Œ This is amended to correct the formatting of the trademarks.

In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-3344

GARY SCHOR,

Plaintiff-Appellant,

v.

ABBOTT LABORATORIES,

Defendant-Appellee.

____________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 05 C 1592—Robert W. Gettleman, Judge.

____________

ARGUED MAY 1, 2006—DECIDED JULY 26, 2006Œ

____________

Before EASTERBROOK, MANION, and SYKES, Circuit

Judges.

EASTERBROOK, Circuit Judge. People infected by the

human immunodeficiency virus (HIV), a retrovirus that

causes the acquired immune deficiency syndrome (AIDS),

can slow the progress of the disease by taking protease

inhibitors, which hamper HIV’s ability to copy itself into

additional cells. Abbott Laboratories holds a patent on

NORVIR® (ritonavir), one such drug. When used in doses

high enough to work as a stand-alone protease inhibitor,

however, NORVIR causes serious side effects. It serves
2 No. 05-3344

better as a booster for other protease inhibitors, causing

them to last longer in the bloodstream. NORVIR has this

effect because it inhibits Cytochrome P450-3A4, an enzyme

in the liver that normally metabolizes away protease

inhibitors. For example, a standard dose of FORTOVASE®

(saquinavir) is 1,200 mg three times a day; when combined

with NORVIR, however, FORTOVASE is effective in doses of

800 mg twice a day. Abbott offers its own combination

under the brand name KALETRA®, which includes ritonavir

plus the protease inhibitor lopinavir. Abbott’s patents (Nos.

5,886,036 and 6,037,157) cover ritonavir taken alone and in

combination with any other protease inhibitor.

Gary Schor, who proposes to represent a class of everyone

who uses protease inhibitors, contends that Abbott charges

too much for NORVIR alone and too little for the NORVIR

component of KALETRA. (Stated otherwise, Schor’s contention is that KALETRA sells for less than a cocktail made by

combining Abbott’s NORVIR with a protease inhibitor from

some other supplier.) According to Schor’s complaint, the

disparity between the unduly high price of NORVIR and the

unduly low price of KALETRA is designed to monopolize the

market in protease inhibitors, in violation of §2 of the

Sherman Act, 15 U.S.C. §2. Schor calls the strategy “monopoly leveraging”: Abbott is trying to use its patent to

obtain a monopoly of all protease inhibitors by inducing

HIV patients to buy KALETRA, which will lead other vendors

to drop out of the market. Once rivals’ products have been

vanquished, Abbott will be able to jack up the price of

KALETRA as well as NORVIR. The district court dismissed the

complaint under Fed. R. Civ. P. 12(b)(6), however, after

concluding that it does not state a claim on which relief may

be granted. 378 F. Supp. 2d 850 (N.D. Ill. 2005). The court

concluded that “monopoly leveraging” does not violate the

antitrust laws unless it takes a particular form, such as a

tie-in sale or refusal to deal.
No. 05-3344 3

Schor’s complaint does not allege any of the normal

exclusionary practices—tie-in sales (or another form of

bundling), group boycotts, exclusive dealing and selective

refusal to deal, or predatory pricing. Abbott sells ritonavir

as part of KALETRA, but this is not a tie-in because ritonavir

is available separately as NORVIR. Abbott will sell to anyone

willing to pay its price: there is no refusal to deal. The price

of NORVIR cannot violate the Sherman Act: a patent holder

is entitled to charge whatever the traffic will bear. This is

true of both NORVIR’s price, see Brunswick Corp. v. Riegel

Textile Corp., 752 F.2d 261, 265 (7th Cir. 1984), and of a

claim that the patent holder has engaged in price discrimination by cutting ritonavir’s price to people who buy it

(through KALETRA) in combination with lopinavir. See In re

Brand Name Prescription Drugs Antitrust Litigation, 186

F.3d 781 (7th Cir. 1999); Zenith Laboratories, Inc. v. CarterWallace, Inc., 530 F.2d 508, 513 n.9 (3d Cir. 1976). And

antitrust law does not require monopolists to cooperate with

rivals by selling them products that would help the rivals to

compete. See Verizon Communications Inc. v. Law Offices

of Curtis V. Trinko, LLP, 540 U.S. 398 (2004). Cooperation

is a problem in antitrust, not one of its obligations.

