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BMI VERSUS THE CABLE INDUSTRY: OLD ISSUES OR NEW?
 

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Introduction

ASCAP and BMI are the two major organizations licensing musical performance rights in the United States.(1) For reasons discussed later, BMI and not ASCAP faces the greater challenge over license fees, but the resolution of that challenge will effect both organizations. The dispute is over musical performance licensing on cable television.

Today, as in the past, the trip to the courthouse comes only after negotiations have failed. BMI has announced that because the cable industry is not a fledgling one anymore, the time has come for it to pay reasonable fees. BMI has demanded a threefold increase in license fees for cable as well as announced its intention to charge channels and local systems separately.(2) The industry accuses BMI of price fixing and placing cable operators in its licensing noose. In response BMI counsel Edward Chapin, referring to the industry's multi-billion dollar income, commented that it was ironic the cable industry "feels it has no obligation to pay America's songwriters any portion of that revenue." He also suggested that this latest round of antitrust activity is frivolous. The courts have dealt with these issues in the past and concluded attacks on the licensing practices of ASCAP and BMI are without merit.(3) This controversy raises this question: Is it time to change these licensing practices or should those who would challenge those practices simply stop?

Antitrust and Licensing Musical Performances

In 1897 the United States first granted performance rights to authors of non-dramatic musical works.(4) This right is not, as Justice White has said, self-enforcing.(5) An impossible task faces an individual author trying to protect his works from unauthorized use even in a given locale, let alone nationwide. Those rights are better protected collectively. So was the rationale for the formation in 1914 of the American Society of Composers, Authors and Publishers (ASCAP).(6) The stimulus for the formation of Broadcast Music Inc. (BMI), the other major performing rights association in the United States, was slightly different. In 1939 radio broadcasters, unhappy with ASCAP's monopoly, formed their own organization.(7) Today ASCAP licenses more than three million compositions(8) while BMI has 1.5 million songs in its repertory.(9)

In its early years, ASCAP got the exclusive performance rights from its members. In turn the society gave licenses to various institutions such as night clubs, movie houses and radio stations. The license, granted for a given period, permitted the user to perform any work in ASCAP's repertory.(10) ASCAP and BMI still employ the blanket license which distributes royalties to members based the popularity of their works.(11) The advantages to the parties flow not only from the saving of individual transactions costs but from the assurance to all parties that no infringement of any single work in the repertory can occur during the currency of the license.

The blanket license has survived but not without challenge. Over the years the license has come under attack as a violation of the antitrust laws of the United States. As a result of an early challenge, users also have, in theory at least, the choice of negotiating directly with copyright holders. As well ASCAP and BMI must also make available a program license--still a license to use any work in the entire repertory, but one limited to a given program.

In 1979 the Supreme Court determined BMI v. CBS, 441 U.S. 1, 99 S.Ct. 1551, 60 L.Ed.2d 1 holding that the blanket license did not violate the antitrust laws. However, the case, involving both ASCAP and BMI, decided the issue in relation only to network television. The same determination followed for local television in 1984 by the Court of Appeal for the Second Circuit in Buffalo Broadcasting v. ASCAP, 744 F.2d. 917.

From a practical viewpoint, the cable industry's complaints are the same as those formerly made by network and local television broadcasters. At the heart of these grievances is the need for two separate licenses--three counting both ASCAP and BMI--one for each show broadcast and one for the music contained in that production. Most shows on television come from distributors or production companies who license programs without licensing the right to perform the music accompanying those works. No legal impediment exists to prevent the producer from acquiring the performance right from the composer (source licensing) at the same time the producer gets the synchronization rights. The practice does not however prevail for shows produced for television. This is so while music in motion pictures shown in theatres is licensed at source. Moreover those performance rights are only contracted for theatrical performances and are not applicable for later television broadcast. This practice has existed for a long time and for a long time the television industry has viewed the blanket license as an impediment to making source licensing standard for both screen and television.

Arguments against the blanket license invoke three general provisions of American antitrust laws. First, because s. 1 of the Sherman Act(12) prohibits contracts, combinations and conspiracies in restraint of trade, performing rights societies act to illegally fix prices. Second, performing rights societies, because the product they offer is unique, monopolize the market in performance rights contrary to s. 2 of the act. Third, when users must purchase the entire repertory of a performing rights organization to end up using only a small part, such a purchase violates the antitrust prohibition against tied sales.(13)

American Antitrust Law Developments

It is helpful to discuss the basics of American antitrust law. The Sherman Act became law in 1890, creating both criminal penalties and civil remedies for its two basic prohibitions. It prohibited firstly restraints of trade and secondly monopolization:

1) Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with the foreign nations, is declared to be illegal...

2) Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States or with the foreign nations, shall be deemed guilty of a felony...

A brief examination of each of these sections will assist in this discussion.

Section One and Price Fixing

In passing the Sherman Act, Congress took its inspiration from the Common Law which made certain restraints of trade illegal. Not all restraints however were illegal per se. They were subject to what became known as the "rule of reason." Mitchel v. Reynolds, decided in 1711, appears the first case using such an analysis.(14) In Mitchel the defendant sold a bakery and promised not to carry on his trade in the parish for five years. He broke the agreement and the defendant sued on the resulting debt. Chief Justice Parker concluded that while general restraints were all void, particular restraints made for consideration, were not void if, considering the various factors involved in the transaction, the contract was reasonable. The court balanced the interests involved and found the restraint ancillary to a legitimate objective of the agreement. With this contract, the restraint was valid when it promoted the sale of the bakery in the first place and when it included limits on time and territory.

Notwithstanding the provisions of the Common Law, under the Sherman Act at least certain restraints were not judged by the rule of reason. The first major Supreme Court case dealing with the 1890 Act was U.S. v. Trans-Missouri Freight Association, 166 U.S. 290 (1897).(15) Two years later the Court confirmed a decision of then Circuit Justice Taft in U.S. v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898).(16) These two cases, although not using the term at the time, established per se rules against price fixing and divisions of territories by competitors.(17) Particularly after 1937 the Court found applications for the rule in other horizontal restraints. U.S. v. Socony-Vacuum Oil Co 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940), found a per se violation where competitors agreed to buy up surplus gasoline.(18) Later the Supreme Court found certain boycotts as well subject to the per se rule.(19) Some transactions had such inherent anti-competitive qualities, it was unnecessary to evaluate them beyond characterizing their nature. More recently Justice Stevens J. evaluated these rules in this way:

The costs of judging business practices under the rule of reason, however, have been reduced by the recognition of per se rules. Once experience with a particular kind or restrain enables the Court to predict with confidence that the rule of reason will condemn it, it has applied a conclusive presumption that the restraint is unreasonable.(20)

The early Supreme Court cases suggested the act went much further than the Common Law, making all restraints illegal. However, in Standard Oil Co. of New Jersey v. United States 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911), in what was essentially dicta, Chief Justice White firmly established that s. 1 prohibited only unreasonable restraints.(21) Later the Court found even price-fixing in certain situations legal.(22) In Chicago Board of Trade v. U.S. 245 U.S. 231, 38 S.Ct. 242, 62 L.Ed 683 (1918), Justice Brandeis applied the rule of reason in concluding that a rule fixing the price of some commodity transactions between trading hours merely regulated competition and perhaps even promoted it. Then in Appalachian Coals v. U.S., 288 U.S. 344, 53 S.Ct. 471, 77 L.Ed. 825 (1933), the Court held a sales agency organized by a region's 137 coal producers did not violate the Sherman Act. The coal produced only amounted to a small part of the market and the agency achieved efficiencies better enabling those producers to meet other competition. A cooperative enterprise, which posed no monopolistic menace, was not to be condemned merely because it might have some effect on the market. Still after Sacony and at least until the BMI v. CBS case, pure price-fixing was illegal.

