Petition — Berkey Photo, Inc. v. Eastman Kodak Company. Eastman Kodak Company v. Berkey Photo, Inc

a bUpreme Court, U. ih;

FILED

69-427 SEP 14 1979

SPC BOHAK, IR., BLERK

In THE us

Supreme Court of the United States

OCTOBER TERM, 1979

+>

Berxey Puoro, Inc.,

Petitioner,

against

Eastman Kopax Company,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Axvin M. Sten

530 Fifth Avenue

New York, New York 10036

Attorney for Petitioner

Of Counsel:

Barry J. Bretr

Mark I. ScHLESINGER

Avrora CASSIRER

Mark D. Orren

Parker CuHapin Fuatravu & Kump

Neuman, Wiiuiams, ANpDERSon & OLsoNn

TABLE OF CONTENTS

ea casi ccecccccs

IEE Mp De ae a

SESE ee re

ne ee ececcveses

A. Prolemamery Btatement ..........61..6.0..

B.

C.

Kodak’s Persistent Domination and Manipu-

lation of Amateur Photography ............

Violations in the Camera Market ..........

1. Proceedings in the District Court ........

a. Conspiracies in Violation of Section 1

OE Ge TID Ae oc vn ccc ecccces.

b. Monopolization in Violation of Section

2 Of Ge Beerman Act ..............

2. Opinion of the Court of Appeals ........

. Section 2 Violations i1 the Photofinishing

-and Photofinishing Equipment Markets ....

. Kodak’s Monopolization of the Film and

Paper Markets in Violation of Section 2 of the

EES re arr

1. Proceedings in the District Court .......

2. Opinion of the Court of Appeals ........

REASONS FOR GRANTING THE WRIT:

I. Supreme Court guidance is urgently required

so that the lower courts may know whether the

avulsive changes in § 2 jurisprudence here ap-

ii TABLE OF CONTENTS

PAGE

plied by the Second Cireuit should henceforth

be applied in lieu of traditional standards which

other circuits are following .................. 19

II. The Court of Appeals raised important issues

as to the roles of a jury and appellate review

in complex cases by substituting its view of the

facts for that of the jury and failing to assess

the evidence as a whole ............cccccceess 24

III. The Court of Appeals has erroneously created

rules of per se legality under § 2 which conflict

with applicable authorities and precluded con-

sideration of less restrictive alternatives ...... 26

IV. In deciding a question of first impression, the

Court of Appeals ruled that, to recover dam-

ages, a direct purchaser of overpriced products

froma monopolist must relate price movements

to specific anticompetitive acts. This require-

ment is substantively unsound and would proce-

durally inhibit private damage actions and

ce. . EN Ra RUARY Came 31

CIE ic 4 0 horse a eh aes 35

Tables of Kodak’s Market Share, Sales and Profits

Table 1—Cameras ............. ead Rowan bees has al

a NRE Seer net wens: SOR ng ae me e2 a2

Table S—Color Paper os. cevccssvcieccsccnnvevcis a3

TABLE OF AUTHORITIES lil

PAGE

Constitution, Statutes and Rules:

United States Constitution

EE acc ch hues woneeveucie ae 3, 25

Sherman Act

Section 1,16 U.S.C. $1 (OTE) 6.65 oo cc descewes 2

Section 2, 15 U.S.C. $2 (1976) ........0000.. passim

Clayton Act

Section 4, 15 U.S.C. §15 (1976) .............. 2

Section 7, 15 U.S.C. $18 (1976) .......6...... 28 n. 42

Section 16, 15 U.S.C. § 26 (1976) .............. 2

SF Cael, SES SOOVO) 28 eos ce tiee decent cree 2

Be Ws SCE CROTED con cccinsinceedeuess 22-23 n. 36

Cases:

American Tobacco Co. v. United States, 328 U.S. 781

CON 3 4d bewslad Us bad aalin os caicceacyen 20 n. 27, 21, 22

Argus, Inc. v. Eastman Kodak Co., 79 Civ. 4525

CAI. Ss ch Soduku hr qaen tenes ces ovneeut 22 n. 36

Associated Press v. United States, 326 U.S. 1 (1945) 30

Atlantic & Gulf Stevedores, Inc. v. Ellerman Lines,

pe ge Ss ere 25

Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251

aR OR PO GLE Be A itgey Saas, SRE 15-16 n. 22, 34

Borden, Inc., 3 Trade Reg. Rep. { 21,490 (FTC

aah hae SEB Sue to EINE WRC ae Aye eee y PWN 20, 22

Broadcast Music Inc. v. Columbia Broadcasting Sys-

tem, Inc., 99 S.Ct. 1551 (1979) .........600.. 26 n. 38.

oF

iv TABLE OF AUTHORITIES

PAGE

Brown Shoe Co. v. United States, 370 U.S. 294

CRIED. «ns'kns:c'ens t.cbees one sh eee 28 n. 42

California Computer Products, Inc. v. IBM Corp.,

1979-1 Trade Cas. J 62,713 (9th Cir. 1979) . .22-23 n. 36

Chattanooga Foundry & Pipe Works v. City of At-

tanta, S66 US. SO GR ‘i cicces ics LET 31

City of Mishawaka, Indiana v. American Electric

Power Co., 465 F. Supp. 1320 (N.D.Ind. 1979)

26-27 n. 39

Continental Ore Co. v. Union Carbide & Carbon Corp.,

S7O-GB. G0 C19) ds cs cise Seat 20 n. 27, 24

Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S.

bs eee 6, 26 and n. 38, 27 n. 41

Eastman Kodak Co. v. Southern Photo Materials Co.,

Bie UTS: Tae (IGS) vnc ceccacwas 15-16 n. 22, 26 n. 39, 34

Engine Specialties, Inc. v. Bombardier Ltd., 1979-2

Trade Cas. { 62,770 (1st Cir. 1979) ............ 24

Fortner Enterprises, Inc. v. United States Steel Corp.,

o06 US, GG GE knksiks tocmlane ss 27 n. 41, 28, 29

Fotomat Corp. v. Eastman Kodak Co., 78 Civ. 351

(BAAGOL) 5: ii. such <ivtadde Sek ee eee 22 n. 36

F.T.C. v. Procter & Gamble Co., 386 U.S. 568

(RDG D vn cencics svcceseenet Geese eee 28 n. 42

GAF Corp. v. Eastman Kodak Co., 73 Civ. 1893

fa) $ eer ee 22 n. 36

Greyhound Computer Corp. v. IBM Corp., 559 F.2d

488 (9th Cir. 1977), cert. denied, 434 U.S. 1040

CENOO) 4 dccducvun scene 20, 21, 22 and n. 36, 25,

26-27 n. 39, 27 n. 41

Griggs v. Firestone Tire € Rubber Co., 513 F.2d 851

(8th Cir.), cert. denied, 423 U.S. 865 (1975) ...17 n. 24

TABLE OF AUTHORITIES v

PAGE

Hanover Shoe, Inc. v. United Shoe Machinery Corp.,

392 U.S. 481 (1968) ........ Rass eed ae ana 21, 32, 33

Hawaii v. Standard Oil Co., 405 U.S. 251 (1972) .... 35

ILC Peripherals Leasing Corp. v. IBM Corp., 458

F. Supp. 423 (N.D.Cal. 1978) (“Memorex”)

22-23 n. 36, 29

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) .... 33

Little v. Green, 428 F.2d 1061 (5th Cir.), cert. denied,

of A, a re en a ne ee 17 n. 24

Mayor of Philadelphia vy. Educational Equality

League, 415 U.S. 605 (1974) ................. 25 n. 37

National Society of Professional Engineers v. United

Biabes,; 468. TIS. CTO CEST) ini sc ccc ss ose edss 26 n. 38

Northern Pacific Railway Co. v. United States, 356

I kes 3s ace Gb bein se va ok sve O20 26 n. 38

Ohio-Sealy Mattress Manufacturing Co. v. Sealy, Inc.,

585 F.2d 821° (7th Cir. 1978), cert. denied, 99

eo ose Wks ve an banhdevneds 24

Otter Tail Power Co. v. United States, 410 U.S. 366

tn ai ESE pe ti Rg ea 26 n. 39, 30

Pacific Coast Agricultural Export Association v. Sun-

kist Growers, Inc., 526 F.2d 1196 (9th Cir. 1975),

cert. denied, 425 U.S. 959 (1976) .......... 15-16 n. 22

Pavelle Corp. v. Eastman Kodak Co., 73 Civ. 4126

dig bs alk We A bee No 4a wh EOX 22 n. 36

Perma Life Mufflers, Inc. v. International Parts

EU ME CRO) 6 vc asc vcvdsenascnnss 35, 36

Phillips v. Crown Central Petroleum Corp., 1979-2

Trade Cas. J 62,743 (4th Cir. 1979) ............ 24, 32

Poller v. Columbia Broadcasting System, Inc., 368 U.S.

UES ae tree per 25

vi TABLE OF AUTHORITIES

PAGE

Purex Corp. v. Procter & Gamble Co., 596 F.2d 881

og ht: | Se ener eee fk cy 22-23 n. 36, 24,

27 n. 41, 28 n. 42

Radovich v. NFL, 352 U.S. 445 (1957) .............. 33

Reiter v. Sonotone Corp., 99 S.Ct. 2326 (1979) ...... 35

Response of Carolina, Inc. v. Leasco Response, Inc.,

oof F.2d 1307 (5th Cir. 1976) ............ 21 n. 31, 29

Richfield Oil Corp. v. Karseal Corp., 271 F.2d 709 (9th

Cir.), cert. denied, 361 U.S. 961 (1959) ..... 15-16 n. 22

Sargent-Welch Scientific Co. v. Ventron Corp., 567

F.2d 70i (7th Cir. 1977), cert. denied, 439 U.S.

Bt eno 20, 21 n. 31, 26-27n. 39, 27 n. 41

SCM Corp. v. Xerox Corp., 463 F. Supp. 983 (D.

