Structure Probe, Inc. v. Franklin Institute
| Decision Date | 01 May 1978 |
| Docket Number | Civ. A. No. 72-2071. |
| Parties | STRUCTURE PROBE, INC. v. The FRANKLIN INSTITUTE. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Benjamin M. Quigg, Jr., Morgan, Lewis & Bockius, Philadelphia, Pa., for defendant.
Lawrence D. Berger, Dilworth, Paxson, Kalish, Levy & Coleman, Philadelphia, Pa., for plaintiff.
Plaintiff, a Pennsylvania corporation in the business of selling services on a Scanning Electron Microscope, (SEM), has brought this action against defendant, The Franklin Institute, a non-profit Pennsylvania corporation which also sells such services to the public through its research arm.
The complaint consists of two counts: Count I alleges that defendant monopolized and attempted to monopolize a local market for SEM services in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2; Count II is brought under the pendant jurisdiction of this Court, and avers that defendant's engagement in this business is ultra vires both under its charter, and the Pennsylvania Non Profit Corporation Law, 15 P.S. § 117.1 Based upon the extensive record, requests for findings of fact, conclusions of law, comprehensive briefing and oral arguments, we find for defendant on the merits on both counts, because of plaintiff's failure to meet its burden of proof.
Our findings of fact, discussions and conclusions of law follow:
FINDINGS OF FACT:
I. PARTIES, PERTINENT PROVISIONS OF THE PENNSYLVANIA NON PROFIT CORPORATION LAW AND OF PLAINTIFF'S ARTICLES OF INCORPORATION
1. Plaintiff, Structure Probe, Inc., (SP), is a business corporation organized and existing under Delaware law. Plaintiff's principal place of business is in West Chester, Pennsylvania, within the Eastern District of Pennsylvania. (Agreed Fact No. 1)
2. Dr. Charles A. Garber is President of plaintiff and the owner of 100% of its outstanding stock. (Agreed Fact No. 48)
3. Dr. Garber is also president of and owns all of the stock of a second corporation by the same name, which was organized in 1973 and incorporated under the laws of the State of New Jersey. The principal place of business of the New Jersey corporation (hereinafter referred to either as "Structure Probe-New Jersey" or "SPNJ") is in Metuchen, New Jersey, near New York City. Structure Probe-New Jersey is not a party to this action and no claim is made on its behalf. (Agreed Facts No. 48, 49)
4. Defendant, The Franklin Institute, (Institute or Franklin), is a non-profit corporation organized and existing under the Pennsylvania Non Profit Corporation Law of 1933, P.L. 289. Defendant's principal place of business is in Philadelphia, Pennsylvania, within the Eastern District of Pennsylvania. (Agreed Fact No. 2)
5. The Franklin Institute operates a Museum and Planetarium open to the public, and engages in a wide variety of scientific and research activities through the Franklin Institute Research Laboratories, (FIRL), and the Bartol Laboratories, both of which are unincorporated divisions of Franklin. (Agreed Fact No. 10)
6. Defendant was originally incorporated under the Act of March 30, 1824, P.L. 206; Section 2 of that Act states the following:
7. The Act of March 30, 1824, was amended by the Act of April 18, 1864, P.L. 429; Section 3 provides as follows:
8. Article III, § 301 of the Pennsylvania Non Profit Corporation Law, Act of May 5, 1933, P.L. 289, reads as follows:
A nonprofit corporation shall have the capacity to act possessed by natural persons, but shall have authority to perform only such acts as are necessary or proper to accomplish the purpose or purposes for which it is organized and which are not repugnant to law.
9. Section 301 has been reenacted in the 1972 Non Profit Corporation Law as Section 7501. 15 Pa.C.S.A. § 7501:
Except as provided in Section 103 of this title (relating to subordination of title to regulatory laws), a nonprofit corporation shall have the capacity of natural persons to act.
