Luxpro Corporation v. Apple, Inc.

Filing 34

RESPONSE & BRIEF in Opposition re 23 MOTION to Dismiss for Failure to State a Claim Plaintiff Luxpro Corporation's Response to Defendant Apple, Inc.'s Motion to Dismiss for Failure to State a Claim filed by Luxpro Corporation. (Adams, Richard) Modified on 3/3/2009 to add text (cap).

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Luxpro Corporation v. Apple, Inc. Doc. 34 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 1 of 46 IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF ARKANSAS TEXARKANA DIVISION LUXPRO CORPORATION, a Taiwanese Corporation, Plaintiff vs. APPLE, INC. f/k/a Apple Computer, Inc., Defendant Case Number: 4:08-cv-4092 PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Dockets.Justia.com Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 2 of 46 TABLE OF CONTENTS Page TABLE OF AUTHORITIES........................................................................ii I. II. INTRODUCTION............................................................................1 LEGAL STANDARD........................................................................2 A. B. III. Luxpro's Factual Allegations Must be Taken as True.........................2 Luxpro's FAC Meets the Notice Pleading Standards of the Federal Rules of Civil Procedure.........................................3 THE PARTIES AND BACKGROUND OF THE LAWSUIT........................5 A. B. Luxpro's MP3 Products Find Early Success in the Global Market..........6 In an Effort to Obtain a Monopoly, Apple Targets Luxpro and Attempts to Destroy Its MP3 Business.....................................7 1. 2. Apple Resorts to a Pattern of Abusive Litigation Against Luxpro and Other Small Competitors........................8 Apple Intimidates and Tortiously Interferes with Luxpro Customers and Prospective Customers.......................10 IV. V. A CHOICE OF LAW ANALYSIS IS PREMATURE.................................12 LUXPRO'S CLAIMS AND APPLE'S AFFIRMATIVE DEFENSES..............13 A. Tortious Interference with Contract and Tortious Interference with Prospective Economic Advantage.........................13 1. 2. B. Luxpro's Tortious Interference Claims are Sufficient to State a Claim Upon Which Relief May Be Granted..............13 Luxpro's Tortious Interference Claims are not Barred by the Statute of Limitations............................................18 Common Law Monopolization..................................................20 1. Luxpro's FAC Alleges Facts Showing Apple's Specific Intent to Monopolize the MP3 Player Market........................20 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 3 of 46 2. 3. C. Arkansas Recognizes a Claim for Common Law Attempt to Monopolize..................................................24 California Courts Have Also Recognized Attempted Monopolization Claims Based in Common Law.....................24 Apple's Attempts to Drive Luxpro Out of Business Violated Section 17200 of the California Business and Professional Code..........26 1. 2. Luxpro Has Alleged Facts Constituting "Unfair" Conduct Under Section 17200..........................................27 Luxpro Need Not Satisfy the Pleading Requirements of the Federal Antitrust Laws to State a Claim Pursuant to Section 17200.......................................................................28 Luxpro's FAC Also Alleges "Deceptive" Conduct..................30 Luxpro's Claim for Restitution Damages is Supported by Section 17200.............................................................30 3. 4. D. E. VI. Apple's Attempts to Dismiss Luxpro's Claims Related to Commercial Disparagement Must Also Fail...................................31 Apple is Not Entitled to Exonerate its Unlawful Conduct Under the Noerr-Pennington Doctrine..................................................33 CONCLUSION.............................................................................35 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 4 of 46 TABLE OF AUTHORITIES Pages CASES Ace American Ins. Co. v. Huntsman Corp. ____ F.R.D. ____, 2008 WL 4453108, *4 (S.D. Tex. 2008)............................................3 Alarmax Distributors, Inc. v. Tyco Safety Products Canada Ltd. 2008 WL 2622899, *4 (W.D. Pa. June 27, 2008).......................................................26 Allied Tube & Conduit Corp. v. Indian Head, Inc. 486 U.S. 492, 499-500 (1988).........................................................................33, 35 American Philatelic Soc. v. Claibourne 3 Cal.2d 689, 698 (1935)...................................................................................28 Beck v. Deloitte & Touche, Deloitte, Haskins & Sells, Ernest & Young, L.L.P. 144 F.3d 732 (11th Cir. 1998)...............................................................................5 Bell Atlantic Corp. v. Twombly 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)................................................3 Burdell v. Grandi 152 Cal. 376, 92 P. 1022 (1907)..........................................................................24 Cardtoons v. Major League Baseball Players Ass'n 208 F.3d 885, 889 (10th Cir. 2000). ................................................................33, 34 California v. ARC America Corp. 490 U.S. 93, 101 (U.S. 1989) ............................................................................26 Cel-Tech Comms., Inc. v. Los Angeles Cellular Tel. Co. 20 Cal.4th 163, 187, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999). .............................27, 28, 29 Chavez v. Whirlpool 93 Cal.App.4th 363, 375 (Cal. App. 2001) ..............................................................29 Coker v. Purdue Pharma Co. No. W2005-02525-COA-R3-CV, 2006 WL 3438082 (Tenn. Ct. App, Nov. 30, 2006)...........26 Cook v. Winfrey 141 F.3d 322 (7th Cir. 1998)...............................................................................12 Conley v. Gibson 355 U.S. 41, 47, 78 S.Ct. 99 (1957).........................................................................3 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 5 of 46 Cormack v. Settle-Beshears 474 F.3d 528, 531 (8th Cir. 2007)..........................................................................5 Cortez v. Purolator Air Filtration Products 23 Cal.4th 163 (2000).......................................................................................31 County of Santa Clara v. Astra USA, Inc. 401 F. Supp.2d 1022, 1026 (N.D. Cal. 2005)............................................................28 Della Penna v. Toyota Motor Sales, U.S.A., Inc. 11 Cal.4th 376, 392-393, 45 Cal.Rptr.2d 436, 902 P.2d 740 (1995)..................................15 Diebold, Inc. v. Continental Casualty Co. 2008 WL 1372948, *3 n.7 (D. N.J., April 10, 2008)...............................................12, 13 Doe ex rel. Doe v. School Dist. of City of Norfolk 340 F.3d 605, 614 (8th Cir. 2003)..........................................................................4 E.