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William Dixon, the owner of a Middletown, Conn., copier repair company, is taking on Stamford-based Xerox Corp. to determine if its refusal to sell him spare parts was a violation of the Sherman Antitrust Act. On Nov. 15, U.S. District Judge Stefan Underhill gave Dixon’s once-thriving outfit a green light to litigate. Through the early 1990s, Dixon’s Creative Copier Services (CCS) faced a complex, nine-step process to obtain repair parts for Xerox’s high-volume copiers. Xerox wouldn’t sell directly to the independents. Its “end-user verification” policy required each of Dixon’s customers to buy their spare parts directly. They had to verify ownership and prove a part was broken. Verification and shipping delays made it impossible for CCS to compete, it alleges. Thus, CCS claims, Xerox was able to leverage its parts monopoly into a service monopoly, in violation of federal antitrust law. Xerox’s lawyers, however, argue slow delivery is perfectly legal: “There is no right to Federal Express written into the Sherman Act,” they countered. Past litigation against Xerox and Kodak, the other bulk copier giant, leaves key questions unanswered. The case before Underhill could clarify whether a company with legal patent and copyright monopolies in spare parts can legally refuse to supply all replacement parts. Xerox settled, on undisclosed terms, with litigants in a Texas class action in 1994. Some 22 who opted out of the settlement, including CCS, joined a federal multi-district litigation in Kansas. In that matter, U.S. District Judge Katherine H. Vratil sought to quantify the losses from denial of Xerox’s patented versus non-patented parts. In reply, the plaintiffs contended they needed all parts, all the time. But one plaintiff from the 22 independents, St. Louis-based Copier Services Unlimited (CSU), appealed to the Federal Circuit, going for all the marbles. CSU contended it violates antitrust law to refuse to sell patented and copyrighted materials to service competitors. The 2000 ruling of Federal Circuit Chief Judge Haldane Robert Mayer, writing for a unanimous three-judge panel, bluntly disagreed. “Xerox was under no obligation to sell or license its patented parts and did not violate the antitrust laws by refusing to do so,” Mayer held. Since then, the U.S. Supreme Court has cautioned that the Federal Circuit, which hears patent, trademark and copyright claims, exceeds its jurisdiction in ruling on antitrust matters. In the current case, Underhill found CCS did state an adequate claim of anti-competitive conduct when it alleged that Xerox suddenly stopped making parts available, and “for no apparent reason,” delayed shipping, raised prices on other parts and allegedly refused to sell copiers to customers who wished to use CCS for servicing. Xerox defense lawyer Jonathan Ian Gleklen, of Washington, D.C.’s Arnold & Porter, said that Judge Vratil, in Kansas, rejected a key post-discovery CCS affidavit. In it, Dixon contended his company could have succeeded if Xerox only restricted sale of its patented parts, and supplied public domain parts freely. Underhill decided to consider Dixon’s contention, and recognized it as authoritative based on Dixon’s experience running CCS for 20 years. In the early 1990s, the business had 30 employees and $1.5 million in annual sales, but is now down to two people, Dixon said. In a parallel copier parts action against Kodak, a California court found the patent argument pretextual, leading to a $70 million verdict for independents.

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