Full opinion text
AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW CHRISTENSEN, Senior District Judge (Assigned). GENERAL Finding 1. This case involves the electronic data processing industry — an industry based upon a concept and system of reckoning (binary) as simple as turning on and off a switch; in which transmissions are timed in billionths of seconds (nano-seconds), storage capacity (memory), measured by millions of combinations of bits of information (megabytes) ; in which numerous problems involving logic or arithmetic functions are separately but simultaneously worked upon and instantly solved within a single system; in which in their own peculiar language machines communicate with one another (multiprocessing) and then in words understandable by humans may present printouts of results at the rate of as much as 2,000 lines per minute; in which devices facilitate maintenance by the detection and isolation of their own malfunctions or mistakes (diagnostic programs); upon which most other industries of the country and countless businesses, as well as science and space explorations, vitally depend; in which product and market developments seem almost kaleidoscopic when viewed from the outside; which appears unique in monopoly context by reason of its youth and apparent dynamics, but which by the same token in this ultramodern setting- may be unprecedented also because of increased inducements for,' and vulnerability to, sophisticated submarket control on the one hand, and massive industrial espionage on the other. STATEMENT OF THE CASE — PRELIMINARY PROCEEDINGS F2. This is an action brought by the Telex Corporation and Telex Computer Products, Inc. (“Telex”) against the International Business Machines Corporation (“IBM”) in pursuance of Section 4 of the Clayton Act (15 U.S.C. § 15) to recover treble damages for alleged violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and Section 2 of the Clayton Act, 15 U.S.C. § 13. IBM counterclaimed against Telex for alleged unfair competition, theft of trade secrets and copyright infringement in reliance upon state law and 17 U.S.C. § 101 with reference to the infringement of copyrights. F3. Telex’s initial complaint was filed on January 21, 1972, in the United States District Court for the Northern District of Oklahoma (Action No. 72-C-18), alleging IBM’s monopolization of, and attempts to monopolize, the worldwide manufacture, distribution, sale and leasing of electronic data processing equipment since 1954, and seeking damages in the amount of $238,290,000, trebled, injunctive relief, attorneys’ fees, and costs. With the consent of the parties the issues and discovery for the purpose of these proceedings were limited to the United States. F4. Concurrently with the filing of its complaint Telex moved before the Judicial Panel on Multidistrict Litigation (JPML) in the matter entitled “In re IBM Antitrust Litigation”, Docket No. 18, to transfer its case to the United States District Court for the District of Minnesota for coordinated and consolidated pre-trial proceedings with Control Data Corporation v. International Business Machines Corporation, 3-68 Civ. 312, and Greyhound Computer Corporation v. International Business Machines Corporation, 3-70 Civ. 329 (N.D.Ill. 70C 2203), both of which were then pending in that court. On February 1, 1972, Telex amended its complaint to describe in more detail its monopolization claims relative to the manufacture, distribution, sale and leasing of plug compatible peripheral products which could be attached to an IBM central processing unit. On February 25, 1972, Telex’s motion to consolidate was argued before the JPML. F5. On March 15, 1972, while its motion for consolidation was pending before the JPML, Telex filed a second complaint in the Northern District of Oklahoma (Action No. 72-C-89) alleging that IBM had violated Section 2 of the Sherman Act (15 U.S.C. § 2) by announcing its “Fixed Term Plan” in May of 1971 and its “Extended Term Plan” on March 1, 1972. Telex sought a temporary restraining order and preliminary injunction from the Oklahoma court. On April 19, 1972, the JPML issued orders transferring the Telex actions to the Minnesota court, Telex Corp. v. International Business Machines, Inc., D.C., 342 F.Supp. 200 (1972), and Honorable Philip Neville, United States District Judge for the District of Minnesota, was assigned to handle complicated discovery and other matters preliminary to trials. Under his able supervision millions of documents were discovered or exchanged and photographed, and various procedural rulings made. On June 12, 1972, Telex filed a supplement to its complaint, alleging violations of the antitrust laws by IBM in the then soon-to-be-announced IBM System 370/168 and 370/158 central processing units (CPU) with integrated CPU memory and integrated disk control circuitry and a lower priced incremental memory. Telex sought injunctive relief preventing IBM from integrating any memory or disk control circuitry into its System 370 central processing units and from lowering its prices for memory incremental to the CPU memory. F6. On July 21, 1972, in partial response to a motion by Telex, the Minnesota court granted a temporary restraining order enjoining IBM from making any announcement of its 370/168 and 370/158 central processing units until the Minnesota court’s decision on Telex’s pending motion for preliminary injunction was entered. IBM sought relief from the Minnesota court's action in the Court of Appeals for the Eighth Circuit (Docket No. 72-1447) both by way of appeal and extraordinary writ. That court on July 28, 1972, determined that the temporary restraining order entered by the Minnesota court was tantamount to the issuance of a preliminary injunction because it exceeded the ten day limitation set forth in Fed.R.Civ.P. 65(b). The Telex Corporation v. International Business Machines Corporation, 464 F.2d 1025 (8th Cir. 1972). It was ordered that the preliminary injunction be dissolved because the district court had made no findings relative to the ultimate probable success of Telex on the merits or on Telex’s claim of irreparable injury. On July 28, 1972, Telex moved for a second temporary restraining order to be limited to ten days. That motion was denied on August 1, 1972. On October 6, 1972, the Minnesota court, after the submission of affidavits, evidentiary appendices and briefs, denied Telex’s motion for a preliminary injunction as well as IBM’s motion for summary judgment. After extensive pre-trial discovery on both sides in the Minnesota proceedings, Telex finally amended its complaint on January 2, 1973, to demand damages in the amount of $416,100,000, trebled, and on January 8, 1973, filed an amended consolidated complaint. F7. Telex moved on January 9, 1973, that its cases be remanded to the Northern District of Oklahoma for trial. On January 10, 1973, the case was assigned to this Judge for final pre-trial preparation and trial. Telex’s remand motion was granted on January 15, 1973, and as of that date, subject to the Minnesota district court’s retention of jurisdiction on certain privilege issues, which have now been finally resolved, this court obtained jurisdiction of these proceedings. On January 22, 1973, IBM answered Telex’s amended consolidated complaint and filed two counterclaims — one alleging unfair competition and theft of IBM trade secrets, and the second alleging Telex’s infringement of IBM copyrighted