The plaintiff Siti-Sites.com, Inc. ("Siti") has brought this antitrust action against Allied Security Trust ("AST") and several large telecommunications companies on the theory that AST and its co-conspirators are preventing small non-producing entities ("NPEs") who own patents in the telecommunications industry from licensing or selling their patents at fair market value. Because Siti has no standing to assert its claims, the defendants' motion to dismiss is granted.
The amended complaint ("Complaint") asserts three antitrust causes of action: collusion to achieve devaluation of patents, concerted refusals to deal, and deceptive price-fixing. It principally asserts that the defendants are attempting to prevent NPEs like the plaintiff from licensing or selling patents for third and fourth generation wireless products at fair market value. The aim of the defendants, as described in the Complaint, is to obtain control of the intellectual property in the wireless industry with a minimal investment of capital.
Siti is a Delaware corporation in voluntary dissolution, with offices in New York. It was actively engaged in the mobile device licensing business from 1989 to 1999, but is currently liquidating its business interests.*fn1
Siti has named MLR LLC ("MLR") as a real party in interest and involuntary plaintiff in its lawsuit. MLR is a Virginia LLC with its principal place of business in Virginia.*fn2 MLR was organized in 1999 by former key Siti employees for the purpose of buying the Siti patents, pending patent applications, issued licenses and client lists. MLR purchased the assets for $27,000. When Siti learned in 2003 that MLR was earning millions of dollars in license revenues, it sued MLR for conversion and breach of fiduciary duty. On February 21, 2006, MLR settled the litigation with a payment of a substantial amount of cash to Siti*fn3 and an agreement to pay up to 40% of its gross proceeds to Siti for a period of years ("Settlement Agreement"). The Settlement Agreement requires MLR to give Siti prior notice of any patent sale or of a change of control in MLR and guarantees to Siti "reasonable" protection of its right to receive its percentage of the gross proceeds of the MLR business. The Settlement Agreement further imposes on MLR sole responsibility to pay all expenses and costs. Based on its right to receive a share of the gross revenue generated by MLR, Siti describes its relationship with MLR as a "joint licensing business."
Siti promptly filed a UCC Financing Statement to protect its right to MLR's gross proceeds ("Financing Statement"). Beginning on March 10, 2006, Siti filed a series of Financing Statements that identified MLR as its debtor and itself as a senior creditor with a right to receive a defined percentage of MLR's future gross proceeds that are related to MLR's licensing or sale of patents.*fn4 The Annex to the Financing Statement lists the MLR patents at issue and explains that Siti "does not claim any ownership rights in the patents or patent applications listed or referred to" in the Annex and that it "has permanently relinquished any claim of ownership or title therein."
Siti provided the U.S. Patent and Trademark Office ("PTO") with a similar disclaimer of ownership. On May 20, 2006, Siti filed a notice of assignment with the PTO which acknowledged that it had previously raised allegations concerning its sale of a portfolio of patents owned by MLR ("Assignment"). After advising the PTO that the parties had resolved all issues related to MLR's acquisition and ownership of the patents, Siti advised the PTO that it "wishes to state clearly and unequivocally that it has no ownership rights in or to any portion of the MLR portfolio of patents" and had agreed with MLR that MLR was "the complete, rightful and lawful owner of all rights, title and interest in the MLR Patents." To "remove" any doubt that Siti had any ownership interest in the MLR patents, Siti "formally assigns to MLR any interest it may have had in the MLR Patents to the extent not already owned by MLR," including "the right to bring suit for and to collect damages for any past infringement of the MLR Patents and for any other cause of action arising from Siti-Sites' alleged ownership of the Patents including any violation by others of any federal or state tort or antitrust or unfair competition laws." (Emphasis supplied.)
Although Siti concedes in the Complaint that it is not an owner of or limited partner or investor in MLR and is neither a licensor nor licensee of MLR patents, it asserts in that pleading that it has independent standing to sue for Clayton Act violations that affect MLR because it is "a permanent assignee of a 'property' or 'business interest' impaired" by those antitrust violations. According to Siti, the antitrust violations it identifies in the Complaint have resulted in an 84% decrease in "licensing frequency, and its cash flow," when measured from March 2007 to March 2010. It adds that both Siti and MLR have each had to spend millions in "separate costs and legal fees" to generate proceeds under the Settlement Agreement.
Siti has sued four entities and two individuals. In addition to AST, the entities are Verizon Communications, Inc. ("Verizon"), Cisco Systems, Inc. ("Cisco"), and Ericsson Inc. ("Ericsson"). Verizon is the parent of Verizon Wireless, the largest wireless network in the United States, and is alleged to control AST. Cisco operates wireless networks, develops wireless software, and needs wireless patent licenses for its business. Ericsson is a global handset and infrastructure manufacturer and is a global services and operations advisor to wireless telecom networks. Cisco and Ericsson are among the eighteen members of AST. The individual defendants Daniel P. McMurdy and Brian Hinman are the current and former chief executive officers of AST, respectively.
Siti defines the relevant product market for the antitrust violations as the "worldwide Market for licenses or sales of mobile wireless-related patents owned by those who only license them, and do not use them in their business." The relevant geographic market is the United States. The Complaint explains that within this market, the defendants compete with Siti-MLR, and are also potential purchasers of MLR patents and licenses and potential sellers of patent licenses to MLR.*fn5
Siti filed its original complaint on May 6, 2010. The original complaint similarly asserted claims of concerted refusals to deal and collusion to create devaluation of patents, but it asserted a claim for bundling instead of the claim for deceptive price-fixing. Defendants filed their motion to dismiss the original complaint on August 12. That original motion to dismiss also contended that Siti lacked standing to pursue its claims and that Siti had failed to allege an antitrust violation. Siti then filed an amended complaint on September 3; accordingly, the Court denied defendants' motion to dismiss without prejudice to renewal on September 9. Defendants filed their motion to dismiss the amended complaint on September 30. Attached to the motion to dismiss were several exhibits, including the Financing Statements and Assignment.*fn6
The defendants have moved to dismiss on two grounds. First, they contend that Siti lacks standing to bring a claim under Section 4 of the Clayton Act, 15 U.S.C. § 15, because it has only identified an indirect injury from the defendants' alleged violations of the antitrust laws, that is, a loss of revenue due to a decline in MLR's business. Second, they argue that Siti has failed to allege any antitrust violation because, inter alia, an agreement to purchase, license and resell patents is not unlawful per se, the Complaint fails to allege that such an agreement has resulted in an actual adverse effect on competition in the relevant market, and the Complaint is too conclusory in its allegations of an illegal agreement among the defendants.
On a motion to dismiss the court must "accept all allegations in the complaint as true and draw all inferences in the non-moving party's favor." LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d 471, 475 (2d Cir. 2009) (citation omitted). The court is "not bound to accept as true legal conclusions couched as factual allegations. Only a complaint that states a plausible claim for relief ...