683 F.

2d 808
216 U.S.P.Q. 184, 1982 Copr.L.Dec. P 25,436

ASSOCIATED FILM DISTRIBUTION CORPORATION,

Avco Embassy
Pictures Corp., Buena Vista Distribution Co., Inc., Columbia
Pictures Industries, Inc., Filmways Pictures, Inc., Metro
Goldwyn-Mayer, Inc., Paramount Pictures Corporation,
Twentieth Century-Fox Film Corporation, United Artists
Corporation, Universal Pictures Division of Universal City
Studios, Inc., Universal Film Exchanges, Warner Bros. Inc.,
Warner Bros. Distributing Corporation, Appellees,
v.
The Honorable Dick THORNBURGH, Governor of the
Commonwealth
of Pennsylvania, Individually and in his official capacity,
Bartle, Harvey, III, Attorney General for the Commonwealth
of Pennsylvania, individually and in his official capacity,
Budco Theatres, Inc., Budco Quality Theatres, Inc., its
subsidiary corporation, Fox Theatres Management
Corporation,
The Governor and the Attorney General of the Commonwealth
of
Pennsylvania, Appellants in No. 81-2706.
Appeal of BUDCO QUALITY THEATRES, INC., in No. 812707.
Appeal of FOX THEATRES MANAGEMENT
CORPORATION, in No. 81-2708.
Nos. 81-2706 to 81-2708.

United States Court of Appeals,

Third Circuit.
Argued May 14, 1982.
Decided July 20, 1982.

Gregg H. S. Golden (argued), Deputy Atty. Gen., Leroy S. Zimmerman,

Atty. Gen., Allen C. Warshaw, Deputy Atty. Gen., Harrisburg, Pa., Chief,
Special Litigation Section, for the Governor and Attorney General of the
Commonwealth of Pennsylvania.
H. Donald Busch (argued), Lewis A. Grafman, Shelley R. Goldfarb,
Philadelphia, Pa. (Harry Norman Ball, Busch & Schramm, Philadelphia,
Pa., of counsel), for Budco Quality Theatres, Inc.
Peter M. Fishbein (argued), Richard M. Squire, Manya L. Kamerling,
Karen E. Katzman, Philadelphia, Pa. (Cohen, Shapiro, Polisher, Shiekman
& Cohen, Kaye, Scholer, Fierman, Hays & Handler, New York City, of
counsel), for Fox Theatres.
Bernard G. Segal (argued), Bancroft D. Haviland, James D. Crawford,
Carole E. Handler, George P. Williams, III, Schnader, Harrison, Segal &
Lewis, Philadelphia, Pa., (Barbara Scott, William Nix, New York City, of
counsel), for appellees.
Before GIBBONS, and HUNTER, Circuit Judges, and GERRY,* District
Judge.
OPINION OF THE COURT
JAMES HUNTER, III, Circuit Judge.

Plaintiffs in this case are movie distributors and producers. They filed suit
against Pennsylvania's governor and several movie exhibitors seeking a
declaratory judgment that the Pennsylvania Feature Motion Picture Fair
Business Practices Law, 73 P.S. 203-1 through 203-11, was
unconstitutional. The trial court granted summary judgment for plaintiffs,
striking down the entire statute as violative of the First and Fourteenth
Amendments and the pre-emption provision of the Copyright Act, 17 U.S.C.
301.1 For the reasons which follow, we will reverse the grant of summary
judgment and remand this case to the district court, 520 F.Supp. 971.

