Rescue Phone
Posted by: scott on Aug 20, 2010 | Tagged in: Untagged
In a decision that is now often cited and which was hailed as one of the leading antitrust decisions of 2007, Thomas Dunlap successfully argued the merits of Rescue Phone, Inc's Antitrust claims against a competitor in a patent infringement case. The result, as published by the American Bar Association's Antitrust Journal was that the Attempted Monopolization Claim need not allege "market share". The substance of the ruling is detailed below as reported in the ABA Antitrust Journal.
In Rescue Phone, Inc. v. Enforcement Technology Group, Inc., 2007 WL 2045514 (E.D. Va. July 9, 2007).
The defendants argued that Rescue Phone failed adequately to plead a relevant market, for two reasons. First, the defendants argued that the difference between the "hostage negotiation telephone systems" sold by Rescue Phone and the "hostage negotiation systems" sold by ETGI caused Rescue Phone's claim to fail as a matter of law. Id. at *3. The defendants' systems allegedly include video and audio technology in addition to the standard telephone communication allegedly offered by Rescue Phone, the defendants argued, and the parties' products therefore occupy separate markets. Id. Accepting the plaintiff's allegations as true, namely that both ETGI and Rescue Phone deal in the same product, the court held that both ETGI and Rescue Phone are active in the same product market, despite Defendants' "semantic argument" regarding the omission of the word "telephone" in Rescue Phone's complaint. Id.
Second, the defendants challenged Rescue Phone's alleged geographic market. Id. The complaint alleged in some portions of the complaint that the relevant geographic market was nationwide, and in others that it was limited to Virginia. Id. The court acknowledged ambiguity in Rescue Phone's complaint, but nevertheless held Rescue Phone's relevant market allegation to suffice, because either alleged market separately would suffice. Id.
The defendants next argued that Rescue Phone failed to allege a dangerous probability of monopolization. Id. at *4. Rescue Phone had not alleged that the defendants had any particular market share. The court held, however, that the defendants cited no precedent for the proposition that Rescue Phone must allege market share as part of its attempted monopolization claim. Id. The court also held that a weak showing of market power can be offset by more compelling evidence of monopolistic intent or anticompetitive conduct. Id. (citing M & M Med. Supplies & Serv., Inc. v. Pleasant Valley Hosp., Inc., 981 F.2d 160, 168 (4th Cir. 1992)). Here, Rescue Phone had alleged that (1) the defendants acted intentionally, fraudulently, and recklessly in obtaining the patent at issue; (2) ETGI's attempted enforcement of its fraudulently obtained patent threatened market competition by dissuading consumers from purchasing Rescue Phone's products; and (3) ETGI made statements to consumers in the relevant market that Rescue Phone does not have the right to sell its products in violation of ETGI's patent, which damaged Rescue Phone's business. Id. The court held that these allegations sufficiently pleaded anticompetitive conduct and specific intent. Id. While noting "the failure to allege market share weakens the claim considerably," the court denied the motion to dismiss. Id.
The court noted that because Otto is an employee of ETGI, Rescue Phone probably could not prove that he has any market share aside from that held by ETGI. Id. It also held, however, that a claim for attempted monopolization does not automatically fail despite alleging a particular defendant's low market share. Id. (citing M & M Med. Supplies & Serv., Inc. v. Pleasant Valley Hosp., Inc., 981 F.2d 160, 168 (4th Cir. 1992)). The court thus concluded that Rescue Phone adequately stated a claim for attempted monopolization against Otto and denied the defendants' motion to dismiss. Id.





