Motion Picture Herald (Sep-Oct 1935)

Ocfober 2 6, 19 3 5 ^ MOTION PICTURE HERALD 17 SIROVICH INVESTIGATION OF THE FILMS BLOWS UP Abrupt Ending of Hearings Follows Disclosure of Connection of Committee Counsel with Lawsuits on Patents Investigation of patent pools and crosslicensing agreements in the motion picture equipment field, which began Tuesday of last week in New York, exploded Friday afternoon when, in sequel to revelations by Motion Picture Daily on Wednesday, Dr. William I. Sirovich, Congressman from New York and chairman of the House committee on patents, announced it had sufficient information and that further testimony of film executives would be "repetitious." At the time of the adjournment only one motion picture executive, Sidney R. Kent, president of Twentieth Century-Fox, had been heard. Will H. Hays, Al Lichtman, E. W. Hammons, Jack Cohn and several other film executives were at the committee's quarters in the Fifth Avenue hotel under subpoena of the committe and prepared to testify. Decision to adjourn was reached at an executive session in which the resignations of David Garrison Berger and Robert Robins as officials of the committee were handed in and accepted. The session followed disclosure of the fact that these two men were affiliated with litigations aggregating $67,000,000 pending in the federal courts against American Telephone & Telegraph Company, Western Electric Company, Inc., and Electrical Research Products, Inc., which were the first companies investigated. The Wall Street Journal on Saturday reported the termination of the inquiry as follows : "Congressional investigation of patent pooling in the movie industry came to an abrupt, unscheduled halt Friday, following resignation of the committee counsel and the economic adviser on the heels of disclosure of their interest in pending litigation by private parties against the American Telephone & Telegraph Co., first of the companies to be probed. "David Garrison Berger, 31 -year-old 'legal expert' for the committee, had been revealed as being of counsel in a Sherman Act case seeking $15,000,000 damages from A. T. and T., and by his own testimony in another suit a few months ago was associated with Ralph Vatner, attorney, in ten suits against the A. T. & T. totalling a face complaint value of $40,000,000. "Robert Robins, it had been disclosed subsequent to the opening of the congressional committee hearings in New York City this week, had the same business address and telephone number as Mr. Vatner, and furthermore was formerly an officer of Duovac Radio Corp. which is currently involved in litigation against A. T. & T. "The resignations, it is understood, fol lowed a hurriedly called, and heated, meetmg of the committee, and the decision to excuse the various movie industry executives assembled there under subpoena was agreed to by all but one of the committee members." The facts concerning the connection of Mr. Berger and Mr. Robins, officially listed as "clerk" to the committee, with the pending lawsuits were related October 16 by Motion Picture Daily and were also presented in the October 19 issue of Motion Picture Herald. The suits were filed on the basis of alleged misuse of the patent pooling arrangements the committee set out to investigate. At the opening session Congressman Sirovich had announced that Mr. Berger and Mr. Robins were working without compensation "for the public good," and later the committee attaches said they were serving as "dollar-a-year men." At Friday morning's session, Congressman Randolph Perkins of New Jersey, a committee member, decried the questioning of Mr. Kent when he was being examined as to his annual compensation. The Congressman declared that questioning along this line was disturbing to business. Perkins Clashes with Robins When Mr. Kent left the stand. Congressman Perkins moved for permanent adjournment. At this point Mr. Robins, who was understood to be one of the committee's advisors or investigators, injected himself openly into the proceedings for the first time, and addressed the committee in opposition to adjournment, saying that 10 or more leading film executives had been subpoenaed and should be heard. "Who are you?" Mr. Perkins asked. When informed that Mr. Robins was "clerk" to the committee, he asked that the record of the proceedings show this identification of the committee's "investigator" and that the identity of the committee counsel also be made part of the record. The session was then hurriedly recessed by the chairman, with the understanding prevailing in the committee room that the hearing would be resumed as usual at about 2 o'clock. Investigation Ends Abruptly In the meantime the executive meeting was being held. Finally, at 4 o'clock the committee members took their seats and Congressman Sirovich read his official statement, which ended the motion picture investigation. Congressman Sirovich announced that the hearing would proceed Monday morning in the Fifth Avenue hotel with an investigation of radio patent poolings. Friday's session, however, was the last. On Wednesday Mr. Berger had taken an active part in questioning Edgar S. Bloom, president of Western Electric and Erpi, on those companies' activities in the sound equipment field, and in interrogating George E. Quigley, vice-president of Vitaphone, but on Thursday and Friday he left the interrogating entirely to the committee. Also, following disclosure of Mr. Berger's Attorney Berger and "Clerk" Robins Resign from Committee; Only One Film Executive, Sidney R. Kent, Is Heard dual position as counsel in the untried lawsuits against AT&T and its subsidiaries, it was reported that officers of the plaintiff companies who had been subpoenaed for the hearing would be excused from testifying, or if they were put on the stand would not be examined by Mr. Berger, their counsel. Though the committee members understood that patent pools and cross-licensing agreements in radio, airplane manufacturing and oil cracking processes were also to be Investigated, Congressman Sirovich, who sponsored the House resolution authorizing the inquiry, chose motion pictures as the first subject. Mr. Kent, the last witness, testified concerning the many claims to patent validity made by various interests during the early days of sound equipment development and the reasons why Fox, Paramount, MGM and other large film companies finally elected to contract for Erpi licensing. 18 Months of Tests The decision was not reached for 18 months, said Mr. Kent, during which a committee of the Motion Picture Producers and Distributors Association continued negotiations with Erpi, at the same time conducting careful tests of many other makes of recording and reproducing equipment. Mr. Kent said the considerations leading to the decision to align with Erpi were the quality of Western Electric equipment, the desirability to have contracts with a company that could manufacture in large quantities, quickly, and at the same time continue improvement of the product ; the financial responsibility of the company to protect its patents and their users, and the existence of service organization large enough to maintain the equipment after installation. "A producing company's investment in sound equipment was so large," said Mr. Kent, "that any producing company would have been bankrupted by patent suits, if it had not contracted with a reliable equipment concern." Mr. Kent under questioning said Erpi first asked 8 per cent of a licensee's gross but that the negotiations finally ended in a flat royalty charge of $500 a reel for recording of features and $100 a reel for shorts and news reels. Replying to a question whether he did not think Western Electric should be required to license any manufacturer who sought to make sound equipment, Mr. Kent explained that a sound manufacturer's responsibility and resources were more important to the producer licensee than the cost of the equipment. He testified that his company's con (Continned on following page)