APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civil No. 75-0419)
Before Hunter, Weis and Sloviter, Circuit Judges.
The plaintiff claims damages from the defendant Xerox Corporation, asserting that it violated the antitrust laws in the development and marketing of plain paper copiers. The district court found that the plaintiff failed to establish liability. We review only the finding that the plaintiff did not prove the fact of injury and, concluding that the district court's determination is supported by the record, affirm.
Van Dyk filed a complaint against Xerox in the United States District Court for the District of New Jersey, alleging violations of §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (1976), and § 3 of the Clayton Act, id. § 14. The latter claim was abandoned before trial. After a bench trial, the district court found no transgression of the antitrust laws and further, even assuming violations, no adequate proof of injury or damages. Accordingly, judgment was entered for the defendant.
The district court's findings of fact establish the pertinent background.*fn1 In 1947 Xerox (then the Haloid Co.) received a license from the Battelle Memorial Institute to make, use, lease, or sell products comprising the inventions in electrophotography patented by Chester F. Carlson in the early 1940's and licensed by him to Battelle. Between 1949 and 1962, Xerox and Battelle worked closely on research and development of the new process in close cooperation with Carlson. Additional patents were secured during this period.
In 1956 and 1959, Battelle assigned all of its xerographic patents to Xerox in exchange for stock. Also in 1956, Xerox and Rank of England concluded an agreement on the formation of a joint venture, Rank Xerox, which was given an exclusive license to manufacture and sell xerographic equipment outside the United States and Canada. Rank Xerox granted licenses to Fuji Xerox in 1960 to sell and manufacture such equipment in Japan and other far eastern countries.
Xerox developed prototypes of the Model 914 and the Model 813 in 1958. These were revolutionary, compact office copiers utilizing plain paper rather than the specially prepared "coated" paper then generally used in machines manufactured by other companies. After IBM rejected an offer to manufacture and market the 914 and 813, Xerox decided to proceed on its own. Since the direct production cost of the 914, apart from research and development, was in excess of $2,000 per unit, Xerox decided to lease the machines. The leases were terminable on 15 days' notice and provided for a monthly minimum rent as well as a charge for each copy.
The 914 competed against a number of models that used a variety of processes to copy material on coated paper, including machines manufactured by Kodak and Minnesota Mining and Manufacturing. The 914, however, was so successful that by 1965 Xerox had captured 80% of the United States market in plain and coated paper copiers.
In 1965 and 1969, Xerox introduced the 2400 and the 3600, respectively, models that produced copies at a rate much faster than previous units. The Model 7000, which was able to reduce a copy in size, was introduced in September 1969.
IBM entered the plain paper copier market in 1970 with its Copier I, and Xerox immediately began patent litigation. The Copier I was followed by a number of Japanese products, primarily low volume machines, and in the mid-1970's both IBM and Kodak were producing high-speed copier/duplicators. By 1974 there were 14 companies other than Xerox marketing plain paper copiers in the United States, and four years later Xerox faced competition from at least 38 plain paper models.
During this period, Xerox developed new units featuring duplexing (the ability to copy on both sides of a sheet of paper), automatic feeder systems, and other refinements. One machine was capable of making 120 copies per minute. Coated paper technology also was improving in the 1960's and 1970's, and offset duplicators began to appear in compact, automatic form suitable for general office use.
In 1968, the Van Dyk Company, which had been organized for about 4 years, acquired a small facility in Hackettstown, New Jersey to develop a prototype plain paper copier that would compete with Xerox. The following year, Van Dyk went public with a stock offering underwritten by Mayflower Securities, Inc., a small investment banking firm. The offering was oversubscribed and yielded over 2.1 million dollars despite a warning in the prospectus that Xerox had over 1,000 ...