A Patent Does Not Automatically Confer Market Power

Originally published March 22, 2006

Earlier this month, the Supreme Court made it clear that having a patent does not automatically mean having market power. While the outcome was not surprising, it put to rest the consternation aroused by a 2005 Federal Circuit decision that applied such a presumption of market power. In particular, as a result of the Supreme Court’s decision in Illinois Tool Works Inc. v. Independent Ink, Inc., if a patentholder requires that a licensee use only certain products or services in connection with the patent, that "tie" would not be a violation of the antitrust laws unless the patent actually confers market power on the patentholder.

Historically, there had been a presumption that a patent confers market power, so that any tie involving a patent was presumed to be an antitrust violation. Over the last three decades, a consensus developed that such a presumption was invalid. The presumption was expressly rejected in the patent law context by a 1988