Not what you're
looking for? Try an advanced search.
Buy This Entire Record For
SYNCSORT INC. v. SEQUENTIAL SOFTWARE
January 28, 1999
SYNCSORT INCORPORATED, PLAINTIFF,
SEQUENTIAL SOFTWARE, INC., DEFENDANT.
The opinion of the court was delivered by: Lechner, District Judge.
On 8 April 1998, Sequential filed an answer to the Complaint
(the "Answer"). See Answer. At that time, Sequential also
alleged counterclaims for antitrust violations (the "Antitrust
Counterclaim") and false advertising (the "False Advertising
Counterclaim") (collectively, the "Counterclaims"). See
Counterclaims. Jurisdiction over the Counterclaims is asserted
under Fed.R.Civ.P. 13, 15 U.S.C. § 1121(a) and 28 U.S.C. § 1331
and 1367. See id. at ¶ 68.
Currently before the court is the motion (the "Motion") by
Syncsort for judgment on the pleadings pursuant to Fed.R.Civ.P.
12(c) ("Rule 12(c)"). Alternatively, Syncsort moves, pursuant to
Fed.R.Civ.P. 42(b) ("Rule 42(b)"), for severance of the
Counterclaims and a stay of discovery as to the
counterclaims.*fn1 For the reasons set forth below, the Motion
is granted in part, and denied in part.*fn2
Syncsort is a large international corporation which has its
principal place of business in New Jersey. See Complaint at ¶¶
1, 3. It researches, develops and sells computer sorting programs
for corporate data processing customers. See id. at ¶ 3.
Syncsort is a leading company in the market for computer sorting
software. See Counterclaims at ¶¶ 73, 75; Complaint at ¶ 3. It
developed and released to the public a computer sorting product
known as "SyncSort/UNIX."*fn4 See Complaint at ¶ 3.
According to Syncsort, the advanced sorting and operational
algorithms and optimization for the various computer platforms
for which Syncsort sorting packages are offered (collectively,
the "Information") are trade secrets, except insofar as they are
covered by issued patents. See Complaint at ¶ 5. To ensure
confidentiality of the Information, Syncsort requires customers
seeking to license or evaluate its sorting products to sign a
licensing agreement (the "Licensing Agreement") and a
non-disclosure agreement (the "Non-Disclosure Agreement"). The
Licensing Agreement and the Non-Disclosure Agreement contain
"strict requirements . . . includ[ing] prohibitions against
unauthorized disclosure, strict limitations on who may use
Syncsort's software, express prohibitions against reverse
engineering, and prohibitions against dissemination of any
benchmark or test results." Id. at ¶ 7.
Sometime during the period from 1994 through 1997, Sequential
sought to obtain trial copies of the sorting products of
Syncsort, including SyncSort/UNIX. See id. at ¶ 8; Answer at ¶
8. Syncsort advised Sequential that in order to obtain such
copies, Sequential would be required to sign the Licensing
Agreement. See Complaint at ¶ 8; Answer at ¶ 8. In light of the
restrictions in the Licensing Agreement, Sequential declined the
trial copies. See Complaint at ¶ 8; Answer at ¶ 8. Sequential
then received an unsolicited copy of SyncSort/UNIX but did not
sign or otherwise agree to sign the Licensing Agreement. See
Answer at ¶ 9. Sequential alleged it received the copy of
SyncSort/UNIX from Syncsort. Id.
Sequential denied that upon receiving a copy of SyncSort/UNIX,
it reverse engineered or ran benchmark tests on SyncSort/UNIX in
order to investigate its methods of operation. See Answer at ¶¶
10, 11; Complaint at ¶¶ 10, 11. Sequential admitted only that it
"ran SyncSort/UNIX." Answer at ¶ 12. Sequential instead contended
it had completed the development of the core sorting algorithms
and operations used in PdqSort before obtaining a copy of
SyncSort/UNIX. See id. at ¶ 13. In fact, Sequential contended
it "has been designing and refining PdqSort since 1993." Id. at
¶ 70. Sequential further contended it developed the user
interface of PdqSort without copying any part of SyncSort/UNIX.
Id. at ¶ 14.
