GSI Technology, Inc. v. Cypress Semiconductor Corporation, No. 5:2011cv03613 - Document 262 (N.D. Cal. 2015)

Court Description: REDACTED ORDER denying 86 Motion for Summary Judgment. Signed by Judge Edward J. Davila on 1/27/2015. (ejdlc1S, COURT STAFF) (Filed on 1/27/2015)

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GSI Technology, Inc. v. Cypress Semiconductor Corporation Doc. 262 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION United States District Court For the Northern District of California 10 11 GSI TECHNOLOGY, INC., Plaintiff, 12 13 14 15 v. CYPRESS SEMICONDUCTOR CORPORATION, Defendant. 16 ) ) ) ) ) ) ) ) ) ) ) Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT [Re: Docket No. 86] 17 Plaintiff GSI Technology Inc. (“GSI” or “Plaintiff”) brings the instant action against 18 Defendant Cypress Semiconductor Corporation (“Cypress” or “Defendant”) asserting unfair 19 competition and violations of federal and state antitrust laws. Presently before the Court is 20 Cypress’ Motion for Summary Judgment. Dkt. No. 86. GSI opposes that motion. Having 21 carefully reviewed the parties’ briefing and considered the parties’ arguments from the hearing on 22 October 21, 2014, the Court DENIES Cypress’ Motion for Summary Judgment for the reasons 23 explained below. 24 25 I. FACTUAL AND PROCEDURAL BACKGROUND GSI and Cypress are developers of Static Random Access Memory (“SRAM”) products. 26 Since the SRAM market consists of a small number of customers, early market entry is critical to a 27 vendor’s success. Customers in the SRAM market demand standardized products, and it is 28 therefore critical for manufacturers to comply with recognized standards. The Institute of 1 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Dockets.Justia.com 1 Electrical and Electronics Engineers (“IEEE”) and the JEDEC Solid State Technology 2 Associations (“JEDEC”) are two recognized standard-setting organizations for memory 3 components. These organizations provide an open and public standard setting process, in which all 4 competitors in the market have equal access to the same information at the same time allowing for 5 competitive products and competitive product introduction schedules. In 1999, Cypress and two of its competitors, Integrated Device Technology, Inc. (“IDT”) 6 and Micron Technology, Inc. (“Micron”), entered into a combination which they named the “QDR1 8 Consortium” (the “Consortium”). The purported purpose of the Consortium was to develop 9 standards for higher performance networking SRAM products outside of IEEE and JEDEC. The 10 United States District Court For the Northern District of California 7 Consortium members shared information and combined their market power to define and promote 11 a family of SRAMs that would address the new market demand. 12 13 14 15 GSI, IBM, Samsung, and Motorola started a separate group known as “SigmaRAM” in order to facilitate the design and development of an open SRAM standard. 16 17 the members in SigmaRAM opened participation to any company and compiled with JEDEC’s standard setting process. 18 On February 16, 2000, the Consortium announced that it had completed the specifications 19 of its initial QDR and DDR2 SRAM architectural design. Even though the Consortium announced 20 that it would publish the data sheets for QDR and DDR SRAM, it only did so after a time delay. 21 With that delay, GSI alleges the Consortium members obtained a “time-to-market” competitive 22 advantage over all SRAM vendors outside of the group. GSI further alleges that the Consortium, 23 with its combined market power and limited membership, created exclusive but de facto product 24 standards which allowed it to lock in customers and impede entry into the SRAM market, thereby 25 harming competition and consumers. 26 1 27 28 QDR stands for Quad Data Rate and is a type of memory that can transfer up to four words of data in each clock cycle. 2 DDR stands for Double Date Rate and is a type of memory that can transfer up to two words of data in each clock cycle. 2 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 2 After establishing the industry standard with first and second generation devices and taking control of the SRAM market, 3 4 5 6 7 8 9 United States District Court For the Northern District of California 10 11 According to GSI, the Consortium and its members have 12 13 14 As a direct result of the Consortium’s 15 16 17 18 It is further alleged that with each new product released, the Consortium 19 20 21 In addition, Consortium members also required SRAM customers 22 23 By its conduct, the Consortium allegedly 24 harmed consumers by denying them the benefits of innovation in product development and lower 25 prices. 