Opposition Brief — Eastman Kodak Co. v. Image Technical Services, Inc.

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upreme Court, U.S.

FILED

J HAR 2G 095

No. 97-1298

CL*®PK

IN THE ;

Supreme Court of the United States

OCTOBER TERM, 1997

EASTMAN KoDAK COMPANY,

i. Petitioner,

IMAGE TECHNICAL SERVICES, INC., et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF FOR RESPONDENTS IN OPPOSITION

JAMES A. HENNEFER MAXWELL M. BLECHER *

LAW OFFICES OF JAMES A. DONALD R. PEPPERMAN

HENNEFER JAMES ROBERT NOBLIN

425 California Street BLECHER & COLLINS, P.C.

19th Floor 611 West Sixth Street

San Francisco, CA 94104 20th Floor

(415) 421-6100 Los Angeles, CA 90017

H. BARTow Farr, III (213) 622-4222

RICHARD G. TARANTO Counsel for Respondents

FARR & TARANTO

2445 M Street, N.W.

Suite 225

Washington, D.C. 20037

(202) 775-0184 * Counsel of Record

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON. D.C. 20001

RULE 29.6 STATEMENT

Pursuant to Rule 29.6 of the Rules of this Court,

respondents Advanced Systems, Inc.; AmTech Equipment

Maintenance, Inc.; Atlanta General Microfilm Co., Inc.

and Datek Ltd.; Data Prox Equipment Co.; Image Tech-

nical Service, Inc.; JESP Company, Inc.; Micrographics

Service, Inc.; Omni Micrographics Services, Inc.; and

Shields Business Machines, Inc. state that they have no

parent corporations and have no subsidiaries, other than

wholly owned subsidiaries, and no affiliates that have

issued shares to the public.

(i)

TABLE OF CONTENTS

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SASSO SSS E SEES SES SOSSOSSSSS SESSSSSOSESS ES SEEE EE ESES SOS SESEESEEEeeces

(iii)

Page

TABLE OF AUTHORITIES

Cases Page

Agostini v. Felton, 117 S. Ct. 1997 (1¢97) ............. 25

sispen Highlands Skiing Corp. v. Aspen Skiing

Co., 738 F.2d 1509 (10th Cir. 1984) 0... 22

Aspen Skiing Co. v. Aspen Highlands Skiing Co.,

ir Bk | RRO ee 11, 15, 21, 22

Atari Games Corp. v. Nintendo of America, Inc.,

897 F.2d 1572 (Fed. Cir. 1990) ...............-..:..c0c0. 18

Data General Corp. v. Grumman Systems Support

Corp., 36 F.8d 1147 (1st Cir. 1994) 00.00.00... 12

Dawson Chemical Co. v. Rohm & Haas Co., 448

pot Re ERP EE ein SORTA es OE 19

Eastern R. Presidents Conference v. Noerr Motor

Freight, Inc., 865 U.S. 127 (1961) ...................... 18

Eastman Kodak Co. v. Image Technical Serv., Inc.,

I rn a passim

Eastman Kodak Co. v. Southern Photo Materials

Cg ee re ED elitictitcerei 16

Ford Motor Co. v. United States, 405 U.S. 562

CCR ee pee a A ON dee 18

Image Technical Serv., Inc. v. Eastman Kodak Co.,

903 F.2d 612 (9th Cir. 1990), aff’d, 504 U.S. 451

ORE SINE Ree RADE a pO res Oot cAAR. 2, 8, 22

International Business Machines Corp. v. United

Sea Ge es ee 15

International Salt Co. v. United States, 332 U.S.

Sy Se AORN ode NC OER “econo Mee 15, 17

Lorain Journal Co. v. United States, 342 U.S. 148

| eee occ RN LS ORE SI 21

Miller Insituform, Inc. v. Insituform of North

America, Inc., 8380 F.2d 606 (6th Cir. 1987),

cert. denied, 484 U.S. 1064 (1988) .......... 19, 20

Panther Pumps & Equipment Co. v. Hydrocraft,

Inc., 468 F.2d 225 (7th Cir. 1972), cert. denied,

SUS en a 18

Professional Real Estate Investors, Inc. v. Colum-

bia Pictures Indus., Inc., 508 U.S. 49 (1998).... 19

SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir.

1981), cert. denied, 455 U.S. 1016 (1982)........ 19, 20

TABLE OF AUTHORITIES—Continued

Page

Service & Training, Inc. v. Data General Corp.,

963 F.2d 680 (4th Cir. 1992) 00.0000... 19

United States v. Griffith, 384 U.S. 100 (1948)........ 11, 16

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

RT sivinssieyinapnsneathceieiage rae oe OR 11

United States v. Line Material Co.,' Inc., 883 U.S.

TE RS a rh 18

United States v. Paramount Pictures, 334 U.S. 131

GT celdiieieie ih ldeneiiaaicadis eee ae Raa oo 16

United States v. Westinghouse Elec. Corp., 648

F.2d 642 (9th Cir. 1981) -..0......... PES MUN NCS Se DD 19, 20

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

eR Pen ee 18

Statutes

Bn 1 SORA eee eect Ny ete Se 1

IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

No. 97-1298

EASTMAN KODAK COMPANY,

¥ Petitioner,

IMAGE TECHNICAL SERVICES, INC., et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF FOR RESPONDENTS IN OPPOSITION

STATEMENT

Following remand from this Court some six years ago,

see Eastman Kodak Co. v. Image Technical Serv., Inc.,

504 U.S. 451 (1992) (Kodak), a jury found that Kodak

had unlawfully attempted to monopolize, and in fact

monopolized, the service of certain Kodak equipment, in

violation of 15 U.S.C. § 2. The jury awarded damages of

$71.8 million (after trebling), and the district court

issued an injunction to bar future unlawful acts. The

Ninth Circuit affirmed with respect to liability, though it

modified both aspects of the relief awarded.

1. Respondents brought this suit in 1987, alleging,

inter alia, that Kodak had unlawfully used its monopoly

power over parts for Kodak photocopier and micrographics

equipment to seek and obtain monopoly power over serv-

ice of that equipment.’ Respondents alleged that Kodak

engaged in a multi-faceted scheme, consisting of the re-

fusal to deal in parts manufactured by Kodak, the control

of sale of parts by original equipment manufacturers,

agreements to prevent resale of parts, and the imposition

of sanctions on those dealing with respondents. The dis-

trict court entered summary judgment for Kodak. Al-

though the court found that Kodak had a “natural monop-

oly over the market for parts it sells under its own name,”

1989-1 CCH Trade Cases 4 68,402, at 60,213, it rejected

the Section 2 claim on the ground that a unilateral refusal

to sell those parts was not a violation of that section. /d.

The Ninth Circuit reversed. See Image Technical Serv.,

Inc. v. Eastman Kodak Co., 903 F.2d 612 (9th Cir.