manuals. F8. Pre-trial conferences were held before this court on February 20, March 30, and April 13, 1973. At the final pre-trial conference a jury, previously demanded on both complaints and the counterclaims, was waived by both sides. This court entered a final pre-trial order, based largely upon the March 30 conference, on April 12, 1973, which enumerated in detail the contentions of the parties, stipulated and disputed factual matters, the documentary evidence intended to be offered, and the witnesses to be called by the respective parties. F9. Trial commenced on April 16, 1973, and the record was closed on May 24, 1973, after 29 days devoted to the taking of evidence. The expedition of the case consistent with full, fair and vigorous presentations was due in important measure to the ability, organizational talent, diligence and experience of counsel, together with the routine informal conferences held each morning before the convening of court among court and counsel where evidentiary problems were anticipated, presented and explored and the management of proceedings was otherwise charted from day to day. A brief post-trial conference was held on May 25, 1973. The parties submitted their separate proposed findings of fact and conclusions of law in compliance with the request of the court, and on June 18 and 19, 1973, oral arguments were had. Whereupon the case was submitted for decision and by the court was taken under advisement. On September 17, 1973, findings of fact, conclusions of law and judgment and decree were filed. On October 16-18, 1973, timely post-judgment motions for correction and amendment thereof were argued to the court and submitted for decision on supplemental briefs. The court, now deeming itself fully advised, makes the following amended Findings of Fact in addition to the statement of the case and proceedings set out above, and the minute stipulated facts not set out, including but not limited to the (i) Stipulation of Background Facts Concerning the Electronic Data Processing Industry, the Products, the Industry, the Parties and the Issues, dated March 23, 1973, (ii) Stipulation of Fact No. 2, dated April 12, 1973, (iii) Stipulation of Fact No. 3,'dated April 7, 1973, and (iv) Defendant’s Exhibit 1662 (an exhibit compiling plaintiffs’ admissions introduced at trial), but incorporated herein by reference since there is no contest with respect to them. I THE PARTIES F10. International Business Machines Corporation (IBM) was incorporated on February 24, 1924, and maintains its principal place of business in a state other than the State of Oklahoma where plaintiffs are incorporated and maintain their principal places of business. Before its entry into the electronic data processing (EDP) industry, IBM manufactured punched card accounting machines and other products. In addition to its EDP business, IBM develops, manufactures and markets other business machines including copiers, dictating equipment, and electric typewriters. IBM has been deeply involved in the phenomenal growth of the electronic data processing industry since almost the beginning of the industry. IBM’s first EDP system offered for sale was the IBM 701. The first IBM 701 was completed in April of 1953 and was intended primarily for scientific work in connection with nuclear research. The first IBM computer intended for commercial work was the IBM 702, which was installed in early 1955. Fll. The Telex Corporation was incorporated in February, 1963. It is the successor to Telex, Inc., which was incorporated in May, 1940. Since at least 1959 Telex has been manufacturing products which have been used by electronic data processing equipment manufacturers as part of their equipment. F12. Because of the success of IBM’s System 360, certain companies such as Telex entered into the marketing of devices functionally equivalent to IBM devices. The devices marketed by Telex and others plugged into and replaced parts of the System 360. In 1966 Telex began to market replacements for the magnetic tape devices which were part of IBM’s System 360 computers. Before the receipt of a contract with DuPont to replace DuPont’s installed second-generation IBM magnetic tape devices, Telex had been conducting engineering development work to modify the Telex Model M3000 — a magnetic tape drive then being marketed by Telex to other EDP equipment manufacturers— to provide an appropriate electronic interface to attach to an IBM central processing unit (CPU). An interface is a shared boundary between electronic data processing machines, or more accurately between the channels or physical pathways connecting those machines, through which data or programs may be transmitted, received, stored or processed. After receipt of the DuPont contract, the work was completed and the equipment delivered in August, 1966. The Telex-developed machine was designed with an electronic interface to work in conjunction with an IBM CPU. It was designated as Telex’s Model 4700. In late 1966, additional 4700’s were installed at Lockheed Aircraft and at Electronic Business Service (AMI). The total engineering cost for designing the electronic interface necessary to adapt Telex’s tape drive for use with IBM equipment was $42,000. F13. In May, 1969, Telex began to market replacements for IBM’s disk drives. Telex does not manufacture but purchases the disk drives and disk drive controllers from another company. In November, 1970, Telex announced that it would begin marketing a printer and a printer controller. The printer mechanism is not manufactured by Telex but is purchased from Control Data Corporation. Telex manufactures some of the printer electronics and the printer controller. In November, 1971, Telex announced it would offer a replacement for the memory or main storage used with certain IBM systems. In November, 1971, Telex announced a 6360 memory for attachment to IBM Systems 370/155 and 370/165. That memory was first delivered in November of 1972. Telex purchases the parts of the memories from various corporations. It assembles the parts and markets the final product. As of January 26, 1973, Telex had installed two memories. In November, 1971, Telex announced a 6345 memory for attachment to an IBM System 370/145. Telex has not yet delivered any 6345 memories. Telex has recently advertised its intention to announce a memory for attachment to IBM Systems 370/168 and 370/158. Telex’s forecast for first customer delivery for these products is the fourth quarter of 1973. F14. Telex has never announced or delivered a “communications controller” but is presently developing a plug compatible communication controller equivalent to IBM’s 3705. Telex has negotiated an agreement with Hitachi, a Japanese corporation, under which Telex will engage in a joint development effort to develop a .CPU compatible with IBM’s System 370 and competitive with System 370 Models 135 and .145. No final decision has yet been made as to the actual manufacturing and marketing of such a product. F15. In the aspect of its business relating to the marketing of EDP products to IBM end-users, Telex in the past has had a company policy generally of following IBM’s product leadership and subordinating any technological product innovation. Telex products are designed as the functional equivalent of previously announced IBM products, except for whatever technological advances Telex is able to introduce because of the later announcements of its