Opinion ID: 368855
Heading Depth: 2
Heading Rank: 3

Heading: the 110 system

Text: 52 We turn now to the events surrounding Kodak's introduction of the 110 photographic system in 1972. In many respects, the factors present here are representative of the case as a whole. They involve four of the five principal markets and provide the basis for several of the damages verdicts upheld by the district court, including the largest, an award of $15,250,000, before trebling, for lost camera sales. 53 We commented earlier on the camera revolution sparked by Kodak's introduction of the 126 Instamatic in 1963. Ben Berkey, chairman of Berkey Photo, described the camera's cartridge-loading feature as foolproof and remarked that the new simple system gave the industry a great boost. Even before the 126 was introduced, however, Kodak had set its sights on a new, smaller line of Instamatic cameras. The aim of Kodak's Project 30, or P-30, as it was often called, was a camera barely one inch thick but capable of producing photographs as clear and large as its bulkier cousins. 54 Kodak's desire to produce large, high-quality snapshots from a small camera created successive ripples in a number of ponds. As camera size decreases, so does the area of film exposed when the shutter is opened. Thus the negative must be substantially enlarged to produce a print, and the P-30 group was concerned that the Kodak color print film then in use, Kodacolor X, might not be equal to the task. There was fear that it was too grainy that full-size photographs printed from tiny Kodacolor X negatives would have an unacceptably speckled, pebbly appearance, reflecting the extreme magnification of the small light-sensitive grains constituting the film. 55 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 56 Nevertheless, on May 10, 1967, the committee recommended that Kodak proceed with the development of the new film and finishing process, tentatively labeled P-118. This recommendation was adopted at a meeting of the Kodak management on September 20. Although management believed that many of the film improvements were desirable without regard to the P-30 program, it decided that Kodak should consider marketing the new film in the P-30 size for approximately one year before introducing it in the 126 format. A firm date was not set at that time for introduction of P-118, but by 1969 Kodak decided that P-118 should be used to help launch the P-30 camera system in March 1972. This decision appears to have been influenced by the views of those Kodak officers who believed that 57 (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. 58 To meet this self-imposed deadline for P-118, Kodak was required to act in great haste. Indeed, the minutes of a Film Process Subcommittee meeting of August 29, 1969, noted that the decision for a 1972 release date required a crash program by all participating divisions. Development schedules were altered and some tests eliminated altogether. Not surprisingly, then, as the target date approached, Kodak realized that its new film was plagued by a number of difficulties. 59 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 60 Despite these deficiencies, Kodak proceeded with its plans for introduction of the 110 system, of which Kodacolor II had become an integral part. On March 16, 1972, amid great fanfare, the system was announced. Finally, said Kodak, there was a little camera that takes big pictures. Kodacolor II was a remarkable new film indeed, the best color negative film Kodak had ever manufactured. There had long been other small cameras, Kodak explained: 61 But they weren't like these. Now there are films fine enough, and sharp enough, to give you big, sharp pictures from a very small negative. 62 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 63 As Kodak had hoped, the 110 system proved to be a dramatic success. In 1972 the system's first year the company sold 2,984,000 Pocket Instamatics, more than 50% Of its sales in the amateur conventional still camera market. The new camera thus accounted in large part for a sharp increase in total market sales, from 6.2 million units in 1971 to 8.2 million in 1972. Rival manufacturers hastened to market their own 110 cameras, but Kodak stood alone until Argus made its first shipment of the Carefree 110 around Christmas 1972. The next year, although Kodak's competitors sold over 800,000 110 cameras, Kodak retained a firm lead with 5.1 million. Its share of 110 sales did not fall below 50% Until 1976. Meanwhile, by 1973 the 110 had taken over most of the amateur market from the 126, and three years later it accounted for nearly four-fifths of all sales. 64 Berkey's Keystone division was a late entrant in the 110 sweepstakes, joining the competition only in late 1973. Moreover, because of hasty design, the original models suffered from latent defects, and sales that year were a paltry 42,000. With interest in the 126 dwindling, Keystone thus suffered a net decline of 118,000 unit sales in 1973. The following year, however, it recovered strongly, in large part because improvements in its pocket cameras helped it sell 406,000 units, 7% Of all 110s sold that year. 65 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 66 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 preserved 20 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. 67
