Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-00619/USCOURTS-cand-3_05-cv-00619-1/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1338 Patent Infringement

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ELECTRONICS FOR IMAGING, INC.,

Plaintiff,

 v.

JAN COYLE and KOLBET LABS,

Defendants. /

J & L ELECTRONICS, LLC,

Plaintiff,

 v.

ELECTRONICS FOR IMAGING, INC.,

Defendant.

____________________________________/

No. C 01-4853 MJJ

No. C 05-0619 MJJ

ORDER GRANTING IN PART AND

DENYING IN PART ELECTRONICS

FOR IMAGING, INC.’S MOTION TO

DISMISS FIRST AMENDED

COMPLAINT

INTRODUCTION

Before the Court is Electronics for Imaging, Inc.’s (“EFI”) motion to dismiss certain claims

from J & L Electronics, LLC’s First Amended Complaint. For the reasons set forth below, EFI’s

motion is GRANTED IN PART AND DENIED IN PART. 

FACTUAL BACKGROUND

Hoping to enter into a profitable business arrangement with Jan Coyle and Kolbet Labs

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(“Coyle”) regarding their technology, EFI entered into a non-disclosure agreement (“NDA”) in

September of 1997. Under the terms and conditions of the NDA, EFI promised not to disclose or

utilize confidential information or technologies relevant to or derived from Coyle’s technologies,

including Coyle’s soon-to-be-issued U.S. Patent No. 6,337,746 (“the ‘746 Patent”). In late 1997, a

representative of EFI traveled to Kolbet Labs, in Reno, Nevada, to view the technology subject to

Coyle’s pending patent. After viewing the subject technology, the representative of EFI stated that

his company would be interested in further discussions of the technology after Coyle’s application

for the ‘746 Patent had been completely processed and the patent issued. 

In late 1999 or early 2000, the parties entered into discussions which led to the signing of a

second NDA in January 2000. Over the course of the next two years, representatives of the parties

visited each other’s facilities to demonstrate or view Coyle’s technology and to consider an

arrangement by which EFI would license or buy the technology. 

When no deal was reached, the relationship turned sour. In or about the week of November

26, 2001, Coyle began making threats to EFI to the effect that he would sue it based on EFI’s

infringement of his patent and that it had stolen his trade secrets. The situation came to a head

when, at a December 5, 2001 negotiation session, Coyle issued an ultimatum to EFI—either pay

$18,000,000 to license his technology within 10 days—or be sued. 

A. First California Action

 EFI responded by filing a declaratory action less than a week later, on December 11, 2001

(“First California Action”). The complaint prayed for (a) invalidity and non-infringement of the

‘746 Patent, (b) a finding of no breach of the two NDAs executed by and between Coyle and

Plaintiff concerning technology related to the ‘746 Patent, and (c) a finding of no trade secret

misappropriation concerning technology related to the ‘746 Patent. On January 8, 2002, the ‘746

Patent issued. EFI then amended its complaint to include a declaratory claim for patent invalidity. 

Coyle responded by filing a motion to dismiss based on improper venue, jurisdictional grounds and

failure to comply with the Declaratory Judgment Act (“DJA”). The Court granted Coyle’s motion to

dismiss for lack of personal jurisdiction on March 27, 2002. Plaintiff timely appealed to the Federal

Circuit, which reversed and remanded the case for further proceedings. Elecs. for Imaging, Inc. v.

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Coyle, 340 F.3d 1344, 1355 (Fed. Cir. 2003).

On February 13, 2004, the Court granted Coyle’s motion to dismiss under the DJA. EFI

timely appealed the Court’s order, and the Federal Circuit again reversed and remanded the case for

further proceedings. Elecs. for Imaging, Inc. v. Coyle, 394 F.3d 1341 (Fed. Cir. 2005).

B. Nevada Action

On January 21, 2002, Coyle assigned to J & L Electronics, LLC (“J&L”) all right, title,

license and interest in the relevant technology. On February 25, 2002, J&L filed suit against EFI in

the District of Nevada based on the same operative facts as the First California Action. The Nevada

District Court dismissed the action on March 31, 2003 for lack of personal jurisdiction over EFI, and

the Federal Circuit affirmed on February 9, 2004. 

C. Second California Action

On February 17, 2004, EFI filed a second complaint against Coyle in California (“Second

California Action”) including the same claims as the First California Action and an additional

declaratory claim against Coyle’s U.S. Patent No. 6,618,157 (“the ‘157 Patent”). EFI later amended

the complaint to include claims for patent infringement, violation of the Lanham Act, product

disparagement, and violation of California Business and Professions Code Sections 17200, et seq. 