Section Two Monopolies

Cases, including Addyston and Standard Oil, discuss the interplay of sections one and two. Simply put while section 1, in part prohibited concerted action which tended to mimic monopolies, section 2 declaring monopolization illegal, relied at least in part on section 1 conduct. Since the beginning of American antitrust law, a clear distinction has never been apparent between the two sections. Justice L. Hand referred to this relationship in U.S. v. Aluminum Co. of America (Alcoa), 148 F.2d 416 (2nd Cir. 1945):

[It] has been accepted law that not all contracts which in fact put an end to existing competition are unlawful. Starting, however, with the authoritative premise that all contracts fixing prices are unconditionally prohibited, the only possible difference between them and a monopoly is that while a monopoly necessarily involves an equal, or even greater, power to fix prices, its mere existence might be thought not to constitute an exercise of that power. That distinction is nevertheless purely formal; it would be valid only so long as the monopoly remained wholly inert; it would disappear as soon as the monopoly began to operate; for, when it did--that is, as soon as it began to sell at all--it must sell at some price and the only price at which it could sell is a price which it itself fixed.(23)

Originally the Common Law did not forbid monopolies. However the Case of Monopolies, 11 Coke 84, 77 Eng.Rep 1260 (King's Bench, 1602), declared illegal Queen Elizabeth's grant of letters patent creating a monopoly to produce, import and sell playing cards. The court found the Queen was first deceived in her grant; and second while monopolies raise prices, they reduce the quality of the goods produced, and impoverish those who buy and produce them. All monopolies were later declared void, although the Crown would continue to allow some.(24) In Standard Oil, the Chief Justice found that monopolies were bad because of three tendencies; to raise prices, limit production and reduce quality. In Alcoa, Hand argues the Sherman Act condemned monopolies for still other reasons:

[Congress] did not condone 'good trusts' and condemn 'bad' ones; it forbad all. Moreover, in so doing it was not necessarily actuated by economic motives alone. It is possible, because of its indirect social or moral effect, to prefer a system of small producers, each dependent for his success upon his own skill and character, to one in which the great mass of those engaged must accept the direction of a few.(25)

Congress, however, did not forbid monopolies, only acts of monopolization. More recently Chief Justice Kaufman in the Second Circuit explained the comments of Justice Hand this way:

The conundrum was indicated in characteristically striking prose by Judge Hand who was unable to resolve it. Having stated that Congress 'did not condone "good trusts" and condemn "bad ones"...he declared with equal force, 'The successful competitor, having been urged to compete, must not be turned upon when he wins.' Hand, therefore, told us that it would be inherently unfair to condemn success when the Sherman Act itself mandates competition.(26)

Thus since the enactment of section 2, Kaufman says:

[W]hile proclaiming vigorously that monopoly power is the evil at which s. 2 is aimed, courts have declined to take what would have appeared to be the next logical step--declaring monopolies unlawful per se unless specifically authorized by law.(27)

Early Litigation

Writing in 1964, historian Richard Hofstadter divided the history of antitrust into three periods.(28) 1890 to 1914 marks the progressive period, starting with the Sherman Act and culminating in the passage of the Clayton Act and the creation of the Federal Trade Commission. Next followed the period to 1937 characterized as the era of neglect, succeeded by a period of revival. This revival period, now past, significantly shaped the relationships between ASCAP and later BMI, its members and their licensees.

As early as 1926, ASCAP was the subject of a Justice Department investigation.(29) The Justice Department was not alone in viewing ASCAP's activities as suspect. The National Association of Broadcasters (NAB) lobbied many states asking for regulation of ASCAP's business.(30)

Certain states responded by actually passing legislation.(31) ASCAP challenged the constitutional authority of these states to do this. Later the Supreme Court ruled they could. Justice Black pronounced the decision of the Court in Buck v. Gallagher 313 U.S. 387, 61 S.Ct. 962, 85 L.Ed. 1416 (1941) finding nothing in the text of the Copyright Act which made the right to combine an essential corollary of the performance right the act provided:

[U]nless constitutionally valid federal legislation has granted to individual copyright owners the right to combine, the state's power validly to prohibit the proscribed combinations cannot be held non-existent merely because such individuals can preserve their property rights better in combination than they can as individuals. We find nothing in the copyright laws which purports to grant to copyright owners the privilege of combining in violation of otherwise valid state or federal laws. We have, in fact, determined to the contrary with relation to other copyright privileges.(32)

Two years earlier this same litigation reached the Court after ASCAP got a preliminary injunction preventing enforcement of the Florida law.(33) Then the Court refused to hear the merits of the case, but Justice Black in his dissenting opinion made some harsh comments about ASCAP's practices:

Not only does this combination fix prices through a self-perpetuating board of twenty-four directors, but its power over the business of musical rendition is so great that it can refuse to sell rights to single compositions, and can, and does require purchasers to take, at a monopolistically fixed annual fee, the entire repertory of all numbers controlled by the combination. And these fees are not the same for like purchasers even in the same locality. Evidence shows that competing radio stations in the same city, operating on the same power and serving the same audience, are charged widely variant fees for identical performance rights, not because of competition, but by the exercise of monopoly power...We have here a price fixing combination that actually wields the power of life and death over every business in Florida, and elsewhere...(34)

In 1941 the Justice Department brought suit in the Southern District of New York alleging Sherman Act violations by ASCAP.(35) This proceeding concluded with a consent decree in which ASCAP agreed to change some of its practices. BMI also entered into a similar agreement with the Department that same year in the Eastern District of Wisconsin.(36) Most significant were the following aspects of these decrees:

1) ASCAP and BMI were to offer licenses on a program basis, as an alternative to the blanket license.
 
 

2) BMI and ASCAP were also not to acquire exclusive performing rights whereby the owner received a percentage of the income of the organization.
 
 

3) ASCAP and BMI were not to require local radio affiliates to obtain a separate program licenses for programs originating with their networks.
 
 

4) No discrimination was to exist between users similarly situated, nor could ASCAP and BMI refuse to license any work upon request.
 
