(1957). Nonetheless, in order to withstand a motion to dismiss, a complaint must allege
facts sufficiently setting forth the essential elements of the cause of action. Lucien v.

Preiner, 967 F.2d 1166, 1168 (7th Cir. 1992).

In reviewing a Rule 12(b)(6) motion, the court may not look outside the
allegations in the pleadings, but documents incorporated by reference into the pleadings
and documents attached to the pleadings as exhibits are considered part of the pleadings

for all purposes. See Fed.R.Civ.P. 10(c); Venture Associates Corp. v. Zenith Data Sys.

Corp., 987 F.2d 429, 431 (7th Cir. 1993). With these principles in mind, we turn to the
parties’ motions.
DISCUSSION

J, Lanham Act Claim

Cook’s first contested claim alleges that Boston’s press release violates 15 U.S.C.
§ 1125(a), which prohibits any person from making false statements regarding the
goods, services, or commercial activities of another. Subsection (a) proscribes a wide
range of activities; the language of Cook’s complaint mixes and matches many of these
terms. A close reading of the statute reveals that Cook’s allegations implicate only one
of the scenarios described: a person may not make a false or misleading representation
of fact in commercial advertising or promotion that “misrepresents the
nature...of...another person’s...commercial activities.” 15 U.S.C. § 1125(a)(1)(B).
According to Cook, the press release fits this bill.

-4-


Boston’s opposition to the Cook’s allegations of the final two elements centers
on the lack of sufficient facts within the complaint to establish them. These arguments
are more appropriate to a motion for summary judgment; antitrust claims are not among
the special matters of Fed. R. Civ. Proc. 9 that require heightened pleading. On a
motion to dismiss, we look only to the sufficiency of the allegations, not to evidentiary
support. Because Boston takes issue only with the factual support of Cook’s
allegations, we cannot conclude that Cook’s allegations are legally flawed, and we
accordingly deny the motion to dismiss Count III.

III. Breach of Covenant of Good Faith and Fair Dealing

As stated above, Boston’s answer includes a counterclaim for breach of contract
and another for breach of the implied covenant of good faith and fair dealing. Cook
seeks to dismiss the second counterclaim on the grounds that Illinois law does not
recognize an independent cause of action for breach of the implied covenant. Boston
counters that Illinois law is irrelevant to the issue because section 11.2 of the Angiotech
agreement specifies that the agreement will be governed by the laws of the state of
Washington. Illinois choice-of-law rules require that a court honor a contractual choice

of law unless the chosen Jaw violates Illinois public policy. Scentura Creations, Inc. v.

Long, 756 N.E.2d 451, 456 (Ill. App. Ct. 2001). Cook counters that the contractual
choice cannot stand because Washington’s position on the issue flies in the face of

IMinois public policy.


(4) Boston put the false statement into interstate commerce, and (5) Cook is likely to be
injured as a result of the false statement, even if the injury is only a loss of goodwill
associated with its products. Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d81 3, 819 (7th
Cir. 1999). The language of paragraphs 20 through 24 of the complaint tracks each of
the latter four elements. Although the statements are admittedly somewhat sparse, they
are enough to put Boston on notice of the nature of the claim against it. See, @.8.5

Kaplan v. Shure Bros, Inc., 266 F.3d 598, 607 (7th Cir. 2001). As such, the allegations

with regard to these four elements are sufficient to survive a motion to dismiss. Id.
The first element, however, does not have the proper underpinning. The
language of the press release, even taken in the light most favorable to Cook, is not a
statement of fact. Rather, it states the basis of Boston’s opinion that it was entitled to
pursue contractual and legal remedies available under the Angiotech agreement and the
intent of that company to seek relief through those avenues. This does not state any
facts pertaining to Cook’s activities with Guidant. A claim that alleges facts

undermining the plaintiff's right to relief cannot survive a 12(b)(6) motion. See, e.g.,

Pernice v. Chicago, 237 F.3d 783, 784-85 (7th Cir. 2001); Bennett v. Schmidt, 153 F.3d
516, 519 (7th Cir. 1998). The statements contained within the press release contradict
Cook’s assertion that Boston made the requisite statement of fact. Withoutthis element,

Count II cannot withstand Boston’s motion to dismiss.