I I i cae at tr ol eens Oo. gee Ole 22-23 n. 36

SmithKline Corp. v. Eli Lilly & Co., 427 F. Supp. 1089

(E.D.Pa. 1976), aff’d, 575 F.2d 1056 (3d Cir.),

cert. demted, 439 U.S. 838 (1978) .......... 20, 21 n. 33,

22-23 n. 36, 26-27 n. 39, 27 n. 41

Story Parchment Co. v. Paterson Parchment Paper

Co, Hie US. SEG CARER) cov iccesasis 15-16 n. 22, 25, 34

Telex Corp. v. IBM Corp., Doc. No. 74-1518 ....... 22 n. 34

Tennant v. Peoria & Pekin Union Railway Co., 321

ee Se CUED bak veh b bbe ebay do a IAS es 25

Thomsen v. Cayser, 243 U.S. 66 (1917) ............ 31-32

Transamerica Computer Corp. v. IBM Corp., 73

oe Bi Bk eer eee weer 22-23 n. 36

United States v. Aluminum Co. of America, 148 F.2d

Gi Cie Sets BGO ose cheek. 2 and n. 2,5 n. 4, 20 and

n. 27, 21, 22, 28

TABLE OF AUTHORITIES Vii

PAGE

Umted States v. AT&T, 74 Civ. 1698 (D.D.C., filed

Bes. Se BRE? Sad cdennesaeesuinsvaxeces® 22-23 n. 36

United States v. Bottone, 365 F.2d 389 (2d Cir.), cert.

Gemeed,, TIS TB. GER CABG S) ass < vccsedecccces 24

Umited States v. Eastman Kodak Co., 226 F. 62 (W.D.

N.Y. 1915), appeal dismissed, 255 U.S. 578

CEE: <euindacec ck vRNA coeds rian tase 8n. 10

United States v. Eastman Kodak Co., 1954 Trade Cas.

Wee COs Rs SOD bin vineidciedectvesss 8n.11

United States v. General Electric Co., 82 F. Supp. 753

gee er ee ee ah eee 24

United States v. Griffith, 334 U.S. 100 (1948) ....20 n. 27,

26 n. 39

United States v. Grinnell Corp., 236 F. Supp. 244

(D.R.I. 1964), aff’d except as to relief, 384 U.S.

oy he cna MEE ELST ERE TT ey eee 20 n. 27

United States v. Grinnell Corp., 384 U.S. 563

CRI ie a's vba NA RAR es Reh ek ote ee 5 n. 6, 19, 20,

21 and n. 32, 22

United States v. IBM Corp., 69 Civ. 200 (S.D.N.Y.,

OP Se: TG TOT a o's ca ee eS 22-23 n. 36

United States v. Johnson, 327 U.S. 106 (1946) ..... 25 n. 37

United States v. Paramount Pictures, Inc., 334 U.S.

pt Re rere ee ae aT 27 n. 41, 28

United States v. United Shoe Machwmery Corp., 110

F. Supp. 295 (D.Mass. 1953), aff’d per curiam,

SET Us We. CARO) on ses pannes 5 n. 5, 20 and n. 27, 21

22, 27 n. 41, 28, 29

United States v. United States Gypsum Co., 438 U.S.

ot ERA Porrer Y at Ft A ie 21 n. 31

Vili TABLE OF AUTHORITIES

PAGE

Inited States v. Yellow Cab Co., 332 US. 218

CREED: o.00wacs ean wcabnedeceen ane eneeeeral 27 n. 41

White Motor Co. v. United States, 372 U.S. 253

(19GS) 2.2... renee ne ccccenenccecececsccvces 26 n. 38

William H. Rankin Co. v. Associated Bill Posters of

United States and Canada, 42 F.2d 152 (2d Cir.),

cert. dented, 282 U.S. 864 (1930) .......... 15-16 n. 22

Zenith Radio Corp. v. Hazeltine Research, Inc., 395

te ee COD xp nines cb eee 15-16 n. 22, 33-34, 35

Zenith Radio Corp. v. Matsushita Electric Industrial

Co., 1979-2 Trade Cas. { 62,753 (E.D.Pa. 1979) .. 25

Miscellaneous:

P. Areeda & D. Turner, Antitrust Law (1978) ...... 30

Austin, The Individual Coercion Doctrine mn Tie-Ins

Analysis: Confusing and Irrelevant, 65 Cal. L.

ae Fas: Perens er ee eer 21 n. 33

Blair & Kaserman, Vertical Integration, Tying, and

Antitrust Poliwcy, 68 Am. Econ. Rev. 397

CREED nanos nnen 0nd sabes vicaseuceeeeeee 28 n. 42

Caves & Porter, From Entry Barriers to Mobility

Barriers: Conjectural Decisions and Contrived

Deterrence to New Competitors, 91 Q. J. Econ.

DE. CROFT) iis 6 ke ARN eee 29

Comanor, Vertical Mergers, Market Power and the

Antitrust Laws, 57 Am. Econ. Rev. 254 (1967) .. 29

Comment, Physical Tie-Ins as Antitrust Violations,

Bore. Ul. See Sa We Ge «ae skier erneae 21 n. 33, 30

Kahn, Standards for Antitrust Policy, 67 Harv. L.

me 8b) eer ere rer 28 n. 42

TABLE OF CONTENTS ix

PAGE

Kaserman, Theories of Vertical Integration, Implica-

tions for Antitrust Policy, 23 Antitrust Bull. 483

Sia d bls be Va MA ae ek aa 28 n. 42

Levi, A Two-Level Monopoly Law, 47 Nw. U. L.

ey SE de oie ns 55 5 oe wikia ees 28 n. 42

Note, Innovation Competition: Beyond Telex v. IBM,

re CU, Da, BROW re CEP TO) ccc vccccccvcceces 21 n. 33

‘Note, The Predisclosure Requirement, 10 Rut.-Cam.

Oe or ere, eer re Tee 30

Schwartz, Berkey-Kodak Verdict No Cause for Panic,

a eS ee | oe eer er eae 30

L. Sullivan, Handbook of Law of Antitrust

SUE re Ce yuan eG ade ie cilia sd pace 20 nn. 28 and 29

O. Williamsou, Markets and Hierarchies: Analysis

and Antitrust Implications (1975) ............ 28 n. 42

January 1979 Report of the National Commission for

Review of Antitrust Laws and Procedures ... .20 n. 30

In THE

Supreme Court of the United States

OCTOBER TERM, 1979

+

Berkey Puoro, Inc.,

Petitioner,

against

Eastman Konak Company,

Respondent.

A.

os

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioner, Berkey Photo, Inc. (“Berkey”), respectfully

prays that a writ of certiorari issue to review the judgment

and opinion entered on June 25, 1979 by the United States

Court of Appeals for th Second Circuit in this cause.

Opinions Below

The opinion of the Court of Appeals is unofficially re-

ported at 1979-1 Trade Cas. {[ 62,718. The memorandum on

* Setar motions of the District Court, Judge Marvin E.

/ Frankel, dated June 16, 1978 and his opinion denying East-

man Kodak Company’s (“Kodak”) motion for a new trial

dated August 8, 1978 are reported at 457 F. Supp. 404.

These three opinions are reprinted in the separate appendix

to this petition.

Jurisdiction

The judgment of the Court of Appeals, reprinted in the

separate appendix, was entered on June 25, 1979. The

jurisdiction of this Court is invoked pursuant to 28 U.S.C.

§ 1254(1).

Statutes Involved

The statutes involved are Sections 1 and 2 of the Sher-

man Act, 15 U.S.C. $§1 and 2, and Sections 4 and 16 of

the Clayton Act, 15 U.S.C. §§15 and 26. The pertinent

portions of these statutes are reprinted in the separate ap-

pendix to this petition.

Questions Presented

As the Court of Appeals observed, this case is “one of

the largest and most significant private antitrust suits in

history” (5a).' Its opinion purported to decide “important

and novel issues concerning § 2 of the Sherman Act” (7a),

noted that “[f]ew, if any cases have presented so many

diverse and difficult problems of § 2 analysis” (14a), re-

jected “Alcoa” in significant part (18a-20a) and reached

results admittedly not supported by precedent (e.g., 40a,

7la-73a). Verdicts of the jury (demanded by Kodak)—

which the trial court endorsed—based on the stream of

evidence and arguments adduced during an eight-month

+ ‘*___. a’’ citations are to the separate appendix submitted

herewith. ‘‘A ——’’ citations are to the parts of the record

printed in the Joint Appendix to the Second Circuit. “—_ —”

citations are to exhibits printed in the Joint Appendix to the See-

ond Circuit ; ‘“C ——”’ citations are to certain confidential exhibits

printed in said appendix.

* United States v. Aluminum Co. of America, 148 F.2d 416

(2d Cir. 1945).

3

trial, were set aside by the Court of Appeals, which: (i)

created enclaves of immunity from § 2 scrutiny for willfully

exclusionary conduct, including the “leveraging’’ of monop-

oly power by “integrated” monopolists; (ii) substituted its

view of the facts, assessed out of context, for the well-

supported jury findings; (iii) promulgated an un-

precedented rule for direct purchaser recovery of monopoly

overcharges, which conflicts with the substantive basis for

recovery and imposes requirements of proof which this

Court has explicitly stated cannot be met and should not be

attempted; and (iv) otherwise acted in conflict with im-

portant established principles of antitrust law. The

questions presented are:

1. Should deliberately exclusionary conduct, including

the leveraging of monopoly power into several relevant

markets, be deemed per se lawful under § 2 of the Sherman

Act because it was undertaken by a single vendor and was

associated with product introduction?

2. May a jury be permitted to consider, in a § 2 case, a

monopolist’s rejection of less exclusionary courses of con-

duct, such as informing camera makers of an arbitrarily

chosen film format,’ prior to its introduction, where such

timely disclosure would have involved no technological

secrets about film or any information whatever about

cameras and was solely a means of ameliorating the effects

in the camera market of other deliberately exclusionary

conduct?

3. Was it consistent with the Seventh Amendment and

§ 2 of the Sherman Act for the Court of Appeals to (a)

substitute its view of the facts for the well supported find-

***Format’’ refers to the dimensions of the film strip and the

cartridge in which it is contained. Cameras, almost without excep-

tion, are designed to use only one format. Illustratively, a 126

film format cannot be used in a 110 camera or vice versa (A 2622).

4

ings of the jury, concurred in by the trial judge, (b) ignore

the market structure and the context, purpose and effect of

the monopolist’s conduct, and (¢) determine that a per-

sistent monopolist in the amateur camera market had not

violated § 2, even though the record as a whole established

and the jury found that its monopoly power was due to the

intentional employment of exclusionary conduct, including

violations of $1 and leveraging of monopoly power in the

film market to gain competitive advantages in the camera

market?

4. Where persistent monopolization in violation of Sec-

tion 2 of the Sherman Act has been found, may a direct

purchaser of overpriced products recover damages

measured by the difference between the monopolist’s price

and the price which would have prevailed in the absence

of monopoly power found to have been unlawful, or is re-

covery limited, as the Court of Appeals ruled, to such

“price increment” as can be shown to have been caused by

“anticompetitive conduct that originated or augmented the

monopolist’s control over the market’?

