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

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No. 79-427 f FILED \

) OCT 15 79 fy

IN THE 4

MICHNE® RODAK, JR., CLERK

Supreme Court of the Anited States ——--— —

OCTOBER TERM, 1979

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BERKEY PHOTO, INC.,

Petitioner,

EASTMAN KODAK COMPANY,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

KODAK’S BRIEF IN OPPOSITION

WILLIAM PIEL, JR.

125 Broad Street,

New York, New York 10004.

Counsel for Respondent

ROBERT MACCRATE

JOHN L. WARDEN

RICHARD E. CARLTON

PuHitip K. HOWARD

SULLIVAN & CROMWELL

Of Counsel

October 15, 1979

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TABLE OF CONTENTS

Ceti DOS pos 65 5 Kee ee as véo eee

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ARGUMENT:

I. Controlling precedent mandated the dismis-

sal of Berkey’s camera claim under § 2 of

Ce. I Nn oo ka dion dete eenees

II. The film and paper “overcharge” claims are

not ripe for review, and the court of appeals’

ruling on causation conforms with statutory

nd, GUUS I 6h 6 ov e08 8 6 ccc kb eeee

III. The court of appeals’ remand of the photo-

finishing claims and one § )} damage award

presents no question for this Court. .....

Ce ss 0 cd es Vadis TA ee eae iss

TABLE OF AUTHORITIES

CASES:

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

Fee SEE vs ee ew ee eae eens

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429

CEE Ore Capers oc 66 wire eek weed 20 Ke

Hanover Shoe, Inc. v. United Shoe Machinery

Corp. 79 UE GRe- CEWeee owas vwsecseces

PAGE

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

423 (N.D. Cal. 1978), appeal docketed, No. 78-

sare (oem Cir. Gamt. 12, PPTS) nw. canes 15

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470

ko. SSP sores eeearerele Va See Oe 14

Reiter v. Sonotone Corp., 99 S. Ct. 2326 (1979) .. 16

Standard Oil Co. v. United States, 221 US. |

S08 DRS ele ey ar 2, 12 &n.12, 13

Story Parchment Co. v. Paterson Parchment Paper

CO, Bee We DOF CEMOED 6 acc enasccases 16

Telex Corp. v. IBM, 510 F.2d 894 (10th Cir.),

cert. dismissed, 423 U.S. 802 (1975) ...... 12-13 n.12

EV AV. fem Bat Wi 159 CHISTES) 2. ne cee cree 13

United States v. Aluminum Co. of America, 148

ee ei oe |. } 13 &n.14

United States v. E. I. du Pont de Nemours & Co.,

pe ey | ee 12 n.12

United States v. Griffith, 334 U.S. 100 (1948) .. 12

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

ST Pg Pat os cel a cepa e bce ee ees 12, 13

United States v. Johnston, 268 U.S. 220 (1925) .. 18

United States v. National Lead Co., 332 U.S. 319

5 BARRIS ct RI Rr, a DP eg 15

United States v. United Shoe Machinery Corp., 110

F. Supp. 295 (D. Mass. 1953), aff'd mem., 347

U.S. 521 (1954)

iii

PAGE

CONSTITUTION AND STATUTES:

United States Constitution:

ig pee ee RA OOO 1

Clayton Act:

Section 4, 15 U.S.C. $15 (ISTE) ......... 16

Sherman Act:

Section 1, 15 U.S.C. § 1 (1976) ......... 5, 17, 18

Bees 2. 1S VBR SE CIPIG) occ evecare passim

MISCELLANEOUS:

U.S. DEp’T OF JUSTICE, REPORT OF THE ATTORNEY

GENERAL’S NATIONAL COMMITTEE TO STUDY

THE ANTITRUST LAWS (1955) ...........- 12-13 n.12

P. AREEDA & D. TURNER, ANTITRUST LAW (1978)

12-13 n.12, 17

IN THE

Supreme Court of the United States

October Term, 1979

No. 79-427

BERKEY PHOTO, INC.,

Petitioner,

Vv.

EASTMAN KopDAK COMPANY,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED

STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

KODAK’S BRIEF IN OPPOSITION

Petitioner Berkey Photo, Inc. (“Berkey”) seeks review

of the court of appeals’ disposition of virtually every claim

for damages in this multifaceted, prolonged and factually

complex case. Berkey’s petition repeatedly misrepresents

the reasoning and holdings of the court of appeals, and in

effect asks this Court not for certiorari on the law but for

another appellate review of the evidence adduced at an

8-month trial.