The (relatively) lower price of ritonavir in KALETRA

summons up thoughts of the price-squeeze claim in United

States v. Aluminum Co. of America, 148 F.2d 416, 436-38

(2d Cir. 1945) (L. Hand, J.), which held that Alcoa violated the Sherman Act by selling processed aluminum

sheets for less than the price it charged for the raw aluminum required to make them. That necessarily excluded all

rivalry in the sheet-metal market. Schor’s claim is no more

than a faint echo of Alcoa, however, because KALETRA sells

for more than its ritonavir component purchased as NORVIR,

and KALETRA therefore does not meet the legal standard

articulated by Judge Hand. See also Mishawaka v. American Electric Power Co., 616 F.2d 976 (7th Cir. 1980);

Concord v. Boston Edison Co., 915 F.2d 17 (1st Cir. 1990)
4 No. 05-3344

(Breyer, J.) (describing the very limited scope of a pricesqueeze doctrine). We therefore need not decide whether

Alcoa’s holding about price squeezes is sound.

Schor does not contend that KALETRA is an instance of

predatory pricing. Even if the ritonavir component of

KALETRA were deemed to cost the same (per milligram) as

ritonavir sold as NORVIR, the imputed price of KALETRA’s

lopinavir component would be above the average variable

cost of its manufacture. None of Abbott’s rivals contends

that, at KALETRA’s going price, it is unable to sell its own

protease inhibitor profitably. If Abbott’s rivals continue

to make money from their protease inhibitors, they

cannot be knocked out of the market and Abbott will be

unable to raise the price of KALETRA. And without any

prospect of rivals’ exit, there is also no prospect of higher

prices later (“recoupment,” in antitrust argot) and no

antitrust worry. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993); Matsushita

Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574

(1986). A (relatively) low price for ritonavir in KALETRA then

is an unalloyed benefit for consumers. The antitrust laws

condemn high prices, not low ones, and it would be wholly

inappropriate to use the Sherman Act to oblige Abbott to

raise its price for KALETRA. And if, as Schor seems to

contend, KALETRA is not as beneficial for consumers as the

combination of NORVIR and a protease inhibitor other than

lopinavir, then it is easy to understand why KALETRA is sold

at a discount: there’s no antitrust rule against reducing the

price of products that consumers desire less than competitive goods.

That leaves the question whether there is a free-standing

theory of “monopoly leveraging.” The first subject would

have to be whether Abbott enjoys a monopoly, which seems

unlikely. A patent does not (necessarily) create market

power. See Illinois Tool Works, Inc. v. Independent Ink, Inc.,

126 S. Ct. 1281 (2006). Although the complaint alleges (and
No. 05-3344 5

we therefore must assume) that ritonavir is unique in its

ability to inhibit Cytochrome P450-3A4, the only benefit of

that effect is to reduce the quantity of protease inhibitor

required for treatment. Many drugs act as protease inhibitors and are substitutes for Abbott’s products. In addition

to lopinavir and saquinavir, which we have already mentioned, amprenavir (AGENERASE®), atazanavir (REYATAZ®),

fosamprenavir (LEXIVA®), indinavir (CRIXIVAN®), and

nelfinavir (VIRACEPT®) are widely used. See

http://www.aidsmeds.com/PIs.htm. Nonetheless, because

the complaint was dismissed under Rule 12(b)(6), we

must assume that Abbott has market power. Likewise we

must assume that some clever combination of prices for

NORVIR and KALETRA could induce one or more of Abbott’s

rivals to withdraw their protease inhibitors from the

market, or reduce the rate of new entry. Still, there is no

antitrust concern unless Abbott could make a monopoly

profit for itself by keeping other drugs off the market—and

there is no good economic reason to think that it could

do so.

