Question

Scuba Diving. Marcy invented a new type of mask for scuba divers that was not subject to fogging. She agrees to allow Jenny to manufacture and sell the mask. She receives a sum of money for every mask that Jenny sells. Similarly, Marcy entered into an agreement with Frank to allow him to sell the masks, but only if he also purchased non-patented diving suits from Marcy. All parties proceeded to do very well with their sales. Which of the following describes the agreement between Marcy and Frank?
1) It is a legal tying arrangement.
2) It is a legal cross-licensing agreement.
3) It is an illegal tying arrangement.
4) It is an illegal cross-licensing agreement.
5) It is both a legal tying and a legal cross-licensing agreement.

Answer 1

Answer:

1) It is a legal tying arrangement.

Explanation:

In the US, tying arrangements are generally legal, except when the party that holds superior bargaining power imposes unfair conditions. In this case, Marcy does not run a huge corporation that wants to monopolize the manufacturing of scuba diving equipment. She even allows Jenny to manufacture and sell her products, so if Frank is not OK with the agreement, he could go and buy the masks from Jenny.

A tying arrangement is basically selling a certain popular product tied to other not so popular products, so the buyer is forced to buy more than one type of product.