26 GSI filed its original Complaint in this case on July 22, 2011 against Cypress for: (1) 27 violation of section 1 of the Sherman Act, 15 U.S.C. § 1, (2) violation of California’s Cartwright 28 Act, Business and Professions Code §§ 16720 and 16726, and (3) violation of California’s Unfair 3 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Competition Law (“UCL”), Business and Professions Code § 17200 et. seq. Dkt. No. 1. Cypress 2 filed a motion to dismiss the Complaint on September 14, 2011. Dkt. No. 14. The Court denied 3 Cypress’ motion to dismiss on July 6, 2012. Dkt. No. 26. On August 3, 2012, Cypress filed an 4 Answer to the Complaint, and on August 24, 2012, filed an Amended Answer. Dkt. Nos. 34, 36. 5 On June 20, 2014, Cypress filed a Motion for Summary Judgment and Daubert Motions (“Cypress 6 Mot.”). Dkt. Nos. 86, 88. On July 28, 2014, GSI filed an Opposition to Cypress’ Motion for 7 Summary Judgment and Daubert Motions (“Opposition”). Dkt. No. 121. In support of its 8 Opposition, GSI also filed multiple Declarations of Robert B. Haig (“Haig Decl.”), Patrick T. 9 Chuang (“Chuang Decl.”), Lee Lean Shu (“Shu Decl.”), David Chapman (“Chapman Decl.”), 10 United States District Court For the Northern District of California 1 Robert Murphy (“Murphy Decl.”), Robert G. Harris (“Harris Decl.”), D. Paul Regan (“Regan 11 Decl.”). Dkt. Nos. 128-134. 12 On August 25, 2014, Cypress filed (under seal) a Reply in Support of Motion for Summary 13 Judgment (“Cypress Reply”). Dkt. No. 173. In support of its Reply, Cypress also filed a 14 Declaration of Dominique-Chantale Alepin and Exhibits A-Q under seal (“Alepin Decl.”). Dkt. 15 No. 174. The parties appeared for a hearing on October 21, 2014. 16 II. LEGAL STANDARD 17 A motion for summary judgment should be granted if “there is no genuine dispute to any 18 material fact and the movant is entitled to a judgment as a matter of law.” Fed. R. Civ. R. 56(c); 19 Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). The moving party bears the 20 initial burden of informing the court of the basis for the motion and identifying the portions of the 21 pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the 22 absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 23 If the moving party meets this initial burden, the burden then shifts to the non-moving party 24 to go beyond the pleadings and designate specific materials in the record to show that there is a 25 genuinely disputed fact. Fed. R. Civ. P. 56(c); Celotex, 477 U.S. at 324. The court must draw all 26 reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita 27 Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). 28 4 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 However, the mere suggestion that facts are in controversy, as well as conclusory or 2 speculative testimony in affidavits and moving papers, is not sufficient to defeat summary 3 judgment. See Thornhill Publ’g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Instead, the 4 non-moving party must come forward with admissible evidence to satisfy the burden. Fed. R. Civ. 5 P. 56(c); see also Hal Roach Studios, Inc. v. Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 6 1990). 7 A genuine issue for trial exists if the non-moving party presents evidence from which a 8 reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the 9 material issue in his or her favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 United States District Court For the Northern District of California 10 (1986); see also Barlow v. Ground, 943 F.2d 1132, 1134-36 (9th Cir. 1991). Conversely, summary 11 judgment must be granted where a party “fails to make a showing sufficient to establish the 12 existence of an element essential to that party’s case, on which that party will bear the burden of 13 proof at trial.” Celotex, 477 U.S. at 322. 14 15 16 III. DISCUSSION A. Statute of Limitations Before proceeding to the merits of Cypress’ motion, the Court will address its assertion that 17 GSI’s Sherman Act claims fail due to the expiration of the statute of limitations. Cypress argues 18 that GSI’s claims are barred by the statute of limitations because 19 20 21 See Dkt. No. 101-6 at 13:5-18. The Court disagrees. Under both federal and state law, an antitrust and unfair competition suit must commence 22 within four years after the cause of action has accrued. 