2nd Circuit Rules Against DOJ Appeal in PRO Consent Decrees 100 Percent Licensing Case
The 2nd U.S. Circuit Court of Appeals cleared the practice of fractional licensing -- payment of royalties only on the portion of a song's ownership under a performance rights organization's repertoire -- over DOJ objections. A three-judge panel ruled Tuesday against DOJ's appeal of BMI's challenge of a portion of the department's 2016 concluding statement on its review of the BMI and ASCAP consent decrees (see 1705190051). Justice filed the appeal after Judge Louis Stanton ruled last year in U.S. District Court for the Southern District of New York the Antitrust Division erred in continuing to believe existing decrees mandate 100 percent licensing (see 1611140065 and 1609190062). Stanton is the rate court judge for the BMI consent decree.
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“This appeal begins and ends with the language of the consent decree,” ruled Judges Christopher Droney, Dennis Jacobs and Reena Raggi. “It is a well-established principle that the language of a consent decree must dictate what a party is required to do and what it must refrain from doing.” But the existing BMI consent decree “does not address the issue of fractional versus full work licensing, and the parties agree that the issue did not arise at the time of the 1966 and 1994 amendments,” the 2nd Circuit said: A consent decree's scope “must be discerned within its four corners; and that the courts 'must abide by the express terms of a consent decree and may not impose additional requirements or supplementary obligations on the parties,' -- even to fulfill the purposes of the decree more effectively.” DOJ may have been appealing within the context of its antitrust jurisdiction but “we do not believe that it is supported by the terms of the consent decree,” the judges said.
It's “a massive victory for songwriters, composers, music publishers and the entire industry,” said BMI CEO Mike O'Neill. “We have said from the very beginning that BMI's consent decree allowed for fractional licensing, and we are incredibly gratified that Judge Stanton and the Second Circuit agreed.” It's “an important victory for music creators," said ASCAP CEO Elizabeth Matthews: The 2nd Circuit “affirms what we have known all along, that the right of public performance allows for the fractional licensing of musical works in our repertories, and the consent decrees do not limit that right.” ASCAP coordinated with BMI on their challenge, with ASCAP leading efforts to lobby Capitol Hill to enact legislation to counteract the consent decrees (see 1608040066).
The decision appears to return the music licensing landscape “back to the status quo” before the department released its final decision in its consent decrees review, said music industry attorney Chris Castle. The DOJ can still decide to appeal the case to the Supreme Court but the justices probably “won't be particularly interested in taking the case,” he said. Pursuit of the case to the 2nd Circuit in some ways was a “distraction from things that could have been more productive” for all involved, he said.
"Today’s Second Circuit decision highlights the challenges of behavioral consent decrees in antitrust cases," said Antitrust Division head Makan Delrahim in a statement. "Such decrees, over time, effectively become perpetual regulations that the Department of Justice and the courts are often not well-suited to enforce." Justice "will review the court’s decision and determine the best course of action for competition and the American consumer," Delrahim said.
National Music Publishers Association CEO David Israelite called the decision a “vindication for all songwriters and music publishers that the [DOJ] overreached when it wrongly claimed that split works should be licensed on a 100 percent basis.” Public Knowledge Policy Counsel Meredith Rose urged DOJ to move “swiftly to address the anticompetitive side effects of this ruling,” which “erodes the purpose and benefit of blanket licensing, imposes additional costs on users, and allows BMI to extract monopoly rents without actually granting the rights that it represents itself as having.” PK was among tech and broadcasting-affiliated groups that filed amicus briefs in support of the agency's appeal (see 1705260049).