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Walter Kidde Portable Equipment, Inc. v. Universal Security Instruments

October 22, 2009

WALTER KIDDE PORTABLE EQUIPMENT, INC., PLAINTIFF/COUNTER-DEFENDANT,
v.
UNIVERSAL SECURITY INSTRUMENTS, INC., ET AL., DEFENDANTS/COUNTER-PLAINTIFFS,
v.
UNITED TECHNOLOGIES, CORP., THIRD PARTY DEFENDANT,



The opinion of the court was delivered by: Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the court is the motion of Plaintiff/Counter-Defendant Walter Kidde Portable Equipment, Inc., and Third-Party Defendant United Technologies Corp. (hereinafter collectively, "UTC") to dismiss Counts Five and Six of the First Amended Answer and Counterclaims of Defendant/Counter-Plaintiff Universal Security Instruments, Inc., and USI Electric, Inc. (hereinafter collectively, "USI"). USI responded by seeking leave to amend its counterclaims and submitting a proposed Second Amended Answer and Counterclaims. USI's motion for leave to amend is allowed, and in this opinion the court examines the sufficiency of the antitrust and unfair competition claims in USI's Second Amended Answer and Counterclaims, an issue which is now fully briefed.

I. BACKGROUND

UTC has been involved in a longstanding dispute with USI, its competitor in the smoke alarm market, regarding a now-expired patent covering a "hush feature" on smoke alarms. The instant suit was brought in 2003 by a predecessor of Kidde, Maple Chase Co., against USI alleging that USI infringed U.S. Patent No. RE: 33,920. The Maple Chase suit was dismissed when the Patent & Trademark Office (the "PTO") granted a request to re-examine the patent. In May 2008, the patent office issued a reexamination certificate for U.S. Patent No. RE: 33,920 ("the '920 Reexamined Patent"). The '920 Reexamined Patent and its predecessors expired on March 7, 2007.

In June 2008, Maple Chase reinstituted its patent infringement suit against USI. Kidde, a subsidiary of UTC, subsequently was substituted as the plaintiff because it had acquired Maple Chase and Maple Chase assigned the '920 Reexamined Patent to it. USI responded by filing a number of counterclaims and third-party claims against Kidde and UTC, alleging in part that it did not infringe the patent and that, in any event, the patent was unenforceable because it was procured by fraud on the PTO. In its Second Amended Answer and Counterclaims, USI refers to "UTC Fire & Security," which it describes as a "multibillion dollar division" of UTC. UTC does not make much of this distinction, so the Court will treat references to "UTC Fire & Security" as references to Third-Party Defendant UTC.

Initially, UTC sought dismissal of Counts Five and Six of USI's First Amended Answer and Counterclaims for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). Count Five alleged an antitrust violation under Section 2 of the Sherman Act and Count Six alleged violations of the Lanham Act, 15 U.S.C. §1125(a), and the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS § 510/1 et seq.

In response, USI argued that its antitrust claim was adequately pled, but sought leave to amend its counterclaims to add specific factual allegations and attached to its response a proposed Second Amended Answer and Counterclaims. USI conceded that its Lanham Act claim was deficient and omitted it from its proposed Second Amended Answer and Counterclaims. However, USI still seeks to pursue an unfair competition claim against UTC under Illinois law based on its allegation that Maple Chase wrongfully coerced its supplier, Allegro Microsystems Inc., into refusing to do business with USI unless USI would agree not to use the built-in hush feature in its smoke alarms.

UTC, in its reply, argues that USI's proposed Second Amended Answer and Counterclaims is deficient. According to UTC, the proposed amended pleading fails to cure the defects in USI's antitrust claim, and its unfair competition claim is barred by the statute of limitations.

Under Federal Rule of Civil Procedure 15(a), leave to amend should be freely given in the absence of undue delay, bad faith, or undue prejudice to the opposing party. See Barry Aviation Inc. v. Land O'Lakes Municipal Airport Com'n, 377 F.3d 682, 687 (7th Cir., 2004). Because the Court finds no undue delay or bad faith on the part of USI and because UTC will not suffer undue prejudice if USI is permitted to amend its pleading, the Court grants USI's request for leave to amend. Accordingly, the Court will consider the sufficiency of the allegations in USI's Second Amended Answer and Counterclaims, an issue which is now fully briefed.

II. DISCUSSION

A. Standard of Review

In ruling on a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court accepts as true all well pleaded facts in the complaint, and draws all reasonable inferences in favor of the plaintiff. Hon Hai Precision Industry Co., Ltd. v. Molex, Inc., No. 08-5582, 2009 WL 310890, at *1 (N.D.Ill., Feb. 9, 2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)). A complaint need not set forth all of the relevant facts, but it must allege "enough facts to state a claim for relief that is plausible on its face." Limestone Development Corp. v. Village of Lemont, Ill., 520 F.3d 797, 803 (7th Cir., 2008) (quoting Twombly, 550 U.S. at 570). "[D]etermining whether a complaint states a plausible claim for relief [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009). For the reasons discussed below, the antitrust and unfair competition claims in USI's Second Amended Answer and Counterclaims meet this standard.

B. Sherman Antitrust Counterclaim (Counts 5 and 6)

Section 2 of the Sherman Antitrust Act makes it an offense for any person to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part ...


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