Justices Take Up Rule Against ‘Tying’ Products

WASHINGTON â€”  The Supreme Court took up the case of a small Southern California ink maker Tuesday to reconsider a nearly 60-year-old rule of antitrust law that affects industries including pharmaceuticals, auto parts and movies.

In the past, Congress and the high court have frowned upon companies that force buyers to purchase extra items as a condition of getting their product, a practice known as “tying.� Since shortly after World War II, the justices have said tying is usually illegal when it involves patented or copyrighted products.

In the movie industry, for example, theater owners won rulings after complaining that they were forced to run studios’ second-rate films as a condition of getting their copyrighted blockbusters.

That rule stands in jeopardy after Tuesday’s argument. Most of the justices said they were inclined to make it harder for challengers to sue big companies that imposed tying requirements on their customers.

If so, the outcome could affect the giant aftermarket in replacement parts for products such as autos, computers and printers. If the court makes it much harder to win antitrust suits, some legal experts say it will encourage the makers of popular products to impose tying requirements on their customers.

The future of the drug industry could be affected as well. Pfizer, the pharmaceutical giant, has proposed marketing a new anti-cholesterol drug by combining it in one pill with its best-selling Lipitor, which is facing the loss of its patent protection. The legality of that arrangement may depend on the court’s ruling.

The case that came before the high court began when Independent Ink Inc., based in Gardena, Calif, sued Trident Inc., the leading maker of printers for industrial uses, such as putting bar codes on products. Trident, a division of Illinois Tool Works, requires buyers of its patented printers to also buy its replacement ink.

Independent Ink says it sells the same ink for one-third as much, but cannot compete in the market because of Trident’s tying deal.

“Their customers said to us, ‘We would love to buy from you, but we can’t,’ � said Barry Brucker, chief executive of Independent Ink. “We’re a $5-million-a-year company going up against a company that has $11 billion in sales per year. This is David versus Goliath.�

In the Supreme Court on Tuesday, “Goliath� had some very big allies. Bush administration lawyers joined the case on the side of Trident and urged the Supreme Court to overturn past rulings that presumed patent holders had enough market power to force buyers to buy extra items.

“This is a relic.... There is no logical basis for such a presumption,� said Andrew Pincus, a lawyer for Trident. Most patents were worthless, he said.

Deputy Solicitor Gen. Thomas Hungar said the presumption imposed a “litigation tax� on patent holders because it encouraged lawsuits.

He sidestepped a question on whether the ruling in this patent case would apply equally to copyright holders, an issue of great concern to the movie and software industries. Among those siding with Trident is the Motion Picture Assn. of America.

Chief Justice John G. Roberts Jr. and Justice John Paul Stevens asked whether the Bush administration had a larger goal of making it legal for companies to impose tying requirements on its buyers.

“We’re going down a new road here. I’m curious about our destination,� Stevens said.

Hungar replied that the administration had not taken a stand on the broader issue.

Stanford law professor Kathleen M. Sullivan, representing Independent Ink, urged the justices to preserve the long-standing rule that assumes patent holders have market power to force customers to buy extra products.

“It still makes sense,� she said, particularly in the current case where the challenger wants to sell the same product for less. “It is bad for consumers� if companies can freely impose tying requirements on their customers, she added.

During the hourlong argument, most of the justices appeared to lean in favor of Trident. Normally, plaintiffs have to prove their claims. Why shouldn’t plaintiffs like Independent Ink have to prove that companies such as Trident have the market power to force buyers to pay too much for extra products, such as replacement ink? they asked.

“We usually leave demonstration of market power to the plaintiff in the case,� Justice Antonin Scalia said.

Sullivan replied that it was unfair to force small companies like Independent Ink to bear the burden of proving that a powerful patent holder like Trident had a type of monopoly power in its industry.

The justices will issue an opinion in the case of Illinois Tool Works vs. Independent Ink in several months.