OCTOBER TERM, 1992
Syllabus
PROFESSIONAL REAL ESTATE INVESTORS, INC., ET AL.
v.
COLUMBIA PICTURES INDUSTRIES, INC., ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
No. 91-1043. Argued November 2, 1992-Decided May 3, 1993
Although those who petition government for redress are generally
immune from antitrust liability,
Eastern Railroad Presidents
Conference v.
Noerr Motor Freight, Inc., 365 U. S. 127, such
immunity is withheld when petitioning activity "ostensibly directed
toward influencing governmental action, is a mere sham to cover ...
an attempt to interfere directly" with a competitor's business
relationships, id., at 144. Petitioner resort hotel operators
(collectively, PRE) rented videodiscs to guests for use with
videodisc players located in each guest's room and sought to
develop a market for the sale of such players to other hotels.
Respondent major motion picture studios (collectively, Columbia),
which held copyrights to the motion pictures recorded on PRE's
videodiscs and licensed the transmission of those motion pictures
to hotel rooms, sued PRE for alleged copyright infringement. PRE
counterclaimed, alleging that Columbia's copyright action was a
mere sham that cloaked underlying acts of monopolization and
conspiracy to restrain trade in violation of §§ 1 and 2 of the
Sherman Act. The District Court granted summary judgment to PRE on
the copyright claim, and the Court of Appeals affirmed. On remand,
the District Court granted Columbia's motion for summary judgment
on PRE's antitrust claims. Because Columbia had probable cause to
bring the infringement action, the court reasoned, the action was
no sham and was entitled to
Noerr immunity. The District
Court also denied PRE's request for further discovery on Columbia's
intent in bringing its action. The Court of Appeals affirmed.
Noting that PRE's sole argument was that the lawsuit was a sham
because Columbia did not honestly believe its infringement claim
was meritorious, the court found that the existence of probable
cause precluded the application of the sham exception as a matter
of law and rendered irrelevant any evidence of Columbia's
subjective intent in bringing suit.
Held:
1. Litigation cannot be deprived of immunity as a sham unless it
is objectively baseless. This Court's decisions establish that the
legality of objectively reasonable petitioning "directed toward
obtaining govern-
50
Syllabus
mental action" is "not at all affected by any anticompetitive
purpose [the actor] may have had."
Id., at 140. Thus,
neither
Noerr immunity nor its sham exception turns on
subjective intent alone. See,
e. g., Al
lied Tube
&
Conduit Corp. v.
Indian Head, Inc., 486 U. S. 492, 503.
Rather, to be a "sham," litigation must meet a two-part definition.
First, the lawsuit must be objectively baseless in the sense that
no reasonable litigant could realistically expect success on the
merits. Only if challenged litigation is objectively meritless may
a court examine the litigant's subjective motivation. Under this
second part of the definition a court should focus on whether the
baseless suit conceals "an attempt to interfere directly" with a
competitor's business relationships,
Noerr, supra, at 144,
through the "use [of] the governmental
processas opposed to
the
outcome of that process-as an anticompetitive weapon,"
Columbia v.
Omni Outdoor Advertising, Inc., 499 U. S. 365, 380. This
two-tiered process requires a plaintiff to disprove the challenged
lawsuit's
legal viability before the court will entertain
evidence of the suit's
economic viability. Pp. 55-61.
2. Because PRE failed to establish the objective prong of
Noerr's sham exception, summary judgment was properly
granted to Columbia. A finding that an antitrust defendant claiming
Noerr immunity had probable cause to sue compels the
conclusion that a reasonable litigant in the defendant's position
could realistically expect success on the merits of the challenged
lawsuit. Here, the lower courts correctly found probable cause for
Columbia's suit. Since there was no dispute over the predicate
facts of the underlying legal proceedings-Columbia had the
exclusive right to show its copyrighted motion pictures publiclythe
court could decide probable cause as a matter of law. A court could
reasonably conclude that Columbia's action was an objectively
plausible effort to enforce rights, since, at the time the District
Court entered summary judgment, there was no clear copyright law on
videodisc rental activities; since Columbia might have won its
copyright suit in two other Circuits; and since Columbia would have
been entitled to press a novel claim, even in the absence of
supporting authority, if a similarly situated reasonable litigant
could have perceived some likelihood of success. Pp. 62-65.
3. The Court of Appeals properly refused PRE's request for
further discovery on the economic circumstances of the underlying
copyright litigation, because such matters were rendered irrelevant
by the objective legal reasonableness of Columbia's infringement
suit. Pp. 65-66.
944 F.2d
1525, affirmed.
THOMAS, J., delivered the opinion of the Court, in which
REHNQUIST,
51
SOUTER, J., filed a concurring opinion,
post, p. 66.
STEVENS, J., filed an opinion concurring in the judgment, in which
O'CONNOR, J., joined,
post, p. 67.
Patrick J.
Coyne argued the cause for petitioners.
With him on the briefs was
James R. Loftis III.
Andrew J.
Pincus argued the cause for
respondents.
With him on the brief were Richard J. Favretto, Roy T. Englert,
Jr., and Stephen A. Kroft. *
JUSTICE THOMAS delivered the opinion of the Court.
This case requires us to define the "sham" exception to the
doctrine of antitrust immunity first identified in
Eastern
Railroad Presidents Conference v.
Noerr Motor Freight,
Inc., 365 U. S.
127 (1961), as that doctrine applies in the litigation context.
Under the sham exception, activity"ostensibly directed toward
influencing governmental action" does not qualify for
Noerr
immunity if it "is a mere sham to cover ... an attempt to interfere
directly with the business relationships of a competitor."
Id., at 144. We hold that litigation cannot be deprived of
immunity as a sham unless the litigation is objectively baseless.
The Court of Appeals for the Ninth Circuit refused to characterize
as sham a lawsuit that the antitrust defendant admittedly had
probable cause to institute. We affirm.
I
Petitioners Professional Real Estate Investors, Inc., and
Kenneth F. Irwin (collectively, PRE) operated La Mancha Private
Club and Villas, a resort hotel in Palm Springs, California. Having
installed videodisc players in the resort's hotel rooms and
assembled a library of more than 200 motion picture titles, PRE
rented videodiscs to guests for in-room
*Solicitor General Starr, Acting Assistant Attorney General
James, Depnty Solicitor General Wallace, Michael R. Dreeben,
Catherine G. O'Sullivan, and James M. Spears filed a brief for the
United States as amicus curiae urging affirmance.
52
viewing. PRE also sought to develop a market for the sale of
videodisc players to other hotels wishing to offer in-room viewing
of prerecorded material. Respondents, Columbia Pictures Industries,
Inc., and seven other major motion picture studios (collectively,
Columbia), held copyrights to the motion pictures recorded on the
videodiscs that PRE purchased. Columbia also licensed the
transmission of copyrighted motion pictures to hotel rooms through
a wired cable system called Spectradyne. PRE therefore competed
with Columbia not only for the viewing market at La Mancha but also
for the broader market for in-room entertainment services in
hotels.
