Dsm Desotech Inc. v. 3D Systems Corporation , 749 F.3d 1332 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
DSM DESOTECH INC.,
Plaintiff-Appellant,
v.
3D SYSTEMS CORPORATION AND
3D SYSTEMS, INC.,
Defendants-Appellees.
______________________
2013-1298
______________________
Appeal from the United States District Court for the
Northern District of Illinois in No. 08-CV-1531, Judge
Sharon Johnson Coleman.
______________________
Decided: April 18, 2014
______________________
MICHELE L. ODORIZZI, Mayer Brown LLP, of Chicago,
Illinois, argued for plaintiff-appellant. With her on the
brief were ANDREW S. MAROVITZ, BRITT M. MILLER,
THOMAS V. PANOFF, and MATTHEW D. PROVANCE. Of
counsel on the brief was MICHAEL B. KIMBERLY, of Wash-
ington, DC.
PAULA W. RENDER, Jones Day, of Chicago, Illinois, ar-
gued for defendants-appellees. With her on the brief were
MICHAEL SENNETT, ERIN L. SHENCOPP, and ALEX P.
MIDDLETON.
2 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
______________________
Before MOORE, SCHALL, and REYNA, Circuit Judges.
SCHALL, Circuit Judge
This is an antitrust case. DSM Desotech Inc. (“Deso-
tech”) is the plaintiff-appellant. Desotech makes, among
other things, resins for use in stereolithography (“SL”)
machines. 3D Systems Corp. and 3D Systems, Inc. (col-
lectively “3DS”), the defendants-appellees, make and sell
SL machines, as well as resins for use in those machines.
Desotech brought suit in the United States District Court
for the Northern District of Illinois, accusing 3DS of
violating the federal and state antitrust laws and various
other state laws by, inter alia, installing a technological
lock on its machines that prevents customers from using
Desotech resins that have not been approved by 3DS.
Desotech also accused 3DS of patent infringement.
After the close of fact and expert discovery, 3DS
moved for summary judgment on all counts of Desotech’s
complaint. The district court granted 3DS’s motion as to
the antitrust claims and certain state-law claims. After
the parties stipulated to dismissal of the remaining
claims, the court entered judgment in favor of 3DS. DSM
Desotech, Inc. v. 3D Sys. Corp., No. 08-cv-1531 (N.D. Ill.
Mar. 4, 2013). Desotech appeals that judgment. For the
reasons set forth below, we affirm.
BACKGROUND
I. SL TECHNOLOGY AND THE PARTIES
The district court described the background of the
case extensively in its summary judgment order. See
DSM Desotech, Inc. v. 3D Sys. Corp., No. 08-cv-1531, 2013
WL 389003, at *1–8 (N.D. Ill. Jan. 31, 2013) (“Final
Decision”). We briefly recite the pertinent facts.
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 3
This case involves what is known as “rapid-
prototyping technology.” There are two general forms of
this technology: additive and subtractive. Additive tech-
nology creates parts by building layer upon layer with
materials such as plastics, metals, or ceramics. Subtrac-
tive technology works by starting with a block of material
and then cutting away layers. Examples of additive
technology include SL, fused deposition modeling, laser
sintering, 3D printing, direct metal laser sintering, and
digital light processing. Computer numerically controlled
machining is an example of subtractive technology.
3DS manufactures SL machines and is the sole sup-
plier of those machines in the United States. SL ma-
chines use an ultraviolet laser to trace a cross section of
the object being made on a vat of liquid polymer resin.
The laser solidifies the resin it touches, while the remain-
ing, untouched, areas remain in liquid form. After one
cross-section has solidified, a vertical elevator lowers the
newly formed layer below the surface of the resin. The
process is repeated until the object is completed.
Users of SL machines include original equipment
manufacturers, “service bureaus,” the government, the
military, and academic researchers. Service bureaus
build parts or prototypes for other companies and often
own multiple types of rapid-prototyping machines. One
reason that service bureaus use multiple types of rapid-
prototyping machines is that, although all such machines
perform the same essential function, they have varying
characteristics, such as size, speed, and accuracy. Those
varying characteristics might make one type of machine
more preferable than another for a given project. For
example, users might employ an SL machine for a fine-
detailed model. By contrast, users might employ laser
sintering—a robust manufacturing process—for parts
that serve a more functional purpose.
4 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
3DS began selling SL machines in the United States
in 1988. Since then, it has sold various models, including
the SLA 250, 350, 500, 3500, 5000, 7000, the Viper, the
Viper Pro, and the iPro. Among those models, 3DS offers
various machine sizes that produce parts comparable to
the size of parts produced by other additive technologies.
3DS makes one extra-large iPro machine, however, that
produces parts larger than any competing technology.
3DS has sold a number of SL machines over the years,
with approximately 2,000 to 3,500 such machines still in
operation. According to Desotech’s expert, 325 customers
purchased resin for their SL machines in 2006; in 2010,
268 customers did so.
Around 2005, 3DS began equipping some of its ma-
chines with Radio Frequency Identification (“RFID”)
capability. RFID is a wireless technology that allows a
receiver placed on the SL machine to communicate with a
transmitter on the cap of a resin bottle. To ensure that
customers use only 3DS-approved resins, a software-
based lockout feature shuts the machine off if the RFID
detects a resin that 3DS has not approved. 3DS has
approved two of Desotech’s resins for use in its RFID-
equipped SL machines. Desotech and 3DS entered into
negotiations for the approval of additional Desotech
resins. After those negotiations broke down, Desotech
filed suit.
II. PROCEEDINGS IN THE DISTRICT COURT
In its suit, Desotech alleged multiple antitrust viola-
tions by 3DS, including tying under § 1 of the Sherman
Act (Count I); tying under § 3 of the Clayton Act (Count
II); unreasonable restraint of trade under § 1 of the
Sherman Act (Count III); attempted monopolization
under § 2 of the Sherman Act (Count IV); and antitrust
violations under the Illinois Antitrust Act (Count V).