Background
2

In 1980, Pennsylvania enacted the Feature Motion Picture Fair Business

Practices Law ("Pennsylvania Act").2 The Act forbids all blind bidding, some
guarantees, all advances, all "five o'clock looks,"3 and exclusive first runs

which last longer than 42 days. Motion pictures contain protected speech.
However, the Pennsylvania Act does not directly affect speech or content;
rather, the Act is an economic statute designed to regulate motion pictures as
commodities.
3

Ohio has enacted a similar statutory scheme, R.C. 1333.05 through .07, the
constitutionality of which was upheld after eight weeks of discovery and a four
week trial. Allied Artists Pictures Corp. v. Rhodes, 496 F.Supp. 408 (S.D.Ohio,
1980), aff'd in relevant part and remanded on commerce clause issue, 679 F.2d
656 (6th Cir. June 4, 1982).4 The Ohio statutory scheme, unlike the
Pennsylvania scheme, allows advances within fourteen days of the first
exhibition of a movie, forbids conditioning a license on guarantees, and
contains no provision regulating the length of first runs.5

Discussion
The First and Fourteenth Amendments
4

The trial court ruled that the Pennsylvania Act was unconstitutional as violative
of the First and Fourteenth Amendment because the Act, on its face, "creates
the risk of a delay in licensing and of shifting financial burdens and
uncertainties (from the exhibitors to the distributors)." 520 F.Supp. at 983.6 We
disagree. On its face, the Act does nothing but forbid certain trade practices.
Whether the Act in fact creates any material risk of delay in exhibition or in fact
threatens to inhibit the production of motion pictures by changing the financial
structure of the industry were hotly contested questions of fact: defendants
argued that, in fact, the statute has no impact on any First Amendment
freedoms at all, or, in the alternative, that any impact is minimal and more than
justified by the need to restore some economic power balance between the
exhibitors and the distributors/producers.7

The Ohio district court established the following framework for its First
Amendment analysis of the Ohio statute:

There is no question that motion pictures are a form of expression falling within
First Amendment protection. Interstate Circuit v. Dallas, 390 U.S. 676, 682 (88
S.Ct. 1298, 1302, 20 L.Ed.2d 225) (1968); United States v. Paramount Pictures,
Inc., 334 U.S. 131, 166 (68 S.Ct. 915, 933, 92 L.Ed. 1260) (1948). Even
assuming that the Ohio statutes encroach upon that expression, however, that
fact does not end the inquiry.

... (In) Konigsberg v. State Bar of California, 366 U.S. 36, 49 (81 S.Ct. 997,

1005, 6 L.Ed.2d 105) (1961), ... the Supreme Court (stated) ...:
8
(G)eneral
regulatory statutes, not intended to control the content of speech but
incidentally limiting its unfettered exercise, have not been regarded as the type of
law the First or Fourteenth Amendment forbade Congress or the States to pass, when
they have been found justified by subordinating valid governmental interests, a
prerequisite to constitutionality which has necessarily involved a weighing of the
governmental interest involved.
9Id. at 50-51 (81 S.Ct. at 1006-07)....
10

The Act (is not directed at the content of expression). It is trade practice
legislation, directed at the motion picture industry as opposed to other
industries, not because that industry communicates ideas, but rather because, as
plaintiffs readily acknowledge, the market structure of that industry is unique.

11

The Ohio Act is clearly content-neutral. It is an economic regulation operating

on all distributors and exhibitors acting within Ohio regardless of the content or
subject matter of the films involved. To the extent that it affects expression, it
does so only incidentally.

12

As such the Act falls within that category of "general regulatory statutes, not
intended to control the content of speech but incidentally limiting its unfettered
exercise," which should be upheld when "justified by subordinating valid
governmental interests." Konigsberg, supra, 366 U.S. at 50-51, 81 S.Ct. at
1006-07....

13

Determination of the constitutionality of such legislation necessarily entails a

balancing of the legitimate governmental interests it serves against its impact
on the protected expression.

14

In United States v. O'Brien, 391 U.S. 367, 377, 88 S.Ct. 1673, 1679, 20
L.Ed.2d 672 (1968), rehearing denied, 393 U.S. 900, 89 S.Ct. 63, 21 L.Ed.2d
188, the court elaborated on the balancing test:

15 government regulation is sufficiently justified if it is within the constitutional

(A)
power of the Government; if it furthers an important or substantial governmental
interest; if the governmental interest is unrelated to the suppression of free
expression; and if the incidental restriction on alleged First Amendment freedoms is
no greater than is essential to the furtherance of that interest.
16

