You are on page 1of 21

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page1 of 21

1
2
3
4
5
6
7
8
9
10
11
12

BINGHAM MCCUTCHEN LLP


Brian C. Rocca (SBN 221576)
brian.rocca@bingham.com
Sujal J. Shah (SBN 215230)
Susan J. Welch (SBN 232620)
Three Embarcadero Center
San Francisco, CA 94111
Telephone: 415.393.2000
Facsimile: 415.393.2286

WILLIAMS & CONNOLLY LLP


John E. Schmidtlein (SBN 163520)
jschmidtlein@wc.com
Jonathan B. Pitt (pro hac vice)
James H. Weingarten (pro hac vice)
Benjamin M. Stoll (pro hac vice)
725 12th St NW
Washington DC 20005
Telephone: 202.434.5000
Facsimile: 202.434.5029

BINGHAM MCCUTCHEN LLP


Hill B. Wellford (pro hac vice )
hill.wellford@bingham.com
Jon R. Roellke (pro hac vice)
Gregory F. Wells (SBN 212419)
2020 K Street NW
Washington, DC 20006
Telephone: 202.373.6000
Facsimile: 202.373.6001
Attorneys for Defendant
Google Inc.

13

UNITED STATES DISTRICT COURT

14

NORTHERN DISTRICT OF CALIFORNIA

15

SAN JOSE DIVISION

16
17
18

GARY FEITELSON, a Kentucky resident, and


DANIEL MCKEE, an Iowa resident, on behalf
of themselves and all others similarly situated,

19
Plaintiffs,

20
21

DEFENDANT GOOGLE INC.S


REPLY ISO MOTION TO DISMISS
PLAINTIFFS FIRST AMENDED
CLASS ACTION COMPLAINT

v.

22
23

No. 5:14-cv-02007 BLF

GOOGLE INC., a Delaware corporation,

24

Defendant.

Date:
Time.
Judge:
Dept.

November 19, 2014


9:00 a.m.
Hon. Beth Labson Freeman
Courtroom 3, 5th Floor

25
26
27
28
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT
A/76503231.5

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page2 of 21


TABLE OF CONTENTS

1
2

Page
I.

INTRODUCTION ............................................................................................................. 1

II.

PLAINTIFFS FAIL TO ALLEGE A SHERMAN ACT 1 CLAIM BECAUSE


THE MADAS DO NOT FORECLOSE COMPETITION ................................................ 3

A.

Plaintiffs Do Not Allege Actual Or De Facto Exclusivity .................................... 4

B.

Plaintiffs Fail To Allege Substantial Foreclosure Because They Concede


The Existence Of Alternative Means Of Distribution............................................ 7

C.

Plaintiffs Generic Sherman Act 1 Claim Is Based On The Same


Allegations And Fails For The Same Reasons....................................................... 8

7
8
9
10

III.

PLAINTIFFS FAIL TO ALLEGE A SHERMAN ACT 2 CLAIM BECAUSE


THE MADAS ARE NOT EXCLUSIONARY .................................................................. 9

IV.

PLAINTIFFS FAIL TO ALLEGE A CLAYTON ACT 3 CLAIM BECAUSE


THE ACT DOES NOT APPLY TO LICENSES AND BECAUSE THE MADAS
DO NOT FORECLOSE COMPETITION ....................................................................... 10

V.

PLAINTIFFS DERIVATIVE STATE LAW CLAIMS ALSO FAIL ............................ 11

VI.

PLAINTIFFS LACK ANTITRUST STANDING TO BRING THEIR CLAIMS .......... 12

11
12
13
14

A.

Plaintiffs Lack Standing To Bring A Damages Claim For Alleged Injuries


In The Handheld Device Market .......................................................................... 12

B.

Plaintiffs Lack Standing To Bring An Injunctive Relief Claim For Alleged


Injuries In The Alleged Search Markets .............................................................. 14

15
16
17

VII.

CONCLUSION ................................................................................................................ 15

18
19
20
21
22
23
24
25
26
27
28
i
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT
A/76503231.5

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page3 of 21

TABLE OF AUTHORITIES

2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Page(s)
Federal Cases
Abbyy USA Software House, Inc. v. Nuance Communs., Inc.,
No. C 08-01035, 2008 U.S. Dist. LEXIS 90308 (N.D. Cal. Nov. 6, 2008) .............................. 8
Allied Orthopedic Appliances v. Tyco Health Care Grp. LP,
592 F.3d 991 (9th Cir. 2010)..................................................................................................... 4
Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal.,
190 F.3d 1051 (9th Cir. 1999)................................................................................................. 12
Ashcroft v. Iqbal,
556 U.S. 662 (2009) ...................................................................................................... 5, 12, 15
Axiom Advisors & Consultants, Inc. v. School Innovations & Advocacy, Inc.,
No. 2:05-CV-02395-FCD-PAN, 2006 U.S. Dist. LEXIS 11404 (E.D. Cal.
Mar. 20, 2006) ................................................................................................................... 14, 15
Blue Shield v. McCready,
457 U.S. 465 (1982) .......................................................................................................... 12, 13
Bus. Elecs. Corp. v. Sharp Elecs. Corp.,
485 U.S. 717 (1988) .................................................................................................................. 9
Cargill, Inc. v. Monfort of Colo., Inc.,
479 U.S. 104 (1986) ................................................................................................................ 14
Church & Dwight Co., Inc. v. Mayer Labs., Inc.,
868 F. Supp. 2d 876 (N.D. Cal. 2012) .......................................................................... 4, 6, 8, 9
Church & Dwight Co., Inc. v. Mayer Labs., Inc.,
No. C-10-4429, 2011 WL 1225912 (N.D. Cal. Apr. 1, 2011) .............................................. 7, 8
Digidyne Corp. v. Data Gen. Corp.,
734 F.2d 1336 (9th Cir. 1984)................................................................................................. 10
Exhibitors Serv., Inc. v. Am. Multi-Cinema, Inc.,
788 F.2d 574 (9th Cir. 1986)................................................................................................... 13
Free Freehand Corp. v. Adobe Systems,
852 F. Supp. 2d 1171 (N.D. Cal. 2012). ................................................................................. 15
Glen Holly Entmt, Inc. v. Tektronix Inc.,
352 F.3d 367 (9th Cir. 2003)................................................................................................... 14

