MacDermid Printing Solutions LLC v. Cortron Corp.

• Decision Date: 10 August 2016
• Docket Number: August Term 2015,No. 15–589–cv,15–589–cv
• Citation: 833 F.3d 172
• Parties: MacDermid Printing Solutions LLC, Plaintiff–Counter–Defendant–Appellee, v. Cortron Corporation, Defendant–Counter–Claimant–Appellant.
• Court: U.S. Court of Appeals — Second Circuit

833 F.3d 172

MacDermid Printing Solutions LLC, Plaintiff–Counter–Defendant–Appellee,
v.
Cortron Corporation, Defendant–Counter–Claimant–Appellant.

No. 15–589–cv
August Term 2015

United States Court of Appeals, Second Circuit.

Argued: May 13, 2016
Decided: August 10, 2016

John R. Horvack, Jr. (James K. Robertson, Jr., Fatima Lahnin, John L. Cordani, Jr., on the brief), Carmody Torrance Sandak & Hennessey LLP, New Haven, CT; for Plaintiff–Counter–Defendant–Appellee.

John P. Elwood (Joshua S. Johnson, on the brief), Vinson & Elkins LLP, Washington, DC; Harry First, New York, NY; Craig A. Raabe, Nuala E. Droney, Robinson & Cole LLP, Hartford, CT; for Defendant–Counter–Claimant–Appellant.

Before: Cabranes, Straub, and Lohier, Circuit Judges.

José A. Cabranes, Circuit Judge:

This appeal primarily concerns the requirements for proving an adverse effect on competition for purposes of section 1 of the Sherman Act, 15 U.S.C. § 1, in cases where the plaintiff has not proved that the allegedly anticompetitive behavior led to higher prices, reduced output, or lower quality in the market. We hold that in such cases, a plaintiff may not prevail under the “rule of reason” merely by proving that (1) the defendant exercised “market power,” and (2) the challenged behavior may have misled consumers to believe that certain products were no longer available, without showing that consumers actually experienced reduced access to those products.

Defendant-appellant Cortron Corp. (“Cortron”) appeals from a February 17, 2015 judgment of the United States District Court for the District of Connecticut (Michael P. Shea, Judge ), which awarded damages of $64,670,821 pursuant to a jury verdict for plaintiff-appellee MacDermid Printing Solutions LLC (“MacDermid”) on its claims for violations of federal and Connecticut antitrust laws, breach of contract, misappropriation of trade secrets, spoliation, and violations of Connecticut statutes prohibiting computer crimes and unfair trade practices. MacDermid had alleged that its commercial rival, nonparty E.I. du Pont de Nemours & Co. (“DuPont”), filed a bogus patent-infringement suit against Cortron, MacDermid's supplier, and that when Cortron and DuPont settled that suit, they entered into an anticompetitive conspiracy that damaged MacDermid's business and hurt consumers.

On appeal, Cortron argues that the District Court erred in (1) denying Cortron a new trial or judgment as a matter of law on its antitrust claims; (2) permitting MacDermid to present evidence of its lawyers' patent advice; (3) concluding that the jury's identical awards on each of the antitrust claims were not duplicative; and (4) failing to remit or to order a new trial on damages regarding the antitrust and trade-secrets claims.

833 F.3d 178

We agree with Cortron that the District Court erred in denying Cortron judgment as a matter of law with respect to MacDermid's antitrust claims because MacDermid failed to present evidence that Cortron's conduct harmed competition. We therefore REVERSE the judgment of the District Court with respect to the antitrust claims. We otherwise AFFIRM the judgment of the District Court and REMAND the cause to the District Court to recalculate damages in a manner consistent with this opinion.

I. BACKGROUND

A. Factual Background¹

MacDermid and DuPont market thermal flexographic processors, which are used to make plates for printing commercial packaging. Such processors are typically sold either to commercial printers, which produce packaging for consumer-goods companies, or to “trade shops,” which supply plates to commercial printers.

DuPont introduced the first thermal flexographic processor in 2000, under the “FAST” trade name. In 2002, MacDermid began to develop an alternative to FAST, which it introduced in 2004 under the “LAVA” trade name. At all relevant times, MacDermid and DuPont were the only companies that marketed thermal flexographic processors, and DuPont had a dominant share of that market.²

Soon after introducing its LAVA machines, MacDermid entered into two contracts with Cortron. Under the “Joint Development Agreement,” signed in November 2004, MacDermid would pay Cortron to develop a second-generation LAVA processor. Under the “Manufacturing Agreement,” signed in April 2005, MacDermid would pay Cortron to build first-generation LAVA processors and to safeguard MacDermid's proprietary information.