15 U.S.C. § 15B (Sherman Act); Cal. Bus. 23 & Prof. Code § 16750.1 (Cartwright Act); Cal. Bus. & Prof. Code § 17208 (UCL). While private 24 antitrust claims are subject to four-year statute of limitations, a new cause of action arises “each 25 time the plaintiff’s interest is invaded to his damage, and the statute of limitations begins to run at 26 that time.” Hennegan v. Pacifico Creative Serv., 787 F.2d 1299, 1300 (9th Cir. 1986) (citing In re 27 Multidistrict Vehicle Air Pollution Litig., 591 F.2d 68, 70 (9th Cir. 1979)). If a plaintiff “alleges a 28 continuing violation, an overt act by the defendant is required to restart the statute of limitations 5 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 inferences in GSI’s favor where matters are disputed. See Cahill v. Liberty Mut. Ins. Co., 80 F.3d 2 336, 337-38 (9th Cir. 1996). Thus, at the very least, Cypress’ public statements create a triable 3 issue of fact as to whether Cypress, 4 5 6 7 . See Celotex, 477 U.S. at 324. Therefore, the Court must deny Cypress’ motion to the extent it relies on the statute of 8 limitations because a genuine issue for trial exists. GSI presented sufficient evidence from which a 9 reasonable jury, viewing the evidence in the light most favorable to GSI, could resolve this issue in United States District Court For the Northern District of California 10 11 12 its favor. B. Section 1 of the Sherman Act The Court now addresses the Sherman Act claim. Cypress argues there is insufficient 13 evidence to establish a claim under § 1 of the Sherman Act because GSI failed to do the following: 14 (1) identify evidence showing an agreement intended to harm or restrain trade; (2) prove a relevant 15 product market encompassing all reasonably interchangeable products, show that it had market 16 power, and prove an anticompetitive effect on competition in a relevant product market, and (3) 17 present competent evidence to establish injury in fact. Having reviewed the evidence, the Court 18 disagrees. 19 Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits “[e]very contract, combination . . . 20 or conspiracy [] in restraint of trade or commerce among several States.” Despite this broad 21 language, the Supreme Court has recognized that Congress intended only to “outlaw . . . 22 unreasonable restraints.” Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006); see also Thurman Indus., 23 Inc. v. Pay ‘N Pak Stores, Inc., 875 F.2d 1369, 1373 (9th Cir. 1989). Thus, to establish a claim 24 under Section 1, a plaintiff must show (1) that there was a contract, combination, or conspiracy; (2) 25 that the agreement unreasonably restrained trade; and (3) that the restraint affected interstate 26 commerce. See Hosp Bhan v. NME Hospitals, Inc., 929 F.2d 1404, 1410 (9th Cir. 1991); see also 27 Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008). 28 7 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 Not all trade agreements can constitute antitrust violations; an agreement constitutes a 2 violation of § 1 of the Sherman Act only if it evidences a “conscious commitment to a common 3 scheme designed to achieve an unlawful objective.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 4 U.S. 752, 764 (1984). Since it is often difficult to show direct evidence of a combination or 5 conspiracy, concerted action may be inferred from circumstantial evidence of the defendant’s 6 conduct and course of dealings. See Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 671 7 (9th Cir. 1980); see also United States v. Gen. Motors Corp., 384 U.S. 127, 142-43 (1966). 8 Antitrust law, however, limits the range of permissible inferences from ambiguous evidence 9 in a § 1 case. In that regard, “although plaintiffs are to be given the benefit of the doubt, they ‘must United States District Court For the Northern District of California 10 do more than simply show that there is some metaphysical doubt as to the material facts.’” In re 11 Citric Acid Litig., 191 F.3d 1090, 1094 (9th Cir. 1999) (quoting Matsushita Elec. Indus., Ltd. v. 12 Zenith Radio Corp., 475 U.S. 574, 588 (1986)). “[A]n inference of conspiracy is sustainable only 13 if ‘reasonable in light of the competing inferences of independent action,’ and ‘to survive a motion 14 for summary judgment . . . , a plaintiff seeking damages for a violation of § 1 must present 15 evidence that tends to exclude the possibility that the alleged conspirators acted independently.” 