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California Association of Realtors, Inc. v. PDFfiller, Inc.

United States District Court, D. Massachusetts

March 2, 2018

CALIFORNIA ASSOCIATION OF REALTORS, INC., Plaintiff and Counterclaim Defendant,
v.
PDFFILLER, INC., VADIM YASINOVSKY, and BORIS SHAKHNOVICH, Defendants. PDFFILLER, INC., Third-Party Plaintiff,
v.
CALIFORNIA ASSOCIATION OF REALTORS, INC., Plaintiff and Counterclaim Defendant, and REAL ESTATE BUSINESS SERVICES, INC. and RE FORMSNET, LLC d/b/a ZIPLOGIX, LLC, Third-Party Defendants.

         REPORT AND RECOMMENDATION RE: COUNTERCLAIM-DEFENDANT CALIFORNIA ASSOCIATION OF REALTORS, INC.'S MOTION TO DISMISS AMENDED COUNTERCLAIMS AND AMENDED THIRD-PARTY COMPLAINT OF PDFFILLER, INC. (DOCKET ENTRY # 121); DEFENDANTS' PARTIAL MOTION FOR JUDGMENT ON THE PLEADINGS (DOCKET ENTRY # 141)

          MARIANNE B. BOWLER, UNITED STATES MAGISTRATE JUDGE

         In this action, plaintiff and counterclaim defendant California Association of Realtors, Inc. (“CAR”) sued defendants PDFfiller, Inc., Vadim Yasinovsky, and Boris Shakhnovich (“defendants”) for copyright infringement under 17 U.S.C. § 501(a), trademark infringement under 15 U.S.C. §§ 1125(a)(1) and 1114(1), violation of the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C § 1201(a), and violation of Massachusetts General Laws chapter 93A (“chapter 93A”), sections two and 11 (“section 11”). CAR alleges that defendants reproduce and sell unauthorized copies of CAR's works. (Docket Entry # 1). The works at issue purportedly bear CAR's trade name and logo, which are registered trademarks belonging to CAR and copyrighted. (Docket Entry # 1).

         Defendant and third-party plaintiff PDFfiller, Inc. (“PDFfiller”) brought an amended third-party complaint (“the third-party complaint”) for antitrust violations under the Sherman Act, 15 U.S.C. § 2, against third-party defendant Real Estate Business Services, Inc. (“REBS”) and third-party defendant RE FormsNet, LLC d/b/a zipLogix™ (“zipLogix”). (Docket Entry # 101). PDFfiller also brought amended counterclaims (“the counterclaims”) for similar antitrust violations under the Sherman Act, 15 U.S.C. § 2, against CAR, REBS, and zipLogix (“the CAR Parties”). (Docket Entry # 100).

         Pending before this court is a motion filed by the CAR Parties to dismiss the counterclaims (Docket Entry # 100) and the third-party complaint (Docket Entry # 101) pursuant to Fed.R.Civ.P. 12(b)(6) (“Rule 12(b)(6)”). (Docket Entry # 121). PDFfiller opposes the motion. (Docket Entry # 123).

         Also pending before this court is a motion for judgment on the pleadings filed by defendants to dismiss with prejudice CAR's chapter 93A claim pursuant to Fed. R. Civ. P 12(c) (“Rule 12(c)”). (Docket Entry # 141). CAR opposes the motion. (Docket Entry # 153). After conducting a hearing on January 10, 2018, this court took the motions (Docket Entry ## 121, 141) under advisement.

         PROCEDURAL HISTORY

         The complaint filed by CAR sets out the following causes of action: (1) copyright infringement under the United States Copyright Act, 17 U.S.C § 501(a); (2) trademark infringement under the Lanham Act, 15 U.S.C § 1125(a)(1); (3) violation of the DMCA, 17 U.S.C § 1201(a); and (4) violation of chapter 93A, sections two and 11. (Docket Entry # 1). In the counterclaims against the CAR Parties and the third-party complaint against REBS and zipLogix, PDFfiller alleges: (1) unlawful tying in violation of the Sherman Act, 15, U.S.C. § 2; (2) monopolization in violation of the Sherman Act, 15 U.S.C. § 2; and (3) attempted monopolization in violation of the Sherman Act, 15 U.S.C. § 2. (Docket Entry ## 100, 101).

