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United States District Court, Northern District of Illinois

July 20, 1973


The opinion of the court was delivered by: Bauer, District Judge.


This cause comes on defendant's motion for Summary Judgment.

This suit is basically an Anti-Trust action brought under Sections 4, 12, and 16 of the Clayton Act, 15 U.S.C. § 15, 22, and 26 in order to prevent and restrain the violation by the defendant of Section 1 of the Sherman Act, 15 U.S.C. § 1 and to compensate the plaintiff for damages arising out of such violations. The plaintiff also brings this suit as a diversity action against the defendant for the willful violation of common law principles of unfair competition and tortious interference with plaintiff's advantageous business relationships.

The plaintiff, Polytechnic Data Corporation ("Polytechnic") is a Delaware corporation with its principal place of business located in Chicago, Illinois. The plaintiff is engaged principally in the business of manufacturing and selling and/or leasing, throughout the United States and elsewhere, the "Copy Controller-Key", a device which controls and measures work being performed on all types of copying machines.*fn1

The defendant, Xerox Corporation ("Xerox"), is a New York corporation transacting business in Illinois. It is alleged to be the dominant manufacturer and marketer of copying machines in the world.

The plaintiff in the Complaint has alleged, inter alia, the following facts:

  1. Plaintiff's Copy Controller-Key is of no value
    to the user unless and until it is installed on
    a copying machine. Installation consists of
    attaching several wires from the master unit
    controller key to the internal wiring of the
    copying machine by means of clip-on type
    devices. The installation of a Copy
    Controller-Key on a copying machine has no
    harmful effect upon the machine or upon the
    quality of the copies that the machine

  2. Plaintiff believes that Xerox has an
    arrangement to purchase for resale a metering
    device known as "Auditron", which controls and
    measures the work performed by Xerox's copying
    machines. Plaintiff also believes that Xerox
    consciously refrains from actively selling,
    leasing or otherwise marketing its metering
    device because the use of any such metering
    device upon its machines allows the user to
    exercise control over the number of copies
    being made on the copy machine and to prevent
    the making of unauthorized and unnecessary
    copies on the machine.

  3. Xerox has engaged in a nationwide combination
    with lessees of its machines to restrict the
    sale or lease of plaintiff's Copy
    Controller-Key device. This course of action
    has been initiated and carried out by Xerox,
    and many of the lessees of Xerox's machines
    have acquiesced in this course of conduct.

  4. About October 1969, Xerox implemented an
    unlawful and malicious policy and course of
    conduct designed to prevent, and which has had
    the effect of preventing the plaintiff from
    marketing its Copy Controller-Key device to
    lessees of Xerox machines. This course of
    conduct was carried out in combination with
    lessees of Xerox's machines and includes, but
    is in no way limited to, the following:

    a. If a lessee of a Xerox copy machine
      requested permission to have the plaintiff's
      Copy Controller-Keys installed on its copying
      machine, permission was denied despite the
      fact that the installation expense would be
      borne by the lessee of the copying machine,
      and the installation itself would be
      performed by either plaintiff's salesmen or
      the lessee.

    b. If a lessee purchased or leased and
      installed a Copy Controller-Key, Xerox
      informed the lessee that Xerox did not allow
      the installation of the Copy Controller-Key
      on any Xerox copy machine and ordered the
      lessee to remove the device from any or all
      of its Xerox copy machines.

    c. In other instances, the Xerox service
      personnel unlawfully, and without the
      authorization of the lessee, disconnected the
      Copy Controller-Key and refused to reconnect
      it after the service call was completed.

    d. In other instances, the Xerox service
      personnel refused to service the copying
      machine further until the Copy Controller-Key
      was removed by the lessee.

    e. In still other instances, Xerox threatened
      to remove its machine from the premises of
      the lessee if the lessee did not remove the
      Copy Controller-Key.