Sequential launched PdqSort in February 1998. See id. at ¶
70. Also in February 1998, Sequential advertised PdqSort on a
site on the Internet (the "Sequential Web Site"). See Complaint
at ¶ 16; Opposition Brief at 2. The Sequential Web Site contained
benchmark results demonstrating that PdqSort was twice as fast as
SyncSort/UNIX. See Opposition Brief at 2; Complaint at ¶ 16.
Syncsort also maintains a web site on the Internet (the
"Syncsort Web Site"), accessible to consumers throughout the
United States. See False Advertising Counterclaim at ¶ 85. In
an advertisement on the Syncsort Web Site (the "Syncsort Web Site
Advertisement") concerning SyncSort/UNIX, Syncsort stated:
`SyncSort is the fastest commercial sort product in
the world. SyncSort provides unmatched sort
performance on UNIX systems. It's been proven time
and time again in benchmark tests . . . [SyncSort
made] a new world record.'
Id. at ¶ 86 (quoting Syncsort Web Site Advertisement, attached
as Exhibit A to Answer and Counterclaims).
Sequential alleged Syncsort controls the computer sorting
market despite the fact that SyncSort is not the fastest sort
product. See id. at ¶ 75-76. Sequential also alleged the
advertisements (collectively, the "Syncsort Advertisements")
professing SyncSort/UNIX to be the fastest sort product are
false, deceptive and misleading. See id. at ¶¶ 91-94.
As mentioned, Syncsort filed the Complaint on 26 February 1998.
See Complaint. On 3 April 1998, pursuant to a scheduling
conference and accompanying order (the "3 April 1998 Order"), the
time in which Sequential was permitted to answer the Complaint
was extended to 8 April 1998. See 3 April 1998 Order.
Sequential filed the Answer and Counterclaims on 8 April 1998.
See Answer and Counterclaims. Syncsort filed a reply to the
Counterclaims (the "Reply to Counterclaims") on 29 April 1998.
See Reply to Counterclaims.
A. Standard For Dismissal Under Rule 12(c)
A defendant may move to dismiss a complaint or parts of a
complaint before or after filing an answer. See Fed.R.Civ.P.
12(b)(6) and (c). A motion made before an answer is filed is a
motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) ("Rule
12(b)(6)"). A motion made after an answer is filed is a motion
for judgment on the pleadings pursuant to Rule 12(c).*fn5 "A
defense of failure to state a claim upon which relief can be
granted . . . may be made in . . . [a] motion for judgment on the
pleadings." See Fed.R.Civ.P. 12(h)(2). In the instant action,
the Motion was filed after the Answer and Counterclaims and is
based on the argument that the Antitrust Counterclaim and the
False Advertising Counterclaim fail to state a claim upon which
relief can be granted.
A Rule 12(c) motion for judgment on the pleadings is treated
like a motion to dismiss under Rule 12(b)(6). See Fed. R.Civ.P.
12(h)(2); see also Turbe, 938 F.2d at 428; Institute for
Scientific Information, Inc. v. Gordon & Breach, Science Pubs.
Inc., 931 F.2d 1002, 1006 (3d Cir.), cert. denied,
502 U.S. 909, 112 S.Ct. 302, 116 L.Ed.2d 245 (1991); Britamco
Underwriters, Inc. v. C.J.H., Inc., 845 F. Supp. 1090, 1092
(E.D.Pa.), aff'd, 37 F.3d 1485 (3d Cir. 1994); Southmark Prime
Plus, L.P. v. Falzone, 776 F. Supp. 888, 891 (D.Del. 1991).
Like Rule 12(b)(6), Rule 12(c) requires the Court "accept the
allegations in the complaint as true, and draw all reasonable
factual inferences in favor of the plaintiff. [The motion can be
granted] only if no relief could be granted under any set of
facts that could be proved." Turbe, 938 F.2d at 428 (citing
Unger, 928 F.2d at 1394-95); see also Dykes, 68 F.3d at 1565
n. 1; Piecknick, 36 F.3d at 1255; Jordan v. Fox, Rothschild,
O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
A complaint may be dismissed for failure to state a claim where
it appears beyond any doubt that no relief could be granted under
any set of facts which could be proved consistent with the
allegations. Hartford Fire Ins. Co. v. California,
509 U.S. 764, 811-12, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993); Hishon v.
King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59
(1984); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2
L.Ed.2d 80 (1957); Piecknick, 36 F.3d at 1255; ALA, Inc. v.
CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994); Ransom v.
Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988); Angelastro v.
Prudential-Bache Sec., Inc., 764 F.2d 939, 944 (3d Cir.), cert.
denied, 474 U.S. 935, 106 S.Ct. 267, 88 L.Ed.2d 274 (1985).
A complaint should not be dismissed unless it appears beyond
doubt that "the facts alleged in the complaint, even if true,
fail to support the claim." Ransom, 848 F.2d at 401. Legal
conclusions made in the guise of factual allegations, however,
are given no presumption of truthfulness. See Papasan v.
Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209
(1986); Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d
Cir. 1997) ("[A] court need not credit a complaint's `bald
assertions' or `legal conclusions' when deciding a motion to
dismiss"); Haase v. Webster, 807 F.2d 208, 215 (D.C.Cir.),
vacated on other grounds, 835 F.2d 902 (D.C.Cir. 1987);
Briscoe v. LaHue, 663 F.2d 713, 723 (7th Cir.), aff'd,
460 U.S. 325, 103 S.Ct. 1108, 75 L.Ed.2d 96 (1983); Western Mining
Council v. Watt, 643 F.2d 618, 626 (9th Cir.), cert. denied,
454 U.S. 1031, 102 S.Ct. 567, 70 L.Ed.2d 474 (1981); Bermingham
v. Sony Corp. of Am., 820 F. Supp. 834, 846 (D.N.J.), aff'd,
37 F.3d 1485 (3d Cir. 1994).
A district court reviewing the sufficiency of a complaint has a
limited role. "The issue is not whether a plaintiff will
ultimately prevail but whether the claimant is entitled to offer
evidence to support his [or her] claims." Scheuer v. Rhodes,
416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974);
Bermingham, 820 F. Supp. at 846.
Generally, when conducting such an inquiry, material beyond the
pleadings should not be considered. See In re Burlington Coat
Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997);
Pension Benefit Guar. Corp. v. White Consol. Indus.,
998 F.2d 1192, 1196 (3d Cir.), cert. denied, 510 U.S. 1042, 114 S.Ct.
687, 126 L.Ed.2d 655 (1994); Wallace v. Systems & Computer Tech.
Corp., No. 95-6303, 1997 WL 602808, at *5 (E.D.Pa.23 Sept.
1997); Gannon v. Continental Ins. Co., 920 F. Supp. 566, 574
If the claims are based upon undisputably authentic documents
expressly relied upon or integral to the pleadings or matters of
public record, however, such documents may be considered. See In
re Burlington Coat Factory Sec. Litig., 114 F.3d at 1426; In re
Westinghouse Sec. Litig., 90 F.3d 696, 707 (3d Cir. 1996); In
re Donald Trump Sec. Litig., 7 F.3d 357, 368 n. 9 (3d Cir.),
cert. denied, 510 U.S. 1178, 114 S.Ct. 1219, 127 L.Ed.2d 565
(1994); EP Medsystems, Inc. v. Echocath, Inc., 30 F. Supp.2d 726,
740 (D.N.J. 1998); Pension Benefit Guar. Corp., 998 F.2d
at 1196; Wallace, 1997 WL 602808, at *5; Interfaith Community
Organization v. Alliedsignal, Inc., 928 F. Supp. 1339, 1345
(D.N.J. 1996); Weiner v. Quaker Oats, 928 F. Supp. 1372 (D.N.J.
1996), rev'd on other grounds, 129 F.3d 310 (3d Cir. 1997);
Gannon, 920 F. Supp. at 574. Documents attached to a motion to
dismiss must be explicitly relied upon or integral to the
complaint or counterclaim of the nonmovant. See In re Burlington
Coat Factory Sec. Litig., 114 F.3d at 1426 (quoting Shaw v.
Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)).
[t]he situation in which a [claimant] is able to
maintain a claim . . . by extracting an isolated
statement from a document and placing it in the
complaint, even though if the statement were examined
in the full context of the document, it would be
clear that the statement was not [actionable].
