Volume 4, Spring Issue, 1991 PATENT MISUSE AND ANTITRUST REFORM: "BLESSED BE THE TIE?" Kenneth J. BurchJiel* One of the purposes of this bill is to deter misuse claims that unnecessarily burden infringement litigation. It would thus be a tragedy if this legislation made patent infringement actions more complicated and protracted, rather than simpler and shorter.l NOITCUDORTNI Tying arrangements, in which a party agrees "to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier, ''2 have long been suspect in intellectual property and anti- trust law. Under varying circumstances, tying arrangements may have such legal consequences as patent unenforceability, 3 and criminal prosecution or treble damages under antitrust laws. a Until 1988, per se misuse of a patent resulted from a patentee's attempt to "extend" the patent right to control the market in unpatented staple commodities, "whatever the nature of the device by which the owner of the patent seeks to effect such unauthorized extension of the monopoly. ''5 The strict patent misuse doctrine has been paralleled by an antitrust rule against tying, providing that an antitrust violation results * ,rentraP Sughrue, Mion, Zinn, kaepcaM & Seas, Washington, D.C., practicing sa Gaikokuho-Jimu-Bengoshi in ,oykoT Japan; A.B., ,3791 tsrehmA ;egelloC J.D., ,7791 -roC nell waL ;loohcS Fellow, ,78--6891 tutitsnI-kcnalP-xaM ftir sehcsidnitlsua und interna- selanoit ,-tnetaP -rebehrU dnu ,thcersbrewebtteW ,hcinuM laredeF cilbupeR of .ynamreG I ma indebted ot Jack .E Brown rof sih review of eht tpircsunam dna sih ytisoreneg in pro- viding current evitalsigel yrotsih esiwrehto unavailable in ,napaJ dna ot rosseforP rotciV .H ,remarK ohw offered helpful comments on eht .tpircsunam This article is detacided ot rosseforP lraK-hcirdeirF reieB on eht noisacco of sih htfif-ytxis .yadhtrib I. 431 .GNOC .CER 841,71S (daily .de Oct. ,12 )8891 skramer( of Senator yhaeL (D-VT) on eht patent misuse snoisivorp of H.R. 4972, ht001 Cong., d2 Sess., detcane sa .buP .L .oN ,307--00I tit. II, § 201,102 .tatS 4676 .))8891( .2 Northern .caP .yR v. United ,setatS 653 U.S. ,1 5-6 .)8591( 3. See infra notes 601--301 dna gniynapmocca .txet 4. See infra notes 126-30 dna gniynapmocca .txet .5 Leitch Mfg. .oC .v Barber Co., 203 U.S. 458, 364 (1938). Cf Recent ,tnempoleveD Intellectual Property Misuse: Recent Developments in the Misuse Doctrine, 4 .VRAH J.L. & .HCET 752 )1991( (this )eussi (for an analysis of eht recent noisnetxe of eht misuse doc- trine into eht thgirypoc .)aera 2 Harvard Journal of Law & Technology Vol. 4 when sufficient market power exists with respect to the tying product to restrain appreciably free competition in the market for the tied product, and a not insubstantial amount of commerce in the tied product is affected. 6 However, where the tying product is patented, no showing of actual market power has bec,'a required for an antitrust violation, since in such circumstances it has been presumed that the inability to buy the product elsewhere provides the seller with market power. 7 Accordingly, the sale or lease of a patented invention on the condition that the buyer purchase a separate tied product from the patentee has also constituted a per se violation of the antitrust laws. 8 The 1988 amendment of the patent infringement statute 9 has swept away the long-standing doctrine that tying of an unpatented staple con- stitutes per se patent misuse, with little legislative indication of what practices are now specifically permitted by a new exception carved out from over seventy years of patent t° and antitrust law. ~1 Although the patent misuse defense is preserved, under Section 271(d) of the patent infringement statute, a defendant may raise this equitable bar to recovery for infringement only if "in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented pro- duct" on which a tying sale is conditioned. This revision of the patent code proceeded from extensive criticism of the antitrust tying doctrine, particularly the market power presumption from patent ownership, by economic theorists, who maintain mat tying arrangements often fail to satisfy theoretical requisites for the 6. See infra notes 128-30 and accompanying text. 7. See Jefferson Parish Hosp. Dist. .oN 2 v. Hyde, 466 U.S. 2, 61 (1984). .8 See infra notes 143-146 and accompanying text. 9. Two new subsections were added to 53 U.S.C. § 271(d) by the Patent and Trademark Authorization Act of 1988, Pub. L. No. 100-703, Title II, §201, 201 Stat. 4676 (1988). The amendment saw included in authorization legislation for the U.S. Patent & Trademark Office, H.R. 4972, 100th Cong., 2d Sess. (1988). A separate Intellectual Property Antitrust Protection Act of 1988, S. 438, 100th Cong., 2d Sess., was passed by the Senate on October 4, 1988. When the Senate received