Petition for Writ of Certiorari — First Comics, Inc. v. World Color Press, Inc.

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IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

FIRST COMICS, INC..,

Petitioner,

WORLD COLOR PRESS, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

KENNETH F. LEVIN *

30 North LaSalle Street

Suite 2000

Chicago, Illinois 60602

(312) 984-6000

PETER FLYNN, p.c.

CHERRY & FLYNN

30 North LaSalle Street

Suite 2140

Chicago, Illinois 60602

(312) 372-2100

Counsel for Petitioner

* Counsel of Record

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

QUESTIONS PRESENTED FOR REVIEW

Like its competitors, First Comics, Inc. (which publishes

comic books) delivered to World Color Press, Inc. (which

manufactured the physical books) the contents of the

books, in the form of plate-ready ‘“‘color separations”’ in-

cluding text and artwork. World Color manufactured the

physical containers for those contents—36-page, 4-color

comic books, physically identical as between First and

its competitors—and ‘‘drop-shipped”’ the finished product

directly to First’s (and its competitors’) distributor-cus-

tomers. World Color charged First as much as 90% more

than its competitors for those physically identical books.

The questions presented are:—

1. Did the Court of Appeals err in holding that

as a matter of law the physical comic books

produced by World Color were not ‘“‘com-

modities”’ but ‘“‘services’’ for Robinson-

Patman Act purposes; and

2. Did the Court of Appeals err in holding that

as a matter of law the physically identical

comic books (the “‘containers’’) World Color

produced for First and its competitors were

not of “like grade and quality” for Robinson-

Patman Act purposes solely because the con-

tents differed;—

where the necessary result of those holdings is to exempt

outright the entire printing and graphics production in-

dustry, and also other manufacturers of copyrighted arti-

cles, from Robinson-Patman Act coverage?

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW ..

TABLE OF AUTHORITIES .................

OPINIONS OF THE COURTS BELOW

JURISDICTIONAL STATEMENT ...........

STATUT eee EVs Vee cc evcvctncecinsvcees

STATEMENT OF THE CASE ...............

PP Pr rr ie eye

The Manufacturing Process ...............

The District Court Rulings ...............

REASONS FOR GRANTING THE WRIT ....

THE COURT OF APPEALS’ MISTAKEN HOLD-

ING THAT THE COMIC BOOKS AT ISSUE

ARE NOT “COMMODITIES” CONFLICTS

WITH DECISIONS IN OTHER CIRCUITS AND

SEVERELY DISTORTS THE ROBINSON-

PATMAN ACT BY EXCLUDING ENTIRE IN-

DUSTRIES FROM THE STATUTE’S REACH ..

A. Comic Books Are ‘Commodities.’ The

Court Of Appeals’ Attempt Artificially To

Transmute Them Into “Services” Distorts

The Robinson-Patman Act And Conflicts

With Thee EOGHIOUD isc ccuvucnepeases

ill

B. The Court of Appeals’ Attempt To Hinge

The Nature Of The Comic Books On The

Skills Involved In Making Them Is Con-

trary To The Decisions And Would Severe-

ly Truncate The Statute .............

C. The Court of Appeals’ Inappropriate In-

jection Of Copyright Questions Into This

Case Seriously Distorts The Law And

Should Be Corrected ................

II.

THE COURT OF APPEALS’ “LIKE GRADE

AND QUALITY” REASONING DISTORTS THE

MEANING OF THAT STATUTORY TEST,

CANNOT BE RECONCILED WITH THE

CASES, AND ALL BUT REPEALS THE STAT-

UTE AS TO A LARGE CLASS OF GOODS ...

APPENDICES

Opinion and Judgment of the United States

Court of Appeals for the Seventh Circuit,

September 3D, BOSD 2... cc ccievccscesss

Memorandum and Order of the United States

District Court for the Northern District of

Illinois (Bua, J.), December 10, 1984 ...

Report and Recommendation of Magistrate

Carl B. Sussman, October 9, 1984 (incor-

porated into Appendix item 2) .........

Memorandum Opinion and Order of the

United States District Court for the North-

ern District of Illinois (Duff, J.), September

| a GIRS RA Ree Rn meer e ry y te

Judgment on Jury Verdict, October 16,

BE Gated cc Anas aA eaRe A eeehe heaven ens

Memorandum Opinion and Order of the

United States District Court for the North-

ern District of Illinois (Duff, J.), October 28,

Ee ee eee ek aa ks

Minute Order reflecting grant of judgment

n.o.v. (on other claims not here involved),

Angst B, IDGB ... nce ccsccccessctcsen

Robinson-Patman Act (15 U.S.C. Sec. 13) ..

Clayton Act, sec. 4(a) (15 U.S.C. Sec. 15(a)) ..

DE oc caus cued taweaweseeeeines

PAGE

App.

App. 5

App.

. 21

. 24

. 35

. 42

. 44

TABLE OF AUTHORITIES

Cases PAGE

Abbott Laboratories v. Portland Retail Druggists

re Fie oe | A ete Ae 10

Advanced Office Systems v. Accounting Systems

Co., 442 F.Supp. 418 (D. S.C. 1977) .... 16-17, 20, 22

Aviation Specialties, Inc. v. United Technologies

Corp., 568 F.2d 1186 (5th Cir. 1978) ....... 15n.

Baum v. Investors Diversified Services, Inc., 409

F.2d 872 (7th Cir. 1969) .............. 11, 13, 14n.

Bruce’s Juices, Inc. v. American Can Co., 87 F.

Supp. 985 (S.D. Fla. 1949), aff'd, 1987 F.2d 919

(5th Cir.), cert. dism., 342 U.S. 875 (1951) .... 23

Columbia Broadcasting System, Inc. v. Amana

Refrigeration, Inc., 295 F.2d 375 (7th Cir.

NE nee che eh eneweouedesinue calceeeeee 14-15n.

Freeman v. Chicago Title & Trust Co., 505 F.2d

Ge SOU GN SUED wo vve ny tcnceacucesuctees 15n., 16

FTC v. Borden Co., 383 U.S. 637 (1966) ..... 22, 23, 24

General Shale Prods. Corp. v. Struck Constr. Co.,

132 F.2d 425 (6th Cir. 1942) .............. 15n.

Gross Valentino Printing Co. v. Clarke, 120 Ill.

App.3d 907, 458 N.E.2d 1027 (1983) ....... 18n.

In the Matter of American News Co., 58 F.T.C.

We UU a4 ck each hence cde ceo ee 12

In the Matter of Archie Comic Publications, 61

Pein ee SO ss yo ccceecenw ieee 12

In the Matter of Christmas Club, 25 F.T.C. 1116

Pere ee ee reer Tee 12-13

In the Matter of Doubleday & Co., Inc., 52 F.T.C.

Eo welikick stk van ocnenevaneee ass 22

In the Matter of General Foods Corp., 52 F.T.C.

EE onic ckodsenbne ekkesseaneaean ces 23

In the Matter of National Comics Publications,

Pe a tae Ge CHD cies ccccasenedins 12

Joseph A. Kaplan & Sons, Inc., 63 F.T.C. 1308

(1963), mod. on other grounds, 347 F.2d 785

a SEE wins 6 0A bawsceehannanenpene’ 22, 23

May Dept. Store v. Graphic Process Co., 637 F.2d

eS GE bab ntadweeaade eedaneee 14-15

Morning Pioneer, Inc. v. Bismarck Tribune Co.,

493 F.2d 383 (8th Cir. 1974) ........ 11, 12, 14, 17

Platt & Munk Co. v. Republic Graphics, Inc., 315

2 8 a ie 3 saerreerr rT rrr 20-21

Reid v. Harper & Bros., 235 F.2d 420 (2d Cir.),

cert. denied, 352- U.S. 952 (1956) .......... 11-12

SCM Corp. v. Xerox Corp., 394 F.Supp. 384 (D.

EE CREED yo in 405 4k ak bee cau cheaeeebenaess 15n.

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479

DD doh ckty Wd kaeus bade esbh Rhea eee 10

Tri-State Broadcasting Co. v. United Press Int'l,

Inc., 369 F.2d 268 (5th Cir. 1966) ......... 15n.

Vil

Statutes and Rules

Robinson-Patman Act.

NE | ee passim

Clayton Act, Sec. 4,

BO WR. Gee. WB oon cece cence 2,4

av WSC. Soc. 06 .. 2... o.oo ccc ccc eee 2, 8, 20

Re Rim MI on onan cn ndeccccscc. 2, 20

af USC. See: MB ....................... 2,8

iy USC. See. 1 ....................... 2, 8, 20

28 U.S.C. Sec. 12541) ......00000.00......... 2

28 U.S.C. Sec. 1881 ......................... 4

2% USC. Sec. 1887 ......................... 4

28 U.S.C. Sec. 2101(c) ....................... 2

Supreme Court Rule 20.1(b) .................. 1

Supreme Court Rule 20.4 .................... 2

Supreme Court Rule 28.1 .................... ]

F.R.Civ.P. Rule 12(bX6) ...................... 6

Other Materials

WEBSTER’S SEVENTH NEW COLLEGIATE DICTIONARY

(7th Ed. 1968) ............................ 1]

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

FIRST COMICS, INC.,

Petitioner,

WORLD COLOR PRESS, INC.,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Petitioner First Comics, Inc. respectfully prays that a

Writ of Certiorari issue to review the opinion and judgment

of the United States Court of Appeals for the Seventh

Circuit, entered on September 19, 1989.

‘ In conformity with Rules 20.1(b) and 28.1, petitioner states that

it is not a publicly held company and has no parents or subsidiaries

and that defendant World Color Press, Inc. is wholly owned by

PACE Industries, Inc., a non-publicly-held company. (Another de-

fendant, Marvel Comics Group, was dismissed by agreement in

April 1987, R. 240-41, and is not involved here.)

OPINIONS OF THE COURTS BELOW

The opinion of the United States Court of Appeals for

the Seventh Circuit, App. 1-20, has not yet been official-

ly reported.

The four opinions of the District Court concerning the

questions presented (all of which rejected the view espoused

by the Court of Appeals)—one by Magistrate Sussman on

October 9, 1984; one by District Judge Bua on December

10, 1984; and two by District Judge Duff on September

18, 1987 and October 28, 1987—are unreported. They are

reproduced at App. 24-34, App. 21-23, App. 35-41, and

App. 44-49, respectively.

JURISDICTIONAL STATEMENT

The judgment of the United States Court of Appeals

for the Seventh Circuit was entered (see Rule 20.4) on

September 19, 1989. This Petition is filed within 90 days

of that date. This Court’s jurisdiction rests upon 28 U.S.C.

Secs. 1254(1) and 2101(c).

STATUTES INVOLVED

The Robinson-Patman Act, 15 U.S.C. See. 13, and Sec-

tion 4 of the Clayton Act, 15 U.S.C. Sec. 15, are set forth

at App. 51 and App. 53 respectively. Pertinent portions

of the Copyright Act, 17 U.S.C. Sees. 106, 109, 202, and

301(d), are set forth at App. 55 and following.

STATEMENT OF THE CASE

Background. Plaintiff First Comics, Inc. (“FC’’) is a

small Chicago-based publisher of comic books and “graphic

novels.” Before FC began publishing (in late 1982), FC

discussed the mechanics of, and prices for, manufacturing

its comic books with defendant World Color Press, Inc.

(“WCP”’), the largest comic book manufacturer in the United

States (and the only one offering “‘letterpress’’ facilities—

important to a small start-up enterprise like FC, because

letterpress printing is less costly than the “‘offset’”’ meth-

od.) App. 1-2; Tr. 265, 450-59, 464.

WCP promised FC that WCP’s prices to FC would be

the same as WCP’s prices to FC’s far larger competitors

(e.g., the giant Marvel Comics Group). But in January

1984, FC learned that WCP had actually been charging

FC as much as 90% (nearly double) what WCP charged

its other comic book customers. For example, WCP charged

FC over 46% more than FC’s competitors for identical

shipping “‘pallets.’”” And WCP charged FC an average,

over the 1982-1984 period, of 63% more than others simply

for the books—so identical and fungible, from WCP’s stand-

point, that WCP often produced competitors’ books on the

same presses and at the same time as FC’s books. App.

2; Tr. 1206-07, 1218-19, 1317; P.Exs. 16, 16A, 93, 101-03.

Throughout the entire 1982-1984 period of the parties’

dealings, the lowest per-book price WCP charged FC was

higher than the highest price WCP charged Marvel or

FC’s other favored competitors. Tr. 1207, 1317; P.Exs.

101-03. WCP’s overcharges alone ate up more than 10% of

F'C’s gross (not net) income from comic book sales through-

willie

out the 1982-1984 period (during which FC operated, over-

all, at a loss).?

WCP offered no “cost justification’ defense of its dis-

criminatory overcharges to FC.

When FC learned of WCP’s discriminatory overcharges,

FC demanded a price rollback for the future and an ad-

justment for past discrimination. WCP refused. Tr. 721-28.

FC sued under the Robinson-Patman Act, 15 U.S.C. Sec.

13, as well as bringing State-law claims. The basis for

Federal jurisdiction in the court of first instance (the Dis-

trict Court) was 28 U.S.C. Sees. 1331 and 1337, FC having

pleaded a substantial Federal question under the Robin-

son-Patman Act and Section 4 of the Clayton Act, 15

U.S.C. Sec. 15. App. 10 n.7.

The Manufacturing Process. The issues presented here,

and the Court of Appeals’ abrupt overturning of the re-

peated holdings of two District Judges and a Magistrate

over a five-year period, focus on how comic books (or for

that matter almost any graphic or other manufacturings

from prior design) are physically produced. As the Court

of Appeals observed, the parties are not significantly at

odds as to how that is done. App. 5.

2 See D.Exs. 220, 229. The parties agreed below that WCP (which

was FC’s only source of physical comic books during the parties’

dealings) produced some 3.75 million comic books for FC. BC sold

the books to distributors—to the “direct market’’ rather than the

consignment-based ‘newsstand market’”—for 40% of the books’

retail cover price. Tr. 278-79. With a $1 retail cover price, that

left 40 cents per book gross for FC, or an aggregate of $1.5 million

gross income. This helps explain why comic books are risky propo-

sitions for new entrants. During the 1982-1984 period at issue, at

least 10 companies other than FC tried to enter the market as

regular monthly publishers of standard 36-page 4-color comics—

and failed. Only FC and one other survived. Tr. 1001.

—)—

FC publishes comic books. FC begins with creative per-

sonnel who develop the story line, dialogue, and graphics

(or drawings) for each comic book. When all of that is com-

plete, FC sends the result to a “color separating’? com-

pany, which separates the original multicolor artwork into

four separate-color printing “screens” and provides FC

with negatives (commonly referred to as “color separa-

tions”) of each screen. When a complete set of color sep-

arations has been assembled for a given comic book, it

is analogous to the fully edited manuscript of a book (or,

FC believes, to the template for a pair of designer blue

jeans, or a Rolex watch, or any other such article which

is manufactured from another’s design). App. 27-28, 31-32.

At this point FC still had no physical comic book. To

arrive at the comic-book end product, FC delivered its

color separations to WCP, which then manufactured the

actual printed comic books containing the story and graph-

ics—a completely finished product, which WCP sold to FC

and directly “drop-shipped” to FC’s customers. FC did

not supply WCP with any ink, paper, or-other tangible

component of the finished comic books. WCP supplied all

of the physical materials, and produced the resulting stand-

ard-form product: 36-page 4-color comic books physically

identical to those WCP manufactured for FC’s competi-

tors. (FC provided only the color separations, which WCP

returned to FC.) WCP did not bill FC separately for any

labor costs. Rather, WCP simply billed FC for the phys-

ical product—the printed comic books. See App. 31-32, 37.

Thus before WCP began there were no comic books.

When WCP finished, the printed comic books WCP manu-

factured for FC—identical, apart from their contents, to

those WCP manufactured for FC’s competitors—were ready

for sale or use without any further action by FC. The

books were then shipped by WCP directly to FC’s

customers. App. 32.

- =

Even WCP saw itself as ‘“‘manufacturing”’ a “‘product.”

WCP’s standard-form contract (P.Ex. 11) is cast in terms

of producing “goods” (not “services’’); see, e.g., its par.

16 (granting a lien) and par. 20 (providing that if the buyer

defaults, WCP may “sell or dispose of any copies of the

work . . . on such terms as it [WCP] may determine’’).

See also that document’s par. 13 (speaking of “‘title and

risk of loss’ in Uniform Commercial Code sale-of-goods

terms); Jd., par. 17 (addressing claims for defective “goods”’).

Just as WCP’s form contract calls for “manufacturing spec-

ifications” and lists WCP’s “manufacturing facilities” (in-

cluding the Sparta, Illinois facility where WCP produced

FC’s comic books), so in correspondence with FC, WCP

itself from time to time referred to what it does as “man-

ufacturing’”’ a ‘completed product.” E.g., P.Exs. 13, 61,

65, 75.

The District Court Rulings. Quite early in this litigation,

WCP moved to dismiss under F.R.Civ.P. Rule 12(bX6) (or

for summary judgment on) FC’s Robinson-Patman claims.

Though WCP conceded that comic books—tangible, end-

product articles of trade—are generally “commodities,”

WCP nonetheless argued that its acknowledged price dis-

crimination fell outside the Robinson-Patman ambit because,

WCP said, it only provided a “service” to FC.

