Telectronics Proprietary, Ltd. v. Medtronic, Inc.
Decision Date | 19 May 1988 |
Docket Number | No. 83 CIV. 8568 (PKL).,83 CIV. 8568 (PKL). |
Citation | 687 F. Supp. 832 |
Parties | TELECTRONICS PROPRIETARY, LTD., Plaintiff, v. MEDTRONIC, INC., Defendant, v. TELECTRONICS, INC., Telectronics U.S.A., Inc. and Telectronics Pty. Ltd., Additional Defendants on Counterclaim. |
Court | U.S. District Court — Southern District of New York |
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Gottlieb, Rackman & Reisman, New York City, Michael I. Rackman, Allen I. Rubenstein, of counsel, for plaintiff and counterclaim defendants.
Quirk & Bakalor, P.C., New York City, Thomas E. Tookey, of counsel, and Medtronic, Inc., Minneapolis, Minn., Grady J. Frenchick, Marcia Bland Staten, Robert C. Beck, of counsel, for defendant.
This case has its origins in a patent-infringement suit brought before the International Trade Commission ("ITC") by Medtronic against Telectronics in July 1983. Telectronics Proprietary Ltd. initiated this action, seeking declaratory judgment of noninfringement and invalidity, in November 1983. Medtronic responded with its answer and a counterclaim for infringement of four patents; Telectronics replied by asserting the defense of a license.
After discovery in the ITC case,1 Telectronics amended its complaint in this Court to assert antitrust claims. Medtronic first answered the amended complaint in November 1984, and included in its answer antitrust-based counterclaims. Later, in February 1986, Medtronic filed an amended pleading which included, inter alia, counterclaims based on antitrust law, patent law, and RICO, and affirmative defenses based on fraud, laches, unclean hands, and estoppel.
The following motions are now before this Court:
This opinion will address this motions seriatim.
All of the parties in this action make and sell medical products including cardiac pacemakers.
Plaintiff Telectronics Proprietary Ltd., and counterclaim defendant Telectronics, Inc. are subsidiaries of counterclaim defendant Telectronics U.S.A., Inc. (hereinafter collectively "Telectronics"). Telectronics Pty., Ltd., an Australian company currently not a party to this suit, owns a majority interest in Telectronics U.S.A.
Defendant Medtronic owns several patents, four of which are involved in this suit: U.S. Patent Nos. 3,595,242, 3,648,707, 4,059,116, and 4,312,355. All four of these patents involve pacemaker technology; their validity is in dispute.
The function of a motion to dismiss under Rule 12(b)(6) is to test the adequacy of the statement of a claim for relief made in any pleading. In considering a Rule 12(b)(6) motion, the court should confine its inquiry to the pleadings.2 A claim for relief "may not be amended by the briefs in opposition to a motion to dismiss." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.1984) (citing Jacobson v. Peat, Marwick, Mitchell & Co., 445 F.Supp. 518, 526 (S.D.N.Y.1977); see Sansom Comm. v. Lynn, 366 F.Supp. 1271, 1278 (E.D.Pa.1973); Chambliss v. Coca-Cola Bottling Co., 274 F.Supp. 401, 409 (E.D.Tenn.1967), aff'd on other grounds, 414 F.2d 256 (6th Cir.1969), cert. denied, 397 U.S. 916, 90 S.Ct. 921, 25 L.Ed.2d 97 (1970)), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985). A Rule 12(b)(6) motion is available to any party wishing to challenge the formal sufficiency of a claim whether it is made in a complaint, counterclaim, cross-claim, or third party claim.3
Rule 8(a) supplements Rule 12(b)(6) by setting forth the requirements of a claim for relief: (1) a brief statement of the basis of the court's jurisdiction; (2) "a short and plain statement of the claim showing that the pleader is entitled to relief;" and (3) a demand for judgment. Under the Federal Rules, "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957). Nonetheless, the pleading must set forth enough information to suggest that relief would be based on some recognized legal theory. "The District Court has no obligation to create, unaided by the plaintiff, new legal theories to support a complaint." District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1081-82 (D.C.Cir.1984).4 "In practice `a complaint ... must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.'" Car Carriers, 745 F.2d at 1106 ).
