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Ill. Tool Works Inc. v. Indep. Ink, Inc. - 547 U.S. 28, 126 S. Ct. 1281 (2006)

Rule:

In rejecting the application of a per se rule that all tying arrangements constitute antitrust violations, the United States Supreme Court has explained that it has condemned tying arrangements when the seller has some special ability--usually called "market power"--to force a purchaser to do something that he would not do in a competitive market. Application of the per se rule focuses on the probability of anticompetitive consequences. Any effort to enlarge the scope of the patent monopoly by using the market power it confers to restrain competition in the market for a second product will undermine competition on the merits in that second market.

Facts:

Petitioners, Trident, Inc., and its parent, Illinois Tool Works Inc., manufactured and marketed printing systems that include three relevant components: (1) a patented piezoelectric impulse ink jet print-head; (2) a patented ink container, consisting of a bottle and valved cap, which attached to the print-head; and (3) specially designed, but unpatented, ink. Petitioners were selling their systems to original equipment manufacturers (OEMs) who were licensed to incorporate the print-heads and containers into printers that were in turn sold to companies for use in printing barcodes on cartons and packaging materials. The OEMs agreed that they will purchase their ink exclusively from petitioners, and that neither they nor their customers would refill the patented containers with ink of any kind. Respondent, Independent Ink, Inc., developed an ink with the same chemical composition as the ink sold by petitioners. After an infringement action brought by Trident against Independent was dismissed for lack of personal jurisdiction, Independent filed suit against Trident seeking a judgment of non-infringement and invalidity of Trident's patents. In an amended complaint, it alleged that petitioners were engaged in illegal tying and monopolization in violation of §§ 1 and 2 of the Sherman Act. Granting petitioners’ summary judgment, the District Court rejected respondent's argument that petitioners necessarily have market power as a matter of law by virtue of the patent on their print-head system, thereby rendering the tying arrangements per se violations of the antitrust laws. On appeal, the U.S. Court of Appeals for the Federal Circuit reversed the summary judgment. Consequently, the petitioners appealed.

Issue:

Was Independent Ink, Inc. required to prove that petitioners Trident, Inc. and Illinois Tool Works, Inc. have the market power in the tying product before the Court can grant a judgment of non-infringement and invalidity of Trident's patents?

Answer:

Yes.

Conclusion:

The Court held that in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product. While some such arrangements were still unlawful, such as those that were the product of a true monopoly or a market-wide conspiracy, that conclusion had to have been supported by proof of power in the relevant market rather than by a mere presumption thereof. The court recognized that many tying arrangements, even those involving patents and requirements ties were fully consistent with a free, competitive market.

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