By Audrey Millemann

This month, the United States Supreme Court has held that owning a patent is not equivalent to having a monopoly. It may be, but it is not necessarily so. In Illinois Tool Works Inc. v. Independent Ink, Inc., 2006 WL 468729 (March 1, 2006), the Court reversed its long-standing rule (in place since 1947) that a tying arrangement involving a patented product is per se illegal. This is a significant victory for patent owners.

Illinois Tool Works involved three products: a patented inkjet printhead, a patented ink container, and an unpatented ink. All three products were used by the patent owner, Illinois Tool Works, in manufacturing its printing systems. In selling its printing systems, Illinois Tool Works required its purchasers to agree to purchase ink only from Illinois Tool Works. Independent Ink sold a competing ink.

After a patent infringement action by Illinois Tool Works against Independent Ink was dismissed, Independent Ink sued Illinois Tool Works for invalidity of the patent based on an illegal tying arrangement and monopoly under �߬� 1 and 2 of the Sherman Act. The district court granted Illinois Tool Works’ motion for summary judgment, finding that Independent Ink had not provided any evidence that Illinois Tool Works had market power in the market for the patented products. The Court of Appeals for the Federal Circuit reversed, holding that Supreme Court case law required the application of the per se rule to a tying arrangement involving a patented product. in restraint of trade

In deciding Illinois Tool Works, the Court reviewed the history of tying arrangements. One of the earliest cases was a patent infringement case, Henry v. A.B. Dick Co., 224 U.S. 1 (1912). In that case, the Court held that a patent was infringed by a competitor’s use of unpatented products in violation of a license agreement. The dissent argued that the patent owner’s conduct was an unlawful extension of the patent monopoly to unpatented products.

Shortly thereafter, the Court decided Motion Picture Patents Co. v. Universal Film Manufacturing Co., 243 U.S. 502 (1917). In that case, the Court established patent misuse as an affirmative defense to a claim for patent infringement. Several cases followed, including Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942), in which the Court continued to develop the defense of patent misuse. The Court’s rationale was that tying arrangements were used by patent owners to obtain a monopoly over an unpatented product, and always constituted restraints of competition.

The patent misuse defense evolved into a per se rule that the Court applied to antitrust cases involving tying arrangements for patented products. In International Salt Co. v. United States, 332 U.S. 392 (1947), the Court held that a tying arrangement involving a patented device was per se illegal under ��3 of the Clayton Act and ��1 of the Sherman Act. The Court did not address the relevant market or the patent owner’s market power; the patent owner was presumed to have the requisite market power.

In later cases, however, the Court cut back on the per se rule, requiring proof that the seller had sufficient economic power in the market for the tying product to restrain competition in the market for the tied product. Patent cases were the exception – they were still analyzed under the per se rule. The rule was premised on the view that a patent owner had already obtained a monopoly and therefore should be presumed to also have the economic power to force purchasers to buy a product that they otherwise would not buy. In United States v. Loew’s Inc., 371 U.S. 38 (1962), the Court explained:

Per se condemnation – condemnation without inquiry into actual market conditions – is only appropriate if the existing of forcing is probable. Thus, application of the per se rule focuses on the probability of anticompetitive consequences…For example, if the Government has granted the seller a patent or similar monopoly over a product, it is fair to presume that the inability to buy the product elsewhere gives the seller market power.

In 1988, Congress amended the patent statute to eliminate the per se rule in connection with the defense of patent misuse. 35 U.S.C. section 271(d)(5) states:

No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following: … (5) conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product, unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned.

Thus, tying arrangements involving the license of a patented product and an unpatented product are not presumed to constitute patent misuse; the party asserting the defense must prove that the patent owner has economic power in the market for the patented product.

In Illinois Tool Works, the Court finally put an end to the per se rule for tying cases involving patents. The Court declined to adopt a rule based on a rebuttable presumption that patent owners have sufficient market power to restrain competition, as Independent Ink proposed. Instead, the Court held that an antitrust plaintiff must show that a patent owner has sufficient economic power in the market for the patented product to restrain competition in the market for the tied product. In quoting Professor Areeda, a leading antitrust commentator, the Court could not have been any clearer that the per se rules is dead: “[t]here is no economic basis for inferring any amount of market power from the mere fact that the defendant holds a valid patent.”

The Court held:

Many tying arrangements, even those involving patents and requirements ties, are fully consistent with a free, competitive market…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. 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.

Audrey Millemann is a shareholder in Weintraub Genshlea Chediak Tobin & Tobin’s Intellectual Property and Disputes, Trials and Appeals sections. A business litigator and registered patent attorney, her practice focuses on intellectual property, unfair competition and antitrust matters. For more articles on IP law, please visit