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`Exhibit B
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`Amanda R. Washton (SBN 88324)
`a.washton@conklelaw.com
`CONKLE, KREMER & ENGEL, PLC
`3130 Wilshire Boulevard
`Suite 500
`Santa Monica, CA 90403
`Tel: (310) 998-9100
`
`Michael M. Lafeber (pro hac vice)
`mlafeber@taftlaw.com
`O. Joseph Balthazor Jr. (pro hac vice)
`jbalthazor@taftlaw.com
`TAFT STETTINIUS & HOLLISTER LLP
`2200 IDS Center
`80 S. 8th St.
`Minneapolis, MN 55402
`Tel: 612.977.8400
`Fax: 612.977.8650
`
`
`
`
`
`David H. Reichenberg (pro hac vice)
`COZEN O’CONNOR
`3 WTC, 175 Greenwich Street, 56th Floor
`New York, New York 10006
`T: (212) 883-4900
`F: (646) 461-2091
`dreichenberg@cozen.com
`
`Mark A. Jacobson (pro hac vice)
`COZEN O’CONNOR
`33 South 6th Street
`Suite 3800
`Minneapolis, MN 55402
`T: (612) 260-9000
`F: (612) 260-8026
`mjacobson@cozen.com
`
`
`Attorneys for Defendant, Counterclaim
`Plaintiff and Third Party Plaintiff
`Dexon Computer, Inc.
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`
`CISCO SYSTEMS, INC., a Delaware
`corporation, and CISCO TECHNOLOGY,
`INC., a California corporation,
`
`
`
`
`
`
`Plaintiffs and Counterclaim
`Defendants
`
`CASE NO: 3:20-cv-04926-CRB
`
`COUNTERCLAIM PLAINTIFF DEXON
`COMPUTER, INC.’S OPPOSITION TO
`COUNTERCLAIM DEFENDANTS CISCO
`SYSTEMS, INC. AND CISCO
`TECHNOLOGY, INC.’S MOTION TO
`DISMISS
`
`
`
`
`
`v.
`
`DEXON COMPUTER, INC.,
`
`Defendant, Counterclaim
`Plaintiff and Third Party
`Plaintiff
`
`v.
`
`ATLANTIX GLOBAL SYSTEMS
`INTERNATIONAL, LLC, BIZCOM
`ELECTRONICS, INC., DIGI DEVICES
`ONLINE, ENTERPRISE BUSINESS
`TECHNOLOGIES, INC., FIBER CABLE
`
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
`
`CASE NO. 3:20-CV-04926-CRB
`
`
`
`
`
`
`
`
`
`
`

`

`
`
`Case 3:20-cv-04926-CRB Document 81 Filed 11/03/21 Page 2 of 31Case 5:22-cv-00053-RWS-JBB Document 22-2 Filed 06/23/22 Page 3 of 32 PageID #: 466
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`CONNECTIONS, MJSI, MULTIMODE
`TECHNOLOGIES, LLC, NETWORK
`REPUBLIC, OPTIMUM DATA, INC.,
`PARAGON, PURE FUTURE
`TECHNOLOGY, INC., SEASTAR IT
`TRADING LLC, SERVER TECH
`SUPPLY, SOFTNETWORKS, INC.,
`STRADA NETWORKS, LLC,
`TEKSAVERS, UNLIMITED NETWORK
`SOLUTIONS, and WISECOM
`TECHNOLOGIES,
`
`
`Third Party Defendants
`
`
`
`
`
`
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`
`
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
`
`CASE NO. 3:20-CV-04926-CRB
`
`
`
`
`
`
`
`
`
`
`

`

`
`
`Case 3:20-cv-04926-CRB Document 81 Filed 11/03/21 Page 3 of 31Case 5:22-cv-00053-RWS-JBB Document 22-2 Filed 06/23/22 Page 4 of 32 PageID #: 467
`
`
`
`
`TABLE OF CONTENTS
`
`
`
`
`
`Page
`
`I.
`
`INTRODUCTION AND SUMMARY OF ARGUMENT ............................................. - 7 -
`
`A.
`
`B.