Additionally, Desotech alleged a state law claim for
violation of the Illinois Uniform Deceptive Trade Practices
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 5
Act (Count VI). It also alleged state law claims for Tor-
tious Interference with Prospective Economic Advantage
(Count VII) and for Tortious Interference with Contractu-
al Relations (Count VIII). Finally, Desotech asserted a
claim of patent infringement (Count IX).
Desotech based its tying claims on alternative theo-
ries, invoking both the “per se rule” and the “rule of
reason.” 1 Pertinent to this case, to establish a per se
illegal tying violation, Desotech was required to show (1)
that 3DS’s tying arrangement was between two distinct
products or services, (2) that 3DS had sufficient economic
power in the tying market (the market for SL machines)
to appreciably restrain free competition in the market for
the tied product (the market for SL resin), and (3) that a
not insubstantial amount of interstate commerce was
affected. Reifert v. S. Cent. Wis. MLS Corp., 450 F.3d 312,
316 (7th Cir. 2006) (quoting Carl Sandburg Vill. Condo.
Ass’n No. 1 v. First Condo. Dev. Co., 785 F.2d 203, 208
(7th Cir. 1985)). If Desotech failed to prove a per se tying
violation, it could still show an illegal tie under the rule of
reason. See Carl Sandburg Vill. Condo. Ass’n No. 1, 758
F.2d at 210. Under the rule of reason, “the factfinder
weighs all of the circumstances of a case in deciding
whether a restrictive practice should be prohibited as
imposing an unreasonable restraint on competition.”
Leegin, 551 U.S. at 885. As with a tying suit based on the
per se rule, a tying suit based on the rule of reason re-
quires a showing of market power. Menasha Corp. v.
1 Per se rules of antitrust liability apply to conduct
deemed by the courts to be conclusively anticompetitive
and, therefore, unlawful. Per se rules eliminate the need
to consider the reasonableness of the conduct at issue.
Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551
U.S. 877, 886 (2007).
6 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
News Am. Marketing In-Store, Inc., 354 F.3d 661, 663 (7th
Cir. 2004) (citations omitted).
To prevail on its unreasonable restraint of trade
claim, Desotech was required to show that the restraint
had a substantially adverse effect on competition in the
marketplace. Magnus Petroleum Co. v. Skelly Oil Co., 599
F.2d 196, 204 (7th Cir. 1979). For its attempted monopo-
lization claim, Desotech was required to show “(1) [3DS’s]
specific intent to achieve monopoly power in a relevant
market; (2) predatory or anticompetitive conduct directed
to accomplishing this purpose; and (3) a dangerous proba-
bility that the attempt at monopolization [would] suc-
ceed.” Mercatus Grp., LLC v. Lake Forest Hosp., 641 F.3d
834, 854 (7th Cir. 2011) (citations omitted).
Under its state law antitrust claim, Desotech was re-
quired to prove the same allegations as under its federal
antitrust claims. Ill. ex. rel. Burris v. Panhandle E. Pipe
Line Co., 935 F.2d 1469, 1479–80 (7th Cir. 1991).
After the close of fact and expert discovery (which
Desotech states resulted in the production of “millions of
pages of documents” and “more than sixty depositions”),
3DS moved for summary judgment on all counts. Regard-
ing the antitrust claims, 3DS argued that Desotech had
failed to put forth sufficient evidence showing that (1) SL
machines constituted an independent market; (2) SL resin
constituted an independent market; (3) 3DS’s conduct was
anticompetitive; and (4) Desotech had suffered an anti-
trust injury. The district court agreed. Final Decision at
*13–14. Finding this failure of proof dispositive, the court
granted summary judgment against Desotech on all of its
antitrust claims.
The district court also granted summary judgment on
two of Desotech’s state law claims. Regarding the alleged
violation of the Illinois Uniform Deceptive Trade Practices
Act, the court found that Desotech could not prove that
3DS’s statements were false, ongoing, or otherwise more
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 7
than just general statements about a licensing policy. 2
Final Decision at *15. Regarding Desotech’s claim for
tortious interference with prospective economic ad-
vantage, the court found that Desotech’s claim failed
because it could not show that 3DS’s actions about which
it complained were motivated solely by spite or ill will.
Final Decision at *16. The court, however, denied sum-
mary judgment-in-part on Desotech’s state law claim of
tortious interference with contractual relations. DSM
Desotech, Inc. v. 3D Sys. Corp., No. 08-cv-1531, 2013 WL
214677 (N.D. Ill. Jan. 18, 2013). In addition, it denied
summary judgment on Desotech’s patent infringement
claim. DSM Desotech, Inc. v. 3D Sys. Corp., No. 08-cv-
1531, 2012 WL 5463803 (N.D. Ill. Nov. 7, 2012).
After the parties stipulated to dismissal of the surviv-
ing claims—including the patent infringement claim—the
district court entered final judgment, and Desotech timely
appealed. The district court had federal jurisdiction over
Desotech’s patent claim under 28 U.S.C. § 1338(a). Alt-
hough the patent claim no longer remains, because the
district court dismissed it with prejudice, we have juris-
diction over the remaining claims pursuant to 28 U.S.C. §
1295(a)(1). See Chamberlain Grp., Inc. v. Skylink Techs.,
Inc., 381 F.3d 1178, 1189–90 (Fed. Cir. 2004) (explaining
that the Federal Circuit retains jurisdiction over a case
that arose under the patent laws, even if no patent claims
remain on appeal, so long as those claims were dismissed
with prejudice).
DISCUSSION
I. STANDARD OF REVIEW
We “review[ ] the district court’s grant or denial of
summary judgment under the law of the regional circuit.”