 

While the decrees certainly made some efforts at reigning in what Justice Black had perceived as the monopolistic powers of these organizations, they probably did not go far enough, certainly not enough to have withstood the scrutiny of the 40's Supreme Court. In Alden-Rochelle, Inc. v. ASCAP, 80 F.Supp. 888 (1948) a group of motion picture theater owners brought suit in the Southern District of New York alleging violations of the Sherman Act. The proceeding did not go beyond the District Court level, but whatever the correctness of its outcome, the decision has endured.(37)

When ASCAP tried raising license fees to motion picture exhibitors in August 1947 by as much as 200% to 1500%, the theater owners responded by bringing a civil antitrust suit.(38) ASCAP's relationship with motion picture exhibitors began long before when Hollywood produced silent movies. During that period musical accompaniment to films came from piano players and orchestras hired by local theaters. ASCAP and organizations of theater operators negotiated blanket licenses based on theater capacity.(39) When studios put sound into their motion pictures, non-commissioned musical works could not be copied onto soundtracks without clearing those rights (synchronization rights) with the copyright holder. When negotiating those rights with parties who were ASCAP members, the producer only got the synchronization right and not the performance right. Theater owners still had to exhibit such films under ASCAP license.(40) The studios were content with this arrangement because, through subsidiary ASCAP publishers, they also profited from the direct licensing ASCAP provided.(41) Even when a composition was commissioned for a motion picture, the composer nonetheless often kept the performance right. Harry Fox started an agency in 1937 for negotiating synchronization rights between publishers and motion picture producers. Such transactions routinely involved lump sum payments. When negotiations involved non-ASCAP members, Fox required the copyright owner to grant the performance rights as well.(42)

However ASCAP members followed a different track and did not grant such rights because ASCAP prohibited them from doing so.(43)
 
 

Judge Leibell concluded all these practices violated the antitrust laws:

Although each member of ASCAP is granted by the copyright law a monopoly in the copyrighted work, it is unlawful for the owners of a number of copyrighted works to combine their copyrights by agreement or arrangement, even if it is for the purpose of better preserving their rights...The result of such a combination "is to add to the monopoly of the copyright in violation of the principle of the patent cases involving tying clauses." U.S. v. Paramount Pictures, [334 U.S. 131] 68 S.Ct. 915, 929.(44)

He found ASCAP was a monopoly, that while ASCAP had formerly been moderate in its pricing demands, this did "not detract from the fact that as a monopoly ASCAP had the power to increase those prices."(45) In deciding this point the court quoted from American Tobacco Co. v. U.S., 328 U.S. 781 at 811, 66 S.Ct 1125, 90 L.Ed. 1575 (1946):

The authorities support the view that the material consideration in determining whether a monopoly exists is not that prices are raised and that competition is actually excluded but the power exists to raise the prices to exclude competition when it is desired to do so.(46)

According to Judge Leibell, not only did ASCAP act illegally as a monopoly but acted illegally when it combined with motion picture producers:

The arrangement by which the producers consent that there be specifically reserved to ASCAP the right to license programming the performing rights is supplemented by a provision in the contract between the distributor and of the motion pictures and the exhibitors which limits the public exhibition of the film of profit to theaters which have an ASCAP license.(47)

The decision upheld the theater owners claims. The judgment, among other provisions, enjoined ASCAP members from licensing the performance right in a synchronized composition to anyone other than the motion picture producer.(48)

Negotiations between the Justice Department and ASCAP followed the decision. They led to the 1950 amendment of the 1941 decree.(49) The Department objectives in negotiating the amended decree included source licensing for television as well as movie theaters. However ASCAP resisted, succeeding in excluding any similar provision for television, on the basis that the industry was in its infancy and involved mostly live programming anyway.(50) In the decree, ASCAP was:

1) Prohibited from licensing motion picture exhibition;

2) Required to obtain licenses from its members on a non-exclusive basis and prohibited from interfering to prevent members from granting their own licenses;

3) Required to issue licenses upon demand to broadcasters subject to the court (District Court for the Southern District of New York), retaining jurisdiction in setting fees;

4) Required to change restrictions on entry and departure of members.

These proceedings did not however involve BMI. In 1966 BMI settled another Justice Department claim.(51) That case concerned other issues, but except in one significant respect, BMI became bound by essentially the same code of business conduct.(52) However where ASCAP's decree provided a "rate court" for broadcasters, the 1966 decree did not. Arbitration clauses became mandatory for any dispute in any BMI agreement. Obviously, this would not avail a party only negotiating a contract with BMI.

ASCAP and the All Television Committee

At one point NAB negotiated with ASCAP and BMI for all television broadcasters. However in 1949 the All-Industry Television Station Music License (All-Industry Committee) began representing local stations in negotiations.(53)
 
 

Television broadcasters have always required blanket coverage but have never been happy with the blanket license. On the one hand the industry has wanted the freedom to select music spontaneously for programs broadcast live. However for filmed programs blanket access is only necessary because of the absence of source licensing. Initially television received gratuitous, experimental licensing from ASCAP and BMI. When ASCAP and BMI began demanding licensing on other than a nominal basis, the television industry took notice. It recognized that a license which either calculated fees on a per use basis or which excluded programs covered by other licensing, would give broadcasters bargaining leverage. They could turn to the producers and demand total broadcast licenses. Those companies would then find it necessary to get both performance and synchronization rights from composers.

The pursuit of source licensing led the All Television Committee to come up with a plan. Under the 1950 decree a broadcaster could get a license covering "some or all" of the ASCAP repertory, simply upon written application. ASCAP was then required to advise the applicant of the fee it thought reasonable. If a dispute arose, the original court would hear the case. Some stations then submitted applications for program licenses which excluded not only network programs but other independent productions. ASCAP refused the request. The trial judge dismissed the application (Shenandoah Valley Broadcasting) and the appeal court eventually affirmed the dismissal.(54)

The All-Television Committee conceded that the decree did not bind ASCAP to grant every kind of license "which the ingenuity or whim of hundreds of television owners could devise."(55) Thus after reviewing the other provisions of the agreement, the court concluded ASCAP did not have to grant this type of license.

The Networks Versus ASCAP and BMI

In 1970 the NBC network tried another plan under the consent decree and submitted an application to license 2,217 specific compositions in the ASCAP repertory. When ASCAP rejected the application, NBC brought the matter before Judge Ryan in U.S. v. ASCAP (Application of National Broadcasting Co.), 1971 Trade Cases Paragraph 73,491 (S.D.N.Y.). ASCAP countered that 1) the decree actually barred a per use license and 2) the proposed license itself would constitute an antitrust violation because it would pit the might of NBC and its 200 affiliates against unprotected individual composers. Without considering this latter argument, the court rejected NBC's petition, noting in passing twenty years of network acquiescence in accepting the full repertory license. Such acceptance weighed in favor of the court's interpretation of the decree.

Following these two back-door attempts at source licensing, a direct challenge came from CBS which sued ASCAP and BMI in CBS v. ASCAP, 400 F.Supp. 737 (S.D.N.Y. 1975). This litigation lasted a total of eleven years. It began when BMI complained to CBS, one of the original founders of BMI,(56) that its proposal for a new license starting January 1, 1970 would not maintain the traditional income parity it had with ASCAP.(57) After BMI refused to renew its license, CBS sued both BMI and ASCAP for antitrust violations including, price-fixing, illegal tie-in, concerted refusal to deal, monopolization and copyright misuse.(58) CBS asked for an injunction forcing both organizations to offer licensing on a per use basis or alternatively to prohibit the use of the blanket license.(59) Judge Lasker reduced these claims to this:

The essence of CBS' claim is that ASCAP and BMI are illegal combinations whose purpose and effect is to exact royalties from CBS for music it does not wish to license. The validity of the claim turns on whether CBS is in fact compelled to take a blanket license from the licensing organizations in order to secure the performance rights it needs.(60)

He then found on the evidence that CBS could reasonably acquire necessary licenses from music publishers. On the monopolization claim Judge Lasker simply accepted the relevant market as the market for performance rights, not the market for blanket licenses.(61) He found that the degree of interchangeability was exactly the same for both products and thus no monopoly existed.(62) The judge did not however consider any difference in the price of the products. The monopoly claim, dismissed at trial was never fully considered on appeal.

