August 1891 - Edison files a patent application on a moving picture camera and film. Granted August 1897.

1897 to 1901 - Edison files 23 infringements suits.

1907 the litigation comes to close in favour of Edison's control over the dominant (and almost only practical) design of camera technology.

However there are five crucial patents for film production:

- Edison’s camera patent

- Edison’s film stock patent

- A Projector Patent (owned by the Armat Motion Picture Company)

- The "Latham Loop" Patent

-The "Pross" patent on projector shutters

1.Edison owns two

2. Armat files patent suit against 10 companies. Wins again Biograph which takes out licence to use technology. Issue fudged against Edison which effectively retains right to use Armat’s technology without licence.

3. By Feb 1908 Biograph owns Latham Loop and Pross Patent.

What are the implications of this struggle over patent rights?

Technically patent law suggests that the value issuing from an invention should go to its originator. However access to legal restitution is not equal. Unless the inventor had sufficient capital to pursue rights, they are unenforceable. Thus economic strength was a key factor in deciding the outcome of patent struggles - as both the Armat company and the Latham Company discovered.

Following the pro-Edison March 1907 decision, film "manufacturers" (production companies) faced a growing demand for product but couldn’t legally meet it.

Thus in Feb 1908, Edison licences:

Lubin, Selig, Vitagraph, Melies, Pathe, Kalem and Essanay

Nov 1907, manufacturers and distributors held meetings to stop price-cutting.

Dec 1907 - the film exchanges (distributors) establish the Film Service Association (FSA).

March 1908 - FSA contracts to buy exclusively from Edison licencees creating a production/distribution alliance which effectively dominates the industry.

Biograph does not become an Edison licensee. Uses ownership of Latham and Pross Patents as counterweight to Edison’s patent strength.

Biograph attempts to construct competing alliance, licencing equipment manufacturers and film importers.

Thus the battle for industrial control is constructed at this point not through competitive products (i.e. films perhaps because at this point demand outstrips supply) but through legal and structural practices. Firms attempted through patent law and the strategy of combination to secure an anticipated legal monopoly with its profits. Litigation and combination immediately typified the industry’s early conduct.

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1908 - US film industry's production structure - two equipment and film manufacturing combinations with two sets of patents – Edison & Biograph

1. They cross-licence each other

2. Form a combination the Motion Picture Patents Company (MPPC).

1. MPPC structured as a patents pool - purpose to acquire inventions and patent rights related to moving picture technology and to licence such use.

2. Royalties from equipment manufacturers, film producers and from theatres (using projectors) collected & distributed to the four companies.

3. MPPC – signs three year exclusive contract with Eastman Kodak

4. Licenced all significant film manufacturers (producers) and importers,fixing rental prices, at minimum level.

5. Moved to control distribution – licence 100 of 130 - 140 film exchanges.

MPPC benefits:

(For MPPC itself):

- constructed a combination with potential monopoly power in all three levels of the industry.

MPPC members had:

- assured routes of wholesaling and distributing,

- a sure level of rental income and

- access to  expanding nationwide market 

"Prior to the formation of the company, a single negative from a Chicago or New York manufacturer might reach only a limited locale or receive spotty distribution because of the expense of setting up a nationwide distribution system with a regular schedule of releases. With the new structure, larger number of prints could be efficiently distributed. Economies of scale could be realised. One of the immediate results was the investment of capital into production."

Janet Staiger

Benefits of MPPC to viewers:

- quality control measures introduced

- better supply of new pictures

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Distribution Moves:

April 1910 – Number of MPPC licence fallen to 69 (cause - voluntary withdrawal or licence cancellation due to contract violations.)

MPPC establishes General Film (GF) - licences it as its sole distributor. General Film:

- purchases 58 of the remaining exchanges

- cancels 10 others

- ultimately reduces operations to streamlined, nationwide 42 exchange setup

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MPPC resisted by exhibs and distribs: May 1910 establish a distribution alliance - the Motion Picture Distribution and Sales Co. Sales Co. does not directly own exchanges, simply a distribution. Economic advantages of alliance attracts film manufacturers.

Thus by 1911 the economic structure of the industry was once again oligopolistic: two distribution firms representing two sets of manufacturers and exhibitors.

Domestic strength of both alliances (with their nationwide distribution) allows move to international distribution by 1911, first distributing excess product, then striking prints for international markets as they developed.

1912 however, Sales Co. implodes, splits into :

- Mutual

- Film Supply

- Universal.

Other Indy counter strategies

Used vagaries of patent laws:

- even after MPPC establishment (1908) court decision on various patents remained to be made legally definitive.

- patent law required that they be caught using patented equipment.

- For MPPC, cost of pursuing infringers generally more than court-ordered payments.

- Ultimately one court case would in fact end MPPC.

Oct 1911 General Film offers William Fox $150,000 for the Greater New York Film Rental Co

Fox refuses - GF cancels supply of films. Fox sues MPPC/GF. Fox Loses but judge agrees that MPPC "may constitute an illegal monopoly and become a restraint of trade."

August 1912 – US government files suit against the MPPC under the Sherman Antitrust Act stating that

"on or about April 1910, defendants set out to monopolize the business of all the rental exchanges in the United States, their purpose being to drive out of business all persons so engaged and to absorb to themselves the profits theretofore made therein."

Lawsuit would last until 1915.

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1911 – Film Industry goes multiple reel. Features offered greater profitability through:

- permitting higher admission prices

- longer runs

- easier to advertise

Warners, Paramount and Fox all emerge in 1914 as feature distributors.

MPPC 1913 - 1915: increasingly uncertain future

The Dept. Justice alleged that:

In short through licensing and royalty contracts the MPPC and General Film had acted unlawfully in all three sectors of the industry.

MPPC position:

a) their purpose had been to constitute a legal business to improve the quality and service of the industry.

b) Motion pictures were works of "fine art and of a literary and dramatic essence". Therefore should not be subject to interstate trade regulations.

However at same time MPPC seek to apply different type of law to utilise their patent control – tying arrangements, allowing manufacturers of a patented invention to require that only certain supplies be used with that machine – MPPC sue Universal for using non-specified films on a MPPC patented projector.

Oct 1915 – Judge argues that whatever motives for establishing MPPC, the effects of the combination’s structure had been restraint of trade. Ordered the combination (not the firms) dissolved.

Jan 1916 - US District Court throws out "tying" case against Universal: A licence patent on patent equipment would not prevent the use of other manufacturers supplies."

MPPC appealed.

April 1917 – Supreme Court ruled that the purpose of patent law (is not to create private fortunes but is to promote the progress of science and the useful arts."

General Film’s producers begin to abandon it. (By 1919 – General Film in receivership.)