CHALLENGES TO THE STATUS QUO

To this day, ASCAP and BMI remain subject to

Department of Justice consent decrees.

Moreover, those

decrees, practically speaking, provide on-going regulation of the organizations' licensing practices. The decrees in theory provide certain third-party rights and protections to

licensees of performance rights, including owners of small commercial establishments.

I presume (though I have not

attempted to draw an independent conclusion) that the decrees do not provide small commercial establishments with sufficient protection (at least from the perspective of those establishments) against unreasonable and abusive claims by ASCAP and BMI. If the decrees are inadequate, are there any options other than legislation available? In theory, there are several; however, they are all probably inferior to legislation I repeat, assuming there really is a problem.

First, an establishment or a trade organization of establishments such as the National Restaurant Association might consider filing a private antitrust action challenging the practices of ASCAP and/or BMI. It would not be the first time such a suit has been filed. However, even though some of the early private suits met with some success (see, e.g., Alden-Rochelle, Inc. v. ASCAP, 80 F.Supp. 888 (S.D.N.Y. 1948)), plaintiffs have lost the more recent cases.

The most famous of the more recent private actions was brought by CBS on the theory that the blanket licenses

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.2/

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."/ Lasercomb notwithstanding, it would likely be

More

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. 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

is

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 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 antitrust courts are well equipped to handle. The complaint is not that owners of copyrighted musical works have restrained competition but rather that the law provides them with too much protection of their property rights. It is not 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.

this conundrum.

There is no correct answer in an absolute sense to 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!