United States v. Paramount Pictures Loew v. United States Paramount Pictures v. Same Columbia Pictures Corporation v. Same United Artists Corporation v. Same Universal Pictures Company v. Same American Theatres Ass v. United States Allred v. Same 86

• Decision Date: 03 May 1948
• Docket Number: Nos. 79,s. 79
• Citation: 92 L.Ed. 1260,68 S.Ct. 915,334 U.S. 131
• Parties: UNITED STATES v. PARAMOUNT PICTURES, Inc., et al. LOEW'S Inc., et al. v. UNITED STATES. PARAMOUNT PICTURES, Inc., et al. v. SAME. COLUMBIA PICTURES CORPORATION et al. v. SAME. UNITED ARTISTS CORPORATION v. SAME. UNIVERSAL PICTURES COMPANY, Inc., et al. v. SAME. AMERICAN THEATRES ASS'N, Inc., et al. v. UNITED STATES et al. ALLRED et al. v. SAME. to 86
• Court: U.S. Supreme Court

334 U.S. 131

68 S.Ct. 915

92 L.Ed. 1260

UNITED STATES

v PARAMOUNT PICTURES, Inc., et al.

LOEW'S Inc., et al.

v. UNITED STATES.

PARAMOUNT PICTURES, Inc., et al.

v. SAME.

COLUMBIA PICTURES CORPORATION et al.

v. SAME.

UNITED ARTISTS CORPORATION

v. SAME.

UNIVERSAL PICTURES COMPANY, Inc., et al.

v. SAME.

AMERICAN THEATRES ASS'N, Inc., et al.

v. UNITED STATES et al.

ALLRED et al.

v. SAME.

Nos. 79 to 86.

Argued Feb. 9, 10, 11, 1948.

Decided May 3, 1948.

Appeals from the District Court of the United States for the Southern District of New York.

[Syllabus from pages 131-138 intentionally omitted] Messrs. Tom C. Clark, Atty. Gen., Robert L. Wright, of Washington, D.C., and John F. Sonnett, Asst. Atty. Gen., for the United States.

Mr. Thurman Arnold, of Washington, D.C., for American Theatres Ass'n and others.

Messrs. John G. Jackson, of New York City, and Robert T. Barton, of Richmond, Va., for W. C. Allred and others.

Mr. John W. Davis, of New York City, for Loew's Inc.

Mr. William J. Donovan, of Washington, D.C., for Radio-Keith-Orpheum Corporation and others.

Mr. Joseph M. Proskauer, of New York City, for Warner Bros. Pictures, Inc., and others.

Mr. James F. Byrnes, of Washington, D.C., for Twentieth Century-Fox and others.

Mr. Whitney North Seymour, of New York City, for Paramount Pictures, Inc., and another.

Mr. Louis D. Frohlich, of New York City, for Columbia Pictures Corporation and another.

Mr. Thomas Turner Cooke, of New York City, for Universal Pictures Co. and others Mr. George A. Raftery, of New York City, for United Artists Corporation.

[Argument of Counsel from Page 139 intentionally omitted] Mr. Justice DOUGLAS delivered the opinion of the Court.

These cases are here on appeal¹ from a judgment of a three-judge District Court² holding that the defendants had violated § 1 and § 2 of the Sherman Act, 26 Stat. 209, as amended, 50 Stat. 693, 15 U.S.C. §§ 1, 2, 15 U.S.C.A. §§ 1, 2, and granting an injunction and other relief. D.C., 66 F.Supp. 323; Id., D.C., 70 F.Supp. 53.

The suit was instituted by the United States under § 4 of the Sherman Act, 15 U.S.C.A. § 4, to prevent and restrain violations of it. The defendants fall into three groups: (1) Paramount Pictures, Inc., Loew's, Incorporated, Radio-Keith-Orpheum Corporation, Warner Bros. Pictures, Inc., Twentieth Century-Fox Film Corporation, which produce motion pictures, and their respective subsidiaries or affiliates which distribute and exhibit films. These are known as the five major defendants or exhibitor-defendants. (2) Columbia Pictures Corporation and Universal Corporation, which produce motion pictures, and their subsidiaries which distribute films. (3) United Artists Corporation, which is engaged only in the distribution of motion pictures. The five majors, through their subsidiaries or affiliates, own or control theatres; the other defendants do not.