As an initial matter, we note that Boston invokes the Noerr-Pennington doctrine
to counter Cook’s Lanham Act claim. The doctrine immunizes parties who seek

government action from antitrust liability. United Mine Workers v. Pennington, 381

U.S. 657 (1965) (executive branch); Eastern R.R. Presidents Conference v, Noerr Motor
Freight, Inc,, 365 U.S. 127 (1961) (legislative branch). However, the rationale behind
the holdings in both Noerr and Pennington rested heavily on interpretation of the
Sherman Act. Although the actions Boston took could conceivably fall under other
umbrellas, such as the First Amendment right to petition, Boston asserts only Noerr-

Pennington immunity. See California Motor Transport Co. v. Trucking Unlimited, 92

S.Ct. 609 (1972) (holding that the First Amended provides immunity for activities

related to Clayton Act litigation); Cardtoons v. Major League Baseball Players Assoc.,

208 F.3d 885, 888-91 (10th Cir. 2000) (comparing right to petition under First
Amendment with Noerr-Pennington immunity). Because Count II arises not under the
Sherman Act but under the Lanham Act, these cases and their reasoning are inapposite,
and we will not use them to bar Cook’s Lanham Act claim.

We therefore examine whether Count II alleges all the required elements of a
claim under § 1125(a). To properly make out its claim, Cook must allege that
(1) Boston made a false or misleading statement of fact in a commercial promotion
about Cook’s commercial activities, (2) the statement tends to deceive a substantial
segment of the audience, (3) the deception is likely to influence the purchasing decision,

-5-


as the author and master of its complaint, can limit the foundation of its claim to just the
one document, and we will correspondingly limit our consideration to the Angiotech
agreement. Graehling v. Village of Lombard, 58 F.3d 295, 297 (7th Cir. 1995). This
formulation would make the agreement supply the concerted action needed for the
antitrust violation. Cook argues that the agreement is per se illegal, but we disagree,
heeding the Supreme Court’s cautions against extending the per se analysis to cases
involving restraints whose economic impact is not immediately obvious. FTC v.

Indiana Federation of Dentists, 106 S.Ct. 2009, 2018 (1986). The simple fact that a

cooperative activity involves a restraint or exclusion does not mean its anticompetitive
consequences will predominate, justifying per se treatment. Northwest Wholesale
Stationers, Inc. v. Pacific Stationers and Printing Co., 105 S.Ct. 2613, 2620 (1985).
This case does not involve price-fixing, or a group boycott, or another situation where
the per se rule is warranted. See Toys “R” Us, 221 F.3d at 936; Denny’s Marina, 8 F.3d
at 1220. Because the agreement does not fall within this narrow category, the antitrust
potential of the Angiotech agreement must be assessed in accordance with the “rule of
reason.” Indiana Federation of Dentists, 106 S.Ct. at 2018. The rule of reason entails
a complex inquiry into the surrounding circumstances that is not susceptible to
resolution on a motion to dismiss, and we conclude that, with respect to the Angiotech

agreement, Cook has properly alleged the first element of their claim.


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

N: f Assigned Jud; Sitting Judge if Oth
mor Magistrate Judge Charles P. Kocoras than Asigned Judge
CASE NUMBER 01 C 9479 DATE 2/28/2002
CASE . Cook Inc. vs. Boston Scientific Corp.
TITLE

{In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented.]

MOTION:

DOCKET ENTRY:

(1) Oo Filed motion of [ use listing in “Motion” box above.]

(2) oO Brief in support of motion due

(3) im Answer brief to motion due___. Reply to answer brief due.

(4) o Ruling/Hearingon___ssetfor at.

(5) a Status hearing[held/continued to] [set for/re-set for] on setfor at

(6) o Pretrial conference[held/continued to] [set for/re-set for]on__——ssetfor_ at.