The problem with “monopoly leveraging” as an antitrust

theory is that the practice cannot increase a monopolist’s

profits. Abbott has (we must assume) a monopoly, but a

monopolist can take its monopoly profit just once. It can

collect a monopoly profit for ritonavir and allow a competitive market to continue in other products. Or, by reducing the price of ritonavir, it can induce customers to buy

more from it. But it can’t do both. Suppose the competitive

price of ritonavir would be $2 per 100 mg, and that the

monopoly price is $7; suppose further that the competitive

price of some other protease inhibitor such as saquinavir is

$3 per 400 mg. Without ritonavir, the patient must

take 3,600 mg of saquinavir daily, at a price of $27; take

100 mg of ritonavir with each 800 mg of saquinavir, however, and the cost falls to $26 (1,600 mg of saquinavir plus

200 mg of ritonavir) even with ritonavir at the monopoly
6 No. 05-3344

price. If Abbott offered KALETRA at $24 for a daily dose, that

would knock saquinavir out of the market—but Abbott

would make less money than if it had charged the monopoly

price for ritonavir alone. If it then raised the price of

KALETRA to $28 (say), the producer of saquinavir would

bring that drug back to market—and Abbott would lose

money from reduced sales even if it did not, for it would

now be charging an (implicit) price of $8 per dose of

ritonavir, or more than the profit-maximizing, monopoly

price.

The basic point is that a firm that monopolizes some

essential component of a treatment (or product or service)

can extract the whole monopoly profit by charging a

suitable price for the component alone. If the monopolist

gets control of another component as well and tries to

jack up the price of that item, the effect is the same as

setting an excessive price for the monopolized component.

The monopolist can take its profit just once; an effort to

do more makes it worse off and is self-deterring. See

Philip Areeda & Herbert Hovenkamp, 9 Antitrust Law ¶¶

1706a, 1706b (2d ed. 2000).

The monopolist’s profit-maximizing strategy is not to take

over the market in related products (ritonavir and other

protease inhibitors are complements, not substitutes, given

the bad side effects when ritonavir is used alone) but to

promote competition among the other producers. The less

the complements cost, the more the monopolist can charge

for its own product. Thus Microsoft does not

make computers but encourages vigorous competition

among Dell, Hewlett-Packard, Sony, Lenovo, and other

participants in that market; the less it costs to buy the

hardware, the more sales of operating system software

there will be and the more Microsoft can charge. Similarly

Abbott hopes that competition among other drug manufacturers will drive down the price of protease inhibitors;

the less they cost, the more Abbott can charge for NORVIR
No. 05-3344 7

(or the ritonavir component in KALETRA). There’s no reason

to think that Abbott would be better off if it took over

the market in protease inhibitors and tried to charge a

monopoly price for substances that complement ritonavir.

And if a manufacturer cannot make itself better off by

injuring consumers through lower output and higher prices,

there is no role for antitrust law to play. See Menasha Corp.

v. News America Marketing In-Store, Inc., 354 F.3d 661, 663

(7th Cir. 2004); Ball Memorial Hospital, Inc. v. Mutual

Hospital Insurance, Inc., 784 F.2d 1325, 1333-34 (7th Cir.

1986).

We appreciate the potential reply that it is impossible to

say that a given practice “never” could injure consumers. A

creative economist could imagine unusual combinations of

costs, elasticities, and barriers to entry that would

cause injury in the rare situation. See Einer Elhauge,

Defining Better Monopolization Standards, 56 Stan. L. Rev.

253, 282-93 (2003); Robin Cooper Feldman, Defensive

Leveraging in Antitrust, 87 Geo. L.J. 2079 (1999); Michael

H. Riordan & Steven C. Salop, Evaluating Vertical Mergers,

63 Antitrust L.J. 513, 516-19 (1995); Michael D. Whinston,

Tying, Foreclosure & Exclusion, 80 Am. Econ. Rev. 837

(1990); Thomas G. Krattenmaker & Steven C. Salop,

Anticompetitive Exclusion: Raising Rivals’ Costs To Achieve

Power over Price, 96 Yale L.J. 209, 230-49 (1986). But just

as rules of per se illegality condemn practices that almost

always injure consumers, so antitrust law applies rules of

per se legality to practices that almost never injure consumers.