In BMI vs. CBS, 562 F.2d 130 (1977), the Second Circuit Court of Appeals allowed CBS' appeal and remanded the case for determination. Because of the findings at trial, the appeal court limited its decision to the issue of price-fixing. The trial court had already dismissed the claims of tied sales and boycott as no evidence suggested any coercion which would support them. However since price-fixing did not require coercion, that issue remained for further review.(63)

On this issue the court went down an avenue formerly not traveled by the trial court. CBS conceded--more correctly argued--that the rule against price-fixing was subject to a "Market-Function" exception.(64) That exception, however, had found no judicial recognition. To support such an exception, CBS unearthed the Solicitor-General's amicus brief in K-91, Inc. v. Gershwin Publishing Corp., 372 F.2d 1 (9th Cir. 1967), cert. denied, 389 U.S. 1045, 88 S.Ct. 761, 19 L.Ed.2d 838 (1968). In that brief, on a petition to the Supreme Court, the government recommended recognition of the defence.(65) That case involved an infringement action in which the defendant, a local radio broadcaster, claimed antitrust violations in its defense. Where in that case, the court found as a practical alternative, the parties had no choice but to use the blanket license, here the trial court found CBS did have a choice. It followed that ASCAP and BMI had no such defense in this instance!(66)

As for the reasonableness of the fees when recourse to the court under the decree was available, the appeal court made the following observations:

...the determination of price by a judge can hardly be the equivalent of a price determined by a competitive market. For a price fixed by a judge, no matter what his personal competence, is not a true reflection of competitive market forces. The price, no matter how reasonable, if determined on the imprimatur of a court, remains the product of non-competitive forces.(67) We also note that the costs of litigating the issue of what is a "reasonable" fee in the Southern District of New York would discourage some users from taking advantage of this provision in the decree. In fact, in the 27-year existence of the provision, the consent decree judge has never had to fix a "reasonable" fee for an ASCAP blanket license. Finally, we note that this defense would not be available to BMI...(68)

The court then concluded that ASCAP and BMI should now provide licenses on a per use basis. This would thus provide its members with an inclination to compete.(69) They remanded the case back to the District Court for that purpose.

The Supreme Court decision in BMI vs. CBS has had a significant impact on antitrust law. The court unanimously over-ruled the decision of the appeal court in not applying the rule of reason. Only Justice Stevens dissented, finding the blanket license anti-competitive even on that standard. Justice White, for the majority, accepted the trial court's reasoning which found no impediment to the network obtaining its own licensing. The dissent of Justice Stevens however characterized the restraint this way:

It is the refusal to license anything less than the entire repertoire--rather than the decision to offer blanket licenses themselves--that raises the serious antitrust questions in this case.(70)

This amounted to an abuse of monopoly power and thus constituted an illegal restraint of trade beyond the privileges individual copyright holders enjoyed.

On remand the Second Circuit confirmed judgment of the district court. See CBS v. ASCAP, 620 F.2d. 930 (1980), ("CBS remand").

BMI, ASCAP and Local Television

Buffalo Broadcasting v. ASCAP, 744 F.2d. 917, (2nd. Cir. 1984), cert. denied, 469 U.S. 1211, 105 S.Ct. 1181, 84 L.Ed.2d 329 (1985) concerned the blanket license and local television. Following the dismissal of the Shenandoah proceeding, the All-Television Committee concentrated its negotiating efforts on reducing the rate of the blanket license.(71) In 1969 ASCAP agreed to reduce that fee to 2% of 1964-1965 revenues plus 1% of the incremental increase above that rate.(72) The program license remained at 9%. In 1978, inspired by the CBS decision in the Second Circuit, five local stations, representing themselves and others, sued ASCAP and BMI. The 1981 trial resulted in an injunction against ASCAP and BMI prohibiting 1) the use of the blanket license for syndicated programs; and 2) the licensing of performance rights at all in those programs.(73)

In reversing the trial decision, Circuit Judge Jon O. Newman recognized that the result in the CBS case did not foreclose a new inquiry. Different factors might affect the same issues as they related to local television.(74) Nonetheless, he found direct licensing by local stations was viable.(75) The appeal court also concluded the program license gave local television stations another alternative. That the program license was priced significantly higher than the blanket license did not exclude it as a reasonable option in the absence of evidence suggesting its costs was considerably greater than its actual value.(76) The opinion of the court thus found no showing the blanket license violated any antitrust laws. In a concurring opinion, Judge Winter went further, suggesting a per se rule of legality for blanket licensing in any context:

The result of this scrutiny [in this case as in others] has been to demonstrate that so long as composers or producers have no horizontal agreement among themselves to refrain from source or direct licensing and there is no other artificial barrier, such as a statute, to their use, a non-exclusive blanket license cannot restrain competition.(77)

Proposed Legislation

In the aftermath of Buffalo Broadcasting, Frederick C. Boucher, a United States Representative from Virginia, introduced a bill in Congress which would fundamentally affect the licensing of syndicated television programs.(78) This legislation would have required composers to sell both synchronization rights and performance rights and would have required program suppliers to license entire works including the performance rights in the synchronized music.(79) Similarly it would have given composers and authors the right to bargain collectively. This concession was necessary: Proponents of source licensing argued that artistic contributions of composers were no greater than those of screenwriters and directors. Screenwriters and directors could however bargain collectively while songwriters and authors could not.(80) If composers could no longer have the right to receive royalties through ASCAP and BMI for synchronized performances, at least like others in the industry, they could negotiate for the right to receive residuals.

Boucher, in a law review article in 1987, makes a convincing argument that television does not have the benefit of source licensing only because of an historical accident leading to the 1950 decree.(81) However, his legislative proposal contained some inherent flaws. For one, the bill contained retrospective provisions which particularly concerned the Registrar of Copyrights.(82) Another problem arose because the proposed legislation conflicted with the principle of copyright divisibility. Finally, the television industry could hardly claim they lacked the bargaining power that made this legislation necessary. All this probably ensured the bill's defeat. As well ASCAP, BMI, the movie industry and associated concerns successfully made their opposition known to Congress.(83)

Recent Litigation

For the first time in the history of the ASCAP decree, the Court has settled a fee dispute. See ASCAP v. Showtime/The Movie Channel Inc., 912 F.2d 563 (2nd Cir. 1990), Judge Jon O. Newman's opinion approving a U.S. Magistrate's ruling on a license fee. In that case ASCAP argued that $.25 per subscriber was a fair fee for Showtime to pay. ASCAP justified the rate as comparable with rates negotiated with the Disney Channel and Home Box Office Inc. (HBO). In reducing that rate to $.15, the rate court determined that the Disney and HBO negotiations were not competitively conducted because of ASCAP's monopoly power. Also noted was Disney's subsidiary music publishing interests for which it receives ASCAP distributions.

