## Facts

- Tyco manufactured pulse-oximetry systems consisting of patient sensors and monitors that interpret sensor signals.
- Tyco initially benefited from patent protection that prevented rivals from selling sensors compatible with Tyco’s large installed base of monitors.
- After the key patent expired in 2003, competitors began selling generic sensors compatible with Tyco’s older monitors.
- Tyco introduced a new patented system (“OxiMax”) using sensors with a writable memory chip and embedding calibration data in the sensor, enabling new sensor models without requiring monitor replacement.
- OxiMax monitors were incompatible with generic sensors designed for Tyco’s earlier monitors, and Tyco gradually discontinued its older technology.
- Purchasers of Tyco sensors brought a putative class action alleging antitrust violations based on (1) Tyco’s contracting practices and (2) the OxiMax redesign.
- The district court denied class certification and later granted summary judgment to Tyco on Sherman Act § 1 and § 2 claims; plaintiffs appealed, and the merits appeal controlled whether class certification would be reviewed.

## Issues

1. Whether Tyco’s sole-source/market-share provisions and tiered-pricing agreements unlawfully restrained trade under Sherman Act § 1 by foreclosing a substantial share of the relevant sensor market.
2. Whether Tyco unlawfully maintained monopoly power under Sherman Act § 2 by introducing a patented, incompatible redesign (OxiMax) and discontinuing older technology.

## Decision

- The Ninth Circuit affirmed summary judgment for Tyco on all claims.
- On § 1, the court held plaintiffs failed to produce evidence that Tyco’s agreements foreclosed competition in a substantial share of the relevant market.
- On § 2, the court held the OxiMax redesign was a genuine product improvement and that increased incompatibility, without coercion or other exclusionary conduct, did not constitute unlawful monopolization.
- Because plaintiffs did not prevail on the merits, the court did not reach the class certification ruling.

## Legal Principles

- Exclusive-dealing and loyalty-discount arrangements are analyzed under the rule of reason; plaintiffs must show substantial foreclosure in the relevant market to establish an unreasonable restraint under Sherman Act § 1.
- Agreements that leave meaningful avenues for rivals to reach customers, compete on price and quality, and gain sales generally do not establish substantial foreclosure.
- Under Sherman Act § 2, product redesign by a firm with monopoly power is not exclusionary merely because it disadvantages rivals or creates incompatibility; antitrust liability requires exclusionary conduct beyond competition through product improvement.
- Absent evidence that customers were forced or coerced to switch, a technologically improved redesign and discontinuation of prior products ordinarily constitutes competition on the merits rather than unlawful monopoly maintenance.

## Conclusion

The Ninth Circuit held that plaintiffs failed to show Tyco’s contracting practices substantially foreclosed the sensor market under § 1 and failed to show exclusionary conduct under § 2 where the redesign was a bona fide improvement and customers were not compelled to adopt it, warranting affirmance of summary judgment for Tyco.


Allied Orthopedic Appliances, Inc. v. Tyco Healthcare Grp. LP, 592 F.3d 991 (9th Cir. 2010)