Goss International v. MAN Roland

2005 DNH 150

• Court: District Court, D. New Hampshire
• Decided: November 8, 2005
• Docket: Civil No. 03-cv-513-SM. Opinion No. 2006 DNH 088
• Status: Published

Opinion

Goss International v . MAN Roland 03-CV-513-SM 11/08/05 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Goss International Americas, Inc., Plaintiff

v. MAN Roland Inc. and MAN Roland Druckmaschinen AG, Defendants Civil N o . 03-cv-513-SM Opinion N o . 2005 DNH 150 MAN Roland Inc. and MAN Roland Druckmaschinen AG, Counterclaim Plaintiffs

v. Goss International Americas, Inc. and Heidelberger Druckmaschinen AG, Counterclaim Defendants

O R D E R

Goss International Americas, Inc. (“Goss”) asserts three

claims of patent infringement against MAN Roland Inc. and MAN

Roland Druckmaschinen AG (collectively, “MAN Roland”). 1 In

response, MAN Roland asserts eleven counterclaims against Goss

and Heidelberger Druckmaschinen AG (“Heidelberger A G ” ) . Before

1 Specifically, Goss alleges infringement of United States Patent Nos. 6,374,734 (the ’734 patent), 6,386,100 (the ’100 patent), and 6,739,251 (the ’251 patent). the court is Heidelberger AG’s motion to dismiss MAN Roland’s

fifth and sixth counterclaims (which allege violations of section

2 of the Sherman Antitrust Act and section 7 of the Clayton

Antitrust Act) for failure to state a claim. See Fed. R. Civ. P.

12(b)(6). MAN Roland objects. For the reasons given, the motion

is granted in part and denied in part.

Standard of Review

When ruling on a motion to dismiss a claim pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure, the court must

“accept as true the well-pleaded factual allegations of the

complaint, draw all reasonable inferences therefrom in the

[counterclaim] plaintiff’s favor and determine whether the

complaint, so read, sets forth facts sufficient to justify

recovery on any cognizable theory.” Martin v . Applied Cellular

Tech., Inc., 284 F.3d 1 , 6 (1st Cir. 2002) (citing TAG/ICIB

Servs., Inc. v . Pan Am. Grain Co., 215 F.3d 1 7 2 , 175 (1st Cir.

2000)). Dismissal is appropriate “only if it clearly appears,

according to the facts alleged, that the plaintiff cannot recover

on any viable theory.” Langadinos v . Am. Airlines, Inc., 199

F.3d 6 8 , 69 (1st Cir. 2000) (quoting Correa-Martinez v .

2 Arrillaga-Belendez, 903 F.2d 4 9 , 52 (1st Cir. 1990)).

Notwithstanding this deferential standard of review, the court

need not accept as true bald assertions or conclusions of law.

Resolution Trust Corp. v . Driscoll, 985 F.2d 4 4 , 48 (1st Cir.

1993) (citations omitted).

Background

Goss and MAN Roland manufacture, market, distribute, and

sell web offset printing presses. Until August 2004, Goss was

known as Heidelberg Web Systems, Inc. (“HWS”) and was a wholly

owned subsidiary of Heidelberger AG. In August 2004,

Heidelberger AG sold HWS to Goss International Corporation (“Goss

Corp.”), which gave the company its new name: Goss International

Americas, Inc.

In 2002, the United States Patent and Trademark Office

(“Patent Office”) issued two patents claiming printing presses to

Heidelberger AG: the ’734 and ’100 patents. Heidelberger AG

subsequently assigned the ’734 and ’100 patents to HWS. In

3 November 2003, HWS filed a complaint asserting infringement of

the ’734 and ’100 patents against MAN Roland.2

In May 2004, the Patent Office issued a third patent

claiming a printing press to Heidelberger AG: the ’251 patent.

