ascap amicus brief - 8-24-17/media/files/pdf/advocacy... · paul, weiss, rifkind, wharton &...

16-3830-cv United States Court of Appeals

for the Second Circuit

UNITED STATES OF AMERICA,

Plaintiff-Appellant, v.

BROADCAST MUSIC, INC., Defendant-Appellee.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

BRIEF OF THE AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS AS AMICUS CURIAE IN SUPPORT OF

DEFENDANT-APPELLEE BROADCAST MUSIC, INC.

Jay Cohen Lynn B. Bayard Hallie S. Goldblatt PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, New York 10019-6064 (212) 373-3000

Clara Kim Richard H. Reimer AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS One Lincoln Plaza 1900 Broadway New York, New York 10023 (212) 621-6200

Attorneys for Amicus Curiae the American Society of Composers, Authors and Publishers

Case 16-3830, Document 138, 08/24/2017, 2109650, Page1 of 37

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CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1, the American

Society of Composers, Authors and Publishers hereby certifies that it is an

unincorporated membership association. It has no parent corporation, and no

publicly held corporation owns 10 percent or more of its stock.


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TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ........................................................................... 1

SUMMARY OF ARGUMENT ................................................................................ 3

ARGUMENT ............................................................................................................ 7

I. A FULL-WORK LICENSING REQUIREMENT CONFLICTS WITH THE TEXT AND HISTORY OF THE CONSENT DECREES ........ 7

A. The ASCAP Consent Decree Neither Requires Full-Work Licensing Nor Prohibits Fractional Licensing ..................................... 8

1. AFJ2 Contains No Express Provisions Addressing Full-Work or Fractional Licensing .................................................... 8

2. No Other Provisions of AFJ2 Support the Government’s Interpretation .............................................................................. 9

B. The Government’s Interpretation Is Inconsistent with the History of the ASCAP Consent Decree ............................................. 14

II. “YEARS OF INTERPRETATIONS BY FEDERAL COURTS” DO NOT SUPPORT THE GOVERNMENT’S POSITION ............................... 16

A. Pandora and Other Rate Court Decisions Do Not Support the Government’s Interpretation .............................................................. 16

B. CBS Does Not Require Full-Work Licensing .................................... 18

III. THE GOVERNMENT’S INTERPRETATION OF THE DECREES WOULD DISRUPT LICENSING AND IS AT ODDS WITH LONGSTANDING INDUSTRY PRACTICE ............................................. 21

CONCLUSION ....................................................................................................... 29


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TABLE OF AUTHORITIES

Page(s) CASES

BMI, Inc. v. Pandora Media, Inc., No. 13 Civ. 4037, 2015 WL 3526105 (S.D.N.Y. May 28, 2015) ................. 24

BMI, Inc. v. CBS, Inc., 441 U.S. 1 (1979) ....................................................................................passim

BMI, Inc. v. DMX Inc., 683 F.3d 32 (2d Cir. 2012) ............................................................................ 21

Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104 (1986)....................................................................................... 26

Davis v. Blige, 505 F.3d 90 (2d Cir. 2007) ............................................................................ 13

Erickson v. Trinity Theatre, Inc., 13 F.3d 1061 (7th Cir. 1994) ......................................................................... 13

King v. Allied Vision, Ltd., 65 F.3d 1051 (2d Cir. 1995) ............................................................................ 8

NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85 (1984)......................................................................................... 20

In re Pandora Media, Inc., 6 F. Supp. 3d 317 (S.D.N.Y. 2014), aff’d sub nom. Pandora Media, Inc. v. ASCAP, 785 F.3d 73 (2d Cir. 2015) ........................ 20

Pandora Media, Inc. v. ASCAP, 785 F.3d 73 (2d Cir. 2015) .................................................................. 4, 16, 17

In re THP Capstar Acquisition Corp., 756 F. Supp. 2d 516 (S.D.N.Y. 2010), aff’d sub nom. BMI, Inc. v. DMX Inc., 683 F.3d 32 (2d Cir. 2012) ...................................... 18

United States v. Armour & Co., 402 U.S. 673 (1971)..................................................................................... 8, 9


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United States v. ASCAP (Application of NBC, Inc.), No. CIV.A.13-95, 1970 WL 556 (S.D.N.Y. Dec. 21, 1970) ................... 18, 21

United States v. ASCAP (Application of Shenandoah Valley Broad., Inc.), 208 F. Supp. 896 (S.D.N.Y. 1962) .......................................... 18

STATUTES

17 U.S.C. § 101 ........................................................................................................ 11

17 U.S.C. § 106(4) ............................................................................................. 11, 12

17 U.S.C. § 201 ........................................................................................................ 12

OTHER AUTHORITIES

Consent Decree Materials

Amended Final Judgment in United States v. ASCAP, No. 41-1395, 1950 U.S. Dist. LEXIS 1900 (S.D.N.Y. Mar. 14, 1950) (“AFJ”) (JA38–44) ........................................ 14, 15

Second Amended Final Judgment in United States v. ASCAP, No. 41-1395, 2001 WL 1589999 (S.D.N.Y. June 11, 2001) (“AFJ2”) .......................................................passim

Memorandum of the United States In Support of the Joint Motion to Enter Second Amended Final Judgment, United States v. ASCAP, No. 41-1395 (S.D.N.Y. Sept. 4, 2000) (“2000 Mem. of United States”), available at https://www.justice.gov/atr/case-document/file/485996/download ............................................................. 20, 28

Final Judgment in United States v. Broad. Music, Inc., No. 64-Civ-3787 (S.D.N.Y. Nov. 18, 1994) (“BMI Decree”) (JA25–33) ................................................................... passim

Books and Treatises

AL KOHN & BOB KOHN, KOHN ON MUSIC LICENSING (4th ed. 2010) ...................... 15

1 MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT § 6.10[C] (Matthew Bender, rev. ed. 2017) ..................................................... 13


