                                                                    FILED
                                                         United States Court of Appeals
                                                                 Tenth Circuit

                                                               August 5, 2014
                                  PUBLISH
                                                 Elisabeth A. Shumaker
                  UNITED STATES COURT OF APPEALS     Clerk of Court

                              TENTH CIRCUIT



LENOX MACLAREN SURGICAL
CORPORATION,

       Plaintiff-Appellant,

v.                                                  No. 13-1307

MEDTRONIC, INCORPORATED, a
Minnesota corporation; MEDTRONIC
SOFAMOR DANEK,
INCORPORATED, an Indiana
corporation; MEDTRONIC PS
MEDICAL, INCORPORATED, d/b/a
MEDTRONIC NEUROLOGIC
TECHNOLOGIES, a California
corporation; MEDTRONIC
SOFAMOR DANEK CO., LTD,

      Defendants-Appellees.



                Appeal from the United States District Court
                        for the District of Colorado
                   (D.C. No. 1:10-CV-02139-RPM-BNB)



Henk Brands, Washington, DC (G. Stephen Long and Nicole A. Westbrook, Jones
& Keller, Denver, CO, on the briefs), for Plaintiff-Appellant.

Pratik Shah (Z.W. Julius Chen and C. Fairley Spillman, Washington, DC; Michael
Simons and David C. Lawrence, Austin, TX, on the briefs), Akin Gump Strauss
Hauer & Feld LLP, for Defendants-Appellees.
Before HOLMES, McKAY, and BACHARACH, Circuit Judges.


BACHARACH, Circuit Judge.



      Lenox MacLaren Surgical Corporation manufactures bone mills, which are

medical devices used in spinal-fusion surgery. In 2000, Lenox began to sell some

of its bone mills through a Medtronic entity, Medtronic Sofamor Danek USA.

The arrangement ended badly: Medtronic Sofamor Danek USA initiated a recall

of Lenox’s bone mills, and another Medtronic entity began to manufacture and

sell its own bone mill. The result, according to Lenox, was that four Medtronic

entities acquired an unfair competitive advantage; thus, Lenox sued these entities 1

for monopolization and attempted monopolization from 2007 to 2010. See 15

U.S.C. § 2 (2012). The district court granted the defendants’ motion for summary

judgment on both claims.

      Lenox appeals, and we must address five issues:

      !      Res Judicata. The first issue is one that was not raised in
             Medtronic’s summary judgment motion. But on appeal, Medtronic
             argues that even if the district court erred on the merits, res judicata
             would foreclose the monopolization and attempted monopolization
             claims because Lenox could have raised them in an earlier
             arbitration. But we will not entertain this argument. Res judicata
             requires privity of the parties in the first and second suit, and this
             element involves a disputed issue of fact. Because Medtronic did not

1
     We collectively refer to the Medtronic entities sued in this case as
“Medtronic.”

                                          2
    raise summary judgment based on res judicata, Lenox had no reason
    to present evidence disputing privity with the entity sued in the
    arbitration. Thus, we decline to entertain Medtronic’s effort to
    salvage the summary judgment ruling based on res judicata.

!   Product Market. The second issue involves definition of the product
    market, which is based on cross-elasticity of demand. If price
    increases for one product would not affect demand for the other
    product, the products would involve separate markets.

    Lenox defines the product market as surgical bone mills. Medtronic
    argues that the product market should include hand tools because
    they (like bone mills) are used in spinal-fusion surgeries. Lenox
    defends its definition of the product market based on evidence that
    large price increases for a hand tool or bone mill would not affect
    demand for the other item. We conclude that this issue involves a
    fact-issue for the jury to resolve.

!   Monopoly Power. With this conclusion, we must confront a third
    question: Does a triable fact-issue exist regarding Medtronic’s
    monopoly power from 2007 to 2010 in a market consisting solely of
    bone mills? We conclude that a triable fact-issue exists.

    Monopoly power involves two factors: market-share and barriers to
    entry. Lenox presented evidence that: (1) Medtronic’s market share
    was 97-98% in 2007 and decreased over the next three years, but
    remained as high as 62% in 2010, and (2) new competitors faced
    substantial barriers to entry, including the need to avoid infringing
    existing patents, obtain significant capital in a market with relatively
    small revenues, and overcome entrenched buyer preferences among
    spinal surgeons. We conclude that Lenox’s evidence of market-share
    and entry barriers creates a jury question on monopoly power.

!   Exclusionary Conduct. The second and third issues lead to a fourth:
    If Medtronic acquired monopoly power from 2007 to 2010, did it
    acquire this power innocently or through exclusionary conduct? We
    conclude that the fact-finder could reasonably infer exclusionary
    conduct.

    Lenox points to the recall, presenting evidence that it constituted a
    ruse and that the various Medtronic entities contrived the alleged

                                 3
            defects because one of them was planning to manufacture its own
            bone mill and wanted to eliminate competition by Lenox. This
            evidence creates a jury issue on exclusionary conduct.

      !     Harm to Competition. The second, third, and fourth issues lead to a
            fifth: harm to competition. Medtronic argues that Lenox has shown
            injury only to itself, not to competition in the marketplace. Lenox
            responds with evidence that the product recall served to concentrate
            power between Medtronic and another firm (Stryker), which
            inhibited competition by other smaller firms. This evidence creates a
            jury question on harm to competition.

      With these conclusions, we hold that genuine issues of material fact exist

regarding market definition, monopoly power, exclusionary conduct, and harm to

competition. Thus, we reverse the district court’s grant of summary judgment to

Medtronic on the claims involving monopolization and attempted monopolization.

I.    Lenox’s Business

      Because this appeal involves the grant of summary judgment to Medtronic,

we view the evidence in the light most favorable to Lenox. See Adler v. Wal-

Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998).

      Spinal-fusion surgery constitutes a form of orthopedic surgery in which two

adjacent vertebrae are fused with the help of small particles of bone. To obtain

these small bone particles, technicians traditionally used hand tools such as

scalpels, scissors, forceps, and rongeurs to grind bone during the surgery.

