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Illinois Tool Works Inc. et al. v. Independent Ink, Inc.

Supreme Court of United States
547 U.S. 28 (2006)
ELI5:

Rule of Law:

In antitrust tying arrangement cases under Section 1 of the Sherman Act, the mere fact that a tying product is patented does not create a presumption of market power; the plaintiff must affirmatively prove that the defendant possesses market power in the relevant market for the tying product.


Facts:

  • Illinois Tool Works Inc., through its subsidiary Trident, Inc., manufactured and sold printing systems.
  • These systems included a patented piezoelectric impulse inkjet printhead and a patented ink container.
  • The ink used in the system was specially designed but was not patented.
  • Illinois Tool Works licensed its systems to original equipment manufacturers (OEMs) who incorporated them into larger printers.
  • The licensing agreements required the OEMs to purchase their ink exclusively from Illinois Tool Works.
  • The agreements also prohibited the OEMs and their customers from refilling the patented ink containers with ink from any other source.
  • Independent Ink, Inc. developed an ink with the same chemical composition as the ink sold by Illinois Tool Works.

Procedural Posture:

  • Independent Ink, Inc. filed suit against Trident, Inc. in the U.S. District Court for the Central District of California, alleging illegal tying in violation of Section 1 of the Sherman Act.
  • The District Court granted summary judgment for Trident, concluding that Independent Ink had failed to present any evidence of Trident's market power in the tying product market.
  • Independent Ink, as appellant, appealed the decision to the U.S. Court of Appeals for the Federal Circuit.
  • The Court of Appeals reversed the District Court, holding that it was bound by Supreme Court precedent which established a presumption of market power for a patented tying product.
  • Illinois Tool Works Inc. and Trident, Inc., as petitioners, successfully petitioned the U.S. Supreme Court for a writ of certiorari.

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Issue:

Does a patent on a tying product create a presumption of market power in an antitrust tying claim under Section 1 of the Sherman Act?


Opinions:

Majority - Justice Stevens

No. The mere fact that a tying product is patented does not support a presumption of market power in an antitrust tying claim. The Court's reasoning is threefold. First, the presumption of market power originated in the patent misuse doctrine, not antitrust law, and its theoretical underpinnings have since been eroded. Second, Congress eliminated this presumption in the patent misuse context with a 1988 amendment to the Patent Act (35 U.S.C. § 271(d)), making it anomalous to preserve the presumption in the more severe context of antitrust law. Third, the consensus among modern economists and antitrust enforcement agencies is that a patent—which can be granted for a minor, commercially insignificant innovation—does not necessarily confer market power. Therefore, tying arrangements involving patented products must be evaluated under the rule of reason, which requires the plaintiff to provide affirmative proof of the defendant's power in the relevant market.



Analysis:

This unanimous decision explicitly overrules a half-century of precedent established in cases like International Salt, which presumed market power from the existence of a patent in a tying arrangement. The ruling significantly increases the burden on plaintiffs in such antitrust cases, as they can no longer rely on the patent as a shortcut to establishing market power. By requiring affirmative proof, the Court aligns antitrust doctrine with modern economic theory and recent congressional amendments to patent law, reflecting a broader judicial trend away from per se rules and toward a more fact-intensive rule of reason analysis in antitrust jurisprudence.

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