Variety (December 1914)

22 MOVING PICTURES GOVERNMENT ARGUMENT ON PICTU RE "TRU ST A CASE," IN Suit to Dissolve "Moving Picture Trust" Now Before Court for Decision. Briefs Submitted in Philadelphia. State- ment Made That General Film Co. Stockholder Received 1,600 Per Cent Return on $10,000 Investment. Philadelphia, Dec. 16. After four days of argument before Judge Dickinson in the United States District Court here, the government's suit to dissolve the so-called motion picture trust under the Sherman anti- trust law is now under the considera- tion of the Court and a verdict may be expected within a short time. At the conclusion of the argument printed briefs were filed by attorneys for both sides and these are now being re- viewed by the Court. In arguing for the defense Charles S. Kingsley, counsel for the Motion Picture Patents Co., claimed that self preservation and not a desire to form a monopoly caused the agreements among the various concerns com- plained of. It was also argued that there was no interstate trade such as would bring the alleged trust under the Sherman Law. The Motion Picture Patents Co. was formed, the lawyer said, to hold pat- ents, issue them tor the practice of the art, issue licenses to practitioners and to accept royalties from licenses. There was no purpose of a conspiracy to monopolize or restrain the trade, he said. The consolidation of the patents and inventions was to advance the art, and eliminate infringement and conse- quent litigation. The conditions were such, he said, that in order to insure a revenue from the different patents it was recognized that it would be necessary to have in- terlocking restrictions. These com- panies were not dealing with any or- dinary commercial article, but with patent rights which could only be made valuable by the adoption of some ef- ftctive means of preventing infringe- ment. It was therefore to stimulate business and not to stifle it that the different patent rights were consoli- dated by interlocking agreements and the system of leases and royalties adopted. The only practical means of insuring protection and obtaining rev- enue under the patents was to control them by this method. Mr. Kingsley said the necessity of protecting the rights of the exhibitors was also recognized. If one exhibitor extensively adveitised he would on a certain date exhibit a picture which had made a hit with the public, it was pot fair that his competitor across the street should be able to arrange for If you don't advertise In VARIETY don't advertise at all. the exhibition of the same picture a day or two in advance. If that condi- tion was permitted to continue it meant the ruination of the business. Measures also had to be adopted to prevent the conflicting of programs and repetitions 01 the same picture by the same exhibitor. "Well, Mr. Kingsley," interrupted Judge Dickinson, "does not your argu- ment bring it down to the question whether you do not stifle interstate commerce in one way in order to boost it in another? In other words, taking your own explanation regarding the advantage taken by one exhibitor of the advertisement of his rival: if you advertise to show a certain him and I secure the same film and divert the crowd to my show, is it not an inter- ference with interstate commerce when you enter into agreements whicn pic- vent me from engaging in this com- petition?" Mr. Kingsley argued that while it might appear so at first glance, it was not so in experience, as under those circumstances the one exhibitor got the business and his competitor got nothing. Whereas if they both were obliged to exhibit different pictures the crowd would be divided in its choice of the two attractions, or, as was true in many cases, they would patronize both shows. The effect, therefore, was to stimulate business. "Yes, but not competition," suggest- ed the judge. Mr. Kingsley argued that it did not destroy competition except to prevent it from becoming destructive of the business. There was a fixing of minimum prices in the Edison licenses, Mr. Kingsley admitted, but this was done at the suggestion of the licensees, to prevent the possibility of Edison, as a competing producer, from cutting prices, and also to compel competition in the quality and the subjects in mov- ing pictures. Mr. Kingsley argued that there was no violation of interstate commerce, as the picture business, from a legal standpoint, could not be construed as an article of commerce. The inven- tions were copyrighted under the Fed- eral laws, he said, and were the ex- clusive use of the patentee until he had by some act relinquished proprietor- ship, and gave them into public do- main. The defendants had not by any specific or implied action released the patents from their possession by which the public could claim them an article of free trade, he said. Melville Church, a New York patent lawyer, followed Mr. Kingsley, and took up the thread of his colleague's argument on the exclusive right of the defendants to their patents. He ar- gued that the contract with the gov- ernment on copyrights was inviolable, and that the defendants were at liberty to apply their patents as suited their wisdom. In the present case, the pat- entees were making a legal and proper use of their inventions and were not