A. Predicate Acts
Mail fraud and wire fraud, see 18 U.S.C. §§ 1341 and 1343, are both predicate acts of racketeering activity for purposes of RICO. See 18 U.S.C. § 1961(1)(B). A baseline requirement to establishing a pattern of racketeering activity requires the commission within a ten year period of at least two predicate acts that violate laws listed in 18 U.S.C. § 1961(1). See 18 U.S.C. § 1961(5). In order to properly plead predicate acts of mail and wire fraud, plaintiffs must comply with the particularity requirements of Fed. R. Civ. P. 9(b). Rule 9(b) requires that "in all averments of fraud . . . the circumstances constituting fraud . . . shall be stated with particularity. Malice, intent, knowledge, and other conditions of mind of a person may be averred generally." Fed. R. Civ. P. 9(b). While knowledge may be averred generally, the Second Circuit has held that plaintiffs must "plead the factual basis which gives rise to a 'strong inference' of fraudulent intent." See O'Brien v. National Property Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991) (quoting Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2d Cir. 1990)).
To plead mail and wire fraud, plaintiffs must allege with particularity the contents of the communications, who was involved, where and when the communications took place, and explain how they were fraudulent. See Mills v. Polar Molecular Corp, 12 F.3d 1170, 1176 (2d Cir. 1993); Naso v. Park, 850 F. Supp. 264, 274 (S.D.N.Y. 1994); Wellington Int'l Commerce Corp v. Retelny, 727 F. Supp. 843, 846 (S.D.N.Y. 1989) (contents of the mailings must be pleaded to satisfy requirements of 9(b)); Azurite Corp. Ltd. v. Amster & Co., 730 F. Supp. 571, 577 (S.D.N.Y. 1990) (Leisure, J.) ("Wire fraud is a separate act from mail fraud and must, itself, be pled with particularity."). If more than one defendant is charged with fraud, plaintiffs' complaint must specify with particularity each defendant's alleged participation in the fraud. See Ouaknine v. MacFarlane, 897 F.2d 75, 80 (2d Cir. 1990); Browning Ave. Realty Corp. v. Rosenshein, 774 F. Supp. 129, 138 (S.D.N.Y. 1991).
In this case, plaintiffs allege 36 violations of the mail and wire fraud statutes. The first 33 alleged violations surround defendants' filing of fraudulent patent applications with the PTO. Plaintiffs assert that this process resulted in thirty acts of mail fraud (mail correspondence with the PTO) and three acts of wire fraud (telephone conversations with the PTO).
For several reasons, the Court finds that plaintiffs' assertions regarding defendants' interactions with the PTO fail to plead mail or wire fraud. First, the complaint fails to allege use of the mails or wires when describing any of these particular acts of alleged fraud on the PTO. The only allegation of mailing with respect to these acts is in P 9 of the complaint, which states that "Hologic and Rochester, directing the activities of the above-mentioned enterprise, committed repeated acts of mail fraud and wire fraud in connection with the activities of fraudulently obtained patents . . . ." Without pleading that a specific mailing occurred, the author and recipient of the mailing, as well as the contents of the mailing, cannot be pleaded. Therefore, mail fraud cannot be pleaded. Similarly, failing to plead a specific phone conversation, and the participants and contents of that conversation, means that wire fraud is not pleaded. Apparently recognizing the deficiency of their complaint, plaintiffs, in their opposition papers and supporting submissions, do allege numerous specific mail and wire communications from defendants to the PTO and from the PTO to defendants. However, the law requires that such allegations be made in the complaint.
