Ecodisc Tech. Ag v. Dvd Format/logo Licensing Corp.

• Decision Date: 22 April 2010
• Docket Number: Case No. 2:09-cv-07875-MRP-AJW.
• Citation: 711 F.Supp.2d 1074
• Parties: ECODISC TECHNOLOGY AG, Plaintiff,v.DVD FORMAT/LOGO LICENSING CORPORATION et al., Defendant.
• Court: U.S. District Court — Central District of California

711 F.Supp.2d 1074

ECODISC TECHNOLOGY AG, Plaintiff,v.DVD FORMAT/LOGO LICENSING CORPORATION et al., Defendant.

Case No. 2:09-cv-07875-MRP-AJW.

United States District Court C.D. California.

April 22, 2010.

COPYRIGHT MATERIAL OMITTED

Jeffery Jay Daar, Michael R. Newman, Daar and Newman, Los Angeles, CA, for Plaintiff.

John H. Longwell, Kelli L. Sager, Robert P. Parker, Paul Weiss Rifkind Wharton & Garrison LLP, Washington, DC, Andrew J. Thomas, Davis Wright Tremaine LLP, Los Angeles, CA, for Defendant.

ORDER RE: MOTIONS TO DISMISS

MARIANA R. PFAELZER, District Judge.

I. INTRODUCTION

In this unfair competition case, the licensor of a new technology for manufacturing thin optical discs (EcoDisc Technology AG or “Plaintiff”) sues the optical disc standard-setting organization (“DVD Forum”) and the corporation that licenses that DVD Format standard and DVD Logo (DVD Format/Logo Licensing Corporation or “DVDFLLC”)(collectively, “Defendants”) to disc replicators worldwide. The First Supplemental Complaint (“FSC”) alleges Defendants have threatened all disc replicators that if they manufacture the new thinner disc-the EcoDisc-they will be in breach of their license agreement with DVDFLLC and will no longer be permitted to manufacture standard DVDs or use the DVD Logo. The FSC further alleges that Defendants have placed in the marketplace false information regarding the EcoDisc. Plaintiff contends Defendants are conspiring to keep EcoDiscs out of the market to preserve the predominance of their own DVD formats and specifications.

Plaintiff filed this lawsuit in late October 2009, alleging Defendants have engaged in: a conspiracy to restrain trade in violation of state and federal antitrust law; false advertising in violation of Section 43(a) of the Lanham Act; tortious interference with contractual relations; tortious interference with prospective economic advantage; trade libel; and unfair business practices in violation of California Business & Professions Code § 17200 et seq.

Defendants each filed a motion to dismiss the claims against them on separate grounds. DVD Forum, a Japanese trade association, filed a Federal Rule of Civil Procedure (“FRCP”) 12(b)(2) motion, contending the Court should dismiss the FSC for lack of personal jurisdiction. DVDFLLC, the licensing corporation, moved to dismiss under FRCP 12(b)(6) for failure to state a claim upon which relief can be granted. DVDFLLC argues Plaintiff's claims are barred under the Noerr-Pennington doctrine, which protects the right to petition the government, and Plaintiff otherwise fails to allege cognizable antitrust and false advertising claims. DVDFLLC further argues the Court should decline to exercise supplemental jurisdiction over Plaintiff's state law claims upon dismissal of the federal causes of action. Plaintiff opposes these motions.

After the Court heard oral argument on Defendants' motions, DVDFLLC filed an ex parte application for leave to file a supplemental declaration. Docket No. 42. Plaintiff opposed. The Court DENIES the application and proceeds to adjudicate the motions to dismiss.

For the reasons outlined in greater detail below, the Court GRANTS DVDFLLC's motion to dismiss the federal antitrust claim on the basis of the Noerr-Pennington doctrine and the false advertising claim on the basis of Plaintiff's failure to plead with the particularity required by FRCP 9(b). The dismissal is with leave to amend. The Court declines to address the merits of the state law claims until Plaintiff has pleaded a viable federal cause of action. With respect to DVD Forum's motion to dismiss for lack of personal jurisdiction, the motion is GRANTED without leave to amend.

The Court addresses DVDFLLC's motion first.

II. THE RULE 12(b)(6) MOTION

On a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court must accept all factual allegations pleaded in the complaint as true, and construe those facts and draw all reasonable inferences therefrom “in the light most favorable to the nonmoving party.” Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996); see also Stoner v. Santa Clara County Office of Educ., 502 F.3d 1116, 1120-21 (9th Cir.2007). The Court recites the factual background of the case as alleged by Plaintiff.

A. Background

Defendant DVD Forum is a standard-setting organization that developed a technical standard for optical discs, which it calls the “DVD Format,” and which it promotes internationally. FSC ¶ 16. Defendant DVDFLLC is a Japanese corporation which is the exclusive licensor of the DVD Format standard and the DVD Logo worldwide.¹ FSC ¶¶ 5, 26. DVDFLLC implements policies and procedures that DVD Forum sets through DVD Forum's Steering Committee. FSC ¶ 27. For example, DVDFLLC produces, maintains and issues DVD Format books; registers trademarks and maintains DVD Logos; and polices pirate manufacturers, non-compliant products, and the incorrect usage of DVD Logos. FSC ¶ 25.

