Opinion · Supreme Court of the United States
ILLINOIS TOOL WORKS v. INDEPENDENT INK, 547 U.S. 28 (2006)
547 U.S. 28
- Type
- Opinion
- Court
- Supreme Court of the United States
- Jurisdiction
- Federal
- Date
- 2006-03-01
- Topic
- general
ILLINOIS TOOL WORKS v. INDEPENDENT INK, 547 U.S. 28 (2006) 126 S.Ct. 1281 ILLINOIS TOOL WORKS INC. ET AL. v. INDEPENDENT INK, INC. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THEFEDERAL CIRCUIT No. 04-1329.
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ILLINOIS TOOL WORKS v. INDEPENDENT INK,547 U.S. 28(2006)
126 S.Ct. 1281
ILLINOIS TOOL WORKS INC. ET AL. v. INDEPENDENT INK, INC.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE
FEDERAL CIRCUIT
No. 04-1329.
Argued November 29, 2005.
Decided March 1, 2006.
(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. ofCal.v.United States,337 U.S. 293,305-306, was rejected inUnited States Steel Corp.v.Fortner Enterprises, Inc.,429 U.S. 610,622(FortnerII), and again inJefferson Parish Hospital Dist. No.2v.Hyde,466 U.S. 2, both of which involved unpatented tying products. Nothing inJefferson Parishsuggested a rebuttable presumption of market power applicable to tying arrangements involving a patent on the tying good. Pp. 33-38.Page 29
(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 inInternationalSalt Co.v.United States,332 U.S. 392. See alsoMorton Salt Co.v.G. S. Suppiger Co.,314 U.S. 488;United Statesv.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 afterJefferson Parishrepeated 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 ofInternational Salt's per serule. 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 likeFortner IIandJeffersonParishrather than theper serule inMortonSaltandLoew'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 theperserule — 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.
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.Page 32Petitioners sell their systems to original equipment manufacturers (OEMs) who are licensed to incorporate the print-heads 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.1In 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.IndependentInk, 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 arrangementsper seviolations 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 thePage 33Federal Circuit reversed the District Court's decision as to respondent's § 1 claim,id., at 1354. Placing special reliance on our decisions inInternational SaltCo.v.United States,332 U.S. 392(1947), andLoew's,371 U.S. 38, as well as ourJeffersonParishdictum, 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 administrative agencies charged with enforcement of the antitrust laws.
II
American courts first encountered tying arrangements in the course of patent infringement litigation. See,e.g.,Heaton-Peninsular Button-Fastener Co.v.EurekaSpecialty Co., 77 F. 288 (CA6 1896). Such a case came before this Court inHenryv.A. B. Dick Co.,224 U.S. 1(1912), in which, as in the case we decide today, unpatented ink was the product that was "tied" to the use of a patented product through the use of a licensing agreement. Without commenting on the tying arrangement, the Court held that use of a competitor's ink in violation of a condition of the agreement — that the rotary mimeograph "`may be used only with the stencil, paper, ink and other supplies made by A. B. Dick Co.'" — constituted infringement of the patent on the machine.Id., at 25-26. Chief Justice White dissented, explaining his disagreement with the Court's approval of a practice that he regarded as an "attempt to increase the scope of the monopoly granted by a patent. . . which tend[s] to increase monopoly and to burden the public in the exercise of their common rights."Id., at 70. Two years later, CongressPage 34endorsed Chief Justice White's disapproval of tying arrangements, enacting § 3 of the Clayton Act. See38 Stat. 731(applying to "patented or unpatented" products); see alsoMotion Picture Patents Co.v.Universal Film Mfg.Co.,243 U.S. 502,517-518(1917) (explaining that, in light of § 3 of the Clayton Act,A. B. Dick"must be regarded as overruled"). And in this Court's subsequent cases reviewing the legality of tying arrangements we, too, embraced Chief Justice White's disapproval of those arrangements. See,e. g., Standard Oil Co. of Cal.v.UnitedStates,337 U.S. 293,305-306(1949);MercoidCorp.v.Mid-Continent Investment Co.,320 U.S. 661,664-665(1944).