10. On May 11, 1971, defendant filed restated Articles of Incorporation pursuant to the Pennsylvania Non Profit Corporation Law, Act of May 5, 1933, P.L. 289. Article II of defendant's restated Articles of Incorporation provides:
11. The Scanning Electron Microscope, (SEM), is an instrument which forms pictures, (micrographs), of a sample by scanning its surface with an electron beam and collecting and amplifying the electrons emitted and/or reflected by the sample. The SEM was initially developed in the early 1960's. (Agreed Fact No. 6)
12. SEMs are unlike an earlier type of electron microscope, now known as the Transmission Electron Microscope, (TEM), in several important respects:
(a) TEMs are analogous to medical x-ray devices; TEM micrographs are formed by electrons which, (like x-rays), pass through a sample, and yield a view of the interior of the sample. SEMs, on the other hand, produce pictures which are analogous to ordinary photographs, because SEM micrographs are formed by electrons that do not pass through the sample; they are reflected back, through a process which is analogous to the manner in which the human eye forms an image of an object from light reflected from the surface of the object;
(b) TEMs are generally able to achieve higher resolution than SEMs, i. e., TEMs are able to distinguish smaller features at the same power of magnification;2
(c) Sample preparation for TEM use is generally more difficult and, therefore, more time consuming;
(d) TEMs do not enable the user to study the surface of a sample as completely as SEMs. SEMs are, therefore, particularly valuable for analysis of surface topography and morphology (structure). Use of the SEM is particularly valuable in the study of metallurgical failure, for example, in which examination of a fractured surface is sought. Similarly, if the subject of an inquiry were directed to a study of the protein deposits left by a shampoo on the surface of a hair, the SEM, a surface tool, would be able to yield more meaningful information. (Agreed Fact No. 7)
13. Prices of full-scale SEMs range between $40,000 and $100,000 or more, depending on resolution capability, attachments, the particular manufacturer and other variables. It is generally true that the more expensive SEMs are more efficient and versatile. While all SEM models will furnish the usual and general range of SEM data, certain categories of samples, and the information sought to be obtained, require particular features or attachments which are available only on certain SEM models. (Agreed Fact No. 8)
14. During the late 1960's, a number of firms, located in various geographical sections of the United States, entered the business of selling time and/or performing research for third parties on SEMs for compensation (the "SEM services business"). Among the pioneers in the business were Ernest Fullman, Inc. in Schenectady, New York; Alpha Laboratories in Chicago, Illinois; Applied Space Products in California; and Sperry Rand Microanalysis Laboratory in Rockville, Maryland. (Agreed Fact No. 9)
15. Both plaintiff and the FIRL division of defendant own SEMs and are engaged in the SEM services business. Defendant entered the field on November 3, 1969, and plaintiff embarked upon the SEM services business in June, 1970. (Agreed Fact No. 10)
16. SEM services run the gamut from simply furnishing micrographs of samples provided by the customer, to sample preparation together with analysis and interpretation of the resulting micrographs, to the implementation of broad-based research contracts which may require investigative analysis that would call for the utilization of a wide range of scientific instruments and skills.
(a) The SEM services performed by plaintiff are as follows: (1) preparation of samples for analysis; (2) development of SEM micrographs of the sample by plaintiff's personnel; and (3) oral or written analyses and interpretation of the results by appropriate personnel.
(b) Defendant's contracts for SEM services include use of an SEM together with the services of a technician to operate it. The client, however, is completely responsible for preparation of samples and for interpretation of the results of the SEM process. A limited degree of consultation with the laboratory director may occur.
(c) Execution of research contracts by the Franklin Institute from time to time requires resort to its SEM when needed, as well as utilization of other equipment or research facilities appropriate to the task. Defendant bids only upon such general research contracts which its capacity and resources will permit. SEM research necessitates the presence and contract availability of such a piece of equipment on the premises.
17. The product market consists of those SEM services for which pl...
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