Additional Legal Battles Ahead for DOJ's ASCAP/BMI Consent Decrees Decision

BMI's consent decree “neither bars fractional licensing nor requires” 100 percent or full-work licensing, Stanton ruled: “Nothing” in the language of BMI's consent decree “gives support” to DOJ's clarifying language on 100 percent licensing. “If a fractionally-licensed composition is disqualified from inclusion in BMI’s repertory, it is not for violation of any provision” of the consent decree, Stanton said. “Questions of the validity, scope and limits of the right to perform compositions are left to the congruent and competing interests in the music copyright market, and to copyright, property and other laws, to continue to resolve and enforce.”

The ruling is the “controlling interpretation” of BMI's consent decree for 100 percent licensing, BMI said in a statement. It directly affects only BMI's consent decree. ASCAP or another party would need to file a separate request for declaratory judgment with District Judge Denise Cote, who's ASCAP's rate court judge, to affect legal interpretation of that performing rights organization's consent decree. ASCAP is the most probable party to seek declaratory judgment and it’s likely to “move very quickly” to file a challenge, said Jay Rosenthal, a Mitchell Silberberg lawyer who represents music industry content owners.

“As we review the potential impact of this ruling on ASCAP, we hope it will provide support for our ongoing work with BMI to modernize the regulatory system so that music creators and publishers can effectively compete in the global music marketplace,” ASCAP President Paul Williams said in a blog post. ASCAP and BMI coordinated their challenge to DOJ's decision, with ASCAP spearheading the lobbying effort on Capitol Hill while BMI headed the court challenge.

DOJ is expected to appeal Stanton's ruling to the 2nd Circuit Court of Appeals. The department "received the order and is reviewing it,” a spokesman said. The chances of DOJ appealing Stanton’s ruling are “pretty good” because Antitrust spent more than two years collecting feedback on the consent decrees before releasing its concluding statement, said copyright and music licensing lawyer Karyn Ablin of Fletcher Heald. “I’m sure there will be a great deal of discussion in the next few days” about whether and how to appeal, she said.

Justice may choose to wait until Cote rules on a challenge to the department's finding on the ASCAP consent decree before appealing Stanton’s decision, Rosenthal told us. “There was obviously a strategy behind BMI being the PRO that challenged [DOJ’s decision] in court and that’s based on the widespread view that Stanton is more favorable to the interests of copyright owners,” Ablin said: “It will be interesting to see if [DOJ] approaches Cote’s court for its interpretation” of the consent decrees decision. Cote has “always been a little bit more independent from the PROs’ position than Stanton has,” Rosenthal said. Cote “definitely believes that she’s there to enforce antitrust laws and benefit consumers,” he said.

Court Split?

A Cote ruling that favored DOJ’s position would make it more likely the 2nd Circuit would agree to hear a Justice appeal because there would be a clear split between the rate court judges that would require a resolution, with the 2nd Circuit likely making its ruling binding on ASCAP and BMI, Rosenthal said. The 2nd Circuit could conceivably take up a DOJ appeal of Stanton’s ruling but may choose not to because it’s “such a specialized area of expertise,” said music industry lawyer Chris Castle. The 2nd Circuit is already likely to favorably view Stanton's opinion because of his expertise in adjudicating the BMI consent decree, he said. “The [2nd Circuit] judges don’t live with this case all the time while [Stanton] does.” Justice could appeal Stanton’s ruling on a range of grounds, including focusing on an argument that Stanton exceeded his authority in the ruling, Rosenthal said.

Challenges focusing on Stanton’s authority or that argue DOJ didn’t need a court’s permission to act on the 100 percent licensing language likely would be unsuccessful, Rosenthal said. The agency would have a better chance at the 2nd Circuit if its appeal focuses on the substance of Stanton’s ruling, Rosenthal said. “DOJ probably feels that it’s their realm to determine what violates antitrust law and this court is only there to disapprove of instances where they’ve vastly exceeded their authority.” The 2nd Circuit could decide that Stanton was correct in taking up BMI’s challenge but “incorrect in terms of interpretation,” Rosenthal said.

Stanton appeared to focus solely on the language in BMI’s consent decree in determining that the decree didn’t require 100 percent licensing, said Digital Media Association (DiMA) General Counsel Greg Barnes. Justice looked at additional factors in deciding to issue its 100 percent licensing language, including the text of BMI’s membership agreements with songwriters, public statements from BMI that suggested that the PRO's licenses were full-work licenses, and public policy arguments in favor of 100 percent licensing, Barnes told us. DiMA supports DOJ’s consent decrees finding.

Songwriters of North America still plans to proceed with its separate lawsuit against DOJ, said IP and entertainment lawyer Dina LaPolt, the group's attorney-adviser. SONA sued in U.S. District Court in Washington, D.C., last week (see 1609140027). SONA always intended for its suit to be litigated separately from BMI's legal challenge even though songwriter groups supported BMI's challenge, LaPolt told us. “The two cases are like apples and oranges,” she said: “BMI sued as a party to its consent decree on the grounds that they feel the DOJ misinterpreted the Copyright Act as it related to the consent decrees. That's not our fight. Our lawsuit is about injury and harm to the songwriters” resulting from the 100 percent licensing language.

SONA believes Stanton’s ruling strengthened the group’s argument that DOJ exceeded its authority in issuing the 100 percent licensing language, LaPolt told us. “That ruling has verified what we’ve alleged,” she said. “They don’t have the right to override the contractual relationships that songwriters have had for years. [Stanton] ruled that this was government gone awry, which is exactly what we’re alleging.” SONA’s case has merit but “it’s going to be tough” for songwriters to prove DOJ didn’t have the authority to issue the 100 percent licensing language under its antitrust authority, Rosenthal said. “Generally, antitrust law has supported DOJ having a lot of power to do things” in its role as an enforcement agency, he said. SONA’s suit could also embolden DOJ to become more aggressive in responding to challenges to its consent decrees decision, Rosenthal said.

Legislation Delayed?

Stanton’s ruling is likely to temporarily stay further progress on potential legislation aimed at addressing the consent decrees, Rosenthal said.

House IP Subcommittee Vice Chairman Doug Collins, R-Ga., and other members of Congress who have followed the consent decrees review are likely to wait until federal courts resolve the BMI, SONA or other legal cases involving the review finding before formally introducing any proposals, Rosenthal said. Collins had been collecting feedback since early August on possible legislation or other actions on the DOJ’s consent decrees finding (see 1608260056).

Stanton’s ruling “is a major win for songwriters, but we can’t stop fighting on behalf of these hardworking men and women,” Collins said in a statement: “In addition to continuing to monitor the DOJ consent decree announcement, I will also continue to push for passage” of the Songwriter Equity Act (HR-1283/S-662). Legislative language on the consent decrees could have involved an updated version of HR-1283/S-662, which would amend sections 114 and 115 of the Copyright Act to allow the Copyright Royalty Board to consider “all relevant evidence” when determining royalty rates and would change the rate standard for mechanical royalties.

Rep. Marsha Blackburn, R-Tenn., separately praised Stanton’s ruling as “a major victory for songwriters.”