1990). Although it agreed with the “general rule” that

even a monopolist “had no duty to deal with its competi-

tors,” 903 F.2d at 620, it stated that a monopolist could

not refuse to do so “in an exclusionary attempt to impede

competition without a legitimate business reason.” 903

F.2d at 620 (citing Aspen Skiing Co. v. Aspen Highlands

Skiing Corp., 472 U.S. 585, 608 (1985)).2 Looking to

the three possible business justifications advanced by Ko-

dak at the time, the court found “triable issues of fact

‘ Respondents also alleged, pointing to one of the several acts

that collectively formed the basis of the Section 2 claims, that

Kodak had engaged in illegal tying practices in violation of Section

1. Following the remand from this Court, the tying claims were

upheld against motions for summary judgment and for judgment

as a matter of law. Because respondents ultimately elected to sub-

mit only their Section 2 claims to the jury, and because the Section

2 claims are the basis of the judgment now before this Court, we

will primarily discuss the history of the case as it relates to those

claims.

2 The court of appeals also observed that “a monopolist may not

retaliate against a customer who is also a competitor by denying

him access to a facility essential to his operations, absent legitimate

business justifications.” 908 F.2d at 620 (citing Otter Tail Power

Co. v. United States, 410 U.S. 366, 377 ( 1978) ).

as to whether [the] first two proffered reasons are genuine

rather than pretextual,” 903 F.2d at 620, and determined

the third to be insufficient as a matter of law. 903 F.2d

at 620. Although the court expressed some uncertainty

about “whether the service of Kodak equipment could be

a relevant market” (903 F.2d at 620), and, if so, whether

Kodak might be found to have monopoly power in it, it

concluded that it could not rule out the existence of a

service market as a matter of law, 903 F.2d at 621, and

that plaintiffs had presented sufficient evidence of market

power to withstand summary judgment. 903 F.2d at 621.

This Court affirmed the Ninth Circuit, See Kodak, 504

U.S. at 480-86. The Court reiterated the well-established

two-part test for monopolization: “‘(1) the possession of

monopoly power in the relevant market and (2) the will-

ful acquisition or maintenance of that power as distin-

guished from growth or development as a consequence

of a superior product, business acumen, or historic acci-

dent.’” 504 U.S. at 481 (quoting United States v. Grin-

nell Corp., 384 U.S. 563, 570-71 (1966)). It then found

that respondents had come forward with enough proof on

these requirements to create triable issues,

The Court determined that “[t]he existence of the first

element, possession of monopoly power, is easily resolved,”

504 U.S. at 481, pointing to, among other things, the fact

that Kodak controlled “80% to 95% of the service mar-

ket.” Id. The Court noted the existence of a “triable

claim that service and Parts are separate markets, and that

Kodak has the ‘power to control prices or exclude compe-

tition’ in service and parts.” 504 US. at 481 (quoting

United States v. E.l. du Pont de Nemours & Co., 351

U.S. 377, 391 (1956) ). In particular, the Court explicitly

rejected Kodak’s argument “that, as a matter of law, a

single brand of a product or service can never be a rele-

vant market under the Sherman Act.” 504 USS. at 481.

Rather, the Court recognized that “[bJecause service and

parts for Kodak equipment are not interchangeable with

other manufacturers’ service and parts, the relevant mar-

ket from the Kodak equipment owner’s perspective is

composed of only those companies that service Kodak

machines.” 504 U.S. at 482. It concluded that “[t]he

proper market definition in this case can be determined

only after a factual inquiry into the ‘commercial realities’

faced by consumers.” 504 U.S. at 482 (quoting United

States v. Grinnell Corp., 384 U.S. 563, 572 (1966) ).

Turning to “[t]he second element of a § 2 claim” (504

U.S. at 482)—that is, “the use of monopoly power ‘to

foreclose competition, to gain a competitive advantage, or

to destroy a competitor’” (504 U.S. at 482-83 (quoting

United States v. Griffith, 334 U.S. 100, 107 (1948) )—

the Court stated: “If Kodak adopted its parts and service

policies as part of a scheme of willful acquisition or main-

tenance of monopoly power, it will have violated § 2.”

504 U.S. at 483. The Court acknowledged “that as a gen-

eral matter a firm can refuse to deal with its competitors,”

504 U.S. at 483 n.32, but held that “such a right is not

absolute; it exists only if there are legitimate competitive

reasons for the refusal.” 504 U.S. at 483 n.32 (citing

Aspen Skiing, 472 U.S. at 602-05). The Court noted

evidence that Kodak had engaged in a scheme of willful

monopolization and explained, therefore, that the case

turned on “whether ‘valid business reasons’ can explain

Kodak’s actions.” 504 U.S. at 483 (quoting Aspen Skiing,

472 U.S. at 605). At that time, Kodak made no men-

tion of protection of intellectual property but defended

its actions on three other grounds, all of which this Court

rejected as bases for summary judgment. The Court de-

cided that one reason (to prevent “free-riding”) was in-

adequate as a matter of law and that the other two rea-

sons (to protect service quality and to improve inventory

management) were inconsistent both with the record and

with Kodak’s own actions and thus presented factual issues

for trial. 504 U.S. at 483-86.

2. After remand, the case eventually proceeded to trial.

Upon the close of evidence, respondents elected to sim-

plify the case and, dropping the Section 1 tying claim,

submitted to the jury only the monopolization and at-

tempted monopolization claims. The jury found Kodak

liable on both claims. It awarded damages of more than

$12 million (before trebling) for lost service profits and

more than $11 million (before trebling) for lost profits on

used equipment sales. To prevent further harm, the dis-

trict court issued an injunction requiring Kodak to sell

parts on “reasonable” and nondiscriminatory terms. Pet.

App. 84B.° Although Kodak argued that its refusal to

Sell parts was grounded in a desire to protect intellectual

property rights, the district court stated that “neither the

record nor the verdict supports Kodak’s contention that its

desire to protect intellectual property actually motivated

Kodak’s parts policy.” Pet. App. 88B. The court added:

“To the contrary, it is clear that protection of intellectual

property was a pretextual, post-hoc justification of Kodak’s

parts policy.” Pet. App. 88B.

The Ninth Circuit affirmed the judgment as to liability.

Reviewing “the extensive record developed at trial,” Pet.

App. 8A, the court of appeals concluded that respondents

had presented sufficient evidence of market power over

parts and service. See Pet. App. 8A-23A; 31A-33A. The

court further found substantial evidence that Kodak was

able to maintain its service monopoly by exercising its

power over parts. Although Kodak argued that it lacked

market power over parts—basing its argument on a theory

that “there are not two relevant parts markets [i.e. for

3’ The Ninth Circuit, on appeal, modified the injunction to elimi-

nate the requirement that the terms be “reasonable.” Pet. App.

69A. The court noted, as respondents conceded, that “Kodak is

entitled to monopoly prices on its patented and copyrighted parts.”