  5. Xerox has attempted to justify its unlawful
    course of conduct by representing to lessees of
    its machines that it cannot permit installation
    of plaintiff's Copy Controller-Key upon its
    machines because plaintiff's device has not
    been approved for use by Underwriter's
    Laboratories, Inc. ("U.L." as an accessory to
    Xerox's machines. This representation has been
    made despite the fact that plaintiff's device
    itself has been approved

    by U.L. Xerox has further represented to
    lessees of its machines that if plaintiff were
    to secure U.L. approval of the device as an
    accessory to its machines, Xerox would have no
    further objection, provided that it could be
    shown that installation of plaintiff's device
    would in no way damage the Xerox machine. Xerox
    has made these representations despite
    knowledge that plaintiff has requested Xerox to
    permit U.L. to test plaintiff's device upon
    Xerox's machines, that Xerox has refused to
    grant such permission and that U.L. will not
    conduct such tests without the permission of

  6. This combination carried out by Xerox and
    lessees of its machines has restrained and will
    continue to restrain the marketing of
    plaintiff's products and constitutes a
    combination in restraint of trade in violation
    of Section 1 of the Sherman Act, 15 U.S.C. § 1.
    This unlawful course of conduct carried out
    by Xerox individually and in combination with its
    lessees is a willful violation of common law
    principles of unfair competition and tortious
    interference with plaintiff's advantageous
    business relationship.

Xerox in support of its motion for Summary Judgment contends that there is no genuine issue of material fact and as a matter of law the plaintiff's Complaint is without merit. The defendant Xerox bases its position on the fact that Polytechnic's device has been tested and listed by U.L. for use in combination with all Xerox model copying machines pursuant to a method of attachment devised by Xerox,*fn2 and Xerox has indicated that Polytechnic is free to make installations by means of this method of attachment. The defendant thus conceives the only issue in the instant action to be a legal question of whether Xerox has violated the law by unilaterally implementing reasonable conditions to protect its property and the users thereof.

The plaintiff in opposition to the instant motion contends that there exists a genuine issue of material fact which precludes summary judgment because: (1) Xerox adopted a "new" policy with respect to attachments; (2) its "old" policy was unreasonable; (3) the charge for Xerox interface equipment (a universal surface plug system for devices such as the plaintiffs) inhibits Polytechnic's ability to market its device in competition with the Auditron; and (4) Xerox's refusal to permit others to install interfact equipment of their own manufacture by their own employees is a tie-in arrangement.

It is important to the proper disposition of the instant motion to consider the following facts disclosed by pre-trial discovery and hearings:

  1. The salient events in this case began in
    January of 1969, when Nicholas Flevaris, who
    was to become President of Polytechnic upon its
    formation in February of 1969, first put
    together his own key device, although he did
    not have a prototype of said device until March
    or April, 1969 (Flevaris PI 65).*fn3 During
    most of 1969, Polytechnic offered the device
    for sale through direct mail to copying machine
    users, including Xerox lessees (Flevaris PI
    66-68) and by advertisement in an office
    management trade journal offering a 30-day free
    trial coupon (Linne Dep. 709-711; Linne Dep.
    Ex. 16). Polytechnic encouraged purchasers to
    install the device themselves on the copying
    machines.*fn4 Although the device

    was being installed during the fall of 1969 on
    Xerox copying machines known by Polytechnic to
    be owned by Xerox, no effort was made to notify
    Xerox or to furnish it with a wiring diagram
    (Flevaris PI 70).

  2. In the Xerox Service Agreement, the Xerox
    lessee promises to "make no alteration in
    equipment". In part, this provision relates to
    the requirement of U.L. that the failure of a
    manufacturer to secure U.L.'s approval for
    changes in a listed product "shall result in
    discontinuance of listing of the product".
    (PIDX 78). In November 1967 before either
    Polytechnic or its devices were in existence
    and three years prior to this lawsuit, Xerox
    announced a uniform policy defining the three
    conditions under which it would permit the
    attachment of third party accessories to
    copying machines owned and leased by it (Finein
    PI 246-247; Trompter PI 253; PIPX 28-29).
    First, Xerox designated a standard which it had
    previously set for itself, namely that the
    accessory be tested by U.L. in combination with
    the copying machine and be recognized as safe.
    Second, Xerox required that the third party
    attachment not damage the copying machine.
    Third, Xerox required that the third party
    attachment not interfere with the normal
    operation and servicing of the copying machine.
    [The Court will note in passing that
    Polytechnic has failed to make any allegation
    that it has complied with these seemingly
    legitimate conditions.]

