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            Title Orson v. Miramax Film Corp.

 

            Date 1999

            By

            Subject Other\Dissenting

                

 Contents

 

 


174 F.3d 377           FOR EDUCATIONAL USE ONLY     Page 1

174 F.3d 377 Withdrawn for N.R.S. bound volume, 1999 WL 243617 (3rd Cir.(Pa.)), 254 Copr.L.Dec. P 27,896, 50

U.S.P.Q.2d 1580, 27 Media L. Rep. 1993

(Cite as: 1999 WL 243617 (3rd Cir.(Pa.)))





Briefs and Other Related Documents


United States Court of Appeals, Third Circuit.

ORSON, INC. t/a Roxy Screening Rooms v.

MIRAMAX FILM CORP., Appellant. No. 97-1994.


Argued Sept. 17, 1998. Filed April 27, 1999.


Editor's  Note:  The  opinion  of  the  United  States  Court  of Appeals,  Third  Circuit,  in  Orson,  Inc.  v.  Miramax  Film Corp.,  published  in  the  advance  sheet  at  this  citation,  174

F.3d  377,  was  withdrawn  from  the  bound  volume  because rehearing  en  banc  was  granted  and  opinion  and  judgment were vacated June 8, 1999.


Thomas E. Zemaitis, Barbara T. Sicalides, Pepper, Hamilton

&  Scheetz,  Philadelphia,  PA,  Carole  E.  Handler  (Argued), Kaye, Scholer, Fierman, Hays & Handler, Los Angeles, CA, for Appellant.


Paul  R.  Rosen,  Jeffrey  M.  Goldstein  (Argued),  Spector, Gadon   &   Rosen,   Philadelphia,   PA,   Richard   J.   Perr

(Argued,) Fineman & Bach, Philadelphia, PA, for Appellee. Before: SLOVITER, SCIRICA and ALITO, Circuit Judges. OPINION OF THE COURT

SLOVITER, Circuit Judge.


I.

INTRODUCTION

*1 Section 106 of the Copyright Act provides that, subject to  certain  exceptions  inapplicable  here,  the  owner  of  a copyright has:

the  exclusive  rights  to  do  and  to  authorize  any  of  the following:

...

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; and


(4)   in   the   case   of   literary,   musical,   dramatic,   and choreographic  works,  pantomimes,  and  motion  pictures and other audiovisual works, to perform the copyrighted work publicly.

17 U.S.C. § 106.


Another section of the same statute provides:

On and after January 1, 1978, all legal or equitable rights that  are  equivalent  to  any  of  the  exclusive  rights  within the general scope of copyright as specified by section 106

... are governed exclusively by this title.

Thereafter,  no  person  is  entitled  to  any  such  right  or equivalent right in any such work under the common law or statutes of any State.

17 U.S.C. § 301.


Section  203-7  of  the  Pennsylvania  Feature  Motion  Picture Fair   Business   Practices   Law   (the   "Pennsylvania   Act") provides that:

No   license   agreement   shall   be   entered   into   between distributor and exhibitor to grant an exclusive first run or an  exclusive  multiple  first  run  for  more  than  42  days without  provision  to  expand  the  run  to  second  run  or subsequent run theatres within the geographical area and license  agreements  and  prints  of  said  feature  motion picture shall be made available by the distributor to those subsequent run theatres that would normally be served on subsequent run availability.

73 P.S. § 203-7.


Appellant Miramax Film Corp., a motion picture production and   distribution   company,   appeals   the   District   Court's failure to overturn a jury's award of damages of $159,780 to plaintiff   Orson,   Inc.,   the   owner   of   a   Center   City Philadelphia (referred to as "Center City") movie theater, for Miramax's  violation  of  section  203-7  of  the  Pennsylvania Act   by   entering   into   an   exclusive   first-run   exhibition agreement for more than forty-two days with another Center City  theater.  See  Orson,  Inc.  v.  Miramax  Film  Corp.,  983

F.Supp. 624 (E.D.Pa.1997). Miramax argues for reversal on the   ground,   inter   alia,   that   the   Pennsylvania   Act   is preempted  because  it  interferes  with  a  copyright  holder's authority to exercise its exclusive rights to license the work. Before we can address this provocative legal issue, we must first consider Orson's argument that this court has already





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174 F.3d 377 Withdrawn for N.R.S. bound volume, 1999 WL 243617 (3rd Cir.(Pa.)), 254 Copr.L.Dec. P 27,896, 50

U.S.P.Q.2d 1580, 27 Media L. Rep. 1993

(Cite as: 1999 WL 243617 (3rd Cir.(Pa.)))


decided  this  issue  contrary  to  Miramax's  position  and  that we are bound to reject Miramax's preemption argument by the law of the case doctrine and our own binding precedent.


II.

FACTS AND PROCEDURAL HISTORY

This  is  the  second  time  the  parties  are  before  this  court  in this  case.  The  facts  are  presented  in  detail  in  our  first opinion   which   followed   the   District   Court's   grant   of summary judgment in favor of Miramax. See Orson, Inc. v.

Miramax Film Corp., 79 F.3d 1358 (3d Cir.1996) ("Orson I

"). Nonetheless, we recount the facts necessary for the issue presented here.


*2  Miramax  distributes  art  films  nationally,  including  in Philadelphia  and  the  surrounding  metropolitan  area.  The parties have not attempted to define "art films" other than as we  previously  did  by  contrasting  them  with  "movies  that may be characterized as 'commercial' or 'mainstream.' " Id.

at  1362.  Only  a  limited  number  of  theaters  in  any  area exhibit  art  films.  Orson  showed  primarily  second-run  art films from January 1992 through October 1994 through the Roxy  Screening  Rooms,  a  Center  City  movie  theater  with two  screens.  The  first  runs  of  Miramax's  art  films  were shown in Center City at the Ritz Theaters, a pair of theaters with  five  screens  each,  the  Ritz  Five  and  the  Ritz  at  the Bourse   (collectively,   the   "Ritz").   During   its   two   and one-half  years  of  operation  by  Orson,  the  Roxy  received only one first-run movie from Miramax, and rarely received second-run movies after the forty-second day of play at the Ritz, despite repeated requests.


In August 1993, Orson filed suit against Miramax, charging that   Miramax's   distribution   of   films,   specifically   in   its dealings   with   the   Ritz,   violated   the   Sherman   Act,   the Pennsylvania common law tort of unreasonable restraint of trade,  and  section  203-7  of  the  Pennsylvania  Act.  The District   Court   granted   Miramax's   motion   for   summary judgment  as  to  both  Orson's  federal  and  state  antitrust claims. It also granted summary judgment to Miramax as to Orson's claim under section 203-7 of the Pennsylvania Act for nine of the fifteen films at issue because it construed that provision   as   satisfied   by   Miramax's   expansion   of   the distribution  of  those  films  to  suburban  theaters  before  the forty-third day of their runs at the Ritz; by agreement of the


parties, it dismissed without prejudice Orson's claim as to the six remaining films. Orson, Inc. v. Miramax Film Corp.,

862 F.Supp. 1378 (E.D.Pa.1994). Orson appealed.


This  court  affirmed  the  grant  of  summary  judgment  to Miramax  on  the  antitrust  claim  and  the  restraint  of  trade claim.  Orson  I,  79  F.3d  at  1358.  The  principal  portion  of our   opinion   was   directed   to   analyzing   how   the   legal principles   regarding   restraint   of   trade   applied   to   the arrangement   by   which   Miramax   granted   the   Ritz   an exclusive license to exhibit its first-run films. We concluded that "Orson failed to present sufficient evidence to support its            claim        that          the           Miramax-Ritz          clearances              were unreasonable restraints of trade." Id. at 1372.


