by Vanda Krefft
Fox also continued to pour money into the antitrust case. As Gustavus Rogers told Variety in July 1913, about halfway through the pretrial hearings, “The expense of litigation . . . is being borne exclusively by Fox, with the U.S. Government as an ally.” According to Rogers, Fox had by then incurred about $500,000 in legal expenses and business losses as a result of the case.
Pretrial hearings lumbered on until late 1913, enduring a number of interruptions because prosecutor Grosvenor was simultaneously working on the International Harvester case. Then, a series of harsh blows fell. In December 1913, Grosvenor announced plans to leave the Justice Department on January 1 to reenter private practice. Although he promised to come back to finish the MPPC case, there was good reason to doubt the strength of his commitment. He was joining a firm of Wall Street corporation lawyers. Then, on December 26, 1913, Fox’s civil suit against the MPPC, the one that launched the antitrust prosecution, died. A New York state appeals court dismissed the case, affirming a trial court ruling of ten months earlier that the MPPC contract terms did not constitute illegal restraint of trade. That decision implied doom for the government’s antitrust case.
Adding to Fox’s distress, the MPPC’s lawyers repeatedly won postponements of the trial date. The more time that passed, the more likely it was that witnesses would forget or stop caring about the case. Ironically, the MPPC could even use Fox’s own money to fight him. Since the organization’s inception in 1909, he had continued to pay the $2-a-week projector royalties—and that money had been designated in part as a legal defense fund. By December 1911, as a licensed exhibitor and as an exchange owner who paid the fees for his customers, Fox had already sent in about $30,000 in projector royalties. On an ongoing basis, the MPPC had not only Fox but several thousand more theater owners nationwide who would have to continue to subsidize its cause.
While waiting for the antitrust case to go to trial, Fox worked with what he had in hand: his reputation as a leader, his organizational skills, and his tireless energy. In mid-1914, he formed a nationwide organization that he hoped would unite all movie companies outside the MPPC to work together to fight the trust. After paying to draw up a charter and incorporate the National Independent Motion Picture Board of Trade, he mailed out letters to every U.S. independent manufacturer and distributor as well as every U.S. theater owner, pleading with them to join. He also took out full-page trade publication ads titled “Time to Get Together,” and even offered to help with hotel reservations so that out-of-towners could attend the group’s first meeting in New York on August 29, 1914.
The idea didn’t work. Right away, Carl Laemmle, who had relocated from Chicago to New York and who was himself forming an amalgamation of independent manufacturers, accused Fox of posturing as “the Moses of the business” and of pursuing his own self-interests under the guise of altruism. Similarly, an unnamed exhibitor groused to a reporter, “Let those who have certain grievances pull their own chestnuts out of the fire.”
Only fifty to one hundred people showed up for the first meeting of Fox’s Motion Picture Board of Trade at the Hotel McAlpin—a dismal result, considering the many thousands of potential members nationwide. Addressing the sparse gathering, Fox lapsed into self-pity. “Don’t you know that if I had lacked courage . . . not a single man in this room would have been in business to-day,” he complained in his keynote speech. “And yet none of you who are present did anything to help me either financially or even wrote me giving me your moral support. I have determined . . . that it is your duty, even at this late day, to come in so that we might act in a united fashion.”
They didn’t listen. The Board of Trade never developed sufficient power to take any noteworthy action, and it quietly faded away. The failure of his colleagues to support him wounded Fox. He saw himself as fighting for their interests and couldn’t understand why they resisted this rather minimal call for assistance.
He did have some consolation. At least he wasn’t the only one suffering. By 1914, the other side had also been overtaken by a gloomy mood. At the General Film Company offices at 200 Fifth Avenue, Variety reported, “The clerks speak in whispers and the minor heads of departments move around on noiseless roller skates, with occasional furtive glances to see who is watching and checking their movements.”
