In Re Independent Ser Org. Antitrust v. Xerox

• Decision Date: 17 February 2000
• Docket Number: XER-DOX,X-TECH
• Citation: 203 F.3d 1322
• Parties: (Fed. Cir. 2000) IN RE INDEPENDENT SERVICE ORGANIZATIONS ANTITRUST LITIGATION CSU, L.L.C., (previously CSU HOLDINGS INC., COPIER SERVICES UNLIMITED, INC., and COPIER SERVICE UNLIMITED OF ST. LOUIS, INC.), Plaintiff-Appellant, and CREATIVE COPIER SERVICES, Plaintiff, and ACQUISITION SPECIALISTS, INC., TECSPEC, INC., CONSOLIDATED PHOTO COPY, INC., COPIER REBUILD CENTER, INC., CPO, LTD., GRADWELL COMPANY, INC., GRAPHIC CORPORATION OF ALABAMA, INTERNATIONAL BUSINESS EQUIPMENT, INC., LASER RESOURCES INC., LASER RESOURCES OF MINNESOTA, INC., LASER SOLUTIONS, INC., LASER SUPPORT AND ENGINEERING, INC., MARATHON COPIER SERVICE, INC., NATIONWIDE TECHNOLOGIES, INC., REPROGRAPHICS RESOURCES SYSTEMS, INC., SUNTONE INDUSTRIES, INC., TECHNICAL DUPLICATION SERVICES, INC.,SYSTEMS INC.,INC., and XEROGRAPHIC COPIES SERVICES, INC., Plaintiffs, v. XEROX CORPORATION, Defendant-Appellee. 99-1323
• Court: U.S. Court of Appeals — Federal Circuit

Page 1322

203 F.3d 1322 (Fed. Cir. 2000)

IN RE INDEPENDENT SERVICE ORGANIZATIONS ANTITRUST LITIGATION CSU, L.L.C., (previously CSU HOLDINGS INC., COPIER SERVICES UNLIMITED, INC., and COPIER SERVICE UNLIMITED OF ST. LOUIS, INC.), Plaintiff-Appellant, and CREATIVE COPIER SERVICES, Plaintiff, and ACQUISITION SPECIALISTS, INC., TECSPEC, INC., CONSOLIDATED PHOTO COPY, INC., COPIER REBUILD CENTER, INC., CPO, LTD., GRADWELL COMPANY, INC., GRAPHIC CORPORATION OF ALABAMA, INTERNATIONAL BUSINESS EQUIPMENT, INC., LASER RESOURCES INC., LASER RESOURCES OF MINNESOTA, INC., LASER SOLUTIONS, INC., LASER SUPPORT AND ENGINEERING, INC., MARATHON COPIER SERVICE, INC., NATIONWIDE TECHNOLOGIES, INC., REPROGRAPHICS RESOURCES SYSTEMS, INC., SUNTONE INDUSTRIES, INC., TECHNICAL DUPLICATION SERVICES, INC., X-TECH SYSTEMS INC., XER-DOX INC., and XEROGRAPHIC COPIES SERVICES, INC., Plaintiffs, v. XEROX CORPORATION, Defendant-Appellee.

99-1323

United States Court of Appeals for the Federal Circuit

Decided February 17, 2000

Rehearing for En Banc Denied: April 13, 2000.

Appealed from: U.S. District Court for the District of Kansas Judge Kathryn H. Vratil

John G. Roberts, Jr., Hogan & Hartson, L.L.P., of Washington, DC argued for plaintiff appellant. With him on the brief were David G. Leitch and Jonathan S. Franklin. Of counsel on the brief were P. John Owen and A. Bradley Bodamer, Morrison & Hecker L.L.P., of Kansas City, Missouri.

