Federal Circuit Reaffirms Rule that Patent Raises Rebuttable Presumption of Market Power

The Federal Circuit recently reaffirmed the unique - most would say antiquated - rule that possession of a patent raises a rebuttable presumption of market power in a tying case under Sherman Act 1. Independent Ink, Inc. v. Illinois Tool Works, Inc., No. 04-1196, 2005 U.S. App. LEXIS 1205 (Fed. Cir. 1/25/2005). To read the full decision in PDF format, please click the following link: http://fedcir.gov/opinions/04-1196.pdf.

The rule that possession of a patent creates a rebuttable presumption of market power was endorsed more than two decades ago by a plurality of the Supreme Court in Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1984). The Federal Circuit declined to follow more recent precedent from the lower courts rejecting this presumption and significant academic criticism of the rule.

The Federal Circuit recognized that Congress abrogated a similar rebuttable presumption of market power in patent misuse defenses based on patent tying, but the court determined that Congress expressly considered and declined to abrogate the presumption for affirmative antitrust tying claims.

Nonetheless, the Federal Circuit implicitly acknowledged that the precedent establishing the rebuttable presumption "contains many infirmities" and concluded that "the time may have come to abandon the doctrine, but it is up to the Congress or Supreme Court to make this judgment."

The Federal Circuit's decision has potentially significant implications for patent holders. Federal Circuit law applies nationwide, and the Independent Ink decision increases the risk of antitrust claims against patent holders who bundle or otherwise link sales of patented products and nonpatented products. While the Federal Circuit's decision does not directly address tying claims involving copyrights, the court in dicta expressly extended the rationale behind its decision to products protected by copyright and "intellectual property" generally.

Background

Independent Ink, Inc. ("Independent Ink") is an independent distributor and supplier of printer ink products. Illinois Tool Works, Inc. ("Illinois Tool") manufactures patented inkjet printheads, patented ink containers and non-patented ink for use in connection with its printheads and ink containers. Illinois Tool licenses its patented products to original equipment manufacturers ("OEMs") as a package, and the patent license agreements require OEMs using Illinois Tool's printheads and ink containers to purchase their...