in any way violating the Sherman Anti- Trust law. In the hope that the case could be completed Thursday a night session of the Court was held but it was found necessary to continue over into Fri- day. At the night session former Congressman Reuben O. Moon of this city concluded the arguments for the Motion Picture Patents Co. In opening his argument Mr. Moon, like the other attorneys for the de- fense, spoke of the disorganized con- dition of the trade before the forma- tion of the Motion Picture Patents Co. in 1908. At that time producers, exchange dealers and exhibitors were rot legally engaged in the business, he asserted, as everyone of them was infringing on patents belonging to others. In ten years, before the or- ganization of the Patents Company, he said, 110 infringement suits were brought by the rival interests, and in pressing the cases several manufac- turers were almost financially ruined. At Friday morning's session Special Assistant Attorney General Grosvenor brought the arguments to a close. He laid special emphasis on the great profits made by the defendants since the consolidation. With competitors out of the way, he said, the General Film Co. conducted such an enormous business that in its first year of exist- ence it disbursed over $2,000,000 from profits, paid large dividends on stock, and at least one of the organizers of the company netted 1,600 per cent, on his investment. The company's operations could be realized, the lawyer said, when in 18 months of 116 of its competiting ex- changes' only one survived, 68 having been absorbed by it and the rest forced out of business by the unrea- sonable and illegal restrictions in its license agreements. Of the disburse- ments, Mr. Grosvenor said, more than $1,000,000 was used in buying up com- peting exchanges. Another million was distributed among manufacturers, exchange dealers and exhibitors who had invested in the company. It was just as much the purpose of the com- pany to prevent competition as it was to protect patents and patent rights. By its license agreements the film company tried to control every ele- ment of the art, he said, and its sever- ity in dealing with licensees who com- mitted infractions of the contracts was aptly demonstrated in the case of Louis M. Swaab, an exchange dealer of this city. It cost Swaab $100 to release a film order ten minutes be- fore the time fixed in the schedule of the license agreement. Mr. Grosvenor urged that the gov- ernment had proved that every act of the defendants since amalgamating their interests was intended to obtain a monopoly and restrain trade. If you don't advertise in VARIETY don't advertise at all. PROTESTS WAR TAX. Syracuse, Dec. 16. Declaring that his picture house is not a theatre, H. F. Goldacker has pro- tested payment of a special war tax and raised a question of nation-wide importance to owners of similar houses. Mr. Goldacker contends he :a en- gaged in giving public exhibitions of pictures in a building having no stage, pit, boxes or gallery. He claims, therefore, that he is liable only to sec- tion 8 of the special war tax law. He demands a refund of the amount he has paid to Internal Revenue Col- lector Cole, claiming it was wrong- fully collected. In protesting to the collector he declares the cashier of the office had no authority to refuse pay- ment on the statement presented to the cashier, as it was a correct account of Mr. Goldacker's business as defined by law. He also claims that he was forced to make a statement under oath which he knew was incorrect, paying taxes under said statement under pres- sure, as he was not and is not conduct- ing a theatre. He contends that Webster's diction- ary and all the other authorities define a theatre as "a house for the exhibition of dramatic performances, such as tragedies, comedies and farces in a playhouse comprehending the stage, pit, boxes, galleries and balconies." MICA EXTENDING. The Tri-State Feature Film Co., with offices in Philadelphia, Baltimore and Wilkes-Barre, this week signed contracts with the Mica Film Corpo- ration for the Kriterion service. The Tri-State is composed of David Keen, Lee Sonneborn, Andrew G. Steen and M. J. Sonneborn, all veterans in film- dom. A. M. Kennedy, head of the Kriter- ion, has taken general charge of the Santa Barbara Co., which is to con- tribute to the Kriterion program and entirely reorganized it. He also is su- pervising the distribution of franchises tc the manufacturers who will become allied with the service. CALIFORNIA'S DENIAL. The California Motion Picture Co. (Eastern Office) makes emphatic de- nial its withdrawal from the Alco pro- gram was caused by that concern's declining to handle the feature, "Mrs. Wiggs of the Cabbage Patch." "On the contrary," declares a state- ment from the California Co., "the picture was withdrawn by us from the Alco program because we sought and obtained cancellation of our contract with the Alco Film Corporation for sufficient reasons. "Even after this cancellation was announced to the officers of the Alco Film Corporation, the latter endeav- ored to persuade us to release 'Mrs. Wiggs 1 on the Alco program. " 'Mrs. Wiggs' and further produc- tions made by the California Motion Picture Co. will be released through the World Film Corporation."