Id.; see Dykes, 68 F.3d at 1567 n. 3 (if documents specifically
referred to in the pleadings could not be considered, "a
plaintiff with a legally deficient claim could survive a motion
to dismiss simply by failing to attach a dispositive document
upon which it relied"). Under these circumstances, where a motion
to dismiss references such documents outside of the complaint or
counterclaim, the motion to dismiss is not converted into a
motion for summary judgment. See id.; Pension Benefit Guar.
Corp., 998 F.2d at 1196-97.
In support of the instant Motion, Syncsort submitted and relied
upon, among other things, the Syncsort Advertisements, the
Licensing Agreement, the Non-Disclosure Agreement and the
Responses of Sequential to the First Set of Interrogatories,
dated 26 May 1998, (the "Sequential Interrogatories
Responses").*fn6 See Moving Brief at 7-8. Syncsort contended
the Syncsort Advertisements, the Licensing Agreement and the
Sequential Interrogatories Responses may all properly be
considered in ruling on the instant Motion. See id.
Consideration of the Syncsort Advertisements, the Licensing
Agreement and the Non-Disclosure Agreement does not require
conversion of the instant Motion into one for summary judgment
under Fed. R.Civ.P. 56. See In re Burlington Coat Factory Sec.
Litig., 114 F.3d at 1426. These documents were expressly
referenced and relied upon in the Answer and Counterclaim. See
Answer and Counterclaims at ¶¶ 8, 9, 77, 85-94. The Licensing
Agreement, the Non-Disclosure Agreement and the Syncsort
Advertisements, moreover, are integral both to the False
Advertising Counterclaim and the Antitrust Counterclaim.
The Sequential Interrogatories Responses, by contrast, were
neither relied upon by Sequential, nor are they integral to the
pleadings of Sequential. Rather, the Sequential Interrogatories
Responses were relied upon by Syncsort "to the extent they help
explain the theories underlying each counterclaim." See Moving
Brief at 7. As such, the Sequential Interrogatories Responses
will not be considered in connection with the instant Motion.
See In re Burlington Coat Factory Sec. Litig., 114 F.3d at
B. The Antitrust Counterclaim
In the Antitrust Counterclaim, Sequential alleged Syncsort
violated section two ("Section Two") of the Sherman Antitrust Act
(the "Sherman Act"), 15 U.S.C. § 2. Specifically, Sequential
alleged, inter alia,
Syncsort is able to control the UNIX sorting
market*fn7 and maintain control of that market
through a variety of means including the use of
improperly restrictive licensing and confidentiality
agreements, misuse of its copyright, bringing
anti-competitive litigation, and knowingly asserting
claims for invalid or unfounded trade secrets.
Antitrust Counterclaim at ¶ 77. Sequential further alleged:
To state a claim for monopolization under Section Two of the
Sherman Act,*fn8 a plaintiff must plead facts indicating "`(1)
the possession of monopoly power in the relevant market and (2)
the willful acquisition or maintenance of that power as
distinguished from growth or development as a consequence of a
superior product, business acumen, or historic accident.'"
Schuylkill Energy Resources, Inc. v. Pennsylvania Power & Light
Co., 113 F.3d 405, 412-13 (3d Cir.) (quoting Fineman v.
Armstrong World Indus., Inc., 980 F.2d 171, 197 (3d Cir.),
cert. denied, 507 U.S. 921, 113 S.Ct. 1285, 122 L.Ed.2d 677
(1993)), cert. denied, ___ U.S. ___, 118 S.Ct. 435, 139 L.Ed.2d
335 (1997); see United States v. Grinnell Corp., 384 U.S. 563,
570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); Hudson's Bay Co.
Fur Sales Inc. v. Am. Legend Coop., 651 F. Supp. 819, 845 (D.N.J.
To state a claim for attempted monopolization under Section Two
of the Sherman Act, a plaintiff must plead facts sufficient to
show Syncsort "`(1) engaged in predatory or anticompetitive
conduct with (2) specific intent to monopolize and with (3) a
dangerous probability of achieving monopoly power.'" Queen City
Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 442 (3d
Cir.) (quoting Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447,
456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993)), reh'g denied,
129 F.3d 724 (1997), cert. denied, ___ U.S. ___, 118 S.Ct. 1385,
140 L.Ed.2d 645 (1998); see Schuylkill Energy Resources, 113
F.3d at 413; Ideal Dairy Farms, Inc. v. John Labatt, Ltd.,
90 F.3d 737, 750 (3d Cir. 1996); Advo, Inc. v. Philadelphia
Newspapers, Inc., 51 F.3d 1191, 1197 (3d Cir. 1995); Barr
Labs., Inc. v. Abbott Labs., 978 F.2d 98, 112 (3d Cir. 1992).