&J. Gallo Winery v. Encana Energy Services, Inc. 388 F. Supp. 2d 1148 (E.D. Cal. 2005)...................................................................25 Eckert v. Titan Tire Corp. 514 F.3d 801, 806 (8th Cir. 2008) ..........................................................................3 Exxon Corp. v. Superior Court 51 Cal.App.4th 1672, 1687-88, 60 Cal.Rptr.2d 195 (Cal. Ct. App. 1997)...........................25 Great American Indemnity Company v. Brown 307, F.2d 306, 308 (5th Cir. 1962).........................................................................32 Gregory v. Albertson's, Inc. 104 Cal. App. 4th 845, 851 (Cal. App. 2002).............................................................28 Hammond Packing Co. v. State 81 Ark. 519, 100 S.W. 407 (1907)........................................................................24 Harmelin v. Man Financial Inc. 2007 WL 2739579, *2 n.2 (E.D. Pa., September 20, 2007).......................................12, 13 Hopkins v. De Beers Centenary AG 2005 WL 1020868, *1 (Cal. Superior, April 15, 2005)................................................25 In re Apple iPod iTunes Antitrust Litigation No. C 05-00037 JW, 2008 WL 5574487, *8-9 (N.D. Cal. Dec. 22, 2008)...........................26 In re Cipro Cases I and II 121 Cal. App. 4th 402, 406, 17 Cal.Rptr.3d 1, 2 (Cal. Ct. App. 4 Dist. 2004)......................25 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 6 of 46 In re Circular Thermostat, No. MDL C05-01673WHA, 2005 WL 2043022, *2 (N.D.Cal. Aug. 24, 2005) ....................25 Korea Supply Co. v. Lockheed Martin Corp. 29 Cal.4th 1134, 1153-1154, 1164-1165, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003).................15 Kraus v. Trinity Management Services 23 Cal.4th 116 (2000)...................................................................................30, 31 Laitram Mach v. Carnitech A/S 901 F.Supp. 1155, 1161 (E.D. La. 1995)................................................................34 Mahoney v. Roberts 86 Ark. 130, 110 S.W. 225 (1908).........................................................................13 Mamot Feed Lot and Trucking v. Hobson 539 F.3d 898, 901-2 (8th Cir. 2008)...................................................................2, 3, 5 Mid-South Beverages, Inc. v. Forrest City Grocery Co., Inc. 300 Ark. 204, 778 S.W.2d 218 (Ark.1989)..............................................................14 Motors, Inc. v. Times Mirror Co. 102 Cal.App.3d 735, 740 (Cal. App. 1980)..............................................................27 Natural Gas Anti-trust Cases I, II, III, & IV 2002 WL 31570296, *2-3 (Cal. Superior, October 16, 2002).........................................25 Nelson v. Berry Petroleum Co. 242 Ark. 273, 279, 413 S.W.2d 46, 50 n.2 (1967) ......................................................24 Pacific Gas & Electric Co. v. Bear Stearns & Co. 41 Cal.3d 118, 1126, 270 Cal.Rptr.1, 791 P.2d 587 (1990)............................................14 Peck v. Hoff 660 F.2d 371, 374 (8th Cir. 1981)...........................................................................4 People's Choice Wireless, Inc. v. Verizon, Inc. 131 Cal.4th 656, 668 (Cal. App. 2005)....................................................................29 Professional Real Estate Investors, Inc. v. Columbia Pictures Indus. 508 U.S. 49 (1993).....................................................................................33, 35 Razorback Ready Mix Concrete Co. v. Weaver 761 F.2d 484 (8th Cir. 1985)..............................................................................33 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 7 of 46 Rodime PLC v. Seagate Technology, Inc. 174 F.3d 1294, 1307 (Fed. Cir. 1999)....................................................................34 Schmedding v. Tnemec Co., Inc. 187 F.3d 862 (8th Cir. 1999)................................................................................5 Slattery v. Apple Computer, Inc. No. C 05-00037 JW, 2005 WL 2204981, *4 (N.D. Cal. Sept. 09, 2005)........................25, 26 Smith v. Ouachita Technical College 337 F.3d 1079, 1080 (8th Cir. 2003) (per curiam)........................................................4 Swierkiewicz v. Sorema, N.A. 534 U.S. 506, 512-3, 122 S.Ct. 992, 997 (2002)...........................................................4 Tucker v. Apple Computer, Inc. 493 F.Supp.2d 1090, 1102 (N.D. Cal. 2006).............................................................25 United Bilt Homes v. Sampson 310 Ark. 47, 832 S.W.2d 502 (1992).....................................................................14 Venetian Casino Resort, L.L.C. v. N.L.R.B. 484 F.3d 601, 612 (C.A.D.C. 2007)......................................................................35 Walker v. Unum Life Ins. Co. of America 530 F.Supp.2d 351, 354 (D. Maine 2008)...........................................................12, 13 STATUTES FEDERAL RULES OF CIVIL PROCEDURE.....................................................................23 FED. R. CIV. P. 8..........................................................................................2, 3, 4 Rule 12(b)(6) of the FEDERAL RULES OF CIVIL PROCEDURE............................1, 3, 4, 5, 35, 36 Noerr-Pennington Doctrine.............................. ..................................................34 Section 17200 of California Business and Professions Code............................... 27, 28, 30 TREATISES 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER FEDERAL PRACTICE AND PROCEDURE: CIVIL 1215, p. 174, 190 (3d 2004..........................4 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 8 of 46 IN THE UNITED STATES DISTRICT COURT WESTERN DISTRICT OF ARKANSAS TEXARKANA DIVISION LUXPRO CORPORATION, a Taiwanese Corporation, Plaintiff vs. APPLE, INC. f/k/a Apple Computer, Inc., Defendant Case Number: 4:08-cv-4092 PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM Luxpro Corporation ("Luxpro") files its Response to Defendant Apple Inc. f/k/a Apple Computer, Inc.'s ("Apple's") Motion to Dismiss for Failure to State a Claim Pursuant to Rule 12(b)(6) of the FEDERAL RULES OF CIVIL PROCEDURE. For the reasons stated below, Luxpro respectfully requests that the Court deny Apple's motion in its entirety. I. INTRODUCTION Apple's motion intentionally attempts to confuse, and grossly mischaracterize, the real issues of this suit as stated by Luxpro in its detailed allegations of fact set forth in the First Amended Complaint ("FAC"). In doing so, Apple attempts to avoid litigating its illegal scheme to destroy Luxpro's business and knows that, if evidence of its acts is allowed to be presented, its unlawful conduct will be revealed. Apple does not even challenge many of Luxpro's factual allegations. Instead, Apple makes an elaborate, but ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 1 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 9 of 46 vain, attempt to justify its actions as an effort to protect its intellectual property rights in the iPod products. However, conspicuously absent from Apple's mischaracterization of Luxpro's claims is any specific description of the alleged intellectual property rights Apple says it attempted to protect. Apple's refusal to define or describe those "intellectual property rights" forces Luxpro and the Court to speculate as to the legitimacy of Apple's perceived threat and the merits of Luxpro's claims. Accordingly, Luxpro respectfully submits it is much too early for the Court to pass final judgment on its claims, and requests that the Court deny Apple's Motion to Dismiss in its entirety and asks this Court to allow the parties to proceed with discovery. This is especially true where, as here, Luxpro's FAC is subject to the notice pleading standard of FED. R. CIV. P. 8; Rule 8's requirements are easily satisfied by the FAC, and Apple's Motion to Dismiss should be denied. Furthermore, to the extent that Apple has raised relevant affirmative defenses, those defenses require the Court address factual issues that have not yet been tested through the discovery process, and dismissal, at this juncture, would be improper. In sum, Apple's motion is based on nothing more than broad mischaracterizations, an affidavit