## Facts

- Xerox manufactured high-volume copiers and printers and also competed in the aftermarket for service and repair of that equipment.
- CSU, an independent service organization (ISO), serviced Xerox machines and sought access to Xerox replacement parts and diagnostic software to compete in service markets.
- Xerox owned patents covering certain replacement parts and copyrights in diagnostic software used to service Xerox equipment.
- Beginning in the mid-1980s, Xerox adopted and expanded policies restricting sales of certain parts to ISOs and limiting access to diagnostic software, including end-user verification measures and efforts to limit alternative supply channels.
- ISOs attempted to source parts through alternative means (e.g., used machines, other ISOs, cooperative customers, and foreign affiliates) with varying success.
- After earlier class litigation produced a settlement temporarily suspending the restrictive parts policy and requiring time-limited software licensing, CSU opted out and pursued its own claims.
- CSU alleged Sherman Act and related state-law violations, including refusal to deal and tying theories, asserting Xerox used parts and software restrictions to exclude ISOs from service markets.
- Xerox counterclaimed for patent and copyright infringement; CSU asserted patent and copyright misuse as defenses.

## Issues

1. Whether a lawful patent or copyright owner’s unilateral refusal to sell patented parts or license copyrighted diagnostic software to ISO competitors can constitute exclusionary conduct supporting antitrust liability.
2. Whether such refusals can amount to patent or copyright misuse that renders the intellectual property unenforceable.

## Decision

- The Federal Circuit affirmed summary judgment for Xerox.
- The court held that a lawful patent or copyright owner’s unilateral refusal to sell or license protected subject matter is not, by itself, unlawful exclusionary conduct under the antitrust laws, even if it affects competition in more than one market.
- The court rejected CSU’s reliance on Xerox’s alleged intent to eliminate ISOs, treating intent as immaterial where the challenged conduct falls within the statutory right to exclude.
- The court held CSU failed to establish patent or copyright misuse because Xerox’s conduct did not impermissibly broaden the scope of its IP rights beyond the statutory grant.

## Legal Principles

- Lawfully acquired patents and copyrights include a right to exclude and generally impose no duty to sell, license, or deal with competitors.
- A unilateral refusal to license or sell protected intellectual property, without additional unlawful conduct, does not constitute monopolization or exclusionary conduct under the Sherman Act.
- Subjective intent to harm competitors does not convert a lawful exercise of the right to exclude into antitrust liability.
- Patent and copyright misuse requires conduct that extends the IP right beyond its lawful scope (e.g., coercive conditions or leveraging that enlarges the statutory grant); an outright refusal to license or sell ordinarily does not meet that standard.
- Competitive harm in an aftermarket or complementary market does not, standing alone, create antitrust liability when it flows directly from a lawful refusal to license protected subject matter.

## Conclusion

The court upheld Xerox’s ability, as a lawful IP owner, to refuse to sell patented parts and to refuse to license copyrighted diagnostic software to ISO competitors, holding that such unilateral refusals neither establish antitrust exclusionary conduct nor constitute IP misuse absent conduct that expands the IP right beyond its statutory scope.


In re Independent Service Organizations Antitrust Litigation, 203 F.3d 1322 (Fed. Cir. 2000)