In the years sinceA. B. Dick, four different rules of law have supported challenges to tying arrangements. They have been condemned as improper extensions of the patent monopoly under the patent misuse doctrine, as unfair methods of competition under § 5 of the Federal Trade Commission Act,15 U.S.C. § 45, as contracts tending to create a monopoly under § 3 of the Clayton Act,15 U.S.C. § 14, and as contracts in restraint of trade under § 1 of the Sherman Act.2In all of those instances, the justification for the challenge rested on either an assumption or a showing that the defendant's position of power in the market for the tying product was being used to restrain competition in the market for the tied product. As we explained inJefferson Parish,466 U.S., at 12, "[o]ur cases have concluded that the essential characteristic of an invalid tying arrangement lies in the seller's exploitation of its control over the tying product to force the buyer into the purchase of a tied product that the buyerPage 35either did not want at all, or might have preferred to purchase elsewhere on different terms."
Over the years, however, this Court's strong disapproval of tying arrangements has substantially diminished. Rather than relying on assumptions, in its more recent opinions the Court has required a showing of market power in the tying product. Our early opinions consistently assumed that "[t]ying arrangements serve hardly any purpose beyond the suppression of competition."Standard OilCo.,337 U.S., at 305-306. In 1962, inLoew's,371 U.S., at 47-48, the Court relied on this assumption despite evidence of significant competition in the market for the tying product. And as recently as 1969, Justice Black, writing for the majority, relied on the assumption as support for the proposition "that, at least when certain prerequisites are met, arrangements of this kind are illegal in and of themselves, and no specific showing of unreasonable competitive effect is required."Fortner Enterprises, Inc.v.United States SteelCorp.,394 U.S. 495,498-499(Fortner I).Explaining the Court's decision to allow the suit to proceed to trial, he stated that "decisions rejecting the need for proof of truly dominant power over the tying product have all been based on a recognition that because tying arrangements generally serve no legitimate business purpose that cannot be achieved in some less restrictive way, the presence of any appreciable restraint on competition provides a sufficient reason for invalidating the tie."Id., at 503.
Reflecting a changing view of tying arrangements, four Justices dissented inFortner I, arguing that the challenged "tie" — the extension of a $2 million line of credit on condition that the borrower purchase prefabricated houses from the defendant — might well have served a legitimate purpose.Id., at 510 (opinion of White, J.);id., at 520 (opinion of Fortas, J.). In his opinion, Justice White noted that promotional tie-ins may provide "uniquely advantageous deals" to purchasers.Id., at 519. And Justice Fortas concluded that thePage 36arrangement was best characterized as "a sale of a single product with the incidental provision of financing."Id., at 522.
The dissenters' view that tying arrangements may well be procompetitive ultimately prevailed; indeed, it did so in the very same lawsuit. After the Court remanded the suit inFortner I, a bench trial resulted in judgment for the plaintiff, and the case eventually made its way back to this Court. Upon return, we unanimously held that the plaintiff's failure of proof on the issue of market power was fatal to its case — the plaintiff had proved "nothing more than a willingness to provide cheap financing in order to sell expensive houses."United States Steel Corp.v.FortnerEnterprises, Inc.,429 U.S. 610,622(1977)(FortnerII).
The assumption that "[t]ying arrangements serve hardly any purpose beyond the suppression of competition," rejected inFortner II, has not been endorsed in any opinion since. Instead, it was again rejected just seven years later inJefferson Parish, where, as inFortner II, we unanimously reversed a Court of Appeals judgment holding that an alleged tying arrangement constituted aper seviolation of § 1 of the Sherman Act.466 U.S., at 5. Like the product at issue in theFortnercases, the tying product inJefferson Parish— hospital services — was unpatented, and our holding again rested on the conclusion that the plaintiff had failed to prove sufficient power in the tying product market to restrain competition in the market for the tied product — services of anesthesiologists.466 U.S., at 28-29.