In 2008, DuPont scheduled a meeting with Cortron, ostensibly to discuss potential business opportunities. During the meeting, which took place on April 1, 2008, DuPont informed Cortron that it had filed a lawsuit alleging that Cortron's work for MacDermid infringed DuPont Patent No. 6,797,454 (“the '>454 patent”).

DuPont and Cortron settled that suit in June 2008. As part of the settlement, Cortron agreed “to immediately cease manufacturing, selling, and offering to sell” thermal flexographic systems;³ “to immediately cease and desist providing all service and/or technical support” for LAVA products; and to give DuPont “all Technical Information relating to” LAVA.⁴ In exchange, DuPont agreed, inter alia , to dismiss its patent-infringement suit with prejudice and to indemnify Cortron against any lawsuit brought by MacDermid. In addition, under a separate agreement, DuPont paid Cortron about $140,000 for design work related to certain DuPont products. Pursuant to the settlement agreement, Cortron gave DuPont all technical information it had regarding LAVA

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technology before deleting that information from its own systems. About five months later, Cortron ceased operations.

DuPont announced the settlement in a press release issued on July 30, 2008:

Under the terms of the agreement, Cortron ... agrees to immediately cease manufacturing LAVA [processors], as well as to immediately discontinue providing all service, spare parts, and technical support for any LAVA equipment .... Thermal processing equipment manufactured by Cortron has been marketed and sold by MacDermid Printing Solutions, LLC under the LAVA trade name.⁵

Unsurprisingly, DuPont hoped that this press release would make potential customers “more likely to buy DuPont's FAST” processors and “less likely” to buy MacDermid's competing LAVA products.⁶ Later that day, MacDermid issued its own press release, which accused DuPont of “inappropriately rais [ing] some questions regarding MacDermid's ability to support” its LAVA products and “assure[d] [MacDermid's] customers that it will continue to sell, support and service” LAVA equipment.⁷

Meanwhile, MacDermid had already started searching for a new manufacturer to replace Cortron. MacDermid had been concerned about Cortron's financial stability even before the DuPont lawsuit. In 2007, MacDermid had started to plan for Cortron's potential failure, and by February 2008, MacDermid had contacted three possible alternative suppliers. MacDermid's concerns only deepened after it learned about the pending litigation. In July 2008—after learning about DuPont's lawsuit, but before the Cortron–DuPont settlement agreement was announced—MacDermid decided to switch from Cortron to a new manufacturer, OLEC Corporation.

Ordinarily, MacDermid would have expected Cortron to facilitate the transition by transferring to OLEC any technical information it had regarding LAVA machines. But because Cortron had given all extant LAVA technical information to DuPont, and because MacDermid did not have its own copy of that information, OLEC had to reverse-engineer the specifications needed to manufacture new LAVA machines. The reverse-engineering process cost $29,970 and took about nine months. During this transition period, MacDermid was unable to obtain new LAVA machines. Nonetheless, MacDermid always retained an inventory of LAVA processors and “never was unable to fulfill a sale,” according to the testimony of its general manager.⁸

B. Procedural History

MacDermid filed the instant action in September 2008 in Connecticut state court, alleging that Cortron and DuPont had engaged in an antitrust conspiracy in violation of section 1 of the Sherman Act, 15 U.S.C. § 1, and the Connecticut Antitrust Act, Conn. Gen. Stat. §§ 35–26, 35–28. MacDermid also brought claims under the Connecticut Uniform Trade Secrets Act (“CUTSA”), Conn. Gen. Stat. §§ 35–50 to 35–58 ; under the state computer-crime statute, Conn. Gen. Stat. §§ 53a–251,

833 F.3d 180

52–570b ; under the Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen. Stat. §§ 42–110a to 42–110q ; under state contract law; and for spoliation of evidence. Cortron filed various counterclaims⁹ and removed the case to the United States District Court for the District of Connecticut.

After a trial in June and July 2014, the jury found for MacDermid on all issues and awarded it approximately $35.4 million in compensatory damages.¹⁰ The District Court denied Cortron's post-verdict motion for judgment as a matter of law, and denied its post-verdict motion for a new trial on condition that MacDermid agree to a remitted award of $19,757,854 in compensatory damages.¹¹ The District Court also awarded punitive damages of $3,790,939 under CUTSA “as punishment for Cortron's...