5. Should the jury’s verdicts have been sustained with

respect to Berkey’s photofinishing and photofinishing equip-

ment damages and reinstated with respect to Berkey’s 1971

camera losses, where the Court of Appeals recognized that

there was sufficient evidence to support each such verdict,

and referred to no error which affected the award?

Statement of the Case

A. Preliminary Statement

No issue is presented as to market definition or as to

Kodak’s monopoly power in the conventional (t.e., non-

instant) film, paper and camera markets here found to

have been monopolized (17a-18a). Kodak’s uniquely per-

sistent and enormous market shares and profits in the

5

monopolized markets, reflective of monopolization, are sum-

marized in Tables 1, 2 and 3 (pp. al, a2, a3 hereof). These

monopolies were illegally acquired and maintained and not

“thrust upon’ Kodak, “economically inevitable” or “a con-

sequence of superior product, business acumen or historic

accident.’

The jury found (182a-83a) that Kodak used its persis-

tent power and approximately 90% market share in film,’

in activities, including those associated with product intro-

ductions, to leverage its position and exclude competition

in the camera and other markets.

Berkey was injured: (i) as a camera manufacturer, by

the loss of sales and profits caused by Kodak’s monopoliza-

tion and attempted monopolization of that market, Kodak’s

use of its film monopoly to injure and destroy camera

competition, and Kodak’s violations of §1 of the Sherman

Act; (ii) as a photofinisher, by the loss of sales and profits

and by overpaying Kodak for photofinishing equipment as

a consequence of Kodak’s misuse of its film monopoly; and

(ili) as a direct purchaser of film and paper from Kodak,®

by paying prices vastly in excess of those which would

have prevailed in the absence of Kodak’s unlawful monop-

olization of these markets. i

enn.

* Alcoa, supra at 429.

*United States v. United Shoe Machinery Corp., 110 F.Supp.

295, 344 (D. Mass. 1953), aff’d per curiam, 347 U.S. 591 (1954).

The trial court expressly observed that Kodak’s camera monopoly

‘“‘was a world away from being ‘economically inevitable’ ’’ (111a).

* United States v. Grinnell Corp., 384 U.S. 568, 570-71 (1966).

*The market where its return on investment has generally

ranged at the extraordinarily high 60%-70% level (see infra, p.

a2).

*From 1969 to 1977, Berkey purchased $75,324,000 of film

and $46,029,000 of color paper from Kodak (E 2490, 2479).

6

Kodak’s principal effort at exculpation with respect to

the claims based on leveraging, associated with product

introduction, was its argument that:

“[A] company’s introduction of a new product—

though the company be a huge one like Kodak with

monopoly power in a mosaic of interconnected markets,

and though the introduction be designed deliberately

to employ monopoly power in one market to create or

enhance such power in another—must ‘as a matter of

law’ be immune from attack under the antitrust laws.”

(105a).°

District Judge Frankel rejected such “formalistic line

drawing’’ in favor of weighing “ ‘all of the circumstances

of a case’ to determine whether a company has engaged in

unlawfully anticompetitive practices. Continental T.V..,

Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977),” and

observed:

‘‘The court remains persuaded, however, that there is

no such enclave for ‘product introduction,’ and that

the mode, purpose, and impact of product introductions

may, as in this case, play central parts in findings of

unlawful monopolization and attempts to monopolize,

no less than other, ordinarily lawful and ‘normal’

business activities like leasing rather than selling

machinery, United States v. United Shoe Machinery

Co., 110 F.Supp. 295, 344 (D.Mass. 1953), aff’d per

curiam, 347 U.S. 521 (1954), the creation of useful re-

sources for added productive capacity, United States

v. Aluminum Co. of America, 148 F.2d 416, 430-31 (2d

Cir. 1945), or the discount offered on used equipment

*See also A 1045-47, 1679, 1691, 1693-94, where Kodak argued

for such a rule of per se lawfulness in connection with requests

to charge and motions to dismiss, while refusing the invitation by

the District Judge to propose any less extreme rule or standard by

which its conduct could be tested.

%

|

| - ¥

and the adoption of separate charges for separate serv-

ices condemned as exclusionary in Greyhound Com-

puter Corp. v. International Business Machines Corp.,

559 F.2d 488, 499-503 (9th Cir. 1977), cert. denied, 46

U.S.L.W. 3453 (1978).” (105a).

The Court of Appeals, disregarding proof and findings

as to the purpose and effect of Kodak’s activities in the

relevant context or market structure, in essence attributed

per se validity to Kodak’s leveraging, on the grounds that

it merely represented one of the permissible competitive

advantages of a multiproduct firm which the Court referred

to as “an integrated business” (25a). Accordingly, it set

aside the §2 camera award to Berkey in the amount of

$15,250,000 and dismissed the claims that Kodak monop-

olized and attempted to monopolize the camera market.

The jury verdicts, predicated upon the claims that Kodak

used its film monopoly to leverage its photofinishing and

photofinishing equipment businesses, were also set aside.

Without questioning the evidentiary or legal sufficiency

of the jury verdicts that Kodak unlawfully secured or

maintained its monopolies in the film and paper markets,

the Court of Appeals set aside Berkey’s award for film

and paper overcharges and remanded the claims for a new

trial with respect to liability and damages. This deter-

mination was based on the Court’s view that the jury was

improperly permitted to award damages for overcharges

measured by the difference between the prices actually

charged and the prices which would have prevailed in the

absence of unlawful monopolization. Instead, the Court

enunciated the unprecedented rule that recovery for

monopolistic overpricing is limited to a “price increment

caused by the anticompetitive conduct that originated or

augmented the monopolist’s control over the market?’

(7la). It thus rejected a measure cf damages based on

Kodak’s power to fix prices without regard to the influence

of competition, which resulted from monopolization in vio-

8

lation of $2. It mandated, instead, inquiry as to the

impact of particular acts on pricing action, in a manner

which this Court has heretofore observed cannot be done

and should not be attempted (see infra, pp. 32-33).

B. Kodak’s Persistent Domination and Manipulation

of Amateur Photography

Kodak’s present monopoly power, as its economist ac-

knowledged at trial, cannot be divorced from its pattern of

acquisition and destruction of competitors, tie-ins, refusals

to deal, conspiracies in restraint of trade and other exclu-

sionary conduct virtually eliminating competition’ (E

1269-74, 1121-39; A 1748-49). Prior to 1954, when a

consent decree in a government-instituted action™ ended

these and other practices, Kodak tied processing to color

film sales and refused to sell monopolized color paper to

others. This foreclosed entry by photofinishers and color

film and paper manufacturers.

Kodak has at all times maintained its overwhelming

dominance of the film and color paper markets so that pho-

tofinishers have been confined to equipment and procedures

needed to process Kodak film and paper. Since ready ac-

cess to photofinishing is essential to the convenient use of

film (A 749-52, 787-90), only film “compatible” with Kodek

film (i.e., film in the same format and capable of being

processed with Kodak film) can be marketed successfully.

Similarly, color papers of other manufacturers must be

Kodak “compatible” (A 773-76, 1614-20).

A camera is useless without film which can be exposed

in that camera, and then developed and printed. Since all

manufacturers of film other than Kodak share only about

*° Certain of this conduct occurred prior to 1915 and was then

adjudicated to be unlawful. United States v. Eastman Kodak Co.,

226 F. 62 (W.D.N.Y. 1915), appeal dismissed, 255 U.S. 578 (1921).

“t United States v. Eastman Kodak Co., 1954 Trade Cas. | 67,920

(W.D.N.Y. 1954).

9

10 percent of the film market (p. a2, infra), Kodak alone

can provide the wide availability of film needed to success-

fully market cameras using a distinct film format. The

powerful brand differentiation in film associated with the

Kodak name and monopolistic presence in the market fur-

ther prevents the successful marketing of cameras for

which Kodak film is not available. Aware of all of the

foregoing, Kodak has consistently refused to make its film

available for innovative cameras of others, with the ex-

plicit purpose of inhibiting the sale of non-Kodak cameras

(A 964-65, 969-73, 1014; E 1813, 2162). As even the Court

of Appeals (41a) and Kodak’s economist (A 1740-41) con-

ceded, Kodak has thereby prevented the successful intro-

duction of any new camera format by any other camera

maker. |

C. Violations in the Camera Market

1. Proceedings in the District Court

a. Conspiracies in Viclation of Section 1 of the

Sherman Act

Kodak used its market dominance to extract from Sy]l-

vania and G.E. exclusive secret information, patent rights,

promotional and marketing advantages and price prefer-

ences with respect to camera related flash lighting devices

invented by these lamp companies. Kodak also conspired

with Sylvania and G.E. to time the introduction of such

lighting devices and, on occasion, to delay introduction, to

correspond with Kodak marketing plans. It compelled the

lamp companies, contrary to their explicit desires, to with-

hold from other camera manufacturers information which

would have enabled them to compete on the merits with re-

spect to cameras capable of cooperating with the flash

inventions of Sylvania and G.E. As a result, when Sylvania

introduced its flasheube in 1963, and its magicube in 1970,

and G.E. introduced its flipflash in 1975, Kodak alone was

in a position to offer cameras using these devices, while

all other camera manufacturers were left with inventories

10

of obsoleted cameras and the need to hastily and ineffi-

ciently proceed with the design of cameras for the new

flash lamps.”* (123a-24a).

The jury determined that Kodak had conspired with

Sylvania and G.E. in violation of §1 of the Sherman Act

(187a) and awarded damages, stated separately for 1970

and 1971 with respect to the magicube conspiracy (188a).

Damages related to the Kodak-G.E. flipflash conspiracy were

not separately determined.

In ruling on Kodak’s post-trial motions, the District

Judge described the Kodak-Sylvania conspiracy as “a re-

straint to be denounced under the rule of reason, and a

form of exclusionary conduct supporting the findings of

liability under Section 2” (123a). Judge Frankel upheld

the 1970 damages, but set aside the 1971 damages because

of the method of quantification (125a-26a).

b. Monopolization in Violation of Section 2 of the

Sherman Act

Having succeeded, by anticompetitive means, in inhibit-

ing the successful introduction by others of small pocket-

able cameras (supra, pp. 8-9), in March 1972, Kodak intro-

duced the 110 system, consisting of (i) a small film format

intended to obsolete existing industry standards; (ii) a

new film, Kodacolor II, offered only in the 110 format -

(iii) a new system of photofinishing equipment and mate-

rials (available only from Kodak) required by the 110

format and associated Kodacolor IT; and (iv) 110 format

*? Flashcube, magicube and flipflash were the only meaningful

amateur conventional still camera flash introductions after the

1950’s except for Everflash introduced by Berkey’s Keystone di-

vision in 1970.