         I. The CAR Parties' Rule 12(b)(6) Motion

         As previously noted, the CAR parties move to dismiss PDFfiller's Sherman Act claims for unlawful tying, monopolization, or attempted monopolization. To survive a Rule 12(b)(6) motion to dismiss, a complaint “must contain ‘enough facts to state a claim to relief that is plausible on its face'” even if actual proof of the facts is improbable. Bell Atlantic v. Twombly, 550 U.S. 544, 556, 570 (2007); Miller v. Town of Wenham Massachusetts, 833 F.3d 46, 51 (1st Cir. 2016). The “standard is ‘not akin to a probability' requirement, ” but it requires “‘more than a sheer possibility that a defendant has acted unlawfully.'” Saldivar v. Racine, 818 F.3d 14, 18 (1stCir. 2016); Feliciano-Hernández v. Pereira-Castillo, 663 F.3d 527, 533 (1st Cir. 2011). “[A]ll reasonable inferences” are drawn “in the pleader's favor.” Sanders v. Phoenix Ins. Co., 843 F.3d 37 (1st Cir. 2016). Legal conclusions in the complaint are not part of the Rule 12(b)(6) record. See In re Ariad Pharmacy, Inc. Securities Litigation, 842 F.3d 744, 750 (1st Cir. 2016). Facts are confined to those in the counterclaims and the third-party complaint supplemented by matters of public record and facts susceptible to judicial notice. See Butler v. Balolia, 736 F.3d 609, 611 (1st Cir. 2013) (supplementing facts in complaint “by examining ‘documents incorporated by reference into the complaint, matters of public record, and facts susceptible to judicial notice'”).

         “[W]hile there are no special pleading requirements for antitrust claims . . . invocation of antitrust terms of art does not confer immunity from a motion to dismiss.” Boston Scientific Corp. v. Schneider (Europe) AG, 983 F.Supp. 245, 253 (D. Mass. 1997). That being said, “[i]n antitrust cases, ‘dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly.'” In re Asacol Antitrust Litig., 233 F.Supp.3d 247, 254 (D. Mass. 2017) (citing Meijer, Inc. v. Ranbaxy Inc., Civil Action No. 15-11828-NMG, 2016 WL 4697331, at *8 (D. Mass. Sept. 7, 2016)) (quoting Hosp. Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746 (1976)).

         FACTUAL BACKGROUND

         PDFfiller is a Massachusetts corporation with a principal place of business in Massachusetts. (Docket Entry # 100, p. 23) (Docket Entry # 101, p. 3).[1] CAR is a “California not-for-profit trade association” and its principal place of business is located in California. (Docket Entry # 100, p. 23). REBS is a California corporation also with a principal place of business in California. (Docket Entry # 100, p. 23) (Docket Entry # 101, p. 3). REBS is a “wholly-owned for-profit subsidiary of CAR.” (Docket Entry # 100, p. 23) (Docket Entry # 101, p. 4). [Z]ipLogix is a “Delaware limited liability company” and its principal place of business is located in Michigan. (Docket Entry # 100, p. 23) (Docket Entry # 101, p. 4).

         PDFfiller provides a “paperless transaction management system through the PDFfiller Website” (“PTM”). (Docket Entry # 100, p. 23) (Docket Entry # 101, p. 2). The PTM system “allows users to fill, edit, and modify electronic fillable forms, including EFRE.” (Docket Entry # 100, p. 23) (Docket Entry # 101, p. 2). CAR is a producer of electronic fillable real estate forms, and specifically produces EFREs “for use in California.”[2] (Docket Entry # 100, p. 21) (Docket Entry # 101, p. 2). PDFfiller's PTM Software is designed to edit and manage the same type of electronic fillable real estate form. (Docket Entry # 100, pp. 21-22). CAR devotes “significant resources to ensuring that its California EFRE remain up-to-date and compliant with relevant law.” (Docket Entry # 100, p. 21) (Docket Entry # 101, p. 2). Specifically, CAR expends “considerable” resources “to continually revise, improve, and update the CAR Library to ensure that its works remain current with the myriad of legal and policy changes affecting the California real estate services industry.” (Docket Entry ## 100, pp. 21, 25) (Docket Entry # 101, p. 6).