28
ii
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT
A/76503231.5

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page4 of 21

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Jefferson Parish Hosp. Dist. No. 2 v. Hyde,


466 U.S. 2 (1984) ................................................................................................................ 3, 11
Kloth v. Microsoft Corp.,
444 F.3d 312 (4th Cir. 2006)................................................................................................... 15
LePages, Inc. v. 3M,
324 F.3d 141 (3d Cir. 2003) ................................................................................................ 9, 10
Lorenzo v. Qualcomm,
603 F. Supp. 2d 1291 (S.D. Cal. 2009) ................................................................................... 14
MedioStream, Inc. v. Microsoft Corp.,
869 F. Supp. 2d 1095 (N.D. Cal. 2012) .................................................................................... 8
Omega Envtl., Inc. v. Gilbarco, Inc.,
127 F.3d 1157 (9th Cir. 1997)................................................................................................... 7
PNY Techs., Inc. v. SanDisk Corp.,
No. 11cv04689, 2014 WL 2987322 (N.D. Cal. July 2, 2014) .................................... 8, 9, 11
Pro Search Plus, LLC v. VFM Leomardo, Inc.,
No. 122102JLS, 2013 WL 6229141 (C.D. Cal. Dec. 2, 2013) ............................................. 6
Pro Search Plus, LLC v. VFM Leonardo, Inc.,
No. SACV 12-2102, 2013 WL 3936394 (C.D. Cal. July 30, 2013) ......................................... 6
R.J. Reynolds Tobacco Co. v. Phillip Morris,
199 F. Supp. 2d 362 (M.D.N.C. 2002)...................................................................................... 9
S. Cal. Inst. of Law v. TCS Educ. Sys.,
No. CV 10-8026, 2011 U.S. Dist. LEXIS 39827 (C.D. Cal. Apr. 5, 2011) ............................ 15
Sicor Ltd. v. Cetus Corp.,
51 F.3d 848 (9th Cir. Cal. 1995) ............................................................................................... 9
Sidibe v. Sutter Health,
No. C 12-04854, 2013 U.S. Dist. LEXIS 78521 (N.D. Cal. June 3, 2013) .............................. 4
Southeast Mo. Hosp. v. C.R. Bard, Inc.,
642 F.3d 608 (8th Cir. 2011)..................................................................................................... 7
TeleAtlas N.V. v. Navteq Corp.,
397 F. Supp. 2d 1184 (N.D. Cal. 2005) .................................................................................. 10
TeleAtlas N.V. v. NAVTEQ Corp.,
No. C-05-01673, 2008 WL 4911230 (N.D. Cal. 2008) .......................................................... 10
Texas v. Cobb,
532 U.S. 162 (2001) ................................................................................................................ 11
iii

CASE NO. 5:14-CV-02007 BLF

DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT
A/76503231.5

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page5 of 21

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Transamerica Computer Co. v. IBM,


698 F.2d 1377 (9th Cir. 1983)................................................................................................... 9
United States v. Dentsply,
399 F.3d 181 (3d Cir. 2005) ...................................................................................................... 9
United States v. Harrison,
296 F.3d 994 (10th Cir. 2002)................................................................................................. 11
United States v. Microsoft,
253 F.3d 34, 64 (D.C. Cir. 2001) .............................................................................................. 5
Vinci v. Waste Mgmt., Inc.,
80 F.3d 1372 (9th Cir. 1996)................................................................................................... 13
In re WellPoint, Inc. Out-of Network UCR Rates Litig.,
903 F.Supp.2d 880 (C.D. Cal. 2012)....................................................................................... 13
In re WellPoint, Inc. Out-of-Network UCR Rates Litig.,
865 F. Supp. 2d 1002 (C.D. Cal. 2011) .................................................................................. 13
Western Parcel Express v. UPS of Am.,
190 F.3d 974 (9th Cir. 1999)................................................................................................... 10
William O. Gilley Enters. v. Atl. Richfield Co.,
588 F.3d 659 (9th Cir. 2009)................................................................................................... 13
ZF Meritor, LLC v. Eaton Corp.,
696 F.3d 254 (3d Cir. 2012) .................................................................................................. 5, 6
California Cases
Belton v. Comcast Cable Holdings, LLC,
151 Cal. App. 4th 1224 (2007) ............................................................................................... 11

21

Chavez v. Whirlpool Corp.,


93 Cal. App. 4th 363 (2001) ................................................................................................... 11

22

Federal Statutes

23

15 U.S.C. 14 ............................................................................................................................... 10

24
25
26
27
28
iv

CASE NO. 5:14-CV-02007 BLF

DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT
A/76503231.5

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page6 of 21

1
2

I.

INTRODUCTION
Plaintiffs opposition to Googles motion to dismiss attempts to help clarify their First

Amended Complaint (FAC), but only underscores why it fails. Having (rightly) jettisoned any

tying claim, plaintiffs shift their focus to a single, untenable theorythat Google engages in

exclusive dealing by licensing, at no charge, its popular apps, such as YouTube and Google Play,

in exchange for an OEMs agreement to set Google Search as a default on the device. This

arrangement, plaintiffs argue, is necessarily exclusive because there can be only one default

search engine on a device at a given time, and, thus, if Google Search is set as the default on a

device, then other competitors, such as Bing, cannot be. Plaintiffs novel theory of exclusivity,

10

however, ignores both the very terms of the Mobile Application Distribution Agreements

11

(MADAs) they attach to the FAC and basic antitrust principles.

