Berkey Photo, Inc. v. Eastman Kodak Co.

Decision Date08 August 1978
Docket NumberNo. 73 Civ. 424(MEF).,73 Civ. 424(MEF).
Citation457 F. Supp. 404
PartiesBERKEY PHOTO, INC., Plaintiff, v. EASTMAN KODAK COMPANY, Defendant.
CourtU.S. District Court — Southern District of New York
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Parker, Chapin, Flattau & Klimpl, New York City, for plaintiff; Alvin M. Stein, Barry J. Brett, New York City, of counsel.

Sullivan & Cromwell, New York City, for defendant; William Piel, Jr., John L. Warden, Richard E. Carlton, New York City, of counsel.

MEMORANDUM ON POST-TRIAL MOTIONS

FRANKEL, District Judge.

Defendant has moved under F.R.Civ.P. 50(b) for judgment notwithstanding the jury's verdicts. Plaintiff has moved for numerous and detailed kinds of injunctive relief, including some divestitures, provisions for predisclosure, and various restrictions on Kodak's business procedures and practices. It is convenient to treat both motions together and to record some pertinent observations on both in this single memorandum.

I. DEFENDANT'S MOTION FOR JUDGMENT N.O.V.1

Many of the issues canvassed in the briefs on this motion were considered at length during the trial, in conversations on the record, and the resolutions reached by the court are largely reflected in the charges to the jury. It does not seem useful for nisi prius purposes to rehearse all the problems again in this writing. Nor is it necessary to discuss the legal standard, not in dispute, for granting judgment notwithstanding the verdict. See National Auto Brokers Corp. v. General Motors Corp., 572 F.2d 953, at 956 (2d Cir. 1978). Accordingly, as to the portions of defendant's motion which are being denied, the court will limit its observations herein to a relatively few matters of possible further interest. On the claims with respect to which the motion is being granted, the result of which will be to reduce the total award from $37,620,130 to $27,154,700, the court will of course state the reasons why the jury's verdict is found now to be vulnerable to this extent.

110 Cameras

The largest single item of damages awarded by the jury was for Berkey's lost profits, $15,250,000, resulting from Kodak's unlawful monopolization and attempt to monopolize the amateur camera market. The predominant part of the evidence supporting this claim dealt with the introduction of the 110 camera line as part of a system of interdependent photographic products, without prior disclosure to competing camera manufacturers of the information about the new Kodacolor II film format that would have enabled these other manufacturers to enter the market at about the same time as, and compete on the merits with, Kodak's initial line of 110 cameras.

For the most part, defendant's contentions on this score, as it observes, retrace ground plowed earlier in denying defendant's motion for summary judgment and formulating the charge to the jury. This reflects a superficially bemusing situation: that despite the length of the trial, the basic historical facts on this, as on many aspects of the case, are not in significant dispute. Without recounting these facts in detail, we may note that the jury undoubtedly found that defendant resolved some years before the 110 introduction to introduce the new camera and film, made to work with each other, and designed to displace with overwhelming suddenness huge segments of the market for 126 cameras. Defendant's responsible executives determined that the simultaneity of these introductions was to be the key weapon against competitors, brushing aside technical objections that the new film was unsatisfactory, inferior to the predecessor Kodacolor X in vital respects, and requiring further research and development to become a satisfactory product. The paramount strategy and goal were thus to use the film monopoly — Kodak's power in a field where its market share consistently exceeded 80% — as a lever for suddenly swelling defendant's power in the camera market, achieving there at least a temporary total monopoly of a vital new segment to be created by the system introduction. Some "responsible persons" within Kodak urged unsuccessfully that predisclosure concerning the new film format be given to camera competitors (as well as photofinishers and photofinishing equipment makers) so that they would not suffer in one blow the instant obsolescence of inventories and work in progress and the inability to compete at all with their cameras in the terrain of the newly announced system. The 110 announcement came substantially as a surprise, following some minimal predisclosures, for a price, two or three months earlier. And these events, it is worth mentioning, followed hard after a magicube coup in June of 1970, when Kodak gained a similar advantage of surprise and temporary exclusivity from what the jury found, and the court entirely agrees, was an unlawful combination in restraint of trade with Sylvania.

