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IP vs. Antitrust

Tags InterventionismMonopoly and Competition

In the September 2005 issue of Corporate Legal Times, the article "High Court Set To Tackle IP Tying In Antitrust Cases" discusses the upcoming Supreme Court case Illinois Tool Works v. Independent Ink, in which the Court will decide whether there should be a presumption of "market power" in antitrust "tying cases" in the case of a patented product.

In this case, Trident holds a patent covering ink jet printer technology and also makes ink. When it licenses its patented ink jet printer it requires its licensee to purchase ink for the system only from Trident--this is known as tying. Trident was sued by Independent Ink, another ink maker and competitor of Trident, alleging that Trident was engaged in illegal tying and monopolization in violation of sections 1 and 2 of the Sherman Act.

Normally, for tying to constitute a violation of the antitrust laws, the plaintiff must affirmatively prove market power. Since a patent is a type of monopoly, however, the question is whether the mere existence of a patent on the product in question means the seller can be presumed to have "market power". The federal appeals ocurt held that "a rebuttable presumption of market power arises from the possession of a patent over a tying product".

The appellate decision has IP advocates, such as the American Intellecual Property Law Association (AIPLA) and the Intellectual Property Owners Assocation (IPO) up in arms--they don't want a patent on the product to create a "presumption of market power in a relevant market to prove an antitrust violation under Section 1 of the Sherman Act." They and others argue that the existence of a patent does not mean there is "market power" for purposes of antitrust law, because while some patents cover "groundbreaking inventions" and therefore "clearly" provide "market power," other inventions cover only minor improvements and don't give the owners a "decisive edge" in the marketplace.

I don't know what is more irrational, arbitrary, and non-objective: patent and IP law, or antitrust law. It's a close call. I keep vacillating, but I tend to think antitrust law is every-so-slightly worse. A amusing note: the article first cited above notes that because of recent incoherent amendments to federal law, the patent infringement defense of patent misuse (similar to an anti-trust claim) no longer benefits from the presumption of market power; while an antitrust claim, which may also be used as a defense against patent infringement, currently benefits from the presumption--so that a defendant accused of patent infringement has an easier time proving an antitrust violation by the plaintiff (which has automatic treble damages), than asserting a patent misuse claim.

It is just bizarre, since both claims rest on establishing market power: but it is presumed in the former case only. What I found amusing was the quoted comment by Glen Belvis, a patent litigator at Chicago's Brinks Hofer Gilson & Lione, in response to this bizarre legal situation: "That seems very unfair." As if patent and antitrust law could be made fair!


Stephan Kinsella

Stephan Kinsella is an attorney in Houston, director of the Center for the Study of Innovative Freedom, and editor of Libertarian Papers.

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