H.R. 4972, it approved an amendment adding the text of S. 438 as Title II, and passed the bill as ded.Pema on October ,41 1988. On reconsidera- tion, the House deleted the provisions of Title ~i concerning presumptions of market power from intellectual property rights, and passed the amended bill on October 20, 1988. On October 2 I, the Senate concurred in the House amendment, and the bill saw signed into law on November ,91 .8891 .01 The rule against "extension" of the patent monopoly to tied, unpatented staples ori- ginated in Motion Picture Patents Co. v. Universal Film Mfg. Co., 342 U.S. 502 (1917). .11 The decision in Motion Picture Patents saw based on the express prohibition of tying contracts by Congress in § 3 of the Clayton Act of 1914, Pub. L. No. 63-212, eh. 723. §3, 38 Stat. 730, 137 (current version at 51 U.S.C. § 41 (1982)). On the close historical relationship of patent and antitrust tying principles, see infra notes 153-223 and accom- panying text. Spring, 1991 Patent Misuse and Antitrust Reform 3 "extension" of monopoly. The degree of market power required to establish patent misuse was not specified by Congress, and the legislative history indicates that the construction of the statute is to be left to the courtsJ 2 In view of the increasing influence of the economic debate over antitrust market power in antitrust law, the economic theory con- ceming tying arrangements in the antitrust context is likely to be significant in the interpretation of the patent misuse provision. This Article examines the 1988 revision of the patent statute, and its relation to parallel antitrust policy, to determine the extent to which trad- itionally prohibited practices should now be permitted, and to consider the appropriate standard for market power in the specific context of patent misuse. A review of the patent rule against tying, and the rela- tionship of patent and antitrust principles, which are now bridged by the concept of "market power," is particularly desirable in view of the prospect of further statutory "reform" of antitrust and patent law. 31 A critical measure of market power in antitrust law and economic theory has been the availability of substitutes for the tying product, since where substitutes are available, the seller cannot exact excess "mono- poly" profits and no danger of anticompetitive effects exists. While such a criterion may be suitable to determination of market power in many antitrust contexts, the proof required has been characterized as "enor- mously time consurnmg and expensive, as well as delusive, ''14 requiring consideration of such factors as market share, functional attributes of potential substitute products, and economic pricing concepts, such as marginal cost, that are difficult if not impcssible to ascertain.15 Critics of the antitrust market power presvmption from patent owner- ship have failed to consider that the determination of economic market power, which presents formidable problems of proof, is further compli- cated by the legal market power conveyed by a patent, which is not lim- ited to the literal scope of the patent claims, but extends to functionally equivalent substitutes. Patent misuse market power analysis should avoid consideration of such traditional antitrust factors as market share .21 See infra notes 553-59 dna gniynapmocca .txet .31 Although ssergnoC dednema eht patent code to eriuqer tekram power for tnetap mis- use, eht House rejected na tnemdnema that would have detanimile eht noitpmuserp of tekram power in tsurtitna wal from ownership of a patent. See .S 438, 100th Cong., 2d .sseS § ,201 tes forth infra note 150. tneuqesbuS bills renewed this effort to etanimile eht tsurtitna .noitpmuserp See, e.g., .S 270, ts101 Cong., ts1 Sess. §2 ;)9891( H.R. 469, ts101 ,.gnoC ts1 .sseS §2 ;)9891( .S 198, ts101 Cong., d2 Sess. tit. IV, §401 (1990) etutitsbuS( tnemdnemA .oN .)6803 .41 Brown, The Intellectual Property Antitrust Protection Act of 1987, 1 .VRAH J.L. & .HCET 209, 412 .)8891( .51 See the secruos cited infra note 442. 4 Harvard Journal of Law & Technology Vol. 4 and the availability of substitutes, since even if it were possible to deter- mine that acceptable functional substitutes exist in an economic sense, it would be necessary to undertake a separate legal inquiry into the scope of patent claims under the doctrine of equivalents. Precisely the factors that would indicate the existence of perfect economic substitutes, thus negating market power under antitrust principles, would also indicate that these "substitutes" are equivalents of the patented product, and infringe the patent even if they are outside the literal scope of the patent claims. The complexity of the antitrust economic market power analysis would be compounded by the requirement of determining the market power