Magistrate Sussman, to whom WCP’s motion had been

referred for a report and recommendation, disagreed (App.

28-32):

“It is really quite clear that comic books, in

and of themselves, are commodities under the

Robinson-Patman Act. . . . However, the defen-

dants see the situation of a ‘printer,’ such as

World Color, printing, constructing and then

passing the finished comic books to the publisher

as a different sort of exchange. They contend

there is no sale of commodities, but rather a ser-

vice is being rendered in the printing and creat-

ing of the comic books... .

“Where the dominant nature of the transaction

is to provide a service, and the passage of any

goods is merely ‘incidental’ to the performance

of the service, the transaction has been held to

not constitute the sale of a commodity. [Citations

omitted.]. ...

‘

‘. . . However, in the instant case, the goods

created ... are not a mere incidence of the ser-

vice. The physical, finished comic books are the

whole point of the performance of the printing.

‘*. . . FCI did not supply World Color with any

ink, paper, or other tangible components of the

finished comic books. . . . Also, World Color

did not bill FCI separately for any labor costs.

Rather, it simply billed FCI for the product.\- .

Thus, before World Color began there were no

comic books. When it finished, the printed comic

books it produced were wholly complete, . . . and

were typically shipped directly to FCI custom-

Smee

‘“.. . World Color exchanges the-comic books

with the publisher for a price. These transactions

constitute the sale of commodities because the

dominant nature of the transactions is the ex-

change of comic books. . . .”

The Magistrate also rejected WCP’s argument that WCP

must be selling a “service” because (given FC’s copyright)

WCP could not itself sell the comic books (App. 32-33):

“World Color’s standard printing contract pro-

vides that ‘(t)itle . . . to the finished work shall

pass to Publisher upon delivery by Printer. . .’

The passage of title is the essential element of

a ‘sale.’ . . . [T]he publisher has the proprietary

ailliiods

sented in the comic books. But this does not

mean that World Color as a ‘printer’ cannot

‘own’ and properly pass title to the physical com-

ic books themselves. World Color [argues] that

as a ‘printer’ it has no proprietary rights to the

copyrighted stories, characters and created ideas

embodied in the comic books. However, . . .

World Color manufactures finished comic books

which until 4elivery and transfer of title belong

to World Color and not the publisher. The pub-

lisher has no. . . right to delivery and to posses-

sion, in the comic books until there is payment.

This is distinguishable from ownership of the

tions omitted.]”

WCP appealed to District Judge Bua, who (though un-

willing at that stage to finally decide the issue) generally

agreed with the Magistrate’s analysis and specifically re-

jected WCP’s “copyright” argument. App. 21-23. After

the case was later transferred to District Judge Duff,

WCP again raised its “copyright’”’ argument, which Judge

Duff alike rejected (App. 36-37):

‘“‘World’s first argument is deceptively simple

but totally erroneous. Relying on section 106(3)

of the Copyright Act, 17 U.S.C. Sec. 106(3), . . .

World claims that it could not have sold the goods

in question because it did not have title to them.

Yet nowhere does World assert that any sale il-

legal under the Copyright Act is ipso facto not

a sale for purposes of the antitrust laws... .

[T]he Copyright Act specifically provides that it

does not limit remedies available under any other

federal statute. See 17 U.S.C. Sec. 301(d).

“Moreover, World underestimates the rele-

vance of 17 U.S.C. Sec. 202, which distinguishes

the ownership of a copyright from the owner-

ship of the material object in which the copy-

righted work is embodied. . . .”

District Judge Duff also rejected WCP’s argument that

because the physical comic books (otherwise physically

identical in every respect) had different contents, which

WCP did not provide and which made no difference what-

ever to WCP’s manufacturing, they themselves—the

containers—were not “of like grade and quality” (App. 37):

‘“. . . World does not suggest that a different

author or character increases the production cost

of the comic book. World provided First and

others with 32 four-color interior page letterpress

comic books with 4-color covers, all of the same

size and paper stock. World does not argue that

First requested bigger or more pages or a differ-

ent kind of paper. Accordingly, [World’s] cita-

tions to cases involving goods manufactured ac-

cording to producer specifications are irrelevant.

[Citations omitted.]

‘“. .. World states that the relevant inquiry

is whether consumers perceive the goods as com-

parable. In this case, the consumers are comic

book publishers like First, not children buying

comic books at newsstands. . . .”

Ultimately District Judge Duff granted FC’s motion for

directed findings in FC’s favor on both the “like grade

and quality” issue and the “commodities versus services”

issue. App. 44-48.

All of these rulings were overturned by the Court of

Appeals.

oa” ae

REASONS FOR GRANTING THE WRIT

This case falls squarely within the primary, longstand-

ing, and direct purpose of the Robinson-Patman Act: To

prevent “‘secondary-line” discrimination by sellers such as

WCP, who give “larger buyers” like FC’s competitors

“discriminatory preferences over smaller ones” like FC.

Abbott Laboratories v. Portland Retail Druggists Ass’n,

425 U.S. 1, 11-12 (1976).

Yet in this case the Court of Appeals effectively gutted

the Act, excising entire industries from the Act’s scope

at the stroke of a poorly reasoned pen. Its resolution of

the issues presented here conflicts sharply with decisions

in other Circuits, with Federal Trade Commission rulings,

and, on one issue, with decisions of this Court.

In some circles it is fashionable to decry Robinson-

Patman as poorly drawn or outmoded. But that is not an

excuse for “improving” or truncating the Act by judicial

fiat. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479

(1985). The Court of Appeals’ contrary approach here should

be corrected before it wreaks further mischief.

THE COURT OF APPEALS’ MISTAKEN HOLDING

THAT THE COMIC BOOKS AT ISSUE ARE NOT “COM-

MODITIES’’ CONFLICTS WITH DECISIONS IN OTHER

CIRCUITS AND SEVERELY DISTORTS THE ROBINSON-

PATMAN ACT BY EXCLUDING ENTIRE INDUSTRIES

FROM THE STATUTE’S REACH.

In this case, the Court of Appeals suggested that distin-

guishing a “commodity” (which is subject to the Robinson-

Patman Act) from a “service” (which is not) is a difficult

philosophical conundrum. App. 7:

“No doubt one could dissect any service arrange-

ment and find results akin to commodities. Like-

wise, one could label each level of any manufac-

turing process as a service with incidental tangi-

ble results.”’

Ordinarily, however, the distinction is quite clear-cut. A

“commodity” is simply “an article of trade or commerce,

especially a product as distinguished from a service.” Baum

v. Investors Diversified Services, Inc., 409 F.2d 872, 875

(7th Cir. 1969) (quoting the dictionary). On the other hand,

a “service” is “useful labor that does not produce a tangi-

ble commodity—usu. used in pl. (charge for professional

services).’” WEBSTER’S SEVENTH NEW COLLEGIATE DIC.

TIONARY (7th Ed. 1963) at 167, 793; see Morning Pioneer,

Inc. v. Bismarck Tribune Co., 493 F.2d 383, 389 (8th Cir.

1974). Common sense says that a “tangible commodity,”’

an “article of trade or commerce” is at issue here: physi-

cal comic books. But the Court of Appeals stood common

sense on its head, insisting that the comic books at issue

(wholly complete end products when they get to WCP’s

loading dock) are at that point merely “printing services” —

even though when WCP ships them, with no change at

all, to FC and its customers they are admittedly ‘“com-

modities.”’

A. Comic Books Are ‘“‘Commodities.’’ The Court of Appeals’

Attempt Artificially To Transmute Them Into ‘‘Services”’

Distorts The Robinson-Patman Act And Conflicts With

The Decisions.

It is clear that comic books, like other printed materials,

are generally subject to the Robinson-Patman Act—that

they are “goods” (or “‘commodities”) rather than “‘ser-

vices.’’ See App. 5. (See also page 6 supra concerning

WCP’s own standard printing contract.) Certainly the de-

cisions have left no doubt. See, e.g., Reid v. Harper &

—]2—

Bros., 235 F.2d 420 (2d Cir.), cert. denied, 352 U.S. 952

(1956) (books); In the Matter of Archie Comic Publications,

61 F.T.C. 100 (1962) (comic books); In the Matter of Amer-

ican News Co., 58 F.T.C. 10 (1961) (books, magazines, and

comic books); In the Matter of National Comics Publica-

tions, Inc., 57 F.T.C. 61 (1959) (comic books); Jn the Mat-

ter of Christmas Club, 25 F.T.C. 1116 (1937) (printed ac-

count books, passbooks, and advertising literature used

by banking institutions).

Yet here the Court of Appeals transmuted the same

comic books everyone acknowledges are ‘‘commodities”’

the moment they leave WCP’s loading dock (shipped by

WCP itself direct to FC’s customers), into “services”

while they wait at that same loading dock. Surely no

amount of alchemy can work such a transformation, seri-

ously damaging the proper scope of Robinson-Patman over

a broad area.

Common sense alone teaches that no such extraordinary

transmutation occurs upon the mere passage of title at

WCP’s loading dock. To the contrary, the comic books

WCP produces are “commodities,” pure and simple—a

reality which cannot be sidestepped by specious distinc-

tions between a “printer’’and a “‘publisher”’ (as the lower

courts understood, App. 33, but the Court of Appeals did

not, App. 9). Both the Federal Trade Commission and

the courts (other than the Court of Appeals here) have

made that clear. Defendants who both print and publish

have been held subject to the Robinson-Patman Act. E.9.,

Morning Pioneer, Inc. v. Bismarck Tribune Co., 493 F.2d

383, 389 n.11 (8th Cir.), cert. denied, 419 U.S. 836 (1974).

And defendants who do not publish at all, but merely

print to a customer's specifications, also have been held

subject to the Act. In the Matter of Christmas Club, 25

F.T.C. 1116 (1937), is on point. In that case Christmas

—13—

Club supplied printed passbooks, account books, and ad-

vertising literature (25 F.T.C. at 1123), to the specifica-

tions of individual commercial bank customers. Christmas

Club printed some of its materials itself; others were pro-

duced by independent contractors who shipped directly

to the customer banks. 25 F.T.C. at 1125. In short, Christ-

mas Club (precisely like WCP here) was engaged in pro-

ducing and selling printed material made to the specifica-

tions of its customers. Yet the Federal Trade Commission

had no difficulty in holding that activity to be within the

Robinson-Patman Act. 25 F.T.C. at 1127.

The Court of Appeals’ contrary ruling here cannot be

reconciled with decisions such as those just discussed. Nor

has FC found support anywhere else for the Court of Ap-

peals’ labored “service-one-minute-but-commodity-the-next”’

reasoning in this case. A “commodity” is quite simply “. . .

a product as distinguished from a service.” Baum v. In-

vestors Diversified Services, Inc., 409 F.2d 872, 875 (7th

Cir. 1969). The thing sold (here, comic books) is necessarily

one or the other. To say that it flip-flops between the two

distorts the statutory concept.

B. The Court of Appeals’ Attempt To Hinge The Nature

Of The Comic Books On The Skills Involved In Making

Them Is Contrary To The Decisions And Would Severely

Truncate The Statute.

To be sure, WCP argued below (and the Court of Ap-

peals’ notion, App. 8, that WCP only sells “the letter-

press method and process’’ amounts to the same view)

that because WCP provides “printing services’ and

“skills,” during the production process, the tangible, com-

plete, saleable comic books it produces are really “ser-

vices” themselves. But that argument unavoidably fails—

and must fail, if the Robinson-Patman Act is to have any

application at all. Sellers of tangible goods like WCP can-

not escape the Robinson-Patman Act by arguing that their

tangible end products are “merely” materials and labor or

embody the “services” or “skills” of numerous people. See,

for example, Morning Pioneer, Inc. v. Bismarck Tribune

Co., supra, 493 F.2d at 389, as to the printing and pro-

duction of a newspaper:

“The term ‘commodity’ is not defined in the

(Robinson-Patman] Act, but is generally thought

to include only tangible items of commerce and

not services. We recognize that the production

of a newspaper [like a comic book] requires and

incorporates the services of a great number of

people, but the fact remains that when finally

published, the paper [or comic book] takes on a

tangible form and it is bought and sold in the

market place. As such, it is predominantly a

tangible good and, thus, a ‘commodity’ subject

to the Act.”

Surely that is obvious—and in direct conflict with the

Court of Appeals’ approach here. One buys comic books

(or newspapers)—not printing “services” with no tangi-

ble outcome. The object is to get the tangible finished

product, not to watch a printing press at work. Here the

products (comic books) are tangible objects with their own,

self-contained function—‘‘commodities.”” By contrast, ‘‘ser-

vices” outside the Act do not end with a tangible, self-

contained object. That is shown by the very cases the Court

of Appeals itself cited. May Dept. Store v. Graphic Process

3 See App. 3-6, 8. Those cases typically involved either no prod-

uct at all, or a product which is merely a tool or step toward pro-

viding an intangible service which is the real p se of the trans-

action. See, e.g., Baum v. Investors Diversified Services, Inc., 409

F.2d 872 (7th Cir. 1969) (commissions on mutual funds shares); Col-

(Footnote continued on following page)

Co., 637 F.2d 1211, 1213 (9th Cir. 1980), makes this clear.

The May defendant produced rot the final product, not

anything usable in itself, but only the means by which the

end result (newspaper advertising) could be accomplished.

In fact, the May court’s description shows pointedly that

what the defendant did there is precisely analogous to the

“color separations”’ in this case—useless objects in them-

selves; useful only as steps toward the desired end result.

(Even so, the May court held that the defendant had not

established Robinson-Patman immunity, or “services.” Thus

the Court of Appeals’ contrary approach here cannot even

be reconciled with its own “‘lodestone”’ citation—let alone

the other cases discussed.)

Tn the “services” cases cited by the Court of Appeals,

the plaintiff sought to squeeze a service such as repair

labor, or construction labor, or billing, into the Act by

pointing to the incidental transfer of some tangible object.

3 continued

umbia Broadcasting System, Inc. v. Amana Refrigeration, Inc..,

295 F.2d 375 (7th Cir. 1961) (television broadcast time); Freeman

v. Chicago Title & Trust Co., 505 F.2d 527 (7th Cir. 1974) (title

insurance); Aviation Specialties, Inc. v. United Technologies Corp.,

568 F.2d 1186 (5th Cir. 1978) (airplane engine repair services); Tri-

State Broadcasting Co. v. United Press Int'l, Inc., 369 F.2d 268

(5th Cir. 1966) (news information via teletype); General Shale

Prods. Corp. v. Struck Constr. Co., 132 F.2d 425 (6th Cir. 1942)

(brick incident to the “entire construction of extensive housing

facilities”; case was “‘not a case . . . claimfing] . . . discrimination

in selling brick at a lower price than (plaintiff s ‘Speedbrik’],”” and

“{ijt [was] not claimed that [plaintiff] was a competitor with the

sellers of brick’’). Even SCM Corp. v. Xerox Corp., 394 F.Supp.

384, 385-86 (D. Conn. 1975), discussed at some length by the Court

of Appeals, involved “copied images . . . considered separately

from the paper on which they appear’’—surely equivalent to the

comic wh contents in this case, not to the physical books WCP

manufactured—because in SCM Corp. the paper itself was not sold

(and the copying equipment itself was only leased).

—_

= =

See page 14 note 3 supra. For example, in Freeman v.

Chicago Title & Trust Co., 505 F.2d 527 (7th Cir. 1974),

title insurance was in issue. Obviously the buyer’s goal

was not just a piece of paper labelled “policy,”’ but rather

the service (title searches, “the rendering of an opinion”

thereon, and insurance coverage) of which the paper was

merely the “incidental” evidence. 527 F.2d at 531. Here,

however, the comic books WCP produced were obviously

not “incidental” to something else. Rather, they were, in

themselves, the goal of FC's entire transaction with WCP.

And plainly they are ‘‘commodities.”’ In the Court of Ap-

peals’ “services” cases, the object was not to produce and

sell a tangible, functional end product; rather, the only

“tangible” was incidental to the real purpose of the trans-

action. Here the “‘tangible”’ was the entire object of the

exercise; and to call it a “service” arbitrarily truncates

Robinson-Patman’s statutory scheme and distorts its aim.

Thus, for example, Advanced Office Systems, Inc. v. Ac-

counting Systems Co., Inc., 442 F.Supp. 418, 423 (D. S.C.

1977), cited by the court, concerned a billing, collection,

and mailing service. Advanced held that sending physical

bills to third parties did not convert the service into a

“commodity”’:

“(T]he issue to be addressed is not the process

by which [a thing] is made or the ‘customized’

nature of the item, but rather what its dominant

function is .... The bills used in a billing ser-

vice have no self-contained function. They are

useless unless sent to an account debtor, but

once sent they effectuate many collections. Such

is the dominant function of the bills and billing

service—by effectuating collection, the defendants

render a service.”

Simply contrast that case with this one. In Advanced, the

physical bills were not the “end,” but a means to the

“end” of a collection service. The bills themselves had no

“self-contained function.” The ‘‘tangible’’ bills were thus

incidental to the “service.”” Here, by contrast, the comic

books were the “end.’’ Here it was the printing which

was a means to that end, which had no “self-contained

function,” and which was indeed “useless” —except as a

step in producing tangible, end-product comic books.