products. Telex’s plug compatible tape drives, disk drives and printers have had better performance in some respects than IBM’s corresponding products. F16. Since entering the EDP indusr try and up to 1971, Telex reported a phenomenal growth in revenues. Its revenues from EDP products and services sold to customers within the United States as reported in the “census” rose from $870,000 in fiscal 1967 to $56,-840,000 in fiscal 1971. II THE INDUSTRY F17. The electronic data processing (EDP) industry is a young and dynamic one ranking high in importance among the industries of the nation. The first commercially built EDP system — the Univac I — was delivered in 1951 to the Bureau of the Census. The demand for EDP products and services as indicated by the revenue of companies responding to the court census has grown from $48 million in 1952 to $10.2 billion in 1970. F18. Electronic data processing is employed by government and major producers of goods and services throughout the country to make their operations more efficient and to provide new and better products and services. The scientific community has used and is continuing increasingly to use electronic data processing extensively. The kinds and types of available products, equipment or services used are determined by the applications for which there is a need and the available resources to meet the need. Examples of electronic data processing applications are almost as numerous as business and scientific applications: The computer can keep track of enormous numbers of people who have made reservations with the various airlines and tell passenger reservation agents when planes are full. EDP systems control many manufacturing processes and almost entire factories, monitor patients with severe heart disease in hospitals, and control some navigational systems on airplanes. Such systems are used in printing newspapers, controlling traffic lights, guiding ships, navigating and controlling space missions, and even in designing other computers. Less dramatic but widespread are day by day business applications affecting the lives and fortunes of almost every individual in the country in one way or another. There has been a marked increase in the sophistication of EDP customers in the last few years. Immediate purchasers of EDP products and services are most often large institutions such as the United States government, universities, or large industrial organizations. Most of the EDP systems are installed in the five hundred largest governmental and business organizations. Many professional consultants offer assistance in the design of EDP systems and the procurement of EDP products and services, thus enabling smaller users to make more knowledgeable decisions concerning their EDP needs. •F19. Dramatically increasing demands for EDP products and services and the needs of EDP users have resulted in a rapid growth in the number of companies which offer EDP products and services and in a variety of products and services which are offered to accomplish the data processing needs of users. Many different kinds of companies have been attracted to the EDP industry. The number of companies responding to the census and reporting EDP revenue in each year from 1952 to 1970 has grown from 13 to 1773, a growth in number of more than 136 times in eighteen years. According to the census, the number of companies which manufacture and market a complete EDP system has grown from 3 in 1952 to 96 in 1972, but only 8 or 9 of these companies are considered in the trade as principal systems manufacturers. Thesé include IBM, Univac (Sperry Rand), Burroughs, Control Data Corp., General Electric, Honeywell, RCA, XDS (Xerox), NCR, and Digital Equipment Corporation (DEC). Recently RCA and GE have gone out of the systems business. The products and systems formerly manufactured and marketed by RCA and GE remain in the market and are now being maintained, serviced and remarketed by Honeywell and Sperry Rand. As a result Honeywell and Sperry Rand probably have been strengthened and their ability to compete with IBM enhanced by their acquisition of the computer operations of RCA and GE. F20. Spurred additionally by the su-cess of IBM’s System 360, manufacturers of certain peripheral devices began in 1966 to market to end-users products which were functionally equivalent to certain IBM System 360 devices. The equipment of these companies “replaced” IBM devices and utilized all the system’s support and services provided by IBM. in 1966 Telex, and shortly thereafter other independent manufacturers, began manufacturing and operating magnetic tape drives which were functionally equivalent to IBM magnetic tape drives and which could be “plugged” into, and thus were “plug compatible” to IBM central processing units. The end-user customer of an IBM computer system then had the option to use an IBM tape drive or to use one made by a “plug compatible manufacturer” (PCM). Peripheral equipment manufacturers have expanded their peripheral product lines, moved into the leasing of complete EDP systems, and certain of those companies, including Telex, Memorex and Mohawk Data Sciences, are now expanding, or considering expanding, into the manufacture and marketing of their own central processing units. F21. In the mid-1960’s leasing companies began purchasing computer products from IBM, which they then leased to computer end-users. These companies purchased $2.6 billion worth of IBM’s 360 computer hardware for which IBM received its full retail price and corresponding profit. Leasing companies typically purchase an installed IBM computer system and then lease it to the existing end-user at a rate less than IBM charges for its identical products. When an initial lease ends and the machine leaves the first end-user’s shop, the leasing company owner remarkets the "used” equipment when possible. During the late 1960’s a substantial quantity of the initial leases relating to the $2.6 billion worth of IBM 360 computer equipment mentioned above were expiring and during the late 1960’s and early 1970’s leasing companies were engaged in remarketing that EDP equipment. Another type of leasing company transaction involves the purchase of plug compatible tape and disk drives from PCM’s after they are installed and on rent in an end-user’s location. This type of transaction is primarily a method of financing and the leasing company depends upon the manufacturer to market and service the product. F22. A service bureau owns or leases computer products and/or services and then performs data processing services for customers for a fee. The customer can get data processed by this method without owning or leasing any specific EDP “hardware” or “software”. A time-sharing company is one that installs a terminal facility in the customer’s business location; the terminal is connected to the time-sharing company’s computer system via telephone communication lines. The end-user can then time-share the computer system by means of the remote terminal for a fee. A data center is an establishment having a computer installation which permits customer personnel to operate the computer equipment for a fee. Software houses prepare and market computer programs or instructions designed to cause the central processor and peripheral products to perform their required functions. Examples are instructions that will cause data from input devices to be transferred to storage devices, to be retrieved when needed, then