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.
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.
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.
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
American courts first encountered tying arrangements in the course of patent infringement litigation. See, e. g., Heaton-Peninsular Button-Fastener Co. v. Eureka Specialty Co., 77 F. 288 (CA6 1896). Such a case came before this Court in Henry v. 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, Congress
In the years since A. 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.
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 Oil Co., 337 U. S., at 305-306. In 1962, in Loew'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 Steel Corp., 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 in Fortner 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 the
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 in Fortner 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. Fortner Enterprises, Inc., 429 U.S. 610, 622 (1977) (Fortner II).
The assumption that "[t]ying arrangements serve hardly any purpose beyond the suppression of competition," rejected in Fortner II, has not been endorsed in any opinion since. Instead, it was again rejected just seven years later in Jefferson Parish, where, as in Fortner II, we unanimously reversed a Court of Appeals judgment holding that an alleged tying arrangement constituted a per se violation of § 1 of the Sherman Act. 466 U. S., at 5. Like the product at issue in the Fortner cases, the tying product in Jefferson 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 a per se rule that all tying arrangements constitute antitrust violations, we explained:
Notably, nothing in our opinion suggested a rebuttable presumption of market power applicable to tying arrangements involving a patent on the tying good. See infra, 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 a per se violation of § 1 of the Sherman Act.
Justice O'Connor wrote separately in Jefferson 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 a per se violation 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 than
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 in Motion 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. Although Motion Picture Patents Co. 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 America v. American Patents Development 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 also Carbice, 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 in International
The assumption that tying contracts "ten[d] ... to accomplishment of monopoly" can be traced to the Government's brief in International Salt, which relied heavily on our earlier patent misuse decision in Morton Salt. The Government described Morton Salt as "present[ing] 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 in International Salt Co. v. United States, O. T. 1947, No. 46, p. 19 (United States Brief). Building on its assertion that International Salt was logically indistinguishable from Morton Salt, the Government argued that this Court should place tying arrangements involving patented products in the category of per se violations of the Sherman Act. United States Brief 26-33.
Our opinion in International Salt clearly 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 cited Morton Salt only 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 that
Indeed, later in the same Term we cited International Salt for 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 "illegal per se." United States v. 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 in International Salt. See, e. g., Loew's, 371 U. S., at 45-46; Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 608 (1953); Standard Oil Co., 337 U. S., at 304.
Although the patent misuse doctrine and our antitrust jurisprudence became intertwined in International Salt, subsequent events initiated their untwining. This process has ultimately led to today's reexamination of the presumption of per se illegality 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 decided International 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 also Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S. 176, 188-198 (1980) (describing in detail Mercoid and the cases leading up to it). In reaching this conclusion, the Court explained that it could see "no
Shortly thereafter, Congress codified the patent laws for the first time. See 66 Stat. 792, codified at 35 U. S. C. § 1 et seq. (2000 ed. and Supp. III). At least partly in response to our Mercoid decision, 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 also Dawson, 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 in Jefferson Parish repeated 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:
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 the per se rule announced in International Salt.
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 like Fortner II and Jefferson Parish rather than under the per se rule applied in Morton Salt and Loew's. While some such arrangements are still unlawful,
Rather than arguing that we should retain the rule of per se illegality, 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 of
The opinion that imported the "patent equals market power" presumption into our antitrust jurisprudence, however, provides no support for respondent's proposed alternative. In International 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 has
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 the per se rule that the Court adopted in the 1940's. See supra, 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.
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.
Briefs of amici curiae urging affirmance were filed for the District of Columbia et al. by Robert J. Spagnoletti, Attorney General of the District of Columbia, Edward E. Schwab, Deputy Attorney General, Don A. Resnikoff, Senior Assistant Attorney General, and Anika Cooper, Assistant Attorney General, by Bill Lockyer, Attorney General of California, Richard M. Frank, Chief Deputy Attorney General, Tom Greene, Chief Assistant Attorney General, Kathleen Foote, Senior Assistant Attorney General, and Ann Marie Marciarille, Deputy Attorney General, and by the Attorneys General for their respective States as follows: Terry Goddard of Arizona, Charles J. Crist, Jr., of Florida, Thomas J. Miller of Iowa, Charles C. Foti, Jr., of Louisiana, J. Joseph Curran, Jr., of Maryland, Thomas F. Reilly of Massachusetts, Jeremiah W. (Jay) Nixon of Missouri, Jim Petro of Ohio, Paul G. Summers of Tennessee, Mark L. Shurtleff of Utah, Darrell V. McGraw, Jr., of West Virginia, and Patrick J. Crank of Wyoming; for AARP et al. by Barbara Jones, Bruce Vignery, and Michael Schuster; for the American Antitrust Institute et al. by Jonathan Rubin; for the International Imaging Technology Council et al. by Patricia Judge; for the National Association of Theatre Owners, Inc., et al. by John T. Mitchell; for Barry Nalebuff et al. by Alan I. Horowitz; and for F. M. Scherer by Parker C. Folse III and Justin A. Nelson.
Patrick J. Coyne, Kenneth M. Frankel, and William C. Rooklidge filed a brief of amicus curiae for the American Intellectual Property Law Association.