Id Security Systems Canada v. Checkpoint Systems

Decision Date28 March 2003
Docket NumberNo. CIV.A.99-577.,CIV.A.99-577.
Citation249 F.Supp.2d 622
PartiesID SECURITY SYSTEMS CANADA, INC., Plaintiff, v. CHECKPOINT SYSTEMS, INC. Defendant.
CourtU.S. District Court — Eastern District of Pennsylvania

Rudolph Garcia, J. Clayton Undercofler, III, William A. De Stefano, Kara H. Good child, Saul Ewing LLP, Philadelphia, PA, for ID Security Systems Canada Inc., Plaintiff.

C. Clark Hodgson, Jr., tradley, Ronon, Stevens & Young, Patricia Casperson, Stradley, Ronon, Stevens and Young, Phidict, la, John De Q. Briggs, III, Howrey Simon Arnold & White, LLP, Washington, DC, Michael C. Chase, Stradley Ronon Stevens &Young, LLP, Keith R. Dutill, Stradley, Ronon Stevens & Ymn LLP Philadel" Phia, for Checkpoint Systems, Inc., Defenthere is: (1) evidence to establish damages an with reasonable certainty; (2) damages OPINION

OPINION

ROBRENO, District Judge.

                TABLE OF CONTENTS
                I.   FACTS...................................................................632
                II.  DISCUSSION..............................................................637
                     A.  Applicable Standards................................................637
                         1. Rule 50..........................................................637
                         2. Rule 59..........................................................638
                
                B. Plaintiff's Antitrust Claims..............................................638
                   1. Attempt to monopolize .................................................638
                      a. Relevant market and market power....................................639
                          i. Kodak and the relevant product market...........................639
                          ii. Relevant market analysis in the wake of Kodak..................641
                      b. Evidence at trial...................................................642
                          i. Switching and information costs.................................643
                         ii. Absence of post lock-in change of policy........................644
                             A. ID Security's average price argument.........................644
                             B. ID Security's duopoly claim..................................645
                        iii. Summary of evidence..............................................647
                             c. Dangerous probability of success prong........................648
                             d. Checkpoint's motion for a new trial on the attempt to monopolize
                                  claim.......................................................650
                                 i. Inconsistent verdicts.....................................651
                                    A. Assuming EAS systems as the relevant market............651
                                    B. Assuming RF tags as the relevant market................652
                                ii. Antitrust jury instructions...............................653
                               iii. Testimony of Dr. Martin Asher ............................655
                                iv. Evidence of patent enforcement activity...................655
                                 v. Evidence of Meto and Mercatec acquisitions................656
                       2. Conspiracy to monopolize............................................657
                          a. ID Security in fact proceeded under § 2, rather than § 1, of the
                              Sherman Act.....................................................658
                          b. ID Security's § 2 failure of proof..........................660
                          c. Checkpoint's motion for a new trial based on inconsistent jury
                              verdicts........................................................662
                       3. Antitrust injury ...................................................663
                    C. Plaintiffs State Law Claims............................................665
                       1. Tortious interference with contractual relations....................665
                          a. Evidence at trial................................................665
                               i. Material breach.............................................666
                              ii. Repudiation.................................................667
                          b. Jury instructions................................................669
                              i. Waiver and Checkpoint's conduct at trial.....................669
                             ii. Exclusion of proposed instruction No. 40 ....................672
                            iii. Exclusion of proposed instruction No. 44(a)..................673
                             iv. Exclusion of proposed instruction No. 51(a)..................673
                              v. Exclusion of proposed instruction No. 51(b)..................675
                             vi. Exclusion of proposed instruction No. 51(c)..................676
                            vii. Exclusion of proposed instruction No. 13.....................677
                         c. Evidentiary objections............................................679
                             i. Exclusion of Haneda letters ..................................679
                            ii. Exclusion of the Haneda affidavits............................681
                           iii. Exclusion of Tokai invoices...................................683
                            iv. Exclusion of evidence of Checkpoint's Post-February 13, 1997
                                 knowledge and accompanying failure to instruct the
                                 jury on that knowledge's relevance...........................683
                             v. Exclusion of a portion of Geiges' testimony...................686
                            vi. Exclusion of Greg Mears' deposition...........................687
                     2. Unfair competition....................................................688      D. Damages..............................................................689
                         1. Future lost sales of Tokai tags...................................689
                         2. Future lost sales of Laserfuse tags...............................694
                III.   CONCLUSION.............................................................697
                