`
`Dexon’s Antitrust Claims .................................................................................... - 7 -
`
`Dexon’s UCL, Lanham Act, Tort and Declaratory Judgment Claims ................ - 9 -
`
`BACKGROUND .......................................................................................................... - 11 -
`
`LEGAL STANDARD ................................................................................................... - 13 -
`
`II.
`
`III.
`
`IV. ARGUMENT ................................................................................................................ - 13 -
`
`A.
`
`B.
`
`C.
`
`D.
`
`E.
`
`F.
`
`G.
`
`H.
`
`Dexon States A Per Se Tying Claim ................................................................. - 13 -
`
`Dexon Also States A Cartwright Act Claim ..................................................... - 17 -
`
`Dexon States A Monopolization Claim ............................................................ - 17 -
`
`Dexon Sustained An Antitrust Injury ................................................................ - 21 -
`
`Dexon Also States An Antitrust-Based UCL Claim ......................................... - 23 -
`
`Cisco’s Challenges to Dexon’s UCL/Lanham Act Claims Lack Merit ............ - 23 -
`
`1.
`
`2.
`
`Cisco’s Standing Argument Rejected – Direct Reliance Not
`Required ................................................................................................ - 23 -
`
`Dexon’s Claims Pled With Requisite Specificity ................................. - 25 -
`
`a.
`
`b.
`
`c.
`
`Cisco’s Deceptive “Used Equipment” Label ............................ - 25 -
`
`“First Sale Doctrine” - Cisco’s Reliance on Unenforceable
`EULA’s ..................................................................................... - 25 -
`
`Dexon’s Proper UCL Restitution Claims .................................. - 26 -
`
`N.Y Gen Bus. Law § 369-b Provides a Private Cause of Action...................... - 27 -
`
`Justiciable Controversy Exists for Dexon’s Sales of Genuine Cisco
`Products ............................................................................................................. - 29 -
`
`I.
`
`Dexon Properly Pled Tortious Interference and Defamation Claims ............... - 30 -
`
`V.
`
`CONCLUSION ............................................................................................................. - 31 -
`
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`-3-
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
`Case No. 3:20-CV-04926-CRB
`
`

`

`
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`
`
`
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`
`Page(s)
`
`Aerotec Int’l, Inc. v. Honeywell Int’l, Inc.,
`836 F.3d 1171 (9th Cir. 2016) ....................................................................................................... 16
`
`Allergan USA Inc. v. Imprimis Pharms. Inc.,
`2017 WL 10526121 (C.D. Cal. Nov. 14, 2017) ............................................................................ 24
`
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ...................................................................................................................... 13
`
`Atlantic Richfield Co. v. USA Petroleum Co.,
`495 U.S. 328 (1990) ...................................................................................................................... 21
`
`Bel Canto Design, Ltd. v. MSS Hifi, Inc.,
`837 F. Supp. 2d 208 (S.D.N.Y. 2011) ..................................................................................... 10, 28
`
`Brantley v. NBC Universal, Inc.,
`675 F.3d 1192 (9th Cir. 2012) ....................................................................................................... 14
`
`Cel-Tech Communications Inc. v. Los Angeles Cellular Telephone Co.,
`20 Cal. 4th 163 (1999) .................................................................................................................. 23
`
`Cisco Systems, Inc. et al v. Dexon Computer, Inc.,
`3:11-cv-01455-WHA (N.D. Cal.) ................................................................................................. 30
`
`Cisco Systems, Inc. v. Beccela’s Etc., LLC,
`403 F. Supp. 3d 813 (N.D. Cal. 2019) ................................................................................... passim
`
`Cisco Systems Inc. v. Link US, LLC,
`2019 WL 6682838 (N.D. Cal. Dec. 6, 2019) ......................................................................... passim
`
`City of Anaheim v. S. California Edison Co.,
`955 F.2d 1373 (9th Cir. 1992) ................................................................................................... 9, 19
`
`Coalition for ICANN Transparency, Inc. v. VeriSign, Inc.,
`611 F.3d 495 (9th Cir. 2010) ......................................................................................................... 13
`
`Coheso, Inc. v. Can't Live Without It, LLC,
`2017 WL 10434396 (N.D. Cal. Dec. 18, 2017) ............................................................................ 29
`
`Cont’l Ore Co. v. Union Carbide & Carbon Corp.,
`370 U.S. 690 (1962) .................................................................................................................. 9, 19
`
`Cont’l T.V., Inc. v. GTE Sylvania Inc.