68 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. 69 It will be useful at the outset to present the arguments on which Berkey asks us to uphold its verdict: 70 (1) Kodak, a film and camera monopolist, was in a position to set industry standards. Rivals could not compete effectively without offering products similar to Kodak's. Moreover, Kodak persistently refused to make film available for most formats other than those in which it made cameras. Since cameras are worthless without film, this policy effectively prevented other manufacturers from introducing cameras in new formats. Because of its dominant position astride two markets, and by use of its film monopoly to distort the camera market, Kodak forfeited its own right to reap profits from such innovations without providing its rivals with sufficient advance information to enable them to enter the market with copies of the new product on the day of Kodak's introduction. This is one of several predisclosure arguments Berkey has advanced in the course of this litigation. 71 (2) The simultaneous introduction of the 110 camera and Kodacolor II film, together with a campaign advertising the two jointly, enabled Kodak to garner more camera sales than if it had merely scaled down Kodacolor X to fit the new camera. The jury could conclude that Kodacolor II was an inferior product and not technologically necessary for the success of the 110. In any event, Kodak's film monopoly prevented any other camera manufacturer from marketing such a film-camera system and the joint introduction was therefore anticompetitive. 72 (3) For eighteen months after its introduction, Kodacolor II was available only in the 110 format. Thus it followed that any consumer wishing to use Kodak's remarkable new film had to buy a 110 camera. Since Kodak was the leading and at first the only manufacturer of such devices, its camera sales were boosted at the expense of its competitors. 73 For the reasons explained below, we do not believe any of these contentions is sufficient on the facts of this case to justify an award of damages to Berkey. We therefore reverse this portion of the judgment.
74 Through the 1960s, Kodak followed a checkered pattern of predisclosing innovations to various segments of the industry. Its purpose on these occasions evidently was to ensure that the industry would be able to meet consumers' demand for the complementary goods and services they would need to enjoy the new Kodak products. But predisclosure would quite obviously also diminish Kodak's share of the auxiliary markets. It was therefore, in the words of Walter Fallon, Kodak's chief executive officer, a matter of judgment on each and every occasion whether predisclosure would be for or against Kodak's self-interest. Thus, well before the 1965 introduction of Super-8 movie films, Kodak, which had a relatively small share of the movie camera market, provided sufficient information to companies such as Keystone and Bell & Howell to enable them to make cameras to use the new film. It also released processing information so that photofinishers could develop the film. But in 1963, when Kodak came out with Kodacolor X and the 126 Instamatic, it kept its own counsel until the date of introduction. 75 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. 76 Although Kodak had most seriously considered divulging advance information of the 110 system to processors and equipment manufacturers, it was a rival camera maker that forced a small breach in its wall of secrecy. In the summer of 1971, Bell & Howell, implicitly threatening legal action, began to pressure Kodak to notify photographic equipment manufacturers in advance of its introduction of new films or film formats which require changes in equipment design. Harmer Brereton, Kodak's general counsel, insisted in letters to Bell & Howell that such predisclosure was not necessary and would raise legal problems of its own. Nevertheless, afraid that the two companies were getting ready to get into the ring, Kodak determined to avoid litigation if it could, and it proposed an experimental predisclosure arrangement with the 110 system. On January 3, 1972, Brereton informed Bell & Howell that Kodak would soon introduce a new cartridge-loading still camera and (slide) projector to accommodate a new film format. More information, Brereton explained, would be forthcoming only for a fee, necessary to compensate Kodak for its very considerable research and development expenses and to represent the value of such knowledge to the recipient. 77 Brereton's letter made clear that the information would be available to other camera makers on a nondiscriminatory basis, and within the next two weeks Kodak explained the offer to Berkey. For a fee of $10,000 Kodak would provide a general description of the new film format and cartridge, a view of the cartridge and sample prints and slides, the anticipated dates of announcement and commercial introduction, and an outline of the terms on which Kodak would further disclose such information as we believe will enable you to design and manufacture cameras to accept our new cartridge and film format. Berkey paid the $10,000 fee and also the supplemental fees, totalling $50,000 for eleven sheets of specifications and notes. For the $60,000 Berkey gained somewhat less than two months advance knowledge of information it needed to compete with Kodak in the sale of 110 cameras. The jury could unquestionably conclude that this was far from adequate to permit Berkey to be at the starting line when the 110 was introduced. 