(CN) – The 9th Circuit affirmed dismissal of an antitrust lawsuit alleging that deals between Tyco Healthcare Group and hospitals that bought its new system to measure blood-oxygen levels had shut out competition in the sensor market.
Judge Barry Silverman, writing for the three-judge panel, found that “innovation does not violate antitrust laws on its own,” and that there is no evidence Tyco “used its monopoly power to force customers to adopt its new product.”
Tyco’s pulse oximetry system uses a monitor and a sensor to measure a patient’s blood-oxygen level.
Tyco gained an early footing in the market and was able to establish a base of monitors that “greatly exceeded that of its competitors,” the ruling states.
When the patent to its first sensor expired, Tyco discontinued the original version and launched a new sensor system. But generic sensors were not yet compatible with the new monitoring system.
A group of hospitals sued Tyco, claiming the introduction of the new system and the discount agreements offered to customers who bought the product in bulk were anticompetitive.
The district court ruled, and the 9th Circuit agreed, that Tyco’s discount agreements “did not create an unreasonable restraint on trade,” because hospitals entered the agreements voluntarily and were free to switch to more competitively priced generics at any time.
The Pasadena-based appellate panel also upheld the district court’s ruling that innovation alone does not constitute an antitrust violation.
“If a monopolist’s design change is an improvement, it is ‘necessarily tolerated by antitrust laws,'” Judge Silverman wrote.