`433 U.S. 36, 52 n.19 (1977) .......................................................................................................... 20
`
`
`
`
`-4-
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
`Case No. 3:20-CV-04926-CRB
`
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`28
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`TABLE OF AUTHORITIES
`(con’t)
`
`
`
`
`Davidowitz v. Delta Dental Plan of California, Inc.,
`946 F.2d 1476 (9th Cir. 1991) ................................................................................................. 20
`
`Page(s)
`
`Eastman Kodak Co. v. Image Tech. Servs., Inc.,
`504 U.S. 451 (1992) ......................................................................................................... passim
`
`FTC v. Qualcomm
`969 F.3d 974, 994 (9th Cir. 2020) ........................................................................................... 20
`
`Graphic Prods. Distribs. v. ITEK Corp.,
`717 F.2d 1560 (11th Cir. 1983) ............................................................................................... 20
`
`Image Technical Services Inc. v. Eastman Kodak Co.,
`125 F.3d 1195 (9th Cir. 1997) ................................................................................................. 17
`
`Jackson v. Bank of Am.
`971 N.Y.S.2d 800, 819 (Sup. Ct. 2013) .................................................................................. 28
`
`Korea Supply Co. v. Lockheed Martin Corp.,
`63 P.3d 937 (Cal. 2003) .......................................................................................................... 27
`
`L.A. Taxi Cooperative, Inc. v. Uber Technologies, Inc.,
`114 F. Supp. 3d 852 (N.D. Cal. 2015) .................................................................................... 24
`
`Lona’s Lil Eats, LLC v. DoorDash, Inc.,
`2021 WL 151978 (N.D. Cal January 18, 2021) ................................................................ 10, 24
`
`Matoff v. Brinker Rest. Corp.,
`439 F. Supp. 2d 1035 (C.D. Cal. 2006)................................................................................... 27
`
`Moore v. Matthews & Co.,
`550 F.2d 1207 (9th Cir. 1977) ................................................................................................. 13
`
`Mozart Co. v. Mercedes Benz of N.A., Inc
`833 F.2d 1342, 1348-50 (9th Cir. 1987) ................................................................................. 21
`
`Newcal Indus., Inc. v. Ikon Office Sol.,
`513 F.3d 1038 (9th Cir. 2008) ................................................................................................. 14
`
`Port Dock & Stone Corp. v. Oldcastle Ne., Inc.
`507 F.3d 117, 125 (2d Cir. 2007) ............................................................................................ 21
`
`Pulaski & Middleman, LLC v. Google, Inc.,
`802 F.3d 979 (9th Cir. 2015) ................................................................................................... 23
`
`San Diego Cty. Credit Union v. Citizens Equity First Credit Union,
`344 F. Supp. 3d 1147 (S.D. Cal. 2018) ................................................................................... 29
`
`
`
`
`-5-
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
`Case No. 3:20-CV-04926-CRB
`
`

`

`
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`TABLE OF AUTHORITIES
`(con’t)
`
`Sec. Pac. Nat. Tr. Co. v. Cuevas,
`675 N.Y.S.2d 500 (Civ. Ct. 1998) .......................................................................................... 28
`
`Page(s)
`
`
`
`Sheehy v. Big Flats Community Day,
`541 N.E.2d 18 (1989) .............................................................................................................. 28
`
`SmileCare Dental Grp. v. Delta Dental Plan of Cal., Inc
`88 F.3d 780, 786 (9th Cir. 1996) ............................................................................................. 20
`
`SPS Techs., LLC v. Briles Aero., Inc.,
`2019 WL 6841992 (C.D. Cal. Oct. 30, 2019) ......................................................................... 24
`
`Twitter, Inc. v. VoIP-Pal.com, Inc.,
`2020 WL 7342733 (N.D. Cal. Dec. 14, 2020) ........................................................................ 30
`
`VP Racing Fuels, Inc. v. General Petroleum Corp.,
`2010 WL 1611398 (E.D. Cal. 2010) ....................................................................................... 24
`
`Worldhomecenter.com, Inc. v. KWC America, Inc.,
`2011 WL 4352390 (S.D.N.Y. Sept. 15, 2011) ............................................................ 10, 27, 28
`
`
`
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`
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`-6-
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
`Case No. 3:20-CV-04926-CRB
`
`

`

`
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`Case 3:20-cv-04926-CRB Document 81 Filed 11/03/21 Page 7 of 31Case 5:22-cv-00053-RWS-JBB Document 22-2 Filed 06/23/22 Page 8 of 32 PageID #: 471
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`I.