In rejecting the application of aper serule that all tying arrangements constitute antitrust violations, we explained:
"[W]e have 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. . . .
. . . . .Page 37
"Per secondemnation — condemnation without inquiry into actual market conditions — is only appropriate if the existence of forcing is probable. Thus, application of theper serule focuses on the probability of anticompetitive consequences. . . .
"For example, 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.United Statesv.Loew's Inc.,371 U.S., at 45-47. 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. Thus, the sale or lease of a patented item on condition that the buyer make all his purchases of a separate tied product from the patentee is unlawful."Id., at 13-16 (footnote omitted).
Notably, nothing in our opinion suggested a rebuttable presumption of market power applicable to tying arrangements involving a patent on the tying good. Seeinfra, at 44; cf.396 F. 3d, at 1352. Instead, it described the rule that a contract to sell a patented product on condition that the purchaser buy unpatented goods exclusively from the patentee is aper seviolation of § 1 of the Sherman Act.
Justice O'Connor wrote separately inJefferson Parish, concurring in the judgment on the ground that the case did not involve a true tying arrangement because, in her view, surgical services and anesthesia were not separate products.466 U.S., at 43. In her opinion, she questioned not only the propriety of treating any tying arrangement as aper seviolation of the Sherman Act,id., at 35, but also the validity of the presumption that a patent always gives the patentee significant market power, observing that the presumption was actually a product of our patent misuse cases rather thanPage 38our antitrust jurisprudence,id., at 37-38, n. 7. It is that presumption, a vestige of the Court's historical distrust of tying arrangements, that we address squarely today.
III
Justice O'Connor was, of course, correct in her assertion that the presumption that a patent confers market power arose outside the antitrust context as part of the patent misuse doctrine. That doctrine had its origins inMotion Picture Patents Co.v.Universal Film Mfg. Co.,243 U.S. 502(1917), which found no support in the patent laws for the proposition that a patentee may "prescribe by notice attached to a patented machine the conditions of its use and the supplies which must be used in the operation of it, under pain of infringement of the patent,"id., at 509. AlthoughMotion Picture PatentsCo.simply narrowed the scope of possible patent infringement claims, it formed the basis for the Court's subsequent decisions creating a patent misuse defense to infringement claims when a patentee uses its patent "as the effective means of restraining competition with its sale of an unpatented article."Morton Salt Co.v.G. S.Suppiger Co.,314 U.S. 488,490(1942); see also,e.g., Carbice Corp. of Americav.American PatentsDevelopment Corp.,283 U.S. 27,31(1931).
Without any analysis of actual market conditions, these patent misuse decisions assumed that, by tying the purchase of unpatented goods to the sale of the patented good, the patentee was "restraining competition,"Morton Salt,314 U.S., at 490, or "secur[ing] a limited monopoly of an unpatented material,"Mercoid,320 U.S., at 664; see alsoCarbice,283 U.S., at 31-32. In other words, these decisions presumed "[t]he requisite economic power" over the tying product such that the patentee could "extend [its] economic control to unpatented products."Loew's,371 U.S., at 45-46.
The presumption that a patent confers market power migrated from patent law to antitrust law inInternationalPage 39Salt Co.v.United States,332 U.S. 392(1947). In that case, we affirmed a District Court decision holding that leases of patented machines requiring the lessees to use the defendant's unpatented salt products violated § 1 of the Sherman Act and § 3 of the Clayton Act as a matter of law.Id., at 396. Although the Court's opinion does not discuss market power or the patent misuse doctrine, it assumes that "[t]he volume of business affected by these contracts cannot be said to be insignificant or insubstantial and the tendency of the arrangement to accomplishment of monopoly seems obvious."Ibid.
