Gatan, Inc. v. Nion Company
4:15-cv-01862
N.D. Cal.Aug 14, 2017Background
- Gatan, a components/software maker (not an electron microscope manufacturer), historically was the primary seller of EEL spectrometers to electron microscope manufacturers (EMMs). Nion is an EMM that formerly purchased spectrometers from Gatan.
- In February 2010 Nion signed a Reseller Agreement with Gatan under alleged pressure because Gatan was effectively the only source of spectrometers for EMMs; that agreement contained paragraph 16, an alleged non-compete later held unenforceable by this court.
- Nion alleges Gatan used paragraph 16 and similar restrictive contracts with other EMMs, discriminatory pricing, refusals to deal, and bad-faith litigation to maintain or obtain monopoly power in the global market for EEL spectrometers sold to EMMs.
- Nion stopped buying from Gatan and developed its own spectrometer; Gatan then sued Nion for trade secret misappropriation. Nion counterclaims that Gatan’s suit and other conduct were anticompetitive and in bad faith.
- Nion asserted seven counterclaims: UCL violation, Sherman Act §1, Sherman Act §2 attempt and monopolization, a Walker-Process-type claim (bad-faith trade-secret litigation), Cartwright Act, and breach of the implied covenant of good faith and fair dealing.
- The court denied Gatan’s motion to dismiss all counterclaims, finding Nion pleaded sufficient facts as to standing, relevant market and market power, an agreement in restraint of trade, antitrust injury, and a cognizable Walker-Process theory based on bad-faith litigation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| UCL standing | Gatan: Nion lacks standing to sue under Cal. Bus. & Prof. Code §17200 | Nion: incurred litigation costs and paid supracompetitive prices, satisfying UCL injury | Court: Nion has alleged injuries sufficient for UCL standing; claim survives dismissal |
| Walker-Process type claim (bad-faith litigation) | Gatan: Nion fails to plead fraud on the patent office or objectively meritless suit | Nion: alleges this is not a fraud-on-patent claim but bad-faith, objectively baseless trade-secret litigation to restrain competition | Court: Recognizes bad-faith litigation Walker theory; Nion alleges the suit is objectively baseless and pleaded sufficiently |
| Antitrust claims (market definition & market power) | Gatan: Nion fails to plead a relevant product/geographic market or Gatan’s market power | Nion: pleads the product market (EEL spectrometers) and global scope; alleges Gatan was sole source to EMMs and dominated market | Court: Allegations suffice at pleading stage to define market and allege market power |
| Antitrust claims (agreement, restraint, injury) | Gatan: Nion fails to identify any agreement in restraint of trade and fails to plead antitrust injury or unreasonable restraint | Nion: identifies the Reseller Agreement and alleges similar contracts with other EMMs, restrictive effects, supracompetitive pricing, and refusals to deal | Court: Reseller Agreement identified with sufficient specificity; Twombly standard met for other alleged agreements; pleads restraint and antitrust injury plausibly |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standards: plausibility and rejecting legal conclusions unsupported by facts)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (antitrust pleadings must allege facts raising a reasonable expectation discovery will reveal an illegal agreement)
- Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965) (enforcement of fraudulently procured exclusionary IP rights can violate Sherman Act)
- Int'l Techs. Consultants, Inc. v. Pilkington PLC, 137 F.3d 1382 (9th Cir. 1998) (use of baseless litigation to drive out competition can be an antitrust violation)
- CVD, Inc. v. Raytheon Co., 769 F.2d 842 (1st Cir. 1985) (assertion of trade-secret claims in bad faith to restrain competition can implicate antitrust law)
- Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038 (9th Cir. 2008) (relevant market requires product market and geographic market identification)
- Leegin Creative Leather Prods. v. PSKS, 551 U.S. 877 (2007) (rule-of-reason analysis may apply to certain vertical restraints)