Far from constituting a transgression of the Seventh

Amendment (Pet. 3, 25) or creating “avuisive changes in

§ 2 jurisprudence” (Pet. 19), the court of appeals’ dis-

missal of Berkey’s camera monopolization claim—the only

claim it finally adjudicated in Kodak’s favor—was based

on a careful and comprehensive review of “the evidence and

the possible inferences in the light most favorable to Berkey”

(30a) and a faithful application of the legal principles

consistently articulated by this Court since Standard Oil

Co. v. United States, 221 U.S. 1 (1911).

All the other challenged rulings are interlocutory and

require further proceedings in the district court. Since their

decisional consequence is uncertain, they are not now ripe

for review. Moreover, the court of appeals’ only error

in directing further proceedings on Berkey’s huge film and

paper “overcharge” claims was error in Berkey’s favor, as

discussed in our conditional cross-petition (No. 79-499).

The decision of the court of appeals was rendered after

full consideration of lengthy briefs and several hours of

oral argument canvassing a record of 18,000 transcript

pages and 3,000 exhibits. Its analysis of Berkey’s claims

and the evidence is reasoned and thorough, and presents

no occasion for certiorari.

Questions Presented

1. Was the court of appeals correct in holding that a

plaintiff in a treble-damage action must show wrongful

conduct to establish a violation of § 2 of the Sherman Act

(18a-22a), and that a leading firm’s introduction of new

products without “predisclosure” does not itself constitute

such wrongful conduct (32a-45a)?

2. Was the court of appeals correct in holding that a

treble-damage plaintiff must prove a causal link between

alleged violations of law and alleged injuries and damages

(71a-75a)?

Statement

Eastman Kodak Company (“Kodak”) has been for many

years the leading firm in virtually all phases of the photo-

graphic industry. Berkey has been for many years a leading

photofinishing firm, and as such has been both a competitor

of Kodak in photofinishing and a customer for Kodak’s

films, photographic print papers, and photofinishing equip-

ment and chemicals (4a-5a).

Berkey began to compete with Kodak as a camera manu-

facturer in 1969, when it started producing cameras in

the 126 format (10a; E 1173). The 126 or “Instamatic”

camera, which featured easy cartridge loading, had been

introduced by Kodak in 1963 and by 1969 had virtually

displaced the old box-roll “Brownie” type cameras in the

marketplace (E 1184). In March 1972, after a decade

of development work, Kodak introduced what became the

most successful amateur photographic products in history,

the 1” thick 110 or “Pocket Instamatic” camera, a cor-

respondingly small film cartridge and a new fine-grain

color print film (see 26a, 29a).'

Kodak made relevant specifications of the 110 camera

and its interfacing cartridge, including manufacturing toler-

ances, available to other camera manufacturers for a total

1 Due to lower labor costs, Far Eastern manufacturers have en-

tirely preempted f.oduction of the labor-intensive 35mm camera

and have become a major force in domestic sales of mass market

cameras as well (A 602-03, A 1151-52, E 616). Through product

innovation, manufacturing efficiency and quality control, Kodak has

nonetheless maintained a strong position in mass market cameras

(9a; A 1151-53), and despite increasing challenges for technological

leadership by major Japanese rivals (A 587-88, A 1352, A 1359),

Kodak has held its preeminent position in the development and pro-

duction of highly sophisticated light-sensitive materials, i.e., photo-

graphic films and papers (1la; A 610, A 651, A 2386, E 3166).

Kodak makes a net contribution of about $1 billion annually to

the United States balance of payments and provides tens of thousands

of stable and well-paid jobs.

fee of $60,000 about two months before introducing the

new system (34a-35a; A 1318-20, E 3299, E 3313-16)

and offered them licenses under all its relevant United States

patents for a nominal royalty (a maximum of $10,000

annually) (E 3216e). Kodak refused, however, to accede

to Berkey’s subsequent demand for substantially broader and

much earlier advance disclosure of Kodak’s future innova-

tions, and, in consequence, Berkey filed this action in

January 1973 (A 2233-34, E 1072-76).