78 Judge Frankel did not decide that Kodak should have disclosed the details of the 110 to other camera manufacturers prior to introduction. Instead, he left the matter to the jury, instructing them as follows: 79 Standing alone, the fact that Kodak did not give advance warning of its new products to competitors would not entitle you to find that this conduct was exclusionary. Ordinarily a manufacturer has no duty to predispose its new products in this fashion. It is an ordinary and acceptable business practice to keep one's new developments a secret. However, if you find that Kodak had monopoly power in cameras or in film, and if you find that this power was so great as to make it impossible for a competitor to compete with Kodak in the camera market unless it could offer products similar to Kodak's, you may decide whether in the light of other conduct you determine to be anticompetitive, Kodak's failure to predisclose was on balance an exclusionary course of conduct. 80 We hold that this instruction was error and that, as a matter of law, Kodak did not have a duty to predisclose information about the 110 system to competing camera manufacturers. 81 As Judge Frankel indicated, and as Berkey concedes, a firm may normally keep its innovations secret from its rivals as long as it wishes, forcing them to catch up on the strength of their own efforts after the new product is introduced. See, e. g., Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974). It is the possibility of success in the marketplace, attributable to superior performance, that provides the incentives on which the proper functioning of our competitive economy rests. If a firm that has engaged in the risks and expenses of research and development were required in all circumstances to share with its rivals the benefits of those endeavors, this incentive would very likely be vitiated. 82 Withholding from others advance knowledge of one's new products, therefore, ordinarily constitutes valid competitive conduct. Because, as we have already indicated, a monopolist is permitted, and indeed encouraged, by § 2 to compete aggressively on the merits, any success that it may achieve through the process of invention and innovation is clearly tolerated by the antitrust laws. United Shoe Machinery Corp., supra, 110 F.Supp. at 344. 83 The Supreme Court's language in United States v. National Lead Co., 332 U.S. 319, 67 S.Ct. 1634, 91 L.Ed. 2077 (1947), is instructive on this score. There, National Lead and du Pont were found to have engaged in an illegal patent pool that restrained commerce in titanium products. As part of its decree, the district court ordered the firms to make licenses available at reasonable fees and also to make available for a period of three years and at a reasonable fee certain information on processes exploiting these patents. The Supreme Court upheld these requirements as a reasonable remedy for the antitrust violations. Id. at 334-35, 67 S.Ct. 1634. It squarely rejected, however, the Government's attempt to extend the decree by requiring the defendants to furnish again for only three years and at a reasonable fee all information desired by any applicant relating to the methods and processes for manufacturing titanium pigments: 84 The attempt of the Government to throw the field of technical knowledge in the titanium pigment industry wide-open would reduce the competitive value of the independent research of the parties. It would discourage rather than encourage competitive research. Id. at 359, 67 S.Ct. at 1653. 85 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. 86 An antitrust plaintiff urging a predisclosure rule, therefore, bears a heavy burden in justifying his request. Berkey recognizes the weight of this burden. It contends that it has been met. Kodak is not a monolithic monopolist, acting in a single market. Rather, its camera monopoly was supported by its activity as a film manufacturer. Berkey therefore argues that by not disclosing the new format in which it was manufacturing film, Kodak unlawfully enhanced its power in the camera market. Indeed, Kodak not only participates in but monopolizes the film industry. The jury could easily have found that, when Kodak introduced a new film format, rival camera makers would be foreclosed from a substantial segment of the market until they were able to manufacture cameras in the new format. Accordingly, Berkey contended that Kodak illegitimately used its monopoly power in film to gain a competitive advantage in cameras. Thus Berkey insists that the jury was properly permitted to consider whether, on balance, the failure to predisclose the new format was exclusionary. We disagree. 87 We note that this aspect of Berkey's claim is in large measure independent of the fact that a new film, Kodacolor II, was introduced simultaneously with the new format. It is primarily introduction of the format itself the size of the film and the cartridge in which it is packaged of which Berkey complains. Indeed, at oral argument counsel for Berkey contended that predisclosure would have been required even had Kodak merely cut down Kodacolor X to fit the new 110 camera and cartridge. 88 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. 