Orson, Inc. v. Miramax Film Corp.

• Citation: 189 F.3d 377
• Decision Date: 17 September 1998
• Docket Number: No. 97-1994,97-1994
• Parties: (3rd Cir. 1999) ORSON, INC. T/A ROXY SCREENING ROOMS v. MIRAMAX FILM CORP., APPELLANT Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 377

189 F.3d 377 (3rd Cir. 1999)

ORSON, INC. T/A ROXY SCREENING ROOMS v. MIRAMAX FILM CORP., APPELLANT

No. 97-1994

U.S. Court of Appeals, Third Circuit

Argued: September 17, 1998

Submitted en banc July 19, 1999

Decided August 20, 1999

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 93-cv-04145) District Judge: Hon. J. Curtis Joyner

Thomas E. Zemaitis Barbara T. Sicalides Pepper, Hamilton & Scheetz Philadelphia, PA 19103-2799

Carole E. Handler (Argued before panel) Kaye, Scholer, Fierman, Hays & Handler Los Angeles, CA 90067 Attorneys for Appellant

Paul R. Rosen Timothy C. Russell Spector, Gadon & Rosen Philadelphia, PA 19103

Richard J. Perr (Argued before panel) Fineman & Bach Philadelphia, PA 19103 Attorneys for Appellee

Lewis A. Grafman Cozen and O'Connor Philadelphia, PA 19103 Attorney for Amicus Curiae, National Association of Theatre Owners of Pennsylvania

Lawrence T. Hoyle, Jr. Hoyle, Morris & Kerr Llp Philadelphia, PA 19103 Attorney for Amicus Curiae, The Motion Picture Association of America

Argued: September 17, 1998

Before: Sloviter, Scirica and Alito, Circuit Judges

Before: Becker, Chief Judge, Sloviter, Man Smann, Greenberg, Scirica, Nygaard, Alito, Roth, and Stapleton, Circuit Judges

OPINION OF THE COURT

Sloviter, Circuit Judge.

The en banc court has granted the Petition for Rehearing filed by plaintiff Orson, Inc., d/b/a Roxy Screening Rooms, and vacated the decision of the panel which held that section 203-7 of the Pennsylvania Feature Motion Picture Fair Business Practices Law, 78 Pa. Cons. Stat.§ 203-7, was invalid because it was preempted by the federal Copyright Act. See Orson, Inc. v. Miramax Film Corp., 174 F.3d 377 (3rd Cir. 1999). Orson argues in its Petition for Rehearing that the panel's decision was foreclosed by previous decisions of this Court. This case directly presents the preemption issue, which the entire court now has the opportunity to examine and decide.

The positions of the parties are fully set forth in their original briefs. In addition, we have received amicus briefs from the Motion Picture Association of America ("MPAA") in support of appellant Miramax Film Corp. and from the National Association of Theatre Owners of Pennsylvania ("Theatre Owners") in support of affirmance. Because the issue is a straightforward one, the court en banc has decided to consider this case on the basis of the submitted briefs.

I. BACKGROUND

Section 106 of the Copyright Act provides that, subject to certain exceptions inapplicable here, the owner of a copyright has:

"the exclusive rights to do and to authorize any of the following:

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; [and]

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly."

17 U.S.C. § 106.

Another section of the same statute provides:

"On and after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 . . . are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State."

17 U.S.C. § 301.

Section 203-7 of the Pennsylvania Feature Motion Picture Fair Business Practices Law (the "Pennsylvania Act") provides that:

"No license agreement shall be entered into between distributor and exhibitor to grant an exclusive first run or an exclusive multiple first run for more than 42 days without provision to expand the run to second run or subsequent run theatres within the geographical area and license agreements and prints of said feature motion picture shall be made available by the distributor to those subsequent run theatres that would normally be served on subsequent run availability."

73 Pa. Cons. Stat. § 203-7.

Plaintiff Orson, Inc., the owner of a Center City Philadelphia (referred to as "Center City") movie theater, brought suit in August 1993 against Miramax Film Corp., a motion picture production and distribution company, alleging that Miramax violated section 203-7 of the Pennsylvania Act by entering into an exclusive first-run exhibition agreement for more than forty-two days with another Center City theater. See Orson, Inc. v. Miramax Film Corp., 983 F. Supp. 624, 626 (E.D. Pa. 1997).

Miramax distributes art films nationally, including in Philadelphia and the surrounding metropolitan area. The parties have not attempted to define "art films" other than as this court did in a prior opinion between the same parties by contrasting "art films" with "movies that may be characterized as `commercial' or `mainstream.' " See Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1362 (3d Cir. 1996) ("Orson I"). Only a limited number of theaters in any area exhibit art films.