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BRUCE POLLACK, A FRIEND IN THE MUSIC BUSINESS: THE ASCAP STORY (2014) ................................................................................................. 14

Public Comments and Other Decree Review Materials

Comments of Christian L. Castle (Nov. 20, 2015) (“Castle Comments”), https://www.justice.gov/atr/public/ ascapbmi2015/ascapbmi14.pdf ...................................................................... 23

Views of the United States Copyright Office Concerning PRO Licensing of Jointly Owned Works (Jan. 29, 2016) (“Copyright Views”), available at https://www.copyright.gov/policy/pro-licensing.pdf ............................................................................................passim

Comments of the Future of Music Coalition (Nov. 20, 2015) (“FMC Comments”), https://www.justice.gov/atr/public/ascapbmi2015/ ascapbmi21.pdf .............................................................................................. 23

Comments of Media Licensees (Nov. 20, 2015) (“Media Licensee Comments”), https://www.justice.gov/atr/public/ ascapbmi2015/ascapbmi19.pdf ...................................................................... 23

Comments from Bart Herbison, Executive Director, Nashville Songwriters Association International on “PRO Licensing of Jointly Owned Works” at the request of the United States Department of Justice (Nov. 16, 2015) (“NSAI Comments”), https://www.justice.gov/atr/public/ascapbmi2015/ascapbmi129.pdf .................................................................................................................. 23

Comments of Donald S. Passman, Gang, Tyre, Ramer, and Brown, Inc. (Nov. 2015) (“Passman Comments”), https://www.justice.gov/atr/public/ascapbmi2015/ ascapbmi31.pdf .............................................................................................. 23

Comments by Peermusic Submitted in Response to US Justice Department Antitrust Division Request for Comments on PRO Licensing of Jointly Owned Works (Nov. 20, 2015) (“Peermusic Comments”), https://www.justice.gov/atr/public/ ascapbmi2015/ascapbmi30.pdf ................................................................ 14, 15


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Comments of Performing Right Society Limited (PRS) (Nov. 20, 2015) (“PRS Comments”), https://www.justice.gov/atr/public/ ascapbmi2015 /ascapbmi48.pdf..................................................................... 26

Comments of Martin Sandberg p/k/a Max Martin (Nov. 18, 2015) (“Sandberg Comments”), https://www.justice.gov/atr/public/ ascapbmi2015/ascapbmi96.pdf ...................................................................... 23

Statement of the Department of Justice on the Closing of the Antitrust Division’s Review of the ASCAP and BMI Consent Decrees (Aug. 4, 2016) (“Closing Statement”), https://www.justice.gov/atr/file/882101/download (JA64–85) ..............passim

U.S. Department of Justice, Antitrust Division, Antitrust Consent Decree Review – ASCAP and BMI 2014, https://www.justice.gov/atr/ascap-bmi-decree-review .................................... 3


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INTEREST OF AMICUS CURIAE

Amicus curiae the American Society of Composers, Authors and

Publishers (“ASCAP”) is the oldest performing rights organization (“PRO”) in the

United States. Founded in 1914, ASCAP is an unincorporated membership

association of more than 625,000 songwriters, composers, lyricists, and music

publishers. Members depend on ASCAP to negotiate licenses with music users,

track public performances, distribute royalties, and advocate on their behalf.1

ASCAP’s licensees include television networks, radio stations, digital music

services, and public establishments that play music, such as bars and restaurants.

Like Defendant-Appellee Broadcast Music, Inc. (“BMI”), since 1941,

ASCAP has operated pursuant to a consent decree (modified two times). In the

Closing Statement, the Government declared, for the first time in the more-than-

75-year history of the PRO consent decrees, that ASCAP and BMI are required to

offer “full-work licenses” (i.e., a license to a work in its entirety) and are

prohibited from issuing “fractional licenses” (i.e., a license of only those fractional

shares of a work owned or controlled by the licensor). The Government

purportedly based its conclusion on nearly identical provisions of the ASCAP and

BMI consent decrees and case law interpreting them.

1 The parties consented to the filing of this brief. No party or party’s counsel authored any

portion of this brief, and no person or entity other than amicus and its counsel contributed any money intended to fund the preparation or submission of this brief.


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As the other PRO subject to a consent decree and to the terms of the

Closing Statement, ASCAP—and its members—would suffer direct harm if this

Court reversed the District Court and endorsed the Government’s incorrect

interpretation of the ASCAP and BMI consent decrees. Moreover, given its long

history of licensing public performance rights and operating under a consent

decree, ASCAP is particularly well situated to provide this Court with relevant

background about the meaning of the ASCAP decree and the established course of

dealing in the licensing of public performance rights, and to explain the substantial

disruption that the Government’s reading of the decrees would have on ASCAP, its

members, and licensees.

Accordingly, ASCAP submits this brief in support of BMI and urges

this Court to affirm the District Court’s decision that the BMI Decree neither

requires full-work licensing nor prohibits fractional licensing. ASCAP submits

that it is essential that any ruling this Court issues apply equally to ASCAP, and

respectfully requests that any decision of this Court so hold. During its review of

the ASCAP and BMI decrees, the Government acknowledged the importance to

the licensing marketplace that ASCAP and BMI operate under a common set of

rules; it ultimately issued a Closing Statement that applied to both ASCAP and


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BMI and their respective consent decrees.2 And before this Court and below, the

Government has argued that AFJ2, and case law interpreting it, support its faulty

reading of BMI’s Decree. Gov’t Br. at 12–20, 30, 36–37; JA87–88. A decision

that results in conflicting interpretations of the decrees would not only contravene

the Government’s stated goal of a “common understanding” of licensing by the

two regulated PROs, it would create unprecedented uncertainty in the market for

public performance rights.

SUMMARY OF ARGUMENT

There is nothing in the text of the ASCAP and BMI consent decrees

that compels full-work licensing. The Government’s newfound interpretation of

these 75-year-old decrees is not only unsupported by their plain language, it is

contrary to decades of prevailing licensing practices. The Government and the

PROs have modified these decades-old consent decrees multiple times without

even a suggestion by the Government that the decrees mandated full-work licenses.