  3. At the time of filing the instant lawsuit,
    Polytechnic only had a general listing from
    U.L. solely for the Copy Controller-Key device
    and not in connection with the device's
    operation with another product.*fn5 The
    general listing issued by U.L. is its notice to
    the public that it has run tests and considers
    a product safe for general use. (Knourek Dep.
    13). While general listing would have indicated
    the safety of the initial combination, U.L.
    felt that its responsibility did not end there
    but rather that it "should also make sure that
    continuing production of these two machines
    resulted in the safe combination". (Knourek
    Dep. 39). There was reluctance on U. L.'s part
    to test and issue a general listing for a
    combination before a workable system was
    established for handling the general listing in
    the event that future changes in either product
    resulted in an unsafe combination. (Knourek
    Dep. 23-24; Knourek Dep. Ex. 3). While Xerox,
    U.L. and Polytechnic all made various
    suggestions as to how to handle this concern of
    U.L., no solution was reached until Xerox
    proposed the universal surface plug system.
    Xerox informed Polytechnic of this solution and
    went to U.L. to obtain testing and general
    listing for its combination. U.L. found the
    universal plug system to be acceptable and to
    overcome its earlier concerns. It proceeded to
    test the Xerox harness and plug combination
    with all existing models of Xerox machines and
    on November 28, 1972, U.L. informed Xerox that
    approval had been issued. Subsequently, the

    Copy Controller-Key was tested and listed for
    use in combination with Xerox copying machines
    by means of this plug (Flevaris Dep. Ex.
    79).*fn6 The use of the U.L. approved
    universal surface plug will ensure compliance
    with Health and Electrical laws such as the
    Federal Occupational Safety and Health Act, and
    numerous state and local ordinances; and it
    will, at the same time, provide one means of a
    safe and efficient method of attachment of
    third party devices to the complex machinery
    which is marketed by Xerox.*fn7

It is the opinion of this Court after examining the pleadings and relevant case law that the defendant's motion for Summary Judgment is meritorious.


The announcement of restrictions by Xerox regarding the attachment of plaintiff's device does not constitute per se a restraint of trade.

Conditions premised on legitimate business interests have been recognized as reasonable and thus do not per se constitute a violation of the Sherman Act. It is well settled that a manufacturer can adopt and implement a policy which is designed to protect its property and the users of its property, and to promote safety. Weather Wise Co. v. Aeroquip Corp., 468 F.2d 716 (5th Cir. 1972), cert. denied 410 U.S. 990, 93 S.Ct. 1505, 36 L.Ed.2d 188 (1973); Bridge Corp. of America v. American Contract Bridge League, Inc., 428 F.2d 1365 (9th Cir. 1970), cert. denied, 401 U.S. 940, 91 S.Ct. 940, 28 L.Ed.2d 220 (1971); Kendall Elevator Co. v. LBC & W Associates of South Carolina, Inc., 350 F. Supp. 75 (D.S.C. 1972). Indeed, even absolute restrictions have been permitted where necessary to protect legitimate business interests such as product or personal safety. Tripoli Co. v. Wella Corp., 425 F.2d 932 (3rd Cir. 1970), cert. denied 400 U.S. 831, 91 S.Ct. 62, 27 L.Ed.2d 62 (1970).

Xerox's restrictions are on their face reasonable because they are purportedly aimed at protecting the public against injury and Xerox against product liability claims.*fn8 It is clear to this Court that Xerox's conditions on attachment of third party devices to its machines are reasonable and do not per se violate the Sherman Act.


The pre-trial discovery to date presents no factual support to the claim by Polytechnic that Xerox unfairly applied its policy to Polytechnic. It is clear that Xerox's condition that Polytechnic's device be tested and approved by U.L. is reasonable and practically wise. U.L.'s combination listing of Polytechnic's Copy Controller-Key and Xerox machines was only recently issued on November 28, 1972. This combination listing was only possible after Xerox had developed a universal plug system that would overcome difficulties present in the method of attachment used by Polytechnic and would meet the safety requirements set by U.L. Polytechnic's installation instructions called for the attachment of its devices by running wires into and through the Xerox machine without the plug and connecting wires internally to various machine wires and terminals (Flevaris Dep. Ex. 74 B-D, 85, 86). Under this method "a plug is not even placed on the machine" (Flevaris Dep. 1106), although the harness submitted to U.L. for testing "terminated to a plug for the purpose of making entry into the machine" (Flevaris Dep. 1107) and the method of interconnection used in testing leading up to the issuance of U.L.'s approval was the Xerox universal surface plug (Flevaris Dep. 1133, 1148).

