Appendix — Yoder Bros. v. California-Florida Plant Corp.

Supreme Court, U. S,

FILED

APPENDIX NEC R 1976

| MICHAEL RODAK, JR., CLERK

IN THE

Supreme Court of the United States

October Term, 1976

x t6- 766 '

YODER BROTHERS, INC.,

Petitioner,

v.

CALIFORNIA-FLORIDA PLANT CORPORATION and

CALIFORNIA-FLORIDA PLANT CORPORATION OF

FLORIDA,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

a

HowarpD C. BUSCHMAN III Davin L. FosTerR

FREDERICK L. MCKNIGHT 1 Chase Manhattan Plaza

ROBERT E. BARTKUS New York, New York 10005

WILLKIE FARR & GALLAGHER Attorney for Petitioner,

Of Counsel Yoder Brothers, Inc.

INDEX TO APPENDIX

PAGE

Opinion of the United States Court of Appeals for

the Fifth Circuit, September 7, 1976 ............ la

Judgment of the United States Court of Appeals for

the Fifth Circuit, September 7, 1976 ............ 126a

Judgment Reflecting Decisions of Court and Jury in

the United States District Court for the Southern

District of Florida, August 28, 1974 ............. 128a

Testimony of Mr. Jack Neckar, Trial Transcript pp.

4810-4812, Appeal Appendix pp. 1862a-1864a .... 132a

Pretrial Stipulation, 15(m), Appeal Appendix p.

DD <odsankonsannedsesetecieceustessasnsnsees 133a

Answers to Interrogatories, Plaintiff’s Exhibit 1101,

Appeal Appendix E521-E524 ................... 134a

-la-

OPINION IN THE COURT OF APPEALS

IN THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 75-2141

YODER BROTHERS, INC.,

Plaintiff-Appellant-Cross Appellee,

vs.

CALIFORNIA-FLORIDA PLANT CORPORATION,

et al., ,

Defendants-Appellees-Cross Appellants.

CALIFORNIA-FLORIDA PLANT CORPORATION,

et al.,

Plaintiffs-Appellees-Cross Appellants,

Vs.

YODER BROTHERS, INC.,

Defendant-Appellant-Cross Appellee.

September 7, 1976

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APPEALS FROM THE UNITED STATES

DISTRICT COURT FOR THE SOUTHERN

DISTRICT OF FLORIDA

Before BROWN, Chief Judge, JONES

and GOLDBERG, Circuit Judges.

GOLDBERG, Circuit Judge:

In this clash between two giants of

the chrysanthemum business we confront a

myriad of antitrust and plant patent

issues. Yoder Brothers (Yoder), plain-

tiff in the district court, sued, al-

leging infringement of twenty-one chrys-

anthemum plant patents by California-

Florida Plant Corp. (CFPC) and Cali-

fornia-Florida Plant Corp. of Florida

(CFPCF) (sometimes referred to col-

lectively as Cal-Florida). CFPC and

CFPCF denied the infringement and filed

antitrust counterclaims under sections l

and 2 of the Sherman Act. As to seven

of the chrysanthemum plant patents, the

lower court directed verdicts for Yoder

that the patents were valid and infringed

and awarded treble damages. The court

also ruled for Yoder on Cal-Florida's

section 2 claim. CFPC and CFPCF, how-

ever, prevailed in their antitrust

counterclaim under section 1 and re-

ceived treble damages for Yoder's der-

elictions.

Because many of the issues in this

case turn on the particular nature of

the ornamental plant industry and the

specific characteristics of chrysanthe-

mums, we shall describe the background

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facts in some detail before discussing

the many complex legal issues presented

on this appeal. Following our descrip-

tion of the facts, we shall briefly

sketch the procedural history of the

case. Finally, we shall consider the

antitrust claims and the issues relating

to the plant patent law.

I. General Background

A. The Chrysanthemum Industry

Chrysanthemums, in their natural

state, blossom only during the fall.

This is because they are photoperiodic

in nature, meaning that their growth is

affected by the relative lengths of

lightness and darkness in the day. When

the days are long, the chrysanthemum

plant remains in a vegetative state.

As the nights become longer, the initi-

ation process of the chrysanthemum bud

begins. Thus, in early August, when the

nights achieve a duration of nine and

one-half continuous dark hours, the

chrysanthemum plant in its natural state

will begin the process of developing a

flower. During the fall and early

winter months, the mature flower ap-

pears.

Yoder began doing business in the

1930's as a simple greenhouse operator,

specializing in tomatoes. Soon there-

after, because the fall tomato crop was

less profitable than the spring crop, it

decided to replace the fall crop with

chrysanthemums. In 1939 or 1940, Yoder

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employees began research into out-of-

season flowering of chrysanthemums. By

applying black cloth shades over the

chrysanthemums when dark hours were

needed and applying artificial light

when light hours were needed, it became

possible to flower chrysanthemums on a

year-round basis. Yet this breakthrough

was not without its problems. For

example, the use of black cloth shades

resulted in an abnormally high tempera-

ture build-up around the plants, which

in turn retarded bud initiation. Sim-

ilarly, when the finishing temperatures

were too warm, the chrysanthemums would

not hold their color. In an effort to

adjust for these conditions and to

improve the quality of the chrysanthemum

generally, Yoder initiated a breeding

program in the early 1940's. One of the

most important goals of the breeding

program was the development of new

varieties for consumers.

Although the ornamental plant

industry encompasses many different

kinds of flowers, including azaleas,

carnations, roses, african violets,

geraniums, snapdragons, and others,

chrysanthemums are one of the most

popular of the genre. According to the

United States Department of Agriculture,

in 1971 approximately 2,134 growers in

twenty-three states sold nearly 145

million blooms from about 129 million

Standard variety chrysanthemum plants,

34.5 million blooms from 136 million

pompon chrysanthemum plants, and 17.5

million potted chrysanthemum plants. At

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the time of the trial there were over

475 different varieties of chrysanthemums

available. The total wholesale value of

growers’ sales in the twenty-three

states that year was approximately 83.5

million dollars.

Chrysanthemums have been subject to

intensive breeding efforts over the past

thirty years; each individual specimen

is a genetically unique complex organism.

Several definitions of the term “vari-

ety" of chrysanthemum were offered at

trial. Mr. Duffett, Yoder's head breed-

er, defined a variety as a group of

individual plants which, on the basis of

observation by skilled floriculturists

and according to reasonable commercial

tolerances, display identical character-

istics under similar environments. Cal-

Florida defined variety in its complaint

as "a subspecies or class of chrysanthe-

mums distinguishable from other sub-

species or classes of chrysanthemums by

distinct characteristics, such as color

hue, shape and size of petal or blossom

or any of them.”

New varieties of chrysanthemums are

developed in two major ways: by sexual

reproduction and by mutagenic tech-

niques. Sexual reproduction, the result

of self or cross pollination, produces a

genetically unique seedling, the charac-

teristics of which are impossible to

predict. Mutagenic techniques simply

accelerate the natural rate of mutation

in the chrysanthemum plant itself. A

mutation was defined by Mr. Duffett as

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"a change in the number of chromosomes

or a change in the chromosome position

or a specific change in the genes within

those chromosomes." Technically, only

those mutations that first express

themselves as bud variations are proper-

ly called “sports”; however, the word is

used loosely in the industry as a gen-

eral synonym for mutation, and we will

so use it. Two types of sports can

appear: spontaneous sports and radiation

sports. The cells of all living things

occasionally mutate, and spontaneous

sports are simply the result of that

process. Radiation sports, on the other

hand, are induced artificially, through

exposure to such things as gamma radi-

ation from radioactive cobalt and xX-

rays. These techniques do nothing that

could not occur in nature apart from

speeding up the natural mutation process.

Although most of the mutations induced

by radiation are not commercially usable

plants, a skilled breeder will select

for further development those that

display such desirable characteristics

as fast response time, temperature

tolerance, durability, size, and vigor.

Afer a breeder has successfully is-

Olated a new variety, the only way he

can preserve his creation is by means

of a sexual reproduction. In the case

of chrysanthemums, the most common

technique of asexual reproduction is the

taking of cuttings from a stock plant.

Cuttings, as defined in Cal-Florida com-

plaint, are "sections or parts of chry-

santhemum plants which may be grown into

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mature plants for sale as cut flowers

and/or potted plants or from which

additional cuttings may be harvested.”

According to Yoder's suggested defini-

tion, cuttings are simply immature chry-

santhemum plants. Since a cutting is

genetically identical to the parent

plant, it will develop into a plant

whose characteristics match the parent's

exactly, so long as the same environ-

mental conditions obtain. A central

fact of life in the chrysanthemum in-

dustry is the ease with which cuttings

can be taken from parent plants: from

one chrysanthemum, it is theoretically

possible to develop an infinitely large

stock, by taking cuttings, maturing some

- into flowered plants, taking more cut-

tings, and so on. _

Over the years since Yoder first

entered the chrysanthemum business, the

industry has become internally specializ-

ed. At the first functional level are

the breeders, who create new varieties

of chrysanthemums. Breeding is an ex-

pensive, complex procedure. The breeder

must possess the skill and discrimina-

tion to spot potential new varieties and

recognize whether they possess desirable

traits; facilities for elaborate testing

and development must be available. Be-

cause chrysanthemums mutate rapidly, a

breeder must always be on the lookout

for new changes.

At the next level in the industry

are the propagator-distributors. The

propagator-distributors build up mother

stock from-sources such as breeders, re-

tail florists, or their existing flowers,

and reproduce cuttings from that mother

stock. In a sense they are simply mass

producers of cuttings. They do not

develop cuttings to the mature flower

stage {except for purposes of their own

testing). Next are the growers, who de-

velop cuttings purchased from propaga-

tor-distributors into mature plants

either for cut flowers or potted plants.

Combining the function of propagator-

distributors and growers are the self-

propagators. Cal-Florida defined a

"self-propagator” as "a person who

either buys or establishes stock and

takes cuttings for the sole purpose of

producing cut flowers and/or potted

plants for resale or own use." In other

words, the self-propagators are verti-

cally integrated into one step. Final-

ly, the growers (or self-propagators)

sell their products to retail florists,

who in turn sell to ultimate consumers.

B. The Parties

During the times relevant to this

litigation, Yoder operated on two levels

in the business: as a substantial (if

not the largest) breeder of new varie-

ties of chrysanthemums, and as a large

propagator-distributor. In addition to

chrysanthemums, Yoder dealt with carna -

tion cuttings, azalea liners (baby aza-

leas), and snapdragon seeds. Yoder is

an Ohio corporation, and it sells its

products nationwide.

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CFPC, which is incorporated in

California, and which sells primarily in

the western part of the United States,

was a propagator-distributor. CFPCF, a

wholly owned subsidiary of CFPC, was

also a propagator-distributor. CFPCF is

incorporated in Florida and it sells in

the eastern United States. Both CFPC

and CFPCF specialize in chrysanthnemums.

They entered the market in 1957, ata

time when Yoder was clearly the largest

of the propagator-distributors. During

the period in question, Yoder and the

two Cal-Florida companies competed

horizontally as propagator-distributors--

they did not compete as breeders, al-

though Cal-Florida did make a minor

foray into breeding during the 1960's.

C. The Plant Protection Programs

The issues in this litigation arose

out of Yoder's breeding operations and

its desire to secure a fair return from

those efforts. Theoretically, once the

first plant of a new variety is sold, it

is impossible for a breeder ever again

to be compensated for his efforts in de-

veloping it. As indicated above, anyone

can take a cutting from that new plant,

propagate a number of cuttings from the

first cutting, and obtain an infinite

supply of the plant. Even as a practi-

cal matter, the evidence at the trial

suggested that it was relatively easy to

obtain plant material of new varieties

without the consent of the breeder.

Yoder's first effort to obtain com-

pensation for its breeders took the form

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of a program entitled the Yoder Grower

Agreement, or YGA, instituted around

1958. In return for access to new var-

ieties developed by Yoder, growers were

required to sign an agreement that pro-

hibited purchasers of Yoder cuttings

from selling, loaning, or otherwise

disposing of purchased cuttings. Spec-

ifically, growers were prohibited from

selling Yoder cuttings to self-propaga-

tors or to propagator-distributors. The

agreement also contained a “sport return

Clause," which required purchasers of

Yoder cuttings to return to Yoder any

mutations which appeared either directly

or indirectly on Yoder cuttings. Yoder

enforced the YGA program by refusing to

ship covered varieties to persons who

did not sign a YGA agreement. The most

Significant aspect of the YGA program

was the fact that a royalty was charged

on = Yoder cuttings propagated or

used.

In the early 1960's, the YGA pro-

gram was replaced by a new system that

took its name from the Breeder-Grower

Agreement that was its central reason

for being. A corporation called BGA,

International [BGA] was created to

administer the program. Any breeder

could be a member of BGA. According to

the members’ regulations, voting strength

was proportional to the amount of ex-

penses the member bore. Expenses, in

turn, were assessed in proportion to the

amount of royalties collected on the

breeder's new varieties. The practical

effect of these provisions was to secure

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control of BGA in Yoder's hands. The

bylaws and articles of incorporation of

BGA indicated that its primary purpose

was to insure a measure of remuneration

to the breeders. A breeder would list

his new variety of ornamental plant with

BGA, and BGA would make plant material

of that variety freely available to

propagator-distributors. The breeder

members of BGA agreed on the amount of

royalty to be charged. Significantly,

during most of the time that the BGA

program was in existence, it was ad-

ministered within Yoder's offices.

Three kinds of agreements were used

in administering the BGA program. The

first was the Propagator~Distributor

Agreement, which permitted the signatory

to make any desired commercial use of

purchased cuttings or cuttings harvested

from the stock plants. Participating

propagator-distributors had an obliga-

tion to send a grower or grower license

agreement to customers who wanted to

purchase a BGA variety. For each cut-

ting sold, the propagator-distributor

had a contractual obligation to pay BGA

a $.006 royalty. He also was required

to report the number of cuttings sold

quarterly, not to give cuttings to non-

signatories, to exercise reasonable care

to keep others from getting cuttings,

and to allow the breeder to inspect and

inventory his plantings at all reason-

able times. The propagator-distributor

agreement also contained a provision

whereby the propagator-distributor was

entitled to full credit from BGA if he

was unable to collect the $.006 royalty

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from his customers. The agreement

required the propagator-distributor to

return all mutations and sports to the

breeder, who retained all rights to

them.

Grower License Agreements were

signed by self-propagators. These

agreements conferred the right to grow

and to propagate plants to sell as cut

flowers or potted plants. The restric-

tions and conditions in the agreement

were essentially the same as those in

the Propagator-Distributor Agreement,

except that the royalty payment was to

go to the propagator-distributor who had

furnished the cutting, instead of to

BGA.

Finally, the growers signed a

Grower Agreement. The Grower Agreement

covered growers who purchased cuttings

from propagator-distributors for the

purpose of selling flowers or potted

plants. All propagator-distributors for

the purpose of selling flowers or potted

plants. All propagation rights were

again reserved to BGA, and the grower

agreed not to propagate without BGA's

consent, not to give BGA varieties to

others for the purpose of propagation,

to allow reasonable inspections, and to

return sports.

Typically, the BGA program operated

as follows: A propagator-distributor

would propagate a large number of cut-

tings of a BGA new variety. For each

cutting he sold to a grower or a self-

propagator, he would pay BGA $.006. On

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his invoices to his customers, a base

price for the cutting would appear, and

separately stated would be the amount of

BGA royalty due. Evidence at the trial

indicated that the industry was gener -

ally aware of the existence of the BGA

royalties and understood that these roy-

alties were in essence compensation to

the breeders of the new variety. The

customer would therefore pay the base

price plus royalty to the propagator-

distributor, and the latter would in

turn remit the full royalty amount to

BGA. Thus, the role of the propagator-

distributor was that of a BGA adminis-

trator; his cooperation was essential in

the process of collecting royalties from

those who sold or used the protected

varieties and channeling. the monies to

the appropriate breeder .1

The degree of enforcement of the

BGA program was the subject of some

dispute at the trial. If Yoder knew

that a grower or a self-propagator had

not signed a BGA agreement, it would not

ship the requested BGA variety. Instead,

a substitute variety would be sent. On

the other hand, the testimony indicated

that a substantial number of complaints

were voiced about the lack of enforce-

ment of the BGA program against non-

signatories. No lawsuits were ever fil-

ed. If a grower or self-propagator went

I. The evidence indicated that the BGA

program's operation insofar as royalty

collection was concerned did not operate

any differently when the propagator-

distributor was Yoder.

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out and purchased his mother stock from

a retail florist, for example, there

was nothing that Yoder could or would

do about the fact that he had obtained

a protected variety without signing a

contract. Yoder explained its lack of

enforcement by the need to maintain good

will in the industry. If a grower mem-

ber informed BGA that someone had access

to BGA varieties who had not signed the

contract, a BGA representative would

check with the alleged pirate and try

to persuade him to become a member.

Yoder's representative testified that in

almost every case, once the purpose of

the BGA system was explained to a non-

participant, the grower or self-propaga-

tor would usually agree to sign a contract

and to pay the royalty to BGA. From

Cal-Florida's perspective, Yoder's

tactics were tantamount to strong-

arming. Both parties agreed that new

varieties were helpful to everyone in

the industry. It was Yoder's position

that BGA, by providing a means for

breeder compensation, was helping in the

development of new varieties of chrysan-

themums.

The GRA program, [Grower Rights

Agreement] developed by Yoder in 1968 to

supplement BGA, was similar to the

latter program in many ways. When a

grower or propagator-distributor or

self-propagator discovered a mutation on

plant material that was not covered by a

BGA agreement (in other words, any free

plant), he could send the mutation to

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Yoder Brothers for evaluation of its

commercial possibilities. After ex-

tensive testing, if Yoder decided that

the new variety could profitably be

introduced, the grower who discovered

the variety would be entitled to 50% of

the royalty return. The agreements used

to administer GRA followed the BGA

pattern--a Propagator-Distributor Agree-

ment, a Grower License Agreement, and a

Grower Agreement. Unlike BGA, under GRA

the royalties collected were returned

directly to Yoder. The amount of the

royalty ynder GRA was again $.006 per

cutting.

