Illinois Tool Works v. Independent Ink

Citation: Independent Ink, Inc. v. Trident, Inc. 210 F. Supp.2d 1155 (C.D. Cal. 2002), rev’d sub nom. Independent Ink, Inc. v. Illinois Tool Works Inc., 396 F.3d 1342 (Fed. Cir. 2005), rev’d, Illinois Tool Works, Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006).

Factual Background
This case involved the practice of Trident (a subsidiary of Illinois Tool Works) of selling its patented printing systems (consisting of patented ink jet printheads and patented ink containers) to manufacturers of printers only on the condition that those manufacturers (and their customers) agree to purchase their ink exclusively from Trident, although such ink itself is unpatented. Independent Ink, a competitor manufacturer of ink that could be used in those printheads, sued Trident, alleging that Trident’s practice was an illegal tying arrangement and monopolization in violation of federal antitrust laws. Traditionally, for tying to constitute an antitrust violation, the plaintiff must affirmatively establish that the defendant has market power (i.e., control over the market in which his product competes). Independent Ink asserted that Trident “necessarily ha[d] market power in the market for the tying product [printheads] as a matter of law” solely by virtue of its patent on the printhead system.

Trial Court Decision
The U.S. District Court for the Central District of California rejected that claim and found that there had been no affirmative evidence of the relevant market nor of Trident’s position in it. Thus, the court granted summary judgment in favor of Trident.

Federal Circuit Decision
In January 2005, the Federal Circuit reversed the district court’s decision, holding that “a rebuttable presumption of market power arises from the possession of a patent over a tying product.” In so ruling, the appellate court emphasized that it had a “duty. . . to follow the precedents of the Supreme Court until the Court itself chooses to expressly overrule them.” The Supreme Court has held for more than sixty years that where a patented product was the “tying” product, there was a presumption that the existence of a patent monopoly creates sufficient market power to support an antitrust violation. Congress, however, rejected this presumption for purposes of establishing the patent misuse defense when it amended the Patent Act in 1988. Yet neither Congress nor the Supreme Court had decided whether the presumption remained in antitrust jurisprudence when the tying product is patented.

U.S. Supreme Court Decision
In March 2006, the Supreme Court vacated the Federal Circuit’s judgment without dissent, holding that “the mere fact that a tying product is patented does not support such a presumption.” The Court explained that its reevaluation of its precedents establishing the per se rule was prudent in light of Congress’s narrowing of the patent misuse defense, as well as the “vast majority of academic literature” that had extensively criticized the “patent equals market power” presumption. Thus, the Court in this case eliminated the presumption in antitrust law and stated that “in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.”