The opinion of the court was delivered by: Robert F. Kelly, Sr. J.
Presently before the Court is the Joint Motion to Dismiss the Amended Complaint of TruePosition, Inc. Filed By Alcatel-Lucent USA, Inc. ("ALU"), LM Ericsson Telephone Company (Telefonaktiebolaget LM Ericsson) ("Ericsson") and Qualcomm, Inc. ("Qualcomm"), (collectively, the "Corporate Defendants"), the response in opposition by Plaintiff, TruePosition, Inc. ("TruePosition"), the Corporate Defendants' Joint Reply, as well as the separate Memoranda by ALU. For the reasons provided below, the Joint Motion to Dismiss will be denied.
TruePosition describes itself as a "leading innovator in developing and marketing high accuracy location products that operate over cellular telecommunications networks." (Am. Compl. ¶ 3.) "More than 55 million cellular callers in the United States each year are located by TruePosition's products, assisting police, fire, and ambulance services in saving lives and enabling law enforcement to combat criminal activity and terrorist threats." (Id.) According to regulatory requirements set forth by the Federal Communications Commission ("FCC"), all mobile voice networks must be able to locate 911 callers. (Id.) In order to meet current FCC requirements, TruePosition's positioning technology, known as Uplink Time Difference of Arrival ("UTDOA"),*fn2 has been deployed on more than 90,000 cell tower sites in the United States. (Id.) TruePosition's UTDOA technology is implemented through Location Measurement Units ("LMU") that are located at multiple cell towers.*fn3 (Id. ¶ 24.) Multiple LMUs measure the difference in time that they receive signals sent over the cellular network by a handset (referred to as the "uplink" transmission). (Id.) These measurements enable the distance of the handset from each cell tower to be calculated. (Id.) By collecting multiple measurements, the handset location can be narrowed to within FCC requirements. (Id.)
This action stems from the alleged anticompetitive conduct of major players in the international telecommunications market within the context of a Standard Setting Organization ("SSO"). (Id. ¶¶ 1-9.) TruePosition alleges that Ericsson, Qualcomm and ALU conspired to exclude its positioning technology, UTDOA, from standards promulgated by Third Generation Partnership Project a/k/a 3GPP ("3GPP"). (Id.) 3GPP is a non-profit standard setting organization of which Plaintiff and the Corporate Defendants are members.*fn4 (See Am. Compl.) 3GPP is a not-for-profit SSO whose business is to fairly and impartially create global standards for mobile telecommunications technologies based on objective technical merit. (Id. ¶ 14.) The 3GPP standards are designed to be implemented globally through six regional SSOs, known as Organizational Partners, including Defendant European Telecommunications Standards Institute ("ETSI").*fn5 (Id.) This case arises from the alleged exclusion of TruePosition's positioning technology from the 3GPP standard for the newest and most advanced 4G (Fourth Generation) or Long Term Evolution ("LTE") mobile telecommunications networks. (Id. ¶ 2.) Inclusion in the 3GPP 4G LTE standard is vital to the commercial success of TruePosition's UTDOA positioning technology. (Id. ¶ 4.) Notably, "[e]xclusion from the standard guarantees commercial failure and, in most instances, absolute foreclosure from the market." (Id.)
According to TruePosition, the Corporate Defendants collaboratively manipulated 3GPP's processes and procedures to gain unfair advantages for their preferred location technologies, and to prevent or delay standardization of TruePosition's technology. (Id. ¶ 6.) TruePosition further alleges that 3GPP participated in the conspiracy to exclude UTDOA from its standards by failing in its obligations to ensure that the Corporate Defendants complied with 3GPP Rules. (Id. ¶¶ 114-122.) TruePosition alleges that the direct consequence of the Defendants' conspiracy is that it, the UTDOA technology, and other competitors that market UTDOA-based products, have been foreclosed from competition for 4G positioning products, and have been harmed in their continued ability to develop and market 2G (Second Generation) and 3G (Third Generation) products that can be upgraded for 4G networks. (Id. ¶ 8.)
TruePosition filed a Complaint on July 20, 2011. Therein, TruePosition alleged that the conduct described above violated United States antitrust law giving rise to two causes of action:
(1) violations of Section 1 of the Sherman Act, 15 U.S.C. § 1; and (2) violations of Section 2 of the Sherman Act, 15 U.S.C. § 2.*fn6 TruePosition's Section 1 claim was asserted against all Defendants, while TruePosition's Section 2 claim was only asserted against Ericsson and ALU.