Peter K. Bleakley, Arnold & Porter, of Washington, DC, argued for defendant-appellee. With him on the brief were Jonathan I. Gleklen and Christopher F. Winters. Of counsel on the brief were C. Larry O'Rourke, Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., of Palo Alto, California, and Peter W. Marshall, Xerox Corporation, of Stamford, Connecticut.

Robert J. LaRocca, Ryan, Brown, McDonnell, Berger, Gibbons & LaRocca, of Philadelphia, Pennsylvania, for amicus curiae Creative Copier Services.

Carter G. Phillips, Sidley & Austin, of Washington, DC, for amicus curiae Intellectual Property Owners Association. Of counsel on the brief was Joseph S. Miller.

Richard H. Stern, Ablondi Foster, of Washington, DC, for amicus curiae American Intellectual Property Law Association.

David F. Ryan, Fitzpatrick, Cella, Harper & Scinto, of New York, New York, for amicus curiae New York Intellectual Property Law Association. Of counsel on the brief were Bruce M. Wexler, Fitzpatrick Cella, Harper & Scinto, and Herbert F. Schwartz, Fish & Neave, of New York, New York.

Mark A. Perry, Gibson, Dunn & Crutcher LLP, of Washington, DC, for amicus curiae Information Technology Industry Council. Of counsel on the brief was Joseph Kattan.

Before MAYER, Chief Judge, ARCHER, Senior Circuit Judge, and PLAGER, Circuit Judge.

MAYER, Chief Judge.

CSU, L.L.C. appeals the judgment of the United States District Court for the District of Kansas, dismissing on summary judgment CSU's claims that Xerox's refusal to sell patented parts and copyrighted manuals and to license copyrighted software violate the antitrust laws. See CSU, L.L.C. v. Xerox Corp., Civ. Action No. MDL-1021 (D. Kan. Jan. 3, 1999) (final judgment order). Because we agree with the district court that CSU has not raised a genuine issue as to any material fact and that Xerox is entitled to judgment as a matter of law, we affirm.

Background

Xerox manufactures, sells, and services high-volume copiers. Beginning in 1984, it established a policy of not selling parts unique to its series 10 copiers to independent service organizations ("ISOs"), including CSU, unless they were also end-users of the copiers. In 1987, the policy was expanded to include all new products as well as existing series 9 copiers. Enforcement of this policy was tightened in 1989, and Xerox cut off CSU's direct purchase of restricted parts. Xerox also implemented an "on-site end-user verification" procedure to confirm that the parts ordered by certain ISOs or their customers were actually for their end-user use. Initially this procedure applied to only the six most successful ISOs, which included CSU.

To maintain its existing business of servicing Xerox equipment, CSU used parts cannibalized from used Xerox equipment, parts obtained from other ISOs, and parts purchased through a limited number of its customers. For approximately one year, CSU also obtained parts from Rank Xerox, a majority-owned European affiliate of Xerox, until Xerox forced Rank Xerox to stop selling parts to CSU and other ISOs. In 1994, Xerox settled an antitrust lawsuit with a class of ISOs by which it agreed to suspend its restrictive parts policy for six and one-half years and to license its diagnostic software for four and one-half years. CSU opted out of that settlement and filed this suit alleging that Xerox violated the Sherman Act by setting the prices on its patented parts much higher for ISOs than for end-users to force ISOs to raise their prices. This would eliminate ISOs in general and CSU in particular as competitors in the relevant service markets for high speed copiers and printers.

Xerox counterclaimed for patent and copyright infringement and contested CSU's antitrust claims as relying on injury solely caused by Xerox's lawful refusal to sell or license patented parts and copyrighted software. Xerox also claimed that CSU could not assert a patent or copyright misuse defense to Xerox's infringement counterclaims based on Xerox's refusal to deal.

