Symbolic Control Inc. v. IBM

Symbolic Control Inc. v. IBM: Eliminating Affirmative Defenses in Antitrust Treble Damage Actions by Bartholomew Lee, 11 Golden Gate University Law Review 241 [no. 1, Spring, 1981 – an excerpt, the beginning of the text]

Member of the Bar of the State of California; B.A. St. John’s College, 1968; J.D. University of Chicago Law School, 1971. This Note owes much to the creative and analytic thought of the senior litigator for plaintiff in Symbolic Control Inc. v. International Business Machs. [643 F.2d 1339 (9th Cir. 1980)], John H. Boone, Esq., of San Francisco, to whom the author is grateful for both his conceptual clarity and encouragement over the years, and also for the privilege of second-chairing the trial in Symbolic Control with him.

A. INTRODUCTION: Symbolic Control Inc. v. International Business Machines Corp. [1] is necessarily a tilting at windmills story. Anybody v. IBM is a tilting at windmills story, and the antitrust enterprise, from a private plaintiff’s view (or that of its counsel) is a fairly quixotic endeavor. The chances of a recovery are small, the journey to treble damages is hard and long, often illusory, and full of traps, pitfalls, detours and wrong ways, not to mention rich and powerful adversaries. Nevertheless, once in a while the national policy of the antitrust laws, furthering competitive markets, is effected by a private recovery, and once in a while such an award survives appeal. Symbolic Control has not yet made it, but this term’s opinion by the Ninth Circuit, which reaffirms an important policy principle in private antitrust law, will help significantly. Symbolic faced an affirmative defense upon which IBM prevailed at trial as a matter of law. The Ninth Circuit reversed, denying the affirmative defense as a matter of law, and remanded for a new trial. The reversal has significance not only to understanding the proper role of affirmative defenses in private treble damage actions, but also for the antitrust bar, Congress, and the courts in the continuing struggle with the so-called “passing-on” defense, which most recently manifested itself in Illinois Brick v. Illinois [2] and a series of proposed bills in Congress to overrule it. [3] If to seek private redress for antitrust injury is indeed a quixotic quest, and treble damages in reality all too often turn to be the same sort of mirage that so often bedeviled Don Quixote, the private plaintiffs’ bar, like Don Quixote, nonetheless continues to ride on to new adventures. One purpose of this Note is to make that ride a little easier, and the goal a little more sure, by suggesting a general principle inhering in several leading cases, and illustrated by Symbolic Control, namely: Affirmative defenses have no place in private treble damage actions, by reason of the national policy in favor of effective enforcement of the antitrust laws. In Symbolic Control, the Ninth Circuit held that an affirmative defense analogous to assumption of risk (namely, that injury from “ante-natal” violations, pre-dating the business existence of the plaintiff, escapes private redress) provides no bar to the private plaintiff’s recovery. So, too, have other affirmative defenses been read out of the antitrust laws, and so too should they all be. Moreover, application of this principle incidentally solves the symmetry dilemma that so troubled the Supreme Court in Illinois Brick, and denial of the “passing-on” defense to promote recoveries need not require any symmetrical limit of privity to deny recoveries to other plaintiffs.

An Historical Excursus The antitrust plaintiff’s bar need not lose heart that their endeavor is so quixotic, because Don Quixote de la Mancha himself was the first trust buster. Shortly after jousting the wind- mills, the good Don came upon an army of knights with whom he did battle (to Sancho Panza’s horror because all he could see was a vast flock of migrating sheep). [5] All the sheep in Spain, however – between two and seven million of them – belonged to one giant wool monopoly, the Mesta, [6] which annually migrated them North to South. The Mesta abused its monopoly powers and privileges, riding roughshod over farmers’ lands and through town squares, and one of its herds, on the Eastern sheep route known as the “highway ‘de la Mancha,’” was a suitable adversary for trust busting, albeit somewhat muddled, in the fashion of the knight Don Quixote. (He killed seven sheep when all was said and done.) Perhaps the present day antitrust plaintiffs’ bar simply has Mestas of its own to contend with, IBM for example, one hopes somewhat more effectively than did Don Quixote.