*8 Judge Frankel observed that the record supports a jury find-

ing that Kodacolor II was confined to the 110 format for ‘‘anti-

competitive purpose alone, not because of any technological or

legitimately commercial concerns.”’ (113a)

11

cameras which alone were able to use the new film or film

format.

Kodak recognized that the 110 camera was merely one

of many “cute little cameras . . . on the market,” that

“[t]here is nothing terribly novel about a new one, espe-

cially when it was bigger than most of the others” (E 1817)

and that “[without] a new film, the program is not a new

advertisable system’’ (EK 1803). Accordingly, it launched

the 110 system with a new film which it knew to be un-

necessary and defective (E 830-33, 1766, 2109-10, 2082;

A 1209-10) but nevertheless falsely promoted as a “remark-

able new film” and the best film Kodak ever manufactured

(E 2587-89, 2706-09; A 640).

As intended by Kodak, the 110 system sounded the “death

knell” of existing camera formats (A 953; E 1519) and—

despite Kodak’s “lawyers worries about systems selling”—

Kodak gained a “hammerlock’’ on the 110 system because

“the new cartridge will fit only into our cameras” (FE 2232).™

Responsible Kodak executives proposed that competing

camera makers be informed of the configuration of the 110

film format prior to its introduction. Such disclosure

would have preserved to Kodak its enormous film making

profits, but would have ameliorated the anticompetitive

effects in the camera market. Such ‘“‘predisclosure” would

not have included any information about Kodak camera

plans or design or film technology, but would have been

“The purposeful exclusionary nature of such systems selling

was lucidly expressed in an August 1970 internal memorandum to

Kodak’s current chief executive officer from the coordinator of the

110 program, stating in material part as follows:

“Kodak wants to sell a system, designs their products to fit

into a system, and encourages their customers to think of

photography as a system that Eastman Kodak Company is

offering. Any marketing strategy which allows other manu-

facturers to introduce their products into this system context

—particularly to serve large segments of the market—is a

loss to the Eastman Kodak Company.’’ (E 1307)

12

limited to information necessary for other manufacturers

to independently design and manufacture cameras to be

used with the new film format.* Kodak rejected such

limited predisclosure in order to use its monopoly in the

film market to deny other camera makers reasonable oppor-

tunity to compete on the merits with Kodak cameras."

In upholding the jury’s verdicts that Kodak monopolized

and attempted to monopolize the camera market, the Dis-

trict Judge wrote, with respect to the foregoing events,

that:

“The paramount strategy and goal were thus to use

the film monopoly . . . as a lever for suddenly swelling

defendant’s power in the.camera market .. .” (104a).

“. .. the evidence tended powerfully to support plain-

tiff’s theory of unlawful ‘leveraging’. It is unneces-

sary to speculate whether plaintiff might have been en-

titled to a directed verdict on this score. It is sufficient

to say that the evidence showed a carefully orches-

trated program by defendant to use its film monopoly

so as to obstruct and frustrate competition on the

merits in the camera market” (109a).

Judge Frankel also concluded that it was appropriate to

permit the jury to consider “predisclosure,” and noted: (i)

the sharply limited significance given to the matter in the

*® Belatedly, in January 1972, after a camera competitor threat-

ened antitrust litigation, Kodak sold such limited information to

camera makers (A 34-37).

**In a 1974 settlement of an antitrust action, Kodak again

agreed to provide the limited disclosure here contemplated (E

2387-2407). Such information had previously been provided by

Kodak in connection with the Super 8 movie format introduction

in 1965 (A 974-77; E 920-23).

13

development of the case and in his charge ;" (ii) the cau-

tionary surrounding instructions, including a statement of

the usual right to keep products secret; (iii) the context

of facts which permitted the jury to “have found the 110

introduction a scheme contrived almost wholly to crush

competitors ;” and (iv) that the Sherman Act and the prece-

dents required “a frequently subtle, inevitably comprehen-

sive appraisal of actions by a company like Kodak wield-

ing enormous monopoly power” (112a-115a).

2. Opinion of the Court of Appeals

The Court of Appeals affirmed the findings of § 1 viola-

tions (87a). The award of damages for 1970 was allowed

to stand. The Court of Appeals found that the measure

of damages used for 1971 was appropriate and reversed the

District Judge’s action in setting aside the 1971 damage

award. However, instead of reinstating the jury’s verdict,

the Court of Appeals remanded for a new trial on damages.

A new trial was also ordered to separately compute the

damages resulting from the 1975 Kodak-G.E. flipflash

conspiracy (101a).

The Court of Appeals reversed the § 2 findings, set aside

the $15,250,000 awarded to Berkey for lost camera profits

following the March 1972 110 system introduction and dis-

missed the § 2 camera claims,” Significantly, however, with

the exception of a single reference to predisclosure in the

charge on liability, the Court rejected all of Kodak’s

challenges to the relevant portions of J udge Frankel’s

charges to the jury (98a n. 72).

See A 265-66 as to the pertinent portions of the charge with

respect to predisclosure.

** A new trial was not ordered with respect to the § 2 camera

claims, as in the case of film and paper, even though the trial court

precluded Berxey’s reliance upon pre-1969 origins of the camera

monopoly, which the appellate court, in discussing the film and

paper monopolies, said was error (75a-76a).

14

The Court held that it was reversible error to allow the

jury to consider the absence of predisclosure (37a-38a).

The opinion failed to reflect the non-technical nature of

predisclosure” and the limiting charge on the matter (see

supra, pp. 11-13).

The Court characterized the exclusionary effects in the

camera market of the simultaneous introduction of the 110

format, Kodacolor II in only the 110 size and the Kodak

110 cameras merely as “competitive advantages” flowing

from the “broad based activities” of “any integrated firm”

(25a). It erroneously assumed, despite clear and uncon-

troverted proof to the contrary, that any other film maker

could have successfully introduced a new film format and

cooperating line of cameras (40a) and that 110 was

primarily a camera development (41a).”* It concluded that

such activities could not constitute the use of monopoly

power, but were solely the ‘‘benefit of integration’? (40a)

which in its novel view, as a matter of law, were im-

mune from § 2 scrutiny. Its opinion does not mention the

unequivocal factual findings by the jury and Judge Frankel

(182a-183a, 105a-112a) that Kodak had used its monopoly

power in film to gain competitive advantages in cameras.

Although the Court of Appeals did note that Kodak, by

refusing to make film available, had unlawfully prevented

other camera manufacturers from competing by intro-

** At certain points in its opinion (34a, 38a) the Court of Ap-

peals recognized that the predisclosure here in issue was limited

to information as to the 110 film format necessary to permit other

camera manufacturers to independently design cameras to coop-

erate with film in this format. However, elsewhere the opinion

ignores this limitation (35a, 36a), and at one point, erroneously

and completely without support in the record, appears to assume

that the disclosure contemplated details of Kodak’s camera design

which would enable others to copy Kodak cameras (31a).

7° But see pp. 8-9, supra.

71 But see p. 11, supra.

15

ducing cameras using new small formats, it viewed that

anticompetitive conduct as irrelevant (41a-43a). Similarly

treated as totally discrete conduct are the next described

practices which the Court of Appeals recognized to be

exclusionary and which were inextricably intertwined with

the 110 scheme.

While the Court of Appeals recognized that the

jury could readily have found that rushing the defective

Kodacolor II film to market was an intentional and effec-

tive act of leveraging the monopoly power in film without

any technological justification (46a-47a), it concluded that

(a) there was no showing that the new film “coerced”

purchases of 110 cameras and (b) it was not improper for

Kodak to falsely promote the new film in order to enhance

its camera-sales (49a-5la).

The Court also acknowledged that Kodak may have

violated 42 by bringing out the allegedly superior and

heavily promoted film in only the 110 format to leverage

Kodak camera market dominance (51-52a). However, it

reasoned that, since Berkey had not further extended this

trial by locating and bringing in some undefined numbers

of the “millions of amateur photographers” who bought

the Kodak 110 camera in preference to a Berkey camera,

in order to establish which of them acted solely as a result

of the limitation of Kodacolor IT to 110 film (54a), the jury

could not have found injury due to that act alone (54a)—

even though the Court of Appeals conceded that Kodak may

have sold more 110 cameras by using and falsely promoting

Kodacolor II in the 110 system (47a).”*

2 Significantly, the Court raised no doubt as to the adequacy of

proof of the fact of Berkey’s injuries in considering the other

aspects of Kodak’s camera related conduct. See also the trial

‘Judge’s observation that the proof of injury may well have merited

a directed plaintiff’s verdict (A 1671-72). Moreover, a require-

ment of such subjective proof of injury based on the views of

(footnote continued on following page)

16

The Court of Appeals repeatedly substituted its own

view of the facts for the jury’s well-supported findings

and otherwise failed to weigh and consider in context: (i)

the interrelationship among the above-considered aspects

of the 110 program to which it specifically referred, and

their relationship to other relevant acts and circumstances

evidencing exclusionary purpose or effect; (ii) the proven

anticompetitive intent and effect of Kodak’s conduct; (iii)

the nature and structure of the markets involved; (iv) the

persistence of Kodak’s monopoly in the camera market and

the extent to which its domination of that market derived

from its monopoly in the film market; (v) the significance

of other exclusionary conduct, including the proven $1

violations, which helps explain the origins of Kodak’s

camera market monopoly; and (vi) the lack of persuasive

evidence that the camera monopoly was due to innovation

or superior business acumen.