As part of the August 2004 transaction in which Heidelberger AG

sold HWS to Goss Corp., Goss was assigned the ’734, ’100, and

’251 patents. In December 2004, Goss filed a supplemental

complaint, asserting infringement of all three patents against

MAN Roland.

In January 2005, MAN Roland answered Goss’s supplemental

complaint and asserted eleven counterclaims against HWS (now

Goss) and Heidelberger AG. MAN Roland’s fifth and sixth

counterclaims assert that Goss and Heidelberger AG violated

section 2 of the Sherman Antitrust Act (fifth counterclaim) and

section 7 of the Clayton Antitrust Act (sixth counterclaim).

2 By order dated April 4 , 2005 (see document n o . 3 0 ) , the caption of this case was amended to list Goss as the plaintiff, to reflect the corporate name change resulting from the August 2004 transaction.

4 Discussion

I. MAN Roland’s Fifth Counterclaim

MAN Roland’s fifth counterclaim asserts that counterclaim

defendants violated section 2 of the Sherman Antitrust Act by

engaging in anticompetitive conduct for the purposes of

monopolization and attempted monopolization. In particular, MAN

Roland asserts a Walker Process claim and a sham litigation

claim.3

In its motion to dismiss, Heidelberger AG argues that it

lacks the monopoly power or the dangerous probability of

achieving such power necessary to violate section 2 , since it

exited the relevant market when it sold HWS. In response, MAN

Roland argues that Heidelberger AG’s current lack of market power

is not dispositive because Heidelberger AG violated section 2

prior to exiting the market by fraudulently procuring the ’734,

3 In its reply to MAN Roland’s objection to the motion to dismiss, Heidelberger AG incorrectly argues that MAN Roland’s fifth counterclaim is premised on the August 2004 transaction. MAN Roland broadly characterizes Heidelberger AG’s anticompetitive conduct as “committing fraud on the [Patent Office] in order to secure the patent-in-suit and then bringing baseless lawsuit—sham litigation—in order to enforce those patents which they know to be unenforceable.” (Corrected Countercl. Pl.’s Mem. in Opp’n to Mot. to Dismiss at 5.)

5 ’100, and ’251 patents and bringing sham litigation to enforce

them. Heidelberger AG and MAN Roland are both correct. (In its

reply, Heidelberger AG argues that it is also entitled to

dismissal because the underlying patent infringement action was

initiated by HWS, the assignee of the patent and a separate

corporate entity. While that argument may prove meritorious, it

is inappropriate to dismiss a claim based on an argument first

raised in a reply to an objection to a motion to dismiss,

particularly an undeveloped and unsupported argument.)

Section 2 of the Sherman Antitrust Act makes it unlawful for

any person to “monopolize, or attempt to monopolize . . . any

part of the trade or commerce among the several States.”

15 U.S.C. § 2 . See also 15 U.S.C. § 15(a) (granting a private

right of action to “any person who shall be injured in his

business or property by reason of anything forbidden in the

antitrust laws”). A successful monopolization claim under

section 2 requires actual monopoly power and a wrongful act

designed to enhance that power. Town of Norwood v . N.E. Power

Co., 202 F.3d 4 0 8 , 420-21 (1st Cir. 2000) (citing Otter Tail

Power C o . v . United States, 410 U.S. 366, 377 (1973); United

6 States v . Grinnell Corp., 384 U.S. 563, 570-71 (1966)). A

successful attempted monopolization claim under section 2

requires anticompetitive conduct, a specific intent to

monopolize, and a dangerous probability of success. Spectrum

Sports, Inc. v . McQuillan, 506 U.S. 4 4 7 , 454-56 (1993).

Walker Process claims form a subset of section 2 claims in

which the allegedly anticompetitive conduct is the enforcement of

a fraudulently procured patent. Walker Process Equip., Inc. v .

