Polaris Innovations Limited v. Kingston Technology Company, Inc.

NOTICE OF MOTION AND MOTION to Dismiss the Amended Counterclaims

C.D. Cal.February 17, 2017

SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IAN SIMMONS (admitted pro hac vice) isimmons@omm.com BENJAMIN J. HENDRICKS (S.B. #288680) bhendricks@omm.com O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, D.C. 20006-4001 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 RYAN K. YAGURA (S.B. #197619) ryagura@omm.com O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071-2899 Telephone: (213) 430-6000 Facsimile: (213) 430-6407 Attorneys for Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Polaris Innovations Limited, Plaintiff, v. Kingston Technology Company, Inc., Defendant. Case No. 8:16-cv-300 CJC (RAO) THIRD-PARTY DEFENDANTS SAMSUNG ELECTRONICS CO., LTD. AND SAMSUNG SEMICONDUCTOR, INC.’S MOTION TO DISMISS THE AMENDED COUNTERCLAIMS [REDACTED VERSION] Hearing Date: March 27, 2017 Time: 1:30 P.M. Place: Courtroom 9B Judge: Honorable Cormac J. Carney Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 1 of 36 Page ID #:3297 - 1 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION To all parties and their attorneys of record: Please take notice that on March 27, 2017 at 1:30 p.m.,1 Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. will move this Court for an order dismissing Counterclaims 14 to 21 of Defendant Kingston Technology Co., Ltd.’s Second Amended Answer, Affirmative Defenses, and Counterclaims (Dkt. Nos. 124 (redacted), 125 (sealed)) for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). This Motion will be heard in the Courtroom of Judge Cormac J. Carney for the United States District Court for the Central District of California. The Court is located at the Ronald Reagan Federal Building and United States Courthouse, Courtroom 9B, 411 West Fourth Street, Room 1053, Santa Ana, CA 92701-4516. This Motion is based on this Notice of Motion, the accompanying Memorandum of Points and Authorities, the attached Declaration and Exhibit thereto, the pleadings on file with the Court, and the arguments and authorities as may be presented at or before the hearing. This Motion is made following the conference of counsel pursuant to L.R. 7- 3, which took place on December 22, 2016 and February 9, 2017. Dated: February 17, 2017 O’MELVENY & MYERS LLP By: /s/ Ian Simmons Ian Simmons (admitted pro hac vice) Attorneys for Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. 1 Concurrent with this Motion to Dismiss, the parties have filed a joint stipulation request for the Court to reschedule the hearing to April 3, 2017. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 2 of 36 Page ID #:3298 TABLE OF CONTENTS Page - i - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES ........................................... 1 I. PROCEDURAL BACKGROUND ....................................................... 2 II. LEGAL STANDARD ........................................................................... 2 ARGUMENT ............................................................................................................. 3 III. KINGSTON FAILS TO PLEAD FACTS THAT STRIP DEFENDANTS OF NOERR-PENNINGTON IMMUNITY .............. 3 A. Kingston Does Not Allege Any Facts Showing the Patent Action Is Objectively Baseless ................................................... 6 B. Kingston Does Not Plead Facts Showing the Patent Action Was Brought With the Subjective Intent to Harm Competition ................................................................................ 8 C. Courts Routinely Grant Motions to Dismiss Under PRE Where, as Here, Plaintiffs Fail to Allege Facts Showing Litigation Is a Sham .................................................................... 9 IV. KINGSTON’S CONSPIRACY ALLEGATIONS DO NOT PASS MUSTER UNDER THE TWOMBLY STANDARD ............. 11 V. KINGSTON FAILS TO ALLEGE FACTS SUFFICIENT TO SUPPORT THE OTHER ESSENTIAL ELEMENTS OF ITS § 2 CLAIMS ........................................................................................... 16 VI. KINGSTON FAILS TO ALLEGE AN ANTITRUST INJURY ........ 18 VII. KINGSTON’S § 2 MONOPOLIZATION CLAIMS PREMISED ON SAMSUNG’S SUPPOSED REFUSAL TO DEAL FAIL BECAUSE SAMSUNG HAD NO DUTY TO DEAL WITH KINGSTON AND THE LIMITATIONS PERIOD HAS EXPIRED ................................................................... 22 VIII. KINGSTON FAILS TO STATE A CLAIM UNDER § 7 OF THE CLAYTON ACT ........................................................................ 24 CONCLUSION ........................................................................................................ 25 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 3 of 36 Page ID #:3299 TABLE OF AUTHORITIES Page(s) - ii - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cases Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051 (9th Cir. 1999) ............................................................................. 18 Amerimax Real Estate Partners, Inc. v. RE/MAX Int’l, Inc., No. 05 C 5300, 2006 WL 2794934 (N.D. Ill. Sept. 26, 2006), vacated in part sub nom. Amerimax v. Re/Max, No. 05 C 5300, 2007 WL 5570835 (N.D. Ill. Sept. 12, 2007) ...................................................... 11 Apple, Inc. v. Motorola Mobility, Inc., 886 F. Supp. 2d 1061 (W.D. Wis. 2012) ............................................................. 21 Arminak & Assocs., Inc. v. Saint-Gobain Calmar, Inc., 789 F. Supp. 2d 1201 (C.D. Cal. 2011) ................................................................. 4 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ............................................................................................ 17 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) ............................................................................................ 23 Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) ................................................................................ 18, 19, 21 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .............................................................................. 3, 7, 10, 13 Blank v. Kirwan, 39 Cal. 3d 311 (1985) ........................................................................................ 2, 5 Boone v. Redevelopment Agency of San Jose, 841 F.2d 886 (9th Cir. 1988) ..................................................................... 4, 10, 17 Bristol-Myers Squibb Co. v. IVAX Corp., 77 F. Supp. 2d 606 (D.N.J. 2000) ........................................................................ 10 Brown Shoe Co. v. United States, 370 U.S. 294 (1962) ............................................................................................ 19 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) ............................................................................................ 18 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 4 of 36 Page ID #:3300 TABLE OF AUTHORITIES (continued) Page(s) - iii - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cal. Motor Trans. Co. v. Trucking Unlimited, 404 U.S. 508 (1972) .............................................................................................. 4 Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104 (1986) ............................................................................................ 18 Cascade Cabinet Co. v. W. Cabinet & Millwork Inc., 710 F.2d 1366 (9th Cir. 1983) ............................................................................. 19 Catch Curve, Inc. v. Venali, Inc., 519 F. Supp. 2d 1028 (C.D. Cal. 2007) ................................................................. 7 Chip-Mender, Inc. v. Sherwin-Williams Co., No. C 05-3465 PJH, 2006 WL 13058 (N.D. Cal. Jan. 3, 2006) ......................... 21 Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978) .............................................................................................. 6 Columbia River People’s Util. Dist. v. Portland Gen. Elec. Co., 217 F.3d 1187 (9th Cir. 2000) ............................................................................. 24 Conservation Force v. Salazar, 646 F.3d 1240 (9th Cir. 2011) ............................................................................... 3 Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992 (9th Cir. 2010) ................................................................................. 3 Dimidowich v. Bell & Howell, 803 F.2d 1473 (9th Cir. 1986) ............................................................................. 22 Dole Valve Co. v. Perfection Bar Equip., Inc., 311 F. Supp. 459 (N.D. Ill. 1970) ........................................................................ 25 Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) .............................................................................................. 4 Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990 (9th Cir. 2014) ................................................................................. 3 EcoDisc Tech. AG v. DVD Format/Logo Licensing Corp., 711 F. Supp. 2d 1074 (C.D. Cal. 2010) ........................................................... 6, 10 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 5 of 36 Page ID #:3301 TABLE OF AUTHORITIES (continued) Page(s) - iv - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Franchise Realty Interstate Corp. v. S.F. Local Joint Exec. Bd. of Culinary Workers, 542 F.2d 1076 (9th Cir. 1976) ......................................................................... 