In 1983, Columbia sued PRE for alleged copyright infringement
through the rental of videodiscs for viewing in hotel rooms. PRE
counterclaimed, charging Columbia with violations of §§ 1 and 2 of
the Sherman Act, 26 Stat. 209, as amended, 15 U. S. C. §§ 1-2,1 and
various state-law infractions. In particular, PRE alleged that
Columbia's copyright action was a mere sham that cloaked underlying
acts of monopolization and conspiracy to restrain trade.
The parties filed cross-motions for summary judgment on
Columbia's copyright claim and postponed further discovery on PRE's
antitrust counterclaims. Columbia did not dispute that PRE could
freely sell or lease lawfully purchased videodiscs under the
Copyright Act's "first sale" doctrine, see 17 U. S. C. § 109(a),
and PRE conceded that the playing of videodiscs constituted
"performance" of motion pictures, see 17 U. S. C. § 101 (1988 ed.
and Supp. III). As a result, summary judgment depended solely on
whether rental of videodiscs for in-room viewing infringed
Columbia's exclusive right to
1 Section 1 of the Sherman Act prohibits "[e]very contract,
combination ... , or conspiracy, in restraint of trade or commerce
among the several States." 15 U. S. C. § 1. Section 2 punishes
"[e]very person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States."
53
"perform the copyrighted work[s] publicly." § 106(4). Ruling
that such rental did not constitute public performance, the
District Court entered summary judgment for PRE. 228 USPQ 743 (CD
Cal. 1986). The Court of Appeals affirmed on the grounds that a
hotel room was not a "public place" and that PRE did not "transmit
or otherwise communicate" Columbia's motion pictures.
866 F.2d
278 (CA9 1989). See 17 U. S. C. § 101 (1988 ed. and Supp.
III).
On remand, Columbia sought summary judgment on PRE's antitrust
claims, arguing that the original copyright infringement action was
no sham and was therefore entitled to immunity under
Eastern
Railroad Presidents Conference v.
Noerr Motor Freight, Inc.,
supra. Reasoning that the infringement action "was clearly a
legitimate effort and therefore not a sham," 1990-1 Trade Cases'
68,971, p. 63,242 (CD Cal. 1990), the District Court granted the
motion:
"It was clear from the manner in which the case was presented
that [Columbia was] seeking and expecting a favorable judgment.
Although I decided against [Columbia], the case was far from easy
to resolve, and it was evident from the opinion affirming my order
that the Court of Appeals had trouble with it as well. I find that
there was probable cause for bringing the action, regardless of
whether the issue was considered a question of fact or of law."
Id., at 63,243.
The court then denied PRE's request for further discovery on
Columbia's intent in bringing the copyright action and dismissed
PRE's state-law counterclaims without prejudice.
The Court of Appeals affirmed.
944 F.2d
1525 (CA9 1991). After rejecting PRE's other allegations of
anticompetitive conduct, see id., at 1528-1529,2 the court focused
on
2 The Court of Appeals held that Columbia's alleged refusal to
grant copyright licenses was not "separate and distinct" from the
prosecution of its infringement suit. 944 F. 2d, at 1528. The court
also held that PRE had failed to establish how it could have
suffered antitrust injury from
54
PRE's contention that the copyright action was indeed sham and
that Columbia could not claim
Noerr immunity. The Court of
Appeals characterized "sham" litigation as one of two types of
"abuse of ... judicial processes": either" 'misrepresentations ...
in the adjudicatory process' " or the pursuit of "'a pattern of
baseless, repetitive claims'" instituted "'without probable cause,
and regardless of the merits.'" 944 F. 2d, at 1529 (quoting
California Motor Transport Co. v.
Trucking Unlimited,
404 U. S. 508,
513, 512 (1972)). PRE neither "allege[d] that the [copyright]
lawsuit involved misrepresentations" nor "challenge[d] the district
court's finding that the infringement action was brought with
probable cause, i. e., that the suit was not baseless." 944 F. 2d,
at 1530. Rather, PRE opposed summary judgment solely by arguing
that "the copyright infringement lawsuit [was] a sham because
[Columbia] did not honestly believe that the infringement claim was
meritorious."
Ibid.
The Court of Appeals rejected PRE's contention that "subjective
intent in bringing the suit was a question of fact precluding entry
of summary judgment."
Ibid. Instead, the court reasoned that
the existence of probable cause "preclude[d] the application of the
sham exception as a matter of law" because "a suit brought with
probable cause does not fall within the sham exception to the
Noerr-Pennington doctrine."
Id., at 1531, 1532.
Finally, the court observed that PRE's failure to show that "the
copyright infringement action was baseless" rendered irrelevant any
"evidence of [Columbia's] subjective intent."
Id., at 1533.
It accordingly rejected PRE's request for further discovery on
Columbia's intent.
Columbia's other allegedly anticompetitive acts.
Id., at
1529. Thus, whatever antitrust injury Columbia inflicted must have
stemmed from the attempted enforcement of copyrights, and we do not
consider whether Columbia could have made a valid claim of immunity
for anticompetitive conduct independent of petitioning activity.
Cf.
Continental Ore Co. v.
Union Carbide &
Carbon Corp., 370 U. S. 690,707-708
(1962).
55
The Courts of Appeals have defined "sham" in inconsistent and
contradictory ways.3 We once observed that "sham" might become "no
more than a label courts could apply to activity they deem unworthy
of antitrust immunity." Al
lied Tube &
Conduit
Corp. v.
Indian Head, Inc., 486 U. S. 492, 508, n. 10
(1988). The array of definitions adopted by lower courts
demonstrates that this observation was prescient.
II
PRE contends that "the Ninth Circuit erred in holding that an
antitrust plaintiff must, as a threshold prerequisite
3 Several Courts of Appeals demand that an alleged sham be
proved legally unreasonable. See
McGuire Oil Co. v.
Mapco, Inc., 958 F.2d
1552, 1560, and n. 12 (CAll 1992);
Litton Systems, Inc.
v.
American Telephone &
Telegraph Co., 700 F.2d
785, 809-812
(CA2 1983), cert. denied, 464 U. S. 1073
(1984);
Hydro-Tech Corp. v.
Sundstrand Corp.,
673 F.2d
1171, 1177 (CAW 1982);
Federal Prescription Service,
Inc. v.
American Pharmaceutical Assn., 214 U. S. App. D.
C. 76, 85, 89,
663 F.2d
253, 262, 266 (1981), cert. denied, 455 U. S. 928 (1982). Still
other courts have held that successful litigation by definition
cannot be sham. See,
e. g., Eden Hannon &
Co. v.
Sumitomo Trust &
Banking Co., 914 F.2d
556, 564-565
(CA4 1990), cert. denied, 499 U. S. 947
(1991);
South Dakota v.
Kansas City Southern Industries,
Inc., 880 F.2d
40, 54
(CA8 1989), cert. denied
sub nom. South
Dakota v.
Kansas City Southern R. Co., 493 U. S. 1023
(1990); Columbia Pictures Industries, Inc. v.
