wpix v. bmi (s.d.n.y. apr. 28, 2011)

8/7/2019 WPIX v. BMI (S.D.N.Y. Apr. 28, 2011)

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USDC SDNYORrGrNALDOCUMENTELECTRONICALLY FILED

UNITED STATES DISTRICT COURT DOC#:SOUTHERN DISTRICT OF NEW YORKDATE FILED: Ii-%S-II

: x e - - - - - - - - - - - - ~ - . _...-----....WPIX, INC. I e t a l . ,

09 C . 10366 (LLS)Applicants ,-agains t - OPINION AND ORDER

BROADCAST MUSIC, INC.Respondent.

x

Th e ques t on Broadcast Music, Inc. ' s ("BMI") motion iswhether the Decree under whi it opera tes requires it to fe r tobroadcas te rs the II carve out" l i cense whi U.S. v. Broadcast

275 F. 3d 168 (2d Cir . 2001) ("AEI ") held BMI must of f e r to nonbroadcas te rs . The "carve out" l i cense i s a blanket l icenseproviding access to BMI's whole r eper t of musi works fo r thewhole per iod of the l i cense , but with a spec i pr ic ing mechanismwhich reduces the the l icensee pays to BMI based on thepropor t ion of the l i c e ns e e ' s performances of BMI music fo r whichhe obtained an a l te rna te l i cense fo r which he i s payingcomposer o r publ isher rec t

BMI argues tha t it no obl igat ion to of f e r broadcas te rs a"carve-out I l i cense , and tha t

AEI dec is ion i s inappl icable to t h i s case . AEIinvolved app l ica t ions by non-broadcasters , and i redcons t ruct ion of the BMI Decree ' s provis ions a f ect ingnon-broadcasters . BMI Decree has spec i f i cprovis ions af fec t ing broadcas te rs tha t c lea r ly precludea f ng t ha t BMI must provide the form of l i cense tha tthe Local evis ion Broadcasters are ng.

Case 1:09-cv-10366-LLS Document 38 Filed 04/28/11 Page 1 of 8


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(BMI Feb. 15, 2011 Mem. ( "BMI br . " ) 2 0 . )

Background

Th e background of the dispute i s s e t for th in the AEI Opinion,27 5 F.3d a t 171-72:

BMI i s one of the l a rges t performing r igh tsorganiza t in the country. I t grants l i censes tomusic users , col lec t s l i cense fees from them, andd i s t r i bu t e s the roya l t i e s among i t s a f f i l i a t e d copyrightholders ( "Aff i l i a te s" ) . I t s Aff i l i a t e s compriseapproximate ly 250[000 songwri ters , composers, andpubl i shers [ and i t s cata log includes about three I l ionmus works. Applicants Muzak LLC and AEI MusicNetwork, Inc. provide music environments, of ten re fe r redto as "background music serv ices [ II to var ious commercialc l i en t s such as res taurants [ r e t a i l e r s [ departments tores [ of f ices , and supermarkets. Th e se rv ices areprovided e i t he r by de l ivery of d iscs or tapes to thec l i en t s , o r by s a t e l l i t e t ransmiss ion .In 1941[ the United Sta tes brought separate an t i t ru s tsu i t s aga BMI and i t s main competi tor[ the AmericanSociety of Composers [ Authors and Publ i shers (HASCAP"),fo r unlawful ly monopolizing the l i cens ing of performingr i gh t s . Both su i t s were se t t l ed by consent decree .United States v. Broadcas t Music, Inc" 1940-43 Trade

