U.S. Supreme Court limits claims of patent market power

A unanimous Supreme Court has ruled that a company does not automatically gain market power, for antitrust purposes, merely because it holds a patent on a product and ties to it the sales of another product that is not patented. Instead, the Court opined that the challenger in such a case must actually prove that the patent holder has market power in the tying product. The Court’s opinion is an important one for agriculture given the tremendous increase in the patenting of seeds in recent years.   

Justice Stevens stated that, “[A]ny conclusion that an arrangement is unlawful must be supported by proof of power in the relevant market rather than by a mere presumption thereof.”  The Court cast aside not only the notion that patent tie-ins are always illegal under the Sherman Act, but also the suggestion that there should be a rebuttable presumption that they are illegal. “Congress, the antitrust enforcement agencies, and most economists have all reached the conclusion that a patent does not necessarily confer market power upon the patentee,” Stevens wrote. “Today, we reach the same conclusion, and therefore hold that, in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.”  A presumption that holding a patent gives a company market power arose outside the antitrust context as part of the “patent misuse” doctrine that dates to a 1917 Supreme Court opinion. The Court noted that the connection has since eroded and the Congress had eliminated the presumption of illegitimacy from the patent field. The Court’s opinion removes the presumption from the antitrust context, where it originated in a 1947 opinion of the Court. While not expressly overruling the 1947 opinion, the Court clearly abandoned it. The case at bar involved a company that had a patent on an ink-dispensing technology (the company had obtained a patent on a system connecting printheads and single-use bottles containing printer ink). The license to use the patent bars anyone from refilling the ink bottles. The patent holder sued another company claiming that the other company refilled empty ink bottles with its own ink in violation of its license to use the patented system. The defendant countered with a claim of an illegal tie-in under the Sherman Act, claiming that the patent gave the plaintiff market power, and that it had tied access to that system to purchases of the plaintiff’s ink. While the Court would not presume the patent bestowed market power on the plaintiff, the Court did remand the case to the lower courts to allow the defendant an opportunity to prove its claim of market power in the patented system. Illinois Tool Works v. Independent Ink, 126 S.Ct. 1281 (2006).