496 F.Supp. at 432-33 (footnotes omitted).8 We agree with the Ohio district

16

496 F.Supp. at 432-33 (footnotes omitted).8 We agree with the Ohio district
court and with the Sixth Circuit, see 679 F.2d at 661, 663, that this framework
embodies the correct approach to statutes like the Pennsylvania Act. However,
the grant of summary judgment in this case precluded the application of this
framework. The trial court could not evaluate the actual impact of the Act (if
any) on First Amendment values;9 could not assess the nature and weight of the
state concerns which led to the Act's enactment; and could not balance the state
concerns against the threat (if any) to the First Amendment.10

The Copyright Act

17

In addition to striking the Pennsylvania Act as unconstitutional under the First

Amendment, the trial court ruled that the Act was pre-empted by the federal
Copyright Act and therefore unconstitutional under the Supremacy Clause:

18

The Act's limit upon the duration of the license, upon when a distributor may
license, its prohibition of guarantees and advances, and its bar against licensing
or negotiations prior to screening, as well as consummating a license without
complying with rebidding requirements, all directly-and severely-restrict the
rights of the licensor.

19

520 F.Supp. at 995. We disagree with the trial court's analysis.

Title 17 U.S.C. 301(a) provides:

20

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.

21

Section 106 of the Copyright Act confers exclusive rights on the copyright
holder to the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

22
(2) to prepare derivative works based upon the copyrighted work;
23
24 to distribute copies of phonorecords of the copyrighted work to the public by sale
(3)
or other transfer of ownership, or by rental, lease, or lending;
25 in the case of ... motion pictures ..., to perform the copyrighted work publicly;
(4)
and

26 in the case of ... individual images of a motion picture ... to display the
(5)
copyrighted work publicly.
27

The trial court stated that the issue before it was

28
whether
the Pennsylvania Act's broad and comprehensive regulation of the process
of licensing copyrighted motion pictures conflicts with the objectives of Congress in
its enactment of the Copyright Act.
29

520 F.Supp. at 995-996.11 The Ohio district court, dealing with this question,
analyzed in great detail the legal contentions of pre-emption raised by plaintiffs
and the actual impact of the Ohio statutory scheme on the plaintiffs' copyrights.
Plaintiffs in Ohio argued that the Ohio Act's prohibitions against conditioning
the licensing of films on the payment of guarantees, against negotiations after
an unsuccessful bidding, and against blind bidding all were pre-empted because
they frustrated the Copyright Act's protections by depriving the copyright's
owner of the right to dispose of its subject matter on the optimum terms. The
Ohio court rejected this argument. The court noted that the Copyright Act,
enacted pursuant to Article I, 8 of the United States Constitution, was "based
on 'the conviction that encouragement of individual effort by personal gain is
the best way to advance public welfare through the talents of authors.' (Citation
omitted)." 496 F.Supp. at 446. The court further noted that " '(t)he copyright
law, like the patent statutes, make reward to the owner a secondary
consideration.' United States v. Paramount Pictures, Inc., 334 U.S. 131, 158 (68
S.Ct. 915, 929, 92 L.Ed. 1260) (1948)." Id. at 446. The court continued:

30 Supreme Court has rejected the notion that because "a copyright is property
The
derived from a grant by the United States," it is not subject to state regulation of the
manner in which its product is marketed. Fox Film Corp. v. Doyal, 286 U.S. 123,
128 (52 S.Ct. 546, 547, 76 L.Ed. 1010) (1932). Further, the Supreme Court has
rejected claims that the exclusive right granted by Congress to distribute copyrighted
material included the exclusive right to distribute it in the manner deemed most
desirable by the copyright holder. Watson v. Buck, 313 U.S. 387, 61 S.Ct. 962, 85
L.Ed. 1416 (1941).
31

In Fox Film, supra, the Supreme Court upheld a state's direct taking by
imposition of a tax, of royalties derived from federal copyrights. Scarcely a
more blatant, effective method of reducing the author's award can be imagined.
Yet the Court stated:

32

The statute confers upon the author after publication the exclusive right for a
limited period to multiply and vend copies and to engage in the other activities

described by the statute in relation to the subject matter, U.S.C., Tit. 17. In
creating this right, the Congress did not reserve to the United States any interest
in the production itself, or in the copyright, or in the profits that may be derived
from its use. Nor did the Congress provide that the right, or the gains from its
exercise, would be free of tax. The owner of the copyright, if he pleases, may
refrain from vending or licensing and content himself with simply exercising
the right to exclude others from using his property. The sole interest of the
United States and the primary object in conferring the monopoly lie in the
general benefits derived by the public from the labors of authors.
33

... The nature and purpose of copyrights place them in a distinct category and
we are unable to find any basis for the supposition that a nondiscriminatory tax
on royalties hampers in the slightest degree the execution of the policy of the
copyright statute.

Fox Film, supra, 286 U.S. at 127, 131, 52 S.Ct. at 548 (citations omitted).
34
35

The authority of the states to regulate market practices dealing with copyrighted
subject matter is well-established. Thus, for example, the Supreme Court has
made it clear that the existence of a copyright does not permit its owner to
contract concerning it in ways that suppress competition in violation of federal
antitrust laws. 15 U.S.C. 1, et seq. Interstate Circuit v. United States, 306 U.S.
208, 230, 59 S.Ct. 467, 476, 83 L.Ed. 610 (1939). Similarly, ownership of a
copyright does not entitle a company to abuse the market power it obtains
thereby by engaging in a per se illegal tying arrangement, see, e.g., United
States v. Paramount Pictures, Inc., 334 U.S. 131, 156-57, 68 S.Ct. 915, 929, 92
L.Ed. 1260 (1948), price fixing, see, e.g., Watson v. Buck, 313 U.S. 387, 61
S.Ct. 962, 85 L.Ed. 1416 (1941), or other fraudulent or deceptive practices, cf.
Mariniello v. Shell Oil Co., 511 F.2d 853 (3d Cir. 1975); Hearing Aid Ass'n of
Kentucky, Inc. v. Bullock, 413 F.Supp. 1032 (E.D.Ky.1976).

36

The State of Ohio is no more interfering with the legitimate rights of owners of
copyrighted motion pictures by regulating the ways in which plaintiffs and
other producer-distributors license their product in order to achieve fair and
open bargaining than were the states in passing the legislation upheld in those
cases.

37 F.Supp. at 446-47. The Sixth Circuit, in affirming the trial court on the
496
Copyright Act challenge, stated:
38 do not find authority for the argument that state trade regulation which affects
we
distribution procedures and, indirectly, monetary returns from copyrighted property

is invalidated implicitly or explicitly by the terms of the Copyright Act ... or the
copyright clause (of the United States Constitution). After thorough analysis, Judge
Duncan rejected each of these claims, 496 F.Supp. at 441-48. We agree with his
decision and his analysis.
Allied Artists, 679 F.2d at 662-663.
39
40

The trial court in this case ruled that the Pennsylvania Act, on its face, is preempted by the Copyright Act because it limits the exercise of federally created
rights and therefore " 'stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress.' Hines v.
Davidowitz, 312 U.S. 52, 67 (61 S.Ct. 399, 404, 85 L.Ed. 581) (1941)." 520
F.Supp. at 996. Specifically, the trial court ruled that the Pennsylvania Act's
prohibitions against advances, against guarantees in combination with
percentage payments, against blind bidding, against private negotiations for
licenses where all bids are rejected, and against first runs of more than 42 days
were all pre-empted by the Copyright Act. 520 F.Supp. at 994-95.

41

It was incorrect to reach this conclusion on summary judgment. Whether the

prohibitions contained in the Pennsylvania Act in fact "stand as an obstacle to
the accomplishment and execution of the full purposes and objectives of
Congress" was in dispute. The Act on its face contains no threat to the
copyrights themselves: the Act does not take away from plaintiffs and give to
another the right to reproduce the film, to prepare derivative works based on the
film, to distribute the film, or to license its performance. With regard to the
question of whether the Pennsylvania Act unconstitutionally prevents or
interferes with the goals of the Copyright Act, defendants contend that as a
matter of fact the Pennsylvania Act has little or no impact upon the exercise of
any federally created rights. 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 pre-emption grounds.12 Thus, while we
agree with the framework of analysis set forth by the Ohio district court and
adopted by the Sixth Circuit, we cannot apply that framework in a summary
judgment context, because the parties do not agree on whether the
Pennsylvania Act in fact precludes the "accomplishment and execution of the
full purposes and objectives" of the Copyright Act.