`INTRODUCTION AND SUMMARY OF ARGUMENT
`
`A.
`
`Dexon’s Antitrust Claims
`
`Cisco forces its customers to buy overpriced networking equipment they do not want by
`
`using its monopoly power in the aftermarkets for service and maintenance and foreclosing its
`
`network equipment competitors in the process. Cisco does not dispute that (i) it is a monopolist in
`
`the relevant markets for Ethernet Switches and Routers (Dexon’s Counterclaims, ECF No. 50
`
`(hereinafter “CC”), ¶¶ 22-35) (ii) it is a monopolist in the relevant aftermarkets for service and
`
`maintenance on those products (id. ¶¶ 16-21), (iii) the relevant aftermarkets for service and
`
`maintenance are separate from the relevant equipment markets (id. ¶¶ 20-21), and (iv) it forced
`
`customers to buy overpriced Ethernet Switches and routers by belatedly claiming that to receive
`
`the service and maintenance customers were previously promised and had already purchased,
`
`customers were required to buy new Cisco equipment (id. ¶¶ 36-45). Cisco primarily argues that
`
`Dexon does not plead that Cisco’s equipment competitors were harmed (Cisco’s Motion to Dismiss,
`
`ECF No. 72 (hereinafter “Motion”), at 1), but that is precisely what is alleged:
`
`Cisco’s conduct also has a direct impact on its competitors in the Relevant Product
`Markets, because in the presence of such pressure, customers are not free to make
`a product choice on the merits but rather need to account for the likely reaction of
`Cisco. Because of the inherently connected and complementary nature of the
`products in the Relevant Product Markets, customers need to take account of what
`treatment it will face if it draws Cisco’s disapproval. In this environment, Cisco
`competitors in the Relevant Product Markets have less revenue than they should
`to bolster next generation innovation, and potential competitors have less incentive
`and ability to overcome the barriers Cisco has erected and viably enter the
`Relevant Product Markets.
`
`
`The inevitable effect of this course of conduct is to drive supra-competitive prices
`in the Relevant Product Markets and hinder the ability for customers to find
`alternatives. While in theory customers could divert purchases in the Relevant
`Product Markets to Cisco’s competitors, because of Cisco’s installed base for so
`many of its customers is a large portion of their networks, it is practically difficult
`for many customers to make a wholesale change, or to even do so over an extended
`period of time given the infrequency of new purchases. As the [previously alleged]
`examples make clear, many customers are left with no practical choice other than
`to purchase equipment in the Relevant Product Markets on Cisco’s terms or face a
`greater risk of a technical compromise.
`
`- 7 -
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
` Case No. 3:20-CV-04926-CRB
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`Throughout the time Cisco engaged in this anticompetitive conduct, [Cisco] had a
`dangerous probability of succeeding in gaining a monopoly in and controlling each
`of the Relevant Product Markets and continuing to maintain supra-competitive
`prices and exclude its competitors.
`
`CC ¶¶ 55, 57, 79; see also CC ¶¶ 67, 73, 89. Cisco does not cite, let alone address these allegations
`
`which spell out how smaller competitors are foreclosed when customers are forced to buy from a
`
`monopolist.
`
`Cisco next argues that Dexon did not sustain an antitrust injury (Motion at 15-16), but
`
`ignores that the overall purpose and effect of Cisco’s scheme was to prevent resellers like Dexon
`
`from offering best competitive options to its customers, including from Cisco’s smaller
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`competitors. Cisco’s anticompetitive and coercive conduct steered sales to Cisco and away from
`
`Cisco’s competitors and also injured Dexon because customers were forced to forego new
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`purchases from Dexon as a result of Cisco’s threats not to service previously installed network
`
`equipment.