Meanwhile BMI has recently found itself in court with several cable networks. Last September, BMI tried to get an injunction against the HBO preventing the cable channel from broadcasting some 80 movies containing BMI music.(84) U.S. District Judge Sprizzo refused the injunction while HBO continued to pay an interim fee.(85) In the previous month, proceedings involving the Lifetime Channel, as defendants and counterclaimants, survived motions for summary judgment in Broadcast Music v. Hearst/ABC Viacom Ent. Services, 766 F.Supp. 320 (S.D.N.Y. 1990). Finally in March, 1991 BMI went to trial in U.S. District Court in Washington, D.C.(86) The proceedings before Judge Joyce Hens Green involve the National Cable Television Association (NCTA) as plaintiffs along with the Community Antennae Television Association Inc.(87) and the Disney Channel.(88)
 
 

New Issues or Old?

These cases appear to involve all the same legal and factual issues which have gone before. In the ABC Viacom case however Judge Keenan is quite ready to resolve the issues anew as they relate to the cable industry:

Here an array of factual issues await the crystallizing effect of discovery, including the history of music licensing to cable program services, BMI's reasons for insisting upon the blanket license for cable program services, the presence of disincentives to individual copyright proprietors to market their compositions separately, the concomitant absence of alternatives available to program services and the effect of the blanket license on the availability and prices of music performing rights for cable program services.(89)

Are these not the same questions which arose before? While the existence of alternatives to the blanket license maybe a factual issue, it is hard to ignore that the appeal court in Buffalo Broadcasting had no difficulty in overturning such a finding. Is cable that much different in this respect from free television? Moreover, it is hard to conceive how these issues have anything to do with antitrust prohibitions against conspiracies and combinations. What has BMI's motivation for insisting on the continued use of the blanket license have to do with conspiracies and combinations? How are disincentives to individual composers germane to concerted conduct? Ironically this passage comes in the opinion after the Judge cites Business Elecs. Corp. v. Sharp Elecs. Corp. 485 U.S. 717, 723, 108 S.Ct. 1515, 99 L.Ed.2d 808 (1988), a decision requiring clear evidence of concerted action in antitrust cases, a decision re-affirming the direction of the Court in antitrust law far different from that espoused by Justices Black and Douglas in what Hofstadter called the period of revival.

Judge Keenan's opinion found approval on May 8, 1991 in Coleman v. ESPN, Inc. ___ F.Supp.___ , 1991 WL 76534, (S.D.N.Y. May 8, 1991). Some ASCAP composers and publishers sued ESPN, the major sports cable channel, for infringement of some twenty compositions. ESPN holds no license with ASCAP because ESPN does not feel this is necessary when it either licenses musical uses directly or insists upon source licensing of independently produced programs. ASCAP had proposed licensing ESPN and suggested participating in the Showtime rate court proceedings, but ESPN declined the offer. The infringed compositions were musical works performed by audiences and participants at certain sporting events. ASCAP brought an application for summary judgment to strike the affirmative defenses of fair use, copyright misuse, estoppel and unclean hands. Judge Patterson allowed the first two defenses to stand. As for issue estoppel, he only permitted the defense as to two of the songs allegedly infringed. While the music ESPN characterized as only "background" would otherwise constitute infringement, Judge Patterson permitted the case to go to trial for later factual consideration of the remaining defenses, including, as an aspect of the copyright misuse claim, the determination of whether direct licensing was a reasonably alternative for ESPN.

Three New Defenses Considered

If no new factual grounds exist for these challenges, are there any new legal arguments to consider? Well both ABC Viacom and more recently Coleman v. ESPN Inc., repeat the charges for sections 1 and 2 of the Sherman Act. They also add copyright misuse, unclean hands and equitable estoppel. While Sherman Act challenges have the potential to bring about the direct demise of the blanket license, the others are matters of defense. However, if cable television operators become immune from infringement claims because of these defenses, the effect is the same.

The unclean hands defense only withstood attack in ABC Viacom on very thin grounds. Quoting from Playboy Enter., Inc. v. Chuckleberry Publishing. 486 F.Supp. 414, 435 (S.D.N.Y. 1980), the court accepted that the defense applied where "the public interest in the punishing the plaintiff outweighs the need to prevent the defendant's tortious conduct."(90) Though the defense survived summary judgment, a

court will not likely find BMI guilty of unclean hands simply on the basis of the exercise of monopoly power. So too is the case with the equitable estoppel doctrine. ABC Viacom cited Tempo Music Inc. v. Myers, 407 F.2d 503 (4th Cir. 1969) when before an infringement claim, the defendant did not apply for an ASCAP license on account of ASCAP's refusal to supply the defendant supper club with a list of its entire repertory.(91) ASCAP was therefore in part responsible for the infringement which followed. While Judge Keenan refused to conclude that BMI's fee demands could not likewise contribute to Lifetime's infringement, doubtless such a claim could not survive merely because it involves the exercise of monopoly power.(92)

Similarly, the copyright misuse defense also suggests nothing which will secure the demise of the blanket license. The defense, if cognizable, finds justification in the misuse doctrine originally found in patent law. Morton Salt Co. v. G. S. Suppiger, 314 U.S. 488, 62 S.Ct. 402, 86 L.Ed. 363 (1942) firmly established the patent misuse defense. Since then, the question of a similar doctrine in copyright law remains open. Most recently however, copyright misuse received approval in Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (1990), where the court held that anticompetitive clauses in a computer software license could sustain such a defense. While cases such as Morton Salt and Lasercomb suggest the misuse doctrine does not require proof of antitrust violations, the connection of the doctrine to that body of law is clear. More particularly it relates to those prohibitions having to do with tying arrangements. In ABC Viacom, Lifetime asserts copyright misuse as an aspect of BMI using its "monopoly power to force cable program services to purchase the blanket license at exorbitant prices."(93) Aside from the issue of whether those prices are unreasonable or not, this claim, like the defenses of unclean hands and estoppel, is simply an attack on the use of BMI's monopoly power. It is unlike the tying arrangement found in Lasercomb, and perhaps therefore is entirely outside the reach of the doctrine.

Even assuming that the defenses of equitable estoppel and copyright misuse are cognizable in this context, they again largely rest on the necessity of finding that it is unreasonable for the licensee to acquire direct licensing. Of course, of the three, perhaps the misuse doctrine stands on the strongest footing. However the defense was suggested and then rejected at trial in the CBS case. So the cable industry challenges are in essence the same as those raised before.

Monopolies and BMI v. CBS Revisited

The three defenses, being attacks on monopoly power, ought to prompt a review of that monopoly power under the Sherman Act. For this, a reconsideration of BMI v. CBS may be in order. Perhaps that case is right but for reasons different than those stated by the majority. The analysis the Court used was more applicable to issues under s. 2 rather than s. 1. As a s. 1 case, the Court could have only concluded that price-fixing occurred and that it was per se illegal. However under s. 2, such a rule would not apply. The inquiry should have focused on whether there was s. 2 monopolization rather than a per se violation under s. 1. Cases dealing strictly with monopolies or mergers under the Clayton Act have not purported to use a rule of reason analysis. Instead inquiries in those cases concern market definition, market power and monopolization, in that order.(94) As to market definition, Justice White characterized the product, and therefore the market, correctly in this passage from CBS:

The blanket license is composed of the individual compositions plus the aggregating service. Here the whole is truly greater than the sum of its parts; it is, to some extent, a different product... ASCAP is not really a joint sales agency offering the individual goods of many sellers but is a separate seller offering its blanket license, of which the individual compositions are raw material. ASCAP, in short, made a market in which individual composers are inherently unable to fully effectively compete.(95)

The relevant market may or may not be the product in issue. For instance in the Cellophane Case(96), the Supreme Court found the relevant market to include all flexible packaging material, not just cellophane as the Government contended. Having concluded other packaging could substitute for cellophane, the court found no monopoly and then did not need to go further. The Court made its decision on the cross-elasticity of differing products by comparing various factors such as adaptability, customer preference and price.