Pet. App. 68A. The court upheld most of the damages for lost

service profits and remanded for a new trial on damages for lost

profits on used equipment sales. Pet. App. 58A-65A.

photocopier and micrographic equipment, respectively],

but thousands of individual ‘part’ markets,” (Pet. App.

10A)—the court rejected that theory, stating that “[c]on-

sideration of the ‘commercial realities’ in the markets for

Kodak parts compels the use of an ‘all parts’ market

theory.” Pet. App. 11A.* The court went on to observe

that “[t]he ‘commercial reality’ faced by service providers

and equipment owners is that a service provider must have

access to all parts to compete in the service market.” Pet.

App. 11A. See also Pet. App. 12A (“[iJn the market for

Kodak parts, a ready supply of all parts is needed to

satisfy service contracts”).

The court of appeals also determined that “substantial

evidence supports the jury’s finding that Kodak controlled

a monopoly share in the market for Kodak parts.” Pet.

App. 19A. The court pointed to a combination of actions

by Kodak: manufacture of parts; control of parts manu-

factured by others; and “discouragement of self-servicing

and resale of parts by end users.” Pet. App. 19A. The

court expressly rejected an argument by Kodak that parts

were nonetheless available, finding “substantial evidence

showing that parts were virtually unavailable for post-

1986 models and often difficult to obtain for older

models.” Pet. App. 19A.° It concluded that, “given the

4The court noted the prior declaration by this Court that the

relevant market could “ ‘be determined only after a factual inquiry

into the ‘commercial realities’ faced by consumers.’” See Pet. App.

11A (quoting Kodak, 504 U.S. at 482). Although the Ninth Circuit

determined that those realities justified use of an all-parts market,

it observed that “Kodak’s 100% monopoly power over the 30% of

parts it manufactures suggests the same potential for control of

the service market under an individual part market theory that the

jury found using the ‘all parts’ market.” Pet. App. 16A.

5 The court further found that “the record reflects substantial

evidence of entry barriers sufficient to prevent Kodak’s monopoly

share from self-correcting.” Pet. App. 22A.

aa =

state of the record, a reasonable jury could conclude that

Kodak had a share of the markets for photocopier and

micrographic equipment parts of 65% or more.” Pet.

App. 21A.

The court of appeals also found that respondents had

satisfied “[t]he second element of a § 2 monopoly claim”

(Pet. App. 23A): “the use of monopoly power ‘to fore-

close competition, to gain a competitive advantage, or to

destroy a competitor.’” Pet. App. 23A (quoting Kodak,

504 U.S. at 482-83) (internal quotes omitted). In this

case, as the court recognized, respondents had alleged

that “Kodak used its monopoly over Kodak parts to gain

a monopoly over the service of Kodak equipment.” Pet.

App. 23A. Analyzing this claim, the court of appeals

specifically noted the statement of this Court, during its

prior consideration of this case, that “ ‘[i]f Kodak adopted

its parts and service policies as part of a scheme of willful

acquisition or maintenance of monopoly power, it will have

violated § 2.’” Pet. App. 23A (quoting Kodak, 504 U.S.

at 483). The court declined to accept Kodak’s argument

that all refusals to deal must be analyzed according to the

terms of the “essential facilities” doctrine, Pet. App. 25A-

31A, saying that “[t]he Supreme Court has never ex-

plicitly held that a § 2 refusal to deal claim can only be

established under the ‘essential facilities’ rubric.” Pet.

App. 28A. See also Pet. App. 28A-31A (discussing fact

that neither Kodak nor Aspen Skiing employed the essen-

tial facilities doctrine by its terms). The court thus ap-

plied the standard repeatedly utilized by this Court: a

Section 2 violation may be found to the extent that a

monopolist engages in exclusionary conduct “harm[ing]

the competitive process in the absence of a legitimate

business justification.” Pet. App. 26A (citing Kodak,

504 U.S. at 483 n.32, which cited Aspen Skiing, 472 U.S.

at 602).

The Ninth Circuit then found that the evidence “es-

tablish[ed] Kodak’s monopoly power in the service mar-

ket.” Pet. App. 32A. Applying a “plain error” standard,

because of a procedural default by Kodak, see Pet. App.

32A, the court pointed to evidence that “Kodak has a

95% share of the Kodak high volume photocopier service

market and an 88% share of the Kodak micrographic

service market.” Pet. App. 33A. In this regard, the

court again recognized that competing service providers

were unable to obtain parts sufficient to become signifi-

cant service competitors and that, as older models were

phased out, those difficulties would worsen. Pet. App.

33A. The court also relied on evidence “that Kodak earns

supracompetitive profits in service, and overall.” Pet.

App. 33A. There was thus “[s]ubstantial evidence [to]

support[] the jury’s verdict on the issue of Kodak’s service

market monopoly.” Pet. App. 33A.

Finally, the Ninth Circuit considered the purported

business justifications for Kodak’s practices. As an initial

matter, it made clear that “[w]hen a legitimate business

justification supports a monopolist’s exclusionary conduct,

that conduct does not violate § 2 of the Sherman Act.”

Pet. App. 33A-34A (citing Kodak, 504 U.S. at 483).

The court then examined in detail one justification prof-

fered by Kodak for its real to deal with respondents:

the protection of copyrign: or patent rights. Recognizing

as a general principle “the right of a patent or copyright

holder to refuse to sell or license protected work,” Pet.

App. 41A, the court expressed “serious concern” about

the potential “effect of claims based upon unilateral con-

duct on the value of intellectual property rights ... .”

Pet. App. 46A.° The court thus established a rule that “a

6 The court later observed that antitrust suits, unless properly

cabined, “will reduce a patent holder’s ‘incentive . . . to risk the

monopolist’s ‘desire to exclude others from its [protected]

work is a presumptively valid business justification for any

immediate harm to consumers.’” Pet. App. 48A (quoting

Data General Corp. v. Grumman Systems Support Corp.,

36 F.3d 1147, 1187 (1st Cir. 1994)). The court further

concluded that jury instructions, in cases like this one,

must reflect this protection of intellectual property rights.

The court of appeals held, however, that “[t]he pre-

sumption may . . . be rebutted by evidence of pretext,”

Pet. App. 51A, reasoning that “[nJeither the aims of in-

tellectual property law, nor the antitrust laws justify

allowing a monopolist to rely upon a pretextual business

justification to mask anticompetitive conduct.” Pet. App.

S1A (citing Kodak, 504 U.S. at 484) (ruling out pur-

ported justification as “pretextual”). It then found con-

vincing evidence of “pretext” here. In particular, the

court observed that the refusal to sell parts to respondents

was an across-the-board refusal: that is, that “no distinc-

tion was made by Kodak between ‘proprietary’ parts cov-

ered by tooling or engineering clauses and patented or

copyrighted products.” Pet. App. 51A. Pointing out that

“Kodak photocopy and micrographics equipment requires

thousands of parts, of which only 65 were patented,”

Pet. App. 52A, the court distinguished this case from

“other cases involving refusals to license patents,” Pet.

