Compuware v. International Business Machines

• Decision Date: 03 February 2005
• Docket Number: No. 02-CV-70906.,02-CV-70906.
• Citation: 366 F.Supp.2d 475
• Parties: COMPUWARE CORP., Plaintiff, v. INTERNATIONAL BUSINESS MACHINES CORP., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

Page 475

366 F.Supp.2d 475

COMPUWARE CORP., Plaintiff, v. INTERNATIONAL BUSINESS MACHINES CORP., Defendant.

No. 02-CV-70906.

United States District Court, E.D. Michigan, Southern Division.

February 3, 2005.

COPYRIGHT MATERIAL OMITTED

Daniel Johnson, Jr., Fenwick & West, Palo Alto, CA, David A. Ettinger, Honigman, Miller, (Detroit), Detroit, MI, Elizabeth H. Tipton, Houston, TX, Harry C. Goplerud, Honigman, Miller, (Bingham Farms), Bingham Farms, MI, Stuart P. Meyer, Fenwick & West, Mountain View, CA, for Plaintiff.

Evan R. Chesler, Rowan D. Wilson, Thomas G. Rafferty, Cravath, Swaine, Kurt E. Richter, Morgan & Finnegan (New York), New York City, Larry J. Saylor, Larry J. Saylor, Saul A. Green, Jonathan W. Fountain, Miller, Canfield, (Detroit), Detroit, MI, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART IBM'S MOTION FOR SUMMARY JUDGMENT

STEEH, District Judge.

FACTUAL BACKGROUND

Compuware is one of several independent software vendors ("ISV") that provide software tools used on IBM mainframe systems. There are five relevant "Mainframe Software Tools" markets at Issue: (1) File and Data Management Products; (2) Fault Diagnosis Products; (3) Interactive Analysis and Debugging Products; (4) Database Tools; and (5) Performance Analyzers. Compuware possesses the dominant market share in each of the alleged tools markets.

In 2000, IBM launched its File Manager and Fault Analyzer products, which compete with Compuware's File-AID and Abend-AID products. IBM states that it entered the market for software tools ("AD tools" or "tools") in order to reduce the total cost of ownership of IBM mainframe computing systems, not to become the largest seller of tools.

IBM possesses a monopoly position in high-end mainframe computers and the basic software used to run those computers. Compuware alleges that after IBM entered the AD tools market, it began to deny critical pieces of information about its mainframe software to Compuware and other ISVs. Compuware also maintains that once it started to sell its tools, IBM began to tie its tools products to its monopoly mainframe products. Finally, Compuware alleges that IBM offered its tools at predatory prices.

The Court has considered the arguments made by counsel for both parties, and, for the reasons given below, denies summary judgment on Compuware's tying claim and three state unfair competition claims. The Court grants summary judgment on Compuware's attempted monopolization and monopoly leveraging claims.

STANDARD FOR SUMMARY JUDGMENT

Federal Rule of Civil Procedure 56(c) empowers the court to render summary judgment "forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Redding v. St. Eward, 241 F.3d 530, 532 (6th Cir.2001). The Supreme Court has affirmed the court's use of summary judgment as an integral part of the fair and efficient administration of justice. The procedure is not a disfavored procedural shortcut. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Cox v. Kentucky Dept. of Transp., 53 F.3d 146, 149 (6th Cir.1995).

The standard for determining whether summary judgment is appropriate is "`whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Amway Distributors Benefits Ass'n v. Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir.2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The evidence and all reasonable inferences must be construed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Redding, 241 F.3d at 532 (6th Cir.2001). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original); see also National Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907 (6th Cir.2001).

If the movant establishes by use of the material specified in Rule 56(c) that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law, the opposing party must come forward with "specific facts showing that there is a genuine issue for trial." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 270, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); see also McLean v. 988011 Ontario, Ltd., 224 F.3d 797, 800 (6th Cir.2000). Mere allegations or denials in the non-movant's pleadings will not meet this burden, nor will a mere scintilla of evidence supporting the non-moving party. Anderson, 477 U.S. at 248, 252, 106 S.Ct. 2505. Rather, there must be evidence on which a jury could reasonably find for the non-movant. McLean, 224 F.3d at 800 (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505).