The trial court in CBS did not spend any time considering the costs of direct licensing. Instead the judge's analysis is something comparable to suggesting an electric utility has no monopoly power because its customers can always buy electric generators. The trial court in CBS found it was feasible for CBS to obtain its own licenses, that if Harry Fox could do it for synchronization rights, somebody else or CBS itself could negotiate performance licenses. However, at what cost, the court did not inquire. The very reasoning of each decision in the CBS case assumes however that the cost of direct licensing are more than the blanket license itself. The history of the blanket license suggests the same. Television and radio made no serious attempts at direct licensing themselves, no doubt because it was plain that the costs were prohibitive. The relevant market is simply the market for the blanket license. Justice White said as much in his decision. Therefore the blanket license involves a monopoly and the issue this raises is foremost a s. 2 matter, not one of price-fixing under s. 1.

Monopolization

Monopoly power does not equal monopolization. A monopoly is still obtainable by sheer efficiency and skill. Such an achievement is not illegal. Still, conduct directed towards excluding competition does come under the s. 2 prohibition. Monopolization involves the specific intent to exclude from the market competition in the product.(97) The decision in the Alcoa case went as far as to suggest that conduct, legal by itself might constitute monopolization. However, current judicial trends suggest that monopolization, requires conduct which is illegal under s. 1 of the Sherman Act or some other antitrust provision. A company which has achieved market dominance is not under any obligation to assist a competitor on that account.(98)

One cannot fit the power of ASCAP and BMI under either theory of monopoly power, not the efficiency model and not the monopolization model. The monopoly power of BMI and ASCAP rests on the monopoly power derived simply from the Copyright Act. So Justice White found the line in commerce in question would not exist but for the act.(99) That ASCAP and BMI can demand more than the market might otherwise bear does not constitute monopolization, only the exercise of monopoly power. This analogy is apt: If a pharmaceutical firm comes up with a life-saving product and demands an outrageous price for the drug or withholds its distribution, that is an exercise of monopoly power, but the company does not thereby monopolize.(100) ASCAP and BMI have the same kind of monopoly power.

Having found monopoly power the next question follows: Does the blanket license cause monopolization? A performing rights society has no right to prevent members from licensing their works separately. Further the findings at the CBS trial were that composers would not refuse to license their works because of their memberships in those organizations. This is where that issue discussed in CBS is applicable to monopolization. Monopolization does not however arise from any aspect of individual licensing of works. The only possible claim that ASCAP and BMI monopolize anything, arises from their steadfast refusal to permit a different system of calculating fees. Their motive for this refusal has not been secret. It is to secure for all their members freedom from the pressure of having to provide source licensing. Can this amount to monopolization? The answer is no because it has nothing to do with competition between composers themselves. As well the cable industry, organized in various trade groups as bargaining units, awaits the demise of the blanket license, following which they would exercise their own market power to force source licensing on production companies. Surely if the television industry may press for the demise of the blanket license, ASCAP and BMI may seek to preserve it.

Competition remains secure between authors. Critics argue that no competitive factors are apparent in the process of selecting music under the blanket license. If it costs the same to choose one piece of music over another, no competition exists between the two. However, competition is only absent in price. This has little consequence to the purchaser for when the user can get all he wants for the same cost, the purchaser has less to complain about than the seller. Since composers receive payments on the basis of popularity, competition clearly survives.(101)

Conclusions

Frederick Boucher contends the present state of affairs is an accident of history. He is right of course when he argues that a broadcast of a motion picture has essentially the same licensing characteristics as a theatrical presentation. Arguably however, if there exists an anachronism, it is that movies shown in theaters do not require separate licenses. Today European theater owners, like European broadcasters must still directly license musical performances. Alden-Rochelle, decided in an era of active antitrust judicial enforcement, perhaps went too far, even its own time, in requiring ASCAP members to give both synchronization and theater performance rights. The ruling only came and is only correct, if at all, because it provided redress for antitrust violations.

As for the current litigation, given prevailing trends in antitrust laws, BMI will probably succeed in protecting its right to offer only blanket licenses. Will this allow BMI to charge what it wants? Alan Hartnick, counsel for the Arts and Entertainment Channel in its suit against BMI, suggested a back door approach to a rate court where the judge sets a reasonable license fee as in Abend v. MCA Inc., 863 F.2d 1465, 1479 (9th Cir. 1988) affirmed sub nom. Abend v. Stewart, 110 S.Ct. 1750 (1990).

What about BMI's demand for licensing both local operators and national channels? While two broadcasts certainly means two public performances and the need for separate licenses, BMI's consent decree must govern and therefore prohibit BMI from double charging. However, the cable industry involves a situation different from free television. The original consent decree contemplated networks paying affiliates, but the reverse applies to the cable industry. When both cable channel and local operator have independent revenue sources, the industry may have difficulty resisting the claim to license both separately. Whatever the outcome of these aspects of the cases, the blanket license will again likely survive another antitrust challenge.

A need does exist nonetheless for a more satisfactory solution. ASCAP and BMI are monopolies which exist not only because of the copyright law, but as a matter of economics. That necessity however should not give either the power to overreach. It calls for some controls perhaps not unlike those which exist over utility companies. For ASCAP the "rate court" of the Southern District of New York may appear to satisfy that requirement. Unfortunately that option is not available to BMI. BMI has proposed such a mechanism to the Justice Department which has not chosen to respond.(102)

Will the rate court route lead to needless expense and unsatisfactory results for all parties? Is the simple solution is to give the authority to set rates to an agency such as the Copyright Royalty Tribunal which has or will develop the expertise in the area?(103) Given the nature of administrative proceedings involving agencies which set tariffs, the costs of such adjudications are not inconsiderable. It is unlikely therefore that any one type of agency, court or administrative tribunal, is more economical than the other. Nonetheless, what may appear incongruous about the "rate court" of New York, aside from its locale, is that it is doing what traditionally is done by an administrative agency. The best agency of course will be the one with expertise in the field. Unfortunately the parties to the current dispute are busy fighting over the existence of the blanket license and not about who can best arbitrate their respective grievances.

1. The third organization is SESAC, Inc. being a privately held corporation with a considerably smaller repertory: See Bernard Korman and I. Fred Koenigsberg, "Performing Rights in Music and Performing Rights Societies," 33 Journal, Copyright Society of the U.S.A. 332, 351 (1986).

2. Washington Post, March 27, 1991, C1. It appears that the basic cable networks such as ESPN, USA and TNT are gaining dramatically in both per-subscriber and advertising revenues. Meanwhile this has caused tension with multiple-system cable operators, who accuse the networks of gouging them on per-subscriber charges: See Variety, May 13, 1991, 47.