Moreover, to avoid that analysis by asserting that the

production process involves “special skills,’ or that FC

really bought the “process” rather than its tangible result

(as the Court of Appeals did), is to eviscerate Robinson-

Patman. Any high-quality finished product—be it a news-

paper, or a Rolls Royce, or a Swiss watch—involves the

“services” and “special skills” of many people. But that

cannot—without wreaking serious damage on the statute—

make the tangible end product (the newspaper, or the car,

or the watch) anything other than a commodity.

9 46

Producing a newspaper involves “graphic arts,” “‘special”’

reporting (and other) “‘skills,’’ and “the services of a great

number of people.” But it is still a tangible end product—

and a “commodity.”’ Morning Pioneer, Inc. v. Bismarck

Tribune Co., quoted at page 14 supra. Producing ‘{a]

specially manufactured T-shirt which is customized and

which serves an advertising purpose’’ no doubt also in-

volves “graphic arts,” “special skills,” and “services.”” But

it too is a tangible end product; it too “has functional

value solely derived from its tangible existence’’—and it

too is a “commodity.” Advanced Office Systems, supra,

442 F.Supp. at 423. Why? Because (as those cases teach)

the newspaper and the T-shirt are not “incidental”; rather,

they are the end product. It is the graphics and skills and

services which are incidental to their production as tangi-

ble goods—not the other way around. Patently “special

skills” or “services of many people” or “using a process’”’

cannot be the test; that would evoke the absurd result

that (e.g.) Rolls Royces, Swiss watches, newspapers, and

customized T-shirts would not be commodities, which would

all but repeal the statute. Rather, the test is whether the

dominant purpose of the transaction is to produce a tangi-

ble item, which has a self-contained function, useful and

saleable in itself—such as, in this case, tangible comic

books so immediately saleable that WCP shipped them

directly to FC’s customers.* The Court of Appeals’ con-

trary approach damages and confuses the Robinson-Pat-

man Act and should be corrected.

C. The Court of Appeals’ Inappropriate Injection Of Copy-

right Questions Into This Case Seriously Distorts The

Law And Should Be Corrected.

Not content with rewriting the normal (and elsewhere

prevailing) meaning of “commodities” and “services,’’ the

Court of Appeals also resurrected WCP’s “copyright-act”’

argument (see pages 7-9 supra) in a way which overlooks

the plain language of the Copyright Act and comes peril-

ously close to excluding all copyrighted or trademarked

goods from the ambit of Robinson-Patman. The Court of

Appeals reasoned, App. 8, that:

“{A]t the printing stage the comic books lack

real value to any entity other than First Comics.

4 The Illinois state court (where WCP and FC are both located,

where WCP’s sales to FC took place, and whose law WCP’s stan-

dard contract expressly invokes), in a closely similar case, ruled

that a magazine publisher’s purchase of magazines from a printer

was a sale of “goods’—not “‘services”—for purposes of the anal-

ogous Uniform Commercial Code differentiation, because in a case

such as this “the primary subject of the contract [is] the tangible

printed magazines [or comic books] and not ‘printing services.’ ”

Gross Valentino Printing Co. v. Clarke, 120 Ill.App.3d 907, 458

N.E.2d 1027, 1030 (1983).

World Color Press cannot sell the finished comic

books to any other buyer since First Comics

holds the copyright, nor would any of World Col-

or Press’ other clients be interested in finished

comic books bearing a First Comics story—rather

each client wants only the printed version of its

own comic book.”

Respectfully, such reasoning is not merely specious, but

pernicious. In effect, it asserts that: (7) the comic books

at issue must be a “service,” (ii) because they “‘lack real

value” as goods to “‘any entity other than [FC],” since

(vit) the Copyright Act would bar WCP from selling them

to “any other buyer.” (Of course the result of that reason-

ing would be the wholesale exclusion of all copyrighted

products from Robinson-Patman.) Here WCP clearly could—

and did—sell the comic books it manufactured to FC; and

those sales, coupled with WCP’s sales of comic books to

other publishers such as Marvel at far lower prices, fall

squarely within Robinson-Patman. And the fact that the

publisher “has the . . . copyright . . . in the creative

ideas” quite plainly “does not mean that World Color .. .

cannot ‘own’ and properly pass title to the physical comic

books themselves.” See App. 32-33, 36-37.

Suppose (see App. 36) that one pirates a copyrighted

design, manufactures the articles, and purveys them to

the public. The Copyright Act has been violated. But no

one would argue that there had not been “sales” of “‘goods.”’

Nor would one claim that (for example) a Taiwan company

which manufactures patented or trademarked or copyrighted

articles (such as designer jeans, or watches, or customized

T-shirts, or electronics goods) for an American patent or

to the buyer for whom they were made—even though, by

law or contract, the manufacturer may not be free to sell

—20—

them to others.5 And no one could sensibly argue that

those goods are not “commodities.” See, e.g., Advanced

Office Systems, supra, 442 F.Supp. at 423.

Here, however, the Court of Appeals’ curious invoca-

tion of copyright concepts not only would resolve all of

those factual situations the other way (and greatly dimin-

ish the protection Robinson-Patman affords), but also

would distort the Copyright Act into a sort of pro tanto

repeal of the anti-price-discrimination provisions of the

Robinson-Patman Act. Of course the Copyright Act does

no such thing. 17 U.S.C. Sec. 301(d) is explicit:

“Nothing in this title [7.e., the Copyright Act]

annuls or limits any rights or remedies under

any other Federal statute.”’

Even with a copyright, 17 U.S.C. Secs. 106 and 109 ex-

pressly permit sales even to third parties where the

tract. (Of course WCP’s own standard contract contains

just such an authorization. See page 6 supra.) And the

Court of Appeals’ strained contrary reasoning also over-

looked Platt & Munk Co., Inc. v. Republic Graphics, Inc.,

315 F.2d 847, 853-55 (2d Cir. 1963), which not only recog-

nized such contractual rights but also held that the third-

party sale right exists even absent any contract, despite

“the copyrighted character of the goods.”” That decision

is directly opposed to the Court of Appeals’ reasoning

here—not merely on the “‘sale’”’ point, but also because

Platt & Munk plainly treated the manufacturer even of

5 For purposes of this point, there is of course no distinction be-

tween the type of resale prohibition (i.e., patent, trademark, copy-

right, or simple contract). See Platt & Munk Co. v. Republic

Graphics, Inc., 315 F.2d 847, 853-55 (2d Cir. 1963), pointedly draw-

ing no such distinction.

copyrighted objects as a ‘‘seller’”’ and the objects them-

selves not as “services,” but as “goods.’’6

THE COURT OF APPEALS’ “LIKE GRADE AND

QUALITY” REASONING DISTORTS THE MEANING OF

THAT STATUTORY TEST, CANNOT BE RECONCILED

WITH THE CASES, AND ALL BUT REPEALS THE

STATUTE AS TO A LARGE CLASS OF GOODS.

In addition to damaging the Robinson-Patman Act by

holding that an acknowledged “commodity” transmutes

into a “service” if it involves “multiplying images” (or,

presumably, any other “design” or “copyright” or “graph-

ic” element), the Court of Appeals wrought further dam-

age by asserting that the physically identical comic books

WCP manufactured for FC and FC’s competitors—

identical in size, number of pages, paper stock, binding,

and every other manufacturing characteristic, to the point

where FC’s and competitors’ books were run on the same

presses at the same time—were nevertheless not “of like

grade and quality.” App. 8-9 at n.6. Apparently the court’s

view was that since the story line was different as be-

tween different books (an element with which WCP had

no concern whatever, though no doubt a reader would),

the physical books WCP manufactured could never be “of

like grade and quality” for Robinson-Patman purposes. /d.

6 E.g.: “... an unpaid manufacturer of copyrighted goods’; “. . .

persons who have . . . purchased . . . the goods”; “. . . the goods

manufactured for plaintiff’; “the copyrighted merchandise’; “. . .

the law gives an unpaid manufacturer a right to sell”; “. . . [plain-

tiffs] refusal to pay for allegedly defective goods”; “(defendant},

having made what it considers a valid tender of the goods, has

a claim for the purchase price.” 315 F.2d at 849, 854, 855.

Respectfully, that makes no sense. The court’s reason-

ing would effectively repeal Robinson-Patman for every

category of identically manufactured goods (for example,

red and blue T-shirts, or shower curtains with stripes as

opposed to dots, or milk with a “premium” brand name

vs. some other label) which have some differentiation ir-

relevant to their manufacture, so long as an “ultimate con-

sumer” would prefer one over another.

Put it in terms of this case: A story is an idea. Who

its writer is in no sense affects the physical object in

which it is contained. The Court of Appeals’ contrary ap-

proach would mean that physically identical shower cur-

tains are not “of like grade and quality” because they

have different patterns (designed by persons akin, in that

regard, to writers or illustrators), which is not so (Joseph

A. Kaplan & Sons, Inc., 63 F.T.C. 1308, 1347-48 (1963),

mod. on other grounds, 347 F.2d 785 (D.C.Cir. 1965)); or

that physically identical but “‘customized” T-shirts cannot

be subject to Robinson-Patman because they have differ-

ent words or designs, which is not so (Advanced Office

Systems v. Accounting Systems Co., 442 F.Supp. 418, 423

(D.S.C. 1977)); or that identical milk products (or blue

jeans, or other articles) are not “of like grade and qual-

ity” because one has an “author’s” or “premium’’ label

and the other does not, which is not so (FTC v. Borden

Co., 383 U.S. 637, 640-41, 645-46 & n.6 (1966); or that

books of differing “subject matter” (words and pictures)

are not subject to Robinson-Patman, which is not so (In

the Matter of Doubleday & Co., Inc., 52 F.T.C. 169, 192-93

(1955)).

What the Court of Appeais did here, in fact, would

stultify the entire purpose of the Robinson-Patman Act.

That Act seeks to require sellers to charge buyers the

same price for making the same thing—even if (as in

—23—

Borden, supra) the brand name (connoting ‘‘authorship’’)

is different, since that does not have any bearing on what

the seller makes. Here all agree that WCP’s radically dif-

ferent prices to FC and others, were for making exactly

the same thing: 32 four-color page letterpress comic books

with 4 four-color cover pages, all of exactly the same size

and paper stock. Plainly the Act was meant precisely to

cover that situation. But the Court of Appeals scuttled

that statutory purpose by pointing to the differences in

intangible ideas—story, characters, illustrations—which

had absolutely nothing to do with what WCP made. The

Court of Appeals did not suggest that those differences

in the contents in any way affected the cost of the physi-

cally identical books WCP manufactured (the containers)—

any more than the differing contents of two identical tin

cans would allow a tin can maker to charge differently

for the cans themselves. See Bruce’s Juices, Inc. v. Amer-

ican Can Co., 87 F.Supp. 985, 987, 990-91 (S.D. Fla. 1949),

aff'd, 187 F.2d 919 (5th Cir.), cert. dism., 342 U.S. 875

(1951).

Moreover, the Court of Appeals made matters even

worse by framing the issue in terms of “ultimate con-

sumers” (App. 8-9 at n.6). On that basis, no two issues

of even the same comic book could ever be “‘of like grade

and quality.”’ “Ultimate consumers” no doubt have differ-

ing preferences for different-patterned shower curtains,

or different brand names, just as much as for different

stories in comic books. But Kaplan, supra, this Court’s

decision in Borden, supra, and other decisions such as In

the Matter of General Foods Corp., 52 F.T.C. 798, 817,

826 (1956) (“institutional blend”’ vs. “grocery blend”’ cof-

fee), al] teach that this does not bear on the physical “like

grade and quality” of otherwise identical goods—i.e., the

physically identical comic books at issue here. Put sim-

ply, as to such goods the Court of Appeals’ “ultimate con-

sumer” (or “market acceptance’’) test was rejected by this

Court in FTC v. Borden Co., supra.7

And there is a worse distortion. In this case, WCP’s

“consumers” were not the ultimate retail buyers. Rather,

WCP’s consumers were FC and other publishers who

bought only the physical books (since they themselves

supplied the ideas). Even “ultimate consumers” never

bought what WCP sold: the container alone, not its con-

tents. One cannot defend price discrimination regarding

the physical container alone, by arguing that an “ultimate

consumer” may pay more for different contents. To allow

the Court of Appeals’ contrary approach to stand would

render Robinson-Patman a virtually toothless dog. For on

that court’s reasoning, any differing contents, or even

labels (be they brand names, or “institutional’’ versus

“grocery” blends, or any other such thing) would at once

exempt the containers, or other objects on or in which

they are included, from Robinson-Patman—even if, as

here, the containers are physically identical and their

manufacturer has nothing whatever to do with the con-

tents or labels.

Such a sweeping, wholesale excision from the Robinson-

Patman Act should not be permitted to stand.

7 In Borden, the lower court had held—precisecy as the Court

of Appeals reasoned here—that the “like grade and quality” deter-

mination should “‘not be based solely on the physical properties

of the products,’ but rather should include “the brand names they

bear,” their “relative public acceptance,” and “‘all [other] commer-

cially significant distinctions.” 383 U.S. at 639-40. That was wrong,

this Court held. Jd. at 640-41, 645-46 & n. 6.

—25—

CONCLUSION

For the foregoing reasons, petitioner First Comics, Inc.

respectfully requests this Court to grant this Petition for

a Writ of Certiorari to the United States Court of Ap-

peals for the Seventh Circuit; to reverse that court’s

determination that defendant World Color Press, Inc. and

the comic books it manufactures are as a matter of law

exempt from the Robinson-Patman Act; and to remand

the case to that court for appropriate further proceedings.

* Counsel of Record

Respectfully submitted,

KENNETH F. LEVIN *

30 North LaSalle Street

Suite 2000

Chicago, Illincis 60602

(312) 984-6000

PETER FLYNN, p.c.

CHERRY & FLYNN

30 North LaSalie Street

Suite 2140

Chicago, Illinois 60602

(312) 372-2100

Counsel for Petitioner

APPENDICES

App. 1

APPENDIX 1

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 88-2731 and 88-2745

First Comics, INC.,

Plaintiff-Appellant

and Cross-Appellee,

WoRLD CoLor PREss, INC.,

Defendant-Appellee

and Cross-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 84 C 1828—Brian Barnett Duff, Judge.

ARGUED JUNE 12, 1989—DercIDED SEPTEMBER 19, 1989

Before BAUER, CUMMINGS, and FLauM, Circuit Judges.

CUMMINGS, Circuit Judge. Plaintiff First Comics, Inc.

is a small Chicago-based enterprise that began seriously

exploring entrance into comic-book publishing in February

1982. By June, First Comics had decided to proceed with

plans to publish comic books and began negotiations with

defendant World Color Press, Inc., a comic book printer.

At this time, World Color Press was allegedly the only

App. 2

printer to use the letterpress method,! a less expensive

process of printing comic books. As the largest comic book

printer its customers included the largest publishers in

the field, notably Marvel Comics Group and DC Comics.

During the negotiations with World Color Press, First

Comics apparently secured a promise that First Comics

would receive the same price and treatment as enjoyed

by the larger comic book publishers. Some time in August,

First Comics agreed to have its comics printed at World

Color Pres= -

World Color Press failed to live up to its promise to

provide the same price and treatment to First Comics as

it provided to its larger customers. First Comics, under

the impression that the prices it was being charged were

the same as the larger publishers that it was competing

against, was actually being charged an average of 11.1

cents per copy, or 4.3 cents more per copy than Marvel

Comics.? First Comics discovered the differing charges in

January 1984 and demanded to be recompensed by World

Color Press through refund or future credit. World Color

Press refused, and in response First Comics switched to

another printer, one that used the more expensive offset

process since no other letterpress printer could be found. )

First Comics then filed this suit, alleging that World

Color Press violated the Robinson-Patman Act, 15 U.S.C.

§ 13(a), and alleging pendent state claims for violations

of the Illinois Consumer Fraud and Deceptive Business

Practices Act, Ill. Rev. Stat. ch. 121%, § 261, et seq., and

common law fraud. The case, originally assigned to Judge

Bua, was transferred to Judge Duff, who presided over

the nineteen-day jury trial. The jury ultimately found for

1 First Comics claims that World Color Press is the only printer

to use the letterpress method, while Judge Duff, in his memoran-

dum opinion of June 16, 1988, referred to other comic book printers,

but did not specify whether these other printers also employed

the letterpress method.

2 These figures are according to First Comics’ damage expert.

App. 3

World Color Press on the Robinson-Patman and Illinois

statutory claims, but found for First Comics on the fraud

claim and assessed damages in the amount of $407,072.

Judge Duff later reduced the damages award by $236,705.

A. Robinson-Patman Act

Section 2(a) of the Robinson-Patman Act, 15 U.S.C.

§ 13(a), makes it “unlawful for any person . . . to discrimi-

nate in price between different purchasers of commodities

.... As a jurisdictional matter, the Robinson-Patman

Act only protects purchasers from discriminatory pricing

of commodities. But what are commodities, and what hap-

pens when a challenged pricing scheme involves commod-

ities and non-commodities? Unfortunately, the Act fails

to answer these questions.