Cal-Florida participated in the BGA

and GRA programs only as a propagator-

distributor. Although it did conduct a

ae In some ways, the GRA program pro-

vided a service to growers. Normally,

a grower would not have the facilities

to test a mutation or sport that he

found on a chrysanthemum plant to see

if, indeed, a new variety that could be

asexually reproduced had been discovered.

By taking advantage of Yoder's extensive

facilities for this work, both parties

benefited--Yoder had another new variety

on which it was receiving royalties, and

the grower had the benefit of half the

royalties paid for his acuteness of ob-

servation in finding the new variety.

Persons who wished to have access to the

Yoder service, however, had to sign GRA

agreements, which contained restrictions

on use of varieties accepted by Yoder

similar to those in the BGA agreement.

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breeding program of its own during the

1960's, it never registered any new var-

ieties with BGA. Instead, it developed

the CFPC program. The CFPC program used

the same three kinds of agreements as the —

BGA program--the propagator-distributor

contract, the grower-propagator license,

and the grower agreement. In one aspect,

however, the CFPC program was more re-

strictive than the BGA program: sales to

self-propagators and other propagator-

distributors were prohibited. The roy-

alty rate was the same $.006 per cutting.

Like the BGA program from which it was

copied, the CFPC program's basic purpose

was to obtain remuneration for the

company's breeding efforts. Sports dis-

covered by participants in the CFPC

program were required to be returned to

_Cal-Florida, the breeder.

As a propagator-distributor par-

ticipant in the BGA program, Cal-Florida

of course paid royalties to BGA. During

the relevant period, CFPC and CFPCF

combined paid $229,805.12 in BGA royal-

ties and $27,941.18 in GRA royalties--

a total »f $257,746.30. The evidence

showed that over the years, more and

more of Cal-Florida's sales were of

varieties controlled by Yoder under

either BGA or GRA. In 1963, 0.19% of

their cutting sales were BGA or GRA var-

ieties; by 1969, the number had grown to

17.59% of total sales, and by 1971, to

41.22%.

BGA and GRA royalties were always

separately stated on Cal-Florida's in-

voices to its customers. In addition,

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the following explanation was to be

found in its catalogs:

BGA (BREEDER GROWER AGREE-

MENT) VARIETIES. The California-

Florida Plant Corp. is licensed

by BGA International to propagate

and distribute BGA varieties. The

terms of our Propagator-Distributor

Contract call for the customer to

sign a BGA Agreement prior to the

shipment of any BGA variety.

BGA varieties are subject to

all discounts of Volume, Advance

Order and Prompt Payment. The

current BGA Royalty is $0.60 per

100 cuttings, rooted or unrooted,

and is in addition to the listed

base price. BGA Royalties are not

subject to Discount or Adjustment

of any kind and the total amount of

BGA Royalty collected by us is

returned to BGA International.

GRA (GROWER RIGHTS AGREEMENT)

VARIETIES. The California-Florida

Plant Corp. is licensed to grow,

propagate and distribute GRA vari-

eties. The terms of our Propa-

gator-Distributor contract call for

the customer to sign a GRA Agree-

ment prior to us shipping any GRA

varieties.

GRA varieties are subject to

all discounts of Volume, Advance

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Order and Prompt Payment. The

current GRA Royalty is $0.60 per

100 cuttings, rooted or unrooted,

and is in addition to the base

price.

GRA Royalties are not subject to

Discount or Adjustment of any kind

and the total amount of GRA Royalty

collected by us is returned to the

developer.

ROYALTY CHARGES. All Royalty

Charges (CFPC, BGA, and GRA) will

be billed separately and included

in the monthly statement.

Thus, CFPC clearly segregated the BGA

and GRA royalty charges from the prices

charged for the cuttings it sold.

D. Government Intervention

On April 20, 1970, the United

States brought an action against Yoder,

alleging that the BGA and GRA programs

violated sections 1 and 2 of the Sherman

Act, 15 U.S.C. §§ 1, 2. The Government's

suit ended in a consent judgment entered

on March 15, 1972 in the Northern Dis-

trict of Ohio. The consent decree

abolished BGA and GRA and prohibited

further collection of royalties and

further enforcement of the sport return

clauses; it also required Yoder to take

certain affirmative actions to inform

the former participants of the changed

status quo. The judgment expressly

stated that it did not apply to any

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rights that Yoder had obtained under the

patent laws of the United States or of

any foreign country. Cal-Florida had

moved to intervene in the Government's

case on February 16, 1972. On March 15,

1972, the same day as the consent decree

was finally approved, the court denied

its motion.

E. Post BGA: Plant Patents

After BGA ended, around the end of

1971, Yoder started patenting some of

its new varieties under the Plant Patent

Act, 35 U.S.C. § 161 et seq. Several

salient differences existed between the

rights conferred by a plant patent and

the rights secured under the old BGA

and GRA agreements. For example, under

a plant patent, sports of the patented

plant are not covered by the original

patent. See Part IV, infra. Second;

the royalty event for a patented plant

is the asexual reproduction of the

plant, instead of its use or sale.

Even so, the Plant Patent Act and the

BGA/GRA programs were quite similar.

Under both, licenses for propagation by

others could be issued, and royalties

could be charged for the use of the

plant. These similarities have led Cal-

Florida to allege that Yoder's new use

of the plant patent laws is simply a

continuation of its old and illegal BGA

program. Since BGA and GRA ended, Yoder

has secured plant patents on all new

varieties it has introduced to the

trade. Shortly after the Government

suit was terminated, and after extensive

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unsuccessful negotiations with Cal-

Florida, Yoder filed its complaint

commencing this litigation. We thus

arrive at last at the beginning--the

procedural history of the case before

us.

II. Summary of Proceedings Below

On March 6, 1973, Yoder filed its

complaint in the United States District

Court for the Southern District of

Florida, alleging infringement of twenty-

one chrysanthemum plant patents by CFPC

and CFPCF. CFPCF answered on April 12,

1973, denying the infringement and

setting forth antitrust and trade dis-

paragement counterclaims. On the same

day, CFPC moved to dismiss for improper

venue under Rule 12 (b) (3), Federal

Rules of Civil Procedure. In addition,

CFPC filed suit in the Northern District

of California on June 5, 1973, fora

declaratory judgment on the validity of

Yoder's patents and for trade disparage-

ment damages. On December 26, 1973, the

California action was ordered transfer-

red to the Southern District of Florida

pursuant to 28 U.S.C. § 1404(a) (trans-

fer in the interests of justice to

district where suit might have been

brought). In the first pretrial order,

filed January 16, 1974, the district

court denied CFPC's motion to dismiss on

venue grounds. The two cases were con-

solidated by an order entered March 4,

1974.

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The trial before a jury began on

April 23, 1974. The issues presented

for trial were stipulated by the parties

in their joint Pretrial Stipulation and

involve both patent and antitrust

claims. Yoder claimed infringement and

contributory infringement of twenty

different United States plant patents by

either CFPC or CFPCF or both. The two

Cal-Florida companies asserted the

invalidity of twenty-two United States

plant patents. In its counterclaim,

Cal-Florida asserted that Yoder, by is

participation in the BGA and GRA pro-

grams, combined to restrain trade in

violation of Sherman Act § 1, 15 U.S.C.

§ 1, and further alleged that Yoder had

committed acts of monopolitzation of the

trade in chrysanthemum cuttings, in

violation of Sherman Act § 2, 15 U.S.C.

§ 2. :

At the close of the evidence, the

district court directed verdicts on sev-

eral critical issues. On June 12, 1974,

it ruled for Yoder on the issues of

patent validity and infringement of all

twenty patents, subject to Cal-Florida's

claims of contract rights and prior com-

mercial exploitation; additionally, it

3. Yoder’s unfair competition claims

and Cal-Florida's price discrimination

and trade disparagement claims were

withdrawn during the trial.

-22a-

ruled in Yoder's favor on all issues of

inventorship, newness and distinctness,

asexual reproduction, and adequacy of

description. On June 13, 1974, the

court granted a verdict in favor of

Yoder on Cal-Florida's monopoly counter-

claims. On Cal-Florida's side, the

court directed a verdict that Yoder,

through the BGA and GRA programs, had

participated in a group boycott which

constituted a per se violation of Sher-

man Act § 1. The court denied Yoder's

motions for directed verdicts claiming

that there was insufficient evidence to

sustain a verdict: (1) that BGA and

GRA were illegal; (2) that CFPC and

CFPCF were injured as a result of the

BGA and GRA programs (i.e. lack of "fact

of damage"); (3) that CFPC and CFPCF

were in the "target area" of the BGA and

GRA programs (i.e. that they had stand-

ing to sue under the antitrust laws);

and (4) that any damages were support~-

able, since the damage proof and theor-

ies were legally improper, factually

unsupported, and speculative.

The patent claims were submitted to

the jury on special interrogatories.

The antitrust claims, in contrast, were

submitted under a general verdict form.

Two theories of antitrust damages were

submitted to the jury: the royalty

payments theory, and the price differen-

tial theory. In connection with the

royalty payments theory, the jury was

told that unless the BGA and GRA systems

-23a-

were analogous to a "pre-existing cost

plus contract," they would not be per-

mitted t2 consider whether Cal-Florida

had "passed on" the incidence of the

royalties paid under those programs to

its customers. This theory was sub-

mitted over Yoder's strenuous objection.

The price differential theory, based on

evidence showing the comparative prices

charged by CFPC and CFPCF (taken togeth-

er) and Yoder, permitted the jury to

find that the Cal-Florida. companies

were damaged to the extent that their

prices were lower than Yoder's. Again

Yoder voiced its objection both to the

introduction of this evidence and to the

jury's consideration of that theory. On

June 21, 1974, after eight days of

deliberation, the jury returned its ver-

dict, finding a violation of section l

of the Sherman Act, causation and damages

in the amount of $64,500 for CFPC and

$64,500 for CFPCF. With regard to the

patent issues, the jury found that CFPC

and CFPCF had established a contractual

right to use eight of the patented

plants. For another seven patented

plants, the court had instructed the

jury that the patents were valid and

infringed as a matter of law; as to

these, the jury awarded compensatory

damages. The jury also awarded damages

on one patent, covering the "Deep

Conquest" chrysanthemum, which it found

valid and infringed. It was unable to

reach a verdict on the rest of the

patents.

-24a-

On this appeal, we are concerned

only with the seven patents that the

district court declared valid and in-

fringed as a matter of law and with Deep

Conquest. For those patents, the court

trebled the amount of the damages found

by the jury, giving ¥qder a total re-

covery of $66,917.64. Following the

jury verdict, Yoder moved for judgment

notwithstanding the verdict as to the

award of damages to CFPC and CFPCF and,

in the alternative, moved for a new

trial as to the award to CFPCF only, for

reasons related to the amount of the

damage award. In orders dated January

16, 1975, and March 4, 1975, the court

denied Yoder's post-trial motions.

Thus, on April 3, 1975 Yoder noticed its

appeal; on April 14, 1975, CFPC and

CFPCF responded with notices of their

cross appeal.

III. Antitrust Appeal

On appeal from the antitrust judg-

ment rendered against it, Yoder raises

4. The court's judgment of August 29,

1974, orders that Yoder recover $42,712.

44 from CFPC for infringement of the

plant patents Deep Conquest, Morocco,

Mountain Snow, Mountain Sun, Promenade,

Red Torch, and Southern Gold. The

remaining $24,205.20 was to come from

CFPCF for infringement of the latter six

plant patents plus Gold Marble.

-25a-

three main issues: (1) that judgment

should be entered for it because appel-

lees lack standing to sue under section

4 of the Clayton Act, 15 U.S.C. § 15;

(2) that the lower court's ruling that

the BGA and GRA programs were per se il-

legal group boycotts was incorrect; and

(3) that neither of the two possible

theories of damages--the “price dif-

ferential” theory or the "royalty pay-

ments" theory--could provide a basis for

the jury's award. Cal-Florida raises

both antitrust and patent claims on its

cross appeal. On the antitrust issues,

it argues that the district court er-

roneously granted Yoder's motion for a

directed verdict on the Sherman Act § 2

claim of monopolization and attempted

monopolization. Its other antitrust

point asserts that the district court

erred in denying it the benefit of the

tolling provision of 15 U.S.C. § 16(i),

the Clayton Act statute of limitations.

We have decided that the district

court correctly ruled that Cal-Florida

had standing to challenge the BGA and

GRA programs and that those programs

were per se violations of section 1 of

the Sherman Act. Furthermore, we find

that the court's ruling that Cal-

Florida had failed to show a section 2

claim of monopolization or attempted

monopolization was justifiable. Final-

ly, although the lower court correctly

ruled that Cal-Florida was not entitled

to the tolling provisions contained in

15 U.S.C. § 16(i), it erroneously ad-

mitted evidence comparing Yoder's and

-26a-

Cal-Florida's prices. Since the jury

may have relied on the price differential

theory in its award of damages, we must

remand the antitrust claims to the trial

court for further proceedings. [In this

connection, we note that the district

court should have disallowed Yoder's

"passing on” defense as a matter of law,

rather than submitting it to the jury.

In the interest of an orderly dis-

cussion of the issues before us, we have

decided to organize them as follows:

(1) whether Cal-Florida had standing to

sue under section 4 of the Clayton Act,

15 U.S.C. § 15; (2) whether the Govern-

ment's suit was still “pending” at the

time Cal-Florida filed its antitrust

claims, thereby entitling Cal-Florida to

the benefit of the tolling provision of

the statute of limitations under Clayton

Act section 4B, 15 U.S.C. §§ 15b,

16(i); (3) whether the BGA and GRA pro-

grams were illegal per se under section

1 of the Sherman Act, 15 U.S.C. § 1;

(4) whether Cal-Florida failed to prove

a relevant market as a matter of law for

purposes of Sherman Act § 2, 15 U.S.C.

§ 2, and whether it failed to show dan-

gerous probability of success in such

market; and (5) whether Cal-Florida suc-

cessfully proved fact of damage and

causation under its price differential

and royalty payments theories of damages.

A. Standing to Sue

Section 4 of the Clayton Act pro-

vides in pertinent part:

-27a-

Any person who shall be

injured in his business or‘ property

by reason of anything forbidden in

the antitrust laws may sue therefor

in any district court of the United

States ....

15 U.S.C. § 15. Focusing on the "by

reason of" language, Yoder argues that

private enforcement of the antitrust

laws should be granted only to those

plaintiffs who suffer sufficiently dir-

ect injury that it is proper that they

act as private attorneys general. Ad-

ditionally, they note this Court's lan-

guage in Jeffrey v. Southwestern Bell,

5 Cir. 1975, S18 F.2d 1125, 1i31:

The "target area" test [for

standing] arose as a means of

limiting the class.of potential

treble-damage plaintiffs to those

persons who could most adequately

vindicate the purposes of the

antitrust laws.

Those purposes include, according to

Yoder, the twin goals of easing the bur-

den on the courts of meritless antitrust

claims while at the same time furthering

the deterrent impact of the laws on

anticompetitive business behavior.

Yoder directs our attention to the

Supreme Court's comment in Hawaii v.

Standard Oil Co., 1972,405 U.S. 251, 92

S.Ct. 885, 891-92 n. 14, 31 L.Ed.2d 184,

noting the virtual unanimity of the low-

er courts in concluding that Congress

-28a-

did not intend the antitrust laws to

provide a remedy in damages for all

injuries that might conceivably be

traced to an antitrust violation. The

question of standing, Yoder argues, is a

legal question for the court to resolve.

Starting with the proposition that the

Fifth Circuit has adopted the "target

area" test for standing, Yoder suggests

that the purpose and specifically in-

tended impact of the violative conduct

must be to injure the alleged victim.

Furthermore, the area of the economy

wherein the impact of the violation

is felt must be specifically foreseeable.

Applying its proposed test, Yoder con-

cludes that propagator-distributors were

not the targets of the BGA and GRA

programs, because only growers and self-

propagators suffered out-of-pocket

expenses due to the royalties. Pro-

pagator-distributors merely collected

royalty payments from growers and self-

propagators and transmitted those monies

to BGA or Yoder. Neither program was

designed to hurt CFPC and CFPCF, nor was

Yoder in its capacity as propagator-

distributor helped vis a vis CFPC and

CFPCF by BGA and GRA. From these

premises, Yoder concludes that neither

CFPC nor CFPCF was injured in its bus-

iness or property by reason of a viola-

tion of the antitrust law and that this

Court should dismiss their action for

lack of standing.

In response to Yoder's arguments,

Cal-Florida argues that a "direct in-

jury" test should apply. It suggests

-29a-

that the courts have followed a twofold

traditional tort analysis: (1) was

there cauaation in fact; and (2) was the

violation a proximate cause of the

victim's injuries. Both of these ques-

tions are questions of fact which should

be submitted to the jury. Finally,

Cal-Florida asserts that the Fifth

Circuit's “target area" test, expressed

in Battle v. Liberty National Life Ins.

Co., 5 Cir. 1974, 4 ° , cert.

denied, 1975, 419 U.S. 1110, 95 S.Ct.

784, 42 L.Ed.2d 807, is the equivalent

of the tort analysis that it proposes.

Applying its test, Cal-Florida

first asserts that the royalty payments

that it made to BGA and to Yoder were

directly caused by Yoder's act--i.e.

Yoder's requirement that it sign Propag-

ator-Distributor Agreements. Second, it

argues that the illegal BGA program was

a factor in depressing Cal-Florida's

overall prices for chrysanthemum cut-

tings. Third, it alleges that it lost

sales because the royalty imposed on BGA

varieties caused prices to be so high

that some growers turned to self-propa-

gation. Finally, it maintains that all

three elements of damage were foresee-

able. From this, it concludes that the

evidence was adequate for the jury to

consider the issue of causation and, in

accordance with the court's instructions,

to render a special verdict against

Yoder.