3. Communications Daily, February 1, 1990, 1.

4. Act of Jan 6, 1897, ch. 4, 29 Stat. 481. Formerly the performance had to be for profit. Today a public performance whether for profit or otherwise qualifies: 17 U.S.C. s. 106(4).

5. See decision of White, J. in BMI v. CBS, 441 U.S. 1, 4, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979).

6. The first such organization existed in France in 1851. Other European societies followed. See Korman, op cit., 350-351.

7. Marcus Cohn, "Music, Radio Broadcasters and the Sherman Act," 29 Georgetown Law Journal 407, 419 (1941).

8. See 1984 reference for ASCAP numbers in Buffalo Broadcasting v. ASCAP, 744 F.2d. 917, 920 (2nd Cir.).

9. See Broadcast Music v. Hearst/ABC Viacom, 766 F.Supp. 320 (S.D.N.Y. 1990).

10. Only non-dramatic performances are covered by the license.

11. Estimates suggest over one billion licensed performances of ASCAP music occur every year. See Jay Fujitani, "Controlling the Market Power of Performing Rights Societies," 72 California Law Review 103, 107 (1984).

12. Act of July 2, 1890, c. 647, 26 Stat. 209; 15 U.S.C. ss. 1-7.

13. Section 3 of the Clayton Act prohibits specific kinds of tying arrangements. See an Act of October 14, 1914, c. 323, 38 Stat 730; 15 U.S.C. 12-27. Tying arrangements have been found to violate the s. 1 of the Sherman Act. See Jefferson Parish Hospital District No. 2 v Hyde, 466 U.S. 2, 104 S.Ct. 1551, 80 L.Ed.2d 2 (1984).

14. P.Wns, 181, 24 Eng.Rep. 347 (King's Bench). See earlier case of Anonymous, "Dyer's Case", Y.B., 2 Hen. V. Vol. 5, pl. 26 (1415), which held void defendant's promise not to pursue his craft within a town for a half year.

15. The majority (5-4) agreed that an association which set freight rates for itself violated the Sherman Act and should be dissolved. The association defended its conduct on the basis of the rule of reason, but the Court refused to read into the statute a term which only forbade "unreasonable" restraints. A contract might be valid at Common Law but still be a restraint.

16. Modified and affirmed per Peckham, J., 175 U.S. 211, 20 S.Ct. 96, 44 L.Ed. 136 (1899). Six defendants justified an agreement dividing territories, as necessary to avoid ruinous competition.

17. These cases were tempered by other decisions of the Court which recognized that only direct restrains on interstate commerce were affected by the Act. See U.S. v. Joint Traffic Association, 171 U.S. 505, 19 S.Ct. 25, 43 L.Ed. 259 (1898); Hopkins v. U.S., 171 U.S. 571, 19 S.Ct. 40, 43 L.Ed. 290 (1898); Anderson v. U.S. 171 U.S. 604, 19 S.Ct. 50, 43 L.Ed. 300 (1898).

18. The decision involved major oil producers who agreed to each pair themselves with independent producers to buy up surplus gasoline as the need arose.

19. For instance in Fashion Originators' Guild of America v. FTC, 312 U.S. 457, 61 S.Ct. 703, 85 L.Ed. 949 (1941) Justice Black found violations of the antitrust laws when an association of dress makers refused to sell to retailers when those retailers bought from "style pirates." Again Justice Black in Associated Press v. U.S., 326 U.S. 1, 65 S.Ct. 1416, 89 L.Ed. 2013 (1945) found that an association of newspapers could not prevent non-members from purchasing news from individual members. In both case, the Court would not accept arguments justifying such conduct where the effect of the arrangements was to ultimately discourage competition.

20. Arizona v. Maricopa County Medical Society, 457 U.S. 332, 102 S.Ct. 2466, 73 L.Ed.2d 48 (1982).

21. Only Harlan J. dissented. In his opinion he accused the majority of judicial legislation: 221 U.S. 1, 100. Nonetheless, many felt it was time to return to the rule of reason approach. For instance, President Taft, author of Addyston Pipe, essentially a per se case, was pleased with the decision re-establishing the rule of reason: See William Letwin, Law and Economic Policy in America (1965) at 266. Standard Oil has been criticized as a model of what a judicial opinion ought not to be: Letwin, supra, 256-265; Richard Posner, Law and Economics of Antitrust, 27 (1976). Nevertheless the case endures in importance.

22. Partly because the decision in Standard Oil failed to unequivocally condemn the trusts and their tactics, Congress in 1914 passed the Clayton Act: An Act of October 14, 1914, c. 323, 38 Stat 730; 15 U.S.C. 12-27. See Posner, op cit., 213. It took from the general provisions of the Sherman Act and made certain specific conduct illegal. For example s. 2, 15 U.S.C. s. 13 (price discrimination); s. 3, 15 U.S.C. s. 14 (tying arrangements); s. 7, 15 U.S.C. s. 19 (certain mergers). Hand in hand came the Federal Trade Commission Act (of September 26, 1914, c. 311, 38 Stat. 717, 15 U.S.C. ss. 41-51), dealing with fair competition and creating a commission with jurisdiction over both new pieces of legislation. The Justice Department retained exclusive jurisdiction over the Sherman Act and shared jurisdiction in the Clayton Act. The divisions remain.

23. 148 F.2d 416, 427-428.

24. Statute of Monopolies, 21 Jac. I, ch. 3 (1623-34).

25. 148 F.2d 416, 427.

26. Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 273 (2d Cir. 1979), cert. denied, 444 U.S. 1093, 100 S.Ct., 1061, 62 L.Ed. 783 (1980).

27. Id.

28. Richard Hofstadter, "What Happened to the Anti Trust Movement?" The Paranoid Style in American Politics and Other Essays. 1965

29. BMI v. CBS, 441 U.S. 1, 10.

30. . See Cohn, op. cit., 416-419.

31. The states which actually passed legislation included Georgia, Louisiana, Mississippi, Nebraska, Washington and Wisconsin. See Simon H. Rifkind, "Music Copyrights and Antitrust: A Turbulent Courtship," 4 Cardozo Arts and Entertainment Law Journal 1 (1985) p. 12.

32. . 313 U.S. 387, 404. See also companion case Marsh v. Buck, 313 U.S. 406, 61 S.Ct. 969, 85 L.Ed. 1426 involving Nebraska legislation.

33. . Gibbs v. Buck, 307 U.S. 66, 59 S.Ct. 725, 83 L.Ed. 1111 (1941).

34. . Id. at 733-734.

35. . United States v. ASCAP, 1940-1943 Trade Cases (CCH) Paragraph 56,104.

36. . United States v. BMI, 1940-1943 Trade Cases (CCH) Paragraph 56,096.

37. . See also the companion case of M. Witmark & Sons v. Jensen, 80 F. Supp. 843 (D. Minn), appeal dismissed at 177 F.2d 515 (8th Cir. 1949).