Berkey’s principal claim at trial was that Kodak’s intro-

duction of the 110 system without “predisclosure” violated

§ 2 and caused Berkey unlawful injury as a competitor in

the camera and photofinishing markets and as a purchaser

of film and photofinishing equipment (31a-32a, 102a, 120a,

i28a).

Berkey also, however, asserted a multitude of other

claims, under both § 2 and various other provisions of the

antitrust laws. Among the more prominent were claims of

monopolization based on the “quality” of Kodak’s products

(32a, 47a-49a, 113a, 115a), the “need” for Kodak’s prod-

uct innovations (id.), the content of Kodak’s advertising

(28a-29a, 128a) and the fact that Kodak identified its

products as made by it (62a-63a, 135a). Berkey further

charged that Kodak violated § 2 by continually impairing

the product quality of the photofinishing industry (121a),

which produces and delivers to consumers the final products

(prints and slides) made from over 90% of Kodak’s film,

in order to “gain a competitive advantage” for Kodak’s own

photofinishing business.* Berkey also challenged joint de-

2 Kodak’s photofinishing services are priced at a premium, and its

share of this market (color and black & white) declined from 19%

in 1956 to 9% in 1976 (E 619, E 620). Photofinishing contributes

less than 2% of Kodak’s profits (E 1176, E 1177, 215), and

Kodak’s self-interest obviously lies in maximizing the product quality

of the whole photofinishing industry.

velopment projects between Kodak and manufacturers of

flash devices as unlawful under § 1 (80a-87a).°

An allegation not focused on at trial, but heavily empha-

sized in the court of appeals and here, was that Kodak

“consistently refused to make its film available” for new

formats developed by other cainera manufacturers (Pet. 9).

Berkey did not allege that it had ever designed a camera

in a new format, much less that it had been refused Kodak

film for such a camera.‘ It also adduced so little proof

regarding this subject that the district court, though includ-

ing virtually every other of Berkey’s allegations in its

hundred-page charge (A 218-336), refused to include this

one, saying that “if there is any basis for an argument left

here, it seems to me to be minute” (A 2337-39). Berkey

conceded in the court of appeals that it had not stated a

claim for relief based on the supposed unavailability of

Kodak film (43a).°

The Camera Award. Berkey’s camera damage award,

$15,250,000 before trebling, was based solely on Kodak’s

3 Other of Berkey’s claims and charges are listed in the opinion of

the court of appeals (Sa-6a n.1). The allegations of wrongful con-

duct urged by Berkey in support of its paper “overcharge” claim are

discussed in detail in the first of the district court’s two opinions

(133a-138a).

4 Berkey’s own officers acknowledged that “we don’t invent” (E

295) and that its commercial success was due to “fallout from Kodak”

(A 1033).

5 The court of appeals, far from concluding that an unjustified

refusal to make film available would be “irrelevant” (Pet. 14-15), said

that, if proven and shown to cause injury to a plaintiff, it might well

provide a basis for recovery (42a-43a). The only specific evidence

Berkey adduced on film availability related to the Minox “spy cam-

era,” which Berkey had distributed for a foreign manufacturer in

earlier years (A 595-96). Berkey acknowledged that the Minox was

too expensive to be a mass market camera, and it was not a part of

the camera market defined by the jury (A 238, A 2336-37). More-

over, Berkey asserted no claim related to sales of the Minox (43a).

failure to “predisclose” the 110 system so that Berkey

could “be at the starting line when the whistle blows” (A

124). Berkey’s claim of injury was not related to any

decline in its sales from the levels of prior years, but to its

failure to achieve what it claimed was its “fair share” of

the market as expanded by demand for the 110 camera

(45a & n.29). This formulation of Berkey’s damage claim

was necessary because Berkey, like Kodak’s other competi-

tors, had its best years ever after the 110 introduction.‘

The district court sustained the award after “a frequently

subtle, inevitably comprehensive appraisal of [Kodak’s] ac-

tions” (114a) led it to conclude that “the jury could have

found the 110 introduction a scheme contrived almost

® Kodak’s competitors were in the market with their own 110

cameras beginning in late 1972 (29a), and they also enjoyed their

highest camera sales ever with their existing models that year. Ber-

key’s 1972 sales, for example, were 50% higher thar any previous

year (C 392). Kodak’s introduction of the new 110 system, as is

often the case with major product developments, stimulated sales in

the entire market, as shown by the following table:

Domestic Camera Sales 1968-1977, in Millions*

Total Kodak’s Others’ Berkey’s

Year Sales Sales Sales* * Sales

1968 LP. pe 2.1 05

1969 7.3 5.3 2.0 .20

1970 5.8 3.8 2.0 39

1971 6.2 4.3 1.9 46

1972 8.2 5.6 2.5 .73

1973 9.7 Ta y 61

1974 8.3 5.6 2.7 76

1975 8.2 5.2 3.0 .60

1976 8.3 4.3 3.9 84

1977 8.3 3.0 + .78

* Excluding instant, 35mm, professional and movie cameras.

** Including Berkey.

Sources: E 1306, E 1184, E 2493, C 392.

wholly to crush competitors, and scarcely or not at all to

compete by serving consumers better” (113a).’

The court of appeals, “constru[ing] the evidence and the

possible inferences in the light most favorable to Berkey”

and taking into account “the interrelationships among .. .

the individual markets” over many years (8a, 30a), describes

Berkey’s claims and arguments fully, often assuming proof

in support of Berkey’s position where none existed (25a-

55a). Berkey consequently does not dispute any part of the

court’s factual presentation; instead it distorts the court’s

conclusions and then attacks those distortions.®

In ruling on the camera claim, the court of appeals held

that wrongful conduct is an essential aspect of a treble dam-

age claim under § 2, and that the introduction into the

marketplace of new and additional products, far from be-

ing “restrictive” or “anticompetitive,” expands choice and

is the very essence of competition on the merits (18a-22a,

25a-55a).

7 The charge to the jury continually reiterated this supposed dichot-

omy between “benefiting consumers . . . through better products”

and “injury to competitors” by offering consumers the opportunity to

purchase “inferior” products (e.g., A 251, A 255-64). The court of

appeals did not, as Berkey asserts (Pet. 13), condone these and

other aspects of the charge, but expressly rejected them (48a-49a).

8 Though not attacking the factual statements of the court of

—— concerning Kodak’s actions, Berkey paints a black picture

of Kodak’s “intent” (Pet. 11). The documents quoted by Berkey

either say the opposite of what Berkey implies or state proposals that

were not adopted. Thus, the entire point of E 1817 was that the

Pocket Instamatic was not a “cute little camera”; the author of the

“hammerlock” memo was suggesting that Kodacolor II not be em-

phasized in advertising the 110 system, a suggestion that was followed

as the advertising focused on the “pocketable” camera (53a; see

E 2497-2899); and the suggestion in E 1307 that film sales would be

encouraged if the Pocket Instamatic were not priced at a premium,

was rejected, and the Pocket Instamatic was priced substantially higher

than Kodak’s 126 cameras (E 1160, E 1161). Such misrepresenta-

tive recitations of “evidence” are the hallmark of Berkey’s approach

to the judicial process.

The court of appeals did not hold, nor did Kodak ever

assert, that “deliberately exclusionary conduct. . . [should]

be deemed per se lawful . . . because it was . . . associated

with product introduction” (Pet. 3, 7, 26). Whe quotation

attributed to Kodak (Pet. 6) is the rhetoric of the district

court, and the court of appeals expressly rejected any such

holding since wrongful conduct “associated with” new

products is obviously no different from wrongful conduct

“associated with” old products (46a). Similarly, contrary

to Berkey’s complaint that the court of appeals “created

enclaves of immunity” for “ ‘leveraging’ of monopoly power”

(Pet. 3, 7, 14, 15, 27), the court expressly endorsed Berkey’s

“leveraging” theory (22a-25a); it simply disagreed that the

production of a smaller, finer-grain film for use in a new

smaller camera constituted unlawful “leveraging” (40a-41a,

S5la-55a).

In like vein, Berkey’s defensive characterizations of its

“predisclosure” demand as “non-technical” (Pet. 14) and

“not involving any information whatever about cameras”

(id, at 3, 11-13, 30) are both revealing of the importance

of “predisclosure” in the case and false.

