Cardinal Films v. Republic Pictures Corporation

• Decision Date: 04 January 1957
• Citation: 148 F. Supp. 156
• Parties: CARDINAL FILMS, Inc., Plaintiff, v. REPUBLIC PICTURES CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

148 F. Supp. 156

CARDINAL FILMS, Inc., Plaintiff, v. REPUBLIC PICTURES CORPORATION, Defendant.

United States District Court S. D. New York.

January 4, 1957.

Louis Kipnis, New York City, for plaintiff.

Meyer H. Lavenstein, New York City, for defendant.

EDELSTEIN, District Judge.

Defendant has moved for summary judgment under Rule 56, Federal Rules of Civil Procedure, 28 U.S.C., in an action for treble damages under the antitrust laws. Plaintiff, Cardinal Films, Inc., is engaged in the business of distributing motion pictures, prints and film in 16mm widths, for rental and exhibition by others throughout the United States. Defendant, Republic Pictures Corporation, is engaged in the production and distribution of motion pictures and in licensing the right to distribute them. In connection with its business, it processes film; that is, it develops negatives and makes the positive prints not only of its own motion pictures, but, on a commercial basis, of the motion pictures produced or distributed by others. The activities are admittedly in interstate commerce. On April 30, 1949, the plaintiff and defendant entered into an agreement in writing whereby Republic granted to Cardinal an exclusive license to distribute 16mm prints of 30 specified motion pictures, of which the defendant was and is the owner and copyright proprietor. Included in the agreement was a provision that the plaintiff was to order from the defendant exclusively all prints required by the plaintiff for the distribution of the pictures, at charges provided.

It is this provision in the agreement which presents the nub of the controversy. Defendant furnished a total of 658 16mm prints to the plaintiff, and because Cardinal was unable to get the film processing done elsewhere, under the agreement, it alleges that Republic has, from the date of the contract to the date of the filing of the complaint, been in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, 15 U.S.C.A. §§ 1, 2, and Section 3 of the Clayton Act, 15 U S.C. § 14, 15 U.S.C.A. § 14, by monopolizing and restraining trade and by enforcing an illegal "tie-in" provision. The effect of the contract, it is contended, is a substantial and unreasonable restraint of competition in the processing of motion pictures, causing ultimate users and consumers of the prints of motion pictures to pay arbitrary and monopolistic prices. It is further alleged that the defendant charged higher prices for prints furnished than it charged to different purchasers of similar prints, and higher prices than other film processors would have charged the plaintiff, resulting in a loss of $7,000 to Cardinal.

A second cause of action seeks to recover, in the event that the contract should be decreed to be illegal and void, in contravention of the Sherman Act, triple the amount of an advance payment of $25,000 and of $12,000 cardinal claims it had to expend to assure itself of prints of a commercially satisfactory quality, because of the poor quality of the prints furnished.

The first issue presented is whether the provision in the licensing agreement requiring the plaintiff to get its prints exclusively from the defendant is an abuse of the lawful copyright monopoly defendant has in the motion pictures subject to the contract. Under the copyright law, the defendant has the exclusive right, 17 U.S.C. § 1, "(a) To print, reprint, publish, copy, and vend the copyrighted work; * * * (d) * * * and to exhibit, perform, represent, produce, or reproduce a dramatic work in any manner or by any method whatsoever * * *." It is clear that the defendant, as copyright proprietor, could license the exhibition of its motion pictures. It seems equally clear that the defendant could license or retain the right to process and reproduce its own films. That right is obviously one included in its monopoly. It is difficult to see how the scope of the monopoly is enlarged by the granting of the one license only. The block-booking aspect of United States v. Paramount Pictures, 334 U.S. 131, 156, 68 S.Ct. 915, 92 L.Ed. 1260, wherein one copyrighted feature was licensed on condition that the exhibitor would also license another copyrighted feature or group of features, is easily distinguishable. The exhibitors' free choice of copyrighted features was restricted, but had they desired the features otherwise forced upon them, they would have had to license those features from the copyright proprietors. In the case at bar, the plaintiff wants the allegedly "tied-in" service, but he objects to purchasing it from the copyright owner. Nor is the situation at all analogous to such cases as Mercoid Corp. v. Mid-Continent Inv. Co., 320 U. S. 661, 64 S.Ct. 268, 88 L.Ed. 376; Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 315 U.S. 788, 62 S.Ct. 402, 86 L.Ed. 363; International Business Machines Corporation v. United States, 298 U.S. 131, 56 S.Ct. 701, 80 L.Ed. 1085; United Shoe Machinery Corporation v. United States, 258 U.S. 451, 42 S.Ct. 363, 66 L.Ed. 708; or Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 37 S.Ct. 416, 61 L.Ed. 871. In those cases, the restrictions involved not materials within the patent monopoly, but rights to use or purchase materials not covered by patents. Here, any laboratory attempting to process one of defendant's films would be guilty of infringement. But in the I. B. M. case, supra, for example, the use in the patented machine of a card manufactured by someone else than the patentee would not constitute infringement. Here, the copyright owner derives his profit from an operation within the scope of the copyright monopoly. In the cited cases, the patent owners sought to derive profit, on the basis of their patents, not only from the patented devices, on which the law gave them a monopoly, but from unpatented materials used with the machines, thereby expanding the patent monopoly to cover the unpatented materials. The situation in the case at bar would be quite different, of course, if the copyright monopoly did not cover the processing of film.

The patent case of Steiner Sales Co. v. Schwartz Sales Co., 10 Cir., 98 F. 2d 999, certiorari denied 305 U.S. 662, 59 S.Ct. 364, 83 L.Ed. 430, is highly analogous to the instant case. There the patentee licensed the use of his device, but required the licensee to purchase it only from a manufacturer authorized by the licensor. The requirement was limited to the licensor's patented devices only. It was held that a patentee may condition the right of his licensee to purchase only from himself or his authorized manufacturer, and that the license agreement did not impose restrictions beyond the lawful monopoly of the patents. Here, the copyright owner licensed a certain use of its motion pictures, but the licensee was required to obtain the film from the copyright proprietor. The requirement is limited to those motion pictures owned by the licensor and the subject of the contract. It follows that the licensor may properly condition the right of his licensee to purchase only from the licensor the services necessary to bring the licensed use to...