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

Plaintiffs cannot deny that the MADAs attached to the FAC reveal the following
fundamental flaws in their exclusive dealing allegation:
Google offers OEMs a suite of popular apps for free, and, in exchange, the OEM sets
Google Search as the default search engine. See FAC, Exs. A, B 2 (Google
Applications) and 3.4 (Placement Requirements).
This arms-length arrangement does not apply to all devices released by an OEM, or even
to any minimum percentage of them. Id., Ex. A 2.4 (For the sake of clarity, [OEM]
has no obligation to install the Google Applications on all of its devices.) (emphasis
added). Thus, there is simply no restrictionnone whatsoeveron an OEMs ability to
deploy different app and search engine configurations on different devices.
An OEM can therefore enter into a MADA, apply its terms to any subset of its devices,
and, as to other Android devices, set Bing as the default search engine, or release devices
that run on non-Android platforms (e.g., a Windows-based phone).
For any device on which an OEM chooses to preload the suite of Google apps, the
MADA does not prevent the OEM from also preloading and prominently placing
competitive search apps on that same device. To the contrary, the MADA affirmatively
requires OEMs to maintain an open environment on the device, allowing consumers to
use any preloaded apps or download other apps. See, e.g., FAC, Ex. A 1.5, 2.6
(OEMs required to maintain an open environment on devices by making all Android
software, content and digital materialsincluding, for example, Android-compatible
search engines, such as Bingavailable and open and cannot take action to limit or
restrict the Android platform); Ex. B 1.4, 2.6 (same).

28
1
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page7 of 21

Hoping to deflect the Courts attention from these key contractual provisions, plaintiffs

repeatedly reference the decades-old Microsoft litigation. But this case is not Microsoft.

Plaintiffs ignore critical distinguishing facts, including that Microsoft prohibited OEMs from

incorporating rival web browsers on new computers at all. Here, plaintiffs concede that rival

search engines have a multitude of ways to reach consumers, including via web browsers

(www.bing.com),1 preloading their search apps on devices, encouraging consumers to take

advantage of near-instantaneous app downloads after purchase, or negotiating their own default

search arrangements. FAC 53, 56-57. And, contrary to Microsoft-based personal computers

in the 1990s, once an Android device is in the hands of a consumer, it can be easily customized,

10

with apps downloaded, and default settings switched in the browser, in a matter of seconds.
Given the plain language of the MADAs and other fatal concessions in the FAC,

11
12

plaintiffs claims require dismissal, for the following reasons:


First, plaintiffs Sherman Act 1 claim fails because (a) the plain language of the

13
14

MADAs demonstrates they are not actual or de facto exclusive agreements and (b) multiple

15

alternative means of distribution admittedly exist to reach consumers, which means there can be

16

no substantial foreclosure, as a matter of law.

17

Second, plaintiffs Sherman Act 2 claims fail because they are based on the same

18

conduct as their Section 1 claimsconduct that is not anticompetitive or exclusionary because it

19

does not substantially foreclose competition.


Third, plaintiffs Clayton Act claim fails because that act does not apply to licenses and,

20
21

regardless, plaintiffs have not adequately alleged an exclusive dealing claim.


Fourth, plaintiffs tagalong state antitrust claims, based on the same conduct, should

22
23

meet the same fate as their federal counterparts.

24

Finally, plaintiffs also have no answer to the other fundamental flaw that plagues each of

25

their claimsthe absence of any well-pled allegations that establish antitrust standing. Plaintiffs

26

do not dispute that in order to suffer antitrust injury, their alleged injury must occur in the same

27
28

Indeed, Googles own browser, Chrome, has a built-in menu of search engine options,
including Bing, any of which can be selected by the user as the default.
2
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page8 of 21

market where the alleged anticompetitive conduct occurred. Here, plaintiffs, a putative class of

Android device purchasers, allege they paid too much for their devicesan injury presumably

occurring in a market for handheld devices (although the FAC never actually defines any such

market). Yet they allege anticompetitive conduct occurring in a different marketthe market for

general internet search or, alternatively, handheld searchwhere Googles services are offered

free of charge. Plaintiffs footnoted and conclusory explanation that their injuries are

inextricably intertwined with Googles conduct in the alleged search market misapplies that

narrow exception to the black letter rule of antitrust standing. Based on plaintiffs own

allegations, the connection between the alleged conduct in one market and the alleged injury in a

10

separate market is, at best, remote and speculative because whether a plaintiff is injured depends

11

on the actions of multiple third parties and the injury must travel through multiple levels in the

12

chain of distribution. Their other argumentthat Googles conduct limits consumer choice and

13

harms innovationis conclusory, inconsistent both with the terms of the MADAs, which, on

14

their face, do not limit choice, and also plaintiffs admissions that Google Search is the

15

Internets most powerful tool in a large and fast growing American market for mobile and

16

tablet general Internet search. FAC 4, 5. Plaintiffs failure to plead antitrust injury is

17

therefore an independent ground for dismissal of each claim in the FAC.

18

II.

19

PLAINTIFFS FAIL TO ALLEGE A SHERMAN ACT 1 CLAIM BECAUSE THE


MADAS DO NOT FORECLOSE COMPETITION

20

Plaintiffs Sherman Act 1 claim is based on their allegation that the MADAs somehow

21

foreclose competition because they supposedly force OEMs into setting Google as the default

22

search engine on a device. Plaintiffs try to shoehorn this allegation into an exclusive or de facto

23

exclusive dealing theory, and, failing that, an unspecified generic restraint of trade claim. Each

24

of these theories, however, requires well-pled allegations demonstrating that Google foreclosed

25

competition in a substantial portion of the alleged market. E.g., Jefferson Parish Hosp. Dist. No.

26

2 v. Hyde, 466 U.S. 2, 45-46 (1984) (Exclusive dealing is an unreasonable restraint on trade

27

only when a significant fraction of buyers or sellers are frozen out of a market by the exclusive

28

deal.). Plaintiffs cannot clear this hurdle.


3
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page9 of 21

The prevailing rule in districts and circuits across the country is that where exclusive or

semi-exclusive contracts are short in duration, easily terminable, incentive-based, and leave open

alternative channels to competitors, they are not exclusionary. Church & Dwight Co., Inc. v.