processed in a usable form. Facilities management companies, or system engineering consultants, such as Computer Usage Corporation, provide the customer with systems engineering and design services as well as services for the actual operation of the end-user’s computer facilities. F23. The speed, reliability and capacity of computer products have increased greatly since 1952. One of IBM's CPU’s the 370/168 (announced but as yet undelivered) when compared to the Univac I will have 700 times the storage capacity of Univac I, and it will execute additions 4,300 times faster, multiplication 3,100 times faster, and division 2,000 times faster. The data transfer rate of current tape drives is 40 times greater than that of the earliest tape drives used with the Univac I. Memory technology has increased cycle speed of main memory devices a thousandfold since 1952. Electronic circuitry improvement permits products to be made today which were difficult to conceive a few years ago. Speed, capacity and reliability have improved, while power requirements have dropped. Ill THE NATURE OF ELECTRONIC DATA PROCESSING F24. Electronic data processing (EDP) is the conversion of words, letters, numbers or combinations of words,, letters and numbers, or other types of data, into electronical signals; the data is then collected, stored, sorted, analyzed, compared or computed. The “hardware” products and “software" programs that perform these functions are often referred to collectively as a computer system, or simply as a computer. Computing may involve both simple and complicated calculations, or the storing and sorting of large amounts of data. An example of the complicated calculations of computers is the work done at the Manned Spacecraft Center which links computer systems throughout the United States to computers on board spacecrafts to perform large numbers of precise, complicated calculations. An example of storing, sorting and comparing large amounts of information is an airlines passenger reservation system, or a warehouse inventory system. F25. An EDP system consists of products which perform five basic functions. These are “processing”, “storage”, “input”, “output” and “control”. Input is the entering of data into storage. The input devices convert data from an “ordinary” language form (i. e., English and numbers) to “machine” language or electronic signals which are then understandable to a computer. Output is the opposite. Output devices convert the “machine” language or electronic signals to the output form desired, such as printed or typed in humanly understandable language on paper, recorded on magnetic tape or magnetic disk, punched as a hole in a punched card, or displayed on a television-like screen. Output devices can also be used to open or close a valve,, or to transfer electrical impulses to another computer system. Storage of data is accomplished in either the main memory or some type of auxiliary storage. F26. Main memory is the storage from which data are transferred to the processor and to which data are returned in their processed form. Auxiliary storage is the storage from which data are interchanged with the main memory for processing, temporary transfer, or more permanent storage. Auxiliary storage is usually accomplished in some one or more of the following: Large core storage (LCS), data cells, magnetic drums, magnetic disk devices, magnetic tape devices, paper tape devices and punch’ cards. The type of auxiliary storage used is dependent upon the applications and needs of the customer with reference to the stored data. F27. The processing function is the computation or performance of logical operations. These logical operations involve additions, subtractions, and comparisons. The logic is composed of simple steps done rapidly to achieve the ultimate results. A control function enables a computer system to perform a large number of consecutive instructions. The control function can usually understand or evaluate the various operations as they are concluded and perform alternate operations without human intervention based upon such evaluation. The control function directs and coordinates the operation of the various products making up the system and can be performed by a combination of hardware, microprogramming and software. Programs are sequences of instructions which tell the various devices what to do. Programs are also referred to as software. ■ F28. A modern computer system is composed of a variety of individual devices each of which usually performs a different function that may be needed to perform a particular needed application. The user may select from various products the particular combination of individual devices and software which will solve the customer’s data handling needs, taking into consideration the economics and applications involved. The user’s choice of alternative devices may depend upon trade-offs among price, capacity, speed, flexibility, space requirements, and the number, kind and priority of applications to be performed and users to be serviced, but inherent are various limitations of function and application which as a practical matter most often dictate a particular device for a particular application. F29. Individual input/output products include teletype machines, typewriter terminals, television-like displays which use cathode ray tubes, card punches and punched card readers, magnetic tape drives and magnetic disk drives. There, are also devices which read magnetic characters or optical characters such as those on checks, and there are devices which read coded tags on merchandise. When used in stores, these devices automatically record the sale, bill the customer, and remind the store to reorder. F30. Printers perform an output function. Like a typewriter terminal, a printer converts electrical signals into printed characters and numbers. Printers, however, operate at much higher speeds than typewriter terminals. Mechanical impact printers operate at up to 2,000 lines per minute while electrostatic printers which operate similar to copying. machines, can operate at higher rates. There are special purpose printers used to produce graphs, charts, drawings and maps. Other output devices produce microfilm. These are called computer output microfilm, or COM, devices. F31. Products which perform a storage function include magnetic core arrays, semiconductor circuitry, magnetic tape drives, magnetic strip files, magnetic drums, and magnetic disk drives. All these devices, except the semiconductor circuitry, store data by converting electrical signals into a .magnetized recording that can be reconverted into electronic signals. A magnetic recording is permanent in that it remains when electric power is “off”, but the semiconductor circuit loses its stored data when the electric power is “off”. F32. The CPU is generally where most of the logical functions or calculations are performed. Controllers, channels, peripheral processors and multiplexors are smaller processors designed for a particular use, and when used permit a more efficient use to be made of the central processor by speeding up interchanges of data and making preliminary or intermediate computations for relay to the CPU. F33. EDP products are built from electronic and electromechanical components. The components include electronic circuits, devices for converting electrical impulses to magnetic, devices for converting magnetic impulses to electrical, devices