Petition — Milgo Electronic Corp. v. Western Electric Co.

MILGO ELECTRONIC CORPORATION and INTERNATIONAL

COMMUNICATIONS CORPORATION, ;

Petitioners,

VS.

WESTERN ELECTRIC COMPANY, INC. and AMERICAN

TELEPHONE & TELEGRAPH COMPANY,

Respondents.

Petition for Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit.

HAROLD L. JACKSON,

STANLEY R. Jongs,

JACKSON & JONES LAW CORPORATION,

Irvine Law Building, Suite 100,

17592 Irvine Boulevard,

Tustin, Calif. 92680,

Attorneys for Petitioners.

—_—

Co-Counsel:

WILLIAM E. SADOWSKI,

HELLIWELL, MELROSE & DEWOLF,

Ninth Floor, 1401 Brickell Avenue,

Miami, Florida 33131.

Parker & Son, Inc., Law Printers, Los Angeles. Phone 724-6622

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SUBJECT INDEX

Page

Lead OF EE Det SOE ARE TR, ARO 2

I ite crinnsidiepllchaed ts icc hacsiihas apc linadeadeioain 2

NT RL AMOR TN 3

Constitutional Provisions and Statutes Involved ...... 3

In UN I i ccc ecient 4

A. Tee Postiment Pleadiogs ................................ 4

B. Brief History of the Challenged Conduct ...... 5

AT ONL OORT T 9

Reasons for Granting the Writ ......0....0.000.0-0..-....... 12

I.

The Fifth Circuit’s Dismissal of Milgo’s Appeal

Manifests a Clear Disregard for Milgo’s Right

I PINE ese cndiictesertdiiccisacrteereencadintinenensntont 12

A. Where Legal Claims and Equitable Claims

in the Same Action Have Common Issues

of Fact, the Right to a Jury Trial on the

Legal Issues Must Be Jealously Guarded

Ne IIIS ccidntdeemnniiowemenioiieieiecenionsnenions 12

B. The Court of Appeals Opinion on Milgo’s

Petition for Rehearing Begs the Question

of Whether Milgo Has Been Foreclosed

ET MINI SII sciehcsainanciksesibnicsourionteapiaetananies 15

Page

C. Milgo Has Been Irreparably Harmed by

the District Court’s Dismissal of Milgo’s

DAA Antitrust Counterclaims and the

Dismissal of Milgo’s Appeal by the Court

ND deiiseash conan tctciercneticstadsineshmnnpinee

Il.

The District Court Erred in Finding That West-

ern Is Immune From the Antitrust Laws ..........

EERE CS ASI Re A iy Pe OA

Appendix A. Opinion of May 19, 1978 of the

UE PIII ols oaictnetnessnthiventsensinencered App. p.

SN EE IE os ccinnshpnstiirnsibensicsquinndaiesinrennencianens

Appendix C. Order of February 3, 1977 of the

I sia dcniiahenninneontnethdeniotiens

Appendix D. Order Granting in Part and Denying

in Part Motion for Summary Judgment ................

Appendix E. Letter to American Telephone and

Telegraph Company, Dated December 16, 1971..

Appendix F. Memorandum of Federal Communica-

tions Commission as Amicus Curiae ....................

21

22

27

TABLE OF AUTHORITIES CITED

Cases Page

AT&T “Foreign Attachment” Tariff Revisions, In re,

15 FCC2d 605 (1968), recon. den. 28 FCC2d

— B __, eeiecelaleie te Cobar rama egies lake lee 6

Beacon Theatres, Inc. v. Westover, 359 U.S. 500

RE in dane ee 13, 14, 15, 18, 20

Cantor v. Detroit Edison Co., 428 U.S. 579 (1976)

Carnation Co. v. Pacific Westbound Conference,

ae, We 0 22, 23, 26

Carterfone, 13 FCC2d 420 (1968), recon. den. 14

te Bg Bg, eee 4,6, 7

Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962)

a ER Ee ee ee ae aD 14, 15, 17, 18, 20

Dimick v. Schiedt, 293 U.S. 474 (1935) 000... 13

Frostie Company v. Dr. Pepper Company, 361 F.

SE EE is: OED adatbncetdensconscscarencenserenench 21

Gordon v. New York Stock Exchange, 422 U.S.

RT NUE cactenstiscactasctanantdlattisartinlancncteeswoccoutensswisttens 23

Greyhound Corp. v. Mt. Hood Stages, Inc., .... US.

els GEO MRI NIT doc tcensacdnlssaicatecanctdseeictaa Ss 26, 27

Inland Steel Products Co. v. MPH Manufacturing

Ss ae Wa Be CEMOPD cine 18

Morton Salt Company v. Suppiger, 314 U.S. 488

I satiate aaacsees hac letctaateachebiensasind snkagnonelaianieiniin 17

Reed v. Riddle Airlines, 266 F.2d 314 (Sth Cir.

UIE Siete ciarcesesecebanlanibcesbaninenhensnedensdibinickicidistatnagiactaenuen 21

Ricci v. Chicago Mercantile Exchange, 409 U.S.

ERE radige seen chestnee a OA ie ee eT 26

iv.

Page

Sheila’s Shine Products, Inc. v. Sheila Shine, Inc.,

406 F286 354- CBR Cle. BRTSD siticcctcbiniciicin 21

United States v. American Telephone & Telegraph

Company, CA-74-1698, District Court for the

DRI OE CII hsad psec icirscenittientintaintpeinie’ 25

United States v. National Associates of Security

Dealers, Inc., 422 U.S. 659 (1975) .................. 23

United States v. Philadelphia National Bank, 374

SO FN REED cccipricnsaceiniinnpininincvnininntainattal 22, 23

United States v. Western Elec. Co., et al., 1956

Trade Cases 968,246 (D.C. N.J. 1956) ............ 4

Miscellaneous

REE GE ee Ss SN. aNd cctcepicsitnsntatictnenitnbiine 7

Pp. ge: Ug US SE AS See 7

pe yy. & 4 i 5 5 Beeman 7

Pye cg hy 8 ED AS eee 7

First Report and Order, 56 FCC2d 593 (1975),

Oe BD mrecncarceccoeynencenccosesnsnsssessnencsiionssnielsniiliniesiatinte 7

First Report and Order, 56 FCC2d 593 (1975),

EB, BG nccrecececsensesecesevsneresesnessninisimsatinnsinnsiisteninienns 8

First Report and Order, 56 FCC2d 593 (1975),

BR. ET .ncecennensnsnsrncentntntininencappelilinnnaiinemainininiactaiiiias 8

Rules |

Federal Rules of Civil Procedure, Rule 39(c) ......

ERT PON SE TEES S. 16, 19, 21

+ ae,

— ‘ OO OR ee

ae — ae

v.

Statutes Page

I RS 9

Ne enw a ioc osobecenunce 9.

United States Code, Title 15, Sec. 1 000... 3

United States Code, Title 15, Sec. 12 -0...000000000.002.... 3

United States Code, Title 28, Sec. 2101 ................ 2

United States Code, Title 28, Sec. 1254 00000000... 2

United States Code, Title 47, Sec. 201 ................ oe

United States Code, Title 47, Sec. 201(b) .......... 6, 8

United States Code, Title 47, Sec. 202 0000000000000... 24

United States Code, Title 47, Sec. 202(a) .......... 6, 8

United States Code, Title 47, Sec. 221(a) ................ 23

United States Constitution, Seventh Amendment

Supreme Court of the United States

October Term, 1978

DOR Sisto sicecets

MILGO ELECTRONIC CORPORATION and INTERNATIONAL

COMMUNICATIONS CORPORATION,

Petitioners,

vs.

WESTERN ELECTRIC COMPANY, INC. and AMERICAN

TELEPHONE & TELEGRAPH COMPANY,

Respondents.

Petition for Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit.

Petitioners, Milgo Electronic Corporation and Inter-

national Communications Corporation (hereinafter

“Milgo”), pray that a Writ of Certiorari issue to review

the opinions and decisions of the United States Court

of Appeals for the Fifth Circuit rendered on March

6, 1978, and May 19, 1978, respectively, and to remand

the case to the Court of Appeals for determination

of Milgo’s appeal. Alternatively, petitioners pray that

a Writ of Certiorari issue to review the Order of

September 18, 1976, of the United States District Court

for the Southern District of Florida, and to determine

whether the District Court improperly withheld juris-

diction over Milgo’s antitrust counterclaims.

aisles

OPINIONS BELOW.

The opinion of May 19, 1978, of the Court of

Appeals, on petition for rehearing is reported at 573

F.2d 255 (5th Cir. 1978), and is set forth in Appendix

A. The opinion of March 6, 1978, of the Court of

Appeals, is reported at 568 F.2d 1203 (Sth Cir. 1978),

and is set forth in Appendix B. The Order of February

3, 1977, of the Court of Appeals denying Western

Electric Company’s (hereinafter “Western”) motion to

dismiss the appeal, presently unreported, appears in

Appendix C. The Order of September 18, 1976, of

the United States District Court for the Southern Dis-

trict of Florida, presently unreported, is set forth in

Appendix D. The Court of Appeals, in its decisions,

dismissed Milgo’s appeal of the District Court’s order

striking certain antitrust counterclaims on the ground

that it lacked jurisdiction over the challenged conduct.

As a result of the decisions of the Court of Appeals,

Milgo will be forced to try equitable issues which

have facts in common with the dismissed antitrust

counterclaims before it will have the right to try the

legal antitrust counterclaims before a jury.

JURISDICTION.

The first Order of the Court of Appeals for the

Fifth Circuit was entered on March 6, 1978, and

the second Order denying a timely filed petition for

a rehearing was entered on May 19, 1978. This Petition

for Writ of Certiorari was filed within 90 days from

the entry of the last Order as required by §2101 of

Title 28 of the United States Code. The jurisdiction

of this Court is invoked under §1254 of Title 28

of the United States Code.

ee eee ae

. a ag We

a wa

QUESTIONS PRESENTED.

1. Whether the Court of Appeals improperly dis-

missed Milgo’s appeal, where such dismissal effectively

forecloses Milgo’s right to a jury trial, and where .

Milgo’s loss of its right to a jury trial is irreparable

and cannot be adequately remedied on appeal after

a trial on the merits.