In Columbia Broadcasting System v. Amana Refrigera-

tion, Inc., 295 F.2d 375, 378 (7th Cir. 1961), certiorari

denied, 369 U.S. 812, this Court, borrowing from § 3 of

the Clayton Act (15 U.S.C. § 14), defined the term com-

modities as “goods, wares, merchandise, machinery or

supplies.” Other courts have similarly tried to separate

commodities from intangible goods or services. See, e.g.,

Tri-State Broadcasting Co. v. United Press Int’l, 369 F.2d

268, 270 n.2 (5th Cir. 1966) (distinguishing between tan-

gible and intangible goods; news information); City of

Gainesville v. Florida Power & Light, 488 F. Supp. 1258,

1281 (S.D. Fla. 1980) (tangible and intangible goods; elec-

tricity); see also W. Patman, Complete Guide to the

Robinson-Patman Act 33 (1963) (the Act covers pricing for

“any movable or tangible thing’’).?

% The Federal Trade Commission, however, has argued for an

analysis that accounts for the practical effects of the challenged

activity in light of the purpose and structure of the Act, “rather

than becoming preoccupied with metaphysical considerations about

what is or is not a tangible product.” In the Matter of the Times

Mirror Co., 92 F.T.C. 530, 233 (1978) (which held that newspaper

advertising is within the ambit of Robinson-Patman; the case was

(Footnote continued on following page)

App. 4

Because of the functional overlap, the distinction be-

tween goods and services is not always clear. Many trans-

actions are of a hybrid nature, contemplating both goods

and services; even the transfer of an intangible or ser-

vice can rarely be accomplished without the incidental in-

volvement of documents or other tangibles. To distinguish

between goods and services the dominant nature of the

transaction governs whether the activity is subject to the

Act.4 See Rowe, Price Discrimination Under the Robin-

son-Patman Act 60-61 (1962) (“price quotations fusing

physical elements with dominant intangible factors can-

not beget price discrimination in commodity sales”) (em-

phasis in original); Freeman v. Chicago Title & Trust Co.,

505 F.2d 527, 531 (7th Cir. 1974). In Freeman, the plain-

tiffs argued that as purchasers of title insurance, they

were primarily interested in the title search report, a

physical document, and not the underlying search or in-

surance. This Court rejected that argument, noting that

“the reports, like legal memoranda, are merely the em-

bodiment of that service. Clearly, it is the performance

of this service and not the delivery of the physical docu-

ment which constitutes the dominant nature of the trans-

action... .” Id.; Baum v. Investors Diversified Services,

3 continued

later settled and dismissed). See also Kinter, Federal Antitrust Law:

The Robinson-Patman Act 233 (1983) (discussing Times Mirror).

But see Rowe, Price Discrimination Under the Robinson-Patman

Act 61-62 (1962) (arguing in favor of the Commission’s earlier opin-

ion that newspaper advertising is not within Act and citing statutory

history limiting Act to ); Von Kalinowski, 4 Antitrust Laws

and e Regulation § 24.05 (1988 ed.) (collecting authorities).

4 The dominant nature examination was first undertaken by the

Sixth Circuit in General Shale Products v. Struck Construction

Co., 132 F.2d 425 (6th Cir. 1942), certiorari denied, 318 U.S. 780.

In Shale, the Sixth Circuit determined that a construction con-

tract did not include a sale of commodities within the meaning

of the Robinson-Patman Act even though the contract listed sepa-

rately the cost of the bricks and other tangible items to be sup-

plied. See May Department Store v. Graphic Process Co., 637 F.2d

1211, 1215 (9th Cir. 1980).

App. 5

Inc., 409 F.2d 872, 875 (7th Cir. 1969) (mutual fund shares

not commodities); see also Columbia Broadcasting System

v. Amana Refrigeration, Inc., 295 F.2d 375 (7th Cir. 1961),

certiorari denied, 369 U.S. 812 (sale of television adver-

tising is a service); Tri-State Broadcasting Co. v. United

Press Int’l, 369 F.2d 268 (5th Cir. 1966) (news informa-

tion provided by telet is a service); Aviation Special-

ties, Inc. v. United Technologies, Corp., 568 F.2d 1186

(5th Cir. 1978) (discrimination in sale prices for aircraft

parts arising from repair contract not actionable because

dominant nature of transaction was for repair work); deal

Plumbing Co. v. Benco, Inc., 382 F. Supp. 1161 (W.D.

Ark. 1974), affirmed, 529 F.2d 972 (8th Cir. 1976) (dis-

crimination in the sale price of components used in con-

struction contract not actionable under the Act because

dominant nature of contract was for construction service);

Kennedy Theater Ticket Serv. v. Ticketron, Inc., 342 F.

Supp. 922 (E.D. Pa. 1972) (admission ticket to theater not

commodity, but rather incidental to license for admission);

Lubbock Glass & Mirror Co. v. Pittsburgh Plate & Glass

Co., 313 F. Supp. 1184 (N.D. Tex. 1970) (contract for glaz-

ing : service even though glass, dcors and windows sup-

plied).

The parties do not dispute that comic books are com-

modities within the meaning of the Act. See, e.g., The

Morning Pioneer, Inc. v. The Bismarck Tribune Co., 493

F.2d 383 (8th Cir. 1984), certiorari denied, 419 U.S. 836

(newspapers are commodities); Reid v. Harper & Brothers,

235 F.2d 420 (2d Cir. 1956) (books are commodities); Jn

the Matter of Doubleday & Co., 52 F.T.C. 169 (1955)

(books are commodities). And while First Comics and

World Color Press agree on the facts of the transaction

between them, they dispute the nature of the transaction.

Both parties agree that during their relationship First

Comics developed an illustrated story and sent it to a

company that produces a color separation. The color sepa-

ration was then sent to World Color Press, which would

print the comic books from the separation, supplying the

paper, ink, staples and labor. World Color Press then

App. 6

delivered the comic books on First Comics’ behalf to retail

vendors. The color separation, as well as the copyright

for the comic books, remained the property of First Com-

ics. First Comics claims that by these transactions it pur-

chased finished comic books from World Color Press. In

contrast World Color Press argues that it did not sell

anything to First Comics, but rather merely performed

the service of printing for a fee.

SCM Corp. v. Xerox Corp., 394 F. Supp. 384 (D. Conn.

1975), and May Dep’t Store v. Graphic Process Co., 637

F.2d 1211 (9th Cir. 1980), addressed issues similar to the

one before us, but neither case finally decided the mat-

ter. The plaintiff in SCM leased a copying machine from

Xerox. The lease price was determined by the number

of copies made; thus the plaintiff claimed that the domi-

nant nature of the transaction was a sale of copies. The

court ultimately determined that the transaction was ac-

tually a sale of the copying process, not a commodity,

primarily because the plaintiff purchased the paper on

which the copies were made independently of the copier.

In a footnote, that court virtually predicted our situation

here:

Where the customer acquires both the paper and the

images upon it, as when a photographer sends his

negatives to be printed, a closer question arises as

to whether the customer has purchased the process

of enlarging or enlarged prints that could be con-

sidered commodities.

394 F. Supp. at 386 n.1.

In May Dep’t Store, the Ninth Circuit heard an appeal

from a grant of summary judgment on a Robinson-Patman

claim. The plaintiff in May Dep’t Store alleged that the

defendant discriminated in the pricing of veloxes, a type

of printing medium in which original artwork is trans-

formed into a series of dots and then used to reproduce

the artwork in newspapers. The court recognized the sim-

ilarity to the “{SCM} trial court’s analogy . . . [that] must

now be addressed.” 637 F.2d at 1211. While the court ma-

jority addressed the issue, it unfortunately did not decide

ee |

App. 7

the matter, but rather determined that the question in-

volved issues of fact that should have precluded summary

judgment.5

The transaction between First Comics and World Color

Press included aspects of a sale of both services and

commodities. No doubt one could dissect any service ar-

rangement and find tangible results akin to commodities.

Likewise, one could label each level of any manufactur-

ing process as a service with incidental tangible results.

But, constrained as we are to identify this transaction

as either one or the other, we have little difficulty in

concluding that the dominant nature of the transaction

was one for services. World Color Press is a printer; it

is hired to transpose images from one surface to another.

First Comics, like any other publisher, purchases the

process of printing from a printer like World Color Press.

5 The court listed as significant the fact that May did not pro-

vide Graphic

with any tangible ingredients. The intangible ingredient, art-

work, is returned to May with a tangible uct, a velox.

Graphic has not produced 2! comparison fotwonn the cost

of the physical components of a velox and the price charged

May. There is no evidence that Graphic billed May separate-

ly for labor. We find, therefore, that summary ju ent was

improperly granted. We do not hold, however, that the trans-

actions involved in this dispute were sales of goods. The plain-

tiff has the burden of proving this element at trial.

637 F.2d at 1216. a factual findings may clarify the mat-

ter, we are unconvinced that the entire issue—whether the trans-

action was a sale of commodities—properly belongs before a trier

of fact. Rather it is for the court to decide if a given transaction

is within a meaning of a statutory term. See Freeman, 505 F.2d

at 531 n.10.

Judge Skopil dissented from the decision to reverse summary

judgment, observing that “Graphic does nothing more than trans-

form May’s artwork into an almost identical image. The produc-

tion of a tangible item is only incidental to the service provided

by Graphic.” Id. at 1217.

App. 8

First Comics argues that because the end result pro-

duces comic books, which are of course tangible objects,

and the comic books are then transferred to First Comics,

the transaction should be characterized as the manufacture

and sale of comic books. This argument is not without some

persuasion since World Color Press supplies the generic

raw materials, viz., the paper, ink and staples, and

arguably no commodities exist at the start of the print-

ing process while at the finish thousands of comic books

are ready to be sold. But what was First Comics buying?

It was not buying the comics themselves—First Comics’

artists and authors produce the comics. And it was not

merely buying the paper and ink. The tangible items pro-

vided by World Color Press, the paper, ink and staples,

are uniformly fungible and not subject to significant price

differentials among printers. Rather, as First Comics ar-

gues in its brief, World Color Press is “the only [printer]

using the less costly ‘letterpress’ method” (Br. 3)—and

that is what First Comics was purchasing, the letterpress

method and process of transposing and multiplying im-

ages. As explained in Rowe, supra, at 60-61, price quota-

tions fusing physical elements with dominant intangible

factors do not beget price discrimination within the Act.

The singularly most important ingredient, the color

separations, were provided by First Comics. Defendant

was in essence multiplying what First Comics already pro-

duced. Borrowing from Advanced Office Systems v. Ac-

counting Systems Co., 442 F. Supp. 418, 423 (D. S.C. 1977)

(preparation of billing statements is a service), at the

printing stage the comic books lack real value to any en-

tity other than First Comics. World Color Press cannot

sell the finished comic books to any other buyer since

First Comics holds the copyright, nor would any of World

Color Press’ other clients be interested in finished comic

books bearing a First Comics story—rather each client

wants only the printed version of its own comic book.®

6 This also relates to the Robinson-Patman Act’s requirement that

the commodities sold be of like grade and quality. Since the fin-

(Footnote continued on following page)

App. 9

The finished comic books are certainly not insignificant

with respect to the process of printing. But the requisite

inquiry is to ascertain whether the resulting tangible

goods were incidental to a service or the crux of the

transaction. Here the comic books were significant, yet

they were nonetheless the result of the service of print-

ing. The transaction was for printing even though it in-

volved the purchase of supplies, just as theater tickets

are incidental to the intangible right to see a performance,

Kennedy Theater Ticket Serv., supra, or bricks are in-

cidentally purchased to satisfy a construction contract,

Shale, supra.

This result does not conflict with earlier decisions

holding that newspapers and books are commodities, be-

cause in those cases the defendants were the publishers.

There the publishers were sued for discriminatory pric-

ing schemes for identical books and identical newspapers

sold to different retailers and consumers. The publishers

were indeed selling commodities, the predominant nature

of the transactions was between the publishers and their

customers and involved sales of identical products. Here

the transaction was for printing, a service which made

possible the production of commodities for future sales by

plaintiff. The Robinson-Patman Act was therefore inappli-

cable.

6 continued

ished First Comics comic books are of no use to any other pub-

lisher, it is a tenuous suggestion that printed comic books, such

as Marvel and First Comics comic books, are of like grade and

oye | simply because they are printed to the same specifications.

yo inter, Federal Antitrust Law: Robinson-Patman Act 232-233

(1983) (“it makes sense to focus principally on the perception of

the ultimate consumer . . . if consumers view the products as

dissimilar, and prefer one to the other even if the prices are equal,

then Robinson-Patman ought to play no role’’) (emphasis in orig-

inal); Vawter, Jurisdiction, Commerce and Exemptions; Sales, Com-

modities and Like Grade and Quality Requirements, 53 Antitrust

L.J. 847, 860 n.31 (1985).

App. 10

B. Illinois Consumer Fraud and Deceptive

Business Practices Act

1. Consumer Injury Requirement

First Comics also appeals the district court’s ruling that

consumer injury is an independent element of its pendent

state claim brought under the Illinois Consumer Fraud

and Deceptive Business Practices Act, Ill. Rev. Stat. ch.

121%, ¢ 261 et seg. The district court originally granted

summary judgment to World Color Press due to First

Comics’ failure to plead consumer injury specifically. The

court later reinstated the claim, but still instructed the

jury that in order for First Comics to prevail on its claim,

it must have proved that World Color Press’ pricing had

an injurious impact on consumers generally, and not sim-

ply on First Comics.

As a federal court hearing a state law claim,’ the dis-

trict court and this Court are obliged to follow the deci-

sions of the Illinois Supreme Court, or if that court has

yet to offer its opinion on a matter, then the federal

courts are to decide the case in the manner the state high

court would likely decide it. In the absence of an Illinois

Supreme Court decision on the matter, intermediate ap-

pellate state court decisions are the guideposts, unless

there are other persuasive data that the state supreme

court would decide the matter differently. Peeler v.

Village of Kingston Mines, 862 F.2d 135 (7th Cir. 1988),

citing Hicks v. Feiock, 108 S. Ct. 1423, 1428-1429 n.3, and

Commissioner v. Estate of Bosch, 387 U.S. 456, 464-465.

The Illinois Supreme Court has yet to rule whether the

Consumer Fraud Act requires proof of public injury or

some general effect on consumers broadly in order to

recover under the Act, and the intermediate state appel-

late courts are in some disagreement on the matter, as

are the district courts within this Circuit. Indeed only

7 Since a substantial federal question was Boar og by this case

and a great many judicial resources have already been expended,

jurisdiction is- proper under pendent jurisdiction.

App. 11

recently this Court was faced with the issue in Graphic

Sales, Inc. v. Sperry Univac Div., 824 F.2d 576 (7th Cir.

1987), but avoided its resolution because the case was

decided on other grounds. This time we cannot avoid the

fray.

The Consumer Fraud Act provides that:

Unfair methods of competition and unfair or decep-

tive acts or practices, * * * are hereby declared un-

lawful whether any person has in fact been misled,

deceived or damaged thereby. In construing this sec-

tion consideration shall be given to the interpreta-

tions of the Federal Trade Commission and the fed-

eral courts relating to Section (a) of the Federal

Trade Commission Act.

Ili. Rev. Stat. ch. 121%, § 262. The Act authorizes a

private right of action by providing:

Any person who suffers damage as a result of a vio-

lation of this Act committed by any other person may

bring an action against such person.

Ill. Rev. Stat. ch. 121%, ¢ 270(a). At first blush, the Act

seemingly does not require that consumer or public in-

jury need be proved to prevail under the Act. Nonetheless

both the state and federal courts have split on the mat-

ter, although the balance seems to require such an injury.

Compare Jays Foods, Inc. v. Frito-Lay, Inc., 664 F. Supp.

364 (N.D.IIl. 1987) (requiring consumer injury); Maduff v.

Life Ins. Co. of Virginia, 657 F. Supp. 437 (N.D.IIl. 1987)

(requiring consumer injury); Horsell Graphic Industries

v. Valuation Counselors, Inc., 639 F. Supp. 1117 (N.D.

Il]. 1986) (requiring consumer injury); Heritage Ins. Co.

v. First National Bank of Cicero, 629 F. Supp. 1412 (N.D.

Il. 1986) (requiring consumer injury); UNR Industries,

Inc. v. Continental Ins. Co., 623 F. Supp. 1319 (N.D.IIL.

1985) (requiring consumer injury); Newman-Green, Inc. v.

Alfonzo-Larrain, 590 F. Supp. 1088 (N.D.IIl. 1984) (requir-

ing consumer injury); Feldstein v. Guinan, 148 Ill. App.

3d 610 (1st Dist. 1986) (requiring consumer injury); Mc-

Carter v. State Farm Mutual Automobile Ins., 130 II.

App. 12

App. 3d 97 (8d Dist. 1985) (requiring consumer injury);

Frahm v. Urkovich, 113 Ill. App. 3d 580 (1st Dist. 1983)

(requiring consumer injury); with Hometown Savings &

Loan Ass’n v. Mosely Securities Corp., 703 F. Supp. 723

(N.D.Ill. 1988) (not requiring consumer injury); Haroco,

Inc. v. American Nat’l Bank & Trust Co., 647 F. Supp.