On the other hand, we vacated the judgment for Miramax on Orson's  claim  under  the  Pennsylvania  Act  because  we determined   that   the   District   Court   had   erred   in   its interpretation   of   section   203-7.   The   District   Court   had construed  the  statutory  requirement  that  a  distributor,  such as Miramax, expand the run of the film after forty-two days to  other  theaters  in  the  "geographical  area"  to  have  been satisfied by Miramax's expansion to suburban theaters. We held,  in  the  absence  of  any  applicable  opinion  by  the Pennsylvania Supreme Court, that the relevant geographical area  for  purposes  of  section  203-7  was  the  same  area covered   by   the   license,   i.e.,   Center   City   Philadelphia. Because   the   record   was   disputed   or   incomplete,   we remanded for further proceedings as to whether Miramax's actions  as  to  those  films  violated  section  203-7  of  the Pennsylvania Act. Id. at 1374-75.


*3  On  remand,  the  case  proceeded  to  a  jury  trial,  and  the jury awarded Orson damages of $159,780. See Orson, Inc.,

983  F.Supp.  at  626.  The  District  Court  denied  Miramax's post-trial motions. The court held that Orson had presented sufficient evidence to establish that Miramax had caused the injury,  that  Miramax  acted  willfully  and  intentionally,  and that the damages were proper. Id. at 634-36.


Additionally,         the           District    Court       rejected   Miramax's challenge to the constitutionality of section 203-7. The court concluded  that  Third  Circuit  precedents  had  decided  the question  of  the  facial  validity  of  the  Pennsylvania  Act; moreover, those same precedents "effectively foreclosed" an





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U.S.P.Q.2d 1580, 27 Media L. Rep. 1993

(Cite as: 1999 WL 243617 (3rd Cir.(Pa.)))



as-applied challenge. Id. at 630.


Miramax  filed  a  timely  notice  of  appeal.  It  argues  that

section 203-7 is unconstitutional on its face and as applied, that   the   finding   of   willful   and   intentional   violation   is erroneous as a matter of law, and that there was no evidence to  support  the  assumption  that  the  Roxy  (Orson's  theater) would  have  exhibited  the  films  after  forty-two  days.  We have jurisdiction pursuant to 28 U.S.C. § 1291.


III.

EFFECT OF PRIOR DECISIONS

We engage in plenary review of a Motion for Judgment as a Matter of Law and apply the same standards as the district court. See Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153,

1166  (3d  Cir.1993).  Where  the  issue  involves  purely  a question of law, such as federal preemption, we review the decision   of   the   district   court   de   novo.   See   Espinal   v.

Northwest  Airlines,  90  F.3d  1452,  1455  (9th  Cir.1996). However,  Orson  contends  that  we  are  foreclosed  from examining  the  legal  issue  presented  because  of  the  law  of the case doctrine and the holdings of our prior decisions.


A. Law of the Case


Orson's  reliance  on  the  law  of  the  case  doctrine  need  not detain   us   long.   This   doctrine   precludes   a   court   from reconsidering   "issues   previously   resolved   by   an   earlier panel"  in  the  same  case.  Atlantic  Coast  Demolition  &

Recycling,  Inc.  v.  Board  of  Chosen  Freeholders,  112  F.3d

652, 663 (3d Cir.1997); see also United States v. Local 560

(I.B.T.),   974   F.2d   315,   329   (3d   Cir.1992)   ("When   an appellate court decides a legal issue, that decision governs all subsequent proceedings in the same case."). As we stated in Schultz v. Onan Corp., 737 F.2d 339, 345 (3d Cir.1984),

" T he law of the case doctrine applies 'to issues that were actually discussed by the court in the prior appeal and  to issues decided by necessary implication.' " Miramax argues that there was no such discussion the first time this case was before us.


Orson's   law   of   the   case   argument   is   predicated   on   a footnote  in  Orson  I  stating  that  this  court  had  already rejected a facial preemption challenge to section 203-7. See

79 F.3d at 1373 n. 14. However, an examination of Orson I


shows   plainly   that   it   did   not   resolve   the   legal   issues regarding preemption that Miramax raises on appeal.


*4  As  we  noted  at  the  outset,  Orson  I  was  an  appeal  by Orson from the District Court's grant of summary judgment to Miramax in Orson's suit alleging that Miramax violated the federal antitrust laws, engaged in restraint of trade and violated section 203-7 of the Pennsylvania Act. See Orson

Inc.,  862  F.Supp.  at  1381.  On  appeal,  after  we  considered and affirmed the grant of summary judgment on the antitrust and  restraint  of  trade  counts,  we  turned  to  Orson's  claims based on section 203-7. Because the District Court had not construed section 203-7 to require expansion after forty-two days  in  Center  City,  we  remanded  for  further  proceedings because the summary judgment record was either "disputed or incomplete in critical respects." Id. at 1374.


There is no indication in the opinion that we focused on the possibility that we could have avoided the remand if we had decided that the Copyright Act preempted section 203-7. At most, we rather summarily read our prior case law regarding

section   203-7   as   having   decided   that   issue.   We   noted Miramax's contention that the federal Copyright Act would preempt  section  203-7  if  the  Act  "were  interpreted  this way," id. at 1373 n. 14, but because we believed that we had previously rejected a facial challenge on that ground in two prior        cases,      see           Associated             Film        Distrib.   Corp.      v.

Thornburgh  ("AFD  I"),  683  F.2d  808  (3d  Cir.1982),  and

Associated Film Distrib. Corp. v. Thornburgh ("AFDI II"),

800  F.2d  369  (3d  Cir.1986),  we  did  not  discuss  it  further.

Orson  I,  79  F.3d  at  1373  n.  14.  Therefore,  because  the preemption   issue   was   neither   actually   discussed   nor necessarily  decided  by  implication  in  Orson  I--the  only prior decision to which the law of the case doctrine might arguably apply--we hold that doctrine inapplicable here.


Therefore,  we  turn  to  consider  Orson's  argument  that  our precedents   on   the   preemption   issue   now   foreclose   our review of Miramax's preemption claim.


B. Third Circuit IOP 9.1


Orson argues that this court decided in AFD I that section

203-7 was not preempted by the federal Copyright Act, and that therefore we are bound to that decision by our Internal






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U.S.P.Q.2d 1580, 27 Media L. Rep. 1993

(Cite as: 1999 WL 243617 (3rd Cir.(Pa.)))