Redd Horne,
Inc., 749 F.2d
154, 161
(CA3 1984).
Other Courts of Appeals would regard some meritorious litigation
as sham. The Sixth Circuit treats "genuine [legal] substance" as
raising merely "a
rebuttable presumption" of immunity.
Westmac, Inc. v.
Smith, 797 F.2d
313, 318 (1986) (emphasis added), cert. denied, 479 U. S. 1035
(1987). The Seventh Circuit denies immunity for the pursuit of
valid claims if "the stakes, discounted by the probability of
winning, would be too low to repay the investment in litigation."
Grip-Pak, Inc. v.
Illinois Tool Works, Inc.,
694 F.2d
466, 472 (1982), cert. denied, 461 U. S. 958 (1983). Finally,
in the Fifth Circuit, "success on the merits does not ... preclude"
proof of a sham if the litigation was not "significantly motivated
by a genuine desire for judicial relief."
In re Burlington
Northern, Inc., 822 F.2d
518, 528 (1987), cert. denied
sub nom. Union Pacific R.
Co. v.
Energy Transportation Systems, Inc., 484 U. S.
1007 (1988).
56
... , establish that a sham lawsuit is baseless as a matter of
law." Brief for Petitioners 14. It invites us to adopt an approach
under which either "indifference to ... outcome,"
ibid., or
failure to prove that a petition for redress of grievances "would
... have been brought but for [a] predatory motive," Tr. of Oral
Arg. 10, would expose a defendant to antitrust liability under the
sham exception. We decline PRE's invitation.
Those who petition government for redress are generally immune
from antitrust liability. We first recognized in
Eastern
Railroad Presidents Conference v.
Noerr Motor Freight,
Inc., 365 U. S.
127 (1961), that "the Sherman Act does not prohibit ... persons
from associating together in an attempt to persuade the legislature
or the executive to take particular action with respect to a law
that would produce a restraint or a monopoly."
Id., at 136.
Accord,
Mine Workers v.
Pennington, 381 U. S. 657, 669
(1965). In light of the government's "power to act in [its]
representative capacity" and "to take actions ... that operate to
restrain trade," we reasoned that the Sherman Act does not punish
"political activity" through which "the people ... freely inform
the government of their wishes."
Noerr, 365 U. S., at 137.
Nor did we "impute to Congress an intent to invade" the First
Amendment right to petition.
Id., at 138.
Noerr, however, withheld immunity from "sham" activities
because "application of the Sherman Act would be justified" when
petitioning activity, "ostensibly directed toward influencing
governmental action, is a mere sham to cover ... an attempt to
interfere directly with the business relationships of a
competitor."
Id., at 144. In
Noerr itself, we found
that a publicity campaign by railroads seeking legislation harmful
to truckers was no sham in that the "effort to influence
legislation" was "not only genuine but also highly successful."
Ibid.
In California Motor Transport Co. v. Trucking Unlimited,
404 U. S. 508
(1972), we elaborated on Noerr in two rele-
57
vant respects. First, we extended
Noerr to "the approach
of citizens ... to administrative agencies ... and to courts." 404
U. S., at 510. Second, we held that the complaint showed a sham not
entitled to immunity when it contained allegations that one group
of highway carriers "sought to bar ... competitors from meaningful
access to adjudicatory tribunals and so to usurp that
decisionmaking process" by "institut[ing] ... proceedings and
actions ... with or without probable cause, and regardless of the
merits of the cases."
Id., at 512 (internal quotation marks
omitted). We left unresolved the question presented by this
case-whether litigation may be sham merely because a subjective
expectation of success does not motivate the litigant. We now
answer this question in the negative and hold that an objectively
reasonable effort to litigate cannot be sham regardless of
subjective intent.4
Our original formulation of antitrust petitioning immunity
required that unprotected activity lack objective reasonableness.
Noerr rejected the contention that an attempt "to influence
the passage and enforcement of laws" might lose immunity merely
because the lobbyists' "sole purpose ... was to destroy [their]
competitors." 365 U. S., at 138. Nor were we persuaded by a showing
that a publicity campaign "was intended to and did in fact injure
[competitors] in their relationships with the public and with their
customers," since such "direct injury" was merely "an incidental
effect of the ... campaign to influence governmental action."
Id., at 143.
4
California Motor Transport did refer to the antitrust
defendants' "purpose to deprive ... competitors of meaningful
access to the ... courts." 404 U. S., at 512. See also id., at 515
(noting a "purpose to eliminate ... a competitor by denying him
free and meaningful access to the agencies and courts"); id., at
518 (Stewart, J., concurring in judgment) (agreeing that the
antitrust laws could punish acts intended "to discourage and
ultimately to prevent [a competitor] from invoking" administrative
and judicial process). That a sham depends on the existence of
anticompetitive intent, however, does not transform the sham
inquiry into a purely subjective investigation.
58
We reasoned that "[t]he right of the people to inform their
representatives in government of their desires with respect to the
passage or enforcement of laws cannot properly be made to depend
upon their intent in doing so."
Id., at 139. In short,
"Noerr shields from the Sherman Act a concerted effort to
influence public officials regardless of intent or purpose."
Pennington, 381 U. S., at 670.
Nothing in
California Motor Transport retreated from
these principles. Indeed, we recognized that recourse to agencies
and courts should not be condemned as sham until a reviewing court
has "discern[ed] and draw[n]" the "difficult line" separating
objectively reasonable claims from "a pattern of baseless,
repetitive claims ... which leads the factfinder to conclude that
the administrative and judicial processes have been abused." 404 U.
S., at 513. Our recognition of a sham in that case signifies that
the institution of legal proceedings "without probable cause" will
give rise to a sham if such activity effectively "bar[s] ...
competitors from meaningful access to adjudicatory tribunals and so
... usurp[s] thee] decisionmaking process."
Id., at 512.
Since
California Motor Transport, we have consistently
assumed that the sham exception contains an indispensable objective
component. We have described a sham as "evidenced by repetitive
lawsuits carrying the hallmark of
insubstantial claims."
Otter Tail Power Co. v.
United States, 410 U. S. 366,
380 (1973) (emphasis added). We regard as sham "private action that
is not genuinely aimed at procuring favorable government action,"
as opposed to "a valid effort to influence government action."
Allied Tube &
Conduit Corp. v.
Indian Head,
Inc., 486 U. S., at 500, n. 4. And we have explicitly observed
that a successful "effort to influence governmental action ...
certainly cannot be characterized as a sham."
Id., at 502.
See also
Vendo Co. v.
Lektro- Vend Corp., 433 U. S. 623, 645 (1977)
(BLACKMUN, J., concurring in result) (describing a successful
lawsuit as a "genuine attemp[t] to use the ... adjudicative process
legitimately"
59
rather than "'a pattern of baseless, repetitive claims' ").
Whether applying
Noerr as an antitrust doctrine or invoking
it in other contexts, we have repeatedly reaffirmed that evidence
of anticompetitive intent or purpose alone cannot transform
otherwise legitimate activity into a sham. See,
e. g., FTC
v.