1026 (N.D.IIl. 1986) (not requiring consumer injury); Dun-

cavage v. Allen, 147 Ill. App. 3d 88 (1st Dist. 1986) (not

requiring consumer injury); Tague v. Molitor Motor Co.,

139 Ill. App. 3d 313 (5th Dist. 1985) (not requiring con-

sumer injury); M & W Gear Co. v. AW Dynamometer,

Inc., 97 Ill. App. 3d 904 (4th Dist. 1981) (not requiring

consumer injury); Beard v. Gress, 90 Ill. App. 3d 622 (4th

Dist. 1980) (not requiring consumer injury).

Besides having the weight of the cases on its side, that

line of reasoning requiring a showing of consumer injury

is the more persuasive and therefore most likely to be

adopted by the Illinois Supreme Court. Without such a

limitation, the Act would not simply be extremely far-

reaching but would likely supplant many common law

breach of contract and fraud cases, something the IIli-

nois legislature surely did not intend. See Maduff, 657

F. Supp. at 440; Exchange National Bank v. Farm Bureau

Life Ins., 108 Ill. App. 3d 212 (8d Dist. 1982).

Moreover a complete reading of the Act supports the

conclusion that its aim was to protect consumers. Para-

graph 262, which broadly forbids unfair methods and de-

ceptive practices, directs “consideration . . . to the in-

terpretations of the Federal Trade Commission and the

federal courts relating to Section 5{a) of the Federal Trade

Commission Act,” 15 U.S.C. § 45, its federal counterpart.

Under Section 5(a) of the Federal Trade Commission Act,

a charge alleging an unfair or deceptive practice must con-

template protection of the public. See Spiegel, Inc. v.

Federal Trade Comm’n, 494 F.2d 59, 62 (7th Cir. 1974),

certiorari denied, 419 U.S. 896, citing Federal Trade

Comm ’n v. Klesner, 280 U.S. 19, 27. The succeeding para-

graphs of the Consumer Fraud Act essentially compare

a laundry list of specific instances in which the Act would

App. 13

apply—all of which necessarily implicate consumer con-

cerns, é.g., { 262A (pyramid sales schemes); ¢ 262B (con-

sumer sales contracts); ¢ 262C (consumer credit); ¢ 262D

(installment sales); ¢ 262J (advertising); ¢ 262J.1 (coupons);

{ 262 (offers of prizes); ¢ 262Q (home improvements). And

though some courts have expressed an unwillingness to

construe the consumer injury requirement absent explicit

legislative dictate, see Haroco, 647 F. Supp. at 1026;

Hometown Savings & Loan, 703 F. Supp. at 727, citing

Sedima, S.P.R.L. v. Imrex, 473 U.S. 479, the Act must

not be read in a vacuum. While the judiciary should not

abuse its authority by correcting a legislative mistake,

Sedima, supra, it should not interpret legislation in such

a microscopic fashion as to blur the context.

As noted, the Illinois Supreme Court has not squarely

addressed this issue, but has indicated that the reach of

the Act is limited to conduct which deceives or exploits

consumers. See Scott v. Ass’n for Childbirth at Home,

88 Ill.2d 279, 285 (1981) (Act applies to advertising and

sale of educational and training services because “pur-

chasers of educational services may be in as much need

of protection against unfair or deceptive practices in their

advertising and sale as are purchasers of any other ser-

vice’’); Steinberg v. Chicago Medical School, 69 Il.2d 320,

328 (1977) (rejected medical school applicants cannot sue

under the Act because they are not consumers).® These

pronouncements indicate an intention on the part of the

Illinois Supreme Court to look beyond the effect of the

immediate scheme on the putative victim to determine

8 Of those cases that did net require consumer injury, most have

either involved consumer plaintiffs or conduct from which con-

sumer injury could readily be inferred. E.g., Haroco, supra (plain-

tiffs were commercial borrowers and alleged deceptive activity in-

volved broad segment of bank’s activities); M & W Gear, supra

(consumer injury easily inferred in false advertising suit between

competitors); Duncavage, supra (tenant was held consumer under

Consumer Fraud Act); Tague, supra (plaintiff was consumer com-

plaining about misconduct in sale of car); see also Jays Foods, 664

F. Supp. at 369; Newman-Green, 590 F. Supp. at 1087.

App. 14

whether a class of consumers was affected. Consequent-

ly, consistent with the Act, it was incumbent upon First

Comics to show that World Color Press’ “‘misconduct in-

jured consumers generally.” Jays Foods, 664 F. Supp.

at 369.

2. Failure to Show Consumer Injury

Under the Illinois Act First Comics had the burden of

proving that consumers generally were injured in some

way by World Color Press’ misconduct. Consumer injury

can take two forms: direct injury to the consumers or in-

direct through stifled competition. First Comics claims

that World Color Press’ pricing scheme stifled competi-

tion by promoting retail price disparities between First

Comics comic books and those of the favored publishers,

primarily Marvel Comics Group, DC Comies and Archie,

another comic book publisher.

First Comics argues, and the jury accepted, that World

Color Press charged higher prices for printing services

to those publishers in competition with its favored pub-

lishers. This does not necessarily mean that competition

was stifled in such a way as to injure consumers. See,

e.g., American Oil Co. v. FTC, 325 F.2d 101, 104 (7th

Cir. 1963), certiorari denied, 377 U.S. 954 (price discrimi-

nation does not per se constitute antitrust violation; plain-

tiff still must show a lessened ability to compete). First

Comics must demonstrate that consumers were affected

by the price disparity; it failed to persuade the jury on

this issue at trial. The “plaintiffs are not entitled to judg-

ment notwithstanding the verdict... . unless no rational

jury could have brought back a verdict for the defen-

dants.” Will v. Comprehensive Accounting Corp., 776 F.2d

665, 678 (7th Cir. 1985), certiorari denied, 475 U.S. 1129

(citations omitted), a more rigorous standard than mere-

ly persuading this Court that a different verdict should

have been reached.

The jury’s decision that World Color Press’ misconduct

did not injure consumers generally is not without rational

App. 15

basis. There was ample evidence for the jury to reach

that decision. For example, there was evidence before the

jury that First Comics set its retail price before even

receiving the price quotations from World Color Press.

Moreover, the difference between First Comics’ one dollar

cover price and those of the favored publishers was much

higher then the overcharge incurred by First Comics. And

when First Comics did receive printing cost reductions,

it did not pass these production cost savings on to the

consumers, but rather pocketed the savings. This detracts

from its argument that lower production costs would have

allowed it to compete with the favored publishers’ cover

price. There was no evidence that First Comics lost sales

or customers because of its higher cover price, and in fact

one witness testified that the market is made up of col-

lectors unlikely to be deterred by the price differential al-

leged by First Comics. Finally, there was evidence concern-

ing other comic book publishers—both successful and not,

favored and unfavored—which suggested that the price

differential did not stifle competition, or result in higher

cover prices or consumer injury. In light of the evidence

available to the jury, there was a rational basis for its

conclusion that competition was not stifled, nor were con-

sumers generally injured.

C. Damages

First Comics prevailed at trial on its common law fraud

claim and was awarded $407,072 in damages by the jury.

This award included $236,705 in consequential damages.

The consequential damages arose following the discovery

of the fraud, when First Comics began using another

printer. According to First Comics, which did not have

a contract with defendant, the contracts between World

Color Press and the favored publishers included a provi-

sion which required either side to tender one-year notice

for non-renewal of the contract. First Comics argues that

this notice provision amounted to a one-year price pro-

tection benefit enjoyed by the favored publishers. First

Comics contends that if it had received equal treatment

App. 16

as promised by the defendant, it too would have been sub-

ject to this provision, which would have meant not only

lower charges during the fraudulent period, but also would

have guaranteed those lower prices during the one-year

period following the fraud. Absent such notice, First od

ics contends that its injuries continued accruing for a year

even after it secured another printer. Thus the consequen-

tial damages figure represents the price differential be-

tween what First Comics paid to the later printer over

the subsequent year and the price First Comics would

have paid to World Color Press had there been no fraud.

After the trial Judge Duff, however, reduced First Com-

ics’ award by that amount, and First Comics appeals his

decision.

Plaintiff argues that fraud damages can accumulate even

after the discovery of fraud, citing Thor Power Tool Co. v.

Weintraub, 791 F.2d 579, 585 (7th Cir. 1986), and Four “S”’

Alliance v. American Nat’l Bank, 104 Ill. App. 3d 636

(1st Dist. 1982). It is true that injuries caused by fraud

are not neatly halted by discovery of the fraud. Neverthe-

less, First Comics was required to show that its claimed

consequential damages grew out of the fraud.

While jury awards will not be disturbed unless lacking

a rational basis, with all inferences drawn in favor of the

non-moving party, a reduction of the damages award was

justified here. There was no basis to justify the jury’s

award of consequential damages.

World Color Press promised First Comics that it would

render treatment equal to that extended to the favored

publishers. This was obviously untrue, as evidenced by

the higher prices charged for printing services which now

comprise First Comics’ direct s award. And First

Comics argues that if it had equal treatment it would

have had one-year price protection. But equal treatment

does not mean identical treatment. The favored publishers

were longstanding customers with longstanding contracts

and whose business, by First Comics’. own estimation,

comprised well over half of World Color Press’ business.

App. 17

The contracts between World Color Press and the favored

publishers were not simply one-year price protection pro-

visions solely for the publishers’ benefit, but rather guar-

anteed to each party at least one-year notice of non-

renewal. The provision was for World Color Press’ benefit

as much as the publishers.

In contrast First Comics had yet to publish a single

book when the promise of equal treatment was extended.

Obviously, neither World Color Press nor First Comics

expected a long-term contract at that time. In fact, First

Comics never signed a contract with World Color Press;

instead, it paid for printing by the job. Thus there was

nothing to hold First Comics to World Color Press, nor

World Color Press to First Comics. While First Comics

no doubt relied on the promise of equal treatment, any

sort of price protection to plaintiff would have been more

favorable than the treatment extended to the favored

publishers because First Comics would enjoy the so-called

one-year price protection without the obligation to con-

tinue with World Color Press for at least a year. The only

rational scope for the term equal treatment would be the

price for each job, since that is the context in which the

promise was made and upon which plaintiff relied.®

World Color Press also excepts to the final damage

award. At the time of the lawsuit, First Comics had been

billed but refused to pay $99,624 in printing charges and

freight costs, which prompted World Color Press to coun-

terclaim for this amount. At trial First Comics’ damage

expert calculated its total damage figure under the mis-

taken impression that these charges had been paid. World

Color Press requested that Judge Duff instruct the jury

% First Comics contends, without rebuttal by World Color Press,

that Judge Duff included within the $236,705 reduction a claim of

$5,370 that the jury had already rejected (Br. 18 n.12). If true,

that $5,370 was not a component of the original damages award

as assessed by the jury and should not have been offset. On re-

mand a determination should be made as to whether the $236,705

reduction did indeed include this already rejected claim.

App. 18

to deduct this amount from whatever damages amount it

might later award First Comics. Judge Duff declined this

instruction as well as World Color Press’ subsequent mo-

tion for judgment on the counterclaim. This was error.

First Comics’ direct damages consisted of the fraudulent

prices it actually paid less the prices it should have paid

absent the fraud. The final damages figure cannot include

that sum which was merely billed but not paid, because

First Comics certainly has not suffered this loss. The

proper resolution is either to exclude the unpaid charges

from First Comics’ damages determination or to award

judgment on World Color Press’ counterclaim. Conse-

quently, First Comics is only entitled to those losses it

actually incurred.

D. Conclusion

First Comics is not entitled to judgment on its Robinson-

Patman Act claim. As a matter of law, First Comics paid

for printing services, not commodities, and therefore the

Robinson-Patman Act had no applicability. As for the IlIli-

nois Consumer Fraud and Deceptive Business Practices

Act, we agree with the district court that the Illinois

Supreme Court would likely require that some sort of

public or consumer injury be demonstrated in order to

recover under that Act. First Comics failed to meet that

standard.

Finally, with respect to the damages awarded by the

jury on First Comics’ common law fraud claim, Judge Duff

correctly reduced the award by the amount of higher

charges incurred by First Comics in the year following

the fraud.!° There was no rational basis to conclude that

First Comics was entitled to a one-year period of price

protection. The damage award should have been reduced

further by the amount of outstanding charges which plain-

tiff never paid.

10 But see note 9 supra.

ell

App. 19

Accordingly, the judgment is affirmed except as to amount

of damages. As to that feature the case is remanded for

recalculation consistent with this opinion.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

App. 20

JUDGMENT — ORAL ARGUMENT

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

Chicago, Illinois 60604

September 19, 1989.

Before

Hon. WILLIAM J. BAUER, Chief Judge

Hon. WALTER J. CUMMINGS, Circuit Judge

Hon. JOEL M. FLAum, Circuit Judge

First Comics, INC.,

Plaintiff-Appellant

No. 88-2731 vs.

88-2745

WoRLD COoLor PREss, INC.,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 84 C 1828—Brian Barnett Duff, Judge.

This cause was heard on the record from the United

States District Court for the Northern District of Illinois,

Eastern Division, and was argued by counsel.

On consideration whereof, IT IS ORDERED AND AD-

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

trict Court in this cause appealed from be, and the same

is hereby, AFFIRMED AND REMANDED, in accordance

with the opinion of this Court filed this date. Costs to

be borne by World Color Press.

eT |

App. 21

APPENDIX 2

[Dated December 10, 1984]

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

FIRST COMICS, INC., —

Plaintiff,

WORLD COLOR PRESS, INC., and MARVEL COMICS

GROUP, a Division of Cadence Industries Corp.,

Defendants.

No. 84 C 1828

Honorable Nicholas J. Bua, Presiding

MEMORANDUM AND ORDER ‘

The Court upholds in part and rejects in part defen-

dants’ objections to the Magistrate’s Report and Recom-

mendation. Therefore, while defendants’ motion for sum-

mary judgment is denied, the court expresses no opinion

on the matter of the existence of a sale of a commodity

under the Robinson-Patman Act.

I. DISCUSSION

The Magistrate’s Report and Recommendation, issued

October 9, 1984, denied defendants’ motion for summary

judgment. It also held that, as a matter of law, there

exists a sale of a commodity under the Robinson-Patman

Act. In effect, the Magistrate granted partial summary

App. 22

judgment for the plaintiff on the issue of the existence

of a sale of a commodity. The Court believes that it was

improper for the Magistrate to so hold on the issue of

the sale of a commodity.

Defendants argue correctly that the Magistrate’s hold-

ing deprived them of a reading of the facts in the light

most favorable to them. The Magistrate began correctly

by reading the facts in the light most favorable to the

plaintiff in the context of defendants’ motion for summary

judgment. However, it was incorrect for the Magistrate

to continue a factual reading favorable to the plaintiff

when he held for the plaintiff on the issue of the sale of

a commodity. This issue involves genuine issues of ma-

terial fact and therefore a finding for the plaintiff at this

time is equal to summary judgment on the issue in plain-

tiffs favor. This result is improper here. Therefore, defen-

dants’ objections to the Magistrate’s affirmative finding

on this issue is upheld and that finding is stricken from

the Report.

Defendants’ objection is overruled regarding the Magis-

trate’s analysis of the “dominant nature’”’ test in deter-

mining whether a commodity exists. The case of May

Department Store v. Graphic Process Company, 637 F.2d

1211 (9th Cir. 1980) is dispositive of this issue here. The

facts in that case are analogous to the facts here. In May

Department Store, the court outlined several issues of fact

under the “dominant nature” test which indicated that

summary judgment was inappropriate: (1) costs between

intangible service and tangible goods provided; (2) supply-

ing of ingredients; and (3) breakdown of costs on billing

invoices. Jd. at 1215.

In the present case, the Court finds all three of the

above facts to be controverted. In addition, the Court

finds that the degree of skill involved in World Color’s

printing and manufacture of the comic books is a ques-

tion of fact which bears on whether the dominant nature

of the comic book printing and manufacture is a service

or a commodity.

App. 23

Finally, defendants’ objection regarding the absence of

a sale since World Color could not be the owner of the

comic books under the federal copyright laws, is over-

ruled. The Court agrees with the distinction in the Magis-

trate’s Report between ownership rights in comic books

printed and manufactured by World Color and ownership

rights of the copyright embodied in the comic books.

(Pages 8-9 of the Report). Therefore, the Court finds that

a genuine issue of material fact exists regarding the exist-

ence of a sale of the comic books between World Color

and First Comics.

II. CONCLUSION

The Court accepts Magistrate Sussman’s recommenda-

tions as modified and incorporates his report into this

order making it a part hereof as Appendix A, and orders

that the motion for summary judgment of defendants World

Color Press and Marvel Comics is denied.

IT IS SO ORDERED.

/s/ NICHOLAS J. BUA

Nicholas J. Bua, Judge

Dated: December 10, 1984

App. 24

APPENDIX 3

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

FIRST COMICS, INC.. -

ar Plaintiff,

No. 84 C 1828 Vv.

WORLD COLOR PRESS, INC., and MARVEL COMICS

GROUP, a Division of Cadence Industries Corp.,

Defendants.

REPORT AND RECOMMENDATION

OF MAGISTRATE CARL B. SUSSMAN

TO THE HONORABLE NICHOLAS J. BUA, one of the

Judges of the United States District Court for the North-

ern District of Illinois.