2. Whether the District Court improperly found

Western to be immune from the antitrust laws, where

there is no repugnancy between the regulatory provi-

sions of the Communications Act and the antitrust

laws, and where the pertinent standards set by the

Communications Act and the antitrust laws are in

harmony. ‘

CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED.

The Constitutional provision at the heart of this

Petition is the Seventh Amendment which states:

“In suits at common law, where the value in

controversy shall exceed twenty dollars, the right

of trial by jury shall be preserved, and no fact

tried by a jury, shall be otherwise reexamined

in any Court of the United States, than according

to the rules of common law.”

The Statues involved include the Sherman Antitrust

Act, 15 U.S.C. §1 et seqg., and the Clayton Act,

15 U.S.C. §12 et seq. (both Acts referred to herein

as the “antitrust laws”); and the Communications Act

of 1934, 47 U.S.C. §201 et seq.

oe We

STATEMENT OF THE CASE.

A. The Pertinent Pleadings.

Western sued Milgo for patent infringement in the

United States District Court for the Southern District

of Florida, case No. 74-1601-Civ-CA. As an affirmative

defense to the patent suit Milgo alleged that Western

and its affiliated companies had violated the Bell con-

sent decree’ and misused the patents in suit by (1)

charging a discriminatory royalty rate, and (2) tying

in a data access arrangement (DAA) with a. license

under the patents in suit to all licensees who desired

to use the patented apparatus (data modems) made

by a source other than Western.

Milgo has alleged in counterclaims against Western

and in a complaint against the third party defendant

American Telephone & Telegraph Company (herein-

after “AT&T”), that AT&T, Western and the Bell

System Operating Companies had conspired to restrain

trade in the telephone customer data modem market

after this market was opened to competition by an

order of the Federal Communications Commission

(hereinafter “FCC” ).”

According to Milgo’s allegations, AT&T and West-

ern, acting in concert with the Operating Companies,

(1) caused the Operating Companies to purchase all

of their requirements of data modems from Western,

and (2) filed a discriminatory DAA-tariff without the

approval of the FCC, and (3) used the tariff to

foreclose the data modem market to Western’s competi-

1United States v. Western Elec. Co., et al., 1956 Trade

Cases 968,246 (D.C. N.J. 1956).

2Carterfone, 13 FCC2d 420 (1968), recon. den. 14 FCC2d

571 (1968).

axseljune

tors. The discriminatory DAA-tariff required that only

those telephone company customers who chose to obtain

data modems from a general trade supplier (such as

Milgo), in lieu of an Operating Company, were saddled

with an expensive and troublesome DAA interface de-

vice for connecting their modems to the AT&T switched

telephone network. The District Court struck these

counterclaims on the ground that the conspiracy was

immune from the antitrust laws.

B. Brief History of the Challenged Conduct.

The patents in suit are directed to terminal equipment

commonly called data modems. Generally, such modems

function as an interface between computers, or other

sources of digital information, and the telephone net-

work. For example, a modem can be arranged to

accept digital data signals (ones and zeros) from a

computer and translate these signals into a signal format

(continuously varying analog signal) which can be

transmitted over a voice-grade telephone line. Another

modem at the other end of the telephone line is

arranged to receive the transmitted signal format and

translate it back into the original digital data signals

for use by another computer or a terminal device

such as a video display unit.

Western is but one component of the massive vertical-

ly integrated Bell System structure which includes

AT&T, Western, Beli Telephone Laboratories (herein-

after “Bell Labs”), and the 23 Operating Companies

which are regionally distributed throughout the United

States. AT&T is the parent and controlling corporation;

Western is the manufacturing arm (and wholly owned

by AT&T); Bell Labs is the research and development

arm (the subject matter of the patents in suit was

cuiillbsiis

developed at Bell Labs); and the 23 Operating Com-

panies provide telephone services and equipment direct-

ly to over 80% of this nation’s telephone customers.

AT&T and the Operating Companies determine the

services, equipment and respective prices to be offered

to customers, and then file tariffs with the appropriate

federal and state regulatory agencies. Regulatory agen-

cies such as the FCC can either approve, disapprove

or permit the tariff to go into effect without approval

and subsequently hold hearings on whether the tariffs

are in compliance with the regulatory act. The FCC

has no power to suspend a tariff other than for a

specific time period which is too short to allow detailed

hearings.’

Milgo is a small company which entered into the

data modem business in the mid-1960’s. At that time

the market available to an outside manufacturer such

as Milgo was small indeed because of a Bell System

tariff which absolutely forbade ‘the connection of any

non-Bell equipment to the AT&T switched telephone

network. That prejudicial practice of absolute non-

interconnection was drastically changed by the FCC

in 1968,*

In 1968, the FCC in Carterfone found that the

challenged sections of the non-interconnection tariff

were, and had been since inception, unreasonably dis-

criminatory and therefore unlawful under §§201(b)

and 202(a) of the Communications Act of 1934, Title

47 U.S.C. After Carterfone, the FCC ruled that cus-

tomers could obtain their equipment such as data

modems for connection to the switched telephone net-

8See, In re AT&T “Foreign Attachment” Tariff Revisions,

15 FCC2d 605 (1968), recon. den. 28 FCC2d 871 (1969).

‘Carterfone, supra.

po.

work from sources other than the Operating Companies.

The FCC requested the common carriers, i.e., AT&T,

to file new tariffs which would carry out this mandate

and placed the burden of proof on the carriers to

establish, prior to the filing of a tariff, that any restric-

tive practices required by the carriers were in fact

necessary and non-discriminatory.°

After the Carterfone decision, the Bell System made

a business decision that, when a customer decided to

obtain equipment such as a data modem from a source

other than the Bell System, a DAA connecting arrange-

ment provided by the telephone companies would be

required to connect that modem to the switched

network. When a customer obtained a modem from

the Bell System, no DAA was to be required. This

business decision was implemented by AT&T’s Tariff

263, Sections 2.7.5, 2.7.6, 2.7.7 and 2.7.8.° Since

as a practical matter, the Bell System only deals in

Western modems, this policy was designed to prevent

or severely hinder customers from obtaining modems

from any source other than Western, thereby main-

taining Western’s monopoly in the telephone customer

modem market.

Without approving the tariff, the FCC allowed it

to go into effect pending FCC review as to its com-

pliance with the law. The FCC did, however, warn

AT&T that:

“As a result of a series of conferences we have

had with representatives of your company and

representatives of other manufacturers and dis-

5First Report and Order (hereinafter “FRO”), 56 FCC2d

593 (1975), paragraph 10.

®°FRO, supra.

a

tributors of customer-provided terminal devices,

one issue has now crystallized to the point that

substantial doubt exists as to whether the revised

tariffs are reasonable, non-discriminatory and in

compliance with the Carterfone decision . . .””

After establishing Docket 19528 and after several

years of hearings, the FCC found that AT&T had

not even attempted to meet its burden of proof that

the tariff was non-discriminatory. As stated in the

FRO: '

“. . . In the seven years which have elapsed

since our Carterfone ruling, the carriers have been

afforded ample opportunity to propose effective

procedures and/or tariff conditions to prevent

harm without unduly restricting a customer’s basic

right to make reasonable use of the facilities and

services furnished by the carrier. This the carriers

have failed to do.. .””

The FCC concluded that Tariff 263 was unreason-

ably restrictive on a customer’s right to make use

of telephone lines [violative of 47 U.S.C. §201(b)],

and that Tariff 263 constituted “. . . an unjust and

unreasonable discrimination both among users . . .

and among suppliers of terminal equipment .. .”

[ violative of 47 U.S.C. §202(a)]. The unlawful carrier-

initiated DAA provisions were stricken and a registra-

tion program was instituted by the FCC." The FCC

registration program applies to carrier-provided equip-

7FCC letter to AT&T, dated December 16, 1971; attached

as Appendix E.

8FRO, supra, paragraph 16.

*FRO, supra, paragraph 16.

10FRO, supra, paragraph 17 et seq.

ae

ment (Western-made DAAs or modems) and non-

carrier provided equipment (Milgo-made DAAs or

modems ) alike.

It is Westera’s and AT&T’s anticompetitive conduct

from 1968 through 1977 in (1) conspiring with the

Bell Operating Companies to ensure that only Western’s

modems were handled by the Operating Companies,

and (2) filing and using the discriminatory DAA tariff

to coerce customers into obtaining their modems from

the Operating Companies which forms the basis of one

of Milgo’s antitrust counterclaims and one of Milgo’s

equitable patent misuse defenses. Obviously, the misuse

defense and the antitrust counterclaim have many factu-

al issues in common, i.e., was a DAA forced on only

those modem users who elected to use modems manu-

factured from a source other than Western as a result

of the AT&T initiated tariff in combination with the

Bell System’s purchasing policy.

C. Proceedings Below.

The District Court on September 18, 1976, by grant-

ing in part Western’s motion for partial summary judg-

ment, struck Milgo’s counterclaims for violation of

Sections 1 and 2 of the Sherman Act directed to

the DAA anticompetitive conduct on the ground that

the FCC had exclusive jurisdiction over such counter-

claims. However, the court retained jurisdiction over

Milgo’s equitable defenses of patent misuse based on

the DAA conduct. With respect to the dismissed DAA

counterclaims, Milgo is entitled to a jury trial and

made a timely request for a jury trial. The fact issues

of Milgo’s equitable DAA misuse defense are triable

to the judge.

a

Milgo appealed the District Court’s decision on the

ground that the order was appealable under the col-

lateral order doctrine or as an order refusing injunctive

relief. In the alternative, Milgo requested the Court

of Appeals issue a Writ of Mandamus to correct the

manifest error of the District Court order in finding

that Western was immune from the antitrust laws.

The Court of Appeals initially determined, by a

first three-judge panel, that it had jurisdiction to hear

the appeal on the dismissal of Milgo’s counterclaims.

After the issues on appeal were briefed and argued,

the Court requested the parties to address the question

of whether Milgo was still seeking an injunction with

regard to the DAA conduct in view of the commence-

ment of the registration program. Milgo responded

that injunctive relief as to the specific DAA requirement

would no longer be appropriate. Milgo, however, point-

ed out that the trial court had broad powers to award

appropriate injunctive relief against a conspiracy after

a trial on the merits. Milgo also indicated that it

would seek appropriate injunctive relief against the

conspiracy in light of the facts proven at the trial.