A majority of Defendants moved to dismiss the Complaint. Instead of dismissing the action, we allowed TruePosition to file an amended complaint curing any defects set forth in our January 6, 2012 Memorandum Opinion. TruePosition filed an Amended Complaint on February 3, 2012. (See Am. Compl.) The Amended Complaint contains only one count asserted against all Defendants entitled "Combination Conspiracy in Violation of Section 1 of the Sherman Act (15 U.S.C. § 1 )." (Id. ¶¶ 139-153.) TruePosition seeks monetary damages, treble damages, attorneys' fees and costs, prejudgment interest and injunctive relief. (Id. ¶ 154.) The Corporate Defendants filed a Joint Motion to Dismiss the Amended Complaint. (Doc. No. 103.) ALU also filed its own separate Memorandum in Support of the Corporate Defendants' Joint Motion to Dismiss. (Doc. No. 104.) TruePosition responded to the arguments made by the Corporate Defendants and they, in turn, filed their Replies. (Doc. Nos. 106, 107, 110 and 112.) For the reasons set forth below, the Corporate Defendants' Joint Motion to Dismiss TruePosition's Amended Complaint is denied.
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When reviewing a motion to dismiss pursuant to Rule 12(b)(6), the complaint must be construed in the light most favorable to the plaintiff. Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220 (3d Cir. 2011) (citing In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010)). Federal Rule of Civil Procedure 8(a)(2) requires "only 'a short and plain statement of the claim showing the pleader is entitled to relief' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
"[A] plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of the cause of action will not do." Twombly, 550 U.S. at 555. In Twombly, the United States Supreme Court "set forth the 'plausibility' standard for overcoming a motion to dismiss and refined the approach in Iqbal." Burtch, 662 F.3d at 220 (citing Twombly, 550 U.S. at 557; Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009)). In other words, Rule 8 requires that a complaint contain factual allegations that, taken as a whole, render the plaintiff's entitlement to relief plausible. West Penn Allegheny Health System, Inc. v. UPMC, 627 F.3d 85, 98 (3d Cir. 2010). "This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.'" Id. (quoting Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008); Twombly, 550 U.S. at 556). When deciding the sufficiency of a complaint "courts should disregard the complaint's legal conclusions and determine whether the remaining factual allegations suggest that the plaintiff has a plausible - as opposed to merely conceivable - claim for relief." Id. (citing Iqbal, 129 U.S. at 1949-50; Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009)). Under both Twombly and Iqbal, a court must take the following three steps in order to determine the sufficiency of a complaint:
First, the court must take note of the elements a plaintiff must plead to state a claim. Second, the court should identify the allegations that, because they are no more than conclusions, are not entitled to the assumption of truth. Finally, where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief.
Id. (quoting Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010)). "It is, of course, true that judging the sufficiency of a pleading is a context-dependent exercise." West Penn, 627 F.3d at 98 (citing Iqbal, 129 S. Ct. at 1950; Twombly, 550 U.S. at 567-68; Phillips, 515 F.3d at 232).
Section 1 of the Sherman Actstates that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal." 15 U.S.C. § 1. Under Section 1 of the Sherman Act, a plaintiff must plausibly allege the following three elements: (1) an agreement; (2) imposing an unreasonable restraint of trade within a relevant product market; and (3) resulting in antitrust injury, that is "injury of the type the antitrust laws were intended to prevent and . . . that flows from that which make defendants' acts unlawful." Ins. Brokerage, 618 F.3d at 315.
To prevail on a Section 1 claim, a plaintiff is required to establish the existence of an agreement, at times also referred to as a conspiracy or concerted action. West Penn, 627 F.3d at 99 (citing Twombly, 550 U.S. at 553; Gordon v. Lewistown Hosp., 423 F.3d 184, 207 & n.16 (3d Cir. 2005)). The existence of an agreement "requires some form of concerted action, which we define as unity of purpose or a common design and understanding or a meeting of minds or a conscious commitment to a common scheme." Burtch, 662 F.3d at 221 (citations omitted). Regardless of the motivation, unilateral action is not a violation of Section 1. Id. (citation omitted). An agreement may be pleaded by a plaintiff by either alleging direct or circumstantial evidence or a combination of the two. Id.
