United States District Court, N.D. California, San Jose Division
November 2, 2005.
TELE ATLAS N.V. and TELE ATLAS NORTH AMERICA, Plaintiffs,
NAVTEQ CORPORATION, Defendant.
The opinion of the court was delivered by: RONALD WHYTE, District Judge
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO
Plaintiffs Tele Atlas N.V. and Tele Atlas North America ("Tele
Atlas") have sued defendant NAVTEQ Corporation ("NAVTEQ") for (1)
violation of the Sherman Antitrust Act, 15 U.S.C. §§ 1-2, (2)
violation of the Clayton Act, 15 U.S.C. § 14, (3) violation of
California Business and Professions Code §§ 16720, 16726, 16727,
and 17200, (4) intentional interference with contractual
relations, and (5) intentional interference with prospective
economic advantage. NAVTEQ moves to dismiss Tele Atlas' first
amended complaint ("FAC"). The court has read the moving and
responding papers and considered the arguments of counsel. For
the reasons set forth below, the court grants in part and denies
in part NAVTEQ's motion. I. BACKGROUND
Tele Atlas and NAVTEQ license digital map data to makers of
navigation devices. FAC ¶ 1. According to Tele Atlas, Etak, Inc.
("Etak") introduced the first consumer navigation system in 1985.
Id. at ¶ 29. Etak and NAVTEQ were competitors for about ten
years. Id. at ¶ 30. In 1996, Sony Corporation of America
("Sony") bought Etak. Id. at ¶ 31. Tele Atlas contends that
Sony limited its investment in Etak, causing Etak to lose its
ability to license digital map data effectively and allowing
NAVTEQ to dominate the market. Id. at ¶ 31. Tele Atlas acquired
Etak in 2000. Id. at ¶ 32. Between 2000 and 2002 Tele Atlas
"upgrade[d] Etak's outmoded digital map data so that it would
once again be competitive." Id. at ¶ 33. This effort involved
dispatching field collectors to drive "over roads covering more
than 55% of the populated regions in the United States" and
"image-attribut[ing]" 80% of these areas. Id.
In January 2003 Tele Atlas allegedly introduced the MultiNet
North America: "a map database of North America that supported
routing applications to provide precise, efficient, legal and
physically reliable turn-by-turn directions[,] . . . featured
links to real-time traffic coverage[,] and included a wide range
of `point of interest' such as gas stations, hotels and
airports." Id. at ¶ 34. By early 2004 Tele Atlas' field
collectors had covered 80% of the United States and Tele Atlas'
digital map data "was at least commensurate with and in some
respects superior to the quality of NAVTEQ's digital map data."
Id. at ¶ 35.
However, Tele Atlas alleges, NAVTEQ's anti-competitive conduct
has prevented Tele Atlas from entering the market. Id. at ¶ 22.
Tele Atlas defines the relevant geographic market as the United
States. Id. at ¶ 11. According to Tele Atlas, the relevant
technological market is the "Perspective Navigation Display
Technology Market," which involves "methods for displaying
portions of a topographic map on a personal navigation device
from an apparent perspective [of] outside and above a vehicle."
Id. at ¶ 12. Tele Atlas alleges that NAVTEQ enjoys monopoly
power in this market. Id. at ¶ 13. Tele Atlas contends that
there are three relevant product markets: (1) the "Embedded
Device Market," which "consists of licenses to digital map data
for use in navigation devices that are intended for permanent
installation in automobiles," (2) the "PNV Device Market," which
"consists of licenses to digital map data for use in personal
navigation devices, including handheld devices as well as devices
that may be affixed onto or near a car's dashboard," and (3) the
"Navigation Device Market," which "consists of licenses to
digital map data for use in navigation devices." Id. at ¶¶ 14-17. Tele Atlas
asserts that NAVTEQ's market share is about (1) 95% of the
Embedded Device Market, (2) 70 to 75% of the PNV Device Market,
and (3) 75% of the Navigation Device Market. Id. at ¶¶ 15-17.