`
`Cisco then addresses a purported “opaque refusal to deal claim,” (Motion at 12) but that
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`mischaracterizes Dexon’s claims. Through the above coercion scheme, Cisco has engaged in a per
`
`se violation of Section 1 of the Sherman Act and it has unlawfully maintained its network
`
`equipment monopolies in violation of Section 2 of the Sherman Act. As part of that same coercion
`
`scheme, Cisco also (i) engaged in bullying tactics with customers not to use resellers like Dexon
`
`even though customers’ needs were being met, (ii) pressured at least one value added reseller
`
`(VAR) not to sell to Dexon despite the VAR’s desire to do so, and (iii) intentionally sustained
`
`losses to networking equipment competitors in order to drive price-cutting resellers like Dexon out
`
`of the market. CC ¶¶ 43-45, 49-53. While the third of these acts includes Cisco’s reversal of its
`
`decision to work with Dexon and subsequent “refusal” to provide Dexon access to a database, the
`
`gravamen of the Section 2 claim is that all of these acts are part of Cisco’s coordinated plan to
`
`maintain its equipment monopolies in the long run. The Supreme Court and Ninth Circuit have
`
`made clear an anticompetitive scheme is not judged by “tightly compartmentalizing the various
`
`factual components and wiping the slate clean after scrutiny of each,” but rather where acts have a
`
`- 8 -
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
` Case No. 3:20-CV-04926-CRB
`
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`
`

`

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`combined “synergistic effect” on competition, as here, they are properly encompassed by the claim.
`
`See Cont’l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 698-99 (1962); City of
`
`Anaheim v. S. California Edison Co., 955 F.2d 1373, 1376 (9th Cir. 1992). Where one of the
`
`improper acts is a per se antitrust violation and the others supplement a long term plan to maintain
`
`supracompetitive pricing, they are all properly the subject of a Section 2 claim.
`
`The balance of Cisco’s antitrust arguments make improper assertions about the merits of
`
`the claims without the benefit of discovery. For instance, Cisco asserts that it “has every incentive
`
`to design a distribution system that is efficient – if middlemen earn large profits, that raises prices
`
`for end users and hurts Cisco’s sales.” Motion at 1. But Cisco ignores that it is an admitted
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`monopolist, and it has resorted to the alleged tactics to force customers to buy its equipment at
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`inflated prices while foreclosing competitors at the same time. If its plan succeeds, Cisco’s inflated
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`prices will yield higher profits and its foreclosure efforts will prevent customers from switching to
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`lower-priced competitors. As Dexon explains in its counterclaims, if Cisco can force ultimate
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`customers to purchase from its more expensive channels, then there is less of a need and ability for
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`Cisco’s preferred dealers to negotiate for price reductions that would impact Cisco’s profits. CC ¶¶
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`44-45. Cisco’s anticompetitive acts seeks to preserve both its monopolies and associated
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`supracompetitive pricing, while small and medium businesses bear the brunt of the economic harm.
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`B.
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`Dexon’s UCL, Lanham Act, Tort and Declaratory Judgment Claims
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`Dexon is an independent secondary-market reseller of computer networking products,
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`including genuine Cisco products. CC ¶¶ 95-96. As detailed in Dexon’s Amended Counterclaims,
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`Cisco unfairly and anti-competitively seeks to control and defeat the secondary market in several
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`improper ways, including:
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`Labeling genuine, lawfully obtained Cisco products as “used equipment” solely
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`because such products were traded on the secondary market. Id. ¶¶ 110-112;
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`Informing consumers they are unable to use genuine Cisco equipment purchased
`ii)
`on the secondary market because such use violates Cisco’s unenforceable End User License
`Agreement (“EULA”). Id. ¶¶ 100-103;
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`Unilaterally voiding SmartNet service packages which Cisco originally authorized,
`iii)
`approved and accepted payment for solely because a covered product was purchased on the
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`- 9 -
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
` Case No. 3:20-CV-04926-CRB
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`Case 3:20-cv-04926-CRB Document 81 Filed 11/03/21 Page 10 of 31Case 5:22-cv-00053-RWS-JBB Document 22-2 Filed 06/23/22 Page 11 of 32 PageID #: 474
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`secondary market and failing to provide any refund in violation of Cisco’s own purported
`policies. Id. ¶¶ 108-119.