for converting electrical current to mechanical movement, as well as cables, connectors, metal frames and various power and cooling elements. The most numerous physical parts of an EDP system are the electronic circuits. Electricity, as used in a computer, essentially has only two states or conditions —it is either “on” or “off” as is the case of an electric light. By combining electronic switches which are on or off, computing can be done if “on” equals 1 and “off” equals 0. Different combinations and sequences of l’s and 0’s then can be used to represent all numbers and all letters. When electronic data processing began, each electronic circuit was made up of a vacuum tube, such as is used in radio or television, plus wires and resistors. The development of transistors in the 1950’s allowed the vacuum tubes to be replaced by transistors. F34. IBM was an early user of the transistor in its EDP systems. IBM built its own factories to make transistors. The use of transistors made possible the reduction of size, cost and power requirements of an EDP system and increased reliability and speed. This allowed the construction of EDP systems of greater capacity and operational speed and expanded the number and types of applications for which such equipment could be used. As work continued on the refinement of the transistor at places like Bell Laboratories, Texas Instruments, Motorola, Fairchild, and IBM ways were found to combine the various components making up an electronic circuit into a single chip, which is now about % inch square. This chip is called an “integrated circuit”. In the 1960’s, IBM as well as others began to build EDP systems using integrated circuits. This allowed a further reduction in size, a further increase in reliability, a further increase in speed and a further reduction in cost. Work at IBM and other places has led to the continual miniaturization of the circuits. It became possible to produce multiple circuits on a chip. This was referred to first as “medium-scale integration” and later, as the number of circuits increased, “large-scale integration”. In the latest EDP equipment, components are in use which have more than two thousand circuits on a single silicon chip % inch square. Under development in IBM and other laboratories are chips containing 16,000 circuits. Moreover, there are under development processes which, it is believed, will produce chips with 64,000 circuits or more. IV RELEVANT MARKET F35. In determining whether there is monopoly power to control prices or exclude competitors in any part or line of commerce, the court is required to consider a relevant market or markets within which such determination can be made. Manifestly, the electronic data processing market in general is one relevant to such an inquiry. But the fact that monopoly power may not exist on the part of any company within that general market as a whole does not end but only begins the inquiry in this case. It should also be noted that we are not primarily concerned with prior or subsequent years, but that in view of the issues of this case a determination must be made as to the relevant market or markets in the period 1969-1972, timing also being an important element here because of the youth and dynamics of the market and its various developmental stages over the years. It is recognized that a purely transitory condition could be so brief or insubstantial as to be de minimis or immaterial in appraising market power; but it must also be recognized that in a real sense every market condition may be temporary in the perspective of historical development, and yet the policy of the antitrust laws does not permit the unlawful application of monopoly power against competition to its damage over a substantial period even though, if competitors could hang on for a time, technological or other developments might change the competitive situation for the better. F36. Telex asserts that in the period mentioned IBM possessed monopoly market power in the general systems (CPU) “relevant market’’, in the market for peripheral devices plug compatible with IBM CPU’s, and in the “relevant sub-markets” for magnetic tape products, direct access storage products, memory products, impact printer products, and communication controllers that were plug compatible with an IBM CPU. IBM claims that it had no monopoly power in any such general markets and that submarkets did not exist because competition in the EDP industry was primarily on a systems basis, and that the relevant market consisted of EDP systems and the products which make up such systems and the companies which provide alternatives to such systems. IBM further claims that even if one were to limit the focus to particular parts of a system, such as peripherals, the relevant market must include all peripheral products, not just those currently attached to IBM systems. It is further contended by IBM that once the decision is reached that the relevant market should include peripherals attached to competitive systems, as well as those attached to IBM systems, it does not make any difference with respect to IBM’s share whether the market is limited to such peripherals or is broadened to include all products which make up systems. IBM further claims that even if “plug compatible” tapes, disks, printers, communications controllers, and memories did constitute separate sub-markets, if the decision were made to include disks or any of the other products attached to known IBM systems, as well as those attached to other than IBM systems, IBM’s share of each of these submarkets would be well below the level that would support any inference of market power. F37. The potential general market toward which the efforts of both companies seem directed, with the progressive broadening of Telex’s base and the technological and industrial developments in prospect, appears substantially the same, and the real issue is whether that market may be realistically subdivided in the time frame 1969-1972 to focus on and encompass only those parts of current product lines which are respectively attached to IBM systems, rather than all those products which actually have similar uses in connection with other systems ; although, with respect to the claimed attempt to monopolize, these distinctions may not be critical. By definition every manufacturer has 100% of its own product. Thus, where a hopeful competitor first offers a product as a substitute for the original, the originat- or typically will continue to have a large share of that product. So, likewise, in the EDP industry each manufacturer of systems normally has a large percentage of the peripheral equipment, which is part of its system. By this token a systems manufacturer has 100% of the peripherals attached to its new system until someone begins to copy some or all of these peripherals or designs others to take their place on a plug compatible basis. It is an oversimplification to say, however, that under Telex’s market definition theory, as soon as someone begins (or perhaps even plans or thinks about) copying a part of a new system, as IBM argues, the manufacturer of that system becomes a monopolist and has an obligation not to cut prices or do anything else that might reduce the profitability of the copier. The record in this case shows that peripheral devices attached to IBM equipment but manufactured or supplied by others during the relevant period have grown into, and have been