Tele Atlas claims that NAVTEQ's "first mover" advantage in the
Embedded Device Market "shield[s its] monopoly power and market
power" because automakers "are generally hesitant to switch to
new products." Id. at ¶ 26. In addition, Tele Atlas contends,
NAVTEQ has entered into contracts with automakers "that
effectively require embedded device makers to license NAVTEQ
data." Id. at ¶ 36. Moreover, Tele Atlas asserts, NAVTEQ locked
up the Automobile Association of America ("AAA") "by literally
giving data away for free to AAA for up to two years. Id. at ¶¶
Tele Atlas also alleges that NAVTEQ has "adopted the same
methods used to exclude Tele Atlas from the Embedded Device
Market to exclude Tele Atlas from the PNV Device Market." Id.
at ¶ 40. Tele Atlas contends that NAVTEQ often requires licensees
to pre-pay in amounts that cover five years or more of service.
Id. at ¶ 41. In addition, according to Tele Atlas, "NAVTEQ
provides free sophisticated and eye-catching PNV device displays"
for retailers who commit exclusively to showcasing PNV devices
that incorporate NAVTEQ's data. Id. at ¶ 42. Tele Atlas also
asserts that NAVTEQ illegally ties Perspective Navigation Display
Technology to the licensing of NAVTEQ's data for use in PNV
devices. Id. at ¶ 44. According to Tele Atlas, NAVTEQ
threatened to sue Navman and TomTom two PNV device makers that
license digital map data from Tele Atlas for infringing U.S.
Phillips Corporation's U.S. Patent No. 5,151,886 ("the "'886
Patent"). Id. at ¶ 45. Tele Atlas alleges that NAVTEQ, which
licenses the '886 patent, told Navman and TomTom that it would
not sue them if they licensed the '886 patent. Id. at ¶¶ 46-47.
Tele Atlas contends that Navman acquiesced to NAVTEQ's demands.
Id. at ¶ 49. Tele Atlas claims that TomTom agreed to license
the '886 patent from NAVTEQ only after NAVTEQ filed a patent
infringement suit against TomTom. Id. at ¶ 50.*fn1
Dismissal under Rule 12(b)(6) is proper only when a complaint
exhibits either a "lack of a cognizable legal theory or the
absence of sufficient facts alleged under a cognizable legal
theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988).
The court must accept the facts alleged in the complaint as true.
Id. "A complaint should not be dismissed `unless it appears
beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief.'"
Gilligan v. Jamco Dev.Corp., 108 F.3d 246, 248 (9th Cir. 1997)
(quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
Federal Rule of Civil Procedure 8(a) requires complaints to
contain "a short and plain statement of the claim showing that
the pleader is entitled to relief." "[A]ntitrust pleadings need
not contain great factual specificity" than other complaints.
Portland Retail Druggists Ass'n v. Kaiser Found. Health Plan,
662 F.2d 641, 648 (9th Cir. 1981). "However, the court is not
required to accept legal conclusions cast in the form of factual
allegations if those conclusions cannot reasonably be drawn from
the facts alleged." Clegg v. Cult Awareness Network,
18 F.3d 752, 754-55 (9th Cir. 1994). "Nor is the court required to accept
as true allegations that are merely conclusory, unwarranted
deductions of fact, or unreasonable inferences." Sprewell v.
Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).
A. Tele Atlas' Exclusive Dealing Claims
Tele Atlas' first four causes of action allege that NAVTEQ
violated (1) section 1 of the Sherman Act,*fn2 (2) section 2
of the Sherman Act,*fn3 (3) section 3 of the Clayton
Act,*fn4 and (4) California Business and Professions Code sections 16720 and 16726.*fn5 Compl. ¶¶
54-77. NAVTEQ moves to dismiss these claims to the extent they
allege that NAVTEQ engaged in exclusive dealing. According to
NAVTEQ, Tele Atlas has failed to "allege a factual predicate" for
these causes of action, "including the specific customers,
agreements, or products supposedly involved." Mot. Dism. at
Courts occasionally seem to reach divergent results on whether
antitrust claims contain enough detail to survive a motion to
dismiss. Some courts do not require the plaintiff to name the
parties who allegedly entered into an illegal contract with the
defendant. For example, in Virgin Atlantic Airways Ltd. v.