Mayer Labs., Inc. (C&D II), 868 F. Supp. 2d 876, 903 (N.D. Cal. 2012). The MADAs fall into

this group of agreements that are not exclusionary as a matter of law. First, by their very terms,

the MADAs are not exclusive in any respect and plaintiffs have failed to adequately allege that

they are coercive so as to make them de facto exclusive agreements. Second, plaintiffs concede

that search competitors can access consumers through alternative means of distribution, which

alone defeats any claim of foreclosure. Finally, plaintiffs generic Section 1 claim suffers from

10

the same defects as their exclusive dealing claim and should be dismissed for the same reasons.

11

A.

12

Exclusive dealing involves an agreement between a vendor and a buyer that prevents the

Plaintiffs Do Not Allege Actual Or De Facto Exclusivity

13

buyer from purchasing a given good from any other vendor. Allied Orthopedic Appliances v.

14

Tyco Health Care Grp. LP, 592 F.3d 991, 996 (9th Cir. 2010) (emphasis added); see also Sidibe

15

v. Sutter Health, No. C 12-04854, 2013 U.S. Dist. LEXIS 78521, at *29 (N.D. Cal. June 3, 2013)

16

(An exclusive dealing arrangement is when a seller agrees with a buyer to sell its products or

17

services only to that buyer, or the buyer agrees to buy only from the seller). As set forth above,

18

pp. 1-2, the MADAs do not prevent OEMs from contracting with rival search engines, or

19

consumers from readily accessing market alternatives. Recognizing these facts, plaintiffs resort

20

to misdirection. They argue that a default search engine is inherently exclusive because there

21

is only one default, at a given time, on a device. Opp. at 5, 12, 14. But the proper question to

22

ask when assessing if an agreement is exclusive is whether an OEM is exclusively dealing with

23

Google, not whether a particular device is exclusive. Plaintiffs do notand cannotdispute that,

24

even after signing a MADA, an OEM is not required to preload Googles suite of apps on any

25

device. An OEM remains free to offer devices without Google apps preloaded, such as a device

26

with Microsoft apps preloaded and Bing set as the default. Moreover, even on devices with

27

Google Search set as the default, OEMs can preload rival search apps and place them

28
4
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page10 of 21

prominently on those devices as an alternative to Google Search. See FAC 44; Exs. A, B

1.4, 1.5, 2.6.2

Even plaintiffs artificial construct of default exclusivity collapses since Android

devices are expressly open under the MADAs and consumers remain free to change default

settings in the browser. See FAC, Exs. A, B 1.4, 1.5, 2.6. Plaintiffs do not deny this

important pointin fact, they concede it. FAC 57 (acknowledging competitors can try to

convince consumers to re-set default search engines, but claiming that mostnot allusers

will maintain the default settings). Nor do plaintiffs allege that Google asks OEMs to technically

block consumers from adjusting default settings. Plaintiffs only suggest, in conclusory fashion,

10

that they, personally, do not know if there is a way to adjust default search engine settings. FAC,

11

15, 16. Plaintiffs do not allege, however, that they ever desired to change their default search

12

engine, were unable to find information on how to do so, or attempted to do so and failed. Id. In

13

the absence of such well-pled allegations, plaintiffs are left with the sort of self-serving,

14

conclusory allegations that are devoid of underlying factual content and insufficient to state a

15

claim. See Ashcroft v. Iqbal, 556 U.S. 662, 677-79 (2009).

16

Plaintiffs de facto exclusive dealing theory fares no better. Plaintiffs rely principally on

17

an out-of-circuit case, ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012), for the

18

notion that courts can look past the terms of the contract to ascertain the relationship between the

19

parties and the effect of the agreement in the real world. Opp. at 17. Eaton is inapposite.

20

There, the defendant used its market power to force the four direct purchasers in the heavy duty

21

truck transmissions market to sign long-term, near-exclusive agreements, by offering substantial

22

rebates in exchange for the buyers commitment to purchase 90% of its transmissions from the

23

defendant. 696 F.3d at 265. Some of the agreements also called for the exclusion of competitive

24

parts manufacturers information from the data books that were distributed to the ultimate

25

buyers of heavy duty trucks. Id. In contrast, besides their allegation that Googles apps are

26
27
28

Again, this stands in stark contrast to plaintiffs oft-cited United States v. Microsoft, which
involved Microsofts efforts to technologically bind[] Internet Explorer to Windows to
prevent[] OEMs from pre-installing other browsers. 253 F.3d 34, 64 (D.C. Cir. 2001).
2

5
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page11 of 21

popular, FAC 35-36, plaintiffs fail to allege that OEMs were coerced into making Google

the default search engine. Plaintiffs have not alleged that Google has sufficient market power in

any market for apps to force Google Search on the OEMs. Moreover, the MADAs do not set any

minimum market share requirements for OEMs, do not mandate exclusion, and are of short

duration (only two years, compared to the five-year agreements in Eaton). See pp. 4-5, above.

Plaintiffs other authority, Pro Search Plus, LLC v. VFM Leomardo, Inc., No. 122102

JLS, 2013 WL 6229141 (C.D. Cal. Dec. 2, 2013), is similarly distinguishable. In Pro Search,

the court denied a motion to dismiss a de facto exclusive dealing claim based on allegations that

contracts for the management and distribution of digital imagery and other digital content are

10

not open to rebidding, that [customers] have been forced into dealing exclusively with VFML,

11

that VFML has recently used its market power to coerce at least one [customer] into dealing

12

exclusively with VFML, that VFML acquired or settled with its other competitors and that the

13

cost of switching suppliers is prohibitive. Id. at *6-7. Here, plaintiffs do not allege similar

14

factsthey do not and cannot allege, for example, that search competitors have been prevented

15

from bidding for OEMs business, that Google has market power in apps sufficient to coerce

16

OEMs into signing a MADA, or that the MADAs mandate that OEMs only deal with Google.3
Ultimately, the MADAs do not force OEMs to preload Google apps (and set Google

17
18

Search as the default search engine) on any devices, much less a minimum percentage of them.

19

Thus, they are facially lawful. See C&D II, 868 F. Supp. 2d at 903 (challenged program was

20

arguably permissible as a matter of law because C&D does not force retailers to purchase

21

anything, much less a certain percentage, of condom products from C&D, and the only

22

consequence is that retailers may not receive a rebate based on those decisions).

