Antitrust Counterclaim in Patent Infringement Action Lacks Plausible Allegations of Competitive Injury

Plaintiff SPX Corporation ("SPX") brought a patent infringement action against Master Cool U.S.A. ("Master Cool"). Master Cool answered and counterclaimed. In its counterclaim, it alleged that SPX had violated Section 2 of the Sherman Act by its utilization of short term exclusive dealing incentive contracts with distributors, which allegedly foreclosed competitive opportunities to Master Cool, SPX's direct competitor. Both SPX and Master Cool sell automotive refrigerant recycling and recovery machines ("ARRR equipment") through distributors. The distributors market the ARRR machines and related services to consumers through catalogs. Through a series of one year distributor contracts with dealers, SPX provided advertising funds that were exclusive to certain SPX products and that were unavailable should a distributor advertise competing products.

Each of the distributor and service contracts was for a one-year duration. Either party could terminate the contract "for any reason" upon thirty days written notice. Similarly, a distributor could terminate a contract "with or without cause" upon ninety days notice.

Master Cool's antitrust counterclaim alleged that SPX maintained a market share of 85-90%, and used its dominant market position to impose exclusivity agreements. It alleged "antitrust injury" in the market for ARRR equipment "in the form of reduced competition, innovation, and consumer choice", in violation of Section 2. The U.S. District Court, Northern District of Ohio dismissed the counterclaim on a FRCP 12(b)(6) motion, on the ground that, as a matter of law, the allegations were insufficient to allege an actionable injury to the competitive process, as opposed to a competitor. SPX Corporation v. Master Cool U.S.A., Inc., Case No. 3:10-CV-1266, ND, Ohio, 6/24/11.

Citing Iqbal, 129 S.Ct. at 1949, the court found that the alleged facts were insufficient to allege a plausible monopoly power maintenance claim. This was because, inter alia, the one year exclusive contracts are equally available to other distributors and competitors in the market. Thus, PSX's competitors, including Master Cool, could have engaged in competition for the same distributors, by engaging in competitive conduct of the same variety as engaged in by SPX. This being the case, the only plausible conclusion would be that at most, the counterclaim presents a case of competitor substitution, not elimination. There were no allegations that the limited exclusive...