U.S. 9th Circuit affirms judgment that incompatibility of products did not constitute monopolization

On 6 January 2010 the U.S. Court of Appeals for the 9th Circuit affirmed a U.S. District Court (Central District of California) grant of summary judgment on a monopoly maintenance claim brought against Tyco Health Care Group LP (“Tyco”). The claim was based on Tyco making its pulse oximetry monitors (OxiMax) incompatible with generic sensors and discontinuing its earlier monitors (R-Cal) that could be used with such sensors.

The Court noted that while as a general rule success achieved through innovation does not raise antitrust concerns, product design is not immune from antitrust, such as when 1) a product design only serves to protect monopoly power without any pro-competitive justification such as an   improvement of the product, or 2) the when an improved product design is associated with other anti-competitive conduct. However, the Court rejected the plaintiffs’ argument that the benefits and anti-competitive effects of product design should be balanced as contrary to the purpose of antitrust laws as well as unadministrable.

The Court affirmed the District Court dismissal under these two tests. First, focusing on whether OxiMax lacked any benefits, the Court agreed with the District Court that there was no genuine issue whether OxiMax was a genuine improvement. This was because of OxiMax’s additional features and reduced costs for consumers, and the fact a patent was granted on the new product, suggesting an improvement over previous designs.

Second, examining whether associated anti-competitive conduct was involved, the Court agreed with the District Court that there was no evidence that Tyco forced consumers to adopt the OxiMax system. In particular, given the presence of competing monitor products on the market, the discontinuation of the R-Cal monitors by Tyco could not force consumers into purchasing OxiMax monitors. [Juha Vesala]

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