U.S. Ring Binder L.P. v. World Wide Stationery Mfg. Co.

• Decision Date: 19 August 2011
• Docket Number: Case No. 3:10 CV 2556.
• Citation: 804 F.Supp.2d 588
• Parties: U.S. RING BINDER L.P., Plaintiff, v. WORLD WIDE STATIONERY MANUFACTURING CO., LTD., Defendant.
• Court: U.S. District Court — Northern District of Ohio

804 F.Supp.2d 588

U.S. RING BINDER L.P., Plaintiff,

v.WORLD WIDE STATIONERY MANUFACTURING CO., LTD., Defendant.

Case No. 3:10 CV 2556.

United States District Court, N.D. Ohio, Western Division.

Aug. 19, 2011.

Jay Harris, Harris, Reny & Torzewski, Toledo, OH, Stephanie H. To, Anthony G. Simon, Timothy M. Cronin, Timothy E. Grochocinski, Simon Law Firm, St. Louis, MO, for Plaintiff.

Emily D. Throop, Hugh F. Bangasser, J. Timothy Hobbs, K & L Gates, Seattle, WA, Michael A. Pavlick, K & L Gates, Pittsburgh, PA, for Defendant.

MEMORANDUM OPINION AND ORDER

JACK ZOUHARY, District Judge.

Introduction

This matter is before the Court on the Motion of Defendant World Wide Stationery Manufacturing Co., Ltd. (“World Wide”) to Dismiss Plaintiff U.S. Ring Binder L.P.'s (“U.S. Ring”) Amended Complaint (“Complaint”) for failure to state a claim upon which relief may be granted (Doc. No. 26). The matter has been fully briefed (Doc. Nos. 27, 34 & 36).

As part of its Motion to Dismiss, World Wide filed a Notice of Constitutional Question with the U.S. Attorney General (“the Government”) (Doc. No. 30). The Government intervened, pursuant to Federal Civil Rule 5.1(c) (Doc. No. 47), and opposed the Motion to Dismiss (Doc. No. 48), defending the constitutionality of 35 U.S.C. § 292 (“False Markings Act”). World Wide replied (Doc. No. 49). Thereafter, the parties stipulated to stay consideration of the constitutional challenge and related arguments until the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) disposes of a case in which the statute's constitutionality is likewise challenged (Doc. No. 52). The constitutional question, however, is dismissed as moot because World Wide's Motion to Dismiss the Complaint is granted on other grounds.

The Complaint

The Complaint advances the following allegations in support of a variety of federal and state law claims.

U.S. Ring manufactures ring metals (“rings”) for use in looseleaf binders (Doc. No. 11 at ¶ 7). World Wide, a Hong Kong-based firm with its primary U.S. office in Fremont, Ohio ( id. at ¶¶ 3–4), is the dominant manufacturer of rings, controlling 80 percent of the domestic ring industry as compared to U.S. Ring's 15 percent share ( id. at ¶ 8).

Ring manufacturers sell their products to binderies, which incorporate the rings into notebooks or looseleaf binders for sale to retailers ( id. at ¶¶ 9–10). Both the ring and bindery markets support a limited number of competitors ( id. at ¶ 11); indeed, U.S. Ring is World Wide's “sole direct competitor[ ]” ( id. at ¶ 20). By contrast, binderies sell to many retailers, which, in turn, sell binders and notebooks to end consumers ( id. at ¶¶ 10–11).

The Complaint divides rings into two relevant product markets ( id. at ¶ 17), distinguishing between unique or patented products versus commodity rings ( id. at ¶ 12). Commodity rings is the relevant market for antitrust analysis ( id. at ¶ 17). As the name implies, demand for commodity rings is price-driven ( id. at ¶ 13). The Complaint defines the geographic market for both unique and commodity rings as the United States ( id. at ¶ 16).

U.S. Ring alleges that World Wide exploits its dominant position in the market to pressure binderies into “less than ideal, unethical, and illegal contracts” in violation of federal antitrust law ( id. at ¶ 22). Specifically, World Wide only sells two of its unique ring products-the One Touch Ring and the One Touch 2 Ring (collectively “the One Touch Ring products”)—to binderies that agree to purchase a certain portion of their commodity ring requirements from World Wide regardless of price ( id. at ¶ 43). U.S. Ring claims it experienced a significant decrease in commodity ring orders from customers subjected to World Wide's allegedly illegal tying agreements ( id. at ¶ 45). Such agreements, according to U.S. Ring, violate Section 1 of the Sherman Antitrust Act under a per se theory ( id. at ¶¶ 69, 82) or, in the alternative, the agreements unreasonably restrain competition under a rule of reason analysis ( id. at ¶¶ 80, 93).

In addition, World Wide is accused of “willfully acquir[ing] and maintain[ing]” monopoly power in the commodity ring market ( id. at ¶¶ 61–62), and that World Wide's strategy is driven by a specific intent to monopolize the commodity ring market, an outcome that has a “dangerous probability” of success if U.S. Ring and other manufacturers are eliminated ( id. at ¶¶ 65–66).