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`Cisco’s challenges to such UCL and Lanham Act claims lack merit. First, this Court has
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`rejected the direct “reliance” requirement advocated by Cisco. Lona’s Lil Eats, LLC v. DoorDash,
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`Inc., 2021 WL 151978 *11 (N.D. Cal January 18, 2021). Second, Dexon’s UCL claims have been
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`pled with the requisite specificity. Without limitation, Dexon’s claims concerning Cisco’s
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`misleading definition of “used equipment” and Cisco’s improper reliance on an unenforceable
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`EULA mirror claims previously allowed by this Court. Lastly, Dexon is not seeking lost “future”
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`profits, but rather the value of its vested interest in contracts cancelled due to Cisco’s UCL
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`violations, as well as restitution for Cisco’s practice of improperly cancelling previously approved
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`SmartNet contracts and retaining all prepayments.
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`Cisco’s contention New York General Business Law (“GBL”) § 369-b does not provide a
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`private cause of action likewise fails. Cisco relies on Cisco Systems, Inc. v. Beccela’s Etc., LLC,
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`403 F. Supp. 3d 813 (N.D. Cal. 2019) which in turn relied exclusively on Worldhomecenter.com,
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`Inc. v. KWC America, Inc., 2011 WL 4352390, at *8 (S.D.N.Y. Sept. 15, 2011), an unpublished
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`Southern District of New York decision. In a subsequent well-reasoned published opinion, Bel
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`Canto Design, Ltd. v. MSS Hifi, Inc., 837 F. Supp. 2d 208, 227 (S.D.N.Y. 2011), the Southern
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`District of New York rejected Worldhomecenter.com and held that a policy identical to Cisco’s
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`violated section 369-b.
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`Cisco’s contention no “justiciable controversy” exists concerning Cisco labeling sales
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`outside “authorized” channels as infringing lacks merit. First, Cisco’s own complaint asserts
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`infringement claims for sales of software licenses outside of “authorized” channels. Dkt. 32 ¶ 63,
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`71). Second, Cisco repeatedly threatens Dexon’s customers that product purchased outside
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`“authorized channels” violates Cisco’s intellectual property rights. Lastly, Cisco has a history of
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`commencing litigation against Dexon and similarly situated secondary market resellers alleging the
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`sale of genuine product constitutes infringement.
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`- 10 -
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
` Case No. 3:20-CV-04926-CRB
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`Case 3:20-cv-04926-CRB Document 81 Filed 11/03/21 Page 11 of 31Case 5:22-cv-00053-RWS-JBB Document 22-2 Filed 06/23/22 Page 12 of 32 PageID #: 475
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`II.
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`BACKGROUND
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`Dexon’s counterclaims explain, and Cisco does not challenge, its monopolies in six
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`interconnected but separate relevant markets: (i) the worldwide and US markets for Ethernet
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`Switches, (ii) the worldwide and US markets for routers (these four markets are jointly referred to
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`as the Relevant Product Markets), and (iii) the worldwide and US aftermarkets for the service and
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`maintenance of Cisco networking equipment (jointly referred to as the Relevant Service Markets).
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`Id. ¶¶ 16-35. Ethernet Switches are complements (rather than substitutes) for routers because while
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`Ethernet switches connect components to create a network, routers allow for communication
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`between networks. Id. ¶ 27. The Relevant Service Markets are separate from the Relevant Product
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`Markets because, inter alia, customers can and do purchase Cisco networking equipment without
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`maintenance services, and the pricing for networking equipment is entirely independent and
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`separate from Cisco’s SmartNet service package pricing. Id. ¶ 20-21. Cisco does not challenge its
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`monopolies in these markets because its market shares in the Relevant Product Markets have
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`consistently been above 60%, and sometimes above 70%, in the last two decades, and its market
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`shares in the Relevant Service Markets consistently exceeds 90%, and all of these markets are
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`characterized by high barriers to entry and expansion. Id. ¶¶ 26, 30-35.
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`For at least the last six years, Cisco has used its monopolies in the Relevant Service Markets
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`as a weapon to force customer purchases in the Relevant Product Markets. Id. ¶¶ 36-45.
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`Specifically, customers buy routers and Ethernet switches manufactured by Cisco, and also
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`separately purchase the SmartNet service package for those products for a one to five year period.
