United States v. Motion Picture Patents Co. , 225 F. 800 (E.D. Pa. 1915), was a civil antitrust prosecution overlapping to some extent with the issues in the decision in the Supreme Court's Motion Picture Patents case. After the trial court found that the defendants violated §§ 1 and 2 of the Sherman Act by establishing control over "trade in films, cameras, projecting machines, and other accessories of the motion picture business," by their patent licensing practices and other conduct, they appealed to the Supreme Court. After the Supreme Court's 1917 decision in Motion Picture Patents Co. v. Universal Film Manufacturing Co., however, the parties dismissed the appeal by stipulation (mutual agreement) in 1918 that the decision had made the defendants' appeal futile.
Background
Thomas Edison developed and patented the first commercial motion picture camera and player (projector) in the United States (in Europe a handful of inventors had already developed and patented similar but different technology), and others followed in his steps, leading to extensive rivalry and patent litigation. In December 1908, Edison formed a combination of his Edison Manufacturing Company and nine other owners of film-related patents: the Motion Picture Patents Company (MPPC), also known as the Motion Picture Patents Trust, or the Edison Trust. The Trust controlled major patents dominating motion picture technology, including patents covering film stock, cameras, and projectors—including the so-called Latham loop patent (U.S. Pat. No. 707,934), a key feature of virtually all motion picture cameras then in use. Using the combined patent rights, the MPPC was able to exact high fees from their competitors for their use of film stock, cameras, and projectors. "The MPPC quickly became a force to be reckoned with, frequently and strenuously asserting its patent rights against independent movie producers through litigation." Between 1909 and 1918, MPCC brought about 40 patent infringement suits against competitors to maintain its control over the industry.
Initially, the federal courts refused to consider antitrust violation as a defense to a patent infringement charge. For example, in March 1910, in two cases in the Southern District of New York, the court held that "the charge, if established, that the complainant is itself, or is a member of, a combination in violation of the federal anti-trust statute, is not a defense available in an action for the infringement of a patent". In a third case later that year, the court held: "Such a suit [for patent infringement] is not based on contract, but on tort, and, of course, the fact that a man has entered into some illegal contract does not authorize others to injure him with impunity."
The Trust established a monopoly on all aspects of the motion picture business. Eastman Kodak, a member of the Trust, owned the patent on raw film stock and it agreed to only sell film stock only to other members. The camera patents prevented companies, not members of or licensed by the Trust, from making films. The projector patents enabled the Trust to require distributors and theaters to screen only the Trust members' films. In addition, the Trust established uniform prices for renting films to theaters. While the patents were the main effective to establish industry control, in some instances the Trust made use of hired thugs and mob connections to violently disrupt productions that were not licensed by the Trust.
In August 1912, the Department of Justice brought an antitrust prosecution against the members of the Trust in the federal court in the Eastern District of Pennsylvania.
Ruling of district court
The defendants made two principal defense arguments. The first was that the "gravamen of the offense may be gathered from the general summary that it is a conspiracy to drive from the field all other traders in the things which make possible the practice of the motion picture art, and to monopolize to themselves that trade, and through this the practice of the art itself." The defendants argued that they were not engaged in trade or commerce, to which the antitrust laws are limited: "The control, with the seeking of which the defendants are charged, is therefore the control of an art, and not of trade, or of anything which is the subject of commerce, or can be brought within the laws relating thereto."