Independent Ink, Inc. v. Trident, Inc., CV98-6686 NM(CWx).

• Decision Date: 03 June 2002
• Docket Number: No. CV98-6686 NM(CWx).,CV98-6686 NM(CWx).
• Citation: 210 F.Supp.2d 1155
• Parties: INDEPENDENT INK, INC., a California corporation, Plaintiff, v. TRIDENT, INC., a Connecticut corporation; Illinois Tool Works, Inc.; and Does 1 through 50, Defendants.
• Court: U.S. District Court — Central District of California

210 F.Supp.2d 1155

INDEPENDENT INK, INC., a California corporation, Plaintiff, v. TRIDENT, INC., a Connecticut corporation; Illinois Tool Works, Inc.; and Does 1 through 50, Defendants.

No. CV98-6686 NM(CWx).

United States District Court, C.D. California.

June 3, 2002.

COPYRIGHT MATERIAL OMITTED

Jan P Weir, Edward F O'Connor, Stradling Yocca Carlson & Rauth, Newport Beach, CA, Joseph A. Yanny, Kelly W. Cunningham, Yanny & Smith, Los Angeles, CA, Mary L. Grieco, Gursky & Ederer, New York City, for plaintiff.

Martin J Foley, III, Laura A Wytsma, Sonnenschein Nath & Rosenthal, Los Angeles, CA, Willmore F. Holbrow, III, Blakely, Sokoloff, Taylor & Zafman, Los Angeles, CA, Jordan Sigale, G Marc Whitehead, Gary Senner, Sonnenschein Nath & Rosenthal, Chicago, IL, for defendants.

ORDER

1) DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

2) GRANTING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

MANELLA, District Judge.

I. FACTS

Independent Ink, Inc. ("Plaintiff") is a distributor and supplier of printer ink and ink products. Trident, Inc. ("Trident") and Illinois Tool Works, Inc. ("ITW") (collectively, "Defendants") manufacture: 1) a patented piezoelectric ink jet printhead, the first of its type; 2) a patented ink container, consisting of a bottle and a valved cap, that attaches to the printhead; and 3) ink specially formulated for use in Trident's printhead system. Original equipment manufacturers ("OEMs") use Defendants' printhead system to manufacture printers that print bar codes on corrugated materials and kraft paper. These printers are then sold through a network of distributors to end users, usually large product manufacturers, who use the printers to place bar codes on their cartons.

Trident licenses its patented products to OEMs as a package. Trident's license allows OEMs to "manufacturer, use and sell equipment employing and including ink jet printing devices supplied by Trident when used in combination with ink and ink supply systems supplied by Trident. . . ." Plaintiff's Memorandum of Points & Authorities, Ex. 1 (emphasis omitted).¹ Plaintiff alleges that these licenses ("OEM agreements") require OEMs and their customers, end users of printers incorporating Trident's printhead system, to purchase their ink exclusively from Trident. Defendants concede that: 1) OEMs must purchase their ink from Trident; and 2) OEMs and end users may not re-fill Trident ink containers with any ink, as they are intended as single-use containers. Defendants' Supplemental Brief, March 22, 2002, at 2. Trident's internal memoranda, proffered by Plaintiff, confirm that OEMs must purchase their ink from Trident and that neither OEMs nor end users may re-fill Trident's ink cartridges. See, e.g., Plaintiff's Supplemental Brief, March 28, 2002, Ex. E; Plaintiff's Memorandum of Points & Authorities, Exs. 1-2. However, Defendants contend that the OEM agreements do not prevent end users from purchasing ink and ink containers from third-party ink manufacturers, like Plaintiff. See O'Connor Decl., February 11, 2002, Ex. 35. Various manufacturers offer ink for use in Trident's printhead system, including Graphic Controls, Squid Ink. Renewable Resources, and ATG. See, e.g., Wystma Decl., Ex. C (Admission No. 26); Brucker Depo., July 24, 2000, at 145-46; Brucker Depo., July 25, 2000, at 97; O'Connor Decl., February 11, 2002, Exs. 5, 6, 36; Defendants' Statement of Uncontroverted Facts, November 13, 2001, at ¶ 15. Although Plaintiff asserts that Trident does not warranty its printhead system for use with third-party inks, Plaintiff does not dispute "the existence of competitors such as Squid Ink, ATG, and Graphic Controls, which, among other competitors in the ink jet ink market, offer ink for use in printing systems incorporating Trident's printhead." Defendants' Statement of Uncontroverted Facts, November 13, 2001, at ¶ 15.

Trident is not the only competitor who manufactures systems for affixing bar codes to cartons. At least two other companies, Markem and Xaar, have developed printheads capable of printing bar codes on corrugated materials and kraft paper. Wystma Decl., Ex. C (Admission No. 31); Wystma Decl., Ex. F, Brucker Depo. at 120-21; Defendants' Statement of Uncontroverted Facts, November 13, 2001, at ¶ 16.² Product manufacturers also use labeling systems to print bar-coded labels, which are then affixed to cartons. Wystma Decl., Ex. F, Brucker Depo. at 191, 205, 207; Defendants' Statement of Uncontroverted Facts, November 13, 2001, at ¶ 21. Plaintiff does not dispute testimony that these labeling systems compete with Trident's printhead systems. Pullen Depo. at 101; Wystma Decl., Ex. H, Barnett Depo. at 119.