Operating  Procedure  ("IOP")  9.1.   FN1  That  IOP  reflects this  court's  commitment  to  "maintain  a  consistent  body  of circuit jurisprudence." A.C.L.U. of New Jersey v. Schundler,

168 F.3d 92, 1999 WL 77766 at *24 n. 6 (3rd Cir.1999).


FN1. IOP 9.1 states: "It is the tradition of this court that the holding of a panel in a reported opinion is binding on subsequent panels. Thus, no subsequent panel overrules the holding in a published opinion of a previous panel. Court in banc consideration is required to do so."


The complaint in AFD I was filed shortly after the passage in 1980 of the Pennsylvania Act. That Act comprehensively regulates  several  aspects  of  the  licensing,  distribution,  and exhibition  of  films.  It  requires  blind  bidding  by  theaters, outlines   specific   procedures   for   that   bidding,   prohibits advances, and strictly curtails minimum guarantees. See 73

P.S.  §§  203-1--203-6.  It  also  includes  the  section  at  issue here,  which  provides  that  no  license  agreement  between  a distributor and an exhibitor can grant an exclusive first run for  more  than  forty-two  days  without  provision  to  expand the run to second-run or subsequent-run theatres within the geographical  area.  See  73  P.S.  §  203-7.  Finally,  the  Act creates   private   causes   of   action   by   exhibitors   against distributors  for  violations  of  its  provisions.  See  73  P.S.  §

203- 10. The Pennsylvania courts have never interpreted the

Act's provisions.


*5   The   plaintiffs   in   AFD   I,   movie   distributors   and producers,  filed  a  motion  for  declaratory  judgment  in  the United  States  District  Court  for  the  Eastern  District  of Pennsylvania  challenging  the  entire  statutory  scheme  on various   grounds.   The   District   Court   granted   summary judgment  to  plaintiffs  on  all  their  claims.  See  Associated

Film  Distrib.  Corp.  v.  Thornburgh,  520  F.Supp.  971,  996

(E.D.Pa.1981).  The  court  held  that  the  Pennsylvania  Act violated both the First Amendment by indirectly restraining dissemination  of  protected  expression,  id.  at  991,  and  the Supremacy Clause because it was preempted by the federal Copyright Act. Id. at 995-96.


In reaching the latter conclusion, the district court held that certain  provisions  of  the  Pennsylvania  Act,  such  as  those prohibiting  advances,  prohibiting  guarantees  in  percentage


leases,  requiring  advance  screenings,  and  requiring  certain bidding   procedures,   interfered   with   the   essence   of   the copyright grant because the provisions "substantially restrict the   conditions   under   which   a   copyright   holder   may distribute and license its work." Id. at 994. The district court recognized   that   an   Ohio   district   court   had   upheld   the constitutionality of a similar, but not identical, Ohio statute. See  Ohio  Rev.Code  Ann.  §§  1333.05-07  (Baldwin  1998). Nonetheless,  the  district  court  in  AFD  I,  emphasizing  the differences   between   the   Pennsylvania   and   Ohio   laws, viewed  the  Pennsylvania  Act's  "broad  and  comprehensive regulation"  to  conflict  with  the  federal  objectives  of  the Copyright   Act.   520   F.Supp.   at   995.   The   court   also concluded  that  the  requirement  in  section  203-7,  requiring that " a fter 42 days the film must be reoffered for licensing and   the   run   must   be   'expanded,'   "   interfered   with   the copyright holder's freedom to license. Id. at 994-95.


On appeal, this court reversed. AFD I, 683 F.2d at 817. In our discussion, we relied essentially on the analysis detailed both  in  the  Ohio  district  court  opinion  reviewing  the  Ohio statute  and  in  the  Sixth  Circuit's  opinion  on  appeal.  See

Allied  Artists  Pictures  Corp.  v.  Rhodes,  496  F.Supp.  408

(S.D.Ohio  1980),  aff'd  in  relevant  part  and  remanded  in part, 679 F.2d 656 (6th Cir.1982). With respect to the First and   Fourteenth   Amendment   claims,   FN2   we   quoted extensively from the Ohio district court opinion, which had rejected the First Amendment challenge, but we stated that because the trial court here had granted summary judgment, it was not able to evaluate the actual impact of the Act, if any,  on  First  Amendment  values,  it  could  not  assess  the weight  of  the  state's  concerns,  and  it  could  not  make  the necessary balance between the distributor's protected rights and  the  nature  and  weight  of  the  state's  concerns.  AFD  I,

683 F.2d at 813-14. Accordingly, we remanded the case so that the district court could apply the standards articulated in the Ohio cases to the Pennsylvania Act.


FN2. Although the District Court's opinion referred exclusively to             the           First         Amendment,          it              is established that the Fourteenth Amendment applies the provisions of the First Amendment to the states. See 44 Liquormart, Inc. v. Rhode Island, 517 U.S.

484,  489  n.  1,  116  S.Ct.  1495,  134  L.Ed.2d  711





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(1996).


*6 We also decided that the court should not have granted summary  judgment  on  the  copyright  preemption  claim. Again, we relied almost exclusively on the analysis used by the  Ohio  district  court  and  the  Sixth  Circuit,  which  had rejected the similar contentions made there. Id. at 816.


It is significant (and overlooked in our prior opinions) that the Ohio district court, in deciding that the Ohio statute did not create, grant or destroy any rights that are "equivalent" to the exclusive rights of the federal Copyright Act, stated,

"Indeed, by providing procedures for the licensing of a film, the  Act  recognizes  sub  silentio  the  right  of  the  copyright owner   to   exhibit   the   motion   picture   and   to   grant   an exclusive or restrictive license to others to exhibit it." Allied

Artists  Pictures,  496  F.Supp.  at  443.  The  Sixth  Circuit agreed  with  this  language,  see  679  F.2d  at  663,  and  we quoted  it  verbatim  in  AFD  I,  683  F.2d  at  814-15  n.  11. However, as with the First Amendment issue, we concluded that the trial court should not have reached its decision on summary judgment, and we remanded the preemption issue, noting that although the Act on its face contains no threat to the copyrights themselves:

The   question   of   whether   and   to   what   extent   the Pennsylvania  Act  interferes  with  attaining  the  "purposes and   objectives   of   Congress"   is   one   which   must   be resolved before the trial court can decide, as a matter of law, whether the interference (if any) is such as to require invalidation  of  all  or  part  of  the  Pennsylvania  Act  on preemption grounds.

Id. at 816 (emphasis added).


We  emphasize  that  the  Ohio  statute  did  not  have  any limitation on the length of the first run, that the Ohio court on which we relied in AFD I stated that the Ohio statute sub silentio  recognized  the  copyright  owner's  right  to  grant  an exclusive license to exhibit the film, and that our opinion in AFD  I  quoted  that  language  about  the  copyright  owner's right to grant an exclusive license to exhibit the film.