2 Desotech based Count VI of its complaint on al-
leged false statements by 3DS.
8 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
MicroStrategy Inc. v. Bus. Objects, S.A., 429 F.3d 1344,
1349 (Fed. Cir. 2005). The Seventh Circuit reviews a
district court’s grant of summary judgment de novo,
viewing all facts in the light most favorable to the non-
movant. McCoy v. Harrison, 341 F.3d 600, 604 (7th Cir.
2003). Summary judgment is proper if there is no genu-
ine issue as to any material fact and the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c). A genuine issue of material fact exists if the evi-
dence would permit “a reasonable jury [to] return a ver-
dict for the nonmoving party.” Serednyj v. Beverly
Healthcare, LLC, 656 F.3d 540, 547 (7th Cir. 2011).
II. RELEVANT PRODUCT MARKET—SL MACHINES
A.
As noted, in the district court, Desotech alleged five
antitrust claims. Desotech’s primary contention on ap-
peal is that 3DS tied sales of resin (tied product) to sales
of SL machines (tying product). According to Desotech,
3DS not only tied resin sales to machine sales via con-
tracts (invoking per se antitrust liability), but also worked
a “technological tie” via use of its RFID technology (invok-
ing a rule of reason analysis). Desotech also contends
that this alleged conduct by 3DS constituted an unrea-
sonable restraint of trade and an illegal attempt at mo-
nopolization. Desotech acknowledges that, “[t]o prevail on
its antitrust claims, [it] must prove that either SL ma-
chines or SL resins constitute an independent product
market for antitrust purposes.” 3 Appellant’s Br. 22. The
failure to define the relevant market as SL machines or
3 For purposes of summary judgment, the parties
agreed that 3DS is the sole supplier of SL machines in the
United States. They also agreed that, as far as SL ma-
chines are concerned, the United States is the relevant
geographic market.
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 9
resins would thus be dispositive of Counts I–V. With this
in mind, we address first whether SL machines constitute
a relevant, independent market.
When reviewing a district court’s conclusion as to the
relevant product market under antitrust law, we apply
the law of the regional circuit. See Nobelpharma AB v.
Implant Innovations, Inc., 141 F.3d 1059, 1068 (Fed. Cir.
1998). The relevant product market consists of all prod-
ucts that are “reasonably interchangeable by consumers
for the same purposes.” United States v. E.I. du Pont de
Nemours & Co., 351 U.S. 377, 395 (1956). The Seventh
Circuit has characterized products and services that are
in the same market as those that are “good substitutes for
one another.” Reifert, 450 F.3d at 318. “The outer bound-
aries of a product market are determined by the reasona-
ble interchangeability of use or the cross-elasticity of
demand between the product itself and substitutes for it.”
Id. (quoting Brown Shoe Co. v. United States, 370 U.S.
294, 325 (1962)). The Seventh Circuit has “explicitly
rejected the proposition that a firm can be said to have
monopoly power in its own product, absent proof that the
product itself has no economic substitutes.” Elliott v.
United Center, 126 F.3d 1003, 1005 (7th Cir. 1997).
Determination of the relevant product market is a ques-
tion of fact. Blue Cross & Blue Shield United of Wis. v.
Marshfield Clinic, 881 F. Supp. 1309, 1321 (W.D. Wis.
1994).
For products to be substitutes for one another, they
need not be identical or fungible. United States v. Cont’l
Can Co., 378 U.S. 441, 449 (1964). When products are not
identical or fungible, they still may be in the same market
as differentiated products:
Products are differentiated when many buyers re-
gard them as different though the products still
perform the same essential function. . . . Many
machines performing the same function—such as
10 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
copiers, computers, or automobiles—differ not on-
ly in brand name but also in performance, physi-
cal appearance, size, capacity, cost, price,
reliability, ease of use, service, customer support,
and other features. Nevertheless, they generally
compete with one another sufficiently that the
price of one brand is greatly constrained by the
price of others.
Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law,
¶563a at 383–84 (3d. ed. 2007) (“Areeda & Hovenkamp”).
“Most courts correctly define the presumptive market to
include similar products, though differentiated by brand
or features.” Id., ¶ 563d at 389.
Differentiated products A and B may have a high
cross-elasticity of demand and therefore be “good substi-
tutes” for one another if enough customers would respond
to a small but significant nontransitory increase in the
price of product A by switching to product B, so that it
would make the increase unprofitable for the seller of A.
Id., ¶ 536 at 284–87; see also 42nd Parallel N. v. E St.
Denim Co., 286 F.3d 401, 405–06 (7th Cir. 2002) (“The key
inquiry in a market power analysis is whether the de-
fendant has the ability to raise prices without losing its
business . . . .” (internal quotations omitted)); IGT v.
Alliance Gaming Corp., 702 F.3d 1338, 1345 (Fed. Cir.
2012). Department of Justice (“DOJ”) guidelines suggest
considering this question based on a 5% or more price
increase. United States v. H&R Block, Inc., 833 F. Supp.
2d 36, 52 (D.D.C. 2011) (citing Fed. Trade Comm’n & U.S.
Dep’t of Justice Horizontal Merger Guidelines § 4.1.2
(2010)).
In determining whether products are “good substi-
tutes” and therefore in the same market, the Seventh
Circuit requires economic evidence. Reifert, 450 F.3d at
318; see also Menasha Corp., 354 F.3d at 664 (requiring
economic evidence to prove the existence of a distinct
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 11
market). Actual data and analysis are necessary. Reifert,
450 F.3d at 318.
Within a given relevant market, courts have also rec-
ognized submarkets in certain instances. These submar-
kets may on their own form the basis for antitrust
liability. IGT, 702 F.3d at 1346. Under Brown Shoe, in
determining whether a valid submarket exists, courts
consider “practical indicia” such as “(1) the industry or
public recognition of the submarket as a separate econom-
ic entity, (2) the product’s peculiar characteristics and
uses, (3) unique production facilities, (4) distinct custom-
ers, (5) distinct prices, (6) sensitivity to price changes, and
(7) specialized vendors.” Beatrice Foods Co. v. FTC, 540
F.2d 303, 308 (7th Cir. 1976) (citing Brown Shoe, 370 U.S.
at 325)).