The assumption that tying contracts "ten[d]. . . to accomplishment of monopoly" can be traced to the Government's brief inInternational Salt, which relied heavily on our earlier patent misuse decision inMorton Salt.The Government describedMorton Saltas "presenting] a factual situation almost identical with the instant case," and it asserted that "although the Court in that case did not find it necessary to decide whether the antitrust laws were violated, its language, its reasoning, and its citations indicate that the policy underlying the decision was the same as that of the Sherman Act." Brief for United States inInternational SaltCo.v.United States, 0. T. 1947, No. 46, p. 19 (United States Brief). Building on its assertion thatInternational Saltwas logically indistinguishable fromMorton Salt, the Government argued that this Court should place tying arrangements involving patented products in the categoryof per seviolations of the Sherman Act. United States Brief 26-33.
Our opinion inInternational Saltclearly shows that we accepted the Government's invitation to import the presumption of market power in a patented product into our antitrust jurisprudence. While we citedMorton Saltonly for the narrower proposition that the defendant's patents did not confer any right to restrain competition in unpatented salt or afford the defendant any immunity from the antitrust laws,International Salt,332 U.S., at 395-396, given the fact thatPage 40the defendant was selling its unpatented salt at competitive prices,id., at 396-397, the rule adopted inInternational Saltnecessarily accepted the Government's submission that the earlier patent misuse cases supported the broader proposition "that this type of restraint is unlawful on its face under the Sherman Act," United States Brief 12.
Indeed, later in the same Term we citedInternationalSaltfor the proposition that the license of "a patented device on condition that unpatented materials be employed in conjunction with the patented device" is an example of a restraint that is "illegalper se." United Statesv.Columbia Steel Co.,334 U.S. 495,522-523, and n. 22 (1948). And in subsequent cases we have repeatedly grounded the presumption of market power over a patented device inInternational Salt.See,e. g., Loew's,371 U.S., at 45-46;Times-Picayune Publishing Co.v.UnitedStates,345 U.S. 594,608(1953);Standard OilCo.,337 U.S., at 304.
IV
Although the patent misuse doctrine and our antitrust jurisprudence became intertwined inInternational Salt, subsequent events initiated their untwining. This process has ultimately led to today's reexamination of the presumption ofper seillegality of a tying arrangement involving a patented product, the first case since 1947 in which we have granted review to consider the presumption's continuing validity.
Three years before we decidedInternational Salt, this Court had expanded the scope of the patent misuse doctrine to include not only supplies or materials used by a patented device, but also tying arrangements involving a combination patent and "unpatented material or [a] device [that] is itself an integral part of the structure embodying the patent."Mercoid,320 U.S., at 665; see alsoDawson Chemical Co.v.Rohm Haas Co.,448 U.S. 176,188-198(1980) (describing in detailMercoidand the cases leading up to it). In reaching this conclusion, the Court explained that it could see "noPage 41difference in principle" between cases involving elements essential to the inventive character of the patent and elements peripheral to it; both, in the Court's view, were attempts to "expan[d] the patent beyond the legitimate scope of its monopoly."Mercoid,320 U.S., at 665.
Shortly thereafter, Congress codified the patent laws for the first time. See66 Stat. 792, codified at35 U.S.C. § 1et seq.(2000 ed. and Supp. III). At least partly in response to ourMercoiddecision, Congress included a provision in its codification that excluded some conduct, such as a tying arrangement involving the sale of a patented product tied to an "essential" or "nonstaple" product that has no use except as part of the patented product or method, from the scope of the patent misuse doctrine. § 271(d); see alsoDawson,448 U.S., at 214. Thus, at the same time that our antitrust jurisprudence continued to rely on the assumption that "tying arrangements generally serve no legitimate business purpose,"Fortner I,394 U.S., at 503, Congress began chipping away at the assumption in the patent misuse context from whence it came.