      Lenox was one of the first manufacturers to design a tool specifically for

spinal-fusion surgery: the bone mill. Lenox’s bone mill uses a hand-cranked




                                         4
design that helps ensure a more consistent output than one might get from hand

tools.

II.      The Arbitration

         Lenox claimed that Medtronic Sofamor Danek USA interfered with

prospective business relations. The claim was decided through a binding

arbitration. There a panel found that Medtronic Sofamor Danek USA had

insufficient proof to justify the recall and that the company had taken action to

clear the Lenox bone mill from the market. With these findings, the panel

awarded damages to Lenox.

III.     Standard of Review

         We engage in de novo review of the district court’s grant of summary

judgment. Sports Racing Servs., Inc. v. Sports Car Club of Am., Inc., 131 F.3d

874, 882 (10th Cir. 1997). Summary judgment is appropriate “if the movant

shows that there is no genuine dispute as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The party seeking

summary judgment must identify portions of the record that demonstrate the

absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S.

317, 323 (1986).

IV.      Res Judicata

         Medtronic moved for dismissal based on res judicata, arguing that Lenox

could have asserted its claims in the arbitration. The district court denied the

                                          5
motion, and Medtronic did not renew the res judicata argument in its motion for

summary judgment.

       On appeal, Medtronic argues that we can affirm the grant of summary

judgment based on the alternative ground of res judicata. But, Medtronic did not

seek summary judgment based on res judicata, and we decline to address the issue

in the first instance. 2

       In the absence of notice to the plaintiff, our cases ordinarily disfavor an

award of a summary judgment based on a ground omitted from the defendants’

summary judgment motion. See Evers v. Regents of the Univ. of Colo., 509 F.3d

1304, 1309-10 (10th Cir. 2007); Tavery v. United States, 32 F.3d 1423, 1427 n.5

(10th Cir. 1994). In oral argument, Medtronic tried to avoid this line of cases by

characterizing res judicata as a “purely legal argument.” Oral Arg. 17:19-20:22.

       For the sake of argument, we can assume that res judicata generally

involves a purely legal argument. But we must consider the specifics of the issue

as it is invoked here.

       Res judicata involves multiple elements, including identity or privity of the

parties in the two suits. Pelt v. Utah, 539 F.3d 1271, 1281 (10th Cir. 2008).

When the facts are undisputed, the application of res judicata involves a question

of law. King v. Union Oil of Cal., 117 F.3d 443, 445 (10th Cir. 1997). But


2
      Lenox also argues that we cannot consider res judicata because Medtronic
did not file a cross-appeal. We need not address this argument.

                                          6
Lenox contests privity, and this element involves a question of fact. See Pelt, 539

F.3d at 1280-81 (“[T]he issue of whether privity exists is a question of fact.”);

Lowell Staats Min. Co. v. Phila. Elec. Co., 878 F.2d 1271, 1276 (10th Cir. 1989)

(“The ‘determination of identity between litigants for the purpose of establishing

privity is a factual question.’” (quoting Astron Indus. Assocs. v. Chrysler Motors

Corp., 405 F.2d 958, 961 (5th Cir. 1968))). At a minimum, privity requires a

showing that the parties in the two actions are “‘really and substantially in

interest the same.’” Pelt, 539 F.3d at 1281 (quoting Lowell Staats Min. Co. v.

Phila. Elec. Co., 878 F.2d 1271, 1275 (10th Cir. 1989)).

       This showing might have been made if Lenox had notice of a dispute

regarding privity. But because Medtronic did not raise res judicata in the

summary judgment motion, Lenox had no reason to present evidence disputing

privity. In these circumstances, we decline to decide the issue of res judicata in

the first instance. See Schramm v. Oakes, 352 F.2d 143, 150 (10th Cir. 1965) (per

curiam) (order on pet. for reh’g) (stating that application of res judicata should be

left to the district court to decide in the first instance); see also Hatch v. Boulder

Town Council, 471 F.3d 1142, 1151 (10th Cir. 2006) (leaving res judicata for the

district court to decide in the first instance).

V.     The Merits of the Monopolization Claim

       On the monopolization claim, Lenox had to prove three items:

(1) monopoly power in the relevant market; (2) willful acquisition or maintenance

                                            7
of this power through exclusionary conduct; and (3) harm to competition. 3 See

United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966) (monopoly power in

the relevant market and willful acquisition or maintenance of monopoly power);

City of Chanute, Kan. v. Williams Natural Gas Co., 955 F.2d 641, 654-55 (10th

Cir. 1992) (discussing exclusionary conduct in connection with the creation or

maintenance of monopoly power), overruled in part on other grounds,

Systemcare, Inc. v. Wang Labs. Corp., 117 F.3d 1137 (10th Cir. 1997) (en banc);

Four Corners Nephrology Assocs., P.C. v. Mercy Med. Ctr. of Durango, 582 F.3d

1216, 1225 (10th Cir. 2009) (harm to competition). The district court held that

Lenox had not created a triable issue of fact on: (1) the relevant product market,

(2) monopoly power, (3) willful acquisition of monopoly power through

exclusionary conduct, or (4) harm to competition. We disagree with these

conclusions.




3
        The district court concluded that Lenox had failed to show antitrust injury.
Appellant’s App. (unsealed) at 195, 198. Attacking this conclusion, Lenox argues
that it could have incurred an antitrust injury even if competition had not been
lessened. Appellant’s Opening Br. at 63 (Oct. 2, 2013); see 15 U.S.C. § 15(a)
(2012) (authorizing recovery for persons injured in their “business or property by
reason of anything forbidden in the antitrust laws”). Responding, Medtronic
argues that harm to competition must be proven either as a part of antitrust
standing or as an element of the Sherman Act claims. Appellee’s Response Br. at
51 n.18 (Dec. 2, 2013). For the sake of argument, we may assume that Medtronic
is correct. Thus, for purposes of our opinion, we assume that Lenox had to prove
harm to competition either as a part of antitrust standing or as an element of the
Sherman Act.

