Papst Motoren GMbH & Co. KG v. Kanematsu-Goshu (USA) Inc.

• Decision Date: 09 January 1986
• Docket Number: No. 84 Civ. 7194.,84 Civ. 7194.
• Parties: PAPST MOTOREN GMbH & CO. KG, Plaintiff, v. KANEMATSU-GOSHU (U.S.A.) INC., a, New York Corporation, Kanematsu-Goshu Ltd., a Japanese Corporation and Shinano Tokki Corporation, a Japanese Corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

629 F. Supp. 864

PAPST MOTOREN GMbH & CO. KG, Plaintiff, v. KANEMATSU-GOSHU (U.S.A.) INC., a, New York Corporation, Kanematsu-Goshu Ltd., a Japanese Corporation and Shinano Tokki Corporation, a Japanese Corporation, Defendants.

No. 84 Civ. 7194.

United States District Court, S.D. New York.

January 9, 1986.

COPYRIGHT MATERIAL OMITTED

Leonard J. Santisi, Theodore F. Shiells, Curtis, Morris & Safford, New York City, John F. Flannery, Philip H. Watt, Fitch, Even, Tabin & Flannery, Chicago, Ill., for plaintiff.

Richard K. Jeydel, Kanematsu-Gosho (U.S.A.) Inc., New York City, David Goldberg, Cowan, Liebowitz & Latman, P.C., New York City, A. Sidney Katz, Roger D. Greer, Welsh & Katz, Ltd., Chicago, Ill., for defendants.

ROBERT L. CARTER, District Judge.

Plaintiff, Papst Motoren GMbH & Co. KG ("Papst"), a West German limited liability company which manufactures various types of computer motors, charges that defendants have been and are infringing three of its patents: U.S. Letters Patent No. 3,873,897, ("897") covering an invention entitled "Collector-Less-DC Motor"; U.S. Letters Patent No. 4,429,263, ("263") covering an invention called "Low Magnetic Leakage Flux Brushless Pulse Control D-C Motor"; and U.S. Letters Patent No. 4,438,542 ("542") covering an invention entitled, "Disk Storage Drive".¹

Plaintiff charges that defendant Kanetmatsu-Gosho Ltd. ("K-G Japan"), a Japanese corporation with its principal place of business in Japan, has actively induced infringement of each of the above-named patents by "selling to Kanematsu USA K-G USA for resale in the U.S.A. the subject matter of each of the Letters Patent," (Amended Complaint at ¶¶ 11, 12), and will continue to induce infringement of plaintiff's named patents unless enjoined by this court.

Defendant Kanematsu-Gosho U.S.A., Inc., ("K-G USA"), a wholly-owned United States subsidiary of K-G Japan, is charged with infringing the above named patents by "using and selling the subject matter of each of the Letters Patents," (Amended Complaint at ¶ 10). Plaintiff avers that such alleged infringement activity will continue unless K-G USA is enjoined.

Defendant Shinano Tokki Corporation ("STC"), a Japanese corporation with its principal place of business in Japan, is also charged with infringing plaintiff's three named patents by "selling to defendant K-G Japan for resale to defendant K-G USA, which in turn, resells in the United States the subject matter of each of plaintiff's patents." (Amended Complaint at ¶ 12).

Plaintiff's patent infringement claim has triggered a cross-fire of motions and counterclaims.² Defendants STC and K-G USA filed counterclaims against plaintiff for violations of the antitrust laws of the United States, particularly Section 2 of the Sherman Act, 15 U.S.C. § 2, alleging that this litigation was initiated and conducted in bad faith and constitutes an attempt to monopolize. Plaintiff moves, pursuant to Rule 12(b)(6) and Rule 12(b)(1), F.R.Civ.P., to dismiss defendants' counterclaims on the grounds that they do not state claims upon which relief can be granted, and that the court lacks subject matter jurisdiction with respect to STC's antitrust counterclaim. Plaintiff also moves to disqualify the law firm that represents STC alleging that STC's attorneys were formerly counsel for plaintiff and have now "switched sides." In response to the motion to disqualify, STC moves to compel the attendance of Hans Dieter Papst, Patent Department Manager of Papst, at a deposition, or alternatively to strike his declaration on matters pertaining to the disqualification motion. Plaintiff, in turn, moves to strike STC's supplemental memorandum in opposition to plaintiff's motion to disqualify, and in the alternative to permit the filing of a surreply memorandum.

A. Plaintiff's Rule 12(b) Motions To Dismiss

For purposes of plaintiff's motions to dismiss, the allegations of the antitrust counterclaims must be taken as true, Walker Process Equipment, Inc. v. Food Machinery and Chemical Corporation, 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965); Kugler v. Helfant, 421 U.S. 117, 125 n. 5, 95 S.Ct. 1524, 1531 n. 5, 44 L.Ed.2d 15 (1975); Fine v. City of New York, 529 F.2d 70, 75 (2d Cir.1975), and the motions may be granted only if it appears beyond doubt that K-G USA and STC can prove no set of facts in support of their claims which would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Dahlberg v. Becker, 581 F.Supp. 855, 859 (N.D.N.Y.) aff'd 748 F.2d 85 (2d Cir.), cert. denied, ___ U.S. ___, 105 S.Ct. 1845, 85 L.Ed.2d 144 (1984).