It is Congress' most recent narrowing of the patent misuse defense, however, that is directly relevant to this case. Four years after our decision inJefferson Parishrepeated the patent-equals-market-power presumption,466 U.S., at 16, Congress amended the Patent Code to eliminate that presumption in the patent misuse context,102 Stat. 4676. The relevant provision reads:
"(d) No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following: . . . (5) conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product,unless, in view of the circumstances, the patentowner hasPage 42market power in the relevant market for the patent orpatented product on which the license or sale isconditioned:'35 U.S.C. § 271(d)(5) (emphasis added).
The italicized clause makes it clear that Congress did not intend the mere existence of a patent to constitute the requisite "market power." Indeed, fairly read, it provides that without proof that Trident had market power in the relevant market, its conduct at issue in this case was neither "misuse" nor an "illegal extension of the patent right."
While the 1988 amendment does not expressly refer to the antitrust laws, it certainly invites a reappraisal of theper serule announced inInternational Salt3A rule denying a patentee the right to enjoin an infringer is significantly less severe than a rule that makes the conduct at issue a federal crime punishable by up to 10 years in prison. See15 U.S.C. § 1. It would be absurd to assume that Congress intended to provide that the use of a patent that merited punishment as a felony would not constitute "misuse." Moreover, given the fact that the patent misuse doctrine provided the basis for the market power presumption, it would be anomalous to preserve the presumption in antitrust after Congress has eliminated its foundation. Cf. 10 P. Areeda, H. Hovenkamp, E. Elhauge, Antitrust Law ¶ 1737c (2d ed. 2004) (hereinafter Areeda).
After considering the congressional judgment reflected in the 1988 amendment, we conclude that tying arrangements involving patented products should be evaluated under the standards applied in cases likeFortner IIandJeffersonParishrather than under theper serule applied inMorton SaltandLoew's.While some such arrangements are still unlawful,Page 43such as those that are the product of a true monopoly or a marketwide conspiracy, see,e. g., United Statesv.Paramount Pictures, Inc.,334 U.S. 131,145-146(1948), that conclusion must be supported by proof of power in the relevant market rather than by a mere presumption thereof.4
V
Rather than arguing that we should retain the ruleof perseillegality, respondent contends that we should 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. Cf.supra, at 37-38. Respondent recognizes that a large number of valid patents have little, if any, commercial significance, but submits that those that are used to impose tying arrangements on unwilling purchasers likely do exert significant market power. Hence, in respondent's view, the presumption would have no impact on patents of only slight value and would be justified, subject to being rebutted by evidence offered by the patentee, in cases in which the patent has sufficient value to enable the patentee to insist on acceptance of the tie.
Respondent also offers a narrower alternative, suggesting that we differentiate between tying arrangements involving the simultaneous purchase of two products that are arguably two components of a single product — such as the provision ofPage 44surgical services and anesthesiology in the same operation,Jefferson Parish,466 U.S., at 43(O'Connor, J., concurring in judgment), or the licensing of one copyrighted film on condition that the licensee take a package of several films in the same transaction,Loew's,371 U.S. 38— and a tying arrangement involving the purchase of unpatented goods over a period of time, a so-called "requirements tie." See also Brief for Barry Nalebuff et al. asAmici Curiae.According to respondent, we should recognize a presumption of market power when faced with the latter type of arrangements because they provide a means for charging large volume purchasers a higher royalty for use of the patent than small purchasers must pay, a form of discrimination that "is strong evidence of market power." Brief for Respondent 27; see generallyJeffersonParish,466 U.S., at 15, n. 23 (discussing price discrimination of this sort and citing sources).
