Luxpro Corp. v. Apple, Inc.

• Decision Date: 28 September 2009
• Docket Number: Case No. 08-CV-4092.
• Citation: 658 F.Supp.2d 921
• Parties: LUXPRO CORPORATION, a Taiwanese corporation, Plaintiff v. APPLE, INC., f/k/a Apple Computer, Inc., Defendant.
• Court: U.S. District Court — Western District of Arkansas

658 F.Supp.2d 921

LUXPRO CORPORATION, a Taiwanese corporation, Plaintiff v. APPLE, INC., f/k/a Apple Computer, Inc., Defendant.

Case No. 08-CV-4092.

United States District Court, W.D. Arkansas, Texarkana Division.

September 28, 2009.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Glenn E. Janik, Patrick J. Conroy, Shore Chan Bragalone LLP, Dallas, TX, Richard A. Adams, Corey Darnell McGaha, Patton Roberts, PLLC, Phillip N. Cockrell, Reid Davis Miller, Patton, Roberts, McWilliams, Greer & Capshaw, L.L.P., Texarkana, TX, Jeremy Young Hutchinson, Leisa B. Pearlman, Patton, Roberts, McWilliams & Capshaw, Little Rock, AR, for Plaintiff.

James M. Pratt, Jr., James M. Pratt, Jr., P.A., Camden, AR, Kevin A. Crass, Friday, Eldredge & Clark, Little Rock, AR, Penelope A. Preovolos, Stuart Christopher Plunkett, Morrison & Foerster, San Francisco, CA, for Defendant.

MEMORANDUM OPINION

HARRY F. BARNES, District Judge.

Before the Court is a Motion to Dismiss for Failure to State a Claim filed by Defendant Apple, Inc. ("Apple"). (Doc. 23). Plaintiff Luxpro Corporation ("Luxpro") responded. (Doc. 34). Apple replied. (Doc. 37). The Court heard arguments from both parties at a hearing on September 1, 2009. The Court finds this matter ripe for consideration.

BACKGROUND

Plaintiff Luxpro is a small Taiwanese corporation with its principle place of business in Taiwan. Luxpro develops, manufactures, and distributes MP3 players worldwide. Defendant Apple is a California corporation with its principle place of business in Cupertino, California. Apple manufactures, develops, and distributes MP3 players worldwide under the brand name iPod.

Apple has many versions of MP3 players including the iPod Shuffle, which was introduced by February 2005. Apple also has an online music store called iTunes Store where it sells songs that can only be played on iPods. Today, Apple dominates the worldwide MP3 market.

A) Luxpro's Business

Luxpro began producing a variety of MP3 players in 2004.¹ These MP3 players came equipped with features that were unavailable on any iPod at the time. In April 2005, Luxpro entered into an agreement with Beijing Huaqi Informational Digital Technology Co., Ltd. ("Beijing Huaqi") to supply Beijing Huaqi with 630,000 sets of various MP3 players. Beijing Huaqi was also licensed to distribute Luxpro's MP3 players for one year in China. Luxpro also entered into an agreement in April 2005 with Beijing Qian Kun Time Digital Technology Co., Ltd. ("Beijing Qian Kun"). Pursuant to this agreement, Luxpro was to provide over 600,000 sets of MP3 players to Beijing Qian Kun for two years. In June 2005, Luxpro began talks with InterTAN Canada, Ltd. ("InterTAN"). In August 2005, Luxpro shipped over seven thousand Top Tangent MP3 players to InterTAN for a two-week trial in InterTAN's retail stores. The trial was successful and InterTAN began to promote Luxpro's Top Tangent. Also in June of 2005, Luxpro entered into an agreement with TC Digital Electronic SBU ("TC"). Under this agreement, Luxpro agreed to supply TC with more than one million of Luxpro's MP3 players. In September of 2005, Luxpro sent MP3 players valued at NTD 2.8 Million to Kaga Electronics Co., Ltd. ("Kaga Electronics"), an electronics supplier in Japan. Finally, in September 2005, Luxpro was able to begin the process of publicly trading company shares on the GreTai Securities Market ("GreTai").