As  the  foregoing  discussion  makes  clear,  at  most  AFD  I remanded the legal decision with respect to the 42-day rule, along  with  the  provisions  of  the  Act  that  we  actually discussed   in   the   opinion,   so   the   district   court   could


determine "whether and to what extent the Pennsylvania Act interferes  with  attaining  the  'purposes  and  objectives  of Congress.'   "   Id.   at   816.   That   we   did   not   decide   the preemption issue is evident from the statement in the same sentence that this question "is one which must be resolved before the trial court can decide, as a matter of law, whether the interference (if any) is such as to require invalidation of all or part of the Pennsylvania Act on preemption grounds." Id.  (emphasis  added).  If  we  had  decided  the  copyright preemption issue as a matter of law, there would have been no  reason  to  remand  for  the  trial  court  to  decide  the  same preemption issue as a matter of law. Indeed, the most direct statement  in  AFD  I  regarding  section  203-7--"particularly with  regard  to  the  42-day  provision,  the  Pennsylvania  Act may have a greater impact upon plaintiffs' copyright rights than  the  Ohio  Act,"  id.  at  816  n.  12--suggests  a  potential preemption problem with that section.


*7  Surprisingly  for  a  decision  on  which  all  the  later  cases depend, the 42- day rule is never discussed or analyzed in AFD   I,   undoubtedly   because   the   Ohio   statute   under discussion  in  the  Ohio  district  court  and  the  Sixth  Circuit opinions  on  which  we  relied  did  not  have  any  comparable provision. Moreover, we cannot regard our decision in AFD I  as  a  legal  determination  on  the  preemptive  effect  of  the Copyright Act on section 203-7 because the construction of the requirements imposed by section 203-7 was first given in Orson I, fourteen years after AFD I. Before that case, the district judges had different understandings of the language of that section. See Associated Film Distrib., 520 F.Supp. at

994-95  ("After  42  days,  the  film  must  be  reoffered  for licensing,  and  the  run  must  be  'expanded.'  ");  Associated Film Distrib., 614 F.Supp. at 1123-24 ("The statute does not prevent  distributors  from  contracting  for  runs  longer  than six weeks.... The statute also does not prevent a distributor from   entering   into   a   series   of   exclusive   licenses   with exhibitors  as  long  as  each  license  does  not  exceed  42 days."); Orson, Inc., 862 F.Supp. at 1387 (Requirement for expansion  after  42  days  satisfied  because  several  of  the films under consideration " 'expanded' to other Philadelphia area theaters, outside of Center City Philadelphia, before the

42-day  period  expired.").  It  was  not  until  we  reversed  the District Court's decision in Orson I that this court provided our  definitive  construction  of  section  203-7,  viz.,  that  it





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required   the   copyright   holder   to   expand   its   license   to another  exhibitor  within  the  same  geographic  area,  that  is, Center City.


In  case  after  case,  courts  commented  on  the  vague  and uncertain   meaning   of   the   statutory   language.   See,   e.g., Associated Film Distrib., 614 F.Supp. at 1111 ("this part of the   statute   section   203-7   was   inartfully   drafted,   and distributors  interpret  its  requirements  differently");  Orson,

Inc.,  862  F.Supp.  at  1387  (characterizing  statute's  wording as  "sufficiently  vague"  to  permit  alternate  readings).  It would  be  stretching  for  us  to  hold  IOP  9.1  applicable  in these  circumstances.  See,  e.g.,  Connors  v.  Beth  Energy

Mines, Inc., 920 F.2d 205, 211 n. 7 (3d Cir.1990) (holding IOP  9.1  inapplicable  when  prior  decision  predicated  on  a different record).


Orson may have been misled because we also fell into the same error regarding the precedential effect of AFD I in two later decisions. After the remand in AFD I, the district court, after a six-week bench trial, issued its Findings of Fact and Conclusions of Law in which it upheld the constitutionality of   the   Pennsylvania   Act   against   all   challenges.   See Associated Film Distrib., 614 F.Supp. at 1125. This time the distributors  appealed,  arguing  that  the  Act  violated  the Commerce  Clause  (a  claim  not  made  in  AFD  I  ),  violated the  First  Amendment,  and  violated  the  Supremacy  Clause because  of  preemption  by  the  Copyright  Act.  We  rejected the  distributors'  claims,  and  affirmed.  AFD  II,  800  F.2d  at

369.


*8 With respect to the copyright preemption issue, we stated that  in  AFD  I  we  had  "conclusively  established  that  the Pennsylvania   Act   was   not   facially   preempted   by   the Copyright Act," AFD II, 800 F.2d at 375, and construed our remand  to  have  been  for  a  factual  determination  by  the District Court whether in actual operation the Act prevented or  interfered  with  federally  created  rights.  Id.  at  376.  We noted that the distributors contended that "the limitation on the  length  of  exclusive  runs  to  42  days  interferes  with  the copyright owner's right to license exclusively for the life of the copyright," id., and we disagreed with the district court's construction   of   this   provision   to   mean   that   the   Act

"permitt ed  a distributor to enter into a series of exclusive contracts  with  the  same  exhibitor  as  long  as  no  contract



lasted  longer  than  42  days,"  id.  (citing  614  F.Supp.  at

1123-24).  In  doing  so,  we  reiterated  that  the  language required the distributor " 'to expand the run to second run or subsequent run theatres within the geographical area.' " Id. at  377  (quoting  73  P.S.  §  203-7)  (emphasis  in  opinion). Thus, although we rejected the district court's interpretation of  the  Act  and  emphasized  the  importance  of  the  term

"expand"  in  doing  so,  we  offered  no  further  opinion  as  to what the Act affirmatively required.


We  recognized  " t here  may  be  merit"  to  the  preemption issue   raised   by   the   distributors   but   believed   our   prior opinion  in  AFD  I  decided  the  Pennsylvania  Act  is  not facially  invalid.  Id.  at  377.  The  writer  of  that  opinion

(coincidentally  the  writer  of  this  opinion)  opined  that  "the

42-day clause is inconsistent with the Copyright Act," id. at

377  n.  3,  but  also  believed  we  were  bound  by  our  prior opinion.


As we have demonstrated above, we did not decide the issue whether the 42-day rule is preempted by the Copyright Act in  AFD  I.  This  writer  concedes  she  erred  in  so  stating  in AFD  II.  As  has  been  said  and  oft-repeated,  "Wisdom  too often never comes, and so one ought not to reject it merely because  it  comes  late."  Henslee  v.  Union  Planters  Nat.

Bank, 335 U.S. 595, 600, 69 S.Ct. 290, 93 L.Ed. 259 (1949)

(Frankfurter, J., dissenting). In any event, it is apparent that our opinion in AFD II cannot be the basis for application of IOP  9.1  because  the  issue  was  not  actually  decided  there. And, as we explained earlier in this opinion, in Orson I we relied  on  the  statement  in  AFD  II  that  the  issue  had  been decided in AFD I.


*9  Accordingly,  we  believe  that  Orson  is  incorrect  in arguing that the issue of the preemption of section 203-7 as now  construed  has  previously  been  decided  by  this  court. We turn now to that issue.


IV.

