April 20, 2004 (WhatTheyThink.com) -- In February, Massachusetts Superior Court handed down a ruling against Creo in a lawsuit between Creo Americas and New American Plantinotype Company. The decision: Creo Americas (known as Scitex America at the time of the sale; Creo did not acquire the prepress division of Scitex until April of 2000) sought payment for printers and certain damages, and was awarded $212,095 from New American.
New American filed counterclaims seeking damages against Scitex alleging that the company had misled New American about the capabilities of Scitex’ TelePress image transmission system, a crucial part of the remote printing system installed for the New York Times. New American was awarded triple damages, raising the award from $339,370 for its counterclaim to $1,018,110 plus costs and attorneys' fees.
Creo’s comments? Brief and to the point: “We will be appealing the decision.”
The Times and Remote Proofing
Known as “The Gray Lady” of the industry, the New York Times decided in 1996 to expand its use of color, and September 1997 was targeted as the rollout date. To provide the remote color proofing capabilities needed to support color production in multiple national printing sites, the Times contracted with New American and Scitex America.
Scitex provided the TelePress transmission systems, and New American was the supplier of the color proofing systems, which included Iris printers, manufactured by Iris Graphics, a subsidiary of Scitex Ltd. Upon delivery of - and invoicing for - the printers, the Times paid New American for the systems. New American did not pay Scitex the full amount invoiced for the Iris printers because of on-going disputes between the companies.
The principal dispute was focused on the efforts to make New American's ColoRip proofing system compatible with Scitex's TelePress color file transmission system and TeleProof functionality, so that ColoRip could generate accurate and timely proofs at the distributed printing sites.
Scitex' TelePress system consisted of a transmission system that forwarded four separated color files in a proprietary file format to a TelePress receiving system that merged the files for output to film. Unfortunately, the TelePress files were not compatible with New American's proofing system.
In the spring of 1997, Scitex delivered a sample file to test compatibility with ColoRip. The file was delivered after considerable delay, and unbeknownst to New American, it was a Photoshop file rather than a TeleProof file. TeleProof was not, at the time, able to perform the combine function and generate TIFF files with the characteristics required by ColoRip. Based on this sample file, New American confirmed to the Times that ColoRip could process the TeleProof files.
In March 1997, the Times purchased several million dollars worth of equipment from Scitex, including TelePress 2000 systems and the TeleProof application. TeleProof was designed to convert transmitted files from a proprietary format to more generally accepted TIFF files and act as a “bridge” to RIPs such those offered by New America.
The TeleProof product as proposed and sold to the Times did not actually exist before 1999. According to the Court’s opinion: “In 1996 and early 1997, Scitex knowingly and falsely represented to the Times that TeleProof existed, was then available for sale, and was suitable for the Times’ intended remote color proof production.”
Scitex, the Court found, was entitled to payment from New American of a net of $213,095 for the Iris printers. The opinion also states that New American’s failure to pay the balance due was not a breach of good faith, but was based on the “good-faith and well-founded desire” to offset the company’s debt to Scitex against the greater damage Scitex’ conduct had caused New American.
The Court found that Scitex had conducted unfair and deceptive trade practices when late in 1996, Scitex misrepresented, to both the Times and New American, the capabilities of TeleProof “... a product that did not then exist, let alone perform the functions which Scitex described. When in February, 1997, it became clear to Scitex that TeleProof could not satisfy the Times’ and New American’s technical requirements, Scitex did not disclose that information.”
According to the Court’s opinion, this misrepresentation resulted in lost profits of $330,000 by New American from July 1, 1997 to June 30, 1998, and caused out-of-pocket losses of $9,370. The total damage was $339,370.
“Scitex’ single-minded focus on making the sale, ignoring what it knew to be disastrous collateral damage to New American, was sufficiently unethical and unscrupulous to merit multiple damages,” therefore the Court awarded treble damages, costs, and attorney’s fees to New American.
By Senior WTT Editor Gail Nickel-Kailing. Please offer Gail your feedback! She can be reached at [email protected]