4, 10 Freeman v. San Diego Ass’n of Realtors, 77 Cal. App. 4th 171 (Cal. Ct. App. 1999) ............................................................ 3 Garrison v. Oracle Corp., No. 14-CV-04592-LHK, 2015 WL 1849517 (N.D. Cal. Apr. 22, 2015) .................................................................................................................... 23 Gen-Probe, Inc. v. Amoco Corp., 926 F. Supp. 948 (S.D. Cal. 1996) ........................................................................ 4 Glen Holly Entm’t, Inc. v. Tektronix Inc., 343 F.3d 1000 (9th Cir. 2003), opinion amended on denial of reh’g, 352 F.3d 367 (9th Cir. 2003) ......................................................................... 18, 19 Hartford Life Ins. Co. v. Variable Annuity Life Ins. Co., 964 F. Supp. 624 (D. Conn. 1997) ...................................................................... 11 Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir. 1997) ....................................................................... 17, 20 In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 906 F.2d 432 (9th Cir. 1990) ............................................................................... 15 In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322 (Fed. Cir. 2000) ........................................................................... 20 In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186 (9th Cir. 2015) ............................................................................. 15 In re Online DVD Rental Antitrust Litig., No. M 09-2029 PJH, 2010 WL 2680837 (N.D. Cal. July 6, 2010) ................... 19 Int’l Distribution Ctrs., Inc. v. Walsh Trucking Co., 812 F.2d 786 (2d Cir. 1987) ................................................................................ 12 Kendall v. Visa U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008) ...................................................................... passim Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 6 of 36 Page ID #:3302 TABLE OF AUTHORITIES (continued) Page(s) - v - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Kottle v. N.W. Kidney Centers, 146 F.3d 1056 (9th Cir. 1998) ......................................................................... 9, 10 Magnetar Techs. Corp. v. Intamin, Ltd., 801 F.3d 1150 (9th Cir. 2015) ............................................................................. 21 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) ............................................................................................ 15 McGlinchy v. Shell Chem. Co., 845 F.2d 802 (9th Cir. 1988) ............................................................................... 19 Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024 (9th Cir. 2015) ............................................................................. 20 Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752 (1984) ............................................................................................ 15 Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 924 F.2d 1484 (9th Cir. 1991) ............................................................................. 11 Nw. Publ’ns, Inc. v. Crumb, 752 F.2d 473 (9th Cir. 1985) ............................................................................... 19 Or. Nat. Res. Council v. Mohla, 944 F.2d 531 (9th Cir. 1991) ........................................................................... 9, 10 Organon Inc. v. Mylan Pharms., Inc., 293 F. Supp. 2d 453 (D.N.J. 2003) ...................................................................... 10 Otter Tail Power Co. v. United States, 410 U.S. 366 (1973) .............................................................................................. 8 Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438 (2009) ............................................................................................ 22 Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145 (9th Cir. 2003) ....................................................................... 11, 16 Pandola v. Texaco Inc., No. 72-1489-MML, 1975 WL 873 (C.D. Cal. Jan. 16, 1975) ............................ 25 Proctor v. State Farm Mut. Auto. Ins. Co., 675 F.2d 308 (D.C. Cir. 1982)............................................................................. 15 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 7 of 36 Page ID #:3303 TABLE OF AUTHORITIES (continued) Page(s) - vi - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993) ....................................................................................... passim Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ......................................................................... 18, 22 Red Lion Med. Safety, Inc. v. Ohmeda, Inc., 63 F. Supp. 2d 1218 (E.D. Cal. 1999) ................................................................. 24 Saigon Central Post, Inc. v. Bank of America, N.A., No. 8:06-cv-516 (C.D. Cal. Sept. 18, 2006) ........................................................ 22 SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981) ................................................................................ 5 Seirus Innovative Accessories, Inc. v. Cabela’s, Inc., No. 09-CV-102 H (WMC), 2010 WL 6675046 (S.D. Cal. Apr. 20, 2010) .................................................................................................................... 10 Somers v. Apple, Inc., 729 F.3d 953 (9th Cir. 2013) ................................................................................. 3 Sosa v. DIRECTV, Inc., 437 F.3d 923 (9th Cir. 2006) ........................................................................... 4, 10 Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) ...................................................................................... 12, 16 Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991 (9th Cir. 2008) ................................................................................. 5 Townshend v. Rockwell Int’l Corp., No. C99-0400SBA, 2000 WL 433505 (N.D. Cal. Mar. 28, 2000) ..................... 21 Truck-Rail Handling, Inc. v. Burlington Northern & Santa Fe Ry., 244 F. App’x 130 (9th Cir. 2007) ........................................................................ 18 Tyco Healthcare Grp. LP v. Mut. Pharm. Co., 762 F.3d 1338 (Fed. Cir. 2014) ............................................................................. 4 United Mine Workers v. Pennington, 381 U.S. 657 (1965) .............................................................................................. 4 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 8 of 36 Page ID #:3304 TABLE OF AUTHORITIES (continued) Page(s) - vii - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 United States v. Westinghouse Elec. Corp., 648 F.2d 642 (9th Cir. 1981) ............................................................................... 20 Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ...................................................................................... 22, 23 Versatile Plastics, Inc. v. Sknowbest! Inc., 247 F. Supp. 2d 1098 (E.D. Wis. 2003) .............................................................. 10 Vizio Inc. v. Funai Elec. Co. Ltd., No. CV 09-0174 AHM (RCX), 2010 WL 7762624 (C.D. Cal. Feb. 3, 2010) .......................................................................................................... 17, 24 Walker Process Equip., Inc. v. Food Mach. and Chem. Corp., 382 U.S. 172 (1965) .............................................................................................. 5 Workman v. State Farm Mut. Auto. Ins. Co., 520 F. Supp. 610 (N.D. Cal. 1981) ...................................................................... 15 Statutes 15 U.S.C. § 15b ......................................................................................................... 23 15 U.S.C. § 18 ........................................................................................................... 24 35 U.S.C. § 282(a) ...................................................................................................... 7 Cal. Bus. & Prof. Code § 16750.1 ............................................................................ 23 Cal. Bus. & Prof. Code § 16755(b) .......................................................................... 23 Other Authorities Dep’t of Justice & Federal Trade Commission, ANTITRUST GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY (2017), available at https://www.justice.gov/atr/IPguidelines/download ............................... 