Keystone Retaining Wall Systems v. Westrock, Inc.

• Decision Date: 16 October 1991
• Docket Number: Civ. No. 91-21-RE.
• Citation: 792 F. Supp. 1552
• Parties: KEYSTONE RETAINING WALL SYSTEMS, INC., Plaintiff, v. WESTROCK, INC. d/b/a Smithwick Western Block Company, et al., Defendants.
• Court: U.S. District Court — District of Oregon

792 F. Supp. 1552

KEYSTONE RETAINING WALL SYSTEMS, INC., Plaintiff, v. WESTROCK, INC. d/b/a Smithwick Western Block Company, et al., Defendants.

Civ. No. 91-21-RE.

United States District Court, D. Oregon.

October 16, 1991.

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Michael H. Simon, Gary U. Schraff, Perkins Coie, Portland, Or., Craig D. Diviney, Ronald J. Brown, Michael E. Florey, Dorsey & Whitney, Minneapolis, Minn., for plaintiff.

James S. Leigh, Patrick W. Hughey, John D. Vandenberg, Klarquist, Sparkman, Campbell, Leigh & Winston, Portland, Or., for defendants.

OPINION

REDDEN, Chief Judge.

A hearing was held on October 2, 1991 on the parties' cross motions for summary judgment and plaintiff's related motions to strike and to dismiss or partially stay defendants' fourth counterclaim. This opinion will address my rulings on those motions.

BACKGROUND

Plaintiff Keystone holds certain patents on retaining wall systems and components. It licenses other, independent companies to manufacture and sell its products throughout the country. Keystone itself markets retaining wall systems in only two regions, Minnesota and southern California. Keystone's retaining wall systems incorporate three main components: blocks, as to which Keystone holds various patents; pins (used to connect and align blocks) that are not patented; and soil stabilizing fabric ("geo-grid"). Geo-grid is manufactured by another company, Tensar. Keystone has patented one retaining wall system in which geo-grid is connected to the wall with the same pins that connect and align the blocks (the "'876 patent").

Defendants (collectively "Westblock") are Oregon manufacturers and distributors of their own "Stonewall" retaining wall systems.¹ Keystone sues Westblock for patent, copyright, and trademark infringement, unlawful trade practices, and unfair competition. Westblock asserts counterclaims for interference with contract, unlawful trade practices and unfair competition, antitrust violations, and patent invalidity.

STANDARDS

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). The materiality of a fact is determined by the substantive law on the issue. T.W. Electrical Service, Inc. v. Pacific Electrical Contractors Assn, 809 F.2d 626, 630 (9th Cir.1987). The authenticity of a dispute is determined by whether the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

The moving party has the burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). If the moving party shows that absence of a genuine issue of material fact, the non-moving party must go beyond the pleadings and identify those facts which show a genuine issue for trial. Id. at 324, 106 S.Ct. at 2553.

Special rules of construction apply to evaluating summary judgment motions: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the non-moving party. T.W. Electrical, 809 F.2d at 630.

DISCUSSION

A. Plaintiff's Motion for Partial Summary Judgment

Plaintiff moves for partial summary judgment dismissing defendant's counterclaims alleging interference with contract, unlawful trade practices and unfair competition, and antitrust violations.

1. Interference with Contract

Defendant's second counterclaim alleges plaintiff intentionally interfered with its contractual relations by communicating with defendant's customers about this dispute. To prevail on this counterclaim, defendant must show: (1) that it had business relations with a third party; (2) that plaintiff intentionally interfered with those relations; (3) that plaintiff acted with an improper motive or by improper means; and (4) that plaintiff's actions caused damage to defendant beyond the fact of the interference. Official Airline Guides, Inc. v. Churchfield Publishing, Inc., 756 F.Supp. 1393, 1408 (D.Or.1990).

Plaintiff argues this claim should be dismissed because defendant fails to show that damages were caused beyond the fact of the interference.

In late March, 1991, Keystone's counsel sent letters to eleven of defendant's customers advising them of this suit and of defendant's alleged patent infringements. These letters concluded with a sentence stating "in addition to the named defendants, anyone who makes, distributes, or installs Westblock's Stonewall systems may also be liable for infringement." Salespeople associated with one of plaintiff's licensees made similar remarks to some of defendant's customers verbally. Defendant responded by sending letters to customers assuring them it would hold them harmless from any liability. Defendant also wrote Keystone's licensee, demanding that its salespeople desist from making such remarks.