We begin our analysis of this pro-

blem by noting that standing to sue is

-3la-

-30a-

, 1973, 409 U.S. 1109, 93 S.Ct. 912, 24

a preliminary matter, to be evaluated ._Ed.2a 690. or the es issue.

upon the allegations of the complaint. nae F oe

See Malamud v. Sinclair Oil Corp., 6 A test focusing on the sector of

Cir. 1975, 521 F. L42, - Cf. the economy is more easily stated than

Battle v. Liberty National Life Ins. Co., applied. The Ninth Circuit suggested

Supra, 493 F.2d at 48. This Circuit's one approach in In Re Multidistrict Vehi-

test for standing was recently expressed cle Air Pollution M.D.L. No. 31, 9 Cir.,

in Jeffrey v. Southwestern Bell, supra, y 2 ; , cert. denied sub nom.

as follows: Morgan v. Automobile Mfr's Ass'n, 1973,

. . g 0 L.Ed. 2d

To attain standing a person 336:

(whether corporation or individual)

must be one against whom the con- A proper application of "by

spiracy is aimed. Or, put in reason of" focuses on whether the

plutonomic terms, the complainant anti-competitive conduct directed

must show that he is within that

a ar f ec

section of the economy which is gainst an area of the economy

injured business operations con-

endangered by a breakdown of compe- ducted by the claimant in that

titive conditions in a particular sector of the economy. The re-

industry. sulting two-step approach first

requires identification of the

518 F.2d at 1131. See Tugboat, Inc. v. SSR ata ee te escncey end

Mobile Towing Co., 5 Cir. 1976, 534 F.2d

1172 [1976]; Battle v. geperty National :

Life Ins. Co., supra, 493 F.2d at 49. 5. One major failing of both proposed

See also Southern Concrete Co. v. United tests is the confusion of the standing

eS eee. 5 Cir. 1976, 535 inquiry with the substantive issues of

wh tne ; Buckle aoe conse causation and fact of damage. Cf.

minium, Inc. v. Buchwald, 5 Cir. ’ Areeda, Antitrust Violations without

533 F.2d 934. One might win the battle Damage Recoveries, 69 Harv.L.Rev. 1127,

of standing to sue but still lose the Tise3t en 3611976) (comparing

war on another issue, such as the vio-

lation issue, see E.A. McQuade Tours, Inc. yo wo a standing and damage

v. Consolidated Air Tour Manual Comm., 5

Cir. 1972, 467 F.2d 178, cert. denied,

-32a-

then the ascertainment of whether

the claimed injury occurred within

that area. 6

Examining Cal-Florida's complaint, we

find first the undisputed fact that both

CFPC and CFPCF were involved as propaga-

tor-distributors in the chrysanthemum

production industry. Next, we find that

the two companies alleged that purchasers

of BGA and GRA cuttings were required to

pay a royalty, t@ the purchasers' in-

jury, as a result of the illegal pro-

grams. Propagator-distributors, in-

cluding CFPC and CFPCF, were among those

who purchased cuttings under BGA and

GRA. Furthermore, they pointed out

other restrictions which were also

imposed on propagator-distributors,

pursuant to the programs, including the

obligation to return sports of BGA and

GRA cuttings, the fixing of the royalty

amount, and restrictions on which of

their customers could receive BGA and

6. We do not believe that ultimate

proof of injury in fact is a necesary

requirement for standing. See 481 F.2d

at 129 n. ll. Cal-Florida's allegations

are sufficient to establish injury in

fact, to the extent that such a pre-

requisite exists for antitrust standing.

-33a-

GRA cuttings. These claims were summar-

ized in the amended answer and counter-

claims of both defendants in paragraph

16(h) as follows:

CFPC and CFPCF were and con-

tinue to be damaged in their

business through, inter alia, over-

payment for cuttings by the payment

of royalties, loss of past profits,

loss of future profits, loss of

sales, and the prospegtive destruc-

tion of its business.

From these allegations, we see that

one affected area of the economy against

which the anti-competitive conduct was

directed was the propagator-distributor

level of chrysanthemum production. CFPC

and CFPCF clearly fall within this

area. The claimed injuries included

the payment of royalty to BGA and to

Yoder. In fact, propagator-distributors

literally sent royalty checks drawn on

their own accounts to BGA and Yoder.

Propagator-distributors were necessary

participants in the BGA and GRA schemes,

7. Yoder does not allege that Cal-

Florida's claimed injuries were not to

its business or property as required by

section 4. Cf. Hawaii v. Standard Oil

Co., 1972, 405 U.S. 251, 92 S.Ct. 885,

3I L.Ed.2d 184.

-34a-

even if their role was simply that of an

administrator of the program or a con-

duit for the funds. Unless propagator-

distributors cooperated with the restric-

tions on access to protected varieties

for non-signatories, the programs could

not operate. The restrictive effect of

the BGA combination on the amount of

royalty charged by different breeders

could have been felt directly by a

propagator-distributor. The adminis-

trative burdens of the BGA and GRA

programs might have dissuaded propagator-

distributors from participation or

imposed some illegal economic burden on

them. Finally, the effect of the two

programs would almost certainly have

been different for Yoder than for other

propagator-distributor participants,

because of Yoder's vertical integration

of the breeder function and the propaga-

tor-distributor function. Yoder a

propagator-distributor would have been

more than happy to return sports of BGA

varieties to Yoder we breeder, whereas

another propagator-distributor might

have preferred to keep the sport for

himself. Cal-Florida was therefore

clearly disadvantaged competitively by

the existence of the BGA and GRA pro-

grams.

All of the foregoing considerations

convince us that Cal-Florida's claimed

injuries did occur within a sector of

the economy which was endangered by the

BGA and GRA programs. Moreover, because

Yoder certainly did intend to operate

-35a-

the BGA program, and because it indispu-

tably did intend to secure compensation

for breeders in the industry and to get

sports back to the breeders, we believe

that it must have intended the necessary

consequences of its acts, thus satis-

fying whatever purpose and intention

requirement might exist for standing

under section 4. One need not be sitting

on the bull's-eye in order to be within

the farget area of an antitrust conspir-

acy.* We therefore find that Cal-Florida

did have standing to seek treble damages

under section 4 of the Clayton Act.

B. Statute of Limitations

Section 4B of the Clayton Act, 15

U.S.C. § 15b, provides a four year stat-

ute of limitations for actions brought

under section 4 of the Clayton Act, 15

U.S.C. § 15. If the private action has

been preceded by a Government proceed-

ing and if it is basea in whole or in

part on any matter complained of in the

Government's action, then under Section

5(b) of the Clayton Act, 15 U.S.C. § 16

3. Because we have found standing under

the stricter requirements of section 4

(treble damages), we necessarily have de-

cided that standing could have been sus-

tained under the more lenient criteria

of section 16, 15 U.S.C. § 26 (injunc-

tive relief). See Tugboat, Inc. Vv.

Mobile Towing Co., supra, F. at

’ nh. °

-36a-

(i),2 the statute of iimitations is tol-

led during the pendency of the suit by

the United States and for one year there-

after. The tolling provision of the

statute has the effect of giving anti-

trust plaintiffs a period of four years

plus the length of the Government suit

for which they can recover.

The United States instituted its

suit against Yoder Brothers and BGA on

April 20, 1970. On January 26, 1972,

Yoder and the United States filed a stip-

ulation containing a proposed consent

decree which would become effective thirty

days following the filing date. On Feb-

ruary 16, 1972, CFPC and CFPCF moved to |

intervene in the consent proceeding. The

district court denied both motions on

March 15, 1972, and entered the consent

decree on that date. Over a year later,

on April 12, 1973, CFPCF's counterclaim

alleging antitrust violations was filed.

5. The 1974 Amendment to the Clayton

Act recodified Section 5(b) at 15 U.S.C.

§ 16(i). Pub.L. 93-528, 88 Stat. 1706.

Formerly, § 5(b) appeared at 15 U.S.C.

§ 16(b). The amendment to the statute

added procedures whereby the Attorney

General would take into account the

public interest before approving a con-

sent decree, but it made no change in

the tolling provision of the statute

of limitations.

~37a-

Even later, on June 5, 1973, CFPC's

counterclaim under the antitrust laws

was filed.

CFPC and CFPCF seek to escape the

consequences of their tardy filing by

arguing that the Government's action did

not cease to “pend” until the statutory

periods provided for appeal elapsed.

They assert that they were entitled to

the full sixty days provided under the

Expediting Act, 15 U.S.C. § 29, to appeal

from the denial of their motions to

intervene. Additionally, since the

parties to the lawsuit might have ap-

pealed from the provisions of the con-

sent decree, they assert that the

I0. The fact that Cal-Florida sought to

intervene in the consent decree proceed-

ings is irrelevant for our purposes. We

assume for the purposes of this discus-

sion that Cal-Florida, whose motion to

intervene in the consent proceedings was

denied on the'same day as the consent

decree was entered, would have been able

to take advantage of the full sixty day

period available to a party to the decree.

We note, however, that its standing to

challenge the provisions of the decree on

appeal would have been questionable. See

Utility Contractors Ass'n of New Jerse

Inc. v. Toops, 3 Cir. 1974, 507 F.2d e

In fact, neither CFPC nor CFPCF attempted

to appeal either from the denial of

intervention or from the provisions of

the consent decree itself.

-38a-

Government's suit continued to pend until

May 15, 1972, thus making CFPCF' s filing

date within the one year period following

the end of the Government's suit. CFPC's

claim, since it was filed on June 5, would

still have to relate back to the Florida

filing date in order to be timely.

_ Yoder argues that the Government's

Suit ceased to pend on the date that the

consent decree was entered and relies in

the first instance on three Supreme Court

cases in which the Court assumed that the

date on which the judgment or decree is

entered governed. American Pipe & Constr.

Co. v. Utah, 1974, 417 U.S. 538,34 S.Ct.

7356, 38 L.Ed.2d 713, 731; Zenith Radio

Corp. v. Hazeltine Research, Inc., 197l,

TOL G-8~ 331-31 U.S. 321, S.Ct. 795, 803-04 n. 5,

28 L.Ed.2d 77; Minnesota Mining & Mfg. Co.

v. New Jersey Wood Finishin Co., 196

381 U.S. 311, S.Ct. 1473, 1475, 14

L.Ed.2d 405. Because the question of

when government proceedings cease to

pend" for purposes of Section 5(b) was

not squarely before the Court in any of

those cases, we do not regard them as

dispositive of the question. Rather, we

examine the problem in the light of the

precedents more directly on point to

decide whether the date that the judg-

ment or decree was entered or the date

when the time for appeal expired governs.

’

-39a-

The Ninth Circuit considered a

question analogous to the one before us

in Marine Firemen's Union v. Owens~-Corn-

ing Fiberglass Corp., 9 Cir. 1974, 503

F 3a 246. The Marine Firmen's Union had

filed a private antitrust action against

the Owens-Corning Company alleging vio-

lations of section 1 of the Sherman Act,

15 U.S.C. § 1. Marine's action followed

a criminal proceeding that had been

brought by the United States on December

28, 1964, which had also alleged a com-

bination and conspiracy in violation of

Sherman Act § 1. On February 6, 1969,

the last of the defendants entered a plea

of nolo contendere in those proceedings.

On February 17, 1969, the district court

orally pronounced its sentence. However,

the judgment of conviction on those pleas

was not signed by the sentencing judge

until February 19, 1969; the clerk enter-

ed the judgment on February 20, 1969.

Marine's action was instituted on

February 18, 1970, less than one year

after entry of the judgment, but more than

one year after entry of the plea and oral

pronouncement of the sentence.

In the subsequent private action,

the district court ruled that the “pen-

dency" of the Government's criminal

proceedings terminated on February 17,

1969, when the defendants were orally

sentenced. Reversing, the Ninth Circuit

held that the pendency of the Government's

case "continues for a period of one year

from and after the date of entry of judg-

ment of conviction against the last

remaining defendant in the related

-40a-

criminal proceeding." 503 F.2d at 249.

(Emphasis in original.)11 ‘the court made

the following comment on the judicial

administration aspect of the problem:

Case law chaos results if

different procedural points and

dates thereof are to be for one

reason or the other selected as

the commencement date of time

limits on the myriad of post

judgment remedies open to any

given party, such as appeal,

motions for new trial, reduc-

tion of sentence or filing of

costs bills, to name a few.

Orderly procedural necessity

dictates uniformity. We sense

no logical reason to differ-

entiate the procedural point

or date of final adjudication

and termination of the "pen-

dency" of a given criminal

proceedings [sic] for the

purpose of computing statute

ll. The court noted that Federal Rule

of Criminal Procedure 32(a) prescribes

the formalities to be followed in the

imposition of sentence. Rule 32 (b) (1)

sets out the procedures to be utilized

in the entry of a final enforcible judg-

ment of conviction. The court also

observed that Federal Rule of Criminal

Procedure 55 refers :to the date that

judgment is entered as one of the records

that must be kept by the clerk.

———

-4la-

of limitations time from that

of calculating appeal time

for any given party. Accord-

ingly we hold that . . . the

“pendency” of the related

criminal proceeding referred

to in § 16(b) [§ 16(i)] ter-

minates at the procedural point

and date of the clerk's nota-

tion in the “criminal docket"

for the case of the entry of

the judge's signed written

judgment of conviction of

the last remaining defendant

in the criminal proceeding.

503 F.2d at 250. The court did not reach

Marine's contention that the “pendency”

of the criminal proceeding continued

through appeal time.

Although Marine Firemen's Union

arose in the case of a private action

following a criminal proceeding, and up-

held the litigants right to the tolling

period, we believe that its reasoning is

equally applicable here. Rule 58 of the

Federal Rules of Civil Procedure provides

that "a judgment is effective only...

when entered as provided in Rule 79(a)."

Rule 79(a) directs the clerk to enter all

papers chronologically in the civil doc-

ket and specifically provides that "the

entry of an order or judgment shall show

the date the entry is made." Rule 4 of

the Federal Rules of Appellate Procedure

relies on the date of the entry of the

judgment or order appealed from for

determining the time for appeal. Unless

either the district court or the appel-

late court grants a stay pending appeal,

-42a-

execution can normally take place on a

final judgment of a district court. Fed.

R.Civ.P. 62, Fed.R.App.P. 8.

Particularly with respect to consent

decrees, it makes sense to look to the

date of the entry of the decree. Since

the scope of review of consent decrees is

extremely narrow, the outcome of the

lawsuit is practically certain as of the

time the decree is entered. Generally,

the only matters that can be raised on

appeal are lack of jurisdiction over the

subject matter or facts which would viti-

ate the consent. Martin Marietta Corp.

v. FTC, 7 Cir., 376 F.2d 430, 434, cert.

denied, 1967, 389 U.S. 923, 88 S.Ct. 237,

19 L.Ed.2d 265. See Fuller v. Branch

County Road Comm'n, 6 Cir. 1975, 520 F.2d

307. Thus, cases involving consent de-

crees may be distinguishable from cases

in which the Government action termina-

ted in a final judgment after full liti-

gation. Deciding a case in the latter

category, the Second Circuit decided

that the "pendency" of a Government en-

forcement action continues until the

expiration of the time to appeal from the

final decree. Russ Togs, Inc. v.

Grinnell Corp., 2 Cir. 426 F.2d 850,

857, cert. denied, 1970, 400 U.S. 878,

91 S.Ct. 119, 27 L.Ed.2d 115. The court

rested its decision on the ground that

[a] judgment or decree in

a government enforcement action

becomes "final" only when the

government and the defendants

-43a-

are satisfied with the result

and determined not to appeal.

Therefore, only after the time

to appeal has expired can pri-

vate litigants rely on the

irrevocability of determina-

tions made in the government

action.

426 F.2d at 857. Even the Russ Togs

court did not require absolute irrevoc-

ability of determination, however, for

the court expressly refused to hold that

pendency included the period subsequent

to a final decree during which a court

exercises continuing jurisdiction for.

purposes of modification and enforcement.

426 F.2d at 856 n. 8. Rather, the

court's concern appeared to be with the

ability of private litigants to rely

upon the finality of the provisions in

the judgment or decree. When the Govern-

ment litigation terminates in a consent

decree, parties will rarely, if ever,

be injured by reliance on the decree's

provisions. Thus, even taking into

account the concerns of the Russ Togs

court, we see no reason to include the

time for appeal within the "pendency"

-44a-

of the Government's suis in the cir-

cumstances sub judice.

Here, since the Government

proceedings terminated in a consent

decree, we hold that the Government's

action ceased to "pend" for purposes of

section 5(b), 15 U.S.C. §16(i), on

March 15, 1972, the date on which the

consent decree was entered. Therefore,

since neither CFPC nor CFPCF filed its

claim within one year of that date,

neither company is entitled to take

advantage of the tolling provision of

section 5(b). Each is relegated to the

four year statute of limitations con-

tained in section 4B, 15 U.S.C. § 15b.

12. We do not reach the precise ques-

tion that was before the Russ Togs court,

since we believe the two cases to be

distinguishable. Nevertheless, we do

note that the policies underlying the

finality of judgments seem to run in a

direction contrary to that court's result.

We express no opinion on the ultimate

resolution of the competing considera-

tions of finality of judgments and lib-

eral access to Government proceedings

for private litigants; we simply stress

that we are not faced with that case.

-45a-

Yoder also attacked the district

court's ruling that the CFPC claim filed

on June 5, 1973, could relate back for

statute of limitations purposes to the

filing date of CFPCF's counterclaim, on

April 11, 1973. If Yoder is correct,

then the CFPC claim would cover only

the period from June 5, 1969, onward.

We have decided not to disturb the lower

court's ruling on this point. In light

of the close parent-subsidiary relation-

ship between the two companies, the

identity of their business, and the

identity of their claims, we think the

court properly held that all claims were

to be measured from April ll, 1969.

