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

Critically, Illinois Tool Works, Inc. ("Illinois"), effectively concedes that under current federal law, they lose this case. They do not argue against the existence of the market power presumption in patent tying cases. Instead, they insist that the rule must be overturned, first by attacking the foundation on which the presumption rests. In earlier tying cases, the Court concluded that, since a patent resembles a monopoly in some respects, it must convey market power the way a monopoly does. Brief for the Petitioners at 23. This conclusion ignores the fact that patents themselves only protect a unique form of a given product. Id. Even when a patented device is initially unique, it encourages competitors to develop substitute products that do not infringe on the patent. See Id. The market power requirement exists to distinguish between tying arrangements which serve benign, pro-competitive forces, and those where a company uses its dominance in one market to force a product on consumers in a different, generally competitive market. Id. at 12. By eliminating the market power requirement in patent tying cases, Illinois argues that the presumption robs federal courts of the ability to tell good tying from bad.

Illinois next argues that, historically, the Court's decisions establishing the presumption rule were based on a hostility to tying that the Court has since discarded. Id. at 20. Historically, the Court has grown increasingly aware of the beneficial effects of tying-buyers often prefer a package deal, and a seller may provide them merely to stay competitive, not to force its products on its customers. See Id. at 20?21. As a result, the Court's recent decisions have demanded a stronger showing of market power to support a finding of illegal tying. Id. at 21. In addition, the Court has never applied the presumption that a patent confers market power outside the tying context. Id. at 14. In sum, the rule has become obsolete-if the Court were deciding the issue for the first time, it would never adopt such a rule. Id. at 22.

Illinois also argues that "distinguished commentators from every point on the antitrust spectrum" feel that the Court should discard the presumption. Id. at 37. Obviously, scholarly opinion does not bind the Court. However, when the Court finds a general scholarly consensus against its past antitrust rules, it has relied on such consensus as one factor supporting a rule's abolition. Illinois urges the Court to do so in this case as well. Id. at 37. In State Oil Co. v. Khan, for example, the Court took notice of the "great weight" of scholarly authority in overruling a decision that vertical maximum price fixing constituted a per se violation of the Sherman Act. 522 U.S. 3, 12 (1997).

Regardless of the economic reality, Illinois argues that the presumption improperly distributes burdens in antitrust litigation. The presumption is difficult to rebut-parties cannot merely show that substitutes for the patented product exist, they must conduct and present a "full-blown antitrust market analysis," Id. at 31, an "enormous" expense. Id. at 32. As a result, many companies may decide to settle a claim, even when faced with "the sketchiest allegation[s]" of anti-competitive practices. Id. at 31. As a result, the rule encourages plaintiffs with sketchy claims to sue, in hopes of extorting a favorable settlement and thereby encourages frivolous litigation.

Finally, Illinois argues that other federal actors have seen the light and abandoned the presumption long ago. Federal antitrust enforcement agencies, in two presidential administrations with quite different political and economic ideologies, have refused to bring antitrust actions against companies, absent a showing of market power. Id. at 36. Again, while these agencies' actions do not bind the Court, it has found such evidence a relevant factor in past decisions, such as Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 777 (1984) (abandoning the intra-enterprise conspiracy doctrine with respect to corporations and their wholly owned subsidiaries).

Independent Ink, Inc. ("Independent") responds by emphasizing the virtues of stare decisis: it promotes stability by encouraging consumers and businesses to rely on past decisions, it fosters public confidence in the courts, and it "improves judicial decision-making" by acknowledging that longstanding precedents reflect the institutional wisdom of the Supreme Court. Brief for Respondent at 12. The doctrine applies with full force here because the decisions recognizing a market power presumption do not merely reflect evolving common law reasoning, but judicial interpretations of explicit congressional commands embodied in federal antitrust law. Id. at 12. As a result, the party challenging the rule must show that it defies "practical workability," that changes in the law make the rule obsolete, or that changed circumstances have rendered the rule insignificant or unjustified. Id. at 11?12 (citing Planned Parenthood v. Casey, 505 U.S. 833, 854?55 (1992)).

First, Independent claims that while many patents may have little or no value, and thus confer no market power, patents used in tying arrangements are a unique subset of patents. Every patent, because it embodies a limited government-granted monopoly, contains the potential for market power. Patents used in tying arrangements have realized this potential-if such products were not valuable, the tying requirement would be useless. Since consumers would normally prefer an unconditional license to a conditional one, their acceptance of a conditional license demonstrates the value of the patented product. Because valuable products confer market power, it is therefore quite reasonable to presume, in the context of patent tying, that the existence of a patented product demonstrates the existence of market power. Id. at 22.

Independent also asserts that the presumption rule itself increases efficiency and fairness. Generally, proving a positive assertion is easier than proving a negative one, but the opposite is true when proving market power. Courts normally require parties to present elaborate and costly market share analysis to establish market power. Id. at 34 To rebut a presumption of market power, however, a party need only show that effective substitutes for its goods are available. Id. at 32. The current presumption therefore puts the burden on the party best positioned to bear it, advancing meritorious claims while promptly dispatching meritless ones. Id. at 34

Next, Independent addresses Illinois' policy concerns. First, abolishing the rule would mark a substantial change in statutory policy, suggesting this is a decision that Congress, not the Court, should make. Id. at 34?35. Congress's enactment of the Patent Misuse Protection Act does not undermine the presumption-since the House deleted provisions in the Senate Bill designed to eliminate the presumption, the resulting act should be interpreted as intent to affirm the presumption. Id. at 40. The Department of Justice enforcement guidelines relied on by Illinois provide no illumination-they deal with governmental enforcement policy, reflecting administration priority, not evidentiary burdens in civil litigation. Id. at 41. Empirically, the presumption does not discourage innovation-since the Court affirmed Jefferson Parish in 1984, patent applications have only skyrocketed. Id. at 37. The law, regardless of the presumption, has other mechanisms to protect beneficial tying arrangements. For example, the requirement that illegal tyings bind economically separate products protects legitimate tying arrangements that are created to capitalize on economies of scale. Id. at 37?38.

Finally, even if the rule changes, Independent argues that it affirmatively proved Illinois' market power, and is, therefore, entitled to its verdict. Id. 45. Market power can be proven by "direct evidence" of its exercise, which the record in this case clearly reflects-how else could Illinois have persuaded Independent and other companies to buy its ink, when chemically identical alternatives offered by other companies sold for roughly one-third of their price? Id. at 46