recognized as, a significant, distinct and important part of the EDP industry. Again, for the particular period mentioned, we are not dealing with mere theory but with a historic, economic fact, transitory or otherwise. The question persists, however, whether such suggested subdivisions of the industry can properly be regarded as relevant markets or submarkets within which economic power can be separately appraised. A related dilemma must be avoided by at once precluding the unreasonable fragmentations of markets and preventing the monopolization of separately competitive components while a whole industry is thus subverted part by part. F38. Peripheral products constitute an important part of a data processing system, accounting for 50-75% of the price of the system. Such products are critical to the performance of the system as a whole. It cannot be gainsaid that indirectly at least and to some degree the peripheral products attached to non-IBM systems necessarily compete with and constrain IBM’s power with respect to peripherals attached to IBM systems. The quality and price/performance of the peripherals attached to a system are a substantial factor in a customer’s choice between competing systems, and if for example IBM failed to improve the price/performance of its peripherals, customers might choose systems (including peripherals) of other systems manufacturers. For example, the IBM Merlin (3330) disk drive was believed by IBM to be a critical factor to the competitive price/performance of the 370 systems 135, 145, 155, 158, 165 and 168. The 3330 was therefore announced in June of 1970 at a price/performance designed to make IBM more competitive with both systems manufacturers and peripheral equipment manufacturers. The Court finds that the document entitled “Listing of Manufacturers of Plug Compatible Products, The Products Offered and the Systems Manufacturers for Whose Systems the Products are Offered” (attached to “IBM’s Response to Some of Telex’s Proposed Findings of Fact and Conclusions of Law Relating to Telex’s Antitrust Claims” dated June 15, 1973) is a summary of the details there stated. Peripheral pricing and product announcements of one systems supplier influence subsequent peripheral pricing and product announcements of other systems suppliers, although it may be difficult to identify any given competitive price cut or product improvement as a reaction to a single competitive act. Many companies, including Telex, which manufacture or market peripheral equipment for attachment to IBM CPU’s also manufacture or market equipment for attachment to non-IBM CPU’s, but to a substantially lesser extent. Moreover, suppliers of peripherals plug compatible with non-IBM systems could in various instances shift to the production of IBM plug compatible peripherals, and vice versa, should the economic rewards in the realities of the market become sufficiently attractive and if predatory practices of others did not dissuade them. In the absence of defensive tactics on the part of manufacturers of CPU’s, the cost of developing an interface for a peripheral device would generally be about the same regardless of the system to which it would be attached, and such cost has not constituted a substantial portion of the development cost of the peripheral device. F39. In this extraordinary industry dominated as it has been by IBM’s influence, neither theoretical relationships nor technological similarities supply the full answer to the relevant market problem. In the realities of the marketplace, as recognized and acted upon by IBM as well as by the plaintiffs and their customers, it must be determined (a) whether plaintiffs’ concept of relevant markets keyed peculiarly to devices plug compatible with IBM CPU’s is sound, and (b) whether there is sufficient demand or supply interchangeability, sub-stitutability or flexibility as to render indistinct or ineffectual the lines dividing the submarkets relied upon by plaintiffs as among themselves or as between them and general EDP systems. A differentiation between the IBM plug compatible peripheral market in general and submarkets involving particular types of such peripherals seems not so critical, since it appears likely that IBM’s market power would not significantly vary as between them. F40. IBM and other systems manufacturers design, develop, manufacture and market system solutions to data processing problems on a systems basis primarily, although with respect to particular applications the suitability of particular peripheral equipment may be emphasized. In designing a system, IBM and other systems manufacturers must design the boxes comprising the system, the configuration of boxes in the system to provide the best solution to a particular set of requirements, the system software essential or helpful for the operation of the hardware generally, and the particular applications software to perform the customer’s special applications. The reliability and predictability of the system involve the hardware, software and the personnel maintaining and operating the system. There are significant expenses involved in designing systems so that the various boxes can be integrated into different configurations and combinations. There are a number of other systems development costs not easily identifiable because of difficulty in segregating an engineer’s time between developing a particular unit and working on its integration into a system. Similarly, systems marketing costs are hard to define because of the difficulty of separating the time a salesman spends configuring a system from his other activities. Particularly with respect to new customers, systems manufacturers offer a substantial amount of EDP education, which is essential in order to market systems. Systems development and marketing costs are allocated across all of IBM’s products and are included in the pricing of those products. Some customers can perform completely their own systems integration work in view of the level of sophistication among them, but others rely upon IBM or other systems suppliers to do this work and to provide systems control programs. Telex and other peripheral manufacturers do not incur substantial systems development and systems marketing costs in connection with their plug compatible business, nor could they market their products for attachment to IBM systems without IBM system software to which is devoted about 30% of IBM’s annual development cost. Thus there are practical and logical difficulties in serving the peripheral market from the systems market. F41. It is true also as a generalization that to a substantial degree each of the different functions of a system can be and is performed by a variety of devices and that users not infrequently can choose among different devices which make up an EDP system on the basis of priee/performance and the particular applications desired. This interchangeability, however, is between particular peripheral devices for particular applications, and in and of itself does not render particular devices a necessary part of a systems market. Rather, it raises the question whether all or a portion of the peripheral devices are a part of the market for peripheral devices. Merely because there are alternate ways of storing data in an EDP system, each of which competes to a degree with others in various applications, does not mean that it is appropriate to consider storage products such as tapes, disks and