Coyle filed a motion to dismiss the complaint under the DJA, and the Court denied the motion on

May 17, 2004. Upon learning that the Federal Circuit remanded the First California Action, EFI

voluntarily dismissed the Second California Action on January 11, 2005.

D. Arizona Action

On May 3, 2004, J&L filed the present action against EFI in the District of Arizona

(“Arizona Action”). EFI moved to transfer, stay or dismiss the Arizona Action. On January 19,

2005, the Arizona court ordered the Arizona action transferred to the Northern District of California. 

On March 7, 2005, the Court ordered the present action consolidated with the First California

Action.

LEGAL STANDARD

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the claims asserted in the

complaint. See Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337 (9th Cir. 1996). Dismissal of an

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action pursuant to Rule 12(b)(6) is appropriate only where it “appears beyond doubt that the plaintiff

can prove no set of facts in support of his claim which would entitle him to relief.” Levine v.

Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41,

45-6 (1957)). In reviewing such a motion, the Court must assume all factual allegations to be true

and must construe them in the light most favorable to the nonmoving party. See North Star v.

Arizona Corp. Comm., 720 F.2d 578, 580 (9th Cir. 1983). However, the Court need “not accept any

unreasonable inferences or assume the truth of legal conclusions cast in the form of factual

allegations.” Ileto v. Glock Inc., 349 F.3d 1191, 1200 (9th Cir. 2003). The Court will dismiss the

complaint or any claim in it without leave to amend only if “it is absolutely clear that the

deficiencies of the complaint could not be cured by amendment.” Cato v. United States, 70 F.3d

1103, 1106 (9th Cir. 1995).

ANALYSIS

I. Antitrust Claims

EFI moves to dismiss five antitrust claims asserted under Section 2 of the Sherman Act: 1)

monopolization of the industry; 2) attempted monopolization of the industry; 3) anticompetitive

acquisition of Coyle Technology; 4) filing an action in violation of 15 U.S.C. § 2; and 5) attempt to

maintain monopoly by patent misuse. The Court agrees with EFI that each of the last three claims is

a variant of a Section 2 actual monopolization claim, with elements largely tracking the first claim. 

EFI asserts that each of these claims must be dismissed because J & H has failed to

adequately plead the essential elements of antitrust claims. Furthermore, EFI contends that the

fourth and fifth claims should be dismissed because J & H has failed to plead with the requisite

specificity that the litigation by EFI on which those claims are based constituted “sham” litigation. 

J & H argues that it has properly plead its antitrust claims and that the allegations satisfy the

liberal pleading requirements under Federal Rule of Civil Procedure 8(a). Additionally, J & H

contends that its allegations are sufficient under Kobe, Inc. v. Dempsey Pump Co., 198 F.2d 416

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J & L contends that Kobe and its progeny provides a “distinct jurisprudential basis for antitrust

liability” whenever the plaintiff alleges an overall scheme to violate Section 2 that involves, as only one

aspect, the misuse of patents. See J & L’s Opposition to EFI’s Motion to Dismiss (“Opp.”) at 6:26. J

& L further alleges that certain Kobe fact patterns, including the one it alleges here, materially change

the elemental analysis under Section 2 by negating certain Section 2 elements and presuming others.

The Court disagrees. An examination of Kobe and its progeny reveals that this line of cases does not

alter the substantive elements or pleading requirements applicable to Section 2 monopolization or

attempted monopolization claims. In fact, the Ninth Circuit has never relied upon Kobe to modify the

essential elements of pleading and proof under Sherman Act cases. 

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(10th Cir. 1952), because some of its antitrust claims are based on an “overall scheme.”1

A. Monopolization Claim

To survive a motion to dismiss a monopolization claim, a plaintiff must allege, in addition to

antitrust injury: “(1) the possession of monopoly power in the relevant market and (2) the willful

acquisition or maintenance of that power as distinguished from growth or development as a

consequence of a superior product, business acumen, or historic accident.” Eastman Kodak. Co. v.

Image Technical Serv., Inc., 504 U.S. 451, 481 (1992) (citations omitted). 

The Supreme Court has held that monopoly power is “the power to control prices or exclude

competition.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956). To

demonstrate market power circumstantially, as J & H as attempted to do, J & H must: 1) define the

relevant market, 2) show that the defendant owns a dominant share of that market, and 3) show that

there are significant barriers to entry and who that the existing competitors lack the capacity to

increase their output in the short run. Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1434

(9th Cir. 1995).