16 Id. (quoting Matsushita, 475 U.S. at 888 (internal quotations omitted)). Put another way, summary 17 judgment should be granted for the defendant unless the evidence as a whole would allow a 18 reasonable fact finder to conclude not just that the evidence is consistent with a conspiracy but that 19 the alleged conspiracy is more probable than not because “[m]ere circumstantial evidence of 20 conspiracy cannot defeat summary judgment unless it would allow an inference that conspiracy is 21 more probable than an inference of independent action.” II Philip E. Areeda et al., Antitrust Law ¶ 22 308c (2d ed. 2000) (emphasis added). 23 1. 24 Cypress offers several explanations for why there is no direct evidence or an inference of an Contract, Combination, or Conspiracy 25 agreement or conspiracy by the Consortium members to stifle innovation in the market. First, 26 Cypress argues that GSI is unable to produce any evidence to support its contention 27 28 See Dkt. No. 175-3 at 7. In support of that point, Cypress indicates GSI’s only evidence 8 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 2 See id. Second, Cypress argues that the Consortium 3 See Dkt. No. 101-6 at 16:8-19. Third, 4 5 6 See id. at 16-17. Finally, Cypress argues that the 7 See id. at 14:3-7. In sum, Cypress’ position is that the evidence does not support either an 9 inference of a conspiracy or an agreement to stifle innovation in the market through “vaporware.” 10 United States District Court For the Northern District of California 8 In response, GSI provides circumstantial evidence that the Consortium members intended 11 to create significant barriers to entry, destroy competition, capture a dominant market share and 12 stifle innovation.9 Specifically, GSI offers evidence from which a conspiracy could be inferred, 13 including: 14 15 16 17 18 .14 19 20 Although Cypress faults GSI for failing to produce any direct or circumstantial evidence 21 revealing anything more than economically rational decision to develop, produce and sell QDR-III 22 products the court finds that GSI has submitted circumstantial evidence tending to show that a 23 conspiracy between Cypress and the Consortium members is more probable than an inference of 24 independent action. Indeed, as the relevant authorities reveal, that Cypress has not entered into an 25 9 Ex. 7 at 39-42; Exs. 15-17; Ex. 18 at 28-9; Ex. 19 at 118-120; Exs. 20-24; Exs. 27-33; Exs. 34-38 Exs. 1, 12, 60 and 110-112 11 See Ex. 107; see also Murphy Decl., Ex. A at ¶ 26; Ex. 80 at 249-251; see also Ex. 79 at 982; Ex. 81; Ex. 18 at100101; Ex. 82at 44-47, 162-164; Ex. 108 at 44-46 12 Ex. 77 at 503; Ex. 78 13 See Exs. 110-112 14 Exs. 10-11 10 26 27 28 9 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 express agreement to engage in an antitrust conspiracy does not insulate it from liability under the 2 Sherman Act. So long as the parties, in a meeting of the minds, coordinated horizontal behavior 3 with the purpose of committing a violation, they remain exposed. See General Motors Corp., 383 4 U.S. 142-43 (finding that “explicit agreement is not a necessary part of a Sherman Act conspiracy, 5 certainly not where . . . joint and collaborative action was pervasive in the initiation, execution, and 6 fulfillment of the plan.”). 7 As Cypress accurately states, none of the evidence necessarily excludes the possibility that 8 Cypress arrived at decisions on its own. However, all that is necessary to avoid summary judgment 9 is evidence that reasonably tends to exclude that possibility. GSI’s evidence cumulatively United States District Court For the Northern District of California 10 accomplishes this. See In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 661 (9th 11 Cir. 2002) (holding that no single piece of the evidence is sufficient in itself to prove a conspiracy, 12 the question 13 is whether this evidence, considered as a whole and in combination with the economic evidence, is 14 sufficient to defeat summary judgment). Therefore, summary judgment is unwarranted on this 15 point because GSI’s evidence, while not conclusive, creates a triable issue for the existence of a 16 conspiracy to act on these motives. 17 2. Unreasonably Restrain Trade or Competition 18 As to the second element, Cypress argues that GSI failed to prove: 19 20 .17 21 Section 1 of the Sherman Act prohibits “[o]nly unreasonable or undue restraints” of trade. 