PREEMPTION

The  Supreme  Court  has  recognized  three  ways  in  which federal  law  may  preempt,  and  thereby  displace,  state  law:

(1)  "express  preemption,"  (2)  "field  preemption"  (which  is also sometimes referred to as "implied preemption"), or (3)

"conflict  preemption."  See  Pacific  Gas  &  Elec.  Co.  v.





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Energy Resources Conservation and Dev. Com'n, 461 U.S.

190,   204,   103   S.Ct.   1713,   75   L.Ed.2d   752   (1983);

International Paper Co. v. Ouellette, 479 U.S. 481, 491, 107

S.Ct.  805,  93  L.Ed.2d  883  (1987).  Express  preemption arises when there is an explicit statutory command that state law be displaced. See Morales v. Trans World Airlines, Inc.,

504 U.S. 374, 382, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992). An  example  of  express  preemption  can  be  found  in  the subsection  of  the  Employee  Retirement  Income  Security Act  of  1974,  stating  that  the  provisions  of  that  Act  "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. §

1144(a).


Under field or implied-preemption principles, state law may be   displaced   "if   federal   law   so   thoroughly   occupies   a legislative  field  as  to  make  reasonable  the  inference  that Congress  left  no  room  for  the  States  to  supplement  it."

Cipollone  v.  Liggett  Group,  Inc.,  505  U.S.  504,  516,  112

S.Ct.  2608,  120  L.Ed.2d  407  (1992)  (internal  quotation marks omitted).


Finally,    state    law    may    be    displaced    under    conflict preemption principles if the state law in question presents a conflict with federal law in one of two situations: when it is impossible  to  comply  with  both  the  state  and  the  federal law, see Pacific Gas, 461 U.S. at 204, or when the state law

"stands as an obstacle to the accomplishment and execution of  the  full  purposes  and  objectives  of  Congress,"  Jones  v.

Rath  Packing  Co.,  430  U.S.  519,  525,  97S.Ct.  1305,  51

L.Ed.2d 604 (1977).


As the Court has noted, these categories are not necessarily air-tight. See English v. General Elec. Co., 496 U.S. 72, 79

n. 5, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990) ("By referring to  these  three  categories,  we  should  not  be  taken  to  mean that they are rigidly distinct. Indeed, field pre-emption may be understood as a species of conflict pre-emption: A state law   that   falls   within   a   pre-empted   field   conflicts   with Congress'   intent   (either   express   or   plainly   implied)   to exclude state regulation.").


The         Copyright               Act          contains an            express   preemption provision in § 301, which states, in relevant part:

On and after January 1, 1978, all legal or equitable rights


that  are  equivalent  to  any  of  the  exclusive  rights  within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of  expression  and  come  within  the  subject  matter  of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished,   are   governed   exclusively   by   this   title. Thereafter,  no  person  is  entitled  to  any  such  right  or equivalent right in any such work under the common law or statutes of any State.

*10  17  U.S.C.  §  301(a)  (emphasis  added).  The  exclusive rights  in  the  copyrighted  work  granted  by  the  Act  are reproduction;  preparation  of  derivative  works;  distribution by sale, rental, lease or lending; public performance, in the case  of  motion  pictures  or  audiovisual  works;  and  public display   of   individual   images   from   motion   pictures   or audiovisual works. 17 U.S.C. § 106.


State laws, whether statutory or common law, are subject to express preemption under Copyright Act § 301 only if they create  rights  that  are  "equivalent"  to  the  exclusive  rights within  the  general  scope  of  copyright.  See  17  U.S.C.  §

301(a);  see  also  Ehat  v.  Tanner,  780  F.2d  876,  878  (10th

Cir.1986)  (because  literary  works,  including  compilations and  derivative  works,  are  within  the  subject  matter  of copyright,  state  common  law  that  purported  to  protect  a work for which plaintiff's copyright action was unsuccessful was preempted); 1 Melville B. Nimmer and David Nimmer, Nimmer  on  Copyright  §  1.01   B 1   (1998)  (discussing various state law causes of action).


As   noted   above,   conflict   preemption   may   arise   either because  "  'compliance  with  both  regulations  is  a  physical impossibility' or because the state law 'stands as an obstacle to  the  accomplishment  and  execution  of  the  full  purposes and  objectives  of  Congress.'  "  Jones,  430  U.S.  at  525;  see also Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85

L.Ed. 581 (1941). The purposes and objectives of Congress, which  appear  in  the  Copyright  Act,  are  to  implement  a nationally uniform system for the creation and protection of rights  in  a  copyrighted  work.  See  Goldstein  v.  California,

412  U.S.  546,  561,  93  S.Ct.  2303,  37  L.Ed.2d  163  (1973)

(turning   "to   federal   copyright   law   to   determine   what objectives Congress intended to fulfill").





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An  illustration  of  conflict  preemption  under  the  Copyright

Act is provided by Capital Cities Cable, Inc. v. Crisp, 467

U.S. 691, 710-11, 104 S.Ct. 2694, 81 L.Ed.2d 580 (1984). That  case  concerned  an  Oklahoma  state  law  that  banned advertising   of   alcoholic   beverages   by   cable   operators. However, the Copyright Revision Act of 1976 established a program   of   compulsory   copyright   licensing   under   the regulations  of  the  Federal  Communications  Commission

(FCC)  pursuant  to  which  a  cable  operator  could  transmit signals out of state upon payment of service royalties. The Supreme Court held the Oklahoma law preempted, not only because the FCC had explicitly preempted the area, but also because  the  state  law  would  destroy  or  interfere  with  the exercise of a federally created copyright right. Id. at 710-11; see  also  1  Nimmer  &  Nimmer,  supra,  §  1.01   B 3 .  Cf.

Storer  Cable  Communications  v.  City  of  Montgomery,  806

F.Supp.   1518,        1534         (M.D.Ala.1992)      (city         ordinance requiring  cable  programming  provider  to  license  programs to  additional  entities  unconstitutional  through  either  §  301 or conflict preemption).


*11 In this case, Miramax argues both express preemption and conflict preemption. In the case before us, we might be able   to   apply   both   express   preemption   and   conflict preemption but because our analysis more closely parallels that used in cases applying conflict principles, we proceed on that ground.


In   AFD   I,   in   considering   the   distributors'   claim   of preemption  we  adopted  the  analytical  structure  previously employed   by   the   Ohio   federal   courts   construing   the comparable Ohio statute. AFD I, 683 F.2d at 817. Relying on § 301 of the Copyright Act, the Ohio district court posed the crucial question as "whether the ... motion picture  Act creates, grants, or destroys any rights that are 'equivalent' to the  exclusive  rights  of  copyright  set  forth  in  17  U.S.C.  §

106." Allied Artists Pictures Corp., 496 F.Supp. at 443. That court  concluded  that  the  Ohio  statute  did  not  create  rights equivalent  to  those  in  §  106,  and  did  not  deprive  the distributors  of  copyright  protections.  Rather,  the  statute

"provid ed  procedures for the licensing of a film, ... and  recognize d  sub silentio the right of the copyright owner to exhibit  and  to  grant  an  exclusive  or  restrictive  license  to others to exhibit it." Id.


