Electronic Arts' and Humongous' counterclaim.
Having reviewed the papers submitted and considered the oral arguments of counsel at a hearing on June 3, 1993, the court hereby: (1) GRANTS Humongous' motion to amend its counterclaim; (2) DENIES Electronic Arts' motion for partial summary judgment on its antitrust counterclaims; and (3) GRANTS LucasArts' motions for summary judgment on Electronic Arts' and Humongous' counterclaims.
Humongous seeks to amend its counterclaim to add a count for breach of contract and to add factual matter to its claim for interference with prospective economic advantage pursuant to FRCP 15(a), or, in the alternative, FRCP 13(f).
FRCP 15(a) provides that leave to amend "shall be freely given when justice so requires." The Ninth Circuit has interpreted FRCP 15(a) with "extreme liberality," United States v Webb, 655 F.2d 977, 979 (9th Cir 1981), and the burden of showing why leave should not be granted rests with the non-moving party, Genentech, Inc v Abbott Laboratories, 127 FRD 529, 530-31 (ND Cal 1989).
The court finds that allowing Humongous to amend its counterclaim to add a count for breach of contract will not affect the pending summary judgment motions and will work no prejudice against LucasArts. Similarly, allowing Humongous to amend its interference with prospective economic advantage claim to add factual matter inadvertently omitted will prevent re-litigation of issues relevant to LucasArts' summary judgment motion, increase judicial efficiency and serve the ends of justice.
The factual allegations concerning LucasArts' bad faith behavior which Humongous wants to add were already described in the third and fourth affirmative defenses in Humongous' answer to the amended complaint. Thus, the amendment would not raise new facts and should not surprise LucasArts in any way. The amendment would simply permit Humongous to correct the pleading by incorporating the allegations of the affirmative defenses into the counterclaim. For the foregoing reasons, the court hereby GRANTS Humongous' motion to amend its counterclaim pursuant to FRCP 15(a).
In addition, Electronic Arts moves for partial summary judgment on its antitrust counterclaims, which allege that section A.1.1.1(b) constitutes an illegal price fixing agreement and an illegal boycott in violation of the Sherman and Cartwright Acts. Further, Electronic Arts contends that LucasArts' enforcement of section A.1.1.1(b) constitutes copyright misuse, thereby preventing enforcement of LucasArts' copyright.
In support of its argument that section A.1.1.1(b) constitutes a per se illegal price fixing agreement, Electronic Arts cites some of the antitrust laws' greatest hits: United States v Socony-Vacuum Oil Company, 310 U.S. 150, 223, 84 L. Ed. 1129, 60 S. Ct. 811 (1940); United States v New Wrinkle, Inc, 342 U.S. 371, 377, 96 L. Ed. 417, 72 S. Ct. 350 (1952) ("Price fixing in commerce, reasonable or unreasonable, has been considered a per se violation of the Sherman Act."); Northern Pacific Railway Co v United States, 356 U.S. 1, 5, 2 L. Ed. 2d 545, 78 S. Ct. 514 (1958) (certain practices, including price fixing, "are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use"); Arizona v Maricopa County Medical Society, 457 U.S. 332, 351, 73 L. Ed. 2d 48, 102 S. Ct. 2466 (1982) (the anticompetitive potential inherent in all price-fixing agreements justifies their facial invalidation even if procompetitive justifications are offered for some).
LucasArts correctly notes that none of these cases involve intellectual property rights of the type here and citation to these cases merely begs the principle question in this case; namely, whether section A.1.1.1(b) falls outside the safe harbor accorded to intellectual property owners by the Supreme Court in United States v General Electric, 272 U.S. 476, 71 L. Ed. 362, 47 S. Ct. 192 (1926).
In General Electric, the Supreme Court held that the statutory right of intellectual property owners to forbid entirely sales by licensees necessarily includes the power to restrict the prices at which such licensees may sell licensed material:
The patentee may make and grant a license to another to make and use the patented articles but withhold his right to sell them * * * . [If the licensee] sells [the patented articles,] he infringes the right of the patentee, and may be held for damages and enjoined. If the patentee goes further, and licenses the selling of the articles, may he limit the selling by limiting the method of sale and the price? We think he may do so provided the conditions of sale are normally and reasonably adapted to secure pecuniary reward for the patentee's monopoly * * * . It would seem entirely reasonable that he should say to the licensee, "Yes, you may make and sell articles under my patent but not so as to destroy the profit that I wish to obtain by making them and selling them myself."