Cas. (CCH) 56[ 096, 38 1 (E.D. Wisc. 1941) iSta tes v. Am. Soc'y of Composers, Authors, and Publ ' r s("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) (HASCAP Decree"). In1950, the ASCAP consent decree was amended to es tab l i sha "ra te court" mechanism, which enabled the cour t to se tfees fo r 1 icenses when 1 icense app l ican t s and ASCAPcould not come to agreement. United Sta tes v. ASCAP,195053 Trade Cas. (CCH) 62[ 595, 63[ 750 (S.D.N.Y.1950) The government brought the i n s t a n t su i t agains tBMI in 1964, and the pa r t i e s ente red in to a consentdecree two years l a t e r . United States v. Broadcas tMusic, Inc. , 1966 Trade Cas. (CCH) 71, 941[ 83[ 323(S.D.N.Y. 1966), amended, No. 64-CV-3787, 1994 WL901652[ a t *1 (S.D.N.Y. Nov. 18[ 1994) (1996 1 TradeCas. (CCH) 71, 378) ("BMI Decree" o r "decree")

The BMI Decree places a number of spec i f i cr e s t r i c t i ons on BMI. Among other th ings , the decreeproh ib i t s BMI from i t s e l f publ i sh ing, record ing or2



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d i s t r i bu t ing music commercial ly (Sect ion IV (B) ) , fromre fus ing to con t rac t with a p o t e n t i a l a f f i l i a t e (Sect ionV(A)), and from disc r imina t ing between s imi la r ly s i tua ted l i censees (Sect ion VIII) .

The decree spec i f ica l ly requires t ha t BMI gran tce r ta in types of l i censes . Sec t ion VIII (B) requirest ha t BMI l i cense to any broadcas te r " the r i gh t s pub l ic lyto perform i t s r eper to ry by broadcas t ing on e i t he r a p erprogram o r per programming per iod bas i s , a t [BMI's]opt ion" ("per program l i cense" ) . Sect ion IX (C)proh ib i t s BMI from re fus ing to l i cense to "music userso ther than broadcasters , l I such as Appl ican t s , a l i cense"a t a pr ice or pr ices to be f ixed by [BMI] with theconsent of th e copyr ight propr i e to r for the performanceof such spec i f i c ( i . e . , per piece) musical composi t ions ,the use of which s ha l l be reques ted by the prospec t ivel icensee" ("per piece I " ) . In add i t ion , Sect ionIV (A) proh ib i t s BMI from prevent ing wri t e rs o rpubl i shers of a composi t ion from d i rec t l y l i cens ingt h e i r work to a music use r .

Trad i t iona l ly , the BMI's l i cense of choice has been a"blanket l i cense , " a l i cense tha t gran t s th e l icenseeaccess to BMI' s e n t i r e reper tory in exchange fo r anannual fee . In Appl ican t s ' case , t ha t fee has alwaysbeen based on the number of l i c e ns e e ' s loca t ions t h a tuse BMI-l icensed works, i.e., on a "per premise" bas i s .The BMI Decree does not spec i f ica l ly mention the b lanke tl i cense i however, BMI has h i s t o r i ca l l y of fe red it andAppl icants have r ecen t ly held blanket l i censes .(a l t e ra t ions in or ig ina l . )

The AEI Holding

As the Second C i r cu i t he ld in AEI, id . a t 171:We conclude t ha t Appl ican t s ' reques t for a blanketl icense sub jec t to "carve outs" c o n s t i t u t e s a reques tnot fo r a new type of l i cense , but fo r a blanke t l i censewith a d i f f e r e n t fee bas i s , over which the d i s t r i c tcour t has r a t e - se t t i ng au thor i ty and which BMI mustof fe r .

In pOint ing out t ha t the add i t ion of Sect ion XIV in 1964es tab l i shed the ra te cour t and added the new prov i s ion t ha t anappl icant for "the r igh t of publ ic performance of any, some o r a l l

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of the composi t ions in [BMI I s] r eper to ry II must be offered a feeBMI deemed reasonable , with app l ica t ion to t h i s ra te cour t i fpa r t i e s could not agree , id . a t 173{ th e Court of Appeals drew nod i s t i nc t ion between appl icants who are broadcas te rs and o ther s .I t had "no t roub le concluding t h a t Sect ion XIV (A) requires BMI{upon reques t fo r a blanket l icense{ to quote a it deemsreasonab le fo r t ha t l i cense , and t h a t Sect ion XIV (A) empowers thed i s t r i c t cour t to se t a reasonable fee i f the pa r t i e s cannot cometo agreement I" id . a t 176{ aga in with no d i s t i nc t ion betweenbroadcas te rs and o ther app l ican t s .