Berkey said before trial that it was entitled to dis-

closure of all “relevant facts” at the same time such

facts were communicated within Kodak, as well as “invita-

tions to participate in committees to coordinate the devel-

opment of products” (C 438). With respect to the 110

system, Berkey set forth 50 steps of required “predisclosure”

by Kodak to camera manufacturers from August 1963 to

February 1974, including such items as a requirement to

disclose “tentative decisions on details of body, lens, film

advance and ASA” in June 1967 (C 439-43). Berkey’s

counsel repeatedly adverted to “predisclosure” during trial

(see A 265) and interrupted Kodak’s trial counsel’s summa-

tion to tell the jury that Berkey was entitled to 5 years ad-

vance notice of the 110 system (A 413), even though

Berkey was not a camera manufacturer 5 years before in-

troduction of the 110.

The Film and Color Print Paper Awards. Berkey’s claim

of monopolization of the amateur film market was based

principally upon the 110 introduction in 1972, which the

district court held unlawful in this context on the ground

that it had “the express purpose and clear effect of buttress-

ing Kodak film sales” (128a). The district court also con-

demned Kodak’s restriction of its own photofinishing busi-

ness to the processing of Kodak film (128a-129a). No

proof was adduced that either-of these “wrongful acts” had

anything to do with Kodak’s film prices, but Berkey was

nonetheless awarded “overcharge” damages of $11,500,000,

untrebled, on all sizes and types of Kodak film it purchased

during the statutory period, 1969 through 1977.

Berkey’s claim of unlawful conduct in the color print

paper market, which the district court ultimately rejected

(133a-138a), similarly bore no relationship to that “over-

charge” award ($8,803,000, before trebling).

In its first post-trial opinion, the district court advanced

the concept of an “overcharge” award as a penalty for

monopoly power rather than as compensation for injury

suffered by reason of a violation of the law, but suggested

that it need not “go this far” (127a n.20). In its second

opinion, however, when it confronted the absence of any

causal link between Kodak’s prices and Berkey’s allegations,

the district court finally held that no causal link, direct or

indirect, was required for recovery (175a).

The district court never addressed the fact that Berkey

freely chose to purchase Kodak film and paper despite

the availability throughout the statutory period of competi-

tors’ lower-priced products, nor the fact that Berkey failed

to prove that anything other than quality and consumer

preference accounted for Kodak’s price premium.”

The court of appeals, noting that the two allegedly wrong-

ful acts relied upon by the district court in the film market

could not “have had a very large impact on Kodak’s film

prices” (75a), held that Berkey, like every other tort plain-

tiff, had to present evidence that its injury “flowed from”

the alleged unlawful acts (7la-74a).'° The court of ap-

peals remanded both the film and paper claims, however,

for retrial uuder the legal standards it set forth, includ-

ing a determination of whether allegedly wrongful conduct

antedating the statutory period caused damages contin-

uing into the statutory period (74a-76a). (See our con-

ditional cross-petition in No. 79-499.)"

9 Since there was no proc either of any foreclosure of the channels

of distribution or of any sv limitations that would have made

Kodak in effect a supplier of last resort, the only conclusion possible

is that consumers paid premium prices for Kodak products as a

matter of freely exercised personal choice. This was conceded by

Berkey’s counsel, who stated with respect to other films, ““You couldn’t

sell them. No one would buy them.” (A 1785)

'0[n the court below, Berkey disparaged any standard requiring

that it establish “ ‘causation-in-fact’ ” (Berkey Brief, Marck 16, 1979,

at 120), and here it characterizes this requirement, fundamental to the

whole of tort law, as “unprecedented” (Pet. 3). Berkey then asserts

that the Court should reinstate the film and paper awards because

Kodak’s prices were the “result” of Kodak’s “monopolization” (Pet.

7-8). Such a causal connection between acts of monopolization and

prices is, of course, what Berkey failed to prove at the first trial and

has been given a second chance to pares

'! Far from not “questioning the legal sufficiency of the jury ver-

dicts” of film and paper monopolization (Pet. 7, 19), the court of

appeals’ rejection of Berkey’s contention that the 110 introduction

was unlawful in the camera market was applicable a fortiori to the

film market. The court also rejected Berkey’s claims of unlawful

“systems selling” (46a) and unlawful introduction of “inferior”

hee (48a-49a), and said it had “no occasion to consider”

erkey’s other claims of wrongful conduct (76a).