The failure to identify when and by whom mailings were made, and when and with whom phone conversations took place, is not the most serious deficiency in the complaint. In alleging mail or wire fraud as predicate acts in a civil RICO complaint, it is necessary to allege that the injured party relied on the fraudulent misrepresentations of the defendant, and that the reliance was the cause of the injury. See Metromedia Co. v. Fugazy, 983 F.2d 350, 368 (2d Cir. 1992), cert. denied, 124 L. Ed. 2d 662, 113 S. Ct. 2445 (1993); County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1311 (2d Cir. 1990); Red Ball Interior Demolition Corp. v. Palmadessa, 874 F. Supp. 576 (S.D.N.Y. 1995); Moeller v. Zaccaria, 831 F. Supp. 1046, 1054 (S.D.N.Y. 1993). But see Trautz v. Weisman, 819 F. Supp. 282, 286 (S.D.N.Y. 1993). Allowing plaintiffs in a civil RICO action to allege mail or wire fraud without alleging reliance would mean extending the common law definition of fraud.
There is no justification for doing so.
In this case, plaintiffs do not claim that they relied on defendants' alleged misrepresentations to the PTO. Therefore, the thirty mailing acts between defendants and the PTO, as well as the three telephone conversations between defendants and PTO representatives, even if pleaded with particularity, cannot be predicate acts of mail or wire fraud.
Plaintiffs also allege the prior federal court litigation, the ITC action, and the interference before the PTO as predicate acts of mail fraud. See Plaintiffs' Memorandum in Opposition ("Pls.' Mem."), at 25. Again, even assuming arguendo that the filing of these lawsuits amounts to misrepresentations, plaintiffs do not allege reliance. Any fraud caused by these lawsuits were on the district court, the ITC, and the PTO, not on the plaintiffs. The Court has carefully reviewed the cases cited by plaintiffs in support of their claim that the filing of a lawsuit can be a predicate act. None of the cases hold that acts of litigation can be predicate acts of mail fraud without a finding that the injured party relied on the misrepresentations. To the extent that Lemelson v. Wang Lab., Inc., 874 F. Supp. 430, 432 (D. Mass. 1994) suggests such a conclusion, the Court finds that court's reasoning unpersuasive, and rejects its precedential value.
B. "Pattern "
Even if it were to accept plaintiffs' argument that the legal actions in this case are predicate acts, the Court finds that these three acts are insufficient to constitute a "pattern" of racketeering activity. In order to establish a RICO pattern "it must also be shown that the predicates themselves amount to, or that they otherwise constitute a threat of, continuing racketeering activity." H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 240, 106 L. Ed. 2d 195, 109 S. Ct. 2893 (1989). In H.J. Inc., the Supreme Court, in identifying continuity as a temporal concept, stated that "predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement: Congress was concerned in RICO with long-term criminal conduct." Id. at 242. Continuous conduct can be either a "closed period of repeated conduct", or an "open-ended concept" referring to "past conduct that by its nature projects into the future with a threat of repetition." Id. at 241. Closed-period continuity can be established "by proving a series of related predicates extending over a substantial period of time." Id. In this case, the district court and ITC actions instigated by defendants were filed within a day of each other; the interference proceeding began in May of 1991, within four months of the first two actions. Considering that the interference was initially provoked by plaintiffs, and the date of its instigation was determined by the PTO, it cannot be considered a predicate act of defendants. It is obvious that the legal actions instigated by Hologic within a day of each other cannot satisfy RICO's continuity requirement. Therefore, plaintiffs have failed to show a pattern of racketeering activity. Even assuming the interference proceeding is a predicate act, three acts over a four month period, conducted for the same purpose, and affecting the same people, cannot support a finding of closed-ended continuity. See Three Crown Ltd. Partnership v. Caxton Corp., 817 F. Supp. 1033, 1044 (S.D.N.Y. 1993) (six-month racketeering scheme "inadequate to establish closed-ended continuity"); Airlines Reporting Corp. v. Aero Voyagers, Inc., 721 F. Supp. 579, 584 (S.D.N.Y. 1989) (court found insufficient threat of continuity "where the racketeering acts involved a brief period of time, relatively few criminal acts, an uncomplicated scheme, few participants and few victims.") (citations omitted).