In granting summary judgment in favor of 3DS on
Desotech’s antitrust claims, the district court held that
Desotech failed to show that SL machines constitute a
distinct market, finding it undisputed that alternatives
for SL exist. In reaching its decision, the court found first
that Desotech’s internal documents showed that SL
competes with other technologies. Second, the court
found that a DOJ report deemed SL to be in the same
market as other rapid-prototyping technologies. 4 Third,
the court found that, while five customers testified that
certain technologies were not substitutes for SL, another
five testified that some technologies are indeed substi-
4 DOJ filed a Competitive Impact Statement in
2001 during a challenge to 3DS’s acquisition of another
rapid-prototyping company. The document states that SL
and laser sintering technology were in direct competition
with one another at that time. Competitive Impact
Statement, United States v. 3D Systems Corp., No. 1:01-
cv-01237 (D.D.C. May 1, 2002) (No. 7), available at
http://www.justice.gov/atr/cases/f9000/9019.htm
12 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
tutes for SL for certain purposes. The court dismissed the
testimony, however, because none of the customers were
asked about reasonable substitutes. Fourth, the court
found that Desotech’s expert conceded that other technol-
ogies are alternatives to SL for some uses.
Regarding customers who testified they would pay a
5–10% price increase in 3DS’s SL machines, the court
concluded that the testimony of three or four customers
out of 268 total customers was insufficient for Desotech to
meet its burden of showing that a “significant number of
users” would not switch to alternatives.
Against this background and legal backdrop, we turn
to the contentions of the parties.
B.
Desotech contends that genuine issues of material fact
should have precluded summary judgment. Urging that
SL machines constitute a distinct product market, it
argues first that, although other types of printing tech-
nologies exist, none are reasonable substitutes for SL
technology because none can produce objects of the same
size, and with the same precision, as an SL machine.
Second, Desotech urges, there are substantial price
differences between SL machines and other rapid-
prototyping technologies. 3DS’s machines range in price
from $179,000 to $1 million, whereas other printing
technologies range in price from $10,000 to $59,000.
Machines with such differentiated prices, Desotech con-
cludes, are not reasonable substitutes.
Third, Desotech contends, the customers deposed in
this case testified they do not consider other technologies
to be substitutes for SL machines. For example, Desotech
explains, laser sintering and fused deposition modeling
each have their own characteristics. They could be sub-
stituted for SL for some projects but not for others. It was
error, Desotech continues, for the district court to reject
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 13
this evidence simply because the witnesses were asked
about substitutes and not reasonable substitutes. On
summary judgment, Desotech concludes, the district court
should have viewed this testimony in Desotech’s favor—
not 3DS’s.
Fourth, Desotech argues, there is direct evidence that
SL customers would not switch to an alternative technol-
ogy in the face of a 5–10% price increase. Under the DOJ
guidelines, Desotech urges, this indicates that SL ma-
chines are a separate market. Indeed, Desotech con-
cludes, four separate customers testified to this effect. In
addition, those four were among 3DS’s very largest cus-
tomers, comprising more than 12% of the annual SL resin
consumption among all customers, and 34% of those
whose resin consumption has been limited by RFID
technology.
Regarding the documents and testimony upon which
the district court relied, Desotech argues that the court
erred by viewing the evidence all in 3DS’s favor. In
particular, Desotech maintains, the court weighed the
evidence and improperly relied on certain Desotech inter-
nal marketing documents written by lay businesspeople—
not economists. A jury might agree with the district
court’s interpretation of those documents (which refer to
substitutes for SL), Desotech concludes, but it also might,
just as plausibly, disagree.
3DS responds that the undisputed facts show there
are substitutes for SL. For example, 3DS points out that
Desotech’s internal strategy documents describe other
technologies as substitutes. And, according to 3DS, this is
confirmed by DOJ’s Competitive Impact Statement. 3DS
also points to the deposition testimony of Desotech’s
expert, who stated, “I don’t think there is actually really
any material dispute that there are some technologies,
which for certain uses, are an alternative to stereolithog-
raphy.” Final Decision at *7. Regarding the customer
14 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
testimony, 3DS explains that five of the thirteen customer
witnesses testified that other technologies are indeed
substitutes for SL.
According to 3DS, the key question in defining the
relevant market is whether, if a manufacturer raises the
price of technology A, enough customers would switch
from technology A to technology B, thus making the price
increase unprofitable. Rather than conduct an economic
analysis on this point, 3DS contends, Desotech instead
chose to rely on the testimony of a small number of cus-
tomers. This small amount of testimony, 3DS concludes,
is insufficient as a matter of law to answer the key eco-
nomic question of whether SL machines constitute a
market.
C.
With the relevant legal principles in mind, we consid-
er whether Desotech has put forth sufficient evidence for
a reasonable jury to find a distinct product market based
on SL machines. As noted, the Seventh Circuit requires a
plaintiff to set forth economic evidence showing whether
products are good substitutes for one another. Reifert,
450 F.3d at 318. In that regard, one approach would be to
analyze sales data and determine whether the prices of
differentiated products move together. Menasha Corp.,
354 F.3d at 664 (describing various forms of econometric
analyses). More generally, an economist might analyze
price relationships, buying and selling patterns, or the
existence of price discrimination. Areeda & Hovenkamp,
¶ 534 at 263. Such data and analyses might reveal
whether customers switch between SL machines and
other rapid-prototyping technologies, and would thus
indicate whether the products are in the same market.