23
24
25
26
27
28

Also, the Pro Search court dismissed an earlier exclusive dealing claim premised on alleged 25 year contracts because they were of short duration and are easily terminable. Pro Search
Plus, LLC v. VFM Leonardo, Inc., No. SACV 12-2102, 2013 WL 3936394, at *2 (C.D. Cal. July
30, 2013). The MADAs only have two year terms. See FAC, Exs. A, B.
3

6
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page12 of 21

1
2

B.

Plaintiffs Fail To Allege Substantial Foreclosure Because They Concede The


Existence Of Alternative Means Of Distribution

Even if plaintiffs had sufficiently alleged the MADAs were exclusive, their claim would

nonetheless fail because they also clearly concede the existence of alternative means of

distribution, which means the MADAs do not substantially foreclose competition. E.g., FAC

53 (One possible alternative channel for distribution of a rival search engine is via a dedicated

search website.); 56 (Another alternative means of distribution that a competitor might try is

to convince users to download and use its app.); 57 (Alternatively, a competitormight

attempt to convince Android OS device consumers to re-set their default search engines.).

Plaintiffs ask the Court to disregard those channels, asserting that default search status is the

10

most cost-efficient and effective means of reaching search customers. FAC 42; Opp. at 15.

11

But under clear Ninth Circuit law, a plaintiff cannot state an exclusive dealing claim if there are

12

alternative distribution channels, even if a plaintiff claims they are inadequate substitutes

13

because they are not the best, most efficient channels. Omega Envtl., Inc. v. Gilbarco, Inc.,

14

127 F.3d 1157, 1163 (9th Cir. 1997).

15

[I]n determining whether a market is foreclosed, the relevant inquiry is what products

16

are reasonably available to a consumer, not what products the consumer ultimately chooses to

17

buy. See Southeast Mo. Hosp. v. C.R. Bard, Inc., 642 F.3d 608, 616 (8th Cir. 2011) (emphasis

18

added). If competitors can reach the ultimate consumers of the product by employing existing

19

or potential alternative channels of distribution, it is unclear whether such restrictions foreclose

20

from competition any part of the relevant market. Omega, 127 F.3d at 1163 (emphasis in

21

original). None of the facts alleged in the FAC negate the reality that search competitors have

22

alternative means to reach consumers. Under the MADAs, search competitors are free to sell

23

directly, to develop alternative distributors, or to compete for the services of the existing

24

distributors. Antitrust laws require no more. Id.

25

Plaintiffs rely principally on Church & Dwight Co., Inc. v. Mayer Labs., Inc. (C&D I),

26

No. C-10-4429, 2011 WL 1225912 (N.D. Cal. Apr. 1, 2011), but fundamentally misstate that

27

decision. In C&D I, the court noted that the defendant allegedly entered into agreements with

28
7
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page13 of 21

retailers that accounted for nearly 100% of condom sales nationwide and the complaint had

alleged with great specificity . . . the relative lack of other non-retail means of reaching the

consumer. Id. at *2, 14. The C&D I court denied the motion to dismiss, not because other

distribution channels were inefficient, but because plaintiffs specifically alleged they did not

exist. The courtciting the same cases as in Googles opening briefexplained that exclusive

dealing claims should be dismissed where, as here, there is no allegation that alternative means

of distribution have been significantly curtailed. Id. at *13.4


Contrary to plaintiffs assertions, courts routinely dismiss Section 1 claims on the

8
9

pleadings where competitors have access to alternative distribution channels. See, e.g.,

10

MedioStream, Inc. v. Microsoft Corp., 869 F. Supp. 2d 1095, 1108 (N.D. Cal. 2012) (granting

11

motion to dismiss in part because of alternative channels, as customers can simply purchase

12

MedioStreams media processing software directly); Abbyy USA Software House, Inc. v.

13

Nuance Communs., Inc., No. C 08-01035, 2008 U.S. Dist. LEXIS 90308, at *6-7 (N.D. Cal.

14

Nov. 6, 2008) (granting motion to dismiss in part because plaintiff has alleged that direct sales

15

and licensing agreements are alternative distribution channels for the same software products);

16

PNY Techs., Inc. v. SanDisk Corp., No. 11cv04689, 2014 WL 2987322, at *8-9 (N.D. Cal.

17

July 2, 2014) (dismissing claim where plaintiff fails to plead the lack of alternative channels of

18

distribution). The Court need not look past plaintiffs own concessions and controlling Ninth

19

Circuit law in ruling on this motion. Search competitors can access both OEMs and consumers,

20

which is both undisputed and dispositive.

21

C.

22

To the extent plaintiffs seek to allege a generic, undefined Section 1 claim, Opp. at 12, it

23
24
25
26
27
28

Plaintiffs Generic Sherman Act 1 Claim Is Based On The Same


Allegations And Fails For The Same Reasons

also fails due to the absence of market foreclosure and the existence of alternative means of
distribution. Notably, plaintiffs plead no additional facts to support this theory. Instead, they
simply remove the exclusive dealing label and replace it with a generic label. No matter the
4

Plaintiffs allegations in C&D I ultimately proved false, and the court granted summary
judgment in C&D II, based on facts similar to those conceded by plaintiffs in their FAC, here.
See C&D II, 868 F. Supp. 2d at 904 (identifying alternative means of distribution).
8
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page14 of 21

label, alleged vertical restraints5 (i.e., the MADAs) require plaintiffs to plead substantial

foreclosure, which, as demonstrated above, is absent from the FAC. See pp. 6-8, above. This

generic theory therefore adds nothing to the analysis and should be dismissed. E.g., C&D II, 868

F. Supp. 2d at 890 (vertical contract not anticompetitive because it did not foreclose[]

competition from a substantial share of any relevant market); see also R.J. Reynolds Tobacco

Co. v. Phillip Morris, 199 F. Supp. 2d 362, 387 (M.D.N.C. 2002) ([C]ourts generally require

plaintiffs to show substantial foreclosure in vertical restraint cases.) (citing cases).

III.