         CAR members are able to access CAR's EFRE[3] through a library (“the CAR Library”) as a resulting benefit of their CAR membership. (Docket Entry # 100, p. 21) (Docket Entry # 101, p. 2). CAR EFRE can be edited using PTM Software that is comparable to PTM Software provided by PDFfiller. (Docket Entry # 100, p. 21) (Docket Entry # 101, p. 2).

         PDFfiller's PTM Software is available through the PDFfiller website and, as noted above, it “allows users to fill, edit, manage, sign, and send a variety of electronic forms online.” (Docket Entry # 100, p. 21) (Docket Entry # 101, p. 2). CAR, however, requires users to manage and edit CAR EFRE “only with ‘zipForm®, ' which is a real estate PTM Software offered for sale by zipLogix.” (Docket Entry 100, p. 22) (Docket Entry # 101, p. 3). [Z]ipLogix is “majority-owned and managed” by CAR's wholly-owned subsidiary, REBS. (Docket Entry # 100, p. 22) (Docket Entry # 101, p. 2).

         [Z]ipForm products include, but are not limited to, “zipForm Plus, zipForm Standard, and any other zipForm product sold, provided by, or otherwise offered by the CAR Parties that allows users to fill, edit, and sign EFRE.” (Docket Entry # 100, p. 22) (Docket Entry # 101, p. 3). [Z]ipForm is “considerably more expensive than competitors' products, ” including products offered by PDFfiller. (Docket Entry # 100, p. 22) (Docket Entry # 101, p. 3). Additionally, when a non-CAR real estate professional “attempts to purchase a CAR EFRE online via CAR's website, ” he or she must also purchase zipForm. (Docket Entry # 100, pp. 22, 25) (Docket Entry # 101, pp. 3, 5). When non-member users click on the link to purchase zipForm, he or she is led “back to the zipLogix e-commerce website to create a zipLogix account and proceed with purchasing zipForm.” (Docket Entry # 100, p. 25) (Docket Entry # 101, p. 5).

         Real estate attorneys are able to “create a document similar to CAR EFRE.” (Docket Entry # 100, p. 26) (Docket Entry # 101, p. 6). The use of real estate attorneys to create this type of document, however, is “significantly more expensive than EFRE” since EFREs are provided to CAR members for free. (Docket Entry # 100, p. 26) (Docket Entry # 101, p. 6). Further, EFREs maintain several “unique” features compared to other types of real estate forms, such as paper forms. (Docket Entry # 100, p. 26) (Docket Entry # 101, pp. 6-7). Some of these features include: the ability to easily change and edit EFREs; EFREs, combined with “search functionality, ” speed up the “process of reviewing and revising documents”; EFREs' format allows them “to be stored and retrieved without the significant storage fees typically endured in relation to the storage of a large number of paper real estate documents”; they minimize the risk of losing forms; it is easy and inexpensive to transfer EFREs, as they can be transferred by e-mail, which in turn “increases real estate transaction efficiency by simplifying the transmission of real estate forms between real estate professionals and their clients.” (Docket Entry # 100, p. 26) (Docket Entry # 101, p. 7).

         The electronic design of California EFRE “necessitate[es] software that is capable of filling, editing, managing, signing, and sending these types of forms - precisely what PTM Software is made to do.” (Docket Entry # 100, p. 26) (Docket Entry # 101, p. 7). In addition, e-signatures allow “users to sign forms without having to print them out, and in some instances these signatures can be encrypted to remove doubts as to their authenticity.” (Docket Entry # 100, p. 27) (Docket Entry # 101, pp. 7-8). California EFRE also allows for greater security measures, such as “two-factor” authentication, for payments to be linked to the forms and for an increase in overall efficiency for real estate professionals. (Docket Entry # 100, p. 27) (Docket Entry # 101, p. 8).

         While PTM Software is needed to “obtain the full benefit of [an] EFRE, ” various types of PTM Software can be used to manage EFRE. (Docket Entry # 100, p. 27) (Docket Entry # 101, p. 8). Some consumers “frequently seek out non-Car PTM Software to edit CAR EFRE” from PTM Software providers like Dotloop, Instanet Solutions, and PDFfiller. (Docket Entry # 100, p. 27) (Docket Entry # 101, p. 8). Moreover, some California competitors offer EFRE and PTM Software products separately, rather than bundling the two products as CAR does with its EFRE and zipLogix's zipForm.[4] (Docket Entry # 100, p. 27) (Docket Entry # 101, p. 8).