conferred upon a patentee by law under the doctrine of equivalents. In accordance with the congressional desire to make patent infringe- ment actions simpler and shorter, 61 it is far preferable to adopt an interpretation of the patent misuse market power dradnat,~. that would avoid economic factors such as market share or the existence of substi- tutes, in favor of indicia earlier applied in the antitrust context, such as the tying product's uniqueness, desirability to consumers, or distinctive- ness in the often very narrow market for the patented product. Alterna- tively, such pragmatic considerations as the existence of licenses, or factors which would support a reasonable royalty as damages for patent infringement, would provide direct evidence of market power. Although my principal focus is market power in patent misuse, the critique supplied by economic theory is directly applicable to the anti- trust presumption of market power resulting from ownership of a patent. Particularly in view of the legal market power conferred upon a patentee under the doctrine of equivalents and the thin markets for many patented inventions, the historical antitrust presumption of market power from patent ownership retains its usefulness, for reasons that do not hold for copyrights or other statutory exclusive rights of narrower scope. In my analysis, Part I examines the statutory amendment modifying the traditional rule that a tying arrangement involving a patented product constitutes misuse rendering the patent unenforceable, and the historical foundation of the patent doctrine. The antitrust per se prohibition of tying is considered in Part II, which traces the history of antitrust tying theory. Part III analyzes the economic critiqtie of the antitrust per se rule and the presumption of market power from ownership of a patent. Part IV returns to the statutory misuse provision, and weighs the appropriate- ness of using the established antitrust market power analysis to deter- mine market power for patent misuse purposes. .61 eeS eht tnemetats of rotaneS ,yhaeL arpus note I. Spring, 1991 Patent Misuse and Antitrust Reform 5 I. THE STATUTORY PATENT MISUSE STANDARD i'/ ~ A. The Statutory Amendment i ,/ The addition of two new subsections to the patent infringement sta- tute 71 has fundamentally altered the judicially-fashioned doctrine of patent misuse, with respect to the sale of a patented product or process 81 tied to the purchase of unpatented staple supplies or components or tied to licenses of separate patents. 91 The amendment introduces a threshold requirement of "market power" in the patented tying product, before the affirmative defense of patent misuse may be asserted. Section 271(d) now provides: No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent fight by reason of his having done any of the following: .°. (4) refused to license or use any fights to the patent; or (5) conditioneff~the license of any fights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separate product, unless, in view of the circumstances, the paten t owner has market power .71 Prior to amendment, the first four subsections of 53 U.S.C. § 172 (1982) provided: (a) Except as otherwise provided in this tide, whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent. (b) Whoever actively induces infringement of a patent shall be liable as an infringer. (c) Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer. (d) No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or ille- gal extension of the patent fight by reason of his having done one or more of the following: (1) derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent; )2( licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent; (3) sought to enforce his patent fights against infringement or contributory infringement. .81 The term "product" is used herein to refer generally both to products, such as articles of manufacture or compositions, and to processes. .91 See infra notes 34--12 and accompanying text. 6 Harvard Journal of Law & Technology Vol. 4 in the relevant market for the patent or patented product on which the license or sale is conditioned. 2° These changes are in part noncontroversial codifications of principles well-established in the case law, and in part radical departures from set- tled rules of law. The two new subsections deal not only with tying arrangements, which will be discussed at length below, but also with refusal to license patent rights, failure to use the patented invention, and package licenses, which are first briefly considered. 1. Refusal to License or Use Rights to the Patent It is clear that prior to the amendment there was no duty to license another to make, use or sell a patented invention, 2t which are the basic exclusive rights granted by a United States patent. 