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Tying: Right or Wrong If we discuss the important tying case between Eastman Kodak Co. V. image Technical Services, Inc. , 112 S. Ct. 2072 (1992), the decree prohibited not only tying, i. e. , conditioning sales of film on the purchase of photo-finishing, but also bundling, i.
e. , offering film with or without photofinishing, or the use of coupons. In terminating the decree, the court eliminated the ban on tying as well as on bundling. Court has terminated an anti monopoly decree over the governments objection. The court held that Kodak had sufficiently shown that it lacks power in the amateur color film market, and so it entitled to termination, even though the courts own findings of fact strongly indicate that Kodak does have such market power. The judgment will not have an impact on the multibillion dollar film and photofinishing industries, which Kodak has long dominated and which affect millions of American consumers. It also poses a serious threat to the ability of federal enforcement agencies and the courts to protect the public interest through injunctions.
There are nearly 1200 federal antitrust decrees in force, and they cover almost every major sector of the American economy. The Antitrust division has concluded with respect to many of the decrees it has reviewed in recent years that they continue to be necessary to the protection of competition. Lets discuss The 1954 Decree, Kodak began to market a color slide film called Kodachrome in the late 1930 s, and a color print film, Koda color, by 1954. At that time, it had over 90 % of the color film market. Since Kodak sold its color film only as a package deal with processing included in the price, it also had over 90 % of the color photofinishing. The tying arrangement resulted in a government antitrust suit and a consent decree in 1954.
Section V of the 1954 decree permanently enjoined Kodak from "tying or otherwise connecting in any manner the sale of its color film to the processing thereof, or the processing of its color film to the sale thereof." The court criticized the government's 1993 pricing data, citing an "entirely different" distribution system in Japan from America. But both Kodak and its rivals use that distribution system and so should be affected equally by it. Moreover, the systems' inefficiencies should be reflected in higher retail prices, not lower wholesale prices, if wholesale prices are related to costs. The fact that Kodak's prices in France are almost as high as in the United States ignores the fact that Kodak's market share in France is its highest in Europe, and its prices are lower elsewhere in Europe where its market share is smaller.
Five firms manufacture all the amateur color negative film sold in the United States: Kodak, Fuji, Konica, Agfa, and 3 M. Although "there is little, if any, difference in the quality of film manufactured by Kodak, Fuji, Konica, and Agfa" in the United States, Kodak greatly outsells its rivals and commands a substantially higher price. In second important tying case, Illinois Tool Works INC. ET AL.
v. INDEPENDENT INK, INC. , was a case decided by the Supreme Court of the United States involving the application of U. S. antitrust law to "tying" arrangements of patented products. The Court ruled unanimously that there is not a presumption of market power under the Sherman Antitrust Act when the sale of a patented product is conditioned on the sale of a second product in a tying arrangement. A plaintiff alleging an antitrust violation must instead establish the defendant's market power in the patented product through evidence.
In this case unpatented product through the case of a licencing agreement. Without commenting on the tying arrangement, the court held that use of a competitor, s ink in violation ofr a condition of the agreement that the rotary mimeograph may be used with the stencil, paper, ink and other supplies made by A. B. Dick Co. constituted infringement of the patent on the machine. In international salt, it was the existence of the patent on the tying product, rather than the use of a requirements tie, that lead the court to produce market power.
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 th even market, unless appellant would furnish the salt at an equal price. Wooten and ITW think the ability of a company to exert market power depends on a number of factors and should not be presumed simply because a patent is owned on a product. But it is that presumption of market power that is at the heart of the lawsuit that independent ink brought against ITW in 1998. Through one of its business units, trident industries inkjet, ITW holds a patent on an inkjet print head.
Printer manufacturers incorporate the print-head into machines they sell to companies that use them to place barcodes on cartons during assembly line production. The agreement raises the issue of patent tying, according to independent Ink, and legal precedent holds that such arrangements are illegal under the Sherman Antitrust Act of 1890. He wrote that presuming that a tie-in is illegal because a patent covers the tying product is a disincentive to innovation and / or patenting and unfairly penalizes inventors. On March 1, 2006, the court sided with ITW, holding that because a patent doesnt necessarily confer market power, a plaintiff must prove that a defendant has such power in the tying product before a court will conclude that such an arrangement is illegal.
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Research essay sample on Sherman Antitrust Act Market Power