89 Clearly, then, the policy considerations militating against predisclosure requirements for monolithic monopolists are equally applicable here. The first firm, even a monopolist, to design a new camera format has a right to the lead time that follows from its success. The mere fact that Kodak manufactured film in the new format as well, so that its customers would not be offered worthless cameras, could not deprive it of that reward. Nor is this conclusion altered because Kodak not only participated in but dominated the film market. Kodak's ability to pioneer formats does not depend on it possessing a film monopoly. Had the firm possessed a much smaller share of the film market, it would nevertheless have been able to manufacture sufficient quantities of 110-size film either Kodacolor X or Kodacolor II to bring the new camera to market. It is apparent, therefore, that the ability to introduce the new format without predisclosure was solely a benefit of integration and not, without more, a use of Kodak's power in the film market to gain a competitive advantage in cameras. 90 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. 91 The predisclosure demanded here is much more radical than that sought and rejected in Memorex. Berkey claims that it should have been given the information about Kodak's new film format long before product announcement and without any licensing fee. Moreover, the possibility lurking in Memorex that IBM, by creating technological incompatibilities, was tying peripherals sales to its CPUs is not present here. Cf. Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1330 (5th Cir. 1976). Kodak's new format was primarily a camera development, and the use of Kodacolor II did not in itself create any incompatibilities with an existing camera. Regardless of whether the district court decided Memorex correctly a question we are pleased to leave to our colleagues in the Ninth Circuit the case makes it manifest that there is no authority for the extreme position asserted by Berkey. 92 Our analysis, however, must proceed beyond the conclusion that introduction of film to meet Kodak's new camera format was not in itself an exercise of the company's monopoly power in film. Berkey contends that Kodak in the past used its film monopoly to stifle format innovations by any other camera manufacturer. Accordingly, it argues that Kodak was barred from reaping the benefits of such developments without making predisclosure to allow its rivals to share from the beginning in the rewards. 93 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 camera 26 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 94 We accept the proposition that it is improper, in the absence of a valid business policy, for a firm with monopoly power in one market to gain a competitive advantage in another by refusing to sell a rival the monopolized goods or services he needs to compete effectively in the second market. Indeed, Kodak itself was the defendant in the leading case establishing this point. Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 375, 47 S.Ct. 400, 71 L.Ed. 684 (1927); Accord, Poster Exchange, Inc. v. National Screen Service Corp., 431 F.2d 334, 339-40 (5th Cir. 1970), Cert. denied, 401 U.S. 912, 91 S.Ct. 880, 27 L.Ed.2d 811 (1971). Moreover, as indicated by our discussion of § 2 principles, such a use of power would be illegal regardless of whether the film monopoly were legally or illegally acquired. It may be that Kodak violated the Sherman Act when it refused to sell Berkey bulk film for use in the Minolta camera, and Berkey might well have recovered for its loss of Minolta sales and for any additional expenses incurred because of Kodak's conduct. 95 But Berkey did not sue Kodak then for its refusal to sell film, and it concedes that it is not now claiming a right to damages on this basis. Rather, it contends that Kodak's past offenses created a continuing duty to disclose its new formats to competing camera manufacturers, and that its violation of that obligation supports the jury's verdict. For two reasons, however, we decline to recognize such a duty. 96 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. 97 Second, it would be inappropriate to hold that Kodak should spontaneously have recognized a duty to release advance information of its new products to its competitors. It is important to note that Berkey, which no longer sells cameras, does not advance its predisclosure argument as part of a demand for equitable relief. Where a firm has engaged in monopolistic practices, a court is not limited, in fashioning prospective remedies, to an injunction against future violations of law. See, e. g., Schine Chain Theatres, Inc. v. United States, 334 U.S. 110, 128, 68 S.Ct. 947, 92 L.Ed. 1245 (1948). Hence the function of the court includes undoing what the monopoly achieved by its illegal acts. United States v. Paramount Pictures, Inc., 334 U.S. 131, 171, 68 S.Ct. 915, 92 L.Ed. 1260 (1948). 98 Accordingly, if Berkey were still a camera maker, it might be able to demand that Kodak, to nullify the effect of its monopolistic obstruction of new formats for competing cameras, be required to allow its rivals to share from the start in the business created by its own changes in format. Even in the equitable context, National Lead Would caution against a decree that might stifle future innovations. But Berkey, in any event, does not demand prospective relief. Instead it asks us to condemn Kodak retrospectively, holding that it violated § 2 and so is liable for damages, because it did not decide on its own initiative to take unusual, self-abnegatory actions as a corrective for unadjudicated prior offenses. This is without justification. 99 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.