22 The right of the patentee to prevent others from practicing the invention has long been regarded as absolute, 32 and Section 271(d)(4) was intended only to codify this established principle. 42 A patentee is entitled to exact as high a price for the patented technol- ogy as the market will bear, i.e., to exercise "monopoly" power in the sense of setting a supracompetitive price, with,.~ut restriction either under 20. 53 U.S.C. §271(d) (1988). 21. See, e.g., Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 512 (1980); W.L. Gore & Assocs. v. Carlisle Corp., 529 F.2d 614, 326 d3( Cir. 1976); SCM Corp. v. Xerox Corp., 546 F.2d 1195, 1204 (2d Cir. 1981), cert. denied, 455 U.S. 1016 (1982). 22. See 53 U.S.C. § 271(a) (1982). A patent confers the separate fights to exclude others from making, using, or selling the invention in the United States, as well as the right to prevent others from importing, selling, or distributing products in the United States made by a patented process in a foreign country, see 53 U.S.C.A. § 271(g) (Supp. 1989), and to exclude others from making the components of a patented product for assembly abroad. See 53 U.S.C. §271(0 (Supp. II 1984). Separate analysis of these provisions is not required for the purposes of this article. 23. See, e.g., Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 423-24 (1908) (suggesting that the Constitution requires an absolute monopoly in the patent grant); Henry v. A.B. Dick Co., 224 U.S. ,1 29-30 (1912) (overruled on other grounds, Motion Picture Patents Co. v. Universal Film Mfg. Co., 342 U.S. 502 (1917)); .fc E. Bement & Sons v. National Harrow Co., 681 U.S. 70, 19 (1902) (price-fixing of patented articles immunized from antitrust attack on similar theory). The general rule is qualified by the eminent domain power of the United States, 28 U.S.C. § 1498 (1982), which limits the remedy for unauthorized use by or for the United States of a patented invention to recovery by the patent owner of reasonable and entire compensation. See Motorola, Inc. v. United States, 729 F.2d 567 (Fed. Cir. .)4891 24. Representative Kastenmeier explained that the refusal to sell provision was intended to codify the case law in this respect, including SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981), cert. denied, 455 U.S. 1016 (1982). See 431 CONG. REC. H10,649 (daily ed. Oct. 20, .)8891 Spring, 1991 Patent Misuse and Antitrust Reform 7 patent 52 or antitrust law. 62 Furthermore, the strong public policy against compulsory licensing 72 has precluded this relief, even when patent misuse has been found. 82 Accordingly, the outfight refusal to license patent rights has generally been approved, when no "extension" of the patent monopoly has been attempted, and the patent "monopoly" has not been secured or aug- mented by unfair means that violate the antitrust laws. 92 Similarly, the statutory privilege permitting a patentee to refuse to use any rights to the patent has long been established by cases confirming the right to suppress an invention for economic advantage. 3° 2. Package Licensing The amendment permitting a patentee, in the absence of market power, to condition the license of any rights to the patent or the sale of 25. See Brulotte v. Thys Co., 379 U.S. 29, 33 (1964). Courts considering allegations of misuse from excessive royalty rates have regarded this proposition as "far-fetched." See Warner-Jenkinson Co. v. Allied Chem. Corp., 477 F. Supp. 371,396 (S.D.N.Y. 1979), affd mere., 633 F.2d 208 (2d Cir. 1980). A patentee has the fight to exclude a competitor entirely, and "a royalty demand which is so high as o.~ preclude acceptance of a esneciL offer is, after all, not appreciably different from a refusal to license upon any terms. The right to refuse to license is the essence of the patent holder's right under the patent law .... " W.L. Gore & Assocs. v. Carlisle Corp., 529 F.2d 614, 623 (3d Cir. 1976). 26. See, e.g., Miller Insituform, Inc. v. Insituform of North America, Inc., 605 F. Supp. 1125, 1133 (M.D. Tenn. 1985), aft'd, 830 F.2d 606 (6th Cir. 1987), cert. denied, 484 U.S. 1064 (1988); United States v. Studiengesellschaft Kohle, m.b.H., 670 F.2d 1122, 1128 (D.C. Cir. 1981) ("exclusion of competitors and charging of supracompetitive prices are at the core of the patentee's fights, and are legitimate rewards of the patent monopoly"); USM Corp. v. SPS Technologies, Inc., 694 F.2d 505,513 (7th Cir. 1982), cert. denied, 462 U.S. 1107 (1983). 27. See, e.g., Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1574-5 (Fed. Cir. 1988); TWM Mfg. Co., Inc. v. Dura Corp., 789 F.2d 895, 900 (Fed. Cir. 1986), cert. denied, 479 U.S. 852 (1986). 