C. Per se Illegality of BGA and GRA

Section 1 of the Sherman Act pro-

hibits "[e]very contract, combination

- +», Or conspiracy, in restraint of

trade » « ee” 15 U.S.C. § 1. Although

generally this section prohibits only

"unreasonable" restraints rs competition,

s Standard Oil Co. v. United States,

T9i1, i Sict- 502,

L.Ed. 619, the Supreme Court has written

that:

[T)here are certain agree-

ments or practices which because

of their pernicious effect on

competition and lack of any

redeeming virtue are conclus-

ively presumed to be unreason-

able and therefore illegal

-46a-

without elaborate inquiry as

to the precise harm they have

caused or the business excuse

for their use. This principal

of per se»unreasonableness not

only makes the type of restraints

which are proscribed by the

Sherman Act more certain to the

benefit of everyone concerned,

but it also avoids the necessity

for an incredibly complicated and

prolonged economic investigation

into the entire history of the

industry involved, as well as

related industries, in an effort

to determine at large whether a

particular restraint has been

unreasonable--an inquiry so often

wholly fruitless when undertaken.

Among the practices which the

courts have heretofore deemed

to be unlawful in and of them-

selves are price fixing, United

States v. Socony-Vacuum Oil Co.,

310 U.s. 150, S10, [60 S.ct. 81l,

883, 84 L.Ed. 1129]; division

of markets, United States v.

Addyston Pipe & Steel Co., [6

Cir. ], F. , a , 175

U.S. 211, [20 S.Ct. 96, 44

L.Ed. 136]; group boycotts,

Fashion Originators’ Guild v.

Federal Trade Comm'n, 312 U.S.

457, [61 S.Ct. 703, 85 L.Ed.

949]; and tying arrangements,

International Salt Co. v.

United States, 332 U.S. 392,

[68 S.ct. 12, 92 L.Ed. 20].

~47a-

Northern Pacific - v. United States,

1958, 356 U.S. 1, 5, 78 S.Ct. 514, 518,

2 L.Ed.2d 545.

In United States v. General Motors

Corp., 1966, 384 U.S. L2?, 66 S.Ct. l3al,

-Ed.2d 415, the Court reaffirmed its

postion that group boycotts are among

those classes of restraints that are

illegal pez se. To label an arrangement

a group boycott, however, is merely to

state a conclusion. In order to deter-

mine whether or not the label fits, it

is necessary to ascertain whether

the presence of exclusionary

or coercive conduct warrants

the view that the arrange-

ment in question is a “naked

restraint of trade."

E.A. McQuade Tours, Inc. v. Consolidat-

ed Air Tour Manual Comm., 5 Cir. 1972,

° P , cert. denied, 1973,

409 U.S. 1109, 93 s.ct. 912, 34 L.Ed.2d

690. See Sulmeyer v. Coca Cola Co., 5

Cir. 1978, S15 2d 835, cert. denied,

1976, U.S. , 96 S.Ct. Il4s, 47

L.Ed.2d 341. oni

The McQuade Tours court discerned

three categories of cases in which col-

lective refusals to deal were condemned

as per se violations of section 1. In

our Opinion, the third category comes

-48a-

closest to_ describing the fact situation

before us.+3 In that group of cases,

the combinations were designed to influ-

ence coercively the trade practices of

boycott victims, rather than those of

direct competitors.

The leading case of this type is

Fashion Originators’ Guild of America,

Inc. v. Fic, 1941, 312 U.S. 457, 61 S.Ct.

703, 85 L.Ed. 949 (hereinafter referred

to as. FOGA). In FOGA, a combination of

women's garment designers, textile man-

ufacturers, and textile dyers, in an

effort to stamp out “style piracy,”

refused to sell their products to re-

tailers who purchased and sold garments

that were surreptitiously copied from

the FOGA designers. Retailers were re-

quired to sign agreements that assured

their cooperation with the FOGA boycott;

those who did not sign would not receive

original designs from FOGA participants.

The FOGA system was enforced by anony-

mous visits to retail outlets, audits of

members' books, and a variety of prohi-

bitions on members' business practices.

13. Category one involved a horizontal

combination among traders at one level

of distribution designed to exclude direct

competitors from the market. 467 F.2d at

186. Category two was somewhat broader,

involving vertical combinations among

traders designed to exclude from the

market direct competitors of some members

of the combination. Id.

-~49a-

The Supreme Court held that FOGA's

refusal to deal with retailers who pa-

tronized style pirates was illegal per

se. Because the purpose and chiest at

the combination was to destroy one type

of manufacture and sale that competed

with FOGA members--i.e. imitation--the

Court found irrelevant FOGA's proffered

evidence tending to show that the pro-

gram was reasonable since it protected

all persons in the manufacturing chain

from the evils of style piracy.

Like the ill-fated FOGA system,

BGA required all persons who wanted

access to new varieties developed by its

breeder members to sign an appropriate

BGA agreement. Propagator-distributors

were forbidden to sell, loan, or in any

way to place BGA cuttings in the hands

of nonsignatories. Like FOGA, BGA had

the right to audit members' books. Like

FOGA, BGA contained other restrictions

on members' business practices--most

importantly, the requirement that all

sports found on BGA varieties be return-

ed to BGA. Like FOGA, if a potential

customer refused to sign an agreement,

the requested BGA variety would not be

sent to him. Finally, unlike FOGA but

like General Motors, supra, an in-

dispensible part of the program

was the assessment and collection of a

royalty whose amount was fixed in

advance by the breeder members of BGA.

-50a-

See 384 U.S. at 147, 86 S.Ct. at 1331,

6 L.Ed.2d at 427.

We believe that these factors

present the kind of exclusionary or

coercive conduct characteristic of a

"naked restraint of trade," see McQuade

Tours, supra.14 The differences in

degree of enforcement between BGA and FOGA,

to the extent they existed, do not

warrant a contrary conclusion. The

central purpose of the BGA program was

to ensure that a set royalty was paid on

every BGA cutting sold, and that BGA

cuttings were not yeleased to those

who would not pay.+ A secondary

14. Yoder's argument that the true

purpose of BGA was to foster the crea-

tion of new varieties of ornamental

plants is analogous to FOGA's argument

that its mission was to help the orig-

inal fashion designers and to protect

the industry from style pirates. Nei-

ther justification is relevant if the

exclusionary or coercive elements in

the program are so central that it

could not exist without them.

15. The fact that BGA varieties could be

obtained outside the program by methods

such as purchasing mother stock at a retail

florist does not save the program. The

record contains ample evidence of Yoder's

efforts to stop such practices. Its use

of friendly persuasion instead of a club

does not lessen the coercive aspects of

the program itself.

-5la-

and equally exclusionary purpose was to

retain control over the sports that

appeared on BGA plants. In light of all

these factors, we hold that the district

court correctly ruled that the BGA and

GRA programs were per se violations of

section 1 of the Sherman Act.

D. Monopolization and Attempted

Monopolization

On this phase of the appeal, Cal-

Florida asserts that the district court

erred in-granting Yoder's motion for a

directed verdict on the section 2 claims

of monopolization and attempted mono-

polization. Without specifying what the

relevant market was, the court held that

Yoder did not have a sufficient share of

the market to permit an inference of

monopoly power, citing United States v.

Grinnell Corp., 1966, 384 U.S. 563, 986

S.ct. 16958, t L.Ed.2d 778, and Cliff

Food Stores, Inc. v. Kroger, Inc., 5

Cir. 1969, 417 F.2d 203. Additionally,

the court found that the evidence tend-

ing to show dangerous probability of

success in an attempt to monopolize was

insufficient to go to the jury.

16. We reject Yoder's suggested analogy

to trade secret law, claiming that the

plant's genetic code is the secret. In

one sense, the genetic code always

remains a secret, even to the breeder.

In the more common sense, however, 4s

soon as the plant is released, so are

its secrets. We prefer the latter view

as the one more in accordance with

experience.

-52a-

Cal-Florida presents two arguments

in support of its position: first, that

the district cou.t erroneously believed

that a defendant had to have something

more than 50 percent of the market before

a monopolization or an attempt offense |

could be made out, misinterpreting this

Court's Cliff Food Stores decision; and.

second, that the facts were sufficient to

allow the jury to find even a 50 percent

market share, depending on how the market

is defined. If offers Fgur possibilities

for the product market: (1) ornamental

plants; (2) chrysanthemums grown; (3) |

chrysanthemum cuttings sold; and (4) new

varieties of chrysanthemum cuttings |

sold. Yoder responds that Cal-Florida

failed to prove a relevant market and

mounts various attacks on Cal-Florida's

computations attempting to show a market

limited to chrysanthemum cuttings.

1. Monopolization.--In United

States v. Grinnell Corp., 1966, 384 U.S.

563, 570-71, 96 S.Ct. fé58, 1703-1704,

16 L.Ed.2d 778, 785-786. The Supreme

I7. That the geographic market was

nationwide was not disputed.

-53a-

Court summarized the section 2 monopoli-

zation offense as follows:+%

The offense of monopoly under

§ 2 of the Sherman Act has two

elements; (1) the possession of

monopoly power in the relevant

market and (2) the willful ac-

quisition or maintenance of that

power as distinguished from grow-

th or development as a conse-

quence of a superior product,

business acumen, or historic

accident.

Monopoly power, defined as "the power

to control price or exclude competition,"

is measured with reference to a relevant

market. United States v. E.I. du Pont

de Nemours & Co., 1956, 351 U.S. 377,

° -Ct. 994, 1005, 1005, 100 L.Ed.

1264 (sometimes referred to as the

Cellophane case). Because the definition

of seYavant market is essentially a fact

question, see Sulmeyer v. Coca Cola Co.,

18. Section 2 provides in pertinent part:

Every person who shall mono-_.

polize, or attempt to monopolize,

or combine or conspire with any

other person or persons, to mono-

polize any part of the trade or

commerce .. . [shall be guilty

of an offense]. 15 U.S.C. § 2.

-54a-

515 F.2d 835, 849, the precise issue we

must address is whether the district

court correctly ruled that Cal-Florida

failed to introduce sufficient evidence

to raise a jury question on the market

issue. See Boeing Co. y. Shipman, 5 Cir.

1969, 411 F.2 65, 374-75 (en banc).

The classic test for determination

of the relevant market was stated in the

Cellophane case:

In considering what is the rele-

vant market for determining the

control of price and competition,

no more definite rule can be

declared than that commodities

reasonably interchangeable by

consumers for the same purposes

make up that "part of the trade

Or commerce," monopolization of

which may be illegal.

351 U.S. at 395, 76 S.Ct. at 1007, 100

L.Ed. at 1280. Products need not be ac-

tually fungible in order to qualify as

reasonable substitutes. Id.; Telex Corp.

v. IBM, 10 Cir., 510 F.2d 894, S17- 18,

cert. dism'd, 1975, 423 U.S. 802, 96

S.Ct. 8, 46 L.Ed.2d 244. On the other

hand, if the differences in the two

products’ price, use, and qualities

become too great, then they can no long-

er be said to be reasonably interchange-

able. Compare United States v. E.I.

duPont de Nemours & Co., supra (broad

market definition), with United States

v. Grinnell Corp., supra (narrower

market definition). Factors such as

-55a-

functional interchangeability, respon-

siveness of the sales of one product

to the price changes of the other, and

degree of competition from the potential

substitute are all relevant to the mar-

ket inquiry.

If the correct relevant market was

all ornamental plants, as Yoder asserts,

then the district court's directed

verdict was correct, for Yoder's share

of the ornamental plant market was

less than 208~-¢jearly not enough for

monopolization. See United States v.

IS. We agree with Cal-Florida that the

district court would have been mistaken

to apply a rigid rule requiring 50% of

the market for a monopolization offense —

without regard to any other factors.

See Cliff Food Stores, Inc. vy. Kroger,

Inc., supra. if the court's directed

verdict was correct on another ground,

however, his reasons for so ruling

would be immaterial. We have there-

fore structured our own discussion ac-

cording to the issue we perceiv?: was

the market all ornamental plants or

could it have been chrysanthemums only?

-56a-

E.I. du Pont de Nemours & Co., supra, 351

U.S. at 379, 76 S.Ct. at 998, 100 L.Ed.

at 1272; Cliff Food Stores, Inc. v.

Kroger, Inc., supra, 417 F.2d 203, 207

n.2. If Cal-Florida did succeed in

raising an evidentiary issue on the

reasonable interchangeability of chry-

santhemeums with other ornamentals, the

opposite conclusion would be required.

According to Cal-Florida's data,

Yoder's share of the proposed market of

chrysanthemums grown ranged from 53.9%

in 1969 to 49.6% in 1972. Looking at

chrysanthemum cuttings taken and sold,

Yoder's share yent from 61.4% in 1969 to

58.1% in 1972. Finally, Cal-Florida

20. This alternative appears to come

closest to the issue stated in the

pre-trial stipulation, which specified

commerce in the propagation and sale of

chrysanthemum cuttings. For the pur-

poses of this discussion, however, we

are willing to consider either chrysan-

themums grown or cuttings taken and

sold.

ae

-57a-

refers to data covering the years prior

to the period of limitations showing

that Yoder had almost 100% of the new

varieties of chrysanthemums registered

with BGA. Since the relevance of this

last data escapes us, we shall con-

centrate our attention on the former two

proposed product markets.

The evidence upon which Cal-Florida

relies to show that chrysanthemums were

not reasonably interchangeable with

other ornamental plants may be summar-

ized as follows. Mr. Tsukushi, the

general manager of the California Chry-

santhemum Growers Association, testified

that the price of chrysanthemum cuttings

did not change at the same time or in

the same amount as the price of carna-

tion cuttings, and that there was no

relationship between price changes of

-58a-

carnation cuttings and chrysanthemum

cuttings. Secondly, Cal-Florida consid-

ers probative the fact that Mr. Ramsey

Yoder did not cite the prices of other

Ornamental plants as one factor he

considered in setting cutting prices.

Third, it recites the truism that in

order to grow chrysanthemums, a grower

must obtain chrysanthemum cuttings. It

asserts that growers could not switch

crops easily, due to factors such as

greenhouse space and layout, watering

systems, and the use of lights and

cloth. Finally, it points to a lack of

testimony showing that commercial pro-

pagators of chrysanthemums competed with

propagators of rose plants, carnation

cuttings, or other immature ornamental

plants.

Yoder first directs our attention

to testimony by Cal-Florida's market

expert, Mr. Fossum, to the effect that

ultimate consumers would accept any kind

of flower. Although Fossum recognized

that certain adjustments were necessary

before a grower could shift crops, he

stated that no barrier existed to

prevent such shifts, and that those

traders who did not shift when consumer

demand changed simply behaved so out of

personal choice. Neckar of CFPC, who

had formerly been a grower, testified

that if the price of one kind of plant

material rose too high, he would move

to another crop; among the crops he

grew were carnations, roses, lilies,

-59a-

poinsettas, cyclamen, calendulas, hy-

drangeas, violets, and gloxinias. Sig-

nificantly, Neckar testified that market

demand at the ultimate consumer level

dictated his choice of how much space to

devote to each kind of ornamental.

Yoder also refers us to testimony

that consumer demand was responsive to

price, that consumer demand fluctuated

rapidly, and that growers and propagat-

ors reacted with the same demand charac-

teristics. Multi-crop growers shifted

production within the year, in response

to shifts in price and demand. A large

number of growers testified that they

handled a wide assortment of ornamentals

and that consumer demand dictated the

way they allocated bench space.

Viewing the evidence as a whole, we

conclude that Cal-Florida failed to

introduce enough evidence supporting a

“chrysanthemums only" product market to

reach the jury. The testimony was

overwhelming that growers, who were Cal-

Florida's and Yoder's immediate custo-

mers, allocated their crop space accord-

ing to the demands of ultimate con-

sumers. The demand of ultimate consum-

ers, in turn, was very sensitive to

price differences among the ornamentals.

See Telex Corp. v. IBM, supra, 510 F.2d

at 917-18. Neither the act that the

price of carnations might have not moved

down at the same instant that the price

of chrysanthemums went up, nor the fact

that carnation prices and chrysanthemum

-60a-

prices might not have changed in pre-

cisely the same amounts, negates this

consumer responsiveness.

We are similarly unpersuaded that

the fact that a grower was put to some

expense and inconvenience to switch

crops undermines our conclusion. The

Tenth Circuit faced a similar situation

in Telex Corp. v. IBM, supra, in which

the plaintiff, Telex, was arguing for a

relevant market limited to peripheral

devices plug compatible with IBM central

processing units (CPU's) and the defen-

dant, IBM, was arguing that the market

should include all peripheral products

(i.e. those plug compatible with other

manufacturers' CPU's). Despite the fact

that it was necessary to design an

interface for the peripheral before it

could be used on another manufacturer's

CPU, the Tenth Circuit found that the

relative ease and minimal cost of de-

signing such an interface required the

conclusion that all peripherals were

reasonably interchangeable.

In our opinion, Cal-Florida failed

to show that the cost and inconvenience

to growers of switching crops was so

high that a commitment to chrysanthemum

growing made it impractical or impossi-

ble to respond to a shift in consumer

demand. On the contrary, all of the

evidence showed that such shifts were

feasible and common. Thus, this factor

cannot help Cal-Florida.

-6la-

Because the correct product market

was ornamental plants, and Yoder's share

of that market was approximately 20%, we

hold that as a matter of law Yoder could

not have been guilty of monopolization.

We therefore affirm the district court's

directed verdict for Yoder on the mono-

polization claim.

2. Attempted Monopolizat ore

order to prove attemp monopolization,

the plaintiff must show an intent on the

defendant's part to bring about a

monopoly and a dangerous probability of

success. Swift & Co. v. United States,

1905, 196 U.S. Ct. ’

7 7

49 L.Ed. 518. ae Sulmeyer v. Coca

Cola Co., supra, 515 Fa at 850; Cliff

Food Stores, inc. v. Kroger, Inc.,

Supra, 417 Fr2d at 207. see generally

r, The Sco of "At t to Mono-

polize. 30 Rec. of Ass'n =, Bar of

ization offense, the attempt offense

must occur within a defined relevant

market. See Sulmeyer v. Coca Cola Co.,

supra.

