Research in Motion Ltd. v. Motorola, Inc.

• Decision Date: 11 December 2008
• Docket Number: Civil Action No. 3:08-CV-0317-G.,Civil Action No. 3:08-CV-0284-G.
• Parties: RESEARCH IN MOTION LIMITED, et al., Plaintiffs, v. MOTOROLA, INC., Defendant. Motorola, Inc., Plaintiff, v. Research in Motion Limited, et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

Page 788

644 F.Supp.2d 788

RESEARCH IN MOTION LIMITED, et al., Plaintiffs, v. MOTOROLA, INC., Defendant.

Motorola, Inc., Plaintiff, v. Research in Motion Limited, et al., Defendants.

Civil Action No. 3:08-CV-0284-G.

Civil Action No. 3:08-CV-0317-G.

United States District Court, N.D. Texas, Dallas Division.

December 11, 2008.

COPYRIGHT MATERIAL OMITTED

John R. Emerson, George W. Bramblett, Jr., Phillip Brett Philbin, Haynes & Boone LLP, Dallas, TX, Dominic E. Massa, Gregory P. Teran, Jared C. Miller, John J. Regan, Joseph J. Mueller, Michael J. Summersgill, Michelle D. Miller, William F. Lee, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, Patricia Smink Rogowski, Connolly Bove Lodge & Hutz, Wilmington, DE, William J. Bohler, Wilmer Cutler Pickering Hale and Dorr LLP, Palo Alto, CA, for Plaintiffs.

Eric W. Pinker, Angela V. Colmenero, Mark E. Turk, Lynn Tillotson & Pinker, Dallas, TX, Jesse J. Jenner, Steven Pepe, Ropes & Gray LLP, New York, NY, Nicole M. Jantzi, Ropes & Gray LLP, Washington, DC, Norman H. Beamer, Ropes & Gray LLP, Palo Alto, CA, for Defendant.

MEMORANDUM OPINION AND ORDER

A. JOE FISH, Senior District Judge.

Before the court are various motions of the defendant Motorola, Inc. ("Motorola" or "the defendant"). Motorola moves to dismiss all of the claims brought by the plaintiffs, Research in Motion Limited and Research in Motion Corporation (collectively, "the plaintiffs" or "RIM"). Motorola also moves, in the alternative, to bifurcate and stay RIM's antitrust and contract claims. Finally, Motorola seeks to dismiss, stay, or transfer RIM's declaratory judgment actions. For the reasons discussed below, all of the motions are denied.

I. BACKGROUND

A. Factual Background

This is an action brought by RIM against Motorola for patent infringement, breach of contract, and violations of the antitrust laws. See generally Complaint. Both Motorola and RIM are in the business of developing and marketing mobile wireless communication devices. To work properly, these devices must connect to a network provided by a mobile wireless carrier. Complaint ¶ 15. These carriers enable consumers to place and receive telephone calls, send and receive e-mails, and connect to the Internet through mobile wireless handsets. Id. New wireless technologies are constantly in development. But before they can be broadly commercialized, service providers and device manufacturers must agree on common technology specifications. In other words, standards must be set. Id. ¶ 16.

Standards are important for several reasons. First, they facilitate the adoption and advancement of technology as well as the development of products that can interoperate with one another. Id. ¶ 20. Standards also lower costs by increasing product manufacturing volume, and they increase price competition by eliminating "switching costs" for consumers who desire to switch from products manufactured by one firm to those manufactured by another. Id. ¶ 21. They also lead to earlier adoption of new technology. Id. There is, however, one downside to standards: they create "essential patents." See id. ¶ 23. The term "essential patents" refers to patents that are essential to a standard—i.e., patents that claim technologies selected by a standards development organization ("SDO"). Id. ¶ 1. Once a patent becomes an essential patent, it gains undue significance as a result. Id. ¶ 5. Companies that produce products governed by a standard become "locked in" to the technologies included in the standard. Id. ¶ 23. Customers have no practical choice other than to buy products that comply with the standard. Thus, the owners of essential patents gain market power.

In order to reduce the likelihood that owners of essential patents will abuse their market power, SDOs have adopted rules, policies, and procedures that control the disclosure and licensing of essential patents. Id. ¶ 25. These rules, policies, and procedures are known as intellectual property rights policies ("IPR policies"). Id. IPR policies usually require owners of essential patents to commit to license those patents on fair, reasonable, and nondiscriminatory ("FRAND") terms. Id. ¶¶ 1, 27. These "FRAND commitments" are intended to prevent owners of essential patents from acquiring too much of the market power that would otherwise be inherent in owning an essential patent. Id. ¶ 28.

