BMI strategy begins to pay dividends.

doj-ascap-bmi-3You may recall our report last August that the U.S. Department of Justice (DOJ) had closed a two-year inquiry into the ASCAP and BMI Consent Decrees by determining that no changes to the Decrees were necessary. DOJ also weighed in on a particularly controversial issue – the licensing of musical works whose copyright is owned by multiple persons where some – but not all – of those persons are members of ASCAP or BMI. DOJ concluded that the Decrees required ASCAP and BMI to grant full-work licenses for those works and barred them from licensing only the fractional copyright interests held by their members. ASCAP and BMI were none too happy with that decision and united to pursue a two-pronged strategy to overturn that determination, with ASCAP seeking legislative change and BMI turning to the federal rate court judge that oversees its operations, Judge Louis Stanton.

That strategy has begun to pay off.

In a five-and-a-half-page opinion released on September 16, Judge Stanton rejected DOJ’s Decree interpretation. He found that “[n]othing in the Consent Decree gives support to [DOJ’s] views” and that “[t]he Consent Decree neither bars fractional licensing nor requires full-work licensing.”  Judge Stanton acknowledged that the Decree defined BMI’s repertory as “‘those compositions, the right of public performance of which (BMI) has … the right to license or sublicense.’” He found, though, that the phrase was “descriptive, not prescriptive” and that “[t]he ‘right of public performance’ is left undefined as to scope or form, to be determined by processes outside the Consent Decree.” In other words, in Judge Stanton’s view, the BMI Decree simply does not speak to the issue of full-work versus fractional licensing.

Judge Stanton is the judge responsible for overseeing the operation of the BMI Consent Decree, so with the stroke of his pen, his interpretation overrides DOJ’s, for now. But the Decree fight is far from settled. Judge Stanton’s interpretation affects only the BMI Decree – it does not alter DOJ’s reading of the ASCAP Decree. DOJ may decide to ask Judge Stanton to reconsider his determination or to amend the BMI Decree to reflect the government’s views, but this may not be the most effective tactic given Judge Stanton’s ruling. Alternatively, it may even decide to appeal the BMI Decree interpretation to the Second Circuit, which could overturn it. DOJ, and perhaps affected music licensees, may also seek a contrary ruling from the ASCAP rate court judge, Denise Cote, who has not always seen eye to eye with Judge Stanton in music licensing issues. And all parties may seek legislative help to enshrine their music licensing views into law.

While no one knows where the dust will settle on the full-work versus fractional licensing issue, we do know that we have not heard the last of this fight. We’ll continue to watch the issue and will keep you posted ….