Superior Court Trial Lawyers Assn., 493 U. S. 411, 424
(1990);
NAACP v.
Claiborne Hardware Co., 458 U. S.
886, 913-914 (1982). Cf.
Vendo, supra, at 635-636, n. 6,
639, n. 9 (plurality opinion of REHNQUIST, J.); id., at 644, n.,
645 (BLACKMUN, J., concurring in result). Indeed, by analogy to
Noerr's sham exception, we held that even an "improperly
motivated" lawsuit may not be enjoined under the National Labor
Relations Act as an unfair labor practice unless such litigation is
"baseless."
Bill Johnson's Restaurants, Inc. v.
NLRB,
461 U. S. 731,
743-744 (1983). Our decisions therefore establish that the legality
of objectively reasonable petitioning "directed toward obtaining
governmental action" is "not at all affected by any anticompetitive
purpose [the actor] may have had."
Noerr, 365 U. S., at 140,
quoted in
Pennington, supra, at 669.
Our most recent applications of
Noerr immunity further
demonstrate that neither
Noerr immunity nor its sham
exception turns on subjective intent alone. In
Allied Tube,
supra, at 503, and
FTC v.
Trial Lawyers, supra,
at 424, 427, and n. 11, we refused to let antitrust defendants
immunize otherwise unlawful restraints of trade by pleading a
subjective intent to seek favorable legislation or to influence
governmental action. Cf.
National Collegiate Athletic Assn.
v.
Board of Regents of Univ. of Okla., 468 U. S. 85, 101, n. 23
(1984) ("[G]ood motives will not validate an otherwise
anticompetitive practice"). In
Columbia v.
Omni Outdoor
Advertising, Inc., 499 U. S. 365 (1991), we
similarly held that challenges to allegedly sham petitioning
activity must be resolved according to objective criteria. We
dispelled the notion that an antitrust plaintiff could prove a sham
merely by showing that its competitor's "purposes were to delay
[the
60
plaintiff's] entry into the market and even to deny it a
meaningful access to the appropriate ... administrative and
legislative fora."
Id., at 381 (internal quotation marks
omitted). We reasoned that such inimical intent "may render the
manner of lobbying improper or even unlawful, but does not
necessarily render it a 'sham.'"
Ibid. Accord,
id.,
at 398 (STEVENS, J., dissenting).
In sum, fidelity to precedent compels us to reject a purely
subjective definition of "sham." The sham exception so construed
would undermine, if not vitiate,
Noerr. And despite whatever
"superficial certainty" it might provide, a subjective standard
would utterly fail to supply "real 'intelligible guidance.'"
Allied Tube, supra, at 508, n. 10.
III
We now outline a two-part definition of "sham" litigation.
First, the lawsuit must be objectively baseless in the sense
that no reasonable litigant could realistically expect success on
the merits. If an objective litigant could conclude that the suit
is reasonably calculated to elicit a favorable outcome, the suit is
immunized under
Noerr, and an antitrust claim premised on
the sham exception must fail.5 Only if challenged litigation is
objectively meritless may a court examine the litigant's subjective
motivation. Under this second part of our definition of sham, the
court should focus on whether the baseless lawsuit conceals "an
attempt to inter-
5 A winning lawsuit is by definition a reasonable effort at
petitioning for redress and therefore not a sham. On the other
hand, when the antitrust defendant has lost the underlying
litigation, a court must "resist the understandable temptation to
engage in
post hoc reasoning by concluding" that an
ultimately unsuccessful "action must have been unreasonable or
without foundation."
Christiansburg Garment Co. v.
EEOC, 434 U.
S. 412, 421-422 (1978). Accord,
Hughes v.
Rowe,
449 U. S. 5, 14-15
(1980)
(per curiam). The court must remember that "[e]ven
when the law or the facts appear questionable or unfavorable at the
outset, a party may have an entirely reasonable ground for bringing
suit."
Christiansburg, supra, at 422.
61
fere
directly with the business relationships of a
competitor,"
Noerr, supra, at 144 (emphasis added), through
the "use [of] the governmental
process-as opposed to the
outcome of that process-as an anticompetitive weapon,"
Omni, 499 U. S., at 380 (emphasis in original). This
two-tiered process requires the plaintiff to disprove the
challenged lawsuit's
legal viability before the court will
entertain evidence of the suit's
economic viability. Of
course, even a plaintiff who defeats the defendant's claim to
Noerr immunity by demonstrating both the objective and the
subjective components of a sham must still prove a substantive
antitrust violation. Proof of a sham merely deprives the defendant
of immunity; it does not relieve the plaintiff of the obligation to
establish all other elements of his claim.
Some of the apparent confusion over the meaning of "sham" may
stem from our use of the word "genuine" to denote the opposite of
"sham." See
Omni, supra, at 382;
Allied Tube, 486 U.
S., at 500, n. 4;
Noerr, supra, at 144;
Vendo Co. v.
Lektro- Vend Corp., supra, at 645 (BLACKMUN, J., concurring
in result). The word "genuine" has both objective and subjective
connotations. On one hand, "genuine" means "actually having the
reputed or apparent qualities or character." Webster's Third New
International Dictionary 948 (1986). "Genuine" in this sense
governs Federal Rule of Civil Procedure 56, under which a "genuine
issue" is one "that properly can be resolved only by a finder of
fact because [it] may
reasonably be resolved in favor of
either party."
Anderson v.
Liberty Lobby, Inc.,
477 U. S. 242,
250 (1986) (emphasis added). On the other hand, "genuine" also
means "sincerely and honestly felt or experienced." Webster's
Dictionary,
supra, at 948. To be sham, therefore, litigation
must fail to be "genuine" in both senses of the word.6
6 In surveying the "forms of illegal and reprehensible practice
which may corrupt the administrative or judicial processes and
which may result in antitrust violations," we have noted that
"unethical conduct in the setting of the adjudicatory process often
results in sanctions" and that "[m]is-
62
IV
We conclude that the Court of Appeals properly affirmed summary
judgment for Columbia on PRE's antitrust counterclaim. Under the
objective prong of the sham exception, the Court of Appeals
correctly held that sham litigation must constitute the pursuit of
claims so baseless that no reasonable litigant could realistically
expect to secure favorable relief. See 944 F. 2d, at 1529.
The existence of probable cause to institute legal proceedings
precludes a finding that an antitrust defendant has engaged in sham
litigation. The notion of probable cause, as understood and applied
in the common-law tort of wrongful civil proceedings,7 requires the
plaintiff to prove that the defendant lacked probable cause to
institute an unsuccessful civil lawsuit and that the defendant
pressed the action for an improper, malicious purpose.
Stewart v.
Sonneborn, 98 U. S. 187, 194 (1879);
Wyatt v.
Cole, 504 U. S. 158, 176 (1992)
(REHNQUIST, C. J., dissenting); T. Cooley, Law of Torts *181. Cf.
Wheeler v.
