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provided by ASCAP and BMI to broadcast networks amount to per

se illegal price fixing (because a single price is set for

multiple competing copyrighted musical works) and tying

(because a licensee is forced to take a license for all the

compositions in the catalog).

That case ultimately found its

way to the Supreme Court.

In one of the most important

antitrust decisions in the last thirty years, the Court held

that the blanket license had to be examined under the rule of

reason.

BMI, Inc. v. CBS, Inc., 441 U.S. 1 (1979).

Suffice

it to say that in light of the tremendous inherent

efficiencies of a blanket license and against the background

of the Department of Justice decrees, it is very difficult for

a plaintiff to prove that ASCAP and/or BMI unreasonably

restrain competition.

Second, a licensee or group of licensees might

challenge an abusive licensing practice by ASCAP and/or BMI as

copyright misuse, which might be established even if it cannot

be proven that ASCAP and BMI have violated the antitrust

laws. 27

In its Lasercomb decision, the Fourth Circuit

Court of Appeals refused to enforce a copyright against

admitted infringers because the copyright holder had enforced

a broad non-compete provision against third parties.

2/ See Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990) ("The question is not whether the copyright is being used in a manner violative of antitrust law (such as whether the licensing agreement is 'reasonable'), but whether the copyright is being used in a manner violative of the public policy embodied in the grant of a patent").

According to the court, that broad non-compete was a misuse of

the copyright (even if it did not violate the antitrust laws)

because the copyright holder attempted to use its copyright

"to control competition in an area outside the copyright. "3/

Lasercomb notwithstanding, it would likely be difficult to prove that ASCAP and/or BMI have misused their

copyrights.

It is not clear for example that any of the

anecdotes amount to a claim that the organizations have

attempted to control competition outside the copyrights. More fundamentally, the doctrine of copyright misuse, unlike the

doctrine of patent misuse, has not been widely accepted by the

courts.

Indeed, no court of appeals other than the Fourth

Circuit has clearly embraced the doctrine.

There is good

reason for the reluctance on the part of other courts:

the

remedy for a misuse

i.e., non-enforcement of the copyright

even against third-parties not affected by the misuse

is

draconian.

Moreover, there is reason to be concerned when the

enforceability of property rights turns on the whims of what a

federal judge believes is good "public policy."

Third, those who feel aggrieved by some practice of

ASCAP and/or BMI could try to persuade the Department of

Justice to modify the ASCAP and BMI decrees to prohibit the

allegedly abusive practice.

As explained above, the decrees

have been modified before.

However, unless ASCAP and BMI were

willing to consent to the modification, the Department would

3/911 F.2d at 979.

essentially have to prove through litigation that the

challenged practice violates the antitrust laws.

The

Department, like a private plaintiff, however, would have to surmount the Supreme Court's BMI decision in order to prove the practice unreasonably restrains trade.

None of these options makes as much sense as

legislation.

As a practical matter, what the National

Restaurant Association and others are complaining about is

really not an antitrust issue or at least not one that

[blocks in formation]

clear, however, whether the law gives them too much or not

enough.

On the one hand, when a restaurant tunes its sound

system to a local radio station to improve its ambiance and to

attract more business it is profiting from performance of a

non-dramatic musical work.

There is some appeal to the

argument that the copyright owner has a right to share in

those profits.

From society's point of view, to the extent

that copyright holders effectively cannot share in those

profits, then at the margin and in theory fewer copyrighted

works will be produced.

On the other hand, there is no way of which I am

aware to determine whether we as a country currently devote

too much, too little, or just the right amount of resources to

copyright creation. If we devote too many resources to such endeavors, then society will be better off by denying copyright protection to incidental performances of works of

music.

There is no correct answer in an absolute sense to

this conundrum.

Rather it is essentially a political question

best resolved in a political forum, namely Congress.

I wish

we antitrust lawyers could help, but I fear you are on your

own on this one!

MAY 8, 1996
PUBLIC HEARING

HOUSE SMALL BUSINESS COMMITTEE

STATEMENT OF

TOMMY TAVENNER

SILO INN
OLNEY, MARYLAND

ON BEHALF OF THE NATIONAL RESTAURANT ASSOCIATION

National Restaurant Association • 1200 Seventeenth Street, NW = Washington, DC 20036 • 202/331-5900

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