Ctunify, Inc. v. Nortel Networks, Inc. and Global Knowledge Network, Inc.

*The Honorable John R. Adams, United States District Judge for the Northern District of
Ohio, sitting by designation.
NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 04a0107n.06
Filed: November 18, 2004
No. 03-6157
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
CTUNIFY, INC.,
Plaintiff-Appellant,
v.
NORTEL NETWORKS, INC. AND
GLOBAL KNOWLEDGE
NETWORK, INC.,
Defendants-Appellees.
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ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE MIDDLE
DISTRICT OF TENNESSEE
O P I N I O N
Before: MOORE and SUTTON, Circuit Judges, and ADAMS, * District Judge.
KAREN NELSON MOORE, Circuit Judge. Plaintiff CTUnify, Inc. appeals from the
judgment dismissing its complaint for failure to state a claim, in this antitrust action brought against
defendants, Nortel Networks, Inc. and Global Knowledge Network, Inc. For reasons set forth
below, we AFFIRM the judgment of the district court.
I. BACKGROUND
Nortel is a market leader engaged in the production of telephone and data systems. Both
CTUnify and Global Knowledge are corporations that provide training on the use and application
of Nortel telephone and data systems. On October 2, 2002, CTUnify filed a complaint in the United

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1CTUnify’s initial complaint merely alleged that the defendants were in violation of 15
U.S.C. § 1-26. As Nortel correctly observed, this statutory reference encompasses nearly all of
antitrust law, including numerous provisions that are wholly inapplicable in this case. Appellee
Nortel’s Br. at 15-17.
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States District Court for the Middle District of Tennessee against Nortel and Global Knowledge,
alleging that Global Knowledge had entered into an exclusive training contract with Nortel to
provide training on Nortel systems. CTUnify alleged that this exclusive training contract violated
antitrust law in two ways: first, by impermissibly tying Global Knowledge’s training services to the
sale of Nortel systems; second, by impermissibly tying Global Knowledge’s training services to
promotional funds which Nortel promised to provide to its distributors and resellers upon purchase
of a Nortel system. CTUnify contended that these tying arrangements represented an impermissible
attempt by Nortel to use its market dominance in systems manufacturing to acquire greater market
power in the training market. CTUnify sought damages for lost profits in the amount of $5 million,
treble damages, attorney fees, and injunctive relief against the defendants.
On November 18, 2002, Nortel filed a motion to quash service and for a more definite
statement. The district court denied Nortel’s motion to quash service but granted its motion for a
more definite statement on the ground that CTUnify’s complaint failed to provide the defendants
with notice of the specific statutory basis for the lawsuit.1 CTUnify then filed an amended complaint
which, although not fully remedying the complaint’s deficiencies, attempted to clarify the statutory
basis for CTUnify’s claims.
On March 5, 2003, both defendants filed separate motions to dismiss CTUnify’s amended
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted both
motions on the basis that the complaint failed to state an antitrust claim. Although the amended

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complaint remained unclear, the district court concluded that CTUnify was attempting to assert an
impermissible tying arrangement in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, and § 3 of
the Clayton Act, 15 U.S.C. § 14. Because the district court concluded that CTUnify had failed to
allege the necessary elements for either claim, it dismissed the complaint. CTUnify then filed this
timely appeal.
II. ANALYSIS
We review de novo a district court’s decision to dismiss a lawsuit for failure to state a claim
upon which relief can be granted under Rule 12(b)(6). Found. for Interior Design Educ. Research
v. Savannah Coll. of Art & Design, 244 F.3d 521, 529 (6th Cir. 2001). In conducting our review,
we “must construe the complaint in the light most favorable to the plaintiff, accept all of the
complaint’s factual allegations as true, and determine whether the plaintiff undoubtedly can prove
no set of facts in support of his claim that would entitle him to relief.” Louisiana Wholesale Drug
Co. v. Hoechst Marion Roussel, Inc. (In re Cardizem CD Antitrust Litig.), 332 F.3d 896, 909 (6th
Cir. 2003) (citation omitted). Although we employ a liberal system of “notice pleading,”
Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168
(1993), the essential elements of the plaintiff’s claim “must be alleged in more than vague and
conclusory terms” in order to survive a Rule 12(b)(6) motion. Found. for Interior Design Educ.
Research, 244 F.3d at 530.
A. Alleged Violation of the Sherman Act
The Supreme Court has explained that “[a] tying arrangement is ‘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.’” Eastman

