Fido's Fences, Inc. v. Radio Systems Corp.

999 F. Supp. 2d 442, 999 F. Supp. 442, 2014 U.S. Dist. LEXIS 26986, 2014 WL 805171
CourtDistrict Court, E.D. New York
DecidedFebruary 28, 2014
DocketNo. 2:12-cv-00179(NG)(JO)
StatusPublished
Cited by7 cases

This text of 999 F. Supp. 2d 442 (Fido's Fences, Inc. v. Radio Systems Corp.) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fido's Fences, Inc. v. Radio Systems Corp., 999 F. Supp. 2d 442, 999 F. Supp. 442, 2014 U.S. Dist. LEXIS 26986, 2014 WL 805171 (E.D.N.Y. 2014).

Opinion

OPINION AND ORDER

GERSHON, District Judge:

Plaintiff Fido’s Fences, Inc. (“Fido’s”) brings this action against defendants Radio Systems Corp. (“RSC”) and Invisible Fence, Inc. (“Invisible Fence”) under section 4 of the Clayton Act, 15 U.S.C: § 15, alleging principally that defendants monopolized and attempted to monopolize the market for electronic pet containment systems and three submarkets in violation of section 2 of the Sherman Act, 15 U.S.C. § 2, and refused to deal and tied the purchase of replacement batteries to the purchase of complete pet containment systems in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. Defendants move to dismiss the complaint as duplicative of a prior action between the parties, as precluded by collateral estoppel, and for failure to plead Article III and antitrust standing. For the reasons that follow, defendants’ motion is granted in part and denied in part.

I. FACTUAL BACKGROUND1

Electronic pet containment systems use electronic collars to keep pets within a specified area without need for a physical fence. Such a system consists of antenna wiring, a radio receiver mounted on a collar designed to be worn by the pet, a radio transmitter, and batteries. The antenna [447]*447wiring is installed along the perimeter of the area within which the pet will be allowed to roam freely, and the radio transmitter is installed in the pet owner’s home. As the pet approaches the buried antenna wire, the collar-mounted receiver is activated by the radio transmitter, which typically first emits a warning sound followed by a negative corrective stimulus.

Electronic pet containment systems were first introduced in the 1970s. Dealer-installed systems manufactured by Invisible Fence were initially covered by U.S. Patent No. 3,753,421 (“the '421 patent”). When the '421 patent expired in 1990, other companies, including Pet Stop, Innotek, Pet Safe, Multivet International, and Premier Pet Products, entered the market and competed vigorously for market share. Through a series of mergers and acquisitions in the 2000s, RSC acquired many of its competitors, including defendant Invisible Fence, Innotek, Pet Safe, Multivet International, and Premier Pet Products. RSC currently manufactures and sells these products under the PetSafe®, SportDOG®, and Innotek® brands. Through Invisible Fence, it also makes and sells Invisible Fence® brand products.

The U.S. market for electronic pet containment systems comprises three distinct submarkets: dealer-installed systems, do-it-yourself systems, and replacement batteries. Fido’s alleges that RSC and Invisible Fence have a monopoly in the overall U.S. market and in each submarket. Specifically, defendants possess a 77% share of the dealer-installed submarket, a 92% share of the do-it-yourself submarket, and a 95% share of the replacement battery submarket. In total, defendants’ sales account for $250 million of the $300 million in annual U.S. sales of electronic pet containment systems and replacement components. Fido’s further alleges that defendants maintain this dominant market share through anticompetitive means, including: requiring dealers to enter into contracts that forbid them from buying pet containment systems or replacement components from anyone other than Invisible Fence; falsely contending that the use of batteries other than their own may cause the equipment to fail; seeking to preclude competitors from using generic terms like “invisible” or “invisible fence” in advertising; and falsely marking products with patent claims and patent numbers. In the sub-market for replacement batteries, defendants’ conduct has almost completely foreclosed competition, allowing defendants to charge exorbitant markups.

Until 2008, Fido’s was a local dealer and installer of electronic pet containment systems and replacement components manufactured by Invisible Fence. Since then, Fido’s has sold systems manufactured by a competing manufacturer, DogWatch, Inc. (“DogWatch”). Beginning in February 2010, Fido’s began to manufacture and sell replacement batteries that are compatible with defendants’ receivers and collars. Because electronic pet containment systems typically last in excess of ten years, but batteries must be replaced quarterly, the sale of replacement batteries is an important and lucrative submarket, accounting for $83 million in annual sales, of which defendants’ sales accounted for $76.5 million. Fido’s has sold 10,000 to 20,000 units since entering the replacement battery submarket. Fido’s also “intends to launch, in the [S]pring of 2012, its own receivers and collars to compete with RSC and Invisible Fence” (Compl. ¶ 102), but it has been hindered in its efforts to compete by defendants’ anticompetitive conduct.

[448]*448II. PROCEDURAL HISTORY2

A. Fido’s Antitrust Suit Against Canine Fence

From 1991 until 2008, Fido’s sold and installed Invisible Fence products pursuant to a dealership agreement with Canine Fence Company (“Canine Fence”), Invisible Fence’s exclusive distributor in seven Northeastern states. See Fido’s Fences, Inc. v. Canine Fence Co., 672 F.Supp.2d 303, 306-07 (E.D.N.Y.2009). After the parties’ “business relationship was threatened by Fido’s non-payment of monies allegedly due to Canine,” Fido’s sued Canine Fence. Id. at 306. Fido’s sought an injunction preventing Canine Fence from terminating the parties’ agreement, and it asserted antitrust and state law claims. Id. at 308. On November 30, 2009, the Honorable Leonard D. Wexler, district judge, granted summary judgment to Canine Fence on Fido’s antitrust claims. Id. at 309-313. The parties subsequently settled Fido’s remaining claims.

B. Fido’s Qui Tam Suit against RSC and Invisible Fence

On October 1, 2010, Fido’s initiated a qui tam action under 35 U.S.C. § 292 against RSC and Invisible Fence, alleging that RSC and Invisible Fence had marked patent numbers on unpatented products “with the intent to deceive competitors and the consuming public and deter them from competing or purchasing competitive products.” (Compl. ¶ 3, Fido’s Fences, Inc. v. Radio Systems Corp., No. 10-cv-4490, Dkt. No. 1 (E.D.N.Y. Oct. 1, 2010) (the “Qui Tam Action”).) Fido’s sought statutory damages of $500 for each offense, with one-half going to the United States and one-half going to Fido’s, and a declaratory judgment that defendants had falsely marked their products. (Id. ¶ 4, pp. 19-20 (Prayer for Relief).) The scheduling order in that action set a March 11, 2011 deadline for amending the pleadings. On September 16, 2011, after that deadline had passed, the America Invents Act revised 35 U.S.C. § 292 to eliminate the qui tam provision that permitted private plaintiffs, such as Fido’s, to sue on behalf of the United States and recover statutory fines. See Leahy-Smith America Invents Act, Pub. L. No. 112-129, 125 Stat. 284 (2011). In January 2012, defendants refused Fido’s request for consent to amend the complaint in that action to add antitrust claims.

C.

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999 F. Supp. 2d 442, 999 F. Supp. 442, 2014 U.S. Dist. LEXIS 26986, 2014 WL 805171, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fidos-fences-inc-v-radio-systems-corp-nyed-2014.