Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

STRUCTURE PROBE, INC. v. FRANKLIN INST.

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


May 1, 1978

STRUCTURE PROBE, INC.
v.
THE FRANKLIN INSTITUTE

The opinion of the court was delivered by: FOGEL

OPINION AND ORDER

 FOGEL, J.

 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. *fn1" 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:

 

That the objects of the said corporation shall be the promotion and encouragement of manufactures, and the mechanic and useful arts, by the establishment of popular lectures on the sciences, connected with them; by the formation of a cabinet of models and minerals, and a library; by offering premiums on all objects deemed worthy of encouragement; by examining all new inventions submitted to them; and by such other measures as they may judge expedient.

 

(Agreed Fact No. 3)

 7. The Act of March 30, 1824, was amended by the Act of April 18, 1864, P.L. 429; Section 3 provides as follows:

 

The object of the said corporation shall be, the promotion and encouragement of manufactures, and the mechanic and useful arts, connected with them, by the formation of cabinets of models, minerals, machines, materials, and products, by exhibitions, and premiums, by a library, and by all such measures, as they may judge expedient.

 

(Agreed Fact No. 4)

 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 P.S. § 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:

 

The purpose or purposes for which the Institute is formed is the perpetuation of the memory of Benjamin Franklin and the promotion and encouragement of science, technology and the mechanic and useful arts. The Institute is organized on a nonstock basis and does not contemplate pecuniary gain or profit, incidental or otherwise, to its members.

 

(Agreed Fact No. 5)

 II. PRODUCT MARKET.

 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; *fn2"

 (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 plaintiff and defendant compete with each other to provide to third party customers. The market includes defendant's sale of time on its SEM to external sponsors, but does not include the defendant's internal SEM use for the preparation of contract proposals or for broad investigative analysis, or other work it may do in connection with research projects.

 III. GEOGRAPHIC MARKET

 18. The record establishes the following relevant factors which a potential customer considers in arriving at a selection of a particular SEM service:

 proximity, price, *fn3" personal relationships, *fn4" prior business dealings in the SEM or other fields, *fn5" special skills, *fn6" special equipment, *fn7" contractual limitations, *fn8" problems of particular samples, *fn9" desirability of direct exchange of ideas during microscopy, *fn10" and time limitations. Proximate and distant customers may attend the microscopy sessions personally. All customers have the option of mailing samples in or dropping them off at the laboratory. (Agreed Fact No. 11)

 19. The appropriate geographic market in which plaintiff and defendant compete is a multistate regional one, including potential customers within a radius of approximately 150 miles of Philadelphia. More specifically, we find that the market essentially includes the states of Pennsylvania, New Jersey, Delaware and Maryland; that area of Northern Virginia in the vicinity of Washington, D.C., Westchester County, western Long Island and additional areas in the southern portion of New York State, exclusive of New York City.

 20. We are not convinced by the evidence that a local submarket in the near-Philadelphia area is appropriate; if such a market were to be found to exist, at the minimum it would include Bucks, Chester, Delaware, Montgomery and Philadelphia Counties in Pennsylvania; Burlington, Camden and Gloucester Counties in New Jersey; and New Castle County in the State of Delaware. For purposes of this litigation, this nine-county group has been referred to as the " Delaware Valley ". The eight counties in Pennsylvania and New Jersey are also referred to as the Philadelphia Standard Metropolitan Statistical Area (SMSA). (Agreed Fact No. 12)

 21. The Philadelphia SMSA is a region determined by economic and socio-cultural criteria which have no direct bearing upon, or relationship to, the distribution of scientific services or industries. It is a shorthand method of describing an area which includes counties in the two states which cluster around Philadelphia.

 A. Distribution of Plaintiff's Customers

 22. Plaintiff's SEM service customers are located primarily along the East Coast, from North Carolina to Massachusetts. Plaintiff has also provided SEM services for customers located in other states, including Ohio, West Virginia, Michigan, Wisconsin, Illinois and California. Many of these customers have utilized other SEM facilities at various times. (Agreed Fact No. 51) 23. From 1970 through 1974 plaintiff had the following SEM customers: Beyond Delaware Valley 199 Within Delaware Valley 87 286

19780501

© 1992-2004 VersusLaw Inc.



Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.