App. 52A, remarking that it “concerns a blanket refusal

that included protected and unprotected products.” Pet.

App. 52A. See also Pet. App. 51A (statement by Kodak

official that patents “‘did not cross [his] mind’”).7 As

often enormous costs in terms of time, research, and development.’ ”

Pet. App. 47A (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S.

470, 480 (1974) ).

7 Although described as a “parts manager,” Pet. 15; Pet. 51A,

that witness actually was the official who crafted the parts restric-

tions for Kodak and thus was the person at Kodak most knowledge-

able about the intent and effect of the restrictions.

a result, the court found it harmless error that the district

court had not identified protection of intellectual property |

as a legitimate justification in its instructions, regarding |

it as “more probable than not that the jury would have

found Kodak’s presumptively valid business justification

rebutted on the grounds of pretext.” Pet. App. 52A.

ARGUMENT

The Ninth Circuit in this case, having reviewed “the

extensive record developed at trial” (Pet. App. 8A), up-

held a jury verdict that Kodak unlawfully monopolized

the service market for certain Kodak equipment. In so

doing, the court of appeals specifically relied on evidence

that access to Kodak parts was necessary to compete in

the service market (Pet. App. 11A, 12A, 15A, 16A);

that Kodak exercised monopoly power over the market

for parts (Pet. App. 19A, 21A, 22A); that Kodak used

its monopoly power to deny access to parts to rivals in

the service market (Pet. App. 23A-31A); that Kodak |

parts were not otherwise available in adequate supply |

(Pet. App. 19A); and that, as a result, Kodak was able

to exercise monopoly power in the service market as well

(Pet. App. 32A-33A). The court further noted that

Kodak had no legitimate business justification for its con-

duct, pointing in particular to the compelling evidence

that protection of intellectual property rights had played

no role in the decision to block access to Kodak parts

(Pet. App. 51A-52A).

Although Kodak now attacks the decision below un a

variety of grounds, none of its arguments merits further

review. First, Kodak argues that it should be exempt or

immune from antitrust liability for its refusal to sell pat-

ented or copyrighted parts to its service rivals. The

Nin» > Circuit, however, extended considerable protection

to intellectual property holders, declaring that a decision

to profit from patented or copyrighted matter was pre-

sumptively a legitimate business justification for refusals

to sell. Pet. App. 48A. The problem for Kodak with

that rule was a case-specific one: its refusal to sell the

small number of patented or copyrighted parts was simply

an undifferentiated piece of a larger, across-the-board re-

fusal to sell any parts. Pet. App. 51A-52A. Because

Kodak offered no legitimate justification for its refusal to

sell parts not subject to patents or copyrights, and because

its policy was uniform with respect to all parts, the court

of appeals reasoned that, in this particular case, the

belated claim of reliance on intellectual property rights

was pretextual. Pet. App. 52A. Kodak is thus left in the

awkward position of claiming in the abstract that the

intellectual property laws require, as an incentive for in-

vention, that patent or copyright holders be able to use

their rights even as a pretext to justify anticompetitive

conduct taken for other reasons. None of the authority

cited by Kodak stands for anything remotely close to that

illogical and dangerous proposition.

Second, Kodak asserts that the courts below failed to

apply critical elements of the “essential facilities” doc-

trine, relying instead on the standard repeatedly approved

by this Court in prior decisions, including Kodak and

Aspen. See Eastman Kodak Co. v. Image Technical Serv.,

Inc., 504 U.S. 451 (1992); Aspen Skiing Co. v. Aspen

Highlands Skiing Corp., 472 U.S. 585 (1985); United

States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966);

United States v. Griffith, 334 U.S. 100, 107 (1948). But

the Ninth Circuit was plainly correct that those decisions

—including the decision in this very case—establish that

claims based on refusals to deal can be adjudicated by

a jury under the long-settled standards applicable to all

other Section 2 claims and need not be specially framed

in “essential facilities” terms. Furthermore, in its review

of the jury verdict, the Ninth Circuit did, in fact, find

sufficient evidence on each of the elements that Kodak

deems crucial: it found that Kodak exerted monopoly

power over the parts market (monopoly); that parts were

not otherwise available (unavailability); and that access

to parts was necessary to compete in the service markets

(essentiality). Kodak naturally disputes those conclusions,

but its disagreement on largely factual matters, resolved

by the jury here, provides no basis for review by this

Court.

The final argument advanced by Kodak—that the find-

ing of aftermarket power is insupportable—is likewise

unworthy of review. For the most part, its argument is

just an attack on the prior ruling of this Court, a ruling

that is law of the case. And its objections to the weight

of the evidence—not grounds for review, in any event—

are made even less meritorious by a procedural default

that led the Ninth Circuit to review the verdict only for

plain error. Pet. App. 32A. Applying that standard, the

court found ample evidence to support the verdict, Pet.

App. 33A, and that conclusion is plainly correct.

1. Kodak, as its first issue, seeks review of a broadly-

Stated question concerning the relation between the anti-

trust laws and the patent and copyright laws. But, despite

Kodak’s wide-ranging discussion, the Ninth Circuit deci-

sion raises only a narrow point: that the justification of

protecting intellectual property, like other Section 2 justifi-

cations, is subject to rebuttal on grounds of pretext. Not

only is that holding not in conflict with any decision of

this Court or any court of appeals, it is in line with the

only other related court of appeals’ precedent (which

Kodak also condemns). See Data General Corp. v.

Grumman Systems Support Corp., 36 F.3d 1147 (1st

Cir. 1994). Furthermore, the Ninth Circuit correctly held

that “[n]either the aims of intellectual property law, nor

the antitrust laws justify allowing a monopolist to rely

upon a pretextual business justification to mask anti-

competitive conduct.” Pet. App. 51A. For these reasons,

review should be denied.*

® Because the Ninth Circuit found sufficient evidence of pretext,

Pet. App. 51A-52A, this case, as it stands, does not present the

more general question whether, as Kodak argues, a nonpretextual

— J

The basic argument advanced by Kodak is that it has

an absolute right to deny access to all of the essential,

otherwise unavailable parts in order to maintain monopoly

power in the service market, even without any other

legitimate business justification, simply because approxi-

mately one percent of the parts was subject to patents or

copyrights. As a general matter, of course, the Ninth

Circuit agreed with the proposition that intellectual prop-

erty holders have a broad right to profit from their works.

Recognizing that the patent laws reward beneficial inven-

tion by extending “a permissible monopoly over the pro-

tected work” (Pet. App. 39A), the court expressed-con-—

siderable concern about the potential effects of unchecked

antitrust claims based on unilateral refusals to deal in

patented or copyright articles. Pet. App. 45A-47A. The

court found it important to shield intellectual property

holders from suits that would be “contrary to the funda-

mental and complementary purposes of both the intellec-

tual property and antitrust laws, which aim to ‘encourag[e]

innovation, industry and competition.’” Pet. App. 47A

(quoting Atari Games Corp. v. Nintendo of America, Inc.,

897 F.2d 1572, 1576 (Fed. Cir. 1990) )°

To achieve this objective, the court of appeals estab-

lished a presumption that »* tection of intellectual prop-

erty rights is a legitimate »»scompetitive justification for

conduct having the effect of excluding competition, but

reliance on intellectual property rights confers a full and complete

immunity from antitrust liability for refusals to deal in patented

and copyrighted goods when that refusal allowed the defendant to

obtain or maintain a monopoly in a second, downstream service

market.

