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January 22, 1959

UNITED STATES of America, Plaintiff,
COLUMBIA PICTURES CORPORATION, Screen Gems, Inc., and Universal Pictures Company, Inc., Defendants

The opinion of the court was delivered by: RYAN

This civil anti-trust suit, filed by the United States on April 10, 1958, under Section 4 of the Sherman Act (15 U.S.C.A. § 4) and Section 15 of the Clayton Act (15 U.S.C.A § 25) alleges that the defendants violated Section 1 of the Sherman Act (15 U.S.C.A. § 1) and Section 7 of the Clayton Act (15 U.S.C.A. § 18). The Government charges that these violations find origin in the making of and performance under a contract between Universal Pictures Company, Incorporated, and Screen Gems Incorporated executed on August 2, 1957 and dated as of July 1, 1957. The contract, described by the parties to it as the 'Distribution Agreement', grants to Screen Gems, a wholly-owned subsidiary of Columbia Pictures Corporation, an exclusive license to distribute for exhibition over television certain listed and specified pre-August 1948 feature films of Universal.

Concurrently, Columbia, Universal and Screen Gems entered into a 'Guaranty Agreement' wherein Columbia guaranteed to Universal the full, faithful and timely performance of the 'Distribution Agreement' by Screen Gems, and by which Columbia further warranted, represented and agreed that Screen Gems would continue to be, during the term of the 'Distribution Agreement', 'the sole and exclusive licensee of the right to distribute for television exhibition substantially all motion pictures not constituting 'new motion pictures' * * * ever produced by Columbia or released for television by Columbia.'

 The suit comes before us on motions made by the Government for partial summary judgment adjudging that the defendants, by the making of these agreements and performance under them, have violated and are violating Section 1 of the Sherman Act; the Government also asks for an injunction pendente lite. The injunctive relief presently sought would not prevent the defendants from performance of sub-licensing agreements covering Universal films which have already been entered into by Screen Gems; the Government now seeks only to enjoin defendants from further sub-licensing these pre-August 1948 Universal feature films during the pendency of the action.

 The contract between Universal and Screen Gems consists of 57 printed pages of apparently carefully drawn and considered provisions. The agreement deals with 'all of the feature photoplays released for theatrical exhibition in the United States by or through Universal or its predecessors under the respective titles listed' in two schedules, 'A' and 'B), which are annexed to and are part of the agreement. The Universal pre-August 1948 feature films subject to the agreement number about 600 of which 586 had not been previously released for television exhibition; some of them are allegedly of poor quality, of little or no value and unusable in the television market. The total number of usable Universal films did not exceed 535.

 In August 1957, prior to the agreement, the inventory of Screen Gems had in it about 950 films, comprising the feature films of Columbia and those of the Hygo Television Films, Inc. The Hygo pictures numbered about 450; they practically had seen their run of the television market; they had been telecast numerous times (15 or more) and were of inferior quality as compared with the Columbia and Universal productions.

 The Columbia feature film catalogue consisted of no more than 500 pre-August 1948 productions, and 247 had been in national release for varying periods of time and had produced about 62% of their projected and estimated total income potential.

 The Government states that Screen Gems 'has available for future release 211 pre-1948 Columbia features and 434 pre-August 1948 Universal features.' To date, 152 Universal pre-August 1948 feature films have been placed in distribution by Screen Gems under the agreement of August 2, 1957. There are left 383 Universal feature films still to be distributed under the agreement. This was not a release for distribution with unholy haste, when we consider that Section V.6 of the agreement obligates Screen Gems to release a minimum of 78 Universal feature films per year.

 To date since the agreement, a total of 249 programs have been released by Screen Gems in four separate package offerings. These packages contain, in addition to 152 Universal feature films, 89 Columbia film programs and 8 Screen Gems re-runs. The four packages released by Screen Gems after execution of the Distribution Agreement consisted of the following films:

 1. September, 1957 -- 52 Universal films entitled 'Shock Package';

 2. December, 1957 -- 9 Universal and 11 Columbia features entitled 'Son of Shock';

 3. January, 1958 -- 52 Universal and 52 Columbia films, along with 8 'Playhouse 90' productions, called 'Triple Crown' package;

 4. June, 1958 -- 39 Universal and 26 Columbia features in 'Sweet 65' package.

 In three out of the four packages released, Universal films were licensed together with Columbia features of the same general classification in the same package.

 We are concerned then with the future distribution and licensing of the remaining 383 Universal feature films, all of the pre-August 1948 vintage.

 The Government maintains in its motion for summary judgment that the distribution contract on its face constitutes an illegal agreement to fix prices in ...

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