Plaintiff, ID Security Systems Canada, Inc. ("ID Security"), brought this federal antitrust and state law action against Checkpoint Systems, Inc. ("Checkpoint") in connection with Checkpoint's alleged interference in a supply agreement between ID Security and Tokai Electronics, Ltd. ("Tokai"). According to ID Security, Checkpoint, a manufacturer of electronic article surveillance systems ("EAS systems"), violated the federal antitrust laws through illegal monopolization, attempted monopolization and conspiracy to monopolize with respect to the radio frequency tags ("RF tags"), products that are used in conjunction with EAS systems. In particular, ID Security alleged that Checkpoint interfered with its existing contract with Tokai in order to block ID Security's efforts to enter the RF tag market as a second supplier of tags to Checkpoint customers and as the future producer of a unique and superior tag compatible with Checkpoint's EAS systems. The contract interference in question also gave rise to ID Security's state law claims of tortious interference with contractual relations and unfair competition.

After a trial, the jury found in favor of Checkpoint on ID Security's claim of monopolization of commerce, but against Checkpoint on ID Security's claims of attempted monopolization and conspiracy to monopolize. It awarded ID Security compensatory damages of $28.5 million. Under federal antitrust law, the court trebled that amount to $85.5 million. The jury also found against Checkpoint on the state law tort claims, and awarded damages in the amount of $19 million, for a combined total of $104.5 million for both the antitrust and the state law claims. Checkpoint has since filed a motion for post-trial relief seeking judgment as a matter of law or, alternatively, a new trial with respect to each of the four claims as to which the jury found in favor against Checkpoint. Checkpoint further challenges the award of damages in this case as unduly speculative, against the great weight of evidence, and a product of erroneous evidentiary rulings by the court.

With respect to the antitrust issues in this case, the court's threshold inquiry, before it may address whether there is sufficient evidence to sustain either of the antitrust verdicts against Checkpoint, is what constitutes the relevant market in this case, given the particular dynamics between the foremarket for EAS systems, in which Checkpoint competed strenuously with its rival Sensormatic, and the aftermarket for RF tags used with Checkpoint's system, i.e., the market which ID Security attempted to enter as a second source tag supplier. A related question is whether, given the burden of proof and the evidence in this case, the relevant market may be determined as a matter of law. As explained in more detail below, the court has determined that it can, and that a proper application of Kodak and its progeny dictate, as a matter of law, that EAS systems alone constitute the relevant market that Checkpoint could be accused of attempting or conspiring to monopolize.

The next question presented by Checkpoint's motion for post-trial relief is whether, given a relevant market for EAS systems, there was legally sufficient evidence to support a jury finding that Checkpoint indeed attempted to monopolize, i.e., had a dangerous probability of succeeding in monopolizing, the EAS systems market. In addition, the court must determine whether there was legally sufficient evidence to support a finding that Checkpoint conspired to monopolize the EAS market in violation of § 2 of the Sherman Act, i.e., whether, even given that Checkpoint had the specific intent to monopolize the EAS market, Tokai Electronics, the object of its acquisition efforts, shared that intent. Having addressed the difficult antitrust questions that characterize this case, the court turns to an examination of the proofs, instructions, and rulings concerning ID Security's state law claims, as well to a determination of whether a new trial is warranted with respect to the damages awarded by the jury.

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