571 F.Supp.3d 1133
N.D. Cal.2021Background:
- Intuitive Surgical dominates the market for da Vinci surgical robots (≈99% market share) and sells proprietary EndoWrist instruments that are required to operate those robots.
- EndoWrist instruments include use counters that disable the instrument after a set number of uses (commonly ten); hospitals typically must buy replacements thereafter.
- Surgical Instrument Service Company (SIS) began refurbishing EndoWrist instruments (inspecting, repairing, restoring specs, and resetting use counters) at 30–45% below Intuitive’s replacement cost, and secured initial contracts indicating distinct customer demand.
- Intuitive contractually prohibits customers from using third‑party repair/refurbishment, threatened warranty voiding, termination of service, and warned that third‑party refurbishment may conflict with FDA approval; after those warnings SIS’s contracts evaporated.
- Intuitive redesigned Xi‑generation instruments with encrypted use‑counter measures that allegedly prevent third‑party resetting; SIS alleges no safety justification and that the redesign aims to exclude competition.
- Procedural posture: District court largely denied Intuitive’s motion to dismiss (antitrust claims survive; Lanham Act claim re: FDA statements survives; Lanham Act claim re: alleged IP statements dismissed with leave to amend). Discovery may proceed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Relevant product market | SIS: there is a distinct EndoWrist aftermarket (repair/refurbishment) separate from robot market | Intuitive: instruments are essential components of robots and cannot form a separate market | Court: Denied motion; pleadings plausibly allege distinct aftermarket given customer demand for third‑party services |
| Contractual restraints / tying or exclusive dealing | SIS: Intuitive’s purchase agreements and threats foreclose third‑party repair market and restrain trade | Intuitive: restrictions are part of bundled contract; analogous to voluntary franchise terms | Court: Claims survive at pleading stage (distinguishes franchise cases because of Intuitive’s monopoly power) |
| Product redesign / refusal to deal (Xi use counter) | SIS: redesign (encryption) was done to prevent counterresetting and exclude competition | Intuitive: redesign is a refusal‑to‑deal theory or otherwise not actionable | Court: Redesign challenge is cognizable under Section 2; not a barred refusal‑to‑deal theory; survives pleading stage |
| Lanham Act preclusion by FDCA | SIS: Intuitive falsely told customers SIS’s services violate FDA rules; actionable under Lanham | Intuitive: FDCA precludes Lanham Act claim because it would require adjudicating FDA compliance | Court: Denied dismissal; POM Wonderful controls—FDCA does not categorically preclude Lanham claims |
| Lanham Act claim re: intellectual property statements | SIS: Intuitive told customers refurbishment infringes Intuitive’s IP | Intuitive: statements were not false/misleading or are insufficiently pled | Court: Dismissed this Lanham claim for failure to plead a false or misleading factual statement, with leave to amend |
Key Cases Cited
- Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) (antitrust standing and market‑effect principles cited for market pleading requirement)
- Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1984) (tying analysis and requirement to plead two separate product markets)
- Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) (aftermarket product markets can be distinct despite dependence on a primary product)
- United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (product‑market and exclusionary conduct precedent referenced)
- Rick‑Mik Enterprises, Inc. v. Equilon Enterprises LLC, 532 F.3d 963 (9th Cir. 2008) (consumer choice evidence can show separate markets)
- Kentmaster Manufacturing Co. v. Jarvis Products Corp., 146 F.3d 691 (9th Cir. 1998) (contrast where complaint failed to allege separate demand)
- Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP, 592 F.3d 991 (9th Cir. 2010) (product design changes can be subject to Section 2 scrutiny)
- POM Wonderful LLC v. Coca‑Cola Co., 573 U.S. 102 (2014) (FDCA does not categorically preclude Lanham Act suits; statutes are complementary)
- PhotoMedex, Inc. v. Irwin, 601 F.3d 919 (9th Cir. 2010) (earlier Ninth Circuit FDCA‑Lanham rule discussed and deemed effectively overruled by POM Wonderful)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard referenced for plausibility)