On August 14, 1998, Plaintiff filed an action seeking a declaratory judgment that it did not infringe upon two of Defendants' patents, and Trident subsequently filed a patent infringement action against Plaintiff.³ Plaintiff amended its complaint to allege that Defendants orchestrated unlawful tying arrangements in violation of the Sherman Act, 15 U.S.C. § 1 et seq., and Section 16727 of the Cartwright Act, California Business & Professional Code § 16700 et seq. Plaintiff alleges that Defendants conditioned the sale of their patented printhead systems ("the tying product") upon OEMs' also purchasing and distributing Trident's ink ("the tied product").⁴ Plaintiff alleges that these tying arrangements preclude OEMs and end users from purchasing printer ink from third parties, like Plaintiff, restraining trade, in violation of Section 1 of the Sherman Act. Fourth Amended Complaint ¶¶ 20-27. Plaintiff also alleges that Defendants monopolized, attempted to monopolize, and conspired to monopolize the market for ink used in Trident's printhead system, in violation of Section 2 of the Sherman Act. Id. ¶¶ 21, 26.

Both parties move for summary judgment of Plaintiff's Section 1 claim, and Defendants move for summary judgment of Plaintiff's Section 2 claim. With respect to its Section 1 claim, Plaintiff argues that Defendants necessarily have market power in the market for the tying product as a matter of law solely by virtue of the patent on their printhead system, thereby rendering Defendants' tying arrangements per se violations of the antitrust laws. Plaintiff contends "[a]s a matter of law, one cannot use contracts which contain patent licenses and make the patent licenses conditioned upon the sale of products which are not patented." Plaintiff's Memorandum of Points & Authorities at 14. However, Plaintiff concedes that "the mere fact of having a patent does not create market power vis-a-vis the products with which the patented product competes." Plaintiff's Reply Brief at 4. Plaintiff does not dispute that its sales have increased during the period Trident allegedly violated the antitrust laws. Defendants' Statement of Uncontroverted Facts, November 13, 2001, at ¶ 32. Thus, the issue before this court concerning Plaintiff's claim under Section 1 of the Sherman Act is narrowly focused upon whether a patent confers market power in the market for the tying product as a matter of law.

Plaintiff's motion and opposition to Defendants' motion do not discuss the products at issue, their substitutes, or the relevant markets. Plaintiff's expert witness "did not perform an antitrust analysis at all." Plaintiff's Response to Defendants' Statement of Uncontroverted Facts, December 4, 2001, at ¶ 10. Plaintiff's motion cites little authority in support of its argument and identifies no tying case in which a court granted the plaintiff summary judgment solely by virtue of the fact that the defendant held a patent on the tying product. Plaintiff's Statement of Uncontroverted Facts in support of its motion contains only one fact: "[Defendants'] OEM agreements contain a patent license on their patented printhead technology. A precondition to this license is that Trident's OEMs as well as their customers (i.e. end users) purchase all of their consumable products (ink) from [Defendants], whether or not those consumables are patented." Plaintiff's Statement of Uncontroverted Facts, October 3, 2001, at ¶ 1. Plaintiff's Statement contains only one conclusion of Law: "Patent tying contracts are a per se violation of the antitrust laws." Id. ¶ 1. Plaintiff does not argue that Defendants' tying arrangements violate the Sherman Act pursuant to the Rule of Reason.⁵ Nor does Plaintiff's motion or opposition to Defendants' motion address its claims that Defendants monopolized, attempted to monopolize, and conspired to monopolize the market for ink in violation of Section 2 of the Sherman Act.⁶

With respect to the Section 1 claim, Defendants argue that Plaintiff cannot establish that Defendants had market power in the tying product market, a requisite element of a tying case. Defendants dispute Plaintiff's contention that a patent, standing alone, with no consideration of the products at issue, their substitutes, or the relevant markets, establishes market power in a tying case as a matter of law. Defendants also argue that Plaintiff cannot establish market power through any other means, as Plaintiff: 1) developed no evidence with which to define the relevant product market; 2) developed no evidence with which to define the relevant geographic market; 3) proffers no credible evidence that Defendants have market power in the relevant market; and 4) identifies no legitimate barriers to entry.

Defendants also argue that Plaintiff cannot, as a matter of law, raise a triable issue of fact that Defendants violated Section 2 of the Sherman Act with respect to either the printhead market or the ink market. Defendants argue that Plaintiff cannot maintain a Section 2 claim with respect to the market for the patented printhead system for the same reasons it cannot prevail on its Section 1 claim. Defendants argue that Plaintiff cannot establish that Defendants monopolized, attempted to monopolize, or conspired to monopolize the ink market, as Plai...