In  the  same  opinion,  the  Ohio  court  also  rejected  the argument  that  the  Ohio  statute  stood  as  an  obstacle  to  the federally   protected   copyright   (i.e.,   conflict   preemption), because  it  viewed  the  challenged  provisions--a  limit  on guarantees,            a               prohibition             on            negotiations          following unsuccessful   bidding,   a   process   for   bidding   with   a concomitant ban on blind bidding, and a requirement for a trade  screening--as  regulating  market  practices,  rather  than the  copyright  itself.  For  example,  the  court  observed,  the exclusive rights conveyed by a copyright did not authorize a copyright  owner  to  engage  in  anti-competitive  practices  in violation  of  antitrust  laws  or  in  fraudulent  or  deceptive practices.  Id.  at  447  (citing,  inter  alia,  United  States  v.

Paramount  Pictures,  Inc.,  334  U.S.  131,  156-57,  68  S.Ct.

915, 92 L.Ed. 1260 (1948), and Mariniello v. Shell Oil Co.,

511  F.2d  853  (3d  Cir.1975)).  Instead,  the  Ohio  statute regulated  distributors  "in  order  to  achieve  fair  and  open bargaining," just as other state market regulations did. Id.


The distribution of motion pictures has been the subject of attention  since  at  least  the  1940s  when  the  Department  of Justice   filed   antitrust   suits   attacking   certain   practices prevailing  within  the  industry.  See  generally  United  States

v. Paramount Pictures, Inc., 334 U.S. 131, 68 S.Ct. 915, 92

L.Ed.       1260         (1948)      (requiring               distributors            to             divest ownership of exhibition theaters). Again, in 1968 the effort of the Department of Justice to correct certain distributors' business  practices  resulted  in  stipulations  in  effect  from

1969 to 1975 which restricted the number of blind-bidding films  placed  on  the  market  by  any  single  distributor.  See

Allied  Artists  Pictures  Corp.,  496  F.Supp.  at  417  &  n.  6; Patrick  McNamara,  "Copyright  Preemption:  Effecting  the Analysis  Prescribed  by  Section  301,"  24  Boston  College

L.Rev. 963, 990 (1983) (citing United States v. Paramount

Pictures,  Civ.  Action  87-273  (S.D.N.Y.  Aug.  14,  1968)).

FN3


FN3. In the mid-1980s, the Department of Justice also  proceeded  against  improper  market  practices by  theater  exhibitors  themselves.  See  generally Stanley  I.  Ornstein,  "Motion  Picture  Distribution, Film  Splitting,  and  Antitrust  Policy,"  17  Hastings

Comm. & Ent. L.J. 415 (1995).


*12 The exhibitors and their trade association then lobbied





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state legislatures to adopt laws that prohibited blind bidding, and  nearly  half  the  states  did  so  between  1978  through

1983.  See  Kathy  Herman,  Comment,  "Anti-Blind  Bidding Legislation in the Motion Picture Industry: Associated Film Distribution Corp. v. Thornburgh," 5 J.L. & Com. 293, 299

(1984).


The Pennsylvania Act is one of the most comprehensive of the regulatory statutes enacted in that period. See Associated

Film Distrib., 520 F.Supp. at 979 (describing Pennsylvania's Act  as  "more  comprehensive"  than  "Ohio's  comparatively limited regulation"); see also Herman, supra, 5 J.L. & Com. at 304. Its provisions prohibiting blind bidding, prohibiting advances, and limiting minimum guarantees are comparable to  regulation  by  other  states  of  several  aspects  of  the licensing  and  distribution  practices  for  exhibition  of  films, and Miramax does not challenge those regulatory provisions before us.


The   legislative   findings   and   purposes   included   in   the Pennsylvania  Act  set  forth  a  litany  of  the  unfair  market practices  it  sought  to  prevent  or  ameliorate.   FN4  One  of the most egregious practices was that of blind bidding: the marketing and licensing of a film prior to its completion and without offering exhibitors a chance to trade screen the final product.  As  a  result,  distributors  could  make  deceptive claims  regarding  films  offered  for  bidding.  See  Associated Film   Distrib.,   614   F.Supp.   at   1107   (discussing   the distributors'  practice  of  promoting  films  based  on  multiple screen stars who had only cameo roles or who were never seen  together  in  a  single  scene);  see  also  Allied  Artists

Pictures,  496  F.Supp.  at  429-30  (describing  information from distributors as "scant and sometimes misleading"). The Pennsylvania  Act  prohibits  this  practice.  See  73  P.S.  §§

203-4, -8(b); see also Ohio Rev.Code Ann. § 1333.06(A).


FN4.  These  legislative  concerns  included,  inter alia,               undue    control    of                              exhibitors;               restraint, destruction,   or   inhibition   of   fair   and   honest competition; unfair and deceptive acts or practices; and          withholding           full                            information            regarding prospective motion picture purchases or rentals in a blind-bidding process. See 73 P.S. § 203-3.


Closely   tied   to   the   problem   of   blind   bidding   was   the


unfairness in the bidding process itself which occurred when distributors  would  unseal  closed  bids  in  collusion  with  a favored exhibitor (the use of "five o'clock looks") in order to enable the exhibitor to offer a sufficiently high bid to obtain the film. See Associated Film Distrib., 614 F.Supp. at 1112

("Collusion  between  favorites  often  controlled  the  bidding for  pictures.");  Allied  Artists  Pictures,  496  F.Supp.  at  430. There    was    even    talk    that    some    distributors    simply disregarded all the bids and awarded a license to a favored exhibitor. See id.


To curtail these practices, the Pennsylvania Act requires that distributors issue invitations to bid that contain, in addition to the usual information, the names of all exhibitors invited to bid, and the day, time, and location for bid opening. See

73  P.S.  §  203-8(a)-(c);  see  also  Ohio  Rev.Code  Ann.  §

1333.07(A)-(D).  Both  the  Pennsylvania  and  the  Ohio  laws also require that exhibitors be able to examine all the bids. See 73 P.S. § 203-8(d); Ohio Rev.Code Ann. § 1333.07(E).

FN5


FN5.  In  Associated  Film  Distributors,  the  District Court observed that the Pennsylvania Act "permits oral bid solicitation and oral bids." 614 F.Supp. at

1112. Although the Act does not expressly permit an   oral   invitation   to   bid   and   bidding   process, neither does it expressly prohibit either action.


*13 Another industry practice that Pennsylvania considered ripe  for  reform  was  the  use  of  minimum  guarantees  and advances,  see  Associated  Film  Distrib.,  614  F.Supp.  at

1109-10, which shifted the risks of unsuccessful exhibitions from  distributors  to  exhibitors,  who  were  required  to  pay fixed   sums   in   advance   of   showing.   See   Allied   Artists

Pictures,   496   F.Supp.   at   418.   The   provisions   of   the Pennsylvania Act directed to this practice prohibit minimum guarantee payments if there is also "a fee or other payment

... based in whole or in part on the attendance or box office receipts," 73 P.S. § 203-5; see also Ohio Rev.Code Ann. §

1333.06(B), and prohibit advance payments in contracts for exhibition.  See  73  P.S.  §  203-6.  But  see  Ohio  Rev.Code

Ann.   §   1333.06(C)   (allowing   advances   but   prohibiting requirement  of  payment  more  than  fourteen  days  before theater's first exhibition).