22 23 OSC Corp. v. Apple Computer, Inc., 792 F.2d 1464, 1467 (9th Cir. 1986) (citing Standard Oil v. 24 United States, 221 U.S. 1, 58-60 (1911)). Courts generally identify restraints as unreasonable if 25 they raise price, reduce output, lower quality, eliminate customer choice, or create or enhance 26 market power. See California ex rel. Harris v. Safeway, Inc., 651 F.3d 1118, 1133 (9th Cir. 2011); 27 15 See Dkt. No. 101-6 at 19:7-23 See id. at 21:3-7 17 See id. at 23-25 16 28 10 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 see also Augusta News Co. v. Hudson News Co., 269 F.3d 41, 47 (1st Cir. 2001). “To demonstrate 2 market power circumstantially, a plaintiff must: (i) define the relevant market, (ii) show that the 3 defendant owns a dominant share of that market, and (iii) show that there are significant barriers to 4 entry and show that existing competitors lack the capacity to increase their output in the short run.” 5 Rebel Oil Co., Inc. v. Atlantic Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995). 6 i. Relevant Market Cypress asserts that there is no triable issue of fact as to the relevant product market.18 “A 7 8 relevant market, for antitrust purposes, can be broadly characterized in terms of the cross-elasticity 9 of demand for or reasonable interchangeability of a given set of products or services.” Coal. for United States District Court For the Northern District of California 10 ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495, 507 (9th Cir. 2010) (citations and 11 internal quotations marks omitted). Courts “consider whether the product and its substitutes are 12 reasonably interchangeable by consumers for the same purpose, as well as industry or public 13 recognition of the submarket as a separate economic entity, the product’s peculiar characteristics 14 and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price 15 changes, and specialized vendors.” Id. (citations omitted). Here, GSI’s expert, Dr. Harris, opined that the 16 17 18 See Harris Decl., Ex. A at 33-41. However, Cypress argues that the 19 20 and as such should be included in the relevant 21 22 product market. See Dkt. No. 86 at 9:24-10:22. Additionally, Cypress argues that Dr. Harris, has 23 failed to use a reliable scientific method (mathematical test of cross-elasticity) to prove a relevant 24 product market encompassing all reasonably interchangeable products. See Dkt. No. 80 at 5:17- 25 18 26 19 Cypress also moved to exclude GSI’s expert economist, Dr. Robert Harris, pursuant to Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). That motion is denied by separate order. 20 27 21 22 28 23 11 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 8:11. GSI, however, relied on identifying the existence of a product market by distinct prices, the 2 product’s peculiar characteristics and uses, industry or public recognition of the submarket as a 3 separate economic entity, and sensitivity to price changes. See Brown Shoe Co. v. United States, 4 370 U.S. 294 (1962); see also Knutson v. The Daily Review, Inc., 548 F.2d 795, 804 (9th Cir. 5 1976). 6 Since Harris will not be excluded, the disagreement between GSI and Cypress is at best a 7 conflict between experts. The Ninth Circuit has held that a dispute over the definition of the 8 relevant product market is a “factual inquiry for the jury.” See Thurman Indus., 875 F.2d at 1374. 9 Because resolution of this factual question will require a number of conclusions to be drawn from United States District Court For the Northern District of California 10 11 the evidence, summary judgment would be improper. ii. Market Power 12 Cypress asserts that whatever the collective market share of the Consortium’s members, 13 GSI does not contend that Cypress alone had market power in any relevant product market. See 14 Dkt. No. 101-6 at 21:8-21. As a result, Cypress argues that there is no basis for a finding that the 15 Consortium members had market power in any relevant market. See id. 16 Market power is “the power to control prices or exclude competition.” Forsyth v. Humana, 17 Inc., 114 F.3d 1467, 1475 (9th Cir. 1997). A high market share raises an inference of market 18 power. See Oahu Gas Service, Inc., v. Pacific Resources, Inc., 838 F.2d 360, 366 (9th Cir. 1988) 19 (citing United States v. Grinnell Corp., 384 U.S. 563, 570 (1966)). “A mere showing of substantial 20 or even dominant market share alone cannot establish market power sufficient to carry out a 21 predatory scheme.” Rebel Oil, 53 F.3d at 1439. Conversely, a “declining market share may reflect 22 an absence of market power, but it does not foreclose a finding of such power.” Oahu Gas, 838 23 F.2d 366 (citation omitted). 