United States: Wheel Games Are Not Shown To Be An Economically Distinct Relevant Market

In IGT v. Alliance Gaming Corp., No. 11-1166 (Fed. Cir. Dec. 17, 2012), the Federal Circuit affirmed the district court’s entry of SJ denying antitrust counterclaims because the undisputed facts were insufficient to establish the existence of a relevant antitrust market in wheel games. 

IGT owns several patents directed to wheel-based casino games.  IGT sued Alliance Gaming Corp., Bally Gaming International, Inc., and Bally Gaming, Inc. (collectively “Bally”) for infringement of those patents.  Bally responded that the patents were invalid and not infringed.  Bally also counterclaimed, alleging that the infringement lawsuit was an attempt to monopolize the wheel game market by asserting patents that IGT knew to be invalid, unenforceable, and not infringed.  The district court denied IGT’s motion for SJ on the antitrust issues, noting that the definition of the relevant market was a question of fact and concluding that there were genuine issues of material fact about whether wheel games were a relevant market and/or submarket.  The district court granted Bally’s motions that the patents were invalid and not infringed, and certified the patent issues for interlocutory appeal.  The Federal Circuit affirmed. 

On remand, IGT moved for reconsideration of the district court’s denial of SJ on the antitrust counterclaims.  Changing course from its previous ruling, the district court ruled that wheel games were not an economically distinct relevant market and granted SJ against Bally.  Bally appealed. 

On appeal, the Federal Circuit applied Ninth Circuit law in reviewing the district court’s conclusions as to the relevant market under antitrust law.  The Court noted that, as a threshold issue in any monopolization claim, the court must identify the relevant market. 

The district court determined that, because wheel games compete with all gaming machines, wheel games are not a relevant market because a market limited to wheel games would not encompass all economic substitutes.  Bally argued that the district court (1) improperly resolved disputed facts when it determined that wheel games were not a relevant market; (2) erred in concluding that the existence of some substitution between wheel and nonwheel games foreclosed the existence of a wheel game market; and (3) improperly focused on functional, rather than economic, substitution. 

To decide whether the district court improperly resolved disputed facts, the Federal Circuit examined the district court’s conclusion that wheel games compete with all gaming machines.  The Court found that both Bally and IGT provided extensive evidence that wheel games compete in the broader gaming machine market and that Bally did not rebut this evidence.  Thus, the Court held that Bally failed to produce evidence to show that there is a genuine issue of material fact that wheel games compete with all gaming machines, and the district court did not resolve a disputed factual issue.

“As Bally has failed to produce evidence to show there is a genuine issue of material fact that wheel games compete with all gaming machines, the district court did not resolve a disputed factual issue.”  Slip op. at 9.

The Federal Circuit next considered whether it was error for the district court to conclude that, because wheel games compete with all gaming machines, wheel games are not a relevant market.  The Court noted that the relevant market inquiry focuses on economic substitution.  Bally argued that it has shown a lack of economic substitution under a test set forth in the Department of Justice’s Horizontal Merger Guidelines, known as the “small but significant and non-transitory increase in price” (“SSNIP”) test, which asks “whether the degree of substitutability between the two products is sufficiently great that it would restrain a hypothetical monopolist from profitably imposing a substantial price increase.”  Slip op. at 11 (citation omitted).  Bally argued that, because the introduction of wheel games forced IGT to lower its prices, this meant that IGT’s prior prices were supracompetitive and those supracompetitive prices represented an SSNIP.  The Court disagreed.  In the Court’s view, even assuming SSNIP is a proper test and that IGT did have to lower its prices, Bally did not explain what the baseline price for wheel games was from which IGT allegedly imposed an SSNIP.  Moreover, even considering IGT’s supracompetitive prices as the baseline, the Court concluded that Bally showed that the prices had decreased, not increased. 

The Federal Circuit also rejected Bally’s argument that the district court improperly focused on technological substitutions.  The Court held that the district court based its ultimate conclusion on competition, not on functionality, and that its recognition of meaningful competition was not in error. 

The Court next considered Bally’s argument that the factors from Brown Shoe Co. v. United States, 370 U.S. 294 (1962), establish wheel games as a submarket.  The Court concluded, however, that the undisputed facts are insufficient to establish the existence of a submarket under the Brown Shoe factors.  The Court found that there are no unique production facilities or specialized vendors for wheel games, and there are no distinct customers; all games are purchased by casinos.  Further, although the Court noted that some players prefer wheel games to other games, “player preference for wheel games says nothing about whether there is a public or industry perception that wheel games constitute a separate market; to the contrary, it is in harmony with the rest of the evidence that gaming machines are a differentiated market and that wheel games compete with all gaming machines to accommodate the spectrum of player preferences.”  Slip op. at 14-15.

Finally, Bally argued that statements IGT and its experts made in support of its lost profits patent damages theory supported a conclusion that nonwheel games are not substitutes for wheel games.  Specifically, IGT argued that there were no noninfringing substitutes for wheel games, and that every infringing game sold represented a loss of profits.  Bally argued that this was a concession by IGT that there are no substitutes for wheel games and that nonwheel games are not in the same market as wheel games.  But the Court found that IGT’s expert’s opinion regarding technological substitutes cannot be read to mean that there were no economic substitutes and did not support a reasonable inference that no economic substitution existed.  Therefore, the Court held that the district court’s order did not resolve disputed issues of material fact.

For these reasons, the Court found that the undisputed facts show that meaningful competition exists between wheel games and all gaming machines, and that wheel games are not a separate submarket.  Accordingly, the Court affirmed the district court’s grant of SJ that a wheel game market did not exist. 

Judge Bryson dissented.  In Judge Bryson’s view, Bally presented sufficient evidence for a reasonable finder of fact to find that the relevant product market is limited to wheel games.  Judge Bryson explained that the relevant market inquiry seeks to determine the scope of the market in which a monopolist can exert market power over buyers, and Bally alleged, and had introduced evidence, that IGT had market power over buyers in supplying wheel games.  Specifically, Judge Bryson found that Bally showed that IGT was forced to lower its prices because of Bally’s introduction of wheel games into the market, that margin and profit per unit for wheel games is higher than for nonwheel games, and that demand for wheel games is higher than for any nonwheel games.  Further, Judge Bryson stated that evidence put forth by IGT showed that there were no alternatives to which consumers could shift their demand other than Bally’s products, which in turn established that the relevant market was limited to wheel games.

Judges:  Bryson (dissenting), Linn, Reyna (author)

[Appealed from D. Nev., Judge Jones]

This article previously appeared in Last Month at the Federal Circuit, January 2013.

To view the original article, please click here.

Copyright © 2013 Finnegan, Henderson, Farabow, Garrett & Dunner, LLP | All rights reserved

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
27 Nov 2017, Seminar, London, UK

Finnegan partner Anthony Tridico will present “U.S. Patent Case Law Update” at the Chartered Institute of Patent Attorneys’ annual Patent Case Law Review.

28 Nov 2017, Seminar, Milan, Italy

Finnegan partner John Paul will present “Internet of Things: Patent Liability, Enforcement and Licensing” and will join the Mock WIPO Mediation at International Technology Transfer—Licensing and ADR, co-hosted by Licensing Executives Society and World Intellectual Property Organization.

29 Nov 2017, Seminar, Tel Aviv, Israel

Finnegan is a platinum sponsor IVC Research Center’s start-up forum, “The Most Promising Start Ups for 2017 – A Synergy of Big Data, Artificial Intelligence, Machine Vision and IoT.”

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.