Telectronics Proprietary, Ltd. v. Medtronic, Inc.

Decision Date19 May 1988
Docket NumberNo. 83 CIV. 8568 (PKL).,83 CIV. 8568 (PKL).
Citation687 F. Supp. 832
PartiesTELECTRONICS PROPRIETARY, LTD., Plaintiff, v. MEDTRONIC, INC., Defendant, v. TELECTRONICS, INC., Telectronics U.S.A., Inc. and Telectronics Pty. Ltd., Additional Defendants on Counterclaim.
CourtU.S. District Court — Southern District of New York



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.


LEISURE, District Judge.

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:

(1) Telectronics' motion under Fed.R. Civ.P. 12(b)(6) to dismiss Medtronic's first (Sherman Act §§ 1, 2) and third (RICO) counterclaims;
(2) Telectronics' motion under Fed.R. Civ.P. 12(f) to strike Medtronic's ninth (unclean hands), twelfth (laches, fraud, estoppel, and unclean hands), and fourteenth (failure to join an indispensable party) affirmative defenses;
(3) Medtronic's motion for judgment on the pleadings or summary judgment on Telectronics' Clayton Act § 7 claim (4) Telectronics' motion for sanctions pursuant to Fed.R.Civ.P. 11 along with Medtronic's motion for summary judgment on this motion.
(5) Telectronics' motion for partial summary judgment that the defense of a license under the '242 patent is res judicata or issue precluded.

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 (quoting Sutliff, Inc. v. Donovan Cos., 727 F.2d 648, 654 (7th Cir.1984) (Posner, J.) (quoting French Quarter Apartments Ltd. v. Georgia-Pacific Corp. (In re Plywood Antitrust Litigation), 655 F.2d 627, 641 (5th Cir.1981), cert. dismissed, 462 U.S. 1125, 103 S.Ct. 3100, 77 L.Ed.2d 1358 (1983))).

Having set forth the standards for evaluating motions under Rule 12(b)(6), the Court now addresses the sufficiency of Medtronic's counterclaims.

A. Medtronic's Antitrust Claim

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 One
Restraint of Trade

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. "The cornerstone of antitrust law is competition. Congress's intent in passing the Sherman Act was not to subject all business and commercial torts to the scrutiny of federal antitrust law." 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).

Section Two

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...

To continue reading

Request your trial
57 cases
  • TV Communications Network, Inc. v. ESPN, Inc., Civ. A. No. 90-F-864.
    • United States
    • U.S. District Court — District of Colorado
    • April 5, 1991
    ...against all the defendants are entirely conclusory merely by quoting words from the Sherman Act. Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F.Supp. 832, 838 (S.D.N.Y.1988) (quoting Segal v. Gordon, 467 F.2d 602, 608 (2d Cir.1972)). Accordingly, the motions to dismiss the third c......
  • Hartford Fire Ins. v. Federated Dept. Stores
    • United States
    • U.S. District Court — Southern District of New York
    • October 13, 1989
    ...complaint. A "claim for relief may not be amended by the briefs in opposition to a motion to dismiss." Teletronics Proprietary Ltd. v. Medtronic, Inc., 687 F.Supp. 832, 836 (S.D.N.Y.1988). 6 The Supreme Court also noted its approval of Susquehanna Corp. v. Pan American Sulphur Company, 423 ......
  • Granite Partners, L.P. v. Bear, Stearns & Co.
    • United States
    • U.S. District Court — Southern District of New York
    • July 26, 1999
    ...was not to subject all business and commercial torts to the scrutiny of federal [antitrust] law.'" Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F.Supp. 832, 837 (S.D.N.Y.1988) (quoting Falstaff Brewing Co. v. Stroh Brewery Co., 628 F.Supp. 822, 826 (N.D.Cal.1986)). Furthermore, "[......
  • SEC v. Lorin
    • United States
    • U.S. District Court — Southern District of New York
    • November 21, 1994
    ...14 (S.D.N.Y.1985). Accordingly, Rule 12(f) motions are not favored and will not be granted routinely. Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F.Supp. 832 (S.D.N.Y.1988). To succeed on such a motion, the movant must first show that it is prejudiced by the inclusion of the defe......
  • Request a trial to view additional results
4 books & journal articles
  • Table of cases
    • United States
    • ABA Antitrust Library Intellectual Property and Antitrust Handbook. Second Edition
    • December 6, 2015
    ...326 Telcomm Tech. Servs. v. Siemens Rolm Commc’ns, 388 F.3d 820 (11th Cir. 2004), 326 Telectronics Proprietary, Ltd. v. Detronic, Inc., 687 F. Supp. 832 (S.D.N.Y. 1988), 270 Teragren, LLC v. Smith & Fong Co., 2008 WL 725186 (W.D. Wash. 2008), 262 In re Terazosin Hydrochloride Antitrust Liti......
  • Antitrust Issues in Transactions Involving Intellectual Property
    • United States
    • ABA Antitrust Library Intellectual Property and Antitrust Handbook. Second Edition
    • December 6, 2015
    ...6. See, e.g. , SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1205 (2d. Cir. 1981); Telectronics Proprietary, Ltd. v. Detronic, Inc., 687 F. Supp. 832, 844 (S.D.N.Y. 1988); United States v. Lever Bros., 216 F. Supp. 887, 889 (S.D.N.Y. 1963). 7. See, e.g. , United States v. Columbia Pictures, 189 ......
  • Assessing bias in patent infringement cases: a review of International Trade Commission decisions.
    • United States
    • Harvard Journal of Law & Technology Vol. 21 No. 2, March 2008
    • March 22, 2008
    ...existence of a license and, therefore, no violation). Related Federal Court Case(s): Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F. Supp. 832 (S.D.N.Y. 1988). District Court Disposition: District court granted alleged infringer's motion to dismiss antitrust and RICO counterclaims......
  • CHAPTER § 4.01 Framework of Antitrust Law
    • United States
    • Full Court Press Regulation of Pharmaceutical Manufacturers Title CHAPTER 4 Antitrust Issues
    • Invalid date
    ...l ittle reason to exempt patent acquisitions from scrutiny under this provision."); Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F. Supp. 832, 844 (S.D.N.Y. 1988) (patents included under Section 7 definition of assets); Record Club of Am. v. Capitol Records, 1971 Trade Cas. (CCH) ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT