Broadcast Music v. Hearst/ABC Viacom Ent. Services

• Decision Date: 29 August 1990
• Docket Number: No. 89 Civ. 2833 (JFK).,89 Civ. 2833 (JFK).
• Citation: 746 F. Supp. 320
• Parties: BROADCAST MUSIC, INC.; Cotillion Music, Inc.; Irving Music, Inc.; Screen Gems-EMI Music, Inc.; Embassy Music Corporation; Michael Joe Jackson d/b/a Mijac Music; Stone Agate Music, Division of Jobete Music Co., Inc.; Cedar-wood Publishing, a Division of Dick James Music, Inc.; Peer International Corporation; Tree Publishing Co, Inc.; Melody Jean Craddock d/b/a Bopping Music Company; Lowery Music Company, Inc.; Dorinda Morgan, as Trustee of the "Hite Morgan and Dorinda Morgan 1974 Trust" d/b/a Guild Music Company; Dick James Music, Inc.; and Michael Jackson d/b/a Maclen Music, Plaintiffs and Counterclaim Defendants, v. HEARST/ABC VIACOM ENTERTAINMENT SERVICES d/b/a Lifetime Television, Defendant and Counterclaim Plaintiff. HEARST/ABC VIACOM ENTERTAINMENT SERVICES d/b/a Lifetime Television, Defendant and Third-Party Plaintiff, v. Frances W. PRESTON, Third-Party Defendant.
• Court: U.S. District Court — Southern District of New York

746 F. Supp. 320

BROADCAST MUSIC, INC.; Cotillion Music, Inc.; Irving Music, Inc.; Screen Gems-EMI Music, Inc.; Embassy Music Corporation; Michael Joe Jackson d/b/a Mijac Music; Stone Agate Music, Division of Jobete Music Co., Inc.; Cedar-wood Publishing, a Division of Dick James Music, Inc.; Peer International Corporation; Tree Publishing Co, Inc.; Melody Jean Craddock d/b/a Bopping Music Company; Lowery Music Company, Inc.; Dorinda Morgan, as Trustee of the "Hite Morgan and Dorinda Morgan 1974 Trust" d/b/a Guild Music Company; Dick James Music, Inc.; and Michael Jackson d/b/a Maclen Music, Plaintiffs and Counterclaim Defendants, v. HEARST/ABC VIACOM ENTERTAINMENT SERVICES d/b/a Lifetime Television, Defendant and Counterclaim Plaintiff.

HEARST/ABC VIACOM ENTERTAINMENT SERVICES d/b/a Lifetime Television, Defendant and Third-Party Plaintiff, v. Frances W. PRESTON, Third-Party Defendant.

No. 89 Civ. 2833 (JFK).

United States District Court, S.D. New York.

August 29, 1990.

COPYRIGHT MATERIAL OMITTED

Hughes Hubbard & Reed, New York City; Robert J. Sisk, Michael E. Salzman, Charles Lozow, and Mary K. Fleck, of counsel, for plaintiffs-counterclaim defendants and third-party defendant.

Weil, Gotshal & Manges, New York City; R. Bruce Rich, Kenneth L. Steinthal, Geoffrey M. Green, Evie C. Goldstein, and Beth K. Neelman, of counsel, for defendant-counterclaim plaintiff and third party plaintiff.

OPINION AND ORDER

KEENAN, District Judge:

This copyright infringement action is before the Court on plaintiffs' motion to dismiss the three-count antitrust and copyright misuse counterclaim and to strike the affirmative defenses of defendant Hearst/ABC Viacom Entertainment Services d/b/a Lifetime Television ("Lifetime"). Fed.R.Civ.P. 12(b)(6), (f). Frances W. Preston also moves to dismiss the third-party complaint against her. For the reasons discussed below, the Court grants in part and denies in part plaintiffs' application. The third-party complaint is dismissed with leave to re-plead.

BACKGROUND

Plaintiff Broadcast Music, Inc. ("BMI") is engaged in the business of licensing performing rights in the copyrighted musical compositions of its affiliated composers and publishers. BMI currently represents over 53,000 affiliated composers and over 32,000 affiliated publishers who have granted BMI non-exclusive authority to license the performing rights in over 1.5 million musical compositions. Where the authority to license performing rights is non-exclusive, the copyright owner retains the right to license his works individually or on a catalogue-wide basis as if BMI did not exist. After BMI issues a license to a music user,¹ it collects the license fees and distributes all royalties to the composers and publishers after expenses and allowances for cash reserves. BMI also monitors unlicensed or unauthorized performances of music and, when able to join the copyright owner, brings infringement actions.

The thousands of individual copyright owners who have appointed BMI as their licensing agent have also authorized BMI to determine the types of licenses that it will offer and the prices at which these licenses will be available. BMI licenses its repertoire on an aggregate basis. That is, it issues a blanket license which entitles the licensee to use any or all of the works in the BMI repertoire as often as desired during the license term. The license is typically conveyed for a fee reflecting a percentage of the user-licensee's revenue. In the television and radio field, BMI also offers a "per program" license which measures license fees based upon the popularity of particular programs or the time-periods in which BMI music is heard.