D. Section 2 Violations in the Photofinishing and

Photofinishing Equipment Markets

The photofinishing of Kodacolor II in the 110 format re-

quired radically different processing equipment, materials :

and procedures from those of its predecessors. For a

limited time after introduction, Kodak alone could offer

processing for Kodacolor II or 110. Independent photo-

(footnote continued from preceding page)

millions of individuals is wholly inconsistent with abundant con-

trolling authorities. See, ¢.g., Zenith Radio Corp. v. Hazeltine Re-

search, Inc., 395 U.S. 100, 121 (1969); Bigelow v. RKO Radio

Pictures, Inc., 327 U.S. 251 (1946); Story Parchment Co. v. Pater-

son Parchment Paper Co., 282 U.S. 555, 561 (1931) : Eastman Kodak

Co. v. Southern Photo Materials Co., 273 U.S. 359, 377 (1927) ;

Pacific Coast Agricultural Export Ass’n v. Sunkist Growers, Inc.,

526 F.2d 1196 (9th Cir. 1975), cert. denied, 425 U.S. 959 (1976) ;

Richfield Oil Corp. v. Karseal Corp., 271 F.2d 709 (9th Cir.), cert.

denied, 361 U.S. 961 (1959); William H. Rankin Co. v. Associated

Bill Posters of United States and Canada, 42 F.2d 152 (2d Cir.),

cert. denied, 282 U.S. 864 (1930).

17

finishers such as Berkey could enter the field only by

purchasing overpriced and inefficient equipment and mate-

rials from Kodak. The jury explicitly found that Kodak

had used its film monopoly to gain competitive advantage

in the photofinishing and photofinishing equipment markets

(183a). The trial judge referred to “unquestionably suffi-

cient evidence, that defendant had used its film monopoly

. . . to injure plaintiff as a photofinisher’’ (120a). He

upheld damage awards for Berkey’s lost profits as a photo-

finisher in the amount of $55,700 and for overcharges on

the equipment in the amount of $19,000 and awarded

equitable relief (144a-47a, 138a-40a; A 571-73).

The Court of Appeals recognized that Kodak had

engaged in “shoddy treatment’’ (58a) of independent

photofinishers and thereby gained competitive advantage,

but held this not to be cognizable under the Sherman Act.

It further observed that the evidence may have supported

the jury’s finding of leveraging in violation of § 2 (60a).

However, cryptically concluding that the instructions to the

jury did not ‘‘draw with sufficient sharpness the distinction

between exercises of power and the natural benefits of size

and integration’’ (61a), it set aside the jury’s verdicts and

remanded the matters for a new trial.* The Court’s

determination did not depend on any denied request to

charge or denied request for a special finding.

* There is a manifest inconsistency between this observation

and the Court’s rulings that the jury erred in concluding that the

Kodak film monopoly was used to leverage its position in the cam-

era market and that the advantages that Kodak derived in the

camera market from its film monopoly were ‘‘solely a benefit of

integration’’ and therefore, per se lawful (supra, pp. 6-7, 14).

** A purported ambiguity in the instructions, just as any other

claimed error in instructing the jury, can support a reversal only

if specifically objected to below. Griggs v. Firestone Tire & Rub-

ber Co., 513 F.2d 851, 857 (8th Cir.), cert. denied, 423 U.S. 865

(1975) ; Lnttle v. Green, 428 F.2d 1061, 1069-70 (5th Cir.). cert.

denied, 400 U.S. 964 (1970).

18

E. Kodak’s Monopolization of the Film and Paper

Markets in Violation of Section 2 of the Sherman Act

1. Proceedings in the District Court

Berkey, as a direct purchaser of film and color paper

from Kodak, proved the extent of Kodak’s mo polistie

overpricing by demonstrating what the pricing would have

been in the absence of monopoly power found to have been

unlawful.** Consistent with Kodak’s position (A 1795)

that the film pricing of others was the best point of refer-

ence for measuring overcharges,” the only theory of film

damages which was permitted to go before the jury was

based on all available proof of film sales and pricing by

others. Analogous data were presented as to color paper

and this was supplemented by a showing of Kodak’s own

price cuts in the face of incipient competition. Extensive

evidence and argument were presented by Kodak to explain

its price premium. The jury was instructed that it could

award damages only to the extent that Kodak’s higher

prices were attributable to its unlawful monopolization

(A 458-64), and that no damages were to be awarded to

the extent that any price premium for Kodak film or paper

“was in whole or in part accounted for by circumstances

and conduct on Kodak’s part that were lawful and per-

missible—such factors as higher quality, better marketing

methods, superior service, customer preference, and other

elements urged by the defendant” (A 461, 464).

The District Judge upheld the jury award of $11,500,000

in damages for excessive prices paid for film. He found,

*° Kodak’s counsel conceded that ‘‘the film market .. . has been

a market where there has not been price competition and where

Kodak has been able to price its products pretty much without

regard to the products of competitors’’ (1la),

*° In view of the fact that Kodak has at all times since at least

1915 enjoyed monopoly share and power in the film market (E 1554,

1643), it was impossible to refer to actual experience of Kodak film

pricing in a competitive climate.

19

however, that there was insufficient evidence of anticom-

petitive conduct during the limitations period to uphold

the color paper award (138a). Accordingly, the paper

award in the amount of $8,803,000 was set aside.

2. Opinion of the Court of Appeals

Recognizing “a dearth of cases on point”, the Court of

Appeals held that the measure of damages applied by this

jury was erroneous, and that the proper measure of dam-

ages ‘‘is the price increment caused by the anticompetitive

conduct that originated or augmented the monopolist’s con-

tro] over the market” (7la). The Court of Appeals ac-

knowledged that the rule of damages which it enunciated

—and which we respectfully submit is substantively inap-

propriate and procedurally unworkable (see Point IV,

infra)—was novel (71a-73a) and “difficult” to apply (75a).

As noted (supra, p. 7), although the Court of Appeals

found error prejudicial to Kodak only in the damage as-

pects of the film and paper claims, it reversed and remanded

for a new trial on liability as well as damages (75a).

REASONS FOR GRANTING THE WRIT

I. Supreme Court guidance is urgently required

so that the lower courts may know whether

the avulsive changes in § 2 jurisprudence here

applied by the Second Circuit should hence-

forth be applied in lieu of traditional stand-

ards which other circuits are following.

United States v. Grinnell Corp., 384 U.S. 563 (1966), this

Court’s most recent opinion on §2 of the Sherman Act,

confirmed that the national policy embodied in that statute

reflects a condemnation of the evils of persistent monopoly

power and makes the possession of such power unlawful

unless attributable solely to practices devoid of exclusion-

20

ary purposes or effects.*” Grinnell was an affirmation of

Alcoa,* which, along with United Shoe Machinery, contin-

ues to be the essential statement of the standards by which

conduct related to the acquisition or maintenance of mo-

nopoly power is to be tested.2* The District Judge ap-

plied these principles in the charge to the jury (108a) in

a manner which was “if anything, more lenient toward

Kodak than the stringent rule of Alcoa”’ (1lla). Recently,

the Ninth Cireuit in Greyhound Computer Corp. v. IBM

Corp., 559 F.2d 488 (9th Cir. 1977), cert. denied, 434 U.S.

1040 (1978); the District Court and the Third Circuit in

SmithKline Corp. v. Eli Lilly & Co., 427 F. Supp. 1089

(E.D.Pa. 1976), aff’d, 575 F.2d 1056 (3d Cir.), cert. de-

nied, 439 U.S. 838 (1978); the Seventh Circuit in Sargent-

Welch Scientific Co. v. Ventron Corp., 567 F.2d 701 (7th

Cir. 1977), cert. denied, 439 U.S. 822 (1978) ; and the F.T.C,

in Borden, Inc., 3 Trade Reg. Rep. 121,490 at 21,504 (FTC

1978) reaffirmed these principles.

In setting aside the camera verdicts and exculpating a

persistent*? monopoly which was convincingly shown to be

the product of deliberately exclusionary conduct, the Sec-

ond Circuit has ignored the purpose or intent of acts which

** See, e.g., Continental Ore Co. v. Union Carbide & Carbon

Corp., 370 U.S. 690, 709 n, 14 (1962) ; United States v. Griffith,

334 U.S. 100 (1948) ; American Tobacco Co. v. United States, 328

U.S. 781 (1946) (quoting at length from Alcoa and endorsing its

essential teachings, 328 U.S. at 813); United States v. Aluminum

Co. of America, 148 F.2d 416 (2d Cir, 1945) (‘‘Aleoa’’) ; United

States v. Grinnell Corp., 236 F. Supp. 244 (D.R.I. 1964), aff’d

except as to relief, 384 U.S. 563 (1966); United States v. United

Shoe Machinery Corp., 110 F. Supp. 295 (D.Mass. 1953), aff’d per

curiam, 347 U.S. 521 (1954).

** L. Sullivan, Handbook of the Law of Antitrust 97 (1977).

7° L. Sullivan, supra at 95.

*° The January 1979 Report of the National Commission for

Review of Antitrust Laws and Procedures observes (p. 156) that

it is appropriate to presume that the possessor of persistent monop-

oly power has violated § 2.

21

enhanced Kodak’s monopoly power, despite Grinnell’s

prohibition of “willfully secured or maintained monopoly

power,” and its own condemnation of monopoly power

as ‘inherently evil’? (17a) and unlawful if ‘‘coupled with

the purpose or intent to exercise that power’’ (Zla). It

concluded that the Grinnell opinion had sub silentio aban-

doned Alcoa’s “thrust upon” formulation (19a),** and

elsewhere dismissed this seminal antitrust opinion as a

‘‘litigant’s wishing well’’ (18a). Clearly, the Second Cir-

cuit acted in conflict with the well-recognized rule that § 2

liability does not depend upon proof of any unlawful or

predatory conduct or act. Hanover Shoe, Inc. v. United

Shoe Machinery Corp., 392 U.S. 481, 498-99 (1968) ; Amer-

tcan Tobacco Co. v. United States, supra at 809; Grey-

hound Computer Corp. v. IBM Corp., supra at 498; United

States v. United Shoe Machinery Corp., supra at 345,

where liability was predicated on conduct whose lawfulness

had already been upheld, see 110 F. Supp. at 348 and

Hanover Shoe, supra at 500.**

** The importance of intent in antitrust litigation was again em-

phasized in United States v. United States Gypsum Co., 438 U.S.

422, 436 n. 13 (1978), a §1 case; Sargent-Welch Scientific Co. v.

Ventron Corp., supra at 712, and Response of Carolina, Inc. v.

Leasco Response, Inc., 5387 F.2d 1307, 1330 (5th Cir. 1976), re-

cent § 2 cases.

* But see Grinnell, supra, 384 U.S. at 576 n. 7, where this

Court explicitly declined to reach Judge Wyzanski’s parallel po-

sition that the plaintiff’s burden of proving monopolization is sat-

isfied by a showing of persistent monopoly power.