13, 15, 20 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 9 of 36 Page ID #:3305 - 1 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES Kingston Technology Co., Ltd.’s (“Kingston”) antitrust counterclaims are nothing more than an attempt to distract from an infringement suit by dragging Samsung Electronics Co., Ltd. (“SEC”) and Samsung Semiconductor, Inc. (“SSI”) (collectively, “Samsung”) into the case. In its antitrust counterclaims, Kingston alleges that Samsung agreed with Polaris Innovations Limited (“Polaris”) (together with Samsung, the “Defendants”) to sue Kingston for patent infringement. On its face, and even if true, this does not state a claim under Fed. R. Civ. P. 12(b)(6). The Noerr-Pennington doctrine immunizes conduct related to lawsuits from antitrust scrutiny. To strip Defendants of this constitutionally-based immunity, Kingston must plead evidentiary facts to show the patent lawsuit was a “sham.” This heavy burden requires Kingston to plead facts establishing that the infringement suit was (1) objectively baseless, and (2) brought with anticompetitive intent. Kingston comes nowhere near pleading legally sufficient allegations. As explained below, courts routinely dismiss “sham litigation” claims for failing to allege facts in support of either or both of these elements. Kingston’s complaint also fails to plead an anticompetitive agreement or conspiracy under Twombly, an independent ground for dismissal. Kingston impermissibly asks this Court to infer an agreement based on an out-of-context reference to SEC’s license agreement with Polaris, without satisfying the ultimate requirement of pleading facts indicating an unlawful agreement. Kingston also asks this Court to infer an antitrust injury from allegations that focus on licensing intellectual property and petitioning the judiciary to uphold it—two pro-competitive actions. Finally, Kingston tries to bolster its claims by stating that Samsung “refused to deal” with Kingston over the last eight years, well beyond the four-year statute of limitations. For these reasons, and those described below, Kingston’s allegations do not state a claim under Rule 12(b)(6) and must be dismissed. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 10 of 36 Page ID #:3306 - 2 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. PROCEDURAL BACKGROUND Polaris sued Kingston on February 19, 2016, alleging six counts of patent infringement arising from Kingston’s manufacture and sale of dynamic random access memory (“DRAM”) modules, which incorporate DRAM chips. See Complaint, Dkt. No. 1 (the “Patent Action”). Kingston filed its Second Amended Answer, Affirmative Defenses, and Counterclaims on December 14, 2016. Dkt. Nos. 124 (redacted), 125 (sealed) (the “Counterclaims”). Kingston asserts eight claims against the Defendants under federal and state antitrust laws. Counterclaims ¶¶ 220-89. These Counterclaims are based on two underlying theories: (1) Samsung allegedly conspired with Polaris to acquire the Qimonda portfolio of DRAM-related patents and instigated the Patent Action against Kingston; and (2) Samsung refused to deal with Kingston by not selling DRAM chips to it beginning in 2008. Kingston’s antitrust claims are as follows: a Sherman Act § 1 claim (No. 14); attempted monopolization and conspiracy to monopolize claims for the DRAM chip market (Nos. 15, 16), and for the DRAM module market (Nos. 17, 18) under Sherman Act § 2; a claim under § 7 of the Clayton Act (No. 19); and claims under California state law, specifically the Cartwright Act (No. 20),2 and the Unfair Competition Law (No. 21) (collectively the “antitrust counterclaims”).3 II. LEGAL STANDARD A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) “tests the legal sufficiency of a claim.” Conservation Force v. Salazar, 646 F.3d 1240, 2 The California Supreme Court has held that “[i]n interpreting the Cartwright Act, we properly look to the Sherman Act and cases construing it: the Cartwright Act is patterned after the Sherman Act and both statutes have their roots in the common law.” Blank v. Kirwan, 39 Cal. 3d 311, 320 (1985) (internal quotations omitted). Samsung does not address the Cartwright Act claims separately because they fail for the same reasons as Kingston’s Sherman Act claims. 3 This claim requires an underlying statutory claim and thus is fully repetitive of claims 14-20, and will rise or fall with those claims. Therefore, this claim is not separately addressed in this motion. See Counterclaims ¶ 287. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 11 of 36 Page ID #:3307 - 3 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1241-42 (9th Cir. 2011) (internal quotation omitted). Dismissal is appropriate if the complaint “lacks a cognizable legal theory” or “fails to allege sufficient facts to support a cognizable legal theory.” Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). A plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 555. The Court need not accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels- Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th Cir. 2010). Rather, a complaint “must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively” and “must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014) (citation omitted). Therefore, a complaint must plead “evidentiary facts” to state a claim. Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008) (distinguishing “evidentiary” facts from “ultimate” facts, which are legal conclusions pled as facts). California courts also require a “high degree of particularity” for claims under the Cartwright Act. See Freeman v. San Diego Ass’n of Realtors, 77 Cal. App. 4th 171, 196 (Cal. Ct. App. 1999). ARGUMENT III. KINGSTON FAILS TO PLEAD FACTS THAT STRIP DEFENDANTS OF NOERR-PENNINGTON IMMUNITY. This Court should dismiss Kingston’s antitrust counterclaims because Kingston fails to allege facts sufficient to state a claim that the Patent Action is a sham under Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993) (“PRE”). The Supreme Court has long held that “[j]oint efforts to influence public officials do not violate the antitrust laws Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 12 of 36 Page ID #:3308 - 4 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 even though intended to eliminate competition.” United Mine Workers v. Pennington, 381 U.S. 657, 670 (1965) (citing Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961)). Courts refer to this doctrine as Noerr-Pennington immunity. The right to petition includes the right to file and prosecute lawsuits. Cal. Motor Trans. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972) (“The right of access to the courts is indeed but one aspect of the right of petition.”). Courts strictly enforce this immunity—often by granting motions to dismiss under it—to ensure antitrust laws do not chill conduct protected by the First Amendment. See Boone v. Redevelopment Agency of San Jose, 841 F.2d 886, 894 (9th Cir. 1988) (affirming grant of motion to dismiss under Noerr “[i]n order not to chill legitimate lobbying activities”); Franchise Realty Interstate Corp. v. S.F. Local Joint Exec. Bd. of Culinary Workers, 542 F.2d 1076, 1092-93 (9th Cir. 1976) (affirming grant of motion to dismiss antitrust claims based on sham activity). The Noerr-Pennington doctrine “generally shields a party that has brought a patent suit against a competitor from antitrust liability.” Arminak & Assocs., Inc. v. Saint-Gobain Calmar, Inc., 789 F. Supp. 2d 1201, 1208 (C.D. Cal. 2011) (Carney, J.) (granting partial summary judgment); see also Tyco Healthcare Grp. LP v. Mut. Pharm. Co., 762 F.3d 1338, 1343 (Fed. Cir. 2014) (remanding appeal for summary judgment stating in a patent infringement case that “[a] party is ordinarily exempt from antitrust liability for bringing a lawsuit against a competitor”). Noerr- Pennington immunity covers all “litigation-related activities preliminary to the formal filing of the litigation” so long as the conduct is “sufficiently related to petitioning activity,” including funding or encouraging litigation. Sosa v. DIRECTV, Inc., 437 F.3d 923, 935, 937 (9th Cir. 2006) (affirming grant of motion to dismiss under Noerr regarding pre-litigation “demand letters”); see also Gen- Probe, Inc. v. Amoco Corp., 926 F. Supp. 948, 959 (S.D. Cal. 1996) (following state court holding that “the same considerations should protect persons who induce or finance others’ litigation” under Noerr). Noerr-Pennington also applies to state Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 13 of 36 Page ID #:3309 - 5 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 competition laws. See Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1007 (9th Cir. 2008) (“[B]ecause Noerr-Pennington protects federal constitutional rights, it applies in all contexts, even where a state law doctrine advances a similar goal.”); Blank v. Kirwan, 39 Cal. 3d 311, 320 (1985) (applying Noerr-Pennington to the Cartwright Act). Because Kingston’s antitrust counterclaims are premised on allegations of a conspiracy between Defendants to petition the judiciary to hear a lawsuit, Kingston may overcome a motion to dismiss only by pleading facts sufficient to show Defendants should be stripped of the Noerr-Pennington protection. See infra Section III(C). Litigation activity is stripped of Noerr-Pennington immunity in only two situations: (1) when the plaintiff pleads facts sufficient to allege that the litigation is a sham under PRE; and (2) when the plaintiff sufficiently pleads fraud on the Patent Office (the “Walker Process exception”). Walker Process Equip., Inc. v. Food Mach. and Chem. Corp., 382 U.S. 172 (1965). Kingston does not invoke the Walker Process exception, relying solely on PRE’s “sham” exemption.4 The Supreme Court established a two-part test that a plaintiff must satisfy to strip a defendant of Noerr-Pennington immunity when the alleged conduct is a lawsuit: (1) “the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits”; and (2) the “baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor.” PRE, 580 U.S. at 60-61 (internal quotation omitted). A plaintiff must satisfy the first prong (the “objective” component) before moving to the second (the “subjective” component.) See id. at 61 (calling the analysis a 4 Kingston’s failure to allege that the patents in issue were not lawfully acquired is significant because, as the Second Circuit explained, “where a patent has been lawfully acquired, subsequent conduct permissible under the patent laws cannot trigger any liability under the antitrust laws.” SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1206 (2d Cir. 1981) (affirming dismissal of Sherman and Clayton Act claims under Fed. R. Civ. P. 54(b)). Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 14 of 36 Page ID #:3310 - 6 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “two-tiered process”).5 Where, as here, a plaintiff does not plead facts sufficient to allege that the lawsuit is objectively baseless and that the antitrust defendant intended the suit to directly interfere with a competitor’s business, the Court should dismiss the claims. See infra Section III(C). A. Kingston Does Not Allege Any Facts Showing the Patent Action Is Objectively Baseless. The first prong requires plaintiffs to allege facts sufficient to show the lawsuit is objectively “baseless.” A “baseless” lawsuit is one for which the plaintiff had no “reasonable belief that there is a chance that a claim may be held valid upon adjudication.” See PRE, 580 U.S. at 62-63 (internal citations omitted); EcoDisc Tech. AG v. DVD Format/Logo Licensing Corp., 711 F. Supp. 2d 1074, 1084 (C.D. Cal. 2010) (granting motion to dismiss because “[t]o qualify for the sham litigation exception and survive the motion to dismiss, Plaintiff must allege [defendant] did not have a reasonable basis to believe its” otherwise protected actions were illegitimate). In other words, “[i]f an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr.” PRE, 580 U.S. at 60.6 The PRE Court itself invoked a “probable cause” standard, analogizing to Fed. R. Civ. P. 11. Id. at 65. “[E]vidence of anticompetitive intent or purpose alone cannot transform otherwise legitimate activity into a sham.” Id. at 59. 5 See Areeda & Hovenkamp, ANTITRUST LAW ¶ 207a (2006) (“[T]he antitrust plaintiff has the burden of proving that a sham exists. That burden will not often be met, for only the exceptional lawsuit . . . is objectively unreasonable in its inception or abusive in its pursuit. . . . the conclusory allegation of a sham is easy, and such easy allegations can themselves chill the exercise of the rights that Noerr would protect.”) (hereinafter “Areeda & Hovenkamp”). 6 The Supreme Court noted that courts “must remember that ‘[e]ven when the law or the facts appear questionably or unfavorable at the outset, a party may have an entirely reasonable ground for bringing suit.’” PRE, 508 U.S. at 61 n.5. (quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 422 (1978)). Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 15 of 36 Page ID #:3311 - 7 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Kingston appears to acknowledge this requirement by repeatedly alleging that the Patent Action is “baseless.” See Counterclaims ¶¶ 105, 126. But Kingston never attempts to explain why this is true. Twombly held that “a formulaic recitation of the elements of a cause of action will not do.” See Twombly, 550 U.S. at 555. Rather, an antitrust complaint must plead “evidentiary facts” indicating that the Patent Action is objectively baseless. See Kendall, 518 F.3d at 1048. Thus, Kingston’s conclusory allegations fail to state a claim. The rare cases in which Noerr-Pennington does not bar an antitrust claim at the 12(b)(6) stage feature far stronger factual allegations than those presented here. Compare Kingston’s barebones allegations to those in Catch Curve, Inc. v. Venali, Inc., 519 F. Supp. 2d 1028 (C.D. Cal. 2007), which also featured an underlying patent infringement claim. There, the plaintiff identified four competitor lawsuits brought in bad faith, numerous instances in which the defendant disseminated false information about the validity of its patents to its competitors, and the repeated use of cease and desist letters sent in bad faith to harass competitors. Id. at 1037-38. Kingston makes no analogous allegations. To the contrary, Kingston’s antitrust counterclaims show that the Patent Action stems from patents that have been recognized by the Joint Electron Device Engineering Council (“JEDEC”) as “essential patents” for standards related to DRAM. See Counterclaims ¶¶ 53-65. Kingston further concedes that JEDEC allows the owner of standard essential patents to obtain “reasonable and non- discriminatory” royalties from those that practice the patents. Id. ¶ 62. These allegations affirm that Polaris may sue entities infringing “essential” intellectual property without paying a reasonable and non-discriminatory royalty. Moreover, while Kingston alleges the patents are invalid in defense of the Patent Action, it does not allege that Polaris has no “reasonable basis” to believe the patents are valid, especially because patents “shall be presumed valid” as a matter of law. 35 U.S.C. § 282(a). Moreover, allegations about the value of the patent portfolio are Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 16 of 36 Page ID #:3312 - 8 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 not relevant to whether the infringement suit is “baseless,” but speak only to a disagreement over the proper damages in the Patent Action.7 Finally, the fact that the Patent Action has moved forward for nearly a year, surviving a motion for judgment on the pleadings, shows that Polaris is serious about its claims. Nothing in Kingston’s antitrust counterclaims indicates the Patent Action is objectively baseless; the Court need look no further to dismiss under Rule 12(b)(6). B. Kingston Does Not Plead Facts Showing the Patent Action Was Brought With the Subjective Intent to Harm Competition. Even if Kingston pled facts sufficient to overcome the objective prong under PRE, it still must meet the subjective prong. Under this test, courts evaluate whether the plaintiff pled facts sufficient to show that the “baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor.” PRE, 580 U.S. at 60-61. Courts may dismiss a complaint for failure to plead facts sufficient to satisfy this test of the “sham” analysis. See infra Section III(C). Kingston relies exclusively on conclusory allegations—invoking little more than Samsung’s “specific intent to monopolize”—to satisfy this element. See Counterclaims ¶¶ 234, 253. But the antitrust counterclaims lack factual allegations supporting this conclusion. At most, Kingston speculates that the Patent Action is “ ” id. ¶ 37, in an attempt to invoke PRE’s note that “repetitive lawsuits” are indicative of “sham” litigation. See PRE, 580 U.S. at 58 (citing Otter Tail Power Co. v. United States, 410 U.S. 366, 380 (1973)). But even if Kingston had identified a likelihood of additional lawsuits, this still would fail because repeated lawsuits are only indicia of bad faith if they “carry[] the hallmark of insubstantial claims.” Id. (emphasis added). As 7 Kingston alleges that a “reasonable and non-discriminatory” license must be Counterclaims ¶¶ 108, 123. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 17 of 36 Page ID #:3313 - 9 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 noted above, Kingston makes no factual allegations that the claims in the Patent Action—let alone any unidentified, hypothetical future lawsuits—are “insubstantial.” Kingston also cites the fact that Polaris has not sued either Micron or SK Hynix for infringement as evidence that the Patent Action was intended to interfere directly with Kingston’s business. Counterclaims ¶ 127. But this fact is not relevant because it does not show any subjective intent or bad faith because there are numerous reasons more likely to explain this, including that those entities may already pay royalties for the use of the intellectual property. Moreover, Kingston’s allegations that Polaris seeks to “ ” id. ¶ 122, are not sufficient to meet PRE’s subjective prong, because collecting a royalty for intellectual property (even if obtained from a third party) does not indicate bad intent, rather it is a legitimate and common business practice.8 C. Courts Routinely Grant Motions to Dismiss Under PRE Where, as Here, Plaintiffs Fail to Allege Facts Showing Litigation Is a Sham. Without specific factual allegations satisfying both PRE’s objective and subjective tests, this Court must dismiss Kingston’s antitrust claims. The Ninth Circuit regularly affirms dismissals under Noerr-Pennington in response to 12(b)(6) motions, including instances when plaintiffs fail to adequately plead the elements of a “sham” litigation. See, e.g., Or. Nat. Res. Council v. Mohla, 944 F.2d 531, 533 (9th Cir. 1991) (affirming grant of motion to dismiss for failure to plead allegations sufficient to “bring this suit within the sham exception”); Kottle v. N.W. Kidney Centers, 146 F.3d 1056, 1063 (9th Cir. 1998) (affirming grant of motion to dismiss under Noerr for failure to plead administrative proceeding was a sham); Sosa, 437 8 To the extent Kingston argues it needs discovery to establish this prong, the Court in PRE itself “refused PRE’s request for further discovery on the economic circumstances of the underlying copyright litigation [because] . . . PRE could not pierce Columbia’s Noerr immunity without proof that Columbia’s infringement action was objectively baseless.” PRE, 508 U.S. at 65. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 18 of 36 Page ID #:3314 - 10 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 F.3d at 937 (affirming, under Noerr, grant of motion to dismiss RICO claims related to “demand letters” threatening litigation); Boone, 841 F.2d at 894-96 (affirming dismissal of antitrust claims under Noerr for failure to plead lobbying activities were a “sham”); Franchise Realty Interstate Corp., 542 F.2d at 1092-93 (affirming grant of motion to dismiss antitrust claims based on sham activity). Indeed, the Ninth Circuit is especially vigilant to dispose of claims under Noerr- Pennington immunity at the dismissal stage to ensure that the claims do not chill constitutionally-protected conduct, such as petitioning the judiciary to uphold an interest in intellectual property. See Or. Nat. Res. Council, 944 F.2d at 533 (“Where a claim involves the right to petition governmental bodies under Noerr- Pennington . . . we apply a heightened pleading standard.”); Kottle, 146 F.3d at 1063 (affirming grant of motion to dismiss “employ[ing] a heightened pleading standard”). Weeding out antitrust cases at the motion to dismiss stage is critical because antitrust cases often result in costly and burdensome discovery. See Twombly, 550 U.S. at 558-59 (discussing “massive factual controvers[ies]” and “unusually high cost of discovery” in antitrust cases); Kendall, 518 F.3d at 1047 (“[D]iscovery in antitrust cases frequently causes substantial expenditures and gives the plaintiff the opportunity to extort large settlements even where he does not have much of a case.”). Indeed, Courts regularly dismiss antitrust claims based on underlying patent litigation under Noerr-Pennington. E.g., EcoDisc Tech. AG, 711 F. Supp. 2d at 1084 (granting motion to dismiss antitrust claims based on warnings to licensees that producing plaintiff’s product infringes their patent license); Seirus Innovative Accessories, Inc. v. Cabela’s, Inc., No. 09-CV-102 H (WMC), 2010 WL 6675046, at *5 (S.D. Cal. Apr. 20, 2010); Organon Inc. v. Mylan Pharms., Inc., 293 F. Supp. 2d 453, 460 (D.N.J. 2003); Versatile Plastics, Inc. v. Sknowbest! Inc., 247 F. Supp. 2d 1098, 1103-06 (E.D. Wis. 2003); Bristol-Myers Squibb Co. v. IVAX Corp., 77 F. Supp. 2d 606, 615 (D.N.J. 2000); see also Amerimax Real Estate Partners, Inc. v. RE/MAX Int’l, Inc., No. 05 C 5300, 2006 WL 2794934, at *5-6 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 19 of 36 Page ID #:3315 - 11 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (N.D. Ill. Sept. 26, 2006), vacated in part sub nom. Amerimax v. Re/Max, No. 05 C 5300, 2007 WL 5570835 (N.D. Ill. Sept. 12, 2007) (granting motion to dismiss antitrust claim based on threatened trademark litigation); Hartford Life Ins. Co. v. Variable Annuity Life Ins. Co., 964 F. Supp. 624, 628 (D. Conn. 1997) (granting motion to dismiss sham litigation antitrust claims based on underlying trademark claims). Thus, because Kingston has not pled facts sufficient to strip Defendants of their Noerr-Pennington immunity under PRE, this Court should dismiss Kingston’s antitrust counterclaims. IV. KINGSTON’S CONSPIRACY ALLEGATIONS DO NOT PASS MUSTER UNDER THE TWOMBLY STANDARD. While the Court need look no further than the Noerr-Pennington doctrine to dismiss all of Kingston’s antitrust counterclaims, Twombly offers an alternative ground for dismissal because Kingston does not allege facts supporting the inference of an agreement between Samsung and Polaris. Under Twombly, “claimants must plead not just ultimate facts (such as a conspiracy), but evidentiary facts which, if true, will prove: (1) a contract, combination or conspiracy among two or more persons or distinct business entities; (2) by which the persons or entities intended to harm or restrain trade or commerce among the several States . . .; (3) which actually injures competition.” Kendall, 518 F.3d at 1047. Kingston does not meet this standard for its Sherman Act § 1 or § 2 claims. Section 1 requires allegations sufficient to show an anticompetitive agreement. Similarly, § 2 conspiracy claims require a showing of an “existence of a combination or conspiracy to monopolize.” Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003). The showing required for a § 1 claim and a § 2 conspiracy claim are identical, or nearly so. See Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 924 F.2d 1484, 1491 (9th Cir. 1991) (granting summary judgment for a § 2 conspiracy claim because the court had “already concluded that there was insufficient evidence of a conspiracy or agreement under the section 1 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 20 of 36 Page ID #:3316 Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 21 of 36 Page ID #:3317 - 13 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Therefore, the PLA’s existence is not probative of the anticompetitive conduct alleged by Kingston. The PLA represents a license agreement between a patent owner (Polaris) and an entity that practices the patents as a DRAM module manufacturer (SEC). From the PLA, Kingston asks this Court to infer another, separate anticompetitive agreement. Kingston’s only factual allegations related to this alleged anticompetitive agreement are based on out-of-context quotations from of the PLA. PLA, Ex. A This provision requires Polaris to “ ” Id. Kingston’s antitrust counterclaims omit the Indeed, Kingston makes no allegations connecting of the PLA to the Patent Action. Kingston’s failure to adequately state a claim based on a conspiracy between the Defendants is highlighted by the fact that Kingston does not allege facts noting the time, place, people involved, or manner in which the alleged agreement or conspiracy was entered. See Twombly, 550 U.S. at 565 n.10; Kendall, 518 F.3d at 1047 (affirming motion to dismiss, stating that “to allege an agreement between https://www.justice.gov/atr/IPguidelines/download (“DOJ LICENSING GUIDELINES”). Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 22 of 36 Page ID #:3318 - 14 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 antitrust co-conspirators, the complaint must allege facts such as a specific time, place, or person involved in the alleged conspiracies to give a defendant seeking to respond to allegations of a conspiracy an idea of where to begin” (internal quotations omitted)).12 The absence of allegations outlining the alleged agreement is especially troubling here because Kingston has already engaged in extensive discovery in the Patent Action, having received the PLA on July 19, 2016. See Polaris’s Opp’n to Kingston’s Mot. for Leave to Amend, Dkt. No. 100, at 3. This Court may not infer the missing steps that Kingston fails to allege in the Counterclaims because Polaris had an economically rational basis for bringing the Patent Action independent of an agreement with Samsung. For example, Kingston alleges that Polaris paid a substantial sum for the Qimonda Portfolio. Counterclaims ¶ 100. But monetizing the portfolio is the overriding, if not sole, rational strategy for a non-practicing entity like Polaris. Pursuant to the PLA, See Counterclaims ¶ 106. Indeed, Kingston’s counterclaims make clear that Polaris’s entire business model is to “extract licenses and royalties” from its patent portfolio. Id. ¶ 11. Where a defendant to a conspiracy claim has an economically rational, independent justification for the alleged anticompetitive conduct, courts do not infer that conduct was a result of an anticompetitive agreement without additional factual allegations. See In re Musical Instruments & 12 In fact, Kingston alleges a conspiracy between “Samsung” and Polaris, defining “Samsung” as “collectively” Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. Counterclaims ¶ Intro. While Kingston alleges these two separate entities “operate together as a vertically integrated semiconductor company,” id. ¶ 10, Kingston fails to separate out these entities when appropriate. For example, Samsung Semiconductor, Inc. is not a party to the PLA, see PLA, Ex. A at 9, despite Kingston’s allegations that “Samsung” entered the license agreement. Kingston’s failure to even identify the correct party to the PLA is evidence of Kingston’s insufficient pleadings. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 23 of 36 Page ID #:3319 - 15 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Equip. Antitrust Litig., 798 F.3d 1186, 1194 (9th Cir. 2015) (“‘Allegations of facts that could just as easily suggest rational, legal business behavior by the defendants as they could suggest an illegal conspiracy’ are insufficient to plead a § 1 violation.” (quoting Kendall, 518 F.3d at 1049)). This is most often illustrated by the “parallel behavior” and “plus factors” cases under § 2 of the Sherman Act. See Proctor v. State Farm Mut. Auto. Ins. Co., 675 F.2d 308, 328 (D.C. Cir. 1982) (“Only when the observed parallel behavior is inconsistent with the behavior to be expected from each actor individually pursuing its own economic interest may an agreement be inferred from the parallel conduct.”); Workman v. State Farm Mut. Auto. Ins. Co., 520 F. Supp. 610, 617 (N.D. Cal. 1981) (same). Thus, there is no reason to infer that Polaris’s Patent Action was the result of illegal collusion or conspiracy. Moreover, inferring an anticompetitive agreement here would run squarely into the Supreme Court’s concern of accidentally deterring pro-competitive behavior—i.e., enforcing legitimate property rights—through antitrust enforcement. See In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 906 F.2d 432, 439 (9th Cir. 1990) (“We think that the key to the proper interpretation of Matsushita lies in the Court’s emphasis on the dangers of permitting inferences from certain types of ambiguous evidence.” (discussing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)). Allowing the owners of intellectual property to collect royalties for the use of that property is pro-competitive. See DOJ LICENSING GUIDELINES § 2.3. Finally, and perhaps most fatally, the Supreme Court has held that “the antitrust plaintiff should present direct or circumstantial evidence that reasonably tends to prove that [defendants] had a conscious commitment to a common scheme designed to achieve an unlawful objective.