Food Mach. & Chem. Corp., 382 U.S. 1 7 2 , 177 (1965). Sham

litigation claims form another subset of section 2 claims in

which the allegedly anticompetitive conduct is the enforcement of

a patent through litigation, with knowledge the patent is invalid

or not infringed. C.R. Bard, Inc. v . M3 Sys., Inc., 157 F.3d

1340, 1368 (Fed. Cir. 1998).

An indispensable element of any section 2 claim is

possession of monopoly power or a dangerous probability of

obtaining monopoly power. Possession of monopoly power and the

dangerous probability of obtaining monopoly power are both

determined at the time of the allegedly wrongful conduct.

7 Fineman v . Armstrong World Indus., Inc., 774 F. Supp. 225, 260

n.28 (D.N.J. 1991) (“The relevant time period on the question of

monopoly power . . . is the time at which [the defendant]

allegedly acted.”); Am. Hosp. Supply Corp. v . Roy Lapidus, Inc.,

493 F. Supp. 1076, 1077 (D. Mass. 1980) (citations omitted)

(dismissing a section 2 claim in part because of a failure to

allege defendant’s possession of “monopoly power in the relevant

market at the time of the acts complained o f ” ) ; United States v .

Am. Airlines, Inc., 743 F.2d 1114, 1118 (5th Cir. 1984) (citing

Multiflex, Inc. v . Samuel Moore & Co., 709 F.2d 9 8 0 , 992 (5th

Cir. 1983)) (“When evaluating the element of dangerous

probability of success, we do not rely on hindsight but examine

the probability of success at the time the acts occur”);

Conceptual Eng’g Assocs., Inc. v . Aelectronic Bonding, Inc., 714

F. Supp. 1262, 1270 (D.R.I. 1989) (citations omitted) (“the

‘dangerous probability’ of successful monopolization must be

determined as of the time the acts occurred”).

The principal wrongful conduct in both Walker Process and

sham litigation claims is an unjustified effort to enforce a

patent. Here, MAN Roland bases its counterclaim on the effort to

8 enforce three different patents. All agree that by the time Goss

asserted the ’251 patent, Heidelberger A G had sold H W S to Goss

Corp. and had assigned the ’251 patent to Goss. Because, on the

facts alleged, there is no legal theory under which Goss’s share

of the market can be attributed to Heidelberger A G , Heidelberger

A G is entitled to dismissal of M A N Roland’s fifth counterclaim as

it relates to the ’251 patent, on grounds that an entity with no

market share cannot be liable on a claim of monopolization or

attempted monopolization. See Colo. Interstate Gas C o . v .

Natural Gas Pipeline Co., 885 F.2d 683, 694 n.18 (10th Cir. 1989)

(citing 2 E . KINTNER, FEDERAL ANTITRUST LAW § 12.6 (1980); 3 P . AREEDA

& D . TURNER, ANTITRUST LAW ¶ 803 (1978)) (“While the Supreme Court

has refused to specify a minimum market share necessary to

indicate a defendant has monopoly power, lower courts generally

require a minimum market share of between 70% and 8 0 % . ” ) ; Twin

Labs., Inc. v . Weider Health & Fitness, 900 F.2d 566, 570 (2d

Cir. 1990) (citing Nifty Foods Corp. v . Great Atl. & Pac. Tea

Co., 614 F.2d 8 3 2 , 841 (2d Cir. 1980)) (“A threshold showing for

a successful attempted monopolization claim is sufficient market

share by the defendant . . . [and] a 33% market share does not

9 even approach the level required for dangerous probability of

success.”).

However, Heidelberger AG’s 2004 sale of HWS to Goss Corp.

provides no basis for dismissing the counterclaim as it relates

to the ’734 and ’100 patents. Assuming that HWS’s share in the

market is attributable to Heidelberger AG, Heidelberger AG did

hold a market share at the time of the allegedly anticompetitive

conduct, that i s , HWS’s attempt to enforce the ’734 and ’100

patents. Thus, Heidelberger AG’s sale of HWS to Goss Corp. does

not entitle it to dismissal of MAN Roland’s fifth counterclaim as

it relates to the ’734 and ’100 patents.