This is an action for violations of the Robinson-Patman

Act, 15 U.S.C. Section 13(a) (1982), the Sherman Act, 15

U.S.C. Section 2, and the Illinois Deceptive Trade Prac-

tices Act, 121% Ill. Rev. Stat. Sections 262, 270(a) and

312. The defendants have moved to dismiss the complaint

for failure to state a claim, or in the alternative, for sum-

mary judgment. Under Rule 12(b) of the Federal Rules

of Civil Procedure, if on a motion to dismiss for failure

to state a claim, “matters outside the pleading are pre-

sented to and not excluded by the court, the motion shall

be treated as one for summary judgment and disposed

of as provided in Rule 56.” Fed.R.Civ.P. 12(b). As the

parties have presented affidavits for this motion, the court

will consider the motion as one for summary judgment.

App. 25

SUMMARY JUDGMENT PROCEDURE

Summary judgment under Rule 56 is an extreme rem-

edy which should not be granted -unless the movant is

entitled to judgment beyond all doubt. City National

Bank of Fort Smith, Arkansas v. Vanderboom, 422 F.2d

221, 223 (8th Cir. 1970), cert. denied, 399 U.S. 905 (1970);

Homan Manufacturing Company v. Long, 242 F.2d 645,

653 (7th Cir. 1957). It should be entered only when “...

the pleadings, depositions, answers to interrogatories and

admissions on file, together with affidavits, if any, show

that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter

of law.” Fed.R.Civ.P. 56(c). See also Fitzsimmons v. Best,

528 F.2d 692, 694 (7th Cir. 1976). The burden is on the

moving party to show that there is no genuine issue of

material fact. Rose v. Bridgeport Brass Company, 487

F.2d 804, 808 (7th Cir. 1973). However, mere conclusory

assertions are not sufficient to support a motion for sum-

mary judgment. Patterson v. General Motors Corporation,

631 F.2d 476, 482 (7th Cir. 1980), cert. denied, 451 U.S.

914 (1981).

The basic mission of the summary judgment procedure

is to allow the court to pierce the pleadings and assess

the proof in order to see whether there is a genuine need

for a trial. Gauck v. Meleski, 346 F.2d 433, 436 (5th Cir.

1965). In performing its task, the court must draw infer-

ences from underlying facts contained in such materials

as affidavits, exhibits and depositions, in the light most

favorable to the non-movant. Poller v. Columbia Broad-

casting System, 368 U.S. 464 (1962); Fitzsimmons, supra,

528 F.2d at 694; Technograph Printed Circuits, Ltd. v.

Methode Electronics, Inc., 356 F.2d 442, 446-47 (7th Cir.

1966), cert. denied, 384 U.S. 950 (1966). The non-movant’s

allegations must be taken as true to the extent that they

are consistent with the evidence before the court. Good-

man v. Mead, Johnson & Company, 534 F.2d 566 (3d Cir.

1976), cert. denied, 429 U.S. 1038 (1977). The court must

resolve all doubts as to the existence of a genuine issue

App. 26

of material fact against the moving party. Technograph,

supra, 356 F.2d at 447.

STATEMENT OF THE CASE IN LIGHT MOST

FAVORABLE TO THE NON-MOVANT

Plaintiff First Comics, Inc. (FCI), a Delaware corpora-

tion with its principal place of business in Illinois, filed

a four count complaint against World Color Press, Inc.

(World Color), a Delaware corporation with its principal

place of business in Illinois, and Marvel Comics Group

(Marvel), also a Delaware corporation with its principal

place of business in New York. FCI is a comic book pub-

lisher, as is Marvel. World Color contends that it is a

“printer” of comic books. FCI alleges that World Color

printed and “sold” comic books for Marve’ at a discrimina-

tory price; a price lower than that for “sales” to FCI.

Complaint Paragraphs 12-47. FCI contends that that trans-

action was a violation of the Robinson-Patman Act, as well

as the Sherman Act and Illinois Deceptive Trade Prac-

tices Act.

The defendants have moved for summary judgment be-

cause the complaint does not state a claim under the

Robinson-Patman Act. The defendants argue certain juris-

dictional elements necessary under the Act are lacking.

The defendants’ motion centers on the Robinson-Patman

claims because defendants contend the entire complaint

depends on those claims. FCI has alleged that the Robin-

son-Patman violation is the basis of a Sherman Act viola-

tion. FCI’s Count II under the Sherman Act alleges that

Marvel perpetrated a marketing strategy to induce com-

ic book distributors to forebear committing their resources

to Marvel’s competitors’ comic books. This effort by

Marvel was to enhance its monopoly in the comic book

market. FCI alleges that Marvel could only do this in con-

junction with the discriminatory pricing arrangement

Marvel had with World Color. Complaint paragraph 117.

Defendants argue if there is no Robinson-Patman viola-

tion because of jurisdictional insufficiency; there can be

renee

App. 27

no Sherman violation. Finally, defendants contend if these

federal statutory claims are not present, the pendent state

trade practices claims must fail for lack of subject mat-

ter jurisdiction. Thus, as it seems to be central to the

continued vitality of this cause, the Robinson-Patman Act

must be considered.

ROBINSON-PATMAN ACT

15 U.S.C. Section 13(a) (1982) provides that:

(i)t shall be unlawful for any person engaged in com-

merce, in the course of such commerce, either directly

or indirectly, to discriminate in price between differ-

ent purchasers of commodities of like grade and qual-

ity, where either or any of the purchases involved

in such discrimination are in commerce, where such

commodities are sold for use, consumption, or resale

within the United States, ... and where the effect

of such discrimination may be substantially to lessen

competition or tend to create a monopoly....

(Emphasis added). The defendants contend to be a Sec-

tion 13(a) violation, the discriminatory dealing must en-

compass a sale of a commodity. They argue that World

Color provides only a service, that is, the printing of com-

ic books, and thus there can be no sale of a commodity

in its dealing with Marvel. The unique situation presented

in the business transaction involved here merits explana-

tion. A comic book publisher, such as Marvel or FCI,

creates a story and the illustrations for a comic book. The

publisher creates color separations, that is, the graphic

arts plate-ready films from which the actual books are

printed. It would seem clear that the publisher “owns”

these “negatives” so to speak, as well as the copyright

interest in the creative material on them. The publisher

then takes its “negatives” to an enterprise such as World

Color who actually prints and “makes up” the comic

books. The “printer” supplies the paper and ink. Thus,

when “printer” and publisher begin their transaction,

there really are no “commodities” to speak of in exist-

App. 28 -

ence—only creative ideas. When the “printer” is through,

commodities have been “created’”—the finished comic

book. The question is whether this activity constitutes

a sale of commodities or simple performance of a ser-

vice.

SALE OF A COMMODITY

The Seventh Circuit has stated that commodities under

Section 13(a) are ‘goods, wares, merchandise, machinery

and supplies ...”. Columbia Broadcasting System v.

Amana Refrigeration, 295 F.2d 375, 378 (7th Cir. 1961),

cert. denied, 369 U.S. 812 (1962). It is really quite clear

that comic books, in and of themselves, are commodities

under the Robinson-Patman Act. It has been held that

one who sells and distributes magazines and comic books

in interstate commerce deals in a commodity. See gen-

erally, Reid v. Harper & Brothers, 235 F.2d 420 (2d Cir.

1956), cert. denied, 352 U.S. 952 (1956); In the Matter of

Doubleday and Company, Inc., 52 F.T.C. 169 (1955). See

also In the Matter of Archie Comic Publications, Inc.,

61 F.T.C. 100 (1962) (comic books); In the Matter of Amer-

ican News Company, 58 F.T.C. 10 (1961) (books, maga-

zines, and comic books); In the Matter of National Comics

Publications, Inc., 57 F.T.C. 69 (1960) (comic books). The

parties seem to be in agreement that comic books are

commodities in general. World Color’s Memorandum at

10; Plaintiff's Response at 1. It would appear that the

defendants would not disagree that when a publisher sells

its comic books to distributors and consumers, the sale

of commodities is taking place. However, the defendants

see the situation of a “printer,” such as World Color,

printing, constructing and then passing the finished comic

books to the publisher as a different sort of exchange.

They contend there is no sale of commodities, but rather

a service is being rendered in the printing and creating

of the comic books.

It appears to this court that the exchange involved here

is a hybrid transaction of performance of a service and

the passing of a commodity. FCI does not deny that

App. 29

World Color indeed prints comic books. This is a service.

But with the performance of that service, commodities are

involved. The commodities (the comic books) are the en-

tire goal of the rendering of the service (the printing).

The courts have often been confronted with situations

that are the combination of an exchange of goods and per-

formance of a service. The courts look to the “dominant

nature”’ of the transaction to determine whether it is es-

sentially the performance of a service. If so, there is no

Robinson-Patman violation. Freeman v. Chicago Title &

Trust Company, 505 F.2d 527, 531 (7th Cir. 1974) (title

insurance, though does pass to buyer a tangible insurance

document, is primarily rendering of a service); Morning

Pioneer, Inc. v. Bismarck Tribune Company, 493 F.2d

383, 389 n. 11 (8th Cir. 1974), cert. denied, 419 U.S. 836

(1974) (though publishing a newspaper does involve ser-

vice, it is primarily selling a commodity); Tri-State Broad-

casting Company v. United Press International, Inc., 369

F.2d 268, 270 (5th Cir. 1966) (news information bureau

provides a service, though tangible items are exchanged).

See also May Department Store v. Graphic Process Com-

pany, 637 F.2d 1211, 1215 (9th Cir. 1980).

Where the dominant nature of the transaction is to pro-

vide a service, and the passage of any goods is merely

“incidental” to the performance of the service, the trans-

action has been held to not constitute the sale of a com-

modity. Tri-State Broadcasting Company, 369 F.2d at 270;

General Shale Products Corp. v. Struck Construction

Company, 132 F.2d 425 (6th Cir. 1942), cert. denied, 318

U.S. 780 (1943) (construction contract, even with separate-

ly stated prices for brick and labor, was predominantly

for service); General Glass Company v. Globe Glass and

Trim Company, 1978-2 Trade Cases (CCH) Paragraph

62,231 (N.D. Ill. 1978) (sale of window replacement glass

was incidental to installation thereof in repair agreement

and did not constitute a transaction in a commodity); SCM

Corp. v. Xerox Corp., 1975-2 Trade Cases (CCH) Para-

graph 60,477 (D. Conn. 1975) (photocopy company renders

a service and not the sale of a commodity).

App. 30

The defendants would have this court apply the “domi-

nant nature” test in the instant case to determine the

“printing” of comic books is primarily a service with the

comic books constituting mere “incidentals” of the ser-

vice rendered. The defendants suggest one case in particu-

lar as determinative here. In Advance Office Systems, Inc.

v. Accounting Systems Company, Inc., 442 F.Supp. 418

(D. S.C. 1977), it was held that a company that printed

and prepared billing statements for other companies’ ac-

counts receivable performed a service and did not sell a

ms The court described the defendant’s operations

as follows:

The defendant’s sale of prepared billings of accounts

receivable is performed generally in (this) manner. . . .

An agent of the defendant goes to the customer’s

place of business and photographs the customer’s ac-

counts receivable ledger cards. The exposed film is

then sent by the defendant’s agent to the defendant’s

place of business. . . . There, utilizing the photo-

graphed copies of the customer’s account cards, the

defendant prints statements, puts them in envelopes,

and mails them to the customer’s debtors.

Id. at 419 n.3. The court held that, despite the fact that

the process resulted in and was intended to create the

transfer of tangible items, that is, the printed billing

statements, the plaintiff's complaint failed to state a

Robinson-Patman claim. Jd. at 421. The court concluded

“the (defendant is not selling a commodity. Defendant is

selling a service, and such service is not a commodity

within the meaning of the Robinson-Patman Act.” Jd. at

424. ‘

The court sees an essential difference between the

instant case and Advance Office Systems and some of

the other “combination” cases cited where a service was

found to be the dominant nature of the transaction. In Ad-

vance Office Systems, the “goods” created, the billing

statements, were of no value or meaning except in the

context of the service provided, that is, the billing of

eee

App. 31

customers’ accounts receivable. Similarly, in Freeman,

—_ a title insurance document has no importance out-

side of the service rendered, the providing of title insur-

ance protection. Freeman, 505 F.2d at 531. However, in

the instant case, the goods created because of the ser-

vice, that is, the comic books from the printing, are not

a mere incidence of the service. The physical, finished

comic books are the whole point of the performance of

the printing. Further, the comic books have value and

meaning in and of themselves outside the context of the

printing service. This is unlike the billing statements of

Advance Office Systems or the title insurance document

of Freeman.

The court is encouraged by other facts apparent from

FCI’s interpretation on the nature of the comic book

“printing” transactions. Supported by affidavit, FCI con-

tends, that as a publisher, it begins with creative per-

sonnel who develop the story line, dialogue, and graphics

(or drawings) for each comic book. When the story, dia-

logue, and graphics have been completed in book form,

FCI sends the result to a “color separating’ company,

which separates the original multicolor artwork into four

separate-color printing “screens” and provides FCI with

negatives or color separations of each screen. When a

complete set of color separations has been assembled for

a given comic book, it is analogous to the fully edited

manuscript of a book. Obadiah Aff. ay oy — 5. FCI de-

livers its completed color separations to World Color,

which uses them to produce the actual printed comic

books, the completely finished product that World Color

“sold” to FCI and “drop-shipped” to FCI’s customers.

Obadiah Aff. Paragraphs 4-5. FCI did not supply World

Color with any ink, paper, or other tangible components

of the finished comic books. World Color supplied those

physical materials. FCI provided only the color separa-

tions, which World Color returned to FCI after it pro-

duced the printed comic book. Obadiah Aff. Paragraph 5.

Also, World Color did not bill FCI separately for any

labor costs. Rather, it simply billed FCI for the product—

App. 32

the printed comic books produced. Obadiah Aff. Paragraph

6. Thus, before World Color began there were no comic

books. When it finished, the printed comic books it pro-

duced were wholly a ready for sale or use with-

out any further action by FCI, and were typically ship-

ped directly to FCI customers. Obadiah Aff. Paragraph 7.

The plaintiff's argument that a sale of commodities is

involved here seems sound. Comic books are clearly a

commodity under the Robinson-Patman Act. It seems

clear that what World Color is giving to publishers such

as Marvel after the printing ph assembling process are

complete and finished comic books—a commodity. World

Color exchanges the comic books with the publisher for

a price. These transactions constitute the sale of commodi-

ties because the dominant nature of the transactions is

the exchange of comic books. There is no doubt that some

element of service is involved in the printing of the comic

books, but the primary p se of the dealing is to pass

on the comic books themselves. These comic books have

value and purpose outside of the context of the service

performed.

Also supportive of the conclusion that these transactions

are sales of commodities is the fact that World Color’s

standard printing contract provides that “(t)itle ... to the

finished work shall pass to Publisher upon delivery by

Printer ...”. Obadiah Aff., Exhibit B paragraph 14. The

passage of title is the essential element of a “sale.” Fur-

ther, the court does not argue that the publisher has the

proprietary copyright interests in the creative ideas repre-

sented in the comic books. But this does not mean that

World Color as a “printer” cannot “own” and properly

pass title to the physical comic books themselves. World

Color makes some detailed arguments that there can be

no sale of a commodity here because as a “printer’’ it

has no proprietary rights to the copy righted stories, char-

acters and created ideas embodied in the comic books.

However, this contention misses the mark. World Color

manufactures finished comic books which until delivery

and transfer of title belong to World Color and not the

App. 33

publisher. The publisher has no ownership rights, that is,

the right to delivery and to possession, in the comic books

until there is payment. This is distinguishable from owner-

ship of the copyright embodied in those magazines. Platt

& Munk Company v. lie Graphics, Inc., 315 F.2d

847, 854 (2d Cir. 1963). This distinction is expressly codi-

fied in the copyright laws: “Ownership of a copyright .. .

is distinct from ownership of any material object in which

the work is embodied. er of ownership of any ma-

terial object, including the copy in which the work is first

fixed, does not of itself convey any rights in the copy-

righted work embodied in the object ....” 17 U.S.C. Sec-

tion 202 (1982).

World Color also makes an argument that because it

is not a publisher, but merely a “printer,” it cannot be

subject to the Robinson-Patman Act. It does not matter

that World Color does not also publish comic books. De-

fendants who both print and publish have been held sub-

ject to the Robinson-Patman Act. Morning Pioneer, Inc.

v. Bismark Tribune Company, 493 F.2d at 389 n. 11. But

defendants who merely print to a customer’s specifica-

tions also have been held subject to the Act. In In re

Christmas Club, 25 F.T.C. 1116 (1937), Christmas Club

supplied printed passbooks, account books, and advertis-

ing literature to the specifications of individual commer-

cial bank customers. 25 F.T.C. at 1123. Christmas Club

printed some of its materials itself; others were produced

by independent contractors who shipped directly to the

customer banks. 25 F.T.C. at 1125. Because Christmas

Club was e ed in producing and selling printed ma-

terial made to the specifications of its customers, the Fed-

eral Trade Commission held that activity to be within the

Robinson-Patman Act. 25 F.T.C. at 1127.