® At the same time, the court of appeals acknowledged (Pet. App.

41A) what this Court had said in Kodak: that even “power gained

through some natural and legal advantage such as a patent, copy-

right, or business acumen can give rise to liability if ‘a seller

exploits his dominant position in one market to expand his empire

into the next.” 504 U.S. at 479 n.29 (quoting Times-Picayune Pub.

Co. v. United States, 345 U.S. 594, 611 (1958)).

not an absolute barrier to antitrust attack. Pet. App.

48A. Kodak, naturally enough, has no dispute with the

general principle that business decisions with respect to

intellectual property are entitled to comprehensive protec-

tion under the antitrust laws. What Kodak objects to is

the less-than-absolute degree of protection afforded by

the Ninth Circuit. Because it found protection of intellec-

tual property to be a species of legitimate business justifi-

cation, the court, as is customary with other tendered

business justifications (see pages 15-16 infra), conducted

an inquiry into whether this justification—potentially legit-

imate in the abstract—in fact played a role in the exclu-

sionary conduct here. Although Kodak claimed that it

had, its eleventh-hour position ran head-on into uncon-

troverted evidence of Kodak’s actual behavior: that is, its

refusal to allow access to any Kodak parts, whether sub-

ject to patents and copyrights or not. See Pet. App. 51A

(“no distinction was made by Kodak between ‘proprietary’

parts covered by tooling or engineering clauses and pat-

ented or copyrighted products”); Pet. App. 52A; Pet.

App. 88B. In light of the fact that Kodak’s explanation

for its practice was facially inconsistent with the practice

itself, the Ninth Circuit reasonably concluded that the

justification of protecting intellectual property rights sim-

ply had no place in this case. See Pet. App. 52A (“[uJn-

like the other cases involving refusals to license patents,

this case concerns a blanket refusal that included pro-

tected and unprotected products”).

Given the across-the-board nature of Kodak’s refusal to

sell parts, it is hardly surprising that its post-hoc reliance

on intellectual property rights was rejected. When the case

was before this Court, for example, Kodak made no claim

that its actions were grounded in the protection of copy-

right or patent rights. See Kodak, 504 U.S. at 483-86.

Furthermore, in the district court, Kodak responded sev-

eral times to interrogatories by stating that patents and

copyrights were irrelevant. RT 6162-65. It was not until

1994, seven years after initiation of this lawsuit, that

Kodak’s counsel asserted a defense based upon the exist-

ence of some patented and copyrighted parts. And, as the

court of appeals noted, a responsible Kodak official stated

that, at the time the parts policy was instituted, “patents

‘did not cross [his] mind.’” Pet. App. 51A.?°

Faced with these facts, Kodak is now forced to argue

that, to serve the purposes of the patent and antitrust

laws, the presumption must be absolute and irrebuttable.

Put another way, Kodak contends that it is entitled to rely

on protection of intellectual property rights as a justifica-

tion even if it is clear, by objective proof, that such pro-

tection had nothing at all to do with its policies or prac-

tices. But none of the decisions cited by Kodak adopts

so absolute a rule even in the face of evidence of pretext.

And, in any event, there is very little to be said in favor

of Kodak’s proposed new per se rule of immunity.

As a matter of antitrust law, the idea of a “pretext

privilege” seems obviously out of place. In antitrust cases,

it is standard for defendants to defend refusals to deal

based on business justifications—for example, a need to

maintain quality or a lack of available Ccapacity—that

(like protection of patent rights) are plainly legitimate in

the abstract. The courts, however, do not simply accept

the assertions at face-value. Rather, they routinely ex-

amine whether, as a matter of fact, the justification is

applicable in the particular case. See, e.g., Aspen Skiing,

472 U.S. at 608-11; International Salt Co. v. United

States, 332 U.S. 392, 396-97 ( 1947); International Busi-

ness Machines Corp. v. United States, 298 U.S. 131, 139-

40 (1936).

10 The record also contains evidence that Kodak gave parts num-

bers to patented and copyrighted items, including diagnostic soft-

ware, and listed them in its catalogue for sale along with other

parts. RT 1696, 2149-51; Exh, 440. In fact, Kodak sold patented

and copyrighted parts, along with other parts, to self-servicing

customers and to ISOs for older micrographic equipment. Jd.

This Court, indeed, followed precisely that course in

its prior review of this case. Addressing the purported

justifications for Kodak’s refusal to sell parts, the Court

found evidence that the first justification—“promot[ing]

interbrand equipment competition by allowing Kodak to

Stress the quality of its service” (504 U.S. at 483)—was

“pretextual.” 504 U.S. at 484. It noted evidence that

“ISOs provide quality service and are preferred by some

Kodak equipment owners” (504 U.S. at 483) and, more

importantly for present purposes, that the claimed justifi-

cation was at odds with Kodak’s own theories and conduct.

It rejected a second justification—“improv[ing] asset man-

agement by reducing Kodak’s inventory costs” (504 U.S.

at 483)—for similar reasons, stating that “Kodak’s ac-

tions appear inconsistent with any need to control inven-

tory costs.” 504 U.S. at 484. All the Ninth Circuit did

here was to conclude that another proffered justification—

the protection of copyright and patent rights—likewise

could not be reconciled with the full extent of Kodak’s

own actions.”

The creation of a “pretext privilege” is also unneces-

sary to comply with the various intellectual property

laws. See Pet. App. 51A. Kodak correctly observes that

“[t]he purpose of the intellectual property laws is ‘to

motivate the creative activity of authors and inventors

by the provision of a special reward.’” Pet. 10 (quoting

1! While Kodak argues that the decision below focuses on “intent”

at the expense of more “objective” analysis, Pet. 13-14, that com-

plaint seems largely out of place in this case. While the court of

appeals did note testimony by a Kodak official that “patents ‘did not

cross [his] mind,’” Pet. App. 51A, the principal evidence relied on

by the court was evidence of what Kodak did: i.e., generally refuse

to sell any parts, regardless of whether they were subject to patents

or copyrights. In any event, this Court has looked at evidence of

monopolistic intent in considering Section 2 claims for more than

half a century. See, e.g., United States v. Paramount Pictures,

334 U.S. 181, 173 (1948); United States v. Griffith, 334 U.S. 100,

106 (1948) ; Eastman Kodak Co. v. Southern Photo Materials Co.,

273 U.S. 359 (1927).

Sony Corp. of America v. Universal City Studios, Inc.,

464 U.S. 417, 429 (1984)). What it does not explain,

however, is why the “special reward” must include the

pretextual use of copyright or patent rights as a cover for

anticompetitive conduct. The presumption adopted by the

Ninth Circuit was intended to assure—and, properly im-

plemented, will assure—that actions necessary to protect

intellectual property rights will satisfy the legitimate busi-

ness justification standard, thereby giving appropriate pro-

tection to patent and copyright holders. It is far-fetched to

suggest that any meaningful creative activity will be de-

terred by the inability of a patent or copyright holder to

invoke its rights as a pretext as well.”

