Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Software solutions company may bring attempted monopolization counterclaims against competitor, (Feb 2, 2015)

By Greg Hammond, J.D.

A software solutions company being sued for patent infringement could bring antitrust counterclaims against its competitor after the deadline for amending pleadings passed, the federal district court in Chicago decided. In granting the software solutions defendant leave to amend, the court determined that the company demonstrated good cause for leave to amend after the deadline for amending pleadings, the plaintiffs would not be unduly prejudiced, and the counterclaims would not be futile (Avnet, Inc. v. Motio, Inc., January 30, 2015, Lefkow, J.).

Background. BSP Software, LLC filed a patent infringement suit against software solutions competitor Motio, Inc., for infringement of U.S. Patent Nos. 7,945,589 (“the ’589 patent”) and 8,073,863 (“the ’863 patent”). The ’589 patent covers software to optimize IBM’s Cognos Business Intelligence Software. Motio denied BSP’s allegations and is seeking a declaratory judgment that the two patents at issue are invalid or were not infringed. Avnet, Inc. subsequently acquired BSP and substituted BSP as plaintiff in 2013. Motio moved for leave to amend in order to add three additional counterclaims, all in violation of the Sherman Act: (1) BSP procured the ’589 patent through intentional fraud on the U.S. Patent and Trademark Office (USPTO); (2) BSP attempted to form a monopoly by filing a suit to enforce the fraudulently obtained patent; and (3) Avnet and BSP entered into a conspiracy to restrain trade.

Good cause. Because the deadline for amending pleadings passed, Motio was required to show good cause in order to assert its additional counterclaims. Motio alleged that BSP attempted to keep relevant documents from Motio by failing to name potential custodians and that BSP further used alias email accounts to cover up its fraudulent conduct and hinder Motio’s attempts at discovery. The court concluded that Motio’s allegations adequately explain its delay in filing the motion to amend and that it therefore demonstrated good cause.

Undue prejudice. BSP and Avnet additionally argued that Motio’s counterclaims were highly prejudicial, because they were never put on notice that the case would involve antitrust claims, which they are now forced to defend. The court, however, rejected this argument, finding that BSP and Avnet will not face undue prejudice, given the seriousness of the claims and Motio’s diligence in pursuing them.

Futility. Finally, BSP and Avnet argued that Motio’s new counterclaims would be futile, but the court did not agree. Rather, the fraudulent conduct claim, under Section 2 of the Sherman Act, was successfully alleged with the particularity required under Federal Rule of Civil Procedure 9(b). In addition, Motio sufficiently asserted a dangerous probability that BSP will achieve monopoly power and that it has suffered and will continue to suffer antitrust injury, including lost sales and incurred fees and costs in defending bad faith allegations of patent infringement. Motio also alleged that BSP raised the cost of entry into the relevant market by requiring “would-be entrants” to incur the cost of challenging the invalid and unenforceable ‘589 patent, and that BSP restricted output and restricted competition by touting a fraudulently obtained patent.

The sham litigation and attempted monopolization claim was also not demonstrably futile. The court determined that, provided the detailed account of facts supporting Motio’s allegations of fraud and the court’s obligation to accept those facts as true, Motio sufficiently stated a claim for sham litigation. In addition, Motio adequately alleged antitrust injury under Section 2 of the Sherman Act because it already alleged anticompetitive conduct with the specific intent to monopolize and that it suffered the same injury as identified under its fraudulent conduct claim.

Lastly, the conspiracy to restrain trade claim was deemed not futile because Motio sufficiently alleged a contract, combination, or conspiracy; a resulting unreasonable restraint of trade in a relevant market; and an accompanying injury in the form of lost sales and damage to the market. Motio alleged that, prior to Avnet’s acquisition of BSP, BSP represented that if the patent infringement suit is successful, it would obtain a monopoly in the marketplace for products that offer version control features for Cognos and the marketplace for products that offer administrative tools for Cognos.

The case number is 12 C 2100.

Attorneys: Ruben Jose Rodrigues (Foley & Lardner LLP) for BSP Software LLC and Avnet, Inc. Austin Champion (Griffith Bates Champion LLP) for Motio, Inc.

Companies: Avnet, Inc.; BSP Software, LLC; Motio, Inc.

Cases: Antitrust IllinoisNews