Yesterday, the US Court of Appeals for the Second Circuit in a “Summary Order” that the Court said does “not have precedential effect,” upheld an even briefer decision of the US District Court Judge who oversees the BMI antitrust consent decree, determining that the Department of Justice was wrong in its interpretation of the consent decree requiring that all songs licensed by BMI represent 100% of the musical work. This is a very arcane issue very deep into the nitty-gritty of copyright law – and an issue that we wrote about several times before, including our articles here and here.
The issue arises as many songs are written by several co-writers. Often times, it is simply a composer of the music and someone else who writes the lyrics. But more and more in many musical genres, there are multiple people who receive songwriting credits on any single song. Each of these authors is deemed to have a “fractional interest” in the song. When these multiple authors of a song belong to different performing rights organizations (e.g. ASCAP, BMI, SESAC and GMR, organizations which authors and their publishing companies join to simplify music licensing to users of lots of music – like radio stations, digital music services, and even bars, restaurants and retail establishments that play music to entertain customers), the issue addressed in this case arises. The question that parties before the court have been debating is whether, when one of these PROs signs a deal with a music user, the user gets the rights to actually perform the song, or whether they simply get the fractional interest in the song that is held by the songwriter who is a member of the PRO, which would require that the user also get the rights to the other fractional interests before the user can play the song.
DOJ, in reviewing the antitrust consent decrees that govern the operations of ASCAP and BMI, decided that the decrees require that, when one of these PROs licenses music to a user like a radio station, that licensing conveys all the rights that the user needs to play the song. This is consistent with the usual arrangement in copyright licensing where a co-author can license the entire work to a user unless there has been a specific agreement to forbid such licensing. The co-author is then responsible for accounting to his or her other co-authors for their shares of any royalties. DOJ said that music licensing by the PROs should work that same way, especially as the user (e.g. the radio station or retail establishment) does not usually have the ability to determine whether the song that they are playing is licensed 100% by one PRO or fractionally by two or more.
BMI, on the other hand, argued that they simply did not have the rights to offer 100% licensing of songs in their catalog. They submitted that they can only license the rights that its members have given them, and that they have always accounted for distribution of their royalties in that manner.
Traditionally, this issue really has not made much difference to most music users, as users (like radio stations or retail establishments) have paid for blanket licenses to each of the PROs (until recently, ASCAP, BMI and SESAC) and these blanket licenses gave the users all the rights to virtually every song that they use. Because one way or the other, the user got all the rights they needed, the user did not care whether they were getting a percentage from each PRO or 100% from one of the PROs. The user just paid their blanket royalties to all of the organizations, and got all the rights that they needed.
But in recent years, where various music writers and publishers have threatened to pull out of BMI and ASCAP (see our articles here and here), and where such withdrawals have already occurred, like with GMR-represented writers, some of whom have fractional interests in the songs that GMR now licenses, the issue becomes more important. If there are a multiplicity of licensing organizations, as there may be if some of the large music publishers decide to pull out of the PROs to license their music directly, then some users may want to avoid using music from certain licensors – which becomes virtually impossible where these licensors each own a fractional interest in different songs, and the overlapping fractional interests makes it almost impossible to avoid licensing from any would-be licensing organization (which is particularly true in the absence of a fully-accurate catalog of who owns what interest in any song – an issue in and of itself). Even computing which PRO represents how many songs becomes difficult if each holds the rights to pieces of the same song – potentially making it seem like each PRO owns the rights to a bigger percentage of the music than any one does, another issue in negotiating appropriate royalty rates.
The parties argued to the Court as to whether the BMI consent decree requires, that when BMI licenses a song to a user, it give the full rights to that user to actually perform that song. The decision did not revolve around any significant analysis of the policy issues involved. Instead, the Court of Appeals merely decided that the consent decrees, on their face, did not require 100% licensing of musical works to users. Where the consent decree is not clear, the Court said that it did not want to impose a new restriction on the PRO, and disagreed with the DOJ contention that 100% licensing was implied by various terms already in the decree. Instead, the Court said, if DOJ wants to impose this obligation on BMI and ASCAP, they need to either petition the District Court that administers the consent decree to amend the decree to put in a specific requirement for 100% licensing, or file an antitrust case looking for such relief.
This is certain to be an issue going forward, as copyright issues are debated in Congress, and as the music licensing landscape evolves in the coming years. Already, with multiple PROs, the US is one of the most difficult music-licensing landscapes in the world. And, as time goes on, this may only get worse. One more issue to deal with in the coming year!