## Facts

- Orson, Inc. operated the Roxy, a two-screen art-house theater in Center City Philadelphia.
- Miramax produced and distributed films and commonly licensed its art-house releases to the Ritz, another Center City art-house theater.
- Pennsylvania law barred distributors from maintaining an exclusive first-run exhibition license in a geographic area for more than 42 days unless, after 40 days, the distributor expanded distribution to another theater in the same area on nondiscriminatory terms.
- Orson alleged it was similarly situated to the Ritz and repeatedly sought Miramax films.
- Over roughly two and one-half years, Orson obtained only one first-run Miramax film and rarely received second-run films after the forty-second day of play at the Ritz.
- Orson sued for damages, alleging Miramax’s prolonged exclusives and refusals to license after 42 days violated the Pennsylvania statute.
- The district court rejected Miramax’s Copyright Act preemption defense and found liability under the Pennsylvania provision.
- A Third Circuit panel initially reversed on preemption grounds; the court later reheard the case en banc, vacated the panel decision, and issued the controlling en banc opinion.

## Issues

1. Whether Pennsylvania’s restriction on the duration of exclusive first-run film licenses and its mandated expanded distribution requirement are preempted by the federal Copyright Act.

## Decision

- The en banc Third Circuit reversed the judgment against Miramax.
- The court held the Pennsylvania provision was preempted under 17 U.S.C. § 301 because it conflicted with the copyright owner’s exclusive distribution right under 17 U.S.C. § 106(3).
- The earlier panel decision was vacated.

## Legal Principles

- Copyright Act § 106(3) grants the copyright owner the exclusive right to decide whether, when, where, and to whom copies of a work are distributed, including through exclusive territorial or temporal licenses.
- State laws are preempted under 17 U.S.C. § 301 when they regulate rights equivalent to federal copyright rights and interfere with the exercise of those rights.
- A state rule that forces a distributor to end exclusivity after a fixed period or to license additional exhibitors on prescribed terms conflicts with the federal distribution right and is preempted.
- State regulations imposing procedural or disclosure obligations may be treated differently from rules that impose substantive limits on exclusivity, because substantive limits can directly constrain federally granted distribution control.

## Conclusion

The Third Circuit held that Pennsylvania’s limit on exclusive first-run film licensing and its requirement of expanded distribution after a set period impermissibly constrained the copyright owner’s federal distribution right, so the provision was preempted and could not support liability against the distributor.


Orson, Inc. v. Miramax Film Corp., 189 F.3d 377 (3d Cir. 1999)