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984) (internal quotations omitted) (emphasis added). Agreeing to file a lawsuit to enforce legitimate intellectual property rights is not an Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 24 of 36 Page ID #:3320 - 16 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “unlawful objective.” Instead, as noted above, it is a lawful exercise of the First Amendment right to petition the government. Thus, even if this Court finds Kingston pled sufficient facts to support its claims of an agreement, this Court must additionally find that Kingston alleged facts sufficient to show that filing the lawsuit was “unlawful.” Litigation is unlawful only if it is (1) objectively baseless, and (2) intended to directly interfere with a competitor’s business under the Noerr- Pennington doctrine. See supra Section III. Simply put, Kingston has not alleged facts sufficient to infer an unlawful, anticompetitive agreement. V. KINGSTON FAILS TO ALLEGE FACTS SUFFICIENT TO SUPPORT THE OTHER ESSENTIAL ELEMENTS OF ITS § 2 CLAIMS. In addition to Kingston’s failure to allege an anticompetitive agreement, Kingston’s counterclaims do not set out sufficient facts to state a claim under the other required elements for a § 2 conspiracy to monopolize (Nos. 16, 18) and § 2 attempt to monopolize (Nos. 15, 17) claim. “To prove a conspiracy to monopolize in violation of § 2, [plaintiff] must show four elements: (1) the existence of a combination or conspiracy to monopolize; (2) an overt act in furtherance of the conspiracy; (3) the specific intent to monopolize; and (4) causal antitrust injury.” Paladin Assocs., Inc., 328 F.3d at 1158. To plead an attempted monopolization claim, a plaintiff must plead facts creating a reasonable inference: “(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993). As described above, Kingston meets neither of these because it has not plausibly alleged the “existence of a combination or conspiracy.” See supra Section IV. Therefore, Kingston fails to plead facts under these necessary elements. Additionally, Kingston has not plead an “overt act” in furtherance of a conspiracy, under the § 2 conspiracy elements. Similarly, Kingston has not pled Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 25 of 36 Page ID #:3321 - 17 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “predatory or anticompetitive conduct” under the § 2 attempt standard. The filing of the underlying patent infringement suit does not satisfy either of these elements. “[E]nforcing a patent does not constitute harm to competition unless the enforcement action is brought in bad faith.” Vizio, Inc. v. Funai Elec. Co. Ltd., No. CV 09-0174 AHM (RCX), 2010 WL 7762624, at *5 (C.D. Cal. Feb. 3, 2010). In fact, “[c]ourts do not generally view a monopolist’s unilateral refusal to license a patent as ‘exclusionary conduct,’” Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1216 (9th Cir. 1997). Thus, courts should not view the lesser-act of filing a patent suit as an “overt act” in furtherance of a conspiracy, nor as “anticompetitive conduct” in an attempt to monopolize claim.13 Because the Patent Action is the only “overt act” or “anticompetitive conduct” alleged, Kingston has failed to plead these essential elements. The § 2 conspiracy and attempt claims also require a showing of a specific intent to monopolize and injure competition. But Kingston fails to plead anything beyond conclusory, unwarranted deductions of fact, or unreasonable inferences of a specific intent to monopolize. See Boone, 841 F.2d at 894 (affirming grant of motion to dismiss because plaintiffs pled only “[c]onclusory allegations”). Allegations merely reciting the elements of an offense do not satisfy Twombly’s pleading requirements. See Counterclaims ¶ 234 (alleging only “specific intent”). Indeed, Twombly holds that “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see also supra Section II. This is of particular importance because one of the alleged conspirators, Polaris, does not compete in either of the proposed antitrust markets. Given its independent interest in monetizing the patents, it is irrational to conclude that Polaris would want to help Samsung obtain a monopoly in either the DRAM chip or DRAM module market. 13 Indeed, this is why patent suits are protected under the Noerr-Pennington doctrine, as discussed supra Section III. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 26 of 36 Page ID #:3322 - 18 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 This conduct would reduce the number of potential licensees of its patents. See Truck-Rail Handling, Inc. v. Burlington Northern & Santa Fe Ry., 244 F. App’x 130, 132 (9th Cir. 2007) (affirming dismissal of antitrust claim that transload terminal and transloader would conspire to give the transloader a monopoly on use of the terminal; the logical result of such a monopoly would be an increase in rates the terminal would charge its customers). VI. KINGSTON FAILS TO ALLEGE AN ANTITRUST INJURY. To recover damages, a private plaintiff “must prove the existence of ‘antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.’” Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)); see also Glen Holly Entm’t, Inc. v. Tektronix Inc., 343 F.3d 1000, 1008 (9th Cir. 2003), opinion amended on denial of reh’g, 352 F.3d 367 (9th Cir. 2003). That is, the injury must be “causally related” to the alleged antitrust violation and “attributable to an anti-competitive aspect of the practice under scrutiny.” Atl. Richfield Co., 495 U.S. at 334. Antitrust injury is “an element of all antitrust suits brought by private parties seeking damages under Section 4 of the Clayton Act.” Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995).14 This requirement ensures a plaintiff “can recover only if the loss stems from a competition-reducing aspect or effect” of the anticompetitive behavior. Atl. Richfield Co., 495 U.S. at 344. There are “four requirements for antitrust injury: (1) unlawful conduct, (2) causing an injury to the plaintiff, (3) that flows from that which makes the conduct unlawful, and (4) that is of the type the antitrust laws were intended to prevent.” Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1055 (9th Cir. 1999). The Ninth Circuit has also imposed a fifth requirement that the “injured party be a 14 Antitrust injury is a necessary, but not always sufficient, requirement for antitrust standing. Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 110 n.5 (1986). Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 27 of 36 Page ID #:3323 - 19 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 participant in the same market as the alleged malefactors.” Glen Holly, 343 F.3d at 1008 (internal quotation omitted). The causal link between the conduct and alleged injury is an “essential element,” and it must be established with “reasonable probability.” Nw. Publ’ns, Inc. v. Crumb, 752 F.2d 473, 476 (9th Cir. 1985). Further, an antitrust complaint must show injury to the market or competition in general, not just to the complainant. McGlinchy v. Shell Chem. Co., 845 F.2d 802, 812 (9th Cir. 1988); Cascade Cabinet Co. v. W. Cabinet & Millwork Inc., 710 F.2d 1366, 1373 (9th Cir. 1983) (“[E]conomic injury to a competitor does not equal injury to competition.”); see also Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962) (antitrust laws are designed to protect “competition, not competitors”). Examples of antitrust injury are increased prices for consumers, reduced output, or less incentive for innovation. Kingston’s allegations fail on all fronts. Kingston argues that the injury to competition lies in the fact that the Patent Action has, or will, raise its costs. See Counterclaims ¶¶ 118, 278-79. This type of injury is typically recognized in vertical merger cases when a firm in the downstream market purchases an upstream input supplier and then refuses to sell inputs to a competitor, either foreclosing the competitor from the upstream market entirely or raising its competitor’s costs so high that it can no longer achieve the economies of scale necessary to compete. See Areeda & Hovenkamp ¶ 1008. This is not the case here. First, Samsung did not acquire any upstream inputs. It was Polaris, not Samsung, that bought the patents at issue and asserted them against Kingston. But even if Samsung could be pulled into this controversy, Kingston has not shown a connection between its supposed injury and the alleged anticompetitive conduct involving Samsung. See Atl. Richfield Co., 495 U.S. at 342 (the harm must “correspond[] to the rationale for finding a violation of the antitrust laws in the first place”); see also In re Online DVD Rental Antitrust Litig., No. M 09-2029 PJH, 2010 WL 2680837, at *6 (N.D. Cal. July 6, 2010) (finding that the antitrust plaintiff must show a sufficiently direct causal link to set forth a plausible theory). Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 28 of 36 Page ID #:3324 - 20 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Kingston’s alleged “raised costs” flow from a patent owner seeking a royalty for the practice of intellectual property. The antitrust laws do not “negate a patentee’s right to exclude others from patent property.” In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000) (internal quotations and citations omitted); see also Image Tech. Servs., Inc., 125 F.3d at 1215; United States v. Westinghouse Elec. Corp., 648 F.2d 642, 647 (9th Cir. 1981). Thus, the payment of a royalty is not the type of “harm” the antitrust laws seek to prevent. Rather, it is common—even procompetitive—for industry players to seek royalties for their intellectual property, even from rivals. See DOJ LICENSING GUIDELINES §§ 2.1, 2.3. Indeed the alleged “FRAND” obligation cited by Kingston specifically contemplates that those who practice the patents will pay a “fair, reasonable, and non-discriminatory” royalty for the right to practice the “essential” patents. Paying for what you use is not an antitrust injury. Kingston does not give any basis for why the Patent Action will result in a non-FRAND royalty.15 The Patent Action seeks only a “reasonable royalty for Kingston’s acts of infringement,” and treble damages if the Court finds willful infringement. Complaint, Dkt. No. 1 ¶ 109. These are typical damages for patent infringement. If Polaris prevails in the Patent Action, its damages, including a future royalty, may still be constrained by the FRAND commitment if the Court finds it is applicable (i.e., the Court may take the FRAND obligation into account when determining damages and the future royalty rate). See Microsoft Corp. v. Motorola, Inc., 795 F.3d 1024, 1044-45 (9th Cir. 2015) (affirming bench trial setting FRAND rate). One theoretical outcome of the Patent Action is to declare that the proper royalty rate is if, as Kingston alleges, the record shows any 15 Even if Kingston’s allegations regarding a non-FRAND royalty were relevant, Kingston further fails to plead a causal connection between a non-FRAND royalty and alleged anticompetitive conduct because Polaris had every incentive to seek a high royalty from Kingston independent of an agreement with Samsung. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 29 of 36 Page ID #:3325 - 21 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 other rate would be “discriminatory.” See Counterclaims ¶ 33. The point being that this determination is relevant to only the damages in the Patent Action, not an allegation supporting antitrust injury. The potential imposition of a license charging a “fair, reasonable, and non-discriminatory” royalty is not the type of injury that the antitrust laws were intended to prevent. See Atl. Richfield Co., 495 U.S. at 334; Townshend v. Rockwell Int’l Corp., No. C99-0400SBA, 2000 WL 433505, at *9 (N.D. Cal. Mar. 28, 2000) (granting motion to dismiss § 1 claim because “allegations that [defendant] initiated a patent infringement suit [implicating FRAND]—without any additional allegations of anti-competitive aspects of this suit—does not state an antitrust injury”); Apple, Inc. v. Motorola Mobility, Inc., 886 F. Supp. 2d 1061, 1076 (W.D. Wis. 2012) (“Apple has presented no evidence that it suffered any antitrust injury as a result of Motorola’s license demand.”).16 There is also no cognizable antitrust injury from Samsung’s supposed “refusal to deal” beginning in 2008. See also infra Section VII. This is obvious because Kingston has remained in the DRAM module market for over eight years despite this supposedly anticompetitive act. Kingston cannot plead otherwise. While Kingston has made conclusory allegations of harm to original equipment manufacturers and end-users, Counterclaims ¶¶ 104, 137, it has not plead any facts to show that the alleged harm reduces market output or raises market prices. See Atl. Richfield Co., 495 U.S. at 344 (the harm must “stem[] from a competition- reducing aspect or effect” of the anticompetitive behavior). For example, Kingston 16 Moreover, to the extent Kingston is alleging an antitrust injury flowing from its litigation costs in defending the Patent Action, this does not constitute antitrust injury. See Magnetar Techs. Corp. v. Intamin, Ltd., 801 F.3d 1150, 1160 (9th Cir. 2015) (holding that “to succeed in an antitrust claim based on litigation expenses,” the plaintiff must show that the “patent lawsuit was a sham”); Chip-Mender, Inc. v. Sherwin-Williams Co., No. C 05-3465 PJH, 2006 WL 13058, at *6 (N.D. Cal. Jan. 3, 2006) (finding the plaintiff did not adequately plead an antitrust injury from payment of attorneys’ fees in defending against patent claims). Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 30 of 36 Page ID #:3326 - 22 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 does not allege that it will pass on these supposed higher costs to end-users. See Rebel Oil Co., 51 F.3d at 1433 (“[R]eduction of competition does not invoke the Sherman Act until it harms consumer welfare.”). Indeed, Kingston maintains that it can manufacture and sell DRAM modules Counterclaims ¶ 88. Accordingly, no antitrust injury has been alleged. Simply put, because Kingston does not—and cannot—allege that supply will decrease, that prices will increase (market wide), or that innovation will slow, it has not alleged an injury to competition. Kingston alleges only that its own costs will increase because it has to pay for the intellectual property it uses. VII. KINGSTON’S § 2 MONOPOLIZATION CLAIMS PREMISED ON SAMSUNG’S SUPPOSED REFUSAL TO DEAL FAIL BECAUSE SAMSUNG HAD NO DUTY TO DEAL WITH KINGSTON AND THE LIMITATIONS PERIOD HAS EXPIRED. “A manufacturer may choose those with whom it wishes to deal and unilaterally may refuse to deal with a distributor or customer for business reasons without running afoul of the antitrust laws.” Dimidowich v. Bell & Howell, 803 F.2d 1473, 1478 (9th Cir. 1986); see also Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 448 (2009) (“As a general rule, businesses are free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing.”); Saigon Central Post, Inc. v. Bank of America, N.A., No. 8:06-cv-516, slip op. at 1 (C.D. Cal. Sept. 18, 2006) (Carney, J.). This right extends even to monopolists. See Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407-08 (2004). Kingston pleads claims under § 2 and the Cartwright Act premised on the allegation that “Samsung has refused and refuses to sell DRAM chips to rival Kingston.” See Counterclaims ¶¶ 2, 24, 103, 123, 235. A mere refusal to deal is not an actionable claim. The Supreme Court recognizes a limited exception to this general rule in Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 31 of 36 Page ID #:3327 - 23 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985). See Trinko, 540 U.S. at 408-09. This exception is based on a “decision to cease participation in a cooperative venture.” Id. at 409. Kingston hints at a similar shift in conduct by Samsung through allegations that Samsung—“after many years of selling” to Kingston—refused to sell DRAM chips to Kingston in 2008 with “no legitimate purpose.” See Counterclaims ¶¶ 24-25. This allegation is insufficient to bring this case under the “outer boundary of § 2 liability” described by Aspen Skiing. See Trinko, 540 U.S. at 409. Kingston does not allege that Samsung’s prior dealings with Kingston were profitable nor that Samsung changed course because the alleged “future monopoly retail price would be higher.” See id. Indeed, the fact that Samsung has allegedly refused to sell chips to Kingston for over eight years without affecting Kingston’s ability to Counterclaims ¶ 9, shows Samsung never realized higher “monopoly” retail prices as a result of this alleged business decision. The statute of limitations for private antitrust claims is four years. 15 U.S.C. § 15b (an action “shall be forever barred unless commenced within four years after the cause of action accrued”). The Cartwright Act also has a four year statute of limitations. Cal. Bus. & Prof. Code §§ 16750.1, 16755(b). The cause of action accrues for a “refusal to deal” claim “when [the refusal] occurs or becomes final.” Areeda & Hovenkamp ¶ 320c3. Kingston pleads only one instance of Samsung’s alleged refusal—in 2008—over eight years prior to the filing of its counterclaims. See Counterclaims ¶¶ 24, 103. Kingston does not plead any “new and independent act” that “inflicts new and accumulating injury” within the limitations period, and thus the alleged refusal became final in 2008. See Garrison v. Oracle Corp., No. 14-CV-04592-LHK, 2015 WL 1849517, at *7 (N.D. Cal. Apr. 22, 2015) (dismissing refusal to deal claims because “[p]laintiff has simply failed to allege any facts indicating when the supposed continuing violations took place, let alone that they took place on or after [limitation date]”); Red Lion Med. Safety, Inc. v. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 32 of 36 Page ID #:3328 - 24 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Ohmeda, Inc., 63 F. Supp. 2d 1218, 1223 (E.D. Cal. 1999). Thus, all claims dependent on Kingston’s refusal to deal allegations are barred. VIII. KINGSTON FAILS TO STATE A CLAIM UNDER § 7 OF THE CLAYTON ACT. Kingston also tries to shoehorn its Sherman Act allegations into § 7 of the Clayton Act. Section 7 prohibits any “person engaged in commerce” from acquiring stock or assets where the “effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18. Most commonly, § 7 is used to challenge mergers or asset acquisitions that create high levels of concentration in an industry. Here, Kingston attempts to use it to challenge the acquisition of the Qimonda patents by Polaris. But Kingston’s allegations do not state a claim under § 7. This claim (No. 19) fails because (1) Samsung did not acquire the Qimonda Portfolio, and (2) the acquisition of a valid patent is not an antitrust violation. Here, Polaris alone acquired the Qimonda Portfolio. While Samsung has a license to the patents, this does not create an ownership interest. Accordingly, Samsung did not and has not acquired the property at issue, and thus Kingston’s Clayton Act claim fails at this threshold level. Additionally, Kingston has not alleged any antitrust injury from the acquisition of the patents. Patents, by design, confer the ability to exclude others, which can result in market power. The transfer of the Qimonda patents from Infineon to Polaris was “merely a lawful shift of market power” from one company to another with “no antitrust significance.” Vizio, Inc., 2010 WL 7762624, at *4; Columbia River People’s Util. Dist. v. Portland Gen. Elec. Co., 217 F.3d 1187, 1190-91 (9th Cir. 2000). As Kingston notes, Polaris does not operate in the DRAM chip or DRAM module markets. Counterclaims ¶¶ 41, 98. Accordingly, the patent acquisition did not shift market power or substantially lessen competition in the alleged markets. See Vizio, Inc., 2010 WL 7762624, at *4. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 33 of 36 Page ID #:3329 - 25 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Moreover, Kingston does not articulate a causal connection between Polaris’s acquisition of the patents and any plausible increase in Samsung’s market power. The injury must result directly from the anticompetitive consequences forbidden by § 7 (i.e., the challenged acquisition). Pandola v. Texaco Inc., No. 72-1489-MML, 1975 WL 873, at *5 (C.D. Cal. Jan. 16, 1975). The alleged injuries, to the extent any are articulated, are from the Patent Action, not the acquisition of the patents. Thus, the “necessary causal link is therefore absent.” Dole Valve Co. v. Perfection Bar Equip., Inc., 311 F. Supp. 459, 463 (N.D. Ill. 1970). CONCLUSION For the reasons stated above, Samsung respectfully requests this Court to dismiss all antitrust counterclaims. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 34 of 36 Page ID #:3330 - 26 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: February 17, 2017 Respectfully submitted, By: /s/ Ian Simmons Ian Simmons (pro hac vice) Benjamin J. Hendricks (S.B. #288680) O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, DC 20006-4001 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 isimmons@omm.com Ryan K. Yagura (S.B. #197619) O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071-2899 Telephone: (213) 430-6000 Facsimile: (213) 430-6407 ryagura@omm.com Attorneys for Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 35 of 36 Page ID #:3331 - 27 - SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE The undersigned certifies that on February 17, 2017, the foregoing document was electronically filed with the Clerk of the Court for the UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA, using Court’s Electronic Case Filing (ECF) system. The ECF system routinely sends a “Notice of Electronic Filing” to all attorneys of record who have consented to accept this notice as service of this document by electronic means. Date: February 17, 2017 By: /s/ Ian Simmons Case 8:16-cv-00300-CJC-RAO Document 157 Filed 02/17/17 Page 36 of 36 Page ID #:3332 - 1 - SIMMONS DECL. ISO SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IAN SIMMONS (admitted pro hac vice) isimmons@omm.com BENJAMIN J. HENDRICKS (S.B. #288680) bhendricks@omm.com O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, D.C. 20006-4001 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 RYAN K. YAGURA (S.B. #197619) ryagura@omm.com O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071-2899 Telephone: (213) 430-6000 Facsimile: (213) 430-6407 Attorneys for Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Polaris Innovations Limited, Plaintiff, v. Kingston Technology Company, Inc., Defendant. Case No. 8:16-cv-300 CJC (RAO) DECLARATION OF IAN SIMMONS IN SUPPORT OF SAMSUNG ELECTRONICS CO., LTD. AND SAMSUNG SEMICONDUCTOR, INC.’S MOTION TO DISMISS Case 8:16-cv-00300-CJC-RAO Document 157-1 Filed 02/17/17 Page 1 of 2 Page ID #:3333 - 2 - SIMMONS DECL. ISO SAMSUNG’S MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I, Ian Simmons, the undersigned, hereby declare: 1. I am an attorney at law, licensed in Pennsylvania and Washington, D.C. I represent Samsung Electronics Co., Ltd. (“SEC”) and Samsung Semiconductor, Inc. (“SSI”) (collectively, “Samsung”) in the above-referenced matter. I submit this declaration in support of SEC and SSI’s Motion to Dismiss the Amended Counterclaims of Kingston Technology Company, Inc. (“Kingston”). I am over the age of 18, am capable of making this declaration, know all the following facts of my own personal knowledge and, if called and sworn as a witness, could and would testify competently thereto. 2. Exhibit A to this Declaration is a true and correct copy of the Patent License Agreement between SEC and Polaris Innovations Limited (“Polaris”) (the “PLA”) produced by Polaris in this litigation and bates stamped PK00010648. The PLA was designated by Polaris as “Highly Confidential – Attorneys Eyes Only” under the Stipulated Protective Order entered by the Court in this case (Dkt. No. 74), and is filed under seal pursuant to Samsung’s Unopposed Application for Leave to File Under Seal filed herewith. Executed this 17th Day of February 2017 in Washington, D.C. _________________________________________ Ian Simmons Case 8:16-cv-00300-CJC-RAO Document 157-1 Filed 02/17/17 Page 2 of 2 Page ID #:3334 - 1 - EX. A TO DECL. OF IAN SIMMONS ISO MOTION TO DISMISS 8:16-CV-300 CJC (RAO) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IAN SIMMONS (admitted pro hac vice) isimmons@omm.com BENJAMIN J. HENDRICKS (S.B. #288680) bhendricks@omm.com O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, D.C. 20006-4001 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 RYAN K. YAGURA (S.B. #197619) ryagura@omm.com O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071-2899 Telephone: (213) 430-6000 Facsimile: (213) 430-6407 Attorneys for Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Polaris Innovations Limited, Plaintiff, v. Kingston Technology Company, Inc., Defendant. Case No. 8:16-cv-300 CJC (RAO) EXHIBIT A TO THE DECLARATION OF IAN SIMMONS IN SUPPORT OF SAMSUNG ELECTRONICS CO., LTD. AND SAMSUNG SEMICONDUCTOR, INC.’S MOTION TO DISMISS [REDACTED] Case 8:16-cv-00300-CJC-RAO Document 157-2 Filed 02/17/17 Page 1 of 2 Page ID #:3335 EXHIBIT A (pages 3 to 12) Conditionally filed under seal Case 8:16-cv-00300-CJC-RAO Document 157-2 Filed 02/17/17 Page 2 of 2 Page ID #:3336 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 [Proposed] Order Granting Samsung’s Motion to Dismiss Case No. 8:16-cv-00300-CJC-RAO IAN SIMMONS (admitted pro hac vice) isimmons@omm.com BENJAMIN J. HENDRICKS (S.B. #288680) bhendricks@omm.com O’MELVENY & MYERS LLP 1625 Eye Street, NW Washington, D.C. 20006-4001 Telephone: (202) 383-5300 Facsimile: (202) 383-5414 RYAN K. YAGURA (S.B. #197619) ryagura@omm.com O’MELVENY & MYERS LLP 400 South Hope Street Los Angeles, CA 90071-2899 Telephone: (213) 430-6000 Facsimile: (213) 430-6407 Attorneys for Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Polaris Innovations Limited, Plaintiff, v. Kingston Technology Company, Inc., Defendant. Case No. 8:16-cv-00300-CJC-RAO [PROPOSED] ORDER GRANTING SAMSUNG ELECTRONICS CO., LTD. AND SAMSUNG SEMICONDUCTOR, INC.’S MOTION TO DISMISS THE AMENDED COUNTERCLAIMS Case 8:16-cv-00300-CJC-RAO Document 157-3 Filed 02/17/17 Page 1 of 2 Page ID #:3337 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 [Proposed] Order Granting Samsung’s Motion to Dismiss Case No. 8:16-cv-00300-CJC-RAO This matter comes before the Court on Third-Party Defendants Samsung Electronics Co., Ltd. and Samsung Semiconductor, Inc.’s (collectively, “Samsung”) Motion to Dismiss the Amended Counterclaims. Having reviewed the submitted materials and the relevant pleadings, the Court finds that Counterclaims 14 to 21 of Defendant Kingston Technology Co., Ltd.’s Second Amended Answer, Affirmative Defenses, and Counterclaims (Dkt. Nos. 124 (redacted), 125 (sealed)) fail to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6). Accordingly, the Court GRANTS Samsung’s Motion to Dismiss and hereby DISMISSES Counterclaims 14 to 21. IT IS SO ORDERED. Dated: ___________________ Honorable Cormac J. Carney United States District Court Judge Case 8:16-cv-00300-CJC-RAO Document 157-3 Filed 02/17/17 Page 2 of 2 Page ID #:3338