Facts and Law in Symbolic Control The Symbolic Control case involved a type of computer program (“software”) commonly called “APT” (an acronym for Automatically Programmed Tools). An APT computer program or “APT Processor” is used with a computer (sometimes called “hardware”) to allow a machine tool parts programmer to prepare from engineering drawings an operating type for numerically controlled (“NC”) machine tools (“NCMT”). *** the record contained a good deal of testimony proving that [Symbolic’s] APT/70 presented very stiff competition for IBM’s NC 360. IBM’s 360 was, however, bundled with its hardware and “free,” and continually improved and maintained. Symbolic Control contended that by this practice IBM intended to, and did exclude Symbolic Control and “capture the market,” and Symbolic Control put into evidence a classic Sherman Act § 2 intent document, authored by IBM’s marketing manager in 1971:

“The N /C strategy of this group was to capture the N /C marketplace within an allowable budget ($300,000 per year). To do this sound management decisions were made. … In conclusion, the competency of the N /C development group and its strategy to capture the N /C highly competitive market has done just that and IBM is currently number one. This group has created and is protecting on a world- wide basis over $300,000,000 of hardware drag along since 1969 to present. This was done with a budget of around $300,000 per year (around one percent).” *** [the note continues…]


1. [1980] Trade Cas[es]. (CCH) ¶ 63,427 (9th Cir. July, 1980) (per Browning, J.; the other panel members were Kennedy, J., and Dumbauld, D.J., sitting by designation), amended, Nov. 19, 1980, rehearing denied, Nov. 24, 1980, rev’g, [1976] Trade Cas. ¶ 60,723 (N.D. Cal. 1975) (per Zirpoli, J.) (While the Ninth Circuit Survey was at the printer, Symbolic Control Inc. v. International Business Machines Corp. was published in 643 F.2d 1339 (9th Cir. 1980)).

2. 431 U.S. 720 (1977); see generally P. Areeda & D. Turner, Antitrust Law, § 337(a)-(g) (2d ed. 1978); Landes & Posner, Should Indirect Purchasers Have Standing to Sue Under the Antitrust Laws? An Economic Analysis of the Rule of Illinois Brick, 46 U. Chic. L. Rev. 602 (1979).

3. E.g., H.R. 8359 & 8516-17, 95th Cong., 2d Sess. (1977); H.R. 2060 (the Rodino bill), ***

4. The Supreme Court in Illinois Brick stated, “we conclude that whatever rule is adopted regarding pass-on in antitrust damage actions, it must apply equally to plaintiffs and defendants. …” 431 U.S. at 728. This Note respectfully suggests that this conclusion of the Court was exactly wrong by reason of the Court’s consistent policy stance over the years in favor of recovery against antitrust violators to further the competitive goals of the antitrust laws.

5. Cervantes, Don Quixote, Bk. I, Ch. XVIII at 170 (Signet ed. 1964).

6. See J. Klein, The Mesta, a Study in Spanish Economic History passim (Harvard ed. 1920). Klein noted Don Quixote’s encounter with a Mesta flock on the sheep highway de la Mancha. Id. at 19 n.2. Mesta abuses, particularly during the migrations, frequently gave rise to litigation. Id. at 21 n.2. Klein reported estimates (which he doubts) of as many as seven million sheep in the Mesta flocks, in the approximate period of Don Quixote’s attack on the vast ovine army before him. The author is indebted to Ruth E. Carsch, Consulting Information Specialist, for finding Professor Klein’s most informative study.

7. Brief for Appellant, Symbolic Control Inc. v. International Business Machs., [1980] Trade Cas. (CCH) ¶ 63,427 (9th Cir. 1980). ***