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

• Decision Date: 01 March 2006
• Docket Number: No. 04-1329.,04-1329.
• Citation: 126 S. Ct. 1281,164 L. Ed. 2d 26,547 U.S. 28
• Parties: ILLINOIS TOOL WORKS INC. ET AL. <I>v.</I> INDEPENDENT INK, INC.
• Court: U.S. Supreme Court

547 U.S. 28

126 S. Ct. 1281

164 L. Ed. 2d 26

ILLINOIS TOOL WORKS INC. ET AL.

v. INDEPENDENT INK, INC.

No. 04-1329.

Supreme Court of United States.

Argued November 29, 2005.

Decided March 1, 2006.

Petitioners manufacture and market printing systems that include a patented printhead and ink container and unpatented ink, which they sell to original equipment manufacturers who agree that they will purchase ink exclusively from petitioners and that neither they nor their customers will refill the patented containers with ink of any kind. Respondent developed ink with the same chemical composition as petitioners' ink. After petitioner Trident's infringement action was dismissed, respondent filed suit seeking a judgment of noninfringement and invalidity of Trident's patents on the ground that petitioners are 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 printhead system, thereby rendering the tying arrangements per se violations of the anti-trust laws. After carefully reviewing this Court's tying-arrangements decisions, the Federal Circuit reversed as to the § 1 claim, concluding that it had to follow this Court's precedents until overruled by this Court.

Held: Because a patent does not necessarily confer market power upon the patentee, in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product. Pp. 33-46.

(a) Over the years, this Court's strong disapproval of tying arrangements has substantially diminished, as the Court has moved from relying on assumptions to requiring a showing of market power in the tying product. The assumption in earlier decisions that such "arrangements serve hardly any purpose beyond the suppression of competition," Standard Oil Co. of Cal. v. United States, 337 U. S. 293, 305-306, was rejected in United States Steel Corp. v. Fortner Enterprises, Inc., 429 U. S. 610, 622 (Fortner II), and again in Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S. 2, both of which involved unpatented tying products. Nothing in Jefferson Parish suggested a rebuttable presumption of market power applicable to tying arrangements involving a patent on the tying good. Pp. 33-38.

(b) The presumption that a patent confers market power arose outside the antitrust context as part of the patent misuse doctrine, and migrated to antitrust law in International Salt Co. v. United States, 332 U. S. 392. See also Morton Salt Co. v. G. S. Suppiger Co., 314 U. S. 488; United States v. Loew's Inc., 371 U. S. 38. Pp. 38-40.

(c) When Congress codified the patent laws for the first time, it initiated the untwining of the patent misuse doctrine and antitrust jurisprudence. At the same time that this Court's antitrust jurisprudence continued to rely on the assumption that tying arrangements generally serve no legitimate business purpose, Congress began chipping away at that assumption in the patent misuse context from whence it came. Then, four years after Jefferson Parish repeated the presumption that patents confer market power, Congress amended the Patent Code to eliminate it in the patent misuse context. While that amendment does not expressly refer to the antitrust laws, it invites reappraisal of International Salt's per se rule. After considering the congressional judgment reflected in the amendment, this Court concludes that tying arrangements involving patented products should be evaluated under the standards of cases like Fortner II and Jefferson Parish rather than the per se rule in Morton Salt and Loew's. Any conclusion that an arrangement is unlawful must be supported by proof of power in the relevant market rather than by a mere presumption thereof. Pp. 40-43.

(d) Respondent's alternatives to retention of the per se rule—that the Court endorse a rebuttable presumption that patentees possess market power when they condition the purchase of the patented product on an agreement to buy unpatented goods exclusively from the patentee, or differentiate between tying arrangements involving requirements ties and other types of tying arrangements—are rejected. Pp. 43-46.

(e) Because respondent reasonably relied on this Court's prior opinions in moving for summary judgment without offering evidence of the relevant market or proving petitioners' power within that market, respondent should be given a fair opportunity to develop and introduce evidence on that issue, as well as other relevant issues, when the case returns to the District Court. P. 46.