100 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. 101 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. 31 102 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. 32 103 But necessity is a slippery concept. Indeed, the two scientists, Zwick and Groet, conceded that improvements in the quality of Kodacolor X would be most welcome. Even if the 110 camera would produce adequate snapshots with Kodacolor X, it would be difficult to fault Kodak for attempting to design a film that could provide better results. The attempt to develop superior products is, as we have explained, an essential element of lawful competition. Kodak could not have violated § 2 merely by introducing the 110 camera with an improved film. 104 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. 34 105 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. 106 It is evident, then, that in such circumstances no one can determine with any reasonable assurance whether one product is superior to another. Preference is a matter of individual taste. The only question that can be answered is whether there is sufficient demand for a particular product to make its production worthwhile, and the response, so long as the free choice of consumers is preserved, can only be inferred from the reaction of the market. 107 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. 39 108 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. 41 109 We conclude, therefore, that Kodak did not contravene the Sherman Act merely by introducing Kodacolor II simultaneously with the Pocket Instamatic and advertising the advantages of the new film for taking pictures with a small camera. 110
111 There is another aspect to Berkey's claim that introduction of Kodacolor II simultaneously with the Pocket Instamatic camera was anticompetitive. For eighteen months after the 110 system introduction, Kodacolor II was available only in the 110 format. Since Kodak was the first to have the 110s on the market, Berkey asserts it lost camera sales because consumers who wished to use the remarkable new film would be compelled to buy a Kodak camera. This facet of the claim, of course, is not dependent on a showing that Kodacolor II was inferior in any respect to Kodacolor X. Quite the opposite is true. The argument is that, since consumers were led to believe that Kodacolor II was superior to Kodacolor X, they were more likely to buy a Kodak 110, rather than a Berkey camera, so that the new film could be used. 112 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. 42 113 But to prevail, Berkey must prove more, for injury is an element of a private treble damages action. Berkey must, therefore, demonstrate that some consumers who would have bought a Berkey camera were dissuaded from doing so because Kodacolor II was available only in the 110 format. This it has failed to establish. The record is totally devoid of evidence that Kodak or its retailers actually attempted to persuade customers to purchase the Pocket Instamatic because it was the only camera that could use Kodacolor II, or that, in fact, any consumers did choose the 110 in order to utilize the finer-grained film. 114 To be sure, some of Kodak's advertisements emphasized the superior qualities of Kodacolor II, but the gist of these messages was merely that Kodacolor II, unlike previous films, would yield, big, sharp pictures from a small camera. In short, Kodak simply claimed to have achieved its goal of truly developing a Pocket Instamatic system whose color prints would be as close as possible to the prints currently obtained from 126-size Kodacolor X. Stressing the pocketability of the 110 format, Kodak did not emphasize Kodacolor II as an independent reason to choose a photography system. Little of the advertising mentioned Kodacolor II by name. Of even greater weight is the fact that none in any way implied that the new film was available only in the 110 size. Accordingly, the content of Kodak's publicity, standing alone, would not permit a jury rationally to infer that Berkey was injured by the restriction of Kodacolor II to the 110 format. 115 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 brief 44 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). 116 Voluminous discovery and a prolonged trial have already given Berkey more than ample opportunity to adduce evidence, which it failed to do, in support of its consistently maintained claim that it lost camera sales because of restriction of Kodacolor II to the 110 format. It would make a mockery of the adversary system in a case of this character, where great expenditures of time and money have been made and where the plaintiff was represented by counsel of extraordinary ability and experience, to afford a new trial so that missing elements of proof could be produced, if, indeed, they exist. 117 To summarize our conclusions on the 110 camera claims, we hold: 118 1. Kodak was under no obligation to predisclose information of its new film and format to its camera-making competitors. 119 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. 120 We, therefore, reverse so much of the judgment as awarded Berkey damages based on the introduction of the 110 camera. 45 121
122 The introduction of the 110 system provided the foundation not only for the enormous camera award but also for the much smaller damage items $55,700 and.$19,000, respectively, before trebling allotted for lost photofinishing profits and for overcharges on photofinishing equipment. These verdicts, moreover, were the basis for the only injunctive relief decreed below. We reverse and remand for a new trial so much of the judgment as was based on damages for the photofinishing and equipment claims, and we vacate and remand the equitable decree for further consideration in light of the principles set forth in this opinion.