28. See, e.g., American Lecithin Co. v. Warfield Co., 501 F.2d 207, 210-11 (7th Cir. 1939), cert. denied, 308 U.S. 609 (1939); Preformed Line Prods. Co. v. Franner Mfg. Co., 328 F.2d 265, 279 (6th Cir.), cert. denied, 379 U.S. 846 (1964). These courts regarded such relief as contrary to the equitable policies underlying the misuse doctrine, permitting enforcement of a valid patent after purge. See infra note 47. A different result has fol- lowed from antitrust violations involving patents, when mandatory licensing is a well- established rememdy. See Hartford-Empire Co. v. United States, 323 U.S. 386, 417 (1945); United States v. National Lead Co., 332 U.S. 319, 338 (1947); United States v. Glaxo Group, 410 U.S. 52, 64 (t973). 29. See SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981), cert. denied, 455 U.S. 1016 (1982). 30. See Continental Paper Bag .~.'C v. Eastern Paper Bag Co., 210 U.S. 405 (1908); Spe- cial Equip. Co. v. Coe, 324 U.S. 370 (1945). For example, ownership of a patent confer- ring the right to exclude others from selling margarine would be of great benefit to makers of butter, even if they had no interest in working the patent themselves. 8 Harvard Journal of Law & Technology Vol. 4 the patented product on the acquisition of a license to fights in another patent modifies the prior rule applied to package licensing. Formerly, :, the determinative legal question was whether there is "conditioning" in a package license sale, i.e., whether the buyer is "forced" to pay royalties on unwanted or unused technology in order to obtain desired elements of the package. 3 I The rule against package patent licensing has not been absolute, 23 but has recognized a business justification defense, where the package is bar- gained for and is the most convenient business arrangement for the par- ties. 33 However, this limited immunity permitted for package licenses of patents has been denied for the block-booking of copyrighted feature films 43 and for tie-ins of patents to commodities. 53 The amendment modifies prior law by limiting misuse from package licensing of patents tO circumstances in which there is "marke t power" in the market for any of the tying patents. Although the legislative history does not indicate whether Congress intentionally included the "condi- tioning" language of Zenith Radio Corp. v. Hazeltine Research, Inc, 63 in § 271(d)(5), it appears that the statutory amendment preserves the prior judicially-fashioned distinction between prohibited "conditioning" and permissible business convenience, even where market power is present. 31. In Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U.S. 827 (1950) (overruled in part on unrelated grounds by Lear, Inc. v Adkins, 593 U.S. 653 (1969)), the Court indicated that "conditioning the granting of a license under one patent upon the acceptance of another and different license" is one of the "condemned schemes" under the patent misuse doctrine. 339 U.S. at 830-31. 32. Compare American Security Co. v. Shatterproof Glass Corp., 862 F.2d 769, 777 (3d Cir.), cert. denied, 163 U.S. 902 (1959) (condemning forced mandatory package licensing under a leverage theory), with Glen Mfg., Inc. v. Perfect Fit Indus., 420 F.2d 319, 123 (2d Cir.), cert. denied, 793 U.S. 1042 (1970); International Mfg. Co. v. Landon, Inc., 336 F.2d 723, 729 (9th Cir. 1964), cert. denied, 379 U.S. 988 (1965) (permitting forced package licensing of ,'blocking" patents); and Carpet Seaming Tape Licensing Corp. v. Best Seam, Inc., 616 F.2d 1133, 1142 (gthCir. 1980) (approving "blocking patent" exception). 33. The rule against conditioning announced in Automatic Radio was tempered when the Court held that a package provision inserted for the convenience of the parties, rather than being forced or "conditioned" by the patent owner, did not result in misuse. See Zenith Radio Corp. v. Hazeltine Research, Inc., 593 U.S. 100, 831 (1969). 34. See, e.g., United States v. Loew's, Inc., 173 U.S. 38 (1962); United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948). But cf. Broadcast Music, Inc. v. Columbia Broadcasting Sys., 144 U.S. 1 (1979) (massive block-licensing of copyrighted musical compositions for broadcast approved as necessary under the circumstances of the business, when a separate license could be negotiated with the individual composer L 35. See, e.g., B. B. Chem. Co. v. Ellis, 314 U.S. 495, 498 (1942), discussed infra notes 92-97 and accompanying text. 36. 