24 25 Here, Professor Harris opined that Harris Decl., Ex. A at 42-45. Cypress does not dispute that the 26 Consortium commanded an overwhelming share of the SRAM market. Nor does it dispute that 27 GSI’s expert shows that it held a substantial share of the market. Instead, Cypress argues that it 28 alone did not have market power in any relevant market and challenges the method by which GSI’s 12 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 expert measures its market share. See Dkt. No. 101-6 at 21. However, Professor Harris provides 2 3 See Harris Decl., Ex. A at 42.24 Again, the disagreement here between GSI and 4 5 Cypress regarding the method used by the GSI’s expert is a conflict between experts that can only 6 be resolved by the jury. 7 Cypress’s additional argument on this issue fares no better. Cypress asserts that GSI must 8 show that new rivals are barred from entering the market and show that existing competitors lack 9 the capacity to expand their output. See Dkt. No. 101-6 at 21. Cypress argues that there were no United States District Court For the Northern District of California 10 barriers to entry and expansion because 11 12 See Dkt. No. 175-3 at 10. 13 “A high market share, though it may ordinarily raise an inference of monopoly power, will 14 not do so in a market with low entry barriers or other evidence of a defendant’s inability to control 15 prices or exclude competitors.” Oahu Gas, 838 F.2d at 366. Barriers to entry include “(1) legal 16 license requirements; (2) control of an essential or superior resource; (3) entrenched buyer 17 preferences for established brands; (4) capital market evaluations imposing higher capital costs on 18 new entrants; and, in some situations, (5) economies of scale.” Rebel Oil, 51 F.3d at 1439. 19 20 Here, contrary to Cypress’ contention that GSI did not incur any costs constituting barriers to entry and expansion GSI provides evidence of significant barriers, including: 21 22 23 24 25 24 26 27 28 25 See Ex. 11. See Murphy Decl., Ex. A at ¶¶ 26, 79; Shu Decl., ¶¶ 3, 12. See also Ex. 18 at 120-121 ; Ex. 114 13 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 2 3 4 Further, Cypress does not dispute that it controls the supply of QDR and DDR DRAM SRAM devices and their specifications, which can be understood to be 5 6 28 7 8 Therefore, , the Consortium greatly increased the market barrier. See Dkt. No. 147-4 at 21. Cypress also claims that GSI’s entry with the SigmaQuad IIIe reflects a lack of meaningful 9 United States District Court For the Northern District of California 10 barriers to entry. See Dkt. No. 101-6 at 21. However, “[t]he fact that entry has occurred does not 11 necessarily preclude the existence of significant entry barriers.” Rebel Oil, 51 F.3d at 1440. GSI 12 argues that its delayed entry was the result of significant expertise, overcoming lack of technical 13 specifications, taking of risk, and great expenditure. See Dkt. No. 147-4 at 22. 14 Finally, Cypress argues that because GSI was able to enter with SigmaQuad IIIe, it shows 15 that there are no barriers to expansion. This claim ignores the realities of GSI’s position in the 16 market. See Dkt. No. 101-6 at 21-22. GSI argues that making substantial additional units of the 17 product takes months even if a company like GSI already has designed and sampled a particular 18 variant of QDR or DDR SRAM. See Shu Decl. ¶¶ 12-13. In addition, response times only get 19 longer if the competitor does not have timely access to Consortium designs and data. See Dkt. No. 20 147-4 at 22. Further, the customer qualification process restricted GSI’s ability to increase output 21 in the short run.29 Therefore, GSI has provided sufficient evidence that barriers to entry and 22 expansion existed in the relevant market. 23 Accordingly, through circumstantial evidence, GSI creates a triable issue of fact as to 24 whether the Consortium had market power and whether significant barriers to entry and expansion 25 26 26 27 27 28 See Ex. 18 at 65-68; Ex. 19 at 37 . See Ex. 115 at 264-265. 28 See Dkt. No. 147-4 at 21; see also Ex. 42 at 138 Ex. 18 at 18 Ex. 43 at 59-62; Ex. 1 ( 29 ; Chapman Decl., ¶¶ 4-5, 7. See Ex. 42 at 25-31; Ex. 43 at 100-101, 105-106. 14 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 existed in the relevant market. Therefore, summary judgment is not warranted on the ground that 2 the Consortium lacked market power. 3 iii. Anticompetitive Effect Cypress asserts that “the development of SigmaQuad IIIe as an alternative to QDR-III 4 5 amply demonstrated the absence of any anticompetitive effect from the alleged ‘anti-innovation’ to 6 supress QDR-III.” See Dkt. No. 101-6 at 23. The Court disagrees. “It can’t be said often enough that the antitrust laws protect competition, not competitors.” 