Having set forth the standards for evaluating motions under Rule 12(b)(6), the Court now addresses the sufficiency of Medtronic's counterclaims.
Medtronic's first counterclaim is based on alleged violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (1982). Medtronic seems to be alleging that Telectronics engaged in a conspiracy to restrain trade, attempted to monopolize, conspired to monopolize, and did monopolize the market for certain kinds of pacemakers. Defendant's First Amended and Supplemental Answer to Plaintiff's First Amended and Supplemental Complaint ¶¶ 83, 88 (hereinafter "Answer"). Each of these allegations suggests a distinct claim under the Sherman Act.
Section 1 of the Sherman Act, 15 U.S.C. § 1 (1982), makes "every contract ... or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, ... illegal." "The gravamen of a charge under section 1 is conduct in restraint of trade; no fundamental alteration of market structure is necessary." Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 272 (2d Cir.1979), cert. denied, 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980). There are several elements to a section 1 claim. There must be (1) concerted action, (2) by two or more persons, and (3) the concerted action must unreasonably restrain interstate or foreign trade or commerce.5 Although Medtronic has alleged that "Telectronics, Inc. and Telectronics U.S.A., Inc. have conspired and contracted with ELA SA and ELA U.S.A. and Nucleus Ltd., Synthelabo S.A. and Nestle Alimenta and Siemens-Elema, Inc. to restrain trade," Answer ¶ 83, it has not specified in this counterclaim what concerted actions these parties took to further their goal.6 "Although the Federal Rules permit statement of ultimate facts, a bare bones statement of conspiracy or of injury under the antitrust laws without any supporting facts permits dismissal." Heart Disease Research Found. v. General Motors Corp., 463 F.2d 98, 100 (2d Cir.1972).7 A generous reading of Medtronic's pleading indicates that the "anticompetitive" concerted action Telectronics allegedly engaged in was a conspiracy to violate the Medicare laws. Answer ¶¶ 63, 89. This allegation by itself is insufficient to state a claim under section 1 of the Sherman Act. Falstaff Brewing Co. v. Stroh Brewery Co., 628 F.Supp. 822, 826 (N.D.Cal.1986). Moreover, Medtronic has failed to plead antitrust injury, another necessary element of an antitrust claim.8 Thus this claim must be dismissed under Rule 12(b)(6).
There are three types of civil actions which may be brought under section 2 of the Sherman Act, 15 U.S.C. § 2 (1982): (1) monopolization; (2) attempted monopolization; and (3) conspiring to monopolize. Medtronic appears to be trying to assert each of these claims.
To state properly a monopolization claim under section 2, the claimant must allege (1) that defendant has monopoly power — the ability to control prices or exclude competition; and (2) that defendant acquired its monopoly power through conduct intended to obtain such power.9
Section 2 of the Sherman Act is "aimed ... at the acquisition or retention of effective market control." United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 945, 92 L.Ed. 1236 (1948). It is designed to prevent "a pernicious market structure in which the concentration of power saps the salubrious influence of competition." Berkey Photo, 603 F.2d at 272. Ordinarily, the court may infer the existence of monopoly power from a predominant share of the relevant market. Grinnell, 384 U.S. at 571, 86 S.Ct. at 1704. Here, although it did offer definitions of the relevant product and geographic markets and submarkets, Medtronic has alleged neither monopoly power, nor even significant market share on Telectronics' part. Instead, it simply avers that: "the Telectronics entities have monopolized and continue to monopolize" the relevant markets. Answer ¶ 88. Such a statement is not a sufficient allegation of monopoly power to withstand a motion to dismiss. "A...
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