Our conclusion that the relevant

market was ornamental plants applies

with equal force to Cal-Florida's

attempt claim. Although we have found

that BGA and GRA were per se viola-

tions of section 1, we agree with the

-62a-

district court that Cal-Florida failed

to prove a dangerous probability that

Yoder would succeed in monopolizing the

ornamental plant industry. Indeed, Cal-

Florida's own arguments implicity con-

cede that no attempt offense could be

established if the market is ornamental

plants, since those arguments all pre-

sume a market limited to chrysanthemums.

Barriers to entry were low in the orna-

mental plant industry; conditions were

highly competitive. In light of these

factors, and Yoder's 20% market share,

we hold that the district court properly

ruled for Yoder on the attempted mono-

polization claim as well.

E. Damages

After the close of the evidence,

Yoder moved for a directed verdict on

the grounds, inter alia, that the evi-

dence was insufficient to show fact of

damage and that the two damage theories

offered were legally improper, factually

unsupported, and speculative. The Court

overruled the motion. Upon receipt of

the jury's verdict, Yoder moved for

judgment n. o. v. pursuant to Rule

SO0(b), Fed.R.Civ.P., and in the alter-

native for a new trial with respect to

CFPCF's damages pursuant to Rule 59,

Fed.R.Civ.P. This motion was likewise

denied.

Cal-Florida's damages must be sus-

tained, if at all, on the basis of one

or both of the theories under which the

case was tried and submitted to the

jury. The first of these is the royalty

-63a-

payments theory, which asserts that Cal-

Florida is entitled to recover the full

amount of royalties paid to BGA Inter-

national for BGA varieties and to Yoder

for GRA varieties. As to this theory,

the issues before us are whether Cal-

Florida submitted enough evidence on

the fact of damage to get to the jury,

whether the court correctly ruled that

the availability of the so-called "pass-

ing on" defense was a question for the

jury, and if not, whether Yoder was en-

titled to the defense as a matter of law.

The second theory, labelled the price

differential theory by Yoder, relies on

the fact that Yoder's average sales in-

come was higher than the average combined

sales income of CFPC and CFPCF. Simply

stated, the question as to this theory

turns on causation: did Cal-Florida sub-

mit sufficient evidence of causation to

reach the jury? Our review of the law

and the sizeable appendix convinces us

that the comparative price data was

fatally vague and was not shown to be

causally related to the antitrust viola-

tion. Since the jury may have relied on

this theory, this alone would require us

to remand the damages issue to the dis-

trict court. Because the case will be

retried, we also consider the royalty

payments theory of damages, concluding

that the passing on defense was not

available to Yoder as a matter of law.

1. Price Differential Theory

The price differential theory

rested on evidence of comparative price

-64a-

studies introduced by Cal-Florida over

Yoder's objection.*1 The exhibits

provided the following information:

DX 2227d- Yoder average selling price

for all cuttings, by fiscal

- from 1965-66 to 1969-

DX 2227e- CFPC/CFPCF combined average

selling price for all cuttings,

by year from 1969 to 1973

DX 2227f- "CFPC/CFPCF Lost Profits on

Actual Sales," computed by

subtracting the CFPC/CFPCF

average selling price from

the Yoder average selling

price and multiplying the

difference times total CFPC/

CFPCF cuttings sold

DX 2227g- CFPCF and CFPCF sales sum-

DX 2227h- maries, respectively, breaking

down sales between rooted and

unrooted cuttings

DX 2227i- CFPC and CFPCF combined sales

summary, showing average rooted

and unrooted prices

21. We note that this theory looks to

the horizontal competition between Cal-

Florida and Yoder in their capacities

as propagator-distributors.

-65a-

DX 2227j- Yoder rooted and unrooted

average net prices

DX 2227k- “Lost Profits on Actual Sales

- CFPC/CFPCF Combined,” showing

net "loss" per cutting times

number of units for rooted and

unrooted cuttings

DX 22271- computing difference between

Yoder price and combined CFPC/

CFPCF price for rooted and un-

rooted cuttings

Yoder launches a broadside attack

on the foregoing evidence, correctly

pointing out that it does not measure

differences in catalog prices for each

variety, does not refer to various

pricing discounts used by each party,

does not determine variety price differ-

ences according to quantity sold, does

not compare prices to the same kinds of

customers, and does not take into account

the fact that some Yoder cuttings were

sold through brokers. For the computa-

tion that lumped together rooted and

unrooted cuttings, the proposed damage

figure was $1,884,710.16; even when

rooted and unrooted cuttings were con-

sidered separately, a figure of $633,330

was produced (DX 2227k). Furthermore,

Yoder correctly points out that the

figure actually represents the sales

income that Yoder would have received if

it had sold the same number of cuttings

as CFPC and CFPCF combined.*2 Addi-

tionally, despite the fact that BGA and

22. Cal-Florida’s computation went as

follows:

l. Yoder average selling price

(YASP) = Yoder Sales (Dollars

)

2. CFPC/CFPCF average selling price

(CFSP) ~ Sere cales (Dollars)

of Cut S

3. Net "Loss" per cutting =

YASP = CFSP for 1969 and 1970 figures.

1971-73 simply uses Yoder's 1970 figure.

4. Net Loss X Total CFPC/CFPCF cuttings sold =

Lost Profit

Translated into one equation, we have

(CFPC/CFPC) Yoder Sales Income

(Total Cut- xX

tings Sold)

— SCOP ner eee

tings)

= Damages.

If the equation is multiplied out, we have

Yoder Sales neo X eae ett

- CFPC/CFPCF Sales Income

= Damages (i.e. difference in

adjusted sales income)

Thus, the only thing that has been

compared by these exhibits is the sales

income of the two companies.

-67a-

GRA both ended in 1971 in accordance

with the terms of the consent decree in

the Government suit, Cal-Florida took

the c rison uP to 1973. Even if the

monopolizatioh claim alone is considered,

it is difficult to see how BGA and GRA

could have been tools of monopolization

two years after termination.

Cal-Florida asserts that its com-

parative price data, detailed above, was

admissible to prove the amount of addi-

tional income Cal-Florida would have re-

ceived if its combined average price per

cutting had been the same as Yoder's.

We must decide whether this evidence

could have supported the jury's general

verdict, or whether Yoder's motion for

directed verdict on this theory should

have been granted.

Cal-Florida suggests only two pos-

sible ways in which the BGA and GRA

programs "my have been connected to a

difference in average price. Johnson,

one of CFPCF's witnesses, testified that

they could not sell at the same price as

Yoder, because Yoder's BGA advertising

program had created an appetite for new

varieties. Price, CFPC's Operations

Manager, testified that if Yoder had

been altogether eliminated from the

marketplace, Cal-Florida's price would

have been higher. 23 Aside from these

two allegations, no purported evidence

connecting BGA and GRA to the price

disparity existed except a few vague

statements to the effect that Cal-

Florida felt “excluded” from the market-

place by Yoder.

Specific testimony that BGA and GRA

did not affect Cal-Florida's prices was

common. As mentioned above, Neckar, the

Cal-Florida officer in charge of pric-

ing, testified that Cal-Florida charged

what it thought was appropriate and that

it would not have charged a different

amount even in the absence of BGA. He

admitted that Cal-Florida's competitors

also handled the royalties as a separ-

ately labelled and clearly identified

charge, which, he said, helped Cal-

Florida to charge whatever it wanted.

One important reason for Cal-Florida's

23. Jack Neckar of Cal-Florida also

testified that the BGA royalty was a

constraint on pricing to the grower,

apparently referring to the danger that

growers might turn to self-propagation.

Yoder, however, faced the same limita-

tion to the same degree in its capacity

as a propagator-distributor., It is

therefore difficult to see how the pre-

sence of self-propagators injured com-

petitive relations between Yoder and

Cal-Florida.

lower price was because Cal-Florida

wanted a little competitive edge.

Price's testimony was to the same effect.

Almost all of the evidence of customer-

switching went in the direction from

Yoder to Cal-Florida. The greater

figures for so-called lost profits under

this theory occurred after the termin-

ation of BGA and GRA. The very nature

of the theory and proof negated the

possibility of predatory price cutting

in connection with the monopolization

claims; in any event, no evidence of

predatory price cuts was introduced.

Finally, the evidence offered no mean-

ingful information, since no allowance

was made for a number of significant

differences between Yoder Brothers and

Cal-Fiorida that more than adequately

account for the difference in lump

average prices, or sales income: e.g.,

quality of cuttings, service, warranty,

experience, method of marketing, use of

discounts, and size of customers.

The cases cited by Cal-Florida to

demonstrate the probative value of the

comparative price evidence are actually

amount of damage cases, rather than fact

-70a-

24

of injury or causation. Bigelow v.

RKO Pictures, Inc., 1946, 327 U.S. 351,

soemense in Bivty Derctmant Co: v. Paterson

sien ane CO. , 1 , owe ‘ , . .

, ’ 75 L.Ed. 544, 548:

It is true that there was uncertainty as

one oe ee Comage, but these was

act of damage; ; and there

lear distinction between the measure

fact

EBS

+f

A

i

af

i

F

i

pe

it

te

!

stricter standard of proof is necessary for fact

of damage than for amount of damage.

See Greene

v. General Foods +, 5 Cir. 1975, SIT F.2d

635 660 corte ee . , 1976, U.S. , 96

S.Ct. 1409, 47 £.8d.3a 348; Copp uor, Inc,

33 os Coors Co., 5 Cir. aoe si Fos aa

P m 09 F.2d 758; Terrell v.

Household Goods c

Carriers' Bureau, 5 Cir., 494

F.2d 16, 20 cert. dism'd, 1974, 419 U.S. 987, 95

(footnote continued)

-7la-

66 S.Ct. 574, 90 L.Ed. 652; Story Parch-

ment Co. v. Paterson Par nt Paper Cco.,

’

, we ’ + ,

75 L.Ed. 544; Poster Exchan Inc. Vv.

National Screen Serv. Corp., é Cir.

1970, 431 F.2d 334, cert. denied, 1971,

401 U.S. 912, 91 S.Ct. 880, 27 L.Ed.2a

8ll. Faced with a similar dearth of

specific evidence to prove fact of

damage in Shumate & Co. v. National

Ass'n of Secur

’ cer * 1975,

Ze . en

423 U.S. 868, 96 S.Ct. 131, 46 L.Ed. 2d

97, this Court said:

(W)ith only his i dixit

to establish the fact of dam-

age, Shumate would have this

Court find his testimonial

speculation and contentions

supply the basis for a jury

issue as to the fact of damage.

But more evidence than this is

necessary to demonstrate that

there has been injury before

Thootnote continued) —

S.Ct. 246 42 L.Ed.2d 260. See generality Arecda

note 5, Reasoner and Carter,

t

ea ee

TIS7S). Since our inquiry is directed to fact

of damage and causation elements rather than to

a a a

of proof.

-72a-

the jury can be allowed to

consider the amount that would

properly compensate him for

such injury.

509 F.2d at 153. ee also Southern

Concrete Co. v. United States Steel

Orp., eS. & , ; » oh7

(summary judgment for defendant appro-

priate when plaintiff "failed to specify

what injuries, if any, it suffered as

a result of the violations alleged).

Cf. Soloman v. Houston Corrugated Box

Co., 5 Cir. 1976, 526 F.2d (affirms

summary judgment where only “bald as-

sertions" support the violation element. )

In our opinion, the isolated self-

serving statements of the Cal-Florida of-

ficers were not enough to constitute sub-

stantial evidence for the jury on the

causation issue under Boeing Co. v.

Shipman, 5 Cir. 1969, 411 F.2d 365 (en

banc) requires a conflict in “substantial

evidence" to create a jury question) .25

25. Ascertaining what constitutes "sub-

stantial evidence" can be difficult. For

amount of damages, the standard is pro-

bably satisfied by reasonable estimates

and indirect proof. See Story Parch-

ment Co. v. Paterson Sarchment Paper Co.,

Supra, Terrell v. Household Goods Car-

riers' Bureau, supra. in contrast, for

fact of damage and causation, we infer

from Story Prachment and Bigelow, supra,

(footnote continued)

-73a-

Therefore, Yoder's motion for directed

verdict based on failure to prove causa~

tion should have been granted. See

Tfootnote continued)

that "substantial evidence" would be less specu-

lative and uncertain.

See oS seaees Ctl

Circuit have addressed prob ° Shumate

& Co. V. National Ass'n of Securities Dealers

Tne. supra, this Court held that Shumate’s own

testimony regarding his damages, unsupported by

any relevant data, was insufficient to create a

jury. question on fact of injury. In Foremeost-

McKesson, Inc. v. Instrumentation Labora

Cm ’ Conc.

Tesi allngations from plaintiffs’ corporate

officers and one of plaintiff's competitors to

the effect that defendant's practices caused

losses to plaintiffs, supported by citation of

only one loss of business on a specific contract

and only one vague opinion that the defendants

price discounting practice made it more dif-

ficult to compete, were insufficient to go to

the jury. Finally, neither fact of injury nor

causation was proved adequately in Kestenbaum

v. Falstaff Brewing Com 5 Cir. 1975, 514

F.2d 690, cert. , 1976, U.S. ,

96 S.ct. 1412, 47 L.Bd.2d 349, and M.C. .

Co. v. Texas Foundries, Inc., 5 Cir. >

517 F.2d 1059 ° denied, 1976, U.S.

° ’ cert

, 96 S.Ct. 1466, 47 L.Bd.2d 736.

(footnote continued)

-74a-

Kestenbaum v. Falstaff Brewing Corp., 5

Cir. 1975, 514 F.2d 690, cert. denied,

1976, U.S. , 96 §.ct. 1412, 47

L.Ed.2d 349; see also Cinema-Tex Enter-

rises, Inc. v. Santikos Theatres, Inc.,

Cir. 1976, 535 F.2d [1976], att'd, 414

F.Supp. 640.

In a similar situation, this Court

said in Kestenbaum v. Falstaff Brewing

Corp., supra, 514 F.2d at 695:

(footnote continued)

With regard to the kind of evidence that

would be material, the M.C. Mfg. court, in

rejecting plaintiff's contention that it too

should have enjoyed a predatorily low price

for a camponent part, offered several comments

relevant to the case before us:

The avowed purpose of the

Sherman Act is the preservation

of the open, campetitive market.

. - - [D])amages are recoverable

only upon a showing that absent

the anticompetitive practice

plaintiff would not have suf-

fered the loss.

517 F.2d at 1064. Antitrust plaintiffs are

not entitled to the utter elimination of

campetition or competitors. Thus, they cannot

prove fact of injury by pointing only to the

effects of normal competition. Rather, they

-75a-

If the jury calculated any

part of its damage award on the

{impermissibly speculative] sum

of Falstaff's price increases to

Kestenbaum, it was error. Under

the enigmatic general verdict we

cannot know whether they did or

not, so the verdict cannot stand.

Since we too have no idea whether or

not the jury relied on the price dif-

ferential theory, we reluctantly reverse

and remand this length case for further

proceedings on the damages issue.

2. Royalty Pavments Theory

Since the case must be retried on

damages, we think it appropriate to

reach the complex issues with regard to

the royalty payments theory at this

time. As indicated above, this theory

presumed that Cal-Florida suffered

monetary injury in the precise amount of

the BGA and GRA royalties charged on its

cutting sales. Over Yoder's objection,

the court submitted this theory to the

jury, together with the question whether

a "passing on" defense should be allowed

as it was recognized in Hanover Shoe,

Inc. v. United Shoe Mach. Corp., 1968,

392 U.S: 401, 88 S.Ct. 2224, 30 L.Ed. 2d

1231.

must prove that the actions in violation of The evidence showed that Cal-Florida

pre ming sy laws were a material factor in of Florida had paid a total of $35,574.52

a pm gee camplained of. See in BGA royalties from May 1969 to Dec-

generally Areeda, supra note 5. ember 1971, when BGA ended, and it had

-76a-

paid a total of $6,731.95 in GRA royalt-

ies until that program ended, for a

grand total of $42,306.47. Cal-Florida

of California had paid $194,230.60 in

BGA royalties and $21,209.23 in GRA

royalties over the same time period, for

a grand total of $215,439.83. Total BGA

and GRA royalties paid by both companies

equalled $257,746.30. The pretrial

stipulation, which the court specifi-

cally ordered would govern at trial,

provided that

[t]he parties stipulate that the

amounts of BGA royalties paid

by defendants [CFPC and CFPCF]

to BGA were the same as the

amounts collected by defendants

from defendants' customers.

On the basis of the instructions and the

evidence of royalties paid, the jury

awarded $129,000 in damages, to be split

evenly between CFPC and CFPCF.

Yoder's central point regarding the

royalty payments made by Cal-Florida,

a propagator-distributor, to BGA and

Yoder is that the very structure of the

BGA and GRA programs ensured that no

propagator-distributor would be in fact

injured. In this connection it argues

tht it was error to submit the theory

to the jury in the absence of evidence

showing that CFPC and CFPCF were ac-

tually injured by either program and

that it was error to use the general

Soon

-77a-

rule precluding a "passing on" defense

articulated in Hanover Shoe to circum-

vent the evidentiary problem. If the

passing on concept was applicable at

all, Yoder asserts that it was entitled

to invoke the defense under pre-existing

cost plus contract exception of Hanover

Shoe.

In Hanover Shoe, Inc. v. United

Shoe Mach. Corp., 1 , 3292 U.S. 481, 88

S.Ct. 2224, L.Ed.2d 1231, Hanover

Shoe, a manufacturer of shoes, charged

that defendant United Shoe Machinery

Corp. [United], a manufacturer and dis-

tributor of shoe machinery, had mono-

polized the shoe machinery industry

through its practice of leasing and

refusing to sell its more complicated

machinery. As damages, Hanover asked

for the difference between what it paid

United in shoe machine rentals and what

it would have paid if United had sold

machines to it instead. Hanover had

prevailed in the district court and had

been awarded trebled damages; the Third

Circuit affirmed. In the Supreme Court,

United argued that Hanover had suffered

no legally cognizable injury, since the

illegal overcharge under the leasing

system was reflected in the price at

26. Yoder also advances a variety of

complaints concerning the instructions

on passing on actually given to the

jury which we do not reach.