42

For the foregoing reasons, we will reverse the trial court's grant of summary
judgment and remand this case for trial.

Honorable John F. Gerry, United States District Court for the District of New
Jersey, sitting by designation

The trial court entered a final judgment under Federal Rule of Civil Procedure
54(b) on the constitutionality of the statute, leaving all other issues, including
Budco's antitrust counterclaims, unresolved

The Pennsylvania Act includes the following provisions:

203-2. Legislative findings and purposes
The General Assembly of the Commonwealth of Pennsylvania finds and
declares that the licensing and distribution of feature motion pictures to theatres
in this Commonwealth, including the rights and obligations of distributors and
exhibitors, vitally affects the general economy as well as the access of the
public to works of artistic expression and opinion. In order to promote the
public interest and public welfare of this Commonwealth to:
(1) insure unabridged access for the public to artistic expression and opinion in
feature motion pictures at reasonable prices and at many different locations;
(2) avoid undue control of the exhibitors by the distributors;
(3) foster vigorous and healthy competition in offering feature motion pictures
for the benefit of the public by prohibiting practices through which fair and
honest competition is restrained, destroyed or inhibited;
(4) promote the wide geographical dissemination at reasonable prices to the
public of ideas, opinions and artistic expression in feature motion pictures;
(5) prevent delay in the exhibition of feature motion pictures to the public in
theatres playing subsequent to the first run showing;
(6) prevent theatres from unnecessarily going out of business, thereby resulting
in reducing the number of small independent businesses and unemployment
with loss of tax revenues and other undesirable consequences;
(7) prevent unfair and deceptive acts or practices and unreasonable restraints of
trade in the business of distribution and exhibition of feature motion pictures
within the Commonwealth;
(8) promote fair and effective competition in that business;

(9) benefit the movie going public by limiting the long and extensive first runs
so that additional theatres, in a given area, may also exhibit the same feature
motion picture and at possibly a lower admission price; and
(10) prohibit blind bidding by insuring that exhibitors have the opportunity to
view a motion picture and know its contents before committing themselves to
exhibit it in their communities;
it is necessary to legislate regulations and standards pursuant to the exercise of
the police power of this Commonwealth governing the relationship between
feature motion picture distributors or licensors and exhibitors serving the public
by establishing fair business practice procedures for the licensing and
distribution of feature motion pictures within the Commonwealth and to
provide remedies for the violation of this act, including damages and attorneys'
fees.
203-3. Definitions
The following words and phrases when used in this act shall have the meanings
given to them in this section unless the context clearly indicates otherwise:
"Bid." A written or oral proposal by an exhibitor to a distributor, which
proposal is in response to an invitation to bid or negotiate and states the terms
under which the exhibitor will agree to exhibit a feature motion picture.
"Blind bidding." Bidding, negotiating, offering terms, accepting a bid or
agreeing to terms for the purpose of entering into a license agreement prior to a
trade screening of the feature motion picture that is the subject to the
agreement.
"Distributor." Any person engaged in the business of renting, selling or
licensing feature motion pictures to exhibitors.
"Exhibit or exhibition." Showing feature motion pictures to the public for a
charge.
"Exhibitor." Any person engaged in the business of operating one or more
theatres in this Commonwealth.
"Invitation to bid." A written or oral solicitation or invitation by a distributor to
one or more exhibitors to bid or negotiate for the right to exhibit a feature
motion picture.
"License agreement." Any contract, agreement, understanding or condition