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Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 461 (1992) (citation omitted). A plaintiff
may bring a private antitrust action based on an illegal tying arrangement under § 1 of the Sherman
Act if he can allege that: (1) the seller has “‘appreciable economic power’ in the tying product
market”; and (2) “the arrangement affects a substantial volume of commerce in the tied market.”
Id. at 462 (citation omitted). We have also required that a plaintiff allege: (1) the seller of the tying
product has a direct economic interest in the sale of the tied product, Beard v. Parkview Hosp., 912
F.2d 138, 139, 142-44 (6th Cir.1990); and (2) the plaintiff has suffered an antitrust injury as a result
of the tying arrangement, Valley Prods. Co. v. Landmark, a Div. of Hospitality Franchise Sys., Inc.,
128 F.3d 398, 402-03 (6th Cir. 1997).
In this case, the district court determined that CTUnify failed to allege a direct economic
benefit to Nortel as a result of its tying agreement with Global Knowledge. CTUnify asserts that
while it must prove a direct economic benefit to Nortel in order to prevail ultimately on its claims,
it need not allege such a benefit in its complaint. We conclude, however, that our precedent requires
that where the seller of the tying product and the seller of the tied product are different entities, the
plaintiff must allege a direct economic benefit to the tying seller in order to survive a Rule 12(b)(6)
motion. See Beard, 912 F.2d at139 (noting that there is no violation of § 1 of the Sherman Act
where the tying seller receives no direct economic benefit from the sale of the tied product).
The Sherman Act condemns certain tying arrangements out of a concern that the seller is
attempting to use its dominance in the tying product market to invade the tied product market. Carl
Sandburg Vill. Condo. Ass’n No. 1 v. First Condo. Dev. Co., 758 F.2d 203, 208 (7th Cir. 1985).
Many courts, including this Circuit, have imposed an economic-interest requirement to ensure that
the seller’s intent is to engage in such anticompetitive business practices. See, e.g., Beard, 912 F.2d

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2In the past, this court has recognized that tying arrangements may be found to violate
antitrust law either under a per-se or rule-of-reason analysis. These two theories of tying analysis,
however, “have, in effect, merged in recent years.” PSI Repair Servs., Inc. v. Honeywell, Inc., 104
F.3d 811, 815, n.2 (6th Cir.), cert. denied, 520 U.S. 1265 (1997).
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at 141-142; White v. Rockingham Radiologists, Ltd., 820 F.2d 98, 104 (4th Cir.1987); Robert’s
Waikiki U-Drive, Inc. v. Budget Rent-A-Car Sys., Inc., 732 F.2d 1403, 1407-08 (9th Cir. 1984);
Keener v. Sizzler Family Steak Houses, 597 F.2d 453, 456 (5th Cir. 1979); Ohio-Sealy Mattress Mfg.
Co. v. Sealy, Inc., 585 F.2d 821, 835 (7th Cir. 1978), cert. denied, 440 U.S. 930 (1979); Venzie
Corp. v. United States Mineral Prods. Co., 521 F.2d 1309, 1317-18 (3d Cir. 1975); but see Gonzalez
v. St. Margaret’s House Hous. Dev. Fund Corp., 880 F.2d 1514, 1517 (2d Cir. 1989).
“In the usual tying arrangement, it is not difficult to establish the economic interest element
because the seller of the tying product is also the seller of the tied product.” Carl Sandburg Vill.
Condo. Ass’n, 758 F.2d at 208. When the seller of the tying product and the seller of the tied
product are different, however, it is more difficult to discern whether or not the tying agreement is
aimed at suppressing competition. Under these circumstances, in order to make out a violation of
§ 1 of the Sherman Act, a plaintiff must show that the seller of the tying product derived a direct
economic benefit from the sales of the tied product or service. Beard, 912 F.2d at 142. Absent a
direct economic benefit to the tying seller from the sale of the tied product or service, the tying
arrangement does not violate the Sherman Act under either the per-se or rule-of-reason analysis.2
Id. at 143 (citing cases).
CTUnify’s complaint lacks any allegation of a direct economic benefit to Nortel as a result
of the tying agreement. CTUnify argues that “it is clear from the relationship between the
Defendants as pled and alleged that Defendant, Nortel Networks, does derive a direct economic

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benefit from its arrangement with Defendant, Global Knowledge, through its dominance in the
market shares in the sales and training on Nortel telephone equipment and its aftermarket.”
Appellant Br. at 11. We are not convinced that CTUnify’s complaint contains allegations which
suggest such a benefit to Nortel as a result of the defendants’ arrangement. Even if this claim is
implied by the complaint’s allegations, however, it is insufficient to satisfy the requirement of a
direct economic benefit. We require that the tying seller must derive a direct financial benefit from
the sale of the tied product, not merely an indirect benefit. See id. at 142 (no illegal tying
arrangement where hospital did not receive payment from radiologist group under exclusive dealings
contract); Crawford Transp. Co. v. Chrysler Corp., 338 F.2d 934 (6th Cir. 1964) (no violation of
antitrust law where car manufacturer did not receive payment under exclusive dealing contract with
common carrier despite the fact that the tying agreement saved the car manufacturer millions of
dollars).
CTUnify does not suggest that Nortel received a portion of the profits that Global
Knowledge earned as a result of its services rendered. Nor does CTUnify claim that Nortel received
some sort of payment in exchange for bestowing on Global Knowledge the exclusive right to
provide training on Nortel systems. Instead, CTUnify merely asserts that the agreement bestowed
on Nortel some type of benefit as a result of Global Knowledge’s dominance in the tied product
market. These allegations represent only an indirect benefit to Nortel as a result of the tying
agreement and thus must fail as a matter of law.
Here, as noted by the district court, CTUnify also failed to allege that it has suffered an
antitrust injury as a result of the tying arrangement necessary to survive a Rule 12(b)(6) motion. An
antitrust injury is an “injury of the type the antitrust laws were intended to prevent and that flows

