441 U.S. 1 (1979), 77-1578, Broadcast Music, Inc. v. Columbia Broadcasting System, Inc.

Docket Nº:No. 77-1578
Citation:441 U.S. 1, 99 S.Ct. 1551, 60 L.Ed.2d 1
Party Name:Broadcast Music, Inc. v. Columbia Broadcasting System, Inc.
Case Date:April 17, 1979
Court:United States Supreme Court
 
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441 U.S. 1 (1979)

99 S.Ct. 1551, 60 L.Ed.2d 1

Broadcast Music, Inc.

v.

Columbia Broadcasting System, Inc.

No. 77-1578

United States Supreme Court

April 17, 1979

Argued January 15, 1979

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Respondent Columbia Broadcasting System, Inc. (CBS), brought this action against petitioners, American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), and their members and affiliates, alleging, inter alia, that the issuance by ASCAP and BMI to CBS of blanket licenses to copyrighted musical compositions at fees negotiated by them is illegal price-fixing under the antitrust laws. Blanket licenses give the licensees the right to perform any and all of the compositions owned by the members or affiliates as often as the licensees desire for a stated term. Fees for blanket licenses are ordinarily a percentage of total revenues or a flat dollar amount, and do not directly depend on the amount or type of music used. After a trial limited to the issue of liability, the District Court dismissed the complaint, holding, inter alia, that the blanket license was not price-fixing and a per se violation of the Sherman Act. The Court of Appeals reversed and remanded for consideration of the appropriate remedy, holding that the blanket license issued to television networks was a form of price-fixing illegal per se under the Sherman Act and established copyright misuse.

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Held: The issuance by ASCAP and BMI of blanket licenses does not constitute price-fixing per se unlawful under the antitrust laws. Pp. 7-25.

(a) "It is only after considerable experience with certain business relationships that courts classify them as per se violations of the Sherman Act." United States v. Topco Associates Inc., 405 U.S. 596, 607-608. And though there has been rather intensive antitrust scrutiny of ASCAP and BMI and their blanket licenses, that experience hardly counsels that this Court should outlaw the blanket license as a per se restraint of trade. Furthermore, the United States, by its amicus brief in the present case, urges that the blanket licenses, which consent decrees in earlier actions by the Government authorize ASCAP and BMI to issue to television networks, are not per se violations of the Sherman Act. And Congress, in the Copyright Act of 1976, has itself chosen to employ the blanket license and similar practices. Thus, there is no nearly universal view that the blanket licenses are a form of price-fixing subject to automatic condemnation under the Sherman Act, rather than to a careful assessment under the rule of reason generally applied in Sherman Act cases. Pp. 7-16.

(b) In characterizing the conduct of issuing blanket licenses under the per se rule, this Court's inquiry must focus on whether the effect and, here because it tends to show effect, the purpose of the practice are to threaten the proper operation of a predominantly free-market economy. The blanket license is not a "naked restrain[t] of trade with no purpose except stifling of competition," White Motor Co. v. United States, 372 U.S. 253, 263, but rather accompanies the integration of sales, monitoring, and enforcement against unauthorized copyright [99 S.Ct. 1554] use, which would be difficult and expensive problems if left to individual users and copyright owners. Although the blanket license fee is set by ASCAP and BMI, rather than by competition among individual copyright owners, and although it is a fee for the use of any of the compositions covered by the license, the license cannot be wholly equated with a simple horizontal arrangement among competitors, and is quite different from anything any individual owner could issue. In light of the background, which plainly indicates that, over the years, and in the face of available alternatives, including direct negotiation with individual copyright owners, the blanket license has provided an acceptable mechanism for at least a large part of the market for the performing rights to copyrighted musical compositions, it cannot automatically be declared illegal in all of its many manifestations. Rather, it should be subjected to a more discriminating examination under the rule of reason. Pp. 16-24.

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(c) The Court of Appeals' judgment holding that the licensing practices of ASCAP and BMI are per se violations of the Sherman Act, and the copyright misuse judgment dependent thereon, are reversed, and the case is remanded for further proceedings to consider any unresolved issues that CBS may have properly brought to the Court of Appeals, including an assessment under the rule of reason of the blanket license as employed in the television industry. Pp. 24-25.

