Antitrust Law Daily Wrap Up, ANTITRUST—D. Minn.: 3M could have attempted to monopolize through patent litigation, (Feb 10, 2015)

By Greg Hammond, J.D.

Multinational conglomerate 3M Co. could not evade claims that it attempted to monopolize certain earplug and earmuff markets through “objectively baseless” patent infringement litigation. In denying 3M’s motion to dismiss, the federal district court in Minneapolis determined that the plaintiff sufficiently alleged product markets, antitrust injury, monopoly power, and willfully acquired or maintained monopoly power through exclusionary or predatory conduct (Moldex Metric, Inc. v. 3M Co., February 9, 2015, Ericksen, J.).

Background. In 2012, 3M sued Moldex Metric, Inc. for patent infringement, claiming that Moldex Metric’s BattlePlug earplug and M-series earmuffs infringed 3M’s U.S. Patent Numbers. 6,070,693 (‘693 patent) and 7,036,157 (‘157 patent). 3M voluntarily dismissed both infringement claims. Roughly one year after the dismissal, Moldex filed this action, alleging that 3M dismissed the infringement claims because it knew they were baseless and that it was going to lose the claims on the merits and that Moldex incurred legal fees, costs, and lost employee time of over $1 million. It asserted three claims against 3M, including: (1) monopolization and attempted monopolization; (2) malicious prosecution; and (3) violations of California’s Unfair Competition Law (UCL). 3M moved to dismiss the complaint.

Monopolization. In support of its motion to dismiss, 3M argued that Moldex failed to state a claim for monopolization or attempted monopolization because it failed to allege antitrust injury, an exception to the Noerr-Pennington doctrine, that 3M had market power in a properly defined product market and willfully acquired or maintained that power through exclusionary or predatory conduct, and that 3M engaged in anticompetitive conduct with the specific intent to monopolize and that there was a dangerous probability of achieving monopoly power.

The court rejected all of 3M’s arguments, first finding that Moldex sufficiently alleged that 3M’s infringement action was objectively and subjectively baseless. Specifically, Moldex alleged that, while the ‘693 patent claims an earplug whose two ends may be inserted into the user’s ear, Moldex’s earplug has only one end that can be inserted into the user’s ear. In addition, Moldex alleged that 3M asserted the ‘157 patent notwithstanding 3M’s knowledge of the patent’s invalidity due to Moldex Metric’s invention of the M-series earmuffs before the patent’s priority date. Further, the court found that Moldex adequately alleged that 3M brought its patent infringement action only after Moldex provided the first actual competition to 3M’s earplugs approved for purchase by the U.S. military, and 3M later issued a covenant not to sue for each claim only days before a motion for summary judgment.

The court next considered whether Moldex failed to allege antitrust violations. First, the court found that Moldex adequately alleged plausible product markets, including non-linear earplugs that are approved for purchase by the U.S. military; a general market for non-linear earplugs; and non-linear earplugs that have dual modes of setting. Second, Moldex adequately alleged that 3M has a dominant market share and that there are significant barriers to entry, demonstrating 3M has monopoly power. Third, Moldex sufficiently asserted that 3M willfully acquired or maintained monopoly power through exclusionary or predatory conduct, as Moldex previously showed that the patent infringement claims were objectively and subjectively baseless. Moldex’s claim that 3M brought sham litigation to drive Moldex out of the market was also sufficient to demonstrate a claim for attempted monopolization. Finally, Moldex’s claim that it incurred costs to defend against the sham patent litigation claims was sufficient to demonstrate antitrust injury. The motion to dismiss the monopolization and attempted monopolization claims was denied.

3M’s motion to dismiss the malicious prosecution claim was denied for essentially the same reasons set forth for the monopolizations claims.

Unfair competition. The motion to dismiss the unfair competition claim, with regard to the alleged sham patent litigation was also denied for the same reasons set forth for the monopolization claims. 3M additionally argued, however, that the unfair competition claim—as it related to 3M’s alleged false advertising—should be dismissed because the claim rests on an improper suggestion that 3M might have omitted the zero noise reduction rating or included a higher noise reduction rating on the Combat Arms label, neither of which 3M could do under EPA mandates. 3M consequently argued that the false advertising claim is not actionable under the UCL. The company also alleged that Moldex’s claim is barred by the statute of limitations.

Once again, the court rejected 3M’s arguments, finding that Moldex sufficiently alleged that the noise reduction rating of zero was the result of tests that did not comply with applicable procedures. Finally, the court denied dismissal based on the statute of limitations because 3M relied on matters outside the pleadings.

The case number is 14-1821 (JNE/FLN).

Attorneys: Harold A. Barza (Quinn Emanuel Urquhart & Sullivan, LLP) and Kevin D. Conneely (Stinson Leonard Street LLP) for Moldex Metric, Inc. Lawrence B. Friedman (Cleary Gottlieb Steen & Hamilton LLP) and Wendy J. Wildung (Faegre Baker Daniels LLP) for 3M Co. and 3M Innovative Properties Co.

Companies: Moldex Metric, Inc.; 3M Co.; 3M Innovative Properties Co.

Cases: Advertising Antitrust MinnesotaNews