Lifetime is a cable television program service (in cable television parlance a "cable supplier") that acquires, produces and markets video programming to subscribers, primarily through cable system operators located across the United States. Lifetime is available to tens of millions of Americans each day on their home televisions.

Like most other cable television program services, Lifetime produces little original programming. The bulk of its programming consists of theatrical movies and other pre-recorded programs which are licensed or purchased by Lifetime from third-party syndicators. Most of this programming features copyrighted music, which is selected by the program producer and recorded on the program soundtrack. The music is thus permanently integrated into the program and the cable service wishing to transmit the program must either transmit whatever music is incorporated in the program or not broadcast the program at all.

A pre-recorded television program or theatrical motion picture represents the collaborative efforts of numerous individuals: composers, actors, directors, editors, etc. In the cable television industry, all copyright rights — save one — are secured by the program suppliers at the time of production and are transferred to the broadcasting cable service as part of the program package. The one exception to this practice concerns the licensing of music performing rights. These rights are not obtained and conveyed by the producer/syndicator, but are reserved by the copyright owner or other licensor (such as BMI) for licensing in separate transactions with the cable program services.

Defendant alleges that cable television music performing rights are not negotiated and licensed in a transaction between the producer and composer "at the source" because the copyright proprietors who are BMI affiliates prefer that the cable services deal with their licensing agent, BMI. The result of this, defendant contends, is that each cable service is required to purchase, through the blanket license, performing rights in all of the music in BMI's repertoire without regard to the service's needs.

Defendant maintains that the alternative of licensing performing rights directly from the copyright owner is a Hobson's choice. The blanket license system, defendant submits, eliminates any incentive for BMI's affiliates to license their works directly. BMI's affiliates are insulated from the negotiations fostered by a competitive marketplace and assured the benefits of what defendant characterizes as "BMI's take-it-or-leave-it licensing tactics." Moreover, defendant claims that it would be prohibitively expensive to locate and obtain licenses from individual composers and publishers.

Plaintiffs allege that Lifetime has for several years willfully infringed numerous copyrights of musical compositions in the BMI repertoire by publicly performing them without a license from either BMI or the individual copyright owners. See 17 U.S.C. § 106(4) (1977 & Supp.1990). When plaintiff first became aware of the alleged copyright violations, it proffered an annual blanket license to Lifetime for a fee calculated at one percent of Lifetime's gross revenues. Lifetime claims that the proffered fee would be three to four times greater than the blanket license fee charged to BMI's "pay" cable television,² broadcast network and local broadcast station licensees. Lifetime rejected the blanket license offer and this suit followed.

The Consent Decree

In 1964, the United States commenced an anti-trust action against BMI alleging violations of the Sherman Anti-Trust Act. In 1966, the United States District Court for the Southern District of New York entered a consent decree in that action, see United States v. Broadcast Music, Inc., 1966 Trade Cas. (CCH) ¶ 71,941 (S.D.N.Y.1966), which prohibits BMI from discriminating among similarly situated music users. The second major music licensing society in the United States, the American Society of Composers, Authors and Publishers ("ASCAP")³ is governed by a separate consent decree which provides for a "rate court." If any music user cannot negotiate an agreeable license with ASCAP, the user may apply to the district court supervising the decree to fix a reasonable fee. BMI's licenses, on the other hand, are granted through private bargaining alone.

DISCUSSION

A motion to dismiss for failure to state a claim may be granted only if it appears certain that no relief could be granted under any set of facts that could be proved consistent with the allegations. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984); Lipsky v. Commonwealth United Corp., 551 F.2d 887, 894 (2d Cir.1976); Burger v. Health Ins. Plan of Greater New York, 684 F.Supp. 46, 49 (S.D.N.Y. 1988). The factual allegations set forth in the complaint or counterclaim must be accepted as true, see Zinermon v. Burch, ___ U.S. ___, 110 S.Ct. 975, 979, 108 L.Ed.2d 100 (1990), and the Court must view the allegations in the light most favorable to the pleader. See Scheuer v. Rhodes, 416 U.S. 232, 237, 94 S.Ct. 1683, 1686-87, 40 L.Ed.2d 90 (1974); Yoder v. Orthomolecular Nutrition Inst., Inc., 751 F.2d 555, 562 (2d Cir.1985). Even if it appears on the face of the pleadings that recovery is remote, the claim will withstand the motion to dismiss as long as the pleader retains a possibility of success. Scheuer, 416 U.S. at 237, 94 S.Ct. at 1686-87. To this landscape must be added the caveat that "dismissals on the pleadings are especially disfavored in antitrust cases." Schwartz v. Jamesway Corp., 660 F.Supp. 138, 141 (E.D.N.Y.1987) (citing Hospital Bldg. Co. v. Rex Hosp. Trustees, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976)).

Section 1 of the Sherman Act

Defendant alleges violation of section 1 of the Sherman Anti-Trust Act, 15 U.S.C. § 1 (1982 & Supp.1990) in count I of its counterclaim. Section 1 forbids "every contract, combination ... or conspiracy in restraint of trade or commerce among the several States." The section 1 claimant must demonstrate (1) concerted action by two or more persons which (2) unreasonably restrains interstate trade or commerce. See Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F.Supp. 832, 837 (S.D.N.Y.1988). Acc...