The Photofinishing and § 1 Awards. The two photofinish-

ing damage awards ($55,700 and $19,000, before trebling)

were based on Kodak’s failure to “predisclose” the 110

system. Berkey claimed to have been unlawfully injured by

Kodak’s six-week “headstart” in 110 film processing (about

1/10 of 1% of the processing business done during that

period) and by Kodak’s sale of allegedly defective and

overpriced 110 processors. The court of appeals, though

finding the 110 introduction to be otherwise lawful, re-

manded the claims for a determination of whether Kodak

had in some unlawful way thereby obtained any “competi-

tive advantage” in the photofinishing market (22a-25a,

56a-63a).

Berkey’s two claims under § 1 of the Sherman Act were

for lost camera sales allegedly resulting from Kodak’s joint

development programs with flashlamp manufacturers, which

led to the introduction in 1970 and 1975 of new flash de-

vices and compatible cameras. These claims were unrelated

to the 110 introduction and were sustained by both the dis-

trict court and the court of appeals (76a-87a). The district

court, however, overturned a damage award for the year

1971 as lacking “any rational relationship to any wrong

for which Kodak may be held liable” (125a-126a). The

court of appeals disagreed with the total rejection of the

award, but said the district court could properly have found

it “excessive” and remanded for redetermination of the

amount of damages (87a-90a).

ARGUMENT

Controlling precedent mandated the dismissal of

Berkey’s camera claim under §2 of the Sherman Act.

A. Contrary to Berkey’s position (Pet. 19-21), a cause

of action for treble damages based on § 2 is not made out

by showing possession of monopoly power—it requires

as well proof of the “willful acquisition or maintenance” of

that power to the demonstrable injury of the plaintiff by

means of acts which are “unlawful and exclusionary,”

United States v. Grinnell Corp., 384 U.S. 563, 570-71,

576 (1966). Such “unlawful and exclusionary” acts are

those which by predation, coercion, or restriction deny

others “access to the market,” United States v. Griffith,

334 U.S. 100, 108 (1948), and “exclude them from their

right to trade,” Standard Oil Co. v. United States, 221 U.S.

1, 76 (1911).

Kodak’s introduction of a new and additional photo-

graphic system, in competition with cameras and films

already on the market, was neither unlawful in nature nor

“exclusionary” in effect. Rather it exemplified precisely

the “superior product [or] business acumen,” United States

v. Grinnell Corp., 384 U.S. at 571, and “the process of

invention and innovation,” United States v. United Shoe

Machinery Corp., 110 F. Supp. 295, 344 (D. Mass. 1953),

affd mem., 347 U.S. 521 (1954), that, throughout the

history of the Sherman Act, have been regarded as the

epitome of competition itself.'? Far from restraining trade,

12 See id.; United States v. E. 1. du Pont de Nemours & Co., 351

U.S. 377, 390-91 n.15 (1956) (quoting legislative history of the

Sherman Act); Standard Oil Co. v. United States, 221 U.S. at 75;

(footnote continued on following page)

the development and marketing of the 110 system actually

and literally created commerce.”

The ambiguous and imprecise language of Alcoa “* can-

not be read to prohibit “monopoly in the concrete,” Standard

Oil Co. v. United States, 221 U.S. at 62, and it has not been

so read by this Court. See American Tobacco Co. v. United

States, 328 U.S. 781, 786 (1946) (describing Alcoa as

involving the “use of various unlawful means,” to be con-

trasted with “a new discovery or an original entry into a

new field”); United States v. Grinnell Corp., supra. In

rejecting Berkey’s contrary argument, the court of appeals

did no more nor less than construe and apply Alcoa in

accordance with the overwhelming force of authority (18a-

24a).

Berkey’s claim of unlawful injury from competitive in-

novation is noteworthy only in its rejection, indeed inver-

sion, of basic legal principles. If wrongful conduct is not

required for the recovery of damages, then the concepts of

causation and injury must also be discarded. The end of

such a path is not law as we know it, but arbitrary transfers

of wealth according to the subjective value judgments of

judges and juries. Cf. TVA v. Hill, 437 U.S. 153, 195

(1978).

