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Avaya Inc. v. Telecom Labs, Inc.

United States District Court, D. New Jersey

June 30, 2014

AVAYA INC., Plaintiff/Counter-Defendant,
v.
TELECOM LABS, INC., TEAMTLI.COM, CONTINUANT INC., DOUGLAS GRAHAM, SCOTT GRAHAM, and BRUCE SHELBY, Defendants/Counter-claimants.

          ARCHER & GREINER, PC Robert T. Egan, Esq. Lloyd Freeman, Esq. Mark Oberstaedt, Esq. Christine S. Baxter, Esq. Trevor J. Cooney, Esq. Erin R. Carroll, Esq. Julie A. Robinson, Esq. One Centennial Square Haddonfield, N.J. 08033 Counsel for Plaintiff/Counter-Defendant

          Pro Hac Vice: BRYAN CAVE LLP Lawrence Scarborough, Esq. Kathleen S. Callahan, Esq. Jacob A. Kramer, Esq. Daniel T. O'Connor, Esq. J. Michael Cooper, Esq. Daniel I. Prywes, Esq. Desmonne A. Bennett, Esq. 1155 F Street, N.W. Washington, DC 20004 Counsel for Plaintiff/Counter-Defendant

          K&L GATES LLP Anthony P. Larocco, Esq. Charles F. Rysavy, Esq. Kathy D. Helmer, Esq. Dana B. Parker, Esq. Michael E. Waller, Esq. Robert F. Pawlowski, Esq. Mark D. Marino, Esq. Ashley L. Turner, Esq. Benjamin I. Rubinstein, Esq. Stacey A. Hyman, Esq. Scott G. Kobil, Esq. Matthew S. Sachs, Esq. One Newark Center 10th Floor Newark, N.J. 07201 Counsel for Defendants/Counterclaimants

          Pro Hac Vice: K&L GATES LLP Douglas F. Broder, Esq. Anthony P. Badaracco, Esq. Daniel A. Pincus, Esq. Counsel for Defendants/Counterclaimants

          OPINION

          JOSEPH E. IRENAS, Judge

         Currently before the Court in this antitrust matter is the motion for permanent injunction of Counterclaimants Telecom Labs, Inc. and Continuant Inc.[1]

         Following a seven-month trial, the jury found Counterclaim-Defendant Avaya Inc. ("Avaya") liable on two of the eight causes of action presented: (1) attempted monopolization of the post-warranty maintenance market for Avaya-brand private branch exchange telephony systems ("PBXs"); and (2) unlawful tying of software patches for Avaya-brand predictive dialer systems ("PDSs") to (i) the purchase of Avaya-brand post-warranty maintenance or (ii) an agreement not to use TLI/C for such maintenance.

         In light of the verdict, TLI/C moves the Court to issue an extensive injunction canceling the vast majority of the licensing agreements Avaya has with its customers and voiding all contracts the company has with its Business Partners. TLI/C also seeks the implementation of internal and external compliance monitors to prevent future anticompetitive conduct.

         Avaya, conversely, argues TLI/C has failed to demonstrate it is entitled to injunctive relief.

         In light of the strict demands that must be met before equitable relief can be granted, the Court holds that only a narrow injunction is appropriate. Specifically, the Court grants Avaya PBX customers who purchased their machines between 1990 and 2008 the right to access on-demand maintenance commands ("ODMCs") on their own systems, free of charge, for maintenance and administrative tasks. This right extends to those purchasers' agents, such as independent service providers, who access the ODMCs for the customers' benefit.[2]

         TLI/C has failed, however, to demonstrate its entitlement to the additional relief requested.

         After detailing the jury's verdict and TLI/Cs proposed injunction, the Court sets forth the equitable analysis it must utilize and the conflicting case law evaluating the propriety of injunctive relief under § 16 of the Clayton Act, 15 U.S.C. § 26. The Court then applies these traditional equitable principles to TLI/Cs motion.

         I.

         Because this suit has been the subject of numerous opinions, knowledge of the facts, which went largely uncontested during trial, is presumed.[3]

         A.

         The jury found that there was a relevant antitrust aftermarket for post-warranty maintenance of Avaya PBXs, and that Avaya attempted, unsuccessfully, to monopolize this aftermarket. (Dkt. No. 1322 (Jury Verdict) Questions 1-3)

         Further, the jury found that there was no relevant antitrust aftermarket for patches for Avaya PBXs, (Question 4), and that Avaya did not conspire with its Business Partners to unreasonably restrain trade with respect to post-warranty maintenance of Avaya PBXs, (Question 6).

         With regards to PDSs, also referred to as "dialers, " the jury found a relevant antitrust aftermarket for post-warranty maintenance of Avaya-brand PDSs, but Avaya neither attempted to monopolize, nor successfully monopolized, such a market. (Questions 7-9)

         The jury did find that there was a relevant antitrust aftermarket for patches for Avaya-brand PDSs, and that Avaya "tied the availability of patches for Avaya-brand dialers to (i) the purchase of Avaya-brand post-warranty maintenance or (ii) an agreement not to use an ISP for such maintenance." (Question 11)

         Lastly, the jury found that TLI/C was in fact injured by Avaya's conduct, that Avaya's violation of the antitrust laws was a material cause of TLI/Cs injury, and that TLI/C suffered an injury of the type the antitrust laws were intended to prevent. (Question 14)

         In light of Avaya's liability and the injury incurred, the jury awarded $20 million in compensatory damages. (Question 15)

         B.

         Following the verdict and pursuant to Fed.R.Civ.P. 65 and § 16 of the Clayton Act, TLI/C makes the instant motion. The injunction it seeks is extensive.

         Specifically, TLI/C asks the Court to order Avaya to:

• refrain from enforcing "any past or present Contract" that "imposes any restrictions on an Owner's ability to access and execute ODMCs on its PBX or PDS for purposes of performing maintenance or administrative tasks, " or allowing TLI/C to do the same. (Dkt. No. 1328-3 ("Proposed Injunction"), § III.A.)
• cease disseminating all written or oral communications indicating that a customer's accessing ODMCs for maintenance or administrative tasks is prohibited. (Id., § III.B)
• void all "provision[s] of an existing agreement with a Business Partner." (Id., § III.F)
• cease disabling, removing, or deactivating MSPs on the PBX system(s) of any Owner that is a present or Prospective Customer of TLI/C." (Id., § III.I)
• stop issuing FUD letters and using the word "unauthorized" to describe TLI/C. (Id., § III.J., K.)
• affirmatively notify prospective customers of TLI/C of the restrictions, both through First Class mail as well as publication in 16 newspapers and websites. (Id., § IV, A., B.)
• retract all disparaging remarks made by Avaya about TLI/C. (Id., § IV.F.)
• re-enable, re-install, or reactivate any MPSs that Avaya previously disabled, removed, or deactivated. (Id., § IV.E.)

         The proposed injunction further requires Avaya to hire both internal and external compliance monitors to ensure both that the requirements of the injunction are followed and that no future ...


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