7 8 United States v. Syufy Enters., 903 F.2d 659, 668 (9th Cir. 1990). Consequently, “[t]o succeed on 9 a rule of reason claim, an antitrust plaintiff must prove that the restraint in question injures United States District Court For the Northern District of California 10 competition in the relevant market.” Roberts Waikiki U-Drive, Inc. v. Budget Rent-A-Car, Inc., 11 732 F.2d 1403, 1408 (9th Cir. 1984) (citing Kaplan v. Burroughs Corp., 611 F.2d 286, 291 (9th 12 Cir. 1979)). With a horizontal agreement, the harm to one market competitor can be considered an 13 injury to competition “when the relevant market is both narrow and discrete and the market 14 participants are few.” Les Shockley Racing, Inc. v. Nat’l Hot Rod Ass’n, 884 F.2d at 508-509 (9th 15 Cir. 1989). Here, GSI offers evidence that the Consortium’s conduct stymied innovation in the relevant 16 17 market and causally links vaporware announcements to the alleged harm. See Dkt. No. 147-4 at 18 24-28. First, GSI believed that QDR-III would be the industry standard because the first and 19 second generation Consortium devices represented the industry standard for QDR and DDR 20 SRAM.30 21 .31 Second, GSI provides evidence that Cypress 22 23 32 24 However, since GSI was 25 26 30 27 See Ex. 13 at 51; Ex. 18 at 18, 19, 26; Ex. 39 at 198-200. Shu Decl., ¶¶ 5-7; Chapman Decl., ¶¶ 7-9. 32 See Exs. 59, 60; Ex. 120 ( 28 Shu Decl., ¶¶ 7-8; Chapman Decl., ¶¶ 8-9, 11. 31 15 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT ; 1 2 See Shu Decl., ¶¶ 7-8; Chapman Decl., ¶¶ 8-9, 11. Third, GSI argues that 3 4 5 See Dkt. No. 147-4 at 24-25. Therefore, 6 .33 Finally, the harm to 7 8 GSI can be considered an injury to competition because the Consortium collectively had a 9 dominant share of the VHPS market - a market that was “both narrow and discrete” with few United States District Court For the Northern District of California 10 market participants - over the period of interest.34 11 Cypress also asserts that the evidence does not show any unmet demand as a result of the 12 failure to develop QDR-III. See Dkt. No. 101-6 at 23-25. Moreover, Cypress argues that the 13 evidence shows that there was no anticompetitive effect because 14 15 See id. As such, Cypress argues that any harm hinges on the implausible theory 16 See id. However, GSI argues that the vaporware’s anticompetitive effect is not the Consortium’s 17 18 failure to develop QDR-III, but the Consortium’s behavior causing delay in the development of 19 SigmaQuad-IIIe (and the delay in successive generation of products). See Dkt. No. 147-4 at 27. 20 An anticompetitive horizontal agreement requires exclusivity; for example, it may be a group of 21 firms that are committed to a particular existing technology or method of doing business and make 22 horizontal agreements designed either to prevent their members from developing or switching to 23 alternative technologies or methods or else to exclude from the market other firms threatening to 24 employ such alternatives.35 GSI argues that the Consortium’s actions hindered innovation by 25 33 Shu Decl., ¶ 7-8; Chapman Decl., ¶ 8, 11, 13; see also Dkt. No. 147-4 at 11:3-5, 26-27. Harris Decl., Ex. A at 42-45. 35 See Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993) (defendant insurers allegedly agreed to deny risk data and reinsurance to competing insurers wishing to write broader coverage that the defendants wished to remove from the market); see also Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988) (cartel of steel conduit makers conspire to keep plastic conduit off the market); see also American Med. Assn. v. United States, 317 U.S. 519 (1943) (agreement preventing members and excluding other physicians from working for prepaid health plans). 34 26 27 28 16 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 2 See Chapman Decl., ¶¶ 8-9. For example, 3 4 See Haig Decl., ¶¶ 10-12. Therefore, 5 6 7 See Hartford Fire, 509 U.S. 764. GSI also argues that customers Dkt. 8 9 No. 147-4 at 24:18-20. Therefore, GSI claims that Cypress’ United States District Court For the Northern District of California 10 11 Free Freehand Corp. v. Adobe Systems, Inc., 852 F. 12 Supp. 2d 1171, 1185 (N.D. Cal. 2012). Therefore, summary judgment on this point is 13 inappropriate. 14 In sum, the Court concludes that GSI has come forward with sufficient evidence by way of 15 the expert testimony and the circumstantial evidence to create a triable issue of fact as to whether 16 Cypress along with the Consortium members intended to harm competition. 