The opinion that imported the "patent equals market power" presumption into our antitrust jurisprudence, however, provides no support for respondent's proposed alternative. InInternational Salt, it was the existence of the patent on the tying product, rather than the use of a requirements tie, that led the Court to presume market power.332 U.S., at 395("The appellant's patents confer a limited monopoly of the invention they reward"). Moreover, the requirements tie in that case did not involve any price discrimination between large volume and small volume purchasers or evidence of noncompetitive pricing. Instead, the leases at issue provided that if any competitor offered salt, the tied product, at a lower price, "the lessee should be free to buy in the open market, unless appellant would furnish the salt at an equal price."Id., at 396.
As we have already noted, the vast majority of academic literature recognizes that a patent does not necessarily confer market power. See n. 4,supra.Similarly, while price discrimination may provide evidence of market power, particularly if buttressed by evidence that the patentee hasPage 45charged an above-market price for the tied package, see,e.g., 10 Areeda ¶ 1769c, it is generally recognized that it also occurs in fully competitive markets, see,e. g., Baumol Swanson, The New Economy and Ubiquitous Competitive Price Discrimination: Identifying Defensible Criteria of Market Power, 70 Antitrust L. J. 661, 666 (2003); 9 Areeda ¶ 1711; Landes Posner 374-375. We are not persuaded that the combination of these two factors should give rise to a presumption of market power when neither is sufficient to do so standing alone. Rather, the lesson to be learned fromInternational Saltand the academic commentary is the same: Many tying arrangements, even those involving patents and requirements ties, are fully consistent with a free, competitive market. For this reason, we reject both respondent's proposed rebuttable presumption and their narrower alternative.
It is no doubt the virtual consensus among economists that has persuaded the enforcement agencies to reject the position that the Government took when it supported theper serule that the Court adopted in the 1940's. Seesupra, at 39. In antitrust guidelines issued jointly by the Department of Justice and the Federal Trade Commission in 1995, the enforcement agencies stated that in the exercise of their prosecutorial discretion they "will not presume that a patent, copyright, or trade secret necessarily confers market power upon its owner." U.S. Dept. of Justice and FTC, Antitrust Guidelines for the Licensing of Intellectual Property § 2.2 (Apr. 6, 1995), http://www.usdoj.gov/atr/public/guidelines/0558.pdf (as visited Feb. 24, 2006, and available in Clerk of Court's case file). While that choice is not binding on the Court, it would be unusual for the Judiciary to replace the normal rule of lenity that is applied in criminal cases with a rule of severity for a special category of antitrust cases.
Congress, the antitrust enforcement agencies, and most economists have all reached the conclusion that a patent does not necessarily confer market power upon the patentee.Page 46Today, we reach the same conclusion, and therefore hold that, in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.
VI
In this case, respondent reasonably relied on our prior opinions in moving for summary judgment without offering evidence defining the relevant market or proving that petitioners possess power within it. When the case returns to the District Court, respondent should therefore be given a fair opportunity to develop and introduce evidence on that issue, as well as any other issues that are relevant to its remaining § 1 claims. Accordingly, the judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.It is so ordered.
JUSTICE ALITO took no part in the consideration or decision of this case.Page 47
- Briefs ofamici curiaeurging reversal were filed for the American Bar Association byRobert J. Grey,Jr., Richard J. Wallis, andKevin D. McDonald;for the Houston Intellectual Property Law Association byKenneth E. Kuffner;for the Intellectual Property Law Association of Chicago byEdward D. Manzo, Bradford P.Lyerla, andGlen P. Belvis;for the Intellectual Property Owners Association byGary M. Hoffman, Kenneth W.Brothers, andDouglas K. Norman;for the Motion Picture Association of America, Inc., et al. byDaniel G.Swanson, Julian W. Poon, Daniel E. Robbins, andVictorS. Perlman;for the New York Intellectual Property Law Association byDavid F. Ryan;for the Patent, Trademark Copyright Section of the Bar Association of the District of Columbia byDavid W. Long, Blair ElizabethTaylor, andLynn E. Eccleston;for Pfizer Inc. byStephen A Stack, Jr., George G. Gordon, RebeccaP. Dick, andKent S. Bernard;for Verizon Communications byRichard G. Taranto, Aaron M. Panner, andJohn Thorne;and for the Washington Legal Foundation byWilliam C. MacLeod, Daniel J. Popeo, andDavid Price.
