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Berkey Photo, Inc. v. Eastman Kodak Company, 603 F.2d 263 (2d Cir. 1979) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 1979 › Berkey Photo, Inc. v. Eastman Kodak Company
Berkey Photo, Inc. v. Eastman Kodak Company, 603 F.2d 263 (2d Cir. 1979)
US Court of Appeals for the Second Circuit - 603 F.2d 263 (2d Cir. 1979)
Argued April 18, 1979. Submitted April 30, 1979. Decided June 25, 1979
Alvin M. Stein, New York City (Barry J. Brett, Mark I. Schlesinger, Aurora Cassirer, Mark D. Offen, Parker, Chapin, Flattau & Klimpl, New York City, Neuman, Williams, Anderson & Olson, Chicago, Ill., of counsel), for plaintiff-appellee-cross appellant.
William Piel, Jr., New York City (Robert MacCrate, John L. Warden, Richard E. Carlton, Jerrold J. Ganzfried, Philip K. Howard, Shelley D. LaVine, William L. Farris, Sullivan & Cromwell, New York City, of counsel), for defendant-appellant-cross appellee.
The two firms thus stand in a complex, multifaceted relationship, for Kodak has been Berkey's competitor in some markets and its supplier in others. In this action, Berkey claims that every aspect of the association has been infected by Kodak's monopoly power in the film, color print paper, and camera markets, willfully acquired, maintained, and exercised in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. It also charges that Kodak conspired with flashlamp manufacturers in violation of § 1 of the Act, 15 U.S.C. § 1. Berkey alleges that these violations caused it to lose sales in the camera and photofinishing markets and to pay excessive prices to Kodak for film, color print paper, and photofinishing equipment.1 A number of the charges arise from Kodak's 1972 introduction of the 110 photographic system, featuring a "Pocket Instamatic" camera and a new color print film, Kodacolor II, but the case is not limited to that episode. It embraces many of Kodak's activities for the last decade and, indeed, from preceding years as well.
The "amateur conventional still camera" market now consists almost entirely of the so-called 110 and 126 instant-loading cameras. These are the direct descendants of the popular "box" cameras, the best-known of which was Kodak's so-called "Brownie." Small, simple, and relatively inexpensive, cameras of this type are designed for the mass market rather than for the serious photographer.2
Kodak has long been the dominant firm in the market thus defined. Between 1954 and 1973 it never enjoyed less than 61% Of the annual unit sales, nor less than 64% Of the dollar volume, and in the peak year of 1964, Kodak cameras accounted for 90% Of market revenues. Much of this success is no doubt due to the firm's history of innovation. In 1963 Kodak first marketed the 126 "Instamatic" instant-loading camera,3 and in 1972 it came out with the much smaller 110 "Pocket Instamatic." Not only are these cameras small and light, but they employ film packaged in cartridges that can simply be dropped in the back of the camera, thus obviating the need to load and position a roll manually. Their introduction triggered successive revolutions in the industry. Annual amateur still camera sales in the United States averaged 3.9 million units between 1954 and 1963, with little annual variation. In the first full year after Kodak's introduction of the 126, industry sales leaped 22%, and they took an even larger quantum jump when the 110 came to market. Other camera manufacturers, including Berkey, copied both these inventions but for several months after each introduction anyone desiring to purchase a camera in the new format was perforce remitted to Kodak.
Berkey has been a camera manufacturer since its 1966 acquisition of the Keystone Camera Company, a producer of movie cameras and equipment.4 In 1968 Berkey began to sell amateur still cameras made by other firms, and the following year the Keystone Division commenced manufacturing such cameras itself. From 1970 to 1977, Berkey accounted for 8.2% Of the sales in the camera market in the United States,5 reaching a peak of 10.2% In 1976. In 1978, Berkey sold its camera division and thus abandoned this market.
The relevant market for photographic film comprises color print, color slide, color movie, and black-and-white film.6 Kodak's grip on this market is even stronger than its hold on cameras. Since 1952, its annual sales have always exceeded 82% Of the nationwide volume on a unit basis, and 88% In revenues. Foreign competition has recently made some inroads into Kodak's monopoly, but the Rochester firm concedes that it dominated film sales throughout the period relevant to this case. Indeed, in his summation, Kodak's trial counsel told the jury that "the film market . . . has been a market where there has not been price competition and where Kodak has been able to price its products pretty much without regard to the products of competitors."
Kodak's monopoly in the film market is particularly important to this case, because the jury accepted Berkey's contention, noted above, that it had been used to disadvantage rivals in cameras, photofinishing, photofinishing equipment, and other markets. Of special relevance to this finding is the color print film segment of the industry, which Kodak has dominated since it introduced "Kodacolor," the first amateur color print film, in 1942.7 In 1963, when Kodak announced the 126 Instamatic camera, it also brought out a new, faster color print film Kodacolor X which was initially available to amateur photographers only in the 126 format.8 Nine years later, Kodak repeated this pattern with the simultaneous introduction of the 110 Pocket Instamatic and Kodacolor II film. For more than a year, Kodacolor II was made only for 110 cameras, and Kodak has never made any other color print film in the 110 size.
Before 1954, Kodak's Color Print and Processing Laboratories (CP&P) had a nearly absolute monopoly of color photofinishing maintained by a variety of practices. Accounting for over 95% Of color film sales, Kodak sold every roll with an advance charge for processing included. Consumers had little choice but to purchase Kodak film, and in so doing they acquired the right to have that film developed and printed by CP&P at no further charge. Since few customers would duplicate their costs to procure the services of a non-Kodak photofinisher, Kodak was able to parlay its film monopoly to achieve equivalent market power in photofinishing.9
Berkey is one of the largest of these processors. It has been a photofinisher since 1933, but until 1954 its principal business was developing and printing black-and-white film.10 In addition, Berkey purchased Kodak black-and-white film, which was sold without a processing tie-in, for resale to its photofinishing customers. After the 1954 decree, Berkey applied to Kodak for the appropriate licenses and in 1956 began to process significant amounts of color film. It now finishes more 126 and 110 color print film than does Kodak.
The Sherman Antitrust Act of 1890 has been characterized as "a charter of freedom," Appalachian Coals, Inc. v. United States, 288 U.S. 344, 359, 53 S. Ct. 471, 77 L. Ed. 825 (1933). For nearly ninety years it has engraved in law a firm national policy that the norm for commercial activity must be robust competition. The most frequently invoked section of the Act is the first, which forbids contracts, combinations, or conspiracies in restraint of trade. But the prohibition of § 1 is incomplete, Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 60-61, 31 S. Ct. 502, 55 L. Ed. 619 (1911), for it only applies to conduct by two or more actors. If sufficiently powerful, however, a single economic entity may also stifle competition. 1 R. Callmann, The Law of Unfair Competition, Trademarks, and Monopolies 341-42 (3d ed. 1967). Accordingly, in § 2 of the Sherman Act, Congress made it unlawful to "monopolize, or attempt to monopolize, or combine or conspire . . . to monopolize" any part of interstate or foreign commerce. It is § 2 to which we give our principal attention in analyzing this case.
In passing the Sherman Act, Congress recognized that it could not enumerate all the activities that would constitute monopolization. Section 2, therefore, in effect conferred upon the federal courts "a new jurisdiction to apply a 'common law' against monopolizing." 3 P. Areeda & D. Turner, Antitrust Law 40 (1978). In performing that task, the courts have enunciated certain principles that by now seem almost elementary to any student of antitrust law. But, because § 2 must reconcile divergent and sometimes conflicting policies, it has been difficult to synthesize the parts into a coherent and consistent whole. To provide a framework for deciding the issues presented by this case, therefore, we begin by stating what we conceive to be the fundamental doctrines of § 2.
The gravamen of a charge under § 1 of the Sherman Act is conduct in restraint of trade; no fundamental alteration of market structure is necessary. Thus, certain restrictive practices among competitors, such as price fixing, are illegal Per se. That the conspirators lack the market power to affect prices is immaterial. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 224 n.59, 60 S. Ct. 811, 84 L. Ed. 1139 (1940). Section 2, by contrast, is aimed primarily not at improper conduct but at a pernicious market structure in which the concentration of power saps the salubrious influence of competition.
Indeed, there is little argument over the principle that existence of monopoly power "the power to control prices or exclude competition," E. I. du Pont de Nemours & Co., supra, 351 U.S. at 391, 76 S. Ct. at 1005 is "the primary requisite to a finding of monopolization." 1 M. Handler, Twenty-five Years of Antitrust 691 (1973). The Supreme Court has informed us that "monopoly power, whether lawfully or unlawfully acquired, may itself constitute an evil and stand condemned under § 2 even though it remains unexercised." United States v. Griffith, 334 U.S. 100, 107, 68 S. Ct. 941, 945, 92 L. Ed. 236 (1948).
Because, like all power, it is laden with the possibility of abuse; because it encourages sloth rather than the active quest for excellence; and because it tends to damage the very fabric of our economy and our society, monopoly power is "inherently evil." United States v. United Shoe Machinery Corp., 110 F. Supp. 295, 345 (D. Mass. 1953), Aff'd per curiam, 347 U.S. 521, 74 S. Ct. 699, 99 L. Ed. 910 (1954); See United States v. Grinnell Corp., 236 F. Supp. 244, 258 (D.R.I. 1964), Aff'd in part, 384 U.S. 563, 86 S. Ct. 1698, 16 L. Ed. 2d 778 (1966). If a finding of monopoly power were all that were necessary to complete a violation of § 2, our task in this case would be considerably lightened. Kodak's control of the film and color paper markets clearly reached the level of a monopoly. And, while the issue is a much closer one, it appears that the evidence was sufficient for the jury to find that Kodak possessed such power in the camera market as well.11 But our inquiry into Kodak's liability cannot end there.