1. Direct Evidence "Direct evidence of a conspiracy is 'evidence that is explicit and requires no inferences to establish the proposition or conclusion being asserted.'" Burtch, 662 F.3d at 225 (quoting Ins. Brokerage, 618 F.3d at 324 n.23) ("A document or conversation explicitly manifesting the existence of the agreement in question is an example of direct evidence.") In this case, TruePosition argues that it has presented direct evidence of an agreement between the Corporate Defendants. Upon examination of the Amended Complaint, we find only conclusory allegations of direct evidence of an agreement.
TruePosition states that "[i]n November 2008, upon information and belief, the corporate defendants agreed to prevent standardization of TruePosition's positioning technology so that their preferred technologies would attain an insurmountable head start in relevant markets." (Am. Com. ¶ 2.) Notably, the Amended Complaint neither contains any allegations that specify a time or place that an actual agreement occurred, nor the identities of any particular individuals who made such an agreement. See Twombly, 550 U.S. at 565 n.10 (stating that plaintiff's failure to allege a "specific time, place, or person involved in the alleged conspiracies" left "no clue as to which of the [defendants] (much less which of their employees) supposedly agreed, or when and where the illicit agreement took place."); Great Western Mining & Mineral Co. v. Fox Rothchild LLP, 615 F.3d 159, 179 (3d Cir. 2010) ("The complaint sets forth merely a conclusory allegation of agreement at some unidentified point[, which] does not supply facts adequate to show illegality. . . . Specifically, Great Western has failed to allege except in general terms the approximate time when the agreement was made, the specific parties to the agreement (i.e., which judges), the period of the conspiracy, or the object of the conspiracy.") Nowhere in the Amended Complaint are there any substantive allegations specifically detailing any facts regarding direct evidence of an illicit agreement.
TruePosition's allegations and arguments of direct evidence of an agreement are conclusory in nature and, therefore, are not entitled to the assumption of truth. See Burtch, 662 F.3d at 224 ("Under Iqbal, we next identify allegations that are no more than conclusions, [and] are not entitled to the assumption of truth . . . [and] disregard naked assertions. . . ."); see also Twombly, 550 U.S. at 557 ("[A] conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality.") Consequently, TruePosition has failed to adequately plead direct evidence of a specific agreement.
2. Circumstantial Evidence
In light of TruePosition's failure to plausibly allege direct evidence of an agreement, we must determine whether TruePosition has adequately alleged circumstantial evidence to plausibly show that an agreement exists between the Corporate Defendants. "Circumstantial evidence of parallel behavior must be pled in 'a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.'" Burtch, 662 F.3d at 226 (quoting Twombly, 550 U.S. at 557). "The law is well-established that 'evidence of parallel conduct by alleged co-conspirators is not sufficient to show an agreement.'" Id. (quoting Ins. Brokerage, 618 F.3d at 321). "Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality." Twombly, 550 U.S. at 556-57. In itself, parallel conduct is insufficient to state a plausible claim because "it is 'consistent with conspiracy, but just as much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market.'" Id. (quoting Twombly, 550 U.S. at 554).
"Alleging parallel conduct 'is thus much like a naked assertion of conspiracy in a § 1 complaint; it gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557). In In re Insurance Brokerage Antitrust Litigation, the Court of Appeals for the Third Circuit ("Third Circuit") identified at least three types of facts, often referred to as "plus factors," that tend to demonstrate the existence of an agreement. Ins. Brokerage, 618 F.3d at 321-22. The three "plus factors" are the following: "(1) evidence that the defendant had a motive to enter into a . . . conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) evidence implying a traditional conspiracy." Id. at 321-22 (citation and internal quotation marks omitted). The Third Circuit ruled that "plaintiffs relying on parallel conduct must allege facts that, if true, would establish at least one 'plus factor.'" Id. at 323.