memories and their substitutes as a part of the systems market rather than part of a peripheral device market. F42. Devices which perform a storage or memory function include core arrays, semiconductor circuitry, magnetic tape drives, magnetic strip files, magnetic drums, and magnetic disk drives. Each of these devices has a different operational speed and a different cost and, depending upon the needs and budget of the user, each can be used in structuring the computer in different ways to: a limited extent. Constrained by particular applications, needs and objectives, these devices compete with one another in a limited sense and in some applications users can employ different devices interchangeably. An EDP user might “trade off”, for example, the higher performance of memory for the lower price of disks in certain applications, whereas for other applications disks and tapes could perform similar functions and be used interchangeably. A user -might trade off the higher performance of magnetic disks or drums for the lower price of magnetic tapes on some applications, and in general, but still in a limited sense, users may have price/performance alternatives or trade-offs among disk drives, memory, tape drives, the tape library, the vault, the disk pack, etc. in configuring any total EDP system. In a limited sense, too, certain storage devices such as memory are interchangeable with the CPU itself, users choosing between larger or faster CPU’s with relatively small amounts of memory and smaller or slower CPU’s with relatively large amounts of memory; and in certain instances CPU’s function as peripheral devices, and peripheral devices or parts of peripheral devices have similarity to CPU’s. Terminals which perform input and output functions also have processing functions, storage functions and control functions. Intelligent terminals perform processing functions otherwise performed by communications controllers or central processing units. Most magnetic core storage, magnetic tape drives, magnetic disk drives and magnetic drums contain some processing control functions. Printers, like Telex’s 5848, can also perform processing storage functions with a controller and magnetic tape drives.. F43. The users also choose between terminals, printers and computer output microfilm devices as various means of accomplishing an output function depending upon the various needs and applications involved. Special kinds of printers, called plotters, can be used to produce graphs, charts or drawings, and even maps. Other types of printers called computer output microfilm (COM) devices produce microfilm. A teletype is one kind of slow speed printer. Other kinds of printers include drum printers, which can be slow or high speed (from 300 to over 1000 lines per minute), chain printers and train printers. Less expensive slow speed printers are alternatives to more expensive higher speed printers. Terminals are also used to perform output functions. Electrical signals are converted into words and numbers on a display screen or typed on a roll of paper. Many terminals also have processing functions, storage functions and control functions. Computer output mireofilm may be a direct competitor to printers because of relative hardware costs as well as cost of paper versus cost of microfilm, and some customers have replaced or are replacing printers with COM equipment on a price/performance basis. F44. An essential element of any electronic data processing system is the control function. In large portion the control function is performed by software or programming. The cost of developing operating system software is substantial and competition in the supply of better operating systems necessarily affects the price a manufacturer can charge for its EDP systems. But it is true only in the superficial sense that software can be used as a direct substitute for hardware, although cost of certain hardware or the extent of its necessity may be affected by the software. F45. Some suppliers of peripheral devices can and do become suppliers of systems and the suppliers of full systems can and do supply peripheral devices plug compatible to the CPU’s of other manufacturers in some instances. Suppliers of peripheral devices, including Telex, either have planned or are considering movement to full systems. Texas Instruments, which began as a supplier of components for EDP and other electronic purposes, now markets the world’s fastest CPU, and Memorex, which began as a supplier of peripheral devices, announced two full EDP systems in 1972. Suppliers of full systems, including IBM, can and in some instances do provide peripheral devices for use with the systems of other manufacturers either directly to end-users or to other system manufacturers. Manufacturers of CPU’s and peripherals use to a substantial degree the same technology, making it technologically practical given time, funds and personnel, to switch from one to the other. In the long range this potential “supply substituta-bility” has had and will have substantial effect upon the development of the market and upon trends of competition, but during the period with which we are concerned supply substitutability was a minimal factor in the marketplace as a constraint upon pricing. It was a fact of economic life in the industry that new technological developments and new entries into the market were continuing, but the primary factor which governed the pricing of peripherals for entrance into the peripheral market was the demand elasticity or the substitutability of immediately available products in connection with the needs and applications of users. F46. Computer equipment is different than used automobiles because when properly maintained such equipment generally performs as well today as it did when new, subject to repair and subject to obsolescence through technological advances. Various end-users view leasing companies as a competitive alternative and in many instances may substitute leasing company equipment for installed IBM equipment. Telex itself leases full systems to users, including IBM CPU’s, and purchases certain peripheral equipment from other manufacturers and remarkets it to end-users. Service bureaus, time-sharing companies and data centers are also used by customers to a degree as alternatives to acquiring new or additional EDP systems. An EDP user may obtain his own equipment, may have his data processing done by establishments such as service bureaus, data centers and time sharing companies, or he may purchase time from another user. Some EDP end-users consider service bureaus, data centers and time purchased from other users as practical alternatives to acquiring new equipment. But with respect to peripheral equipment to be added to or integrated with IBM CPU systems, these alternatives have not provided substantial constraints on IBM’s product and pricing decisions. F47. Systems manufacturers offer central processing units and peripheral products which are electronically compatible to each other. The peripheral products designed to be compatible with one manufacturer’s central processing unit are not interchangeable or attachable to the central processing units of another manufacturer without modification of their interfaces. As a practical matter, there is no direct or box for box competition between IBM’s peripherals and the peripherals of other systems manufacturers, and in order to replace IBM peripherals with the