Nesbitt, 24 How. 544, 549-550 (1861)
(related tort for malicious prosecution of criminal charges).
Probable cause to institute civil proceedings requires no more than
a "reasonabl[e] belie[f] that there is a chance that [a] claim
representations, condoned in the political arena, are not
immunized when used in the adjudicatory process."
California
Motor Transport, 404 U. S., at 512-513. We need not decide here
whether and, if so, to what extent
Noerr permits the
imposition of antitrust liability for a litigant's fraud or other
misrepresentations. Cf. Fed. Rule Civ. Proc. 60(b)(3) (allowing a
federal court to "relieve a party ... from a final judgment" for
"fraud ... , misrepresentation, or other misconduct of an adverse
party");
Walker Process Equipment, Inc. v.
Food
Machinery &
Chemical Corp., 382 U. S. 172, 176-177
(1965); id., at 179-180 (Harlan, J., concurring).
7This tort is frequently called "malicious prosecution," which
(strictly speaking) governs the malicious pursuit of
criminal proceedings without probable cause. See W. Keeton,
D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Torts §
120, p. 892 (5th ed. 1984). The threshold for showing probable
cause is no higher in the civil context than in the criminal. See
Restatement (Second) of Torts § 674, Comment
e, pp. 454-455
(1977).
63
may be held valid upon adjudication" (internal quotation marks
omitted).
Hubbard v.
Beatty &
Hyde, Inc.,
343 Mass. 258, 262, 178 N. E. 2d 485, 488 (1961); Restatement
(Second) of Torts § 675, Comment
e, pp. 454-455 (1977).
Because the absence of probable cause is an essential element of
the tort, the existence of probable cause is an absolute defense.
See
Crescent City Live Stock Co. v.
Butchers' Union
SlaughterHouse Co., 120 U. S. 141, 149
(1887);
Wheeler, supra, at 551;
Liberty Loan Corp. of
Gadsden v.
Mizell, 410 So. 2d 45, 48 (Ala. 1982). Just
as evidence of anticompetitive intent cannot affect the objective
prong of
Noerr's sham exception, a showing of malice alone
will neither entitle the wrongful civil proceedings plaintiff to
prevail nor permit the factfinder to infer the absence of probable
cause.
Stewart, supra, at 194;
Wheeler, supra, at
551; 2 C. Addison, Law of Torts § 1, , 853, pp. 67-68 (1876); T.
Cooley,
supra, at *184. When a court has found that an
antitrust defendant claiming
Noerr immunity had probable
cause to sue, that finding compels the conclusion that a reasonable
litigant in the defendant's position could realistically expect
success on the merits of the challenged lawsuit. Under our decision
today, therefore, a proper probable-cause determination irrefutably
demonstrates that an antitrust plaintiff has not proved the
objective prong of the sham exception and that the defendant is
accordingly entitled to
Noerr immunity.
The District Court and the Court of Appeals correctly found that
Columbia had probable cause to sue PRE for copyright infringement.
Where, as here, there is no dispute over the predicate facts of the
underlying legal proceeding, a court may decide probable cause as a
matter of law.
Crescent, supra, at 149;
Stewart,
supra, at 194;
Nelson v.
Miller, 227 Kan. 271,
277, 607 P. 2d 438, 444 (1980);
Stone v.
Crocker, 41
Mass. 81, 84-85 (1831); J. Bishop, Commentaries on NonContract Law
§ 240, p. 96 (1889). See also
Director General of Railroads
v.
Kastenbaum, 263 U. S. 25, 28 (1923)
("The question is not whether [the defendant] thought the facts
to
64
constitute probable cause, but whether the court thinks they
did"). Columbia enjoyed the "exclusive righ[t] ... to perform [its]
copyrighted" motion pictures "publicly." 17 U. S. C. § 106(4).
Regardless of whether it intended any monopolistic or predatory
use, Columbia acquired this statutory right for motion pictures as
"original" audiovisual "works of authorship fixed" in a "tangible
medium of expression." § 102(a)(6). Indeed, to condition a
copyright upon a demonstrated lack of anticompetitive intent would
upset the notion of copyright as a "limited grant" of "monopoly
privileges" intended simultaneously "to motivate the creative
activity of authors" and "to give the public appropriate access to
their work product."
Sony Corp. of America v.
Universal
City Studios, Inc., 464 U. S. 417, 429
(1984).
When the District Court entered summary judgment for PRE on
Columbia's copyright claim in 1986, it was by no means clear
whether PRE's videodisc rental activities intruded on Columbia's
copyrights. At that time, the Third Circuit and a District Court
within the Third Circuit had held that the rental of video
cassettes for viewing in on-site, private screening rooms infringed
on the copyright owner's right of public performance.
Columbia
Pictures Industries, Inc. v.
Redd Horne, Inc., 749 F.2d
154 (1984);
Columbia Pictures Industries, Inc. v.
Aveco, Inc., 612 F. Supp. 315 (MD Pa. 1985), aff'd,
800 F.2d
59 (1986). Although the District Court and the Ninth Circuit
distinguished these decisions by reasoning that hotel rooms offered
a degree of privacy more akin to the home than to a video rental
store, see 228 USPQ, at 746; 866 F. 2d, at 280-281, copyright
scholars criticized both the reasoning and the outcome of the Ninth
Circuit's decision, see 1 P. Goldstein, Copyright: Principles, Law
and Practice § 5.7.2.2, pp. 616-619 (1989); 2 M. Nimmer & D.
Nimmer, Nimmer on Copyright §8.14[C][3], pp. 8-168 to 8-173 (1992).
The Seventh Circuit expressly "decline[d] to follow" the Ninth
Circuit and adopted instead the Third Circuit's definition of a
"public place."
Video
65
Views, Inc. v.
Studio 21,
Ltd., 925 F.2d
1010, 1020, cert. denied, 502 U. S. 861 (1991). In light of the
unsettled condition of the law, Columbia plainly had probable cause
to sue.
Any reasonable copyright owner in Columbia's position could have
believed that it had some chance of winning an infringement suit
against PRE. Even though it did not survive PRE's motion for
summary judgment, Columbia's copyright action was arguably
"warranted by existing law" or at the very least was based on an
objectively "good faith argument for the extension, modification,
or reversal of existing law." Fed. Rule Civ. Proc. 11. By the time
the Ninth Circuit had reviewed all claims in this litigation, it
became apparent that Columbia might have won its copyright suit in
either the Third or the Seventh Circuit. Even in the absence of
supporting authority, Columbia would have been entitled to press a
novel copyright claim as long as a similarly situated reasonable
litigant could have perceived some likelihood of success. A court
could reasonably conclude that Columbia's infringement action was
an objectively plausible effort to enforce rights. Accordingly, we
conclude that PRE failed to establish the objective prong of
Noerr's sham exception.
