Columbia Broadcasting Sys., Inc. v. AMERICAN SOC. OF C., A. & P.

Decision Date20 January 1972
Docket NumberNo. 69 Civ. 5740.,69 Civ. 5740.
Citation337 F. Supp. 394
PartiesCOLUMBIA BROADCASTING SYSTEM, INC., Plaintiff, v. AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, et al., Defendants.
CourtU.S. District Court — Southern District of New York

Cravath, Swaine & Moore, New York City, for plaintiff; Alan J. Hruska, Robert K. Baker, Ronald S. Rolfe, John A. Lucido and J. Barclay Collins, New York City, of counsel.

Paul, Weiss, Rifkind, Wharton & Garrison, Herman Finkelstein, New York City, for ASCAP and defendants Coleman, Hamilton, Schwartz and Washington; Simon H. Rifkind, Jay H. Topkis, Allan Blumstein, and Max Gitter, New York City, of counsel.

LASKER, District Judge.

This is a civil antitrust action by Columbia Broadcasting System, Inc. ("CBS") against American Society of Composers, Authors and Publishers ("ASCAP") and others for alleged violations of the Sherman Act. ASCAP and the defendants who are members of its board of directors move, pursuant to Rule 56, Fed.R.Civ.P., for summary judgment dismissing the complaint. For the reasons set forth below, the motion is denied.

ASCAP is an unincorporated association of approximately 17,500 authors, publishers and composers of musical compositions which was organized in 1914. Its members have granted ASCAP, as their common licensing agent, the nonexclusive right to license their works. In exchange, ASCAP assists its members by distributing and collecting revenues, as well as policing and protecting the works against copyright infringement by maintaining a complex surveillance system of radio and television broadcasts.

CBS, a national radio and television broadcaster, is a licensee of ASCAP's repertory.

In 1941, the government sued ASCAP for violations of the antitrust laws. As a result of that litigation a consent decree was entered in 1941 which required ASCAP to grant licenses to users in proportion to the amount of music used. In 1950 that decree was substantially amended to remedy certain deficiencies.

Under the 1950 amended judgment, ASCAP is required to offer two types of license to the broadcasters — a "blanket" license and a "per program" license. Both licenses grant the user the right to use any or all of the works in ASCAP's repertory. The difference between the two is that the blanket license allows use of the entire inventory for a period of time — generally, in the history of the parties, one year — for which ASCAP receives a fee based upon a fixed percentage of the licensee's overall revenues for that period; whereas a per program license, as its name suggests, allows the use of the entire ASCAP inventory only for one broadcast program and the fee is based upon a fixed percentage of revenues derived from that program.

The 1950 decree also enjoins ASCAP from discrimination in fees which "would deprive the licensees ... of a genuine choice among such various types of licenses" (Par. VIII) and specifies that it must offer comparable fees to all applicants similarly situated (Par. IX(C)). Under the decree a special procedure is established for the determination of licensing fees. Upon the receipt of a license application, ASCAP is required to "advise the applicant in writing of the fee it deems reasonable for the license requested." If ASCAP and the prospective user are unable to agree upon a fee, the decree provides that the applicant "may forthwith apply to the District Court for the Southern District of New York for the determination of a reasonable fee ..." (Par. IX). Finally, ASCAP's licensing authority is not exclusive. The amended decree provides that prospective licensees may bypass ASCAP and secure a license directly from the individual composer, author or publisher.

I.

The thrust of CBS' complaint is that the availability of ASCAP's blanket and per program licenses is not sufficient to satisfy the commands of the Sherman Act. CBS contends that these options "compel a broadcaster to pay for the right to use all copyrighted music in the ASCAP pool, even though it might want rights only as to some of those musical compositions." (Par. 10, Complaint). In other words, CBS asserts that ASCAP is "using the leverage inherent in its copyright pool to insist that plaintiff pay royalties on a basis which does not bear any relationship to the amount of music performed." (Par. 19, Complaint). Finally, as to individual licensing, CBS alleges that "any attempt by plaintiff to acquire such a large body of rights from the individual members of ASCAP ... would be wholly impracticable ..." (Par. 15, Complaint).

CBS does not contend that ASCAP has violated the decree. It contends, however, that the procedures by which ASCAP operates under the 1950 amended judgment constitute illegal price fixing, boycotting, and tying. CBS asserts that the grant of a proposed "per-use" license1 (payment measured by the actual use of copyrighted music) "would go far toward unraveling the strands with which this combination has hogtied competitive market forces since 1914."