PLAINTIFFS FAIL TO ALLEGE A SHERMAN ACT 2 CLAIM BECAUSE THE


MADAS ARE NOT EXCLUSIONARY
Exclusionary conduct is a necessary element of any Section 2 claim. Transamerica

10
11

Computer Co. v. IBM, 698 F.2d 1377, 1382 (9th Cir. 1983). Because plaintiffs allege the same

12

alleged exclusionary conduct in support of their Section 1 and Section 2 claims, the latter must

13

be dismissed for the same reasona failure to allege facts demonstrating foreclosure. See Mot.

14

at 17-18; Sicor Ltd. v. Cetus Corp., 51 F.3d 848, 856 (9th Cir. Cal. 1995) (if conduct alleged in

15

support of [a] Section 1 claim is not deemed anticompetitive, [the] same conduct alleged in

16

support of [a] Section 2 claim must also fail); SanDisk, 2014 WL 2987322, at *11 (Because I

17

again conclude that the TAC does not sufficiently plead actionable exclusive dealing, PNY

18

cannot state a claim for attempted monopolization).


Plaintiffs ignore numerous Ninth Circuit cases and instead rely on out-of-circuit cases to

19
20

argue that, in some situations, otherwise permissible conduct may still form the basis of a

21

Section 2 claim if practiced by an alleged monopolist. Opp. at 19-20 (citing United States v.

22

Dentsply, 399 F.3d 181 (3d Cir. 2005) and LePages, Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003)).6

23

The nature of plaintiffs allegations in Dentsply and LePages, however, differs substantially

24

from plaintiffs allegations here. See Dentsply, 399 F.3d at 196 (Dentsplys grip on its 23

25

authorized dealers effectively choked off the market for artificial teeth, leaving only a small

26

27
28

A vertical restraint is one imposed by agreement between firms at different levels of


distribution. Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 730 (1988).
6
Even if the Third Circuit allows such claims, the Ninth Circuit does not and its law is
controlling here.
9
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page15 of 21

sliver for competitors.); LePages, 324 F.3d at 154 (noting the evidence of the full panoply of

3Ms exclusionary conduct, including both the exclusive dealing arrangements and the bundled

rebates). As discussed above, plaintiffs do not sufficiently allege any such conduct or effect

here; there can be no claim that Google choked off access to any aspect of the alleged markets.

The only in-circuit case plaintiffs cite is TeleAtlas N.V. v. NAVTEQ Corp., No. C-05-

01673, 2008 WL 4911230 (N.D. Cal. 2008). In TeleAtlas, the district court noted that dismissal

of the section 2 claim is warranted when no allegation of anticompetitive conduct survive[s]

after a dismissal of a Section 1 claim. Id. at *2 (citation omitted). The court allowed the Section

2 claim in that case, however, because, unlike here, the combined allegations suggest a broad

10

course of conduct designed to foreclose the market and prevent entry. Id. (discussing

11

allegations of exclusive licenses, tying and threats of patent litigation). Conversely, where, as

12

here, the conduct does not substantially foreclose the market or exclude a competitor, and is

13

therefore not anticompetitive, it cannot form the basis of a Section 2 claim. See, e.g., Western

14

Parcel Express v. UPS of Am., 190 F.3d 974, 976 (9th Cir. 1999).

15

IV.

16

PLAINTIFFS FAIL TO ALLEGE A CLAYTON ACT 3 CLAIM BECAUSE THE


ACT DOES NOT APPLY TO LICENSES AND BECAUSE THE MADAS DO NOT
FORECLOSE COMPETITION

17

Plaintiffs Clayton Act claim fails because the Clayton Act does not apply to licenses or

18

intangible property. The Clayton Act concerns only goods, wares, merchandise, machinery,

19

supplies, or other commodities, 15 U.S.C 14, and that provision is strictly construed. See

20

TeleAtlas N.V. v. Navteq Corp., 397 F. Supp. 2d 1184, 1192-93 (N.D. Cal. 2005) (a patent

21

license is not a tangible good); Mot. at 18. Plaintiffs argue that their case is not about the

22

MADA (a license), but rather the software that the MADAs cover. But that argument fails for

23

two reasons. First, it mischaracterizes the MADA, which is clearly a software license, and it is

24

this license that plaintiffs allege restrains trade. See FAC, Exs. A & B (MADA 2.1, entitled

25

License Grant). Second, software, such as a Google app, is also deemed intangible for

26

purposes of the Clayton Act. Although the one and only case cited by plaintiffs to support their

27

position, Digidyne Corp. v. Data Gen. Corp., 734 F.2d 1336 (9th Cir. 1984), allowed a Clayton

28

Act claim for an alleged refusal to license, the case never addressed the question of whether
10
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page16 of 21

software licenses are covered by the Clayton Act. [A] prior opinion cannot stand as precedent

for a proposition of law not explored in the opinion, even when the facts stated in the opinion

would support consideration of the proposition. United States v. Harrison, 296 F.3d 994, 1005

(10th Cir. 2002) (citing Texas v. Cobb, 532 U.S. 162, 169 (2001)).7

V.

PLAINTIFFS DERIVATIVE STATE LAW CLAIMS ALSO FAIL


Plaintiffs agree that if their federal law Sherman Act and Clayton Act claims fail, so do

6
7

their state law Cartwright Act claims. See Mot. at 23-24; Opp. at 24 (noting the similar standards

for the federal and state claims). Moreover, even if plaintiffs were able to state a Sherman Act

claim, their Cartwright Act claim would still fail because the act only applies to products, not

10

licenses, and because plaintiffs did not purchase their devices for use within California. See Mot.

11

at 24. Plaintiffs want to simply ignore these deficiencies.

12

Plaintiffs UCL claimwhether based on the unlawful or unfair prongis entirely

13

derivative of their antitrust claims. Because Googles conduct does not violate the antitrust laws,

14

it is not unlawful under the UCL. See Mot. at 25. While conduct can be found to be unfair in

15

certain circumstance even when not specifically proscribed by some other law, here plaintiffs

16

only allege that Googles conduct is unfair because it is anticompetitive. When the:

17

20

same conduct is alleged to be both an antitrust violation and an unfair business


act or practice for the same reasonbecause it unreasonably restrains competition
and harms consumersthe determination that the conduct is not an unreasonable
restraint of trade necessarily implies that the conduct is not unfair toward
consumers. To permit a separate inquiry into essentially the same question under
the unfair competition law would only invite conflict and uncertainty and could
lead to the enjoining of procompetitive conduct.