Subsequently, the Court of Appeals, through a second

panel, dismissed the appeal on the grounds that the

order was not appealable (1) under the collateral

order doctrine because Milgo would suffer no irrep-

arable injury if it had to wait until after trial to

appeal the dismissal of the DAA tie-in antitrust counter-

claims and then return to the District Court to try

such claims, or (2) as an order refusing injunctive

relief because the need for injunctive relief became

moot during the pendency of the appeal. The Court

of Appeals also refused to grant a writ of certiorari.

—

On petition for rehearing, Milgo strongly urged that

the respective dismissals by the District Court and

the Court of Appeals were tantamount to a denial

of Milgo’s right to a jury trial on the dismissed counter-

claims. The Court of Appeals in its opinion denying

the petition for rehearing indicated that there was a

possibility that Milgo might get a jury trial.

Milgo urges that the possibility of preserving the

right to a jury trial is not contemplated by the Consti-

tution nor is it contemplated by the decisions of this

Court.

anbiion

REASONS FOR GRANTING THE WRIT.

I.

The Fifth Circuit’s Dismissal of Milgo’s Appeal Mani-

fests a Clear Disregard for Milgo’s Right to a Jury

Trial.

A. Where Legal Claims and Equitable Claims in the Same

Action Have Common Issues of Fact, the Right to a Jury

Trial on the Legal Issues Must Be Jealously Guarzed by

the Courts.

The present posture of Milgo’s right to a jury trial

on the dismissed counterclaims is as follows. The misuse

defense related to the DAA-tariff will be tried to the

trial court, and the court will make the findings of

fact with respect to the equitable misuse defense.”

After the complete trial, Milgo can then appeal the

dismissal of its antitrust counterclaims.

However, such an appeal covld not adequately

remedy Milgo’s loss of a trial by jury if the Court

of Appeals determines that the District Court had juris-

diction over Milgo’s DAA-tariff related antitrust coun-

terclaims. At that time, issues of fact common to the

DAA-tariff related antitrust counterclaims will already

have been tried by the District Court. Those determina-

tions will be conclusively binding on any subsequent

trial of Milgo’s DAA-tariff related antitrust counter-

claims through the doctrines of collateral estoppel

and res judicata.

11As discussed below, Milgo has no right to a jury trial

on the misuse issue. The only way in which Milgo could

get a jury trial on the misuse issue is through the remote

possibility that Western and AT&T would consent to a jury

trial on the misuse issue and that the trial court would order

a jury trial based on such consent.

—

Therefore, the Orders of the District Court and

the Court of Appeals effectively require that Milgo’s

DAA equitable claims are to be tried prior to Milgo’s

DAA legal claims, despite the fact that there are factual

issues common to both claims. The curtailment of

a right to jury trial, by a trial sequence which required

that equitable claims be tried first, is the very situation

which this Court has found to be impermissible.

This Court’s decision in Beacon Theatres, Inc. v.

Westover, 359 U.S. 500 (1959), is clearly on point

and provides the basis upon which this case can be

decided. In Beacon Theatres, this Court relied upon

the following language from Dimick v. Schiedt, 293

U.S. 474 (1935), for granting certiorari:

“Maintenance of the jury as a fact-finding body

is of such importance and occupies so firm a

place in our history and jurisprudence that any

seeming curtailment of the right to a jury trial

should be scrutinized with the utmost care.” 293

U.S. 474, at 486. (Emphasis added)

Such mandated close scrutiny was clearly not exercised

by the Court of Appeals.

The Beacon Theatres case involved an order by

the District Court which called for a trial wherein

equitable claims were to be tried prior to legal claims

although there were common issues of fact. This was

found to be impermissible by this Court. Where legal

claims and equitable claims in the same action involve

common issues of fact, the paramount importance of

first trying legal claims before a jury prior to the

determination of equitable claims was set forth by

this Court:

eesililisea

“.. . only under the most imperative circum-

stances, circumstances which in view of the flexible

procedures of the Federal Rules we cannot now

anticipate, can the right to a jury trial of legal

issues be lost through prior determination of equi-

table claims.” Beacon Theatres, Inc. v. Westover,

supra, at 510-511 (Footnote 19 omitted).

In Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962),

this Court reaffirmed and reemphasized the importance

of preserving a litigant’s right to a jury trial:

“That holding [in Beacon Theatres], of course,

applies whether the trial judge chooses to char-

acterize the legal issues presented as ‘incidental’

to equitable issues or not. Consequently, in a

case such as this where there cannot even be a

contention of such ‘imperative circumstances’, Bea-

con Theatres requires that any legal issues for

which a trial by jury is timely and properly de-

manded be submitted to a jury.” 369 U.S. 469,

at 473 (Footnotes 7 and 8 omitted).

Similarly, there are no “imperative circumstances” in

this case which justify denying Milgo’s right to a jury

trial on its DAA-tariff related antitrust counterclaims.

It is imperative that Milgo’s right to a jury trial be

protected.

In both the Beacon Theatres and Dairy Queen cases,

this Court held that the Court of Appeals erred in

refusing to grant a writ of mandamus to -compel a

jury trial which had been improperly denied by the

District Court. As stated by this Court in Beacon

Theatres:

“Respondent claims mandamus is not available

under the All Writs Act, 28 U.S.C. §1651. What-

—15—

ever differences of opinion there may be in other

types of cases, we think the right to grant man-

damus to require jury trial where it has been

improperly denied is settled.” 359 U.S. 500, 511

(Footnote 20 omitted).

Similarly, this Court in Dairy Queen stated that manda-

mus was appropriate to correct the error of a district

court which refused a demand for a jury trial:

“The Court of Appeals should have corrected the

error of the district judge by granting the petition

for mandamus.” 369 U.S. 469, 480.

The case at bar is different from the Beacon Theatres

and Dairy Queen cases only because of the contingency

of a reversal of the District Court’s immunity ruling.

This difference does not change the mandate set out

in these cases, that Milgo should not be deprived

of a jury trial by a delay of an appellate review

of the immunity ruling until after the other issues

are tried.

B. The Court of Appeals Opinion on Milgo’s Petition for

Rehearing Begs the Question of Whether Milgo Has Been

Foreclosed From a Jury Trial.

In its opinion of May 19, 1978, the Court of Appeals

mischaracterizes Milgo’s contention of loss of a jury

trial as “conjectural”. Such characterization is unfound-

ed and, indeed, unsubstantiated by the Circuit Court’s

analysis of Milgo’s predicament. Milgo’s threatened loss

is more than “conjectural”, it is very imminent.

If anything in this matter might be characterized

as “conjectural”, it is the analysis by the Court of

Appeals of how Milgo’s right to a jury trial might

be preserved. For example, the Court of Appeals stated:

pa eee

“It may be that in the pending proceeding the

district court will order a jury trial as a matter

of right on such issues as may embrace the ‘DAA

facts’ or it may order a jury trial with the consent

of both parties.” (Emphasis added).

Thus, the Court of Appeals alludes to the possibility

that the DAA-tariff related facts are triable by a jury

as a matter of right, and the possibility that Western

would consent to a common law jury trial of the

DAA-tariff related facts as provided for by Rule 39(c)

of the Federal Rules of Civil Procedure.

In a similar vein, the Court of Appeals indulges

in further speculation as to how Milgo’s equitable de-

fense might be triable as a matter of right since it

is asserted as a defense to legal claims. In footnote

1, the Court stated:

“We note that Western Electric has prayed for

an accounting for damages. Such a prayer ordi-

narily gives rise to a right to trial by jury, Dairy

Queen, Inc. v. Wood, 369 U.S. 469, 477-80, 82

S.Ct. 894, 899-901, 8 L.Ed.2d 44, 51-52 (1962),

which perhaps extends to the issue of patent mis-

use.” (Emphasis added).

However, Milgo’s threatened loss of a Constitutional

right is not as mitigated as the Court of Appeals

would have us believe. It should be pointed out that

the Court of Appeals failed to cite any authority for

its contention that Milgo might be entitled to a jury

trial on the misuse issue as a matter of right. Moreover,

the Court of Appeals failed to cite any authority for

its apparent proposition that the trial judge had discre-

tion to order a jury trial on Milgo’s misuse issue

-—17—

without the consent of Western and AT&T. It should

also be pointed out that the Dairy Queen case makes

no suggestion of extending the right to a jury trial

to the equitable misuse defense which is asserted as

a defense to a legal claim. Dairy Queen states that

a legal claim cannot be taken from the province of

a jury by assertions of an equitable defense to such

a legal claim. Dairy Queen does not in any manner

suggest that an equitable defense to a legal claim

must necessarily be tried by a jury.

An equitable defense to a legal claim does not make

the equitabie defense triable by right to a jury, and

the defense of patent misuse is equitable in nature.

It has been well established by this Court that patent

misuse is an application of the equitable maxim of

“unclean hands.” In Morton Salt Company v. Suppiger,

314 U.S. 488 (1942), this Court stated with respect

to a patent grant:

“, . . the use of it [the patent] to suppress

competition in the sale of an unpatented article

may deprive the patentee of the aid of a court

of equity to restrain an alleged infringement by

one who is a competitor.” 314 U.S. 488, 491.

This Court further stated:

“Equity may rightly withhold its assistance from

such a use of the patent by declining to entertain

a suit for infringement, and should do so at least

until it is made to appear that the improper prac-

tice has been abandoned and that the consequences

of the misuse of the patent have been dissipated.”

314 U.S. 488, 493.

Thus, it should be clear that misuse is a defense to

the equitable aspects of a patentee’s claims for relief.

peer We

Further, it is well established that the doctrine of “un-

clean hands” is equitable in nature; and indeed, its

application is within the discretion of the trial judge.

In Inland Steel Products Co. v. MPH Manufacturing

Corp., 25 F.R.D. 238 (1959), the court, in holding

that issues of patent validity and infringement were

triable to a jury and that issues of patent misuse

were triable only to the court, stated:

“The defense of patent misuse has consistently

been treated as an equitable defense; it is a branch

of the doctrine of ‘unclean hands.’ See, e.g., Mor-

ton Salt Co. v. G.S. Suppiger Co., 1942, 314

U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363; Gray

Tool Co. v. Humble Oil & Refining Co., 5 Cir.,

1951; 186 F.2d 365; Mercoid Corporation v. Min-

neapolis-Honeywell Regulator Co., 7 Cir., 1942,

133 F.2d 811. Therefore, the misuse claims are

not triable of right by jury.” 25 F.R.D. 238,

247.

