Professional Real Estate Investors (PRE) operated a resort hotel in Palm Springs, California. Having installed videodisk players in the hotel’s rooms and assembled a library of more than 200 motion picture titles, PRE rented videodisks to guests for in-room viewing. PRE also sought to develop a market for the sale of videodisk players to other hotels that wished to offer in-room viewing of prerecorded material. Columbia Pictures Industries and seven other major motion picture studios (referred to collectively as Columbia) owned the copyrights on the motion pictures that appeared on the videodisks PRE had purchased. Columbia also licensed the transmission of copyrighted motion pictures to hotel rooms through a wired cable system called Spectradyne. PRE therefore competed with Columbia not only for the viewing market at PRE’s hotel, but also for the broader market for in-room entertainment services in hotels. Columbia sued PRE for copyright infringement on the basis of PRE’s rental of videodisks for viewing in hotel rooms. PRE counterclaimed, charging Columbia with violations of §§ 1 and 2 of the Sherman Act. PRE alleged that Columbia’s copyright action was a mere sham that cloaked underlying acts of monopolization and conspiracy to restrain trade. The district court granted summary judgment in favor of PRE on Columbia’s copyright infringement claim. Columbia sought summary judgment on PRE’s antitrust counterclaims. Columbia asserted that its copyright infringement claim had not been a sham and that the Noerr–Pennington doctrine therefore protected Columbia against antitrust attack. PRE opposed Columbia’s motion for summary judgment on PRE’s antitrust counterclaims by arguing that Columbia’s copyright infringement claim was a sham because Columbia did not honestly believe that the claim was meritorious. If Columbia did not subjectively believe that the claim was meritorious but there was probable cause to bring the claim, was Columbia’s claim a sham for purposes of the sham exception to the Noerr– Pennington doctrine’s protection against liability?