Although Kodak asserts that exploitation of intellectual

property rights is necessarily compatible with the antitrust

laws, that position is only partly correct: it has long been

recognized that the antitrust laws place limits on the free-

dom of a patent holder to exploit its limited monopoly

under the patent. Thus, for example, this Court has held

that the Sherman Act bars a patentee from requiring pur-

chase of a second product as a condition of gaining access

to a patented one. See, e.g., International Salt Co., supra.

Indeed, as the court of appeals noted (Pet. App. 41A), this

Court in Kodak explicitly reaffirmed that “power gained

through some natural and legal advantage such as a

patent, copyright, or business acumen can give rise to lia-

bility if ‘a seller exploits his dominant position in one

market to expand his empire into the next.’” 504 US.

at 479 n.29 (emphasis added) (quoting Times-Picayune

Pub. Co. v. United States, 345 U.S. 594, 611 (1953)).

12 Indeed, the standard urged by Kodak, amounting to antitrust

immunity whenever a patent or copyright is involved, is rife with

the potential for mischief. Kodak’s standard would give companies

an incentive to obtain a patent—even when doing so is not eco-

nomically beneficial in traditional terms of improving quality or

lowering costs—merely because the patent would amount to a

license to destroy competition in downstream markets,

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

U.S. 100, 136 (1969) (“[T]here are established limits

which the patentee must not exceed in employing the lev-

erage of his patent to control or limit the operations of

the licensee.”); United States v. Line Material Co., 333

U.S. 287, 308 (1948) (“Possession of a valid patent or

patents does not give the patentee any exemption from the

provisions of the Sherman Act beyond the limits of the

patent monopoly.”); Ford Motor Co. v. United States,

405 U.S. 562, 576 n.11 (1972) (“Even constitutionally

protected property rights such as patents may not be used

as levers for obtaining objectives proscribed by the anti-

trust laws.”); Atari Games Corp. v. Nintendo of America,

Inc., 897 F.2d 1572, 1576 (Fed. Cir. 1990) (“On the

other hand, a patent owner may not take the property

right granted by a patent and use it to extend his power

in the marketplace improperly, i.e. beyond the limits of

what Congress intended to give in the patent laws.”);

Panther Pumps & Equipment Co. v. Hydrocraft, Inc., 468

F.2d 225, 231 (7th Cir. 1972) (“Supreme Court has un-

equivocally condemned the use of a patent as a beach-

head from which competition in unrelated lines of com-

merce may be assaulted”), cert. denied, 411 U.S. 965

(1973). While it plainly would enhance the value of a

patent to allow unlimited power to refuse to sell patent

goods except upon purchase of unpatented goods, the law

does not regard that added incentive as necessary in order

to stimulate inventive efforts. It is equally unnecessary

to provide inventors with the dubious additional incentive

of invoking copyrights or patent rights in a pretextual

manner.”®

18 By the logic of Kodak’s theory, it could be argued that recogni-

tion of the so-called “sham” exception likewise weakens the con-

stitutionally-rooted right to petition governmental officials or to file

lawsuits. See Eastern R. Presidents Conference v. Noerr Motor

Freight, Inc., 365 U.S. 127 (1961). But this Court has never found

it essential to accord absolute immunity to those activities. Indeed,

There is certainly nothing in the authority cited by

Kodak that compels an opposite conclusion. To begin

with, although Kodak seeks to rely on the language of

35 U.S.C. § 271(d)(4), that provision applies only to

cases, unlike this one, filed after November 19, 1988."

The cases cited by Kodak (Pet. 10-11) are similarly be-

side the point. See SCM Corp. v. Xerox Corp., 645 F.2d

1195 (2d Cir. 1981), cert. denied, 455 U.S. 1016 (1982);

Miller Insituform, Inc. v. Insituform of North America,

Inc., 830 F.2d 606 (6th Cir. 1987), cert. denied, 484

U.S. 1064 (1988); Service & Training, Inc. v. Data Gen-

eral Corp., 963 F.2d 680 (4th Cir. 1992); United States

v. Westinghouse Elec. Corp., 648 F.2d 642 (9th Cir.

1981). While those cases stand for the oft-reiterated

principle that a patent or copyright holder has no general

duty to deal with its competitors, that principle is not in

dispute here: the Ninth Circuit explicitly acknowledged

and agreed with it. See Pet. App. 41A (“[c]ase law also

supports the right of a patent or copyright holder to refuse

to sell or license protected work,” citing Westinghouse,

despite Kodak’s heavy emphasis on Professional Real Estate In-

vestors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993),

that decision does not stand for the proposition that actions ostensi-

bly protecting copyrights are entitled to absolute immunity. If that

were so, it would follow that any suit to enforce a copyright, even

a “sham” suit, would have to be treated as legitimate, just as Kodak

insists that a pretextual reliance on patent rights must be. The

decision in Professional Real Estate Investors, Inc. is contrary to

that theory.

14 Thus, to the extent that provision is relevant to analysis of

the issue raised by Kodak, it would be appropriate for this Court

to await a case in which the provision applies and, therefore, has

been dealt with in the lower courts. Furthermore, with respect to

the matter specifically addressed by the statute (i.e., the criteria

for patent misuse), this Court had simply held, prior to enactment

of the statute, that a patent holder does not forfeit its right to sue

for infringement solely because it has not offered to license its

invention to an accused infringer. See Dawson Chemical Co. v.

Rohm & Haas Co., 448 U.S. 176, 214-15 (1980).

648 F.2d at 647). None of those cases, however, ad-

dressed the specific question presented by this case—

whether a patent or copyright holder may claim, as a busi-

ness justification, a reason for refusing to deal (i.e., pro-

tection of copyrighted or patented matter) that had noth-

ing to do with its actual behavior—and thus none of the

cases had any reason to consider whether a pretextual

invocation of intellectual property rights should be ac-

cepted as though it were genuine. Indeed, insofar as it

appears from the cases, there was no allegation in any of

them that the companies refusing to deal in patented

materials had done so as part of an indiscriminate refusal

to sell patented and unpatented goods alike, let alone in

an effort to monopolize a downstream market not encom-

passed within the scope of the patent or copyright. See

Pet. App. 52A (distinguishing Westinghouse, SCM, and

Miller Insituform on the ground that, unlike this case,

they did not involve “a blanket refusal that included pro-

tected and unprotected products”). It was reliance on

those facts, however, that prompted the Ninth Circuit to

hold that the protection generally afforded to patent and

In short, the decision below provides ample protection

for patent and copyright holders without erecting a wholly

unnecessary shield from antitrust liability for holders pre-

textually asserting their rights as a basis for anticompeti-

tive behavior. Neither this Court nor any court of ap-

peals has ever held that it is necessary for patent or copy-

right holders to be able to invoke their rights as a pretext,

and nothing in the intellectual property laws or the anti-

trust laws requires it. There is thus no reason for review

by this Court.