17 18 C. Injury-in-Fact Cypress’ final argument in favor of summary judgment is that GSI failed to show any 19 causal link between GSI’s alleged injury and the “vaporware” conduct that it alleges against 20 Cypress and the other members of the Consortium. See Dkt. No. 101-6 at 26:10-18. Specifically, 21 Cypress contends that GSI cannot establish injury-in-fact because: (1) there is no evidence that the 22 Consortium’s “vaporware” delayed SigmaQuad-IIIe’s development, and (2) there is no evidence 23 that, if SigmaQuad-IIIe were developed one year earlier, there would have been any customer 24 demand for the device. See id. at 25-30. 25 To survive summary judgment, Plaintiff must also show that they suffered a cognizable 26 injury resulting from Defendants alleged conspiracy. See Matsushita, 475 U.S. at 585-86. 27 “Antitrust injury is defined not merely as injury caused by an antitrust violation, but more 28 restrictively as ‘injury of the type the antitrust laws were intended to prevent and that flows from 17 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 that which makes defendants’ acts unlawful.’” Glen Holly Entm’t, Inc. v. Tektronix, Inc., 352 F.3d 2 367, 371 (9th Cir. 2002) (citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 3 (1977). The intentions of the antitrust laws are well synthesized in Apex Hosiery Co. v. Leader, 4 310 U.S. 469 (1940): 8 The end sought [by the Sherman Act’s prohibition against unreasonable restraints of trade] was the prevention of restraints to free competition in business and commercial transactions which tended to restrict production, raise prices or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which had come to be regarded as a special form of public injury. 9 Id. at 493 (emphasis added). Thus, “the central purpose of the antitrust laws, state and federal, is to 5 6 7 United States District Court For the Northern District of California 10 preserve competition.”” Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 988 (9th Cir. 11 2000). “Every precedent in the field makes clear that the interaction of competitive forces . . . is 12 what will benefit consumers.” Id. In addition, the Ninth Circuit requires that the injured party be a 13 participant in the same market as the alleged malefactors. Glen Holly Entm’t, 352 F.3d at 372. 14 Here, GSI asserts that Cypress’ alleged conduct is the type that antitrust laws were intended 15 to prevent because GSI’s evidence shows that Cypress denied consumers the benefits of innovation 16 in product development and lower prices. See Rebel Oil, 53 F.3d at 1433 (holding that consumer 17 welfare is maximized when economic resources are allocated to their best use and when consumers 18 are assured competitive price and quality). 19 20 .36 Moreover, GSI 21 22 argues that 23 Id. Again, the evidence discussed in the section above demonstrates that 24 . See Haig Decl., ¶¶ 10- 25 12. Therefore, GSI provides evidence showing that Cypress caused an antitrust injury to GSI 26 under the Ninth Circuit’s requirements. 27 28 36 Shu Decl., ¶ 7-8; Chapman Decl., ¶ 8, 11, 13; see also Dkt. No. 147-4 at 11:3-5, 26-27. 18 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT 1 Finally, Cypress argues that GSI’s damages expert, D. Paul Regan’s (“Regan”), economic 2 model does not provide a reasonable basis to estimate “lost profits” from the alleged delay of the 3 production of SigmaQuad-IIIe. See Dkt. No. 101-6 at 27-28. However, GSI argues that Regan’s 4 market and sales analysis is soundly based on GSI’s actual sales of SigmaQuad-IIIe and Cypress’ 5 own market demand projections. See Regan Decl., ¶¶ 6-7. 6 Although Cypress argues that GSI cannot prove antitrust injury, the substance of Cypress’ 7 arguments target GSI’s damages calculations. Cypress asserts that Regan relies on faulty analytical 8 methods or mere guesswork. But the arguable inaccuracy of Regan’s damages calculations is not 9 grounds for granting summary judgment. The credibility and persuasiveness of GSI’s expert United States District Court For the Northern District of California 10 witnesses are issues best left to a factfinder. Until a factfinder is given an opportunity to assess the 11 disputed facts underlying GSI’s theory, the issue of antitrust injury is not ripe for summary 12 judgment. IV. CONCLUSION 13 14 At this point, GSI has raised enough issues of contested material fact to preclude summary 15 judgment on the merits for this case. Accordingly, Cypress’ motion for summary judgment is 16 DENIED. 17 18 IT IS SO ORDERED. Dated: January 27, 2015 19 20 21 _ __ __________ __ EDWARD J. DAVILA United States District Judge 22 23 24 25 26 27 28 19 Case No.: 5:11-CV-03613-EJD ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT ______

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