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A recent ruling from the U.S. Court of Appeals for the Federal Circuit confronted a controversial issue in an area where intellectual property and antitrust law intersect. In overruling a lower court, the Federal Circuit panel held that when a party holds a patent over a so-called tying product, the law establishes a rebuttable presumption of market power for antitrust purposes. A tying arrangement occurs when a seller conditions the purchase of one product with an obligation to purchase a second, tied, product. In this case, the defendant obligated buyers to purchase ink (the tied product) along with its printers (the tying product). Illinois Tool Works held a patent for a device used to print bar codes on cartons. Its contracts required purchasers of its printers to use the ink it manufactured exclusively. Unlike the printers, the ink was not patented. Independent Ink also produced ink usable with Illinois Tool’s printers. It sued claiming the contracts Illinois Tool deployed amounted to a tying arrangement, a violation of �1 of the Sherman Act. The lower court based in California held on a summary judgment motion that there was no antitrust violation because Independent Ink had failed to show that Illinois Tool had the requisite market power over the tying product. But the Federal Circuit panel in Independent Ink v. Illinois Tool Works, 04-1196, disagreed. The opinion by Judge Timothy Dyk, joined by Judges Raymond Clevenger III and Sharon Prost, analyzed several U.S. Supreme Court cases and held that “patent and copyright tying, unlike other tying cases, do not require an affirmative demonstration of market power.” In other words, “the necessary market power to establish a section 1 violation is presumed,” he said. The panel went to some lengths to support its ruling, rejecting several interpretations of U.S. Supreme Court precedent offered by defendants that were largely accepted by the lower court. The Supreme Court’s doctrine, Judge Dyk acknowledged, “has been subject to heavy criticism” by academics and other circuits. “The fundamental error in all of defendants’ arguments is that they ignore the fact that it is the duty of a court of appeals to follow the precedents of the Supreme Court until the Court itself chooses to expressly overrule them,” Dyk said. “The time may have come to abandon the doctrine,” Dyk wrote, “but it is up to the Congress or the Supreme Court to make this judgment.” The panel found no direct precedent for the specific issue of whether this presumption of market power can be rebutted by the defendant. The court held the presumption to be rebuttable. Outlining the scope of the market, which is critical to antitrust analysis, Dyk wrote that “a patent presumptively defines the relevant market as the nationwide market for the patented product.” The panel noted that the presumption of market power did not amount to a presumption of monopoly power needed for a �2 Sherman Act claim. Dyk remanded the case to the lower court for further proceedings allowing Illinois Tool to rebut the presumption of market power. Edward O’Connor of Levin & O’Connor, of Laguna Beach, Calif., represented Independent Ink. Jordan Sigale of Sonnenschein Nath & Rosenthal’s Chicago office represented Illinois Tool.

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