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TELE ATLAS N.V. v. NAVTEQ CORPORATION

November 2, 2005.

TELE ATLAS N.V. and TELE ATLAS NORTH AMERICA, Plaintiffs,
v.
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 DISMISS
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 ¶¶ 3, 37.

  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

  II. ANALYSIS

  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 8:23-26.

  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 66.

  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 sellers.
JM Computer, 1996 WL 241607 at *4 (ellipsis and second alteration in original). ...

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