Briefs ofamici curiaeurging affirmance were filed for the District of Columbia et al. byRobert J.Spagnoletti, Attorney General of the District of Columbia,Edward E. Schwab, Deputy Attorney General,Don A. Resnikoff, Senior Assistant Attorney General, andAnika Cooper, Assistant Attorney General, byBill Lockyer, Attorney General of California,Richard M. Frank, Chief Deputy Attorney General,TomGreene, Chief Assistant Attorney General,KathleenFoote, Senior Assistant Attorney General, andAnnMarie Marciarille, Deputy Attorney General, and by the Attorneys General for their respective States as follows:Terry Goddardof Arizona,Charles J. Crist, Jr., of Florida,Thomas J. Millerof Iowa,Charles C.Foti, Jr., of Louisiana,J. Joseph Curran, Jr., of Maryland,Thomas F. Reillyof Massachusetts,Jeremiah W. (Jay) Nixonof Missouri,Jim Petroof Ohio,Paul G. Summersof Tennessee,Mark L.Shurtleffof Utah,Darrell V. McGraw, Jr., of West Virginia, andPatrick J. Crankof Wyoming; for AARP et al. byBarbara Jones, Bruce Vignery, andMichael Schuster;for the American Antitrust Institute et al. byJonathan Rubin;for the International Imaging Technology Council et al. byPatricia Judge;for the National Association of Theatre Owners, Inc., et al. byJohn T. Mitchell;for Barry Nalebuff et al. byAlan I.Horowitz;and for F. M. Scherer byParker C. FolseIIIandJustin A. Nelson.Patrick J. Coyne, Kenneth M. Frankel, andWilliamC. Rooklidgefiled a brief ofamicus curiaefor the American Intellectual Property Law Association. ↩ - Illinois Tool did not acquire Trident until February 19, 1999, approximately six months after this action commenced. ↩
- See,e. g, Jefferson Parish Hospital Dist. No.2v.Hyde,466 U.S. 2,9(1984) (Sherman Act);Times-Picayune Publishing Co.v.United States,345 U.S. 594,609(1953) (Federal Trade Commission Act);International Salt Co.v.UnitedStates,332 U.S. 392,395-396(1947) (Clayton Act and Sherman Act);Morton Salt Co.v.G. S. SuppigerCo.,314 U.S. 488,494(1942) (patent misuse);MotionPicture Patents Co.v.Universal Film Mfg. Co.,243 U.S. 502,516(1917) (same). ↩
- While our opinions have made dear that such an invitation is not necessary with respect to cases arising under the Sherman Act, seeState Oil Co.v.Khan,522 U.S. 3,20(1997), it is certainly sufficient to warrant reevaluation of our precedent,id., at 21 ("[T]his Court has reconsidered its decisions construing the Sherman Act when the theoretical underpinnings of those decisions are called into serious question"). ↩
- Our imposition of this requirement accords with the vast majority of academic literature on the subject. See,e.g., 10 Areeda ¶ 1737a ("[T]here is no economic basis for inferring any amount of market power from the mere fact that the defendant holds a valid patent"); Burchfiel, Patent Misuse and Antitrust Reform: "Blessed be the Tie?" 4 Harv. J. L. Tech. 1, 57, and n. 340 (1991) (noting that the market power presumption has been extensively criticized and citing sources); 1 H. Hovenkamp, M. Janis, M. Lemley, IP and Antitrust § 4.2a (2005 Supp.) ("[C]overage of one's product with an intellectual property right does not confer a monopoly"); W. Landes R. Posner, The Economic Structure of Intellectual Property Law 374 (2003) (hereinafter Landes Posner). ↩