Finally, the Court of Appeals properly refused PRE's request for
further discovery on the economic circumstances of the underlying
copyright litigation. As we have held, PRE could not pierce
Columbia's
Noerr immunity without proof that Columbia's
infringement action was objectively baseless or frivolous. Thus,
the District Court had no occasion to inquire whether Columbia was
indifferent to the outcome on the merits of the copyright suit,
whether any damages for infringement would be too low to justify
Columbia's investment in the suit, or whether Columbia had decided
to sue primarily for the benefit of collateral injuries inflicted
through the use of legal process. Contra,
Grip-Pak, Inc. v.
Illinois Tool Works, Inc., 694 F.2d
466, 472 (CA7 1982), cert. denied, 461 U. S. 958 (1983). Such
matters concern Colum-
66
SOUTER,~,concurring
bia's economic motivations in bringing suit, which were rendered
irrelevant by the objective legal reasonableness of the litigation.
The existence of probable cause eliminated any "genuine issue as to
any material fact," Fed. Rule Civ. Proc. 56(c), and summary
judgment properly issued.
We affirm the judgment of the Court of Appeals.
So ordered.
JUSTICE SOUTER, concurring.
The Court holds today that a person cannot incur antitrust
liability merely by bringing a lawsuit as long as the suit is not
"objectively baseless in the sense that no reasonable litigant
could realistically expect success on the merits."
Ante, at
60. The Court assumes that the District Court and the Court of
Appeals were finding this very test satisfied when they concluded
that Columbia's suit against PRE for copyright infringement was
supported by "probable cause," a standard which, as the Court
explains it in this case, requires a "reasonabl[e] belie[f] that
there is a chance that [a] claim may be held valid upon
adjudication."
Ante, at 62-63 (internal quotation marks
omitted). I agree that this term, so defined, is rightly read as
expressing the same test that the Court announces today; the
expectation of a reasonable litigant can be dubbed a "reasonable
belief," and realistic expectation of success on the merits can be
paraphrased as "a chance of being held valid upon
adjudication."
Having established this identity of meaning, however, the Court
proceeds to discuss the particular facts of this case, not in terms
of its own formulation of objective baselessness, but in terms of
"probable cause." Up to a point, this is understandable; the Court
of Appeals used the term "probable cause" to represent objective
reasonableness, and it seems natural to use the same term when
reviewing that court's conclusions. Yet as the Court acknowledges,
ante, at 63, since there is no dispute over the facts
underlying the suit
67
at issue here, the question whether that suit was objectively
baseless is purely one of law, which we are obliged to consider
de novo. There is therefore no need to frame the question in
the Court of Appeals's terms. Accordingly, I would prefer to put
the question in our own terms, and to conclude simply that, on the
undisputed facts and the law as it stood when Columbia filed its
suit, a reasonable litigant could realistically have expected
success on the merits.
My preference stems from a concern that other courts could read
today's opinion as transplanting every substantive nuance and
procedural quirk of the common-law tort of wrongful civil
proceedings into federal antitrust law. I do not understand the
Court to mean anything of the sort, however, any more than I
understand its citation of Rule 11 of the Federal Rules of Civil
Procedure, see
ante, at 65, to signal the importation of
every jot and tittle of the law of attorney sanctions. Rather, I
take the Court's use of the term "probable cause" merely as
shorthand for a reasonable litigant's realistic expectation of
success on the merits, and on that understanding, I join the
Court's opinion.
JUSTICE STEVENS, with whom JUSTICE O'CONNOR joins, concurring in
the judgment.
While I agree with the Court's disposition of this case and with
its holding that "an objectively reasonable effort to litigate
cannot be sham regardless of subjective intent,"
ante, at
57, I write separately to disassociate myself from some of the
unnecessarily broad dicta in the Court's opinion. Specifically, I
disagree with the Court's equation of "objectively baseless" with
the answer to the question whether any "reasonable litigant could
realistically expect success on the merits." 1 There might well be
lawsuits that fit the latter defi-
1
Ante, at 60. See also
ante, at 62: "[S]ham
litigation must constitute the pursuit of claims so baseless that
no reasonable litigant could realistically expect to secure
favorable relief";
ante, at 60: "If an objective litigant
could conclude that the suit is reasonably calculated to elicit a
favorable
68
STEVENS, J., concurring in judgment
nition but can be shown to be objectively
unreasonable,
and thus shams. It might not be objectively reasonable to bring a
lawsuit just because some form of success on the meritsno matter
how insignificant-could be expected.2 With that possibility in
mind, the Court should avoid an unnecessarily broad holding that it
might regret when confronted with a more complicated case.
As the Court recently explained, a "sham" is the use of "the
governmental
process-as opposed to the
outcome of
that process-as an anticompetitive weapon."
Columbia v.
Omni Outdoor Advertising, Inc., 499 U. S. 365, 380
(1991). The distinction between abusing the judicial process to
restrain competition and prosecuting a lawsuit that, if successful,
will restrain competition must guide any court's decision whether a
particular filing, or series of filings, is a sham. The label
"sham" is appropriately applied to a case, or series of cases, in
which the plaintiff is indifferent to the outcome of the litigation
itself, but has nevertheless sought to impose a collateral harm on
the defendant by, for example, impairing his credit, abusing the
discovery process, or interfering with his access to governmental
agencies. It might also apply to a plaintiff who had some reason to
expect success on the merits but because of its tremendous cost
would not bother to achieve that result without the benefit of
collateral inju-
outcome, the suit is immunized under
Noerr .... " But see
ante, at 62:
"The existence of probable cause to institute legal proceedings
precludes a finding that an antitrust defendant has engaged in sham
litigation." And see
ante, at 65: "Columbia's copyright
action was arguably 'warranted by existing law'" under the
standards of Federal Rule of Civil Procedure 11. These varied
restatements of the Court's new test make it unclear whether it is
willing to affirm the Court of Appeals by any of these standards
individually, or by all of them together.
2 The Court's recent decision in
Farrar v.
Hobby,
506 U. S. 103
(1992) makes me wonder whether "10 years of litigation and two
trips to the Court of Appeals" to recover "one dollar from one
defendant," id., at 116 (O'CONNOR, J., concurring), would qualify
as a reasonable expectation of "favorable relief" under today's
opinion.
69
ries imposed on its competitor by the legal process alone.
Litigation filed or pursued for such collateral purposes is
fundamentally different from a case in which the relief sought in
the litigation itself would give the plaintiff a competitive
advantage or, perhaps, exclude a potential competitor from entering
a market with a product that either infringes the plaintiff's
patent or copyright or violates an exclusive franchise granted by a
governmental body.
The case before us today is in the latter, obviously legitimate,
category. There was no unethical or other improper use of the
judicial system; instead, respondents invoked the federal court's
jurisdiction to determine whether they could lawfully restrain
competition with petitioners. The relief they sought in their
original action, if granted, would have had the anticompetitive
consequences authorized by federal copyright law. Given that the
original copyright infringement action was objectively
reasonable-and the District Court, the Court of Appeals, and this
Court all agree that it was-neither the respondents' own measure of
their chances of success nor an alleged goal of harming petitioners
provides a sufficient basis for treating it as a sham. We may
presume that every litigant intends harm to his adversary;
moreover, uncertainty about the possible resolution of unsettled
questions of law is characteristic of the adversary process. Access
to the courts is far too precious a right for us to infer
wrongdoing from nothing more than using the judicial process to
seek a competitive advantage in a doubtful case. Thus, the Court's
disposition of this case is unquestionably correct.