British Airways PLC, 872 F.Supp. 52 (S.D.N.Y. 1994), Virgin
Atlantic Airways ("Virgin") sued British Airways for exclusive
dealing. Virgin alleged that British Airways rewarded travel
agents for selling specified numbers of British Airways tickets
and gave corporate customers rebates "on the condition that they
purchase all or a certain high percentage of their travel
requirements from British Airways." Id. at 56-58. British
Airways moved to dismiss, arguing that "the complaint does not
identify the specific corporations and travel agents with whom
[British Airways] is alleged to have executed illegal
agreements." Id. at 65-66. The court denied the motion,
reasoning that "such specificity is not required when the sources
of proof are clearly within the defendant's control." Id. at
Likewise, in Hewlett-Packard Co. v. Arch Associates Corp.,
908 F.Supp. 265 (E.D. Pa. 1995), the court did not require an
antitrust plaintiff to name the entities that benefitted from the
defendant's allegedly anticompetitive conduct. In that case, Arch Associates
("Arch"), a printer dealership, sued Hewlett-Packard ("HP"), an
electronics manufacturer. Arch alleged that HP assisted a certain
type of dealership by giving them cash rebates without requiring
them to document sales. Id. at 269. However, Arch's complaint
stated only that "HP, in concert with certain members of its
authorized distribution network, . . . unlawfully conspired and
combined in an effort to expand its monopoly and to further
restrain trade." Id. (ellipsis in original). HP moved to
dismiss on the grounds that Arch's allegations involved "unnamed
conspirators" and were "conclusory." Id. at 268. The court
denied the motion, reasoning that the conspirators were "a finite
group whose members can be determined through discovery" and that
"the subject matter of the alleged contracts is sufficiently
identified by the pleading." Id. at 269.
Conversely, in JM Computer Servs., Inc. v. Schlumberger Tech.,
Inc., 1996 WL 241607 (N.D. Cal. 1996), a semiconductor testing
company sued a competitor for exclusive dealing. The complaint
accused the defendant of forming illegal contracts with an
ascertainable class of companies:
[Defendant] entered into exclusive dealing agreements
with the manufacturers of the parts . . . in the
relevant parts markets that Defendant itself did not
manufacture. The purpose of the exclusive agreements
was to harm competition in general in the relevant
markets. These agreements actually did harm
competition in the relevant markets. These exclusive
dealing agreements unreasonably deprived [Plaintiff]
of a needed source of supply and froze out of the
market a significant fraction of the buyers and
JM Computer, 1996 WL 241607 at *4 (ellipsis and second
alteration in original). Nevertheless, the court dismissed the
claim, reasoning that the plaintiff "failed to identify an
agreement with a specific person or entity and does not identify
the parts, services, or contracts involved in the alleged
exclusive dealing." Id.
The court concludes that Tele Atlas' exclusive dealing claims
are sufficiently detailed to survive NAVTEQ's motion. Admittedly,
Tele Atlas fails to name the entities with which NAVTEQ
supposedly struck exclusive deals. Nevertheless, unlike JM
Computer, where the plaintiff's skeletal complaint recited only
that the defendant had "entered into exclusive dealing
arraignments" with "manufacturers of parts," Tele Atlas explains
how NAVTEQ's alleged scheme operates. Tele Atlas asserts that
NAVTEQ has "enter[ed] into contracts with automakers that
effectively require embedded device makers to license NAVTEQ
data. Once an automaker agrees to support NAVTEQ, each supplier
of embedded devices to that automaker must either license NAVTEQ
data or lose the automaker's business." FAC ¶ 36. Other than the
reference to "parts manufacturers," the allegations in JM
Computer declared without explanation that the defendant had broken the law. The allegations here, however, are not mere
legal conclusions. Although the line between a fact and a legal
conclusion can be razor-thin,*fn6 Tele Atlas' assertions do
not revolve entirely around legal concepts and are better
characterized as factual. Because NAVTEQ likely knows the
identity of this "finite group" of "automakers," it is on notice
of Tele Atlas' claim.