Also, the Third Circuit has "cautioned that the first two plus factors may indicate that 'defendants operate in an oligopolistic market, that is, may simply restate the (legally insufficient) fact that market behavior is interdependent and characterized by conscious parallelism.'" Burtch, 662 F.3d at 227 (quoting Ins. Brokerage, 618 F.3d at 322); see also In re Baby Food Antitrust Litig., 166 F.3d 112, 117 (3d Cir. 1999). "Evidence of the third plus factor is 'non-economic evidence that there was an actual, manifest agreement not to compete, which may include proof that the defendants got together and exchanged assurances of common action or otherwise adopted a common plan even though no meetings, conversations, or exchanged documents are shown.'" Id. (quoting Ins. Brokerage, 618 F.3d at 322).
"[W]hen evidence shows communications which provided an opportunity for agreement, a plaintiff must still produce evidence permitting an inference that an agreement in fact existed." Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996, 1013 (3d Cir. 1994) (citation omitted). "The evidence must give rise to more than speculation." Id. (citation omitted). "Requiring plausibility to infer an agreement from circumstantial evidence 'does not impose a probability requirement at the pleading stage; it simply calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of an illegal agreement.'" Id. (quoting Twombly, 550 U.S. at 556).
With these standards in mind, we review the Amended Complaint's allegations granting reasonable inferences to TruePosition's nonconclusory well-pleaded factual allegations. Unlike TruePosition's unsuccessful attempt at plausibly alleging direct evidence, the Amended Complaint satisfactorily alleges parallel conduct. The Amended Complaint is replete with allegations of parallel conduct by the Corporate Defendants pertaining to their various roles within the standardization process. In addition, the Amended Complaint details the standardization process of the 4G LTE Standard and the Corporate Defendants' alleged concerted acts to obstruct or stop the inclusion of UTDOA within the Standard.
TruePosition articulates the relevant times in which representatives of the Corporate Defendants held central positions of Chairmanship over key committees and working groups making crucial decisions about the standardization of the positioning technologies at issue. (Am. Compl. ¶¶ 41.) According to TruePosition, the Corporate Defendants needed each other in order to successfully obstruct the standardization of TruePosition's UTDOA technology. (Id.) "The corporate defendants . . . controlled the Chairmanships of, and had key members in, every committee essential to progress the corporate defendants' positioning work item." (Id.) (listing the Corporate Defendants' positions). TruePosition asserts that "the corporate defendants could not have foreclosed U-TDOA standardization and secured an insurmountable head start for [their preferred positioning technology], except by coordinating their violations of 3GPP rules and procedures at key points in the standardization process, and permitting those violations through their authority as Chairmen." (Id.)
Although TruePosition has successfully alleged parallel conduct by the Corporate Defendants, "[t]he law is well-established that 'evidence of parallel conduct by alleged co-conspirators is not sufficient to show an agreement.'" Burtch, 662 F.3d at 226 (quoting Ins. Brokerage, 618 F.3d at 321); see also Twombly, 550 U.S. at 556--57 ("Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality.") Thus, we now examine whether the plus factors advanced by TruePosition lend plausibility to the allegations of conspiratorial parallel conduct.
As previously explained, when relying upon circumstantial evidence to sufficiently plead the existence of an agreement, as is this case, at least three types of facts, often referred to as "plus factors," tend to demonstrate the existence of an agreement: "(1) evidence that the defendant had a motive to enter into . . . conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) evidence implying a traditional conspiracy." Ins. Brokerage, 618 F.3d at 321-22 (stating "plaintiffs relying on parallel conduct must allege facts that, if true, would establish at least one 'plus factor'"). Here, viewing all of the non-conclusory allegations as a whole, we conclude that TruePosition's Amended Complaint plausibly alleges parallel conduct by the Corporate Defendants that is consistent with a conspiracy.
Regarding the first two plus factors (i.e., evidence that defendants had a motive to enter into a conspiracy and evidence that defendants acted contrary to their interests), we conclude that TruePosition has not adequately shown that these factors alone demonstrate the existence of an agreement. Without delving into a lengthy discussion about the two factors, it is sufficient to say that neither the first nor second plus factor set forth by TruePosition adequately raise a suggestion of a preceding agreement. In fact, they can be seen as merely parallel conduct that could just as well be independent action motivated by self-interest and legitimate business practices. We caution that "a fine line demarcates concerted action that violates antitrust law from legitimate business practices." Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992). We will, however, consider TruePosition's allegations concerning the first two plus factors within our overall analysis of whether TruePosition's Amended Complaint has plausibly alleged parallel conduct that is consistent with conspiracy. Although we conclude that TruePosition has not ...