         Moreover, “CAR EFRE has a market share of approximately 90% of all EFRE in California” and CAR describes its products “as ‘the standard forms used in nearly every transaction in California.'” (Docket Entry # 100, p. 27) (Docket Entry # 101, p. 8). CAR EFRE forms and zipForm software are provided to members as a benefit[5] and CAR memberships are obtained “by joining a local REALTOR® affiliate.” (Docket Entry # 100, p. 27) (Docket Entry # 101, p. 8).

         Membership costs vary “by affiliate, but total membership fees are in excess of $600 per year.” (Docket Entry # 100, p. 28) (Docket Entry # 101, p. 8). Non-members must purchase zipForm before they are able to purchase CAR's ERFE and the most basic version of zipForm “costs $849 for an annual license.” (Docket Entry # 100, p. 28) (Docket Entry # 101, p. 8). Therefore, it costs between $600 and $849 per year for non- members to access CAR EFRE. (Docket Entry # 100, p. 28) (Docket Entry # 101, p. 8). In contrast, a number of competitors of CAR, such as PDFfiller, offer PTM Software that is comparable to zipForm for prices as low as $72 per year. Other competitors even offer their most basic PTM Software for free. (Docket Entry # 100, p. 28) (Docket Entry # 101, pp. 8-9). Because CAR only allows users to manage CAR EFRE with zipForm PTM Software, however, users cannot use these cheaper alternatives provided by competitors. (Docket Entry # 100, p. 22) (Docket Entry # 101, p. 9).

         REBS[6] “is licensed to sell CAR EFRE to non-CAR members for the benefit of CAR.” (Docket Entry # 100, p. 28) (Docket Entry # 101). In general, however, CAR “does not license the use of its EFRE in California to third parties.” (Docket Entry # 100, p. 28) (Docket Entry # 101, p. 9). Thus, consumers must “either join a REALTOR® affiliate or purchase a zipForm® subscription” if they wish to buy a CAR EFRE. (Docket Entry # 100, p. 28) (Docket Entry # 101, p. 9). Either option of joining a REALTOR® affiliate or purchasing a zipForm® subscription is “significantly more expensive than CAR's competitors in the California EFRE market, and both options are conditioned on the purchase and use of zipForm®.” (Docket Entry # 100, p. 28) (Docket Entry # 101, p. 9). A “considerable number of consumers” have expressed frustration because they are unable to use a PTM Software other than zipForm to edit CAR EFRE. (Docket Entry 100, p. 31) (Docket Entry # 101, p. 11). Additionally, some consumers of zipForm complain that the “software has compatibility issues with mobile devices and occasionally requires forms to be printed in order to be completed.” (Docket Entry # 100, p. 31) (Docket Entry # 101, 11).

         Finally, on several occasions, CAR engaged in legal disputes over CAR's copyright policy.[7] (Docket Entry # 100, p. 29) (Docket Entry # 101, p. 10). CAR's copyright policy prohibits the “printing [of] blank CAR EFRE from zipForm®, or placing CAR EFRE in any PTM Software other than zipForm®.” (Docket Entry # 100, p. 29) (Docket Entry # 101, p. 10). “[O]n information and belief, CAR is encouraging or asking its sister state realtor associations to sue PDFfiller.” (Docket Entry 100, p. 30) (Docket Entry # 101, p. 11). The Texas Association of Realtors, Inc. (“TAR”) “sent a cease-and-desist letter to and filed suit against PDFfiller, making essentially the same allegations as CAR in the present litigation.” (Docket Entry # 100, p. 30) (Docket Entry # 101, p. 11). Similar to CAR, TAR owns an interest in zipForm. (Docket Entry # 100, p. 30) (Docket Entry # 101, p. 11).