38. Id. at 895.

39. Id. at 891-892.

40. Id. at 892.

41. Id. One half of ASCAP's net receipts are allotted to the publisher members: Id. at 893.

42. Id. at 896.

43. Id. at 893.

44. Id. at 893.

45. Id. at 895.

46. Quote at 80 F.Supp. 888 at 894.

47. Id. at 894.

48. Id. at 900 n. 2 includes decree: XXVII (d) "Restraining ASCAP's members from licensing, except to motion picture producers, the right of public performance for profit through the exhibition of motion picture films, of musical compositions synchronized with motion picture films."

49. . United States v. ASCAP, 1950-1951 Trade Cases (CCH) Paragraph 62,595.

50. Frederick C. Boucher, "Blanket Music Licensing and Local Television: An Historical Accident in Need of Reform," 44 Washington and Lee Law Review 1157, 1172-73 (1987).

51. . United States v. BMI and RKO General, 1966 Trade Cases (CCH) Paragraph 71,941 (S.D.N.Y.).

52. Id. Although this agreement did not restrain BMI from obtaining exclusive licenses, BMI could not prohibit its members from issuing non-exclusive licenses. The agreement said nothing about motion pictures.

53. See Boucher, op cit., 1175.

54. U.S. v. ASCAP (Application of Shenandoah Valley Broadcasting), dismissed at 208 F.Supp. 896 (S.D.N.Y.), appeal dismissed on other grounds at 317 F.2d 90 (2nd Cir. 1964), cert. granted at 375 U.S. 39, 994, remanded to 331 F.2d. 117, 121, cert. denied 377 U.S. 997.

55. 331 F.2d. 117, 122.

56. Id. at 742.

57. 400 F.Supp. 737, 753.

58. Id. at 745.

59. CBS also sought not only injunctive but declaratory relief on the issue of copyright misuse: 400 F.Supp. 737, 741.

60. 400 F.Supp. 737, 745.

61. Id. at 782.

62. Id. at 782-783.

63. 562 F.2d 130, 135-136.

64. Id. 136.

65. Id. at 137. On the petition for certiorari in an amicus brief, the Solicitor General, in approving the result reached by the Ninth Circuit, stated:

"The Sherman Act has always been discriminatingly [sic] applied in the light of economic realities. There are situations in which competitors have been permitted to form joint selling agencies or other pooled activities, subject to strict limitations under the antitrust laws to guarantee against abuse of the collective power thus created. Associated Press v. United States, 326 U.S. 1; United States v. St. Louis Terminal, 224 U.S. 383; Appalachian Coals, Inc. v. United States, 288 U.S. 344; Chicago Board of Trade v. United States, 246 U.S. 231. This case appears to us to involve such a situation. The extraordinary number of users spread across the land, the ease with which a performance may be broadcast, the sheer volume of copyrighted compositions, the enormous quantity of separate performances each year, the impracticability of negotiating individual licenses for each composition, and the ephemeral nature of each performance all combine to create unique market conditions for performance rights to recorded music.

"If this market is to function at all, there must be - at least with respect to licensing the performance of recorded music - some kind of central licensing agency by which copyright holders may offer their works in a common pool to all who wish to use them."

Memorandum of the United States as Amicus Curiae on Petition for Writ of Certiorari in the Supreme Court of the United States, K-91, Inc. v. Gershwin Publishing Corp., No. 147, dated December, 1967 at 10-11 ("Amicus Brief").

66. Id. at 138.

67. Citing at n. 23. Cf. United States v. Trenton Potteries Co., 273 U.S. 392, 396-97, 47 S.Ct. 377, 71 L.Ed. 700 (1927).

68. 562 F.2d 130, 139.

69. Id. at 140. In a concurring opinion, Judge Moore agreed a consideration of per use licensing was necessary but did not agree the blanket license involved price-fixing. See 562 F.2d 130, 141.

70. 441 U.S. 1, 28, 99 S.Ct. 1551, 60 L.Ed.2d 1.

71. 744 F.2d. 917, 926.

72. Id. at 923.

73. Id. at 924.

74. Id. at 925.

75. Id. 928-929.

76. 744 F.2d. 917, 926.

77. Id. 934.

78. Syndicated Television Music Copyright Act of 1987 H.R. 1195, 100th Cong., 1st Session., 133 Cong. Rec. H743 ; S. 698 100th Cong., 1st Sess., 133 Cong. Rec. S2928.

79. Id., s. 113.

80. Stephen Carlisle, "The Continuing Battle over Music Performance Rights in Television Programming," 61 Florida Bar Journal 113.

81. Frederick C. Boucher, "Blanket Music Licensing and Local Television: An Historical Accident in Need of Reform," 44 Washington and Lee Law Review 1157 (1987).

82. E. Scott Johnson, "Source Licensing Threat," 6 University of Miami Entertainment & Sports Law Review 1, 29-30 (1989).

83. Robin Karr, "Blanket Licensing of Music Performing Rights in Syndicated Television: It's Time to Change the System," 9 Whittier Law Review 331 (1987).

84. Los Angeles Times, September 7, 1990, D4.

85. Id.

86. Washington Post, March 27, 1991, C1.

87. The two channels represent most of the cable operators in the country.

88. The same week in January 1990 that the D.C. proceeding was launched, suit was filed in Los Angeles in the U.S. District Court by ATC, Paragon, Warner and long list of cable systems for antitrust violations: Communications Daily, February 1, 1990, 1. BMI has also proceedings pending before Judge Kimba Wood in the Southern District of New York, involving the Arts and Entertainment Cable Network: New York Law Journal, October 31, 1989, 2. Another action involves the Christian Broadcasting Network before Judge Sprizzo: New York Law Journal, October 20, 1989, 5; 746 F. Supp. 320, 326.

89. 766 F.Supp. 320, 326.

90. 746 F.Supp. 320, 329.

91. Id.

92. In Coleman the estoppel claim arises from on alleged assurances from ASCAP that the performance of two compositions without license would not infringe any copyright interest.

93. 746 F.Supp. 320, 328.

94. See U.S. v. E.I. Du Pont De Nemours (Cellophane Case), 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264 (1956).

95. 441 U.S. 1, 21-22, 99 S.Ct. 1551, 60 L.Ed. 1.

96. U.S. v. E.I. Du Pont De Nemours (Cellophane Case), 351 U.S. 377, 76 S.Ct. 994, 100 L.Ed. 1264 (1956).

97. See Swift & Co. v. United States, 196 U.S. 375, 396, 2 S.Ct. 276, 49 L.Ed. 518 (1905).

98. Berkey Photo, Inc., supra.

99. 441 U.S. 1, 18, 99 S.Ct. 1551, 60 L.Ed.2d 1.

100. Another analogy may be found in the result of the recent decision of Stewart v. Abend, ___ U.S. ___, 110 S.Ct. 750, 109 L.Ed.2d 184 (1990). That case left the owner of the renewal rights in a short story with a stake in the redistribution of the movie made under rights granted by the original author.

101. ASCAP for instance tracks every television network performance of its works. As for radio broadcasts and local television comprehensive surveys suffice as representative of those uses as well as others, for instance restaurants which are not surveyed. Royalties are distributed according to formulas based on factors such as time-of-day, day-of-week and length of performance. See Korman, op cit., 363-367.

102. Telephone interview with Gary Roth, Assistant Counsel, BMI, April 9, 1991.

103. For this argument see Jay Fujitani, "Controlling the Market Power of Performing Rights Societies," 72 California Law Review 103, 137 (1984).


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