II.

ASCAP's motion for summary judgment is predicated on the contention that the Ninth Circuit, in K-91, Inc. v. Gershwin Publishing Corp., 372 F.2d 1 (9 Cir., 1967), cert. denied 389 U.S. 1045, 88 S.Ct. 761, 19 L.Ed.2d 838 (1968), rejected the same antitrust claims that CBS now asserts here. Thus, this motion presents the narrow issue whether under the rationale of K-91 summary judgment for ASCAP should be granted.

K-91 was an action for copyright infringement brought by several members of ASCAP against a radio broadcaster operating in the State of Washington. The broadcaster admitted the infringement allegations, but defended on the ground that ASCAP had formed an unlawful combination in violation of the Sherman Act which was engaged in price-fixing and block-booking of its members' works. The trial court upheld plaintiff's claims and rejected defendants' counterclaims and defenses.

The Ninth Circuit, in affirming the trial court's rejection of defendants' antitrust allegations, stated:

"We agree with the trial court that the activities of ASCAP do not constitute a combination in restraint of trade or a monopoly within the meaning of the Sherman Act. ASCAP is certainly a combination, but not every combination is a combination in restraint of trade or a monopoly." 372 F.2d at 4.

The Court's affirmance rested on three grounds. As to the price-fixing allegation, the Court stated:

"ASCAP cannot be accused of fixing prices because every applicant to ASCAP has a right under the consent decree to invoke the authority of the United States District Court for the Southern District of New York to fix a reasonable fee whenever the applicant believes that the price proposed by ASCAP is unreasonable, and ASCAP has the burden of proving the price reasonable. In other words, so long as ASCAP complies with the decree, it is not the price fixing2 authority." Id. at 4.

With regard to the other Sherman Act violations alleged, the Court stated:

"We cannot agree with the contention that the danger of unreasonable activity that might arise from ASCAP's activities makes everything that it does a violation of the antitrust laws, when those of its potential activities that might have this effect are prohibited by the decree. No contention is here made that ASCAP's actual activities do not comply with the decree. In short, we think that as a potential combination in restraint of trade, ASCAP has been `disinfected' by the decree." Id., at 4.3

After their claims were rejected by the Ninth Circuit, petitioners appealed to the Supreme Court. Before acting upon the petition the Supreme Court invited the Solicitor General to express the views of the United States in an amicus curiae brief. While the Solicitor General approved the result of the K-91 court in the limited context of the case, his brief contained pertinent caveats which we discuss below. Thereafter the Supreme Court denied certiorari.

III.

While the antitrust allegations of the petitioners in K-91 and those of CBS are substantially similar, one outstanding difference exists between the two cases which compels a denial of ASCAP's motion. No proposal was made to the K-91 court of a practical alternative to per program and blanket licensing such as CBS proposes here. And, thus, finding that some form of central licensing system was necessary in the music publishing field, the Ninth Circuit applied a "rule of reason" test to ASCAP's activities and found that there was no violation of the antitrust laws.

We agree with the Ninth Circuit that a rule of reason test and not a per se test should be applied to ASCAP's activities. As the Solicitor General said in his amicus curiae brief to the Supreme Court:

"... in the present state of technology there appears to be no effective means by which the enormous number of separate performances broadcast each year by commercial stations across the nation can be accounted for by copyright holders. ... It would appear, therefore, that there must be some form of centralized licensing system which serves the mutual interests of copyright holders and of music users ..."

When economic realities of the market place dictate such treatment the Supreme Court has often applied the rule of reason test to activities which would otherwise call for the per se test. Associated Press v. United States, 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945); Appalachian Coals, Inc. v. United States, 288 U.S. 344, 53 S.Ct. 471, 77 L.Ed. 825 (1933); Chicago Board of Trade v. United States, 246 U.S. 231, 38 S.Ct. 242, 62 L.Ed. 683 (1918); United States v. Terminal Railroad Ass'n, 224 U.S. 383, 32 S.Ct. 507, 56 L.Ed. 810 (1912).

However, the application of a rule of reason test to ASCAP's activities does not mean that it is immune to the antitrust laws. Nor does the regulation of ASCAP by the consent decree furnish it immunity. As the Second Circuit Court stated in United States v. ASCAP (Application of Shenandoah Valley Broadcasting, Inc.), 331 F.2d 117 (1964), a...

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