Rather than analyze economic data, Desotech and its
expert relied on four of the Brown Shoe practical indicia:
(1) distinct prices; (2) the product’s peculiar characteris-
tics and uses; (3) industry or public recognition of the
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 15
submarket as a separate economic entity; and (4) sensitiv-
ity to price changes. Although such practical indicia are
generally discussed in the context of submarkets, see
Brown Shoe, 370 U.S. at 325, identifying a submarket is
in principle no different than identifying a market.
Areeda & Hovenkamp, ¶ 533c at 255–57. Some circuits
might accept the use of such practical indicia to prove a
market in the absence of economic evidence. But the
Seventh Circuit does not. ChampionsWorld, LLC v. U.S.
Soccer Fed’n, Inc., 890 F. Supp. 2d 912, 949 (N.D. Ill.
2012). As the Seventh Circuit has explained, “[w]hile the
‘practical indicia’ named in Brown Shoe and Beatrice
Foods Co. are important considerations in defining a
market, they were never intended to exclude economic
analysis altogether.” Reifert, 450 F.3d at 320. For this
reason alone, we believe the district court properly grant-
ed summary judgment on Desotech’s antitrust claims. We
nevertheless consider the evidence Desotech proffers. For
the reasons explained below, we find that evidence an
insufficient basis for a reasonable jury to reach a verdict
in Desotech’s favor.
First, Desotech contends that a significant price dif-
ference between SL machines and other products shows
“distinct prices,” Brown Shoe, 370 U.S. at 325, thus sug-
gesting that SL machines constitute a separate market
from other kinds of rapid-prototyping technology. Specifi-
cally, Desotech argues that SL machines range in price
from $179,000 to $1 million, whereas 3D printing ma-
chines range in price from $10,000 to $59,000. In making
its argument, however, Desotech compares SL machines
to some of the cheapest possible substitutes—3D printing
machines. It thus ignores the evidence showing that 3DS
offers a range of SL machines with a broad range of prices
comparable to those of other rapid-prototyping technolo-
gies. For example, selective laser sintering and fused
deposition modeling machines have prices commensurate
with those of SL machines. Contrary to Desotech’s argu-
16 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
ment, therefore, the record demonstrates that SL ma-
chines do not have distinct prices in relation to all other
rapid-prototyping technologies.
Second, Desotech urges that SL has “peculiar charac-
teristics and uses,” Brown Shoe, 370 U.S. at 325, making
it superior to other fabrication techniques. Specifically,
Desotech argues that SL machines are more accurate and
can produce larger parts than other technologies. Regard-
ing the alleged size advantage of SL machines, Desotech
focuses on one model at the top end of 3DS’s product line.
Desotech, though, provides no evidence of how many
machines of that model 3DS actually sold. Additionally,
Desotech ignores the fact that 3DS sells many other
models that are comparable in size to laser sintering and
fused deposition modeling machines. Regarding the
accuracy of SL machines, Desotech again compares them
to one of the cheapest possible substitutes—3D printing
machines—which its expert ranked as “among the least
accurate.” The “peculiar characteristics and uses” Deso-
tech alleges, therefore, are tenuous at best. Nevertheless,
because this appeal comes from the grant of summary
judgment, we view the evidence in the light most favora-
ble to Desotech. Accordingly, we consider this factor as
evidence of a potential distinct market for SL machines.
Third, Desotech maintains that there is “industry or
public recognition of the [SL machine] submarket as a
separate economic entity,” Brown Shoe, 370 U.S. at 325,
based on testimony that some customers do not consider
other products to be substitutes for SL machines. Five
customers testified that other technologies are not substi-
tutes for SL, whereas another five testified that some
technologies are substitutes for certain uses. The district
court dismissed the testimony favorable to Desotech
because, although customers were asked about substi-
tutes, none was asked about reasonable substitutes.
Final Decision at *11. Viewing the facts in the light most
favorable to Desotech, however, the district court should
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 17
have credited this testimony. Nevertheless, the testimony
is insufficient to establish that SL machines constitute a
separate market. Rather, along with characteristics of
size and accuracy, it establishes that SL machines and
other rapid-prototyping technologies are differentiated
products. In considering whether these differentiated
products are in separate markets, we turn to the final
Brown Shoe factor upon which Desotech relies.
Desotech argues that customers are insensitive to
price changes in SL machines, Brown Shoe, 370 U.S. at
325 (“sensitivity to price changes”), thus indicating a
separate market. Although labeled in Brown Shoe as one
of the practical indicia of a submarket, the sensitivity of
customers to price reflects the basic economic test of cross
elasticity of demand. In measuring cross elasticity of
demand, we typically consider whether a sufficient num-
ber of customers would switch to other technologies in
response to a price increase in SL machines so as to make
the increase unprofitable. If enough customers switch,
then SL machines do not constitute an independent
market.
In making this argument, Desotech relies on the tes-
timony of four customers who indicated they would still
buy an SL machine if faced with a 5–10% price increase.
The district court considered the testimony, but found
that four customers out of 268 for SL machines was not a
significant enough proportion for Desotech to meet its
burden. The district court did not provide a reason be-
hind this conclusion, but a close look at the evidence
shows why the court was correct.
In arguing that the four customers are representative,
Desotech acknowledges they are a small portion of the
268 total customers for SL machines. It contends, howev-
er, that they nonetheless make up 12% of the market as
measured by resin consumption. Although the amount of
resin these four customers consume is tangentially rele-
18 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
vant, it does not address the more pertinent question,
which is the percentage of the SL market they comprise.
The record indicates that 3DS has produced a number of
SL machine models over the past 20 years, with approxi-
mately 2,000 to 3,500 machines remaining in operation.
