Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Pandora’s license to stream ASCAP works applies to entire repertory, (Sep 19, 2013)

By Thomas Long, J.D.

Withdrawals by music publishers of licensing rights with regard to new media transmissions from performing rights society ASCAP (American Society of Composers, Authors and Publishers) did not affect the scope of the ASCAP repertory subject to Internet streaming radio company Pandora Media’s license to transmit ASCAP-repertory music through the Pandora service during the period of January 1, 2011 through December 31, 2015, the federal district court in New York City has decided (In re Petition of Pandora Media, Inc., September 17, 2013, Cote, D.). Pandora’s license covered all works in ASCAP’s repertory, regardless of the purported withdrawals.

ASCAP consent decree. ASCAP is composed of voluntary writer and publisher-members, which exists in part to facilitate licensing of artists’ works to third parties. ASCAP collects license fees on behalf of 460,000 members from third parties. Since 1941, ASCAP has been operating under a consent decree stemming from a Department of Justice antitrust lawsuit that alleged monopolization of performance rights licenses. Since that time, ASCAP has been governed by this consent decree, as modified occasionally over the years. The most recent version of the consent decree, issued in 2001, known as the Second Amended Final Judgment (“AFJ2”). See United States v. Am. Soc’y of Composers, Authors & Publishers, Civ. No. 41-CV-1395, 2001-2 Trade Cases ¶73,474 (S.D.N.Y. June 11, 2001).

Pursuant to Section IX of AFJ2, the federal district court in New York City has continuing jurisdiction over the setting of reasonable license fees for the public performance of works in the ASCAP repertory. AFJ2 also sets out the characteristics of the four types of licenses ASCAP issues: blanket licenses, per-program licenses, per-segment licenses, and through-to-the-audience licenses. These license categories do not affect the scope of the ASCAP music repertory available to a licensee. All of the license types contemplate that the user will have access to ASCAP’s entire repertory, the court noted.

Section IV of AFJ2 also contains a provision preventing ASCAP from discriminating in pricing or with respect to other terms or conditions between similarly situated licensees. Section VI and Section IX of AFJ2 contain provisions that prohibit ASCAP from denying a blanket license of all of the musical compositions in its repertory to any entity making a request for them.

Pandora’s relationship with ASCAP. Pandora provides Internet radio services. On July 11, 2005, Pandora and ASCAP first entered into a license agreement to allow Pandora to stream music from ASCAP’s repertory. On October 28, 2010, Pandora sent a letter to ASCAP terminating its 2005 license agreement and applying for a new license, pursuant to the terms of AFJ2, to run from January 1, 2011 through December 31, 2015. Upon making a written request to ASCAP, Pandora obtained, pursuant to AFJ2 requirement that “ASCAP is hereby ordered and directed to issue, upon request, a through-to the audience license to … an on-line user,” the right to perform all of the compositions in ASCAP’s repertory for that period. Litigation to determine the proper fee for the license (“rate proceeding”) was ongoing, with trial scheduled to occur on December 4, 2013.

Modification of ASCAP rules—member withdrawals with regard to new media. In April 2011, ASCAP’s board adopted a resolution to amend its rules to allow members to withdraw from ASCAP its rights to license their music to new media outlets, while allowing ASCAP to retain the right to license those works to other outlets. The amended rules define new media services as “[A]ny standalone offering by a ‘Music User’ by which a New Media Transmission of musical compositions is made available or accessible (i) exclusively by means of the Internet, a wireless mobile telecommunications network, and/or a computer network and (ii) to the public, whether or not, in exchange for a subscription fee, other fee or charge.”

Subsequent to ASCAP’s rule change—but after Pandora made its October 28, 2010 request for a blanket ASCAP license to begin on January 1, 2011—several music publishers withdrew their New Media licensing rights from ASCAP. Pandora then also engaged those publishers in licensing negotiations.

Pandora’s motion. On July 1, 2013, Pandora filed a motion for summary judgment seeking a determination that “ASCAP publisher ‘withdrawals’ [of New Media rights] during the term of Pandora’s consent decree license do not affect the scope of the ASCAP repertory subject to that license.” Pandora argued that AFJ2 requires ASCAP to license Pandora to perform for five years all of the works in the ASCAP repertory as of January 1, 2011, even though certain music publishers beginning in January 2013 have purported to withdraw from ASCAP the right to license their compositions to new media services such as Pandora.

Scope of ASCAP repertory—”works.” The language of the consent decree unambiguously required ASCAP to provide Pandora with a license to perform all of the works in its repertory, the court said. Because ASCAP retained the works of “withdrawing” publishers in its repertory even if it purported to lack the right to license them to a subclass of new media entities, ASCAP’s entire repertory was included in Pandora’s license. The court disagreed with ASCAP’s argument that “’ASCAP repertory’ refers only to the rights in musical works that ASCAP has been granted by its members as of a particular moment in time.” Instead, the court endorsed Pandora’s view that “ASCAP repertory” is a “defined term[] articulated in terms of ‘works’ or ‘compositions,’ as opposed to in terms of a gerrymandered parcel of ‘rights.’” “ASCAP repertory” was defined in terms of “works,” and not “individual rights” in works with respect to classes of potential licensees, the court said. The term “works” means musical compositions, and not rights with respect to those compositions.

Because “works” in AFJ2 means “composition[s]” and not “rights in compositions”, and because it is undisputed that the terms of ASCAP’s rules modification of April 2011 permit ASCAP to retain the right to license the works of the withdrawing publishers for non-new media purposes, those compositions remain “works in the ASCAP repertory,” the court concluded.

Pandora’s rights. Once it had been determined that “works” in AFJ2 means musical compositions, and that those musical compositions remain “in the ASCAP repertory” so long as ASCAP retains any licensing rights for them, it remained only to apply the clear language of Sections VI and IX of AFJ2, the court said.

Section VI of AFJ2 was unambiguous in requiring ASCAP to grant to “any music user making a written request therefor a non-exclusive license to perform all of the works in the ASCAP repertory.” Section IX(E) required that “[p]ending the completion of any [rate] negotiations or proceedings” following a music user’s application to ASCAP for a license, that music user “shall have the right to perform any, some or all of the works in the ASCAP repertory to which its application pertains.”

Sections VI and IX(E) consequently mandate that Pandora’s license to perform ASCAP compositions during the five year term of its license extends to all of ASCAP’s repertory and is unaffected by any new media licensing rights withdrawals by ASCAP publishers, the court determined.

Pandora’s motion for summary judgment was granted.

The case is No. 12 Civ. 8035 (DLC).

Attorneys: Kenneth L. Steinthal (King & Spalding, LLP) for Pandora Media, Inc. Joy Cohen (Paul, Weiss, Rifkind, Wharton & Garrison, LLP) for American Society of Composers, Authors, and Publishers.

Companies: Pandora Media, Inc.; American Society of Composers, Authors, and Publishers

Cases: Antitrust NewYorkNews