And although the Government asserts that case law is on its side, in fact no court

interpreting the decrees has ever concluded that they mandate full-work licensing.

2 The Government asked the public to comment on whether “differences between the two

Consent Decrees adversely affect competition” and considered a set of parallel modifications to the decrees. See U.S. Department of Justice, Antitrust Division, Antitrust Consent Decree Review – ASCAP and BMI 2014, https://www.justice.gov/atr/ascap-bmi-decree-review; JA65–66. The Closing Statement emphasized that it was “essential” that the industry transition to a “common understanding” of the requirements of the two decrees. JA80.


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Courts have routinely concluded that consent decrees cannot be

rewritten to impose obligations that the parties to the decree did not assume. The

Government’s reading of the decrees would not only run afoul of this well-

established principle, it would upend decades of existing licensing practices, create

confusion about the scope of the ASCAP and BMI licensable repertories, force

musical work creators to restructure their creative and business relationships, and

impede the efficient licensing of public performance rights in the United States.

First, the text of the consent decrees does not support the

Government’s interpretation. As demonstrated in BMI’s brief and set forth below,

the decrees neither expressly require full-work licensing nor prohibit fractional

licensing. In the absence of such express provisions, the decrees cannot now be

rewritten—and, with them, the rules and practices that have long sustained the

market for public performance rights. That is what the Government attempts to do,

however, relying on—and misreading—provisions of the decrees that do not

address, much less compel, full-work licensing.

Second, the Government’s interpretation of the decrees finds no

support in this Court’s decision in Pandora Media, Inc. v. ASCAP, 785 F.3d 73 (2d

Cir. 2015) (“Pandora”), the Supreme Court’s decision in BMI, Inc. v. CBS, Inc.,

441 U.S. 1 (1979) (“CBS”), or any other decision interpreting the decrees.


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Although the Government claims the weight of case law is on its side, it fails to

cite a single case holding that the decrees require full-work licensing.

Third, the Government’s reading of the decrees conflicts with decades

of music licensing practices. Comments submitted in response to the

Government’s investigation make plain that the industry has not operated under the

construct that ASCAP and BMI are required to issue full-work licenses; rather,

fractional valuation, pricing, and payment practices have long been the industry

norm. ASCAP and BMI have historically licensed only those rights in works

granted to them by their members/affiliates, whether full works or fractional

interests. Had ASCAP or BMI been operating under a mandatory full-work

licensing regime, they would have been required to cross-account to each other for

the fractional shares of their members/affiliates, which did not occur. The United

States Copyright Office’s comprehensive and authoritative 2014 study of music

licensing found fractional licensing to be a longstanding, accepted industry

practice, and the Copyright Office rejected the interpretation of the consent decrees

that the Government now proffers. Even music users supporting the Government’s

position do not dispute that their PRO licenses have been priced on the basis of

fractional shares, or that rightsholders receive royalties only from their respective

PROs in accordance with their fractional interests in musical works. Most music

users acknowledge the marketplace reality that they secure the right to publicly


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perform musical works by obtaining licenses from all U.S. PROs and do not rely

on purported full-work grants from any single one.

This system has worked for decades, enabling parties to license freely

without regard to agreements, or foreign copyright laws, that may restrict

rightsholders’ ability to license full works without their co-owners’ consent and

enabling the PROs collectively to offer robust repertories to licensees. A shift to

full-work licensing would upset these practices, raise questions as to whether

certain works (including foreign works that ASCAP and BMI license through

reciprocal agreements with foreign PROs) would become stranded and

unlicensable, impose new and expensive burdens on the PROs, and disrupt the

marketplace for licensing performing rights. And all of this would come at the

expense of music creators, who would be deprived of performing rights royalties as

a result of having entered into collaborations premised on their understanding that

the copyright law permitted them and their PROs to license on a fractional basis.

Nothing in either the ASCAP or BMI decree compels such a harsh and

unwarranted result.


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ARGUMENT

I.

A FULL-WORK LICENSING REQUIREMENT CONFLICTS WITH THE TEXT AND HISTORY OF THE CONSENT DECREES

Although this appeal concerns a dispute between the Government and

BMI over the meaning of the BMI Decree (Gov’t Br. at 2), the Government’s

arguments—and its misreading of BMI’s Decree—apply equally to the ASCAP

consent decree, AFJ2.3 In the Closing Statement, the Government wrongly

concluded that the decrees require ASCAP and BMI to issue full-work licenses and

emphasized that the industry should develop a “common understanding” of the

decrees’ requirements. In this proceeding, the Government relies on the ASCAP

decree to support its flawed interpretation of BMI’s Decree and cites provisions of

BMI’s Decree that are present, in nearly identical form, in AFJ2—putting the

ASCAP decree directly at issue in this appeal. JA66–67, JA74–76; JA87, JA88

n.2; Gov’t Br. at 12–20, 26–38.

BMI has persuasively shown why its decree does not prohibit it from

licensing fractional interests. BMI Br. at 21–41. The plain language and history of

the ASCAP decree similarly refute the Government’s view.

3 Certain cited materials are abbreviated in this brief. See Table of Authorities for full

citations.


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A. The ASCAP Consent Decree Neither Requires Full-Work Licensing Nor Prohibits Fractional Licensing

1. AFJ2 Contains No Express Provisions Addressing Full-Work or Fractional Licensing

It is well settled that a court may not rewrite a consent decree to

include a prohibition or requirement that is not unambiguously expressed in the

decree. United States v. Armour & Co., 402 U.S. 673, 678–79, 682 (1971) (where

consent decree unambiguously “prohibits certain behavior” and not other behavior,

other behavior is not prohibited); King v. Allied Vision, Ltd., 65 F.3d 1051, 1060

(2d Cir. 1995) (no obligation to take certain actions where decree “contains a

number of detailed provisions, [but] does not specifically require” such action).

