K-91, INC. v. Gershwin Publishing Corporation, 20074.

• Decision Date: 16 February 1967
• Docket Number: No. 20074.,20074.
• Citation: 372 F.2d 1
• Parties: K-91, INC., Appellant, v. GERSHWIN PUBLISHING CORPORATION et al., Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

372 F.2d 1 (1967)

K-91, INC., Appellant, v. GERSHWIN PUBLISHING CORPORATION et al., Appellees.

No. 20074.

United States Court of Appeals Ninth Circuit.

January 13, 1967.

Rehearing Denied February 16, 1967.

Ronald A. Murphy, Seattle, Wash., for appellant.

J. Paul Coie, of Holman, Marion, Perkins, Coie & Stone, Seattle, Wash., Simon H. Rifkind, Jay H. Topkis, Allan Blumstein, of Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for appellees.

Before BARNES, KOELSCH and DUNIWAY, Circuit Judges.

BARNES, Circuit Judge.

This is an appeal in a civil nonjury case from a judgment in favor of the appellees, the owners of copyrights on various musical compositions. Appellant, a radio station operator in the State of Washington, played these musical compositions on the air without the permission or consent of the appellees. Appellees filed a complaint, under 17 U.S.C. §§ 1, 101, seeking damages for and an injunction against such infringement. Appellees prevailed, and the court below entered judgment awarding them $1,000 damages and enjoining further infringement. The trial court had jurisdiction under 28 U.S.C. §§ 1337, 1338, and we have jurisdiction of the appeal under 28 U.S.C. § 1291.

Appellant, both in the trial below and on oral argument before this court, admitted the expropriation and infringement of appellees' copyrights, but claimed appellees were misusing their copyrights in violation of public policy generally, and particularly in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. Therefore, appellant contended, no relief should be granted because appellees had come into court with unclean hands. It was charged that appellees had, between themselves and in conjunction with the American Society of Composers, Authors and Publishers (hereinafter "ASCAP"), conspired to fix prices and to engage in other unlawful practices, in violation of (a) the Sherman and Clayton Acts, and (b) the laws of the State of Washington, particularly R.C.W. § 19.24.020. Appellant also counterclaimed seeking treble damages and an injunction against further misuse of the copyrights. Fed.R.Civ.P. 13(a), 15 U.S.C. §§ 15, 26. This relief was denied.

This case cannot be understood without an analysis of the role of ASCAP. ASCAP is an unincorporated membership association comprising over 8000 author, composer and publisher members who own copyrights on various separate musical compositions. (Finding of Fact No. 16, C.T. p. 196.) ASCAP functions as a licensing agency for the composers, authors and publishers. When someone in the professional entertainment field wants to perform a copyrighted piece, they merely secure a license from ASCAP rather than seeking out the individual composer, author and/or publisher whose work they want to perform. ASCAP charges a fee or royalty for the license, and its members periodically receive royalty distributions from ASCAP.

In the 1940's the Justice Department became concerned over the operations of ASCAP and its overwhelming position in the entertainment field. Suit was brought under the antitrust laws to prevent restraints of trade by ASCAP, which resulted in the Amended Final Judgment of March 14, 1950, in the United States District Court for the Southern District of New York in Civil Case No. 13-95, 1960 Trade Cas. ¶ 69,612 (S.D.N.Y.). There is no claim in this case that ASCAP and appellees, ASCAP members, have not conformed to the terms of the Amended Final Judgment.

We note three specific requirements of the Amended Final Judgment:

(1) The rights acquired by ASCAP to license the public performance of copyrighted compositions must be nonexclusive;

(2) The license fees or royalties must be reasonable, and if there is a dispute as to the reasonableness of the proposed fee, the fee will be set by the United States District Court for the Southern District of New York; and

(3) A license must be granted on the same terms and conditions to all applicants similarly situated.

Basically, appellant challenges the lower court result in three aspects: (a) failure to make certain findings of fact; (b) failure to find violations of the federal antitrust laws; and (c) failures to find violations of the Washington State antitrust laws. We treat them in that order.

I. Failures to Make Certain Findings

Appellant lists eight examples of the court's failure to find. Among them are the facts that: the ASCAP repertory (inventory of copyrighted compositions) includes more than a million musical compositions; that ASCAP is managed by a Board of Directors which sets the fees for its licenses; that music is a necessity to the broadcasting industry within the State of Washington and throughout the United States; and that each musical copyright is unique. We think that in view of the detailed findings of fact and conclusions of law made by the trier of fact (C.T. pp. 193-217), these eight examples (four of which we have cited) of the failure to make specific findings, are without enough substantial merit to constitute reversible error.

Instead of finding that one million musical compositions were controlled by ASCAP, the court found that ASCAP is made up of over 8000 members (Finding of Fact No. 16, C.T. p. 196); is but one of three music licensing organizations in the United States, which together license substantially all of the copyrighted musical works in the United States (Finding of Fact No. 18, C.T. pp. 196-97); and that fifty per cent of all performances of copyrighted music by broadcasting stations are performances of compositions which ASCAP members have created (Ibid.) That "music is a necessity to the broadcasting industry" paraphrases the trial judge's remark that "music is an essential part of the operation of a radio station." (R.T. p. 6) While the statement may not be completely true in this modern age of "two-way radio" or "conversation programs", it has been only too evident to listeners for many years. We can likewise assume that "each musical copyright is unique", though not with the same uniqueness as is implied in a patented article. Cf. Alfred Bell & Co. v. Catalda Fine Arts, 191 F.2d 99 (2d Cir. 1951).

As to each of the stipulated facts which appellant claims should have been specifically found as facts by the trial court, we find they were either immaterial or redundant in light of the findings made. (The trial judge, on motion for a new trial, found they were "repetitious or irrelevant." (R.T. p. 251.)) There was no error in this regard.

II. ASCAP and the Federal Antitrust Laws

This litigation skirts a very perplexing problem long existing in federal antitrust law, to wit, the extent to which relief, if any, should be granted against a business for conduct which is permissible under the terms of a judicially approved consent decree. Put another way, the question is whether a consent decree by its terms can immunize against further prosecution for violation of the antitrust laws. Fortunately, however, the present case does not call for an answer to this question.

At the beginning of this litigation there were three possible results for appellant's counterclaim based on federal antitrust violations. The court could have found: (1) that there were in fact no violations of the federal antitrust laws; (2) that federal antitrust laws were violated, but since the conduct of the appellees conformed to the earlier consent decree no remedy was available; or (3) that the federal antitrust laws were violated and that the earlier consent decree offered no protection, granting relief to the appellant on its counterclaim. While either of the last two possibilities would have squarely raised the question of immunity deriving from the earlier consent decree, it was the first possibility which actually occurred. Since the trial court found no violations of the federal antitrust laws,¹ we do not reach the question of whether activities which would otherwise be a violation of the antitrust laws could be rendered immune because consistent with the terms of the consent decree.

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. 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 fixing authority. 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.

There is an additional reason why the activities disclosed by this record do not violate the antitrust laws. ASCAP's licensing authority is not exclusive. The right of the individual composer, author or publisher to make his own arrangements with prospective licensees, and the right of such prospective licensees to seek individual arrangements, are fully preserved. There was no error in the trial court's finding that appellees have not violated the federal antitrust laws.

III. ASCAP and the Washington State Antitrust Laws

The State of Washington has certain antitrust laws relating to copyrights. Copyrighted music and drama are protected by R.C.W. § 19.24.010 (1957), but R.C.W. § 19.24.020 ...