“Monopoly power in the relevant geographical market . . . is an essential element of a

monopolization claim.” Rutman Wine, 829 F.3d at 739. The first paragraph of the First Amendment

Complaint states that “EFI has purposefully obtained and maintained an overwhelmingly dominant,

if not preclusive, status with the printer control industry.” (First Amended Complaint (“FAC”), ¶1.) 

J & H contends that the “printer control industry” sufficiently describes the relevant market. The

Court disagrees. This allegation is nothing more than a legal conclusion that assumes such a market

exists. J & H’s description of the market also fails to provide any information of the market’s

purported geographical scope (regional, national, or global). See Rockbit Indus. U.S.A., Inc. v. Baker

Hughes, Inc., 802 F. Supp. 1544, 1550 (S.D. Tex. 1991) (“Because the relevant market provides the

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While the relevant market may often be a question of fact, the Ninth Circuit has often held that

the plaintiff’s failure to identify a relevant market is a proper ground for dismissal in a Rule 12(b)(6)

motion. See Tanaka v. University of S. Cal., 252 F.3d 1059, 1062-63 (9th Cir. 2001); Rutman Wine, 829

F.2d at 736.

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framework against which economic power is measured, defining the product and geographic markets

[is] a threshold requirement under § 2.”); United States v. LSL Biotechnologies, 379 F.3d 672, 700

(9th Cir. 2004). Furthermore, J & H has not alleged significant barriers to entry of the market or that

the existing competitors lack the capacity to increase their output in the short run. See Townsend v.

Rockwell Int’l Corp., 2000 WL 433505, *12 (N.D. Cal. March 28, 2000). Thus, the Court finds that

J & H has failed to adequately allege “the possession of monopoly power in the relevant market.”2

Additionally, in order to recover under the Sherman Act, a plaintiff must demonstrate

antitrust injury. Rebel Oil, 51 F.3d at 1433. In doing so, J & H must show more than mere injury to

its own interests. Antitrust injury is “injury of the type the antitrust laws were intended to prevent

and that flows from that which makes defendants’ acts unlawful. The injury should reflect the

anticompetitive effect either of the violation or of anticompetitive acts made possible by the

violation.” Brunswick Corp. v. Pueblo Bowl-O-Mat., Inc., 429 U.S. 477, 489 (1977). 

In the FAC, J & H alleges that it “has been damaged by EFI’s actions in violation of 15

U.S.C. § 2, as alleged herein.” (FAC, ¶74). Upon reviewing the FAC, it appears that the damages J

& L could be referring to are from alleged breaches of contract, misappropriation of trade secrets,

infringement of patents, and misconduct in litigation. (FAC, ¶¶23-69). These injuries, even if

proven, are not related to EFI’s purported monopoly. Rather, these allegations only relate to the

injuries suffered by J & H, and do not speak to the manner in which EFI’s conduct injured

competition in the marketplace. See American Ad Management, Inc. v. General Telephone Co. of

California, 190 F.3d 1051, 1056-57 (9th Cir. 1999). Therefore, the Court finds that J & H’s

allegations of antitrust injury are insufficient.

In sum, J & H has failed to adequately allege all the necessary elements of a Section 2

monopolization claim. Accordingly, EFI’s motion to dismiss this claim is GRANTED with leave to

amend. 

B. Attempted Monopoly

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The essential elements of a cause of action for attempted monopolization are: “(1) specific

intent to control prices or destroy competition; (2) predatory or anticompetitive conduct directed at

accomplishing that purpose; (3) a dangerous probability of achieving ‘monopoly power’; and (4)

causal antitrust injury.” Rebel Oil, 51 F.3d at 1433 (citations omitted). Thus, the requirements for

attempted monopolization are similar to the requirements for a monopolization claim, “differing

primarily in the requisite intent and the necessary level of monopoly power.” Image Technical

Services, Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1202 (9th Cir. 1997). 

