756 F.2d 200 (1st Cir. 1985), 84-1277, Computer Identics Corp. v. Southern Pacific Co.

Docket Nº:84-1277.
Citation:756 F.2d 200
Party Name:COMPUTER IDENTICS CORPORATION, Plaintiff, Appellant, v. SOUTHERN PACIFIC COMPANY, et al., Defendants, Appellees.
Case Date:March 07, 1985
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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Page 200

756 F.2d 200 (1st Cir. 1985)

COMPUTER IDENTICS CORPORATION, Plaintiff, Appellant,

v.

SOUTHERN PACIFIC COMPANY, et al., Defendants, Appellees.

No. 84-1277.

United States Court of Appeals, First Circuit

March 7, 1985

Argued Nov. 9, 1984.

Page 201

Stephen A. Hopkins, Boston, Mass., with whom Paul Killeen and Sherburne, Powers & Needham, Boston, Mass., were on brief for plaintiff, appellant.

Jerome P. Facher, Boston, Mass., with whom Robert D. Keefe, James C. Burling, John F. Batter, III and Hale & Dorr, Boston, Mass., were on brief for defendants, appellees.

Before BOWNES, BREYER and TORRUELLA, Circuit Judges.

TORRUELLA, Circuit Judge.

This is an action alleging a conspiracy under Section 1 of the Sherman Antitrust Act, 15 U.S.C. Sec. 1 (the Act). 1 It is before us on appeal by Plaintiff Computer Indentics Corporation (Computer Identics) 2 from a jury verdict in favor of defendants-appellees Southern Pacific Company (Southern Pacific), a holding company, its wholly owned subsidiary, Southern Pacific Transportation Company (SPT), a railroad operating company, TOPS On-Line Services, Inc. (On-Line), a computer consulting service, and Strong-Wishart & Associates (Strong-Wishart), transportation management consultants. The core of Computer Identics' allegations was that appellees conspired to restrain trade by damaging its position in the market for computerized control systems used in railroad operations.

On March 1, 1984, after a lengthy trial, the jury answered an interrogatory specifically finding that there had been no conspiracy among any of the defendants and thus returned a verdict in their favor.

Page 202

That finding being the fundamental issue underlying this action and appeal, the question before us is reduced to a determination of whether any error was committed in connection therewith. Having made timely objections to the jury instructions, alleging that said instructions were incomplete, confusing, inadequate and erroneous, Computer Identics seeks a new trial.

The relevant facts are as follows:

After testing various processes for automatically identifying railroad freight cars, the Association of American Railroads (AAR), in 1967, experimentally adopted technology, developed by the Sylvania company, which uses retro-reflective labels affixed to railroad cars. 3 At that time AAR amended its rule dealing with the physical characteristics of freight cars being interchanged between railroad lines, requiring that cars in interchange must be equipped with ACI labels, which could only be read by scanners employing the Sylvania technology. Appellant was a supplier of this technology.

Following the adoption of this rule, the railroad industry began the task of labeling the almost two million cars then in use. By the early 1970's, nearly 95% of the rolling stock had been labeled at some time. Nothing in the AAR's ruling, however, required that the railroads purchase the scanners or actually use the technology. Therefore, although there was a potential market for over 10,000 scanners, only about 400 scanners were actually sold to the entire railroad industry between 1967 and 1975. During this period Systems and Computer Identics began to expand their interests into the development of complex computer based operational control systems (CBOCS), with their optical scanners as the cornerstone of these systems.

Systems and Computer Identics, however, were not the only companies developing and implementing CBOCS. Appellee SPT had also developed, for its own use, a system commonly referred to as TOPS, which consisted of sophisticated centralized computing equipment with remote terminals located throughout its rail system. Its computer software programs were continually revised and updated. In 1969, Southern Pacific management decided to cash in on the development of TOPS and on the expertise gained by SPT in the process, through the establishment of a new company organized to sell the system to other railroads. Known as TOPS On-Line Services, the company was formed as a wholly separate corporation with Southern Pacific owning 80% of the stock and 20% being owned by Strong-Wishart. The TOPS system was not based on optical scanners nor was it designed for individual railroad yard control but, rather, was primarily designed for the central control of large railroad systems. When marketed to other railroads, the system software was not sold, but was made available at no cost to system purchasers who could then modify it to suit their particular needs, or pay On-Line and Strong-Wishart to do it for them. Appellant alleges, therefore, that Strong-Wishart/On Line and Computer Identics/Systems were competitors insofar as their business involved offering the "product" which consisted of the design and implementation of CBOCS in North American railroads.

By 1973, railroads using the scanner technology were experiencing serious labeling problems and deficiencies, including label mislocation and misapplication and unreadability due to dirt, damage and other causes. The label readability fell well below the 95% level, which some railroads considered a minimum...

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