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Barry Brucker, president of a $5 million company in California that makes specialty inks, knew he was getting into deep water when he sued Illinois Tool Works, Inc., an $11 billion business, for antitrust violations under the Sherman Act. Brucker claimed that Illinois Tool Works’ Trident division was engaged in illegal “tying” by demanding that customers who buy its patented printheads also buy its unpatented ink � thereby shrinking the market for Brucker’s identical but cheaper ink. Seven years later, with his suit setting up a potential landmark decision by the U.S. Supreme Court, Brucker estimates he has businesses worth $5 trillion arrayed against him, including the likes of Verizon Communications Inc. and Pfizer Inc. Brucker knows he is in a fight for the life of his family business, Independent Ink. “When you are a small business owner, you have to wear a lot of hats,” Brucker says from his Gardena, California office. “I’m wearing my survival hat now.” If he loses, his own business is not the only one that may not survive; he estimates the entire aftermarket industry � makers of products ranging from razors to auto parts � will be devastated as patent holders shove them aside through tying arrangements, such as, if you buy our car, you have to buy our parts. The pharmaceutical industry will cash in too, says Brucker, by making life harder for generic manufacturers. Copyright holders, including moviemakers, will also join in, Brucker adds. “They’ll say to theater owners, if you want to show our blockbuster movie, you’ve got to take these dogs, too.” Illinois Tool Works, Inc. v. Independent Ink, Inc., set for argument December 6, is a standout among an otherwise middling term for business cases at the high court. Former solicitor general Seth Waxman of Wilmer Cutler Pickering Hale and Dorr described the business docket as “midgets” at a recent preterm briefing by the National Legal Center for the Public Interest in Washington, D.C. At the same event, his Republican successor, Theodore Olson, now with Gibson, Dunn & Crutcher, said � perhaps more diplomatically � “I don’t see a lot of high-visibility cases to write about.” That could change later this fall if the Court grants review in United States v. Philip Morris USA, Inc. et al., which asks whether, under the Racketeer Influenced and Corrupt Organizations Act (RICO), disgorgement of the tobacco industry’s ill-gotten profits is a possible remedy. But in the view of one Court advocate, Jeffrey Lamken at Baker Botts, the Independent Ink case (coupled with another Sherman Act case as well as Philip Morris and other RICO cases) makes for a broader theme. At a Washington Legal Foundation panel discussion, Lamken said, “This term may be known as the treble damages statute term,” referring to the business-bashing damages available under antitrust and RICO laws. The Independent Ink case has drawn such widespread business interest in part because, as Waxman says, “it comes at the very interesting intersection of competition law and intellectual property law.” Companies usually covet the exclusive rights that come with a patent or copyright. But under some hoary antitrust precedents, patents and copyrights can actually be a disadvantage in tying cases like the one before the Supreme Court. Why? Because under the 1962 decision United States v. Loew’s, if a product has a patent or copyright, it is presumed to have the requisite “market power” that makes it illegal to “tie” the sale of the patented product to another, even if, in the real world, the patent has no such clout. The U.S. Court of Appeals for the Federal Circuit labeled the Loew’s precedent and others related to it “wobbly and moth-eaten,” and federal antitrust enforcement authorities have long since abandoned the presumption. Nonetheless, the Federal Circuit said it was up to the Supreme Court or Congress to declare the presumption dead, so it ruled in favor of Independent Ink. The ink company did not have to affirmatively prove that Illinois Tool Works had market power, the ruling stated; it could be presumed from the patent on the printheads. That is what got the intellectual property community up in arms. Modern economic theory runs against the presumption, according to the numerous friend of the court briefs filed on the side of patent-holder Illinois Tool Works. “The presumption does not purport to be, nor can it be, grounded in economics, logic or experience,” writes Daniel Swanson of Gibson Dunn’s Los Angeles office in a brief filed for the Motion Picture Association of America and other entertainment industry groups. Hanging onto the presumption would be “an unfair burden imposed upon patent and copyright holders,” argues Gary Hoffman of Dickstein Shapiro Morin Oshinsky in D.C., on behalf of the Intellectual Property Owners Association. Upholding the federal circuit will “ripple through the intellectual-property-based segments of the nation’s economy,” according to a brief filed for Pfizer by Stephen Stack, Jr., of Dechert in Philadelphia. These groups argue that antitrust plaintiffs in cases should have to prove market power, and if they do, they can still make out an antitrust claim if the facts support it. But that position ignores the real world of litigation, says Brucker and his lawyer Edward O’Connor of O’Connor Christensen & McLaughlin in Irvine, California. Without the presumption, most antitrust claims would be difficult to prove, they say. Brucker offers an example of a printer-maker, such as Hewlett-Packard Company, which could, if the presumption is killed off, tie the sale of ink to purchase of its printer. But since HP has other competitors in the market, it might have only 30 percent market share � not enough for illegal market power, but more than enough to choke off sales to aftermarket ink makers. There is “hardly a business in America that won’t be affected by this case,” says O’Connor. Losing the presumption will be a “major obstacle” to bringing antitrust cases, he adds. Former Stanford Law School dean Kathleen Sullivan, now of counsel with Quinn Emanuel Urquhart Oliver & Hedges in Silicon Valley, has been brought in to argue for Independent Ink. Consumer groups, fearing the higher prices and restricted competition that go along with tying arrangements, are lining up on the side of Independent Ink. The general betting, however, is that the Supreme Court will side with Illinois Tool Works and ditch the presumption. “Only a small percentage of patents actually confer significant market power,” says solicitor general Paul Clement in a brief on ITW’s side. Arguing