United States v. Loew’s, Inc.

The United States government (plaintiff) filed an antitrust action against Loew’s, Inc. (defendant) for its practice of packaging multiple films together and requiring television stations to purchase films the stations did not want in order to purchase the films they wanted. For example, if a station wanted to purchase a movie package that contained the famous Casablanca, the station was required to purchase a movie package that contained movies like Tear Gas Squad and Tugboat Annie Sails Again. Loew’s held the copyright to both the desirable tying movies and the unwanted tied movies. In 25 contracts with these arrangements that tied one product to another, Loew’s received payments from $60,800 to $2.5 million. These tying arrangements had a negative effect on competition and trade. Not only were television stations required to buy products they did not want, but sellers of the tied products did not have the opportunity to compete for the sale of the tied products alone. The United States filed suit alleging that Loew’s had violated § 1 of the Sherman Act. The United States had also filed suit against Paramount Pictures for its practice of block booking—requiring movie theaters to purchase multiple films. In that case, the Supreme Court ruled that refusing to license one copyrighted product unless a different copyrighted product is purchased is unlawful. That holding was consistent with rulings in prior patent cases. Essentially, because of the desire to reward uniqueness, patent holders were granted a monopoly by statute in their patented products. For this reason, any extension of a patent holder’s economic power over products that were not patented was forbidden. Against the backdrop of these earlier cases, a district court found that Loew’s had engaged in block booking and that each package containing copyrighted films was a unique product. The district court also found that by virtue of the copyright, which granted Loew’s monopolistic power over its tying products, Loew’s had sufficient economic power to restrain competition. Loew’s appealed.