of a single corporate officer, and a handful of pleadings from prior litigation between the parties that fail to address Luxpro's claims. II. A. LEGAL STANDARD Luxpro's Factual Allegations Must be Taken as True. Apple's motion grossly mischaracterizes a number of the facts pled by Luxpro. Even more important to this analysis, Apple's motion wholly fails to address the majority of the factual allegations in Luxpro's FAC. As discussed below, the Court must take Luxpro's factual allegations as true. See Mamot Feed Lot and Trucking v. Hobson, 539 ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 2 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 10 of 46 F.3d 898, 901-2 (8th Cir. 2008). When the Court views Luxpro's factual allegations as true and applies the notice pleading standard to those facts, the Court is left with no choice but to deny Apple's motion in its entirety. B. Luxpro's FAC Meets the Notice Pleading Standards of the Federal Rules of Civil Procedure. Because Luxpro's FAC meets the pleading standards of FED. R. CIV. P. 8(a) and 12(b)(6), the Court should deny Apple's Motion to Dismiss in its entirety and allow Luxpro to litigate its claims. "In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Court confirmed that Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires `a short and plain statement of the claim showing that the pleader is entitled to relief.'" Ace American Ins. Co. v. Huntsman Corp., ____ F.R.D. ____, 2008 WL 4453108, *4 (S.D. Tex. 2008) (quoting FED. R. CIV. P. 8(a)(2)). The short and plain statement contemplated by FED. R. CIV. P. 8(a) must only provide a defendant with "fair notice of what the plaintiff's claim is and the grounds upon which it rests." Eckert v. Titan Tire Corp., 514 F.3d 801, 806 (8th Cir. 2008) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99 (1957)). The United States Supreme Court recently reaffirmed the federal pleading standard by emphasizing that no requirement for a heightened pleading standard exists and only enough facts to "state a claim for relief that is plausible on its face" must be present. See Twombly, 550 U.S. at _____, 127 S.Ct at 1974. The Supreme Court clarified the Rule 8 standard: "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Id., 550 U.S. at _______, 127 S.Ct. 1969. ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 3 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 11 of 46 The simplified notice pleading standard expressed in Rule 8(a) and by the United States Supreme Court is reinforced by the instruction of FED. R. CIV. P. 8(f) that "all pleadings shall be construed to do substantial justice." Indeed, a complaint cannot be dismissed, nor a claim pled ignored, merely because the complaint does not state with precision all elements giving rise to a legal basis for recovery. Smith v. Ouachita Technical College, 337 F.3d 1079, 1080 (8th Cir. 2003) (per curiam). The Eighth Circuit Court of Appeals recognizes the practical reality that a plaintiff "may not be privy to the facts necessary to accurately describe or identify" the harm inflicted by a defendant and that holding a plaintiff to such a high standard disregards the liberality of Rule 8. Doe ex rel. Doe v. School Dist. of City of Norfolk, 340 F.3d 605, 614 (8th Cir. 2003). The Eighth Circuit view is consistent with the United States Supreme Court position that the simple notice pleading standard applicable under the Federal Rules of Civil Procedure relies on liberal discovery rules and summary judgment motions to define disputed facts and to dispose of flawed claims. Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 512-3, 122 S.Ct. 992, 997 (2002). The Federal Rules of Civil Procedure were designed so that "the discovery procedures should give the parties an opportunity for securing an elaboration of the allegations and that process and not the pleadings bears the burden of filling in the details of the dispute for the parties and the court." 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL 1215, p. 174, 190 (3d 2004) (emphasis added). While a motion to dismiss filed under FED. R. CIV. P. 12(b)(6) properly tests the legal sufficiency of the complaint, such a motion cannot be used to test facts to support the claims found in the complaint. Peck v. Hoff, 660 F.2d 371, 374 (8th Cir. 1981). ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 4 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 12 of 46 When deciding a Rule 12(b)(6) motion, courts must (1) accept all factual allegations in the complaint as true, (2) view those facts in the light most favorable to the nonmoving party, and construe the complaint liberally, and (3) make all reasonable inferences in favor of the nonmoving party. See Mamot Feed, 539 at 901-2; Cormack v. SettleBeshears, 474 F.3d 528, 531 (8th Cir. 2007). In seeking dismissal for failure to state a claim, a defendant bears the very high burden of showing that the plaintiff cannot conceivably prove any set of facts that would entitle her to relief. Beck v. Deloitte & Touche, Deloitte, Haskins & Sells, Ernest & Young, L.L.P., 144 F.3d 732 (11th Cir. 1998). As a practical matter, a court should grant a motion for failure to state a claim under FED. R. CIV. P. 12(b)(6) only in the unusual case in which a plaintiff has presented allegations that show on the face of the complaint that there is an insuperable bar to relief. Schmedding v. Tnemec Co., Inc., 187 F.3d 862 (8th Cir. 1999). With these pleading standards in mind, together with the Supreme Court's reminder that the Court must accept all factual allegations in the complaint as true, 1 Luxpro turns to a substantive response to Apple's motion to dismiss. III. THE PARTIES AND BACKGROUND OF THE LAWSUIT While Apple's motion mischaracterizes a number of facts pled by Luxpro, many other facts detailed in Luxpro's FAC are not even addressed by Apple. For example, Apple fails to discuss the following: (1) the complex history of Apple's development of the iPod product (FAC at 7-9); (2) Apple's monopolization of the worldwide MP3 player market (FAC at 10-11); (3) Apple's conduct in the worldwide MP3 player market (FAC at 12-13); (4) Luxpro's history and product development (FAC at 141 Luxpro's First Amended Complaint contains a Factual Background at 6- 35. Those facts must be taken as true by the Court. ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 5 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 13 of 46 15); (5) Luxpro's products gaining momentum in the global electronics market (FAC at 16-22); and (6) Luxpro's opportunity for a public offering on the GreTai Securities Market in Taiwan. (FAC at 23-24). Apple only glosses over and mischaracterizes the remaining factual allegations addressing Luxpro's efforts to develop and market its own unique MP3 players and Apple's plans to crush Luxpro as a competitor. FAC at 2536. A. Luxpro's MP3 Products Find Early Success in the Global Marketplace. Luxpro is a privately-held Taiwanese consumer electronics corporation. In addition to producing and selling other products such as television and radio receivers, Luxpro engages in developing, manufacturing, distributing, and selling functionally superior MP3 players throughout world, including in the United States. FAC at 1. Luxpro's research and development team has a first-rate reputation in the worldwide MP3 player market for high-quality design. FAC at 14. Notwithstanding Apple's belittling (and incorrect) claim that Luxpro simply developed "knock-offs" of the Apple products, Luxpro is often called upon by consumers, retailers and other third parties to design and develop custom MP3 products. Luxpro has independently developed and marketed a variety of cutting-edge MP3 players, such as the Luxpro "EZ Share," "EZ Season," "EZ Listen," "Top Tangent," "EZ Tangent," "Super Tangent," "iOta Flash," "Pico" (and "iPico") and the "Top Square." FAC at 14. As Luxpro's FAC demonstrates, due to the quality and popularity of its MP3 products, Luxpro gained momentum in the global MP3 marketplace including, notably: (1) executing agreements with two Chinese companies (Beijing Huaqi Informational Digital Technology Co., Ltd. and Beijing Qian Kun Time Digital Technology Co., Ltd.) ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 6 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 14 of 46 to supply over one million MP3 players for sale to consumers; (2) arranging discussions with executives from Circuit City Stores, Inc. ("Circuit City"), and Circuit's City's Canadian subsidiary, InterTAN Canada, Ltd. ("InterTAN"), and then executing an agreement with InterTAN to ship over 7,000 of its Top Tangent MP3 players to InterTAN for sale in retail stores; (3) executing an agreement with a third Chinese company (TC Digital Electronic SBU) to supply more than one million sets of MP3 players; (4) receiving substantial interest and orders for its MP3 players from retailers, distributers, suppliers, and consumers in the United States, and around the globe; (5) executing an agreement with Kaga Electronics Co., Ltd., an electronics supplier in Japan, for the sale of $NTD 2.8 million worth of Luxpro MP3 players; (6) receiving interest from other consumer electronics retailers, including Best Buy and Radio Shack; (7) agreeing with the Starbucks Corporation to initiate a proposal that would place Luxpro's MP3 players in Starbucks' Japanese stores; and (8) entering into agreements with a number of other companies to sell Luxpro MP3 products around the world, including, but not limited to, Compu Import Co. in Mexico and Taiwanese Luxpro distributers Carrefour, EUPA, 3C, and ET Mall. FAC at 16-22, 32-34. B. In an Effort to Obtain a Monopoly, Apple Targets Luxpro and Attempts to Destroy Its MP3 Business. Apple is a publicly-traded multinational corporation that manufactures, distributes and sells consumer electronics and computers. FAC at 2. Apple's MP3 players, marketed under the brand name iPod, are sold throughout the world, including in the Western District of Arkansas. FAC at 2, 4-5; Apple, Inc.'s Transfer Brief at 3. In conjunction with the development of its proprietary iTunes product--a digital media player application that plays and organizes digital music and video files--Apple has ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 7 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 15 of 46 achieved a monopoly in both the hard-drive based MP3 market (90% market share) as well as the more general MP3 market (70% market share). FAC at 10. As further demonstrated in Luxpro's FAC, Apple's focused, intentional strategy designed to destroy Luxpro's MP3 business was widespread and involved various illicit and illegal activities throughout the world, including Canada, China, Germany, Japan, Poland, Singapore, Taiwan, and the United States. FAC at 6, 10-13, 25-36. Not coincidentally, these illegal activities were directed toward Luxpro when its products were first gaining momentum in the marketplace, and Apple was attempting to achieve a monopoly in the global MP3 industry. 1. Apple Resorts to a Pattern of Abusive Litigation Against Luxpro and Other Small Competitors. During the time when Apple was attempting to achieve a monopoly in the marketplace for its iPod products, it targeted certain small and medium sized competitors by filing lawsuits against them. For example, in 2006, Apple sued Creative Technology ("Creative") for infringement of several of Apple's patents related to technology allegedly embodied in Creative's MP3 players. FAC at 13. Creative, a Singapore company who competes with Apple in manufacturing and selling MP3 players, was also asserting claims for patent infringement against Apple related to Apple's iPod products. On August 23, 2006, Apple announced that it was paying Creative $100 million to settle the lawsuit; Creative made no payments to Apple as part of the settlement. 2 Similar to its strategy with Creative, Luxpro's FAC explains that Apple targeted Luxpro, another small competitor in the MP3 market. By March of 2005, Luxpro had developed a couple of prototypes of an MP3 player it called the "Super Shuffle" to 2 Id; http://www.apple.com/pr/library/2006/aug/23settlement.html ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 8 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 16 of 46 display at the CeBit Tradeshow in Hanover, Germany. Those prototypes were to demonstrate the superior functionality of Luxpro's products in a package that did not exceed the size of other available players. Without notice to Luxpro, Apple sought and obtained ex parte injunctive relief from a German court precluding Luxpro from using the name "Super Shuffle" on its products at the tradeshow. FAC at 26. Even though Apple had no registered intellectual property rights (i.e., no patent, copyright, or trademark) that related to Luxpro's Super Shuffle, Luxpro decided to make a few changes to the product and change its name to the "Super Tangent" in order to (1) eliminate any possible legal claim of product confusion, and (2) efficiently resolve the dispute (because Luxpro is a small company and only a few samples of the Super Shuffle had been made). Id. Even so, after refusing Apple's baseless demand that Luxpro cease the manufacturing and selling of all of its MP3 products (not just the player originally described as a Super Shuffle), Apple sued Luxpro in Taiwan alleging that the appearance of Luxpro's other MP3 players too closely resembled Apple's iPod Shuffle product. Again, it must be noted that Apple did not claim that Luxpro had infringed any "intellectual property right," such as a patent, trademark, or copyright. Nevertheless, in the early stages of the lawsuit, Apple was able to temporarily convince the Taiwanese court through a one-sided presentation to enjoin Luxpro from manufacturing any of its MP3 players. This injunction lasted until November of 2005 when the Taiwanese court ruled in Luxpro's favor and lifted the injunction. Apple appealed that ruling. The Taiwan Supreme Court agreed with the lower court's decision and dismissed Apple's appeal, although not until March of 2008. FAC at 27-28. Notwithstanding Luxpro's ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 9 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 17 of 46 victory in court, Apple's litigation had its intended effect: The litigation cost Luxpro substantial resources, the injunction stalled the momentum Luxpro had achieved with its MP3 products and resulted in strained relationships and lost consumer and manufacturing partners. Apple was not finished. Undeterred by its failure, Apple then filed a motion with the Fair Trade Commission alleging that Luxpro violated Taiwan's Fair Trade Act. Not unlike the result in the Taiwanese civil courts, the Fair Trade Commission issued a ruling stating that Apple's complaints lacked merit and that Luxpro's MP3 products did not violate the Fair Trade Act. FAC at 29. Again, however, Apple's litigation had its intended effect: The delays stemming from Apple's Fair Trade Act complaints, coupled with the previous lawsuits, created a cloud over Luxpro that resulted in the loss of valuable market opportunities, product orders and business relationships. 