Court ends booking law
Studios welcome ruling
Reversing an earlier decision in the 6-year-old case of Orson Inc. v. Miramax Film Corp., the Third Circuit Court of Appeals decided by a 2-1 vote that section 203-7 of Pennsylvania's anti-blind bidding law was preempted by the federal Copyright Act.
Section 203-7 requires that after the 42nd day of a picture's theatrical run, the film's distributor must offer it to competing complexes in the same zone.
Restricting free trade
"This was the most obnoxious restriction on free trade imaginable," said one studio distribution topper. "It was an artificial window designed to help independent theaters. But it really backfired because it turned out to be a restriction on first run theaters who could never have the confidence they would maintain the normal clearance over the natural length of a film's run."
In the 1970s and early '80s, after lobbying from exhibitors, about half the states adopted so-called anti-blind bidding laws, which sought to limit certain then-common distribution practices that were seen as anti-competitive. The laws typically require screenings of films prior to booking, prohibit blind bidding, and limit advance payments and minimum guarantees.
The 1980 Pennsylvania Act, one of the most comprehensive of the statues enacted in that period, is the only one with the 42-day requirement.
Despite legal challenges mounted by film studios in the early 1980s, the law was at the time upheld by the Third Circuit.
Suing Miramax
In August 1993, Orson, the operator of a two-screen arthouse in Philadelphia, sued Miramax, claiming the distributor had violated section 203-7. Three years later, a jury awarded Orson damages of nearly $160,000, after a district court determined that over a two-year period, the Roxie received only one first-run film from Miramax, and that despite repeated requests, it rarely received second-run movies after the 42nd day of play at a nearby competing arthouse.
Miramax appealed the decision on the grounds that the law was unconstitutional. In Tuesday's decision, the Third Circuit reversed its earlier ruling and determined that section 203-7 interfered with a distributor's federally protected right to grant an exclusive license to an exhibitor of choice.
Right of refusal
Writing for the majority, Judge Sloviter went so far as to reiterate a 1990 Supreme Court decision that a copyright owner has "the capacity arbitrarily to refuse to license one who seeks to exploit the (copyrighted) work."
At various times over the years, other states have moved to adopt laws similar to section 203-7, but the recent ruling is likely to stop any such legislative efforts. In fact, the 42-day requirement has had less effect in recent years, as films began coming offscreen more rapidly and second-run theaters have virtually disappeared.
"Before, it was really anti-competitive; now it's just superfluous," said a distribution honcho. "It's really a welcome thing to be rid of."