°° When, without the citation of authority, the Court of Appeals

distinguished the exclusionary joint introduction of products by a

monopolist from a per se illegal tie-in because of the absence of

; ‘“‘eoercion’’ (49a-50a), it also contravened the explicit holding of the

Third Circuit in SmithKline Corp. v. Eli Lilly & Co., supra, 575

F.2d at 1061 n. 3; see also Austin, The Individual Coercion Doctrine

in Tie-Ins Analysis: Confusing and Irrelevant, 65 Cal. L. Rev. 1143,

1176-80 (1977) ; Note, Innovation Competition: Beyond Telex v.

IBM, 28 Stan. L. Rev. 285, 296-97 (1976) ; Comment, Physical

Tie-Ins as Antitrust Violations, 1975 U. Ill. L. F. 224.

SERENE nT oe oa ee

22

The continuing vitality of Alcoa, American Tobacco (and

its approval of Alcoa), United Shoe and Grinnell and the

application of their principles in Greyhound, Borden and

the other cases above cited, have thus been squarely brought

into question by this opinion. The ability of § 2 of the Sher-

man Act to deal with monopolization has been severely

undermined. The threat to effective § 2 enforcement result-

ing from the Second Circuit’s aberrational result will be

particularly acute with respect,to unilateral monopolization,

as distinct from monopolization involving combination or

acquisition, since this Court has heretofore provided so

little express guidance on this issue,** which is of such

critical importance to the further proceedings in this

action®® and numerous other cases of national moment now

pending.**

**In fact, this case appears to be the first private action tried

to a jury so clearly presenting the issue. The question was pre-

sented and the paucity of this Court’s guidance on the matter was

noted in the Petition for Writ of Certiorari to the Court of Ap-

peals for the Tenth Circuit in Telex Corp. v. IBM Corp., Doe. No.

74-1518 at pp. 26-30. That petition was withdrawn prior to a ruling

by this Court.

*° Particularly in the light of the Court of Appeals’ determina-

tion that culpable conduct must be related to price increments in

proving film and paper overcharge damages.

**See GAF Corp. v. Eastman Kodak Co., 73 Civ. 1893

(S.D.N.Y.) ; Pavelle Corp. v. Eastman Kodak Co., 73 Civ. 4126

(S.D.N.Y.) ; Fotomat Corp. v. Eastman Kodak Co., 78 Civ. 351

(S.D.Cal.) ; and Argus, Inc. v. Eastman Kodak Co., 79 Civ. 4525

(S.D.N.Y.), where further proceedings and jury trials are an-

ticipated following the outcome of this case; Greyhound Com-

puter Corp v. IBM Corp., 559 F.2d 488 (9th Cir. 1977), cert.

denied, 434 U.S. 1040 (1978), remanding for jury trial in a deci-

sion which sharply conflicts, in principle at least, with the instant

opinion of the Second Circuit; further proceedings, following hung

juries after lengthy trials, are anticipated in ILC Peripherals

(footnote continued on following page)

23

The conflicts among the leading authorities which the

Second Circuit referred to and created, and the important

and novel questions regarding §2 of the Sherman Act

which that Court purported to resolve (7a, 14a, 19a, 40a,

7la-73a) by enunciating unprecedented doctrines so in-

imical to antitrust policy and enforcement, are matters

which urgently require immediate consideration by this

Court.

(footnote continued from preceding page)

Leasing Corp. v. IBM Corp., 458 F. Supp. 423 (N.D.Cal. 1978)

(‘‘Memorex’’) and Transamerica Computer Corp. v. IBM Corp.,

73 Civ. 1832 (N.D.Cal.), both involving claims of exclusionary

product interface design and introduction to maintain and leverage

monopoly power; California Computer Products, Inc. v, IBM Corp.,

1979-1 Trade Cas. {] 62,713 (9th Cir. 1979) involving, among other

claims, the asertion that IBM used its main frame computer domi-

nance to make design changes to exclude peripheral equipment man-

ufacturers—rehearing en banc of the decision affirming a defend-

ant’s directed verdict has been sought and is deemed to be of suffi-

cient moment by the Ninth Circuit to require briefing by the defend-

ant; SmithKline Corp. v. Eli Lilly & Co., where the application of

the law as to § 2 liability differed radically from that of the Court

of Appeals below (427 F. Supp. 1089 [E.D.Pa. 1976], aff’d, 575

F.2d 1056 [3d Cir.], cert. denied, 439 U.S. 838 [1978]) is ecur-

rently being tried as to damages; SCM Corp. v. Xerox Corp., 463

F. Supp. 983 (D. Conn, 1978), following a ten-month jury trial

was certified by the Second Circuit on May 25, 1979 for inter-

locutory appeal under 28 U.S.C. § 1292(b), and involves the ques-

tion of liability for damages resulting from monopoly power will-

fully acquired or maintained; and compare the amended com-

plaint in United States v. IBM Corp., 69 Civ. 200 (S.D.N.Y.,

filed Jan. 14, 1975), presently on trial and the complaint in

United States v. AT&T, 74 Civ. 1698 (D.D.C., filed Nov. 20,

1974), both involving §2 charges including allegations of mis-

use of monopoly power by multiproduct companies. See also

Purex Corp. v. Procter & Gamble Co., 596 F.2d 881 (9th Cir.

1979), remanding for a jury trial in an opinion which sharply

conflicts, in principle at least, with the opinion below as to the

lawfulness of the use of the power of a multiproduct company.

24

II. The Court of Appeals raised important issues

as to the roles of a jury and appellate review

in complex cases by substituting its view of

the facts for that of the jury and failing to

assess the evidence as a whole.

In Continental Ore Co. v. Union Carbide & Carbon Corp.,

370 U.S. 690 (1962), the Ninth Circuit had separately

reviewed each of the matters relied on by an antitrust

plaintiff and found none, standing alone, sufficient to sus-

tain a finding of violations or injury. This Court reversed

and observed that:

“It is apparent . . . that the Court of Appeals ap-

proached Continental’s claims as if they were five

completely separate and unrelated lawsuits. We think

this was improper. In eases such as this, plaintiffs

should be given the full benefit of their proof without

tightly compartmentalizing the various factual com-

ponents and wiping the slate clean after scrutiny of

each.” 370 U.S. at 698-99.

See also Ohio-Sealy Mattress Manufacturing Co. v. Sealy,

Inc., 585 F.2d 821, 827-28 (7th Cir. 1978), cert. denied, 99

S. Ct. 1267 (1979), rejecting reliance by defendant on the

fact that each of its allegedly improper acts had been held

lawful as “missing the mark” since the evidence must be

viewed “as a whole”; Engine Specialties, Inc. v. Bombar-

dier Ltd., 1979-2 Trade Cas. 62,770 at 78,418 (1st Cir.

1979); Purex v. Procter & Gamble, supra at 888; Phillips

v. Crown Central Petroleum Corp., 1979-2 Trade Cas.

1] 62,743 at 78,210 (4th Cir. 1979) ; United States v. Bottone,

365 F.2d 389, 392 (2d Cir), cert. denied, 385 U.S. 974

(1966); United States v. General Electric Co., 82 F.

Supp. 753, 817 (D.N.J. 1949).

25

The Second Cirecvit’s reversal of the §2 camera claim

verdicts because of its perception of the propriety of the

acts of Kodak, each considered separately and out of con-

text, plainly conflicts with the foregoing authorities. It

is particularly inappropriate in lengthy and complex anti-

trust litigation where the intricacies of market structure,

motive, intent and effect play such important roles and

where, as here, the Court of Appeals found no error in the

manner in which the trial was conducted before an expe-

rienced and able District Judge. Poller v. Columbia Broad-

casting System, Inc., 368 U.S. 464, 473 (1962); Story

Parchment Co. v. Paterson Parchment Paper Co., 282

U.S. 555, 566 (1931); Greyhound Computer Corp. v. IBM

Corp., supra at 499. (See p. 13, supra).

Such a review of a jury verdict and the appellate court’s

factual assumptions in conflict with the verdict (see supra,

pp. 14-15) also violate the Seventh Amendment limitations

upon appellate reexamination of a jury verdict, Atlantic &

Gulf Stevedores, Inc. v. Ellerman Lines, Ltd., 369 U.S. 355,

358-59 (1962) and are alone an appropriate circumstance

for the granting of certiorari. Tennant v. Peoria & Pekin

Union Railway Co., 321 U.S. 29, 30, 34.35 (1944).**° The

importance of early resolution of the issues here involved

is fortified by the consideration of the roles of jury, trial

judge and appellate courts in antitrust and other complex

cases, such as was undertaken in Zenith Radio Corp. v.

Matsushita Electric Industrial Co., 1979-2 Trade Cas.

f] 62,753 at 78,341-48 (E.D.Pa. 1979).

** By rejecting the jury verdict, the Court of Appeals also failed

to accord the opinions of the District Judge upholding the ver-

dicts the deference due them by virtue of the fact that he ‘‘had

conducted the original trial and had watched the case... . unfold

from day to day.’’ United States v. Johnson, 327 U.S. 106, 112

(1946); see Mayor of Philadelphia v. Educational Equality

League, 415 U.S, 605, 621 n. 20 (1974).

26

III. The Court of Appeals has erroneously created

rules of per se legality under § 2 which con-

flict with applicable authorities and precluded

consideration of less restrictive alternatives.

In no instance has this Court approved the classification

of any conduct as per se lawful, and not subject to scrutiny

by a finder of fact in light of its purposes and effects and

all other relevant circumstances. Cf. Continental T.V., Inc.

v. GTE Sylvania, Inc., 433 U.S. 36, 49 and nn. 15 and 16

(1977).

In this case, however, absent an assessment of economic

or social effects or detriment, the Court of Appeals has

immunized as per se legal, conduct associated with prod-

uct introduction, which, as next below demonstrated, has

been recognized to be fraught with anticompetitive

potential.

Leveraging by a monopolist in the manufacture

of related products

It is firmly established, as the Court of Appeals recog-

mizes (22a-24a), that a firm may not employ its monopoly

power in one market to derive a competitive advantage in

another market.” It was explicitly here found at trial that

** This Court has repeatedly condemned classification of conduct

as per se unlawful under the Sherman Act in the absence of the

most compelling demonstration that it has a pernicious anticom-

petitive effect and lacks any redeeming virtue. Broadcast Music

Inc. v. Columbia Broadcasting System, Inc., 99 S.Ct. 1551 (1979) ;

National Society of Professional Engineers v. United States, 435

U.S. 679 (1978); Continental T.V., Inc. v. GTE Sylvania, Inc.,

supra at 49-56; White Motor Co. v. United States, 372 U.S. 253,

263 (1963); Northern Pacific Ry. Co. v. United States, 356 U.S.