Desotech provides little to no information about which
machines the four customers purchased, how many they
purchased, or when they purchased them. Further, the
record shows that the four customers are service bureaus,
whereas the overall customer base includes not only
service bureaus, but also original equipment manufactur-
ers, the government, the military, and academic research-
ers. Desotech provides no explanation for why the four
service-bureau customers would be representative of the
other classes of customers.
Further, the record indicates that the SL machine
models that 3DS sells differ in price by more than a half-
million dollars. Desotech, though, provides no justifica-
tion for the conclusion that a purchaser of a $900,000
machine is representative of a purchaser of a $400,000
machine, or vice versa. For the testimony of the four
customers to have been useful, Desotech would have at
least needed to ask them about the full range of prices of
3DS’s various machine models. See, e.g., United States v.
Country Lake Foods, Inc., 754 F. Supp. 669, 676–77 (D.
Minn. 1990) (finding evidence insufficient to identify the
market where it addressed only one price point out of a
range of prices). But Desotech did not do that. That
Desotech asked about a 5 to 10% price increase in the
abstract without reference to an actual or hypothetical
price makes the testimony even more questionable. Id. at
675. Adding to that questionability, one of the four cus-
tomers testified that 3DS actually gave him a 5% discount
to make him buy the machine.
Finally, as 3DS points out, the evidence and testimo-
ny Desotech relies on fails to answer the pertinent eco-
nomic question of whether a sufficient number of
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 19
customers would switch to a competing technology if faced
with a small but significant price increase. Desotech
offered no evidence or argument for what would constitute
a sufficient number. Instead, based on the testimony of
four customers, Desotech would have one believe that no
customers would switch technologies in the face of a price
increase. But with such a small sampling (four) from only
a single category of customer (service bureaus), and
without regard to the broad range of price points of the
various SL models, we believe the evidence is insufficient
for a reasonable jury to draw that conclusion.
In sum, when considering the proffered evidence in to-
tal and viewing it in the light most favorable to Desotech,
we conclude that only two of the Brown Shoe factors
weigh in Desotech’s favor. Some courts have found the
existence of a submarket based on three or four of the
indicia. See 2 J. Von Kalinowski, Antitrust Laws and
Trade Regulation § 24.02[2][a] (Matthew Bender 2d ed.)
(collecting cases). Although two indicia standing alone
might be satisfactory in certain cases, this is not such a
case. Given the limited and tenuous nature of the evi-
dence, we conclude that a reasonable jury could not find
an independent market for SL machines. We also con-
clude that Desotech failed to satisfy the stringent demand
for economic data and analysis required by the Seventh
Circuit. See Reifert, 450 F.3d at 318. Accordingly, the
district court did not err in granting summary judgment
that Desotech failed to prove an independent market for
SL machines. See Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587–88 (1986) (approving of
summary judgment in antitrust cases where the plaintiff
fails to raise a genuine issue for trial); see also Collins v.
Associated Pathologists, Ltd., 844 F.2d 473, 475 (7th Cir.
1988) (“[T]he use of summary judgment is not only per-
mitted but encouraged in certain circumstances, including
antitrust cases.”) (citations omitted).
20 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
III. RELEVANT PRODUCT MARKET—SL RESIN
A.
As an alternative theory, Desotech argues that a dis-
tinct product market exists for SL resin. Even if a manu-
facturer does not have power in a primary market, it still
may have power in an aftermarket and be liable under
the antitrust laws for conduct in that market. See East-
man Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451,
465–71 (1992). However, “a court may conclude that the
aftermarket is the relevant market for antitrust analysis
only if the evidence supports an inference of monopoly
power in the aftermarket that competition in the primary
market appears unable to check.” 5 SMS Sys. Maint.
Servs., Inc. v. Digital Equip. Corp., 188 F.3d 11, 17 (1st
Cir. 1999). For example, if the high cost of a machine
“locks in” customers to using the manufacturer’s parts
and service, the manufacturer could still exercise monopo-
listic power in the aftermarket, even though it competes
in the primary market. Kodak, 504 U.S. at 476. Even so,
“[i]t is an article of faith, for antitrust purposes, that
unless a substantial number of preexisting customers are
locked in, defections from the manufacturer’s installed
base, coupled with losses in the foremarket, in all proba-
5 If competition exists in a primary market (e.g.,
rapid-prototyping machines) and a manufacturer treats
its customers poorly in the aftermarket (e.g., resin), the
manufacturer presumably will lose new sales of machines
as well as lose some existing customers in the resin af-
termarket. If the manufacturer wishes to stay in busi-
ness, it will not bite the hand that feeds it for very long.
SMS Sys. Maint. Servs., 188 F.3d at 16–17 (citations
omitted). Unless something exists that prevents market
forces from operating this way, the antitrust laws are not
concerned because market forces on their own will correct
the anticompetitive conduct.
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 21
bility will sabotage any effort to exploit the aftermarket.”
SMS Sys. Maint. Servs., 188 F.3d at 21.
The district court considered Desotech’s argument
that resin constituted a separate market, but ultimately
ruled against Desotech, concluding that it had put forth
no evidence that 3DS was limiting resin variety or charg-
ing supracompetitive prices for SL resin. Final Decision
at *12–13.
B.
Desotech bases its contention regarding an alterna-
tive SL resin market on a lock-in theory. According to
Desotech, materials other than SL resin cannot function
in an SL machine. And, so the argument goes, because
customers who have sunk hundreds of thousands of
dollars into an SL machine are effectively unable to
switch to alternative technologies, they are locked in to
using that machine and the accompanying resins. The
district court erred, Desotech concludes, by dismissing
this argument out of hand.