B) Apple's Actions

In March 2005, while Luxpro was debuting its Super Shuffle MP3 player at the CeBit Tradeshow in Hanover, Germany, Apple applied for and received an injunction from a German court. This injunction prohibited Luxpro from using the name "Shuffle." Luxpro renamed its Super Shuffle the Super Tangent and added the word "LUXPRO" to the front of the MP3 player. In April 2005, Apple sent letters to Luxpro demanding that they immediately stop marketing, manufacturing, and selling all of its competing MP3 players. Finally, in August 2005, Apple received a preliminary injunction from a Taiwanese court. This injunction prohibited Luxpro from manufacturing, distributing, and marketing any of its MP3 players. Eventually, Luxpro was successful in having the injunction lifted except to those products using the name "Shuffle." This injunction forced Luxpro to stop performing its existing contracts and orders. Luxpro was also forced to halt the progress in having its company shares publicly traded. The Taiwanese injunction was not lifted until November 2005, but it was March 2008 when the Taiwan Supreme Court dismissed the appeal. Apple also filed a claim with the Fair Trade Commission alleging Luxpro violated Taiwan's Fair Trade Act. The Fair Trade Commission issued a letter stating that Luxpro's Tangent product line did not violate the act.

C) Luxpro loses business

While Apple's injunctions were on appeal and without Luxpro's knowledge, Apple sent warning letters to companies who were doing business with Luxpro. These letters demanded that those companies cease business relations with Luxpro. In September 2005, InterTAN pulled 4,500 Luxpro MP3 players from its shelves and destroyed them. In April 2006, InterTAN officers informed Luxpro that they had to cease all business dealings with them because of the pressure exerted on them by Apple. In September 2006, Starbucks Corporation backed out of a proposal to place Luxpro MP3 players in Japanese Starbucks. Also in September 2006, Apple threatened to file suit against Orchard Company, Kaga Electronics, and Web Worker if they did not end all business relationships with Luxpro. Apple also, through its distributors, exerted pressure on Compu Import Co., Carrefour, EUPA, 3C and ET Mall to discontinue business with Luxpro.

STANDARD OF REVIEW

A motion to dismiss should be granted where the plaintiff fails to state a claim upon which relief can be granted. Fed. R.Civ.P. 12(b)(6). The Federal Rules of Civil Procedure require that a complaint state "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The Court assumes that all facts in a complaint are true when considering a motion to dismiss. Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993). While the Court assumes the facts in a complaint are true, it is free to ignore "sweeping legal conclusions" and "unwarranted inferences." Wiles v. Capitol Indem. Corp., 280 F.3d 868, 870 (8th Cir.2002). When evaluating a complaint, its legal sufficiency may be considered but not the weight of the evidence supporting it. Id. The Court is not to require "heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). The plaintiff must "nudge their claims across the line from conceivable to plausible." Id.

DISCUSSION

In its First Amended Complaint ("FAC"), Luxpro claims Apple: 1) interfered with its contractual/prospective advantage; 2) tortiously interfered with its contracts; 3) committed an attempted common law monopolization; 4) committed commercial disparagement; and 5) violated California Business and Professions Code section 17200. Apple first argues in its Motion to Dismiss that California law applies to Luxpro's claims, the Noerr-Pennington doctrine immunizes Apple from all of Luxpro's claims, and if it does not, Luxpro's interference claims are barred by the applicable statute-of-limitations period. Apple goes on to argue that, if Luxpro's claims are not completely barred, they must fail for failure to state a claim upon which relief can be granted. The Court will address each argument in turn.

1) Choice of law: California v. Arkansas

Apple asserts that California state law applies to all of Luxpro's claims. Luxpro disagrees and asserts that it is premature for the Court to perform a choice-of-law analysis. Alternatively, Luxpro contends that it has stated claims upon which relief may be granted under both Arkansas or California law. While the Court does not agree that a choice-of-law analysis is premature at this stage in the case, the parties have not sufficiently briefed the issue for the Court to perform an analysis without making arguments for the parties. Rather than engaging in guesswork, the Court will analyze each of Luxpro's claims under both Arkansas and California law to determine if a claim upon which relief may be granted has been made.

2) Noerr-Pennignton Doctrine

Apple alleges that all of Luxpro's claims are barred by the Noerr-Pennington doctrine. Luxpro responds by arguing that Apple's strategic plan to ruin Luxpro's business does not fall under the protection of the Noerr-Pennington doctrine. Specifically, in Luxpro's response it states that its FAC "clearly takes issue with the validity and the abusive nature of Apple's litigation." (Doc. 34). However, in the same paragraph Luxpro states its claims "arise from damages caused by Apple's wholly separate strategy of intimidating Luxpro's customers, retailers, suppliers, and manufacturers." (Doc. 34). The Court interprets this language, along with the totality of Luxpro's response and statements made in the hearing, to mean that Luxpro is asserting that Apple's actions of sending warning letters, making threats, and exerting pressure on non-parties is not covered by Noerr-Pennington immunity.

The Noerr-Pennington doctrine provides that a party's efforts to procure government action, even when motivated by anticompetitive intent, are protected from antitrust scrutiny. E.g., Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). This protection extends to "the use of administrative or judicial process" as well. California Motor Transport Co. v. Trucking...