2. The broadest argument put forward by Kodak,

though styled as its second question presented, is that the

courts below applied the wrong standard to its refusals

to deal. In the court of appeals, Kodak argued that courts

must apply the “essential facilities” doctrine, but its posi-

tion now seems to be only that a proper standard (distilled

from a survey of cases) must require proof of monopoly,

unavailability, and essentiality. See Pet. 16-19. This issue,

however, is a red herring: the Ninth Circuit, while it held

that it was not required to apply the essential facilities doc-

trine in this case, did look to proof of the very elements

that Kodak finds to be critical. Its holding that the evi-

dence was sufficient to uphold the verdict is correct, and

there is no reason for further review on this issue.

Before turning to this evidence, we should note that, if

Kodak actually means that a court must employ the essen-

tial facilities doctrine by its terms, its argument is clearly

off the mark. This Court, in both Aspen and Kodak, an-

alyzed refusals to deal without itself employing the essen-

tial facilities language or indicating that instructions must

be framed in that manner. See Aspen Skiing, 472

U.S. at 600-11; Kodak, 504 U.S. at 482-86. In Aspen,

having upheld a jury verdict of monopolization under in-

structions providing that a monopolist may refuse to deal

“if valid business reasons exist for that refusal” (472 US.

at 597), the Court found it “unnecessary to consider the

possible relevance of the ‘essential facilities’ doctrine.”

472 U.S. at 611 n.44. In Kodak, this Court stated that

“Tilf Kodak adopted its parts and service policies as part

of a scheme of willful acquisition or maintenance of mo-

nopoly power, it will have violated § 2.” 504 U.S. at 483.

More specifically, after saying that “[i]t is true that as a

general matter a firm can refuse to deal with its competi-

tors,” 504 U.S. at 483 n.32, the Court went on to declare

that “such a right is not absolute; it exists only if there

are legitimate competitive reasons for the refusal.” 504

U.S. at 483 n.32. See also Lorain Journal Co. v. United

States, 342 U.S. 143, 155 (1951). Nothing in that dis-

cussion—addressing the very claims that were tried on

remand—trequired that Kodak’s conduct be analyzed ac-

cording to the terms of the essential facilities doctrine.”

Kodak is thus left with a more generic argument: that

courts must employ some sort of “objective criteria” to

separate lawful from unlawful refusals to deal.** But the

inquiry conducted by the Ninth Circuit did just that: in

reviewing the jury’s verdict, it looked to proof of pre-

cisely those elements—monopoly, unavailability, and essen-

tiality—that Kodak finds to be necessary. Thus, the Ninth

Circuit explicitly determined that Kodak had “monopoly

power in the parts market.” See Pet. App. 20A; id. at

19A (“[w]Je hold that substantial evidence supports the

jury’s finding that Kodak controlled a monopoly share in

the market for Kodak parts”).’ More particularly, the

court stated that “given the state of the record, a reason-

able jury could conclude that Kodak had a share of the

markets for photocopier and micrographic equipment parts

18 The lack of reliance on the essential facilities doctrine in Aspen

and Kodak is all the more noteworthy because, in each of them, the

court of apncals had talked in terms of essential facilities. See

Aspen Highlands Skiing Corp. v. Aspen Skiing Co., 738 F.2d 1509,

1520-21 (10th Cir. 1984) ; Image Technical Serv., Inc. v. Eastman

Kodak Co., 903 F.2d 612, 620 (9th Cir. 1990).

16 Although Kodak describes its conduct as a unilateral refusal to

deal, that description is actually incomplete. As the Ninth Circuit

noted, and as the record shows, Kodak engaged in a schome that

featured its own refusals to deal, its efforts to prevent third parties

from dealing with respondents, and various acts of retaliation

against respondents and customers using respondents’ services. See

Pet. App. 4A, 19A.

17 Kodak continues to object to the definition of the relevant mar-

ket, arguing that the Ninth Circuit should have looked at the mar-

ket for each of the thousands of parts rather than all parts. See

Pet. 20; id. n.12. The Ninth Circuit correctly held, however, that

the definition offered by Kodak was incompatible with “commercial

realities,” Pet. App. 11A, and that Kodak would likely lose even

under its own theory. Pet. App. 16A. In any event, the resolution

of that issue—whether the proper market is all parts or not—is

case-specific and, therefore, obviously an issue of no general

importance.

23°

of 65% or more.” Pet. App. 21A.% In addition, the

court found sufficient evidence to “support a finding of

high barriers to entry by new manufacturers and to in-

creased output by established suppliers.” Pet. App. 22A.

The court of appeals also addressed whether Kodak

parts were otherwise available to service providers, find-

ing substantial proof that they were not. Noting evidence

of “a shortage of available substitutes” (Pet. App. 19A),

the court found “unpersuasive[]” Kodak’s argument “that

the ISO’s failed to prove that parts were absolutely un-

available.” Pet. App. 19A. To the contrary, the court

observed, “[t]he record contains substantial evidence show-

ing that parts were virtually unavailable for post-1986

models and often difficult to obtain for older models.”

Pet. App. 19A. Indeed, while Kodak in its petition baldly

asserts that parts “were available elsewhere” (Pet. 19;

see id. at 21), the Ninth Circuit pointed to an admission

by Kodak itself “that the availability of parts was ‘lim-

ited.’” Pet. App. 19A.

Finally, the Ninth Circuit repeatedly stated that access

to parts was necessary to compete in the service market.

In defining the relevant market, the court stated that

“(t]he ‘commercial reality’ faced by service providers and

equipment owners is that a service provider must have

ready access to all parts to compete in the service market.”

Pet. App. 11A (emphasis added). The court then re-

peated that fact, in various forms and contexts, through-

out its analysis of respondents’ Section 2 claim. See Pet.

App. 12A (“{iJn the market for Kodak parts, a ready

supply of all parts is needed to satisfy service contracts”);

18 Kodak challenges the statement (Pet. App. 21A) that even a

market share “near 50%” would suffice to support an attempted

monopolization claim where, as here, there are significant barriers

to entry and expansion. See Pet. 20-21. This Court need not

consider the legal sufficiency of this evidence of attempt, however,

because the court of appeals found sufficient evidence of a market.

share of 65% in this case.