(footnote continued from preceding page)

Telex Corp. v. IBM, 510 F.2d 894, 925-28 (10th Cir.), cert.

dismissed, 423 U.S. 802 (1975). See also U.S. DEp’t oF Justice,

REPORT OF THE ATTORNEY GENERAL’S NATIONAL COMMITTEE TO

STUDY THE ANTITRUST Laws 60 (1955) (monopolies do not mo-

nopolize “by being active, enterprising and dynamic,” conduct meant

to be encouraged by the antitrust laws); III P. AREEDA & D. TURNER,

ANTITRUST LAW 77-78 (1978).

13 Berkey acknowledged in its complaint that the 126 introduction

a decade earlier caused a market to “come into being” (A 8).

14 United States Vv. Aluminum Co. of America, 148 F.2d 416 (2d

Cir. 1945).

Moreover, Kodak’s camera competitors were not “ex-

cluded” by the 110 system, even in Berkey’s peculiar usage

of that word to mean not sharing in someone else’s success.

Rather, the industry as a whole thrived upon introduction

of the 110, which Berkey’s top management described as

“a tremendous advance in photography” (E 226) that is

“giving us... a great boost” (E 252).

B. As noted above (page 8), the court of appeals

created no “enclaves of immunity from § 2 scrutiny for

willfully exclusionary conduct” (Pet. 3). Instead, it dis-

tinguished between the natural, proper and socially useful

benefits of industrial integration and the misuse of monopoly

power in related markets, termed “leveraging” by Berkey

(22a-25a).'° Nor did the court create a rule of “per se”

legality for “conduct associated with product introduction”

(Pet. 3, 26). Berkey’s real, though disclaimed, complaint

is that the court did not adopt a per se rule of illegality for

a dominant firm’s product innovation without “predisclo-

sure” (see 37a-38a).

Berkey’s novel demand for “predisclosure” is repugnant

both to the concept of private property basic to our law

and society, and to the express policy embodied in the

federal patent and state trade secret laws, see Kewanee Oil

Co. v. Bicron Corp., 416 U.S. 470, 484 (1974). Asa

matter of antitrust policy, “predisclosure” would have ob-

15 Berkey’s “leveraging” premise—that consumers puichased the

Pocket Instamatic camera (retailing for $30-$130) so that they would

be able to use the allegedly defective Kodacolor II film—was both

inherently incredible as a theory of human behavior and entirely

devoid of evidentiary support. The court of appeals did not, as Ber-

key asserts here (Pet. 15), require untold numbers of consumers to

testify; it only noted in closing that Berkey had failed to produce

“anyone” to support the claim, when the evidence—if it existed—

should have been readily available from Berkey’s own retail store

employees (54a-55a; A 2591-92). Nor did Berkey challenge testi-

mony to the contrary (A 1370).

vious and significant anticompetitive, not pro-competitive,

effects. See United States v. National Lead Co., 332 US.

319, 359 (1947). The court of appeals’ rejection of “pre-

disclosure” accords with the only other case to have con-

sidered such a notion, albeit in a form far less drastic than

that advanced by Berkey. JLC Peripherals Leasing Corp.

v. IBM, 458 F. Supp. 423, 437 (N.D. Cal. 1978), appeal

docketed, No. 78-3050 (9th Cir. Sept. 12, 1978)."°

C. The court of appeals’ rejection of Berkey’s conten-

tions creates no conflict with any of the decisions of this

Court or other circuits cited by Berkey (Pet. 19-22), all

of which involved monopolistic acquisitions or conspiracies,

predatory or coercive conduct, or restrictive agreements

foreclosing commerce. Nor does the opinion below have

any astounding consequence for various complex and di-

verse government and private actions now pending in the

lower courts (Pet. 22-23, n.36). Presumably the courts

hearing those cases will apply the decisions of this Court to

the facts before them as faithfully as the court of appeals

did here.

Berkey erected a byzantine structure of inconsistent and

improbable factual allegations and sought mightily to avoid

traditional legal principles in order to arrive at the claim

it now asks the Court to review in myriad detail and rein-

state. The holding below was clearly correct, both under

controlling precedent and as a rejection of massive “anti-

trust” litigation as a new form of corporate diversification.

16 Memorex, the plaintiff in JLC, sought only disclosure of inter-

face specifications for new IBM computers at the time of announce-

ment and for afee. 458 F. Supp. at 437. Such disclosure was provided

by Kodak two months before the 110 introduction (see pages 3-4,

above).