DVDFLLC enters into license agreements with disc replicators to allow replicators to manufacture optical discs in compliance with the accepted DVD Format. The license agreements mandate that the proprietary technology may not be used to manufacture, sell or distribute any products that do not comply fully with the specifications set forth in the DVD Format Book. FSC ¶ 56; Saito Decl., Ex. 1 [DVDFLLC License Agreement Art. 2.8].² The heart of this dispute is whether disc replicators, licensed by DVDFLLC, are using the specifications in the DVD Format Book to create EcoDiscs that do not fully comply with the technical standard adopted by DVD Forum and required to use the DVD Logo. Plaintiff alleges its 0.6mm discs are compatible with standard DVD players and can be played in 132 different playback systems. See FSC ¶ 52.

Plaintiff is a research and development company that licenses “EcoDisc Technology” in Europe and in the United States. FSC ¶ 39. EcoDisc Technology consists of a thin 0.6mm disc that is essentially one-half the thickness of the standard DVD (1.2mm disc) and more flexible. FSC ¶ 40. In addition, an EcoDisc is recyclable and environmentally-friendly. Id. Plaintiff alleges Defendants, along with certain of their respective members and shareholders, acted intentionally to suppress the use of innovative EcoDisc Technology and prevent EcoDiscs from competing with the standard DVD promoted by the DVD Forum and DVDFLLC. FSC ¶ 45.

For example, Plaintiff alleges that in 2008 a DVD Forum Working Group, WG-2, conducted a technical study of 0.6mm discs. FSC ¶ 47. At a September 17, 2008 DVD Forum Steering Committee meeting, the DVDFLLC representative reported DVDFLLC was awaiting the WG-2's final report on its technical study to determine “what should be done as to 0.6mm discs.” Id. Two months later, the Steering Committee met and heard the WG-2's report on 0.6mm discs, which judged the EcoDisc non-compliant with DVD Forum's specifications. FSC ¶¶ 47, 51. At this meeting, “[t]here was a further discussion of the issue of 0.6mm discs in the marketplace in Europe.” FSC ¶ 47.

Plaintiff further alleges in March 2009, DVDFLLC sent a written communication to all of its licensed replicators throughout the world. FSC ¶ 48. Plaintiff characterizes this communication as a threat to each replicator with a DVDFLLC License Agreement (“License Agreement”) that if the replicator manufactures any 0.6mm discs, including an EcoDisc, the manufacture would be a serious breach of the DVDFLLC License Agreement and may lead to early termination. FSC ¶ 48. The letter stated “0.6mm Optical Discs are Not DVD Format Complaint” and “in some instances, such 0.6mm discs have caused damages to the playback apparatus.” Id. The letter quoted from Article 2.8 of the License Agreement which states, “[t]he License Agreement requires that all DVD products manufactured by Licensees comply with the specifications set forth in the applicable DVD Format Books.” Id. Moreover, “[t]he manufacturer of non-compliant products, including but not limited to the manufacture of 0.6mm discs, is a serious breach of the DVD Format/Logo License Agreement and may lead to early termination of the DVD Format/Logo License Agreement.” Id.

DVDFLLC also posted a warning about 0.6mm discs on its website. FSC ¶ 49. The posting stated that the 0.6mm disc does not use DVD Format in a proper manner and “is only imperfectly and inappropriately using the Format. The DVD Forum judged that such a Disc is not compliant with the DVD Specifications. To use DVD Formats for products that do not conform to the Specifications is NOT admissible.” Id. The posting also states that 0.6mm discs “often cannot be properly played on existing players and drives, and there have been reports of damages to the discs and/or the hardware.... Licensees are warned that manufacturing non-compliant DVD Products could lead to termination of the License.” Id.

In response to at least one e-mail from a licensee regarding the March 2009 letter, DVDFLLC reiterated that the 0.6mm disc does not use DVD Format in a proper manner and is non-compliant with DVD Specifications. FSC ¶ 55. DVDFLLC explained that because it “strive[s] to contain non-compliant products from appearing in the market” and in order to “minimize the problems between disc products and hardware,” DVDFLLC must instruct its licensees to manufacture compliant DVD Products as stipulated in Articles 2.8 and 2.9 of the License Agreement. Id.

On June 12, 2009, DVDFLLC filed a complaint in federal court in the Southern District of New York against two licensees for producing EcoDiscs, which were marketed as identical to standard DVD discs in all respects other than thickness. FSC ¶ 60. DVDFLLC later distributed copies of the complaint to other licensees. FSC ¶ 62.

Plaintiff filed this lawsuit in October 2009, contending Defendants are attempting to suppress and prevent competition from EcoDisc “by making knowingly unfounded and unwarranted statements about the reliability of the...