Plaintiffs are no more able to establish open-ended continuity. They do not and cannot argue that coercive litigation is a regular aspect of defendants' business, or that there is a likelihood of repetition of these alleged predicate acts. See Passini v. Falke-Gruppe, 745 F. Supp. 991, 993 (S.D.N.Y. 1990) (no threat of continuity where facts do not show that plaintiff made a practice of defrauding clients).
V. The Antitrust Claim
Plaintiffs' second cause of action is for attempted monopolization under § 2 of the Sherman Act. See 15 U.S.C. § 2. The Supreme Court has decided that the maintenance and enforcement of a patent obtained by fraud on the PTO may be the basis of a § 2 attempted monopolization claim. See Walker Process Equip., Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177, 15 L. Ed. 2d 247, 86 S. Ct. 347 (1965). In Walker Process, the Court also stated that proof of fraud on the PTO is insufficient to survive a motion to dismiss; rather, all of the elements of a § 2 claim must be established. See id. at 177-78.
In order to establish a § 2 attempted monopolization claim, a plaintiff must prove (1) that the defendant engaged in predatory or anticompetitve conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power. See Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 113 S. Ct. 884, 890-91, 122 L. Ed. 2d 247 (1993). In order to determine whether there is a dangerous probability of achieving monopoly power, it is necessary to consider what is the relevant product market. See id.6 Merely asserting that a commodity is in some way unique is insufficient to plead a relevant market. Rather, an antitrust complaint must explain why the market it alleges is the relevant, economically significant product market. See Re-Alco Indus., Inc. v. National Ctr. for Health Educ., Inc., 812 F. Supp. 387, 391 (S.D.N.Y. 1993). Because a relevant market includes all products which are reasonably interchangeable, id. (citing United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377, 76 S. Ct. 994, 100 L. Ed. 1264 (1956), "plaintiff's failure to define its market by reference to the rule of reasonable interchangeability is, standing alone, valid grounds for dismissal." E & G Gabriel v. Gabriel Bros., Inc., 1994 U.S. Dist. LEXIS 9455, *10, 1994 WL 369147, at *3 (S.D.N.Y. July 13, 1994) (Leisure, J.) (citing Ford Piano Supply Co. v. Steinway & Sons, 1988 U.S. Dist. LEXIS 523, 1988 WL 3488 (S.D.N.Y. Jan. 13, 1988)).
In this case, plaintiffs' complaint states that "the relevant market is chest equalization radiography." Complaint P 34a. The complaint also states that "at all relevant times, no persons other than the parties hereto have had the capacity to provide chest equalization radiography equipment in the United States." Id. at 34c. The Court finds this attempt to define the relevant market inadequate to survive a motion to dismiss. Plaintiffs' pleadings do not refer to any reasonably interchangeable alternatives, nor do they offer an explanation for why they are defining the relevant product market in such narrow terms.
Because the relevant market has not been adequately defined, it is impossible for the Court to assess the anticompetitve effects of defendants procurement of the patents in issue. See Re-Alco, 812 F. Supp. at 392. Plaintiffs attempt to support their antitrust claim by merely asserting that defendants wanted to block their efforts to market their product in the United States by obtaining fraudulent patents. However, it is obvious that merely obtaining a patent for a product does not create a product market for antitrust purposes. See Papst Motoren GMbH & Co. KG v. Kanematsu-Goshu ( U.S.A.,Inc., 629 F. Supp. 864, 871 (S.D.N.Y. 1986) ("'It may be that the [patented] device . . . does not comprise a relevant market. There may be effective substitutes for the device which do not infringe the patent."') (quoting Walker Process, 382 U.S. at 178)). Indeed, without pleadings from plaintiffs asserting otherwise, it appears to the Court that chest equalization radiography is not an independent product market, but rather part of the overall X-ray market. The Court's hesitancy to make such an assessment in this highly technical field is precisely why there is ample case authority requiring antitrust plaintiffs to plead interchangeability. See E&G Gabriel, 1994 U.S. Dist. LEXIS 9455, 1994 WL 369147, at *3.