Defendant contends it subsequently lost wall system sales on a construction project in Vancouver, Washington to plaintiff's local licensee. Defendant also contends it lost anticipated sales of pins to one customer due to that customer's having "heard of" this litigation. These lost sales, however, are not shown to have been caused by defendant's letters or contacts. Neither involves customers alleged to have been written to or contacted by plaintiff. Defendant's contention that they "presumably" resulted from plaintiff's actions is not sufficient. I find that defendant has not shown the existence of a genuine issue of fact as to whether it incurred damages, beyond the fact of the contacts themselves, as a result of these contacts.

2. Unlawful Trade Practices and Unfair Competition

Defendant's third counterclaim alleges that plaintiff's communication with its customers constituted unlawful trade practices and unfair competition.

Causation of damages is again dispositive. A statutory unlawful trade practice claim is available only where an ascertainable loss occurs "as a result" of an unlawful practice. ORS 646.656. A common law unfair competition claim also requires a showing of resulting damages. Airwick Industries, Inc. v. Alpkem Corp., 384 F.Supp. 1027, 1032 (D.Or.1974). The same facts relevant to the interference with contract claim are relevant here. Those facts lead me conclude that no genuine issue of fact exists as to causation of damages.

3. Antitrust Claims

Defendant's fifth counterclaim alleges violations of section 1 of the Sherman Act and section 3 of the Clayton Act, 15 U.S.C. §§ 1 and 14. Defendant contends plaintiff's licensing agreements restrain trade both by (1) requiring licensees to purchase wall system pins only from plaintiff-approved vendors (a "tying" arrangement), and (2) by prohibiting licensees from dealing in competing goods (an "exclusive dealing" arrangement).

a. Preliminary Matter

In moving against defendant's anti-trust counterclaim, plaintiff relies on the affidavit of Robert A. MacDonald. Defendant objects to the admission of the MacDonald affidavit, citing Fed.R.Civ.P. 56(e). Rule 56(e) requires that affidavits be "made on personal knowledge" and "show affirmatively that the affiant is competent to testify to the matters stated therein." Plaintiff's counsel neglected to include in MacDonald's affidavit a statement of the basis for his personal knowledge. Plaintiff contends, however, that MacDonald is the executive vice-president of Keystone; that he has been employed there since June, 1987; and that his identity is well known to defendants, as they took his deposition "more than a month ago." Reply, p. 2, n. 1. In light of these circumstances, I have admitted the affidavit, and consider it in analyzing this motion.

b. Tying Arrangement

In a tying arrangement, a seller uses its power in the market for one product (the "tying" product) to force purchases of another (the "tied" product) that the buyer may have preferred to buy elsewhere. Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 12, 104 S.Ct. 1551, 1558, 80 L.Ed.2d 2 (1984). Tying arrangements are forbidden by the anti-trust laws in order to protect competition in the market for the "tied" product. Id. Here, defendant alleges, in effect, that by conditioning its sale of licenses — the tying product — on licensees' commitment to buy pins — the tied product — only from approved sources, plaintiff Keystone undermines competition in the market for pins. Illegal tying can be established on either a per se, or a rule of reason basis. Hyde, 466 U.S. at 9, 29, 104 S.Ct. at 1556, 1567.

(i.) Per Se Illegal Tying

Establishing a per se illegal tying arrangement requires proving that: (1) two separate products are tied together; (2) the defendant has sufficient power in the tying product market to impose restrictions in the tied product market; (3) the arrangement effects a "not insubstantial" volume of commerce in the tied product market; (4) the seller of the tying product coerces the buyer of the tying product into buying the tied product; and (5) the seller of the tying product has an economic interest in the sale of the tied product. Airweld, Inc. v. Airco, Inc., 742 F.2d 1184, 1189 (9th Cir.1984), cert. denied 469 U.S. 1213, 105 S.Ct. 1184, 84 L.Ed.2d 331 (1985).

I find that plaintiff lacks a sufficient economic interest in the sale of pins, the tied product here. Because the Ninth Circuit finds such an interest essential to establishing a per se tying arrangement, defendant's failure to show a genuine issue of fact requires granting this motion. It is therefore unnecessary to discuss plaintiff's other...