21

Belton v. Comcast Cable Holdings, LLC, 151 Cal. App. 4th 1224, 1240 (2007); see also Chavez

22

v. Whirlpool Corp., 93 Cal. App. 4th 363, 375 (2001) (same).

23

VI.

18
19

24

PLAINTIFFS LACK ANTITRUST STANDING TO BRING THEIR CLAIMS


A.

25

Plaintiffs Lack Standing To Bring A Damages Claim For Alleged Injuries In


The Handheld Device Market

26
27
28

Regardless, plaintiffs Clayton Act exclusive dealing claim fails for the same reasons stated
above. See Section II above; Mot at 18 n.12; SanDisk, 2014 WL 2987322, at *4-10 (same
standards apply); Jefferson Parish, 466 U.S. at 23 n. 39 (same).
11
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page17 of 21

Even if Plaintiffs had sufficiently asserted a federal or state claim under Iqbal and

Twombly (which they have not), plaintiffs lack antitrust standing to bring those purported claims

based on injuries suffered in the handheld device market. See Mot. at 19-23. Tellingly, plaintiffs

fail to acknowledge most of the factors a court must consider to determine whether a plaintiff has

antitrust standing. See id. at 19 (listing factors). Although plaintiffs concede they must

adequately plead antitrust injury, Opp. at 21-22, they ignore Googles arguments that their

alleged injury in the device market is too remote and unduly speculative. See Mot. at 21-23.

8
9

Even when discussing antitrust injury, plaintiffs barely mention the requirement that a
plaintiff must suffer[] its injury in the market where competition is being restrained. Am. Ad

10

Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1057 (9th Cir. 1999); Mot. at 20 (citing

11

cases).8 Plaintiffs do not, and cannot, dispute that any injury resulting from supra-competitive

12

device prices occurs in a market different than the one where Google allegedly restrains

13

competition (the alleged search markets). Instead, they try to squeeze into a narrow exception

14

allowing claimants to allege antitrust injury for injuries in one market that are inextricably

15

intertwined with anticompetitive injury sought in a different market. See Opp. at 23 n.26; Am.

16

Ad. Mgmt., 190 F.3d at 1057 n.5 (the Supreme Court has carved a narrow exception to the

17

market participant requirement for parties whose injuries are inextricably intertwined).9 An

18

injury is only inextricably intertwined if causing the injury is a necessary step in effecting the

19

ends of the alleged illegal conspiracy. McCready, 457 U.S. at 476-79, 484 (emphasis added).

20

Plaintiffs do not fall within the exception because their alleged injury in the device market is not

21

necessary or essential to effectuate the alleged conspiracy. See Vinci v. Waste Mgmt., Inc.,

22

80 F.3d 1372, 1376 (9th Cir. 1996); Exhibitors Serv., Inc. v. Am. Multi-Cinema, Inc., 788 F.2d

23

574, 580 (9th Cir. 1986).

24

25
26
27
28

It makes no difference that plaintiffs are participants in the alleged search markets. See Opp. at
23 n.26. The injury must occur in the same market as the anticompetitive conduct.
9
Plaintiffs incorrectly invoke the exception by arguing their injury is suffered in a market
inextricably intertwined with the [alleged] search markets. Opp. at 23 n.26. Whether markets
are inextricably intertwined is irrelevant. Rather, the plaintiffs injury must be inextricably
intertwined with the alleged anticompetitive injury in the restrained market. Blue Shield v.
McCready, 457 U.S. 465, 484 (1982).
12
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page18 of 21

In McCready, the plaintiff, a group health plan subscriber, had standing because the

conduct at issuedenying reimbursements to subscribers for psychotherapy services provided

by psychologists rather than psychiatristsdirectly injured her. 457 U.S. at 478-80. Although

the conspiracy was directed at psychologists, denying reimbursements were the very means

used to effectuate it. Id. at 479. Here, plaintiffs allege the MADAs foreclose competition in the

alleged search markets. But they do not allege that Google raised handheld device prices to

effectuate this alleged scheme; Google does not set device prices. Nor do plaintiffs allege (or

even explain) why raising device prices is a necessary step to foreclose the alleged search

markets. Plaintiffs only claim that obtaining search users is necessary to the alleged scheme.

10

See Opp. at 23 n.26 (citing FAC 15-16, 40-41, 51, 54). But obtaining users is different from

11

raising device prices.10 Moreover, the MADAs do not directly cause OEMs to raise their device

12

prices. At most, plaintiffs merely allege that the MADAs indirectly result in OEMs charging

13

higher prices because they do not get funds from rival search providers. FAC 9, 71-73.11

14

Simply saying something is necessary or integral to an alleged scheme does not make it so.

15

See Lorenzo v. Qualcomm, 603 F. Supp. 2d 1291, 1300-01 (S.D. Cal. 2009) (denying standing to

16

cell phone buyers because conclusory allegation that injury was inextricably intertwined with

17

alleged conspiracy not enough to allege antitrust injury).

18
19
20
21
22
23
24
25
26
27
28

10

It is also economically implausible that higher device prices would advance a scheme to obtain
more search users. See William O. Gilley Enters. v. Atl. Richfield Co., 588 F.3d 659, 662 (9th
Cir. 2009) (a court must determine whether an antitrust claim is plausible in light of basic
economic principles). Under plaintiffs theory, devices not subject to a MADA (e.g., a
Windows Phone or Android phone with Bing as the default search engine) would be less
expensive and therefore more attractive to consumers. Indeed, Google obtains no benefit from
higher device prices.
11

Curiously, plaintiffs rely on In re WellPoint, Inc. Out-of-Network UCR Rates Litig., 865 F.
Supp. 2d 1002, 1030 (C.D. Cal. 2011) (see Opp. at 23 n. 26) even though the court did not
directly address antitrust standing in that opinion. Id. at 1029. The case involved insurance
companies failure to properly reimburse claims (id. at 1015) and one group of plaintiffs were
insurance subscribers in the exact same position as the plaintiff in McCready. However, in a
later decision, the court addressed antitrust standing with respect to two other groups of plaintiffs
and found they lacked standing because their injurylike the injury claimed by plaintiffs here
was derivative and thus too remote to afford standing. In re WellPoint, Inc. Out-of Network
UCR Rates Litig., 903 F.Supp.2d 880, 902 (C.D. Cal. 2012); see also Mot. 21-23.
13
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page19 of 21

1
2

B.