Moreover, if as suggested by the Court of Appeals

that an equitable defense to a legal claim extends

the right to a jury trial to the equitable defense,

then the decisions of this Court in Beacon Theatres

and Dairy Queen would have been unnecessary. The

injury remedied in those cases was the denial of a

right to a jury trial on legal issues which had facts

in common with equitable claims which were to be

tried first. If the equitable claims, by virtue of being

related to legal claims, had been triable by right to

a jury, then the order of trial would have been immate-

rial. However, since no such right to a jury determina-

tion attaches to equitable claims which are related

to legal claims, this Court held that the order in which

outliiien

equitable and legal issues are tried is of critical impor-

tance.

The suggestion by the Court of Appeals that the

trial judge might have the discretion to order a jury

trial without the consent of Western and AT&T is sim-

ilarly untenable. Indeed, such a suggestion flies in the

face of the words of Rule 39(c) of the Federal Rules

of Civil Procedure which states in pertinent part:

“In all actions not triable of right by a jury,

the court . . . with the consent of both parties,

may order a trial with a jury whose verdict has

the same effect as if trial by jury had been a

matter of right.” (Emphasis added).

Thus, since an equitable matter is clearly not triable

by right to a jury, it is clear that any discretion the

trial judge in this case might have with respect to

ordering a jury trial on the misuse issue can be exercised

only after both Western and AT&T consent to a jury

trial on the misuse issue.

However, the suggestion by the Court of Appeals

that Western might consent to a jury trial comes close

to straw-grasping. It certainly would be unreasonable, if

not reckless, to rely upon an opponent in a litigation

to protect one’s Constitutional rights. It certainly would

not be in Western’s best interests to consent to some-

thing which might be favorable to Milgo.

There are further problems with the suggestion by

the Court of Appeals that Western might consent to

a jury trial on the DAA misuse defense. Since facts

involving the DAA misuse defense are common to

the DAA antitrust counterclaims, any jury findings

on such facts would be binding on AT&T in a subse-

quent trial on the antitrust claims, particularly since

saan

AT&T is a party to this litigation. Therefore, AT&T’s

consent to a jury trial on the DAA misuse defense

would be required in addition to Western’s consent.

Thus, the threat to Milgo’s Constitutional right is

not as “conjectural” as the Court of Appeals would

have us believe. Distilled to its essence, the opinion

of the Court of Appeals indicates that Milgo’s right

to a jury trial is not irreparably threatened because

there is an extremely remote possibility that both West-

ern and AT&T will consent to a jury trial on the

DAA facts, even if such consent would not be in

the best interests of Western and AT&T.”

Such remote possibilities cannot be considered as

sufficient safeguards to Constitutional rights. This Court

in Beacon Theatres v. Westover, supra, did not even

consider the possibility that the parties could consent

to a jury trial on the equitable issues, even though

such possibility may have existed, and even though

a portion of the case before the District Court was

to be tried to a jury. Similarly, this Court in Dairy

Queen v. Wood, supra, did not consider the possibility

of consent by the parties to a jury trial on equitable

issues.

Although not discussed by the Court of Appeals,

Milgo urges that an advisory jury impanelled to assist

the trial judge in deciding equitable issues would not

12Western and AT&T are not likely to consent to a jury

trial, in which event Milgo would probably have no means

of appealing the loss of a jury trial to the Court of Appeals.

Even if a jury trial on the misuse issue could be had, the

procedural complexity of first trying the misuse issue, appealing

the dismissal of Milgo’s antitrust counterclaims, and subsequently

trying the antitrust counterclaims in view of the prior findings

on the misuse issue would be burdensome and wasteful for

the litigants and the courts.

a

preserve Milgo’s right to a jury trial. Rule 39(c)

provides the basis for impanelling an advisory jury:

“In all actions not triable of right by a jury,

the court upon motion or of its own initiative

may try any issue with an advisory jury .. .”

The rule itself makes clear that such an advisory jury

does not fulfill the requirements of a traditional jury

trial.”

As discussed above, consent of all parties to a jury

trial is necessary in actions where there is no right

to a jury trial. Only where such consent is present

can the jury verdict have “the same effect as if trial

by jury had been a matter of right.” Rule 39(c),

Federal Rules of Civil Procedure.

Thus, it is clear that impanelling an advisory jury

for issues in an equitable matter is not the same as

a jury trial on such equitable matter. If an advisory

jury fulfills the right to a jury trial, and if a trial

judge has discretion to order a jury trial on an equitable

matter, then Rule 39(c) would be meaningless and

superfluous.

C. Milgo Has Been Irreparably Harmed by the District Court’s

Dismissal of Milgo’s DAA Antitrust Counterclaims and the

Dismissal of Milgo’s Appeal by the Court of Appeals.

Milgo therefore urges that, in view of the foregoing

analysis of the present posture of this case, it has

18This is particularly true in view of the trial judge’s discre-

tion in submitting issues to an advisory jury. Sheila’s Shine

Products, Inc. v. Sheila Shine, Inc., 486 F.2d 114 (Sth Cir.

1973). Also, even with an advisory jury, the trial court has

the ultimate responsibility of being the trier of fact in equitable

matters, Frostie Company v. Dr. Pepper Company, 361 F.2d

124 (Sth Cir. 1966), and the trial court’s findings will be

reviewed on appeal just as though no jury had been present.

Reed v. Riddle Airlines, 266 F.2d 314 (Sth Cir. 1959).

a, an

been irreparably harmed by the decisions below. Its

Constitutional right to a jury trial has been effectively

foreclosed, and appellate review after trial could not

adequately remedy Milgo’s loss of its Constitutional

right.

The immediacy of Milgo’s loss of a jury trial, coupled

with the irreparable nature of such loss, calls for

extraordinary relief which only the Court can provide.

No other recourse is available to Milgo to protect its

right to a jury trial.

II.

The District Court Erred in Finding That Western Is

Immune From the Antitrust Laws.

In granting the Motion for partial summary judgment

dismissing Milgo’s antitrust counterclaims on the ground

that it did not have jurisdiction, the District Court

failed to abide by this Court’s mandate that antitrust

immunity is not to be lightly implied, and that implicit

repeal of the antitrust laws by a regulatory statute

is strongly disfavored. United States v. Philadelphia

National Bank, 374 U.S. 321 (1963). The reason

for only grudgingly granting antitrust immunity was

stated in that case:

“This canon of construction, which reflects the

felt indispensable role of antitrust policy in the

maintenance of a free economy, is controlling

here.” 374 U.S. 321, 348.

Similarly, this Court in Carnation Co. v. Pacific West-.

bound Conference, 383 U.S. 213 (1966), stated the

national importance of the federal antitrust laws as

follows:

“We have long recognized that the antitrust laws

represent a fundamental national economic policy

_—

and have therefore concluded that we cannot

lightly assume that enactment of a special regula-

tory scheme for particular aspects of an industry

was intended to render the more general provisions

of the antitrust laws wholly inapplicable to that

industry.” 383 U.S. 213, 218.

The pertinent regulatory act here involved is the

Communications Act of 1934, 47 U.S.C. §201 et seq.

Any immunity for Western’s DAA related activities

must be implied, for Congress provided only a limited

specific antitrust exemption for telephone companies

. with respect to certain consolidations which have been

certified by the FCC. 47 U.S.C. §221(a). Such express

provision for limited immunity gives credence to the

inference that Congress did not intend any other activ-

ities to be immune, for if Congress did so intend,

it would have set forth its intent along with the express

immunity.

In the absence of express Congressional language

exempting a regulatory scheme from the antitrust laws,

implied repeal of the antitrust laws will be found »nly

where there is “plain repugnancy between the antitrust

and regulatory provisions.” United States v. Philadel-

phia National Bank, 374 U.S. 321, 351; United States

v. National Associates of Security Dealers, Inc., 422

U.S. 659, 682 (1975): Gordon v. New York Stock

Exchange, 422 U.S. 659 (1975). Moreover, the ap-

plicability of the antitrust laws will be repealed only

to the minimum extent necessary to make the regulatory

scheme work. Cantor v. Detroit Edison Co., 428 U.S.

579 (1976).

Here, there is no repugnancy but, rather, harmony

between the regulating provisions of the Communica-

tions Act and the antitrust laws. Applying the antitrust

we

laws to the challenged conduct would not subject West-

ern and its co-conspirators to conflicting standards. The

pertinent standard set out in the Communications Act

forbids carriers from filing tariffs which provide for

discriminatory or preferential treatment. 47 U.S.C.

§202. The DAA-tariff 263 on its face provided for

treatment which was preferential for the Operating

Companies, and discriminatory with respect to the cus-

tomers of the Operating Companies and to general

trade suppliers (such as Milgo). The same standard

of non-discrimination as mandated by the antitrust laws

and the Communications Act, is applicable to the DAA

conduct of Western and its co-conspirators. Indeed,

the FCC found the tariff to be unlawful under the

Communications Act for the same reason that Milgo

alleges it to be unlawful under the Sherman Act; i.e.,

the tariff is unreasonably discriminatory in favor of

one supplier to the detriment of free competition in

the telephone company customer equipment market.

The District Court, in striking the DAA counter-

claims, failed to even make specific findings of repug-

nancy between the regulatory act and the antitrust

laws, or of any grounds from which repugnancy could be

reasonably concluded. Clearly, the importance of the

antitrust laws dictates that some basis must be given

for a finding of immunity. This is particularly true when

consideration is given to the fact that neither Western

nor the concerted action between the affiliated Bell

System companies to maintain Western as the sole

supplier of modems to the Operating Companies is

subject to the regulatory scheme.

=i Gann

Further support for lack of immunity can be found

with the FCC itself. In its amicus brief filed in United

States v. American Telephone & Telegraph Company,

CA-74-1698, District Court for the District of Colum-

bia, the FCC states:

“Carriers subject to FCC jurisdiction are re-

quired to file tariffs setting forth the rates, prac-

tices and regulations that govern their service offer-

ings. 47 U.S.C. §203. These must be just and

reasonable 47 U.S.C. §201, and they must not

contain undue discriminations or preferences, 47

U.S.C. §202.

a

But rate filings generally proceed from the car-

rier’s independent business judgment and the Com-

munications Act does not require Commission ap-

proval either before or after the rates become

effective without Commission scrutiny or approval.