                                         8
       A.     Product Market Definition

       In assessing the existence of monopoly power, we must begin by

identifying the relevant product market. SCFC ILC, Inc. v. Visa U.S.A., Inc., 36

F.3d 958, 966 (10th Cir. 1994). Lenox bears the burden on this issue. Campfield

v. State Farm Mut. Auto Ins. Co., 532 F.3d 1111, 1118 (10th Cir. 2008).

       The outer bounds of the product market are defined by cross-elasticity of

demand, an economic measure of the substitutability of two products. See Brown

Shoe Co. v. United States, 370 U.S. 294, 325 (1962). This definition involves an

issue of fact. See Telecor Commc’ns, Inc. v. Sw. Bell Tel. Co., 305 F.3d 1124,

1131 (10th Cir. 2002) (“It is well settled that defining the relevant market is an

issue of fact.”).

       The degree of substitutability turns on sensitivity of demand based on price

changes for the other item. David N. Hyman, Microeconomics 144 (4th ed.

1997). For example, if the demand for margarine increases 200% when the price

of butter increases 100%, the cross-elasticity of demand between margarine and

butter is 2. A high cross-elasticity of demand indicates that products are

substitutes; a low cross-elasticity of demand indicates that the products are not

substitutes and, as a result, do not compete in the same market. See United States

v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 400 (1956). A relevant product

market excludes products with low or zero cross-elasticity of demand. See Times-

Picayune Publ’g Co. v. United States, 345 U.S. 594, 612 n.31 (1953).

                                          9
         Lenox defines the relevant product market as the surgical bone-mill market,

including both hand-cranked and electric-powered bone mills. This definition

excludes other tools used to mill bone, such as scalpels and surgical scissors.

Medtronic argues that this proposed market definition is too narrow and that the

relevant market consists of both bone mills and hand tools such as scalpels and

scissors.

         The differing definitions create a fact question on the product market,

precluding summary judgment. For three reasons, a fact-finder could reasonably

conclude that the relevant product market includes bone mills but excludes hand

tools: (1) Lenox presented expert testimony that substantial price changes would

not lead surgeons to switch from bone mills to hand tools; (2) a substantial price

difference exists between hand tools and bone mills; and (3) Medtronic’s market

literature identifies its competition as other companies’ bone mills, not hand

tools.

         First, Lenox presented expert testimony by a medical expert, Dr. Samuel J.

Chewning, Jr.:

         !     “Surgeons like myself would not select handtools over bone mills
               even if the price of bone mills increased significantly above the
               current level — say, even if the price of bone mills doubled.” 4




4
         Appellant’s App. (unsealed) at 165 ¶ 6.


                                           10
      !      Surgeons do not view hand tools as reasonably interchangeable with
             bone mills. 5

      !      Using hand tools is time-consuming and generates inferior output;
             thus, “no spinal surgeon who regularly practices in the field relies on
             anything but a bone mill for use in spinal surgery.” 6

From Dr. Chewning’s testimony, a fact-finder could reasonably infer a low or

zero cross-elasticity of demand between hand tools and bone mills. With this

inference, a fact-finder could reasonably conclude that the product market does

not include hand tools.

      Medtronic downplays the reliability of Dr. Chewning’s testimony as

“anecdotal” extrapolations from his personal experience, citing Lantec, Inc. v.

Novell, Inc., 306 F.3d 1003 (10th Cir. 2002). Appellee’s Response Br. at 23

(Dec. 2, 2013). But the fact-finder could reasonably rely on Dr. Chewning’s

testimony.

      Dr. Chewning testified that he had become “intimately familiar” with

medical devices to morselize bone, as well as the ways that bone mills are

marketed. Appellant’s App. (unsealed) at 97. From this testimony, the district

court could infer sufficient knowledge to qualify as an expert on purchasing

preferences among hospitals for medical devices used to morselize bone.




5
      Appellant’s App. (unsealed) at 97-98 ¶ 4.
6
      Appellant’s App. (unsealed) at 97-98 ¶ 4.

                                         11
      Medtronic’s reliance on Lantec, Inc. is misguided. There, we considered

whether the district court had abused its discretion in excluding expert testimony.

Lantec, Inc. v. Novell, Inc., 306 F.3d 1003, 1025 (10th Cir. 2002). Here,

however, the district court did not exclude Dr. Chewning’s opinion testimony or

question its admissibility. See Appellant’s App. (unsealed) at 191-92. Thus, we

are not limited by the abuse-of-discretion standard.

      Instead, we view Dr. Chewning’s affidavit in the light most favorable to

Lenox as the party opposing summary judgment. When confronted with this

affidavit, Medtronic did not challenge its admissibility. See Appellant’s App.,

vol. 2 (sealed) at 630-31. In the absence of such a challenge, we assume the

affidavit was admissible for purposes of summary judgment. See McGarry v. Bd.

of Cnty. Comm’rs., 175 F.3d 1193, 1200 n.3 (10th Cir. 1999) (“[W]e assume that

Cumnock’s statements are evidence that would be admissible at trial, as required

by Fed. R. Civ. Pro. 56(c), because no objection to the statements’ inclusion in

McGarry’s Opposition to the Board’s summary judgment motion was raised.”);

Thrasher v. B & B Chem. Co., 2 F.3d 995, 998 (10th Cir. 1993) (holding that an

expert affidavit presented by the plaintiff would be considered on appeal of a

summary-judgment ruling because the defendant did not move to strike the

affidavit from “the summary judgment consideration”).