AFJ2 does not expressly prohibit ASCAP from granting fractional

licenses. Nor does it expressly require ASCAP to issue full-work licenses. There

are no such provisions in AFJ2, and the Government cites none.

Had the parties to AJF2 agreed to prohibit ASCAP from accepting

and licensing fractional rights from its members, that prohibition would have been

included in Section IV of AFJ2, which expressly governs “Prohibited Conduct”

from which ASCAP is “enjoined and restrained.” AFJ2 § IV.4 Similarly, if the

4 AFJ2 enjoins ASCAP from granting or holding exclusive rights, licensing rights other than

the right of public performance, and limiting, restricting, or interfering with members’ right to enter into direct licenses. AFJ2 §§ IV(A)–(B). It also prohibits licenses of more than five years in duration and licensing of public performance rights in motion pictures to movie theaters, as well as discrimination in license fees and terms among similarly situated licensees. AFJ2 §§ IV(C)–(E).


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parties had agreed that ASCAP must issue only full-work licenses, that

requirement would have been included in Section VI, which governs “Licensing,”

or in Section VII, which concerns specific kinds of licenses that ASCAP must

issue. AFJ2 §§ VI–VII.5 None of these sections, or any other part of AFJ2,

however, addresses—let alone requires or prohibits—full-work or fractional

licensing. Because the issues are not addressed by the decree, the decision to

accept and license fractional rights is left to ASCAP and its members. See

Armour, 402 U.S. at 678–79, 682.

2. No Other Provisions of AFJ2 Support the Government’s Interpretation

Unable to point to any express requirement of full-work licensing or

prohibition on fractional licensing, the Government instead relies on two

provisions of the BMI Decree (Articles II(C) and XIV(A)), which correspond to

Sections II(C) and IX of AFJ2. Gov’t Br. at 23–25. The Government argues that,

taken together, these provisions mandate that BMI—and, by implication,

ASCAP—“offer music users full-work licenses for the compositions in its

repertory because only a full-work license gives the user the right to publicly

perform those compositions without the need for additional licenses.” Gov’t Br. at

5 ASCAP must issue licenses upon request, make available to music users certain kinds of

licenses (such as through-to-the-audience, per-program, and per-segment licenses), and offer “genuine choice” of licenses to licensees. AFJ2 §§ V–VIII. AFJ2 also requires ASCAP to make publicly available a list of works in its repertory and to admit to membership applicants meeting certain minimum requirements. AFJ2 §§ X–XI(A).


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23. The argument rests on faulty constructions of these provisions and conflicts

with long-settled copyright law.

First, the Government’s argument that the “right of public

performance” does not embrace a fractional interest (Gov’t Br. at 24–25) hinges on

a flawed interpretation of Article XIV(A) of the BMI Decree (and, by extension,

Section IX(A) of AFJ2), which require the PROs to quote a reasonable fee for “a

license for the right of public performance of any, some or all of the compositions

in defendant’s repertory.” BMI Decree § XIV(A); AFJ2 § IX(A) (same, except

referring to “works” instead of “compositions” and “the ASCAP repertory” instead

of “defendant’s repertory”). In the Government’s view, the “only plausible

interpretation” of that language is that “the right of public performance” means the

“immediate” right to perform a work without additional licenses. Gov’t Br. at 27.

But these sections, which concern the PROs’ obligations to quote reasonable

license fees, say nothing about the immediacy of any right to perform a work or the

necessity of other licenses.

The District Court properly rejected the Government’s attempt to read

into the BMI Decree requirements not expressly found in its text, holding that

BMI’s Decree “contains no provision regarding the source, extent, or nature” of

the right of public performance, and acknowledging that the decree does not

address the possibilities that BMI might license performances of works without


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sufficient legal right to do so or that users might perform works without all

necessary licenses. JA10. Accordingly, the District Court concluded that the

relevant language was “descriptive, not prescriptive” and the meaning of the “right

of public performance” must be determined by reference to copyright and property

laws. JA11–12.

The text of AFJ2 leads to the same conclusion. AFJ2 expressly

defines the “right of public performance” as “the right to perform a work publicly

in a nondramatic manner, sometimes referred to as the ‘small performing right,’

and any equivalent rights under foreign copyright law.” AFJ2 § II(Q). This

definition is also “descriptive, not prescriptive.” JA12. It defines the term by

express reference to copyright law, making clear that the term describes a specific

right (the right of public performance under Section 106(4)), and not a “right to

perform” in the everyday sense (i.e., the right to play the song) that the

Government now advances. But the decree does not otherwise prescribe rules

concerning the validity, scope, and limits of that defined right. JA10. That is left

to applicable copyright and common law, which “allow[] for divided ownership of

exclusive rights, including the right of public performance,” Copyright Views at

13, and notably do not provide that the authorized right to perform must be

immediate, see 17 U.S.C. §§ 101, 106(4).


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Second, the Government misconstrues the meaning of “repertory” in

each decree. BMI Decree § II(C); AFJ2§ II(C). AFJ2 defines “ASCAP repertory”

as “those works the right of public performance of which ASCAP has or hereafter

shall have the right to license at the relevant point in time.” AFJ2 § II(C)

(emphasis added). The Government focuses on the supposed plain meaning of

“works,” which it contends must mean full works rather than fractional interests in

a “work.” JA74–75. But it ignores the phrase the “right to license” and, thus, the

critical part of the “repertory” definition. That phrase modifies, and necessarily

limits, the meaning of “works” to the scope of ASCAP’s right to license those

works, as granted by its members, at the relevant point in time.

Long-settled copyright law refutes the Government’s reading of the

decrees. It permits co-owners of copyrighted works to divide ownership of the

right of public performance, resulting in each co-owner having fractional

ownership of the right to perform their works publicly and to authorize others to

perform them publicly. See 17 U.S.C. § 201(a) (granting co-ownership to joint

authors); 17 U.S.C. § 201(d)(2) (a copyright, and any of the exclusive rights

comprised in a copyright, may be divided and owned separately); 17 U.S.C. §

106(4) (granting copyright owner “exclusive rights to do and to authorize . . . in the

case of . . . musical . . . works, to perform the copyrighted work publicly”);

Copyright Views at 13, 18–19.


