On Friday, the US District Court judge who oversees the administration of the BMI Consent Decree rejected the recent Department of Justice interpretation that the antitrust consent decree required that, when BMI licensed music to music users, that license would embody the full musical work, not just a fractional interest that might be held by the songwriter who was the BMI member. DOJ’s decision stemmed from its review of the ASCAP and BMI antitrust consent decrees, which was initiated by ASCAP and BMI. While ASCAP and BMI initiated the review looking for certain relief from provisions of the Consent Decrees that govern their operations (see our summary of the initial proposals here), in its decision, which we wrote about here, the DOJ decided that the only clarification of the consent decree that it would put forward was one that required 100% licensing by ASCAP and BMI. 100% licensing means that, if a song was licensed as part of the repertoire of ASCAP or BMI, the licensee would get rights to all of that song, even if there were multiple songwriters some of whom were not affiliated with ASCAP or BMI. This interpretation was rejected by Judge Stanton, the Judge who oversees the BMI consent decree. His decision can be found on the BMI website, here.
The Judge’s decision seems to be premised not on the policies and practicalities of licensing by ASCAP and BMI, but instead simply from an interpretation of the language of the BMI consent decree itself. Moreover, the decision itself does not necessarily conclude that songs to which BMI holds less than a full right will necessarily be excluded from the BMI repertoire, only finding that “[i]f a fractionally-licensed composition is disqualified from inclusion in BMI’ s repertory, it is not for violation of any provision of the Consent Decree.” The decision basically says that the rights conveyed by the BMI licenses to the songs in its catalog, and even the validity of the rights to even license any song in its repertoire, are not consent decree decisions, but instead decisions that are left to be determined in civil proceedings interpreting property and contract rights. Seemingly, the Judge’s decision ends up raising more questions than it answers.
As we wrote in our summary of the DOJ decision, the DOJ’s goal was to make sure that music users, when they license music from a PRO, get the rights that they expected from that license. Few services, licensing the huge catalogs of music available through ASCAP and BMI, have the resources or ability to determine who owns what song – or what part of what song. Lacking a reliable public database for that information, the music user pays the performing rights organization (“PRO”) like ASCAP or BMI for the rights to the music that the PRO licenses, and the service assumes that it is covered to perform the music that it has licensed.
If, as suggested by the Judge, the licensee getting a license from ASCAP or BMI can’t rely on the fact that the license covers the songs included in the PRO’s catalog – that any of those songs may be listed by mistake or without legal right or a song may only be partially in the catalog and require other additional licenses – what exactly is a licensee getting when it pays for the PRO license? While the question of whether or not any particular song was covered by any particular PRO’s license may not have made much difference in the past to most music users, when virtually all popular music was licensed by ASCAP, BMI or SESAC. As most music services got a license from all three organizations, whether any particular song was partially in one PRO’s repertoire and partially in that of another made no difference, as the blanket licenses from the three organizations would effectively cover everything. The licensee paid their blanket license and left it to the PRO to determine which songwriter and publisher was paid out of the proceeds of that license fee.
But in today’s music world, where we have a fourth service, GMR, cherry picking the ASCAP and BMI catalog for songwriters it can get to abandon those PROs so that it can license music users at rates not subject to a consent decree, and where there are other organizations looking to form their own version of GMR, as well as big publishers threatening to withdraw from ASCAP and BMI to license the music to which they have rights on their own, a music service can no longer rely on the fact that holding license agreements from just ASCAP, BMI and SESAC will cover all the songs that it uses (see our article here about the potential fractionalization of the music licensing process). And if it can’t rely on the catalog of music that these organizations publish as setting out the songs to which it is getting rights, there would seem to be a concern that, rather than promoting these licensing entities that make the music licensing process manageable for all music users, instead we may be faced with an ever more fragmented music world where licensees are even more confused than they are now about how they go about getting the rights to the songs that they want to play. A licensee may pay fees to the established PROs, thinking that it has rights to specific songs, only to get additional demands from other organizations representing fractional owners.
The PROs and publishers suggested that the 100% licensing requirement would allow music services to shop around and get the cheapest PRO that had at least a fractional interest in a song. However, that would only work if a service was looking to license a handful of songs, all of which had split licenses where at least part of all of the songs that it wanted to use were held by a single PRO. In reality, services are licensing hundreds or, in the case of most digital services, thousands of songs. They can’t just sign a deal with one PRO, as there are bound to be songs completely within the repertoire of another PRO that the service needs to be able to offer. Instead of letting the services pick a PRO, what seems more likely is that services will end up paying for the same song multiple times to multiple organizations representing fractional owners, and the services will effectively end up paying more to cover the same songs.
What makes this decision perhaps even more confusing is that the Judge does not even conclude that 100% licensing is not effectively conveyed when a composer sings up with BMI. Under Section 201 of the Copyright Act, “[t]he authors of a joint work are coowners of copyright in the work.” The caselaw seems to pretty much uniformly hold that any co-owner of a joint work can license that work absent a specific agreement to the contrary. As in most cases, there is no specific agreement to the contrary, it would seem that a co-owner could license the full song to one of the PROs, even if another co-owner was part of another PRO. That other co-owner could also license the same song to their PRO – effectively putting the song into the repertoire of multiple PROs. Can that happen under the decision? The judge simply does not address this precedent at all, leaving unclear if a co-owner can license the entire work to which he or she has rights to a PRO.
ASCAP and BMI were vocal in their opposition to the DOJ decision, and a songwriter’s organization has already filed a suit for a declaratory ruling that the decision should be disallowed. Given its disappointment in the DOJ decision, BMI immediately expressed its pleasure at Judge Stanton’s ruling. But, given that this decision would seemingly give more publishers an incentive to withdraw from ASCAP and BMI and potentially leverage pieces of the publishing rights in songs to get extra-competitive rates from music users, it would seem to me that this might actually hasten publisher withdrawals from the PROs. Judge Stanton’s decision is likely not the last word on this subject, as DOJ can appeal the decision, and the decision applies only to BMI, not ASCAP. Plus, with Copyright reform potentially on the agenda for the next Congress, these issues will no doubt be argued about for years to come.