NAVTEQ's other authority is inapposite. NAVTEQ cites Aquatherm
Industries, Inc. v. Florida Power & Light Co., 145 F.3d 1258
(11th Cir. 1998) and Nine West Shoes Antitrust Litig.,
80 F. Supp. 2d 181 (S.D.N.Y. 2000) for the proposition that "[i]n the
similar context of antitrust conspiracies, courts routinely
dismiss complaints that fail to identify the alleged
co-conspirators." Mot. Dism. at 9:14-21. However, Aquatherm
actually held that the plaintiff's conspiracy to monopolize claim
failed because the plaintiff failed to name co-conspirators and
thus could not establish intent to monopolize, a necessary
element of the claim. See Aquatherm, 145 F.3d at 1261. In
addition, the plaintiff's allegations were much like those of the
plaintiff in JM. See id. (plaintiff alleged that defendant
"combined and conspired in a concerted action with manufacturers
and sellers of electric pool heat pumps and pool contracting
firms in its geographic area"). As discussed above, unlike
Aquatherm, Tele Atlas has provided some modicum of detail. On
the other hand, Nine West Shoes actually denied a motion to
dismiss a conspiracy claim because as here "[t]he complaint
gives some detail about how this conspiracy operated." Nine West
Shoes, 80 F. Supp. 2d at 191. Thus, the court denies NAVTEQ's
motion with respect to Tele Atlas' exclusive dealing causes of
B. Tele Atlas' Tying Claims
NAVTEQ also moves to dismiss Tele Atlas' first five causes of
action to the extent they allege that NAVTEQ entered into illegal
tying arrangements.*fn7 To state a claim for per se tying
under sections 1 and 2 of the Sherman Act, a plaintiff must
allege that the defendant (1) tied two products or services sold
in the relevant markets, (2) had sufficient economic power in the
tying market to affect the tied market, and (3) affected a substantial volume of commerce in the tied market.
See California Glazed Prods., Inc. v. Burns & Russell Co.,
708 F.2d 1423, 1427 (9th Cir. 1983). To state a "rule of reason"
tying claim, a plaintiff must allege that the defendant (1)
entered into a tying arrangement (2) that adversely affected
competition. See Jefferson Parish Hosp. Dist. v. Hyde,
466 U.S. 2, 31 (1984) (plurality opinion). Similar rules apply under the
Clayton Act, see Airweld, Inc. v. Airco, Inc., 742 F.2d 1184,
1189 n. 2 (9th Cir. 1984), and under California's antitrust
statutes, see Suburban Mobile Homes,
101 Cal. App. 3d at 542-43.
NAVTEQ cites CCBN.com, Inc. v. Thomson Fin., Inc.,
270 F. Supp. 2d 146 (D. Mass. 2003), Rockbit Indus. U.S.A., Inc. v.
Baker Hughes, Inc., 802 F. Supp. 1544 (S.D. Tex. 1991), and
StunFence v. Gallagher Sec., 2002 WL 1837128 (N.D. Ill. 2002)
to support its contention that Tele Atlas' failure to "allege
that the tying arrangement at issue affects a substantial amount
of commerce in the tied product market" dooms its claims. Mot.
Dism. at 13:12-16.
In NAVTEQ's cited cases, courts dismissed tying claims that
were either woefully deficient in crucial areas or could not
logically give rise to a viable cause of action. For example,
CCBN.com, dismissed a tying claim that failed to (1) allege the
existence of contracts that could have given rise to a tying
agreement, (2) identify any customers who had entered into such
contracts, and (3) estimate the defendant's market share. See
CCBN.com, 270 F. Supp. 2d at 154-55. Similarly, in Rockbit,
the plaintiff alleged that the defendant had "sufficient power in
the market for horizontal drilling technology to force the use of
its bits on customers because . . . [the market] is a research
intensive, patent dominated, developing field, and [the
defendant] is allegedly one of the few companies which has
patents in this technology." Rockbit, 802 F. Supp. at 1549. Yet
the plaintiff did not "identif[y] the patents held by [the
defendant], nor . . . allege the percentage of the horizontal
drilling technology market possessed by [the defendant] which
purportedly gives [it] sufficient power to exert coercive
pressure on its customers." Id. at 1540. Finally, in
StunFence, the plaintiff's own allegations that the defendant
tied commonly-used products foreclosed the possibility of
proving that the alleged tying "affect[ed] a substantial volume
of commerce." StunFence, 2002 WL 1838128 at *2.