between a distributor and an exhibitor for the exhibition of a feature motion

picture by the exhibitor.
"Person." One or more individuals, partnerships, associations, societies, trusts
or corporations.
"Run." The continuous exhibition of a feature motion picture in a defined
geographical area for a specified period of time. A "first run" is the first
exhibition of a feature motion picture in the designated area; a "second run" is
the second exhibition and "subsequent runs" are subsequent exhibitions after
the second run. "Exclusive run" is any run limited to a single theatre in a
defined geographical area and a "nonexclusive" or "multiple run" is any run in
more than one theatre in a defined geographical area.
"Theatre." Any establishment in which feature motion pictures are exhibited
regularly to the public for a charge.
"Trade screening." The showing of a feature motion picture by a distributor in
recognized exchange cities within the Commonwealth which is open to any
exhibitor.
203-4. Blind Bidding
Blind bidding is hereby prohibited within the Commonwealth. No negotiations
between exhibitors and distributors for the licensing or exhibition of a feature
motion picture shall take place and no license agreement or any of its terms
shall be agreed to for the exhibition of any feature motion picture within the
Commonwealth before the feature motion picture has been trade screened
within the Commonwealth.
203-5. Guarantees
(a) Minimum payment to distributor.-It shall be unlawful for any license
agreement which provides for a fee or other payment to the distributor based in
whole or in part on the attendance or the box office receipts at a theatre within
the Commonwealth to contain or be conditioned upon a guarantee of a
minimum payment to the distributor.
(b) Prohibited guarantees void.-Any provision, agreement or understanding
which provides for such a guarantee shall be void and purported waiver of the
prohibition in subsection (a) shall be void and unenforceable.
203-6. Advances

(a) Advances prohibited.-It shall be unlawful for any license agreement for the
exhibition of a feature motion picture at a theatre within the Commonwealth to
contain or be conditioned upon a provision, agreement or understanding that
the exhibitor shall advance any funds prior to the exhibition of the picture as
security for the performance of the license agreement or to be applied to
payments under such an agreement.
(b) Prohibited advances void.-Any provision, agreement or understanding
which provides for such an advance shall be void and any purported waiver of
the prohibition in subsection (a) shall be void and unenforceable.
203-7. Length of run
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.
203-8. Bidding procedures
(a) Invitation to bid contents.-If bids are solicited from exhibitors for the
licensing of a feature motion picture within the Commonwealth, then the
invitation to bid shall specify the following:
(1) Whether the run for which the bid is being solicited is a first, second or
subsequent run; whether the run is an exclusive or non-exclusive run; and the
geographical area for the run.
(2) The names of all exhibitors who are being solicited.
(3) The date and hour the invitation to bid expires.
(4) The time, date, name and address of the location where the bids will be
opened, which location shall be in the exchange centers of this Commonwealth.
(b) Trading screening.-If the motion picture that is the subject of a bid has not
already been trade screened within the exchange centers in this Commonwealth,
the distributor soliciting the bid shall include in the invitation to bid, the date,
time and location of the trade screening for such picture.
(c) Bid submission and opening.-All bids shall be submitted in writing and shall

be opened at the same time and in the presence of those exhibitors, or their
agents, who submitted bids and are present at such time.
(d) Examination of bids.-Any exhibitor, or the agent of an exhibitor, who
submits a bid for a particular run of a feature motion picture may, at reasonable
times within 60 days after a bid is opened, examine any bid that is made for the
same run of the motion picture by another exhibitor. The exhibitor may
examine the bids even if the distributor rejects all bids that are submitted.
Within seven business days after a bid for a particular run of a feature motion
picture is accepted, the distributor shall notify in writing each exhibitor who
submitted a bid for that run, the terms of the accepted bid and the identity of the
successful bidder.
(e) Rejection of all bids.-If a distributor issues invitations to bid for a feature
motion picture and rejects all bids received, he shall not enter into a license
agreement for the exhibition of the picture except by means of the bidding
process specified in this section. If the distributor rejects all bids submitted
pursuant to the invitation to bid, he shall notify all exhibitors who submitted
bids that he rejected all bids and shall issue a new invitation to bid.
3

A "five o'clock look" occurs when a distributor allows a favored exhibitor to

see other bids, so that the exhibitor may re-bid. 496 F.Supp. at 430

The Ohio statute is quoted in 496 F.Supp. at 419-420

Several other states have similar statutes. It appears that Pennsylvania's is the
only such statute which has not survived constitutional challenge. See Allied
Artists, 679 F.2d at 659 n. 2.