II. MAN Roland’s Sixth Counterclaim

MAN Roland’s sixth counterclaim asserts that counterclaim

defendants violated section 7 of the Clayton Antitrust Act by

participating in the August 2004 transaction. In its motion to

dismiss, Heidelberger AG argues that in August of 2004 it was the

selling party, to which section 7 does not apply. MAN Roland

counters that claims seeking relief by divestiture or rescission

are appropriate against sellers. Heidelberger AG replies that

10 divestiture or rescission claims may allow the courts to exercise

jurisdiction over a seller, but do not allow a section 7 claim to

be asserted against a seller. Heidelberger AG is correct.

Section 7 of the Clayton Antitrust Act makes it unlawful for

any person “engaged in commerce or in any activity affecting

commerce [to] . . . acquire the whole or any part of the assets

of another person engaged also in commerce . . . where . . . the

effect of such acquisition may be substantially to lessen

competition, or to tend to create a monopoly.” 15 U.S.C. § 18

(emphasis added). See also 15 U.S.C. § 15(a) (granting a private

antitrust laws”). Section 7 focuses on unlawful acquisition,

holding entities acquiring assets, but not those relinquishing

assets, in violation. Dailey v . Quality Sch. Plan, Inc., 380

F.2d 4 8 4 , 488 (5th Cir. 1967); United States v . Coca-Cola

Bottling Co., 575 F.2d 2 2 2 , 227 (9th Cir. 1978) (citations

omitted).

11 In certain instances, courts may maintain jurisdiction over

entities relinquishing assets to allow for the equitable remedy

of rescission. Coca-Cola, 575 F.2d at 229 (citations omitted).

Even in those instances, however, the relinquishing entities are

not violators of section 7 . Id. at 230. In any event,

rescission is not a remedy at issue in this case because MAN

Roland “has failed to join the buyer of the assets, [Goss Corp.],

as a party in the action.” Arbitron C o . v . Tropicana Prod.

Sales, Inc., N o . 91 Civ. 3699 (PKL), 1993 WL 138965, *7 (S.D.N.Y.

Apr. 2 8 , 1993).

In August 2004, Heidelberger AG sold HWS, and MAN Roland

does not allege that Heidelberger AG acquired any assets.

Because MAN Roland has alleged no conduct by Heidelberger AG that

violates section 7 , Heidelberger AG is entitled to dismissal of

MAN Roland’s sixth counterclaim.

Conclusion

For the foregoing reasons, MAN Roland’s fifth counterclaim

states a viable cause of action against Heidelberger AG only with

respect to the ’734 and ’100 patents; its sixth counterclaim

12 fails to state a viable cause of action against Heidelberger AG.

The fifth counterclaim is dismissed as it relates to the ’251

patent, but otherwise remains. The sixth counterclaim is

dismissed. Accordingly, Heidelberger AG’s motion to dismiss

(document n o . 51) is granted in part and denied in part.

SO ORDERED.

Steven J __McAuliffe ^Chief Judge

November 8 , 2005

cc: Daniel E . Will, Esq. Hugh T . Lee, Esq. Richard S . Gresalfi, Esq. Georg C . Reitboeck, Esq. Mark A . Hannemann, Esq. Michael J. Lennon, Esq. T . Cy Walker, Esq. Irvin D. Gordon, Esq. Martin B . Pavane, Esq. Michael J. Songer, Esq. Shari R. Lahlou, Esq. Sidney R. Bresnick, Esq. Richard D. Margiano, Esq. John F. Sweeney, Esq. Steven F. Meyer, Esq. Tony V . Pezzano, Esq. Bruce W . Felmly, Esq. Seth J. Atlas, Esq. Anthony S . Augeri, Esq.