Tele Atlas' tying claims are more specific. Tele Atlas asserts
that NAVTEQ used the specter of an infringement suit to bully
Navman and Tom Tom into purchasing a license under the '886
patent. FAC ¶¶ 44-50. Thus, unlike the plaintiffs claims in CCBN.com, Tele
Atlas' claims spring from specific customers and a specific
contract. In addition, unlike the plaintiff in Rockbit, Tele
Atlas accuses NAVTEQ of misusing a specific patent. Moreover,
Tele Atlas estimates that NAVTEQ's market share is about (1) 95%
of the Embedded Device Market, (2) 70 to 75% of the PNV Device
Market, and (3) 75% of the Navigation Device Market. Id. at ¶¶
15-17. These allegations give rise to a reasonable inference that
NAVTEQ's alleged wrongdoing affects a substantial amount of
commerce. As such, they suffice to state a tying claim. See
Slattery v. Apple Computer, Inc., 2005 WL 2204981 *3 (N.D. Cal.
2005) (denying motion to dismiss tying claim where plaintiff's
allegation "that [d]efendant posses an 80 percent market share"
in one relevant market and "over a 90 percent market share" in
another revealed that "the tying would have an effect on a
substantial volume of commerce").
C. Tele Atlas' Third and Fifth Causes of Action
However, the court must dismiss Tele Atlas' tying allegations
in its third and fifth causes of action for another reason.
Section 3 of the Clayton Act and California Business and
Professions Code section 16727 only forbid tying arrangements
with respect to tangible goods. See 15 U.S.C. § 14 ("forbidding
parties from making tied contracts for the sale of "goods, wares,
merchandise, machinery, supplies, or other commodities"); Cal.
Bus. & Prof. Code § 16727 (applying to "goods, merchandise,
machinery, supplies, commodities"). Here, Tele Atlas asserts that
NAVTEQ improperly "conditioned the purchase of [a] patent license
on the additional licensing of NAVTEQ's digital map data." FAC ¶
48. A license is not the sale of a tangible good. See La Salle
St. Press, Inc. v. McCormick & Henderson, Inc.,
293 F. Supp. 1004, 1006 (N.D. Ill. 1968) (holding that a patent license is
"the sale of the right or privilege of using a particular method
or process" and thus does not fall within the word "commodity"
under the Clayton Act).
Tele Atlas contends that "the licenses at issue here concern
the '886 patent, a patent `purpot[ing] to claim certain methods
and devices for the perspective display of a portion of
topographic information'" and that "NAVTEQ's license to the '886
patent conveys the right to manufacture `products'. . . ." Opp.
Mot. Dism. at 19:27-20:2 (quoting FAC ¶ 46) (alteration and
emphasis added by Tele Atlas). Tele Atlas cites Ansel Comms. v.
Novell, 1999 WL 33302368 (N.D. Cal. 1999) for the proposition
that courts look to the "dominant nature of the transaction
between the parties" to determine "whether [a] contract
represents a sale of tangible goods." Opp. Mot. Dism. at 20:7-14
(quoting Ansel, 1999 WL 33302368 at *2) (alteration added). According to Tele Atlas, the dominant nature
test is fact-intensive and not properly resolved on a motion to
Tele Atlas' arguments lack merit. "Courts have strictly
construed" the term "commodit[y]" and held "that it denotes only
tangible products of trade." Innomed Labs, LLC v. Alza Corp.,
368 F.3d 148, 155 (2d Cir. 2004) (quoting May Dep't Store v.
Graphic Process Co., 637 F.2d, 1211, 1214 (9th Cir.
1980)).*fn8 Indeed, the word "commodity" means a "tangible
good, such as products or merchandise." Black's Law Dictionary
291 (8th ed. 2004). Thus, courts apply the dominant nature test
only where "the subject of the contract is a combination of
goods and intangible rights and services." Id. at 156 (emphasis
added). Here, Tele Atlas alleges that NAVTEQ sold a purely
ethereal consideration: "the right to manufacture `products.'"
