cases was formed based on contentions of the government that were accepted by the Court in its 1947 decision in International Salt that the presumption in the patent misuse context from its 1942 decision in Morton Salt should be applied in the context of antitrust claims as well. The Court noted that the foundation for the rule had eroded in several ways. First, since the Court's 1977 decision in Fortner II, the Court has required a showing of market power in tying cases in general in order to establish a per se violation. Second, Congress in 1988 amended the Patent Act to provide that tying could not be grounds to establish "misuse" or "illegal extension of the patent right" without a showing of market power in the tying market. Third, the federal antitrust enforcement agencies in adopting their Antitrust Guidelines for the Licensing of Intellectual Property in 1995 established and maintained a policy that they would not presume market power based on the mere existence of a patent. In addition, the Court cited modern scholars who have advocated rejection of any such presumption. It would be anomalous, according to the Court, to allow a presumption to support a finding of an antitrust violation with more severe consequences than misuse in contexts in which Congress determined that no presumption should support a finding of misuse.

    The result of the Court's opinion is that a plaintiff seeking to establish that a patent holder is violating the antitrust laws by tying sale of a patented good or licensing of the patent to the sale of unpatented goods must establish market power in the tying product market in order to prevail on such a claim. This puts patent tying antitrust claims on a par with other types of tying claims and with tying misuse law as established in the 1988 amendments to the Patent Act.

    Courts assessing the effect of the holding will likely need to confront whether any presumption of market power remains in copyright tying cases. Although the Court did not expressly address anything other than patent tying claims and did not expressly state that it was overruling United States v. Loew's Inc., which held that the now-discredited presumption of market power applied to copyrights as well as patents, much of its reasoning would be applicable to suggest that, given the opportunity, the Court would also overrule Loew's and hold that there is no presumption of market power based on a copyright.

    Of course, the fact that there is no presumption of market power does not mean that intellectual property owners do not have to take care to avoid tying violations. Even without the presumption, there are some situations in which intellectual property does establish or enhance existing market power, and per se tying claims may be brought and may succeed in such situations. However, following Illinois Tool Works, the burden of proof is on the party asserting an antitrust tying violation.