396 F. 3d 1342, vacated and remanded.

STEVENS, J., delivered the opinion of the Court, in which all other Members joined, except ALITO, J., who took no part in the consideration or decision of the case.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

Andrew J. Pincus argued the cause for petitioners. With him on the briefs were Richard J. Favretto, Christopher J. Kelly, Nickolai G. Levin, and Stewart S. Hudnut.

Deputy Solicitor General Hungar argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Clement, Acting Assistant Attorney General Barnett, Jeffrey P. Minear, Catherine G. O'Sullivan, Steven J. Mintz, Frances Marshall, John M. Whealan, Cynthia C. Lynch, and Thomas Krause.

Kathleen M. Sullivan argued the cause for respondent. With her on the briefs were Daniel H. Bromberg, Margret M. Caruso, Elizabeth B. Wydra, and Edward F. O'Connor.^*

JUSTICE STEVENS delivered the opinion of the Court.

In Jefferson Parish Hospital Dist. No. 2 v. Hyde, 466 U. S. 2 (1984), we repeated the well-settled proposition that "if the Government has granted the seller a patent or similar monopoly over a product, it is fair to presume that the inability to buy the product elsewhere gives the seller market power." Id., at 16. This presumption of market power, applicable in the antitrust context when a seller conditions its sale of a patented product (the "tying" product) on the purchase of a second product (the "tied" product), has its foundation in the judicially created patent misuse doctrine. See United States v. Loew's Inc., 371 U. S. 38, 46 (1962). In 1988, Congress substantially undermined that foundation, amending the Patent Act to eliminate the market power presumption in patent misuse cases. See 102 Stat. 4676, codified at 35 U. S. C. § 271(d). The question presented to us today is whether the presumption of market power in a patented product should survive as a matter of antitrust law despite its demise in patent law. We conclude that the mere fact that a tying product is patented does not support such a presumption.

I

Petitioners, Trident, Inc., and its parent, Illinois Tool Works Inc., manufacture and market printing systems that include three relevant components: (1) a patented piezoelectric impulse ink jet printhead; (2) a patented ink container, consisting of a bottle and valved cap, which attaches to the printhead; and (3) specially designed, but unpatented, ink. Petitioners sell their systems to original equipment manufacturers (OEMs) who are licensed to incorporate the printheads and containers into printers that are in turn sold to companies for use in printing barcodes on cartons and packaging materials. The OEMs agree that they will purchase their ink exclusively from petitioners, and that neither they nor their customers will refill the patented containers with ink of any kind.

Respondent, Independent Ink, Inc., has 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 noninfringement and invalidity of Trident's patents.¹ In an amended complaint, it alleged that petitioners are engaged in illegal tying and monopolization in violation of §§ 1 and 2 of the Sherman Act. 15 U. S. C. §§ 1, 2.

After discovery, the District Court granted petitioners' motion for summary judgment on the Sherman Act claims. Independent Ink, Inc. v. Trident, Inc., 210 F. Supp. 2d 1155, 1177 (CD Cal. 2002). It rejected respondent's submission that petitioners "necessarily have market power in the market for the tying product as a matter of law solely by virtue of the patent on their printhead system, thereby rendering [the] tying arrangements per se violations of the antitrust laws." Id., at 1159. Finding that respondent had submitted no affirmative evidence defining the relevant market or establishing petitioners' power within it, the court concluded that respondent could not prevail on either antitrust claim. Id., at 1167, 1173, 1177. The parties settled their other claims, and respondent appealed.

After a careful review of the "long history of Supreme Court consideration of the legality of tying arrangements," 396 F. 3d 1342, 1346 (2005), the Court of Appeals for the Federal Circuit reversed the District Court's decision as to respondent's § 1 claim, id., at 1354. Placing special reliance on our decisions in International Salt Co. v. United States, 332 U. S. 392 (1947), and Loew's, 371 U. S. 38, as well as our Jefferson Parish dictum, and after taking note of the academic criticism of those cases, it concluded that the "fundamental error" in petitioners' submission was its disregard of "the duty of a court of appeals to follow the precedents of the Supreme Court until the Court itself chooses to expressly overrule them." 396 F. 3d, at 1351. We granted certiorari to undertake a fresh examination of the history of both the judicial and legislative appraisals of tying arrangements. 545 U. S. 1127 (2005). Our review is informed by extensive scholarly comment and a change in position by the...