These carrier-initiated tariffs which have not

been approved by the Commission do not in our

opinion immunize the carri-r against claims that

the tariffs are anticompetitive. The courts have

consistently exercised jurisdiction in antitrust cases

attacking carrier practices and rates that purported-

ly were justified by tariffs on file with but not

approved by the Commission. . .” (Pages 19 &

20)"

A further compelling reason for denying antitrust

immunity to the DAA-tariff related activities is the

finding of unlawfulness by the FCC of the DAA-

4The title page and pages 19 and 20 of the Amicus Brief

are attached as Appendix F.

is

tariff. In Carnation Company vy. Pacific Westbound

Conference, supra, the statute involved there, the Ship-

ping Act, included an express antitrust exception for

rate-making activities which were lawful under the Ship-

ping Act. This Court stated that the exemption “implies

that unlawful rate-making activities are not exempt.”

383 U.S. 213, 217. Similarly, in Ricci v. Chicago

Mercantile Exchange, 409 U.S. 289, 306-307 (1973),

this Court found that there need be no determination

of antitrust immunity where particular acts have been

found to be unlawful under the statute which is alleged

to provide antitrust immunity.

It therefore follows that assertions of antitrust im-

munity under the Communications Act are meaningless

where the very acts alleged to be immune have been

found by the FCC to be in violation of the Communi-

cations Act.

This Court recently refused to grant certiorari to

review a Ninth Circuit Court of Appeals holding directly

in point to that requested by Milgo herein, namely

that a common carrier is not immune from the antitrust

laws because the challenged conduct was also subjected

to regulatory proceedings. Greyhound Corp. v. Mt.

Hood Stages, Inc., .... U.S. ..... 57 L.Ed.2d 239, at

246, footnote 12 (1978).

In denying the carrier’s claim of antitrust immunity,

the Ninth Circuit Court of Appeals held:

“Conduct is not immunized merely because it falls

within the jurisdiction of the regulatory agency,

as it did in this case. Immunity is not implied

—= mn

merely because the applicable regulatory standard

requires the agency to give weight to antitrust

policy, as it did in this instance. . .

* * *

“Only where there is a ‘plain repugnancy between

the antitrust and regulatory provisions’ will repeal

be implied. Gordon v. New York Stock Exchange,

Inc., 422 U.S. 659, 682 (1975). . .” Mt. Hood

Stages, Inc. v. Greyhound Corp., 555 F.2d 687,

691-692 (9th Cir., 1977) (Footnotes omitted).

The trial court’s order striking the antitrust counter-

claims is contrary to the decisions of this court. The

order should be reversed.

CONCLUSION.

Milgo’s loss of its right to a jury trial is imminent, and

the loss cannot be adequately remedied by appeal after

a trial on the merits. Review by certiorari is the only

effective means of assuring that Milgo will not lose

its right to a jury trial.

It is therefore urged that this Court review and

remand this case to the Court of Appeals with an

order that the Court of Appeals decide the merits

of Milgo’s appeal which was directed to the issue

of whether Western was immune from the antitrust

laws.

Alternatively, petitioners urge that this Court should

decide whether the District Court improperly found

that Western is immune from the antitrust laws, since

immediate determination of this question is necessary

to preserve Milgo’s right to a jury trial, and since

=

the District Court’s determination of exclusive FCC

jurisdiction is contrary to the decisions of this Court

and critically erodes the national economic policy de-

fined by the antitrust laws.

Respectfully submitted,

MILGO ELECTRONIC CORPORATION and

INTERNATIONAL COMMUNICATIONS CORP.,

By HAROLD L. JACKSON,

HAROLD L. JACKSON,

STANLEY R. JONES,

JACKSON & JONES LAW CORPORATION,

Attorneys for Petitioners.

Co-Counsel:

WILLIAM E. SADOWSKI,

HELLIWELL, MELROSE & DEWOLF.

APPENDIX A.

WESTERN ELECTRIC COMPANY, INC., Plain-

tiff-Appellee, v. MILGO ELECTRONIC CORPORA-

TION and International Communications Corporation,

Defendants-Third-Party Plaintiffs-Appellants, y AMER-

ICAN TELEPHONE AND TELEGRAPH COM-

PANY, Third-Party Defendant. No. 76-4079. United

States Court of Appeals, Fifth Circuit. May 19, 1978.

ON PETITION FOR REHEARING AND PETITION

FOR REHEARING EN BANC

Before THORNBERRY, GODBOLD and FAY, Cir-

cuit Judges.

PER CURIAM:

Milgo urges that it is entitled to review under

the collateral order doctrine because it is irreparably

injured by possible loss of its constitutional right to

jury trial. The argument runs this way. It demanded

a jury trial on its counterclaims. However, those of

its counterclaims which were based on the DAA require-

ment were dismissed by the summary judgment from

which it is attempting to appeal. The facts involved

in the DAA counterclaims are also involved in Milgo’s

patent misuse defense, and the trial of the proceeding

below will be without a jury (at least as to those

facts).’ If eventually it should be determined that

1Milgo has not told us whether it has requested a jury trial

on the issues to which patent misuse is a defense or whether the

district court has issued an order regarding jury trial; all it

has told us is that it has demanded a jury on its counterclaims.

(This footnote is continued on next page)

pan Tee

the court erred in dismissing the DAA counterclaims

Milgo will then be permitted to go to trial on these

counterclaims, but, Milgo asserts, under the doctrines

of res judicata or collateral estoppel the factual issues

determined without a jury in the proceeding now pend-

ing will be determinative of the same factual issucs

in the later trial. Hence, Milgo may be denied a jury

trial as to these facts.

At this point Milgo’s contention is conjectural. It

may be that in the pending proceeding the district

court will order a jury trial as a matter of right

on such issues as may embrace the “DAA facts,”

or it may order a jury trial with the consent of both

parties.

If in the present proceeding below Milgo does not

receive a jury trial on the “DAA facts,” and ultimately

it is allowed to go to trial on its DAA counterclaims,

Milgo will be able to require a new trial before a

jury unless the denial was harmless error. See U. S. v.

Williams, 441 F.2d 637 (CAS, 1971); Wright & Miller,

Federal Practice and Procedure § 2322. Milgo thus

will not be irreparably injured.

The Petition for Rehearing is DENIED and no mem-

ber of this panel nor Judge in regular active service

We note that Western Electric has prayed for an accounting for

damages. Such a prayer ordinarily gives rise to a right to trial

by jury. Dairy Queen, Inc. v. Wood, 369 U.S. 469, 477-80, 82

S.Ct. 894, 899-901, 8 L.Ed.2d 44, 51-52 (1962), which per-

haps extends to the issue of patent misuse.

a,

on the Court having requested that the Court be polled

on rehearing en banc, (Rule 35 Federal Rules of

Appellate Procedure; Local Fifth Circuit Rule 12)

the Petition for Rehearing En Banc is DENIED.

aii:

APPENDIX B.

WESTERN ELECTRIC COMPANY, INC., Plain-

tiff-Appellee, v. MILGO ELECTRONIC CORPORA-

TION and International Communications Corporation,

Defendants, Third-Party Plaintiffs-Appellants, v.

AMERICAN TELEPHONE AND TELEGRAPH

COMPANY, Third-Party Defendant. No. 76-4079.

United States Court of Appeals, Fifth Circuit. March

6, 1978.

Before THORNBERRY, GODBOLD and FAY, Cir-

cuit Judges.

GODBOLD, Circuit Judge:

Defendant Milgo appeals from the district court’s

order of summary judgment against it as to some

of its counterclaims. We conclude that we iack juris-

diction to hear an appeal from this order.

I. Facts

Both Milgo and Western Electric’ manufacture ter-

minal equipment known as data modems. “Modem”

is an acronym for “modulation and demodulation.”

Modems, when connected to telephone lines, allow com-

puters to send and receive information to and from

each other. Western sued Milgo for infringement of

Western’s modem patents. Milgo counterclaimed for

damages and injunctive relief, alleging violations of

Western Electric is the manufacturing arm of American

Telephone & Telegraph Company (the Bell System).

“Foreign Attachment” Tariff Revisions in A.T.&T. Tariff

FCC Nos. 263, 260, and 259, 15 F.C.C.2d 605, 607 (1968).

er om

the antitrust laws and acts of unfair competition.’ Each

claim alleged two separate but, to Milgo’s view, interre-

lated discriminatory practices employed by the Bell

System. First, Bell has required customers using modems:

not of Western’s design to install and lease a connecting

device known as a Data Access Arrangement (DAA).

Customers who use Western-designed modems are ex-

cused from this requirement. Second, Bell has required

that customers who use modems of Western’s design

but manufactured by another source through a patent

license pay a 2% royalty.

The district court’s summary judgment dismissed

those parts of the counterclaims based upon the DAA

requirement. Its decision stemmed from the FCC’s re-

cent establishment of a registration program, 47 C.F.R.

pt. 68, whereby terminal equipment and interconnection

devices could be registered and approved by the FCC,

and if a modem not of Western’s design were registered,

the use of an interconnection device would not be

required.‘ The district court based its order on the

SMilgo also alleged a violation by Western of the terms

of a 1949 antitrust consent decree requiring it to grant patent

licenses on its equipment. U. S. v. Western Elec. Co., 1956

Trade Cases 968,246 (D.N.J. 1956). The district court dismissed

this part of the unfair competition counterclaim on the theory

that consent decree violations can be used only as defenses

and not as causes of action. Milgo has not appealed from

the summary judgment against this counterclaim.

4See First Report and Order in Docket No. 19528, 56

F.C.C.2d 598 (1975), aff'd, North Carolina Util. Comm'n

v. FCC (North Carolina I1), 522 F.2d 1036 (CA4, 1977),

cert. denied, ........ isha , SS SCX. 222, 54 LEd2d

154 (1977). Although modems were not specifically included

(This footnote is continued on next page)

LLL

ntti

doctrine of implied repeal, see, e.g., Gordon v. New

York Stock Exchange, 422 U.S. 659, 95 S.Ct. 2598,

45 L.Ed.2d 463 (1973), U. S. v. National Association

of Securities Dealers, Inc., 422 U.S. 694, 95 S.Ct.

