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Ojmar US, LLC v. Security People, Inc.

United States District Court, N.D. California

April 5, 2018

OJMAR US, LLC, Plaintiff,
v.
SECURITY PEOPLE, INC., et al., Defendants.

          ORDER DENYING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT, DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT, AND DENYING PLAINTIFF'S MOTION TO STRIKE PORTIONS OF DEFENDANTS' EXPERT REPORT RE: DKT. NOS. 145, 146, 156

          HAYWOOD S. GILLIAM, JR. United States District Judge.

         Pending before the Court are Security People, Inc. (“Digilock”) and Asil Gokcebay's (collectively, “Defendants”) motion for partial summary judgment on several claims asserted by Ojmar U.S., LLC (“Ojmar” or “Plaintiff”) in its second amended complaint, Dkt. No. 146 (“Defs. Mot.”); see also Dkt. No. 117 (“SAC”); Plaintiff's motion for partial summary judgment that U.S. Patent No. 5, 337, 043 is material prior art to U.S. Patent No. 6, 655, 180, Dkt. No. 145 (“Pl. Mot.”); and Plaintiff's motion to strike portions of the expert report of Larry Nixon, Dkt. No. 156 (“Mot. to Strike”). Briefing on the motions is complete. See Dkt. Nos. 160 (“Pl. Opp.”), 167 (“Defs. Reply”), 159 (“Defs. Opp.”), 166 (“Pl. Reply”), 157 (“Opp. to Strike”), 158 (“Reply to Strike”).[1]Having carefully considered the parties' arguments, the Court DENIES the motions.

         I. SUMMARY JUDGMENT STANDARD

         Summary judgment is proper when a “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is “genuine” if there is evidence in the record sufficient for a reasonable trier of fact to decide in favor of the nonmoving party. Id. The Court views the inferences reasonably drawn from the materials in the record in the light most favorable to the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986), and “may not weigh the evidence or make credibility determinations, ” Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997), overruled on other grounds by Shakur v. Schriro, 514 F.3d 878, 884-85 (9th Cir. 2008).

         The moving party bears both the ultimate burden of persuasion and the initial burden of producing those portions of the pleadings, discovery, and affidavits that show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party will not bear the burden of proof on an issue at trial, it “must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). Where the moving party will bear the burden of proof on an issue at trial, it must also show that no reasonable trier of fact could not find in its favor. Celotex Corp., 477 U.S. at 325. In either case, the movant “may not require the nonmoving party to produce evidence supporting its claim or defense simply by saying that the nonmoving party has no such evidence.” Nissan Fire & Marine Ins. Co., 210 F.3d at 1105. “If a moving party fails to carry its initial burden of production, the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial.” Id. at 1102-03.

         “If, however, a moving party carries its burden of production, the nonmoving party must produce evidence to support its claim or defense.” Id. at 1103. In doing so, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586. A nonmoving party must also “identify with reasonable particularity the evidence that precludes summary judgment.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). If a nonmoving party fails to produce evidence that supports its claim or defense, courts enter summary judgment in favor of the movant. Celotex Corp., 477 U.S. at 323.

         II. DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

         Defendants move for summary judgment on Ojmar's federal antitrust claims, Cartwright Act claim, Lanham Act claim, tort claims, and Ojmar's request for attorneys' fees.[2] Disputes of material fact preclude summary judgment on each of these claims.

         A. Antitrust Claims

         Defendants argue that Ojmar's alleged product market and submarket-electronic keypad locks with electronically actuated bolts (“EKLs”)-are artificially narrow. See Defs. Mot. at 14. Defendants claim that there is no dispute that the proper product market and submarket extend beyond EKLs to include other types of shared use locks, including EKLs with manually actuated bolts, mechanical keypad locks, electronic non-keypad lock products, and hasps and cam locks. See Id. at 16-17. Defendants accordingly contend that summary judgment on Ojmar's antitrust claims is proper.

         Defendants are incorrect. To begin, Defendants need not move for summary judgment on Ojmar's alleged product market. In its order denying Defendants' second dismissal motion, the Court precluded Ojmar from proceeding on a product market consisting only of EKLs. See Dkt. No. 132 (“SAC Dismissal Order”) at 3 (finding that Ojmar's “trait-focused allegations” “fail[ed] as a matter of law to demonstrate the absence of economic substitutability, the benchmark for a facially sustainable product market”). Nonetheless, the Court allowed Ojmar to advance its antitrust claims based on a properly alleged submarket. See Id. at 4-5; Pl. Opp. at 10; Defs. Mot. at 17. Specifically, the Court held that Ojmar could premise a cognizable antitrust claim on an economically distinct EKL submarket (i.e., a “small part of the general market of substitutable products”) within the broader market for locker locks. See SAC Dismissal Order at 4-5.; Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1045 (9th Cir. 2008).

         For Ojmar's alleged submarket to survive summary judgment, Ojmar “must be able to show that the alleged submarket is economically distinct from the general product market.” Newcal Indus., Inc., 513 F.3d at 1045. Indicia of a valid submarket include: “industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.” Brown Shoe Co. v. U.S., 370 U.S. 294, 325 (1962). Defendants argue that Ojmar fails to set forth evidence demonstrating that the EKL submarket is economically significant or otherwise distinct from the broader locker lock market. See id.; Defs. Mot. at 18.

