Judge delivers blow to the US Department of Justice on 100% licensing

Judge delivers blow to the US Department of Justice on 100% licensing

The US music publishing community has welcomed a decision from a federal judge rejecting the Department of Justice anti-trust division’s recent ruling on 100% licensing.  

On Friday September 16, court rate Judge Louis L. Stanton of the United States District Court in the Southern District of New York said the DoJ was misguided in imposing this measure as part of its review of the consent decrees that govern performance rights organisation BMI. In his declaratory judgement, Judge Stanton concluded: "Nothing in the consent decrees neither bars fractional licensing, nor requires full-work licensing.”  

On August 4, the DoJ ruled that neither BMI's not ASCAP's consent decrees should be changed, and in addition they had to introduce 100% licensing, which allows one party to licensed a whole song even without owning 100% of the rights. BMI decided to pursue the litigation route to reverse the DoJ's decision. BMI was seeking a declaratory judgement that the consent decree did not require 100% licensing or what is called "full-work" licensing.

The September 16 hearing was eagerly anticipated by PROs, publishers and songwriters who considered that the 100% licensing proposal would create chaos in the music licensing world. After a two-hour hearing, Judge Stanton issued a ruling that BMI described in a statement as “the controlling interpretation of the BMI consent decree.”

While the DoJ argued in its August 4 resolution that "the consent decrees must be read as requiring full-work licensing" and that "nothing in this interpretation contradicts copyright law," Judge Stanton countered that “nothing in the consent decree gives support to the [DoJ anti-trust] division’s views.” Stanton added that the consent decree "does not regulate the elements of the right to perform compositions." He commented: "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.”  

The ruling was applauded by all the publishing community (see below). David Israelite, CEO of the National Music Publishers Association (NMPA) tweeted: “Victory not complete until it includes @ASCAP.” To which ASCAP Chairman/President Paul Williams responded: “Let's hope it's a trend.”  

How decisive will Judge Stanton's ruling be for ASCAP? A separate consent decree rules ASCAP, which is administered by rate court Judge Denise Cote of United States District Court for the Southern District of New York. Legal experts point out that in the past, Stanton and Cote have taken different path regarding the consent decree, sometimes even being in complete opposition.  

Jay Rosenthal, former General Counsel of the National Music Publishers Association and now a partner at Washington, DC-based law firm Mitchell Silberberg & Knupp, told Music Week that “while Stanton's decision is the right decision, and it carries a lot of weight, it is not certain that the two courts will agree.”

He added: “The Judges have disagreed in the past. But it will be much harder for Judge Cote to reach a contrary decision now that Judge Stanton has ruled in favour of the publishers.”  The Department of Justice has not reacted so far other that to say that it was reviewing the ruling. The DoJ has several possible options, including appealing Judge Stanton's decision. “Technically, the DoJ can appeal to the Second Circuit,” added Rosenthal. “Publishers are hoping they won’t appeal. At times, the Second Circuit has not been friendly to the interests of copyright owners.”  

It is also unclear whether Judge Stanton's decision will have an impact on the legal case against the DoJ launched by songwriters' group SONA last week. Jacqueline Charlesworth, who acted as a legal expert on the SONA case and who was until this summer General Counsel and Associate Register of Copyrights at the US Copyright Office, told Music Week that “SONA's members are elated – and relieved – by Judge Stanton's ruling.”

She added: “But because Judge Stanton oversees only the BMI decree, songwriters still need to ensure that the same applies to the ASCAP decree. And of course there is always the possibility that Antitrust will choose to appeal Judge Stanton's ruling rather than accept the fact that it does not have the authority to control songwriters' copyrights and contractual relationships.”  

Charlesworth said that from a legal perspective, “at a minimum, [the ruling] confirms exactly what SONA is saying – that the Antitrust Division has no basis under the consent decrees to regulate how songwriters choose to manage their copyright interests, including through the practice of fractional licensing. Those questions are left to copyright and contract law.”

Regarding the SONA case, Rosenthal said it was well written and had merit, but could have an unintended consequence: “It could incentivise the Justice Department to more forcefully appeal Judge Stanton’s opinion,” said Rosenthal. “Perhaps Justice will back down, but it is the DoJ – they might not want their authority to enforce the anti-trust laws to be challenged in a such a brazen manner on two fronts at the same time.”  

Reactions from the creative community include:  

BMI president and CEO Mike O’Neill: “As we have said from the very beginning, we believed our consent decree allowed for the decades-long practice of fractional licensing and today we are gratified that Judge Stanton confirmed that belief. Our mission has always been to protect the interests of our songwriters, composers and publishers, and we feel we have done just that. Today’s decision is a victory for the entire music community.”

ASCAP CEO Beth Matthews: "This is terrific news for all of us in the songwriting community as we continue to work on modernising the consent decrees to reflect the real world.”  

NMPA president and CEO David Israelite: "Thanks to the courage of Mike O'Neil, BMI, and the entire songwriting and music publishing community, the DOJ's disastrous views on 100% licensing have been rejected by a federal Judge. This is a huge win for songwriters and a huge win for the rule of copyright law.”

Warner/Chappell Music chairman and CEO Jon Platt (in a letter to songwriters): “Today, I am very pleased to inform you of the result of a legal challenge brought by BMI against the DOJ. Just this afternoon, Judge Stanton ruled that the BMI consent decree does not require 100% licensing. While I'm sure this story will continue to unfold, this is a fantastic result which should give us hope that the status quo for US performance rights licensing will not be upended. This is a big win, not just for BMI, but for all publishers and songwriters. My personal congratulations to the BMI team for this wonderful outcome.”

Sony/ATV Music Publishing chairman and CEO Martin Bandier: “We are thrilled with Judge Stanton’s common sense interpretation of the consent decree which clarifies that BMI is not required to grant 100% licenses. His statement that nothing in the consent decree gives support to the division’s views' could not be clearer. While the DOJ’s interpretation would have upended decades of licensing practices and caused uncertainty and disorder to everyone in the marketplace, Judge Stanton’s ruling is in the public interest and will benefit all interested parties in the music industry, including songwriters, music publishers and licensors. We can now focus once again on working on behalf of our songwriters.”

Universal Music Publishing Group chairman and CEO Jody Gerson: "We are delighted that our songwriters received a great victory today.”

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