Having shown that plaintiffs failed to plead a relevant product market, it necessarily follows that plaintiffs cannot prove that defendants' allegedly fraudulent conduct creates a dangerous probability of successful monopolization. See Spectrum Sports, 113 S. Ct. at 891. Unless plaintiffs can show that chest equalization radiography is the relevant market, proof that defendants obtained their patents fraudulently does not translate into a showing of successful monopolization. Cf. Twin Lab., Inc. v. Weider Health & Fitness, 900 F.2d 566, 570 (2d Cir. 1990) ("A threshold showing for a successful attempted monopolization claim is sufficient market share by the defendant."). Therefore, plaintiffs' antitrust claim is dismissed.
VI. Declaratory Judgment
Plaintiffs, pursuant to the Declaratory Judgment Act, see 28 U.S.C. § 2201, seek from this Court a declaratory judgment finding the '192 Patent invalid and unenforceable.
In order to have standing to sue for such a declaratory judgment, plaintiffs must plead that an actual controversy exists between the parties regarding the validity and enforceability of the patents. See Cardinal Chemical Co. v. Morton Int'l Inc., 508 U.S. 83, 124 L. Ed. 2d 1, 113 S. Ct. 1967, 1974 (1993). Whether an actual case or controversy exists is a question of law decided by the Court. See BP Chemicals Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993). See Preiser v. Newkirk, 422 U.S. 395, 401, 45 L. Ed. 2d 272, 95 S. Ct. 2330 (1975). When seeking a declaration of patent invalidity and unenforceability, plaintiffs must plead two elements to establish an actual case or controversy: (1) "an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit;" and (2) "present activity [by the plaintiff] which could constitute infringement or concrete steps taken with the intent to conduct such activity." BP Chemicals, 4 F.3d at 978. The test of reasonable apprehension is an objective test. See id. The purpose of the test is "to determine whether the need for judicial attention is real and immediate." See id. (citing Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 239-41, 81 L. Ed. 617, 57 S. Ct. 461 (1937).
Plaintiffs fail to plead the required first element of the BP Chemicals test because they have failed to plead that defendant-patentee Hologic made any threat or took any other action that would create in plaintiffs a reasonable apprehension of being sued for infringement. See Strutevant v. Van Remortel, 1995 WL 613320, at *7 (S.D.N.Y. Oct. 18, 1995) (plaintiff's failure to allege apprehension of being sued resulted in dismissal). Nor do plaintiffs plead the second element of the test: namely, that they are engaging in, or preparing to engage in, conduct constituting infringement.
Rather, plaintiffs assert (1) that the pending interference proceeding provides jurisdiction; (2) the necessity of the Court to decide the invalidity of the '192 patent in deciding the motion to dismiss counts 1 and 2 of the complaint provides jurisdiction; and (3) Hologic's ownership of the '192 patent provides jurisdiction. All three of these assertions fail to meet the case or controversy requirement, leaving this Court without jurisdiction to issue a declaratory judgment. First, the pending interference was instituted by plaintiffs, and therefore cannot be seen as conduct or threatened by the defendant-patentee. Second, as this Opinion has made clear, it has not been necessary for the Court, in deciding this motion, to determine whether defendants' conduct constituted fraud on the PTO. Even if the Court did decide that defendants' conduct was fraudulent, the BP Chemicals case or controversy test is not met because plaintiffs still must show that defendants are threatening an infringement suit. Finally, the mere fact that a competitor may own a patent which plaintiffs claim a right to does not create jurisdiction for a court to issue a declaratory judgment. The need for judicial attention to this matter is neither real nor immediate. Plaintiffs' declaratory judgment count is dismissed for lack of jurisdiction.
For the reasons stated above, defendants' motion to dismiss all of plaintiffs claims is hereby GRANTED. The Court grants plaintiffs leave to replead their complaint.
New York, New York
December 14, 1995
Peter K. Leisure