Addressing market definition issues in the context of Sherman Act antitrust claims, the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s ruling granting summary judgment to plaintiffs, finding that defendant’s proposed relevant market was too narrow. IGT v. Alliance Gaming Corp., Case No. 11-1166 (Fed. Cir., Dec. 17, 2012) (Reyna, J.) (Bryson, J., dissenting).
The plaintiff, IGT, is a designer, developer and manufacturer of computerized gaming machines, one of which is the “Wheel of Fortune,” a popular wheel game. IGT holds a number of patents on wheel games. The defendant, Bally Gaming International, also designs, develops and manufacturers gaming machines, including wheel games. IGT sued Bally for infringement of certain patents relating to wheel games. In response, Bally brought a counterclaim accusing IGT of illegal monopolization under Sherman Act § 2. IGT moved for summary judgment against Bally’s antitrust claim, and the district court granted the motion.
On appeal, Bally argued that the district court erred when it concluded that wheel games were not a relevant submarket of casino gaming machines. However, Bally had agreed with IGT that wheel games compete with all gaming machines because casinos mix and match products to maximize floor space revenue generation. Bally also agreed with IGT that wheel games did not require any special or unique production facilities and that the customers of wheel games—the casinos—were the same customers as all other gaming machines.
Bally’s argument that wheel games were a relevant submarket was based, in part, on the proposition that some players preferred wheel games. The Federal Circuit found that what players preferred said nothing about whether wheel games should be considered a submarket under the Brown Shoe factors. The Brown Shoe factors include industry or public recognition of the submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes and specialized vendors.
Bally further based its proposed relevant market on IGT’s argument supporting its patent infringement claims that there were no non-infringing substitutes of wheel games. According to Bally, this meant that IGT conceded that there were no substitutes for wheel games. The Federal Circuit disagreed, and held that an expert’s opinion that there were no non-infringing technological substitutes did not necessarily mean that there were no economic substitutes. According to the Court, Bally had not presented any evidence that there were no economic substitutes for wheel games, particularly in light of the fact that Bally had agreed wheel games competed with other gaming machines. Thus, the Federal Circuit ruled that the undisputed facts showed that meaningful competition existed between wheel games and all gaming machines, and as a result the district court did not decide a disputed issue of material fact.