HP's Dismissal Motion Draws No Reasonable Inferences From Pleaded Facts: Plaintiffs

HP’s claim that it’s entitled to dismissal of an 80-count antitrust and consumer fraud class action depends on "applying pleading standards that have no basis in the law of this circuit," said the response Monday (docket 1:24-cv-00164) in U.S. District Court for Northern Illinois in Chicago from the 11 plaintiffs in opposition to HP's motion to dismiss.

HP's motion draws no "reasonable inferences from the facts that were pleaded,” and introduces “purported facts” that don’t appear in the complaint, said the plaintiffs' opposition. If the court deems any of HP's bases for dismissal persuasive, it should dismiss without prejudice, it said.

The January complaint, brought by consumers who bought HP printers between 2016 and 2022, seeks to recover damages for a firmware update HP implemented in late 2022 and in 2023. The purpose of the update was to determine whether consumers had installed non-HP-branded ink cartridges in their printers. If they did, then the update “disable[d] the printer” until an HP-branded cartridge was installed, it said.

The complaint alleges plaintiffs received no warnings that HP might take such action when they bought their printers. Indeed, the company “provided some reassurances that [it] would not do this,” the answer said. Each plaintiff bought an HP printer that functioned with third-party ink at the time of purchase; that functionality ended with the firmware update that disabled the ability to accept non-HP ink, it said.

After the “illegal updates,” the printers showed error messages when plaintiffs attempted to print using third-party cartridges, saying firmware blocked the cartridges because they contained a “non-HP chip,” said the response. Plaintiffs claim injuries of “the cost of the now useless third-party ink cartridges” and inflated prices they had to pay for HP cartridges “since HP successfully monopolized the ink cartridge market.”

By “first waiting until it achieved ‘substantial sales’ of various printer models, then gradually blocking each model’s ability to use third-party ink through new firmware updates, HP sought to ‘take advantage of customers’ sunk costs,'” said the response, citing Schor v. Abbot Laboratories. That's enough to state a cause of action under the Sherman Act and relevant state statutes, it said. HP advances many arguments to counter that conclusion, but “none is convincing,” and the motion to dismiss should be denied, it said.

On Sherman Act tying claims, the plaintiffs plead a plausible aftermarket for replacement ink cartridges compatible with HP printers that are available from numerous online sources, creating a “single nationwide market,” said the response. HP claims those allegations are “implausible,” but it can’t hide the “obvious” existence of a replacement ink cartridge market of buyers and sellers, said the response.

HP seeks dismissal on a “grab bag of arguments” based on either “misreading the law” or the complaint, said the response. HP asserts tying requires an explicit contractual agreement, but that’s wrong, said the plaintiffs' response. Recently, the 7th U.S. Circuit Court of Appeals held that when a defendant adopts a policy that makes it “unreasonably difficult or costly to buy the tying product (over which the defendant has market power) without buying the tied product from the defendant, it ‘forces’ buyers to buy the tied product from the defendant and not from competitors,” said the response, citing Viamedia Inc. vs. Comcast Corp. HP’s firmware update “forces consumers to buy HP-branded ink or give up the use of their printers,” it said.

HP's argument that the plaintiffs inadequately pleaded “exclusionary conduct” fails because they pleaded that HP had sufficient market power in the tying market to effect a monopoly in a “well-defined aftermarket for HP-compatible ink cartridges,” the response said. The firmware update, which had the effect of preventing competitors from selling their products to owners of HP printers, “is unquestionably exclusionary,” it said.

HP argues it has no duty to aid competitors, but that argument was rejected in Viamedia v. Comcast, where the 7th Circuit found “that a change from past practices that has the effect of is not immune from antitrust scrutiny, even if it could be characterized as a decision to stop cooperating with competitors,” said the response. In that case, Comcast terminated contracts with Viamedia in one market to drive it out of competing in a different one, said the response. HP’s firmware update was a “change in existing practice that had the result of eliminating competition in the ink cartridge market, and is not immunized from antitrust liability,” it said.