1. Specific Intent

A claim for attempted monopolization requires allegations of a specific intent to control

prices or destroy competition in the relevant market. Rutman Wine, 829 F.2d at 736. The Ninth

Circuit recently stated that “[a]nticompetitive conduct alone can satisfy the specific intent

requirement if the conduct form[s] the basis for a substantial claim of restraint of trade or is clearly

threatening to competition or clearly exclusionary.” Confederated Tribes of Siletz Indians of Oregon

v. Weyerhaeuser, Co., 2005 WL 1269668, *7 (9th Cir. May 31, 2005) (internal quotation marks

omitted). Here, J & H alleges that “EFI’s actions and statements regarding EFI’s acquisition of

competing entities and technologies in the Industry demonstrate EFI’s intent to control prices and

destroy competition.” (FAC at ¶78). As noted above, J & H has adequately alleged that EFI’s

purported practice of acquiring competitors to enhance its dominant market position. This

anticompetitive conduct, along with J & H’s allegation that EFI intended “to control and prices and

competition,” certainly helps satisfy the specific intent requirement. However, Rutman Wine

requires the plaintiff to allege that a defendant had a “specific intent to control prices or destroy

competition in a relevant market.” 829 F.2d at 736. As noted above, J & H has not adequately

alleged the relevant market. Accordingly, J & H has failed to adequately plead this element.

2. Probability of Monopolization

The Supreme Court has stated that “demonstrating the dangerous probability of

monopolization in an attempt case also requires inquiry into the relevant product and geographic

market and the defendant's economic power in that market.” Spectrum Sports, Inc. v. McQuillan,

506 U.S. 447, 459 (1993). The Ninth Circuit has also instructed that market share is insufficient to

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show market power and has found that courts evaluate the presence of entry barriers and the inability

of competitors to expand output. See Rebel Oil, 51 F.3d 1421, n. 10 (9th Cir. 1995). For the reasons

stated above, J & H’s allegations regarding market power in the relevant market are woefully

lacking. In the absence of sufficient allegations of market power in the relevant market, the Court

finds that J & H has not adequately alleged that EFI possesses a dangerous probability of

monopolization in the undefined market.

3. Antitrust Injury

As previously noted, J & H has not sufficiently alleged antitrust injury.

4. Summary

For these reasons, the Court finds that J & H has not adequately alleged the necessary

elements of an attempted monopolization claim. Thus, EFI’s motion to dismiss this claim is

GRANTED with leave to amend.

C. Remaining Antitrust Claims

Because the Court finds that J & H has not sufficiently alleged an actual monopolization

claim, J & H remaining three Claims must also be dismissed with leave to amend. In addition, EFI

moves to dismiss J & L fourth and fifth antitrust causes of action on the additional ground that J & L

fails to plead a recognized exception to the Noerr-Pennington doctrine. J & L’s fourth and fifth

Antitrust Claims seek to base causes of action for actual monopolization on EFI’s “filing claims

against Coyle and Kolbert” and assertion of “claims regarding the 314 Patent’s coverage to

invalidate [J & L’s] 746 Patent.” (FAC, ¶¶89, 96). 

Under the Noerr-Pennington doctrine, private entities are immune from liability under

antitrust laws for “mere attempts to influence the passage or enforcement of laws” even if the laws

they advocate would have anticompetitive effects. See Eastern R.R. Presidents Conf. v. Noerr

Motor Freight, Inc., 265 U.S. 127, 135 (1961); United Mine Workers v. Pennington, 381 U.S. 657,

670 (1965). This immunity extends to all “conduct incidental to the prosecution of the suit.” 

Columbia Pictures Indus., Inc. v. Profess. Real Estate Investors, Inc., 944 F.2d 1525, 1528 (9th Cir.

1991). Parties, however, are not immunized for their petitioning conduct if such conduct “is a mere

sham to cover what is actually nothing more than an attempt to interfere directly with the business

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relationships of a competitor.” Noerr, 365 U.S. at 144. The Supreme Court has made clear that a

“sham exception” to Noerr-Pennington must meet a two-tiered test. First, the challenged lawsuit

must be objectively baseless, without any reasonable basis to elicit a favorable outcome. Only if that

initial inquiry can be met does a court move on to the subjective motivation of the party’s use of

governmental process. See Professional Real Estate Inves. v. Columbia Pic. Indus. Inc., 508 U.S.

49, 56-57 (1993). 

The Court finds that since J & L has relied upon EFI’s conduct in the parties prior litigation

concerning their intellectual property rights, J & L has subjected its First Amended Compliant to the

pleading scrutiny of the Noerr-Pennington doctrine. The Ninth Circuit has applied a heightened

pleading standard to claims involving Noerr-Pennington. See Oregon Natural Resources Council v.

Mohla, 944 F.2d 531, 533 (9th. Cir. 1991). “This heightened level of protection accorded

petitioning activity is necessary to avoid a chilling effect on the exercise of this fundamental First

Amendment right. Conclusory allegations are not sufficient to strip a defendant’s activities of

Noerr-Pennington protection.” Id. (citations and internal quotation marks omitted). The Court finds

that J & L has not alleged that EFI’s lawsuit regarding its intellectual property disputes with J & L

was a sham. Nor has it alleged any facts suggesting that the lawsuit was so baseless that no

reasonable litigant could have expected to succeed on the merits. For this reason, EFI’s motion to

dismiss J & H’s fourth and fifth Antitrust Claims is GRANTED with leave to amend.

