Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Tex.: Counterclaims in software patent dispute dismissed as duplicative of affirmative defenses, (Sep 9, 2024)

By Martin A. Steinberg, J.D.

Antitrust counterclaim accused Honeywell of filing its patent infringement case as an anticompetitive sham litigation.

In a patent dispute over aerospace analytical software between Honeywell International, Inc. (Honeywell), and Lone Star Aerospace, Inc. (Lone Star), the federal court in Dallas, Texas granted Honeywell’s motion to dismiss Lone Star’s counterclaims. Honeywell, the owner of patents for software systems and methods, sued Lone Star, an aerospace corporation that offers operational analytics software, claiming that Lone Star’s MaxUp Fleet, MaxUp Energy, MaxUp Readiness, and MaxUp Manufacturing solutions infringed on Honeywell’s patents. The court dismissed the counterclaims for being duplicative of Lone Star’s affirmative defenses and for failure to state a claim (Honeywell International Inc. v. Lone Star Aerospace, Inc., No. 3:24-cv-00430-N (N.D. Tex. Sept. 4, 2024)).

Lone Star filed seven counterclaims against Honeywell, with the first six counterclaims raising invalidity and unenforceability of Honeywell’s patents and seeking declaratory relief, while the seventh counterclaim accused Honeywell of antitrust violations by filing its patent suit in bad faith. Honeywell moved to dismiss by arguing that the invalidity and unenforceability counterclaims should be dismissed because they were duplicative of Lone Star’s affirmative defenses, and the antitrust counterclaim for failure to state a claim.

Dismissal of counterclaims. The court found that Lone Star’s first six counterclaims were duplicative of Lone Star’s affirmative defenses. Because this was an independently sufficient ground for dismissal, the court did not need to address the sufficiency of the facts to state a claim. As to the seventh counterclaim, the court found that Lone Star had not pled factual allegations that plausibly showed that Honeywell engaged in anticompetitive sham litigation.

Declaratory relief. Lone Star raised invalidity and unenforceability as both affirmative defenses and counterclaims and sought declaratory relief for its counterclaims. The Declaratory Judgment Act grants federal courts broad discretion in determining whether to exercise jurisdiction over claims seeking declaratory judgment. The court had previously declined to entertain similar declaratory counterclaims mirroring affirmative defenses. See Super-Sparkly Safety Stuff, LLC v. Skyline USA, Inc., 2019 WL 4860959, at *2 (N.D. Tex. 2019). Maintaining Lone Star’s declaratory judgment counterclaims that mirrored its affirmative defenses would not further the Declaratory Judgment Act’s purpose because its use of the declaratory judgment vehicle in this procedural context was unnecessary. Lone Star had simply recast as counterclaims the very arguments it pled in response to Honeywell’s claims. Thus, dismissing these declaratory counterclaims would not leave Lone Star “helpless and immobile.”

Antitrust counterclaim. Because Lone Star failed to plead sufficient facts to meet the Rule 12(b)(6) plausibility standard, the court also granted the motion to dismiss this counterclaim. Federal patent law permits parties to give notice of their patent rights to patent infringers and protects parties from antitrust and tort liability for conduct that is based on good-faith assertions of patent rights. Under the Noerr-Pennington doctrine, a party’s assertion of its patent rights does not support liability unless the assertion is made in bad faith and objectively baseless such that “no reasonable litigant could realistically expect success on the merits.” Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., 508 U.S. 49, 60 (1993).

Conclusory allegations, without facts to support them, are not accepted as true for the purposes of deciding a motion to dismiss. The court noted that Lone Star appeared to contend that the mere assertion of Honeywell’s patent rights created an inference that Honeywell’s litigation was brought in bad faith. At most, Lone Star referenced an exploratory joint venture between the companies as factual proof of anticompetitive conduct but failed to demonstrate the application of those facts to a Sherman Act claim. Lone Star failed to plead any facts to support an allegation of bad faith or the objective baselessness of the assertion of Honeywell’s patent rights. The closest Lone Star got was a conclusory allegation that “Honeywell brought its patent infringement claims in bad faith, for an improper purpose, and as a means of directly interfering with and harming Lone Star’s business and to frustrate and prevent competition by Lone Star.”

Lone Star’s Answer failed to allege facts to support the elements necessary to show an attempted monopolization by Honeywell. Claims brought under section 2 of the Sherman Act alleging attempted monopolization must show “(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power” in the relevant market. Spectrum Sports v. McQuillan, 506 U.S. 447, 456–58 (1993).

Regarding the first element, conduct does not fall into this category simply because it negatively impacted a competitor or violated a law or contract. Rather, conduct is predatory when it is inconsistent with competition on the merits and has a potential for making a significant contribution to monopoly power. The crux of Lone Star’s predatory and exclusionary conduct claims was that Honeywell’s actions were an abuse of its market power against a small privately held Texas-based company. Lone Star, however, failed to plead that this lawsuit created an actual or threatened injury to the market as a whole, not just to a particular plaintiff.

Lone Star’s answer similarly failed to allege specific intent to monopolize. The mere comparative size of the companies involved in the litigation did not demonstrate a specific intent to monopolize. The extent of Lone Star’s antitrust violation allegations were conclusory statements. These conclusory allegations, without sufficient facts to support them, are not enough to state a claim. Because Lone Star failed to demonstrate Honeywell’s conduct or intent to monopolize competition, it also had not shown a dangerous likelihood of monopoly based on these facts. Accordingly, the court concluded that none of the elements of a Sherman Act claim had been met.

Leave to amend. The court granted Lone Star leave to replead its antitrust counterclaims within 30 days of the date of this order.

The Case is No. 3:24-cv-00430-N.

Judge: Godbey, D.

Attorneys: Paul R. Genender (Paul Hastings LLP) for Honeywell International Inc. Ferdose al-Taie (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC) for Lone Star Aerospace Inc. d/b/a Lone Star Analysis.

Companies: Honeywell International Inc.; Lone Star Aerospace Inc. d/b/a Lone Star Analysis

Cases: Antitrust TexasNews GCNNews