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The Circle Bastiat

How the patent office almost shut down Hollywood

New book 'The Master Switch' examines the role of the patent office and the history of film – including how Thomas Edison tried to have a movie monopoly.

By Stephan KinsellaGuest blogger / December 2, 2010

The Master Switch: The Rise and Fall of Information Empires by Tim Wu, November 2010, Knopf Doubleday Publishing Group, 384pp.

Knopf Doubleday Publishing Group


My C4SIF post The Perils of Centralized Innovation concerned a fascinating excerpt from The Master Switch by Tim Wu (excerpts on scribd and google books). I have since downloaded and begun to read this fascinating book. I noticed that it contains some illuminating discussions of the effect of patent and copyright on the development of the American movie industry. One of the points of Wu’s book is how dominant information-based firms often resort to state help when their dominance is threatened. As Wu observes (quoted here in a post by Cory Doctorow):

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The problem is that dominant firms are like congressional incumbents and African dictators: They rarely give up even when they are clearly past their prime. Facing decline, they do everything possible to stay in power. And that’s when the rest of us suffer.

AT&T’s near-absolute dominion over the telephone lasted from about 1914 until the 1984 breakup, all the while delaying the advent of lower prices and innovative technologies that new entrants would eventually bring. The Hollywood studios took effective control of American film in the 1930s, and even now, weakened versions of them remain in charge. Information monopolies can have very long half-lives.

Declining information monopolists often find a lifeline of last resort in the form of Uncle Sam. The government has conferred its blessing on monopolies in information industries with unusual frequency. Sometimes this protection has yielded reciprocal benefits, with the owner of an information network offering the state something valuable in return, like warrantless wiretaps.

Wu’s description of the evolution of Hollywood’s rise to dominance and the role state monopolies played in its structure is fascinating. In ch. 4, he notes how in France one Louis Lumière invented a working camera and projector in 1895. The same year, Charles Francis Jenkins in the US invented a projector called the “Phantoscope.” Edison then entered the market with the “Vitascope,” basically the same as the Phantoscope except for the name. He managed to procure Jenkins’s patent rights for $2500. But then another company, Biograph, entered the market, leading to almost a decade of patent litigation. The patent holders finally decided to settle and form the Motion Pictures Patent Company, a cartel known as the Film Trust. The Film Trust comprised the large film producers and the largest manufacturer of film stock, Eastman Kodak. The Trust pooled sixteen key patents, leading to the blocking of film imports and price fixing at every stage of the film production and exhibition process. The Trust had a series of meetings to establish rules that would permit only Trust members to make or import films into the US; those who didn’t comply would be sued for patent infringement. Theater owners had to pay license fees, distributors had to comply, and so on.