The district court granted summary judgment to Xerox dismissing CSU's antitrust claims and holding that if a patent or copyright is lawfully acquired, the patent or copyright holder's unilateral refusal to sell or license its patented invention or copyrighted expression is not unlawful exclusionary conduct under the antitrust laws, even if the refusal to deal impacts competition in more than one market. The court also held, in both the patent and copyright contexts, that the right holder's intent in refusing to deal and any other alleged exclusionary acts committed by the right holder are irrelevant to antitrust law. This appeal followed.

Discussion

The issue is whether the district court erred in granting Xerox's motion for summary judgment on CSU's antitrust claims. We review a grant of summary judgment de novo. See Petrolite Corp. v. Baker Hughes Inc., 96 F.3d 1423, 1425, 40 USPQ2d 1201, 1203 (Fed. Cir. 1996) (citing Meyers v. Asics Corp., 974 F.2d 1304, 1306, 24 USPQ2d 1036, 1037 (Fed. Cir. 1992)). Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See id. (citing Transmatic, Inc. v. Gulton Indus., Inc., 53 F.3d 1270, 1274, 35 USPQ2d 1035, 1038 (Fed. Cir. 1995)).

As a general proposition, when reviewing a district court's judgment involving federal antitrust law, we are guided by the law of the regional circuit in which that district court sits, in this case the Tenth Circuit. See Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1068, 46 USPQ2d 1097, 1104 (Fed. Cir. 1998). We apply our own law, not regional circuit law, to resolve issues that clearly involve our exclusive jurisdiction. See Pro-Mold & Tool Co. v. Great Lakes Plastics, Inc., 75 F.3d 1568, 1574-75, 37 USPQ2d 1626, 1631 (Fed. Cir. 1996). "Whether conduct in procuring or enforcing a patent is sufficient to strip a patentee of its immunity from the antitrust laws is to be decided as a question of Federal Circuit law." Nobelpharma, 141 F.3d at 1068, 46 USPQ2d at 1104; see Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1360, 50 USPQ2d 1672, 1676 (Fed. Cir. 1999) (en banc in relevant part) ("Pro-Mold and Nobelpharma make clear that our responsibility as the tribunal having sole appellate responsibility for the development of patent law requires that we do more than simply apply our law to questions of substantive patent law. In order to fulfill our obligation of promoting uniformity in the field of patent law, it is equally important to apply our construction of patent law to the questions whether and to what extent patent law preempts or conflicts with other causes of action."). The district court's grant of summary judgment as to CSU's antitrust claims arising from Xerox's refusal to sell its patented parts is therefore reviewed as a matter of Federal Circuit law, while consideration of the antitrust claim based on Xerox's refusal to sell or license its copyrighted manuals and software is under Tenth Circuit law.

A.

Intellectual property rights do not confer a privilege to violate the antitrust laws. See Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1362, 52 USPQ2d 1641, 1652 (Fed. Cir. 1999). "But it is also correct that the antitrust laws do not negate the patentee's right to exclude others from patent property." Id. (citation omitted). "The commercial advantage gained by new technology and its statutory protection by patent do not convert the possessor thereof into a prohibited monopolist." Abbott Lab. v. Brennan, 952 F.2d 1346, 1354, 21 USPQ2d 1192, 1199 (Fed. Cir. 1991). "The patent right must be 'coupled with violations of § 2', and the elements of violation of 15 U.S.C. § 2 must be met."¹ Id. (citations omitted). "Determination of whether the patentee meets the Sherman Act elements of monopolization or attempt to monopolize is governed by the rules of application of the antitrust laws to market participants, with due consideration to the exclusivity that inheres in the patent grant." Id. at 1354-55, 21 USPQ2d at 1199 (citations omitted).

A patent alone does not demonstrate market power. See id. at 1355, 21 USPQ2d at 1199. The United States Department of Justice and Federal Trade Commission have issued guidance that, even where it exists, such "market power does not 'impose on the intellectual property owner an obligation to license the use of that property to others.'" Intergraph, 195 F.3d at 1362, 52 USPQ2d at 1652 (citing United States Department of Justice and ...