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Acting in a case at the intersection of patent and antitrust law, the U.S. Supreme Court on March 1 issued a ruling that makes it harder for upstart companies and generic manufacturers to challenge patent holders’ power in the marketplace. The 8-to-0 decision, written by Justice John Paul Stevens, overturns a 1947 decision that was issued when Stevens was a law clerk for the late Justice Wiley Rutledge. Rutledge voted in the majority. The March decision said that a patent on a product does not automatically mean that the patent holder has market power of the type that would trigger an antitrust “tying” violation. Tying occurs when a seller conditions its sale of one product on the purchase of another. Without the presumption, the ruling means competitors will have to actually prove that the patent holder has market power � an uphill battle that critics say will put many patent-related tying arrangements beyond legal challenge. The ruling also has a spillover effect on copyright law. For example, movie theater owners warned the Court that if the presumption was removed, they could be forced to buy and show unwanted movies along with the titles they do want to show. On the other side, Daniel Swanson of Gibson Dunn & Crutcher, who wrote a brief in the case for copyright holders including the Motion Picture Association of America, says, “The Court’s holding has enormous significance for successful individual and corporate holders of intellectual property rights who might be confronted with antitrust suits as a result of their use of package marketing arrangements that make economic sense and are pro- consumer.” The case before the Court was Illinois Tool Works v. Independent Ink. Illinois Tool Works defended tying its sale of unpatented ink to the sale of patented machinery that prints bar codes on packages. Independent Ink, which sells ink that works with the machines, challenged the tying arrangement as an antitrust violation. “This is a huge victory for big business and a sad day for the consumer, small business, and fair-market competition,” says Barry Brucker, president of the California-based Independent Ink. “Consumers and small businesses will be penalized because large companies will have a free license to tie with virtually no consequences at all.” The case returns to lower courts where the ink company will have to produce evidence of market power, which Brucker says is ample. Andrew Pincus of Mayer, Brown, Rowe & Maw, who represented Illinois Tool Works, notes that the Stevens ruling says that tied products can sometimes be good for consumers, and those that are not can still be challenged in the same way that other types of tying arrangements are challenged. “Arrangements involving patented goods will not be deterred by a fear of unjustified antitrust liability,” says Pincus, “while plaintiffs who suffer competitive injury will be able to prove their case and recover damages � just like in every other tying case.” Stevens’s opinion offered extensive details on the 1947 precedent International Salt Co. v. United States, suggesting that he still remembers working on the case. It was the first to apply the market-power presumption in an antitrust context. But Stevens also charted the gradual drift away from the precedent by academics, practitioners, and even the government. The Federal Trade Commission in 1995 said it would no longer presume market power in its enforcement actions. “Congress, the antitrust enforcement agencies, and most economists have all reached the conclusion that a patent does not confer market power upon the patentee,” Stevens wrote. “Today, we reach the same conclusion.” A version of this story originally appeared in Legal Times, a sibling publication of Corporate Counsel.

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