1, 5 (1958).

** See, e.g., Otter Tail Power Co. v. United States, 410 U.S. 366

(1973) ; United States v. Griffith, 334 U.S. 100 (1948) ; Eastman

Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359 (1927) ;

(footnote continued on following page)

27

Kodak had deliberately used its film monopoly to the injury

of Berkey in the camera and other markets in a manner

which Judge Frankel described as “a deliberate, anticom-

petitive mode of economic warfare rather than unobjection-

able competition on the merits’’ (157a; see also 109a-12a).

The Court of Appeals, however, determined that de-

liberately exclusionary conduct, involving leveraging as-

sociated with simultaneous product introduction by a

monopolist and a variety of other means of securing com-

petitive advantages from presence in a variety of markets,

is protected from § 2 scrutiny solely by virtue of the “in-

tegrated” nature of its business (25a).“° No authority

was cited to support the Court of Appeals’ conclusions, and

prior decisions preclude insulating such conduct from the

analysis made in the trial court as to its purpose and

effect.

(footnote continued from preceding page)

SmithKline Corp, v. Eli Lilly & Co., supra; Sargent-Welch Scien-

tific Co. v. Ventron Corp., supra; Greyhound Computer Corp. v.

IBM Corp., supra; City of Mishawaka, Indiana v. American Elec-

tric Power Co., 465 F. Supp. 1320 (N.D.Ind. 1979).

*°The Court of Appeals’ rejection of an inquiry as to the pur-

pose or effect of the conduct here involved and its broad approval

of a firm’s enjoyment of the ‘‘competitive advantages’’ of inte-

gration cannot be reconciled with its suggestion that it was not

adopting a per se rule for product introductions by such a firm

(46a n.30), particularly when both Kodak and the District Court

recognized that the adoption of such a rule was essential for Kodak

to prevail (105a-08a). (See also pp. 6-7, supra.)

“See Continental T.V., Inc. v. GTE Sylvania, Inc., supra at

d7 n. 26; Fortner Enterprises, Inc. v. United States Steel Corp.,

394 U.S. 495, 509 (1969); United States v. Paramount Pictures,

Inc., 334 U.S. 131, 174 (1948) ; United States v. Yellow Cab Co.,

332 U.S. 218, 227 (1947) ; Purex v, Procter & Gamble Co., supra;

Sargent-Welch Scientific Co. v. Ventron Corp., supra; Greyhound

Computer Corp. v. IBM Corp. supra; SmithKline Corp. v. Eli

Lilly & Co., supra; United States v. United Shoe Machinery Corp.,

supra at 340.

28

lui United States v. Paramount Pictures, Inc., supra, in-

volving leveraging made possible by integration, this Court

stated that the legality of the conduct employing the bene-

fits of integration turned on such factors as the purposes

with which it was conceived, the power it created and the

attendant intent and effect. Following the teachings of

Alcoa, the Court stated that such conduct of a vertically

integrated enterprise would be unlawful if it encompassed

& power to exclude competition and a purpose or intent to

do so.

In Fortner Enterprises, Inc. v. United States Steel Corp.,

supra, this Court noted that while the advantages of in-

tegration alone are not condemned, this power in one

market should not be used to exert economic power over

other product lines that the company produces no more

efficiently than its competitors. Jd. at 509; see also

United States v. United Shoe Machinery Corp., supra at

340, where the potential for the pernicious exclusion of

competition inherent in the integrated monopolist was

clearly recognized.

The opinion of the Court of Appeals ignores the par-

ticularly apposite admonitions against the use of the

“Commentators observe that integration presents anticom-

petitive potential and must be judged by no more permissive a

standard than the rule of reason. 0. Williamson, Markets and

Hierarchies: Analysis and Antitrust Implications 118 (1975) ; Blair

and Kaserman, Vertical Integration, Tying, and Antitrust Policy,

68 Am. Econ. Rev. 397, 401 (1978) ; Kaserman, Theories of Ver-

tical Integration, Implications for Antitrust Policy, 23 Antitrust

Bull. 483, 507-09 (1978) ; see Kahn, Standards for Antitrust Policy,

67 Harv. L. Rev. 28, 44-46, 54 (1953) ; Levi, A Two-Level Monop-

oly Law, 47 Nw. U. L. Rev. 567, 583-84 (195.2). Section 7 of the

Clayton Act, of course, also, reflects an awareness of the anticom-

petitive potential of integration, see Brown Shoe Co. v. United

States, 370 U.S. 294 (1962) and FTC. v. Procter & Gamble Co.,

386 U.S. 568 (1967). In Purezx v. Procter & Gamble Co., supra,

the Ninth Circuit recently commented upon the anticompetitive

potential of certain conduct which was based on being a multi-

product firm.

29

powers of the integrated monopolist to disadvantage com-

petitors and preclude competition on the merits. See

Fortner, swpra, and United States v. United Shoe, supra;

Comanor, Vertical Mergers, Market Power and the

Antitrust Laws, 57 Am. Econ. Rev. 254-265 (1967) ; Caves

& Porter, From Entry Barriers to Mobility Barriers: Con-

jectural Decisions and Contrived Deterrence to New Com-

petitors, 91 Q.J. Econ. 241, 246-47 (1977).

This Court should determine whether any true social ad-

vantages which may be found to inhere in the ability to

operate as a multiproduct firm, without the restraints of

§ 2, and monopolize several separate markets, should out-

weigh the values reflected in the antitrust laws which have

at all prior times mandated inquiry as to the purpose or

effect of conduct by an integrated firm under a rule of

reason test.

Predisclosure unrelated to technological ad-

vances or inventions but essential for preserva-

tion of competition

As earlier demonstrated, § 2 precedents require the con-

sideration of all aspects of a monopolist’s conduct in de-

termining the lawfulness of its monopoly. Rather than

excluding predisclosure from such appropriate considera-

tion, Response of Carolina, Inc. v. Leasco Response, Inc.,

supra at 1330, alluded to by the Court of Appeals (41a),

would find a violation where predisclosure was withheld

and complementary products were shown to have been de-

signed by a monopolist for exclusionary purposes ‘‘rather

than to achieve some technologically beneficial result.’’ In

Memorez, supra at 437, the court found it significant that

it did not appear that others ‘‘cannot compete with IBM”’

in the absence of predisclosure. Judge Frankel’s instrue-

tion on predisclosure (A 265-66)—held faulty by the Court

of Appeals—framed the very inquiry contemplated by

Memorex and was, read in context with extensive surround-

ing caveats, consistent with Response of Carolina, supra.

Moreover, the concerns expressed in Memorex as to the

30

right to protect technical secrets are not here apposite

since the disclosure contemplated in this case did not relate

to film technology or any aspect of camera design (supra,

pp. 11-12).

The authorities which condemn monopolists who deny

competitors access to an essential resource, e.g., Associated

Press v. United States, 326 U.S. 1 (1945) and Otter Tail

Power Co. v. United States, 410 U.S. 366 (1973), also es-

tablish that it was proper for the jury to have been per-

mitted to consider whether Kudak’s decision not to predis-

close, in the light of other conduct determined to be anti-

competitive, had a similar exclusionary effect.*

The manifest propriety of allowing the fact finder to

consider whether the monopolist has employed ‘‘the least

restrictive way of achieving [its] legitimate purpose’’, IIT

P. Areeda & D. Turner, Antitrust Law 75-76 (1978), sup-

ports the consideration of predisclosure solely as a means

of ameliorating the effects of anticompetitive conduct as

was done in the District Court. As a recent law review ar-

ticle observed:

‘‘ Allowing the jury to consider evidence indicating fail-

ure to predisclose was appropriate because the lack

of predisclosure was merely one factor which estab-

lished a course of unlawful monopoly conduct. The

Berkey court’s instructions suggest, however, that

failure to predisclose by itself is not the type of con-

duct which infringes section 2.” Note, The Predis-

closure Requirement, 10 Rut.-Cam. L.J. 395, 421 (1979).

See also Comment, Physical Tie-Ins as Antitrust Viola-

tions, swpra at 224, 235 ( 1975) ; Schwartz, Berkey-Kodak

Verdict No Cause for Panic, N.Y.L.J .» May 1, 1978 at 1.

Accordingly, Judge Frankel’s charge on predisclosure

and the jury’s consideration of the matter were not im-

“Cf. relevant portion of Judge Frankel’s charge to the jury

(A 265-66).

31

proper or validly the basis for reversal of the 42 camera

claim verdicts and the contrary conclusion of the Court of

Appeals, arrived at without meaningful precedential sup-

port (40a), should be reviewed so as to avoid confusion on

the matter which the opinion below has engendered.

IV. In deciding a question of first impression, the

Court of Appeals ruled that, to recover dam-

ages, a direct purchaser of overpriced prod-

ucts from a monopolist must relate price

movements to specific anticompetitive acts.

This requirement is substantively unsound

and would procedurally inhibit private dam-

age actions and preclude recovery.

As early in the history of the Sherman Act as 1906, this

Court upheld a recovery in a price fixing conspiracy for

overcharges by a direct purchaser based on ‘the difference

between the price paid and the market or fair price that

the [plaintiff] would have had to pay under natural con-

ditions’’ holding that ‘‘the fact that the sale was not so

connected in its terms with the unlawful combination as to

be unlawful [citation omitted] in no way contradicts the

proposition that the motives and inducements to make it

were so affected by the combination as to constitute a

wrong.’’ Chattanooga Foundry & Pipe Works v. City of

Atlanta, 203 U.S. 390, 396, 397 (1906). In Thomsen v.

Cayser, 243 U.S. 66 (1917), this Court reversed the Second

Circuit and reinstated a jury verdict for overcharged cus-

tomers, rejecting defendants’ contention that it was not

shown that plaintiffs were injured by the illegal combina-

tion. The Court stated:

‘‘[t]he plaintiffs alleged a charge over a reasonable

rate and the amount of it. If the charge be true that

more than a reasonable rate was secured by the com-

bination, the excess of over what was reasonable was

an element of injury (citation omitted). The unrea-

32

sonableness of the rate and to what extent unreason-

able was submitted to the jury, and the verdict repre-

sented their conclusion.’’ 243 U.S. at 88.