The Court of Appeals viewed the "carve-out I s t ru c t u re not asan a l t e r a t i on of th e l ega l r igh t s of the pa r t i e s , but simply as amechanism whereby "Applicants would be gain ing use of p a r t of therepe r to ry e i t h e r by paying BMI a p er piece l i cense fee , or bypaying a fee to the copyr ight holder . The only modi f ica t ion

to the t r a d i t i ona l blanket l i cense i s in th e way th e i sca lcu la ted ." a t 176. Thus, the Court concluded, againwithout d i s t i nc t ions between broadcas te rs or non-broadcasters ( id .a t 177):

Therefore, we const rue Sect ion XIV to require t ha twhen an app l i can t may obta in a l te rna t ive l i cens ing underthe BMI Decree, and the appl i can t reques ts a blanketl i cense with a fee s t ruc tu re tha t r e f l e c t s sucha l t e rn a t i v e l icensing{ BMI must advi se the app l i can t ofthe fee it deems reasonab le fo r such a l i cense . Fa i lu reto do so wil l empower the d i s t r i c t cour t to se t areasonable fee .

Since th e 11 carve-out II l i cense rep re sen t s merely a d i f f e re n t feeca lcu la t ion in a t r a d i t i ona l blanket l i cense ,

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we need not address Appel lants ' argument t h a t the"any, some, o r a l l " language in Sect ion XIV requires BMIto quote a fee for , and o f fe r , any type of l i cense anappl icant might reques t . We are presented in t h i sappeal with reques ts for two types of l i censes : th eblanke t l i cense , which BMI has s ta ted it w i l l alwayswant to of , a n d the per p iece l i cense , which i sexp l i c i t l y requi red in Sect ion IX(C). The ques t ion ofwhether o r not the provis ion requires BMI to of f e r someothe r form of l i cense , should one be reques ted , i s notnecessary to the r eso lu t ion of the i s sues on appeal andwe leave it another day.

a t 178 n .2 .

This Appl ica t ion

Essen t ia l ly , BMI's argument t ha t it i s not requi red to of f e rthe "carve out" l i cense to broadcas te rs i s t ha t

In , n o n -b ro a d c a s t e r s claimed to have no a b i l i t y totake advantage of d i r e c t l i cens ing the absence of th ecomposition-by-compos ion cred i t ing system t ha t theywere seeking. But those non-broadcas te rs had no accessto the per program l i cense to which only broadcas te rshave mandatory access under Sect ion VIII (B) .Accordingly, unl ike the broadcas te r Appl icant s in t h i scase, the non-b roadcasters in AEI succes s fu l ly contendedt h a t they had no ef fec t ive means to t ake advantage ofd i r e c t l i cens ing in the absence of the composi t ion-bycomposi t ion cred i t ing system t h a t they were seeking. Id .a t 173.

But here , the BMI Decree express ly affordsbroadcas te rs a means of obta in ing the benef i t s of d i r e c tl i cens ing through the use of the per program l i cense .

* * *In as non-broadcas te rs , the app l ican t s couldargue t ha t , because they had the r i gh t to l i cense anyone or more composi t ion, up to the ent i re BMI reper to i rewi th per p iece l i censes , (BMI Decree IX (C) ) , theyshould be allowed to get a l i cense to the e n t i r ereper to i re , and a c re d i t fo r anyone o r more pieces t h a tthey l i cense d i r e c t ly . Thus, the background music

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se rvice appl icants had ava i lab le to them the argumentt h a t because they had the r i g h t to l i cense through BMIone, two or 100 composit ions, they should a l so be ableto l i cense the ent i re BMI reper to i re with a c re d i t fo rthose one, tw o o r 100 separa te ly - l i censed composi t ions .Whether o r not such an argument was persuas ive , theLocal Tel s ion Broadcasters can make no such argumenthere .

