USA DOJ appeal: “full-work” or fractional licencing – that’s the question

This appeal concerns a dispute between the United States and Broadcast Music about the meaning of a longstanding antitrust consent decree governing BMI’s aggregation and collective licensing of the right of public performance of copyrighted musical works.

The consent decree requires BMI to offer anyone, at a reasonable fee, “a license for the right of public performance of any, some or all of the compositions in its repertory,” which the consent decree defines as “those compositions, the right of public performance of which defendant has or hereafter shall have the right to license or sublicense.”

BMI takes the position that the Decree allows it to provide “fractional licenses” for split works, meaning licenses for only a fraction of the right of public performance based on its own affiliates’ ownership. In the government’s view, BMI’s repertory includes every song, and only those songs, for which BMI has the right to license or sublicense on a “full-work” basis – meaning that it has the right to authorize a licensee to publicly perform the song without the need for additional licenses. And if BMI has the right to grant a full-work license for a song, the decree requires it to offer a full-work license for that song.

There is no dispute that a fractional license for split works would not allow a user to publicly perform those compositions without first obtaining additional licenses from the unaffiliated co-owners, lest the user risk violating the co-owners’ rights. In the government’s view, BMI’s special exception conflicts with the plain language of the decree that requires BMI to grant licenses for “the right of public performance of any, some or all of the compositions in defendant’s repertory.”

Split works are works for which the right of public performance is owned by more than one party (e.g., a composer and a lyricist), and those co-owners are not all affiliated with the same PRO. According to BMI, split works represent only a minority of the compositions in its repertory. Full-work licenses authorize the immediate public performance of works without any other permissions and without risk of infringement. Fractional licenses do not. They purport to license only a fraction of the right of public performance and thus do not authorize an actual public performance until the licensee obtains additional licenses from any co-owners.

The PROs, songwriters, and publishers claimed that adopting the government’s interpretation of the decrees would force the PROs to drop from their blanket licenses split works for which they could not secure full-work authorization. And they argued that this might leave some split works (particularly those with foreign owners) unlicenseable by any PRO. But, the Division recognized, songwriters and publishers have within their power the ability to agree to confer full-work licenses on PROs. The Division found the benefits of full-work licensing outweighed its potential costs.

In sum, the Division concluded that decrees require BMI and ASCAP to offer full-work licenses for all compositions in their respective repertories, and that BMI’s and ASCAP’s repertories include “only those songs they can license on . . . a full-work basis.” Because BMI and ASCAP can license unrestricted split works on a fullwork basis, unrestricted split works are part of their repertories and the PROs must offer full-work licenses for them. But to the extent BMI and ASCAP do not have the right to license restricted split works on a full-work basis, those restricted split works are not within the PROs’ repertories.

On September 16, the district court held the pre-motion conference BMI requested. The court ruled on the merits of BMI’s proposal, issuing an Opinion and Declaratory Judgment on the same day. In the court’s view, whether a license was full or fractional was a matter of the “validity, scope and limits of the right to perform compositions” that are outside the scope of the Decree and left to other laws to resolve. Thus, “if a fractionally-licensed composition is disqualified from inclusion in BMI’s repertory it is not for violation of any provision of the Consent Decree.”

The government’s position is that district court made error when concluded that fractional licencing is permitted by the Decree. The Decree requires BMI to offer “a license for the right of public performance of any, some or all of the compositions” in its repertory. According to government’s point of view (1,2,3,4), this requirement is unambiguous: BMI must authorize users to publicly perform those compositions. Only a full-work license satisfies that requirement. Nothing about fractional payments indicates or necessitates fractional licensing. If BMI were to include in its blanket license fractional interests in songs, it would no longer provide immediate, indemnified access to all works in its repertory. Users would have to secure additional rights before performing those works – a difficult task because there is no reliable database of ownership interests. This result would undercut the utility of the blanket license and alter the bargain the United States and BMI struck.

Under the government’s interpretation the Articles II(C) and XIV(A) require the described licenses to confer “the” right of public performance. The definite article “the” indicates that the Decree refers to a singular right that is complete in and of itself. As the Court has explained, “placing the article ‘the’ in front of a word connotes the singularity of the word modified… In contrast, the use of the indefinite article ‘a’ implies that the modified noun is but one of several of that kind.” The type of license that confers the singular right to perform music is a full-work license. Fractional licenses do not confer the right of public performance – something that BMI has not disputed.

Government believes the phrase “the right of public performance” in Articles II(C) and XIV(A) must be given a prescribed scope and form to make sense of those provisions. If terms are used but not defined, “deference is to be paid to the plain meaning of the language of a decree and the normal usage of the terms selected.” BMI argued to the district court that the term “composition” in the Decree should be construed to “include partial interests in musical works.” But the Decree does not speak in terms of portions of, or partial rights in, musical compositions. When the Decree references a composition, it means the composition as a “unified whole,” (Random House Dictionary 420), and the collective rights and interests therein. Thus, BMI seeks not to construe the term “composition” as much as rewrite the Decree to insert the words “composition or any partial interests in that composition” every time the word “composition” appears. Such after-the-fact redrafting is not allowed.

The output of department’s arguments is that if, for any reason, a BMI affiliate is unable to grant BMI the full performance right in a particular composition, that composition is not included in BMI’s repertory and cannot be licensed under the Decree. Many split works fall outside of this category: the co-owners are treated as tenants-in-common, and thus, while a BMI affiliate may own only a fraction of the copyright, she can provide BMI with a non-exclusive, fullwork license. But BMI cannot, as it argued below, license “only the shares of a co-owned work that belong to its affiliates.”

Department wants the appellate court to reverse the decision of the district court and hold that the BMI Decree requires BMI to provide users full-work licences to the compositions in its repertory.