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RECORD CLUB OF AMERICA, INC. v. CBS

March 20, 1970

RECORD CLUB OF AMERICA, INC.
v.
COLUMBIA BROADCASTING SYSTEM, INC. et al.


Troutman, District Judge.


The opinion of the court was delivered by: TROUTMAN

The plaintiff, Record Club of America, Inc., (RCOA) has filed a complaint consisting of five (5) counts. Count III has already been dismissed as to all defendants, except Columbia Broadcasting System, Inc., (CBS) and Count V has already been dismissed as to all defendants.

 Pursuant to Rule 56 of the Federal Rules of Civil Procedure, CBS, together with certain other defendants, has now moved for summary judgment as to Count IV of the complaint. Count IV seeks treble damages, costs of suit, reasonable attorneys' fees and injunctive relief by reason of alleged violations of Sections 2(a) and 2(f) of the Act of October 15, 1914, 38 Stat. 730, as amended by the Act of June 19, 1936, 49 Stat. 1526, 15 U.S.C. § 13(a) commonly known as the Robinson-Patman Act. The act provides in pertinent part, as follows:

 
* * *
 
"It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section." [ 15 U.S.C. § 13(f)]

 The Act applies only to "sales" of commodities to different "purchasers". It does not apply to "licensing" agreements or arrangements. County Theatre Co. v. Paramount Film Distributing Corporation, 146 F. Supp. 933 (E.D. Pa. 1956); LaSalle Street Press, Inc. v. McCormick & Henderson, Inc., 293 F. Supp. 1004 (N.D. Ill. 1968); Loren Specialty Mfg. Co. v. The Clark Mfg. Co., 241 F. Supp. 493 (N.D. Ill. 1956), aff'd 360 F.2d 913 (7th Cir. 1966). In the latter case, the Court said at page 914:

 
" The burden rested upon plaintiff to show that Clark sold its products * * *". (Emphasis added.)

 In Gaylord Shops, Inc. v. Pittsburgh Miracle Mile Town and Country Shopping Center, Inc., 219 F. Supp. 400 (W.D. Pa. 1963), the Court, in entering summary judgment in favor of the defendants "with regard to any claim * * * based upon the Robinson-Patman Act" said as follows at page 404:

 
"Defendants also contend that § 2 of the Robinson-Patman Act is not applicable because that section only applies to 'sales' and does not apply to 'leases'. Again, we find that we agree with defendants." (Emphasis added.)

 Plaintiff does not, in its complaint, allege at any time or point to a "sale" or a "purchase" as between CBS and the remaining defendants. It consistently and without exception alleges the existence of "licensing" agreements as between CBS and the remaining defendants. Only in paragraph 58 of the complaint does plaintff suggest price discrimination "under color of the exclusive licensing agreements ". (Emphasis added.) But whatever is here or elsewhere alleged in the complaint by way of price discrimination flows entirely from the existence of what plaintiff repeatedly and without exception describes as "exclusive licensing agreements". It does not allege "purchases" and "sales" as between the defendants separate and apart from or in addition to those transactions between the defendants which were based upon or otherwise flowed from the existence of "licensing agreements". The Act does not apply as already shown, to "licensing agreements" and transactions based thereon and flowing therefrom.

 In support of their contention that no "sale" or "purchase" was here involved, the defendants rely, as stated, on the repeated references in the complaint to "licensing agreements" and, in addition, submit the affidavit of Asa D. Sokolow, Esquire, who attests to the existence of "licensing agreements" between CBS and non-CBS defendants, the operation of which he describes. He asserts, under oath, that the transactions between the licensors and CBS are not "buy-sell arrangements" and that there are "no sales invoices and no purchases". (See pages 3 and 4 of Sokolow affidavit.) He asserts that "licensing agreements of this nature are common business practices in the record industry". (See page 4 of Sokolow affidavit.) He asserts that CBS, under the licensing agreements obtains an "unmanufactured" product, whereas plaintiff purchases a "finished" product, and that the arrangement is one on which "royalties" are paid and which does not constitute a "buy-sell" arrangement. (See pages 3 and 6 of Sokolow affidavit) The contents of the affidavit combined with the repeated references in the complaint to "licensing agreements" seems to establish exactly that, i.e., a licensing arrangement as opposed to a purchase-sale arrangement contemplated by the Act. The absence of a "sale" is clearly evident from this record. Simply stated, defendants have filed an affidavit establishing the factual basis for the motion here being considered. Additionally, repeated references in the complaint to "licensing agreements", as opposed to "purchases" and "sales", if not corroborative of the facts alleged in defendants' affidavit, are, at least, not inconsistent therewith.

 Faced with defendants' motion, the authorities cited in defendants' memorandum and the affidavit filed in support thereof, the plaintiff has elected not to "respond * * * directly" (page 3 of plaintiff's memorandum filed in opposition to said motion), but rather to rely on that language of F.R.C.P. Rule 56(c) which provides, inter alia, that judgment shall be granted only if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law". Plaintiff suggests that defendants' motion must fail because it does not refer to the "operative paragraphs of the complaint" and because the affidavit filed by defendants is "insufficient to show that there is no genuine issue as to any material fact". (See page 4 of plaintiff's memorandum.) But reference to the "operative paragraphs of the complaint" shows repeated references to "licensing agreements" as opposed to "sales" or "purchases" and reference to defendants' affidavit discloses unequivocal and unconditional statements and assertions of fact to the effect that the dealings, transactions and relationship between the defendants were based upon "licensing" agreements involving an unfinished product and not upon a purchase and sale agreement or arrangement involving a finished product. (See page 3 et seq. of Sokolow affidavit.) Faced with this plaintiff has had an abundance of opportunity to file a counter-affidavit, but has failed to do so. Rather, plaintiff relies upon a statement found at page 5 of CBS' memorandum that "CBS generally does not acquire finished product" and labels such statement "unsubstantial". (See page 6 of plaintiff's memorandum.) We need not and do not rely upon that statement by counsel. Rather, we rely upon the unequivocal, unconditional, and uncontradicted statements of fact contained in the affidavit filed on behalf of the defendants.

 Plaintiff also relies upon certain exhibits extracted from the FTC record *fn1" and attached to plaintiff's memorandum contending that they show "acquisition of finished product" with the resulting implication or conclusion that the transactions beween the defendants constituted sales notwithstanding the existence of "licensing agreements". A study of these exhibits does not in fact establish consummated "sales" of "finished products". At most exhibits A to D, inclusive, may represent invitations to engage in sales of finished products, but do not, by any stretch of the imagination, establish in fact "sales" of "finished products". Exhibit E, being a portion of the Commission's conclusions of July 25, 1967, apparently vacated and reversed by the Court of Appeals of the Seventh Circuit on June 26, 1969, *fn2" suggests an unfair trade practice and an unfair method of competition, *fn3" but certainly does not suggest "purchases" and "sales" as between CBS and the remaining defendants. As a matter of fact, Exhibit D refers expressly to "licensing" contracts and agreements, "exclusive grants" and "rent" (referred to by ...


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