While Polytechnic has allegedly developed a plug attachment system, it has not been approved by U.L. and the only universal surface plug system approved by U.L. to date is the one developed by Xerox. Xerox's universal plug which allowed the U.L. combination listing of its machines and other third party controller devices is an adequate demonstration of Xerox's good faith.

Polytechnic rejects Xerox's universal plug as too costly and thus claims Xerox's universal plug system is not an acceptable solution to the instant controversy. However, Polytechnic has failed to develop by itself an attachment or universal plug system which is approved by U.L. Polytechnic's failure to sufficiently meet Xerox's proper and reasonable condition of U.L. testing and approval erodes their claim that Xerox's conditions have been misapplied. The plaintiff has failed to sufficiently allege and pre-trial discovery fails to disclose that Xerox has misapplied its conditions for attachment to its machine in order to restrain trade.

It is clear from the cases that there is no anti-trust violation in adopting and implementing a policy which is designed to promote safety, protect the integrity of one's property or good will or assure proper functioning of equipment. Indeed, what Xerox has required is exactly what various local governments have insisted upon in their electrical codes, namely, U.L. approval and testing. This is exactly what Polytechnic has failed to accomplish by itself.

Moreover, Xerox has not misused or misapplied this legitimate policy with respect to Polytechnic. Indeed, Polytechnic was given an opportunity to conform to the prescribed conditions, and to date Polytechnic has failed to comply with this condition.


Essential to any Section 1 Sherman Act violation is the existence of a "contract, combination in the form of trust or otherwise or conspiracy" in restraint of trade (15 U.S.C. § 1). The violation must be comprised of concerted action by separate business entities, as opposed to mere unilateral action by a single person or firm. See Dart Drug Corp. v. Parke, Davis & Co., 120 U.S. App.D.C. 79, 344 F.2d 173, 182-183 (1965).

Polytechnic has alleged that Xerox has combined with certain of its lessees who have "acquiesced" in the prohibition of the attachment of devices to its machines. (Compl. ¶ 9). These charges do not contain the "collaborative element" of a combination or conspiracy required by the Sherman Act. Dart Drug Corp. v. Parke, Davis & Co., supra. The express basis for this claim is nothing more than the unilateral acts of Xerox. There is no allegation that Xerox engaged the co-operation of any of its lessees to compel other lessees to abide by the Xerox policy; nor is there any allegation that any of the lessees joined together to compel other lessees to abide by the policy. All actions taken were by Xerox. Indeed, there would be no logical reason for the Xerox lessees to join together, either with Xerox or themselves, to enforce Xerox's own policy particularly if plaintiff's allegation about the efficacy of its device is well founded. The alleged mere acquiescence by certain individual Xerox lessees in the unilateral policy of Xerox does not give rise to an illegal combination.*fn9

The absence of any potential gain on the part of Xerox lessees if the use of Polytechnic's device were prevented is fatal to Polytechnic's claim of combination.

It is not sufficient to merely allege acquiescence and thus claim a combination has been demonstrated. The finding of an illegal combination has traditionally been based upon the fact that the third parties benefitted from their acquiescence.*fn10 There could be no benefit to the lessee of Xerox from acquiescence since, if Polytechnic is correct in its assertions, these lessees could only benefit by installing Polytechnic equipment.

It is clear that the actions of Xerox were not pursuant to an illegal combination or conspiracy between Xerox and its lessees. The Xerox policy was apparently adopted as an independent business decision without consultation or collaboration with its lessees who, in fact, are neither competitors of Polytechnic, Xerox, nor necessarily competitors of each other. In fact, Xerox's lessees are putative consumers of Polytechnic devisees. Under these circumstances, plaintiff's claim of combination must fail. There is neither a legal basis nor substantial evidence to support plaintiff's claim of unlawful concert of action.


Polytechnic in its brief in opposition to the instant motion alleges that Xerox has set up an illegal tie-in arrangement in that Xerox requires its universal plug system to be used in all attachment of third party devices to Xerox machines because it is the only attachment approved by the U.L. Plaintiff's anti-trust count has, in fact, been brought only under Section 1 of the Sherman Act and does not allege a tie-in violation. Indeed, the thrust of plaintiff's complaint is to the contrary, namely that Xerox wanted no control devices installed upon its machines.