I am persuaded, however, that all, or virtually all, of the
Courts of Appeals that have reviewed similar claims (involving a
single action seeking to enforce a property right) would have
reached the same conclusion. To an unnecessary degree, therefore,
the Court has set up a straw man to justify its elaboration of a
two-part test describing all potential shams. Of the 10 cases cited
by the Court as evidence of
70
STEVENS, J., concurring in judgment
widespread confusion about the scope of the "sham" exception to
the doctrine of
Eastern Railroad Presidents Conference v.
Noerr Motor Freight, Inc., 365 U. S. 127 (1961), and
Mine Workers v.
Pennington, 381 U. S. 657 (1965), see
ante, at 55, n. 3, 5 share three important characteristics
with this case: The alleged injury to competition was defined by
the prayer for relief in the antitrust defendant's original action;
there was no unethical conduct or collateral harm "external to the
litigation or to the result reached in the litigation"; 3 and there
had been no series of repetitive claims. Each of those courts
concluded, as this Court does today, that allegations of subjective
anticompetitive motivation do not make an otherwise reasonable
lawsuit a sham.4
In each of the five other cases cited by the Court, the
plaintiff alleged antitrust violations more extensive than the
filing of a single anticompetitive lawsuit. In three of those cases
the core of the alleged antitrust violation lay in the act of
petitioning the government for relief: One involved the repetitive
filing of baseless administrative claims,5 another in-
30mni Resource Development Corp. v. Conoco, Inc.,
739 F.2d
1412, 1414 (CA9 1984) (Kennedy, J.).
4 See
McGuire Oil Co. v.
Mapco, Inc., 958 F.2d
1552 (CA111992) (unsuccessful action to enjoin alleged
violations of Alabama's Motor Fuel Marketing Act not a sham);
Hydro-Tech Corp. v.
Sundstrand Corp., 673 F.2d
1171 (CAW 1982) (unsuccessful action alleging misappropriation
of trade secrets not a sham);
Eden Hannon &
Co.
v.
Sumitomo Trust &
Banking Co.,
914 F.2d
556 (CA41990) (successful action imposing constructive trust on
profits derived from breach of nondisclosure agreement not a sham);
Columbia Pictures Industries, Inc. v.
Redd Horne,
Inc., 749 F.2d
154 (CA3 1984) (successful copyright infringement not a sham);
South Dakota v.
Kansas City Southern Industries,
Inc., 880 F.2d
40 (CA8 1989) (successful action to enjoin breach of
contract not a sham; the court was careful to point out, however,
that success does not "categorically preclude a finding of sham."
Id., at 54, n. 30).
5
Litton Systems, Inc. v.
American Telephone &
Telegraph Co., 700 F. 2d
785 (CA2 1983), cert.
denied, 464 U. S. 1073 (1984). The Second Circuit found that
AT&T's continued filing of administrative tariffs long
after
71
volved extensive evidence of anticompetitive motivation behind
the lawsuit that followed an elaborate and unsuccessful lobbying
effort,6 and in the third a collateral lawsuit was only one of the
many ways in which the antitrust defendant had allegedly tried to
put the plaintiff out of business.7 In each
those claims had become objectively unreasonable supported a
jury's sham finding. AT&T's anti competitive actions were in
fact so far removed from the act of petitioning the government for
relief that Chief Judge Oakes and Judge Meskill also held, in
reliance on
Continental Ore Co. v.
Union Carbide
&
Carbon Corp., 370 U. S. 690 (1962), and
Cantor v.
Detroit Edison Co., 428 U. S. 579 (1976)
(plurality opinion), that tariff filings with the Federal
Communications Commission were acts of private commercial activity
in the marketplace rather than requests for governmental action,
and thus were not even arguably protected by the
Noerr-Pennington doctrine.
Litton Systems, 700 F. 2d,
at 806-809.
6
Westmac, Inc. v.
Smith, 797
F.2d 313 (CA6 1986), cert. denied, 479 U. S. 1035
(1987). Although the Sixth Circuit did hold that the genuine
substance of an anticompetitive lawsuit creates a rebuttable
presumption of objective reasonableness, given the facts of that
case-in which the antitrust plaintiff had presented strong evidence
that the defendants' lawsuit, which followed a long and
unsuccessful lobbying effort, had been motivated solely for the
anticompetitive harm the judicial process would inflict on it-that
modest reservation was probably wise. Evidence of anticompetitive
animus in
Westmac was in fact so great that Chief Judge
Merritt thought that the plaintiff
had successfully rebutted
the presumptive reasonableness of defendants' lawsuit. The delay
from the defendants' combined lobbying and litigation attack had
allegedly sent the plaintiff into bankruptcy, and memos from one
defendant to its attorney had stated, "'If this [lobbying activity]
doesn't succeed, start a lawsuitbonds won't sell,'" 797 F. 2d, at
318, and (in a statement repeated to a codefendant), "'if nothing
else, we'll delay sale of the bonds,'" id., at 322 (Merritt, C. J.,
dissenting) (emphasis omitted). In any event, the Sixth Circuit
rule-to the extent that it would apply in a case as simple as this
one-would result in the same conclusion we reach here.
7
Federal Prescription Service, Inc. v.
American
Pharmaceutical Assn., 214 U. S. App. D. C. 76,
663 F.2d
253 (1981), cert. denied, 455 U. S. 928 (1982). In that case,
the antitrust plaintiff alleged a 2-decade long conspiracy to
lobby, boycott, and sue it (in state licensing boards, state
legislatures, the marketplace, and both state and federal courts)
out of existence. In spite of those allegations, the Court of
Appeals found that
72
STEVENS, J., concurring in judgment
of these cases the court showed appropriate deference to our
opinions in
Noerr and
Pennington, in which we held
that the act of petitioning the government (usually in the form of
lobbying) deserves especially broad protection from antitrust
liability. The Court can point to nothing in these three opinions
that would require a different result here. The two remaining
cases-in which the Courts of Appeals did state that a successful
lawsuit could be a sham-did not involve lobbying, but did contain
much broader and more complicated allegations than petitioners
presented below.8 Like the three opinions described above, these
decisions should not be expected to offer guidance, nor be blamed
for spawning confusion, in a case alleging that the filing of a
single lawsuit violated the Sherman Act.
Even in this Court, more complicated cases, in which, for
example, the alleged competitive injury has involved something more
than the threat of an adverse outcome in a single
the defendant's actions, which primarily consisted in lobbying
for the abolition of plaintiff's mail-order prescription business,
were immune under
Noerr-Pennington.
sIn
Grip-Pak, Inc. v.
