Federal Circuit Holds Patent Over Tying Product Creates Rebuttable Presumption Of Market Power In Antitrust Tying Action

On January 25, 2005, the Federal Circuit held, in Independent Ink, Inc. v. Illinois Tool Works, Inc., No. 04- 1196, 2005 WL 147399 (Fed. Cir. Jan. 25, 2005), that, in the context of a "tying" claim under the antitrust laws, a patentee's intellectual property rights trigger a presumption that the patent owner has market power over the patentee's product.

Tying arrangements usually refer to coercive bundling practices, whereby a supplier will only sell a desired, highly demanded product if the purchaser also agrees to buy a second, less-desirable product from the supplier. To prove a tying arrangement in violation of Section 1 of the Sherman Act, a plaintiff must establish the following elements: 1) two distinct productsone "tying" product and one "tied" product; 2) an agreement to sell the tying product only on the condition that the tied product is also purchased; 3) market power in the tying product market; and 4) the tied product involves a "not insubstantial" amount of interstate commerce. Under Independent Ink , a plaintiff can prove the third element simply by establishing that the tying product is patented.

The Federal Circuit felt bound to follow the somewhat dated and often criticized Supreme Court precedent. That precedent, however, conflicts with the more contemporary and widely held beliefs that intellectual property rights do not necessarily confer market power nor should they give rise to a presumption of market power, a belief expressed by the Federal Circuit in non-tying Sherman Act cases. Indeed, the last occasion the Federal Circuit addressed the issue, it expressly held that the "[m]ere possession of a patent, or a family of patents, does not establish a presumption of antitrust market power." Schlafly v. Caro-Kann Corp., No. 98-1005, 1998 WL 205766, at *7 (Fed. Cir. Apr. 28, 1998). In this case, the Federal Circuit acknowledged that although "[t]he time may have come to abandon the doctrine,it is up to the Congress or the Supreme Court to make this judgment." Independent Ink, Inc., 2005 WL 147399, at *7. By this decision, the Federal Circuit may have set the stage for the Supreme Court to bring the law in line with modern thinking. In the meantime, intellectual property owners that offer their products in bundles or package arrangements face a greater risk of litigation and of those arrangements being found illegal.

Background

Plaintiff Independent Ink, Inc. ("Independent") appealed the district court's grant of summary...