2. Apple Intimidates and Tortiously Interferes with Luxpro Customers and Prospective Customers. Apple's attempt to destroy Luxpro's MP3 business was not limited to filing meritless and abusive litigation. In conjunction with the frivolous legal proceedings it initiated against Luxpro, Apple also began an illegitimate business campaign against Luxpro by threatening and sending intimidating letters to Luxpro's customers, business partners and others. While the breadth and scope of Apple's illegal acts will not be completely exposed without thorough discovery, Luxpro is aware of several non-parties with which Apple has illegally interfered. For example, as articulated in Luxpro's FAC, Apple placed significant pressure on InterTAN to drop from its retail shelves the MP3 players it had already purchased from Luxpro. FAC at 30-31. InterTAN was one of Luxpro's North American customers and had been working with Luxpro to develop MP3 ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 10 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 18 of 46 players for InterTAN's retail stores. InterTAN, along with its parent company, Circuit City, had discovered Luxpro's products at a tradeshow in Las Vegas, Nevada and expressed interest in Luxpro's MP3 products. Circuit City was also interested in selling Luxpro's MP3 products in the United States. However, as a result of Apple's actions and threats, InterTAN stopped offering Luxpro's products for sale and destroyed several thousand Luxpro MP3 players; this, despite the popularity of the Luxpro MP3 players in InterTAN retail stores. Further, Circuit City's interest in discussing the sale of Luxpro MP3 players in the United States ceased. InterTAN was not the only customer or business partner of Luxpro that Apple targeted, however. News of Apple's lawsuits and intimidation of InterTAN spread throughout the MP3 player marketplace, resulting in (1) other business partners terminating contracts with Luxpro, and (2) other large U.S.-based retailers (such as Best Buy and RadioShack) refusing to do business with Luxpro. Another Luxpro partner-- U.S.-based Starbucks Corporation--backed out of an agreement with Luxpro to sell MP3 players in its Japanese stores because of pressure from Apple. FAC at 32. In addition, Apple threatened the following companies to force an end to all business relationships with Luxpro: Orchard Company, a Singapore company, Kaga Electronics Co. Ltd., a Japanese company, and Web Worker, a German Luxpro client. FAC at 33. Further, Apple successfully encouraged some of its own suppliers to begin to pressure Luxpro's business partners to end their relationships with Luxpro. For example, Apple's supplier ASUS Tek Computer Co. threatened Compu Import Co., a Luxpro client in Mexico. Apple's supplier Synnex Technology International Corp. also threatened a number of Luxpro's distributors in Taiwan. FAC at 34. In sum, similar to ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 11 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 19 of 46 its abusive litigation strategy, Apple's illegal interference and intimidation of Luxpro's business partners, customers (including prospective customers), and suppliers had its intended affect: Luxpro's MP3 business was crippled at the most critical stage of market development. IV. A CHOICE OF LAW ANALYSIS IS PREMATURE. Because no discovery has been conducted by the parties, a sufficient record for a proper choice of law analysis is not before the Court. If, at the Rule 12(b)(6) stage of litigation, a district court lacks sufficient facts on which to conduct a choice of law analysis, the court need not do so. See Walker v. Unum Life Ins. Co. of America, 530 F.Supp.2d 351, 354 (D. Maine 2008); see also Diebold, Inc. v. Continental Casualty Co., 2008 WL 1372948, *3 n.7 (D. N.J., April 10, 2008); Harmelin v. Man Financial Inc., 2007 WL 2739579, *2 n.2 (E.D. Pa., September 20, 2007). The delay of a choice of law analysis during the Rule 12(b)(6) stage of litigation is further warranted if a district court is convinced that the plaintiff has alleged "a plausible entitlement to relief." Walker, 530 F.Supp.2d at 354. Apple's short and incomplete choice of law analysis shows the need for further development of facts and issues through discovery before the Court performs a choice of law analysis. First, Luxpro's cause of action under Section 17200 of California's Business and Professions Code does not mean California law applies to its common law claims. See e.g. Cook v. Winfrey, 141 F.3d 322 (7th Cir. 1998) (applying Illinois law to tortious interference claims and Ohio law to defamation claims). Although Apple is headquartered in California, Apple sells iPods throughout the United States and the world. At the time of Apple's unlawful and wrongful actions, Luxpro was attempting to ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 12 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 20 of 46 introduce its own unique MP3 players into the same market. For Apple to flatly assert that California is the only state with any relationship to either the parties or issues in this litigation glosses over other significant factors to be considered in making a choice of law analysis. Similarly, Apple's conclusion that California law must apply to Luxpro's claims merely because that is where Apple's headquarters is located is perfunctory, at best. Apple is not a small, local California company. Apple's products are sold throughout the United States and the world. Therefore, the need to apply California law to advance governmental interests is ameliorated as a factor in the choice of law analysis. At this stage of these proceedings, the parties are not in a position to fully and competently address the choice of law analysis, and the Court is well within its discretion to delay a decision on the issue. See Walker, 530 F.Supp.2d at 354; Diebold, Inc., 2008 WL 1372948 at *3 n.7; Harmelin, 2007 WL 2739579 at *2 n.2. In any event, Luxpro believes that its claims withstand scrutiny under either California or Arkansas law. Further, California and Arkansas law do not differ substantially with respect to Luxpro's claims. V. A. LUXPRO'S CLAIMS AND APPLE'S AFFRIMATIVE DEFENSES. Tortious Interference with Contract and Tortious Interference with Prospective Economic Advantage 1. Luxpro's Tortious Interference Claims are Sufficient to State a Claim Upon Which Relief May Be Granted. Arkansas has recognized wrongful interference with a contract as an actionable tort for nearly a century. See Mahoney v. Roberts, 86 Ark. 130, 110 S.W. 225 (1908). The underlying premise of this cause of action is that a person has a right to pursue valid ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 13 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 21 of 46 contractual and business expectancies unmolested by the wrongful and officious intermeddling of a third party, so that a third party who intentionally and with malice interferes with the contractual relations of another incurs liability for his action in tort. United Bilt Homes v. Sampson, 310 Ark. 47, 832 S.W.2d 502 (1992). In Arkansas, the elements of tortious interference with contract or prospective economic advantage that must be alleged are: (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference; (4) inducing or causing a breach or termination of the relationship or expectancy; and (5) resultant damage to the party whose relationship or expectancy has been disrupted. Id. In Arkansas, a cause of action for the tort of interference with contractual relationship or business expectancy does not require a contractual relationship