On December 8, 1914, the United States v. Motion Picture Patents Co. antitrust case finally went to trial. One day later—as it had three and a half years earlier, when the Dreamland amusement park fire augured the downfall of Big Tim Sullivan—fate sent a prophetic message. Around 5:30 p.m. on December 9, a thunderous boom sounded throughout the Edison plant in West Orange, New Jersey. In a motion picture film storage room, reels of highly flammable nitrate film had exploded by spontaneous combustion, unleashing a “roaring inferno” that destroyed nearly three-quarters of the manufacturing and experimentation facilities within twelve hours. After it was over, Edison’s son Charles surveyed “a smoldering jumble of blackened foundations and concrete skeletons.” At least, thanks to well-practiced fire drills, there was only one fatality: the following morning, a man’s corpse would be found with a melted fire extinguisher under his arm.
At work in his old redbrick laboratory, which remained undamaged, sixty-seven-year-old Edison had rushed out to try to help fight the flames. A short time later, discouraged and disheveled, he stood in the doorway, “his white hair tossed by the December wind,” and just watched. His face showed little emotion. He told reporters he planned to “start all over again tomorrow.”
Yet Edison had little with which to start over again. Of more than $2 million in damage, only $268,000 was covered by insurance. Edison hadn’t bothered to take out policies on all his concrete buildings and even some wood frame ones because he had considered them—somewhat like the MPPC—the last word in modern scientific construction, completely fireproof.
In the austerely furnished courtroom of U.S. District Court judge O. B. Dickinson in the Federal Building in Philadelphia, the MPPC antitrust trial lasted four days. Prosecutor Grosvenor made good on his promise to return to the case. He brought with him an impeccable trial record: during his entire time with the attorney general’s office, the government hadn’t lost a single antitrust case in which he’d participated.
Grosvenor—whom MPPC lawyer Frank Dyer had once derided as “absolutely fanatical” and dimly informed—hit upon the pertinent issues. While the MPPC argued that it had an inviolate right to use its patents however it wished, Grosvenor highlighted the “rule of reason”* and portrayed the MPPC as a deliberate monopoly that practiced both subjective and objective restraint of trade. Subjectively, the ten licensed manufacturers suppressed competition among themselves, Grosvenor alleged, and objectively, they harmed exchange owners and exhibitors through arbitrary, oppressive, and arrogant action. Grosvenor emphasized the enormous financial harvest reaped by the MPPC: during its first year, its GFC subsidiary had taken in at least $2 million in profits.
When the trial ended on December 11, 1914, no one expected a speedy decision. Although Judge Dickinson was known as a quick study, the testimony, exhibits, and briefs added up to 4,235 printed pages, including much abstruse technical information.
Whatever one felt, Fox believed, one had to project confidence. Six days after the trial ended, he filed a “triple damages” lawsuit against the MPPC that assumed the government would win the antitrust case. Fox’s action was based on provisions of the Clayton Antitrust Act, which President Wilson had signed into law on October 15, 1914, as a claw-sharpening amendment to the Sherman Law. (Fox had sent Gustavus Rogers to Washington to lobby for the legislation.) The Clayton Act allowed individuals harmed by proven antitrust violations to sue for triple damages plus attorneys’ fees—and, crucially, to use a successful antitrust prosecution as prima facie evidence of an illegal combination.* Fox claimed losses of $600,000 and therefore asked the court to award him $1.8 million. Of course, the new lawsuit would have to remain on hold pending the outcome of the antitrust case.
The decision finally arrived on October 1, 1915. It was just what Fox had hoped for. Judge Dickinson ruled that the Motion Picture Patents Company and its General Film Company subsidiary were illegal monopolies and ordered them disbanded. At Dickinson’s request, Grosvenor drafted the dissolution decree—with help from Gustavus Rogers, whom Edison patents lawyer George F. Scull suspected of having inserted several veiled clauses intended to benefit Fox.
It was a crucial victory, but not a final one. The MPPC announced that it would appeal and, if necessary, carry the case all the way to the U.S. Supreme Court.