2427, 45 L.Ed.2d 486 (1975), finding in particular

that the antitrust laws were impliedly repealed in this

area because of pervasive regulation by the FCC.

II. Appealability

By a one-sentence order dated February 3, 1977,

a panel of this court denied Western’s motion to dismiss

Milgo’s appeal.° The panel in effect determined that

an appeal could be maintained, but we are not bound

by this determination. EEOC v. International Long-

shoremen’s Association, 511 F.2d 273, 276 n. 5 (CAS),

cert. denied, 423 U.S. 994, 96 S.Ct. 421, 46 L.Ed.2d

368 (1975).°

within the scope of the registration program, the FCC later

established that they were included. Memorandum Opinion

and Order in Docket No. 19528, 57 F.C.C.2d 1216, 1219

(1976).

5Motions to dismiss and various other prehearing matters

are assigned to screening panels of this court, each composed

of three judges designated for one-year periods. A case in

which a motion to dismiss is denied will later fall to a

screening panel—not necessarily the same one—for consideration

of whether it will be assigned to the summary calendar or

the oral argument calendar. If not placed on the summary

calendar the case will be assigned to an oral argument panel

for hearing and decision. The present panel is the oral argument

panel.

SAction on a motion to dismiss before a case is assigned

to an oral argument panel disposes of those cases in which

appellate jurisdiction is clearly lacking so that the court and

the advocates do not expend their efforts in a consideration

of the merits that later would prove to be fruitless. Matters

of appellate jurisdiction are also subject to scrutiny by the

==

Milgo has raised two possible grounds for appeal-

ability: whether the partial summary judgment is a

final decision under the collateral order doctrine, hence

appealable under 28 U.S.C. § 1291, and whether it

is an interlocutory order refusing an injunction, hence

appealable under 28 U.S.C. § 1292(a)(1). We con-

clude that the district court’s order is not a final

decision. We need not decide whether the district court’s

order is an interlocutory order refusing an injunction

because the prayer for injunctive relief, which the order

refused, is now moot.

(A.) Collateral order doctrine

Section 1291 confers on the courts of appeals “juris-

diction of appeals from all final decisions of the district

oral argument panel to whom the case falls. In EEOC v.

International Longshoremen’s Association, we said:

“Indeed, it might appear that once a panel of this

Court had made a legal determination that jurisdiction

exists, no subsequent panel on its own could make a

contrary determination. Rather the original panel’s action

would appear, at the least, the law of the case, and

could not be overruled except by this Court sitting en

banc. Nonetheless, this Court has held that the panel

deciding the case must make a de novo determination

of jurisdiction. We have said: ‘Although motions to dismiss

have been denied under our administrative procedures,

the Court of Appeals is not precluded from a further

inquiry as to its jurisdiction and is not relieved of the

duty to dismiss the appeal if it appears there is no

jurisdiction.’ Austracan, Inc. v. M/V Lemoncore, § Cir.

1974, 500 F.2d 237 at 239; see also Cook v. Eizenman,

5 Cir. 1963, 312 F.2d 134 at 136. Thus we must make

the independent inquiry above.”

511 F.2d 273, 276 n. 5 (CAS), cert. denied, 423 US.

994, 96 S.Ct. 421, 46 L.Ed.2d 368 (1975). In other circuits,

see. Melendez v. Singer-Friden Corp., 529 F.2d 321 (CAI1O,

1976); Cromaglass Corp. v. Ferm, 500 F.2d 601, 604 n.

1 (CA3, 1974) (en banc).

a

court.” 28 U.S.C. § 1291. Since the partial summary

judgment against Milgo’s counterclaims does not end

the litigation, it can be a “final decision” only by

virtue of the collateral order doctrine. See Cohen v.

Beneficial Industrial Loan Corp., 337 U.S. 541, 69

S.Ct. 1221, 93 L.Ed. 1528 (1949); Abney v. U.S.,

431 U.S. 651, 97 S.Ct. 2034, 52 L.Ed.2d 651 (1977);

Litton Systems, Inc. v. Southwestern Bell Telephone

Co., 539 F.2d 418 (CA 5, 1976); In re Nissan Motor

Corp. Antitrust Litigation, 552 F.2d 1088 (CAS,

1977). The statutory basis for this doctrine is that

a trial court’s disposition that is not a final judgment

may nevertheless be a final “decision” if it adjudicates

an “important right” collateral to the cause of action

asserted that would otherwise be “lost, probably irrepa-

rably” if review had to await a final judgment. Abney,

supra, 431 U.S. 651, 97 S.Ct. 2034, 52 L.Ed.2d at

659, quoting Cohen, supra, 337 U.S. at 546, 69 S.Ct.

at 1225, 93 L.Ed. at 1536. We have granted review

under the collateral order doctrine when we have found

either that the order concerned an issue wholly sepa-

rable from the remainder of the case or that irreparable

injury will result. See 2/ Turtle Creek Square, Ltd.

v. New York State Teachers’ Retirement System, 404

F.2d 31, 33 (CAS, 1968). In this case we find that

the summary judgment neither concerns a wholly sepa-

rable issue nor threatens irreparable injury.

To preserve even attenuated notions of finality, the

collateral order doctrine requires a final disposition

= eR

of the question by the district court, not a disposition

that is “tentative, informal or incomplete.” Cohen,

supra, 337 U.S. at 546, 69 S.Ct. at 1225, 93 L.Ed. at

1536; see Abney, supra, 431 U.S. 651, 97 S.Ct. 2034,

52 L.Ed.2d at 659; In re Nissan Motor Corp. Antitrust

Litigation, 552 F.2d 1088, 1095 (CAS, 1977); 15

C. Wright, A. Miller, & E. Cooper, Federai Practice

& Procedure § 3911, at 470, 478-79 (1976). The

order appealed from here is not tentative. In view

of the court’s outright dismissal of the claims, any

argument of tentativeness loses its force.’

The dismissal of the counterclaim on an implied

repeal ground, although final, hardly constitutes an

order “completely collateral to the cause of action

asserted.” Abney, supra, 431 U.S. at 658, 97 S.Ct.

at 2040, 52 L.Ed.2d at 659. The district court’s decision

that certain counterclaims must fail by virtue of FCC

regulation in a particular area is a decision sustaining

TThe district court’s order reads in pertinent part:

“The Court now has read the {FCC’s] First Report

and Order in Docket # 19528 (released November 7,

1975). It appears that the Commission therein established

a registration program for customer-provided equipment.

Allegations of registration in accordance with that Order

are absent from Milgo’s filings. Thus, at this time, it

appears to the Court that those paragraphs of Milgo’s

counterclaim which allege unfair competition and antitrust

claims based upon the tariff are not properly before

this Court.”

App. at 161 (emphasis added). The court’s language “at

this time” indicates not tentativeness, but rather that the court

had changed its view after having been apprised of the exact

nature of the registration program. Of course, under Federal

Rule of Civil Procedure 54(b) the order “is subject to revision

at any time before the entry of judgment adjudicating all of

the claims and the rights and liabilities of all the parties.”

—i0—

a substantive defense to the cause of action asserted;

it is a “step toward the final disposition of the merits

of the case.” Id., quoting Cohen, supra, 337 US.

at 546, 69 S.Ct. at 1225, 93 L.Ed. at 1536. Indeed,

if the DAA counterclaims were all this case were

about, the order would represent the end of the case.

Litigation continues only because a claim (patent in-

fringement) and other counterclaims (discriminatory

royalty) remain to be adjudicated.®

Nor can Milgo point to any right that would be

“lost, probably irreparably,” from waiting to appeal

the DAA matters after decisions on its other counter-

claims and on Western’s infringement claim. The only

injury Milgo may undergo here is that it may have

to return to the district court to try those claims based

on the DAA device. This is not enough. In sum,

the order dismissing certain of Milgo’s counterclaims

is neither collateral nor irreparably injurious.

(B.) Interlocutory order refusing an injunction

Milgo claims alternatively that the district court’s

dismissal of those parts of its counterclaims that chal-

lenged the DAA interconnection requirement was a

refusal of Milgo’s request for injunctive relief and is

SMilgo based much of its argument on Litton Systems,

Inc. v. Southwestern Bell Telephone Co., 539 F.2d 418 (CAS,

1976), in which the court regarded as a collateral order

a stay of an antitrust suit pending referral of an antitrust

claim to state utility commissions so that they could clarify

the degree of state action involved by virtue of their ratemaking.

The court said that the stay pertained not to the merits

of the claim but rather to the manner in which the case

would be tried. 539 F.2d at 426. In this case, however,

the court’s order is not a stay pending referral but an outright

‘

—— }

————Ew

oot

therefore appealable under § 1292(a)(1).° We need

not decide whether the order refused injunctive relief

because the prayer for injunctive relief is now moot.

During the pendency of this appeal the FCC’s regis-

tration program went into effect. All the parties recog-

nize that this program prevents Bell from categorically

requiring the use of DAAs with modems not of West-

ern’s design. Accordingiy, there is no longer any need

for injunctive relief against the DAA requirement, and

the justification for appellate review under § 1292(a)

(1) no longer exists.

By complaining against Bell’s DAA policy, Milgo

sought both injunctive relief and damages. The district

court’s order effectively refused not only injunctive

relief but also an award for damages, which is not

moot. Appellate review under § 1292(a)(1) is ordi-

narily confined to the injunctive aspects of the district

court’s order, Abercrombie & Fitch Co. v. Hunting

World, Inc., 461 F.2d 1040 (CA2, 1972); Zwack

v. Kraus Brothers & Co., 237 F.2d 255 (CA2, 1956);

Wrist-Rocket Manufacturing Co. v. Saunders Archery

Co., Inc., 516 F.2d 846 (CA8), cert. denied, 423

U.S. 870, 96 S.Ct. 134, 46 L.Ed.2d 100 (1975);

see C. Wright, Law of Federal Courts 513 (3d ed.