Rules for predatory pricing are good examples. Lower

prices almost always benefit consumers. Subjecting all low

prices to litigation, and the inevitable risk of error in a

search for the rare instances in which consumers could

be made worse off in the long run by low prices today, would

make it more risky for firms to reduce prices, and they

would be less inclined to do so—to consumers’ considerable
8 No. 05-3344

detriment. That’s why in Matsushita and Brooke Group the

Supreme Court held that low prices are lawful, even if the

seller has considerable market power, unless rivals have

been driven out of the market and recoupment is either

ongoing or imminent. It is why any firm’s unilateral conduct

is almost always deemed lawful unless it creates a dangerous probability of success in monopolizing. Spectrum Sports,

Inc. v. McQuillan, 506 U.S. 447 (1993). Cf. Areeda &

Hovenkamp, 9 Antitrust Law ¶1730 (recommending the

greatest restraint in condemning any unilateral practice as

“monopolization,” given the risk of forbidding a practice that

benefits consumers in ways that judges do not appreciate);

David S. Evans & A. Jorge Padilla, Designing Antitrust

Rules for Assessing Unilateral Practices, 72 U. Chi. L. Rev.

73, 80-83 (2005).

Just so with arguments that low prices are designed

to “leverage” a firm from one monopoly to another. As long

as rivals continue to sell, and no second monopoly is in

prospect, the search for the rare situation in which that

second monopoly just might allow the firm to gain a profit

by injuring consumers is not worth the candle. The search

itself (and the risk of error in the judicial process) has much

more chance of condemning a beneficial practice than of

catching a detrimental one. A price high enough to avoid

condemnation under predatory-pricing rules cannot be

condemned under a “monopoly leveraging” theory that is

just a predatory-pricing variant without the intellectual

discipline of that doctrine. Schor does not contend that

KALETRA’s pricing could be condemned under Matsushita or

Brooke Group, so there is nothing to this case.

Having said this, we must acknowledge that one court

of appeals has adopted just such an undisciplined

monopoly-leveraging principle. See Image Technical

Services, Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1208-13

(9th Cir. 1997). Perhaps some portions of Berkey Photo v.

Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1980), should be
No. 05-3344 9

included in the same category. At least one court of appeals

has gone the other way, rejecting Image Technical by name.

See In re Independent Services Organizations Antitrust

Litigation, 203 F.3d 1322, 1327 (Fed. Cir. 2000). It would be

possible to cabin Image Technical by observing that, despite

the opinion’s language, the case arose from a refusal to deal,

so it occupies one of the traditional antitrust categories

rather than a claim of “naked” monopoly leveraging of the

sort that Schor attempts to pursue. But we think it better

to join the Federal Circuit in saying that Image Technical

just got it wrong.

The ninth circuit did not give any reason for thinking that

a monopolist’s acquisition of market power in a complementary product injures consumers. Instead the court attributed the principle to Eastman Kodak Co. v. Image Technical

Services, Inc., 504 U.S. 451 (1992). That’s a misunderstanding of the Supreme Court’s opinion. See Digital Equipment

Corp. v. Uniq Digital Technologies, Inc., 73 F.3d 756, 762-63

(7th Cir. 1996). What the Supreme Court held in Image

Technical is not that firms with market power are forbidden

to deal in complementary products, but that they can’t do

this in ways that take advantage of customers’ sunk costs.

Kodak sold copiers that customers could service themselves

(or through independent service organizations). Having

achieved substantial sales, Kodak then moved to claim all

of the repair work for itself. That change had the potential

to raise the total cost of copier-plus-service above the

competitive level—and, we observed in Digital Equipment,

above the price that Kodak could have charged had it

followed a closed-service model from the outset. Schor does

not accuse Abbott of any similar switch that would exploit

customers’ sunk costs; none is possible in this market.

Unless we generalize the Supreme Court’s decision in Image

Technical to a rule against selling products that complement those in which the defendant has market

power—which Digital Equipment already has held would be

inappropriate—Schor is left without a leg to stand on.
10 No. 05-3344

Schor pretty much concedes most of this analysis but

maintains that patented products are different. That’s what

the ninth circuit said in Image Technical. But why would a

patent matter? A given patent may (or may not, see Illinois

Tool Works) create market power, but if a monopolist

cannot gain by “leveraging” its way to dominance of a

related product, the fact that the patent rather than

something else supplies the market power can’t create an

antitrust problem.