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The default rule under copyright law is that each copyright co-owner

is a tenant-in-common, with a unilateral right to grant a non-exclusive license to

the work in its entirety, subject to a duty to account for any profits to its co-owners.

See, e.g., Davis v. Blige, 505 F.3d 90, 98–100 (2d Cir. 2007); Erickson v. Trinity

Theatre, Inc., 13 F.3d 1061, 1068 (7th Cir. 1994). Co-owners can, and do, modify

this default rule and enter into agreements requiring the consent of all co-owners to

license the work and permitting each co-owner to license only its share of the

work. See 1 MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT §

6.10[C] (Matthew Bender, rev. ed. 2017); Copyright Views at 9; see also id. at 4–6

(default rules “are subject to the [Copyright] Act’s express provision that a

copyright, and the exclusive rights thereunder, can be divided and separately

owned”). A co-owner cannot convey greater rights than it has in a musical work.

See Davis, 505 F.3d at 99 (applying to copyright law “the venerable principle of

the law of property that . . . [an owner] may not convey more than he owns,” and

noting that when co-owners “granted rights to [a music publisher], they could but

transmit what they had to part with, and they could not transfer what interest the

[other co-owner] had”) (alterations in original); Copyright Views at 17–18

(describing legal constraints on rights conveyed to and by PROs). As a result, the

scope of ASCAP’s license is necessarily limited by the rights its members can

grant.


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The Government’s interpretation ignores that rights in copyrighted

works—including the right of public performance—may be divided and therefore

each co-owner may hold, and be able to license, only a fractional right. It also fails

to take into account the meaning and limiting effect of the phrase “right to license,”

and instead interprets “repertory” to mean that ASCAP and BMI must provide full-

work licenses to all of their members/affiliates’ compositions—even where those

members/affiliates own, and therefore can license to their PRO, only fractional

rights. The decrees cannot be read without reference to these important principles

of copyright law, and there is no doubt that the Government’s interpretation of the

decrees conflicts with them.

B. The Government’s Interpretation Is Inconsistent with the History of the ASCAP Consent Decree

The history of the ASCAP decree confirms that the parties never

intended to require full-work licensing or prohibit fractional licensing.

When ASCAP and the Government entered into the decree in 1941

and modified it in 1950 in AFJ, split works of the kind addressed by the Closing

Statement generally did not exist. ASCAP encouraged members to write alone or

collaborate only with other ASCAP members; by 1955, ASCAP actually

prohibited members from collaborating with BMI affiliates. See Peermusic

Comments at 2–3; BRUCE POLLACK, A FRIEND IN THE MUSIC BUSINESS: THE


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ASCAP STORY 54 (2014). This context makes clear why it would not have made

sense for the original ASCAP decree or AFJ to have addressed split works.

By the early 1970s, however, split works became more common, and

ASCAP and BMI changed their rules to allow for cross-registration so that songs

could be registered with both PROs. See AL KOHN & BOB KOHN, KOHN ON MUSIC

LICENSING 1259 (4th ed. 2010) (“KOHN”) (societies began allowing cross-

registration in early 1970s); Gov’t Br. at 44; Peermusic Comments at 3–4. Each

PRO included the split work in its repertory, while paying licensing royalties only

to its member/affiliate for its share. See KOHN at 1259.

At the time ASCAP and the Government agreed to the modifications

of the ASCAP decree that became AFJ2 in 2001, it was well established in the law

and the marketplace that the ASCAP repertory included many musical works co-

owned by ASCAP members and affiliates of other PROs, and that those co-owners

could freely divide and restrict ownership interests in their works. But the

Government did not seek to address these circumstances or expressly prohibit

fractional licensing in AFJ2. See, supra, Part I.A.1. Nor did it take the position, in

the years after entry of AFJ2, that the decree mandated full-work licensing or that

ASCAP’s licensing practices violated the decree. To the contrary, the Government

acknowledges that it was only “recent events,” including its review of the consent

decrees, that “made it necessary to confront the question” whether the decrees


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required full-work licensing (JA72)—an admission that the requirement the

Government now finds in the decrees is a recent construct. The decades of silence

by the Government on full-work licensing is powerful evidence that the parties

never agreed to such a prohibition.

II.

“YEARS OF INTERPRETATIONS BY FEDERAL COURTS” DO NOT SUPPORT THE GOVERNMENT’S POSITION

Although the Government asserts that its interpretation of the ASCAP

and BMI decrees is “compelled by . . . years of interpretations by federal courts”

(JA74), neither the Closing Statement nor the Government’s brief cites any

decision that even addresses the question at issue in this appeal, let alone holds that

the decrees require full-work licensing. For good reason: No court has so held.

The two cases upon which the Government principally relies—this Court’s

Pandora decision and the Supreme Court’s ruling in CBS—provide no support for

the Government’s interpretation.

A. Pandora and Other Rate Court Decisions Do Not Support the Government’s Interpretation

In Pandora, this Court considered whether ASCAP could withhold

from certain new media music users (e.g., Pandora and Spotify) works that were in

the ASCAP repertory for the purpose of licensing all other music users, but had

been withdrawn by ASCAP’s members with respect to such new media users. 785

F.3d at 77–78. This Court held that AFJ2 required ASCAP to license its entire


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repertory—that is, “all works contained in the ASCAP repertory”—to all users. Id.

at 78 (emphasis in original). The Government argues that this decision compels

full-work licensing. It does not.

The Government’s argument conflates a requirement that ASCAP

license its full repertory to all users with a requirement that ASCAP license full

works to all users. Pandora held only that AFJ2 required the former: Members

cannot restrict ASCAP’s right to license their works to some users and not others.

If ASCAP has the right to license a work, either in part or in whole, it must grant

that right (to whatever degree ASCAP has it) to all users. 785 F.3d at 77–78.

