U.S. v. Broadcast Music Inc.
| Decision Date | 01 August 2000 |
| Docket Number | APPLICANTS-APPELLANTS-CROSS-APPELLEES,PLAINTIFF-APPELLANT-CROSS-APPELLEE,Docket Nos. 00-6123,DEFENDANT-APPELLEE-CROSS-APPELLANT |
| Citation | 275 F.3d 168 |
| Parties | (2nd Cir. 2001) UNITED STATES OF AMERICA,, MUZAK LLC; AEI MUSIC NETWORK, INC.,v. BROADCAST MUSIC, INC.(LEAD), 00-6125(XAP), 00-6157(CON) |
| Court | U.S. Court of Appeals — Second Circuit |
Plaintiff-Appellant-Cross-Appellee United States of America and Applicants-Appellants-Cross-Appellees Muzak LLC and AEI Music Network, Inc. appeal, and Defendant-Appellee-Cross-Appellant Broadcast Music, Inc. cross-appeals, from an order of the United States District Court for the Southern District of New York (Louis L. Stanton, Judge) dated March 9, 2000, granting in part and denying in part Applicants' motion for an order determining that under a consent decree Broadcast Music, Inc. is required to offer certain forms of licenses to perform works in its repertory, and that such licenses are within the district court's rate-setting authority under the consent decree.
AFFIRMED IN PART and VACATED AND REMANDED IN PART.
[Copyrighted Material Omitted] Robert J. Wiggers, United States Department of Justice, Washington, DC (Joel I. Klein, Assistant Attorney General, A. Douglas Melamed, Deputy Assistant Attorney General, Robert B. Nicholson, Robert P. Faulkner Of Counsel), for Plaintiff-Appellant-Cross-Appellee.
R. Bruce Rich, Weil, Gotshal & Manges Llp, New York, NY (John W. Carroll, Wolfson & Carroll, New York, Ny, Of Counsel), for Applicants-Appellants-Cross-Appellees.
Norman C. Kleinberg, Michael E. Salzman, David L. Sorgen, Beatrice A. Hamza Hughes, Hubbard & Reed, New York, NY (Marvin L, Berenson, Joseph J. DiMona, Kerri Howland-Kruse, Broadcast Music, Inc., Of Counsel), for Defendant-Appellee-Cross-Appellant.
Bruce G. Joseph, Thomas W. Kirby, Wiley, Rein & Fielding, Washington, Dc, for Amici Curiae Television Music License Committee, Radio Music License Committee, ABC, Inc., CBS Broadcasting Inc., National Broadcasting Company Inc.
John H. Shenefield, Morgan, Lewis & Bockius Llp, Washington, DC (Jonathan M. Rich, Philip C. Zane, Of Counsel), I. Fred Koenigsberg, White & Case Llp, New York, Ny, Richard H. Reimer, New York, Ny, for Amicus Curiae American Society of Composers, Authors and Publishers.
Before: Oakes, Jacobs and F.I. Parker, Circuit Judges.
Plaintiff-Appellant-Cross-Appellee United States of America and Applicants-Appellants-Cross-Appellees Muzak LLC and AEI Music Network, Inc. ("Applicants") appeal, and Defendant-Appellee-Cross-Appellant Broadcast Music, Inc. ("BMI") cross-appeals, from an order of the United States District Court for the Southern District of New York (Louis L. Stanton, Judge) dated March 9, 2000, granting in part and denying in part Applicants' motion for an order determining that under a consent decree BMI is required to offer certain forms of licenses to perform works in its repertory, and that such licenses are within the district court's rate-setting authority under the consent decree. The court ruled, in pertinent part, that: the BMI Decree does not compel BMI to offer to Applicants licenses not specifically mandated under the consent decree; it does not have rate-setting authority over Applicants' proposed blanket license with a "carve-out" fee structure; and BMI is required to offer per piece licenses, which are subject to the court's rate-setting authority. The court declined to decide whether individual copyright holders are required to accept fees for per piece licenses that had been determined by the rate court. We conclude that Applicants' request for a blanket license subject to "carve-outs" constitutes a request not for a new type of license, but for a blanket license with a different fee basis, over which the district court has rate-setting authority and which BMI must offer. We vacate the court's judgment on this issue and remand for further proceedings. We further conclude that per piece licenses are subject to the rate court's authority under the decree, and that the question of whether the holder of the copyright on the piece licensed may reject the fee determined by the rate court is not ripe, and affirm the district court with respect to its rulings on these issues.
BMI is one of the largest performing rights organizations in the country. It grants licenses to music users, collects license fees from them, and distributes the royalties among its affiliated copyright holders ("Affiliates"). Its Affiliates comprise approximately 250,000 songwriters, composers, and publishers, and its catalog includes about three million musical works. Applicants Muzak LLC and AEI Music Network, Inc. provide music environments, often referred to as "background music services," to various commercial clients such as restaurants, retailers, department stores, offices, and supermarkets. The services are provided either by delivery of discs or tapes to the clients, or by satellite transmission.