-78a-

which Hanover sold shoes to its cus-

tomers, and since Hanover would have

charged less if its costs were less and

thereby would have made no more profit.

Rejecting that argument, the Court held

that

when a buyer shows that the

price paid by him for materials

purchased for use in his business

is illegally high and also shows

the amount of the overcharge, he

has made out a prima facie case

of injury and damage within the

meaning of § 4 [of the Clayton

Act].

392 U.S. at 489, 88 S.Ct. at 2229, 20

L.Ed.2d at 1239. In the normal case,

according to the Court, it was of no

legal consequence that the buyer might

have left his prices unchanged and

absorbed the loss, made adjustments in

volume or other costs, or raised his

prices. Unwilling to adopt United's

proposed analysis the Court explained

itself as follows:

We are not impressed with

the argument that sound laws of

economics require recognizing

this defense. A wide range of

factors influence a company's

pricing policies. Normally

the impact of a single change

in the relevant conditions can-

not be measured after the fact;

~_———— > —

-79a-

indeed a businessman may be

unable to state whether, had

one fact been different (a

single supply less expensive,

general economic conditions

more buoyant, or the labor

market tighter, for example),

he would have chosen a dif-

ferent price. Equally dif-

ficult to determine, in the

real economic world rather

than an economist's hypo-

thetical model, is what effect

a change in a company's price

will have on its total sales.

Finally, costs per unit for a

different volume of total

sales are hard to estimate.

Even if it could be shown that

the buyer raised his price in

response to, and in the amount

of, the overcharge and that

his margin of profit and total

sales had not thereafter

declined, there would remain

the nearly insuperable dif-

ficulty of demonstrating that

the particular plaintiff could

not or would not have raised

his prices absent the over-

charge or maintained the

higher price had the over-

charge been discontinued.

Since establishing the ap-

plicability of the passing-on

defense would require a con-

vincing showing of each of

these virtually unascertain-

-80a-

able figures, the task would

normally prove insurmountable.

On the other hand, it is not

unlikely that if the existence

of the defense is generally

confirmed, antitrust defend-

ants will frequently seek to

establish its applicability.

Treble-damage actions would

often require additional long

and complicated proceedings

involving massive evidence and

complicated theories.

In addition, if buyers

are subjected to the passing-

on defense, those who buy from

them would also have to meet

the challenge that they passed

on the higher price to their

customers. These ultimate

consumers, in today's case the

buyers of single pairs of

shoes, would have only a tiny

stake in a lawsuit and little

interest in attempting a class

action. In consequence, those

who violate the antitrust laws

by price fixing or monopoliz-

ing would retain the fruits of '

their illegality because no

one was available who would

bring suit against them.

Treble-damage actions, the im-

portance of which the Court

has many times emphasized,

would be substantially reduced

in effectiveness.

'

-8la-

392 U.S. at 492-94, 88 S.Ct. at 2231-32,

20 L.Ed.2d at 1241. (Footnotes omit-

ted.) The Court did not sanction an

iron rejection of the defense, however.

On the contrary, it indicated that the

above-quoted policy factors had impelled

it to reject the defense for most cases,

but that where those factors were absent,

the defense would be allowed:

We recognize that there

might be situations--for

instance, when an overcharged

buyer has ¢« pre-existing

“cost-plus' contract, thus

making it easy to prove that

he has not been damaged--where

the considerations requiring

that the passing-on defense

not be permitted in this case

would not be present. We also

recognize that where no dif-

ferential can be proved

between the price unlawfully

charged and some price that

the seller was required by law

to charge, establishing dam-

ages might require a showing

of loss of profits to the

buyer.

392 U.S. at 494, 88 S.Ct. at 2232, 20

L.Ed.2d at 1242. See generally Pollock,

Automatic Treble Damages and the Pas-

the Hanover Shoe

Sectsion. I3 Antitrust Bull. L183 (1968).

-82a-

Post-Hanover Shoe cases dealing

with the passing on concept fall into

two categories: so-called offensive use

of passing on, and defensive use.

Typical of the offensive use cases is

In re Western Liguid Asphalt Cases, 9

Cir. 1973, 487 F.2d I9i, cert. denied

sub nom. Standard Oil Co. v. Alaska,

415 U.S. 919, 94 S.Ct. 1415, 39 L.Ed. 2a

474. In that group of cases, the pas-

sing on issue arose in the context of

the question whether the remote pur

chaser would have standing to sue. 7

27. Some Courts had held that the

remote purchaser would not have stand-

ing unless he could prove that the

overcharge was passed on to him under

something analogous to a cost plus

contract, turning Hanover S Shoe ae its

head. E.g. Albertson's, Inc. v.

Amalgamated Sugar Co., D. Utah 1973,

62 F.R.D. 43, mo ed on other grounds,

503 F.2d 459; Philadelphia Housing Auth.

v. American Radiator & Std. Sanitary

Corp., L.D.Pa. 1970, 50 F.R.D. 13, aff'd

sub nom. Mangano v. American Radiator &

Std. Sanitary Corp., 438 F.2d 1187.

Fortunately for the jurisprudence, the

Liguid Asphalt court recognized that

the policies underlying Hanover Shoe

required a different approach if the

question was plaintiff's access to a

forum instead of defeating a treble

damage award. See Comment, Standing to

Sue in Antitrust Cases: The Offensive

Use of Passing-On, 123 U.Pa.L.Rev. 976

(1975).

-83a-

Hanover Shoe itself exemplified defen-

Sive use of passing on, where the ques-

tion is whether the defendant can avoid

liability for damages because the plain-

tiff passed on the overcharge. Since

Yoder is asserting that the burden of

the BGA and GRA royalties passed from

the propagator-distributors to the

growers or self-propagators, to the

extent that the passing on concept ap-

plies, it is defensive passing on.

Although none of the cases since

Hanover Shoe have discussed defensive

passing on in great detail, we have

distilled some general guidelines from

the Hanover Shoe decision itself and

other cases that we believe should

direct the inquiry. First, we believe

that the ultimate question of availa-

bility of the defense vel non is a

legal one for the court. ee Obron

v. Union care Corp. 6 Cir. 1973, 477

; ate of Minnesota v. United

States Steel Co 8 Cir. I9571, 438

F.2d 1380. But see Suenteré Teieeurien

Inc. v. Mobil O Corp., 10 Cir., 475

F.2d 220, cert. Xenter

1973, 414 U.S.

829, 94 S. Ct. 55, 61, 38 L.Ed.2d 63

("passing on" issue submitted to jury,

but no discussion of judge-jury al-

location point). It was therefore error

for the court here to submit the issue

to the jury.

-84a-

At the U.S. Steel court recognized,

a number of evidentiary questions will

often have to be answered before the final

legal issue is resolved. Those questions,

which might usefully be the subject of

special interrogatories in an appropriate

case, might inquire as to the evidence

on the impact on the price and volume

after the alleged overcharge is dis-

continued, the evidence on how easily

ascertainable the amount of the over-

charge is, the evidence on the extent

of the pass-on, and the evidence as to

the nature of the scheme if that is

not clear from written documents. Never-

theless, once all those inquiries are

resolved, the court must direct whether

or not the defense will stand.

Secondly, we believe that a flex-

ible, policy-oriented approach should be

taken to the application of the limited

defense still available. See Obron v.

Union Camp Corp., supra; State of West

Virginia v. as. zer & Co., 2 Cir.,

440 F.2d 1079, cert. denied sub nom.

Colter Drugs, Inc. v. Chas. Pfizer & Co.,

T971, 404 U.S. 871, 92 S.Ct. BI, 30

L.Ed.2d 115; State of Minnesota v. United

States Steel Corp., supra. Particularly,

the overriding importance of the private

treble damage action in the antitrust

enforcement scheme should be kept in

mind.

Because the critical facts for the

passing-on defense were either stipulated

or are contained within the BGA or GRA

contracts, we can proceed immediately to

an application of the law to this case.

Cal-Florida, it seems clear, succeeded in

the first instance in establishing a prima

facie case of damage: it showed that the

final price at which it sold chrysanthe-

mum cuttings was illegally high,¢8 and it

showed that the amount of the over-

charge was $.006 per cutting. On the

basis of this showing, Cal-Florida was

entitled to have the fact of damage pre-

sumed, unless Yoder could bring itself

within_the Hanover Shoe pre-existing

cost plus contract exception or rebut the

prima facie case in some other way.

28. A few observations here are in

order. We have been careful to describe

the overcharge as one affecting Cal-

Florida's sales price to its cutomers,

rather than as a cost in Gal-Florida's

business in the same sense as fertilizer

was a cost. The fact that the alleged

overcharge was @nominated a royalty is

not enought to negate the possibility

of overcharge.

Yoder's entitlement to the cost

plus exception depends on its overcoming

the almost “insurmountable” burden of

showing that the factors that led the

Supreme Court to reject the pass~-on de-

fense do not apply to the BGA and GRA

programs. We have decided that it failed

to meet that burden and thereby to qual-

ify itself for the pre-existing cost

plus contract exception. Even if we as~

sume that Yoder had adequately demon-

strated that (1) the impact of a single

change in the conditions and factors in-

fluencing the pricing decision could be

measured after the fact, (2) Cal-Florida

would not have raised its price and did

not maintain the higher price, and (3)

persons to vindicate the antitrust laws

would be readily available to do so, we

’ think that it did not show the effect

of a change in price on total sales

and costs per unit for a different volume

of total sales.

The impact of the higher illegal

price on total sales is extremely dif-

ficult to measure. Yoder argues that

since the only difference between sales

pursuant to Cal-Florida's March 1971

price list and the list a year later was

the elimination of the illegal royalty,

a simple comparison of sales volume for

the two years would suffice. However,

other economic data, such as the general

state of the economy at both times, the

-87a-

entry of a new competitor, or an unex-

pected external event such as the Arab

oil boycott migh skew this measurement.

Yoder introduced no evidence attempting

to adjust for these variables.

Yoder also argues that the fact

that Cal-Florida suffered no sales de-

cline during the BGA and GRA programs

helps to negate this factor. Yet we

have no way of knowing whether sales to

growers would have increased even more

if the cuttings had been available at a

lower price. Simple economics suggests

that sales would have increased at lower

prices. The evidence indicated that

growers looked to the total cost of a

cutting in deciding what to buy; when

that cost became prohibitively high,

some growers turned to self-propagation.

Each move to self-propagation removed

one customer from Cal-Florida's universe

of potential customers. The uncertain-

ties surrounding this factor are simply

too great, and we conclude that Yoder

failed to meet its high burden of

dispelling them.

The difficulty of estimating the

cost per unit for a different volume of

sales suffers from the same infirmity.

Since the difference in total sales is

an uncertain figure, the breakdown of

that figure into cost per unit plus

profit is equally uncertain. Adminis-

_ tration of BGA may have affected cost

per unit on those varieties. Because

it was Yoder's burden to negate this

factor, we attach no significance to

Cal-Florida's failure to introduce

evidence on administrative costs. Ad-

ditionally, we know nothing about Cal-

Florida's unused capacity. If volume

of sales had increased at the lower

price, it may have been able to cut

down somewhat on marginal cost.

The long, complex proceedings feared

by the Supreme Court would have been

necessary in order adequately to deal

with the two factors we have singled

out. Until the policy considerations

that led the Court to reject the passing

on defense are rebutted, a litigant cannot

take advantage of the pre-existing cost

plus contract exception. Because Yoder

did not show the inapplicability of

those factors, we hold that the lower

court should have ruled that Yoder was

not entitled to assert a passing on

defense.

We note that the BGA and GRA pro-

grams do not fit the model of a pre-

existing cost plus contract in any case.

Two characteristics are essential to

such a contract, only one of which was

met here: first, the buyer must have

his contract with a particular customer

for a particular sale before the illegal

overcharge is imposed on the buyer, and

-89a-

second, the contractual arrangement must

assure that whatever the cost of the

product was to the buyer, it is the same

to the customer. Unquestionably, the

BGA and GRA systems satisfied the latter

criterion. They were not pre-existing

contracts, however, in the former sense.

Volume was indefinite; identity of

customer was indefinite. The uncer-

taininty in those terms was exactly the

flaw in Yoder's arguments purporting

directly to meet the Hanover Shoe policy

considerations.

Thus whether the problem is ap-

proached by attempting to refute the

Court's reasons for disallowing the de-

fense or by trying to come within the

exception, Yoder fails. On remand, the

fact-finder must be permitted to con-

sider the full amount of the overcharge--

i.e. the total amount of royalties

Ppaid--as evidence of damages.

29. Even if the comparative price data had not

been fatally defective, we note that the amount

of the jury's verdict might have required a

remand in any event. Cal-Florida suggests that

the jury arrived at its figure by taking the

total royalties paid by both campanies, rounding

that amount up to $258,000, deciding that

damages were one-half that amount, and giving

each company $64,000 prior to the court's with

this explanation: for example, no evidence of a

“reasonable” royalty amount was introduced, thus

casting doubt on the jury's license to split the

royalties in half; and Cal-Florida of Florida

paid only $42,306.47 in royalties, which leaves

$22,193.53 of its award unaccounted for unless

the two companies are treated as one.

-90a-

To summarize the antitrust part of

this case, then, we have held that Cal-

Florida did have standing to sue Yoder,

that Cal-Florida was not entitled to the

benefits of the tolling provision of the

statute of limitations, that BGA and GRA

were per se violations of section l,

that the relevant market was ornamental

plants, that Yoder neither monopolized

nor attempted to monopolize that market,

and finally, that a remand is necessary

on the damages issue.

IV. Plant Patents

A. Introduction

With the antitrust issues decided,

we return to the problem that initially

gave rise to this lawsuit--Yoder's

allegation that Cal-Florida was infring-

ing its plant patents and its consequent

demand for damages. Cal-Florida re-

sponded with the predictable assertions

of patent invalidity and noninfringe-

ment, among others. As discussed above,

the only issues before this Court con-

cern the seven patents that the district

court ruled valid and infringed as a

matter of law:39 Red Torch, Gold Marble,

30. An eighth plant vatent, Deep Conquest,

was found valid and infringed by the jury.

Cal-Florida's only point regarding that patent

goes to the court's trepling of the damages

for infringement. See Part IV. E., infra.

-9la-

Morocco, Promenade, Southern Gold, Moun-

tain Snow, and Mountain Sun.31 After

considerable thought, we have decided

that the district court correctly ruled

that Cal-Florida failed to rebut the

statutory presumption of validity with

sufficient relevant evidence. Never-

theless, we hold that the court should

not have trebled the damages found for

the infringement, in light of the dif-

ficulty and novelty of the issues pre-

sented and the good faith defense of

invalidity.

B. Constitutional and Statutory

Background

Article I, section 8, clause 8

of the Constitution provided that Con-

gress shall have the power:

31. The U.S. Plant Patent numbers for

those varieties were as follows: Red

Torch, U.S. Plant Patent 3,262; Gold

Marble, U.S. Plant Patent 3,220; Morocco,

U.S. Plant Patent 3,191; Promenade, U.S.

Plant Patent 3,221; Southern Gold, U.S.

Plant Patent 3,257; Mountain Snow, U.S.

Plant Patent 3,215; Mountain Sun, U.S.

Plant Patent 3,250.

-92a-

To promote the Progress of

Science and useful Arts, by secur-

ing for limited Times to Authors

and Inventors the exclusive Right

to their respective Writings and

Discoveries; ...

Although the first legislation implement-

ing this provision for mechanical inven-

tions was passed in 1790 by the first

Congress, 1 Stat. 109, see 1 Deller's

Walker on Patents § 12, at 93 (2d ed.

1964), Congress did not include plants

within the clause's protection until 1930.

Act of May 23, 1930, 46 Stat. 376. In

its present form, the principal statute

allowing patents on plants reads:

Whoever invents or discovers

and sexually reproduces any dis-

tinct and new variety of plant,

including cultivated sports, mutants,

hybrids, and newly found seedlings,

other than an tuberpropagated pliant

or a plant found in an uncultivated

state, may obtain a patent therefor,

subject to the conditions and re-

quirements of this title.

The provision of this title

relating to patents for inventions

shall apply to patents for plants,

except as otherwise provided.

-93a-

35. U.S.C. § 161. Since section 161

makes the general patent law applicable

to plant getents except as otherwise

provided,32 we take as our starting point

the general requisites for patentability,

and then apply them as well as we can to

plants. See Application of LeGrice, Ct.

Cust. & Pat.App.1962, 301 F.2d 929.

Normally, the three requirements

for pe ten tabs sity are novelty, utility,

and obviousness.33 See, e.g., Graham

32. The only express provision modify-

ing the applicability of the invention

patent statutes for plant patents is

contained in 35 U.S.C. § 162, which

says that no plant patent will be in-

validated for noncompliance with § 112

(description) if the description is as

complete as is reasonably possible. No

description issue is before us.

33. These factors are taken from 35

U.S.C. § 101 ("any new and useful pro-

cess, machine, manufacture, or composi-

tion of matter, or .. . improvement

thereof") and 35 U.S.C. § 103 ("the

differences between the subject matter

sought to be patented and the prior act

are such that the subject matter as a

whole would [not] have been obvious").

-94a-

v. John Deere Co., 1966, 383 U.S. 1, 86

S.Ct. 004, 666, 15 L.Ed.2d 545; Van

Gorp Mf Inc. v. Townley Indus. Plas-

’ . ’

17; Ramirez v. Perez, 5 Cir. 1972, 457

F.2d 267, 209. For plant patents, the

requirement of distinctiness replaces

that of utility, and the additional re-

quirement of asexual reproduction is

introduced.

The concept of novelty refers to

novelty of conception, rather than

novelty of use; no single prior art

structure can exist in which all of the

elements serve substantially the same

function. See Van Gorp Mfg., Inc. v.

Townley Indus. astics nc., supra,

In Beckman Instruments, Inc. v. an

tronics, inc., 5 Cir. 535 F.2d 1369

. ’

T375, cert. denied, 1970, 400 U.S. 956,

91 S.ct. 353-54, 27 L.Ed.2d 264, this

Court said:

[S)ection 102, which

pertains to novelty, requires

that the patentee be the

original inventor of the

object claimed in his patent,

and also that the invention

not have been known or used by

others before his discover of

it. . . Furthermore the prior

art is to be considered as

covering all uses to which it

could have been put.