The conundrum was indicated in characteristically striking prose by Judge Hand, who was not able to resolve it. Having stated that Congress "did not condone 'good trusts' and condemn 'bad' ones; it forbad all," Alcoa, supra, 148 F.2d at 427, he declared with equal force, "The successful competitor, having been urged to compete, must not be turned upon when he wins," Id. at 430. Hand, therefore, told us that it would be inherently unfair to condemn success when the Sherman Act itself mandates competition. Such a wooden rule, it was feared, might also deprive the leading firm in an industry of the incentive to exert its best efforts. Further success would yield not rewards but legal castigation. The antitrust laws would thus compel the very sloth they were intended to prevent. We must always be mindful lest the Sherman Act be invoked perversely in favor of those who seek protection against the rigors of competition. E.g., Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48 (2d Cir. 1979).
In Alcoa the crosscurrents and pulls and tugs of § 2 law were reconciled by noting that, although the firm controlled the aluminum ingot market, "it may not have achieved monopoly; monopoly may have been thrust upon it." 148 F.2d at 429. In examining this language, which would condemn a monopolist unless it is "the passive beneficiary of a monopoly," Id. at 430, we perceive Hand the philosopher. As an operative rule of law, however, the "thrust upon" phrase does not suffice. It has been criticized by scholars, 3 P. Areeda & D. Turner, Supra, at 20; L. Sullivan, Supra, at 96-97; Handler, Some Unresolved Problems of Antitrust, 62 Colum. L. Rev. 930, 934 (1962), and the Supreme Court appears to have abandoned it. See United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S. Ct. 1698, 16 L. Ed. 2d 778 (1966); 1 M. Handler, Supra, at 692. Grinnell instructs that after possession of monopoly power is found, the second element of the § 2 offense is "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." 384 U.S. at 570-71, 86 S. Ct. at 1704.
The key to analysis, it must be stressed, is the concept of market power. Although power may be derived from size, E. g., United States v. Swift & Co., 286 U.S. 106, 116, 52 S. Ct. 460, 76 L. Ed. 999 (1932), the two are not identical. F. Scherer, Supra, at 352. A firm that has lawfully acquired a monopoly position is not barred from taking advantage of scale economies by constructing, for example, a large and efficient factory. These benefits are a consequence of size and not an exercise of power over the market.12 Nevertheless, many anticompetitive actions are possible or effective only if taken by a firm that dominates its smaller rivals. See Telex Corp. v. International Business Machines Corp., 510 F.2d 894, 925-26 (10th Cir.), Cert. dismissed, 423 U.S. 802, 96 S. Ct. 8, 46 L. Ed. 2d 244 (1975). A classic illustration is an insistence that those who wish to secure a firm's services cease dealing with its competitors. See, e. g., Lorain Journal Co., supra. Such conduct is illegal when taken by a monopolist because it tends to destroy competition, although in the hands of a smaller market participant it might be considered harmless, or even "honestly industrial." Alcoa, supra, 148 F.2d at 431.
It is clear that a firm may not employ its market position as a lever to create or attempt to create a monopoly in another market. See, e. g., Griffith, supra; Smith-Kline Corp. v. Eli Lilly & Co., 575 F.2d 1056 (3d Cir.), Cert. denied, 439 U.S. 838, 99 S. Ct. 123, 58 L. Ed. 2d 134 (1978). Kodak, in the period relevant to this suit, was never close to gaining control of the markets for photofinishing equipment or services and could not be held to have attempted to monopolize them.13 Berkey nevertheless contends that Kodak illicitly gained an advantage in these areas by leveraging its power over film and cameras. Accordingly, we must determine whether a firm violates § 2 by using its monopoly power in one market to gain a competitive advantage in another, albeit without an attempt to monopolize the second market. We hold, as did the lower court, that it does.
We need not rely solely on policy considerations or an analysis of the Griffith dictum to support the view asserted here. Indeed, whatever problems of murkiness may plague the Alcoa opinion, on this point it is pellucid. The defendant had employed its monopoly power in the ingot market to impose a price squeeze on the manufacturers of aluminum sheet.14 Although this court expressly noted that there was no attempt to monopolize the sheet market, it held the challenged practice to be "an unlawful exercise of 'Alcoa's' power." 148 F.2d at 438. A more recent case arriving at the same conclusion is Sargent-Welch Scientific Co. v. Ventron Corp., 567 F.2d 701, 711-13 (7th Cir.), Cert. denied, 439 U.S. 822, 99 S. Ct. 87, 58 L. Ed. 2d 113 (1978). There a manufacturer of precision scientific instruments with a monopoly in the market for electromagnetic microbalances allegedly threatened to refuse to sell these devices to retailers who did not stock its millibalances as well. The court ruled that this practice would violate § 2, even though Ventron did not seek or gain a monopoly in the market for millibalances.15
The early view at P-30 had been that despite this problem Kodacolor X would prove "quite adequate" for the new format. By 1966, however, the Kodacolor Future System Committee, considering Kodak's film sales in the 126 size as well as in the format being created by Project 30, began actively to consider the possibility of developing a new type of Kodacolor film. This engendered the second set of ripples, for the committee realized that basic changes in the film would require a new photofinishing process, conducted at temperatures higher than those used in the so-called C-22 method by which prints were made from Kodacolor X. Some committee members, therefore, expressed concern about the effect that a new process might have on independent photofinishers, who developed Kodak film and were purchasers of Kodak equipment and supplies. These concerns were shared by a number of Kodak scientists, such as D. M. Zwick, who feared an "unethical" attempt to create a "deliberate . . . incompatibility with systems other than Kodacolor."16
(w)ithout a new film, the (camera) program is not a new advertisable system. Without the film, our splicer and processors (for the new high-temperature photofinishing process) are not required.
Shortly after initial production runs began in October 1971, Kodak recognized that "several product deficiencies" would exist in the film, now called Kodacolor II, at the time of introduction. Indeed, just eight days before the joint announcement of the new camera, film, and photofinishing process, a technical committee listed eleven "presently identified" problems that could affect "the customer's ultimate quality." Not only did Kodacolor II have a significantly shorter shelf life than had been anticipated, but it also proved grainier than Kodak had originally hoped. This problem was highly significant, of course, because low graininess was supposedly the quality that made Kodacolor II especially suitable for the Pocket Instamatic cameras.17
In accord with Kodak's 1967 plan, Kodacolor II was sold only in the 110 format for eighteen months after introduction. It remains the only 110-size color print film Kodak has ever sold.18
Berkey contends that the introduction of the 110 system was both an attempt to monopolize and actual monopolization of the camera market. It also alleges that the marketing of the new camera constituted an impermissible leveraging of Kodak's film monopoly into the two photofinishing markets, services and equipment.19
Because the jury returned what amounted to general verdicts for the plaintiff on each of these charges, we are bound in the following discussion to construe the evidence and the possible inferences in the light most favorable to Berkey. See, e. g., Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 696 & n.6, 82 S. Ct. 1404, 8 L. Ed. 2d 777 (1962). We note En passant, however, that in large and complex cases such as this, involving many novel legal issues, the better practice would have been to require special verdicts or the submission of interrogatories to the jury pursuant to Fed. R. Civ. P. 49. In that way the right to a jury trial of all factual issues is preserved20 while the probability of a laborious and expensive retrial is reduced. See SCM Corp. v. Xerox Corp., 463 F. Supp. 983, 988-90 & nn.13, 15 (D. Conn. 1978), Remanded on other grounds, 599 F.2d 32 (2d Cir. 1979). Certainly the already difficult task of reviewing a case of this magnitude would have been eased somewhat for this court if we knew precisely what the jury's findings were on several specific factual issues.
There is little doubt that the evidence supports the jury's implicit finding that Kodak had monopoly power in cameras.21 The principal issues presented to us regarding the effect of the 110 introduction in the camera market are whether Kodak engaged in anticompetitive conduct and, if so, whether that conduct caused injury to Berkey.
As early as 1968, some Kodak employees urged that advance warning of the P-30 system would be needed, at least to film processors and manufacturers of photofinishing equipment, to give them time to prepare for Kodacolor II and the new high-temperature finishing process, which was eventually labeled C-41. One memorandum noted that "P-30 will require more changes in photofinishing techniques than were required for P-13 (the 126 system). These differences . . . seem to indicate a minimum 6 month advance disclosure to other firms."22 Nevertheless, Kodak decided not to release advance information about the new film and format. The decision was evidently based on the perception of Dr. Louis K. Eilers, Kodak's chief executive officer at that time, that Kodak would gain more from being first on the market for the sale of all goods and services related to the 110 system than it would lose from the inability of other photofinishers to process Kodacolor II. An important factor in Eilers's thinking may have been that Kodak had already decided to manufacture the new film initially in the 110 format only. Since Kodacolor II could not be used in any pre-existing cameras, the demand for photofinishing services and equipment in the first several months would be within the capacities of CP&P and KAD.
Moreover, enforced predisclosure would cause undesirable consequences beyond merely encouraging the sluggishness the Sherman Act was designed to prevent. A significant vice of the theory propounded by Berkey lies in the uncertainty of its application. Berkey does not contend, in the colorful phrase of Judge Frankel, that "Kodak has to live in a goldfish bowl," disclosing every innovation to the world at large.23 However predictable in its application, such an extreme rule would be insupportable. Rather, Berkey postulates that Kodak had a duty to disclose limited types of information to certain competitors under specific circumstances. But it is difficult to comprehend how a major corporation, accustomed though it is to making business decisions with antitrust considerations in mind, could possess the omniscience to anticipate all the instances in which a jury might one day in the future retrospectively conclude that predisclosure was warranted.24 And it is equally difficult to discern workable guidelines that a court might set forth to aid the firm's decision. For example, how detailed must the information conveyed be? And how far must research have progressed before it is "ripe" for disclosure? These inherent uncertainties would have an inevitable chilling effect on innovation. They go far, we believe, towards explaining why no court has ever imposed the duty Berkey seeks to create here.