Furthermore, U.S. Ring alleges World Wide misuses patents and abuses the patent process by introducing small variations into existing ring metal products, patenting the modified product, and then representing to customers that World Wide possesses patent rights to both the new and old (unmodified) ring metal technologies ( id. at ¶¶ 24–25). Based on these representations, customers purchase products incorporating the new and old technologies solely from World Wide, under the mistaken belief that World Wide maintains exclusive right to sell both products ( id. at ¶ 26). World Wide further allegedly abuses the patent process by labeling certain of its products as patented technologies when, in fact, World Wide holds no patent for the product ( id. at ¶ 51), a practice that violates the False Markings Act and harms World Wide's competitors ( id. at ¶¶ 52–53). U.S. Ring offers the events leading to Hong Kong Stationery Manufacturing Co., Ltd.'s exit from the U.S. ring market as an example of World Wide's misuse and abuse of the patent process ( id. at ¶¶ 28–32).

U.S. Ring also claims World Wide's conduct during and after two previous lawsuits, in which U.S. Ring was the opposing party, demonstrates World Wide's anti-competitive conduct. In 2001, World Wide filed a counterclaim against U.S. Ring for patent infringement ( id. at ¶ 34), only to abandon this counterclaim and agree to a settlement of U.S. Ring's claims after U.S. Ring shared evidence of prior art. This evidence demonstrated World Wide's asserted patent was invalid ( id. at ¶¶ 35–36). Thereafter, World Wide “corruptly and unethically utiliz[ed] the Chinese government to forcefully injure” U.S. Ring ( id. at ¶ 38). Specifically, World Wide induced the Chinese government to shutter the Chinese facility that produced rings for U.S. Ring, and was the subject of World Wide's baseless patent infringement counterclaim ( id. at ¶¶ 37–38).

Six years later, World Wide again filed claims against U.S. Ring for allegedly infringing two patents—claims U.S. Ring answered by proving the supposed World Wide patents were, in fact, invalid ( id. at ¶¶ 54–56). During trial, World Wide's claims were demonstrated as groundless after World Wide's own uncontested evidence established the improper inventorship of the disputed patents ( id. at ¶ 57). Further, World Wide produced scant evidence on its infringement claims and no evidence to rebut U.S. Ring's invalidity counterclaims ( id.). Finally, World Wide caused delays through poor litigation management and pursued a willful infringement claim that, as a matter of law, had no chance of success ( id.). Such unwarranted claims were allegedly pursued with the intent of damaging U.S. Ring's business by, among other things, indicating to U.S. Ring's customers that the firm's products infringed on World Wide patents ( id. at ¶ 58).

In addition to claims for violations of federal antitrust and patent law, U.S. Ring advances the following claims:

• Violations of state antitrust statues in “the various states where World Wide and U.S. Ring do business” ( id. at ¶ 100);

• Unfair competition resulting from deceptive acts harming competition in the Relevant Market for Sales ( id. at ¶¶ 106–08);

• A “count” labeled “injunctive relief” ( id. at ¶¶ 111–13);

• Tortious interference with prospective economic advantage resulting from World Wide disrupting and capturing U.S. Ring's relationships with current and future customers ( id. at ¶¶ 114–21);

• Common law and statutory unfair competition ( id. at ¶¶ 122–24);

• Tortious interference by causing binderies to breach contracts they have entered into with U.S. Ring ( id. at ¶¶ 125–31); and

• Relief for damage caused by World Wide's “sham litigation” ( id. at ¶¶ 141–44).

Standard of Review

Federal Civil Rule 8 demands that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” The pleading standard does not require “detailed factual allegations,” but it demands more than an unadorned legal accusation. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Id. Such conclusory allegations must be rejected, and only a complaint containing well-pled factual allegations that plausibly give rise to an entitlement to relief will survive demurrer. Id. at 1950.

Discussion

The Complaint contains six counts explicitly linked to Sections 1 and 2 of the Sherman Antitrust Act (“the Act”). U.S. Ring alleges World Wide has monopolized, or is attempting to monopolize, “any part of the trade or commerce among the several States.” 15 U.S.C. § 2. U.S. Ring also invokes the prohibition of “[e]very contract, combination ... or conspiracy, in restraint of trade or commerce among the several States,” 15 U.S.C. § 1, with respect to the alleged tying agreements under both per se and rule of reason analysis.

Section 2 Claims

U.S. Ring argues World Wide has monopolized, or is attempting to monopolize, the commodity ring market. To state a claim arising from World Wide's alleged monopolization, U.S. Ring must adequately allege World Wide attained monopoly power in the commodity ring market through “anti-competitive or exclusionary means” as compared to the lawful accretion of monopoly power through, for example, superior products. Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 782 (6th Cir.2002). To survive this Motion to Dismiss with...