Plaintiffs,
Defendants.
----------------------------------------X
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Section One of the Sherman Act (id. at ¶¶ 77-82), that SESAC has
Section Two of the Sherman Act, and that all defendants have
BACKGROUND2
id.
1
Plaintiffs’ amended complaint was filed on March 18, 2010. Defendant SESAC
filed its motion to dismiss on May 17, 2010. Plaintiffs filed an opposition
brief on June 28, 2010, and SESAC filed a reply on July 19, 2010. Oral
argument was held on January 24, 2011.
2
The facts below are drawn from the amended complaint. For purposes of
reviewing this motion to dismiss, all nonconclusory allegations are accepted
as true. See S. Cherry St., LLC v. Hennessee Grp. LLC, 573 F.3d 98, 100 (2d
Cir. 2009).
2
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practices of ASCAP and BMI, the two largest PROs, have been
Publishers (“CBS Remand”), 620 F.2d 930 (2d Cir. 1980); Buffalo
Inc. (“NCTA”), 772 F.Supp. 614 (D.D.C. 1991). This is the first
3
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¶ 12. The fee for the blanket license does not vary based on
ASCAP, and a civil action filed by the DOJ against BMI, both
ASCAP and BMI have operated under consent decrees for the past
BMI’s market power by requiring that both PROs: (1) refrain from
4
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local stations already “in the can,” i.e. “with music and other
3
As a result, the licensing of music performance rights for these programs
is not at issue in this case.
5
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4
The remainder of third-party programming consists of movies, sports,
religious programming, and infomercials. Am. Compl. at ¶ 5.
6
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5
We note that the complaint contains no numerical comparison of prices.
7
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to deal with SESAC” (Am. Compl. at ¶ 32) because: (1) SESAC has
licensing.
6
Plaintiffs never actually identify what percentage of all copyrighted
musical compositions are in the SESAC repertory.
7
These include composers who have compositions that are either (i) “embedded
in established syndicated and unlicensed network programming to which
[p]laintiffs have made substantial and irreversible commitments,” (ii)
incorporated in plaintiffs’ locally produced programs, or (iii) included in
commercials. Syndicated programs containing SESAC songs include Seinfeld,
Two & A Half Men, Will & Grace, Wheel of Fortune, Jeopardy!, Entertainment
Tonight, Dr. Oz, Dr. Phil, and The Ellen DeGeneres Show. Id. at ¶ 30.
8
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1. Per-program Licensing
neither the station nor the producer has access to a cue sheet.
9
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programming for which neither SESAC nor the station had a cue
10
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2. Direct Licensing
3. Source Licensing
11
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DISCUSSION
Ave. Delicatessen, Inc., 496 F.3d 229, 237 (2d Cir. 2007). A
550 U.S. 554, 570 (2007). Where a plaintiff has not “nudged
B. Relevant Market
12
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way.” Id.
8
SESAC does not dispute that the relevant geographic market is the United
States and its territories. Thus, we limit our analysis to the relevant
product market.
13
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Inc., 124 F.3d 430 (3d Cir. 1997), and its progeny. In Queen
14
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Sections One and Two of the Sherman Act, alleging that the
Id. at 435. The Third Circuit held that the proposed market
15
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Hack, and the other “contract power” cases cited by SESAC are
9
Similarly, in Maris Distributing Co. v. Anheuser-Busch, Inc., 302 F.3d
1207, 1209-10 (11th Cir. 2002), a beer distributor (plaintiff) entered into a
16
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Plaintiffs do not allege (and SESAC does not contend) that the
means).
F.3d 1038, 1048 (9th Cir. 2008) (reviewing the Queen City Pizza
17
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have purchased tomato sauce from any seller in the tomato sauce
market. In Hack, but for the contract between Yale students and
Yale College, the students could have purchased housing from any
for the contract between the insurance agents and the insurer,
seller in the market for computers. And in Maris, but for the
claim that SESAC’s market power arises from factors other than
18
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that SESAC’s conduct has made the blanket license the only
SESAC repertory.
19
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already “in the can.” Thus, to the extent that the Queen City
broadcast rights.
20
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City Pizza] was that the Kodak customers did not knowingly enter
and services for the life of the equipment. In other words, the
21
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its purchase).10
complaint are the underlying songs for which local stations must
SESAC notes that the complaint does “not allege that any
10
Furthermore, we note that the industry practice of music being “in the can”
(i.e., irrevocably embedded) when television stations acquire programs from
producers was established prior to earlier (post-consent decree) challenges
to both the ASCAP and BMI licenses. See, e.g., National Cable Television
Ass’n, Inc. v. Broadcast Music, Inc. (“NCTA”), 772 F.Supp. 614, 620-21
(D.D.C. 1991) (“[W]hen the syndicated program is sold or licensed to the
cable program services, the music is ‘in the can,’ i.e. indelibly part of the
program. That means that cable program services do not play any role in the
selection of or negotiation over the bundle of music rights . . . concerning
syndicated programming.”) Even though television stations were contractually
prohibited from removing embedded music, the NCTA court still considered --
after a trial -- whether other methods of obtaining performance rights were
available. See, e.g., id. at 634 (“In sum, cable program services do have
realistically available alternatives to the BMI blanket license and,
therefore, the latter does not constitute a restraint of trade within the
meaning of § 1 of the Sherman Act.”). The court found that source licensing,
direct licensing, and per-program licensing were all realistically available
alternatives to the BMI blanket license.