Orson showed primarily second-run art films from January 1992 through October 1994 through the Roxy Screening Rooms, a Center City movie theater with two screens. The first runs of Miramax's art films were shown in Center City at the Ritz Theaters, a pair of theaters with five screens each, the Ritz Five and the Ritz at the Bourse (collectively, "the Ritz"). During its two and one-half years of operation by Orson, the Roxy received only one first-run movie from Miramax, and rarely received second-run movies after the forty-second day of play at the Ritz, despite repeated requests.

In its complaint, Orson charged that Miramax's distribution of films, specifically in its dealings with the Ritz, violated the Sherman Act, the Pennsylvania common law tort of unreasonable restraint of trade, and section 203-7 of the Pennsylvania Act. The District Court granted Miramax's motion for summary judgment.¹ Orson, Inc. v. Miramax Film Corp., 862 F. Supp. 1378, 1390 (E.D. Pa. 1994). We affirmed the judgment for Miramax rejecting Orson's claims that the arrangement by which Miramax granted the Ritz an exclusive license to exhibit its first-run films constituted an illegal restraint of trade and antitrust violation. Orson I, 79 F.3d at 1358.

On the other hand, we vacated the judgment that the District Court had entered for Miramax on Orson's claim under section 203-7 of the Pennsylvania Act because we determined that the District Court had erred in its interpretation of section 203-7. Id. at 1374. The District Court had construed the statutory requirement that a distributor, such as Miramax, expand the run of the film after forty-two days to other theaters in the "geographical area" to have been satisfied by Miramax's expansion to suburban theaters before the forty-third day of their runs at the Ritz. Orson, Inc., 862 F.Supp. at 1387. We held that the relevant geographical area for purposes of section 203-7 was the same area covered by the license, i.e., Center City. Because the record was disputed or incomplete, we remanded for further proceedings as to whether Miramax's actions as to those films violated section 203-7 of the Pennsylvania Act. Orson I, 79 F.3d at 1374-75.

On remand, the case proceeded to a jury trial, and the jury awarded Orson damages of $159,780. See Orson, Inc., 983 F. Supp. at 626. In ruling on Miramax's post-trial motions, the District Court rejected Miramax's challenge to the constitutionality of section 203-7 because it read our decisions in Associated Film Distribution Corp. v. Thornburgh, 683 F.2d 808 (3d Cir. 1982) (" AFD I"), Associated Film Distribution Corp. v. Thornburgh, 800 F.2d 369 (3d Cir. 1986) ("AFD II"), and Orson I as upholding the constitutionality of that section. Orson, Inc., 983 F. Supp. at 630.

On appeal, the panel majority sought to distinguish the language in our earlier decisions and held that section 203-7 conflicts with the Copyright Act. The Dissenting Judge believed that we were bound by those opinions. Because we are now en banc, neither the language nor the holdings of those panel decisions bind us here. Therefore, we need not reach the issue of the effect of our prior decisions, and we are free to consider the preemption issue as a matter of law. We have jurisdiction pursuant to 28 U.S.C. § 1291.

II. DISCUSSION

A.

Before we can consider the effect of the Copyright Act on the validity of section 203-7 of the Pennsylvania Act, we must address the meaning of that provision. The district courts have characterized the statutory language as vague and uncertain. See, e.g., Orson, Inc. , 862 F. Supp. at 1387 (characterizing statute's wording as "sufficiently vague" to permit alternate readings); Associated Film Distrib. Corp. v. Thornburgh, 614 F. Supp. 1100, 1111 (E.D. Pa. 1985) ("this part of the statute [section 203-7] was inartfully drafted, and distributors interpret its requirements differently"). As a result, the courts had differing views of a distributor's responsibility. See Orson, Inc., 862 F. Supp. at 1387 (requirement for expansion after 42 days satisfied because several of the films under consideration " `expanded' to other Philadelphia area theaters, outside of Center City Philadelphia, before the 42-day period expired."); Associated Film Distrib., 614 F. Supp. at 1123-24 ("The statute does not prevent distributors from contracting for runs longer than six weeks. . . . The statute also does not prevent a distributor from entering into a series of exclusive licenses with exhibitors as long as each license does not exceed 42 days."); Associated Film Distrib., 520 F. Supp. at 994-95 ("After 42 days, the film must be reoffered for licensing, and the run must be `expanded.' ").

Finally, as we noted above, in Orson I we construed section 203-7 to "prohibit[ ] a distributor and exhibitor from entering into a license agreement which grants an exclusive first-run for more than 42 days without...