CONCLUSION

This magistrate concludes as a matter of law and after

careful review of the pleadings, briefs and arguments, based

upon the undisputed facts, that there was a sale of a com-

App. 34

modity under the Robinson-Patman Act, and, therefore,

defendants’ motions should be DENIED.!

Counsel are given ten (10) days from the date hereof,

unless otherwise extended by the Court to file exceptions

to said Report and Recommendations with the Honorable

Nicholas J. Bua.

Respectfully submitted,

/s/ CARL B. SUSSMAN

United States Magistrate

Dated: October 9, 1984

ec: (w/o encls.)

Myron M. Cherry

Cherry & Flynn

Three First National Plaza

Suite 3700

Chicago, Illinois 60602

(Attorney for Plaintiff First Comics, Inc.)

Michael D. Freeborn

Freeborn & Peters

11 South LaSalle Street

Chicago, Illinois 60603

(Attorney for Defendant World Color Press, Inc.)

Edwin D. Akers, Jr.

Gallop, Johnson & Neuman

1800 Pierre Laclede Center

7733 Forsyth Boulevard

St. Louis, Missouri 63105

(Attorney for Defendant World Color Press, Inc.)

Gary L. Specks

Altheimer & Gray

333 West Wacker Drive

Suite 2600

Chicago, Illinois 60606

(Attorney for Defendant Marvel Comics Group)

1 As the court has concluded the Robinson-Patman claims are

viable, the defendants’ contention that the dependent Sherman Act

and state trade claims must fail need not considered.

reer

re ee er ee ey

App. 35

APPENDIX 4

[Dated September 18, 1987]

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

No. 84 C 1828

FIRST COMICS, INC., me

Plaintiff,

WORLD COLOR PRESS, INC.,

Defendants.

MEMORANDUM OPINION

First Comics, Inc. (“First”), a publisher and creator of

comic books, brings suit against World Color Press, Inc.

(“World”), a printer. First claims that World engaged i in

discriminatory pricing—i.e., that World charged First more

for printing comic books than it did others—even though

World assured First that the fees were the same.

First alleges violations of the Robinson-Patman Act, 15

U.S.C. § 13; the Clayton Act, 15 U.S.C. § 15; the Illinois

Uniform Deceptive Trade Practices Act (“DTPA”), IIl.

Rev. Stat. ch. 121% 494 311-17 (Supp. 1987); and the II-

linois Consumer Fraud and Deceptive Business Practices

Act (“Consumer Fraud Act” or “CFA’’), Ill. Rev. Stat.

ch. 121% 44 261-272 (Supp. 1987); and claims that World

committed common law fraud. In a counterclaim, World

seeks to recover printing fees, prepaid freight, and postage

charges it says First never paid.

Before the court are World’s motions for partial sum-

mary judgment on the Robinson-Patman and state stat-

App. 36

utory claims, and on the counterclaim. Jurisdiction is pur-

suant to 28 U.S.C. § 1337 and principles of pendent juris-

diction.

DISCUSSION !

1. The Robinson-Patman Act

The Robinson-Patman Act prohibits price discrimination

between different purchasers of commodities of like grade

and quality where the effect is anti-competitive. 15 U.S.C.

§ 13(a). World advances three arguments in support of its

motion for summary judgment on this claim: (1) that the

Robinson-Patman Act requires a sale to take place, and

that it could not have sold the goods in question because

it did not have title to them; (2) that the goods are not

of like grade and quality; and (3) that the transactions

at issue are not comparable. Each of these contentions

is without merit.”

World’s first argument is deceptively simple but total-

ly erroneous. Relying on Section 106(3) of the Copyright

Act, 17 U.S.C. § 106(3), which gives the copyright owner

the exclusive right to distribute copies of the copyrighted

work, World claims that it could not have sold the goods

in question because it did not have title to them. Yet

nowhere does World assert that any sale illegal under the

antitrust laws. It is undisputed that certain sales took

place, and the Copyright Act specifically provides that it

does not limit remedies available under any other federal

statute. See 17 U.S.C. § 301(d).

Moreover, World underestimates the relevance of 17

U.S.C. § 202, which distinguishes the ownership of a copy-

1 Since these motions request partial summary judgment, all fac-

tual inferences are drawn in favor of the non-moving party.

2 The court does not address the question of whether World sold

services or commodities to First, as this issue has not been pre-

sented by the parties.

ae ee

App. 37

right from the ownership of the material object in which

the copyrighted work is embodied. While First may have

a copyright in the comic strips as expressions, it does not

have a proprietary right in the comic books. Judge Bua

and Magistrate Sussman explicitly so held. See Report and

Recommendation of Magistrate Carl B. Sussman at 9-10,

Memorandum and Order of Judge Bua at 2-3. World’s con-

tention that the Copyright Act protects expressions rather

than ideas, citing 17 U.S.C. § 102(b), is accurate but un-

persuasive: in this case, the crucial distinction lies in the

difference between the expressions and the comic books,

not the expressions and the ideas.

World’s second argument, that the goods are not of like

grade and quality, is also weak. World attempts to distin-

guish the comic books at issue based on the authors, char-

acters, stories, and illustrations. But World does not sug-

gest that a different author or character increases the pro-

duction cost of the comic book. World provided First and

others with 32 four-color interior page letterpress comic

books with 4 four-color covers, all of the same size and

paper stock. World does not argue that First requested

bigger or more pages or a different kind of paper. Accord-

ingly, First’s citations to cases involving goods manufac-

tured according to producer specifications are irrelevant.

See, e.g., Ambrook Enterprises v. Time, Inc., 612 F.2d

604 (2d Cir. 1979); Wire Mesh Products, Inc. v. Wire Belt-

ing Association, 520 F. Supp. 1004 (E.D. Pa. 1981).

Furthermore, the very test articulated by World con-

vinees this court that the products involved may be of

like grade and quality. World states that the relevant in-

quiry is whether consumers perceive the goods as com-

parable. In this case, the consumers are comic book pub-

lishers like First, not children buying comic books at

newsstands. If First and its competitors perceive the type

and quality of comic books described above as identical,

this court must do the same. Summary judgment there-

App. 38

fore is denied because World has not shown as a matter

of law that the goods in question are dissimilar.*

World’s final argument under Count I can be summarily

rejected. World argues that the transactions First com-

pares in order to demonstrate price discrimination are too

different for purposes of applying the Robinson-Patman

Act. Specifically, it claims that its contracts with Marvel

Comics (“Marvel’’) are long-term agreements with auto-

matic yearly renewals, while its contracts with First were

merely individual orders made on a one-shot basis. World

never demonstrates, however, that long-term contracts are

per se unlike spot orders under the Act. All the act re-

quires is that the transactions be made at approximately

the same period of time, see Texas Gulf Sulphur Com-

pany v. J.R. Simplot Company, 418 F.2d 793, 806-07 (9th

Cir. 1969), and World itself admits that it could have re-

negotiated its contract with Marvel during the time it was

doing business with First. Moreover, at least one court

has expressly declined to grant summary judgment in

these circumstances because of a lack of authority on the

subject. See SDI Reading Concrete, Inc. v. Hilltop Basic

Resources, Inc., 576 F. Supp. 525, 532 (S.D. Ohio 1983).4

Accordingly, World’s motion for partial summary judg-

ment on the Robinson-Patman Act claim is denied on all

grounds.

% World has not argued that any differences in prices charged

to First and to others is due to a difference in the volume of comic

books produced. Accordingly, the court expresses no opinion on

this matter. ~

4 Dealers Wholesale Supply v. Pacific Steel and Supply, 1984-2

Trade Cas. (CCH) 4 66,109 (N.D. Cal. 1984), which held that sales

separated Aopen’ five months were insufficiently alike, is distin-

guishable. The court noted the lack of evidence on the issue and

stated that the evidence that was submitted was “badly flawed.”

In addition, the court did not rule that sales separated by more

_ than five months were per se incomparable. Jd. at 66,204.

eee eee

eS eee

ieee.

NE rt HORE ESR tee we A aes label ar

;

App. 39

2. The State Statutory Claims.

First’s claims under the Illinois Uniform Deceptive

Trade Practices Act, swpra, and the Illinois Consumer

Fraud Act, supra, are set out in Count III of the com-

plaint. World seeks summary judgment on the grounds

that (1) the DTPA provides only for injunctive relief and

First’s complaint seeks damages; and (2) First does not

have standing to sue under the CFA because it cannot

show that consumers were injured by World’s alleged

acts.

Rule 54(c) of the Federal Rules of Civil Procedure states,

with one exception not relevant here, that “every final

judgment shall grant the relief to which the party in

whose favor it is rendered is entitled, even if the party

has not demanded such relief in his pleadings.” See also,

2A Moore’s Federal Practice, § 8.14 at 8-85 (1987). In this

case, World cannot even claim that it would be surprised

by an award of injunctive relief, because whenever a prac-

tice unlawful under § 2 of the DTPA is used in the con-

duct of trade or commerce, there is a violation of the CFA

as well. See Ill. Rev. Stat. ch. 121%, ¢ 262 (Supp. 1987).

Thus, World’s motion for summary judgment under the

DTPA is denied.

World’s argument on the CFA claim comprises three

parts: first it contends that First must be a consumer in

order to sue; second and alternatively, if First is not a

consumer, it must at least show consumer injury; and

third, consumer injury should not be presumed. The court

will address those contentions in the order given.

The Consumer Fraud Act clearly extends to businesses;

First need not be an individual to bring a claim. Jay’s

Foods, Inc. v. Frito-Lay, Inc., 1987-2 Trade Cas. (CCH)

{ 67,651 at 58,317 (N.D. Ill. 1987). The question of whether

First has to demonstrate consumer injury is more difficult,

since Illinois courts have disagreed on the issue. Jd. This

court finds, however, that the consumer injury require-

ment usually is applied where the suit involves a private

dispute between businessmen. See, id. and cases cited

App. 40

therein. First attempts to argue that this is more than

a private dispute because of the antitrust claims, but its

own pleadings demonstrate that the alleged CFA viola-

tion is premised on common law fraud rather than fed-

eral antitrust statutes. See complaint, {4 167-68; plaintiff's

proposed jury instruction No. 36. Even if the antitrust

allegations were stated under the CFA claim, First would

have trouble, for this is still a suit between businessmen.

Fitzgerald v. Chicago Title & Trust Company, 46 Ill. App.

3d 526 (1st Dist. 1977), aff'd, 72 Ill.2d 179 (1978), does

not compel a different result because the court in that

case did not discuss the public injury requirement. It did

not need to do so because the suit was brought by a class

of individual plaintiffs. Jd. at 526-27.

First has not pleaded a consumer injury, nor has it sub-

mitted any evidence of one. The court refuses to presume

a consumer fraud injury because it would be contrary to

Illinois law and because First has not submitted any evi-

dence suggesting that World’s allegedly higher prices

were in fact passed on to consumers at the newsstand.

See Jay’s Foods, supra at 58,318 (court refused to presume

consumer injury based on allegedly improper allocation

of shelf space between competing suppliers). According-

ly, World’s motion for partial summary judgment on the

Consumer Fraud Act Claim is granted.

3. World’s Counterclaim.

World’s motion for summary judgment on its counter-

claim is denied. World seeks to recover printing fees and

prepaid freight and postage charges it claims First owes.

First concedes that it was billed for the money, that it

has not paid those bills, and that it customarily paid

freight and postage charges and printing fees. See Plain-

5 The parties have not addressed whether the Deceptive Trade

practices Act claim can survive dismissal of the Consumer Fraud

Act claim, thus the court expreses no opinion on the issue at this

time.

——7E

stot yf ste crate Aicty sine sealeahcca Ais A OT atts EN let

has ali

App. 41

tiffs Answer to Counterclaims of World Color Press, Inc.,

q¢ 5-8. First claims, however, that the bills are incorrect

and that the money is not due and owing. While a party

opposing a motion for summary judgment ordinarily must

go beyond his pleadings, see Celotex Corporation v. Cat-

rett, 106 S. Ct. 2548, 2553 (1986), we note that the burden

on this counterclaim is on World, the movant. Accordingly,

the court finds an issue of material fact and does not ad-

dress the sufficiency of First’s defenses to the counter-

claim.

CONCLUSION

Defendant’s motion for partial summary judgment is de-

nied as to the Robinson-Patman Act claim, the Illinois

Uniform Deceptive Trade Practices Act claim, and the

counterclaim. The motion is granted as to the claim under

the Illinois Consumer Fraud and Deceptive Business Prac-

tices Act.

ENTER:

/s/ BRIAN BARNETT DUFF

Brian Barnett Duff, Judge

United States District Court

DATE: September 18, 1987

App. 42

APPENDIX 5

[Dated October 16, 1987]

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

Eastern Division

JUDGMENT IN A CIVIL CASE

First Comics, Inc.

V. Case Number: 84 C 1828

World Color Press, Inc.

& Jury Verdict. This Action came before the Court for

trial by jury. The issues have been tried and the

jury has rendered its verdict.

(} Decision by Court. This action came to trial or hear-

ing before the Court. The issues have been tried or

heard and a decision has been rendered.

IT ISORDERED AND ADJUDGED judgment is entered

as follows:

(1) for the defendant and against the plaintiff on plain-

tiffs Robinson-Patman claim;

(2) for the plaintiff and against the defendant on plain-

tiffs fraud claim and assess the plaintiff's actual dam-

ages in the sum of $407,072.00;

(3) for the defendant and against plaintiff on plaintiff's

Illinois Consumer Fraud Act claim;

———————

ne ee ee eel

App. 43

(4) for the defendant and against plaintiff on plaintiff's

promissory estoppel claim;

(5) against the defendant and for the plaintiff on defen-

dant’s counterclaim.

October 16, 1987

Date

H. STUART CUNNINGHAM

Clerk

/s/ CLAUDIA M. FLAGG

(By) Deputy Clerk

Claudia M. Flagg

App. 44

APPENDIX 6

[Dated October 28, 1987]

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

No. 84 C 1828

rIRST COMICS INC., _

Plaintiff,

WORLD COLOR PRESS,

Defendant.

MEMORANDUM OPINION

This suit between First Comics, Inc. (“First’’) and World

Color Press, Inc. (““World’’) is based on the Robinson-Pat-

man Act, 15 U.S.C. § 13(a), and pendent state claims. Be-

fore the court are World’s motion for a directed verdict

and First’s cross-motions for certain directed findings.

At conferences on October 14-15, 1987, this court de-

nied World’s motion but granted some of the directed

_findings that First requested. This opinion will supplement

those oral rulings.

I. Motion for a Directed Finding on the Dominant Nature

of the Transaction.

By its terms, the Robinson-Patman Act applies only to

sales of “commodities.”” 15 U.S.C. § 13(a). Commodities,

at least in this circuit, are “goods, wares, merchandise,

machinery and supplies ....” Columbia Broadcasting Sys-

App. 45

tem, Inc. v. Amana Refrigeration, Inc., 295 F.2d 375, 378

(7th Cir. 1961). When a transaction involves both the

transfer of a commodity and the performance of a ser-

vice, courts have looked to the “dominant nature”’ of the

transaction in order to determine whether the Robinson-

Patman Act applies. Aviation Specialties, Inc. v. United

Technologies C tion, 568 F.2d 1186, 1191 (5th Cir.

1978); Bawm v. Investors Diversified Services, Inc., 409

F.2d 872, 875 (7th Cir. 1969).

In this case, it is undisputed that First develops an ilius-

) trated story and sends it to a company that produces color

, separations from which the comic books will be printed.

) World then receives the color separations and manufac-

tures comic books, supplying ink, paper, staples, and other

) physical materials as needed. At that point, and at no time

prior thereto, a saleable item is produced.’

The majority of Robinson-Patman cases dealing with the

service versus commodity issue have treated it as a mat-

ter of law. See, e.g., Aviation Specialties, supra; Baum,

supra; Columbia Broadcasting, supra; but see May De-

partment Store v. Graphic Process Company, 637 F.2d

1211 (9th Cir. 1980). It is helpful to look to those cases -

to determine the dominant nature of the transaction be-

tween First and World.

Where the tangible good produced in a hybrid transac-

| tion is merely incidental to the services performed, courts

| have held that the dominant nature of the exchange was

| for a service. See Freeman v. Chicago Title & Trust Com-

pany, 505 F.2d 527, 581 (7th Cir. 1974) (issuance of title

insurance certificate); Advance Office Systems, Inc. v. Ac-

counting Systems Company, Inc., 442 F. Supp. 418, 421

SS eae —

' In December, 1984, Judge Bua reversed Magistrate Sussman’s

ruling that a newspaper was a commodity as a matter of law, find-

ing that there were factual issues involved. It is appropriate to

re-examine that ruling, however, because three years’ worth of

discovery has transpired since then. See Redfield v. Continental

Casualty Corp., 818 F.2d 596, 597 (7th Cir. 1987) (aw of the case

is a discretionary doctrine that may be modified as a matter of

common sense).

App. 46

(D.S.C. 1977) (preparation of billing statements). Converse-

ly, a number of older decisions, without applying the domi-

nant nature test, have held that printers such as World

are subject to the Robinson-Patman Act. See Reid v.

Harper & Brothers, 235 F.2d 420 (2d Cir. 1956); In the

Matter of Doubleday and Company, 52 F.T.C. 169 (1955).