Pandora did not hold that members may grant to ASCAP only their full works, not

their fractional rights, and in the case of split works, it did not compel ASCAP to

license both the interests of its members and those of non-member co-owners. In

fact, the decision does not address full-work or fractional licensing at all (or even

mention either term).

Rate Court decisions interpreting ASCAP’s decree similarly define

ASCAP’s obligation to license its repertory to all users but do not opine on

whether the rights contained in that repertory must be full or fractional. Indeed,

decisions addressing the “any, some or all” provision, on which the Government

now premises its interpretation (BMI Decree § XIV(A); AFJ2 § IX(A)), contradict

the Government’s view. As an initial matter, those decisions recognize that “the


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whole thrust of [the provision] is to provide the mechanics for setting appropriate

license fees, not for establishing the scope of a license.” United States v. ASCAP

(Application of NBC, Inc.), No. CIV.A.13-95, 1970 WL 556, at *2 (S.D.N.Y. Dec.

21, 1970). The “any, some or all” provision requires ASCAP to license its full

repertory to users, but says nothing about whether that repertory must include only

full works. Id.; see also United States v. ASCAP (Application of Shenandoah

Valley Broad., Inc.), 208 F. Supp. 896, 897–98 (S.D.N.Y. 1962) (rejecting similar

application for limited license to subset of repertory).6

B. CBS Does Not Require Full-Work Licensing

The Government’s reliance on the Supreme Court’s decision in CBS is

similarly misplaced, as the decision did not even purport to interpret the consent

decrees. The Court did not mention full-work or fractional licensing in the

decision. Nor did it mandate that the decrees require full-work licensing or hold,

as the Government suggests, that only full-work grants saved the blanket license

6 The Government fails to cite In re THP Capstar Acquisition Corp., 756 F. Supp. 2d 516

(S.D.N.Y. 2010), aff’d sub nom. BMI, Inc. v. DMX Inc., 683 F.3d 32 (2d Cir. 2012) (“DMX”), in which the Rate Court (and music user DMX) acknowledged the existence of fractional licensing under the ASCAP decree. After entering into direct licenses with music publishers, DMX sought an adjustment of its ASCAP license fee to account for the works it had directly licensed and to “reflect ASCAP’s share of total performances on the DMX network.” 756 F. Supp. 2d at 518, 548. DMX determined that approximately 48% of DMX performances were of works owned or controlled by ASCAP members. This figure was “share-weighted” and “account[ed] for the fact that certain works [were] only partially controlled by ASCAP.” Id. at 548 n.46. The Rate Court adopted DMX’s proposal in full, including its share-weighted calculation based on fractions, and nowhere even suggested that the fractional nature of the license or the fee calculation was contrary to the requirements of AFJ2. Id. at 551–52.


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from per se condemnation. Instead, the Court identified several reasons—

principally aggregation of a substantial number of rights and efficiencies

benefitting licensees and rightsholders—why the PROs’ blanket licenses provided

procompetitive benefits. See CBS, 441 U.S. at 20–22.

The Government attempts to hang its hat on the Court’s observation

that “[m]ost users want unplanned, rapid, and indemnified access to any and all of

the [PROs’] repertory of compositions,” including “immediate use” of works in the

repertories, 441 U.S. at 20, 22, claiming that this language translates into a

conclusion that the decrees require full-work licensing. JA70, JA75; Gov’t Br. at

17, 22–23, 26, 46; see also Industry Br. at 8, 18; TMLC Br. at 19, 23–24. But the

Supreme Court said nothing of the kind in CBS; instead, the Court recognized that

the blanket license responded to users’ needs because, for a single fee, it “gave

unlimited access to the repertory and reliable protection against infringement,” 441

U.S. at 20–21 (emphasis added), in contrast to a market without a blanket license,

which would require predetermination of the works the music user intended to use

and “individual negotiations” for “individual fees for the use of individual

compositions,” id. at 20.

Moreover, CBS did not identify immediate access to works as the sole

benefit of collective licensing. Rather, the Court identified copyright owners’

desire for “a reliable method of collecting for the use of their copyrights” and


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large-scale monitoring and enforcement, the “integration of sales, monitoring, and

enforcement against unauthorized copyright use,” and the steep reduction in

transaction costs afforded by “a blanket license that is sold only a few, instead of

thousands, of times.” CBS, 441 U.S. at 20–21; NCAA v. Bd. of Regents of Univ. of

Okla., 468 U.S. 85, 103, 114 (1984) (blanket license “increase[s] sellers’ aggregate

output” and “enhance[s] the total volume of music that [is] sold”). These

features—and their attendant benefits to licensees and rightsholders—distinguished

the blanket license from individual licenses and provided justifications for

collective licensing, and the blanket license in particular, as a procompetitive

solution to the problems associated with licensing music. CBS, 441 U.S. at 20.7

While the Government’s interpretation of the decrees would disrupt longstanding

practices and undermine these efficiencies (see, infra, Part III), the fractional

licensing regime that has been in place before, at, and subsequent to the time of the

CBS decision will continue to afford the music licensing marketplace the benefits

of the blanket license that underlie the Court’s decision.

7 Since CBS, courts have cited the increased efficiency and output resulting from the PROs’

aggregation of rights—not immediate access—as the principal procompetitive benefits of collective licensing. See NCAA, 468 U.S. at 103 (“Broadcast Music squarely holds that a joint selling arrangement may be so efficient that it will increase sellers’ aggregate output and thus be procompetitive.”); In re Pandora Media, Inc., 6 F. Supp. 3d 317, 322 (S.D.N.Y. 2014), aff’d sub nom. Pandora Media, Inc. v. ASCAP, 785 F.3d 73 (2d Cir. 2015) (citing efficiencies, cost savings, monitoring, and infringement protection as primary benefits of blanket licenses). Similarly, the Government’s brief in support of AFJ2 identified a long list of benefits—efficiencies, monitoring, infringement protection, and immediate access to works—as reasons why public performance rights are licensed collectively. 2000 Mem. of United States at 8–9.


