The Supreme Court issued a unanimous ruling today in a case that will make it harder for companies to sue competitors over market power. (For the AP's breaking-news take on the ruling, click here.)
The case the Court decided involved a printer maker, Illinois Tool Works, who was sued by Independent Ink, a company that makes toner cartridges, for requiring customers to buy Illinois Tool Works cartridges. Independent Ink claimed that this was an illegal effort to reduce competition. In past cases, the Court had ruled that companies that hold a patent can exert undue market power, and therefore can be sued for abusing their power by limiting their customers' ability to weigh different options if the product they sell requires an add-on, as in the razor-razor blade model. But today, the Court ruled that companies that hold patents (as Illinois Tool Works does) may not, in fact, have that much market power after all, and therefore, the model of requiring customers to buy add-on products or replacement products for a system is not inherently anticompetitive.
In the writing the 8-0 decision, Justice John Paul Stevens noted that "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."
MIKE HOFMAN was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City. @mikehofman