We do not perceive, however, how Kodak's introduction of a new format was rendered an unlawful act of monopolization in the camera market because the firm also manufactured film to fit the cameras. The 110 system was in substantial part a camera development. After all, P-30 existed long before the P-118 film project began, and much of the creative energy behind it was consumed by efforts to produce the camera itself.25 Indeed, Berkey not only argues that a new film was not necessary to introduce the new pocket cameras; it also concedes that the early models of its own 110 cameras, brought to market some eighteen months after it first learned of the new format, suffered because of the haste with which they were designed.
Indeed, such authority as exists supports this conclusion. ILC Peripherals Leasing Corp. v. International Business Machines Corp., 458 F. Supp. 423 (N.D. Cal. 1978) (Memorex), was a case similar in some respects to this one. IBM was the leading manufacturer of central data processing units (CPUs) and competed with Memorex and others to supply peripheral equipment for use in conjunction with IBM CPUs. When IBM made changes in the intricate interface the "computer 'plug' " by which peripherals are attached to the central system, it did not provide advance information to Memorex, thereby forcing its rival to learn what it could after the new CPUs were shipped to customers. Memorex contended that to compete effectively in the peripherals market it needed to know, under some form of licensing arrangement, about interface changes as soon as IBM announced its products. Id. at 436-37. Noting the total absence of authority in support of this position, the district court indicated that plaintiff could properly be left to rely on "reverse engineering" to develop IBM-compatible equipment. IBM would thus be unchallenged for a time in the market for certain peripherals, but "(d) epriving IBM of its lead time would remove its incentive to invent." Id. at 437.
There is, indeed, little doubt that the jury could have found that Kodak, by refusing to make film available on economical terms, obstructed sales of cameras in competing formats. Thus, Kodak has never supplied film to fit the Minox, a small camera26 that uses a cartridge similar to that of the Instamatics and that has been on the market since the 1930s, or similar cameras by Minolta and Mamiya that were also introduced before the Kodak 126. Merchants of these cameras, including Berkey, made numerous requests that Kodak sell film packaged in their formats, with or without the Kodak name. As an alternative, they asked Kodak to sell bulk film rolls large enough to permit the camera manufacturers economically to cut the film down to the appropriate size and spool it. Kodak denied all such appeals. Some of the miniature cameras did survive but, as even Kodak's own economic expert testified, its policy drastically reduced the ability of rival manufacturers to compete by introducing new camera formats.27
First, the benefits that would flow to Kodak's rivals in the camera market from such a rule bear no relationship to the injury caused them by the monopolist's refusal to sell films for their competing camera formats. There is no reason to suppose, for example, that the loss suffered by Berkey because Kodak undercut Minolta sales was at all comparable to the boon Berkey would have received had Kodak given it the opportunity to participate from the beginning in the 110 revolution.28 Indeed, some of the camera manufacturers who would be benefited by predisclosure might not have participated in or even contemplated entering the market at the time Kodak committed its alleged violations. For them, predisclosure would be pure windfall.
Conclusion. We have held that Kodak did not have an obligation, merely because it introduced film and camera in a new format, to make any predisclosure to its camera-making competitors. Nor did the earlier use of its film monopoly to foreclose format innovation by those competitors create of its own force such a duty where none had existed before. In awarding Berkey $15,250,000, just $828,000 short of the maximum amount demanded, the jury clearly based its calculation of lost camera profits on Berkey's central argument that it had a right to be "at the starting line when the whistle blew" for the new system.29 The verdict, therefore, cannot stand.
Berkey's claims regarding the introduction of the 110 camera are not limited to its asserted right to predisclosure. The Pocket Instamatic not only initiated a new camera format, it was also promoted together with a new film. As we noted earlier, the view was expressed at Kodak that "(w)ithout a new film, the (camera) program is not a new advertisable system." Responding in large measure to this perception, Kodak hastened research and development of Kodacolor II so that it could be brought to market at the same time as the 110 system. Based on such evidence, and the earlier joint introduction of Kodacolor X and the 126 camera, the jury could readily have found that the simultaneous release of Kodacolor II and the Pocket Instamatic was part of a plan by which Kodak sought to use its combined film and camera capabilities to bolster faltering camera sales. Berkey contends that this program of selling was anticompetitive and therefore violated § 2. We disagree.
It is important to identify the precise harm Berkey claims to have suffered from this conduct. It cannot complain of a product introduction Simpliciter for the same reason it could not demand predisclosure of the new format: any firm, even a monopolist, may generally bring its products to market whenever and however it chooses.30 Rather, Berkey's argument is more subtle. It claims that by marketing the Pocket Instamatics in a system with a widely advertised new film, Kodak gained camera sales at Berkey's expense. And, because Kodacolor II was not necessary to produce satisfactory 110 photographs and in fact suffered from several deficiencies, these gains were unlawful.31
It may be conceded that, by advertising Kodacolor II as a "remarkable new film" capable of yielding "big, sharp pictures from a very small negative," Kodak sold more 110 cameras than it would have done had it merely marketed Kodacolor X in 110-size cartridges. The quality of the end product a developed snapshot is at least as dependent upon the characteristics of the film as upon those of the camera. It is perfectly plausible that some customers bought the Kodak 110 camera who would have purchased a competitor's camera in another format had Kodacolor II not been available and widely advertised as capable of producing "big, sharp pictures" from the tiny Pocket Instamatic. Moreover, there was also sufficient evidence for the jury to conclude that a new film was not necessary to bring the new cameras to market. Walter Fallon testified that in 1967, as manager of Kodak's Film Emulsion and Plate Organization, he expressed the view that Kodacolor X "would give satisfactory pictures, satisfactory customer results" in the P-30 format. Documents introduced at trial indicated that this opinion was shared by at least two Kodak research scientists.32
Accordingly, much of the evidence at trial concerned the dispute over the relative merits of Kodacolor II and Kodacolor X. There was ample evidence that for some months following the 110 introduction, Kodacolor II was inferior to its predecessor in several respects. Most notably, it degenerated more quickly than Kodacolor X, so that its shelf life was shorter.33 It is undisputed, however, that the grain of Kodacolor II, though not as fine as Kodak had hoped, was better than that of the older film.34
In this context, therefore, the question of product quality has little meaning. A product that commends itself to many users because superior in certain respects may be rendered unsatisfactory to others by flaws they considered fatal. Millions of consumers, for example, evidently found the 110 camera highly attractive because of its "pocketability." Others, perhaps more concerned over the quality of their flash pictures, found the original models unsatisfactory because of the high incidence of "red-eye."35 Similarly, some individuals would, if given the option and aware of the relevant factors,36 select Kodacolor II over Kodacolor X because of its superior grain, which was especially useful for a small camera; others might choose Kodacolor X because the original variety of Kodacolor II had to be used more quickly to produce attractive pictures.
When a market is dominated by a monopolist, of course, the ordinary competitive forces of supply may not be fully effective. Even a monopolist, however, must generally be responsive to the demands of customers, for if it persistently markets unappealing goods it will invite a loss of sales and an increase of competition.37 If a monopolist's products gain acceptance in the market, therefore, it is of no importance that a judge or jury may later regard them as inferior, so long as that success was not based on any form of coercion. Certainly the mere introduction of Kodacolor II along with the Pocket Instamatics did not coerce camera purchasers.38 Unless consumers desired to use the 110 camera for its own attractive qualities, they were not compelled to purchase Kodacolor II especially since Kodak did not remove any other films from the market when it introduced the new one. If the availability of Kodacolor II spurred sales of the 110 camera, it did so because some consumers regarded it as superior, at least for the smaller format.39
Of course, Kodak's advertising encouraged the public to take a favorable view of both Kodacolor II and the 110 camera, but that was not improper. A monopolist is not forbidden to publicize its product unless the extent of this activity is so unwarranted by competitive exigencies as to constitute an entry barrier. See American Tobacco Co. v. United States, 328 U.S. 781, 797, 66 S. Ct. 1125, 90 L. Ed. 1575 (1946); Borden, Inc., 3 Trade Reg. Rep. (CCH) P 21,490 (FTC 1978). And in its advertising, a producer is ordinarily permitted, much like an advocate at law, to bathe his cause in the best light possible.40 Advertising that emphasizes a product's strengths and minimizes its weaknesses does not, at least unless it amounts to deception, constitute anticompetitive conduct violative of § 2.41
Where a course of action is ambiguous, "consideration of intent may play an important role in divining the actual nature and effect of the alleged anticompetitive conduct," United States v. United States Gypsum Co., 438 U.S. 422, 436 n.13, 98 S. Ct. 2864, 2873 n.13, 57 L. Ed. 854 (1978); Accord, e. g., Sargent-Welch Scientific Co., supra, 567 F.2d at 712. We shall assume Arguendo that Kodak violated § 2 of the Sherman Act if its decision to restrict Kodacolor II to the 110 format was not justified by the nature of the film but was motivated by a desire to impede competition in the manufacture of cameras capable of using the new film. This might well supply the element of coercion we found lacking in the previous section. We shall assume also that there was sufficient evidence for the jury to conclude that the initial decision to market Kodacolor II exclusively in the 110 format during its introductory period was indeed taken for anticompetitive purposes.42
The abstract possibility nevertheless remains that there might have been some customers who would have purchased a Berkey camera in one of the pre-existing formats but decided to select a Kodak 110 instead because they were aware that there was no alternative means of using Kodacolor II, even in the absence of advertising to that effect. Yet, although millions of amateur photographers bought Pocket Instamatics, Berkey did not produce anyone at the trial to testify that he was so motivated. Nor did Berkey present the testimony of camera dealers, or evidence of any kind, to establish that such customers existed. Indeed, Berkey declined to challenge the testimony of a camera dealer that he never promoted the fact that Kodacolor II was available only in the 110 size.43 We expressed our concern over the absence of such evidence at oral argument, but Berkey's post-argument brief44 did not point to any relevant items in the record that we had overlooked. We conclude, therefore, that the jury could not find that Berkey suffered more than De minimis injury, if any, because Kodacolor II was limited to the 110 format. Although the antitrust laws afford latitude in permitting the factfinder to estimate "the extent of the damages" where precise calculation is impossible, they do not allow recovery where there has been no showing that plaintiff suffered cognizable injury. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562-63, 51 S. Ct. 248, 26 L. Ed. 2d 83 (1931); See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123, 89 S. Ct. 1562, 23 L. Ed. 2d 129 (1969); Gottesman v. General Motors Corp., 436 F.2d 1205, 1210 (2d Cir. 1971).