for the tool company will be another veteran advocate, Andrew Pincus of Mayer Brown Rowe & Maw. One wild card, however, may be the new chief justice John Roberts, Jr. He spent a long week in September pledging to the Senate Judiciary Committee that he would respect precedents � and he did not make an exception for “moth-eaten” ones. In addition, notes antitrust expert Roy Englert, Jr., partner at Robbins, Russell, Englert, Orseck & Untereiner in D.C., Roberts as a private practitioner “has much more of a pro-plaintiff background in antitrust cases. That has me worried.” Other business cases on the fall docket that were granted review last spring include: Shell game. Another Sherman Act case also has businesses alarmed, because it could severely restrict the flexibility of joint ventures, which are increasingly common in today’s economy. Shell Oil Company and Texaco launched a joint venture in 1998 that had the effect of ending competition between the two companies in the domestic gasoline market. Resulting efficiencies would save $800 million annually, the companies said. The two brands continued to be sold separately, but the prices were set by the joint venture. A class of 23,000 service station owners sued, claiming this “restraint of trade” was a per se violation of the Sherman Act. The U.S. Court of Appeals for the Ninth Circuit agreed in a ruling by Judge Stephen Reinhardt. Because the ruling thwarts legitimate joint ventures, the betting is on reversal. “This is a mistake by Judge Reinhardt that the Supreme Court will correct,” says Robbins, Russell’s Englert, author of a brief urging reversal. “The only question is which of the 17 reasons used by the judge, the Court will reverse on.” No date has been set for argument. Donning and doffing. It may not seem like much of an issue for those who arrive at the office already wearing their work clothes. But the question of whether time spent walking, waiting, donning and doffing related to required work clothes and equipment should be compensated is a big deal, especially in the poultry-and meat-processing industries. The issue was scheduled to be argued on the first day of the term October 3. Where does a bank live? In Wachovia Bank v. Schmidt, the issue is whether, for purposes of federal diversity jurisdiction, a bank is a resident of every state in which it does business. If so, banks may have a harder time getting cases removed from state to federal courts, where they prefer to litigate. Argument is set for November 28. Where does a landlord live? Christopher and Juanita Roche sued their landlord, Lincoln Property, over the harmful effects of mold in their Fairfax County, Virginia, apartment. The suit was filed in Virginia, but Lincoln, a subsidiary of a Texas company, had the case removed to federal court under federal diversity jurisdiction. The U.S. Court of Appeals for the Fourth Circuit ruled, however, that there was no federal court jurisdiction because Lincoln had not proven its non-Virginia citizenship. According to Lincoln’s lawyer David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel in D.C., if the Supreme Court reverses in Lincoln Property v. Roche, “this is going to be a case every first-year law student someday will be reading.” The case was set for argument October 11. Domino effect. After a deal between Domino’s Pizza and JWM Investments, Inc., to build restaurants in Las Vegas went sour, JWM’s president John McDonald sued Domino’s. McDonald, an African American, claimed Domino’s violated 42 USC 1981, which bars discrimination in private contracts. The Ninth Circuit said McDonald had standing to sue even though, strictly speaking, he was not a party to the contract. The Chamber of Commerce of the United States fears “horrendous implications” if such a broad view of standing is upheld. The case, set for argument December 6, is Domino’s Pizza v. McDonald. Buckeye state. When a class of Florida residents claimed that Buckeye Check Cashing Inc. was charging loan rates that violated state usury laws, the company tried to force the dispute into arbitration, citing the arbitration clause written into loan documents. But the class asserted � and the Florida Supreme Court agreed � that the arbitration clause cannot be enforced if the underlying contract is illegal. If that ruling is upheld in Buckeye Check Cashing, Inc. v. Cardegna, business groups claims the Federal Arbitration Act, which aims to resolve disputes quickly, will be thwarted. Argument is scheduled for November 29. Treble damages. One of this term’s RICO cases to watch is Bank of China v. NBM L.L.C. The New York branch of the Bank of China filed suit claiming that it had been defrauded on a massive scale by NBM and numerous other individuals and companies through use of fraudulent loan documents and the like. A federal jury agreed and awarded treble damages amounting to more than $100 million, as allowed by the RICO statute. But the losing parties appealed, claiming that an essential element of a RICO violation was missing. The victim, here the Bank of China, must show that its injury resulted from “reasonable reliance” on the misrepresentations. But NBM, noting that some of the bank’s employees were in on the scheme, says that reasonable reliance is impossible. The high court will hear the case in early 2006. Businesses will be watching, says Gene Schaerr of Winston & Strawn in D.C., because “civil RICO claims are a huge risk for companies,” and so far, “standards under RICO are very, very lax.” The Moonlight Cafe. For Jenifer Arbaugh, even before Hurricane Katrina, waitressing at the Moonlight Cafe in New Orleans was risky business. She claims the owner made lewd comments to her and reached his hand up her skirt. She led and filed a Title VII claim. After a federal trial jury found in her favor, the restaurant for the first time asserted that the court had no jurisdiction because it did not have 15 employees � the threshold for Title VII coverage. The issue before the Supreme Court is whether the 15-employee question is a jurisdictional issue, or whether it is an issue on the merits. That’s an important question for small businesses, says Winston & Strawn’s Schaerr, because if the issue is deemed jurisdictional, “small employers can dismiss these cases more quickly at the summary judgment stage.” The United States filed a brief on Arbaugh’s side. The case, Arbaugh v. Y & H Corp., was set for argument November 7, but it was put off because the hurricane swamped the office of one of the lawyers in the case. Tony Mauro is ALM’s Supreme Court correspondent.

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