Rebuttable Presumption of Market Power and Per Se Illegality in Antitrust Actions in Which Patented Tying Product is Tied to Unpatented Tied Product

Trident owns U.S. patent no. 5,343,226, which claims a patent on an ink jet device and supply system used in the manufacture of printers.  Trident also manufactures ink for use in the patented ink jet device.  In licensing agreements with OEM manufacturers to use the patented ink jet device, Trident required the OEM manufacturers to purchase from Trident the ink used to refill the licensed ink jet devices.  A competitor, Independent Ink, sued Trident claiming that the license agreements constitutes a per se illegal tying arrangement in violation of the Sherman Act, 15 U.S.C. §1 et seq.  Specifically, Independent Ink asserted that license illegally tied the licensing of the patented ink jet with the purchase of unpatented ink.  While the District Court held that such tying arrangements require a showing of market power in the market for the patented ink jet device, the Federal Circuit overturned the District Court’s decision.  Specifically, the Federal Circuit noted that, as required by the Supreme Court in Jefferson Parish Hospital District No. 2 v. Hyde, 466 US 2, 16 (1984) and International Salt Co. v. United States, 332 US 392 (1947), where the tying product is patented, there is a presumption of market power in the tying market.  The Federal Circuit specifically noted that, in comparison with recent trends to require a showing of market power for non-patented tying goods, the treatment of patented tying products and the presumption of market power has been “more consistent” than for unpatented products.  (Opinion at Pg. 8).  As such, while there is considerable criticism of the presumption of market power for patented products and while the prosecutorial guidance set forth in the Department of Justice’s Antitrust Guidelines for the Licensing of Intellectual Property (1995) indicates that no presumption of market power exists based only upon a patent, this criticism and exercise of prosecutorial guidance “does not affect the validity of the Supreme Court’s decisions in International Salt and United States v. Loew’s Inc., 371 US 38 (1962)]” such that both International Salt and Loew’s remain good law.  (Opinion at Pgs. 13 and 14, n. 10).  Therefore, the Federal Circuit held that Independent Ink did not need to prove market power in the market of the patented tying product.  However, the Federal Circuit held that, while there is a presumption of market power in the patented tying product, the patent owner Trident is entitled to present evidence to rebut the presumption. Independent Ink, Inc. v. Illinois Tool Works, Inc., et al., Civ Case No. 04-1196 (Fed. Cir. January 25, 2005).

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