Antitrust Law Daily Wrap Up, ANTITRUST—S.D. N.Y.: Antitrust counterclaims fail in copyright action against reseller of foreign editions, (May 27, 2014)

By Linda O’Brien, J.D., LL.M.

A reseller of foreign editions of textbooks in the United States failed to state cognizable antitrust counterclaims against publishers of educational textbooks that filed suit against the reseller for copyright infringement, the federal district court in New York City has decided (Pearson Education, Inc. v. Allen Air Conditioning Co., May 22, 2014, Forrest, K.).

Pearson Education, Inc. is a publishing and assessment service provider to educational institutions. John Wiley & Sons, Inc. is a publisher of journals, encyclopedias, books, and textbooks. Ganghua Liu is in the business of purchasing foreign editions of textbooks published by Pearson and Wiley abroad and selling those editions in the United States. Pearson and Wiley filed suit against Liu, a company, and another individual for copyright infringement. Liu filed counterclaims against the publishers, alleging that the companies engaged in anticompetitive conduct against importers of foreign editions of publications for the purpose of restraining competition and maintaining their monopoly positions, in violation of Sections 1 and 2 of the Sherman Act. Specifically, Liu alleged that the publishers coordinated the commencement of litigation to protect their copyrights and entered into agreements with online retailers to refuse to deal with Liu. Pearson and Wiley moved to dismiss the counterclaims.

The court found that Liu’s counterclaims failed to state a cognizable antitrust claim. To state an antitrust claim, the complaint must allege sufficient facts to state a claim that is plausible on its face. According to the court, Liu did not suffer an antitrust injury as a result of her allegations that the publishers engaged in coordinated litigation against competing resellers such as the online retailers. Instead, the prevention of a competitor from obtaining used textbooks would result in higher prices for textbooks and enhance Liu’s competition position. Moreover, Liu’s allegations that the publishers suppressed competition by publishing new editions of textbooks and bundling the copies with other materials were not a basis for antitrust standing, since the publication of new editions were output-enhancing and resulted in an improved product in the market.

Additionally, Liu’s allegations of concerted action failed due to lack of the required specificity. There were no specific allegations that the publishers agreed to attempt to undermine Liu’s business by bringing litigation against her, the court noted. It was more plausible that, in pursuing the expense of litigation, the publishers were engaged in a good faith and legitimate task of protecting their copyrights. Further, the litigation was protected under the Noerr-Pennington doctrine. The publishers presented evidence that they believed in their litigation position of copyright infringement and that it was not objectively baseless. Thus, the publishers’ litigation was immune from antitrust liability.

Liu’s allegations that the publishers failed to alter their business practices and caused her accounts with the online retailers to be blocked also lacked specificity. There were no specific allegations that the publishers agreed on certain business practices regarding Liu or that any of the online retailers agreed with the publishers to execute a coordinated strategy. The plausible interferences were more consistent with lawful, unilateral behavior, the court noted.

Finally, the court determined that Liu’s allegations that the publishers used their exclusive rights to certain works to monopolize the right to resell foreign editions in the United States failed to state a monopolization claim. Liu failed to allege a cognizable market, that the publishers had market power, or that the publishers engaged in conduct to willfully maintain their monopoly position, the court concluded.

The case is No. 08 Civ. 6152.

Attorneys: Megan Leigh Martin (Dunnegan & Scileppi LLC) for Pearson Education, Inc. and John Wiley & Sons, Inc. John T. Mitchell (Interaction Law) for Ganghua Liu.

Companies: Pearson Education, Inc.; John Wiley & Sons, Inc.

Cases: Antitrust NewYorkNews