-95a-

As applied to plants, the Patent Office

Board of Appeals held that a “new" plant

had to be one that literally had not

existed before, rather than one that had

existed in nature but was newly found,

such as an exotic pant from a remote

part of the earth.34 Ex parte Foster,

90 U.S.P.Q. 16 (1951). n pplication

of Greer, Ct.Cust. & Pat. App. , 484

° , the court indicated that the

Board believed that novelty was to be

determined by a detailed comparison with

other known varieties.

The legislative history of the Plant

Patent Act is of considerable assistance

in defining "distinctness." The Senate

Report said:

[I]n order for the new variety

to be distinct it must have char-

acteristics clearly distinguishable

from those of existing varieties

and it is immaterial whether in the

judgment of the Patent Office the

new characteristics are inferior

or superior to those of existing

varieties. Experience has shown the

absurdity of many views held as to

the value of new varieties at the

time of their creation.

The characteristics that may

distinguish a new variety would in-

clude, among others, those of habit;

-immunity from disease; or soil

conditions; color of flower, leaf,

fruit or stems; flavor; productiv-

ity, including ever-bearing qual-

ities in case of fruits; storage

qualities; perfume; form; and

ease of asexual reproduction.

Within any one of the above or

other classes of characteristics

the differences which would suf-

fice to make the variety a dis-

tinct variety, will necessarily

be differences of degree.

S.Rep. 315, 7lst Cong. 2d Sess. (1930).

(Emphasis omitted.) A definition of

"distinctness" as the aggregate of the

plant's distinguishing characteristics

seems to us a sensible and workable one.

The third requirement, nonobvi-

ousness, is the hardest to apply to plants,

though we are bound to do so to the best

of our ability. The traditional three

part test for obviousness, as set out in

John Deere, supra, inquires as to (1)

the scope and content of the prior art,

(2) the differences between the prior

art and the claims at issue, and (3)

the level of ordinary skill in the

prior art. 383 U.S. at 17, 86 §.Ct.

at 694, 15 L.Ed.2d at 556. Accord,

Sakraida v. Ao Pro, Inc., 1976,

U.S. , 96 “S.Ct. 1532, 47 L.Eav2a

784; Dann cP Johnston, 1976, U.S.

. 47 L.Ed.2d 692.

Secondary characteristics such as com-

mercial success, long felt but unsolved

-97a-

needs, and failure of others can be used

to illuminate the circumstances surround-

ing the subject matter sought to be

patented. Graham v. John Deere Co.,

supra, 383 U.S. at 17-18, 86 S.Ct. at

15 L.Ed.2d at 556.

The Supreme Court has viewed the

obviousness requirement of section 103

as Congress’ articulation of the con-

stitutional standard of invention. Dann

v. Johnston, supra, U.S. at

56 S.Ct. at 1 47 L.Ed.24 at 658. ‘See

Sakraida v. A Pro, Inc., supra. In

Dann, the Saet eemen te that

{aJs a judicial test, "“invention"--

i.e. "an exercise of the inventive

Faculty,". . .--has long been re- |

garded as an absolute prerequisite

to patentability.

U.S. at , 96 S.Ct. at 1397, 47

L.Ed.2d at 697-98 (citation omitted).

Accord, Sakraida v. Ag Pro, Inc., supra,

U.S. at 96 S.ct. at 1535,

a7 T..Ra.2a at “7859. An “invention” is

characterized by a degree of skill and

ingenuity greater than that possessed

by an ordinary mechanic acquainted ,with

the business. Hotchkiss v. Greenwood,

52 U.S. (11 How.) 248, 267, I3° L.Ed.

683, at 691. The obviousness requirement

appears to presume that if the gap be-

tween the prior art and the claimed im-

provement is small, then an ordinary me-

chanic skilled in the art would have been

able to create the improvement, thus

-98a-

leading to the conclusion that the im-

provement was obvious and a patentable

invention not present. Section 103 re-

quires the determination of obviousness

vel non to be made with reference to the

time the invention was made. See

Jacobson Bros., Inc. v. United States,

Ct.cl. 1975, S12 F.2d 1065, 1068.

Obviousness, like the general question

of patent validity, is ultimately a

question of law, though factual inquiries

are often necessary to its resolution.

Sakraida v. Pro, Inc., supra; Graham

v. John Deere Co., supra.

Rephrasing the John Deere tests

for the plant world, we might ask about

(1) the characteristics of prior plants of

the same general type, both patented

and nonpatented, and (2) the differences

between the prior plants and the claims

at issue. We see no meaningful way to

apply the third criterion to plants--

i.e. the level of ordinary skill in the

prior art. Criteria one and two are

reminiscent of the “distinctness” re-

quirement already in the Plant Patent

Act. Thus, it we are to give obviousness

an independent meaning, it must refer to

—- other than observable character-

istics.

We think that the most promising ap-

proach toward the obviousness require-

ment for plant patents is reference to

the underlying constitutional standard

that it codifies--namely, invention.

-99a-

The general thrust of the "“inven-

tion” requirement is to ensure that

minor improvements will not be granted

the protection of a seventeen year

monopoly by the state, In the case of

plants, to develop or discover a new

variety that retains the desirable

qualities of the parent stock and

adds significant improvements, and to

preserve the new specimen by asexually

re it constitutes no small

eat.

This Court's case dealing with the

patent on the chemical compound commonly

known as the drug "Darvon," Eli Lill

& Co. v. Generix Dru Sales Inc., 5

E. , . , Provides some

insight into the problem of how to apply

the “invention” requirement to a new

and esoteric subject matter. The

court first noted that

{a]nalogical reasoning is neces-

sarily restricted in many chemical

patent cases because of the neces-

sity for physiological experimen-

tation before any use can be de-

termined.

In fact, such lack of predictability

of useful result from the making

of even the slightest variation in

the atomic structure or spatial

-100a-

arrangement of a complex molecule

. . + deprives the instant claims

of most of their vitality .. ..

460 F.2d at 1101. The court resolved

the apparent dilemma by looking to the

therapeutic value of the new drug in-

stead of to its chemical composition;

[R)eason compels us to agree that

novelty, usefulness and non-ob-

viousness inhere in the true

discovery that a chemical compund

exhibits a new needed medicinal

capability, even though it be

closely related in structure to a

known or patented drug.

460 F.2d at 1103.

The same kind of shift in focus

would lead us to a more productive in-

quiry for plant patents. If the plant

is a source of food, the ultimate ques-

tion might be its nutritive content or

its prolificacy. A medicinal plant

might be judged by its increased or

changed therapeutic value. Similarly,

an ornamental plant would be judged by

its increased beauty and desirability in

relation to the other plants of its

type, its usefulness in the industry,

and how much of an improvement it repre-

sents over prior ornamental plants,

-l10la-

taking all of its characteristics to-

gether. 35

Before reaching the issues on

appeal, we make a final comment about

the rgquirement of asexual reproduc-

tion. It has been described as the

“very essence" of the patent. lLangrock,

Plant Patents --Biological Necessities

n Infringements Suits, 41 J.Pat.Off.Soc.

787 (1555) Asexual reproduction is

literally the only way that a breeder

can be sure he has reproduced a plant

identical in every respect to the

parent. It is quite possible that

infringement of a plant patent would

35. We suspect that part of our problem

in applying patent concepts to the facts

before us lies in the fact that we are

dealing with ornamental plants. Beauty

for its own sake is not often a goal of

inventors--indeed, even ornamental plant

breeders might be more aptly described

as seekers of beauty for prefit. Never-

theless, the statute does not exempt

ornamental plants, and so we are bound

to treat them on a par with more “use-

ful" botanical creations.

36. Lest the reader fear that Congress

neglected to make adequate provision for

reproduction of the sexual type, we has-

ten to note that the Plant Variety Pro-

tection statute, 7 U.S.C. §§ 2321-2583,

applies only to sexually reproducing

plants.

-102a-

occur only if stock obtained from one of

the patented plants is used, given the

extreme unlikelihood that any other

plant could actually infringe. See

Cole Nursery Co. v. Youdath Perennial

“Inc F.Supp.

Gardens, inc., N.D.Ohio .

159, 160; Ex parte Weiss, Bd.App.1967,

159 U.S.P.Q. (dictum); Langrock, supra,

at 788-89. If the alleged infringer

could somehow prove that he had de-

veloped the plant in question indepen-

dently, then he would not be liable in

damages or subject to an injunction for

infringement.3/ This example illustrates

the extreme extent to which asexual re-

production is the heart of the present

plant patent system; the whole key to

the “invention” of a new plant is the

discovery of new traits plus the fore-

sight and appreciation to take the step

of asexual reproduction. See Nicholson

v. Bailey, $.D.Fla.1960, 182 F.Supp.

509; Ex parte Moore, 115 U.S.P.Q. 145

(1957); Dunn v. Ragin v. Carlile, 50

U.S.P.Q. 472 (1941).

C. Yoder's Plant Patents--Validity

During the trial, Cal-Florida of-

fered as evidence certain documents

showing that growers had found mutations

on the Mandalay variety that were the

same as the patented variety Glowing

37. Whether he might also be entitled

to a patent on his plant is more prob-

lematic, although we would not want to

rule out the possibility.

-103a-

Mandalay~--i.e. evidence that the s r

Glowing Mandalay had recurred. Although

Glowing Mandalay is no longer in the

case, Cal-Plorida later proffered simi-

lar evidence with respect to Gold Marble

Promenade, and Red Torch, which are :

three of the patents whose validity is

challenged on appeal. Gold Marble,

Promenade, and Red Torch are all sport

patents, meaning that they first ap-

peared as a sport of another plant, in

‘contrast to seedling patents, which de-

velop from seeds. Of the remaining four

challenged patents. two were sport

patents and two were seedling patents.

Cal-Florida never proffered any sport

recurrence evidence as to the other two

Sport patents, Mountain Sun and Southern

Gold, ner did it offer any specific

evidence attacking the seedling patents

Morocco and Mountain Snow. Since we j

find that the district court's ruling on

the sport recurrence evidence did not

preclude Cal-Florida from introducing

other types of evidence to attach the

validity of the patents, and since no

Sport recurrence evidence was introduced

as to Mountain Sun and Southern Gold, we

find no warrant on appeal to disturb the

ruling that Mountain Sun, Southern Gold

Morocco, and Mountain Snow were valid ‘

pon Rogge og Plant patents, like

, enjoy a statuto re

validity that was not sebusted os an ”

those four. See 35 U.S.C. § 282; Kim

Bros. v. Hagler 9 Cir. 1960, 276 F.2a

, .

-104a-

At the time the court rejected the

sport return evidence for Glowing Man-

dalay, it made a ruling designed to

apply to the rest of the trial with re-

spect to that kind of evidence. That

ruling is the focus of Cal-Florida's

cross appeal on the plant patent val-

idity point. Because of its importance,

we set out the pertinent parts in some

detail here:

[I]t seems clear that it was the

Congressional intent that a person

who discovered an asexually re-

produced variety of a new and dis-

tinct plant was entitled to a

patent.

It was not contemplated,

apparently, that he invent, in the

term that is used, or in the sig-

nificance of that term, as we

understand it, traditional concept

of inventing a machine...

In any event, the issue pre-

sented here is a rather narrow one

and it has some practical over-

tones.

I am frank to confess that I

think that Mr. Foster's [Yoder's

counsel] presentation here ... is

very persuasive. In all proba-

bility, this will be, or may be,

the ultimate result of this trial.

It may not be, after we have

-105a-

listened to the testimony, of

course, Of Mr. Boone's [Cal-Flor-

ida's counsel] other witnesses who

are coming in to testify on the

genetics of this thing, but on this

one narrow limited issue, it would

seem that the plaintiffs [Yoder]

were entitled to prevail.

Therefore, the objection to

the introduction of the various

letters and documents from...

the growers and plant propagators

around the country, which were

forwarded to Yoder Brothers over

the years, is sustained.

Cal-Florida consturues the above-quoted

ruling as an all-encompassing holding

that the constitutional standard of in-

vention does not apply to plant patents.

It further claims that since the ruling

was admittedly intended to apply to the

entire trial, it was precluded from

offering evidence on the issues of

newness, Ccistinctness, and obviousness

by the court's action. In fact, it

never even tried to introduce the ex-

pected expert genetics testimony, al-

though it did make a formal offer of

more sport return evidence at a later

time in the trial.

-106a-

Yoder disputes the breadth of the

ruling and its effect on any other evi-

dence Cal-Florida might have offered,

and notes that the court's actual ruling

on the issues of newness and distinct-

ness did not come until some two weeks

later. With regard to the ruling on the

admissiblity of the evidence, Yoder

argues that the documents would not have

shown lack of distinctness, since the

fact that a sport with particular traits

recurs says nothing about what those

traits are and how they differ from

other plants. Furthermore, Yoder argues

that the document would not have shown

obviousness, because if sport recurrence

were evidence of obviousness, then

almost no mutations would be patentable,

and that ,would be contary to Congress’

intent.

We do not construe the district

court's evidentiary ruling as anything

38. Yoder also argues that the pretrial

stipulation did not include obviousness

as an issue to be tried, and that we

should ignore it for that reason. We

prefer not to take that approach; while

"invention" or obviousness was not ex~-

plicitly listed as an issue, it was

implicit in several issues. Further-

more, it was discussed thoroughly by the

district court and counsel for both

parties.

-~107a-

more than that; in our opinion, it

simply held that che euaee recurrence

evidence was not relevant to any of the

patent validity issues. We therefore

confine our remarks accordingly,

The only possible probative value

of the sport recurrence evidence would

be to show that a sport of that particu-

lar size, shape color, or other trait is

predictable from a given variety of

parent plant. Thus, we must first de-

termine whether Congress intended pre-

dictability to negate the possibility of

invention." Next, if Congress con-

sidered that factor irrelevant, we must

decide if the Constitution is offended

by permitting patepts on the kinds of

sports that recur. 9

39. In this discussion, we are con-

cerned only. with the "invention" or

obviousness issue. As we have defined

novelty, supra, the recurrence of a

sport of a particular color would be

irrelevant. Similarly, sport recurrence

says nothing about the new plant's

particular characteristics. The testi-

mony at the trial amply established that

Yoder's patented chrysanthemums were

distinct to those skilled in the field--

i.e. those in the breeding business. We

note that there is a distinction between

looking to the opinion of persons in the

industry to prove a feature of patenta-

bility and relying on commercial success

to prove nonobviousness. Yoder's argu-

ments relied on the former kind of

evidence.

-108a-

Both the language of the statute

and its legislative history persuade us

that Congress did not intend to exclude

the kind of mutation that migh recur

from the Act's protection. Instead,

both Senate Report 315, 7lst Cong. 2d

Sess. (1930), on the original bill, and

Senate Report 1937, 83d cong., 2d See

(1954), on the 1954 amendment, speak

generally about sports and mutations.

The 1954 amendment was added to clarify

Congress' intention that seedlings

should be patentable, but in the process

of describing the bill, the report

states:

The enactment of this legislation

will remove any doubt that the

legislative intent of the Congress

Clearly means that sports, mutants,

hybrids, and seedlings, discovered

by persons engaged in agriculture

or horticulture, should be patent-

able .. «

S.Rep. 1937, supra.

Although we are willing to assume

for purposes of this argument that some

mutations may appear that would have

been genetically impossible before--

i.e. that a fundamental change in the

biochemical structure of the chromosome

may take place-~by far the majority of

mutations and sports of chrysanthemums

are predictable to some extent for those

skilled in the field. For example, the

testimony at trial indicated that a

yellow sport could be expected from a

-109a-

white chrysanthemum. Indeed, part of

the skill required of a chrysanthemum

breeder is to know what to look for and

to take steps immediately to preseve it

by asexual reproduction if the desire

trait appears. Given that fact, we

think that the purpose of the Plant

Patent Act would be frustrated by a

requirement that only those rare, never-

before-seen, if not genetically im-

possible sports or mutations would be

patentable. That purpose was "to afford

agriculture, so far as practicable, the

same opportunity to participate in the

benefits of the patent system as has

been given industry, and thus assist in

placing agriculture on a basis of

economic equality with industry."

S.Rep. 315, supra. To make it signifi-

cantly more d icult to obtain a plant -

patent than another type of patent would

frustrate that purpose.

We therefore find that Congress did

not intend to exclude the kind of sport

that recurs frequently from the Plant

Patent Act. That being the case, the

district court correctly ruled that the

evidence pro-offered by Cal-Florida was

irrelevant, as a matter of statutory

law.

The only way that the Constitution

would be offended by permitting patents

on recurring sports would be if such

leniency indicated that no "invention"

-1l10a-

was present. 42 We do not think sport

recurrence would negate invention, how-

ever. An infinite number of a certain

sized sport could appear on a plant, but

until someone recognized its uniqueness

and difference and found that the

traits could be preserved by asexual

reproduction in commercial quantities,

no patentable plant would exist. An

objective judgment of the value of the

sport's new and different characteris-

tics--i.e. nutritive value, ornamental

value, hardiness, longevity, etc.--would

not depend in any way on whether a

similar sport had appeared in the past,

or whether that particular sport was

predictable. We therefore find no

reason to disturb our approval of the

district court's evidentiary ruling

based on the constitutional standard of

invention. As that standard applies to

plant patents, the proffered evidence

was irrelevant.

Viewing the evidence offered on the

patent validity question as a whole, we

40. We do not regard this argument as

one attacking the constitutionality of

the Plant Patent Act; rather, it simply

inquires how broadly the Act can he

read consistent with the Constitution.

-llla-

find that Cal-Florida failed to rebut

the statutory presumption of validity as

to Gold Marble, Promenade, and Red

Torck, as well as the other four dis-

cussed above. Thus, the lower court's

finding of validity must be affirmed on

this record.