593 U.S. 001 (1969). Spring, 1991 Patent Misuse and Antitrust Reform 9 3. Tying Arrangements The provision of greatest interest permits a patentee, under some cir- cumstances, to condition the licensing of patent rights or the sale of a patented product "on the purchase of a separate product." While the leg- islative history does not analyze the issue in any detail, the significant effect of this provision is to permit the patentee, for the first time since 1917, 73 to tie staple products to the sale of patented technology. s3 A tie of a patented product to a nonstaple was permitted prior to the amendment by 35 U.S.C. §271(d)(3), even when there was market power in the tying product. Based on extensive consideration of the leg- islative history of this section, the Court in Dawson Chemical Co. v. Rohm & Haas Co. 93 held that Congress had intended to change the judicially-developed law of contributory infringement "and to expand significantly the ability of patentees to protect their rights against contri- butory infringement": 4° In our view, the provisions of § 271(d) effectively confer upon the patentee, as a lawful adjunct of his patent rights, a limited power to exclude others from competition in nonstaple goods. A patentee may sell a nonstaple article himself while enjoining others from marketing that same good without his authorization. By doing so, he is able to eliminate competitors and thereby to control the market for that product. Moreover, his power to demand royalties from others for the privilege of selling the nonstaple item itself implies that the patentee may control the market for the nonstaple good; otherwise, his "right" to sell licenses for the marketing of the nonstaple good would be meaningless, since no one would be willing to pay him for a superfluous authorization. 14 Furthermore, the Court construed the statutory language to exclude any requirement that the patentee be required to license others to sell a .73 Before noitoM erutciP stnetaP .oC .v lasrevinU Film Mfg. Co., 342 .S.U 205 ,)7191( tying stnemegnarra were generally condoned by eht courts. See infra notes 57-60 dna gniynapmocca .txet .83 The noitcnitsid neewteb a elpats elcitra or commodity of ecremmoc that si elbatius for gnignirfninon use, dna na detnetapnu article that si especially made or yllaicepse detpada for esu ni na ,tnemegnirfni having no laitnatsbus gnignirfninon use, si latnemadnuf ni eht wal of yrotubirtnoc ,tnemegnirfni dna si deifidoc ni 53 .C.S.U § )c(172 .)8891( .93 844 U.S. 671 .)0891( .04 ld. at .302 .14 ld. at .102 10 Harvard Journal of Law & Technology Vol. 4 nonstaple, even though a monopoly in the unpatented nonstaple results. 24 The critical distinction between unpatented staple and nonstaple pro- ducts, which has shaped the development of patent misuse and contribu- tory infringement for over a century, 34 appears largely to have been overlooked by Congress in 1988, although the legislative history endorses continued heightened scrutiny of ties involving staples. 44 The legislative floor remarks explaining new subsection 271(d)(5) indicate that the tying provision is significantly more limited than the earlier Senate-passed provision that would have required proof of an antitrust violation before a finding~0f patent misuse could be made. 54 Instead, the amendment is intended ~ to alter the judicially created rule that tying is "per se" patent misuse. 64 B. History of the Per Se Patent Misuse Rule For seventy years, tie-ins of patents and unpatented staple articles were uniformly condemned, without judicial mercy, as an unlawful 42. Seeid. at214-15. 43. The history of the distinction, which can be traced to Wallace v. Holmes, 29 F. Cas. 74 (C.C.D. Conn. 1871) (No. 17,100), is reviewed in detail in Dawson, 448 U.S. at 187-200. .44 See infra notes 36--265 and accompanying text. 45. 431 CONG. REC. H10,648 (daily ed. Oct. 20, 1988) (remarks of Rep. Kastenmeier). The Senate version had provided: No patent owner otherwise en'.itled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his or her licensing practices or actions or inactions relating to his or her patent, unless such practices or actions or inactions, in view of the circumstances in which such practices or actions or inactions are employed, violate the antitrust laws. S. 438, 100th Cong., 2d Sess., tit. ,1I § 102 (1988). An identical provision was earlier pro- posed by the Senate, Title II of S. 1200, 100th Cong., ts1 Sess. (1987), but deleted from H.R. 3, 100th Cong., Ist Sess. (1988), and the final Omnibus Trade and Competitiveness Actof 1988, Pub. L. No. ,814--001 201 Star. 1107 (1988). See H.R. REP. NO. 576, ht001 Cong., 2d Sess. at 1901 (1988); see generally bills cited infra notes 121-22. Senator Leahy conceded defeat in the House after the Senate dah passed S. 438 three times, but warned that the Senate is clearly sending a message to the couas that they would be mistaken to continue to apply any presumption of market power involving intellectual property rights as automatically granting meaningful economic power over a particular market in antitrust cases. 431 CONG. REC. S17,148 (daily ed. Oct. 2i, .)8891 46. See 431 CONG. REC. HI0,648 (daily ed. Oct. 20, 1988) (remarks of Rep. Kasten- meier);/d, at S 741,71 (daily ed. Oct. 21, 1988) (remarks of Senator DeConcini).