RIM and Motorola both produce wireless communication devices. RIM offers the well-known BlackBerry® device, with built in Wi-Fi capabilities. Id. ¶¶ 8, 29, 35. Motorola offers similar devices. Id. ¶ 10. As a result, the two companies are in direct competition. Id. ¶¶ 34-35. Motorola, however, is the owner of several essential patents. Its patents have been incorporated into standards set by the European Telecommunications Standards Institute ("ETSI"), and the Institute of Electrical and Electronics Engineers ("IEEE"). See id. ¶¶ 42, 48, 59-80. Both ETSI and IEEE require all patent owners to promise that they will license any patents incorporated into their standards on FRAND terms. Id. ¶¶ 60, 61, 76. Motorola's agreements with ETSI and IEEE require it to license its essential patents on FRAND terms. See id.

In 2003, Motorola licensed several of its essential and non-essential patents to RIM. Id. ¶¶ 84-86. Motorola and RIM entered into a Cellular Essential Properties Cross License Agreement ("Cross License Agreement"). Id. This agreement gave RIM a license to use Motorola's essential patents for five years, and provided that in 2007, the parties would begin good faith negotiations to extend the contract. Id. When the license expired at the end of 2007, RIM sought to enter negotiations to extend the contract. Id. ¶ 88. RIM avers that Motorola refused to negotiate reasonably and will not re-license the patents at a FRAND price. Id. ¶¶ 88-89.

RIM contends that Motorola's refusal to negotiate in good faith constitutes a breach of both the Cross License Agreement and the commitments Motorola made to IEEE and ETSI to license its essential patents on FRAND terms. Id. ¶¶ 162-67, 175-79. RIM also asserts a claim against Motorola under a theory of promissory estoppel. Id. ¶¶ 168-74. RIM maintains that Motorola promised potential licensees, via its commitments to IEEE and ETSI, that it would license its essential patents on FRAND terms. Id. ¶ 169. Motorola insists that because other wireless device companies, like RIM, foreseeably relied on this promise, Motorola is estopped to deny it. Id. ¶¶ 170-72.

RIM brings two other causes of action against Motorola. Based on Motorola's alleged failure to license its patents on FRAND terms, RIM brings a claim for violation of Section 2 of the Sherman Act. Id. ¶¶ 180-85. Finally, RIM asserts that Motorola has willfully infringed nine of RIM's patents. Id. ¶¶ 115-61.

B. Procedural Background

RIM filed this suit against Motorola on February 16, 2008. Only minutes later, on the same day, Motorola filed suit against RIM in the United States District Court for the Eastern District of Texas. Plaintiff Research in Motion's Notice of Supplemental Authority in Opposition to Motorola's Motion to Dismiss, Stay or Transfer ("Notice of Supplemental Authority") at 1. RIM moved to transfer Motorola's suit to the Northern District of Texas. Id. Judge T. John Ward of the Eastern District granted this motion on October 17, 2008. Appendix in Support of Plaintiff Research in Motion's Notice of Supplemental Authority in Opposition to Motorola's Motion to Dismiss, Stay or Transfer ("Appendix to Notice of Supplemental Authority") at 1. His decision rested on the "first-filed" rule, holding that, although RIM filed its suit only minutes earlier than Motorola, the rule still applied. Id. RIM states that it will seek to consolidate Motorola's case with this one as soon as it is transferred to the Northern District of Texas. Notice of Supplemental Authority at 1.

II. ANALYSIS

A. The Motions to Dismiss

1. 12(b)(6) Standard

"To survive a Rule 12(b)(6) motion, the plaintiff must plead `enough facts to state a claim to relief that is plausible on its face.'" In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir.2007) (quoting Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007)). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 127 S.Ct. at 1964-65 (citations, quotations marks, and brackets omitted). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Katrina Canal, 495 F.3d at 205 (quoting Twombly, 127 S.Ct. at 1965). "The court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." Id. (internal quotation marks omitted) (quoting Martin K. Eby Construction Company v. Dallas Area Rapid Transit, 369 F.3d 464 (5th Cir.2004)).

2. The Motion to Dismiss the Antitrust Claim

RIM's antitrust claim alleges that Motorola violated Section 2 of the Sherman Act. Complaint ¶¶ 180-85. To establish such a violation, RIM must prove two elements: (1) possession of monopoly power in the relevant market, and (2) that the monopolist achieved or is maintaining monopoly power through anticompetitive conduct. Verizon Communications Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S. 398, 407, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004). Motorola moves to dismiss RIM's antitrust claim under Rule 12(b)(6) on three separate grounds. First, Motorola argues that it does not have monopoly power in the relevant market. Defendant Motorola, Inc.'s Brief in Support of its Motion to Dismiss or Stay Plaintiffs' Antitrust and Contract Claims; And to ...