Pet. App. 15A (“Kodak either manufactures or otherwise

controls a monopoly share in most of the necessary parts”’) ;

Pet. App. 16A (“Kodak photocopiers and micrographic

equipment require thousands of individual parts and a

supply of all parts is necessary in order to fulfill service

contracts”); Pet. App. 16A (“service providers need all

parts to compete in the service market”). Indeed, it seems

beyond serious question that access to parts is essential to

provide service. For all of its various theories, even

Kodak does not attempt to argue that it would be possible

for respondents to offer service without parts.”

The approach taken by the Ninth Circuit thus assured

that liability, even to the extent that it rested on a refusal

to deal considered in isolation, was imposed only upon

proof of each of the elements that Kodak deems impor-

tant.” That proof established that Kodak was able to

maintain a monopoly over service by denying access to

necessary and otherwise unavailable parts over which it

exercised monopoly power. Kodak may believe that the

court of appeals should have found the evidence to be

insufficient, but its dissatisfaction offers no reason for

further review.

3. The final argument pressed by Kodak is that the

Ninth Circuit mistakenly upheld the jury’s finding of

market power in a derivative aftermarket. But Kodak

offers nothing new or important here. Its argument is a

loose mixture of quarrels with the earlier decision in this

19 Kodak’s contention that the ISOs grew rapidly despite the parts

restrictions is misleading. In fact, the parts restrictions devastated

the ISOs’ ability to compete meaningfully against Kodak for service

business. See e.g., Pet. App. 4A (two plaintiffs and other ISOs were

actually driven out of the service business); RT 1715-16, 1720-22,

2380-84, 3459-62; Exh. 132, 32, 123.

20 To the extent that Kodak is objecting that the relevant instruc-

tion did not set forth those elements in the proper terms, it has

waived that argument by its failure to challenge that instruction

(No. 27). See Pet. App. 18A.

case and fact-specific disputes about the narrow ruling of

the court below. None of its contentions is grounds for

further review.

Much of the argument is, in effect, an invitation for

this Court to revisit its earlier decision. But this invita-

tion should be declined. The determination that Kodak

may unlawfully exert monopoly power in derivative after-

markets is law of the case." As this Court observed last

Term, “[uJnder this doctrine, a court should not reopen

issues decided in earlier stages of the same litigation.”

Agostini v. Felton, 117 S. Ct. 1997, 2017 (1997). Al-

though the Court may depart from that doctrine, if it is

“ ‘convinced that [its prior decision] is clearly erroneous

and would work a manifest injustice,” id. (quoting Ari-

zona v. California, 460 U.S. 605, 618 n.8 (1983)),

Kodak falls well short of meeting either prong of that

standard.”

The rest of the argument amounts to a wholesale attack

on the Ninth Circuit’s ruling on the sufficiency of the evi-

dence. But, in making this argument, Kodak labors under

a heavy procedural obstacle—both in attacking the Ninth

Circuit’s holding and in promoting this case as an appro-

priate vehicle for further consideration by this Court.

21 The Court in Kodak held that, upon a proper showing, respond-

ents could establish a § 2 claim with respect to the parts and service

aftermarkets, even if Kodak did not have monopoly power in the

equipment market. 504 U.S. at 482-86. See also 504 U.S. at 464-79.

Kodak obviously thinks little of that holding, see Pet. 24-28, but

it remains binding under traditional principles of law of the case.

22 Although Kodak claims that a “ ‘torrent’” of litigation has

followed the Kodak decision, Pet. 25, Pet. App. 104E-105E, the

majority of cases cited by Kodak were, in fact, instituted before

Kodak was decided. Thus, by Kodak’s own figures, there have been

fewer cases filed in the six years since Kodak than in the six years

preceding it. Further, some of those cases involve tying claims.

Because this case no longer contains a tying claim, any decision in

this case will provide, at best, incomplete guidance for the resolution

of those cases.

‘Because Kodak failed to move for judgment as a matter

of law on the sufficiency of the evidence on this issue, as

required by long-established and clear precedent, the

Ninth Circuit reviewed this contention “only for plain

error.” Pet. App. 32A. According to that standard, re-

versal of the jury’s findings about the service market was

possible “only if there is an absolute absence of evidence

to support the jury’s verdict.” Pet. App. 32A-33A (in-

ternal quotes omitted). The court of appeals accordingly

rejected Kodak’s challenge to the verdict under that strict

standard.

That ruling presents no basis for further review, for

the evidence in the record plainly satisfied that (and,

indeed, the usual) standard of appellate scrutiny. As the

Court noted, the record reflected, among other things,

that Kodak had extremely high (95% and 88%) shares

of the relevant service markets. Pet. App. 33A. In addi-

tion, the court said, “the ISOs presented evidence that

Kodak earns supracompetitive profits in service, and over-

all.” Pet. App. 33A.% Specifically looking at issues previ-

ously addressed by this Court, the court of appeals found

evidence that “Kodak equipment customers experience the

‘lock-in’ and information imperfections as described in

Kodak.” Pet. App. 33A. It thus rejected Kodak’s after-

market argument, concluding that “[s]ubstantial evidence

supports the jury’s verdict on the issue of Kodak’s service

market monopoly.” Pet. App. 33A.

To rebut these findings, Kodak largely sets forth its

own view of the evidence. For example, Kodak contends

that, “no matter what the Ninth Circuit says” (Pet. 28),

it never changed its policy toward selling photocopier

parts to its rivals. Pet. 28. In fact, there was substantial

evidence that Kodak adopted the parts restrictions after

competition had arisen, based on access to parts, that

28 Although Kodak contends (Pet. 2) that it sold its copier busi-

ness because of unprofitability, that claim is devoid of support in

the record.

threatened its service monopoly. RT 816, 1496-97, 2302-

03, 2855. Indeed, the Ninth Circuit pointed to evidence

that the restrictions on photocopier parts were adopted

only after one plaintiff lured a large service account, the

State of California, away from Kodak. Pet. App. 36A;

RT 2819, 2837; Exh. 943. Kodak also claims that the

restrictions on micrographics parts were “prospective

only,” operating only on equipment sold after the restric-

tions were announced. Pet. 28. Again, the record shows

that the restrictions cut off parts for some advanced equip-

ment that had been on the market for years before the

restrictions were announced. RT 2174-76, 2374-75,

2808-10.™

There is no need to go over this ground again. The

Ninth Circuit correctly upheld the verdict under the prop-

erly limited standard of review available to Kodak after

its procedural default. Further review by this Court is

unnecessary and unwarranted.

24 Kodak also ignores or misstates other record evidence refuting

its theory that it was unable to exploit service customers. Sub-

stantial evidence established that the equipment markets were not

competitive. See, e.g., Exhs. 190, 721, 724-26, 763-64, 898-99. In-

deed, some models of Kodak equipment have no substitutes. See,

e.g., RT 1722-24, 2895-2900, 3892-96, 5404-05. Lastly, for most of

the relevant time period, Kodak’s only competitive manufacturer of

photocopiers (Xerox) employed parts restrictions similar to

Kodak’s. RT 999-1001, 1298-1300, 1314.

CONCLUSION

The petition for a writ of certiorari should be denied

Respectfully submitted,