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(Cite as: 1999 WL 243617 (3rd Cir.(Pa.)))


In AFD II, we recognized that statutes that bar exaction of advances from exhibitors, limit guarantees, and regulate the bidding and negotiation process may keep a distributor from achieving the optimal monetary return for the film. See AFD

II, 800 F.2d at 376 (citing AFD I, 683 F.2d at 816 (quoting

Allied Artists Picture, 679 F.2d at 662-63)). Nonetheless, we concluded  that  a  reasonable  government  regulation  that seeks to remedy problems caused by the economic disparity that impedes fairness in bargaining and honesty in business dealings  is  not  impermissible  merely  because  it  has  an economic effect on those regulated.


These regulations do not create a preemption issue because they  only  "touch  copyrighted  works  indirectly."  1  Nimmer

& Nimmer, supra, § 1.01 B 3   c  at 1-65. However, a state regulatory   scheme   that   is   "copyright-based   in   essence" presents  a  different  matter.  See  id.  The  42-day  exclusive first-run            license    limitation                in             section    203-7              of             the Pennsylvania  Act  is  a  distinctly  different  regulation  from those   within   the   state's   power   over   improper   market practices.  If  the  state's  ban  on  exclusivity  after  forty-two days  directly  regulates  a  right  that  is  protected  by  federal copyright  law,  it  must,  of  necessity,  be  preempted  under conflict preemption principles.


Among  the  "exclusive  rights"  granted  under  §  106  in  the Copyright Act are the rights to "distribute" and to "perform the  copyrighted  work  publicly."  However,  section  203-7 requires   the   distributor   to   expand   its   distribution   after forty-two  days  by  licensing  another  exhibitor  in  the  same geographic  area,  even  if  such  expansion  is  involuntary.  A distributor   who   exercises   its   federal   right   to   grant   an exclusive license to an exhibitor of choice will be subject to liability  under  the  Pennsylvania  Act  for  refusing  to  grant licenses to other exhibitors in the same geographic area after the forty-second day. It is evident that the Pennsylvania Act regulates the essence of the federally protected copyright.


*14  That  a  copyright  encompasses  the  right  to  refuse  to license  was  reiterated  by  the  Supreme  Court  in  a  decision post-dating   AFD   I   and   AFD   II,   which   stated   that   the Copyright   Act   grants   a   copyright   owner   "the   capacity arbitrarily to refuse to license one who seeks to exploit the work."  Stewart  v.  Abend,  495  U.S.  207,  228-29,  110  S.Ct.

1750,  109  L.Ed.2d  184  (1990)  (citing  Fox  Film  Corp.  v.



Doyal,  286  U.S.  123,  127,  52  S.Ct.  546,  76  L.Ed.  1010

(1932));  see  also  Schnapper  v.  Foley,  667  F.2d  102,  114

(1981)  (vesting  "the  liberty  not  to  license  rights  in  his work");  Lawlor  v.  National  Screen  Serv.  Corp.,  270  F.2d

146,  154  (3d  Cir.1959)  (recognizing  corollary  right  under copyright law to exclude others under licensing right).


In  Storer  Cable,  806  F.Supp.  1518,  the  court  considered  a challenge to a local ordinance that raised a presumption that cable programmers who entered into exclusive licenses for the   broadcast   of   their   programming   were   engaging   in proscribed    conduct.    Although    the    city    defended    the ordinance   as   a   legitimate   antitrust   and   pro-competition regulation,  the  court  held  it  was  preempted  because  "a presumption that exclusive licensing contracts are illegal is

...  not  amenable  to  any  saving  construction."  Id.  at  1540. The  court  noted  that  " a   party  who  holds  a  copyright  for cable  programming  and  who  does  no  more  than  grant another  an  exclusive  distribution  or  exhibition  license  is then  in  automatic  jeopardy  of  liability  as  a  result  of  these sections, as is the licensee." Id. at 1539.


Orson   argues   that   once   a   copyright   holder,   such   as Miramax,  makes  an  initial  distribution,  a  state  is  free  to regulate   the   manner   in   which   the   work   is   thereafter distributed.   We   reject   Orson's   contention.   In   College

Entrance  Examination  Board  v.  Pataki,  889  F.Supp.  554

(N.D.N.Y.1995), the court addressed a New York State law that  required  the           owners    of             copyrights             in             certain standardized tests, which were used, inter alia, for graduate school admissions, to file copies of those tests with the State after  they  were  administered.  The  court  held  that  the  New York law improperly interfered with the copyright holders' rights  under  §  106  because  it  required  reproduction  and distribution  of  the  copyrighted  tests  in  the  face  of  the owners' desire not to do so.


Applying  a  similar  analysis  in  this  case,  we  note  that Congress  determined  that  the  copyright  holder  should  be granted  exclusive  rights  under  §  106,  albeit  for  a  limited period.   Although   a   State   regulation   falling   within   the federally established exceptions to those rights, such as fair use, see 17 U.S.C. § 107, may obligate a copyright holder to change  its  practices  to  accommodate  such  uses,  see,  e.g.,

Association of Am. Med. Colleges v. Cuomo, 928 F.2d 519,





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(Cite as: 1999 WL 243617 (3rd Cir.(Pa.)))


525-26  (2d  Cir.1991)  (remanding  to  district  court  to  make factual  findings  on  whether  existing  State  law  constitutes fair  use),  the  parties  here  have  not  suggested,  nor  can  we conclude, that the regulation enacted through section 203-7 falls within one of the Copyright Act's exceptions.


*15  Rather,  the  Pennsylvania  Act,  like  the  New  York  law regulating  standardized  tests,  would  impose  on  copyright holders,  contrary  to  their  exclusive  rights  under  §  106,  an obligation  to  distribute  and  make  available  other  copies  of the  work  following  their  initial  decision  to  publish  and distribute copies of the copyrighted item. Although it is true, as  Orson  points  out,  that  the  examiners  in  Association  of American   Medical   Colleges   and   in   College   Entrance engaged  in  extensive  efforts  to  prevent  disclosure  of  their tests,  see  Appellee  Br.  at  17  n.  10,  this  factor  does  not change the fundamental principle that these cases offer: the State  may  not  mandate  distribution  and  reproduction  of  a copyrighted  work  in  the  face  of  the  exclusive  rights  to distribution granted under § 106.


Even  Orson's  own  quotation  of  Warner  Bros.,  Inc.  v.

Wilkinson,    533    F.Supp.    105    (D.Utah    1981),    appeal dismissed   and   case   remanded,   782   F.2d   136   (10th

Cir.1985), another federal decision discussing an anti-blind bidding statute, supports our distinction between regulations that are designed to assure a fair market and honest business dealings   and   those   that   direct   a   copyright   holder   to distribute and license against its will or interests. That court stated,

The  right  to  transfer  or  license  copyrighted  material  for use  by  others  under  sections  106  and  201  et  seq.  of  the Copyright Act has never encompassed a right to transfer the work at all times and at all places free and clear of all regulation; it has meant that the copyright owner has the exclusive right to transfer the material for a consideration to others.