between a plaintiff and defendant. Mid-South Beverages, Inc. v. Forrest City Grocery Co., Inc., 300 Ark. 204, 778 S.W.2d 218 (Ark.1989). In California, a plaintiff establishes a prima facie case of intentional interference with contractual relations by showing "(1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendants' intentional acts designed to induce breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage." Pacific Gas & Electric Co. v. Bear Stearns & Co., 41 Cal.3d 118, 1126, 270 Cal.Rptr.1, 791 P.2d 587 (1990). In addition, in order to plead a claim for interference with prospective economic advantage, a plaintiff in California must allege an economic relationship between it and a ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 14 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 22 of 46 third party that carries a probability of future economic benefit to the plaintiff, defendant's knowledge of the relationship, intentional acts by the defendant designed to disrupt the relationship, actual disruption of the relationship, and economic harm to the plaintiff proximately caused by the defendant's acts. Korea Supply Co. v. Lockheed Martin Corp. 29 Cal.4th 1134, 1153-1154, 1164-1165, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003). The plaintiff must allege that the defendant's conduct was "wrongful `by some measure beyond the fact of the interference itself.'" Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal.4th 376, 392-393, 45 Cal.Rptr.2d 436, 902 P.2d 740 (1995). As is the case in Arkansas, California courts do not require a plaintiff pleading intentional interference with prospective economic advantage to prove an existing contractual relationship, but he must prove that the defendant's act of interference was wrongful apart from the fact of the interference itself. Id. Moreover, it is not necessary to prove that the defendant acted with the specific intent, or purpose, of disrupting the plaintiff's prospective economic advantage. Korea Supply Co., 29 Cal.4th at 1155-1157. Instead, "it is sufficient for the plaintiff to plead that the defendant `[knew] that the interference is certain or substantially certain to occur as a result of his action.'" Id. at 1156-1157, quoting Rest.2d Torts, 766B, com. d, p. 22. In this context, "an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard." Korea Supply, 29 Cal.4th at 1159 (fn. omitted). Arkansas and California law do not substantially differ regarding tortious interference claims. Thus, whether the Court applies California law or Arkansas law, Apple's contention that Luxpro's FAC fails to state a cause of action for tortious ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 15 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 23 of 46 interference is wholly without merit. As seen below, Luxpro's FAC adequately alleges that Apple disrupted Luxpro's relationships with a variety of businesses through a host of individualized illegal acts including, but not limited to, abusive litigation and even direct contact with Luxpro's business partners and prospective business relationships. Again, Apple incorrectly points to one single incident (i.e., the foreign litigation which occurred between Apple and Luxpro) and argues that because the litigation was brought with probable cause, Luxpro's claims for tortious interference must fail. Apple's argument is once again misplaced. As stated above, the litigation Apple continues to refer to was only the backdrop in a myriad of separate actions taken by Apple in an effort to interfere with Luxpro's business partners and prospective business relationships. Contrary to Apple's contention, the German litigation is not the basis of this suit, but rather, is merely one spoke in the wheel of Apple's scheme to destroy Luxpro's MP3 player business. For example, Luxpro alleges that abusive litigation was not the only tactic Apple utilized in an attempt to stunt Luxpro's growth in the worldwide MP3 player market. Apple placed significant pressure on InterTAN to drop Luxpro's MP3 players from its retail shelves. Later, under pressure from Apple, InterTAN yanked 4,500 Luxpro MP3 players off its shelves and destroyed these products, directly costing Luxpro significant revenue, to say nothing of Luxpro's brand, marketing efforts, and related issues. Despite the popularity of the Luxpro MP3 players in its retail stores that are owned and operated by Circuit City, InterTAN stopped placing orders with Luxpro. News that spread throughout the MP3 player market, combined with undisclosed threatening calls, visits and letters to Luxpro's business partners, resulted in other entities terminating contracts ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 16 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 24 of 46 with Luxpro, causing further economic damages. FAC at 30. At a meeting between Luxpro and InterTAN that took place in April of 2006, InterTAN officers informed Luxpro that Apple had placed exceptionally strong pressure on InterTAN to discontinue its business relationship with Luxpro. FAC at 31. Thereafter, Luxpro showed InterTAN many MP3 players that Luxpro had improved and developed since InterTAN's first order. Over Luxpro's vigorous insistence that Apple's actions were designed to improperly stop the production of better products, InterTAN ultimately refused to order more of Luxpro's MP3 players. Upon hearing this devastating news, Luxpro inquired as to why InterTAN would carry other MP3 players, like those produced by Samsung, but not Luxpro's. InterTAN explained it could not afford to annoy Apple over a small company like Luxpro. Id. Apple also filed a motion with the Fair Trade Commission alleging that Luxpro violated Taiwan's Fair Trade Act. The Fair Trade Commission ultimately issued a letter opinion stating that Luxpro's Tangent product line was not in contravention of the act. However, the delays caused Luxpro to lose valuable market opportunities and a considerable amount of product orders. FAC at 29. In an attempt to erase its fingerprints from the secretly developed scheme to squash Luxpro's business, Apple successfully encouraged some of its suppliers to pressure Luxpro business partners to end their relationships with Luxpro. For example, Apple supplier ASUS Tek Computer Co. threatened Compu Import Co., a Luxpro client in Mexico. ASUS told Compu Import that if it did not stop carrying Luxpro products, ASUS would stop supplying Compu Import with ASUS products. Apple supplier ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 17 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 25 of 46 Synnex Technology International Corporation threatened a number of Taiwanese Luxpro distributors, including Carrefour, EUPA, 3C, and ET Mall. FAC at 34. To this day, Apple continues to pursue its litigation strategy through endless appeals, in hopes that the litigation, coupled with the pressure exerted against Luxpro's business partners, will completely ruin Luxpro's ability to increase market share in the worldwide MP3 market. FAC at 29. Apple's combined, concerted and illegal efforts to unfairly ruin a viable competitor caused great damage to Luxpro and its consumers, and had a chilling effect on competition. FAC at 36. Luxpro's FAC adequately alleges (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference; (4) inducing or causing a breach or termination of the relationship or expectancy; and (5) resultant damage to the party whose relationship or expectancy has been disrupted. For Apple to argue otherwise is clearly disingenuous. Apple's contention that Luxpro's tortious interference causes of action should be dismissed for failure to state a claim is wholly without merit and should be denied. 