The complaint charged that the producer defendants had attempted to monopolize and had monopolized the production of motion pictures. The District Court found to the contrary and that finding is not challenged here. The complaint charged that all the defendants, as distributors, had conspired to restrain and monopolize and had restrained and monopolized interstate trade in the distribution and exhibition of films by specific practices which we will shortly relate. It also charged that the five major defendants had engaged in a conspiracy to restrain and nonopolize, and had restrained and monopolized, interstate trade in the exhibition of motion pictures in most of the larger cities of the country. It charged that the vertical combination of producing, distributing, and exhibiting motion pictures by each of the five major defendants violated § 1 and § 2 of the Act. It charged that each distributor-defendant had entered into various contracts with exhibitors which unreasonably restrained trade. Issue was joined; and a trial was had.³

No film is sold to an exhibitor in the distribution of motion pictures. The right to exhibit under copyright is licensed. The District Court found that the defendants in the licenses they issued fixed minimum admission prices which the exhibitors agreed to charge, whether the rental of the film was a flat amount or a percentage of the receipts. It found that substantially uniform minimum prices had been established in the licenses of all defendans . Minimum prices were established in master agreements or franchises which were made between various defendants as distributors and various defendants as exhibitors and in joint operating agreements made by the five majors with each other and with independent theatre owners covering the operation of certain theatres. ⁴ By these later contracts minimum admission prices were often fixed for dozens of theatres owned by a particular defendant in a given area of the United States. Minimum prices were fixed in licenses of each of the five major defendants. The other three defendants made the same requirement in licenses granted to the exhibitor-defendants. We do not stop to elaborate on these findings. They are adequately detailed by the District Court in its opinion. See 66 F.Supp. 334—339.

The District Court found that two price-fixing conspiracies existed—a horizontal one between all the defendants, a vertical one between each distributor-defendant and its licensees. The latter was based on express agreements and was plainly established. The former was inferred from the pattern of price-fixing disclosed in the record. We think there was adequate foundation for it too. It is not necessary to find an express agreement in order to find a conspiracy. It is enough that a concert of action is contemplated and that the defendants conformed to the arrangement. Interstate Circuit v. United States, 306 U.S. 208, 226, 227, 59 S.Ct. 467, 474, 83 L.Ed. 610; United States v. Masonite Corp., 316 U.S. 265, 275, 62 S.Ct. 1070, 1076, 86 L.Ed. 1461. That was shown here.

On this phase of the case the main attack is on the decree which enjoins the defendants and their affili- ates from granting any license, except to their own theatres, in which minimum prices for admission to a theatre are fixed in any manner or by any means. The argument runs as follows: United States v. General Electric Co., 272 U.S. 476, 47 S.Ct. 192, 71 L.Ed. 362, held that an owner of a patent could, without violating the Sherman Act, grant a license to manufacture and vend and could fix the price at which the licensee could sell the patented article. It is pointed out that defendants do not sell the films to exhibitors, but only license them and that the Copyright Act, 35 Stat. 1075, 1088, 17 U.S.C. §§ 1, 17 U.S.C.A. § 1, like the patent statutes, grants the owner exclusive rights.⁵ And it is argued that if the patentee can fix the price at which his licensee may sell the patented article, the owner of the copyright should be allowed the same privilege. It is maintained that such a privilege is essential to protect the value of the copyrighted films.

We start, of course, from the premise that so far as the Sherman Act is concerned, a price-fixing combination is illegal per se. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129; United States v. Masonite Corporation, supra. We recently held in United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, that even patentees could not regiment an entire industry by licenses containing price-fixing agreements. What was said there is adequate to bar defendants, through their horizontal conspiracy, from fixing prices for the exhibition of films in the movie industry. Certainly the rights of the copyright owner are no greater than those of the patene e.

Nor can the result be different when we come to the vertical conspiracy between each distributor-defendant and his licensees. The District Court stated in its findings (70 F.Supp. 61): 'In agreeing to maintain a stipulated minimum admission price, each exhibitor thereby consents to the minimum price level at which it will compete against other licensees of the same distributor whether they exhibit on the same run or not. The total effect is that through the separate contracts between the distributor and its licensees a price structure is erected which regulates the licensees' ability to compete against one another in admission prices.'

That consequence seems to us to be incontestable. We stated in United States v. United States Gypsum Co., supra, at page 401 of 333 U.S., at page 545 of 68 S.Ct., that 'The rewards which flow to the patentee and his licensees from the suppression of competition through the regulation of an industry are not reasonably and normally adapted to secure pecuniary reward for the patentee's monopoly.' The same is true of the rewards of the copyright owners and their licensees in the present case. For here too the licenses are but a part of the general plan to suppress competition. The case where a distributor fixes admission prices to be charged by a single independent exhibitor, no other licensees or exhibitors being in contemplation, seems to be wholly academic, as the District Court pointed out. It is, therefore, plain that United States v. General Electric Co., supra, as applied in the patent cases, affords no haven to the defendants in this case. For a copyright may no more be used than a patent to deter competition between rivals in the exploitation of their licenses. See Interstate Circuit v. United States, supra, 306 U.S. at page 230, 59 S.Ct. at page 476, 83 L.Ed. 610.

(2) Clearances and Runs.

Clearances are designed to protect a particular run of a film against a subsequent run.⁶ The District Court found that all of the distributor-defendants used clearance provisions and that they were stated in several different ways or in combinations: in terms of a given period between designated runs; in terms of admission prices charged by competing theatres; in terms of a given period of...