2. It is no basis for antitrust liability that Kodacolor II, despite certain deficiencies compared to Kodacolor X, may have encouraged sales of the 110 camera.3. Finally, although the restriction of Kodacolor II to the 110 format may have been unjustified, there was no evidence that Berkey was injured by this course of action.
We, therefore, reverse so much of the judgment as awarded Berkey damages based on the introduction of the 110 camera.45
Furthermore, it is urged that Berkey faced greater expense in finishing Kodacolor II than did CP&P, because Kodak refused to divulge the formulae for chemicals used in the C-41 process. Large photofinishers like Berkey preferred to buy these compounds from chemical suppliers in bulk, both to save money and to gain flexibility. But to be able to process Kodacolor II, they were forced to buy pre-mixed "kits" from Kodak at twice the price. Kodak, meanwhile, provided all but one of the CP&P plants with bulk chemicals.46 And, because for some time Kodak was the only manufacturer of machinery capable of processing the new film, the independent photofinishers were required to purchase this equipment in order to proceed at all. The jury found that Kodak's prices were excessive and almost certainly found also that the equipment Kodak sold to the independents was vastly inferior to its product for CP&P.
Because of its early jump and greater efficiency in the C-41 process, CP&P gained a disproportionately high share of 110 finishing, an effect Berkey contends lasted through the end of 1973. There was clear evidence that Kodak was aware of the impact its conduct would have on the business of its photofinishing rivals. One Kodak marketing officer urged introduction of Kodacolor II along with the 110 cameras in part to compel the independent photofinishers to buy Kodak C-41 equipment,47 and Kodak engineers realized that the machinery their firm planned to sell would not allow independents to do more than "limp through the C-22 to P-118 transition stage." Not surprisingly, one Kodak scientist noted early in the development of the 110 system that the new process would "raise hell in the photofinishing business" without benefit to the consumer.48 And, shortly after Kodacolor II came to market, a worried Kodak employee predicted that CP&P's announcement of its early readiness to process the new film would "cause some photofinishing reaction due to the fact that we are using 110 to gain business over their operations."
Kodak's conduct with respect to the independent photofinishers perhaps may be criticized as shoddy treatment of firms providing an essential service for Kodak products. Indeed, largely for that reason a number of Kodak employees urged that photofinishers and equipment manufacturers be given advance warning of the C-41 process. The purpose of the Sherman Act, however, is not to maintain friendly business relations among firms in the same industry nor was it designed to keep these firms happy and gleeful. See Kestenbaum v. Falstaff Brewing Corp., 575 F.2d 564 (5th Cir. 1978). Moreover, it is clear that Kodak did not monopolize or attempt to monopolize the photofinishing or equipment markets.49 Thus, it is not liable under § 2 for the actions described above unless it gained a competitive advantage in these markets by use of the monopoly power it possessed in other segments of the industry.
It is not clear, however, whether in bringing forth the 110 system Kodak did anything that a smaller firm with integrated capabilities but no market control might not have done.50 Kodak did not use its power to shift the entire photofinishing market from C-22 to the C-41 process, for Kodacolor II was introduced only in the 110 size and at first represented a minuscule percentage of all color print photofinishing. Indeed, the film was not marketed in other formats until eighteen months later, long after the original surprise had worn off.51 In sum, Kodak's ability to gain a rapidly diminishing competitive advantage with the introduction of the 110 system may have been attributable to its innovation of a new system of photography, and not to its monopoly power. On the other hand, we cannot dismiss the possibility that Kodak's monopoly power in other markets was at least a partial root of its ability to gain an advantage over its photofinishing competitors and to sell them overpriced equipment. For example, it may be that, had Kodak possessed only a small portion of the film market, other manufacturers would have found it more feasible to bring out their C-22 films in the 110 size. CP&P would then have had no competitive advantage for a large percentage of 110 photofinishing. Moreover, absent a Kodak film monopoly, the independent photofinishers might not have felt an urgent need to buy expensive equipment for the C-41 process.52
It is evident from our discussion, however, that this decree forecloses not only the use of monopoly power but the legitimate benefits of integration as well. Although an injunction need not be limited to prohibiting repetition of past misconduct, it does not lie within the discretion of the trial judge to restructure a market that Kodak has neither monopolized nor attempted to monopolize. Cf. Schine Chain Theatres, Inc.,supra, 334 U.S. 125-30, 68 S. Ct. 947; Paramount Pictures, Inc., supra,334 U.S. at 166-75, 68 S. Ct. 915. This portion of the judgment must therefore be vacated. On remand the district court may consider whether a narrower decree, limited to the prevention of uses of monopoly power, may be appropriate. In this regard, the court should consider to what extent the erosion of Kodak's share in the camera and color paper markets lessens the need for injunctive relief.
The decree also mandated the sale of color paper without a Kodak backprint, at the option of the purchaser. Judge Frankel indicated that Kodak's insistence on placing its backprint on the paper "was, or could be found to be, a device to force Kodak's photofinishing rivals to advertise their competition." Judge Frankel did not expressly consider whether his prohibition was a justifiable curtailment of Kodak's trademark rights. Whatever the merits of such a decree may be in the abstract and the judge himself indicated at one point that its primary impact would be to benefit Kodak's color paper competitors53 the need for its is nullified by Judge Frankel's own observation that Berkey's purchases of Kodak paper fell in 1977 to 7% Of its requirements. We therefore direct that the "backprint" relief be eliminated from any decree to be entered on remand.
It is clear that Kodak possessed a monopoly in the film and color paper markets during the period relevant to this suit. Berkey contends that this power, which enabled Kodak to overcharge its customers, was acquired and maintained, at least in part, by anticompetitive conduct. Some of the evidence introduced by Berkey in support of its claims concerned events that occurred many years ago. In particular, Berkey succeeded in introducing a 1915 decision which was to play a dramatic role in an unfortunate incident near the close of the liability trial54 holding Inter alia that Kodak, by illegal acquisitions and other improper conduct, had monopolized the photographic paper market. Judge Frankel admitted this evidence as "background" only. Over Berkey's objection, he instructed the jury that it could not base liability on anticompetitive actions that Kodak had committed earlier than the beginning of the limitations period on January 29, 1969, four years before the commencement of suit.
Excessive prices, maintained through exercise of a monopolist's control of the market, constituted one of the primary evils that the Sherman Act was intended to correct. Letwin, Congress and the Sherman Antitrust Law: 1887-1890, 23 U. Chi. L. Rev. 221, 249-52 (1956). Where a monopolist has acquired or maintained its power by anticompetitive conduct, therefore, a direct purchaser may recover the overcharge caused by the violation of § 2. E. g., Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 487-94, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968).
2. If a defendant has violated § 2, may a purchaser recover the excess of its price over a competitive price, or merely the increment attributable to its anticompetitive conduct?We hold that Judge Frankel erred in Kodak's favor on the first of these questions but that he was overly generous to Berkey on the second.
Plainly, at the time a monopolist commits anticompetitive conduct it is entirely speculative how much damage that action will cause its purchasers in the future. Indeed, some of the buyers who will later feel the brunt of the violation may not even be in existence at the time. Cf. Continental Ore Co., supra, 370 U.S. at 709-10, 82 S. Ct. 1404. Not until the monopolist actually sets an inflated price and its customers determine the amount of their purchases can a reasonable estimate be made. The purchaser's cause of action, therefore, accrues only on the date damages are "suffered":Otherwise future damages that could not be proved within four years of the conduct from which they flowed would be forever incapable of recovery, contrary to the congressional purpose that private actions serve "as a bulwark of antitrust enforcement." Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 139, 88 S. Ct. 1981, 1984, 20 L. Ed. 2d 982 (1968). . . . .
Moreover, it would undercut enforcement of the Sherman Act to hold that, if a monopolist merely retains its illicit market control for four years after its last anticompetitive action, it may charge an exorbitant price until its power is eviscerated in an appropriate suit for equitable relief.55 The rule urged by Kodak would mean that, as the Supreme Court has indicated in a related context:
There is a dearth of cases on point. Indeed, the only citation in Judge Frankel's discussion of this point is to a rather vague Dictum in Alcoa. The reason for this lack of authority is that in most successful monopolization suits brought by purchasers the § 2 violation was merely a consequence of a § 1 offense that provided the rule of damages. Often, for example, the § 2 violation consists of a price-fixing conspiracy among firms controlling a large share of the market. The measure of the damages to one of the conspirators' customers is the difference between the price actually paid and the one at which the product would have sold absent the conspiracy. E. g., Reiter v. Sonotone Corp., --- U.S. ----, ----, 99 S. Ct. 2326, 60 L. Ed. 2d 931 (1979); Chattanooga Foundry & Pipe Works v. City of Atlanta, 203 U.S. 390, 396 (1906). In such a case, the monopoly price is entirely attributable to the anticompetitive conduct. The two alternative rules of § 2 damages therefore merge and it is impossible to tell which would apply if the monopoly power, and hence the excessive price, resulted only in part from wrongful conduct.56
Were the law otherwise, it would establish an unnecessary and unwarranted trigger mechanism. See 3 P. Areeda & D. Turner, Supra, at 86-87. A pristine monopolist, we have held, may charge as high a rate as the market will bear. But under the competitive price rule, if it committed any anticompetitive conduct beyond a De minimis Level it would suddenly be held liable for threefold the entire excess of its price over a competitive price. In effect, instead of being required simply to compensate its customers for the consequences of its wrongful action, it would be required to forfeit its legitimately acquired advantage. But the Sherman Act does, as we have said, tolerate the lawfully acquired and maintained monopoly. This principle would be undercut if a monopolist whose position has for the most part been attained legitimately is required to forfeit all fruits of its success because its power has merely been supplemented by improper conduct.57
We recognize that if the monopolist, but for its illegitimate actions, would have had little or no market power, the wrongful conduct and competitive price rules may yield very similar results. The proper standard, though, is one that bases damages on the monopolist's actual record of misconduct.58
It may, of course, be difficult for a purchaser to demonstrate that conduct occurring many years before the commencement of suit contributed to an overcharge that it paid within the limitations period. That, however, is no reason for denying it the opportunity to do so. The treble damage provision, 15 U.S.C. § 15, was intended in large part as an inducement to encourage potential plaintiffs to endure the considerable expense and labor of seeking recovery against violators of the antitrust laws. E. g., Reiter, supra, --- U.S. at ----, 99 S. Ct. 2326.