1976), but such confinement is a rule of judicial ad-

ministration, not of jurisdiction. An appellate court

has power to review the case to the extent it chooses

**(a) The courts of appeals shall have jurisdiction of

appeals from:

(1) Interlocutory orders of the district courts .. .

granting, continuing, modifying, refusing or dissolving injunc-

tions, or refusing to dissolve or modify injunctions, except

where a direct review may be had in the Supreme Court;”

28 U.S.C. § 1292(a)(1).

=

to exercise it. See Aerojet-General Corp. v. American

Arbitration Association, 478 F.2d 248, 252-53 (CA9,

1973); Hurwitz v. Directors Guild of America, Inc.,

364 F.2d 67, 69-70 (CA2, 1966). See also Smith

v. Vulcan Iron Works, 165 U.S. 518, 524-25, 17

S.Ct. 407, 410, 41 L.Ed. 810, 812-13 (1897). Moore’s

Federal Practice § 110.25[1], at 273. In this case

where the injunctive aspects are moot and the justifica-

tion for review under § 1292(a)(1) is no longer

present, we doubt that we have the power to reach

the remaining noninjunctive aspects of the district

court’s order, and, if we do, we decline to exercise

it.

(C.) All Writs Act

The parties have also urged, somewhat tardily, that

we should resort to the extraordinary writ of certiorari

to allow interlocutory review. See All Writs Act, 28

U.S.C. § 1651. Such writs should be used to allow

interlocutory review only in very limited and unusual

circumstances. We believe that review by certiorari

is not appropriate for this case.

The appeal is DISMISSED.

a

APPENDIX C.

In the United States Court of Appeals for the Fifth

Circuit.

Western Electric Company, Inc., Plaintiff-Appellee,

versus Milgo Electronic Corporation and International

Communication Corporation, Defendants Third-Party

Plaintiffs-Appellants, versus American Telephone and

Telegraph Company, Third-Party Defendant. No. 76-

4079.

Appeal from the United States District Court for

the Southern District of Florida.

Before Clark, Gee and Fay, Circuit Judges.

BY THE COURT: IT IS ORDERED that appel-

lee’s motion to dismiss the appeal is DENIED.

ae ee

APPENDIX D.

United States District Court, Southern District of

Florida.

Western Electric Company, Inc., Plaintiff v. Milgo

Electronic Corporation and International Communica-

tions Corporation, Defendants and Third-Party Plain-

tiffs v. American Telephone and Telegraph Company,

Third-Party Defendant. Case No. 74-1601-Civ-CA.

Order Granting in Part and Denying in Part

Motion for Summary Judgment.

THIS CAUSE is before the Court on motion of

plaintiff Western Electric Company, Incorporated

(hereinafter “Western”) for summary judgment against

defendants Milgo Electronic Corp. and International

Communications Corporation (hereinafter “Milgo”).

As grounds for its motion, Western asserts that Milgo

has no standing to enforce the consent decree entered

in the Government action against Western and has

no standing to assert a claim for discriminatory royal-

ties because Milgo has not applied for, and does not

want, a license and therefore has not been damaged

by the alleged discrimination.

Western strenuously argues that Milgo cannot show

either actual or potential damages to itself resulting

from Western’s allegedly discriminatory licensing prac-

tices because Milgo is neither an applicant for a license

nor a licensee of Western’s patents. It is academic

that injury in fact is a requirement for standing under

the antitrust laws.

Plaintiff cites GAF Corp. v. Circle Floor Co., Inc.,

463 F. 2d 752 (2d Cir. 1972) where the Court held

_ a a ne we. ee

/

(eae

that the facts alleged by plaintiff were not sufficient

to state a claim for relief for damages to GAF’s business

by reason of a restraint of trade; that treble dam-

ages are available only to those who have suffered

some dimunition of their ability to compete. Thus, this

Court must look to the allegations found in the counter-

claim against Western to determine whether Milgo has

alleged competitive injury. In so doing, the Court must

keep in mind the teaching of the Supreme Court Hos-

pital Building Co. v. Trustees of Rex Hospital, #74-

1452 (S. Ct. 5/24/76); and the Fifth Circuit, Miller

v. Grandados, 529 F. 2d 393 (Sth Cir. 1976), that

complaints alleging antitrust violations are to be liberal-

ly construed. The inquiry, then, is whether Milgo’s

competitive business position was harmed by the anti-

competitive effects of the alleged restraint of trade.

Perkins v. Standard Oil Co., 395 U.S. 642 (1969).

Milgo is a competitor of Western in the manufacture

of telephone equipment. The market in which they

compete is loosely defined as those who purchase and/

or lease telephone equipment. Milgo has alleged that

because of practices engaged in by Western; i.e., use

of discriminatory royalty rates monopolization and at-

tempted monopolization, and tieing the use of a DAA

to all non-Western manufactured equipment, Milgo has

suffered in that the class of telephone equipment pur-

chasers/lessees are forced to pay more if they pur-

chase/lease from Milgo and therefore purchase/lease

from Western. These allegations, specifically stated in

the counterclaim, allege competitive injury sufficient

to confer standing.

Milgo’s counterclaims were skillfully drafted in that

there are very few references to violation of the consent

pas aa

decree per se. Examination of the complained of sec-

tions shows that only paragraphs A-29(d) and (e)

allege violations of the consent decree. Those para-

graphs should be stricken. The remaining paragraphs,

although alleging acts that may fall within the prohibi-

tions of the consent decree, are couched in antitrust

and unfair competition language and suffer no infirmity

such that would cause this Court to strike them.

Western further attacks Milgo’s assertion of para-

graphs which constitute a challenge to tariffs filed

with the FCC. In this Court’s March 17, 1976 Order,

there was a ruling that the issue of whether or not

the tariffs which allowed plaintiff to require the use

of a data access arrangement when non-Western manu-

factured equipment was used was a matter peculiarly

suited for reference to the Federal Communications

Commission (hereinafter “FCC”). At that point the

Court did not have the benefit of the FCC Order

entered in Docket #19528 before it.

The Court has now read the First Report and Order

in Docket #19528 (released November 7, 1975).

It appears that the Commission therein established a

registration program for customer-provided equipment.

Allegations of registration in accordance with that Order

are absent from Méilgo’s filings. Thus, at this time,

it appears to the Court that those paragraphs of Mil-

go’s counterclaim which allege unfair competition and

antitrust claims based upon the tariff are not properly

before this Court.

The issue of claims based upon the alleged violations

of the consent decree present a different problem. It

is clear that this Court may entertain the alleged consent

decree violations as a defense to the infringement action.

— =

American Securit Company v. Shatterproof Glass Cor-

poration (D.C. Del. 1957, 1958), 154 F. Supp. 890

and 166 F. Supp. 813, affirmed, 268 F. 2d 769 (3d

Cir. 1959), cert. den. 361 U.S. 902, reh. den., 361.

U.S. 973; American Securit Company v. Hamilton

Glass Company, 258 F. 2d 889 (7th Cir. 1954).

However, the violations, if any, of the consent decree

do not give rise to an independent cause of action

under the antitrust laws. Paul M. Harrod Co. v. A. B.

Dick Co., 194 F. Supp. 502 (N.D. Ohio 1961). The

cases cited to the Court by Western show that the

use of consent decree violations by defendants is limited

to that of a shield and may not be extended as a

sword.

Western also claims that the challenged practices

are proper and refers to Paragraph X(C) of the consent

decree to show that the practices are specifically

authorized. It does not appear to the Court that there

are no material facts in issue as to whether or not

the challenged practices are proper and thus summary

judgment would be improper at this time. Examination

of the allegations shows that Milgo’s claims are based

on its assertion that Western and AT&T are related

and therefore, while there is no requirement that the

Bell Operating Companies pay royalties to Western,

when the operating companies lease modems to sub-

scribers without charging a royalty; it is the same

as Western leasing the modems without charging a

royalty. The underlying facts are heavily contested and

preclude entry of summary judgment. Western further

argues that research and development costs are passed

on to operating company subscribers for whom a royalty

is not separately stated and that these licensees suffer

no economic disadvantage because, by buying the tech-

ae

nology from Western, they have avoided incurring the

expenses which the royalty is intended to recoup. Based

on that statement, Western claims that Milgo’s funda-

mental proposition is fallacious. However, it does not

appear to be so clear cut to this Court. Milgo’s argu-

ment in opposition is that if the research and develop-

ment costs are billed to all subscribers, and if those

subscribers who use non-Western manufactured

modems pay equally with those who use Western manu-

factured modems and also pay the additional royalty,

then the cost to non-Western manufactured modem

users is higher and as a result Western’s practices

cause modem users to purchase from Western rather

than Milgo.

In view of the foregoing, it is clear that most of

the essential facts are in dispute and that granting

of summary judgment would be improper.

It iis ORDERED and ADJUDGED that Western’s

motion for summary judgment is denied, except as to

paragraphs A-29(d) and (e) of the counterclaim and

those paragraphs alleging unfair competition and anti-

trust claims based upon tariff #163. Accordingly, those

paragraphs are hereby ordered stricken.

ENTERED at Miami, Florida, this i8th day of

September, 1976.

/s/ Clyde Atkins

United States District Judge

cc: William E. Sadowski, Esq.

Michael J. Cappucio, Esq.

Albert E. Fey, Esq.

Stanley R. Jones, Esq.

John K. Aurell, Esq.

Dewey, Ballantine, Bushby, Palmer & Wood

at Come

APPENDIX E.

Federal Céihintibications Commission

Washington, D.C. 20554

December 16, 1971

American Telephone and Telegraph Company

195 Broadway

New York, New York 10007

Attention: Mr. Thomas W. Scandlyn

Assistant Vice President

Gentlemen:

In its “foreign attachment” decisions of December 24,

1968 and August 13, 1969, the Commission permitted

certain tariff revisions filed by AT&T, in response to

our 1968 Carterfone decision, to go into effect subject

to further action by the Commission. 15 F.C.C. 2d

605, 18 F.C.C. 2d 871.

One of the principal features of these revised tariffs

was to provide that any customer-provided terminals

device directly connected to the switched telephone net-

work must be connected through (1) a “connecting

arrangement” that would be “furnished, installed and

maintained” only by the telephone company, and (2)

a “network control signaling unit” that would likewise

be “furnished, installed and maintained” only by the

telephone company.

The Commission neither approved nor disapproved

these revisions. It decided that, in lieu of further formal

proceedings on questions as to the lawfulness thereof,

it would be better for the Chief of the Common Carrier

Bureau to conduct informal conferences for the purposes

of identifying, examining and, subject to Commission

review, resolving any questions presented by these re-

nlite

visions. The Commission said that these conferences

would be the principal forum to assist it in ascertaining

what further changes in the tariffs are necessary, desir-

able and technically feasible. The Commission further

stated that it would “be prepared to take such further

action as it deems necessary or desirable to resolve

outstanding issues.”