In 1941, the United States brought separate antitrust suits against BMI and its main competitor, the American Society of Composers, Authors and Publishers ("ASCAP"), for unlawfully monopolizing the licensing of performing rights. Both suits were settled by consent decree. United States v. Broadcast Music, Inc., 1940-43 Trade Cas. (CCH) ¶56,096, 381 (E.D. Wisc. 1941); United States v. Am. Soc'y of Composers, Authors, and Publ'rs ("ASCAP"), 1940-43 Trade Cas. (CCH) ¶56,104, 402 (S.D.N.Y. 1941), amended, 1950-53 Trade Cas. (CCH) ¶62,595, 63,750 (S.D.N.Y. 1950) ("ASCAP Decree"). In 1950, the ASCAP consent decree was amended to establish a "rate court" mechanism, which enabled the court to set fees for licenses when license applicants and ASCAP could not come to agreement. United States v. ASCAP, 1950-53 Trade Cas. (CCH) ¶62,595, 63,750 (S.D.N.Y. 1950). The government brought the instant suit against BMI in 1964, and the parties entered into a consent decree two years later. United States v. Broadcast Music, Inc., 1966 Trade Cas. (CCH) ¶71,941, 83,323 (S.D.N.Y. 1966), amended, No. 64-CV-3787, 1994 WL 901652, at *1 (S.D.N.Y. Nov. 18, 1994) (1996-1 Trade Cas. (CCH) ¶ 71,378) ("BMI Decree" or "decree").
The BMI Decree places a number of specific restrictions on BMI. Among other things, the decree prohibits BMI from itself publishing, recording or distributing music commercially (Section IV(B)), from refusing to contract with a potential affiliate (Section V(A)), and from discriminating between similarly-situated licensees (Section VIII).
The decree specifically requires that BMI grant certain types of licenses. Section VIII(B) requires that BMI license to any broadcaster "the rights publicly to perform its repertory by broadcasting on either a per program or per programming period basis, at [BMI's] option" ("per program license"). Section IX(C) prohibits BMI from refusing to license to "music users other than broadcasters," such as Applicants, a license "at a price or prices to be fixed by [BMI] with the consent of the copyright proprietor for the performance of such specific (i.e., per piece) musical compositions, the use of which shall be requested by the prospective licensee" ("per piece license"). In addition, Section IV(A) prohibits BMI from preventing writers or publishers of a composition from directly licensing their work to a music user.
Traditionally, the BMI's license of choice has been a "blanket license," a license that grants the licensee access to BMI's entire repertory in exchange for an annual fee. In Applicants' case, that fee has always been based on the number of licensee's locations that use BMI-licensed works, i.e., on a "per premise" basis. The BMI Decree does not specifically mention the blanket license; however, BMI has historically offered it and Applicants have recently held blanket licenses.
In 1994, BMI filed a motion in the district court for an amendment to the BMI Decree adding a "rate court" provision similar to the provision added to the ASCAP Decree in 1950. In support of its motion, BMI argued that "an orderly rate-setting procedure would be a more efficient way to deal with negotiation breakdowns"; a rate court would "balance competition between BMI and ASCAP more fairly"; the major users of BMI's music, radio, television, and cable broadcasters and programmers had asked BMI to seek such a provision; and an interim fee mechanism in the amendment would provide for a continuing relationship between BMI and music users when disputes arose. The government assented, concluding that a rate court provision would be in the public interest because it would foster competition thereby furthering the antitrust goals behind the original suit. The user community also supported the motion, arguing that a rate court provision would establish a check on anticompetitive behavior such as "demands for arbitrary, substantial, and unwarranted fee increases," threats of copyright infringement litigation, and use of litigation "in order to force users to accede to BMI's fee demands." BMI's motion was granted. United States v. Broadcast Music, Inc., No. 64-CV-3787, 1994 WL 901652, at *1 (S.D.N.Y. Nov. 18, 1994) (1996-1 Trade Cas. (CCH) ¶ 71,378). The new provision was added as Section XIV, and provides in pertinent part:
Defendant [i.e., BMI] shall, within ninety (90) days of its receipt of a written application from an applicant for a license for the right of public performance of any, some or all of the compositions in defendant's repertory, advise the applicant in writing of the fee which it deems reasonable for the license requested. If the parties are unable to agree upon a reasonable fee within sixty (60) days..., the applicant may forthwith apply to this Court for the determination of a reasonable fee.... If the parties are unable to agree upon a reasonable fee within ninety (90) days..., then defendant may forthwith...
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