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DSM Desotech Inc. v. 3D Systems Corp.

United States Court of Appeals, Federal Circuit

April 18, 2014

DSM DESOTECH INC., Plaintiff-Appellant,
v.
3D SYSTEMS CORPORATION AND 3D SYSTEMS, INC., Defendants-Appellees

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Appeal from the United States District Court for the Northern District of Illinois in No. 08-CV-1531, Judge Sharon Johnson Coleman.

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 Washington, DC.

PAULA W. RENDER, Jones Day, of Chicago, Illinois, argued for defendants-appellees. With her on the brief were MICHAEL SENNETT, ERIN L. SHENCOPP, and ALEX P. MIDDLETON.

Before MOORE, SCHALL, and REYNA, Circuit Judges.

OPINION

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Schall, Circuit Judge

This is an antitrust case. DSM Desotech Inc. (" Desotech" ) is the plaintiff-appellant. Desotech makes, among other things, resins for use in stereolithography (" SL" ) machines. 3D Systems Corp. and 3D Systems, Inc. (collectively " 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.

This case involves what is known as " rapid-prototyping technology." There are two general forms of this technology: additive and subtractive. Additive technology creates parts by building layer upon layer with materials such as plastics, metals, or ceramics. Subtractive 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 supplier of those machines in the United States. SL machines 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 remaining, 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.

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

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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 machines 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 violations 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 Act (Count VI). It also alleged state law claims for Tortious Interference with Prospective Economic Advantage (Count VII) and for Tortious Interference with Contractual Relations (Count VIII). Finally, Desotech asserted a claim of patent infringement (Count IX).

Desotech based its tying claims on alternative theories, 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., 758 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 requires a showing of market power. Menasha Corp. v. 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

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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 monopolization 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 probability that the attempt at monopolization [would] succeed." 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 required 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. Regarding 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 antitrust injury. The district court agreed. Final Decision, [WL] 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 than just general statements about a licensing policy.[2] Final Decision, [WL] at *15. Regarding Desotech's claim for tortious interference with prospective economic advantage, 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, [WL] at *16. The court, however, denied summary 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 surviving 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). Although the patent claim no longer remains, because the district court dismissed it with prejudice, we have jurisdiction 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

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the law of the regional circuit." 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 genuine 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 evidence would permit " a ...


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