Kodak does not make such devices. For approximately fifteen years, however, it has engaged in three separate "joint development programs" with lamp manufacturers to ensure that the desired lighting innovations would be compatible with Kodak cameras. In 1963, Sylvania Electric Products, Inc. approached Kodak with a prototype of a new battery-powered light device the flashcube59 and a modified Kodak 126 camera to fire it. Berkey argued that although Kodak did not make meaningful technical contributions to the flashcube, it nevertheless required Sylvania not to disclose its invention to any other camera manufacturer. Accordingly, for some time after the flashcube was introduced along with a line of Kodak flashcube cameras in 1965, Kodak was the only manufacturer able to sell cameras to use the device.60
Once more, the two firms entered into a joint project to exploit the Sylvania invention. Over Sylvania's protests, Kodak insisted again that details of the new device be withheld from the public and the trade. Kodak, Berkey contended, maintained this position until just two months before magicubes and magicube cameras were ready for shipment.61 Sales of Kodak magicube cameras commenced in July 1970. Berkey, it appears, was the first competitor to offer its own magicube cameras, reaching the market in October, but its production capacity was at first limited. It was not until late 1971 that Berkey's magicube cameras were truly competitive with Kodak's.
Kodak was troubled by the GE proposal. It was already committed to Sylvania on the magicube project, and there was abundant evidence from which the jury could conclude that Kodak did not wish to introduce two new flash systems at approximately the same time.62 Rather, its marketing strategy was, as we noted in connection with our discussion of the 110 system, to withhold introduction of improved camera models until the maximum benefit from the prior model had been reaped. The jury's verdict could reflect its belief that Kodak embarked on a carefully balanced campaign. Kodak desired to cool GE's ardor for its inventions sufficiently to delay introduction of the piezo device for several years, and, at the same time, to avoid the appearance of deferment so that the lamp manufacturer would not seek another camera maker to exploit its invention.63
After several years of intermittent discussion, Kodak and GE decided to move forward with the piezo device. In a contract executed on October 31, 1972, they agreed to aim for a Spring 1975 introduction of GE piezo flashlamps and Kodak cameras designed to fire them. Disclosure before hand to other lamp and camera manufacturers was forbidden. At a joint press conference in April 1975, the two firms announced the GE "flipflash"64 and two new lines of Kodak 110 cameras designed to accommodate it. Kodak had the field to itself for several months. This time, however, Berkey was not the first non-Kodak camera manufacturer to enter the arena. It did not market its own flipflash cameras until early 1976, months after Japanese and Chinese models had begun to appear.
There is a vast difference, however, between actions legal when taken by a single firm and those permitted for two or more companies acting in concert. To repeat a simple example, a monopolist may, assuming he acquired his power legally, charge any nonpredatory price for his product, but agreements among competitors to raise prices have been recognized as Per se violations of the Sherman Act since Socony-Vacuum. See Part II Supra. We have stated that we respect innovation, and we have construed § 2 of the Act to avoid an interpretation that would stifle it. But this is Toto caelo different from an agreement among a few firms to restrict to themselves the rewards of innovation. Such conduct is not immune to examination under § 1. Citing a case we believe to be inapposite,65 Kodak contends that it is "not a 'restraint of trade,' reasonable or unreasonable, jointly to develop a new product." Where a participant's market share is large, however, we believe joint development projects have sufficient anticompetitive potential to invite inquiry and thus stand on a different footing.
Kodak and GE, of course, are not direct competitors, and Kodak and Sylvania were at best potential competitors when the magicube was being developed.66 Nevertheless, because of Kodak's market power over cameras, the exclusionary potential of horizontal research pools was present. In the case of the flipflash, for example, GE indicated early in 1971 that it could be at maximum production in two years. Kodak, however, counselled delay, at one point urging GE project officials to make a show of progress, "even if all you do is 'paint the red base black,' " so that "we'll feel free to work with you." Otherwise, Kodak said, GE could not be assured of being part of Kodak's future flash plans, for "we would then have to ask all (lamp) manufacturers" to submit ideas. A few months later, the two firms executed the formal agreement binding them to joint development of flipflash and nondisclosure to rival lamp and camera manufacturers. From this and other evidence, the jury could have found in the verdict it returned that, without any technological justification, GE kept a desirable innovation off the market for two years solely to suit Kodak's convenience. There is a hollow ring to a claim of justification by appeal to the need to promote innovation, where the result of the conduct was such a clear loss to consumers.
On the record before us, we have little doubt that a properly instructed jury could find that the magicube and flipflash agreements violated § 1.67 It remains, therefore, to examine Kodak's challenges to the charge to the jury. Kodak asserts that Judge Frankel erred in instructing the jury to consider whether (1) Sylvania's substantial interest in Argus Camera Co. rendered it a potential camera competitor of Kodak, and (2) the "legitimate purposes" of the magicube and flipflash agreements might be accomplished by "less restrictive alternatives" than those actually chosen. We believe, however, that the charge provided accurate guidance for the jury's deliberations.
More troublesome is the contention that Berkey would not have benefited had Sylvania chosen to "go it alone" and therefore lacked standing to raise the Argus issue. Cf. Brunswick Corp., supra. But magicube entry on the small scale available to Argus may well have been less harmful to Berkey and to camera competition in general than was entry by a monopolist such as Kodak. See 3 P. Areeda & D. Turner, Supra, at 114. In any event, the only objection to the Argus charge that Kodak presented to the district court related to whether Sylvania's ownership of Argus was too remote in time to be relevant to the magicube project, not the "standing" and "non-competing agreements" contentions now raised on appeal. Accordingly, the latter objections have been waived. Fed. R. Civ. P. 51; Spano v. N. V. Koninklijke Rotterdamsche Lloyd, 472 F.2d 33 (2d Cir. 1973).
Kodak contends that this in effect directed a verdict for Berkey because, in retrospect, lawyers can always "conjure up some method of achieving the business purpose in question that would result in a somewhat lesser restriction of trade," American Motor Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 1230, 1249 (3d Cir. 1975). We agree with the Third Circuit that a better charge would be to require that "the restraints . . . not exceed 'the limits Reasonably necessary to meet the competitive problems,' " Id. (quoting United States v. Arnold, Schwinn & Co., 388 U.S. 365, 380-81, 87 S. Ct. 1856, 18 L. Ed. 2d 1249 (1967) (emphasis added by the court)). American Motor Inns noted, however, Id. at 1248, that the existence of alternatives is obviously of vital concern in evaluating putatively anticompetitive conduct. See, e. g., White Motor Co. v. United States, 372 U.S. 253, 271-72, 83 S. Ct. 696, 9 L. Ed. 2d 738 (1963) (Brennan, J., concurring); Foster v. Maryland State Savings & Loan Association, 191 U.S.App.D.C. 226, 590 F.2d 928, 934-35 (1978), Cert. denied, 439 U.S. 1071, 99 S. Ct. 842, 59 L. Ed. 2d 37 (1979); 1 M. Handler, Supra, at 708. Read as a whole, See, e. g., Chavis v. Finnlines Ltd., O/Y, 576 F.2d 1072, 1076 (4th Cir. 1978), Judge Frankel's § 1 charge simply presented the availability of less restrictive alternatives to the jury as one among many possibilities to be considered. The quoted paragraph did not in any way diminish the earlier instructions based on the rule of reason, including the specific admonition that no single test determines reasonableness.
Finally, we must address Kodak's contention that even if the less restrictive language passes muster, the reference in this context to predisclosure as a specific alternative does not.68 As is clear from both the charging conference and Kodak's requests to charge, Kodak views the "fact that these products were developed by two companies, rather than by Kodak alone" as immaterial to the issue of predisclosure. But, given the significantly different posture of single-firm and multi-firm conduct under the Sherman Act and Kodak's arguably minimal technological contributions to the two projects, we believe it was quite appropriate for the jury to consider whether Kodak's refusal to permit Sylvania or GE to disclose their inventions to other camera manufacturers was unreasonable.
Berkey contends that the judge's ruling was based on an erroneous perception that the Everflash and magicube cameras were to be regarded as noncompeting products with no impact on one another. As Berkey points out, the jury's finding of a single relevant still camera market, including all 126 cameras as well as 110s, suggests that these products do compete with each other. The strobe built into the Everflash perhaps may be regarded merely as an alternative to the magicube as a light source for cameras that are otherwise similar. On the other hand, a Berkey executive testified that the Everflash introduced in late 1971 was a very different and markedly superior camera. These were factors that the jury was properly given to consider. Its verdict, representing a 20% Deduction from Berkey's demand for 1971, suggests that it did so.69
Professor Merton J. Peck, a former chairman of the Yale Economics Department, was Kodak's sole expert witness. His task was to explain Kodak's view of the relevant markets and the reasons for Kodak's persistently high market shares. In April 1977, several weeks before the trial began, Berkey availed itself of the right to depose its adversary's expert witness under Fed. R. Civ. P. 26(b) (4). Pursuant to a ruling by Magistrate Sol Schreiber, Mahlon Perkins, a Kodak attorney, furnished Berkey with several documents before the deposition commenced. These consisted of interim reports that Peck had drafted, along with Peck's appointment book for the first four months of 1977, the time sheets he kept while working as a consultant to Kodak, and a three-page summary of the materials supplied by Kodak that Peck had reviewed in preparing for his testimony. At the deposition, which was held at the offices of Berkey's counsel, Perkins represented in Peck's presence that all of the information and data upon which the witness had relied was now available to Berkey, and that there was no record of those documents Peck had read but did not utilize.
