As we have previously blogged, the Department of Justice (“DOJ”) rejected proposed modifications to the existing Broadcast Music, Inc. (“BMI”) and American Society of Composers, Authors and Publishers (“ASCAP”) consent decrees. Nor did the DOJ purport to change any of the existing interpretations of the decrees.
As we predicted, BMI and ASCAP are challenging the DOJ action. That is not surprising. What may be is the nature of the challenge, in two respects: (i) BMI and ASCAP announced that they were splitting the challenges, with BMI assigned litigation and ASCAP legislation (it would be interesting to know if one drew the short straw and, if so, who); and (ii) BMI seeks permission to challenge the DOJ’s interpretation of the decrees to require only “full work” or “100%” licensing, and thereby prohibit BMI’s (and ASCAP’s) longtime practice of licensing “fractional” interests in works that are co-owned with other, non-BMI-affiliated rights holders. Fractional licensing is the practice whereby BMI licenses only the shares of a co-owned work that belong to its affiliates, as opposed to “full work licensing” or “100% licensing,” which refers to the practice of granting full rights to publicly perform co-owned works, even if the co-owners are not BMI affiliates. This comports with the longstanding common law principle that an owner of any portion of a copyrighted work may issue a non-exclusive license for the use of the entire work, subject to the duty to account to his or her co-owners. The rights granted by members and affiliates of ASCAP and BMI, respectively, to license non-dramatic public performances of their compositions are non-exclusive. Nevertheless, in BMI’s view, its decree has never required full work licensing and to read it as doing so now would contradict decades of historical practice, undermine the purposes of the decree, and reduce the benefits of the blanket license.
Responding to an 8-page missive in 3 pages, the DOJ disagreed in strong terms. The DOJ explained that it had conducted a two-year review of the BMI and ASCAP antitrust consent decrees that included intensive consultation with BMI and ASCAP. The DOJ concluded that proposed modifications posed considerable disruptions in the music licensing industry, while the concerns BMI and others have described with preserving full-work licensing are overstated. BMI’s argument that the Closing Statement marks a radical departure from existing practice is belied by its own statements, is disproven by its own practices, and, if accepted, would undermine the value of BMI’s licenses
The DOJ explained that as “BMI itself acknowledged more than a year ago, BMI’s consent decree ‘has been construed to compel BMI to grant licenses to perform the ‘composition’ – not merely the partial interest in the composition owned by BMI’s affiliate.’ And BMI’s unilateral request for modification, far from identifying the ‘significant change in circumstances’ required to modify a consent decree, expressly denies that the requested modification ‘is proposed to adapt the decree to changed circumstances in law or fact.'” BMI Letter at 5 n.7.
BMI will likely make its motion and it will likely be denied. No doubt, more to come.