2. Luxpro's Tortious Interference Claims are not Barred by the Statute of Limitations. Apple incorrectly argues that the claims asserted accrued over three years before Luxpro filed its complaint on October 14, 2008. In making its argument, Apple points to the German injunction that was obtained in March of 2005 and the demand letters sent by Apple to Luxpro in April and August of 2005. Apple conveniently ignores the conduct that occurred in 2006 and continued to occur right up to the date this case was filed. The litigation referred to in Luxpro's FAC is simply the "first shot" of Apple's concentrated ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 18 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 26 of 46 effort to destroy Luxpro. It is not, however, the sole basis of Luxpro's FAC or its claims against Apple. Many other events related to Apple's illegal efforts, all of which took place much later, form the basis of Luxpro's claims. For example, by April 2006, Luxpro managed to persuade InterTAN's officers and company product buyers to travel to Taiwan to meet. At that meeting, InterTAN's officers disclosed to Luxpro that Apple had previously placed exceptionally strong pressure on InterTAN (Circuit City's Canadian subsidiary) to pull its Centrios 3 brand from InterTAN's retail shelves and discontinue all business dealings with Luxpro. FAC at 31. This pattern of tortiously interfering in Luxpro's business did not end with InterTAN. In September 2006, Apple increased its pressure on Luxpro's other business partners, including a number of U.S. based partners and retailers located in the United States. For example, Starbucks Corporation had agreed to initiate a proposal that would place Luxpro's MP3 players in Starbuck's Japanese stores. Following pressure by Apple, Starbucks ended its relationship with Luxpro. FAC at 32. Also, in September 2006, Apple threatened Orchard Company, a Singapore company, and Kaga Electronics Co. Ltd., a Japanese company, to cease all business relations with Luxpro or Apple would file suit against Orchard and Kaga or end its business relationship with those companies. Luxpro also alleged that Apple threatened Web Worker, a German Luxpro client, to end all business relationships with Luxpro. FAC at 33. InterTAN placed orders for Luxpro's Top Tangent MP3 player under the brand name "Centrios." ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 19 3 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 27 of 46 In sum, Apple, again, seeks to re-plead Luxpro's FAC in an attempt to avoid the true facts from coming to light. The facts alleged in Luxpro's FAC, which is referenced above and must be taken as true at this stage, show that Apple created a plan to destroy Luxpro. In doing so, Apple carried its plan out with brutal efficiency by engaging in a variety of unlawful schemes in an effort to interfere with Luxpro's business relationships and prospective business relationships. Apple's misconduct occurred well within the established limitations period. Luxpro adequately pled these events in detail. FAC at 33, 34, 35. B. Common Law Monopolization 1. Luxpro's FAC Alleges Facts Showing Apple's Specific Intent to Monopolize the MP3 Player Market. Apple complains Luxpro fails to allege that Apple specifically intended to monopolize the MP3 player market. Luxpro has alleged many actions that show Apple specifically intended such a monopoly. Apple deliberately makes digital music purchased at its iTunes Store inoperable with its competitors' MP3 players. FAC at 8. In order to play music from Apple's iTunes Store, the dominant online music retailer, the consumer's only option in the digital music player market is Apple's iPods. Id. Apple makes iPods that are unable to play music sold at rival online music stores, leaving consumers with no choice but to purchase music from the iTunes Store. Id. The iTunes Store sells individual songs that can only be played by the iPod. FAC at 9. Because of the importance of the worldwide MP3 player market to Apple's bottom line, Apple has sought to monopolize the worldwide MP3 player market and crush legitimate, smaller competitors. Id. ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 20 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 28 of 46 Apple has obtained a dominant 90% market share of the hard drive based MP3 player market and a 70% share of the MP3 player general market. FAC at 10. Apple dominates the worldwide market today, and over time has increased its market share. FAC at 11. At the same time Apple was increasing its market share, smaller-range MP3 manufacturers, like Luxpro, were also increasing their market share. Id. Once Apple realized its strongest threat in the MP3 player market included small-range manufacturers, Apple intentionally targeted Luxpro, a small-range MP3 player manufacturer in Taiwan. Id. Apple sought to conquer smaller competitors such as Luxpro to prevent an increased market share among the smaller-ranged manufacturers. Id. Since the introduction of the iPod, Apple has sought to stamp out the competition using various schemes. FAC at 12. Apple developed a confidential, internal strategy to stop competition through strategically filed litigation and has repeatedly used other unfair tactics against other small manufacturers. FAC at 13. As an example, although Creative Technology, a Singapore based company, beat Apple to the patent punch on iPod's interface, Apple sued Creative Technology in a Wisconsin District Court alleging that Creative Technology infringed on four of Apple's patents. Id. Ultimately, Apple paid Creative Technology over $100 million to settle the case and obtained the use of Creative Technology's patent on the interface. Id. Apple initiated a well-planned strategy to specifically target Luxpro. FAC at 25. Although Apple had not obtained a trademark for the word "Shuffle," at the CeBit Tradeshow in Germany, Apple initiated litigation to enjoin Luxpro from using the word "Shuffle" in its products. FAC at 26. Luxpro renamed its Super Shuffle the Super ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 21 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 29 of 46 Tangent and added "LUXPRO" to its product, which obviously eliminated any confusion of the products, and began to market this MP3 player under the "Tangent" label. Id. Despite Luxpro's actions to address Apple's complaints, Apple furthered its scheme to preclude Luxpro, a small-range MP3 manufacturer, from any place in the MP3 player market. Id. Apple engaged a third party to purchase Luxpro's products, surreptitiously obtained two of Luxpro's proprietary price lists, sent threatening letters to Luxpro demanding Luxpro immediately stop marketing, manufacturing and selling all of its MP3 players (even MP3 players that Luxpro never branded with the "Shuffle" moniker). Id. Luxpro responded by reminding Apple that it had changed the name of one its MP3 players to the Super Tangent to avoid any possibility of confusion and to differentiate it from Apple's iPod Shuffle and continued with manufacturing, marketing, distributing, licensing and selling its MP3 players. Id. Nevertheless, Apple sued Luxpro in Taiwan, and successfully obtained a preliminary injunction (with a one-sided submission) that enjoined Luxpro from manufacturing, distributing or marketing any MP3 player. Id. Eventually, Luxpro overturned the injunction with respect to all of its MP3 players, except that Luxpro could not use the name "Shuffle," which it had