In another pretrial maneuver, Berkey sought an advisory ruling as to the admissibility of the district court opinion in United States v. Eastman Kodak Co., 226 F. 62 (W.D.N.Y. 1915), Appeal dismissed, 255 U.S. 578, 41 S. Ct. 321, 65 L. Ed. 795 (1921). In that decision, somewhat inaccurately referred to throughout this litigation as "the 1915 decree," Kodak was found to have monopolized the amateur camera, film, and paper industries through acquisitions and other exclusionary practices. Judge Frankel ruled that the "decree" was too ancient to be probative of the current structure of the relevant markets, and that its value would be outweighed by the danger that the jury would give excessive weight to a judicial holding. See Fed.R.Evid. 403. The judge indicated, however, that he would reassess this decision should Kodak raise the defense that monopoly power had been "thrust upon" it.
Mr. Stein's questions, therefore, far from consisting of the mere compendium of inflammatory rhetoric that Kodak describes, were legitimate challenges to Peck's credibility and to the independence of his judgment.70 Indeed, Judge Frankel, who throughout the unusual disclosures described here maintained an attitude of cautious restraint, noted in a colloquy with the attorneys that Peck's credibility had, in his judgment, been destroyed on the witness stand. To be sure, the jury need not have believed Berkey's argument that Peck had deliberately collaborated with Perkins in an effort to destroy or conceal documents unfavorable to Kodak's cause. But there was certainly more than an adequate basis to permit Berkey to contend that this inference was justified, and that, at best, Peck was a willing tool of Kodak.
We are not unmindful that the incidents described, as presented to the jury, led to the unfortunate consequence of casting Kodak's attorneys, and the defendant itself, in a highly unfavorable light. It is no less true, however, that the cross-examination elicited information that was highly relevant to an assessment of the independence of judgment and probity of one of Kodak's principal witnesses.71 Where the trial judge has taken great care to balance the probative value of the evidence against the prejudice that may accrue from its introduction, we think it inappropriate to substitute our judgment for his. See Perel v. Vanderford, 547 F.2d 278 (5th Cir. 1977); Hood v. United States, 125 U.S.App.D.C. 16, 365 F.2d 949, 951-52 (1966).72 VII. ATTORNEYS' FEES AND COSTS
Under Section 4 of the Clayton Act, 15 U.S.C. § 15, the successful plaintiff in a suit for treble damages may be awarded reasonable attorneys' fees. Judge Frankel awarded $5.3 million in counsel fees, calculated essentially on the hourly rate at which counsel agreed to bill their client. Berkey, which had asked for a fee of over $30 million, contends that because the trial court failed to take into account the difficulty of the litigation, the employment opportunities foregone by counsel, and the result achieved, the reduction of its request was arbitrary and must be reconsidered by this court. Judge Frankel's computation appears to be in conformity with the agreement between Berkey and Parker Chapin Flattau & Klimpl, its principal counsel in this case.73 And were it not for our holdings on appeal we would be inclined not to disturb this award.74 But inasmuch as we have reversed the judgment for Berkey on its single most significant claim, and have remanded other claims for a new trial, it is plain that the award of attorneys' fees must be vacated for reconsideration by the district court.75
The Court below This Court's holding 1. Awarded Berkey $45,750,000 Reversed. treble damages for lost profits on 110 cameras. 2. Awarded Berkey $167,100 Reversed and remanded for treble damages for lost a new trial. photofinishing profits. 3. Awarded Berkey $57,000 Reversed and remanded for treble damages for excessive a new trial. prices paid for photofinishing equipmemt. 4. Awarded Berkey $34,500,000 Reversed and remanded for treble damages for excessive a new trial. prices paid for film. 5. Granted judgment n.o.v. to Reversed and remanded for Kodak on Berkey's claim for a new trial. damages for excess prices paid for color print paper ($8,803,000, pretrebling, awarded by the jury). 6. Held that Kodak has violated Affirmed. Because the flipflash Sec. 1 of the Sherman Act by conspiracy was not conspiring with Sylvania and made a separate subject of General Electric in the introduction damages at the first trial, of the magicube and flipflash a retrial is necessary to determine systems. the resultant damages. 7. Awarded Berkey $990,000 Affirmed. treble damages for lost camera sales in 1970 resulting from the magicube conspiracy. 8. Granted Kodak judgment Reversed and remanded for n.o.v. on Berkey's claim for a new trial on damages damages in 1971 arising from the only. same conspiracy ($1,417,330, pretrebling awarded by the jury). 9. Granted Berkey equitable Vacated and remanded for relief. further proceedings consistent with this opinion. 10. Awarded Berkey attorneys Vacated for further consideration fees and costs of $5,627,209.47. on remand.
Berkey had charged several other violations that are not before us on this appeal. During the liability trial, Berkey withdrew or the court dismissed claims under the Clayton Act, §§ 3 & 7, 15 U.S.C. §§ 14 & 18, as well as allegations arising from some of Kodak's early acquisitions, its use of patents, its relations with Polaroid Corp., and its other activities in the instant photography field. Despite jury findings of § 2 liability, Berkey did not attempt to prove damages with respect to color negative printers and chemicals, and the jury found no damages with respect to amateur movie cameras. Kodak's purchases of flashcubes, magicubes, and flipflash arrays led to a $245,100 jury verdict under the Robinson-Patman Act, § 2(f), 15 U.S.C. § 13(f), which was set aside by Judge Frankel because there was no evidence of injury to Berkey
More complicated cameras, such as those in the 135 format ("35-millimeter") commonly used by professionals and photographic hobbyists, were found not to be part of this market. The jury also rejected Kodak's request to include in the definition "instant" cameras, pioneered by the Polaroid Corporation, which produce a finished print within minutes, or even seconds, after the shutter is snapped
Instant-loading cameras are not to be confused with the "instant" cameras referred to in the previous footnote
In 1967 Berkey acquired a manufacturer of amateur photographic accessories, the Atlas-Warner Corp., along with three distributors of Atlas-Warner products
Berkey entered into the manufacture of instant cameras in 1972, but discontinued this line in settlement of patent litigation instituted by Polaroid Corp
The jury included movie film and 35-millimeter film in this market, presumably because they are substantially identical to the film used in amateur still cameras. Instant film, however, a product chemically distinct from laboratory-processed film, was excluded
Kodak marketed improved versions of Kodacolor in 1945, 1949, and 1955
The new film was also initially sold for use in 35-millimeter cameras, which are not part of the amateur market. It did not replace Kodacolor in the amateur 127 and 620 sizes until one year later. "Film speed" refers to an emulsion's sensitivity to light. Thus Kodacolor X as compared to its predecessor could produce acceptable images under markedly inferior lighting conditions
To be sure, Kodak could not in this fashion control the market for color reprints production of additional prints from slides or negatives. Here it resorted to other tactics. By refusing to sell the special paper or chemicals necessary to produce such reprints to rival photofinishers, it ensured since there was no other adequate source for these supplies that even this segment of the market did not escape its grip
Prior to 1954 a small part of Berkey's business consisted of processing Anscocolor film manufactured by a rival of Kodak's, Ansco into both slides and color prints. Using paper and chemicals supplied by Ansco, Berkey was also able to produce color prints from Kodachrome slides
See our discussion of the relevant markets, Part I Supra. Kodak sold approximately two-thirds of all amateur conventional still cameras throughout most of the relevant period. The frequency with which flashlamp manufacturers approached Kodak with suggestions for joint development of products and their willingness to acquiesce in arguably one-sided agreements is further evidence of Kodak's power in the camera market. See our discussion of Berkey's § 1 allegations, Part V Infra. The precipitous decline, beginning in 1976, of Kodak's share of the camera market was evidence that the jury could consider, although it was not dispositive
Nor is a lawful monopolist ordinarily precluded from charging as high a price for its product as the market will accept. True, this is a use of economic power; indeed, the differential between price and marginal cost is used as an indication of the degree of monopoly power, 2 P. Areeda & D. Turner, Supra, at 323-24; See Borden, Inc., 3 Trade Reg. Rep. (CCH) P 21,490, at 21,502-03 (FTC 1978). But high prices, far from damaging competition, invite new competitors into the monopolized market. See Part IV Infra. Excessive prices may, however, create an illegal "price squeeze" in another market. See Alcoa, supra, 148 F.2d at 438
The jury rejected this contention, which was submitted to them Dubitante
That is, Alcoa sold ingot to rival sheetmakers at such a high price that it gained a distinct competitive advantage for its own sales of sheet
We cannot accept Kodak's argument that, read literally, § 2 prevents a plaintiff from recovering unless there was at least an attempt to monopolize the market in which it claims to have been injured. Since monopoly power itself is the target of § 2, it is unreasonable to suggest that a firm that possesses such power in one market and uses it to damage competition in another does not "monopolize" within the meaning of the statute
Writing on March 9, 1967, Zwick saw "no need" for a new film, which would require a higher-temperature process: "We can make Small improvements in Kodacolor X grain and sharpness, in a film which could go through the C-22 process." On the same day, another Kodak scientist, N. H. Groet of the Color Photography Division, wrote that he was "convinced that Project 30 could go with the presently available Kodacolor X film." Like Zwick, Groet conceded that a finer-grained film "would be most welcome for P-30," but he did not believe that major changes in Kodacolor X would be necessary. Indeed, he believed that the new finishing process being considered by the Kodacolor Future System Committee
would raise hell in the photofinishing business, would do little to decrease the cost of the operation, and that the ultimate customer would not benefit.
