Page:Michael Anthony Jewelers v. Peacock Jewelry.pdf/9

 Cir.1975), cert. denied, 459 U.S. 1009, 103 S.Ct. 364, 74 L.Ed.2d 400 (1982) (“Where the degree of substitutability in production is high, cross-elasticities of supply will also be high, and … the two commodities in question should be treated as part of the same market.”). Our difficulty with MAJ’s position, instead, derives from our inability to conclude that Peacock’s definition of the relevant market is patently implausible solely on the basis of the four corners of the amended countercomplaint. While arguments concerning substitutability or “cross-elasticity of supply” may be appropriate on a motion for summary judgment, they seem inappropriate in the context of a motion to dismiss. MAJ’s argument that the antitrust counterclaims must be dismissed for failure to allege a plausible relevant market must therefore be rejected.

Exclusionary Power.

MAJ next contends that even if the relevant market is diamond-cut gold charms, the “facts alleged by Peacock simply do not add up to … exclusionary power.” MAJ’s Memorandum of Law in Support of Motion to Dismiss at 15. Specifically, MAJ argues that in light of the “infinite number of charm designs available and the limited exclusionary power of copyrights,” MAJ’s fraudulent procurement and enforcement of thirteen copyrights cannot amount to exclusionary market power. MAJ’s Supplemental Memorandum of Law in Support of Motion to Dismiss at 11. We disagree for several reasons.

In the first place, to the extent that MAJ is claiming that the nature of the monopoly conferred by a copyright somehow renders it exempt from the antitrust laws, we reject that notion in its entirety. As prior cases have indicated, the “[f]raudulent procurement of a copyright by means of knowing and willful misrepresentations to the Copyright Office may strip a copyright holder of its exemption from the antitrust laws,” as long as the other aspects of a monopolization or attempted monopolization claim are present. See Knickerbocker Toy Co.Co., [sic] Inc. V. Winterbrook Corp., 554 F.Supp. 1309, 1321 (D.N.H.1982).

The Supreme Court’s decision in Walker Process Equip., Inc. v. Food Machinery & Chemical Corp. lends further support to our position. Walker Process addressed the antitrust consequences of the fraudulent procurement of a patent, and concluded that the enforcement of a patent procured by fraud on the Patent Office may violate § 2 of the Sherman Act provided the other elements of the violation are also stated. 382 U.S. 172, 174, 86 S.Ct. 347, 348–49, 15 L.Ed.2d 247 (1965). Although MAJ would have us limit the application of Walker Process to the patent context, we agree with the Knickerbocker court that such a limitation would be anomalous in light of the Supreme Court’s observation that “ ‘[c]ertainly the rights of the copyright owner are no greater than that of the patentee.’ ” Knickerbocker, 554 F.Supp. at 1321 n. 19 (citing United States v. Paramount Pictures, Inc., 334 U.S. 131, 143, 68 S.Ct. 915, 922, 92 L.Ed. 1260 (1948)).

In addition to our rejection of some theoretical bar to a finding that the bad faith procurement and enforcement of a series of copyrights may amount to exclusionary power, we also note that MAJ’s challenge to Peacock’s showing with respect to this element misses the fundamental thrust of Peacock’s theory of recovery. In alleging that MAJ’s conduct amounts to an exercise of exclusionary power, Peacock does not claim that the mere procurement of thirteen copyrights confers on MAJ the power to extract monopoly rents and to exclude competitors. It relies, instead, on the notion that MAJ’s usurpation of charm designs created by others or in the public domain, combined with this and other bad faith litigation to enforce its fraudulently obtained copyrights, has caused Peacock to lose business in and have difficulty