Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Sony swings past anticompetitive claims over use of Beatles songs, (Sep 29, 2014)

By Greg Hammond, J.D.

A film company failed to allege sufficient antitrust claims against Sony/ATV Music Publishing, LLC and Apple Corps Limited for allegedly interfering with the United States distribution of the documentary film The Beatles: The Lost Concert. The federal district court in New York City consequently dismissed the Sherman Act claims (Ace Arts, LLC v. Sony/ATV Music Publishing, LLC, September 26, 2014, Nathan, A.).

Background. The first live public performance of the Beatles in the United States was filmed in Washington, D.C. in February 1964. The tape, which contains 12 songs including “I Wanna Hold Your Hand,” “Twist and Shout,” and “She Loves You,” was used in the production of The Beatles: The Lost Concert, a film that “consists of the entire D.C. Concert footage, fully digitally remastered, and newly original filmed sequences, including contemporary interviews with individuals and celebrities connected to the D.C. Concert as well as expert commentary on the cultural significance of the event.”

The producers of the film entered into a synchronization license with Sony, but Sony later allegedly refused to honor the agreement, and instead granted Apple an exclusive synchronization license. Shortly before the premier of the film in the United States, Sony contacted Ace’s distribution partner and demanded that no exhibition of the film occur. After Ace failed to provide written confirmation of its right to use the songs in the film, the company’s distribution partner cancelled the U.S. premiere. Ace later filed a complaint against Sony and Apple alleging—in part—violations of the Sherman Act, and seeking declaratory judgment establishing that: (1) commercial exploitation of The Lost Concert would not infringe on any of Sony’s or Apple’s rights; (2) Sony misused its copyright on the songs; (3) the use of the songs in the film constitute “Fair Use” and does not violate or infringe any copyrights; and (4) the unprotected, unchallenged publications of the tape have carried the songs into the public domain. Sony and Apple moved to dismiss Ace’s claims.

Sherman Act claims. Ace alleged that Sony’s and Apple’s conduct in preventing Ace from exhibiting The Lost Concert in the United States was illegal per se under Section 1 of the Sherman Act. In the alternative, Ace argued that Sony’s and Apple’s conduct unreasonably restrained competition in the relevant market and violated Section 1 under the rule of reason.

The court first determined that Ace failed to allege horizontal restraints on trade that are per se violations of the Sherman Act, because the company alleged that Sony granted an exclusive synchronization license to Apple. Specifically, the court determined that by alleging Sony supplied rights to Apple, Ace pleaded facts showing a vertical dimension to the defendants’ relationship, precluding Ace from fitting into the recognized category of per se violations for horizontal restraints on trade.

In considering Ace’s alternative argument, the court noted that Ace was required to demonstrate that Sony’s and Apple’s conduct had an actual adverse effect on competition as a whole in the relevant market. However, the court found that the only injury that Ace alleged was the defendants’ interference with and prevention of the United States distribution of Ace’s film. These allegations, according to the court, were insufficient to plausibly establish any harm to the market as a whole. Further, in dismissing the Sherman Act claims, the court noted that this was exactly the kind of “routine dispute between business competitors that is not cognizable under the Sherman Act,” because—at most—Ace’s allegations “establish nothing more than the enforcement of an exclusive synchronization license, to the detriment of a single competitor within the market.”

Although Ace’s Sherman Act claims were dismissed, its claim for declaratory judgment survived Sony’s motion to dismiss.

The case number is 13-cv-7307 (AJN).

Attorneys: Kara A. Elgersma (Wexler Wallace LLP) for Ace Arts, LLC. Donald S. Zakarin (Pryor Cashman LLP) for Sony/ATV Music Publishing, LLC. Paul V. LiCalsi (Robins, Kaplan, Miller & Ciresi, LLP) for Apple Corps. Ltd.

Companies: Ace Arts, LLC; Sony/ATV Music Publishing, LLC; Apple Corps. Ltd.

Cases: Antitrust NewYorkNews