Without dwelling further on the facts of a huge record leading to the jury's award, the court refers briefly to some recurrent arguments defendant has pressed on this subject and sketches the reasons why they have been, and are once again, rejected.

1. The claim of immunity per se for product introductions

Throughout the case, defendant has urged, and it urges once more, that a company's introduction of a new product — though the company be a huge one like Kodak with monopoly power in a mosaic of interconnected markets, and though the introduction be designed deliberately to employ monopoly power in one market to create or enhance such power in another — must "as a matter of law" be immune from attack under the antitrust laws. If this is sound law, defendant should indeed be relieved of the verdict with respect to 110 camera damages. The court remains persuaded, however, that there is no such enclave for "product introductions," and that the mode, purpose, and impact of product introductions may, as in this case, play central parts in findings of unlawful monopolization and attempts to monopolize, no less than other, ordinarily lawful and "normal" business activities like leasing rather than selling machinery, United States v. United Shoe Machinery Co., 110 F.Supp. 295, 344 (D.Mass.1953), aff'd per curiam 347 U.S. 521, 74 S.Ct. 699, 98 L.Ed. 910 (1954), the creation of useful resources for added productive capacity, United States v. Aluminum Co. of America, 148 F.2d 416, 430-31 (2d Cir. 1945), or the discount offered on used equipment and the adoption of separate charges for separate services condemned as exclusionary in Greyhound Computer Corp. v. International Business Machines Corp., 559 F.2d 488, 499-503 (9th Cir. 1977), cert. denied, 434 U.S. 1040, 98 S.Ct. 782, 54 L.Ed.2d 790 (1978).

Before United Shoe and Alcoa, arguments similar to Kodak's could have been mounted with respect to the practices of defendants there involved — leasing, building capacity, etc. Indeed, they were made. Thus, in the United Shoe case, seeking reversal of Judge Wyzanski's historic ruling, the appellant company accepted the restrictions the Alcoa case had placed upon it as a dominant firm but assailed bitterly the notion that leasing of machinery could be the basis for a judgment against it. United Shoe complained of being condemned for its decision merely "to continue a business policy which it found in existence at its birth."2 It noted that this was "the policy of its more important American competitors,"3 that it was among United's familiar practices "which are traditional, natural and normal,"4 and that allowing such practices to be outlawed after years of use would subject every dominant company to the threat of unpredictable, retrospective, destructive judgments by judges and juries.5 That plea was unavailing; leasing practices were held subject to scrutiny and capable of being proscribed in a proper case as exclusionary techniques in the hands of a company with monopoly power. Kodak accepts that, as it must, but would draw the line now at product introductions. To reject that position does not mean, of course, that Kodak's product innovation techniques are ipso facto to be denounced. It means merely that they were open to informed inspection in this case, in the setting of all the circumstances of Kodak's power and practices, and that the jury could well have found (as the court would have found) anticompetitive uses by Kodak of its monopoly power in the manner and timing of its product system introductions.

There are few mechanical rules to take the place of informed judgment in the enforcement of the antitrust laws. While per se rules of liability are useful and comfortable where they exist, the task usually is to weigh "all of the circumstances of a case" to determine whether a company has engaged in unlawfully anticompetitive practices. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977). The ultimate judgment, as in the cited case, must commonly rest "upon demonstrable economic effect rather than . . . upon formalistic line drawing." Id. at 59, 97 S.Ct. at 2562. So, here, the jury was commissioned and instructed to appraise all the facts and circumstances and decide whether the manner, timing, and effects of the 110 introduction amounted to the anticompetitive employment of monopoly power not merely "to gain a competitive advantage," United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 92 L.Ed. 1236 (1948), but to attempt unlawfully to monopolize, and to monopolize, another market. The court is compelled to conclude that the record and the law wholly justified the verdict in this aspect against Kodak.

Under the law, generally speaking, the inquiry required appraisal of all Kodak's relevant behavior to determine whether that behavior should be accepted as no...

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