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III.

THE GOVERNMENT’S INTERPRETATION OF THE DECREES WOULD DISRUPT LICENSING AND IS AT ODDS WITH

LONGSTANDING INDUSTRY PRACTICE

Industry licensing practices confirm that the consent decrees do not

require full-work licensing or prohibit fractional licensing. Both the PROs and

industry stakeholders have transacted consistently with the fact that neither AFJ2

nor the BMI Decree requires the PROs to license only those works that they

controlled fully. These industry practices provide powerful confirmation of

ASCAP and BMI’s reading of their decrees. See, e.g., DMX, 683 F.3d at 43 (court

may consider extrinsic evidence to determine parties’ intent about meaning of

decree); NBC, 1970 WL 556, at *3 (considering user’s “consistent practice” in

licensing as “indicative of the intent of the judgment,” and calling “[t]wo decades

of acquiescence in this interpretation of the judgment . . . most relevant to a

decision on this application”).

By contrast, the Government’s interpretation would wreak havoc in a

licensing marketplace that has functioned effectively for many decades. Although

the Government acknowledges that its interpretation of the decrees “will require

adjustment by some market participants” (JA80 (emphasis added)), that

concession, as well as the Government’s suggested “guidelines and practices” to

accomplish that “adjustment” (JA81–83), woefully understate the disruption its

reading of the decrees would cause. Requiring the PROs to license entirely on a


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full-work basis could well turn a well-functioning licensing marketplace on its

head, potentially removing certain works from the ASCAP and BMI licenses;

imposing new and costly administrative burdens on the PROs to review many

thousands of co-owner agreements to attempt to confirm that those agreements

authorize members/affiliates to convey the right to license on a full-work basis;

and requiring the PROs to develop new business practices and systems to price

licenses and collect and distribute royalties on a full-work basis. And all of these

changes would come at the direct expense of music creators, who would not only

lose royalty revenue from works that would not be licensable but would be forced

to make collaborative decisions on the basis of PRO affiliation rather than artistic

merit. Nothing in the decrees requires such draconian results.

As the Copyright Office has concluded, “the fractional licensing of

jointly owned musical works—a longstanding practice of the music industry—

went unquestioned as a background fact by the many stakeholders who participated

[in the Office’s comprehensive music licensing study], including both licensors

and licensees.” Copyright Views at 2. Decades of industry licensing experience

confirm that conclusion. Licensees typically obtained blanket licenses from PROs

without any distinction between songs that were licensable on a full-work or

fractional basis. Music users relied on the fact that the licenses issued by those

PROs, in the aggregate, granted them the right to publicly perform all of the songs


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in the repertories of each of the PROs. The PROs, in turn, typically valued their

repertories and calculated license fees on the basis of market shares determined by

the sum of the fractional interests in the works in each PRO repertory. See JA72,

JA74; Media Licensee Comments at 13 n.11 (“ASCAP and BMI typically receive

license fees commensurate with their estimated market shares.”).

Agreements between and among songwriters and other rightsholders

are similarly inconsistent with any requirement that the PROs license on only a

full-work basis. Music creators frequently enter into agreements with co-owners

that restrict them from licensing more than their ownership shares, restrictions that

would make no sense if the PROs with which many of these creators affiliated

could not license fractional interests in musical works. JA71; Passman Comments

at 2–3, A-1, B-1; Copyright Views at 8–12.8

If either AFJ2 or the BMI Decree had required licensing to be done on

only a full-work basis, every aspect of the licensing process would have been

different. Most critically, music users, who have repeatedly clashed in Rate Court

8 See, e.g., Castle Comments at 4 (“The licenses issued by all the PROs are limited to the

rights controlled by the applicable PRO.”); FMC Comments at 3 (“Through their membership with a PRO, songwriters and composers enjoy the ability to license the portion of the rights to which they control, without concerning themselves with whether co-authors of a work have negotiated adequate royalty and payment terms.”); NSAI Comments at 2 (“Historical practice has never seen one PRO licensing its song on behalf of other owners who may be affiliated with a different PRO nor has it seen a songwriter being paid from a PRO with whom he is not affiliated for performance of a song licensed by that PRO.”); Sandberg Comments at 1 (“I have never understood either STIM [Sandberg’s Swedish PRO] or ASCAP [Sandberg’s U.S. PRO] [to] license 100% of a song that I have co-written with someone else simply on the basis of my partial ownership of that song.”).


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with ASCAP and BMI over reasonable license fees, would have sought to reduce

their fees by asserting that they should not pay for joint works in the ASCAP (or

BMI) repertory that were already covered by a full-work license granted by the

other PRO; in practice, however, music users made no such arguments. See, e.g.,

BMI, Inc. v. Pandora Media, Inc., No. 13 Civ. 4037, 2015 WL 3526105, at *2, *25

(S.D.N.Y. May 28, 2015) (while licensed by ASCAP, Pandora sought blanket

license from BMI that credited portion of Pandora’s fee attributable to

“performances of directly licensed or withdrawn BMI works,” including works co-

owned by BMI affiliates and withdrawn publishers, but sought no such credit for

works co-owned by BMI affiliates and ASCAP members).

The Government’s assertion that AFJ2 and the BMI Decree require

full-work licensing ignores this history. The Government suggests that enforcing

such a requirement would simply require an “adjustment” by industry participants.

In fact, mandatory full-work licensing would disrupt and distort the licensing

marketplace. Although all of the adverse effects cannot be anticipated with

certainty, there is little doubt that the end result would be to create confusion and

uncertainty as to the availability of works for public performance and to saddle the

PROs with administrative burdens and expense that would increase the costs of

licensing, at the expense of music creators whose works could not be performed


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and whose artistic collaborations would have to factor in the unwanted effects of a

full-work licensing regime.

Stranded works. The Government’s interpretation of the decrees

would potentially remove certain works from the ASCAP and BMI repertories.