The claim that the jury considered “‘supposititious profits’?

was answered by the Court’s observation that an admoni-

tion was given to the jury against speculation. Compare

Phillips v. Crown Central Petroleum Corp., supra at 78,216,

where very recently the Fourth Circuit applied these

principles, and observed that in calculating damages the

District Court was entitled to use what it perceived to be

“‘the best approximation” of what the price would have

been in the absence of the violation.

In Hanover Shoe Inc. v. United Shoe Machinery Corp.,

supra, a § 2 case, this Court followed the authorities first

above cited (id. at 489-90), and upheld the right of a direct

purchaser to recover from a monopolist the full amount

of an overcharge.* The Court noted that “ [nJormally the

impact of a single change in the relevant conditions cannot

be measured after the fact,’’ and recognized the difficulty

of determining the impact of individual events on price

movements ‘‘in the real economic world rather than an

economist’s hypothetical models.’’ Jd. The Opinion states

that if it were necessary to try to determine such hypotheti-

cal economic effects, “[t] reble-damage actions would often

require additional long and complicated proceedings in-

volving massive evidence and complicated theories” (id.

at 493-94). Seeking to avoid such complexity or the un-

desirable results of allowing violators to “retain the fruits

of their illegality,” the Court reversed the judgment of

the Court of Appeals to the extent it had set aside the

District Court’s computation of damages.

** Judge Frankel also believed that price fixing principles and

authorities were here controlling (see 129a-133a).

33

In Illinois Brick Co. v. Illinois, 431 U.S. 720, 724-25

(1977), this Court restated the last mentioned concerns

expressed in Hanover Shoe; quoted at length from the

discussion in Hanover Shoe as to the unproductive burdens

inherent in attempting to explain a company’s pricing

policy (id. at 725 n. 3); and cautioned against “the costs

to the judicial system and the efficient enforcement of the

antitrust laws” (id. at 732) of a rule which embroiled a

trial in such an economic morass.

The above authorities reflect the fundamental tenet that

private treble damage actions play a vital and salutary

role in antitrust enforcement and should be €ncouraged.

See, e.g., Illinois Brick, Supra. at 745 and pp. 35-36 infra.

As stated in Radovich v. NFL, 352 U.S. 445, 454 ( 1957), the

courts “should not add requirements to burden the private

litigant beyond what is specifically set forth by Congress

in [the antitrust] laws.”

Trial and appellate courts alike have been enjoined by

this Court to:

“. . . observe the practical limits of the burden of

proof which may be demanded of a treble-damage plain-

tiff who seeks recovery for injuries from a partial or

total exclusion from a market; damage issues in these

cases are rarely susceptible of the kind of concrete,

detailed proof of injury which is available in other

contexts. The Court has repeatedly held that in the

absence of more precise proof, the factfinder may

‘conclude as a matter of just and reasonable inference

from the proof of defendants’ wrongful acts and their

tendency to injure plaintiffs’ business, and from the

evidence of the decline in prices, profits and values,

not shown to be attributable to other causes, that

defendants’ wrongful acts had cansed damage to the

34

plaintiffs.’ ’’ Zenith v. Hazeltine, supra, 395 U.S. at

123-24.

Accordingly, any uncertainty as to the amount of damages

is to be resolved against the wrongdoer. Bigelow v. RKO

Radio Pictures, Inc., 327 U.S. 251, 264-65 (1946). See also

Story: Parchment Co. v. Paterson Parchment Paper Co.,

supra; Eastman Kodak Co. v. Southern Photo Materials

Co., 273 U.S. 359 (1927).

Although no prior decision has considered the method of

quantifying damages of a direct purchaser from a

monopolist, the rule of damages applied in the District

Court for determining the film and paper overcharges is

wholly in accord with the foregoing authorities. It was, as

previously demonstrated (supra, p. 18), based on all

relevant proof required to show the difference between the

prices which would have prevailed in the absence of

monopolization and the unconscionably high prices defend-

ant was able to exact as a result of the wrongs which § 2

interdicted—i.e., monopolization—the illegally obtained or

maintained power to fix or establish prices. All proffered

proof and argument which would permit the jury to assess

the extent to which defendant’s price premium derived from

legitimate factors were received and the jury was specif-

ically instructed to exclude from its award any element of

Kodak’s pricing attributable to lawful or permissible

circumstances.*®

The rule enunciated by the Court of Appeals would,

on the other hand, base the damage award not on the inter.

** At the prices for Kodak film and paper which would have

prevailed in the absence of Kodak’s monopolization of the markets,

as reflected in the jury damage awards, Kodak’s earnings on sales

or return on investment would still have been in the extraordinar-

ily high 30-40 percent range for film and 40-50 percent range for

paper.

35

dicted, improperly acquired power to fix prices, but on in-

dividual acts, despite the fact that as that Court observed,

§2 is “aimed primarily not at improper conduct, but a

pernicious market structure” (16a). Additionally, this

formulation entails the Staggering** tasks of proving and

identifying all of the forces that influence the monopolist’s

pricing*’ and the individual effects of each, despite this

Court’s recognition that it cannot be done and should not

be attempted.

CONCLUSION

The result below can only serve to undermine

‘the private enforcement of the antitrust laws which

this Court has declared to be essential to the preservation

of competition. Reiter v. Sonotone Corp., 99 S.Ct. 2326

(1979); Hawaii v. Standard Oil Co., 405 U.S. 251,

262 (1972); Zenith Radio Corp. v. Hazeltine Research, Inc.,

395 U.S. 100, 130-31 (1969); Perma Life Mufflers, Inc. v.

International Parts Corp., 392 U.S. 134 (1968). Signif-

icantly, it was specifically because of a perceived threat to

*© The Court of Appeals observed ( 75a): ‘It may, of course,

be difficult for a purchaser to demonstrate that conduct occurring

many years before the commencement of suit contributed to an

overcharge that it paid within the limitations period.’’

‘7 If the views of the Court of Appeals prevail, it would behoove

plaintiffs to prove all manner of a defendant’s conduct, including

that which is otherwise lawful or remote, that questionably was

exclusionary, and it would be necessary for the trier of fact to

determine each such claim. On the other hand, a comprehensive

review of other conduct of defendant and competitors would pre-

sumably also be required to weigh the relative importance and

quantitative significance of the exclusionary conduct. As a con-

Sequence, actions of this kind, which are now uncomfortably long,

would be further extended.

36

“the effectiveness of the private action as a vital means for

enforcing the antitrust policy of the United States” that

certiorari was granted in Perma Iife, swpra at 136.

For the reasons stated, the petition for writ of cer-

tiorari should be granted.

Respectfully submitted,

Auvin M. Ste

530 Fifth Avenue

New York, New York 10036

Attorney for Petitioner

Of Counsel:

Barry J. Brett

Marx I. Scuiestncer

Avrora CASSIRER

Mark D. Orren

Parker CuHapin Fuatrav & Kump.

NeEuMAN, WiuuiaMs, ANDERSON & OLSON

Year

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

Source E1185 E 1185

Market Share

Units % $%

61 64

67 69

71 70

66 73

67 69

69 75

72 78

65 77

61 75

65 85

71 90

80 87

74 82

71 75

72 74

73 75

65 70

70 72

69 77

74 79

67 N.A,

63 N.A.,

53 N.A.

al

TABLE 1

CAMERAS

The following are Kodak’s camera sales,

profit data as set forth in the record:

Rate of

Earnings from

Operations

to Sales %

16.8

9.3

16.8

D.7

15.7

23.4

26.0

38.4

44.6

57.0

49,1

45.6

44.7

36.7

42.0

42.5

44.2

40.7

36.5

C 213

market shares, and

Return on

Investment % Sales

126 110 ~=$(000)

10,800

12,200

12,500

15,000

12,200

16,000

13,500

13,800

15,200

25,500

42,200

50,600

65,700

68,500

70,600

74.4 71,600

49.4 60,900

72.2 67,100

93.6 67.0 114,200

85.6 92.3 141,900

59.1 55.0 102,000

46.2 41.3

C 214 C 214 E 1183

EES

The following are Kodak’s film sales,

FILM

data as set forth in the record:

Year

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

Rate of

Earnings

from

Market Share Operations

Units % $% to Sales %

83 89

86 92

86 91

84 91

84 91

85 92

86 93

86 94

86 92

83 91

82 88

82 88

82 88 47.1

85 90 51.6

88 92 54.0

91 93 55.0

90 92 57.6

89 92 56.3

87 89 55.7

87 89 59.4

88 90 57.9

87 55.6

87 55.5

86 56.3

59.2

Sovroe E 1286 E 1287 © 210

Return on

Invest-

ment %

58.0

64.9

714

71.6

71.5

64.9

61.7

63.5

68.1

63.3

67.2

66.7

C 236-37

Sales

$(000)

76,912

75,063

82,387

96,221

104,609

114,570

125,215

126,569

126,982

126,705

120,277

138,010

167,479

187,311

222,817

241,740

246,413

260,453

269,826

304,618

317,419

346,072

383,613

436,806

C 210

market shares, and profit

Earnings

$(000)

65,083

86,466

101,138

122,450

139,358

138,597

144,984

160,281

176,432

176,456

192,019

216,080

258,745

C 210

|

The following are Kodak’s color paper sales,

a3

TABLE 3

COLOR PAPER

profit data as set forth in the record:

Year

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

Rate of

Earnings

from

Market Share Operations

Units % $% to Sales %

Neg.

—69.7

8.7

85 28.1

95 39.9

95 40.9

97 45.9

99 52.9

94 54.4

97 55.1

95 56.5

98 100 57.6

98 96 57.6

94 94 58.9

91 92 61.1

91 91 60.7

89 89 61.0

86 87 63.0

85 87 60.7

76 78 08.3

67 69 58.1

60

Source E 1289 EB 1288 ¢ 9211

While the table indicates sales

period, it was clear that up to 196

competition and was generally consi

color print paper (A 796-97; E 1977).

Return on

Invest-

ment %

49.6

53.3

58.1

58.1

59.9

09.4

59.2

57.0

66.0

63.3

68.4

68.7

C 236-37

Sales

$(000)

14

1,036

4,623

8,993

14,022

16,450

20,017

23,601

28,132

35,812

44,188

57,923

77,054

98,772

113,843

123,592

137,331

164,576

176,202

190,146

190,209

C 211

market shares, and

Earnings

$(000)

—615

—722

404

2,529

5,095

6,727

9,184

12,494

15,309

19,739

24,962

33,378

44,403

58,181

69,560

74,984

83,815

103,723

106,910

110,949

110,494

C 211

by others in the 1958-1966

6 Kodak faced no cognizable

dered to be the sole source of