The basic principle of a tie-in is that a manufacturer conditions purchases of desired products upon the purchase of unwanted products. Moreover, the traditional purpose of a tie-in is to enable the manufacturer to obtain additional revenue and profit (often undue profit) and to preclude his competitors from the market. Neither fact is present in the instant case. Xerox is not in the business of selling or leasing its interface equipment in order to gain economic benefit or to preclude its competitors from marketing similar equipment. Rather, it is providing this equipment, allegedly at a loss to itself, as a means by which others can market and install their products in a safe, efficient manner where none previously existed.*fn11 It is clear that no tie-in violation has been adequately pleaded.


Plaintiff alleges that the conduct set forth above is also tortious. Count II alleges that Xerox has been guilty of unfair competition and Count III alleges that Xerox has committed tortious interference with the plaintiff's advantageous business relationships. In both counts plaintiff alleges that Xerox's conduct has been carried out "maliciously and with wanton disregard for plaintiff's right to market its product" (Compl. Counts II-III, ¶ 15).

The common law rights which the plaintiff purports to assert in Counts II and III must be evaluated in light of common law rights that Xerox has and is entitled to protect; namely (1) its property rights in its machines, (2) its contractual rights in its lease agreements, and (3) its right to preserve the reputation of its business.

As owner of the machines, Xerox has an absolute property right therein, a right which courts have consistently recognized that the owner is entitled to protect. One's ownership rights in tangible personal property include a right to prohibit the attachment of devices thereto, or to retain authority to decide whether such attachment shall be made. Illinois Bell Telephone Co. v. Miner, 11 Ill. App.2d 44, 136 N.E.2d 1 (1956). See also In Re Farrell Publishing Corp., 165 F. Supp. 40 (S.D.N.Y. 1958), aff'd sub nom. Hendler v. Cuneo Eastern Press, Inc., 279 F.2d 181 (2nd Cir. 1960); Winters v. University Dist. Bldg. & Loan Ass'n, 268 Ill. App. 147 (1932); Quinlivan v. Brown Oil Co., 96 Mont. 147, 29 P.2d 374 (1934); Milliken v. Hildebrand, 234 Ill. App. 276 (1924); Bliss v. So. Pac. Co., 212 Or. 634, 321 P.2d 324 (1959); Krause v. Hartford Accid. & Indem. Co., 331 Mich. 19, 49 N.W.2d 41, 44-45 (1951); Herbits v. Constitution Indem. Co., 279 Mass. 539, 181 N.E. 723 (1932).

One having an interest in personal property is entitled to protect that interest against unauthorized intermeddling. The right to do so is not only a good defense to an action for wrongful interference, it gives rise to an action against the intermeddler. See E. Rauh & Sons Fertilizer Co. v. Shreffler, 139 F.2d 38 (6th Cir. 1943); Royal Stein, Inc. v. B.C.U. Holding Corp., 283 App. Div. 700, 127 N.Y.S.2d 886 (1954); Morris Plan Co. v. Hillcrest Farms Dairy, Inc., 323 Mass. 452, 82 N.E.2d 889 (1948). See also, Restatement of Torts 2nd, section 220.

It is clear that under the law Xerox is entitled to exercise and protect its property rights, and by so doing it is not guilty of unfair competition or tortious interference with the plaintiff's business interests.

Thus, the plaintiff has failed to adequately allege that Xerox is liable for the common law torts alleged. Further, the inadequacy of the plaintiff's antitrust allegations necessarily casts serious doubts on any allegation of tortious conduct. See Bridge Corp. of America v. American Contract Bridge League, Inc., supra.

It is the opinion of this Court after examining the pleadings and the affidavits and the exhibits presented by the parties in support of their respective positions that Summary Judgment should be granted in favor of the defendant. There exist no genuine issues of material fact to be resolved by this Court. The plaintiff has failed to adequately comply with reasonable and proper conditions established by Xerox in order to protect the public against injury, and the defendant Xerox against potential product liability claims. The plaintiff has failed to adequately allege an illegal combination of Xerox and its lessees. These failures have been fatal to both the plaintiff's anti-trust claim and its common law tort claims. However, this decision would not preclude the plaintiff at a future date, given an attempt by the plaintiff to adequately comply with the conditions of Xerox, from bringing an action against the defendant Xerox for subsequent anti-trust and common law tort violations.

It is this Court's opinion that the major problem with plaintiff's case might well be that the plaintiff prematurely called foul before he had made any attempt to reasonably comply with the proper and necessary conditions established by Xerox to protect its property rights.

Accordingly, it is hereby ordered that the Defendant's Motion for Summary Judgment is granted.

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