Opinion ID: 4076467
Heading Depth: 4
Heading Rank: 1

Heading: Post-2008 Sales Contracts

Text: According to Avaya, by May 2008, all purchasers of new PBX systems were on notice that they were contractually barred from using ISPs, so that there could be no antitrust aftermarket for maintenance. It points out that the sales agreement that accompanied PBX systems at that point expressly provided for “[l]icense [r]estrictions” that made it clear to purchasers – sophisticated and unsophisticated alike – that they could not use ISPs for maintenance. (J.A. 7283.) Specifically, § 6.2 of the sales agreement provided that the Customer agrees not to ... allow any service provider or other third party, with the exception of Avaya’s ... resellers and their designated employees ... to use or execute any software commands that cause the software to perform functions that facilitate the maintenance or repair of any Product except ... those software commands that ... would operate if ... [MSPs] were not enabled or activated[.] (Id.) Even TLI’s CEO, Douglas Graham, testified that when Avaya introduced that version of the sales contract for its new PBX systems, it was “making it clear that ... part of buying [a PBX] is the customer giving up the ability to access an [ISP].” (J.A. 2746.) In its post-trial opinion granting TLI’s request for an injunction, the District Court endorsed that view, even quoting Graham’s language. Accordingly, it limited the 97 injunction against Avaya’s restraints on ISPs to cover only those PBX systems purchased prior to May 2008.50 We agree that no antitrust liability for a Kodak-style attempted monopolization claim could lie after May 2008 when customers were put on clear notice that purchasing an Avaya PBX precluded use of ISP maintenance. As we explained in Queen City Pizza, when the defendant’s power “stems not from the market, but from plaintiffs’ contractual agreement,” then “no claim will lie.” 124 F.3d at 443. By May 2008, PBX customers were on clear notice that Avaya “retained significant power over their ability to purchase cheaper [maintenance] from alternative sources because that authority was spelled out in detail in section [6.2] of the standard [customer] agreement.” Id. at 440. If the customers viewed those terms as “overly burdensome ... at the time they were proposed, [they] could have purchased a different [brand] of [PBX].” Id. at 441. Avaya was therefore “subjected to competition at the pre-contract stage” in the primary market, id. at 440, which was undeniably competitive. Absent a new and compelling economic theory to justify antitrust liability that reaches beyond Kodak – 50 TLI seeks to downplay the effect of the post-2008 customer agreements by arguing that they were “boilerplate” and “ambiguous” (Answering Br. at 36), and by arguing that there was “no evidence that any post-May 2008 Avaya PBX purchasers signed the form contracts” (id. at 38). We conclude that there is no reason to disturb the District Court’s factual findings or legal conclusion on this point. The contractual language is unambiguous, and TLI’s own CEO acknowledged the language’s clarity and its use beginning with the new PBX systems introduced in 2008. 98 which TLI has not provided – Avaya cannot be liable under the antitrust laws for enforcing a transparent contract freely agreed to in a competitive market. “The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993). For PBX systems sold after May 2008, TLI could not credibly claim that Avaya was abusing its market power over locked-in customers. Instead, TLI’s complaint was with its potential customers, who had agreed to Avaya’s terms forbidding ISP maintenance in a competitive market. TLI may wish that the PBX customers had demanded access to ISPs when negotiating with Avaya, but that is not a complaint cognizable under the antitrust laws. Therefore, any PBX systems sold during and after May 2008 cannot be a basis for holding Avaya liable for attempted monopolization.