         DISCUSSION

         A. Antitrust Claims: Unlawful Tying; Monopolization; and Attempted Monopolization

         The Sherman Act was created “to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4 (1958). To maintain the fundamental liberties of competition, the Sherman Act “prohibits ‘[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce among the several States.'” Id.; 15 U.S.C. § 1. “Although this prohibition is literally all-encompassing, the courts have construed it as precluding only those contracts or combinations which ‘unreasonably' restrain competition.” Northern Pacific Railway Co., 356 U.S. at 5. Section two of the Sherman Act “holds liable ‘every person who shall monopolize, or attempt to monopolize, or combine or conspire to monopolize . . . any part of the trade or commerce among the several States.'” Boston Scientific Corp., 983 F.Supp. at 268; 15 U.S.C. § 2.

         The CAR Parties first contend that PDFfiller has not sufficiently defined the relevant product markets to satisfy any of PDFfiller's antitrust claims and, as such, all of the antitrust claims should be dismissed. Specifically, the CAR Parties suggest that California EFRE and PTM Software for California are incorrect tying and tied product markets, respectively. (Docket Entry # 122) (Docket Entry # 127). The CAR Parties further maintain that even if PDFfiller properly defined the relevant product markets, PDFfiller's unlawful tying claim[8] is still subject to dismissal because PDFfiller incorrectly considered California EFRE and California PTM Software as two separate products. (Docket Entry # 122, p. 15) (Docket Entry # 127, p. 5). Additionally, the CAR Parties argue that PDFfiller fails to plead sufficient facts to demonstrate the CAR Parties' market power in the alleged tying market, and also that PDFfiller's monopoly and attempted monopoly claims fail because PDFfiller has not pled wrongful or anticompetitive conduct by the CAR Parties, nor have they pled any antitrust injury. (Docket Entry # 122) (Docket Entry # 127).

         Conversely, PDFfiller maintains that at this stage in the proceedings, it pled a factually detailed, legally sound basis for its allegations of the relevant tying and tied product markets. (Docket Entry # 123, p. 6). Additionally, PDFfiller argues that it not only pled sufficient facts to satisfy an unlawful tying claim using either a per se or rule of reason standard, but it also pled sufficient facts to show that the tying and tied products are separate products as well as sufficient facts to show the CAR Parties' market power (Docket Entry # 123). Finally, PDFfiller argues that its allegations of the CAR Parties' sham litigation demonstrate the CAR Parties' wrongful or anticompetitive conduct and this same conduct resulted in PDFfiller's antitrust injury. (Docket Entry ## 123, pp. 20-21).

         1. Relevant Markets for Antitrust Claims

         Turning to the relevant market argument, the CAR Parties maintain that the first criterion for all of PDFfiller's antitrust claims is to define the relevant markets. As set out in the counterclaims and the third-party complaint, PDFfiller defines the relevant tying market as California EFRE and the relevant tied product market as PTM Software for California EFRE. (Docket Entry # 100, pp. 25-26) (Docket Entry # 101, p. 6). The CAR Parties argue that naming California EFRE as the tying product market “excludes obvious substitute products” that “serve the same purpose as California EFRE.” (Docket Entry # 122) (Docket Entry # 127). Additionally, the CAR Parties argue that naming PTM Software for California EFRE as the tied product market excludes possible substitutes and that PDFfiller provides no support for “why the relevant market should be PTM Software for California EFRE rather than PTM Software in general.” (Docket Entry # 122, p. 18) (Docket Entry # 127, pp. 4-5). In response, PDFfiller maintains that the relevant tying and tied markets are properly defined, noting that these markets do not exclude reasonable substitute products. (Docket Entry # 123, p. 10).

         All parties agree that the standard used to determine a relevant product market is a “reasonable interchangeability” standard; specifically, the determination of a relevant product market depends on “an analysis of the interchangeability of use” or rather, that a relevant product market “includes all goods that are reasonably interchangeable with each other.” (Docket Entry # 122, p. 16) (Docket Entry # 123, p. 8). Each party, however, defines reasonable interchangeability differently. The CAR Parties suggest that reasonable interchangeability is determined by an equivalence test and that a relevant product market includes all products that serve the same purpose as each other. (Docket Entry # 122, pp. 16-17). PDFfiller suggests that reasonable interchangeability is determined instead by “the cross-elasticity of demand for the product in question - the extent to which purchasers will accept substitute products in instances of price fluctuation and other changes.” (Docket Entry # 123).