In determining whether there exists a viable claim of
monopolization or attempted monopolization, an inquiry "into the
relevant product and geographic market" is required. Spectrum
Sports, 506 U.S. at 459, 113 S.Ct. 884; see Schuylkill Energy
Resources, 113 F.3d at 415; Ideal Dairy Farms, 90 F.3d at 750;
Pastore v. Bell Telephone Co. of Pennsylvania, 24 F.3d 508, 512
(3d Cir. 1994); Hudson's Bay Co., 651 F. Supp. at 835. An
antitrust plaintiff must plead facts sufficient to demonstrate a
viable relevant market. See Queen City Pizza, 124 F.3d at 436;
Schuylkill Energy Resources, 113 F.3d at 415; Brader v.
Allegheny General Hospital, 64 F.3d 869, 877 (3d Cir. 1995).
In the antitrust context, the standard for dismissal under Rule
12 is rigorous; antitrust claims are construed liberally. See
McLain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232,
246, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980); Hospital Bldg. Co. v.
Trustees, 425 U.S. 738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338
(1976); Poller v. Columbia Broadcasting Sys., 368 U.S. 464,
473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Radiant Burners, Inc.
v. Peoples Gas Light & Coke Co., 364 U.S. 656, 660, 81 S.Ct.
365, 5 L.Ed.2d 358 (1961); Knuth v. Erie-Crawford Dairy Coop.
Ass'n, 395 F.2d 420, 423 (3d Cir.), cert. denied,
410 U.S. 913, 93 S.Ct. 966, 35 L.Ed.2d 278 (1973); Electronics
Communications Corp. v. Toshiba America Consumer Prods., Inc.,
129 F.3d 240, 243 (2d Cir. 1997). Where the specific facts and
details are "largely in the hands of the alleged [monopolists],"
see Poller, 368 U.S. at 473, 82 S.Ct. 486, dismissals should be
granted "very sparingly." See Hospital Building Co., 425 U.S.
at 746, 96 S.Ct. 1848.
Facts must be pleaded with reasonable particularity, however,
in order to permit an inference that a Federal antitrust claim is
cognizable. See Associated General Contractors of California,
Inc. v. California State Council of Carpenters, 459 U.S. 519,
526 n. 17, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983) ("Associated
General") (in an antitrust case, "a district court must retain
the power to insist upon some specificity in the pleading before
allowing a potentially massive factual controversy to proceed");
Commonwealth of Pennsylvania ex. rel. Zimmerman v. PepsiCo,
Inc., 836 F.2d 173, 179 (3d Cir. 1988) (quoting Associated
General, 459 U.S. at 526 n. 11, 103 S.Ct. 897) ("`It is not . . .
proper to assume that the [plaintiff] can prove facts that it has
not alleged or that the defendants have violated the antitrust
laws in ways that have not been alleged.'"); see also
Electronics Communications Corp., 129 F.3d at 243; Garshman v.
Universal Resources Holding, Inc., 641 F. Supp. 1359, 1367
(D.N.J.) (quoting Sutliff, Inc. v. Donovan Cos., 727 F.2d 648,
654 (7th Cir. 1984)), aff'd, 824 F.2d 223 (3d Cir. 1987).
"[A] litigant must adumbrate in each counterclaim an
intelligible definition of the elements of its antitrust claim,
even under the liberal notice pleading requirements of the
Federal Rules of Civil Procedure." CCPI Inc. v. American
Premier, Inc., 967 F. Supp. 813, 819 (D.Del. 1997). Factual
specificity in antitrust complaints is required.
`When the requisite elements [of an antitrust claim]
are lacking, the costs of modern federal antitrust
litigation and the increasing caseload of the federal
courts counsel against sending the parties into
discovery when there is no reasonable likelihood that