II. State Law Claims

A. Breach of Contract

In its seventh and eighth causes of action, J & H asserts breach of contract claims based on

the 1997 and 2000 Non-Disclosure Agreements, respectively. EFI asserts that neither contract was

made between EFI and F & H. EFI also argues that J & L failed to plead the required element of

resulting injury with respect to the 1997 NDA. J & H contends that both the 1997 and 2000 NDA’s

were executed by and between Coyle d/b/a Kolbet Labs and EFI, and that Coyle “assigned the Coyle

Technology, and all contract rights inuring to the benefit of Coyle with respect to the Coyle

Technology, to J & L Electronics.” (FAC, ¶35).

Under California law, a claim for breach of contract requires: 1) a contract; 2) plaintiff’s

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Federal Rule of Civil Procedure 17(a) requires that “every action shall be prosecuted in the

name of the real party in interest.”

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performance or excuse of performance, 3) defendant’s breach, and 4) resulting damages. Love v.

Motion Indus., Inc., 309 F. Supp. 2d 1128, 1135-36 (N.D. Cal 2004). Here, there is no dispute

regarding the existence of the 1997 and 2000 NDA’s, or whether F & H has adequately alleged that

those contracts were breached. Rather, the Court must decide whether J & H has adequately alleged

that it was a party to those contracts. The FAC states that both the 1997 NDA and the 2000 NDA

were executed by and between Defendant Coyle d//b/a Kolbet Labs and EFI, and that Coyle

“assigned the Coyle Technology, and all contract rights inuring to the benefit of Coyle with respect

to the Coyle Technology, to J & L Electronics.” (FAC, ¶¶24, 34, 35). The Court finds that these

allegations are sufficient to demonstrate that a contractual agreement existed between J & L and EFI

based upon the NDA’s. 

EFI also argues that F & H seventh claim for relief (1997 NDA) seeks damages only for

Coyle, but not for F &H itself.3

 The Court agrees. However, F & H has characterized this mistake

as a “clear typographical error.” Given this error, the Court GRANTS EFI’s motion to dismiss this

claim with leave to amend. 

B. Misappropriation of Commercial Properties 

EFI moves to dismiss J & H’s claim for Misappropriation of Commercial Properties. EFI

asserts that the commercial property allegedly misappropriated, the “Coyle Technology,” ostensibly

comprises patents and trade secrets. EFI notes that J & L has asserted separate claims for the alleged

misappropriation of these patents and trade secrets, and thus concludes that J & H’s claim for

misappropriation of commercial properties is superfluous. The Court agrees. J & H has simply not

alleged that the “Coyle technology” comprised anything other than trade secrets and patents. (FAC

at ¶¶6, 7, 10, 25). Thus, the Court DISMISSES this claim with leave to amend.

C. Unjust Enrichment

 EFI asserts that because J & L has adequate remedies in law and equity for its patent and

trade secret claims, its equitable claim for unjust enrichment must be dismissed. In support, Plaintiff

cites Marina Tenants Ass’n v. Deauville Marina Development Co., 181 Cal. App. 3d 122 (1986). In

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Marina Tenants, the court concluded that the plaintiff’s claims for breach of a master lease were

subsumed to the contract, thereby precluding an equitable claim for unjust enrichment. Id. at 134. 

Here, in contrast to Marina Tenants, the Court finds that J & L’s claim for unjust enrichment is not

subsumed to any of J & L’s other claims for relief. 

Furthermore, the Court finds that J & H has adequately plead the necessary elements of

unjust enrichment: 1) receipt of a benefit; and 2) unjust retention of the benefit at the expense of

another. Lectrodryer v. SeoulBank, 77 Cal. App. 4th 723, 726 (2000). Specifically, F & H alleges

that EFI received trade secrets from regarding the Coyle technology (FAC, ¶25) and that EFI has

benefitted from the use of that technology. (FAC, ¶139). Accordingly, EFI’s motion to dismiss the

unjust enrichment claim is DENIED.

CONCLUSION

For the foregoing reasons, EFI’s motion to dismiss is GRANTED IN PART AND DENIED

IN PART. If it so chooses, J & H shall have 25 days to amend its complaint.

IT IS SO ORDERED.

Dated: July __14__, 2005 _______________________________

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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