As a result of a series of conferences we have had

with representatives of your company and representa-

tives of other manufacturers and distributors of cus-

tomer-provided terminal devices, one issue has now

crystallized to the point that substantial doubt exists

as to whether the revised tariffs are reasonable, non-

discriminatory and in compliance with the Carterfone

decision insofar as certain practices thereunder are being

foliowed by the company.

The practices in question relate to those terminal devices

that are now being manufactured (or have been manu-

factured in the recent past) by independent manu-

facturers according to specifications of the telephone

company and are now being furnished or offered (or

have been offered or furnished in the recent past)

by the telephone company to the public for direct

connection to the switched telephone network under

the trade mark, brand name or symbol of the inde-

pendent manufacturer. Examples of these are the “Magi-

call” and “Code-A-Phone” devices.

The question of the lawfulness of the practice arises

from the following facts. When such devices are fur-

nished by the telephone company for direct connection,

the customer is not required to obtain from the tele-

phone company any additional or separate “connecting

arrangement” or “network control signaling unit.” These

ow

features are generally incorporated into the device itself.

However, if the same device is obtained by a customer

from the same manufacturer for direct connection to

the network, the current practice of the telephone com-

pany, under the present tariffs, is to refuse to provide

service or to discontinue or threaten to discontinue

the service of that customer if he uses that same

device without obtaining a separate telephone company-

provided connecting arrangement and network control

signaling unit. This practice involves the imposition

of extra charges and conditions upon customers who

obtain these same devices from non-telephone company

sources. Thus, the practice would appear to place inde-

pendent suppliers of such devices at a competitive

disadvantage in their efforts to market such devices

directly to the public.

In connection with the foregoing we have examined

the telephone company sales brochures for the “Magi-

call” and “Code-A-Phone.” These brochures extol the

qualities of these devices as though they were Bell

System devices. Thus, for example, the Bell Systems

brochure on the “Code-A-Phone” describes that device

as “rugged,” “dependable” and as “Bell System equip-

ment.” Moreover, according to these brochures, both

the “Magicall” and the “Code-A-Phone” are provided

to the customer with the manufacturers’ registered trade

mark on brand names thereon as well as the Bell

System’s symbol.

The apparent competitive disadvantage referred to

above appears to be aggravated by the fact that certain

competitive devices of other manufacturers are, contrary

to the tariff requirement, being “hardwired” by non-

telephone company installers to the switched telephone

network without going through such additional tele-

ttc

phone company-provided facilities. We understand from

the telephone company that it endeavors to enforce

its tariffs where it learns of the existence of these

cases, but that it has no way of assuring that there

is general compliance with the tariffs. Under these

circumstances it would appear that the independent

manufacturers, who provide brand name devices to

the telephone company and to the public according

to specifications set by the telephone company are

being prevented from effectively competing with either

the telephone company, who markets the same device,

or other manufacturers who are marketing competitive

products.

When the Commission permitted the revised tariffs

to go into effect on January 1, 1969, it was unaware

of the existence of this apparent type of discrimination.

However, as heretofore stated, one of the purposes

of our informal conferences has been to identify and

uncover problems such as this, and to take such steps

as may be necessary to resolve them.

In view of all of the foregoing, we believe that the

telephone company should promptly terminate its prac-

tice of refusing service or of discontinuing, or threaten-

ing to discontinue, the service of customers who obtain

devices in the categories referred to above (e. g. the

“Magicall” and “Code-A-Phone”) and, further, that

it should make such revisions in its tariffs as may

be necessary to reflect such change in practice. This

does not mean that the telephone company should

not perform the actual “hard-wire” connection in ac-

cordance with the provisions of its tariffs applicable

to the installation of the same device provided by

the telephone company. Nor does it mean that the

=

company could not discontinue service to protect against

actual harm as provided in other portions of the tariffs.

It would mean that the company could not require

separate connecting arrangements and network control

units over and above those incorporated into devices

which are built according to the telephone company

specifications, and provided to customers under the

brand name or symbol of the independent manufac-

turers. Under these conditions, customers obtaining such

a device from the telephone company would be treated

the same as one obtaining the same device from an

independent manufacturer. This, in turn, would remove

the competitive disadvantage to the independent manu-

facturer which would appear to result from your present

practice.

We assume that you will take no steps to discontinue

or threaten discontinuance of any existing service pend-

ing any necessary revisions in your tariffs.

In addition to the foregoing, and pending the develop-

ment of appropriate standards to apply to all such

devices, certain additional measures appear to warrant

immediate consideration, particularly to avoid giving

an unfair competitive advantage to the telephone com-

pany and the independent manufacturers who sell their

brand name devices to the telephone company and

to the public. First, the telephone company should

permit other suppliers of terminal devices that are

competitive with such brand name devices, to obtain

direct connections by the telephone company of their

devices on the same terms and conditions that apply

in the case of such brand name devices. Second, the

telephone company should publish and make available

to all interested parties, and the Commission, the specifi-

ee

cations which the telephone company has adopted for

the manufacture of the aforementioned brand name

devices insofar as such specifications are related to

the prevention of harm to the switched telephone net-

work from (i) improper signaling or (ii) line imbalance

or (iii) excessive voltages. Third, the telephone com-

pany should continuously monitor each installation it

makes under the foregoing revised practices and keep

written records as to the occurrences, types and fre-

quency of the harm allegedly caused by such devices

and the disposition made thereof and should submit

monthly reports thereon to the Commission.

These measures will enable other manufacturers and

distributors, pending the development of more universal

standards, to be treated the same as the telephone

company and its brand name manufacturers in the

direct connection of all such competitive devices. They

will also assist in the gathering of empirical data relative

to the nature and extent of “harm” to the network

that such types of interconnection may occasion.

Your response within 10 days from the date of this

letter will be appreciated.

Sincerely yours,

/s/ Bernard Strassburg

Bernard Strassburg

Chief, Common Carrier Bureau

cc: NARUC

USITA

General Telephone

United Telephone

Continental Telephone

5 cre ee ae

=

APPENDIX F.

United States District Court for the District of Co-

lumbia.

United States of America, Plaintiff, v. American

Telephone and Telegraph Company, Western Electric

Company, Inc. and Bell Telephone Laboratories, Inc.,

Defendants. Civil Action No. 74-1698.

Memorandum of Federal Communications Commission

as Amicus Curiae.

K « *

| Pages 19 and 20}

5. Tariff Regulation.

Carriers subject to FCC jurisdiction are required

to file tariffs settting forth the rates, practices and

regulations that govern their service offerings. 47 U.S.C.

§203. These must be just and reasonable, 47 U.S.C.

§201, and they must not contain undue discriminations

or preferences, 47 U.S.C. §202. The Commission’s au-

thority for policing these requirements is specifically

set forth in Sections 204 and 205 of the Act, 47

U.S.C. §§204, 205, which balance the interests of con-

sumer and corporate investor. On the one hand, the

consumer is entitled to service at rates that are just

and reasonable; on the other, the carriers are entitled

to a reasonable return so that the “vast sums necessary

for the maintenance and expansion of their systems

through equity and debt financing” will be available.

United Gas Pipe Line Co. v. Memphis Light, Gas

& Water Division, 358 U.S. 103, 113 (1958). As

the Court said in the United Gas case, the consuming

public has a vital stake in the financial stability of

public utilities. /d.

The Communications Act, like other federal regula-

tory statutes, contemplates that the carrier in most

=

instances will initiate rate changes by filing new tariffs,

and that those tariffs generally will go into effect

without agency approval. AT&T v. FCC, 487 F.2d

865, 871-72 (2d Cir. 1973). Cf. United States v.

Southern Ry., 372 U.S. 658 (1963). The Commission

may suspend tariff changes up to 90 days and initiate

investigations to determine lawfulness. After full hear-

ing, it may declare the tariffs unlawful and either

require changes or prescribe changes of its own making.

In addition, it may require refund of unlawful rates

after hearing.” 47 U.S.C. §§ 204, 205. But rate

filings generally proceed from the carrier’s independent

business judgment, and the Communications Act does

not require Commission approval either before or after

the rates become effective. It follows, then, that rates

and other tariff provisions may and often do become

effective without Commission scrutiny or approval.”

These carrier-initiated tariffs which have not been

approved by the Commission do not in our opinion

immunize the carrier against claims that the tariffs

are anticompetitive. The courts have consistently exer-

cised jurisdiction in antitrust cases attacking carrier

practices and rates that purportedly were justified by

tariffs on file with but not approved by the Commission.

22The refund remedy, of course, can provide no relief

to a competitor who alleges that the rates are so low as

to be predatory. The Act simply contains no provisions for

redressing such a wrong, even if the Commission after hearing

finds that the allegations are true. See Nader v. FCC, Nos.

73-1045, 73-2051, D.C. Circuit, decided Sept. 29, 1975, slip

opinion, pp. 1930, 1940.

*8In a recent 12-month period (September 1974 through

August 1975), the Commission received 1,371 tariff filings

totaling 11,491 pages. This does not count the voluminous

supporting papers filed with the tariffs. The Commission ob-

aw could investigate only a small percentage of these

gs.

— Ss

See, e.g., Macom Products Corp. v. AT&T, supra;

Chastain v. AT&T, supra; Carter v. FCC, supra. As

in the interconnection area, accommodation of antitrust

policy to FCC regulation of tariff matters has been

effected by referral under the doctrine of primary juris-

diction. /d.

The sole exception to this rule of concurrent juris-

diction arises when the Commission has prescribed

or specifically approved a tariff.** Congress has en-

trusted the Commission with sole authority to prescribe

and approve rates, practices, procedures and regulations

set forth in tariffs. Even a court with...

*4The difference between carrier-made and prescribed rates

has been recognized in another context. See Arizona Grocery

Co. v. Atchison, Topeka & Santa Fe Railway Co., 284 US.

370 (1932), where the Court held that reparations could not

be ordered if the carrier had charged rates prescribed by

the Interstate Commerce Commission. See also Public Utilities

Commission of California v. FCC, 356 F.2d 236 (9th Cir.),

cert. denied, 385 U.S. 816 (1966). This principle remains

valid. See Nader v. FCC, supra, slip opinion, p. 1936.