         For antitrust purposes, the “definition of the relevant market is ordinarily a question of fact.” Flovac, Inc. v. Airvac, Inc., 817 F.3d 849, 853 (1st Cir. 2016). There are two components that comprise the relevant market, the first being the relevant geographic market, and the second being the relevant product market. Id. “In general, the relevant geographic market consists of the geographic area in which the defendant faces competition and to which consumers can practically turn for alternative sources of the product.” Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196 (1st Cir. 1996) (emphasis added with internal citations omitted). The geographic market is relatively self-evident, whereas the product market demands a more complex analysis. Flovac, 817 F.3d at 853.

         A relevant product market is “made up of ‘commodities reasonably interchangeable by consumers for the same purposes.'” In re Nexium (Esomeprazole) Antitrust Litig., 968 F.Supp.2d 367, 387 (D. Mass. 2013) (quoting United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 395 (1956)). For a relevant product market to survive a Rule 12(b)(6) motion to dismiss, the CAR Parties aptly note that, “[A]n alleged product must bear a rational relation to the methodology courts prescribe to define a market for antitrust purposes-analysis of the interchangeability of use or the cross-elasticity of demand, and it must be plausible.” Chapman v. N.Y. State Div. for Youth, 546 F.3d 230, 237-38 (2d Cir. 2008) (emphasis added). As also correctly noted by PDFfiller:

The reasonable interchangeability of a set of products is not dependent on the similarity of their forms or functions; instead, “Such limits are drawn according to the cross-elasticity of demand for the product in question-the extent to such purchasers will accept substitute products in instances of price fluctuation and other changes.”

In re Nexium (Esomeprazole) Antitrust Litig., 968 F.Supp.2d at 387-88 (quoting George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 508 F.2d 547, 552 (1st Cir. 1974)). Thus, as explained by the Third Circuit in Queen City Pizza:

[W]here the plaintiff fails to define its proposed relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a proposed relevant market that clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in plaintiff's favor, the relevant market is legally insufficient and a motion to dismiss may be granted.

Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir. 1997).

         Although reasonable interchangeability need not focus solely on similar form and function of possible substitute products, George R. Whitten, 508 F.2d at 552, the determination of the interchangeability of products is a fact-intensive process. See Eastman Kodak, 504 U.S. at 482 (“in most cases, proper market definition can be determined only after a factual inquiry into the commercial realities faced by consumers”). Here, at this stage in the pleadings, however, “courts hesitate to grant motions to dismiss for failure to plead a relevant product market” due to the “deeply fact-intensive” nature of the inquiry. Todd v. Exxon Corp., 275 F.3d 191, 199-200 (2d Cir. 2001). The Second Circuit in Todd further explains that:

Cases in which dismissal on the pleadings is appropriate frequently involve either (1) failed attempts to limit a product market to a single brand, franchise, institution, or comparable entity that competes with potential substitutes or (2) failure even to attempt a plausible explanation as to why a market should be limited in a particular way.

Todd, 275 F.3d. at 200. Thus, Todd instructs that, “it is sufficient that plaintiff has alleged specific facts that support a narrow product market in a way that is plausible and bears a rational relation to the methodology courts prescribe to define a market for antitrust purposes.” Id. at 203.

         A determination of reasonable interchangeability using an equivalence test is based on “whether the substituted element in the accused device performs substantially the same function, in substantially the same way, to produce substantially the same result as the claimed element.” Boston Scientific Corp., 983 F.Supp. at 261 (internal citations omitted). The Federal Circuit notes, however, that this type of test “goes too far . . . to describe the function-way-result test as ‘the' test for equivalency” and that, “[a]s technology becomes more sophisticated, and the innovative process more complex, the function-way-result test may not invariably suffice to show the substantiality of the differences.” Id. at 261 (internal citations omitted); see, e.g., In re Nexium (Esomeprazole) Antitrust Litig., 968 F.Supp. at 367, 388 (“Although it may be beyond this Court's competence to confirm the accuracy of the Direct Purchasers' characterization of the reasonable interchangeability of brand Nexium with other drugs, such a factually intensive determination is better left for resolution by a jury.”).