         The Court disagrees. There are genuine disputes of material fact underlying several of the Brown Shoe factors. See 370 U.S. at 325. One such disagreement concerns what an EKL actually is. See Id. Defendants argue that EKLs include electronic locks with manual bolts, and that electronic locks with manual bolts are indistinguishable from EKLs with electrically actuated bolts. See, e.g., Defs. Mot. at 10 (“The lock industry does not draw a boundary between manual and motorized EKLs, let alone with other locks.”). Ojmar, in contrast, claims that there is no such thing as an EKL with a manual bolt. See Pl. Opp. at 11 n.8. Ojmar presents evidence that, when all required inferences are made in its favor, supports that proposition. That evidence also suggests that the bolt's look and function are economically significant because they implicate purchasing decisions. See Dkt. No. 160-40 (“Lenzo Decl.”) ¶ 22 (differentiating between EKLs and locks with “an electronic keypad with a manual-cam locking device, ” and opining that the latter “have less complex circuitry and require significantly less battery power because they do not include an electrically actuated bolt or latch”); Dkt. No. 161-3 (“Wind Decl.”) ¶ 4 (distinguishing “electronic locks that are motorized or solenoid-actuated” from those “with an electronic keypad but a manual lock”); Dkt. No 160-42 (“Oonk Decl.”) ¶¶ 3-4, 6-12 (observing that certain purchasers opt for EKLs because of the “premium image EKLs convey because they are fully automatic”); Dkt. No. 161 (“Callaway Decl.”), Ex. 3 at 74:23-75:19 (indicating that there are only three competitors in the marketplace for an electronic lock for lockers with a motor-driven or solenoid-driven locking mechanism). Thus, what lock technology comprises an EKL presents a disputed factual issue for a jury to decide.

         Making all inferences in Ojmar's favor, as required at this stage, the Court finds that a reasonable jury could also find that EKLs occupy a distinct submarket based on unique and economically significant characteristics. Ojmar sets forth facts showing that lock consumers prefer EKLs to other lock types because EKLs can improve efficiency, reduce management costs, enhance user convenience, augment security, provide a “premium image, ” and facilitate compliance with the Americans with Disabilities Act (“ADA”). See Oonk Decl. ¶¶ 4-35 (listing advantages to EKLs over conventional locks and electronic lock variations); Wind Decl. ¶¶ 4, 7, 12-14, 16 (detailing benefits relating to enhanced security, image, and ADA compliance); Lenzo Decl. ¶¶ 54-56 (describing a combination of value-adding EKL features and functionalities); Dkt. No. 160-6 (“Boullié Decl.”) ¶¶ 7-12 (explaining design features that can enhance security).

         Other Brown Shoe factors are similarly in dispute. There are, for instance, facts tending to show that lock manufacturers recognize competition within a distinct EKL submarket. See, e.g., Wind Decl. ¶ 17 (“Zephyr Lock competes with Ojmar and Digilock in the market for electronic keypad locks for lockers.”); Callaway Decl., Ex. 3, 74:23-75:19 (stating that there are three competitors in the EKL marketplace: Zephyr, Ojmar, and Digilock). One expert opines that EKLs require distinct production facilities. See Boullié Decl. ¶¶ 15-19. There is evidence, if viewed through a lens favorable to Ojmar, that could show that EKL pricing is distinct from and immune to pricing of other lock types, including conventional locks, mechanical shared use locks, and radio frequency identification (RFID) locks. See Boullié Decl. ¶ 20 (noting that EKL complexity implicates costs); Oonk Decl. ¶¶ 5-12 (depicting features contributing to price premium), 32-33 (detailing price differences between EKLs, mechanical locks, and RFID locks), 36. Considering these disputes of fact, summary judgment is inappropriate on Ojmar's federal antitrust claims.[3]

         Separately, Defendants move for summary judgment on Ojmar's Cartwright Act claim. See Cal. Bus. & Prof. Code § 16720. “In California, exclusive dealing arrangements are . . . proscribed when it is probable that performance of the contract will foreclose competition in a substantial share of the affected line of commerce.” Fisherman's Wharf Bay Cruise Corp. v. Sup. Ct., 7 Cal.Rptr.3d 628, 649 (2003) (quotation omitted). Defendants argue that Digilock's conduct does not stifle competition in the alleged EKL submarket. See Defs. Mot. at 11-13, 19- 21. Specifically, Defendants contend that Ojmar has not lost market share because (1) Digilock's agreements with original equipment manufacturers (“OEMs”) are short term and terminable at will; and (2) these agreements occupy just a small fraction of the marketplace. See Id. Defendants assert that these agreements can even promote competition. See id.

         Disputed material facts preclude summary judgment on Ojmar's Cartwright claim. For instance, Ojmar presents evidence which, when all required inferences are made in its favor, could suggest that Digilock's OEM agreements were, in fact, coercive, and that OEMs could not realistically terminate these agreements for financial reasons. See Wind Decl. ¶¶26-28 (describing how OEMs might lose market share as a result of declining Digilock's terms); Dkt. No. 160-7 (“Day Decl.”), Ex. A ¶¶ 9-10; Dkt. No. 144-22. There is also evidence, interpreted in the light most favorable to Ojmar, that Defendants stifled competition by threatening to bring patent infringement lawsuits against OEMs that used or displayed Ojmar EKLs. See Callaway Decl., Exs. 23, 24, 25; Oonk Decl. ¶ 38, 40 (describing companies' refusals to display Ojmar locks at subsequent industry trade shows); Lenzo Decl. ¶ 44. The Court does not, and need not, offer any view as to ...


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