(7) Qo Trial[set for/re-set for] on___at

(8) a [BenclhyJury trial] [Hearing] held/continued to___ at

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OFRCP4(m) (General Rule21 OOFRCP41(a)(1) O FRCP41(a)(2).

ao) of [Other docket entry] Ruling held. ENTER MEMORANDUM OPINION: Motion (Doc 8-1) to

dismiss one counterclaim is granted, and motion (Doc 11-1) to dismiss portions of the complaint is
granted in part and denied in part. We dismiss Count II of Cook’s complaint and Boston’s second
counterclaim. Boston’s motion to dismiss Count III is denied. Plaintiff is given leave to file its motion
for summary judgment on the contract claim by March 21, 2002. Defendant’s answer and cross-motion
for summary judgment is due April 11, 2002. Plaintiff's reply and answer to the cross-claim due May 2,
2002. Defendant’s reply due May 16, 2002. All briefs are limited to 15 pages. Ruling set for June 6,

2002 at 9:45 a.m.

Date/time received in |
central Clerk’s Office mailing deputy initials

aly [For further detail see order attached to the original minute order.)
No notices required, advised in open court.
No notices required. vonbe tsa Number S
Notices mailed by judge’s staff. 3)\6 9,
Notified counsel by telephone. H satoeketed
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Illinois public policy, and we are therefore obligated to enforce the contractual choice
of law. However, Boston has not alleged that Cook’s obligations toward it arise from
any source but the Angiotech agreement, so Washington law does not impose a free-
floating duty of good faith that would support their second counterclaim. Instead, any
discussion of the implied covenant of good faith and fair dealing is properly raised as
a facet of their first counterclaim for breach of contract. The second counterclaim
therefore does not state a claim upon which relief can be granted; it is dismissed.
CONCLUSION
Based on the foregoing analysis, we dismiss Count II of Cook’s complaint and

Boston’s second counterclaim. Boston’s motion to dismiss Count III is denied.

Che Be P Koei,

Charles P. Kocoras
United States District Judge

Dated: __ FEB 28 2002

-ll-


Boston argues that the second counterclaim is viable because Washington, unlike
Illinois, supplies a freestanding cause of action for breach of the implied covenant. We
disagree. Washington law, though not as explicit on the point as Illinois has been,
shares IIlinois’s view that the implied covenant of good faith and fair dealing is a rule
of construction to be used in interpreting the express conditions of a contract; neither
state recognizes a “free-floating duty of good faith unattached to the underlying legal

document.” Badgett v. Security State Bank, 807 P.2d 356, 360 (Wash. 1991); see also

Coleman v. Madison Two Associates, 718 N.E.2d 668, 675 (Ill. App. Ct. 1998). The

cases upon which Boston relies do not hold otherwise. Rather, they stand for the
propositions that an assignment of a contract does not relieve the assignor of its
obligation to act in good faith and that parties to specific kinds of contracts can be
subject to heightened duties imposed by sources other than the contract itself.

Coventry Associates v. American States Ins. Co., 961 P.2d 933, 935-38 (Wash. 1998)
(holding that insurance companies can be subject to causes of action for breach of good
faith imposed by Washington statutes); Lonsdale v. Chesterfield, 662 P.2d385, 387-388
(Wash. 1983) (holding that an assignor of a contract must act in good faith even after
assignment); State v. Van Buren, 2 P.3d 991, 996 (Wash. Ct. App. 2000) (stating that
prosecutor’s obligation to act in good faith with regard to plea agreements is
supplemented by due process concerns). Because the two states treat the issue in a

similar fashion, we agree with Boston that the choice of Washington law does not flout

-10-


I. Sherman Act Claim

Section 1 of the Sherman Act states, in pertinent part, “Every contract,
combination in the form of trust or otherwise, or conspiracy, in restraint of trade or
commerce...is hereby declared to be illegal.” 15 U.S.C. § 1. Commercial arrangements
prohibited by this section can occur as vertical restraints (i.e., between parties at
different levels of the distribution chain) or horizontal restraints (i.e., between parties
at the same level of the distribution chain). Toys ‘R’ Us, Inc. v. FTC, 221 F.3d 928,
930 (7th Cir. 2000). To properly plead a cause of action under this section, Cook must
allege a contract, combination, or conspiracy; an unreasonable restraint of trade within
the relevant market; and injury. Denny’s Marina, Inc. v. Renfro Productions, Inc., 8
F.3d 1217, 1220 (7th Cir. 1993). The thrust of Cook’s argument is that if the Angiotech
agreement means what Boston says it does, it constitutes a horizontal restraint of trade
because it allows Boston to prevent them from working with Guidant in the production
of the coated stents. Of course, if Cook eventually succeeds in advancing this
argument, they could invalidate their own license to the Angiotech technology, but they
are entitled to pursue the argument if they wish. CVD, Inc. v. Raytheon Co., 769 F.2d
842, 856 (1st Cir. 1985).