562 F.2d 130, reversed and remanded.

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, STEWART, MARSHALL, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 25.

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WHITE, J., lead opinion

MR JUSTICE WHITE delivered the opinion of the Court.

This case involves an action under the antitrust and copyright laws brought by respondent Columbia Broadcasting System, Inc. (CBS), against petitioners, American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), and their members and affiliates.1 The basic question presented is whether the issuance by ASCAP and BMI to CBS of blanket licenses to copyrighted musical compositions at fees negotiated by them is price-fixing per se unlawful under the antitrust laws.

I

CBS operates one of three national commercial television networks, supplying programs to approximately 200 affiliated stations and telecasting approximately 7,500 network programs per year. Many, but not all, of these programs make use of copyrighted music recorded on the soundtrack. CBS also owns television and radio stations in various cities. It is "`the giant of the world in the use of music rights,'" the "`No. 1 outlet in the history of entertainment.'"2

Since 1897, the copyright laws have vested in the owner of a copyrighted musical composition the exclusive right to perform the work publicly for profit,3 but the legal right is not self-enforcing. In 1914, Victor Herbert and a handful of other composers organized ASCAP because those who performed

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copyrighted music for profit were so numerous and widespread, and [99 S.Ct. 1555] most performances so fleeting, that, as a practical matter, it was impossible for the many individual copyright owners to negotiate with and license the users and to detect unauthorized uses. "ASCAP was organized as a `clearing-house' for copyright owners and users to solve these problems" associated with the licensing of music. 400 F.Supp. 737, 741 (SDNY 1975). As ASCAP operates today, its 22,000 members grant it nonexclusive rights to license nondramatic performances of their works, and ASCAP issues licenses and distributes royalties to copyright owners in accordance with a schedule reflecting the nature and amount of the use of their music and other factors.

BMI, a nonprofit corporation owned by members of the broadcasting industry,4 was organized in 1939, is affiliated with or represents some 10,000 publishing companies and 20,000 authors and composers, and operates in much the same manner as ASCAP. Almost every domestic copyrighted composition is in the repertory either of ASCAP, with a total of three million compositions, or of BMI, with one million.

Both organizations operate primarily through blanket licenses, which give the licensees the right to perform any and all of the compositions owned by the members or affiliates as often as the licensees desire for a stated term. Fees for blanket licenses are ordinarily a percentage of total revenues or a flat dollar amount, and do not directly depend on the amount or type of music used. Radio and television broadcasters are the largest users of music, and almost all of them hold blanket licenses from both ASCAP and BMI. Until this litigation, CBS held blanket licenses from both organizations for its television network on a continuous basis since the late 1940's, and had never attempted to secure any other form of

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license from either ASCAP5 or any of its members. Id. at 752-754

The complaint filed by CBS charged various violations of the Sherman Act6 and the copyright laws.7 CBS argued that ASCAP and BMI are unlawful monopolies, and that the blanket license is illegal price-fixing, an unlawful tying arrangement, a concerted refusal to deal, and a misuse of copyrights. The District Court, though denying summary judgment to certain defendants, ruled that the practice did not fall within the per se rule. 337 F.Supp. 394, 398 (SDNY 1972). After an 8-week trial, limited to the issue of liability, the court dismissed the complaint, rejecting again the claim that the blanket license was price-fixing and a per se violation of § 1 of the Sherman Act, and holding that, since direct negotiation with individual copyright owners is available and feasible, there is no undue restraint of trade, illegal tying, misuse of copyrights, or monopolization. 400 F.Supp. at 781-783.

Though agreeing with the District Court's factfinding and not disturbing its legal conclusions on the other antitrust theories of liability,8 the Court of Appeals held that the blanket license issued to television networks was a form of price-fixing illegal per se under the Sherman Act. 532 F.2d 130, 140 (CA2 1977). This conclusion, without more, settled the issue of liability under the Sherman Act, established copyright misuse,9 and required reversal of the District [99 S.Ct. 1556] Court's

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judgment, as well as a remand to consider the appropriate remedy.10

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