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November 8, 1939

GITTONE, Mayor, et al.

Memorandum sur Decree

In the dissenting opinion in Interstate Circuit, Inc., et al. v. United States et al., 306 U.S. 208, 59 S. Ct. 467, 480, 83 L. Ed. 610, Mr. Justice Roberts said, "We have often held that a contract containing a covenant in restraint of trade is valid if the restraint is reasonably necessary for the protection of the right granted by the owner of the property," referring to property rights in copyrighted films. Whether or not the restraints imposed by the defendants, by means of which Warner has obtained a monopoly in Vineland, are reasonably necessary for the protection of its business and the rights granted by the distributors in the license agreements, is the question which lies at the heart of the present case. The defendants' principal arguments all come down to the proposition that they are reasonably necessary to that end, and, of course, if I thought that they were, I should not enter this decree. But it seems perfectly plain that there is room for two first class theatres in Vineland.A fair division of first run feature pictures will naturally affect Warner's earnings, because it will take away its virtual monopoly and place it upon a competitive basis, but there is nothing in this record to indicate that it is necessary for the protection of Warner's license rights and its business under them that the present monopoly should be continued, to the destruction of the competitor's business and against what is clearly the public interest.

The fact that Landis is a newcomer in the field does not affect the objective test. The motive professed by the defendants to favor an old customer as against a new one is merely a statement of a business policy which may be sound enough but which cannot be carried beyond the limit set by the law. If it were a defense, there would be very few decrees entered under the Anti-Trust Laws.

There are undoubtedly some kinds of business in which license agreements to constitute monopolies and operate to exclude newcomers entirely from a particular field, and yet may be entirely reasonable restraints. Justice Roberts was of the opinion that "the principles governing the right to use, sell, or turn to account other forms of property are equally applicable here." It is at just this point that I think the majority opinion differs from the dissent. The motion picture business is sui generis. Not only are there peculiar and complicated relationships between producers, distributors and exhibitors which arise of necessity from the nature of the thing sold, but it must be recognized that the public has a very definite interest in the services of recreation, education and information which the industry furnishes. I believe that the courts have already reached the point of view that a situation such as is presented by the facts of this case cannot be dealt with as though it were a matter of licensing retailers to sell a patented article, or of the restriction of the field of selling agents by manufacturers of automobiles. This public interest furnishes one reason why the policy announced by a distributors' witness (but not followed in Vineland) of dealing with the theatre rather than the owner should have the full approval of the Courts, and the fact that it registers in increased box office receipts means that the industry can follow it without sacrificing its own interests for the benefit of the public.

 The remarks made by the Court at the hearing, upon which the defendants have based some argument, were made merely in an attempt to explore the questions involved. The Court was and still is fully aware of the difficulties in establishing a condition of fair competition in Vineland. That, however, is a matter which must be left to the defendants with all their knowledge of the methods and practices of the business. I suppose it would not be disputed that free competitive conditions exist elsewhere, and there is no insuperable reason why they may not exist in Vineland.

 It is not the purpose of this decree to strike down the clearance provisions of the license agreements. Justice Roberts thought that the effect of the decision in the Interstate Circuit case was to do that. Whether or not that is a necessary conclusion is a question not here involved.


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