Fox now began to doubt himself. He had been tied up in this war for nearly four years, and there was no telling when or how it would end. One evening in January 1916, an MPPC lawyer called to present a settlement offer on Fox’s triple-damages lawsuit. Under pressure from Gustavus Rogers, Fox accepted. The three worked on the agreement until six the next morning. In exchange for dropping his $1.8 million lawsuit, Fox would receive $300,000 from the whole MPPC organization and another $50,000 from the GFC for his film rental agency and all its stock.
It was a mistake. Although Fox didn’t know it, MPPC leaders privately conceded that he had a good chance of winning his triple-damages lawsuit. Indeed, he would have won. Upon hearing of the settlement agreement, an appeals court judge assigned to the case told Fox that the court had been ready to decide unanimously in his favor. Furthermore, the MPPC’s appeal on the antitrust case failed. On April 10, 1917, the U.S. Supreme Court upheld Dickinson’s decision and called the MPPC “a potential power of evil over an industry in the amusement life of the nation.” The combination was finally, irrevocably, dead.
As for Edison, he got out of the feature film business in the spring of 1918 when he sold off his studio, including the equipment, at 2526 Decatur Avenue in the Bronx as well as the equipment at the Edison Positive Film Plant in Orange, New Jersey. Then he tried to forget all about the MPPC misadventure. In published reminiscences, he doesn’t mention one word about the battles with Fox or about the government’s antitrust lawsuit. Instead, he claims he lost interest in motion pictures: “When the industry began to specialize as a big amusement proposition I quit the game as an active producer.”
Fox has never gotten full credit for his role in dismantling the Motion Picture Patents Company. Most film historians, after noting the importance of his December 1911 lawsuit in calling attention to the issue, primarily acknowledge the Justice Department’s prosecution, the rise of independent film producers, and/or the MPPC’s many internal weaknesses. All those factors certainly played a vital role.
In fact, though, the MPPC fell apart largely because of Fox’s campaign against it. Right away the Justice Department’s antitrust lawsuit, instigated by Fox, aggravated tensions among the MPPC’s members, further polarizing them and distracting them just when they needed to pull together. They squabbled over money—nobody wanted to pay steep legal fees—and strategy. Annoyed, Thomas Edison grumbled, “It would be better to throw the whole thing to the dogs and be free.” Some of the licensed manufacturers even considered renouncing their licenses and joining the independents to fight the MPPC. Although that didn’t happen, the next few years of litigation sharpened internal resentment by draining resources of money and energy and by keeping the MPPC in the crosshairs of a largely hostile trade press. The organization became so badly demoralized that most of the licensed manufacturers and even the GFC stopped paying royalty fees to the parent company. By the fall of 1916, a year after Judge Dickinson’s decision, Edison Company general manager C. H. Wilson privately acknowledged that the GFC was moribund.
Perhaps the strongest evidence of Fox’s pivotal role in destroying the MPPC came from the MPPC itself. At the end of the antitrust trial in December 1914, while delivering his closing argument, MPPC attorney Reuben O. Moon kept looking over at the prosecutor’s table, where Gustavus Rogers sat alongside government prosecutor Grosvenor. Then, “with a rising inflection in his voice,” Moon charged that Fox, and not the U.S. government, was the real plaintiff in the case. In “ringing tones,” Moon exclaimed that his clients had “become obsessed” with this “cruel suspicion . . . because Fox’s lawyer is in court conferring with Mr. Grosvenor and has been present at every hearing and at every step taken in the case since its inception.”
The end of the MPPC opened a new chapter in film history. Now, anyone in the United States who wished to make movies could do so legally. Thanks largely to Fox, the foundation had been laid for the American movie studio system.
It had all been so wasteful. Fox had spent several years fighting the MPPC, time that could have been spent building his business and advancing the motion picture industry. He had also suffered financially, recouping from his triple-damages lawsuit settlement just slightly more than half the losses he’d incurred. He was angry—but also proud of himself and of his country. American justice worked. In a full-page trade publication ad, he boasted, “I fought in the United States Courts and won.”