      Second, Lenox presented evidence indicating a substantial difference

between the prices for hand tools and bone mills. For example, Dr. Chewning

                                         12
testified that the cost of hand tools is effectively zero because hospitals already

have them for other procedures. Appellant’s App. (unsealed) at 164. In contrast,

bone mills cost thousands of dollars. See Appellant’s App., vol. 1 (sealed) at 251

(testimony that Medtronic’s price is $6250 for its bone mill and ten disposable

bowls), 258 (testimony that the average selling price is $7500 for a bone-mill

base), 266, 272, 274 (Medtronic stating that the prices were $1000 for a console

and $3000 for a base), 276 (Lenox sales data showing $4500-$6900 as the sales

price per bone mill); Medtronic’s Supplemental App. (unsealed) at 132 (showing

the suggested retail price of a Stryker bone mill as $8000); Medtronic’s

Supplemental App. (sealed) at 305 (stating that the average price paid to Lenox

for a bone mill was $5688).

      Our court, like other courts, has held that a substantial price difference can

support an inference that the products belong in different markets. See Bd. of

Regents of the Univ. of Okla. v. NCAA, 707 F.2d 1147, 1158 (10th Cir. 1983)

(noting that a 2½ times differential in the price of advertising constitutes evidence

that NCCA football is a distinct market), aff’d, 468 U.S. 85, 111 (1984); accord

Geneva Pharms. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485, 497 (2d Cir. 2004)

(“Here we find a substantial gap in pricing indicative of separate markets.”); U.S.

Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986, 996 (11th Cir. 1993) (stating

that the fact that prices for one product were higher provides evidence “that a

distinct group of customers” would not “switch products “in response to price

                                          13
increases above competitive levels”); Kaplan v. Burroughs Corp., 611 F.2d 286,

292 (9th Cir. 1979) (“[P]rice differential between competing products and

services is a relevant factor to consider, though price differential alone does not

govern the scope of the relevant market.”).

      Medtronic cites one circuit opinion for the proposition that a substantial

price difference is not enough to create a jury question on the product market.

Appellee’s Response Br. at 26-27 (Dec. 2, 2013) (citing HDC Med., Inc. v.

Minntech Corp., 474 F.3d 543, 548-49 (8th Cir. 2007)). But, that decision did not

preclude consideration of a price differential as one factor among many bearing

on product definition; the court simply held that a price difference was

insufficient by itself to create a fact question on the product market. HDC Med.,

Inc. v. Minntech Corp., 474 F.3d 543, 548-49 (8th Cir. 2007). Indeed, the

Supreme Court has held that a substantial price difference, along with other

factors, can bear on definition of the product market. United States v. Aluminum

Co. of Am., 377 U.S. 271, 277 (1964).

      Third, Lenox submitted Medtronic’s marketing literature, which identifies

two competing bone mills (but no hand tools) as the “Competition.” Appellant’s

App., vol. 2 (sealed) at 576-77.

      Medtronic downplays this evidence, arguing that its marketing literature

also lists hand tools. That is true. Medtronic’s literature lists “manual

preparation” tools when discussing “[p]roblems with current methods.”

                                          14
Appellant’s App., vol. 1 (sealed) at 290, 352, 358; Appellant’s App., vol. 2

(sealed) at 575, 578, 582. But, Medtronic’s literature does not refer to hand tools

as the “competition.” That description is used only for bone mills.

      The fact-finder could consider Medtronic’s marketing literature as evidence

that large price increases might lead surgeons to switch to other bone mills, but

not to hand tools. See Spirit Airlines, Inc. v. Nw. Airlines, Inc., 431 F.3d 917,

933-34 (6th Cir. 2005) (relying in part on the defendant’s internal documents

regarding pricing to conclude that business and leisure travel constitute separate

markets for purposes of Section 2 of the Sherman Act).

      For these three reasons, a fact-finder could reasonably conclude that cross-

elasticity of demand of bone mills and hand tools is low or zero, meaning that the

products are not substitutes. Thus, a fact-finder could reasonably conclude that

the relevant product market consists of bone mills. 7 On the other hand, a fact-

7
       At oral argument, defense counsel stated that Medtronic had to lower its
prices when another powered bone mill entered the market, but not when manual
bone mills entered. Oral Arg. 24:46-26:41. Based on this statement, Medtronic’s
counsel argued that Lenox had improperly defined the market under its own
theory, as the Lenox hand-operated bone mill did not constrain the price of
electric bone mills. Id.

       But Medtronic did not raise this argument in its motion for summary
judgment. Even in its appeal brief, Medtronic did not raise the argument.
Instead, Medtronic simply stated in a footnote that Lenox’s legal theory suggested
“that . . . powered bone mills constituted a distinct market,” separate from hand-
cranked bone mills. Appellee’s Resp. Br. at 25 n.6 (Dec. 2, 2013) (emphasis
omitted).

      With only this passing mention in a footnote of Medtronic’s appeal brief

                                          15
finder might conclude that the relevant product market consists of both hand tools

and bone mills, relying on evidence that both can be used to grind bone for spinal

surgery. Because both conclusions would be reasonable, the factual dispute on

the product market would preclude summary judgment on this issue.

      B.    Monopoly Power

      Lenox must not only identify the product market, but also show monopoly

power in that market. United States v. Grinnell Corp. 384 U.S. 563, 570-71

(1966). The district court held that Lenox had failed to create a fact question on

monopoly power even under its proposed market definition. We disagree. A fact-

finder could reasonably conclude that Medtronic had monopoly power in the

bone-mill market.

      The parties agree that “monopoly power” involves two aspects: the power

to control prices and the power to exclude competition. The parties disagree,

however, about whether the plaintiff must establish one or both of these powers.

Compare Shoppin’ Bag of Pueblo v. Dillon Cos., 783 F.2d 159, 162-64 (10th Cir.

1986) (stating that both must be proven), with Four Corners Nephrology Assocs.,


and complete omission in its summary judgment brief filed in the district court,
we decline to consider Medtronic’s assertion in oral argument that powered mills
and hand-cranked mills constitute separate markets. See Gross v. Burggraf
Constr. Co., 53 F.3d 1531, 1547 (10th Cir. 1995) (declining to consider a matter
presented in oral argument when it was inadequately briefed); United States v.
Williamson, __ F.3d __, 2014 WL 998409, at 4 n.1 (10th Cir. Mar. 17, 2014)
(declining to consider an argument presented in oral argument because the Court
does not address arguments omitted or inadequately presented in an appellant’s
opening brief).