(BMI b r. a t 22-23 , emphasis in or ig ina l . )BMI also argues t ha t Sect ion VIII(B) the Decree gives BMI,

ra the r than a broadcas te r , the r i gh t to decide whether to o f fe rbroadcas te rs any l i censes o ther than the requ i red pe r program orprogramming period l i censes . (Id. 2 .) BMI argues,

Sec t ion VIII (B) gives BMI the so le r i gh t to c ide ,providing that" [ i ln the event [BMI] offe rs to l i censebroadcas te rs on bases in addi t ion to a per program o rr programming period bas i s , " BMI must ac t in goodi th to ensure t ha t there i s an appropr ia tere l a t ionsh ip tween the per program fee and thea l te rna t ive fee s t ruc tu re offered . (BMI Decree VIII (B) (emphasis added).) BMI i s simply not requi redto provide broadcas te rs the composi t ion-by-composi t ioncredi t ing fea ture they seek.(emphasis, bracke ts and parenthes is BMI's) . See so a tp. 1 2 :

By including the fo l lowing language[BMIl o f fe r s to l i cense broadcas te rs on bases inaddi t ion to a per program or per programming periodbas i s (emphasis added) - the BMI Decree c l e a r ly mani fes t sthe p a r t i e s ' in ten t ion t ha t it was BMI's opt ion to o f fe ra l i cense on any othe r bas i s than the t r ad i t i ona lblanket l i cense , per program l i cense or pe r programmingper iod l i cense .

(emphasis, bracke ts and pa ren thes i s BMI's) .

* * *Whatever meri t these arguments might hold i f the case involved

requi r ing the of f e r of a new form of l i cense , they do not apply

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here , fo r t h a t i s not the i s sue . These app l i can t s a re not seekinga new form of l i cense . spec i f i c provis ions on which BMIr e l i e s , pa r t i c u l a r to broadcas te rs and o ther s , do no t a f f e c t th eb lanket l icense which has t r a d i t i ona l ly been of fe red to a l lapp l ican t s . That i s what these app l i can t s seek . In render ing i t sdec is ion in the Court of Appeals was fu l ly aware of thein te rp lay between those prov i s ions . 275 F.3d a t 172. I t s dec i s iondid not r e s t upon th e i n t e r r e l a t i o n sh i p between them. Rather , itdecided t ha t what was sought was a mere readjustment to thefundamental blanket l i cense and thus was requi red to be madeava i l ab le without regard to the per p iece o r per-program opt ions .Like an argument made under Shenandoah 1 to th e AEI Court , 27 5 F.3da t 177:

. whatever re levance [those arguments] might have toreques ts for new types of l i censes , it does not compelthe same outcome here s ince Appl icants have requested ablanket l i cense with a revised fee s t ru c t u re .Thus, th e "carve outll blanket l i cense , b ei no more than the

t r a d i t i o n a l and common blanket l i cense desp i te i t s pa r t i c u l a rpr ic ing mechanism, i s requi red by long t r a d i t i on and by Sect ionXIV of th e Decree to be i ssued to any app l ican t , without regard towhether the app l i can t i s a broadcas te r o r non-broadcas te r .

1 United Sta tes v. ASCAP (Applica t ion of Shenandoah ValleyBroadcas t ing , Inc . ) , 331 F.2d 117 (2d Cir . 1964)7



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Conclusion

Accordingly , BMI I S February 15, 2011 "Motion For An Order ThatThe BMI Consent Decree Does Not Require BMI To Provide ToBroadcas ter s Another Blanket License With An Adj us tab le Cred i t I(Dkt No. 23) i s denied .

So ordered .

DATED: New York, New YorkApr i l 27, 2011

L.,t+i,s L , . s t . . . t ~ - - - - - - - - - - ~ ~ ~ LOUIS L. STANTONU. S. D. J .

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wpix v. bmi (s.d.n.y. apr. 28, 2011)

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