already stopped using. Id. Despite Luxpro's ultimate success in the litigation in Taiwan, the preliminary injunction required Luxpro to halt manufacturing, advertising and marketing its MP3 players and forced Luxpro to cease performing existing contracts and filling existing orders. Id. Luxpro's relationship with its business partners was ruined, its plans for a public stock offering were unavoidably abandoned, and its chance of garnering market ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 22 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 30 of 46 share was lost. Id. Apple continued with litigation with the hopes that it, coupled with pressure on Luxpro's business competitors, would completely destroy Luxpro or severely hamper its ability to increase market share in the MP3 player market. Id. Apple compounded the effects of the litigation by sending warning letters to Luxpro's business partners demanding those business partners cease relations with Luxpro, including InterTAN, a subsidiary of U.S. based Circuit City. FAC at 30. Even though Luxpro had successfully placed its MP3 players on the retail shelves of InterTAN, Apple successfully pressured InterTAN to yank over 4,000 of Luxpro's MP3 players, costing Luxpro significant lost revenue and damage to its brand and marketing efforts. Id. InterTAN also stopped placing orders with Luxpro and any opportunities Luxpro had with other major U.S. based retailers was lost. Id. Examples of Apple approaching other Luxpro business partners are listed in Luxpro's FAC. FAC at 32-34. These potent facts indicated Apple's thirst for a monopoly on the MP3 player market and show Apple's specific intent to create a monopoly. During this time frame, Apple was gaining market share, but so were small-range companies like Luxpro. Apple had essentially defeated more medium-size MP3 player manufacturers, like Creative Technology's ZEN series, Reigncom's Iriver series, Samsung and ScanDisk and was gaining market share as a result. However, the cumulative market share of small-range companies like Luxpro was growing as well, and Apple saw those small-range companies as its next threat in the marketplace. Luxpro's FAC alleges a number of facts showing Apple's specific intent to monopolize and is sufficient to meet the pleading requirements of the FEDERAL RULES OF CIVIL PROCEDURE on this issue. ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 23 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 31 of 46 2. Arkansas Recognizes a Claim for Common Law Attempt to Monopolize. As discussed above, the Court is not required to conduct a choice of law analysis at this early stage of the case. After discovery has been completed, a choice of law analysis may show that Arkansas, California, or another state's common law, may be more appropriately applied to Luxpro's attempted monopolization claim. Apple is the driving force behind creating and possibly monopolizing a worldwide MP3 player market. It makes little sense to decide at the infant stages of this litigation which state's law should be applied to a claim addressing the attempted monopolization of the worldwide MP3 player market. However, to the extent the Court deems it appropriate to examine the issue now, Arkansas law recognizes that, aside from any statutory authority, an attempted monopoly or an agreement in restraint of trade, amounts to the equivalent of a criminal conspiracy at common law. See Nelson v. Berry Petroleum Co., 242 Ark. 273, 279, 413 S.W.2d 46, 50 n.2 (1967) (citing Hammond Packing Co. v. State, 81 Ark. 519, 100 S.W. 407 (1907)). Therefore, Arkansas clearly recognizes the viability of an attempted monopoly claim based in common law. Luxpro's FAC, as discussed above, addresses Apple's specific intent to attempt a monopoly. 3. California Courts Have Also Recognized Attempted Monopolization Claims Based in Common Law. For many years, California appellate courts have recognized that monopolization and attempted monopolization are against public policy and prohibited at common law. See Burdell v. Grandi, 152 Cal. 376, 92 P. 1022 (1907). Despite Apple's contentions to the contrary, California does recognize the existence of the common law "business tort" ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 24 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 32 of 46 of monopolization. See Exxon Corp. v. Superior Court, 51 Cal.App.4th 1672, 1687-88, 60 Cal.Rptr.2d 195 (Cal. Ct. App. 1997); Natural Gas Anti-trust Cases I, II, III, & IV, 2002 WL 31570296, *2-3 (Cal. Superior, October 16, 2002). In fact, in 2004, a California appellate court affirmed a trial court's decision to grant class certification status to litigation alleging, inter alia, claims asserting the common law tort of monopolization by the manufacturers of the pharmaceutical know as Cipro. See In re Cipro Cases I and II, 121 Cal. App. 4th 402, 406, 17 Cal.Rptr.3d 1, 2 (Cal. Ct. App. 4 Dist. 2004); see also Hopkins v. De Beers Centenary AG, 2005 WL 1020868, *1 (Cal. Superior, April 15, 2005). Not unlike California state courts, federal courts in California too have recognized the claim. See In re Circular Thermostat, No. MDL C05- 01673WHA, 2005 WL 2043022, *2 (N.D.Cal. Aug. 24, 2005) (noting claim for common law monopolization); E.&J. Gallo Winery v. Encana Energy Services, Inc., 388 F. Supp. 2d 1148 (E.D. Cal. 2005) (denying motion to dismiss common law claims of monopolization and attempted monopolization). The availability of the common law claim of monopolization under California law is not news to Apple. In the "The Apple iPod iTunes Anti-Trust Litigation" 4 presently pending in the Federal District Court, Northern District of California, Apple's attempts to dismiss the plaintiff's claims of common law monopolization as a matter of law have been denied in two separate cases. See Tucker v. Apple Computer, Inc., 493 F.Supp.2d 1090, 1102 (N.D. Cal. 2006) (denying Apple's motion to dismiss claim of common law monopolization); Slattery v. Apple Computer, Inc. No. C 05-00037 JW, 2005 WL Apparently the Tucker and Slattery cases cited herein have been consolidated with a number of other cases into the class action now styled In re Apple iPod iTunes Antitrust Litigation pending in the Northern District of California and also cited herein. ______________________________________________________________________________________ PLAINTIFF LUXPRO CORPORATION'S RESPONSE TO DEFENDANT APPLE INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM 25 4 Case 4:08-cv-04092-HFB Document 34 Filed 03/02/09 Page 33 of 46 2204981, *4 (N.D. Cal. Sept. 09, 2005) (same). Indeed, the court now presiding over the consolidated "The Apple iPod iTunes Anti-Trust Litigation" recently granted class certification as to several counts in the plaintiff's amended complaint, including the claim for common law monopolization. See In re Apple iPod iTunes Antitrust Litigation, No. C 05-00037 JW, 2008 WL 5574487, *8-9 (N.D. Cal. Dec. 22, 2008). As discussed previously, given the inadequate record before the Court on the choice of law issues at this juncture, the Court should allow the parties to conduct discovery before deciding which state's law to apply to the attempted monopoly claim. This is true especially where, as here, the application of several jurisdictions' laws may be applicable (particularly given the scope and breadth of Apple's illegal scheme) and the claim of common law monopolization is widely recognized in multiple jurisdictions. See. e.g., California v. ARC America Corp., 490 U.S. 93, 101 (U.S. 1989) (acknowledging the "long history of state common-law and sta