                                        16
P.C. v. Mercy Med. Ctr. of Durango, 582 F.3d 1216, 1220 (10th Cir. 2009)

(“Monopoly power . . . consists of ‘the power to control prices or exclude

competition . . . .’” (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-

71 (1966))). For the sake of argument, we can assume that both must be proven.

      These powers can be proven through identification of “a relevant product

and geographic market,” with a showing that the defendant had a sufficient

market share and that new competitors would face significant barriers to entry.

Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1071 (10th Cir. 2013), cert.

denied, 82 U.S.L.W. 3626 (U.S. Apr. 28, 2014) (No. 13-1042). Lenox has

presented sufficient evidence of market share and barriers to entry for a fact-

finder to infer that Medtronic had monopoly power in the bone-mill market.

      Though market-share percentages bear on the existence of monopoly

power, they are not ordinarily conclusive. See Reazin v. Blue Cross & Blue

Shield of Kan., Inc., 899 F.2d 951, 968 (10th Cir. 1990) (“We prefer the view that

market share percentages may give rise to presumptions, but will rarely

conclusively establish or eliminate market or monopoly power.”). When the

market-share percentages are viewed favorably to Lenox, they could support a

finding of monopoly power.

      Lenox’s economic expert testified that in 2007, Medtronic had a 97-98%

share of the bone-mill market. Appellant’s App., vol. 1 (sealed) at 249. The




                                         17
expert added that Medtronic’s market share had “dropped somewhat,” but had

remained “as high as 62 percent” as late as 2010. Id. at 250.

      Medtronic questions these figures. For example, Medtronic argues that

“the undisputed evidence shows that Stryker had captured a third of the

disposable bone bill market revenue in the latter half of 2008 . . . .” Appellee’s

Response Br. at 30 (Dec. 2, 2013). For this characterization of evidence as

“undisputed,” Medtronic cites one page (Appellant’s App., vol. 1 (sealed) at 344),

which is from its own marketing documents. See Appellant’s App., vol. 1

(sealed) at 221-22. On this page, Medtronic states that its share of bone-mill

revenue was 100% throughout 2007 and the first half of 2008. Id. at 344. For the

third and fourth quarters of 2008, Medtronic refers to its share of market revenues

as 76.3% and 65%. Id. Other Medtronic literature refers to its market share as

73.6% for the year ending in the first quarter of 2009 and only a 26.4% market

share for Stryker during the same period. Appellant’s App., vol. 2 (sealed) at

460. Medtronic’s reliance on its own marketing literature is neither “undisputed”

nor inconsistent with a finding of monopoly power throughout 2007 and 2008.

      In addition, Medtronic argues that its 2010 market share was overstated by

Lenox. Appellee’s Response Br. at 30 (Dec. 2, 2013). For this argument,

Medtronic relies on a page from its own summary judgment brief. Id. There,

Medtronic compares the number of disposable units it sold in 2010 by the sum of

disposable units sold in 2010 by both Medtronic and Stryker. Id.; see Appellant’s

                                          18
App., vol. 1 (sealed) at 423. This reference shows Medtronic’s calculation of

market share, 8 not Lenox’s.

      A fact-finder could reasonably consider a 97-98% or 62% market share as

evidence of monopoly power. See Reazin v. Blue Cross & Blue Shield of Kan.,

Inc., 899 F.2d 951, 969-70 (10th Cir. 1990) (holding that evidence of monopoly

power was sufficient when the defendant had a market share between 47% and

62%); accord Arthur S. Langenderfer, Inc. v. S.E. Johnson Co., 917 F.2d 1413,

1443-44 (6th Cir. 1990) (holding that an average market share of 58% was

sufficient, along with other factors, to support a finding of monopoly power).

      Medtronic not only presents evidence of a lower market share, but also

questions the durability of its alleged market dominance. Market power is

meaningful only if it is durable. See Reazin v. Blue Cross & Blue Shield of Kan.,

Inc., 899 F.2d at 968 (“[M]arket power, to be meaningful for antitrust purposes,

must be durable.”); see also IIB Phillip E. Areeda, Herbert Hovenkamp, & John

L. Solow, Antitrust Law ¶ 506d, at 128 (2d ed. 2002) (“The ability profitably to

charge a supracompetitive price indicates market power, but transitory power may

8
       In its response brief, Medtronic refers to Lenox’s figure as 63.3% of market
revenues, but does not explain how it derived this figure from the chart that it
cited (at Appellant’s App., vol. 1 (sealed) at 423). This chart includes
Medtronic’s data regarding the number of disposable units sold by Medtronic and
Stryker. Id. From this chart, one could calculate Medtronic’s share of disposable
units sold (not revenue) at 58%, not 63.3%. But Lenox’s economic expert
calculated Medtronic’s market share in 2010 as 62% (not 63.3%) of revenues (not
units sold) for all bone-mill manufacturers. Appellant’s App., vol. 1 (sealed) at
250, 257.

                                        19
safely be ignored by antitrust law.”). We conclude that durability involves a fact

question for the jury.

      From Lenox’s evidence, a fact-finder could reasonably conclude that

Medtronic’s market domination was durable. Lenox’s evidence showed a four-

year period in which Medtronic had 62% to 97-98% of the bone-mill market.

Viewing the evidence favorably to Lenox, a fact-finder could reasonably infer

that Medtronic’s market dominance was sufficient to impede competition between

2007 and 2010.

      Though Medtronic’s market share could support a finding of monopoly

power, we must also consider barriers to entry, which are characteristics of the

market impeding new entries. See Reazin v. Blue Cross & Blue Shield of Kan.,

Inc., 899 F.2d at 967-68; Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1071

(10th Cir. 2013), cert. denied, 82 U.S.L.W. 3626 (U.S. Apr. 28, 2014) (No. 13-

1042). On the issue of entry barriers, Lenox has created a genuine fact question

through expert testimony on economics and design of medical devices.