3DS responds that Desotech’s theory that customers
are “locked in” to using 3DS’s machines can only prevail
where a substantial number of customers were locked in
to their machine purchases before they learned of a re-
striction on aftermarket resins. Here, no lock-in could
have occurred for any Viper Pro or iPro purchases after
August 2007, and only seven customers purchased their
machines before that time. 6 Seven customers out of 268,
6 The Viper Pro machines purchased by the seven
customers prior to August 2007 came equipped with RFID
technology. 3DS had not activated the RFID, however, at
the time of sale. 3DS began activating the RFID lockout
in mid 2007 by way of a software update for the Viper Pro
machines. According to Desotech’s expert, there was a
general market awareness by August 2007 of the impend-
22 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
3DS concludes, is not a “substantial” number. Further,
six of those seven bought machines before 3DS’s licensing
discussions with Desotech broke down. According to 3DS,
it could not have violated the antitrust laws by failing to
accurately predict the outcome of those discussions.
C.
As noted, to show that SL resin constitutes an inde-
pendent market in which anticompetitive conduct cannot
be regulated by competition in the primary market,
Desotech relies on a lock-in theory. We conclude that
Desotech cannot succeed on this theory, however, because
it has not presented evidence showing that a substantial
number of customers are, in fact, locked in.
If the high cost of switching equipment locks custom-
ers in to using specific aftermarket parts or service, then
the aftermarket might form the basis for antitrust liabil-
ity. Kodak, 504 U.S. at 476–77. Crucial to the Kodak
decision, however, was the fact that customers had al-
ready purchased their equipment before learning about
Kodak’s policies on aftermarket parts and services. Id. at
477 n.24; Digital Equip. Corp. v. Uniq Digital Techs., Inc.,
73 F.3d 756, 763 (7th Cir. 1996) (“The Court did not doubt
in Kodak that if spare parts had been bundled with Ko-
dak’s copiers from the outset, or Kodak had informed
customers about its policies before they bought its ma-
chines, purchasers could have shopped around for compet-
itive life-cycle prices.”); see also PSI Repair Servs., Inc. v.
Honeywell, Inc., 104 F.3d 811, 820 (6th Cir. 1997) (“We
likewise agree that the change in policy in Kodak was the
crucial factor in the Court’s decision. By changing its
policy after its customers were ‘locked in,’ Kodak took
ing RFID activation. 3DS began selling its iPro machines
in 2008, with the RFID lockout activated at the time of
sale.
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 23
advantage of the fact that its customers lacked the infor-
mation to anticipate this change.”) Accordingly, it is only
the customers who learned about the RFID lock after
purchasing their equipment that are relevant to the
“locked-in” analysis.
Customers who learn about the RFID lock before buy-
ing the equipment cannot be exploited in the same way as
the “locked-in” customers because they can shop around
for competitive life-cycle prices. Digital Equip. Corp., 73
F.3d at 763. In other words, if potential SL machine
customers find the cost of resin too high due to the effect
of 3DS’s RFID technology and licensing policies, they can
simply opt for a different type of machine; they are not
locked in by high switching costs. In Kodak, the Court
voiced a concern that some customers may be unable to
effectively compare life-cycle costs due to the difficulty in
obtaining information. Kodak, 504 U.S. at 473–75. That
concern, however, is not present here. The record indi-
cates that resin prices may be readily obtained, and
Desotech has not argued otherwise.
As explained in SMS, a substantial number of cus-
tomers must be locked in for a party to be able to exert
market power. SMS Sys. Maint. Servs., 188 F.3d at 21;
see also Kodak, 504 U.S. at 476 (explaining that a seller
could maintain supracompetitive prices if “the number of
locked-in customers were high relative to the number of
new purchasers.”) Here, only seven out of 268 customers
purchased their equipment before learning of the RFID
lock. In our view, seven out of 268 is not substantial.
Accordingly, the district court did not err in granting
summary judgment on Desotech’s claims based on SL
resin as the relevant market.
Because we conclude that Desotech failed to prove an
independent market for SL machines or resins—as it
acknowledged it must do—we affirm the district court’s
grant of summary judgment on Desotech’s antitrust
24 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
claims. Desotech also appeals the district court’s rulings
that it failed to show anticompetitive conduct and failed
to show it suffered an antitrust injury. Because the
failure to prove the relevant market is dispositive of the
antitrust claims, we do not reach those additional rulings
of the district court.
III. TORTIOUS INTERFERENCE
A.
Desotech also accused 3DS of tortious interference
with prospective economic advantage. Under Illinois law,
tortious interference with prospective economic advantage
requires that “(1) [the] plaintiff must have a reasonable
expectancy of a valid business relationship; (2) [the]
defendant must know about it; (3) [the] defendant must
intentionally interfere with the expectancy, and so pre-
vent it from ripening into a valid business relationship;
and (4) [the] intentional interference must injure the
plaintiff.” Schuler v. Abbott Labs., 639 N.E.2d 144, 147
(Ill. App. Ct. 1993) (citation omitted). However, the
“privilege to engage in business and to compete allows one
to divert business from one’s competitors generally as well
as from one’s particular competitors provided one’s intent
is, at least in part, to further one’s business and is not
solely motivated by spite or ill will.” Soderlund Bros., Inc.
v. Carrier Corp., 663 N.E.2d 1, 8 (Ill. App. Ct. 1995).
The district court found that 3DS implemented RFID,
at least in part, to further its business. In particular, the
court found that 3DS implemented the technology to
increase resin sales and provide its customers with useful
functionality. Finding that 3DS was therefore shielded by
the so-called privilege of competition, the district court
granted summary judgment against Desotech on its
tortious interference claim. Final Decision at *16.
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 25
B.
