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FONAR CORP. v. MAGNETIC RESONANCE PLUS

March 13, 1997

FONAR CORPORATION, Plaintiff, against MAGNETIC RESONANCE PLUS, INC. and ROBERT DOMENICK, Defendants.


The opinion of the court was delivered by: MOTLEY

 Plaintiff Fonar Corporation ("Fonar") makes this motion for (1) judgment as a matter of law pursuant to Rule 50(b), or, in the alternative, for (2) a new trial pursuant to Rule 59(e), or (3) other relief from judgment pursuant to Rule 60(b). For the reasons explored below, this motion is granted in part and denied in part as to Rule 50(b) and granted in part as to Rule 59. The court does not address the motion pursuant to Rule 60(b).

 BACKGROUND

 Fonar is a manufacturer and seller of Magnetic Resonance Imaging ("MRI") parts and equipment. Fonar also services its own MRI machines. Counterclaimants Magnetic Resonance Plus, Inc. and Robert Domenick ("MR Plus") are engaged in the business of servicing Fonar MRI machines. This suit was originally brought by Fonar, which alleged that MR Plus had been infringing Fonar's copyrighted software in servicing Fonar equipment. MR Plus filed counterclaims alleging (1) that Fonar had violated § 1 of the Sherman Act by tying the sale of replacement parts, software upgrades, and diagnostic software to a service contract, (2) that Fonar had attempted to monopolize the market consisting of the service of Fonar MRI machines in violation of § 2 of the Sherman Act, (3) that Fonar had tortiously interfered with a number of MR Plus' contracts, (4) that Fonar had tortiously interfered with MR Plus' business relations, and (5) that Fonar was liable under the tort of injurious falsehood.

 The court granted MR Plus summary judgment as to Fonar's claims by order and opinion dated March 27, 1996. The court held in that opinion that Fonar had failed to define its software or register it properly, so it did not raise a genuine issue of material fact regarding the validity of the copyright. Central to the court's analysis in that case was the Second Circuit's opinion in Fonar Corp. v. Deccaid Services, Inc., 983 F.2d 427 (2d Cir. 1993). In that case, Fonar had sued another competing servicer of its MRI machines for copyright infringement and had obtained a preliminary injunction from the District Court preventing that company from infringing Fonar's software in the future. In vacating the injunction, the court held that Fonar's definition of its software was too vague to have a preliminary injunction issued in its favor. In its grant of summary judgment, the court took special note of the fact that Fonar continued to cling to that definition in this case.

 MR Plus continued to press its counterclaims, however, and a trial of four of the counterclaims was held from December 2, 1996 until December 19, 1996. *fn1" The trial was bifurcated into a liability phase and a damages phase. During the liability phase, MR plus alleged that Fonar had engaged in five predatory acts that constituted an unlawful attempt to monopolize. These were the pursuit of baseless copyright infringement litigation, the refusal to sell parts, industrial espionage directed against MR Plus, coercing customers into purchasing service contracts with Fonar by charging them exorbitant prices for software upgrades if they did not, and making false statements about IR Plus. The jury ultimately found that there was no separate market restricted to the service of Fonar MRI scanners and that therefore Fonar could not have violated § 2 of the Sherman Act since it lacked market power in the broader market of sales and service of all brands of MRI scanners. The jury also found that Fonar was not liable under the tort of injurious falsehood because no injurious falsehoods attributable to Fonar caused MR Plus pecuniary loss. However, the jury did find that Fonar had tortiously interfered with one of MR Plus' contracts and that Fonar had tortiously interfered with MR Plus' business relations.

 Seeking to resurrect much of its antitrust case during the damages portion of the trial, MR Plus sought to introduce the rather novel argument that Fonar's predatory acts alluded to above caused it to go out of business, thereby interfering with all of its contracts and business relations (Trial Transcript "Tr." at 1615-16). Thus, MR Plus sought to recover as damages the lost value of its business (Tr. at 1613). However, though MR Plus was permitted to introduce evidence regarding the lost value of its business on the grounds that this may have been damage suffered as a consequence of Fonar's interference, the court also required that MR Plus identify the specific business relationships with which Fonar allegedly interfered and allow the jury to decide the extent of Fonar's interference with those relationships. (Tr. at 1624-26) The names of 34 businesses and other entities were then introduced at the damages phase of the trial by MR Plus' CEO, Dr. Robert Domenick. These names were then placed on a special verdict form and given to the jury when they were deliberating. The jury ultimately found that MR Plus had suffered $ 21,000 as a direct result of Fonar's tortious interference with MR Plus' contract and $ 288,175 as a consequential result. In addition, the jury awarded $ 124,090 as damages suffered as a direct result of Fonar's tortious interference with three of MR Plus' business relationships, and $ 1.1 million in consequential damages as a result of Fonar's tortious interference with 31 of MR. Plus' business relationships. Finally, the jury awarded $ 800,000 in punitive damages to MR Plus. Judgment was entered on December 26, 1996, and Fonar timely filed a motion for judgment as a matter of law pursuant to Rule 50(b) and for a new trial pursuant to Rule 59.

 On January 21, 1997, the Second Circuit vacated this court's grant of summary judgment as to Fonar's copyright infringement claims, holding that the copyright was entitled to a presumption of validity because it was properly registered and that the Deccaid case was not controlling because the issue there was whether a preliminary injunction could be issued for such a vague definition, not whether the underlying copyright was valid. The court acknowledged that Fonar's definition was "flawed and unhelpful" and that it could be difficult if not impossible for MR Plus to prepare a proper defense, but that the proper way for this court to have proceeded would have been to order the disclosure of further information regarding the allegedly protected software and to issue Rule 37 sanctions, including dismissal if necessary, if such an order was not complied with.

 Soon thereafter, Fonar supplemented its Rule 59 motion and moved for relief from judgment pursuant to Rule 60(b)(5) on the grounds that the entire issue of baseless litigation upon which MR Plus relied had to be reexamined in light of the Second Circuit's ruling. The court held a hearing on January 23, 1997 where it set a briefing schedule and required Fonar to post with the court $ 3 million of its own stock as security pending the court's resolution of this issue.

 DISCUSSION

 Fonar moves for judgment as a matter of law or, in the alternative, a new trial because the verdicts holding Fonar liable under the state law torts were against the overwhelming weight of the evidence. Fonar also moves for a new trial pursuant to Rule 59 and relief from judgment pursuant to Rule 60(b) on the grounds that the Second Circuit's opinion vacating this court's dismissal of its copyright infringement claims requires that there be a new trial on these issues.

 I. State Law Claims

 A. Standards for Rules 50(b) and 59

 In order to grant judgment as a matter of law pursuant to Rule 50(b), a court must determine whether "the evidence, viewed in the light most favorable to the non-movants without considering credibility or weight, reasonably permits only a conclusion in the movants' favor." Jund v. Town of Hempstead, 941 F.2d 1271, 1290 (2d Cir. 1991); Pena v. Brattleboro Retreat, 702 F.2d 322, 323 (2d. Cir. 1983). Judgment as a matter of law is proper when

 
(1) there is such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture, or (2) there is such an overwhelming amount of evidence in favor of the movant that ...

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