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`Id. ¶ 3. At the time a SmartNet service package is purchased, Cisco approves customers’ SmartNet
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`service purchase and knows that in many cases the service package is being purchased through a
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`secondary reseller. Id. SmartNet customers then receive service from Cisco for a portion of the
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`period, but at some point before the end of the service package period, when customers contact
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`Cisco to get the service they paid for, Cisco changes its policy and notifies customers that their
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`SmartNet service has been terminated unless they buy entirely new routers and/or Ethernet switches
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`from a specified Cisco reseller at a far higher price than the original network equipment purchase.
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`- 11 -
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
` Case No. 3:20-CV-04926-CRB
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`Case 3:20-cv-04926-CRB Document 81 Filed 11/03/21 Page 12 of 31Case 5:22-cv-00053-RWS-JBB Document 22-2 Filed 06/23/22 Page 13 of 32 PageID #: 476
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`Id. Alternatively, to preserve customers’ SmartNet service, Cisco will demand a “re-certification”
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`fee on the customers’ original equipment purchase, charging just as much if not more than the
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`original equipment purchase and providing no value to the customer other than restoration of
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`SmartNet. Id. In one case, Cisco even threatened a customer that it would not service any of the
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`customer’s Cisco products pursuant to its SmartNet service package, regardless of how or when the
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`customer previously purchased those products, unless the customer made all new equipment
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`purchases. Id.
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`This conduct is not sporadic, but rather part of an enterprise-wide scheme to use SmartNet
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`service packages to be sure that customers purchase networking equipment at supracompetitive
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`prices to pad Cisco’s profits as well as the commissions of its sales representatives. Id. ¶¶ 44-45.
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`As explained above, this conduct foreclosed Cisco’s competitors in the Relevant Product Markets,
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`depriving customers of the free choice between vendors they would have had in the absence of
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`coercion.
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`Cisco’s anticompetitive scheme is supplemented by a series of acts that further deprives
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`customers’ ability to utilize aggressive reseller pricing and service, such as the type provided by
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`Dexon. Cisco has bullied customers including a 911-service center that unless it purchased new
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`equipment to replace its Dexon-supplied equipment, Cisco would not service its existing
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`equipment. Id. ¶¶ 43, 56. Cisco also threatened VARs which successfully worked with Dexon in
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`the past not to do business with Dexon, with a VAR being forced to reassign one of its employees
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`for refusing to comply with Cisco’s demand. Id. ¶¶ 52-53. In addition, Cisco decided in 2016 that
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`it was willing to sustain a short term loss in order to cut off Dexon’s ability to service its customers,
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`for the purpose of maintaining supracompetitive pricing for its equipment in the long run. Id. ¶¶
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`49-51. As explained below, Cisco is a monopolist that took a series of economically irrational acts
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`as parts of a plan to maintain its monopoly power and charge supracompetitive prices.
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`The overall purpose and effect of Cisco’s actions has been to force customer purchases that
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`restrain competition and restrain price competition, and as part of that plan, to reduce or eliminate
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`customers’ access to a reseller channel that is more aggressive in pricing than Cisco would prefer.
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`Id. ¶¶ 55, 66-68, 72-74. As Dexon explains in its counterclaims and Cisco ignores, a monopolist
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`- 12 -
`COUNTERCLAIM PLAINTIFF’S OPPOSITION TO COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS
` Case No. 3:20-CV-04926-CRB
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`Case 3:20-cv-04926-CRB Document 81 Filed 11/03/21 Page 13 of 31Case 5:22-cv-00053-RWS-JBB Document 22-2 Filed 06/23/22 Page 14 of 32 PageID #: 477
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`is not permitted to take coercive and other actions that do not constitute competition on the merits
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`to maintain or expand its monopolies, especially where it holds a monopoly position in a number
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`of interrelated markets. Id. ¶¶ 1-9.
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`III.
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`LEGAL STANDARD
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`To withstand a motion to dismiss, Dexon’s Counterclaims need only contain “sufficient
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`factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
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`Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
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`“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to
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`draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. In
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`assessing the sufficiency of Dexon’s Counterclaims, “[a]ll allegations of material fact are taken as
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`true and are construed in the light most favorable to” Dexon. S