If the assertion of the exhibitor defendants that advances are often required
"against license fees to become due far in the future," appendix at 333, is true,
then the fact that the Ohio statute allows advances two weeks before the first
showing would not be a material difference between the two statutory schemes

The trial court reached only the First Amendment and Copyright Act issues

The Ohio district court described the nature of the motion picture industry in
some detail. 496 F.Supp. at 414-415

Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 100 S.Ct. 826,
63 L.Ed.2d 73 (1980), relied on below, 520 F.Supp. at 980, 982, 985, is
distinguishable from this case. In Schaumburg, a statute forbade door to door
solicitation by groups which used less than 75% of the proceeds for the group's
charitable purposes. Id. at 634, 100 S.Ct. at 834-35. Unlike the statute at issue

in this case, the statute in Schaumburg was on its face a "direct and substantial
limitation on protected activity." Id. at 636, 100 S.Ct. at 836. Here, the statute
has no facial impact upon speech and does not directly regulate speech or
content at all
Schad v. Mount Ephraim, 452 U.S. 61, 101 S.Ct. 2176, 68 L.Ed.2d 671 (1981),
also cited by the trial court, involved an ordinance which forbade all live
entertainment and thus constituted a "substantial restriction of protected
activity." 452 U.S. at 72, 101 S.Ct. at 2184. Its adverse impact on
"communicative activity" was direct and unjustifiable. Id. at 71-72, 101 S.Ct. at
2184-85.
The state actions challenged in Consolidated Edison Co. v. Public Service
Commission, 447 U.S. 530, 100 S.Ct. 2326, 65 L.Ed.2d 319 (1980), and in In re
RMJ, --- U.S. ----, 102 S.Ct. 929, 71 L.Ed.2d 64 (1982), involved direct
regulation of content. In Consolidated Edison, defendant had forbade "the
inclusion in monthly electric bills of inserts discussing controversial issues of
public policy." 447 U.S. at 532, 100 S.Ct. at 2330. The Supreme Court
construed this as a "content-based regulation," id. at 537, 100 S.Ct. at 2333, and
as a regulation of "speech on the basis of its subject matter." Id. at 536, 100
S.Ct. at 2332. Thus, the Court noted, "the state action may be sustained only if
the government can show that the regulation is a precisely drawn means of
serving a compelling state interest." Id. at 540, 100 S.Ct. at 2334. In RMJ, the
state had restricted lawyer advertising "to certain categories of information,"
thereby prohibiting certain speech altogether. --- U.S. at ----, ----, 102 S.Ct. at
932, 939. See also Metromedia, Inc. v. San Diego, 453 U.S. 490, 516, 101 S.Ct.
2882, 2897, 69 L.Ed.2d 800 (1981) (content-based restriction on billboards
invalid under First Amendment) (plurality); Linmark Associates, Inc. v.
Willingboro, 431 U.S. 85, 94, 97 S.Ct. 1614, 1619, 52 L.Ed.2d 155 (1977) (law
restricting signs "based on their content" ruled invalid under First Amendment).
In Heffron v. International Society for Krishna Consciousness, 452 U.S. 640,
101 S.Ct. 2559, 69 L.Ed.2d 298 (1981), the Court upheld a state rule which
required that exhibitors at the Minnesota State Fair conduct sales, distribution
and fund solicitation operations from a booth. Id. at 644, 101 S.Ct. at 2562. The
Court decided that the state rule, which it construed to be a non-content-based
time, place and manner restriction on speech, was not based on content and was
valid under the facts before it.
Unlike the state rules challenged in Schaumburg, Schad, Consolidated Edison,
RMJ, and Heffron, the statute at issue here is not a direct regulation of speech,
but is rather a restriction on certain trade practices which may (or may not)
have an indirect impact on speech. Whether the statute has any impact on

speech and the extent (if any) of that impact are questions of fact. Whether the
impact requires invalidation of the statute or parts thereof is a question of law.
9