The impact on music creators and users alike would be enormous. Although the

majority of works in ASCAP’s repertory are fully controlled by one or more

ASCAP members, many of today’s most popular songs (including most of the

songs on Billboard’s Top 100) are co-written by multiple songwriters who are

members/affiliates of different PROs. BMI Br. at 13, 43; Copyright Views at 29.

If the Government’s reading of the decrees causes these works not to be licensed,

they would become stranded—unable to be licensed or played by any music user—

unless and until the co-owners of those works amend their agreements to permit

full-work licensing by either ASCAP or BMI, or the co-owners remove their works

from ASCAP and BMI and move them to unregulated PROs, such as SESAC and

GMR, that do not have a full-work licensing requirement.

Music user amici assert that fractional licensing will increase

transaction costs (Industry Br. at 14–15, 28–36; TMLC Br. at 26–28), but the

stranded works problem shows that they have it backwards: Mandatory full-work

licensing would potentially require users to engage in multiple individual

negotiations to obtain rights they once acquired through their ASCAP and BMI


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licenses. And the companion argument, that fractional licensing will harm music

users by leading to the creation of new PROs, is essentially a complaint that music

users will be harmed by more competition. The argument rings particularly hollow

from music users who have long complained about the purported market power of

ASCAP and BMI (see TMLC Br. at 8–13), and finds no support in the antitrust

laws that undergird the ASCAP and BMI consent decrees. Cf. Cargill, Inc. v.

Monfort of Colo., Inc., 479 U.S. 104, 109–10 (1986) (“[I]t is inimical to the

antitrust laws to award damages for losses stemming from continued

competition.”) (internal alterations and quotation marks omitted).

Foreign works. Many countries (such as the United Kingdom,

France, and Germany) whose creators export music for performance in the United

States do not follow the tenancy-in-common default rule of U.S. copyright law; as

a result, non-U.S. rightsholders typically can license only their fractional shares in

co-owned works under their local laws. See Copyright Views at 18; PRS

Comments at 1–2. The Government’s erroneous reading of the decrees would

potentially disrupt the licensing of these works, many of which are highly valued

and oft-played classic and modern hits.

New administrative burdens and expense. Mandatory full-work

licensing would impose significant administrative burdens on ASCAP and BMI,

which would have to confirm the right to license on a full-work basis the split


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works in their respective repertories. The Government posits that this gargantuan

problem can be solved by having ASCAP and BMI “remind their members that the

members made grants of rights to their PRO to license all works of which a

member is a partial or complete owner and warranted that there were no other

agreements that would prevent licensing on the basis described in the grant of

rights.” JA83. But to obtain the assurances the Government suggests, ASCAP

would have to amend the terms of its membership agreements with more than

625,000 members, assuming the members would in fact permit such an

amendment. To verify such assurances, ASCAP would have to collect third-party

agreements governing the ownership rights for millions of works in the ASCAP

repertory. The result would be to increase dramatically ASCAP’s administrative

expenses while decreasing significantly its operational efficiency, all to the

detriment of the music licensing marketplace.

New pricing and payment structures. Full-work licensing also may

require PROs to abandon their well-established practice of negotiating and pricing

licenses based on fractional interests in favor of new pricing models for licenses

that convey full works. This fundamental change in the economic relationship

between ASCAP and BMI, on the one hand, and music users, on the other, would

likely result in protracted fee negotiations and increased Rate Court litigation,

which would do little other than drive up the cost of licensing public performance


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rights. In addition, PROs that are called upon to license works that are not fully

controlled by their members/affiliates may also have to develop new systems to

facilitate the distribution of royalties payable to unaffiliated rightsholders, again

resulting in increased transaction costs.

Harm to creators. Last and certainly not least, mandatory full-work

licensing would fundamentally and needlessly injure music creators. The most

significant impact would result if those creators whose works have been created in

collaboration with members/affiliates of a different PRO were unable to continue

to receive royalties that they now receive. Even in circumstances in which their

jointly created works can continue to be licensed, full-work licensing would

deprive creators of the benefits of their chosen PRO and force them to look to their

co-owners or other PROs to receive royalties for performances of co-owned works.

Rather than be paid according to the distribution rules and practices of a PRO with

which they never chose to affiliate, songwriters may choose to collaborate only

with writers affiliated with their same PRO, restricting their creative choices

without benefit, and in contravention of the Government’s prior efforts to increase

PRO competition for songwriters, as reflected in AFJ2. See AFJ2 § XI(B); 2000

Mem. of United States at 40–43.


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CONCLUSION

This Court should affirm the District Court’s decision and hold that

the ASCAP and BMI consent decrees do not require full-work licensing or prohibit

fractional licensing.

Dated: August 24, 2017

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP By: /s Jay Cohen

Jay Cohen Lynn B. Bayard Hallie S. Goldblatt

1285 Avenue of the Americas New York, New York 10019-6064 (212) 373-3000 [email protected] [email protected] [email protected] Clara Kim Richard H. Reimer American Society of Composers, Authors and Publishers One Lincoln Plaza 1900 Broadway New York, New York 10023 (212) 621-6200 [email protected] [email protected]

Attorneys for Amicus Curiae the American Society of Composers, Authors and Publishers


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CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. App. P. 32(g), I hereby certify that this document

complies with the word limit of Fed. R. App. P. 32(a)(7)(B) and Local Rules

29.1(c) and 32.1(a)(4) because, excluding the parts of the document exempted by

Fed. R. App. P. 32(f), this document contains 6,820 words. I further certify that

this document complies with the typeface requirements of Fed. R. App. P. 32(a)(5)

and the type-style requirements of Fed. R. App. P. 32(a)(6) because this document

has been prepared in a proportionally spaced typeface using Microsoft Word 2010

in 14-point Times New Roman font.

Dated: August 24, 2017 /s/ Jay Cohen

Jay Cohen Attorney for Amicus Curiae the American Society of Composers, Authors and Publishers


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