1. Subject Matter Jurisdiction

The enforcement of a patent procured by fraud on the Patent Office may violate Section 2 of the Sherman Act provided that the other elements necessary to a Section 2 case are established; in such event, the treble damages provision of Section 4 of the Clayton Act, 15 U.S.C. § 15, would be available to the injured party. Walker Process Equipment, Inc. v. Food Machinery and Chemical Corporation, supra, 382 U.S. at 174, 86 S.Ct. at 349.

Section 7 of the Sherman Act provides that the Act:

shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless—

(1) such conduct has a direct, substantial, and reasonably foreseeable effect—

(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or

(B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States;

15 U.S.C. § 6a.

Plaintiff contends that STC, a Japanese corporation which does not sell the motors in dispute in the United States, "has failed to allege a `direct, substantial, and reasonably foreseeable effect' on import trade, as required by 15 U.S.C. § 6a," since any lost sales of STC caused by alleged Papst antitrust violations did not occur in the United States; hence, Papst argues, STC's antitrust counterclaim should be dismissed for lack of subject matter jurisdiction. (Memorandum in Support of Plaintiff's Motion under F.R.Civ.P. 12(b) To Dismiss STC's Antitrust Counterclaim).

The extraterritorial reach of the Sherman Act depends on whether the challenged restraint has, or is intended to have, any anticompetitive effect upon United States commerce, either foreign or interstate. National Bank of Canada v. Interbank Card Association, 666 F.2d 6, 8 (2d Cir.1981). This court has held that any demonstrable effect on United States commerce will suffice, so long as it is not de minimus, see Dominicus Americana Bohio v. Gulf & Western Industries, 473 F.Supp. 680, 687 (S.D.N.Y.1979) (Carter, J.) ("even wholly foreign conduct may come within the sweep of the antitrust laws if it has a sufficient effect on the interstate or foreign commerce of the United States. Indeed, it is probably not necessary for the effect on foreign commerce to be both substantial and direct as long as it is not de minimus"). Hence, Section 7 does not preclude all persons or entities injured abroad from recovering under the Sherman Act. El Cid, Ltd. v. New Jersey Zinc Company, 551 F.Supp. 626 (S.D.N.Y.1982) (Knapp, J.); National Bank of Canada v. Interbank Card Association, 507 F.Supp. 1113 (S.D. N.Y.1980) (Sand, J.), aff'd, 666 F.2d 6 (2d Cir.1981).

That STC neither claims to be selling its motor products in the United States nor suggests that it has ever sold or has made any specific plans to sell motors in the United States is irrelevant as long as Papst's alleged injurious conduct towards STC has an anticompetitive effect on United States commerce. STC asserts that because its manufactured motors are eventually sold in this country (presumably through K-G USA), Papst's course of conduct has a "direct, substantial and reasonably foreseeable effect on import trade in the United States." (Memorandum in Opposition to Plaintiff's Motion under F.R. Civ.P. 12(b) to Dismiss STC's Antitrust Counterclaim at 4). Because Papst's patent infringement claim outlines a close manufacture-sale-marketing nexus among STC, K-G Japan, and K-G USA, STC asserts that its motor sales are lost not in Japan, where the motors are sold to K-G Japan, but in the United States, the final sales destination point for STC manufactured motors that K-G Japan has resold to its subsidiary K-G USA. (Id. at 4).

Any effect in the United States of Papst's alleged conduct towards STC, however, would be, at most, de minimus. Papst's alleged restraint on STC in Japan cannot be said to have an anticompetitive effect upon United States commerce based upon K-G USA's later sale of STC manufactured motors in the United States, since jurisdiction over Sherman Act claims "is not supported by every conceivable repercussion of the action objected to on United States commerce." National Bank of Canada, supra, 666 F.2d at 8 (1981); Eurim-Pharm v. Pfizer Inc., 593 F.Supp. 1102, 1104 (S.D.N.Y.1984) (Lowe, J.) (plaintiff failed to establish that defendants' alleged foreign price-fixing and market allocation scheme resulted in an anticompetitive effect on United States domestic or import commerce where "the transactions underlying this action and the effect of these transactions occurred solely within Europe, and the primary actors were European companies doing business solely within Europe."); cf. Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 993 (2d Cir.1975) ("antifraud provisions of the federal securities laws ... do not apply to losses from sales of securities to foreigners outside the United States unless acts (or culpable failures to act) within the United States directly caused such losses.")

The effects of the plaintiff's alleged antitrust activities occur solely in Japan where STC sells the motors at issue to K-G Japan. Accordingly, STC cannot rely on cases where defendants...