      Lenox’s economic expert opined that significant barriers to entry had

existed in the bone-mill market, including: (1) the need to develop and research

the product, (2) comply with FDA rules, (3) develop a sales channel, and (4)

overcome existing relationships between market incumbents and large-scale

purchasers. Appellant’s App., vol. 1 (sealed) at 252.




                                         20
      Lenox also presented sworn testimony by a designer and engineer of

medical devices. Appellant’s App. (unsealed) at 172-74. This expert testified

about the significance of five barriers to new entry into the bone-mill market:

      !      the necessity of a design and development phase,

      !      the need to find a manufacturer offering sufficient reliability at
             attractive prices,

      !      the need to make a name for oneself among influential surgeons,

      !      the need to build and supervise a distribution channel, and

      !      the need to overcome powerful bundling tactics employed by existing
             competitors in the sale of medical devices.

Id.

      From the testimony of Lenox’s experts on economics and design of medical

devices, a fact-finder could infer the existence of significant barriers to entry in

the bone-mill market. These barriers, combined with Medtronic’s market share of

62 to 97-98% (from 2007 to 2010), could lead a reasonable fact-finder to infer

monopoly power.

      Medtronic argues that Lenox’s own entry into the bone-mill market shows

that entry was neither time-consuming nor costly. But we measure entry barriers

for new entrants, not incumbents. See Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d

1421, 1439 (9th Cir. 1995). To measure the barriers for new entrants, we must

view the evidence in the light most favorable to Lenox. Viewing the evidence in




                                          21
this manner, the fact-finder could infer significant barriers to entry for companies

wanting to compete in the bone-mill market.

      One competitor, Stryker, broke through the entry barriers. The district

court viewed Stryker’s success as indisputable proof that barriers to entry were

insignificant. We disagree. A single competitor’s breakthrough does not

preclude a finding of significant barriers to entry. See Rebel Oil Co. v. Atl.

Richfield Co., 51 F.3d 1421, 1440 (9th Cir. 1995) (“The fact that entry has

occurred does not necessarily preclude the existence of ‘significant’ entry

barriers.”); IIB Phillip E. Areeda, Herbert HovenKamp, & John L. Solow,

Antitrust Law ¶ 422e, at 99 (3d ed. 2007) (“a single instance of entry over recent

years need not show low barriers”); see also Multistate Legal Studies, Inc. v.

Harcourt Brace Jovanovich Legal & Prof’l. Publ’ns, Inc., 63 F.3d 1540, 1555-56

(10th Cir. 1995) (holding that the plaintiff’s evidence of entry barriers, showing

that two of three attempted entries into the market were “largely unsuccessful,”

would preclude summary judgment to the defendant on a claim of attempted

monopolization).

      From Lenox’s evidence, the fact-finder could regard Stryker as an atypical

competitor, for it enjoyed three attributes―an existing distribution network,

credibility among institutional buyers, and a vast supply of capital to invest in a

market generating limited revenues―that provided a competitive edge uniquely

suited to the bone-mill market.

                                          22
       When entering the bone-mill market, Stryker was already a major

manufacturer of medical devices. As a result, it had a ready-made distribution

network and an existing reputation among hospital purchasers. Appellant’s App.

(unsealed) at 173-74; Appellant’s App., vol. 1 (sealed) at 252. Both proved

beneficial because other competitors would have experienced difficulty in

overcoming entrenched buyer preferences and the absence of a reputation in the

industry. See Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195,

1208 (9th Cir. 1997) (stating that “entrenched buyer preferences” are common

entry barriers); Am. Council of Certified Podiatric Physicians & Surgeons v. Am.

Bd. of Podiatric Surgery, 185 F.3d 606, 623 (6th Cir. 1999) (“[E]stablishing

credibility naturally seems to be a significant barrier to entry, particularly for an

enterprise that depends heavily upon reputation, such as certification of medical

specialists.”).

       The fact-finder could also infer that Stryker had ample financial resources

to take advantage of its existing distribution network and established credibility

among medical purchasers. With these resources, Stryker was able and willing to

spend roughly $1.5 million to develop its bone mill. Appellant’s App. (unsealed)

at 144. A fact-finder could view this investment as unique because the entire

bone-mill market produced only about $7-8 million in revenue. See Reazin v.

Blue Cross & Blue Shield of Kan., Inc., 899 F.2d 951, 968 (10th Cir. 1990)

(“Entry barriers may include high capital costs . . . .”); Appellant’s App., vol. 1

                                          23
(sealed) at 344 (Medtronic literature showing 2008 revenues for 4 disposable

bone mills as $7,806,000).

      Stryker’s entry into the bone-mill market would not preclude the jury from

finding significant barriers to entry in the bone-mill market. Notwithstanding

Stryker’s successful entry, a fact-finder could reasonably infer that Medtronic had

monopoly power in the bone-mill market from 2007 to 2010 based on its high

market share and the presence of barriers to entry. Thus, Medtronic is not

entitled to summary judgment on the issue of monopoly power.

      C.     Exclusionary Conduct

      Lenox must show not only monopoly power, but also anticompetitive

conduct. Christy Sports, LLC v. Deer Valley Resort Co., Ltd., 555 F.3d 1188,

1192 (10th Cir. 2009). On the existence of anticompetitive conduct, the district

court held that Lenox had failed to create a fact question, reasoning that Lenox

demonstrated injury to itself but not to the competitive market. In articulating

this reasoning, the district court analyzed Medtronic’s conduct under a six-factor

test for trade disparagement. Medtronic urges us to do the same. But even if we

were to apply this test, Lenox has presented sufficient evidence for a fact-finder

to infer anticompetitive conduct.