533  F.Supp.  at  108  (emphasis  added).  Nothing  in  that quotation  detracts  from  the  copyright  owner's  exclusive federal  right  to  decide  to  whom  it  will  transfer  the  work. Moreover, the language from the same paragraph serves to support  precisely  the  point  made  herein;  as  the  Warner Bros.  court  stated,  "No  one  has  appropriated  a  product protected by the copyright law for commercial exploitation


against the copyright owner's wishes." Id. at 108 (emphasis added).


Unlike  the  provisions  in  the  Pennsylvania  Act  that  are directed to market practices that have no counterpart in the Copyright  law,  section  203-7  conflicts  with  the  Copyright Act's grant to the copyright holder of an exclusive right to distribute and license a work, and it therefore follows that it is preempted.


V.

CONCLUSION

In   conclusion,   we   hold   that   because   §   203-7   of   the Pennsylvania            Feature   Motion   Picture    Fair          Business Practices  Law  "stands  as  an  obstacle"  to  the  federally created exclusive rights given to a copyright holder, namely, the exclusive right to distribute the copyrighted work, it is preempted by the federal Copyright Act. Our dictum in AFD I  that  section  203-7  "may  have  a  greater  impact  upon   a distributor's  copyright rights," AFD I, 683 F.2d at 816, was prescient. FN6


FN6.  In  light  of  our  conclusion,  we  need  not address           Miramax's               objections              to             the           trial proceedings.


*16  For  the  reasons  set  forth  above,  we  will  reverse  the decision of the District Court denying Miramax's Motion for Judgment   as   a   Matter   of   Law   and   directing   entry   of judgment for Miramax.


ALITO, Circuit Judge, dissenting:


The court makes a strong argument that Section 203-7 of the Pennsylvania             Feature   Motion   Picture    Fair          Business Practices Law, 78 P.S. § 203-7 (the "Pennsylvania Act"), is invalid on its face under principles of conflict preemption, but  I  believe  that  this  argument  is  foreclosed  by  the  panel decision  in  Associated  Film  Distribution  Corporation  v.

Thornburgh,  683  F.2d  808,  816-17  (3d  Cir.1982)  ("AFD  I

").  In  my  view,  Judge  Sloviter,  writing  for  the  Court, interpreted AFD I correctly in Associated Film Distribution

v.  Thornburgh,  800  F.2d  369  (3d  Cir.1986)  ("AFD  II  "), when she wrote:

T he   earlier   decision   of   this   court   "   AFD   I   "






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conclusively  established  that  the  Pennsylvania  Act  was not facially preempted by the Copyright Act. At the same time, we recognized that in actual operation the Act might prevent  or  interfere  with  the  goals  of  the  Copyright  Act and  remanded  for  a  factual  determination  by  the  district court  of  the  Act's  actual  impact  on  federally  created rights.

Id. at 375-76. Specifically addressing the 42-day provision, Judge Sloviter wrote:

There may be merit to the distributors' argument that the

42-day    provision,    when    construed    as    limiting    the distributors' right to license an exclusive run to 42 days, is preempted              by            the           Copyright               Act.         However,                such preemption  would  be  apparent  on  the  face  of  the  statute and cannot be reconciled with the court's earlier decision that  the  Act  is  not  facially  invalid  under  the  Copyright Act.... W e are bound to that position.

Id. at 377.


In a footnote, she added:

The writer of this opinion believes that the 42-day clause is inconsistent with the Copyright Act. The Copyright Act gives  the  owner  of  a  copyright  the  exclusive  right  to distribute copies of the copyrighted work by rental, lease, or  lending.  17  U.S.C.  §  106(3);  see  also  M.  Nimmer, Nimmer on Copyright § 8.11 at 8-115 (1985). That right encompasses the grant of an exclusive license for a period as long as the copyright owner desires within the term of the  copyright.  Nonetheless,  she  feels  compelled  to  join her  colleagues  in  affirming  the  district  court  decision because  Internal  Operating  Procedure  8C  of  this  court

now IOP 9.1  binds subsequent panels to reported panel opinions.   Court   in   banc   consideration   is   required   to overrule a published opinion.

Id. at 377 n. 3.


I  also  agree  with  the  way  AFD  I  was  interpreted  in  the earlier appeal in this case. In Orson, Inc. v. Miramax Film,

Corp., 79 F.3d 1358, 1373 n. 14 ( 3d Cir.1996), the panel stated:

*17   W e  have  already  rejected  a  facial  challenge  to Section 203-7 under the Copyright Act, holding that "the Act   on   its   face   contains   no   threat   to   copyrights themselves...."   Associated   Film   Distribution   Corp.   v.


Thornburgh,   683   F.2d   808,   816   (3d   Cir.1982),   cert. denied,  480  U.S.  933,  107  S.Ct.  1573,  94  L.Ed.2d  765

(1987);   see   Associated   Film   Distribution   Corp.   v.

Thornburgh,   800   F.2d   369,   377   (3d   Cir.1986),   cert. denied,  480  U.S.  933,  107  S.Ct.  1573,  94  L.Ed.2d  765

(1987)....


While  I  entirely  agree  with  the  court  that  we  are  not constrained  to  follow  dicta  in  prior  opinions,  I  cannot reconcile the court's holding in this case with the holding of the prior panel in AFD I. The court's reinterpretation of AFD I  is  an  innovative  tour  de  force,  but  in  the  end  I  find  it unconvincing. Accordingly, I respectfully dissent.


Briefs and Other Related Documents (Back to top)


•   1999   WL   33654752   (Appellate   Brief)   Brief   Amicus Curiae  of  the  Motion  Picture  Association  of  America  in Support   of   Appellant   Miramax   Film   Corporation   on Rehearing   En   Banc   Seeking   Affirmance   of   the   Panel Decision  (Jul.  01,  1999)Original  Image  of  this  Document

(PDF)


•  1998  WL  34110904  (Appellate  Brief)  Reply  Brief  of

Defendant/Appellant           Miramax  Film         Corp.       (Jun.        22,

1998)Original Image of this Document (PDF)


•               1998         WL          34110886                 (Appellate              Brief)       Brief        of Plaintiff-Appellee   Orson,   Inc.   (Jun.   05,   1998)Original Image of this Document (PDF)


•               1998         WL          34110905                 (Appellate              Brief)       Brief        for

Defendant/Appellant           Miramax  Film         Corp.       (Apr.       23,

1998)Original Image of this Document (PDF)


97-1994 (Docket) (Dec. 19, 1997)


•   1997   WL   33555915   (Appellate   Brief)   Brief   Amicus Curiae   of   National   Association   of   Theatre   Owners   of Pennsylvania in Support of Affirmance of the Order Entered Below  (Jan.  01,  1997)Original  Image  of  this  Document

(PDF)


END OF DOCUMENT






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