Plaintiffs Lack Standing To Bring An Injunctive Relief Claim For Alleged


Injuries In The Alleged Search Markets

To have antitrust standing for an injunctive relief claim, plaintiffs must allege facts

demonstrating the alleged conduct risks a threatened loss or damage and that they suffered

antitrust injury (i.e., an injury of the type the antitrust laws were designed to prevent). Cargill,

Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 112 (1986). Plaintiffs fail to allege sufficient facts

demonstrating they have standing for their injunctive relief claim based on their alleged injuries

in the search markets, namely: (1) reduction of choice and (2) harm to innovation. Opp. at 21-23.

Instead they rely on conclusory allegations that are belied by other facts alleged in the FAC.

First, plaintiffs do not allege an actual reduction in choice. For example, plaintiffs do not

10

allege the MADAs prevented them from: choosing their preferred search engine among the

11

myriad methods of accessing search, changing their default search engine, downloading an

12

alternative search app, or purchasing a device with an alternative default search engine. None of

13

these have been foreclosed. Plaintiffs instead allege that their ignorance of a default search

14

engine or how to change it, see FAC 8, 15, 16, 41, somehow restricts choice. But plaintiffs

15

also allege that, but for the MADAs, rival search companies would pay for default status. See

16

FAC 9. Plaintiffs do not explain how, in the world they envision, where search competitors

17

pay for default status, plaintiffs would somehow have more choice at the time of purchase, since

18

they would still (allegedly) be ignorant of the default search engine and how to change it.

19

Plaintiffs reliance on Glen Holly Entmt, Inc. v. Tektronix Inc., 352 F.3d 367 (9th Cir.

20

2003) and Axiom Advisors & Consultants, Inc. v. School Innovations & Advocacy, Inc., No.

21

2:05-CV-02395-FCD-PAN, 2006 U.S. Dist. LEXIS 11404 (E.D. Cal. Mar. 20, 2006) is

22

misplaced. In Glen Holly, the plaintiff alleged an actual reduction in choice because the only

23

competing product on the market was discontinued by agreement between the only two

24

competitors in the market. 352 F.3d at 374. Here, competitive search products still exist and

25

nothing in the MADA forecloses their existence. Axiom is a pre-Twombly and Iqbal case where

26

the court accepted conclusory allegations of consumer harm. But we are now post-Twombly and

27

Iqbal and such allegations would likely be held insufficient if the case was decided today. See S.

28
14
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page20 of 21

Cal. Inst. of Law v. TCS Educ. Sys., No. CV 10-8026, 2011 U.S. Dist. LEXIS 39827, at *25-26 n.

6 (C.D. Cal. Apr. 5, 2011) (questioning the continued viability of Axiom).

Second, plaintiffs fail to allege anything but conclusory allegations regarding an alleged

harm to innovation. Plaintiffs simply speculate that in the future, Google may not have an

incentive to innovate. But merely hypothesizing about what may happen in the but-for world is

insufficient to allege injury and thereby demonstrate antitrust standing because it would require a

court to create in hindsight a technological universe that never came into existence and thus

harm could not possibly be adequately measured. See Kloth v. Microsoft Corp., 444 F.3d 312,

324 (4th Cir. 2006).12 Conversely, in the case cited by plaintiffs, Free Freehand Corp. v. Adobe

10

Systems, the plaintiffs alleged that Adobe reduced innovation when it acquired competing

11

software that it effectivelykilled and that Adobe effectively acknowledged its intent to

12

cripple innovation. 852 F. Supp. 2d 1171, 1176-77 (N.D. Cal. 2012). Importantly, the FTC had

13

forced Adobe to divest the competing software years earlier after a previous acquisition because

14

it determined that the merged firm would, inter alia, be able to reduce innovation by delaying or

15

reducing product development. Id. at 1175. Those allegations are a far cry from the speculative

16

and conclusory allegations plaintiffs offer regarding an alleged reduction in innovation.

17

VII.

CONCLUSION

18

Plaintiffs opposition underscores the fatal defects in their FAC. Plaintiffs fail to allege

19

well-pled facts to support their conclusory assertion of exclusive dealing, and thus their federal

20

and state antitrust claimsall based on that alleged conductshould be dismissed. Moreover,

21

the Clayton Act does not apply to licenses, requiring dismissal of that claim. Finally, the FAC

22

does not allege facts establishing antitrust standing, which is an independent ground for dismissal

23

of each federal and state antitrust claim. Google requests an order granting its motion and

24

dismissing the FAC and each claim with prejudice.

25
26
27
28

12

Such speculation is unwarranted where, as here, there continues to be considerable innovation


in search, including: voice search (e.g., Apples Siri, Microsofts Cortana); graph search
(Facebook); visual search (Amazons Firefly); and vertical search (e.g., Yelp, Kayak).
15
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT

Case5:14-cv-02007-BLF Document41 Filed11/07/14 Page21 of 21

1
2
3

DATED: November 7, 2014

By: /s/ Brian C. Rocca


BINGHAM MCCUTCHEN LLP
Brian C. Rocca
brian.rocca@bingham.com

WILLIAMS & CONNOLLY LLP


John E. Schmidtlein
jschmidtlein@wc.com

Attorneys for Google Inc.

7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
16
CASE NO. 5:14-CV-02007 BLF
DEFENDANT GOOGLE INC.S REPLY ISO MOTION TO DISMISS FIRST AMENDED COMPLAINT