CHAPTER 11
Independence
The viciousness of the MPPC antitrust fight impelled Fox to make the most important decision of his career. No longer willing to endure bad service and the constant threat of contract cancellation from the production companies that supplied movies to his businesses, he realized he needed to sever those ties completely. In January 1914, after the pretrial hearings had ended and while waiting for the trial to begin in December, Fox started the Box Office Attraction Company (BOA) as a combined independent distribution and production company.
He intended first to build BOA up as a leading nationwide chain of branch rental exchanges, and then to begin making movies. The market looked highly promising. In 1914, the United States had about eighteen thousand movie theaters with a combined annual revenue of $300 million, and since the previous July, thanks to the confrontation he had provoked over Kinemacolor, the MPPC had allowed its licensed exhibitors to show independent films. By the summer of 1914, Fox had opened BOA film rental offices in fifteen North American cities.
There was a lot to learn. He had planned to deal mainly in European feature films, but he soon discovered that foreign manufacturers were willing to send only their worst junk to the United States, films they apparently didn’t dare try to foist onto their home audiences. Out of every twenty foreign features submitted to him, only two or three were acceptable, and those few proved virtually impossible to market because of the reputation of all the rest. Often, European producers simply slashed the price of their films until someone picked them up, so that the average American theater owner had come to view all foreign movies as garbage. “Most of the exhibitors do not see the picture before it is rented. They ask, ‘foreign?’ and if the answer is ‘yes’ they decline it,” Fox explained. By July 1914, he decided to drop all foreign films. Because his handful of American suppliers (companies such as Nemo, White Star Features, and the Balboa Amusement Producing Co.) were too small to provide sufficient volume, Fox realized that in order to stay in the film rental business, he’d have to start making movies himself.
While Fox knew next to nothing about feature film production, at least no one else in the United States knew much more. Carl Laemmle, who had recently changed his company’s name from IMP to Universal Films, was still producing only short films. The Warner brothers, headquartered in the same building as Fox at 130 West Forty-Sixth Street, had made their first movie, Peril of the Plains, in 1912. Jesse L. Lasky and his brother-in-law Sam Goldfish (who would change his name to Goldwyn in December 1918), partners in the Jesse L. Lasky Feature Play Company, had begun filming Hollywood’s first feature film, the six-reel The Squaw Man, in December 1913, only one month before Fox started BOA. Adolph Zukor had founded Famous Players Film Company in 1912.
As he contemplated moviemaking, Fox’s sense of a special calling deepened. In building his theater chain, he’d wanted (in addition to making money) to brighten the lives of ordinary working people by offering entertainment in a
pleasant, clean setting. He hadn’t given much thought to what they were watching. Now he decided he wouldn’t present any entertainment that he didn’t want his wife and daughters to see. “It became with me a sort of ideal . . . I felt a strong obligation that was mine that if a man, woman, or child were going to buy a ticket to enter my buildings, I was responsible for their welfare while they were in that building.” He also thought about the other exhibitors who would rent the films he made. He was especially interested in helping those who were struggling financially, as he once had. He believed he had “a mission to perform for the less luckily situated showman no less than for the satisfied individual.”
If Fox, then thirty-five, knew little about making movies, his thirty-year-old second-in-command, BOA general manager Winfield R. Sheehan, knew even less. Sheehan had no experience at all in the movie business or in any other creative field. Instead, the boyish-faced, blue-eyed, fireplug-shaped Sheehan came from a background of city government and journalism.
The son of a prosperous Irish immigrant dry goods store owner in Buffalo, New York, Sheehan had started work as a teenage reporter for the Buffalo Courier and then had gone to New York City to cover the police beat and local politics, first for the Journal and American and then the World. Shrewdly ambitious, he ingratiated himself with Tammany Hall denizens and moved up quickly by delivering Rhinelander Waldo, a wealthy but naïve former army officer who was willing to serve as window dressing for the corrupt local regime. After Tammany mayor William Gaynor named Waldo as fire commissioner in 1909, Waldo hired Sheehan as his private secretary. When Waldo advanced to police commissioner the following year, Sheehan went along with him. It wasn’t much of a job: Sheehan’s official duties consisted mainly of opening Waldo’s mail, seeing visitors, and supervising one employee—the janitor.