FAC ¶ 46. Because Tele Atlas does not allege that NAVTEQ also
sold a physical item, there is no reason to apply the dominant
nature test. See Allen Archery, Inc. v. Browning Mfg. Co., 1982
WL 1840 *1-*2 (D. Utah 1982) (license granting "the nonexclusive
right to manufacture, use and sell compound bows . . . [is] an
intangible right that [i]s in no sense a commodity"); Record
Club of Am., Inc. v. Capitol Records, Inc., 1971 WL 558 *3
(S.D.N.Y. 1971) ("the right to manufacture embodied in [license]
agreements is not a `commodity'").
Ansel is not to the contrary.*fn9 In Ansel, the court
applied the dominant nature test to software licenses under the
Robinson-Patman Act, 15 U.S.C. s 13(c). Ansel, 1999 WL 33302368
at *2. However, the licensor admitted that its product included
"tangible materials, such as disks and packaging." Id.
Moreover, the licensor's contracts stated that "it is selling
`the tangible personal property described herein.'" Id.
Accordingly, the court held that factual issues remained as to
whether the dominant nature of the agreements was tangible or
intangible. See id. Here, on the other hand, Tele Atlas does
not allege that NAVTEQ's licenses include anything corporeal. Thus, because a
patent license is not a tangible good, the court must dismiss
Tele Atlas' third and fifth causes of action to the extent they
allege tying violations.
D. Tele Atlas' Unfair Competition and Intentional Interference
with Contractual Relations Claims
Tele Atlas' sixth and seventh causes of action seek redress for
violation of California Business and Professions Code section
17200 and intentional interference with contractual relations.
FAC ¶¶ 83-94. A plaintiff must predicate these causes of action
on some other form of illegal conduct. See Barquis v. Merchants
Collection Ass'n, 7 Cal. 3d 94, 113 (1972) (section 17200
forbids "anything that can properly be called a business practice
and that at the same time is forbidden by law"); PG&E v. Bear
Sterns & Co., 50 Cal. 3d 1118, 1126 (1990) (intentional
interference with contractual relations involves, inter alia,
"intentional acts designed to induce breach or disruption of [a]
contractual relationship"). NAVTEQ moves to dismiss these claims
on the grounds that Tele Atlas has failed to state a claim for
antitrust violations.*fn10 As discussed above, the court
finds that Tele Atlas has, in fact, stated claims for antitrust
violations. Thus, the court denies NAVTEQ's motion with respect
to these claims.
E. Tele Atlas' Intentional Interference with Prospective
Economic Advantage Claim
Tele Atlas' eighth cause of action claims that "NAVTEQ intended
to harm Tele Atlas by interfering with Tele Atlas' prospective
contractual relationships . . . with third parties." FAC ¶¶ 97.
The elements of a claim for interference with prospective
economic advantage include, inter alia, "an economic
relationship between the plaintiff and some third party, with the
probability of future economic benefit to the plaintiff."
Pacific Gas & Elec. v. Bear Stearns & Co., 50 Cal.3d 1118, 1126
n. 2 (1990). Courts often require a plaintiff to identify at
least one such "third party" to state a claim. See, e.g., Morton
v. Rank America, Inc., 812 F.Supp. 1062, 1075 (C.D. Cal. 1993)
(dismissing intentional interference with prospective advantage
claim where plaintiffs failed to identify any third party with
whom it had a "legal relationship"); Pinnacle Systems, Inc. v. XOS Technologies, Inc., 2003 WL
21397845 *6 (N.D. Cal. 2003) ("[i]n order to state a claim,
[plaintiff] must allege that it had a relationship with and
expected to receive an economic benefit from a specific third
party"). Because Tele Atlas fails to identify the "third parties"
with which it had "economic relationships," the court dismisses
this claim. III. ORDER
For the foregoing reasons, the court:
1. Grants NAVTEQ's motion to dismiss Tele Atlas'
third and fifth causes of action to the extent they
allege tying violations;
2. Grants NAVTEQ's motion to dismiss Tele Atlas'
intentional interference with prospective economic
3. Gives Tele Atlas twenty days leave to amend; and
4. Denies NAVTEQ's motion in all other respects.
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