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SZ DJI Technology Co., Ltd. v. Autel Robotics USA LLC

United States District Court, D. Delaware

March 18, 2019

SZ DJI TECHNOLOGY CO., LTD. and DJI EUROPE B.V., Plaintiffs-Counterclaim Defendants,
v.
AUTEL ROBOTICS USA LLC and AUTEL AERIAL TECHNOLOGY CO., LTD., Defendants-Counterclaim Plaintiffs.

          Jody C. Barillare and Amy M. Dudash, MORGAN, LEWIS & BOCKIUS LLP, Wilmington, DE Willard K. Tom, Jon R. Roelike, Ryan Kantor, MORGAN, LEWIS & BOCKIUS LLP, Washington, DC Attorneys for Plaintiff-Counterclaim Defendants

          Anne Shea Gaza, Robert M. Vrana, Samantha G. Wilson, YOUNG CONAWAY STARGATT & TAYLOR, LLP, Wilmington, DE Timothy C. Bickham, John Caracappa, Jonathan B. Sallet, Scott M. Richey, Beau M. Goodrick, STEPTOE & JOHNSON LLP, Washington, DC Michael Flynn-O'Brien, STEPTOE & JOHNSON LLP, San Francisco, CA Attorneys for Defendants

          MEMORANDUM OPINION

          STARK, U.S. DISTRICT JUDGE

         Defendants-Counterclaim Plaintiffs Autel Robotics USA LLC and Autel Aerial Technology Co., Ltd. (collectively, "Autel") assert, in their operative Second Amended Answer ("SAA"), antitrust counterclaims against Plaintiffs-Counterclaim Defendants SZ DJI Technology Co., Ltd. ("SZ DJI"), DJI Europe B.V. ("DJI BV"), and DJI Technology Inc. ("DJI US") (collectively, "DJI"). (D.I. 277) DJI has moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), contending that Autel has not alleged facts that plausibly support any of its antitrust counterclaims. (D.I. 282) After reviewing the parties' briefing (D.I. 283, 291, 301), the Court will grant DJI's motion.

         I. BACKGROUND

         On August 11, 2016, DJI filed suit against Autel for patent infringement relating to drone technology and operation. (D.I. 1) Autel filed an amended answer to DJI's complaint on May 23, 2018, which included counterclaims for monopolization in violation of the Sherman Act, attempted monopolization in violation of the Sherman Act, predatory pricing in violation of sections 17043 and 17044 of the California Unfair Practices Act, and predatory pricing in violation of section 481-3 of the Hawaii Unfair Practices Act. (D.I. 241 at ¶¶ 211-41) DJI moved to dismiss these antitrust counterclaims on June 29, 2018 (D.I. 266), to which Autel responded by filing a second amended answer (D.I. 277) ("SAA"), mooting the earlier motion. DJI filed the present motion on September 14, 2018. (D.I. 282)

         Autel describes a drone as an "aircraft without a human pilot aboard, controlled by a ground-based operator, with a system of communications between the two." (D.I. 291 at 2) The parties agree that DJI holds a powerful, if not controlling, position in the drone industry. (Id. at 3; D.I. 283 at 6) Autel characterizes its antitrust counterclaims as relating specifically to the market for "prosumer" drones, which are "[m]ore than toys and less than fully-configured professional units," are "easy to use," "and contain certain 'pro' features, like improved cameras, navigation software and growing intelligence." (D.I. 291 at 3) (citing SAA at ¶ 61) Autel alleges that DJI has captured the majority of the growth of this market, fueling its monopoly power. (Id.) Autel further alleges that using this market power, "DJI has repeatedly engaged in predatory pricing to blunt the advance of new competitors and ultimately drive them out of the prosumer drone market entirely or, at a minimum, to its fringes." (Id.) "[N]early a dozen companies have attempted to bring new and better 'prosumer' drones to American consumers ... [b]ut each time DJI has perceived a new threat, DJI has used its dominant market share to maintain and extend its monopoly by predatorily cutting its prices, below cost, to undercut the advent of the competitor drone." (Id. at 4) Autel describes "a continuing pattern of DJI's anticompetitive conduct," whereby DJI tactically lowers its price below cost to drive out each new competitor that enters. (Id. at 4-7)

         Conversely, DJI characterizes its success as stemming from "several key advantages over its competitors," namely "the largest research and development team in the industry with a state-of-the-art R&D infrastructure" and a "manufacturing facility in Shenzhen, China ... with direct access to the best supply chain of electronic components." (D.I. 283 at 6) DJI asserts that, despite its large market share, it does not have monopoly power, as shown by allegations Autel included in its SAA, including that "as many as a dozen companies (including Autel) introduce[ed] new products to the market over the past few years at prices comparable to and often lower than those offered by DJI." (Id. at 7) (citing SAA at ¶¶ 62, 70, 100, 112, 115, 124-26, 149) "Thus, according to Autel's own allegations, DJI's years of alleged predatory pricing practices did nothing to deter a steady onslaught of new and persistent competition." (Id. at 7) DJI further blames the exit of these competitors on their own "failure and troubles." (Id. at 8)

         DJI insists that Autel's allegations of below-cost pricing are "nothing more than speculation," pointing out that Autel "does not, for example, identify any of DJFs advertised prices, does not identify any prices offered by DJI resellers, and does not identify any transactions in which a purchaser actually paid the prices alleged." (Id. at 8-9) (citing SAA at ¶¶ 69(a), 127(a), 127(c), 69(b), 127(d), 69(c), 128) DJI provides the Court with a DJI accounting document that Autel obtained through discovery (on the pending patent claims) and which forms the basis of Autel's pricing and cost allegations.[1] This accounting document provides DJFs revenue, cost, gross profit, and quantity of drones sold by DJI for each month in 2016. Autel replies to DJFs analysis of its accounting document by asking the Court to deny DJFs motion to allow the parties to ascertain "[t]he real meaning of DJFs internal financial analysis, produced during discovery on DJFs patent claims, which Autel contends demonstrates DJFs predatory pricing." (D.I. 291 at 1) DJI finds further flaws in Autel's counterclaims, including Autel's "measure of cost" and whether DJI had the ability to recoup lost profits.

         II. LEGAL STANDARDS

         A. Rule 12(b)(6) Motion to Dismiss

         Evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) requires the Court to accept as true all material allegations of the complaint. See Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory Sec. Litig., 114 F.3d at 1420 (internal quotation marks omitted). Thus, the Court may grant such a motion to dismiss only if, after "accepting all well-pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief." Maio v. Aetna, Inc., 221 F.3d 472, 481-82 (3d Cir. 2000) (internal quotation marks omitted).

         A well-pleaded complaint must contain more than mere labels and conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff must plead facts sufficient to show that a claim has substantive plausibility. See Johnson v. City of Shelby, 135 S.Ct. 346, 347 (2014). A complaint may not be dismissed, however, for imperfect statements of the legal theory supporting the claim asserted. See Id. at 346.

         "To survive a motion to dismiss, a civil plaintiff must allege facts that 'raise a right to relief above the speculative level on the assumption that the allegations in the complaint are true (even if doubtful in fact).'" Victaulic Co. v. Tieman,499 F.3d 227, 234 (3d Cir. 2007) (quoting Twombly, 550 U.S. at 555). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. At bottom, "[t]he complaint must state enough facts to raise a reasonable expectation that discovery will reveal evidence of [each] ...


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