Desotech argues that the competitor’s privilege does
not apply under Illinois law when interference between
competitors involves “wrongful means” or “an unlawful
restraint of trade.” Here, Desotech contends, a jury could
find that the RFID resin lockout was an unlawful re-
straint of trade. Further, Desotech argues, even if 3DS’s
actions do not violate the letter of the law, they surely
violate the public policies underlying the law.
3DS responds that, in Illinois, the competitor’s privi-
lege protects against claims of tortious interference when
one acts to further its business and is not solely motivated
by spite or ill will. The undisputed facts, 3DS contends,
show it was not acting solely out of spite or ill will.
Regarding Desotech’s argument about violating the
spirit of the law, 3DS responds that the courts have
already rejected arguments like Desotech’s where the
conduct was not independently actionable. Accordingly,
3DS concludes, Desotech’s argument fails here as well.
C.
Desotech presented evidence that 3DS’s RFID tech-
nology interfered with its prospective business relation-
ships with resin purchasers. 3DS, on the other hand,
presented evidence that its reputation as a machine
manufacturer depended on the quality of resins used in
those machines, and Desotech came forward with no
evidence to demonstrate that 3DS acted out of spite or ill
will. The record indicates, therefore, that 3DS imple-
mented its qualification and licensing policy, at least in
part, to protect its reputation and thus advance its busi-
ness by ensuring the use of quality resins in its machines.
Accordingly, in our view, Desotech failed to create a
genuine issue of fact as to whether 3DS acted out of spite
or ill will rather than to advance its business interests.
See Soderlund Bros., 663 N.E.2d at 8. Finally, we are not
26 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
persuaded that Desotech’s argument about violating the
spirit of the law raises a genuine issue of material fact.
Accordingly, the district court did not err in granting
summary judgment against Desotech on its tortious
interference claim.
IV. ILLINOIS UNIFORM DECEPTIVE TRADE PRACTICES ACT
A.
Desotech alleged that 3DS violated the Illinois Uni-
form Deceptive Trade Practices Act (“UDTPA”) 815 ILCS
§ 510/2(a). In relevant part, that statute provides that a
“person engages in a deceptive trade practice when, in the
course of his or her business, vocation, or occupation, the
person . . . represents that goods or services are of a
particular standard, quality, or grade or that goods are a
particular style or model, if they are of another . . . .” Id. §
510/2(a)(7). The UDTPA applies only to statements that
are false. Fedders Corp. v. Elite Classics, 279 F. Supp. 2d
965, 972 (S.D. Ill. 2003). Further, it does not provide a
cause of action for damages, but only instead provides
injunctive relief for ongoing or future practices. Kensing-
ton’s Wine Auctioneers & Brokers, Inc. v. John Hart Fine
Wine, Ltd., 909 N.E.2d 848, 857 (Ill. App. Ct. 2009).
The district court granted summary judgment in
3DS’s favor on the UDTPA claims. First, the court found
that the UDTPA provides for only injunctive relief and
that Desotech had provided no evidence of ongoing con-
duct. Second, relying on Conditioned Ocular Enhance-
ment, Inc. v. Bonaventura, 458 F. Supp. 2d 704, 710 (N.D.
Ill. 2006), the court found that statements regarding a
licensing and qualification policy are not actionable.
Third, the court found that Desotech did not present
evidence creating a genuine issue of material fact that
any of the alleged statements by 3DS were actually false.
Final Decision at *14–15.
DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION 27
B.
Desotech contends that 3DS violated the UDTPA by,
among other things, telling customers they could not use
Desotech resins because those resins were not “author-
ized,” “approved,” “licensed,” or “qualified.” Desotech
argues that the district court erred by relying on Condi-
tioned Ocular, 458 F. Supp. 2d at 710. According to
Desotech, Conditioned Ocular addressed only a general
statement that the plaintiff did not have a patent license.
By contrast, Desotech contends, 3DS’s statements about
resins being “untested” or “unapproved” implied that the
resins failed to meet quality standards. Whether those
statements were false or misleading, Desotech contends,
is a question for the jury.
Further, Desotech argues, it is of no bearing that the
evidence relates to 3DS’s past conduct because evidence
gained during discovery and used at trial will always be
past conduct. The UDTPA provides relief against viola-
tions that are ongoing or simply “likely” to occur, Deso-
tech concludes, and there is no reason to believe 3DS’s
conduct will stop in the future.
3DS responds that the UDTPA does not apply to
statements regarding whether a party has a “license or
authorization” to use another party’s product. Further,
3DS continues, the UDTPA applies only to statements
that are false or misleading. Here, the undisputed facts
show that 3DS made true statements about licensing that
are not actionable.
Moreover, 3DS argues, the UDTPA offers injunctive
relief only, and the relief must be based on ongoing or
future practices. Not only did Desotech fail to prove that
3DS made any disparaging statements, but it also had no
basis to allege Desotech would do so in the future.
28 DSM DESOTECH INC. v. 3D SYSTEMS CORPORATION
C.
In our view, Desotech failed to create a genuine issue
of material fact on its UDTPA claim. The allegedly
wrongful statements about Desotech’s resins not being
authorized, approved, licensed, qualified, or tested all
relate to 3DS’s licensing and approval policy. As 3DS
points out, general statements that a company “does not
have a license or authorization” to use another company’s
product do not violate the UDTPA. Conditioned Ocular,
458 F. Supp. 2d at 710. Further, we do not believe Deso-
tech raised a genuine issue of material fact that those
statements were false. Accordingly, summary judgment
was appropriate on Desotech’s UDTPA claim. 7
CONCLUSION
For the foregoing reasons, we affirm the grant of
summary judgment on Desotech’s antitrust claims, its
tortious interference claim, and its UDTPA claim.
AFFIRMED
COSTS
Each party shall bear its own costs.
7 Because separate grounds for summary judgment
exist, we need not reach the parties’ dispute about the
ongoing nature of the conduct.