ANALYSIS

I. Unlawful Tying — Sherman Act § 1

The Sherman Act does not explicitly prohibit tying arrangements. However, such arrangements can violate Section 1 of the Sherman Act when they produce an anticompetitive effect. A tying arrangement may also support a claim for monopolization under Section 2 of the Sherman Act. See, Highland Capital, Inc. v. Franklin National Bank, 350 F.3d 558, 564-65 (6th Cir.2003).

A tying arrangement is defined "as an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier." Northern Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958); Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 461-62, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). Tying arrangements have been found to be "unreasonable in and of themselves whenever a party has sufficient economic power with respect to the tying product to appreciably restrain free competition in the market for the tied product and a `not insubstantial' amount of interstate commerce is affected." Northern Pac. Ry., 356 U.S. at 6, 78 S.Ct. 514. A tying claim under the Sherman Act requires that the plaintiff prove that a seller had substantial economic power in the tying product's market, and an anticompetitive effect in the tied-product market Highland Capital, 350 F.3d at 565 (citations omitted), Eastman Kodak, 504 U.S. at 462, 112 S.Ct. 2072 (arrangement constitutes impermissible tie under § 1 of Sherman Act "if the seller has `appreciable economic power' in the tying product market and if the arrangement affects a substantial volume of commerce in the tied market.").

The Supreme Court has "condemned tying arrangements when the seller has some special ability — usually called "market power" — to force a purchaser to do something that he would not do in a competitive market.... [citations omitted]. When `forcing' occurs, our cases have found the tying arrangement to be unlawful." Jefferson Parish Hospital v. Hyde, 466 U.S. 2, 13-14, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984). "[F]rom the standpoint of the consumer — whose interests the statute was especially intended to serve — the freedom to select the best bargain in the second market is impaired by his need to purchase the tying product, and perhaps by an inability to evaluate the true cost of either product when they are available only as a package." Id. at 15.

There are two theories of tying — per se and rule-of-reason. Under rule-of-reason analysis, the antitrust plaintiff must show an adverse effect on competition. The Sixth Circuit has adopted the following three-step analysis for determining whether a tying arrangement is likely to cause such an anticompetitive effect: "(1) the seller must have power in the tying product market; (2) there must be a substantial threat that the tying seller will acquire market power in the tied-product market; and (3) there must be a coherent economic basis for treating the tying and tied products as distinct." Hand v. Central Transp., Inc., 779 F.2d 8, 11 (6th Cir.1985). Under traditional per se analysis, restraints of trade were condemned without any inquiry into the market power possessed by the defendant. However, under current per se analysis, the antitrust plaintiff must show the seller possesses substantial market power in the tying product market and that the arrangement affects a substantial volume of commerce in the tied market. Kodak, 504 U.S. at 462, 478-79, 112 S.Ct. 2072. The two theories differ in only one respect — the per se analysis dispenses with proof of anticompetitive effects. PSI Repair Services, Inc. v. Honeywell, Inc., 104 F.3d 811, 815 n. 2 (6th cir.1997) (citing 10 Phillip E. Areeda et al., Antitrust Law ¶ 1760e, at 372 (1996)).

Compuware alleges a per se tying arrangement by IBM in this case. IBM clearly has substantial power in the alleged tying product market of mainframe computers and/or critical software ("mainframe products"). Therefore, the Court will focus on Compuware's contentions that IBM has forced customers to take its tools, and that IBM's alleged tying arrangements affect a substantial volume of commerce in the tools market.

A. Evidence of tying

IBM argues that the fact that the tools are sometimes sold in discounted packages (called Enterprise License Agreements or ELAs) does not demonstrate the existence of a tie. See, Jefferson Parish, 466 U.S. at 12, 104 S.Ct. 1551. IBM describes the ELAs as multi-product package discounts where the customer chooses among hundreds of products — only a handful of which are the alleged tools products at issue in this case...