The Ohio district court found, after trial and an exhaustive analysis of the facts,
that the actual threat to First Amendment values was minimal, and consisted
solely of the "risk of an occasional and minor delay in the release of a new
film." 496 F.Supp. at 435. See 496 F.Supp. at 433-35 for the court's summary
of the evidence relating to the First Amendment claims. Inter alia, plaintiffs'
own witnesses "made it clear that the decision to finance and produce a
particular film is not primarily motivated by considerations regarding its
marketing." 496 F.Supp. at 434. Indeed, the court noted that the "evidence
supports the inference that (plaintiffs' former practices) may discourage
production and distribution of controversial films or of low-budget films with
unknown artists." 496 F.Supp. at 434 n. 14
We note that 10 of the 12 plaintiffs in this suit were 10 of the 11 plaintiffs in
the Ohio suit.

10

Any argument that the Ohio statute accomplished the state's goals at too high a
cost to the First Amendment faded in the face of the Ohio district court's
factfinding that the only risk to the First Amendment created by the Ohio
statute was a minimal risk of delay in exhibition. The Ohio district court
balanced this minimal risk against the "substantial legitimate governmental
interests served by the Act":
the State's interest in readjusting the relative market strengths of exhibitors and
distributors; in establishing fair and open bidding practices; protecting
consumers from a rise in ticket prices; removing the opportunities for unfair
dealing and as a result, inhibiting suspicion within the industry; and permitting
Ohio exhibitors to exercise their independent business judgments in licensing
films.

496 F.Supp. at 435. The list of reasons for the Pennsylvania Act set forth in 203-2
of that Act includes these concerns in addition to others
11

The Ohio district court noted that "(t)he first question ... is whether the Ohio
Act creates, grants or destroys any rights that are 'equivalent' to the exclusive
rights of copyright set forth in 17 U.S.C. 106." 496 F.Supp. at 443. The court
continued:
(The Ohio Act) neither creates rights equivalent to those within the scope of the
federal act nor deprives copyright owners of the protections afforded by the
federal copyright. The Ohio Act does not deprive motion picture copyright
owners of their rights to prohibit reproduction, performance, distribution or

display of their work; nor does it vest the rights to reproduction, performance,
distribution or display in exhibitors or any other person. 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.
496 F.Supp. at 443. The Sixth Circuit agreed, 679 F.2d at 663
This analysis and conclusion seem applicable to the Pennsylvania Act, at least
on its face. The trial court in this case did not need to reach this question,
however, because it ruled that the Copyright Act pre-empted the Pennsylvania
scheme by limiting the exercise of federally created rights. 520 F.Supp. at 993.
12

The Ohio district court, after trial, ruled that the Ohio Act did not in fact
interfere with the "purposes and objectives" of the Copyright Act. To the
contrary, the Ohio district court found that the Ohio Act furthered Copyright
Act goals: inter alia, the prohibition against blind bidding and the requirement
of a trade screening protect exhibitors from being compelled to rent movies
without first being able to assess their quality, and " 'the reward (to an author or
artist) does not serve its public purpose if it is not related to the quality of the
copyright....' (United States v. Paramount Pictures, Inc., 334 U.S. at 158, 68
S.Ct. at 929)." 496 F.Supp. at 447. Furthermore, the Ohio court found that the
Ohio Act, by forbidding blind bidding and its inevitable result of requiring
theaters to book movies far in advance, in fact "further(s) the wide
dissemination of copyrighted works" by increasing the opportunity of
"independents for the showing of their films." 496 F.Supp. at 447-48
We note that, unlike the Ohio Act, which forbids conditioning licenses on the
payment of guarantees, the Pennsylvania Act forbids all guarantees where
payment to the distributor will be based on box office receipts. Further, the
Pennsylvania Act forbids first runs of longer than 42 days without plans for
expanding the run: the Ohio Act contains no equivalent prohibition. Thus,
particularly with regard to the 42-day provision, the Pennsylvania Act may
have a greater impact upon plaintiffs' copyright rights than the Ohio Act.