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From Antitrust Law Daily, October 27, 2015

Monopoly claims against Keurig keep brewing, but preliminary injunction denied

By Jeffrey May, J.D.

The U.S. Court of Appeals in New York City will not prohibit Keurig Green Mountain, Inc. from selling its newer version of the Keurig single-serve coffee brewer that prevents consumers from using “unlicensed portion packs,” while coffee producer JBR, Inc. and others pursue antitrust and unfair competition law claims against Keurig. An order denying JBR preliminary injunctive relief in connection with its complaint was affirmed (JBR, Inc. v. Keurig Green Mountain, Inc., October 26, 2015, per curiam).

JBR produces, among other things, “OneCups,” which are primarily designed for use in a single-serve coffee brewer, such as the “Keurig 1.0.” Keurig makes its own portion packs, called “K-Cups,” for use in the Keurig 1.0 and also has licensing agreements with other manufacturers of portion packs that are compatible with the Keurig 1.0. The Keurig 2.0 accepts only portion packs made or licensed by Keurig. As a result, the machine does not allow consumers to use unlicensed portion packs, such as OneCups. Scanner technology reads the ink on the tops of portion packs inserted into the brewer to prevent use of unlicensed products.

JBR filed a complaint against Keurig in 2014, alleging that Keurig “monopolized the market for single-serve brewers, as well as the market for the single-serving ‘portion packs’ of coffees used in those brewers since the inception of single-serve brewers in or around 1998.” After patents on the K-Cup format expired in 2012, Keurig allegedly used its proprietary single-cup brewers to exclude competition from other formats of portion packs. JBR’s suit, which included a request for injunctive relief, was consolidated with similar actions for pretrial proceedings in the federal district court in New York City.

Expressing no view as to the merits of JBR’s antitrust and unfair competition claims, the appellate court ruled that the district court did not abuse its discretion in determining that JBR failed to make the requisite showing of irreparable harm for a preliminary injunction. JBR offered sparse evidence, in the appellate court's view.

JBR’s alleged losses of OneCup sales were speculative and remote. Further, JBR's contention that it would imminently lose a significant amount of its sales because Keurig 1.0 owners were likely to replace their existing brewers was unsubstantiated. JBR also argued that it would lose business with retailers in the so-called “away from home” (AFH) segment of the portion pack market, which was geared toward coffee consumption at commercial locations, such as offices and hotels. However, the AFH retailers' refusals to do business with JBR did not stem from the incompatibility between OneCups and the Keurig 2.0, it was found. The AFH retailers were bound by exclusivity agreements with Keurig.

The district court also properly denied a preliminary injunction barring Keurig from making alleged false statements about JBR’s products. The district court committed no abuse of discretion in concluding that JBR failed to establish any irreparable harm from a warning that users of a Keurig 2.0 see when they insert an unlicensed portion pack into their coffee makers. JBR unsuccessfully contended that “Oops! This pack wasn’t designed for this brewer” falsely implied that JBR was to blame for failing to design OneCups to be compatible with the Keurig 2.0, when the reality was that Keurig fashioned the new scanner feature to ensure that the Keurig 2.0 would not accept OneCups. In addition, claims based on Keurig's purported statements to distributors, suggesting that unlicensed portion packs could affect the quality and safety of its coffee brewers, did not establish irreparable harm.

Federal false-statement antitrust claims. The appellate court refused to opine on JBR's contention that the district court erred by applying a de minimis presumption to its federal false-statement antitrust claims. Because JBR failed to make a clear showing of irreparable injury arising from any of the alleged false statements, its motion to enjoin the alleged false statements failed on that ground alone.

In light of JBR's failure to establish irreparable harm, there was no need to reach the other components of the preliminary injunction inquiry, the appellate court concluded.

This is Case 14-3578-cv.

Attorneys: Daniel Johnson, Jr. and Kent M. Roger (Morgan Lewis & Bockius LLP) for JBR, Inc. Leah Brannon (Clearly Gottlieb Steen & Hamilton) and Wendelynne J. Newton (Buchanan Ingersoll & Rooney) for Keurig Green Mountain, Inc.

Companies: JBR, Inc.; Keurig Green Mountain, Inc.

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