The Eighth Circuit has followed the dominant nature test

and ruled that a newspaper is a commodity, but only in

dicta. The Morning Pioneer, Inc. v. The Bismark Tribune

Company, 493 F.2d 383, 389 n. 11 (8th Cir. 1974).

Even without relying on the latter cases, this court is

comfortable in ruling that newspapers are commodities.

The comic books generated as a result of the transactions

between First and World are anything but incidental: they

are the very point of the exchanges. Moreover, instead of

merely working with the raw expressions provided by First,

World adds tangible materials to those expressions such

that there is a value added to the item in the production

chain. Finally, once World contributes materials and labor —

to the expressions, the production chain ends and a con-

sumable item results. Compare May Department Store,

supra (defendant created an input from which the con-

sumable item, a newspaper advertisement, was produced).

World attempts to argue that a two-page contract be-

tween it and First, and the testimony of several wit-

nesses, show that there are disputed issues of fact on this

questions. At least one court has already opined, however,

that the parties’ beliefs as to whether a transaction in-

volves a commodity or a service are not controlling. See

Wise & Company v. Rand McNally, 195 F. Supp. 621,

626 n. 5 (S.D.N.Y. 1961). And a motion for summary judg-

ment (and likewise, for a directed verdict) cannot be de-

feated by any factual issue, no matter how small. Ander-

son v. Liberty Lobby, Inc., _. U.S. ___, 106 S. Ct.

2505, 2510 (1986).

General Shale Products Corporation v. Struck Construc-

tion Company, 132 F.2d 425 (6th Cir. 1942), is not to the

contrary. In that decision, the Sixth Circuit ruled that

ae Se See

App. 47

an agreement to build housing facilities was a contract

for services rather than the sale of a commodity. But a

house is not a commodity, it is a piece of real estate. It

does not “move” in commerce. General Shale therefore

is not controlling.

Il. Motion for a Directed Finding on the Like Grade and

Quality Issue.

In order to invoke the Robinson-Patman Act, a plain-

tiff also must show that the commodities at issue are so

alike that their prices should be the same. In legal terms,

the commodities must be “of like grade and quality.” 15

U.S.C. § 13(a). The parties agree that the consumers’

perspective controls in determining whether this test is

met.

As this court has already explained at length in a prior

opinion, see First Comics, Inc. v. World Color Press, Inc.,

0. 84-1828, Memurandum Opinion at 3-4 (Sept. 18, 1987),

the consumers for p s of this issue are comic book

publishers like First. They pay for 32 four-color interior

page letterpress comic books. World’s argument, in es-

sence, is that the comic books are different because they

sell for different prices at the newsstands. But such a dis-

tinction between standard and premium versions of the

same item has been outlawed by the court in Checker

Motors Corporation v. Chrysler Corporation, 283 F. Supp.

876, 889 (S.D.N.Y. 1968), aff'd on other grounds, 405 F.2d

319 (2d Cir. 1969). It also would eviscerate the very pur-

pose of the Robinson-Patman Act.

Defendant’s citation of The Morning Pioneer, Inc. v. The

Bismarck Tribune Co., 342 F. Supp. 1138 (D.N.D. 1972),

aff'd, 493 F.2d 383 (8th Cir. 1974), is unpersuasive. In that

case, the court distinguished between newspapers that

were delivered at different times, contained varying

amounts of local news, and had advertisements that per-

tained to events in particular areas, id. at 1141, because

those variables affected the value of the newspaper to the

consumer. Here the values of the comic books provided

App. 48

to First and its competitors, at least insofar as they con-

tain work performed by World, are identical. It makes

no difference for the purposes of this evaluation that the

comic books contain copyrighted materials which can be

sold only by the copyright holder. See Memorandum Opin-

ion of Sept. 18, 1987, supra at 2-3.

The parties have not raised any disputed issues of ma-

terial fact. Accordingly, a directed finding is granted in

favor of First on the issue of like grade and quality.

III. Motion for a Directed Finding on the Issue of Com-

petitive Injury.

First also requested this court to hold, as a matter of

law, that World’s actions caused an injury to competition.

In Falls City Industries, Inc. v. Vanco Beverage, Inc.,

460 U.S. 428, 435-36 (1983), the Supreme Court held that

injury to competition could be inferred from proof of a

substantial, sustained price discrimination, but that this

inference could be overcome in the absence of direct evi-

dence that sales had been displaced. See also, Richard

Short Oil Co., Inc. v. Texaco, Inc., 799 F.2d 415, 420 (8th

Cir. 1986); Foremost Pro Color, Inc. v. Eastman Kodak

Company, 703 F.2d 534, 548 (9th Cir. 1983); The Amer-

ican Oil Company v. Federal Trade Commission, 325

F.2d 101, 104 (7th Cir. 1963). The parties agree that plain-

tiff has not submitted any such direct evidence in this

case.

The evidence at trial showed that over a period of ap-

proximately eighteen months, World charged one price to

First and other small publishers, and a lower price to the

larger, more established companies. The amount of this

price difference, however, is contested. First claims it has

shown price differences of at least 50%, citing Mr. Obadi-

ah’s testimony, while World insists that the differences

may be as little as one cent per copy, or less than 10%,

by relying on the testimony of Dr. Pisarkiewicz. Even if

a substantial, sustained price difference was shown, World

has demonstrated that those differences may not have

App. 49

been reflected in prices charged at the retail level, and

hence, may have had no effect on competition whatsoever.

See testimony of Mr. Geppi. Accordingly, First’s motion

for a directed finding on this issue must be denied.

CONCLUSION

World’s motion for a directed verdict on First’s com-

plaint is denied. First’s motions for directed findings on

the dominant nature of the transaction and on the like

grade and quality issues are granted. First’s motion for

a directed finding of competitive injury is denied.

ENTER:

/s/ BRIAN BARNETT DUFF

Brian Barnett Duff, Judge

United States District Court

DATE: October 28, 1987

App. 50

APPENDIX 7

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Case Number: 84 C 1828 Date: August 2, 1988

Name of Assigned Judge: Brian Barnett Duff

Case Title: First Comics, Inc. v. World Color Press, Inc.

DOCKET ENTRY:

(1) L Judgment is entered as follows:

(2) & [Other docket entry:]

This case meets the high standard necessary for

granting judgment n.o.v., for there is no competent

evidence on which plaintiff's consequential damages

award can be based- World Color’s motion for judg-

ment n.o.v. is granted in part and First Comics’

damages recovery is reduced in the amount of

$236,705.00. The remainder of World Color’s motion

is denied.

*x* * * kX *

(12) & (For further detail see & order attached to

the original minute order form.)

x* * * KX *

_—— 6 ts

App. 51

APPENDIX 8

15 U.S.C. § 13

(a) It shall be unlawful for any person engaged in com-

merce, in the course of such commerce, either directly or

indirectly, to discriminate in price between different pur-

chasers of commodities of like grade and quality, where

either or any of the purchases involved in such discrimina-

tion are in commerce, where such commodities are sold

for use, consumption, or resale within the United States

or any Territory thereof or the District of Columbia or

any insular possession or other place under the jurisdic-

tion of the United States, and where the effect of such

discrimination may be substantially to lessen competition

or tend to create a monopoly in any line of commerce,

or to injure, destroy, or prevent competition with any per-

son who either grants or knowingly receives the benefit

of such discrimination, or with customers of either of

them: Provided, That nothing herein contained shall pre-

vent differentials which make only due allowance for dif-

ferences in the cost of manufacture, sale, or delivery re-

sulting from the differing methods or quantities in which

such commodities are to such purchasers sold or delivered:

Provided, however, That the Federal Trade Commission

may, after due investigation and hearing to all interested

parties, fix and establish quantity limits, and revise the

same as it finds necessary, as to particular commodities

or classes of commodities, where it finds that available

purchasers in greater quantities are so few as to render

differentials on account thereof unjustly discriminatory or

promotive of monopoly in any line of commerce; and the

foregoing shall then not be construed to permit differen-

tials based on differences in quantities greater than those

so fixed and established: And provided further, That noth-

ing herein shall contained shall prevent persons engaged

in selling goods, wares, or merchandise in commerce from

selecting their own customers in bona fide transactions

App. 52

and not in restraint of trade: And provided further, That

nothing herein contained shall prevent price changes from

time to time where in response to changing conditions af-

fecting the market for or the marketability of the goods

concerned, such as but not limited to actual or imminent

4 deterioration of perishable goods, obsolescence of seasonal

goods, distress sales under court process, or sales in good

faith in discontinuance of business in the goods concerned.

(b) Upon proof being made, at any hearing on a com-

plaint under this section, that there has been discrimina-

tion in price or services or facilities furnished, the burden

of rebutting the prima-facie case thus made by showing

justification shall be upon the person charged with a viola-

tion of this section, and unless justification shall be affir-

matively shown, the Commission is authorized to issue an

order terminating the discrimination: Provided, however,

That nothing herein contained shall prevent a seller re-

butting the prima-facie case thus made by showing that

his lower price or the furnishing of services of facilities

to any purchaser or purchasers was made in good faith

to meet an equally low price of a competitor, or the ser-

vices or facilities furnished by a competitor.

merce, in the course of such commerce, to pay or grant,

or to receive or accept, anything of value as a commis-

sion, brokerage, or other compensation, or any allowance

or discount in lieu thereof, except for services rendered

in connection with the sale or purchase of goods, wares,

or merchandies, either to the other party to such trans-

action or to an agent, representative, or other intermedi-

ary therein where such intermediary is acting in fact for

or in behalf, or is subject to the direct or indirect con-

trol, of any party to such transaction other than the per-

son by whom such compensation is so granted or paid.

(d) It shall be unlawful for any person engaged in com-

merce to pay or contract for the payment of anything of

value to or for the benefit of a customer of such person

in the course of such commerce as compensation or in con-

sideration for any services or facilities furnished by or

ce eee

SSeS a Neck Rea BLE PERI ee RR IT IS <

App. 53

through such customer in connection with the processing,

handling, sale, or offering for sale of any products or com-

modities manufactured, sold, or offered for sale by such

person, unless such payment or consideration is available

on proportionally equal terms to all other customers com-

peting in the distribution of such products or commodities.

(e) It shall be unlawful for any person to discriminate

in favor of one purchaser against another purchaser or

purchasers of a commodity bought for resale, with or

without processing, by contracting to furnish or furnishing,

or by contributing to the furnishing of, any services or

facilities connected with the processing, handling, sale, or

offering for sale of such commodity so purchased upon

terms not accorded to all purchasers on proportionally

equal terms.

(f) It shall be unlawful for any person engaged in com-

merce, in the course of such commerce, knowingly to in-

duce or receive a discrimination in price which is pro-

hibited by this section.

Oct. 15, 1914, c. 323, § 2, 38 Stat. 730; June 19, 1936, c.

592, §1, 49 Stat. 1526.

15 U.S.C. § 15(a)

(a) Amount of recovery; prejudgment interest

Except as provided in subsection (b) of this section, any

person who shall be injured in his business or property

by reason of anything forbidden in the antitrust laws may

sue therefor in any district court of the United States

in the district in which the defendant resides or is found

or has an agent, without respect to the amount in contro-

versy, and shall recover threefold the damages by him

sustained, and the cost of suit, including a reasonable at-

torney’s fees. The court may award under this section,

pursuant to a motion by such person promptly made, simple

interest on actual damages for the period beginning on

the date of service of such person’s pleading setting forth

a claim under the antitrust laws and ending on the date

App. 54

of judgment, or for any shorter period therein, if the court

finds that the award of such interest for such period is

just in the circumstances. In determining whether an

award of interest under this section for any period is just

in the circumstances, the court shall consider only—

(1) whether such person or the opposing party, or

either party’s representative, made motions or as-

serted claims or defenses so lacking in merit as to

show that such party or representative acted inten-

tionally for delay, or otherwise acted in bad faith;

(2) whether, in the course of the action involved,

such person or the opposing party, or either party’s

representative, violated any applicable rule, statute,

or court order providing for sanctions for dilatory be-

havior or otherwise providing for expeditious proceed-

ings; and

(3) whether such person or the opposing party, or

either party’s representative, engaged in conduct pri-

marily for the purpose of delaying the litigation or

increasing the cost thereof.

(As amended Sept. 12, 1980, Pub.L. 96-349, § 4(aX(1), 94

Stat. 1156; Dec. 29, 1982, Pub.L. 97-393, 96 Stat. 1964.)

sibiceihbinin ta nat

Vee en ee es b

5 elt wea (rez!

App. 55

APPENDIX 9

17 U.S.C. Sections 106, 109, 202, and 301 provide as

follows:

§ 106. Exclusive rights in copyrighted works

Subject to sections 107 through 118, the owner of copy-

right under this title has the exclusive rights to do and

to authorize any of the following:

(1) to reproduce the copyrighted work in copies or

phonorecords;

(2) to prepare derivative works based upon the

copyrighted work;

(3) to distribute copies or phonorecords of the

copyrighted work to the public by sale or other trans-

fer of ownership, or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and

choreographic works, pantomimes, and motion pic-

tures and other audiovisual works, to perform the

copyrighted work publicly; and

(5) in the case of literary, musical, dramatic, and

choreographic works, pantomimes, and pictorial,

graphic, or sculptural works, including the individual

images of a motion picture or other audiovisual work,

to display the copyrighted work publicly.

§ 109. Limitations on exclusive rights: Effect of transfer of

particular copy or phonorecord

(a) Notwithstanding the provisions of section 106(3), the

owner of a particular copy or phonorecord lawfully made

under this title, or any person authorized by such owner,

is entitled, without the authority of the copyright owner,

to sell or otherwise dispose of the possession of that copy

or phonorecord.

App. 56

(bX1) Notwithstanding the provisions of subsection (a),

unless authorized by the owners of copyright in the sound

recording and in the musical works embodied therein, the

owner of a particular phonorecord may not, for purposes

of direct or indirect commercial advantage, dispose of, or

authorize the disposal of, the possession of that phono-

record by rental, lease, or lending, or by any other act

or practice in the nature of rental, lease, or lending. Noth-

ing in the preceding sentence shall apply to the rental,

lease, or lending of a phonorecord for nonprofit purposes

by a nonprofit library or nonprofit educational institution.

(2) Nothing in this subsection shall affect any provision

of the antitrust laws. For purposes of the preceding sen-

tence, “‘antitrust laws” has the meaning given that term

in the first section of the Clayton Act and includes sec-

tion 5 of the Federal Trade Commission Act to the ex-

tent that section relates to unfair methods of competition.

(3) Any person who distributes a phonorecord in viola-

tion of clause (1) is an infringer of copyright under sec-

tion 501 of this title and is subject to the remedies set

forth in sections 502, 503, 504, 505, and 509. Such viola-

tion shall not be a criminal offense under section 506 or

cause such person to be subject to the criminal penalties

set forth in section 2319 of title 18.

owner of a particular copy lawfully made under this title,

or any person authorized by such owner, is entitled, with-

out the authority of the copyright owner, to display that

copy publicly, either directly or by the projection of no

more than one image at a time, to viewers present at the

place where the copy is located.

(d) The privileges prescribed by subsections (a) and (b)

do not, unless authorized by the copyright owner, extend

to any person who has acquired possession of the copy

or phonorecord from the copyright owner, by rental, lease,

loan, or otherwise, without acquiring ownership of it.

App. 57

§ 202. Ownership of copyright as distinct from ownership of

material object

Ownership of a copyright, or of any of the exclusive

rights under a copyright, is distinct from ownership of

any material object in which the work is embodied. Trans-

fer of ownership of any material object, including the copy

or phonorecord in which the work is first fixed, does not

of itself convey any rights in the copyrighted work em-

bodied in the object; nor, in the absence of an agreement,

does transfer of ownership of a copyright or of any ex-

clusive rights under a copyright convey property rights

in any material object.

§ 301. Preemption with respect to other laws

(a) On and after January 1, 1978, all legal or equitable

rights that are equivalent to any of the exclusive rights

within the general scope of copyright as specified by sec-

tion 106 in works of authorship that are fixed in a tangi-

ble medium of expression and come within the subject

matter of copyright as specified by sections 102 and 103,

whether created before or after that date and whether

published or unpublished, are governed exclusively by this

title. Thereafter, no person is entitled to any such right

or equivalent right in any such work under the common

law or statutes of any State.

(b) Nothing in this title annuls or limits any rights or

remedies under the common law or statutes of any State

with respect to—

(1) subject matter that does not come within the

subject matter of copyright as specified by sections

102 and 103, including works of authorship not fixed

in any tangible medium of expression; or

(2) any cause of action arising from undertakings

commenced before January 1, 1978; or

(3) activities violating legal or equitable rights that

are not equivalent to any of the exclusive rights

within the general scope of copyright as specified by

section 106.

App. 58

ruary 15, 1972, any rights or remedies under the com-

mon law or statutes of any State shall not be annulled

or limited by this title until February 15, 2047. The pre-

emptive provisions of subsection (a) shall apply to any

such rights and remedies pertaining to any cause of ac-

tion arising from undertakings commenced on and after

February 15, 2047. Notwithstanding the provisions of sec-

tion 303, no sound recording fixed before February 15,

1972, shall be subject to copyright under this title before,

on, or after February 15, 2047.

(d) Nothing in this title annuls or limits any rights or

remedies under any other Federal statute.

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