      1.     Analysis Under the Test for Trade Disparagement

      Lenox alleges that Medtronic engaged in anticompetitive conduct by: (1)

telling potential customers that the Lenox mill was dangerous, and (2) helping to

                                         24
initiate a recall. The district court treated these allegations as involving trade

disparagement rather than general anticompetitive conduct.

      Lenox contends that Medtronic’s conduct extended beyond trade

disparagement into a comprehensive scheme of exclusionary conduct. Thus,

Lenox urges us to apply the less stringent test, which does not presume a de

minimis effect on competition. We need not decide which test applies because

Lenox has demonstrated a fact question regarding anticompetitive conduct under

the more stringent trade-disparagement test.

      This test presumes that trade disparagement bears only a de minimis effect

on competition. E.g., Nat’l Ass’n of Pharm. Mfrs., Inc. v. Ayerst Labs., 850 F.2d

904, 916 (2d Cir. 1988); Am. Council of Certified Podiatric Physicians &

Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 323 F.3d 366, 371 (6th Cir. 2003).

A Section 2 plaintiff may rebut this presumption by satisfying a six-factor test,

showing that the disparagement was: (1) clearly false, (2) clearly material, (3)

clearly likely to induce reasonable reliance, (4) made to buyers without

knowledge of the subject matter, (5) continued for prolonged periods, and (6) not

readily susceptible to neutralization or other offset by rivals. E.g., Am. Prof’l

Testing Serv., Inc., 108 F.3d at 1152.

      The district court held that Lenox could satisfy the first three factors, and

Medtronic supplies no reason to disturb that portion of the district court’s




                                          25
conclusion. We also conclude that Lenox presented sufficient evidence for a

favorable finding on the last three factors.

      Factor 4 requires Lenox to demonstrate that Medtronic made false

statements to buyers without knowledge of the subject matter. In analyzing this

factor, the district court noted that hospitals and hospital purchasing groups are

“sophisticated consumers.” Appellant’s App. (unsealed) at 197. But Lenox

presented evidence that even sophisticated consumers would rely on Medtronic’s

false statements. And Lenox’s medical expert opined that “hospitals are

extremely hesitant to acquire a product that has been the subject of a product

recall” when they have a choice among competing products. Id. at 99. From this

evidence, a fact-finder could reasonably infer that Medtronic made its

representations to hospital buyers who would not have known whether the bone

mills were dangerous.

      Factor 5 requires Lenox to show that the materially false statements

continued for prolonged periods. To make this showing, Lenox’s president

submitted a declaration stating that “the Lenox bone mill remains on the FDA

website for recalled products and the hospitals find the taint of a prior

recall—regardless of its validity—to be too much of a liability risk to justify the

purchase and use of a Lenox bone mill.” Id. at 184. From this declaration, a fact-

finder could reasonably conclude that Medtronic’s false statements affected

demand for a prolonged period.

                                          26
      Factor 6 requires Lenox to show that it could not readily neutralize the

disparaging statements. To make this showing, Lenox presented testimony from

its medical expert and company president. Both witnesses opined that because of

worries involving malpractice liability, hospitals are unwilling to purchase bone

mills that have been recalled. Id. at 99, 184. From this testimony, a fact-finder

could reasonably infer that Lenox could not have neutralized the effects of the

recall: Once the bone mill appeared on the FDA’s recall list, it became too risky

because of the threat of malpractice liability.

      Lenox has presented sufficient evidence to create a question of material

fact on each prong of the trade-disparagement test. 9 Thus, a fact-finder could

reasonably infer that Lenox rebutted the presumption of a de minimis impact on

competition.

      2.       Medtronic Sofamor Danek USA’s Role

      Medtronic also challenges Lenox’s reliance on the recall, stating that it was

instigated by Medtronic Sofamor Danek USA and that this entity is not a party in

the present case. In earlier litigation, Lenox had sued Medtronic Sofamor Danek

USA for breach of contract. This entity sought to intervene in the present case,

but Lenox successfully objected. According to Medtronic, Lenox represented that


9
      We need not determine whether a plaintiff must satisfy all six factors to
overcome the de minimis presumption. See Am. Council of Certified Podiatric
Physicians & Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 323 F.3d 366, 371
(6th Cir. 2003) (declining to consider whether each factor must be met).

                                          27
the prior litigation “was ‘utterly collateral’ to this case.” Appellant’s App.

(unsealed) at 188 (district court’s order).

      Plaintiff’s counsel argued to the district court that: (1) in the antitrust case,

Lenox is focusing on exclusionary conduct by PS Medical, not Medtronic

Sofamor Danek USA, and (2) the prior litigation had involved “different facts,

claims, parties, and damages . . . .” Appellee’s Supplemental App. (unsealed) at

94, 156. Lenox’s present theory is consistent with the representations made to the

district judge.

      Medtronic appears to assume that the present defendants—Medtronic, Inc.,

Medtronic Sofamor Danek, Inc., Medtronic PS Medical, Inc., and Medtronic

Sofamor Danek Co., Ltd.—had no role in the recall. But, Medtronic does not

expressly advance this argument, and we doubt that it could: On January 4, 2012,

the district court directed the parties to focus discovery on market share; then the

court prohibited further discovery in November 2012. Appellant’s App.

(unsealed) at 156; Mots. Hearing Tr. at 14-15 (Nov. 14, 2012). The district court

could not have required evidence regarding the role of the affiliated companies in

the recall when Medtronic lacked an opportunity to conduct discovery on the

issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).

      Though Medtronic assumes that Medtronic Sofamor Danek USA is solely

responsible for the recall, the defendants do not defend the summary judgment

ruling on this ground and their roles were not subject to discovery. As a result,

                                          28
Medtronic cannot salvage the summary judgment ruling based on its assumption

that none of the present defendants played a role in the recall.

      3.     Our Prior Opinion

      Lenox represented to a prior panel that it was not alleging concerted action

between the four Medtronic defendants and Medtronic Sofamor Danek USA.