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from that which makes defendants’ acts unlawful.” Found. for Interior Design Educ. Research, 244
F.3d at 530 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)).
Because antitrust laws were intended to protect “competition, not competitors,” id. (quoting Brown
Shoe Co. v. United States, 370 U.S. 294, 320 (1962)), it is not sufficient for the plaintiff to claim
economic injuries as a competitor. Valley Prods. Co., 128 F.3d at 402. Alleging an injury that is
merely linked to the alleged antitrust violation is insufficient. Hodges v. WSM, Inc., 26 F.3d 36, 38
(6th Cir. 1994). The plaintiff must allege “that the illegal antitrust conduct was a necessary
predicate to their injury.” Id. at 39. The Sixth Circuit in particular has been “reasonably aggressive”
in dismissing cases where the injury to the plaintiff “although linked to an alleged violation of the
antitrust laws, flows directly from conduct that is not itself an antitrust violation.” Valley Prods.,
128 F.3d at 403.
In the instant case, CTUnify alleges damages of at least $5 million for lost profits and seeks
injunctive relief to prevent the defendants from continued violation of antitrust law. CTUnify lost
profits as a result of Nortel’s decision to limit the number of training companies designated as a
preferred vendor. CTUnify’s injuries flow from the fact that it was not chosen to be a preferred
vendor and not from any alleged tying arrangement between Nortel and Global Knowledge. Thus,
CTUnify has not alleged a cognizable antitrust injury. See Hodges, 26 F.3d at 38 (noting that “[i]f
Plaintiff would have suffered the same injury without regard to the allegedly anticompetitive acts
of Defendant, Plaintiff has not suffered an antitrust injury”).
More importantly, CTUnify has not concretely alleged any anticompetitive effect that the
defendants’ tying agreement has had on the tied market. It has not alleged any anticompetitive effect
on the training market as a result of the defendants’ tying agreement. Nor has it alleged that the

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tying agreement stripped consumers of their freedom to choose among training service providers.
That CTUnify also seeks injunctive relief does little to bolster its allegations of an antitrust injury.
Valley Prods., 128 F.3d at 402 (“Without antitrust injury, no private antitrust action will lie at law
or in equity.”). CTUnify has therefore failed to state a claim under § 1 of the Sherman Act.
B. Alleged Violation of the Clayton Act
Section 3 of the Clayton Act makes it unlawful
for any person engaged in commerce . . . to lease or make a sale or contract for sale
of goods, wares, merchandise, machinery, supplies, or other commodities . . . on the
condition, agreement, or understanding that the lessee or purchaser thereof shall not
use or deal in the goods, wares, merchandise, machinery, supplies, or other
commodities of a competitor or competitors of the lessor or seller, where the effect
of such lease, sale, or contract for sale or such condition, agreement, or
understanding may be to substantially lessen competition or tend to create a
monopoly in any line of commerce.
15 U.S.C. § 14. As the plain meaning of the statute indicates, in order for there to be a violation
under § 3 of the Clayton Act both the tying and tied products must be “goods, wares, merchandise,
machinery, supplies, or other commodities.” Id. Section 3 of the Clayton Act does not apply if
either the tying product or the tied product is a service. Chelson v. Oregonian Publ’g Co., 715 F.2d
1368, 1372 (9th Cir. 1983); Rosebrough Monument Co. v. Mem’l Park Cemetery Ass'n, 666 F.2d
1130, 1141 (8th Cir. 1981), cert. denied, 457 U.S. 1111 (1982).
CTUnify’s complaint alleges that there are two impermissible tying arrangements between
Nortel and Global Knowledge. In the first, CTUnify alleges that Nortel tied the sale of its telephone
and data systems to the training services offered by Global Knowledge. In the second, CTUnify
contends that Nortel tied promotional funds promised to buyers of Nortel systems to the use of
Global Knowledge’s services. In both agreements the tied product, namely Global Knowledge’s

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service, does not qualify as a commodity under the statute. As a result, the district court properly
dismissed pursuant to Rule 12(b)(6) CTUnify’s claim under § 3 of the Clayton Act.
III. CONCLUSION
In summary, CTUnify failed to allege the necessary elements of a private antitrust claim.
We therefore AFFIRM the judgment of the district court dismissing CTUnify’s complaint.

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