The film and paper “overcharge” claims are not ripe

for review, and the court of appeals’ ruling on causa-

tion conforms with statutory and decisional law.

The court of appeals remanded the film and paper “over-

charge” claims to afford Berkey an opportunity to prove

that its alleged injuries “flow from” wrongful conduct (71a-

74a). In so doing, the court did not “add requirements

beyond what is specifically set forth by Congress” (Pet. 33),

but merely complied with the express language of § 4 of

the Clayton Act, which allows recovery only for injuries

actually sustained “by reason of” unlawful conduct. 15

U.S.C. § 15.

The requirement of a causal link between violation of

law and injury is as basic in antitrust treble-damage actions

as in common-law tort actions, and has been repeatedly

reaffirmed by this Court. E.g., Reiter v. Sonotone Corp., 99

S.Ct. 2326, 2332 (1979) (recovery may be had for prices

“inflated by reason of . . . anticompetitive conduct”); Bruns-

wick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477,

488-89 (1977) (injury must be attributable to “that which

makes [the act] unlawful”); Story Parchment Co. v. Pater-

son Parchment Paper Co., 282 U.S. 555, 562 (1931)

(injury must be “the certain result of the wrong”). As the

court of appeals noted (72a n.56), this Court applied that

requirement with full force to the claim for monopoly “over-

charges” in Hanover Shoe, Inc. v. United Shoe Machinery

Corp., 392 U.S. 481 (1968), upon which Berkey inex-

plicably places great reliance (Pet. 32).”

17 This Court’s rejection of the “pass-on” defense in Hanover

Shoe provides no support at all for dispensing with proof of causation

of injury and damages. Hanover Shoe, unlike Berkey, had proved

causation of inj in fact; absent such proof, liability would not

have been established, and the “pass-on” defense would never have

been considered.

The standard on remand allows Berkey to prove not only

direct causation, i.e., that prices it paid were raised by a

wrongful act, see III P. AREEDA & D. TURNER, ANTITRUST

Law 73, 98-99 (1978), but also indirect causation—that

price increases resulted from “distortion of the market”

caused in turn by wrongful conduct (73a). Berkey failed

to prove anything approaching direct causation at the first

trial, and its present complaint that it cannot prove indirect

causation either (Pet. 34-35) is reason not for awarding it

tens of millions of dollars in “damages” from Kodak, but

for dismissing its claims.

Moreover, a remand of the film claim was required aside

from the failure to prove causation because it was put to

the jury with clearly erroneous instructions on the relevance

of “systems introduction” and product quality (e.g., A 249-

64) and was sustained by the district court principally on

the erroneous thesis that the 110 introduction was unlawful

(126a-129a).'* As to the paper claim, Berkey can hardly

complain of being given a second chance to prove its case,

which also went to the jury under erroneous instructions

regarding conduct and which the district court found insuffi-

cient as to both liability and damages (133a-138a).

The court of appeals’ remand of the photofinishing

claims and one § 1 damage award presents no question

for this Court.

Berkey asserts in its petition that the photofinishing serv-

ices and equipment awards should have been sustained be-

cause the court of appeals “referred to no error which

18 The charge went so far as to permit a finding of film monopoliza-

tion based solely on conduct affecting another market; the district

court expressly recognized that if this nonsensical proposition,

“which I have been bullied into accepting for our purposes, is held

erroneous,” Berkey “is wiped out on appeal” (A 1713).

affected the award” (Pet. 4). Aside from the fact that this

Court does not grant certiorari “to review evidence and

discuss specific facts,” United States v. Johnston, 268 U.S.

220, 227 (1925), we note that Berkey’s photofinishing

claims were based on the 110 introduction, which the court

of appeals “referred to” at some length (see 25a-63a).

Berkey also asks the Court to review the court of

appeals’ determination to remand rather than reinstate

a § 1 damage award pertaining to the year 1971, an award

that had been overturned by the trial court as based on

nothing “more than speculation” (125a) and that the

court of appeals suggested was probably “excessive” (89a-

90a). Seeking certiorari on this issue, wholly a question

of fact, is frivolous. United States v. Johnston, supra.

Conclusion

For the reasons stated, the petition for a writ of certiorari

should be denied.

Respectfully submitted,