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Hon Hai Precision Industry Co., Ltd. v. Molex

February 9, 2009

HON HAI PRECISION INDUSTRY CO., LTD., A TAIWAN CORPORATION; AND FOXCONN ELECTRONICS, INC., A CALIFORNIA CORPORATION, PLAINTIFFS,
v.
MOLEX, INC., A DELAWARE CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court is a Motion to Dismiss filed by Defendant Molex, Inc. (hereinafter, "Molex"). Molex requests that the Court dismiss certain antitrust, state tort, and contract claims (Counts III, V, VI, VII, and VIII). For the reasons given below, Molex's Motion to Dismiss is granted in part and denied in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs Hon Hai Precision Industry Co., Ltd. and its subsidiary Foxconn Electronics, Inc. (collectively, "Hon Hai") develop, market, and distribute electronic components, including electrical connectors used to interconnect personal computers and audio/visual equipment. Molex is a supplier of interconnect products and the owner of the United States patent for the DisplayPort Interface Standard ("DisplayPort"), a standard that relates to a flexible digital interface capable of handling video and audio data over a common cable. DisplayPort was published by the Video Electronics Standards Association ("VESA"), a nonprofit corporation that sets industry-wide standards. According to Hon Hai, Molex is a member of VESA and helped to develop the DisplayPort. Hon Hai also made certain representations and warranties to VESA, including promising to offer patent licenses to others interested in implementing the DisplayPort on reasonable and nondiscriminatory terms.

On September 17, 2007, Hon Hai and Molex entered into the DisplayPort Standard License Agreement (the "License Agreement"), in which Molex granted to Hon Hai a license to the "necessary claims" for implementing the DisplayPort. The parties agree that the License Agreement covers connectors that conform to the VESA standard and include a surface mount termination (the "SMT connectors"), but dispute whether the license covers connectors that otherwise conform to the VESA standard but have a through-hole termination (the "TH connectors").

On September 30, 2008, Hon Hai filed a Complaint against Molex, alleging breach of contract, tortious interference with prospective economic advantage, deceptive business practices, commercial disparagement, and anticompetitive conduct constituting antitrust violations under the Sherman Antitrust Act. Hon Hai alleges that Molex breached the License Agreement and made false and misleading statements to its customers and competitors in an attempt to obtain monopoly power in the relevant industry.

In its Motion, Molex first argues that the Complaint fails to allege facts that would entitle it to relief for attempted monopolization under Section 2 of the Sherman Act. Second, Molex contends that Hon Hai's state tort law claims are preempted by federal patent law and that Hon Hai did not allege sufficient facts to support its commercial disparagement claims. Finally, Molex argues that Hon Hai failed to state a claim for breach of contract relating to the License Agreement.

II. STANDARD OF REVIEW

In deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6), the Court accepts all well-pleaded allegations in the complaint as true and draws all reasonable inferences in a light favorable to the plaintiff. Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007). "A complaint must always, . . . allege 'enough facts to state a claim to relief that is plausible on its face,'" Limestone Development Corp. v. Village of Lemont, Ill., 520 F.3d 797, 803 (7th Cir., 2008) (quoting Bell Atlantic, 127 S.Ct. at 1974). To avoid dismissal, the "allegations must plausibly suggest that the defendant has a right to relief, raising that possibility above a speculative level." E.E.O.C. v. Concentra Health Services, Inc., 496 F.3d 773, 776 (7th Cir., 2007).

III. DISCUSSION

A. Sherman Act Claim (Attempted Monopolization)

Section 2 of the Sherman Act states that "every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony. . . ." 15 U.S.C. § 2. A claim for attempted monopolization requires a plaintiff to show:

(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of obtaining monopoly power. Spectrum ...


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