Appellee’s Br. at 25, Lenox MacLaren Surgical Corp. v. Medtronic, Inc., Case

No. 11-1251 (10th Cir. Aug. 3, 2011); see Oral Arg. 17:47-18:38. In oral

argument, the Medtronic defendants contended that this representation was fatal

because: (1) the prior panel had held that the present claims require proof of

cooperation between Medtronic Sofamor Danek USA and the four Medtronic

defendants, and (2) without Medtronic Sofamor Danek USA’s conduct, there

would be no evidence of coordination between MSD Japan and Medtronic PS

Medical. Oral Arg. 20:27-23:07. We disagree.

      The Medtronic defendants err in characterizing the prior panel’s holding.

The prior panel simply held that Lenox did not need to arbitrate its claims for

monopolization and attempted monopolization. Lenox MacLaren Surgical Corp.

v. Medtronic, Inc., 449 F. App’x 704, 710-11 (10th Cir. 2011). For this holding,

the panel reasoned that the antitrust claims had not been founded in or intertwined

with the contract between Lenox and Medtronic Sofamor Danek USA. Id. at 710.

The antitrust claims were based on actions by the four Medtronic defendants, not

Medtronic Sofamor Danek USA: “What matters is whether the Medtronic

                                          29
defendants used the recall as a way to clear the market of [Lenox’s] bone mill so

Medtronic PS Medical could substitute its own bone mill.” Id.

      Focusing on the conduct of the four Medtronic defendants, the prior panel

did not say that the monopolization and attempted monopolization claims could

succeed only with proof of collusion with Medtronic Sofamor Danek USA.

Instead, the panel correctly pointed to the need to prove exclusionary conduct by

the entities being sued. Their conduct was either exclusionary or it was not. If

the conduct was exclusionary, there would be no need to prove complicity by

Medtronic Sofamor Danek USA. As a result, we reject the contentions by defense

counsel in oral argument.

      D.     Harm to Competition

      The district court concluded that Lenox had not shown harm to

competition. Appellant’s App. (unsealed) at 195, 198. For this conclusion, the

district court relied on the availability of other bone mills. Id. at 196.

Notwithstanding evidence of other bone mills, a fact-finder could reasonably have

inferred harm to competition.

      This inference was possible in part because Lenox presented evidence that

from 2007 to 2010: (1) Medtronic was able to charge supracompetitive prices,

and (2) other bone mills remained insubstantial. Lenox’s economic expert stated

under oath that by eliminating Lenox from the market, Medtronic raised the price

of spinal surgeries. Appellant’s App., vol. 1 (sealed) at 253-56.

                                          30
      Medtronic pointed to continued sales by Biomet and Tracer, two

competitors, but Lenox’s evidence indicated that these two companies had

accounted for only about 2% of the market in 2007. See id. at 340-41, 344, 413-

33; Appellant’s App., vol. 2 (sealed) at 447, 462.

      Unlike Bryant and Tracer, Stryker did emerge as a significant competitor.

But the fact-finder could infer harm to competition from concentration of the

market in Medtronic and Stryker. See LePage’s Inc. v. 3M (Minn. Mining & Mfg.

Co.), 324 F.3d 141, 159 (3d Cir. 2003) (en banc) (stating that foreclosure of even

a single significant competitor can lead to higher prices and reduced output);

Conwood Co. v. U.S. Tobacco Co., 290 F.3d 768, 790 (6th Cir. 2002) (holding

that evidence of injury to competition was sufficient when the plaintiff presented

evidence that two of the three other manufacturers grew more slowly than they

otherwise would have).

VI.   Claim of Attempted Monopolization

      Lenox also claims attempted monopolization under § 2 of the Sherman Act.

This claim involves three elements:

      !      predatory or anticompetitive conduct,

      !      a specific intent to monopolize, and

      !      a dangerous probability of achieving monopoly power.

See Christy Sports, LLC v. Deer Valley Resort Co., 555 F.3d 1188, 1192 (10th

Cir. 2009). Each element could be decided favorably to Lenox.

                                         31
      We have elsewhere concluded that the fact-finder could reasonably infer

monopoly power and exclusionary conduct. With these inferences, the jury could

also find an intent to monopolize. See M & M Med. Supplies & Serv., Inc. v.

Pleasant Valley Hosp., Inc., 981 F.2d 160, 166 (4th Cir. 1992) (“Specific intent

may be inferred from the defendant’s anticompetitive practices.”); Gen. Indus.

Corp. v. Hartz Mountain Corp., 810 F.2d 795, 802 (8th Cir. 1987) (“Specific

intent need not be proven by direct evidence, but can be inferred from the

defendant’s anticompetitive practices or other proof of unlawful conduct.”); Volvo

North America Corp. v. Men’s Int’l. Prof’l. Tennis Council, 857 F.2d 55, 74 (2d

Cir. 1988) (stating that specific intent to monopolize can be inferred from proof

of “anticompetitive or exclusionary conduct”); Penn. Dental Ass’n v. Med. Serv.

Ass’n of Penn., 745 F.2d 248, 261 (3d Cir. 1984) (“Direct evidence of specific

intent . . . may be inferred from predatory or exclusionary conduct.”). Thus,

Lenox presented sufficient evidence to survive summary judgment not only on its

claim of actual monopolization, but also on its claim of attempted

monopolization. See E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637

F.3d 435, 453 (4th Cir. 2011) (“Given that we held above that [the plaintiff] pled

actual monopolization, we can reach no conclusion other than that [the plaintiff]

adequately pled a dangerous probability of success as to [the defendant’s]

attempted monopolization.”).




                                         32
VII. Conclusion

      Lenox has presented sufficient evidence to support a finding on each

element of its Section 2 claim for actual monopolization: monopoly power in the

relevant product market, exclusionary conduct, and harm to competition. Thus,

fact questions also exist on Lenox’s claim of attempted monopolization. These

disputes of material fact preclude summary judgment to Medtronic. In these

circumstances, we reverse the district court’s grant of summary judgment to

Medtronic and remand for further proceedings.




                                       33
