Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Software solutions company proceeds with fraud, monopolization counterclaims in patent suit, (Sep 14, 2015)

By Greg Hammond, J.D.

A software solutions company can go forward with counterclaims for Walker Process fraud, sham litigation and attempted monopolization, and conspiracy in restraint of trade, in response to a competitor’s patent infringement suit. The federal district court in Chicago denied the competitor’s motion to dismiss, finding that sufficient facts were pleaded to support the three antitrust counterclaims (Avnet, Inc. v. Motio, Inc., September 9, 2015, Lefkow, J.).

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. Avnet, Inc. subsequently acquired BSP and substituted BSP as plaintiff in 2013. Motio added three counterclaims, all brought under the Sherman Act, alleging (1) procurement of the ’589 patent through intentional fraud on the U.S. Patent and Trademark Office; (2) sham litigation and attempted monopolization under Section 2 of the Sherman Act; and (3) conspiracy in restraint of trade under Section 1 of the Sherman Act. Avnet and BSP moved to dismiss the counterclaims.

Market definition, power. The plaintiffs first argued that Motio failed to adequately allege market definition and market power. The court rejected this argument. Accepting as true Motio’s explanation that an industry has grown around supporting and optimizing Cognos and that one of the markets that has emerged in the industry is for products that offer version control features, the court found that it was not clear that the market does not encompass all interchangeable substitute products. The court also previously concluded that Motio had identified facts from which the court could infer that BSP and Avnet had sufficient market power to have been able to create a monopoly. Avnet failed to allege facts that demonstrated the prior ruling was erroneous.

Walker Process claim. Avnet additionally claimed that dismissal of the Walker Process claim was appropriate because Motio failed to allege but-for materiality. Motio claimed that BSP had deliberately selected search terms in order to exclude prior art and, on at least three occasions, failed to identify as “most closely related” highly relevant products with which BSP was intimately acquainted, including Motio’s product. Motio asserted that BSP intentionally withheld material references to the documentation included with Cognos software installation; made false and misleading statements to the USPTO, including intentionally misrepresenting the version control functionality in Motio’s MotioCI product; and attempted to cover-up its knowledge of Motio’s product by deleting references to Motio and Motio’s product in the chat logs submitted to the USPTO. The court concluded that Motio successfully alleged with particularity that the fraud was knowing and willful, that BSP was aware of the fraud, and that there was deceptive intent along with material reliance on the part of the USPTO.

Sham litigation. Avnet also argued that Motio’s sham litigation claim should be dismissed because Motio failed to plausibly allege that the suit was both objectively and subjectively baseless. The court concluded that Motio stated a sufficient claim for sham litigation, however, because Avnet provided no controlling authority that the entire suit was baseless, since Motio alleged only one of the two patents was procured by fraud. Rather, case law suggested that a single claim is sufficient, the court noted. The case was also not deemed objectively baseless because BSP produced sufficient evidence that the chat logs were not, in fact, doctored and were not, in any event, material to the USPTO’s decision.

Conspiracy. Lastly, Avnet argued that Motio’s conspiracy claim must fail because four of Motio’s five factual allegations were immune from Section 1 liability, since they represented the unilateral conduct of a single firm rather than an agreement between separate entities. The court concluded that Motio needed only a single allegation of an agreement between the separate entities and that Avnet admitted Motio has made this allegation. The motion to dismiss the antitrust counterclaims, as well as the inequitable conduct and declaratory judgment counterclaims was therefore denied.

The case is number 12 C 2100.

Attorneys: Ruben Jose Rodrigues (Foley & Lardner LLP) for BSP Software LLC and Avnet Inc. Kimberly L. Scott (Miller Canfield Paddock and Stone PLC) for Motio, Inc.

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

Cases: Antitrust IllinoisNews