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International Equipment Trading Ltd. v. Illumina, Inc.

United States District Court, N.D. Illinois, Eastern Division

February 28, 2018

INTERNATIONAL EQUIPMENT TRADING, LTD., Plaintiff,
v.
ILLUMINA, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          HONORABLE MARVIN E. ASPEN UNITED STATES DISTRICT.

         Plaintiff International Equipment Trading, Ltd. (“IET”) alleges Defendant Illumina, Inc. (“Illumina”) engaged in predatory and anticompetitive behavior that violated federal antitrust law and Illinois state law. (Am. Compl. (Dkt. No. 21) ¶ 1.) Presently before us are three pending motions. First, Illumina has filed a motion to dismiss IET's amended complaint in its entirety. (Pl's Mot. (Dkt. No. 23).) Second, IET has filed a motion to strike Illumina's affirmative defenses under Federal Rule of Civil Procedure 12(f). (Pl.'s Mot. to Strike (Dkt. No. 27).) Third, Illumina filed a motion requesting we postpone briefing on IET's motion to strike pending our ruling on its motion to dismiss. (Def.'s Mot. to Postpone (Dkt. No. 30).) For the following reasons, we grant Illumina's motion to dismiss in part and deny in part, and dismiss Counts I through V without prejudice. We also deny Illumina's motion to postpone briefing on IET's motion to strike as moot, and order briefing on IET's motion to strike. Illumina may file a response to IET's motion to strike Illumina's affirmative defenses and IET's supporting brief on or before March 16, 2018, and IET may file a reply brief on or before March 30, 2018.

         BACKGROUND

         For the purposes of a motion to dismiss, “we accept the well-pleaded facts in the complaint as true.” McCauley v. City of Chi., 671 F.3d 611, 616 (7th Cir. 2011). IET, an Illinois corporation with its principal place of business in Vernon Hills, Illinois, sells and leases laboratory equipment to laboratories, hospitals, and research institutions across the United States and internationally. (Am. Compl. ¶¶ 2, 11.) As part of its business, IET sources various models of used or refurbished genome sequencing unit systems (“sequencing units”) manufactured by Illumina. (Id. ¶¶ 2, 5.) Illumina manufactures “integrated systems” that “serve the sequencing, genotyping and gene expression markets” and sells its used sequencing units in competition with IET. (Id. ¶¶ 3-4.)

         IET alleges that beginning in or around 2007, once Illumina learns of a possible sale or lease by IET of a refurbished Illumina sequencing unit, Illumina engages in “scare tactic[s] . . . intended to kill the sale or lease between the customer and IET ” (Id. ¶ 7.) Specifically, IET alleges Illumina informs IET's potential customers that they must pay a significant “site licensing fee” for operation and data collection software needed to operate a used Illumina sequencing unit purchased from IET. (Id. ¶¶ 5-6.) IET claims Illumina has discretion in charging the fee, sometimes charges the fee for machines exempt from site licensing fees based on a preexisting contract, and only threatens the fee to interfere with sales from “third party resellers like IET.” (Id. ¶¶ 7-8, 17-18.) IET further alleges Illumina refuses to service sequencing units purchased from IET when the purchasers do not pay Illumina the site licensing fee. (Id. ¶¶ 8, 18.) Based on these allegedly anti-competitive tactics, IET alleges Illumina “has unlawfully attempted to create a monopoly within the secondary sequencing unit market over [Illumina] sequencing units.” (Id. ¶ 9.) As a result, IET has lost sales, including the sale of a HiSeq 4000 Illumina sequencing unit to the University of Central Florida. (Id. ¶ 19.)

         IET's amended complaint alleges Illumina violated various antitrust laws, and asserts attempted monopolization claims under Section 2 of the Sherman Act, 15 U.S.C. § 2 (Count I); Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a), 26 (Count II); and the Illinois Antitrust Act (“IAA”), 740 ILCS 10/1 et seq. (Count V). IET claims Illumina's “predatory and anticompetitive conduct” in charging site licensing fees has been an attempt to “drive IET and other third-party resellers from the . . . sequencing unit markets and thereby strengthen its dominant position within these markets.” (Id. ¶ 29.)

         IET's amended complaint also includes claims under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq, . (“ICFA”) (Count III) and Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/2 et seq., (“UDTPA”) (Count IV) based on Illumina's willful engagement in “deceptive trade practices” and “unfair conduct.” (Id. ¶¶ 37-45.) IET additionally includes a claim for intentional interference with a prospective economic advantage (“intentional interference”) (Count VI), alleging Illumina intentionally and maliciously interfered with customers with whom IET had a “reasonable expectancy of completing sales and/or leases of refurbished sequencing units.” (Id. ¶¶ 49-51.) Finally, IET seeks a declaratory judgment pursuant to 28 U.S.C. § 2201(a) declaring Illumina cannot legally charge or threaten to charge site licensing fees to IET customers who purchase used Illumina sequencing units. (Id. ¶¶ 52-59.)

         LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b)(6) governs Illumina's motion to dismiss. “The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits.” Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990) (internal citation omitted). When considering a motion to dismiss under Rule 12(b)(6), we accept as true all well-pleaded facts alleged in the complaint and view them in the light most favorable to the plaintiff. Santiago v. Walls, 599 F.3d 749, 756 (7th Cir. 2010). While “detailed factual allegations” are not required to survive a motion to dismiss, the complaint must “state a claim [for] relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949-50 (2009) (internal quotation marks omitted) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974 (2007)). The plausibility standard “is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft, 556 U.S. at 678, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. at 1965). While the plaintiff need not plead “detailed factual allegations, ” the complaint must allege facts sufficient “to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 127 S.Ct. at 1964-65. However, to protect defendants from expensive discovery, “[i]n a complex antitrust . . . case a fuller set of factual allegations . . . may be necessary to show that the plaintiff's claim is not largely groundless.” Limestone Dev. Corp. v. Vill. of Lemont, Ill., 520 F.3d 797, 803 (7th Cir. 2008) (internal citation omitted).

         ANALYSIS

         I. Attempted Monopolization Claims (Counts I, II, and V)

         We first consider whether IET sufficiently pled its antitrust claims to survive a Rule 12(b)(6) motion to dismiss. Our analysis focuses on the requirements of the Sherman Act, as IET's Clayton Act and IAA claims “stand or fall with the Sherman Act Claim.”[1] Int'l Equip. Trading, Ltd. v. AB SCIEX LLC, No. 13 C 1129, 2013 WL 4599903, at *3 n.3 (N.D. Ill. Aug. 29, 2013). To succeed in an attempted monopolization claim under Section 2 of the Sherman Act, a plaintiff must prove a defendant (1) engaged in predatory or anticompetitive conduct, (2) specifically intended to acquire monopoly power, and (3) reached a stage based on defendant's actions and market position where there is a dangerous probability defendant will achieve an actual monopoly. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 890-91 (1993); Attempted Monopolization, Holmes & Mangiaracina, Antitrust Law Handbook § 3:6.

         Illumina argues IET's antitrust claims must be dismissed because IET failed to plead any non-conclusory facts to establish that Illumina has a dangerous probability of establishing monopoly power. (Def.'s Mem. in Support of Mot. to Dismiss (“Mem.”) (Dkt. No. 24) at 15-17.) A dangerous probability of establishing a monopoly in a particular market requires more than allegations of merely “unfair or predatory conduct”; instead, “the antitrust plaintiff must also prove the defendant has market power in a relevant market” and that the “market power will tend to approach monopoly power if the alleged unlawful conduct remains unchecked.” Walter Kidde Portable Equip., Inc. v. Universal Sec. Instruments, Inc., 669 F.Supp.2d 895, 900-01 (N.D. Ill. 2009) (citing Spectrum Sports, 506 U.S. at 457, 113 S.Ct. at 891; DSM Desotech Inc. v. 3D Sys. Corp., No. 08 C 1531, 2009 WL 174989, at *7 (N.D. Ill., Jan. 26, 2009)). Courts regularly find pleading the defendant's share of the relevant market sufficient to allege this element at the pleading stage. Walter Kidde, 669 F.Supp.2d at 901; see also Avnet, Inc. v. Motio, Inc., No. 12 C 2100, 2015 WL 425442, at *6 (N.D. Ill. Jan. 30, 2015) (finding an allegation that defendant controlled 95% of a market sufficient to survive a motion to dismiss); Hon Hai Precision Indus. Co. v. Molex, Inc., No. 08 C 5582, 2009 WL 310890, at *3 (N.D. Ill. Feb. 9, 2009) (dismissing attempted monopolization claim under the Sherman Act for failure to plead dangerous probability of achieving a monopoly, noting that “the extent of [defendant's] worldwide share in the relevant market . . . would allow the Court to infer that [defendant] threatens or even has the capacity to obtain monopoly power”). Lack of “competition in the relevant market” also suggests a dangerous probability of establishing a monopoly. Hon Hai, 2009 WL 310890, at *3.

         IET has failed plead the dangerous proximity of monopoly element of attempted monopolization because IET has not identified any facts that establish Illumina's market power in the relevant secondary market of refurbished Illumina sequencing units.[2](Am. Compl. ¶¶ 14, 24.) The only non-conclusory facts in IET's amended complaint establishing Illumina's market control involve the market of new sequencing units: IET alleges “Illumina controls approximately 65% of the market for new sequencing units.” (Id. ¶ 16 (emphasis added).) This information is irrelevant to IET's market control in the used Illumina sequencing unit market, a market IET itself argues is entirely distinct from the market for new Illumina sequencing units based on the “enormous price differential between new and used models.” (Id. ΒΆ 14.) Furthermore, IET acknowledges the existence of a number of competitors in the used sequencing unit market, which in itself suggests Illumina does ...


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