Illinois Tool Works, Inc.,
694 F.2d
466 (1982) (Posner, J.), cert. denied, 461 U. S. 958 (1983),
the antitrust defendant's alleged violations of several provisions
of the Sherman and Clayton Acts included much more than the filing
of a single lawsuit; they encompassed a broad scheme of
monopolizing the entire relevant market by: purchasing patents;
threatening to file many other, patently groundless lawsuits;
acquiring a competitor; dividing markets; and filing a fraudulent
patent application. In
In re Burlington Northern, Inc.,
822 F.2d
518 (CA5 1987), cert. denied, 484 U. S. 1007 (1988), the
plaintiffs alleged, and produced evidence to support their theory,
that the defendant had filed suit solely to cause them a delay of
crippling expense, and the defendants had either brought or
unsuccessfully defended a succession of related lawsuits involving
plaintiff's right to compete. In both of these cases the Courts of
Appeals ably attempted to balance strict enforcement of the
antitrust laws with possible abuses of the judicial process. That
they permitted some reliance on subjective motivation-as even we
have done in cases alleging abuse of judicial process, see
California Motor Transport Co. v.
Trucking Unlimited,
404 U. S. 508,
513-518 (1972)-is neither surprising nor relevant in a case
involving no such allegations.
73
lawsuit, have produced less definite rules. Repetitive filings,
some of which are successful and some unsuccessful, may support an
inference that the process is being misused.
California Motor
Transport Co. v.
Trucking Unlimited, 404 U. S. 508
(1972). In such a case, a rule that a single meritorious action can
never constitute a sham cannot be dispositive. Moreover, a simple
rule may be hard to apply when there is evidence that the judicial
process has been used as part of a larger program to control a
market and to interfere with a potential competitor's financing
without any interest in the outcome of the lawsuit itself, see
Otter Tail Power Co. v.
United States, 410 U. S. 366, 379, n. 9
(1973);
Westmac, Inc. v.
Smith, 797
F.2d 313, 322 (CA6 1986) (Merritt, C. J., dissenting). It is in
more complex cases that courts have required a more sophisticated
analysis-one going beyond a mere evaluation of the merits of a
single claim.
In one such case Judge Posner made the following observations
about the subtle distinction between suing a competitor to get
damages and filing a lawsuit only in the hope that the expense and
burden of defending it will make the defendant abandon its
competitive behavior:
"But we are not prepared to rule that the difficulty of
distinguishing lawful from unlawful purpose in litigation between
competitors is so acute that such litigation can never be
considered an actionable restraint of trade, provided it has some,
though perhaps only threadbare, basis in law. Many claims not
wholly groundless would never be sued on for their own sake; the
stakes, discounted by the probability of winning, would be too low
to repay the investment in litigation. Suppose a monopolist brought
a tort action against its single, tiny competitor; the action had a
colorable basis in law; but in fact the monopolist would never have
brought the suit-its chances of winning, or the damages it could
hope to get if it did win, were too small compared to what it would
have to spend on the litigation-except that it wanted to
74
STEVENS, J., concurring in judgment
use pretrial discovery to discover its competitor's trade
secrets; or hoped that the competitor would be required to make
public disclosure of its potential liability in the suit and that
this disclosure would increase the interest rate that the
competitor had to pay for bank financing; or just wanted to impose
heavy legal costs on the competitor in the hope of deterring entry
by other firms. In these examples the plaintiff wants to hurt a
competitor not by getting a judgment against him, which would be a
proper objective, but just by the maintenance of the suit,
regardless of its outcome. See
City of Gainesville v.
Florida Power &
Light Co., 488 F. Supp. 1258,
1265-66 (S.D. Fla. 1980).
"Some students of antitrust law would regard all of our examples
of anticompetitive litigation as fanciful, and in all the
evidentiary problems of disentangling real from professed motives
would be acute. Concern with the evidentiary problems may explain
why some courts hold that a single lawsuit cannot provide a basis
for an antitrust claim (see Fischel,
Antitrust Liability for
Attempts to Influence Government Action: The Basis and Limits of
the Noerr-Pennington Doctrine, 45 U. Chi. L. Rev. 80, 109-10
(1977))-an issue we need not face here since three improper
lawsuits are alleged, and it can make no difference that they were
not all against Grip-Pak. Still, we think it is premature to hold
that litigation, unless malicious in the tort sense, can never be
actionable under the antitrust laws. The existence of a tort of
abuse of process shows that it has long been thought that
litigation could be used for improper purposes even when there is
probable cause for the litigation; and if the improper purpose is
to use litigation as a tool for suppressing competition in its
antitrust sense, see, e. g.,
Products Liability Ins. Agency,
Inc. v.
Crum &
Forster Ins. Cos., 682 F.2d
660, 663-64 (7th Cir. 1982), it becomes a matter of antitrust
concern. This is
75
not to say that litigation is actionable under the antitrust
laws merely because the plaintiff is trying to get a monopoly. He
is entitled to pursue such a goal through lawful means, including
litigation against competitors. The line is crossed when his
purpose is not to win a favorable judgment against a competitor but
to harass him, and deter others, by the process itself-regardless
of outcome-of litigating. The difficulty of determining the true
purpose is great but no more so than in many other areas of
antitrust law." Grip-Pak, Inc. v. Illinois Tool Works,
Inc., 694 F.2d
466, 472 (1982).
It is important to remember that the distinction between "sham"
litigation and genuine litigation is not always, or only, the
difference between lawful and unlawful conduct; objectively
reasonable lawsuits may still break the law. For example, a
manufacturer's successful action enforcing resale price maintenance
agreements,9 restrictive provisions in a license to use a patent or
a trademark,lO or an equipment lease,l1 may evidence, or even
constitute, violations of the antitrust laws. On the other hand,
just because a sham lawsuit has grievously harmed a competitor does
not necessarily mean that it has violated the Sherman Act. See
Spectrum Sports, Inc. v.
McQuillan, 506 U. S. 447, 455-459
(1993). The rare plaintiff who successfully proves a sham must
still satisfy the exacting elements of an antitrust demand. See
ante, at 61.
In sum, in this case I agree with the Court's explanation of why
respondents' copyright infringement action was not "objectively
baseless," and why allegations of improper sub-
9 Dr. Miles Medical Co. v. John D. Park & Sons Co.,
220 U. S. 373 (1911);
Schwegmann Brothers v. Calvert Distillers Corp.,
341 U. S. 384 (1951).
10 Timken Roller Bearing Co. v. United States,
341 U. S. 593 (1951);
Farbenfabriken Bayer A. G. v. Sterling Drug, Inc.,
307 F.2d
207 (CA3 1962).
11 International Salt Co. v. United States,
332 U. S. 392 (1947);
United Shoe Machinery Corp. v. United States,
258 U. S. 451 (1922).
76
STEVENS, J., concurring in judgment
jective motivation do not make such a lawsuit a "sham." I would
not, however, use this easy case as a vehicle for announcing a rule
that may govern the decision of difficult cases, some of which may
involve abuse of the judicial process. Accordingly, I concur in the
Court's judgment but not in its opinion.
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