In PNY Technologies, Inc. v. SanDisk Corp., Case No. C-11-04689 (N.D. Cal. Apr. 25, 2014) (Orrick, J.), the court dismissed PNY’s exclusive dealing and attempted monopolization claims. I previously covered the case here.
The case is significant because it found – on a motion to dismiss – that allegations of foreclosure from a substantial percentage of retail outlets were insufficient as a matter of law. The court took judicial notice of SanDisk’s contracts with retailers under the “incorporation by reference” doctrine, and proceeded to conclude that because they were terminable on short notice, they did not plausibly foreclose competition. Unfortunately, due to protective order issues, the court redacted information on the term(s) of SanDisk’s exclusives, so we don’t know precisely how long would be too long.
The court also determined that PNY had failed to adequately plead a lack of alternative channels of distribution. Although PNY alleged that non-retail channels were insufficient, the court held that PNY’s allegations were wholly conclusory and therefore insufficient. The court gave PNY leave to amend.
The case is a (relatively) uncommon exclusive dealing victory at the motion to dismiss stage for defendants. It shows that courts will scrutinize and look at exclusive dealing contracts (even if not attached to the complaint). It also demonstrates that in the case of short-term exclusives, and where the plaintiff does not allege in substantial detail why other distribution channels are insufficient to compete, plaintiffs’ claims may be dismissed.