123 Berkey's damages claims here are based on the fact that Kodacolor II, introduced along with the 110 camera, required the new, high-temperature C-41 finishing process instead of the C-22 process used for Kodacolor X and similar films. Thus independent photofinishers could not offer processing service for Kodacolor II the only color print film Kodak ever offered in the 110 size until they bought new equipment and received instruction in and supplies for C-41 processing. Moreover, Kodak did not give advance warning to the independents that the new film would be introduced, nor did it predisclose the C-41 process to other makers of photofinishing equipment. Accordingly, CP&P was able to begin processing Kodacolor II several weeks before its competitors. 124 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. 125 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. 126 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. 127 It bears emphasis that only the wielding of power will support recovery in this context; advantages inuring to Kodak's photofinishing and equipment arms by virtue of membership in an integrated firm will not. As we suggested earlier, a use of monopoly power is an action that a firm would have found substantially less effective, or even counterproductive, if it lacked market control. Thus, the classic example of such a use is a refusal to deal in goods or services needed by a competitor in a second market. E. g., Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 47 S.Ct. 400, 71 L.Ed. 684 (1927). But, a firm without control of the market that attempts this will simply drive the purchaser to take its patronage elsewhere. 128 Similarly, suppose that Kodak was aware that most consumers would prefer Kodacolor X but nevertheless decided to replace it by Kodacolor II, hoping thereby to place competing photofinishers at a disadvantage. A small film manufacturer attempting this tactic would find it ineffective and self-destructive the slack in C-22 films would be filled by other firms, and consumers would have no reason to buy a film they did not like. Kodak, by contrast, would face a far different calculus: consumers desiring film would have little choice but to buy Kodacolor II and would thereby ineluctably strengthen CP&P's hand in photofinishing. 129 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. 52 130 We cannot resolve this ambiguity. The instructions to the jury did not draw with sufficient sharpness the distinction between exercises of power and the natural benefits of size and integration. Nor is the record so clear that we can say with certainty on which side of this demarcation the facts fall. The parties quite naturally gave relatively little attention to this aspect of the case, in light of the comparatively small sums involved. If the parties wish to pursue these claims to a final determination, therefore, a new trial will be necessary.
131 Although Berkey's claim for damages in the photofinishing market was limited to the events surrounding the 110 introduction, the plaintiff also made extensive allegations that Kodak had used its control over other markets to disadvantage photofinishing competitors. For example, Berkey complained about Kodak's policy, evidently discontinued after the commencement of this suit, in the sale of color paper. The emulsions on each production run of paper are slightly different, yielding a variance of color characteristics. Because tests and machinery adjustments are necessary each time a roll of paper from a new emulsion run is used, large photofinishers like Berkey naturally wish to buy as many rolls as possible from a single run. Kodak, however, refused to sell more than 400 rolls from any one run to each photofinisher. Given Kodak's monopoly power in color paper, this refusal to deal would, unless justified by a valid business reason, appear to violate § 2 and form the basis for a grant of equitable relief. 132 Citing several examples of what he considered to be uses of Kodak's spectrum of monopoly powers as a lever in the photofinishing field, Judge Frankel issued a wide-ranging decree that requires the defendant, as he explained, to treat all photofinishers, including CP&P, alike in relevant respects. Accordingly, any technical information made available by any other branch of Kodak to CP&P must also be offered promptly on the payment of a $200 annual fee to cover postage, printing, and handling to all domestic firms providing amateur photofinishing services. 133 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. 134 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 competitors 53 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.