Boston frames its motion as if Cook were basing Count III only on the notice
letter and press release. However, Cook unequivocally states that Count III is “based

solely on [Boston’s] impermissible construction of the Angiotech agreement.” Cook,

-7-


violated the terms of the agreement and expressing Boston’s intention to “aggressively
protect” its rights in the face of the perceived breach.

Cook filed suit, seeking a declaratory judgment that they are not in breach of the
Angiotech Agreement, as well as asserting violations of both the Sherman Act and the
Lanham Act based on the notice letter and the press release. Boston answered the
complaint and asserted two counterclaims, one for breach of contract and one for breach
of the implied covenant of good faith and fair dealing.

The parties now each move to dismiss portions of the other’s case pursuant to
Fed. R. Civ. Proc. 12(b)(6): the Sherman Act and Lanham Act counts and the
counterclaim involving the covenant of good faith.

LEGAL STANDARD
The purpose of a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6) is to test the legal sufficiency ofa complaint. Triad Associates, Inc. v. Chicago

Hous. Auth., 892 F.2d 583, 586 (7th Cir. 1989). In ruling on a motion to dismiss, the
court must construe the allegations of the complaint in the light most favorable to the
plaintiff, and all well-pleaded facts and allegations in the complaint must be accepted

as true. Bontkowski v. First Nat'l Bank of Cicero, 998 F.2d 459, 461 (7th Cir. 1993).

The allegations ofa complaint should not be dismissed for failure to state a claim
"unless it appears beyond a doubt that the plaintiff can prove no set of facts in support
of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S, 41, 45-46

-3-


stents to be coated with medication to further increase the treatment potential of
implanted stents.

Rather than producing and marketing the stents itself, Angiotech granted
coexclusive licenses in the underlying technology to Plaintiff Cook Incorporated
(“Cook”) and Defendant Boston Scientific Corporation (“Boston”). Both licenses were
embodied in a single agreement (“the Angiotech agreement’). The agreement grants
worldwide coexclusive rights to Cook and Boston to “use, manufacture, have
manufactured, distribute and sell, and to grant sublicenses to its Affiliates to use,
manufacture, have manufactured, distribute and sell, the Angiotech Technology...”
Each licensee is responsible for obtaining necessary regulatory approval for the
products they produce that use the Angiotech technology. In addition, none of the
parties could assign their rights or obligations under the agreement without the prior
written consent of the others.

After entering the agreement with Angiotech, Cook then contracted with another
party, Guidant, to perform certain tasks during the production of the stents, including
obtaining regulatory approval for and selling the finished product. Upon learning of
Cook’s arrangement with Guidant, Boston sent a notice letter to Cook of its belief that
the Cook-Guidant association breached certain provisions of the Angiotech licensing
agreement. The following day, Boston issued a press release that contained a quote
from its CEO regarding the company’s belief that Cook’s arrangement with Guidant

-2-


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION . aN
“ cy a
COOK INCORPORATED, ) W . ye
) ws
Plaintiff, )
) wee
vs. 01 C9479 ae
5 a
BOSTON SCIENTIFIC CORPORATION, )
)
Defendant. )
MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge:

This matter comes before the court on the Defendant Boston Scientific
Corporation’s motion to dismiss certain counts of the complaint as well as Plaintiff
Cook Incorporated’s motion to dismiss one counterclaim. For the reasons set forth
below, the motion to dismiss the counterclaim is granted; the motion to dismiss portions
of the complaint is granted in part and denied in part.

BACKGROUND

Arteriosclerosis, or narrowing of the arteries, is a common and serious medical
condition. One method of treatment involves an expandable mesh tube called a stent,
which is inserted into a diseased artery and enlarged to increase arterial flow capacity.

Recently, a Canadian corporation called Angiotech patented an invention that allows