peripherals of another system manufacturer, the user must first replace his IBM central processing unit. The only box for box peripheral competition of any substantiality has been and is between IBM and the plug compatible manufacturers (PCM’s). IBM’s Systems competitors were not directly affected by IBM’s pricing and product actions for peripherals and made no competitive price responses to IBM’s 2319A and B and Fixed Term Plan (FTP) price reductions for its peripheral products. After FTP, IBM’s Systems competitors were not mentioned in any of IBM’s FTP tracking documents as having cut or reduced their price for any of their products. Time sharing companies, service bureaus, and data centers, were not directly affected by IBM’s price and product actions for peripherals, and after 2319A and B and FTP made little if any competitive pricing responses to IBM's peripheral price reductions. F48. IBM markets its product by both lease and sale. All sales to end-users or leasing companies are at IBM’s full retail price. IBM determines its retail sale prices by establishing a monthly rental multiple for the product that is equivalent to the number of months of rent that IBM reasonably expects to receive for that product. The rental-sale multiple for each machine may be different — based on the estimate of product life. When IBM is paid the full economic value of a product sold, it expects the product to be used for its full product life. Peripheral products separately leased by other companies or by IBM are not numerous, and leasing companies most generally lease systems or a combination of peripherals and CPU’s. There is a substantial amount of IBM equipment owned by leasing companies. The pricing of leasing companies is constrained or affected by IBM’s pricing policies, which may neutralize to an extent the competitive effect of leasing company activities as to IBM pricing. F49. The court has not been unmindful of these and other circumstances and arguments pressed upon it by IBM in attempted demonstration that since its predatory acts or market power have not been proved in respect to the EDP industry or the systems market as a whole, it cannot be vulnerable to a charge of monopoly by reason of the interrelationship among components of the industry. Some practical considerations among other more imponderable ones militate against such a theory: (1) The pattern for a divide and conquer strategy of monopoly which its acceptance would permit and foster, and (2) in the realities of the market and of competitive conduct, neither IBM, its competitors nor the public have experienced difficulty in subdividing the EDP industry into markets roughly equivalent to the classification contended for by plaintiffs. IBM recognized as early as 1964 that a' separate and distinct market for input/output peripheral products that were plug compatible to IBM central processing units was developing. For several years IBM studied possible market and product actions which would minimize potential entry of new competitors into that market. Plug compatible manufacturers have been defined in IBM internal documents as “those manufacturers which merely have to plug into IBM hardware to be operable”. •F50. In late 1969 “peripherals” were designated as a “key corporate strategic issue” — (“KCSI”)—by IBM’s management committee. The key peripherals issue was limited to selected competitive compatible products which replaced IBM products in an IBM computer system. In IBM’s internal processing and study of this issue “competitive compatible products” were described as “system attached input/output and memory products” including “magnetic tape drives and control units — direct access storage products and control units- — -impact printers and control units.” Memory products were both “main” and “large capacity storage”. Excluded were central processing units, consoles, paper tape products, communication products and control units, information display products and control units, RPQ’s and non-standard products, and non-system attached products. The objective of designating peripherals as a KCSI was to assess the factors affecting both current and future competitive compatible peripheral products; to review IBM strategies, policies and practices so as to identify exposure areas; and to recommend actions to reduce or eliminate such exposures. These plug compatible products were treated by IBM for competitive studies, strategies and other purposes as separate economic entities. And, particularly, IBM recognized for said purposes central processing units, memory products, consoles, -paper tape products and control units, communication controllers and related communication products, magnetic tape products and control units, direct access disk drives and subsystems, and impact printers and control units, as separate economic entities. This separate consideration and treatment no doubt is ascribable in part to convenience of record keeping, comparison of data, effectiveness of evaluation and such factors, but with reference to memory products, magnetic tape products and control units, direct access disk drives and subsystems and impact printers and control units, in view of the competition of other marketers furnishing devices plug compatible to IBM machines, such suppliers, IBM and the industry in general came to regard these lines especially as representing separate economic entities as a result, and for the purpose, of actual competition in the marketplace. F51. IBM’s 2319A-B product and marketing actions hereinafter discussed affected and were intended to affect directly only one type of product, its 2314 type equipment, and were particularly intended to reduce profits for Telex and Memorex on this type of product. The only IBM products forecasted by it to be protected by IBM’s Fixed Term Plan (FTP) was IBM’s tape, disk, and printer products. The only competitive products forecasted by IBM to be affected by FTP were plug compatible manufacturers’ tape, disk and printer products. When, as here, predatory action is selective and focused, and its anticompetitive effects are similarly shunted away from a more general market, corresponding submarkets should be more readily recognized. IBM has made the persuasive argument that a market concept based on the idea that every manufacturer has a monopoly in each of the components of its product is too sweeping, and necessarily flawed, the flaw being “the disregard of economic forces operating in the markets where manufacturers compete.” With such a generalization there can be large agreement. But the critical flaw in application to the circumstances of this case, it seems to me, would be created by ignoring the separate market and submarkets within which IBM .waged its predatory competitive battles and which became and were thereby made separate competitive entities in the marketplace and within which monopoly power existed and was exercised. F52. The court finds that the peripheral devices plug compatible with the CPU’s of IBM may be considered the relevant market for the purposes of this case, and that relevant submarkets existed for plug compatible tapes, disks, memories and printers with their respective controllers, and communications controllers. F53. CPU’s are not reasonably in-cludable within this market and these submarkets, nor are software as such, but the peripheral equipment plug compatible to IBM CPU’s which are separately leased by leasing companies to end-u