Kodacolor II's grain, though disappointing, was clearly superior to that of Kodacolor X. Berkey does not appear to dispute the point. Shortly after introduction of the 110 system, a confidential memorandum prepared by a competitor in the film market compared Kodacolor II with Kodacolor X and found that the new film "yields a less granular image structure and, therefore, better detail rendition in an enlarged color print."
Three pre-existing Kodak films were, however, sold for other uses: Verichrome Pan for black-and-white snapshots, and Kodachrome X and Ektachrome X for color slides
The jury found Kodak guilty of leveraging its monopoly power into the market for photofinishing chemicals, See note 1, Supra. Berkey withdrew this claim during the damages trial, citing its inability to obtain statistical proof of its own harm
Since the issue is not presented on this appeal, we need not express our view on whether some actions may be too complex to be tried to a jury. The relevant cases are canvassed in Note, The Right to a Jury Trial in Complex Civil Litigation, 92 Harv. L. Rev. 898 (1979)
The same memorandum also recommended six-month predisclosure to competing film manufacturers
This is apparent from the transcript of the conference to settle the language of the charge to the jury
Berkey's argument that Kodak considered predisclosing the 110 system, and so could not be surprised when found liable for failing to do so, is thus a two-edged sword. It illustrates the difficulties in prediction even when the problem has been squarely faced
The "red-eye" problem experienced by the early 110 models, See note 35 Infra, does not detract from the fact that the new camera was indeed smaller and more convenient than its predecessors
The Minox "spy camera" was even smaller, but substantially more expensive, than the 110
Although Kodak does not manufacture cameras in the 135 format, it does sell film for them. This policy may represent a perception that the 135 format competes less directly with Kodak's popular cameras than do the Minolta and other miniature models
Even if the format obstructed by Kodak were comparable to the 110, predisclosure would not be a necessary remedy, as the following example demonstrates. Suppose that Berkey, unaware that Kodak is planning to bring forth the 110 camera, asks Kodak to make film available for a new camera it has designed that happens to be identical in all respects to the 110 except that it requires a slightly different film format. Kodak, without a legitimate competitive reason and solely to prevent Berkey's camera sales, declines to supply the film. Berkey then concludes that marketing of its new camera would be economically unfeasible. Just three months later, without predisclosure to Berkey, Kodak introduces the 110, which is a great commercial success
At first it might appear that in this extreme hypothetical case Berkey has a right to share the initial profits of the 110 camera through predisclosure. On closer examination, it becomes clear that the wrong to Berkey is not the absence of knowledge of the 110 but exclusion from the market of its own essentially identical camera. To be sure, most of Kodak's 110 sales would have been captured earlier by Berkey had it not been prevented from introducing its camera, so the volume of Kodak's 110 sales may assist in computation of Berkey's damages. That, however, is the only relevance of the 110 system to this hypothetical case. As the premise is varied to bring the hypothetical closer to the actual case at bar for example, by attenuating the physical similarity between the two cameras or the proximity of their arrival in the market even this relevance disappears. Kodak's violation is completed when it blocks Berkey's new camera format; nothing is added to the offense by its decision to introduce its own new format without predisclosure.
The three 110 damages theories, submitted to the jury in the alternative, attempted to measure the displacement of Berkey camera sales from the moment the 110 system was introduced. One theory, allocating to Berkey its "fair share" of all Kodak post-introduction camera sales, indicated untrebled damages of $16,073,000. The other two theories, addressing 110 sales only, suggested $13,668,000 and $15,835,000 respectively
This is not to say, of course, that new product introductions are Ipso facto immune from antitrust scrutiny, and we do not agree with Kodak's argument that they are, See, e. g., Sargent-Welch Scientific Co. v. Ventron Corp., 567 F.2d 701 (7th Cir. 1977), Cert. denied, 439 U.S. 822, 99 S. Ct. 87, 58 L. Ed. 2d 113 (1978) (use of power over old product to promote sale of new); in all such cases, however, it is not the product introduction itself, but some associated conduct, that supplies the violation
To the extent that Berkey argues that Kodak's past monopolization of film hindered any other firm from introducing a new photographic system, the contention is merely a repetition of that rejected in Part III.A.1 Supra
Testimony and documents introduced at trial indicated that Kodacolor II lost much of its "speed", See note 8, Supra, within three to six months of manufacture. In addition, there were problems with "latent image keeping" the ability of the film to retain a scene until the film was developed
"Red-eye" is the appearance of a red glint in the eye of the snapshot's subject on a picture taken with a flashlamp. It is a result in large part of the small distance between the flash device and the camera lens. Hence, it was a greater problem for the original 110 cameras than for their larger predecessors in the 126 format
See 3 P. Areeda & D. Turner, Supra, at 41-42
Similarly, it appears that the Pocket Instamatic spurred sales of Kodak's film at the expense of its competitors, despite a red-eye problem that made the camera unacceptable to many consumers. But it would appear unreasonable on its face to allow a jury to conclude from this that the introduction of the 110 camera, which millions of other customers welcomed eagerly, was improper conduct
Thus, the situation might be completely different if, upon the introduction of the 110 system, Kodak had ceased producing film in the 126 size, thereby compelling camera purchasers to buy a Kodak 110 camera. Or had Kodak shifted production in all formats from Kodacolor X to Kodacolor II before other photofinishers could process the new film, it would force photographers to procure their photofinishing services from CP&P. In such a case the technological desirability of the product change might bear on the question of monopolistic intent. See Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1330 (5th Cir. 1976)
Indeed, Kodak apparently did precisely that in introducing the 110 camera. Aware of the camera's substantial red-eye problem, the firm evidently decided "to provide enough ambient light for exposure without flash" at the press conference announcing the new system. This rather obvious ploy certainly did not amount to the type of deception that might, as we indicate in the following footnote, support an action under § 2
There was evidence that Kodak indicated on the boxes in which Kodacolor II was sold that the film had a shelf life of 14 months, whereas in fact the film lost half its speed within three to six months. We need not decide whether this action amounted to deceptive advertising, or whether and under what circumstances such deception might amount to a violation of § 2. See 3 P. Areeda & D. Turner, Supra, at 278-79. The Sherman Act is not a panacea for all evils that may infect business life. Before we would allow misrepresentation to buyers to be the basis of a competitor's treble damage action under § 2, we would at least require the plaintiff to overcome a presumption that the effect on competition of such a practice was De minimis. See id. Berkey, however, has failed to provide any evidence that a significant number of Kodak 110 purchasers would have, if the Kodacolor II boxes had included accurate information on the shelf life of the film, bought a Berkey camera in a pre-existing format instead
We have already stated that in September 1967 Kodak's management noted that development of the new film was justified, even if Project 30 were never brought to fruition, because of the benefits it would yield to pre-existing formats. Kodak, however, tentatively decided at the same meeting that Kodacolor II would at first be sold in the 110 format only. See Part III.A Supra. Kodak's explanation for the initial restriction of Kodacolor II to the 110 size is that the advantages of the new film were most useful for small cameras; until the defects in Kodacolor II were eliminated, therefore, Kodak preferred to continue selling Kodacolor X in pre-existing formats. That Kodak did not advertise the restriction was evidence in support of its assertion that the plan was not undertaken for an anticompetitive purpose
Advertisements of dealers, like those of Kodak, emphasized that Kodacolor II would yield sharp pictures but not that the film was exclusively available in the 110 size
Because of the extraordinary complexity of this case, we invited the parties to submit post-argument briefs on any aspect of the case they felt merited further attention
But see Part V Infra, where we hold that Berkey's claim arising from the introduction of the "flipflash" in 1975, the damages for which were not considered separately but were included in the total computation of damages for lost 110 camera sales, must be submitted to a new trial on these damages only
Kodak also did not inform independent photofinishers, or even its own technical sales representatives assigned to help the independents process Kodak films, that there were two distinct "populations" of Kodacolor II with markedly different color characteristics. CP&P, however, was told of this divergence as soon as it was discovered
See Part III.A Supra
See Part II.C. & n.13 Supra. Although Kodak was for a time the only firm able to finish Kodacolor II, and for a longer period the only company able to provide equipment for the C-41 process, the new process and the machinery used in it did not define separate markets; rather, they were, like Kodacolor II and the 110 camera itself, new entries in markets of wider scope. Kodak held a temporary monopoly in C-41 processing and equipment only in the sense that every firm initially possesses a 100% Market share in its own innovations and the peripheral products and services associated with it. See Telex Corp. v. International Business Machines Corp., 510 F.2d 894, 915 (10th Cir.), Cert. dismissed, 423 U.S. 802, 96 S. Ct. 8, 46 L. Ed. 2d 244 (1975) (endorsing district court statement)
We do not, of course, intend to cast any doubt on the well-established doctrine, which we have reaffirmed, See Part II.B Supra, that certain actions may violate § 2 when taken by a monopolist even though they would be perfectly legitimate in the hands of a firm lacking market control. Rather, our consideration rests on a simple proposition: if an action that gains a firm a competitive advantage is effective because of the company's efficiency, prestige, and innovativeness, and not because of its control over the market, the action is not a use of power
In 1972, fewer than one-tenth as many rolls of Kodacolor film were processed in the 110 format as were finished in the 126 size, and CP&P processed only about 15% Of the 110 rolls. Even in 1973, photofinishers processed more than three times as many 126 Kodacolor rolls nearly all of it Kodacolor X as Kodacolor rolls in the 110 format, and CP&P's share in the 110 size fell to approximately 6%
We do not hold that Kodak, which did not have a monopoly in photofinishing equipment, was required to provide such machinery for other photofinishers. But a violation might be found if Kodak's ability to market equipment at an excessive price was attributable to its monopoly power in other areas
Judge Frankel's opinion appears to contradict itself on this point. Compare Berkey Photo, Inc. v. Eastman Kodak Co., 457 F. Supp. 404, 425 (S.D.N.Y. 1978) With id. at 433
If, as the Ninth Circuit has held in International Telephone & Telegraph Corp. v. General Telephone & Electronics Corp., 518 F.2d 913, 922 (9th Cir. 1975), dissolution or divestiture may only be ordered in a Government suit a question that we of course do not reach the rule for which Kodak argues would be even less tolerable
To the extent that any inference may be gleaned from the extended Hanover Shoe litigation, it favors the wrongful conduct rule. After the Supreme Court affirmed Judge Wyzanski's judgment in the celebrated United Shoe case, Hanover, a United customer, brought an action to recover illegal overcharges. The calculation of Hanover's damages was based on "the excess of leasing costs over what it would have cost to own the same machines had they been available for purchase," Hanover Shoe, Inc. v. United Shoe Machinery Corp., 245 F. Supp. 258 (M.D. Pa. 1965); See Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 487, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968). Significantly, the hypothetical purchase prices for prior years were determined from the actual prices for 1955 the first year the lease-only machines were offered for sale and clearly, as later litigation would demonstrate, a period in which United retained its monopoly. See United States v. United Shoe Machinery Corp., 266 F. Supp. 328, 331 (D. Mass. 1967), Rev'd on other grounds, 391 U.S. 244, 88 S. Ct. 1496, 20 L. Ed. 2d 562 (1968). Moreover, United's anticompetitive leasing policy was only a partial source of its monopoly power; the other roots were, as Judge Wyzanski indicated in his original opinion, "plainly beyond reproach." 110 F. Supp. at 344. It appears, therefore, that damages in Hanover Shoe were limited to the price excess caused by United's wrongful conduct
The situation might be different in a Government equity action. It is interesting to note that Areeda and Turner would allow the break-up of a persistent monopoly in such a suit even in the absence of exclusionary conduct, 3 P. Areeda & D. Turner, Supra, at 63-64. They strongly advocate the position we are asserting here, however that "an injured plaintiff is not entitled to have damages based on the excess of the monopoly price over the competitive price but only to the price increment reasonably attributable to actionable behavior." Id. at 73; See id. at 99
We express no view on how the trial judge should allocate the burden of proving this causal relation, or lack of it, when plaintiff makes a preliminary showing of persistent monopoly power and a substantial history of anticompetitive conduct. Cf. Ohio Valley Electric Corp. v. General Electric Co., 244 F. Supp. 914, 946 (S.D.N.Y. 1965)
The flashcube contains four flashbulbs mounted on the face of a small cube, each containing its own reflector. The cube is rotated after each shot, so four flash pictures may be taken without the need to change cubes
Several other camera makers complained bitterly to Sylvania following this episode. They were particularly disturbed that Sylvania had assigned its camera patents to Kodak, keeping only its lamp patents. One Sylvania official wrote:
Also during the past years the royalties other camera manufacturers have paid to EK to use Sylvania flashcubes on their equipment have disturbed them deeply. They keep telling us that the flashcube was a Sylvania development . . . why did they have to pay royalties?