Abbott’s patents do more to support its position than

to assist Schor. Recall that the patents cover not only

ritonavir administered by itself but also ritonavir administered in combination with another protease inhibitor.

Abbott therefore could take control of the market in combination treatments until the patents expire. A patent does

not permit its owner to condition use of the patented

product on the surrender of a monopoly in some other

unpatented product. See Ethyl Gasoline Corp. v. United

States, 309 U.S. 436, 457-58 (1940); Motion Picture Patents

Co. v. Universal Film Manufacturing Co., 243 U.S. 502, 512

(1917). But the product “ritonavir in combination with

another protease inhibitor” is patented to Abbott, which

therefore is entitled to monopolize the combination. Yet it

has not done so—doubtless because, as we have explained,

Abbott’s profits are highest when the price of other protease

inhibitors is lowest, and Abbott therefore has a powerful

incentive to encourage competition among other producers

rather than monopolize the market for all protease inhibitors. It would make little sense to use the antitrust laws to

condemn Abbott for a strategy (a) that it has not in fact

pursued; (b) that would disserve its own interests; and (c)

that the patents entitle Abbott to pursue if it chooses.

One final topic and we are done. Schor maintains that he

is entitled to prevail without regard to the merits—that

issue preclusion (collateral estoppel) blocks Abbott from

offering any legal defense. Three users of protease inhibi-
No. 05-3344 11

tors have brought essentially identical suits against Abbott.

Two were filed in the Northern District of California and

the third, Schor’s, in the Northern District of Illinois.

District Judge Wilkin denied Abbott’s motion to dismiss one

of the California suits under Rule 12(b)(6). See Doe v.

Abbott Laboratories, 2004 U.S. Dist. LEXIS 29129 (N.D. Cal.

Oct. 21, 2004). Then she consolidated them and denied (as

premature) Abbott’s motion for summary judgment, concluding that plaintiffs are entitled to conduct additional

discovery. See In re Abbott Laboratories NORVIR Anti-Trust

Litigation, 2005 U.S. Dist. LEXIS 24238 (N.D. Cal. Sept. 12,

2005). According to Schor, these decisions conclusively

establish that his complaint does state a claim on which

relief may be granted; all that remains for decision, he

insists, is whether the complaint’s allegations can be proved

at trial.

There are two problems with Schor’s use of issue preclusion. The first is that the California decisions are not final.

They do not resolve any issue in plaintiffs’ favor; they

conclude only that more litigation is required. No judgment has been entered; Abbott has not had an opportunity

to appeal. Federal law determines the preclusive effect of a

federal court’s decision, and as a matter of federal law the

denial of a motion (whether under Rule 12(b)(6) or Rule 56),

so that a suit continues and the issue remains alive, has no

preclusive effect. See Financial Acquisition Partners L.P. v.

Blackwell, 440 F.3d 278, 284-85 (5th Cir. 2006). Although

it is possible to imagine circumstances under which the

denial of a motion to dismiss may conclusively resolve some

concrete issue, see Gilldorn Savings Association v. Commerce Savings Association, 804 F.2d 390, 393-96 (7th Cir.

1986), that’s not what happened in the Northern District of

California. Nothing has been resolved there with finality.

Even if a point of law had been resolved against Abbott in

the California suits, that would not be preclusive in Illinois.

Schor is invoking a doctrine known as offensive non-mutual
12 No. 05-3344

issue preclusion. (The preclusion is offensive because Schor

is the plaintiff and non-mutual because he is not a party to

the California cases. A decision favorable to Abbott in

California would not have been conclusive against Schor in

Illinois, unless the California court first certified a class and

Schor failed to opt out.) Although federal law recognizes the

possibility of offensive non-mutual issue preclusion, see

Parklane Hosiery Co. v. Shore, 39 U.S. 322 (1979), the

Supreme Court added in Parklane that circumstances may

make its application inappropriate. One of those circumstances is a difference in the governing law. A district court

in California must apply the ninth circuit’s decision in

Image Technical. We need not. Having concluded that

Image Technical misunderstood the Sherman Act, we are

unwilling to allow its effect to extend beyond the boundaries

of that circuit. The district court in Illinois did not err in

making an independent decision about the merit of Schor’s

complaint.

AFFIRMED

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-31-06