         Turning to the task, in the counterclaims and the third-party complaint, PDFfiller suggests that the relevant geographic market is EFRE in California. (Docket Entry # 100, p. 26) (Docket Entry # 101, p. 6). The pleadings specifically note that “real estate laws vary significantly by state and a consumer of EFRE is unlikely to have sufficient knowledge of the difference between different states' laws to efficiently adapt an out-of-state EFRE so that it is suitable for use in California.” (Docket Entry # 100, p. 26) (Docket Entry # 101, p. 6). The aforementioned allegations render it plausible that EFRE, specifically in California, is a plausible geographic market for the tying product. It is reasonable to define California as the relevant geographic market particularly because, as PDFfiller alleges, real estate laws are unique to each state and EFRE deals explicitly with real estate laws. Moreover, based on the state-by-state peculiarity of real estate laws, the pleadings allow for a reasonable inference that the geographic area in which the CAR Parties face competition is California, as it is the area which consumers can turn for alternative sources of PTM Software to edit EFRE for California. Construing the facts in PDFfiller's favor, the alleged relevant geographic market in the pleadings is plausible.

         Moving to the relevant product market, under either an equivalence analysis or a cross-elasticity demand analysis, the antitrust claims survive the Rule 12(b)(6) challenge. PDFfiller provides a reasonable basis not to broaden the product market from California electronic real estate forms to include nonelectronic forms, namely paper forms created by attorneys or standard paper forms provided by a real estate professional. Thus, as stated in the counterclaims and the third-party complaint: real estate professionals are not reasonable substitutes for EFRE because it takes “considerable amounts of time and money . . . to continually revise, improve and update the CAR Library to ensure that its works remain current with the myriad of legal and policy changes affecting the California real estate industry”; real estate attorneys are also not reasonable substitutes because it would be significantly more expensive to use a real estate attorney “to create a document similar to CAR EFRE, ” and also because “attorneys themselves are consumers of EFRE”; and paper is not a reasonable substitute because, unlike paper forms, electronic forms can be changed easily, increase the efficiency of reviewing and revising documents, do not incur storage fees, and provide a low cost of transferring electronic forms. (Docket Entry # 100, pp. 25-26) (Docket Entry # 101, p. 7).

         Here, PDFfiller pled adequate facts to demonstrate that under either interpretation of reasonable interchangeability, it is plausible that California EFRE is a relevant product market. Specifically, PDFfiller's allegations of “product performance differences” with non-electronic California real estate forms, “lack of interchangeability with other [non-electronic California real estate] products, and significant price differences between California EFRE and those other products” are sufficient to state a plausible product market consisting of electronic real estate forms in California. (Docket Entry # 123, p. 9). Whether this market definition adheres at trial or at summary judgment is not before this court. Additionally, PDFfiller's allegations render it plausible that the products the CAR Parties suggest as reasonable substitute products for California EFRE because they “serve the same purpose as California EFRE - preparation of real estate contracts - and are put to the same use” are not reasonable substitutes because PDFfiller provides ample support for its claim as to why these alternatives (attorneys, paper forms, and real estate professionals) either do not serve the same purpose or are not put to the same use. In particular, PDFfiller's allegations regarding the increased expense and time-consuming nature of the non-electronic products render it plausible that California EFRE provides an appropriate tying product market, at least for purposes of a Rule 12(b)(6) challenge.

         In short, the relevant product market is a deeply fact-intensive process and it is necessary that the pleader adequately assert facts to demonstrate that the stated relevant market is plausible. Here, the counterclaims and the third-party complaint are sufficient to render California electronic real estate forms a plausible market. The antitrust claims therefore survive the 12(b)(6) challenge to the alleged relevant market because the pleadings set out a plausible relevant product market.

         2. Per Se Unlawful Tying

         The CAR Parties next maintain that PDFfiller's unlawful tying claim is subject to dismissal because PDFfiller fails to demonstrate the existence of separate product demand for the tying and the tied products. (Docket Entry # 122, p. 18) (Docket Entry # 127, p. 5). The CAR Parties contend that there is no separate demand for the tied product. More specifically, they submit “there is no plausible basis to believe a consumer would purchase EFRE without also purchasing or obtaining the necessary software, or buy the software but not the EFRE.” (Docket Entry # 122, p. 19) (Docket Entry # 127, p. 5). The CAR Parties argue that, because California EFRE cannot be used without some type of PTM Software, they cannot be considered separate products. The CAR Parties explain that California EFRE ...


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