As Kodak's trial counsel conceded, there was conflicting evidence concerning the terms of the secrecy agreement. The written agreement permitted disclosure to "other responsible camera manufacturers," but Sylvania never made disclosure to anyone but Polaroid, which only manufactured instant cameras and was thus not a competitor of Kodak's. In October 1968, Sylvania pressed Kodak for an early announcement to the trade, but Kodak resisted, in part to "make sure that our foreign manufacturing plants could change to the new system." Kodak then instituted a "crash program" to get to market before, as the jury could have found, Sylvania unilaterally decided to disclose its invention to the trade
In March 1970, Sylvania again complained to Kodak about delay, noting that rumors of the Kodak-Sylvania project had caused other camera manufacturers to press Sylvania for disclosure. Kodak agreed to a limited form of disclosure, but refused to permit release of, Inter alia, the design of the camera socket into which the magicube would fit.
In addition to the evidence adduced in connection with the 110 camera that Kodak had a policy of cyclical product introduction, a Kodak official testified that if the piezo would not be ready for the initial 110 introduction, Kodak could not use it for another two or three years
For example, at a time when Kodak was committed to Sylvania and had shelved its own piezo plans, it complimented GE on its devices and urged them to continue development
This device was a rectangular array of eight bulbs, set in four rows of two. The top four bulbs would be fired and the array would then be "flipped" and the remaining bulbs, now on top, would be used
United States v. Citizens & Southern National Bank, 422 U.S. 86, 95 S. Ct. 2079, 45 L. Ed. 2d 41 (1975), involved the antitrust implications of an attempt to evade Georgia's branch banking laws and has nothing to do with joint development ventures by firms in complementary markets
Until 1962, Argus Camera was operated as a division of Sylvania. In May of that year, Sylvania sold Argus for a small amount of cash and $7.8 million in promissory notes. Over the next seven years, as a result of recapitalizations of Argus, Sylvania was, at various times, a major creditor, common shareholder, and preferred shareholder of its former division, on occasion placing a nominee on Argus's Board of Directors. Berkey contended that Sylvania's relationship with Argus permitted the jury to infer that the lamp manufacturer was a potential camera competitor as well
In particular, there was in each instance evidence that Kodak used its camera monopoly to extract secrecy agreements from the lamp manufacturers, and that the benefits it derived from the agreements far exceeded the value of its technological contributions. We note, in passing, that Kodak contends that Berkey should be barred from recovery because a Berkey official once told an officer of GE that Berkey was not interested in innovation, preferring to copy Kodak designs. The evidence concerning this conversation was conflicting, however, and we must assume the jury resolved the conflict in Berkey's favor. Accordingly, we need not determine the effect such a Berkey policy would have on its right to complain of Kodak's illicit agreements with the lamp makers
Kodak has waived its right to contest the charge on royalty-free licensing by failing to raise an objection below. Fed. R. Civ. P. 51
By contrast, the jury awarded all but $4,000 of the claimed amount for 1970
A careful reading of the transcript reveals one brief interchange that was not relevant to Peck's own veracity, but only to that of Perkins himself. Peck was asked if he now was aware of the falsity of the representations Perkins made to Berkey that all the expert's papers had been destroyed. Peck replied that he did know this. Although we believe that the reference to Perkin's dissembling and Peck's present knowledge of it was immaterial, we do not think that this dialogue, or the reference to it in Mr. Stein's summation, was so prejudicial as to warrant a new trial. It was proper to argue to the jury that Peck played a role in the attempt to conceal information from Berkey, and to urge the jury to infer that Peck was either aware, or consciously chose not to recognize, that material was not in fact being destroyed, but withheld. The sole additional fact that it was Perkins who actively misrepresented the facts to Berkey was, at worst, incremental. We do not think that Kodak has met its heavy burden of demonstrating that this interchange, standing alone, caused it prejudice so severe as to call for reversal. See, e. g., Gray v. Shell Oil Co., 469 F.2d 742, 751-52 (9th Cir. 1972), Cert. denied, 412 U.S. 943, 93 S. Ct. 2773, 37 L. Ed. 2d 403 (1973)
See Walker v. Firestone Tire & Rubber Co., 412 F.2d 60 (2d Cir. 1969) (expert may be cross examined concerning falsity of testimony in earlier unrelated trial)
We have examined Kodak's other objections to the conduct of the trial and believe they are without merit. We also find insubstantial Kodak's contentions that the Sherman Act and the treble damages provision of the Clayton Act are unconstitutional on their face. Moreover, we do not think that our interpretation of the former statute has effected a fundamental alteration of the law of monopolization. Accordingly, we reject the view that the Sherman Act is unconstitutional as applied to the facts of this suit. See generally Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 495-502, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968)
In a letter dated March 4, 1976, Mr. Stein of Parker Chapin wrote to co-counsel that "the client has no commitment to any of the firms representing it in the case to pay a contingent fee or to compensate us on any measure other than time and effort expended." Moreover, despite the trial court's repeated requests, counsel failed to provide any information from which the judge could determine the size of the "success premium" Berkey allegedly agreed to pay its law firm
Because of the conclusions we have reached on appeal, we have decided not to award costs to either party
Since the question was neither briefed nor argued, we do not decide under what circumstances a court may award fees for time expended by counsel on claims that ultimately prove unsuccessful. Compare Union Leader Corp. v. Newspapers of New England, Inc., 218 F. Supp. 490, 493 (D. Mass. 1963), Set aside on other grounds sub nom. Haverhill Gazette Co. v. Union Leader Corp., 333 F.2d 798 (1st Cir.), Cert. denied, 379 U.S. 931, 85 S. Ct. 329, 13 L. Ed. 2d 343 (1964) With Trans World Airlines, Inc. v. Hughes, 312 F. Supp. 478, 483 (S.D.N.Y. 1970), Modified on other grounds, 449 F.2d 51 (2d Cir. 1971), Rev'd on other grounds, 409 U.S. 363, 93 S. Ct. 647, 34 L. Ed. 2d 577 (1973) And L. Sullivan Supra, at 794
Judge Frankel also awarded Berkey $343,794.97 in costs, comprising court costs taxable under 28 U.S.C. § 1920, and certain expenses incurred in taking depositions. This award must also be vacated and reconsidered by the district court. We do make two observations for the guidance of the court below. Berkey's contention that the trial court erred in refusing to allow reimbursement for expert witness fees is clearly foreclosed by our decision in Trans World Airlines, Inc. v. Hughes, 449 F.2d 51, 81 (2d Cir. 1971), Rev'd on other grounds, 409 U.S. 363, 93 S. Ct. 647, 34 L. Ed. 2d 577 (1973), in which we indicated that the only costs recoverable by a successful plaintiff in a private antitrust suit are those normally allowable under 28 U.S.C. § 1920 and Fed. R. Civ. P. 54(d). Accord, Twentieth Century Fox Film Corp. v. Goldwyn, 328 F.2d 190, 224 (9th Cir.), Cert. denied, 379 U.S. 880, 85 S. Ct. 143, 13 L. Ed. 2d 87 (1964). Similarly, Berkey may not recover as costs of suit its expenditures for use of a computer retrieval service.