Motion Picture Patents Company

Exhausted by the lawsuits, Edison's competitors — Essanay, Kalem, Pathé Frères, Selig, and Vitagraph — approached him in 1907 to negotiate a licensing agreement, which Lubin was also invited to join.

The purpose of the licensing agreement, according to an Edison lawyer, was to "preserve the business of present manufacturers and not to throw the field open to all competitors."

Biograph retaliated for being frozen out of the trust agreement by purchasing the patent to the Latham film loop, a key feature of virtually all motion picture cameras then in use.

[2] The MPPC eliminated the outright sale of films to distributors and exhibitors, replacing it with rentals, which allowed quality control over prints that had formerly been exhibited long past their prime.

Films were initially limited to one reel in length (13–17 minutes),[4] although competition by independent and foreign producers by 1912 led to the introduction of two-reelers, and by 1913, three and four-reelers.

[6] The Ninth Circuit Court of Appeals, which is headquartered in San Francisco, California, and covers the area, was averse to enforcing patent claims.

[7] Southern California was also chosen because of its beautiful year-round weather and varied countryside; its topography, semi-arid climate and widespread irrigation gave its landscapes the ability to offer motion picture shooting scenes set in deserts, jungles and great mountains.

Hollywood had one additional advantage: if a non-licensed studio was sued, it was only a hundred miles to "run for the border" and get out of the US to Mexico, where the trust's patents were not in effect and thus equipment could not be seized.

Another reason was the MPPC's overestimation of the efficiency of controlling the motion picture industry through patent litigation and the exclusion of independents from licensing.