D. Patent Infringement

On cross appeal, Cal-Florida as-

serts that the absence of flowering

plants grown from the cuttings it had

admittedly taken from Yoder's patented

plants was fatal to Yoder's infringement

counts. This is because the patent

claim in each instance describes a

mature flowering plant, and it is Cal-

Florida's position that only another

mature flowering plant could directly

infringe. Yoder retorts that the Plant

Patent Act provides that

[iJn the case of a plant patent the

grant shall be of the right to

exclude others from asexually

reproducing the plant or selling or

using the plant so reproduced.

35 U.S.C. § 163. The district court

ruled that the act of asexual repro-

duction was complete at the time the

cutting was taken. Finally, the pre-

trial stipulations established that Cal-

Florida had taken plant material, or

cuttings, from Yoder's patented plants.

We agree with Yoder that it was not

necessary to prove that the cuttings

-ll2a-

actually matured into flowered plants to

show infringement. Under such a rule,

it would be virtually impossible for a

propagator-distributor directly to

infringe a patent, despite the vital

role he plays in dissemination of plant

material. Furthermore, we think section

163 is plain in its statement that a

pattentee may exclude others from a-

sexually reproducing, selling or using

the plant. The negative inference to be

drawn from this is that commission of

one of those acts would constitute

infringement. We therefore affirm the

finding of infringement.

E. Treble Damages for Infringement

Section 284 of Title 35, U.S. Code,

provides that the Court shall award

damages to the claimant upon a finding

for him, and further provides that

[w]hen the damages are not found by

a jury, the court shall assess

them. In either event the court

May increase the damages up to

three times the amount found or

assessed.

Although a trial court has consid-

erable discretion in assessing damages

under this section, Maloney-Crawford

Tank Corp. v. Sauder Tank Co., 10 Cir.

1975, 511 F.2d 10, 12, an appellate

court can reverse the trebling of dama-

ges if an abuse of discretion is shown.

White v. Mar-Bel, Inc., 5 Cir. 1975, 509

-ll3a-

F.2d 287; Dixie Cup Co. vy. Paper Con-

tainer Mfg, Co., 7 Cir. 1948, 169 F.2d

645. Where the issue of patentability

is close and litigated in good faith,

the court should be more reluctant to

impose punitive damages. See Wahl v,

Carrier Mfg. Co., 7 Cir. 1975, 511 F.2d

209; Enterprise Mfg. Co. v. Shakespeare

Co., 6 Cir, 1944, 141 F2d S16, Th this

case the jury was instructed that the

seven patents now on appeal were valid

and infringed. In response to a special

interrogatory inguiring about the amount

of damages for each patent found valid

and infringed by either the court or the

jury, the jury entered figures as to

those seven, and in addition, as to

Deep Conquest. It then found that the

infringement was willful as to the seven

valid and infringed patents. It left

blank, however, the space wherein it was

to indicate by what factor the damage

figure should be multiplied. The dis-

trict court then trebled the damage

amounts found by the jury, from which

action Cal-Florida appeals.

Cal-Florida's principal effort to

avoid the district court's trebling of

the damages rests on a recital of its

conduct and on protestations of its good

faith both before and after suit was

filed. It correctly points out that

this case presented difficult issues of

impression on the Plant Patent Act and

that it therefore had a good faith

belief that the patents were invalid.

-1l4a-

The parties had extensive negotiations

concerning the patents prior to the

filing of the suit. Finally, Cal-

Florida asserts that it did discontinue

handling patented varieties after suit

was filed.

In light of the above factors, we

believe the district court abused its

discretion in trebling the damages here.

The primary reason that impels us to

reverse on this point is the novelty of

the issues presented. Cal-Florida has

argued its case against the validity of

these patents forcefully, and it is no

small task to decide how to fit plants

into the niches normally used by me-

chanical, design, or process inventions.

The jury's finding that the infringement

was willful was advisory only. gee

White v. Mar-Bel, Inc., supra, 509, F.2d

at 292. Although we have affirmed the

district court's findings of validity

and infringement, we direct that only

actual damages should be awarded to

Yoder, the successful claimant.

The subleties of the chrysanthemum

business heve given rise to a welter of

legal issues in this case, both patent

and antitrust. To summarize our holdings

on the patent claims briefly, we have

agreed with the lower court that evi-

dence of sport recurrence is irrelevant

to the patentability of plants, and that

insufficient evidence was introduced to

rebut the statutory presumption of

patent validity. We have thus affirmed

the court's holding that the seven plant

-115a-

patents were valid and infringed.

Finally, we have held that the novelty

and difficulty of the plant patent

oe .- ae Case rendered the lower

ourt'’s trebling of the jury's

abuse of discretion. stad —

V. CONCLUSION

In light of our ruling on th

differential theory of , Sel — es

and remand the antitrust claims for re-

trial of damages. We affirm the district

court's ruling of patent validity and

infringement; and finally, we direct that

the patent damage award be reduced to

actual damages.

AFFIRMED IN PART, REVERSED AND

REMANDED IN PART.

JOHN R. BROWN, Chief Judge dis-

senting in part and concurring in part:

I concur in all of Judge Goldberg's

excellent opinion and the result except

those portions headed Monopol4 zation

and Attempted Monopolization.41

41. For ease of reference, the footnotes

in the dissent follow consecutivel

of the Court. —

-116a-

I think the issues of monopoly or

attempted monopoly called for a jury de-

termination. The holding on no monopo-

ly as a matter of law rests42 on the

determination that the relevant market

was ornamental plants generally, not

just chrysanthemums in the infinite

varieties.

Because Judge Goldberg has with

infinite patience and objectivity dis-

cussed fully the factual and legal pros

and cons I need not detail them here.

42. I fully approve the’ Court's construc-

tion of our opinion in Cliff Food Stores,

Inc. v. Kroger, Inc., 5 Cir. ’

F.2d 203, which in language looser than

wie By discussed this in terms of 50%

plus. That would be bad law, but worse

bad economics. In non-§ 2 Sherman Act

but highly analogous antitrust situa-

tions, 14% and 34-36% of the relevant

markets have been sufficient for anti-

competitive purposes. United States v.

Philadelphia National Bank, et al., 1963,

374 U.S. 321, 83 S.Ct. 1715, 10 L.Ed.24

915; compare United States v. First Cit

National Bank of Houston, 1967, 386 U.S.

s.Ct. L.Ed.2d 151, with

United States v. Provident National Bank,

E.D.Pa., 1968, 280 F.Supp. l.

-l117a-

It is enough for me to base this on

my impressions. As I faced--in prepar-

ation for the oral arguments of a case ~

all feared would produce an opus of the

kind it did--the complex briefs of these

skilled advocates, I thought that the

whole thing turned on chrysanthemunms.

That is all we talked about and heard on

oral arguments.43 This was big busi-

ness~-the business of the breeding,

developing, propagating and everexpanding

distribution and sales of chrysanthe-

mums or cuttings which would produce

chrysanthemums for a like cycle of pro-

duction, distribution and sales of

chrysanthemums.

43. I acknowledge, of course, that CFPC

and CFPCF did, soto voce, urge the orna-

mental flower relevant market theory.

44. The Court recognizes. this (see

p. 1351.):

23 states

2,134 growers

145 million standard plant

blooms

129 million standard plants

34.5 million pompom blooms

136 million pompom plants

475 varieties

$83.5 wholesale value

-118a-

Equally significant, what we hold

unanimously as to § 1 of the Sherman

Act is that CFPC and CFPCF were hurt,

not in whatever business they might

have had in general ornamental plants,

but in the business of chrysanthemums.

The pricing, distribution and exclusion-

ary practices condemned related to chry-

santhemums, because the record shows

(see my note 45, supra) that no matter

how much sale of particular flowers may

vary from time to time because of rela-

tive availability, price and demand,

chrysanthemums are a large and signifi-

cant factor in the total ornamental

plant trade. The "relevant market"

then even on the Court's analysis is

not just ornamental flowers generally,

but ornamental flowers including, as a

significant element, chrysanthemums.

The power to exclude CFPC-CFPCF

from chrysanthemums implies the possi-

bility of exclusion of others to the point

even of ultimate actual monopoly. And

what has happened in this process? It is

that one having an overwhelming posi-

tion in an essential product has forced a

competitor or potential competitors to

abandon a significant legitimate phase of

its general business so that no longer

can it offer to the trade popular items

without which service and market accepta-

bility is incomplete. And all of this is

accomplished, not because the predator

-119a-

has a dominant position in all plants, but

because it has dominance‘5 as ab an in- F

dispensable element.

In more traditional language

cryptic analysis bears eukerony a

accurately--flowers. When the practical

result of the BGA is realized, it becomes

apparent that he relevant market is the

chrysanthemum market. The agreements

effectively gave Yoder control over

existing new and future, as yet non-

existent, new chrysanthemum varieties.

This was accomplished in a manner which

affected two groups, not just boycott

victims. To receive the newer varieties,

the boycott victims were required to

agree to the BGA terms. Likewise, those

who had already agreed to these terms

had to continue to adhere to them or

risk becoming a boycott victim. Thus,

reciept by anyone of the BGA covered

never varieties depended on acceptance

of or continued following of the BGA.

Since BGA was composed only of

breeders, since a breeder member's vot-

ing strength was proportional to the ex-

penses which that member bore, and since

45. The Court points out that Yoder's

share of chrysanthemum cuttings went

from 61.4% in 1969 to 58.1% in 1972

(see note 20, supra and appended text).

-120a-

the expenses borne were determined in

proportion to the amount of royalties

collected on the breeder's new variet-

ies, Yoder controlled BGA. The record

indicates that Yoder's share of chrysan-

themum cuttings varied from 61.4% in

1969 to 58.1% in 1972. Furthermore,

although not legally significant with

respect to relief, the fact that in the

pre-statute of limitations period Yoder

had almost 100% of the newer varieties

of chrysanthemums registered with BGA

has great historical significance.

Control of the BGA is tantamount to

control of the sale of any chrysanthemum

cutting registered with BGA. In econ-

omic terms, Yoder controlled the market

supply of BGA chrysanthemum cuttings.

Indeed, the structure of BGA for voting

purposes was such that Yoder could

control this cutting supply without

necessarily retaining ownership of a ma-

jority of BGA chrysanthemum varieties.

Not satisfied with this control, Yoder

supplemented the BGA with the GRA pro-

gram (with similar restrictions to the

BGA) which was designed to extend its

control over non-BGA covered new chry-

santhemum varieties. The intended ef-

fect was expansion of Yoder's control

over the tctal market supply of chry-

santhemum cuttings. The success of this

combined BGA-GRA program is partly

demonstrated by the increasing percent~

age of CFPC's and CFPCF's sales which

-l2la-

Yoder controlled varieties claimed:

1963, 0.19%; 1969, 17.59%; 1971, 41.22%.

In light of Yoder's control of BGA,

the increased percentage of Yoder con-

trolled varieties in CFPC and CFPCF

sales, and the indicated responsiveness

_ Of grower demand for cuttings to changes

in ultimate consumer demand, any refusal

by CFPC and CPFCF to abide by the terms

of the respective agreements would have

made them unable to service growers,

partly or perhaps totally, when the con-

sumer demand switched from other flowers

in the ornamental flower bouquet to

chrysanthemums.

Anytime discussion of the relevant

market arises, basic economic tools are

used. Often use of these tools tends to

make one forget the explicit underlying

assumptions on which these analytical

devices are based. Explicit in all

supply and demand analysis is time.

Similarly, relevant market determina-

tions necessarily entail supply and

demand considerations. Thus, time is a

mandatory consideration when the rele-

vant market is being determined. Over a

time span, the responsiveness of grower

demand for different flowers to shifting

consumer demand does not, a fortiori,

indicate that the ornamental flower

market per se is composed of ", ..

commodities reasonably interchangeable

by consumers for the same purpose . .

-122a-

at a given time. If the bundle of

flowers described as the ornamental

flower market is perceived as a changing

composition of certain flowers over a

time span, at any given moment that

market is one for a specific flower or

for specific flowers. Thus, the time

frame under consideration is a variable

which must be controlled when the rele-

vant flower market is being determined. 4®

Consequently, when a supplier

cannot sell growers a specific flower

demanded at a set time, he is effective-

ly excluded from the ornamental flower

market at that time. Alternatively,

when the demand for a specific combina-

tion of flowers includes chrysanthemums,

one who cannot supply all parts of that

singular bundle is excluded from the

market for that bundle of flowers at

that time.

At any given moment when CFPC-CFPCF

was faced with grower demand for chrysan-

themum cuttings or a flower cutting

bundle which included significant amounts

of chrysanthemum cuttings, the relevant

market was chrysanthemum cuttings:

either chrysanthemum cuttings were

synonymous to the ornamental flower

market or monopolization of the chrysan-

themum market carried with it the power

a6. Cc. Ferguson, Microeconomic Theory,

-123a-

to control the ornamental market analog-

ous to the Standard Oil Co. v. United

States, 1911, 221 U.S. 1, 77, 31 S.Ct.

502, 55 L.Ed. 619, and United States v.

Aluminum Company of America, 2 Cir.,

, 148 F.2d 416, 424, rationale. As

any propagator-distributor who desired

to supply growers with the flower cut-

tings they required at the iustant, any

failure to adhere to the BG?. system by

CFPC-CFPCF risked the inability to meet

demand at the instant when Yoder control-

led varieties were requested. In simpler

terms, at specific times through the BGA

and GRA arrangement Yoder possessed the

power to exclude CFPC and CFPCF from the

Ornamental flower market by monope}iza-

tion of the chrysanthemum market.

A stronger plant will not immediate-

ly take over an entire garden. However,

failure to control its relentless growth

into various portions secures its even-

tual elimination of weaker varieties.

So too in the ornamental flower-chrysan-

themum market.

Operating on what I hope is not a

dubious notion that a Judge should have

at least the common sense--although not

encased in Seventh Amendment armor--of

47. See generally R. Posner, An Econ-

omic Analysis of Law, at 124-27 (1974);

see also R. Posner, Antitrust Cases,

Economic Notes and Other Materials,

at 612-18 (1974).

-124a-

a jury I cannot escape the conviction

that these competing factors called for

fact-finder resolution, not a deliver-

ance of law from our non-horticulture

hothouse. When one wants a Yellow Rose

of Texas he is not satisfied with a Mrs.

Miniver, no matter how cheap, available

or beautiful in some other beholder's

eye. A camellia for a hair dress offset

to olive skin and a black gown is not

filled by a carnation, or for that

matter, a chrysanthemum.

To each his own. And here David

and Goliath are struggling over a single

thing--chrysanthemums. Survival of one

in this business depends on whether the

other can be curbed.

I respectfully dissent as 58 this

feature of the Court's holding.

48. I can't resist the temptation to express a

regret that having gone all the way through an

extended evidentiary jury trial the Trial Court

did not submit this issue to the jury under

appropriate general instructions and a special

verdict. F.R.Civ.P. 49(a). Jamison Co.

Inc. v. Westvaco, Corp., 5 Cir., 1976, 526 F.2d

922, reh. Led, F.2d 34. Then we could

have disposed of the issue once and for all,

without--assuming I am right and the Court

wrong--a new trial on substantially the same

evidence.

(footnote continued)

-125a-

(footnote continued)

This comment goes also to the Trial J .

failure to use, is Gl aie Genie os cae :

issues-—an alternative 49(a) special issue

Submission on the two "fact of damage" theories,

one Of which we find to be faulty but which in

‘the inscrutable mystery of a general verdict may

damage award. Now all agree that this must

back for a limited retrial wending its way "

between what we have said, what we have not said

and what perhaps we meant to say.

126a

Judgment in the Court of Appeals

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

October Term, 1975

No. 75-2141

st

—_

D. C. Docket Nos. CA 73-392 & 74-9JLK

(Consolidated in D.C.)

Yopver BroruHess, Inc.,

Plaintiff-Appellant

Cross-Appellee,

versus

Catirognis-F'Lorma Piant Corporation, Et al.,

Plaintiffs-A ppellees

Cross-Appellants.

Cauirornia-F'Lorma Piant Corporation, Et al.,

Plaintiffs-Appeliees

Cross-Appellants,

versus

Yoper Broruers, Inc.,

Defendant-Appellant

Cross-Appellee.

APPEALS FROM THE Unitep States District Court FoR THE

SouTHern District or FLorma

4s

“

Before Brown, Chief Judge, and Jones and GoupBeERe, Cir-

cuit Judges.

127a

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the

Southern District of Florida, and was argued by counsel;

On ConsIDERATION WHEREOF, It is now here ordered and

adjudged by this Court that the judgment of the said Dis-

trict Court in this cause be, and the same is hereby, affirmed

in part, reversed and that this cause be and the same is

hereby remanded in part to the said District Court in ac-

cordance with the opinion of this Court;

It is further ordered that Yoder Brothers, Inc. be con-

demned to pay one-third of the costs on appeal to be taxed

by the Clerk of this Court; and that California-Florida

Plant Corporation, et al. be condemned to pay two-thirds

of said costs. :

September 7, 1976

Brown, Chief Judge, dissenting in part and concurring in

part.

Issued as Mandate:

128a

Judgment Reflecting Decisions of Court and Jury

UNITED STATES DISTRICT COURT

Sovurnern Disrnict or Forma

ra*

——

Case No. 73-392-Civ-JLK

Yopzs Broruess, Inc.,

Plaintiff,

vs.

CaturorNua-FLorma Piant Corporation and CaLirorni-

Fiogmwa Puant Corporation oF F'Lorip,

Defendants.

Case No. 74-9-Civ-JLK

CaLirornta-FLorma Piant Corporarion,

Plaintiff,

vs.

Yoper Broruers, Inc.,

Defendant.

— *

VV

This action came on for trial before the court and a jury.

The jury, however, was unable to reach a verdict as to all

of the issues. For the convenience of the parties and in

the interest of delineating the issues which must be retried,

the court enters the following judgment reflecting the

decisions to date of the court and the jury. This judgment

129a

shall not be deemed a determination and direction for entry

of a judgment on less than all of the claims. See Fed. R.

Civ. P. 54(b). It is therefore,

ORDERED and

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