22
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stations could avoid SESAC music altogether if they did not lock
are far more songs in the ASCAP and BMI repertories than there
23
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show.” See Jan. 24, 2011 Oral Argument, Tr. (“Tr.”) at 18:25-
at 635 n.55.
24
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SESAC blanket license. See Pl. Mem. at 17. Where (1) virtually
all composers affiliate with only one of the three PROs (Am.
Compl. at ¶ 11), (2) almost all stations have licenses from all
three PROs (id. at ¶ 13), and (3) local stations have not
11
SESAC’s other arguments concerning the relevant market do not affect our
conclusion. First, SESAC’s argument that the market definition must be based
25
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PSKS, Inc., 551, U.S. 877, 885 (2007) (internal quotation marks
26
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Cir. 1980). However, the rule of reason does not govern all
27
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In CBS, the Supreme Court held that the ASCAP and BMI
28
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complaint.12
17, n.27.13
12
Plaintiffs argue that SESAC “brings no new marketplace efficiencies”
because ASCAP and BMI already exist to offer a product that individual
composers could not offer on their own. See Pl. Mem. at 6, n.4. While it is
obviously true that ASCAP and BMI already exist (and can provides individual
copyright holders with the benefits of membership), it does not follow that
SESAC should simply cease to exist, or that SESAC does not provide its
Rightsholders with the same benefits that ASCAP and BMI provide.
13
In addition, we note that plaintiffs have not suggested that they do not
have to plead a relevant product market in order to establish a § 1
violation. See generally Part II.B, supra. In antitrust cases governed by a
per se analysis, “it is well settled that plaintiff is excused from defining
the relevant product market.” In re European Rail Pass Antitrust Litig., 166
F.Supp.2d 836, 844 (S.D.N.Y. 2001)(internal quotation marks and citation
omitted).
29
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the ASCAP and BMI licenses have been unsuccessful, none were
television stations, the Second Circuit stated that “it does not
follow that the local stations lose simply because the CBS
the same inquiry that the Second Circuit had made in CBS Remand.
30
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court judge] concluded that ‘CBS has failed to prove the factual
744 F.2d at 928 (noting the “lack of evidence that the program
licensing).
14
See e.g., Def. Mem. at 2, n.1, 12 (citing Buffalo Broadcasting’s rejection
of local stations’ claim that the blanket license precluded direct licensing
because plaintiffs failed to produce evidence that stations actually offered
money to composers for the performing rights to their music); id. (citing
Buffalo Broadcasting’s rejection of claim that source licensing was not an
alternative because plaintiffs had made no significant attempt to acquire
source licensing); id. at 11, n.8 (citing the NCTA court’s finding that there
was competition among composers to have their works included in broadcast
programming); id. at 12 (citing the NCTA court’s rejection of plaintiffs’
claim that there was a lack of competition among composers).
31
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CBS Remand, 620 F.2d at 938 (stating that “one indisputable fact
of a consent decree.
32
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33
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with this practice, and thus cannot be the source of any alleged
anticompetitive result.
15
It strikes this Court –- based on the history of litigation in this
industry, the parties’ briefs, and the oral argument –- that, purely as a
practical matter, the core of the dispute between the parties could be
resolved with relatively minor adjustments. The fact that plaintiffs did not
bring an antitrust action against SESAC for decades, and that this lawsuit
was only filed after changes to SESAC’s per-program license, speaks to the
possibility of an acceptable licensing framework (and one that would likely
not raise antitrust issues).
34
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to avoid SESAC music (id. at ¶ 32) ; and (4) the SESAC blanket
performing rights are not conveyed and must be obtained from the
16
Relying on Judge Winter’s concurring opinion in Buffalo Broadcasting, SESAC
also argues that “separate bilateral agreements between SESAC and its
35
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position in the event that they forgo the blanket license and
36
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with a viable per program license, which SESAC has altered (and
composers or producers.
17
Plaintiffs do allege that they “have made good-faith commercials efforts to
enter into source licensing arrangements with major syndicators and producers
and have been completely rebuffed.” Am. Compl. at ¶ 9.
37
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pleadings.
power. PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d
Cir. 2002).
351 U.S. 377, 391 (1956). See also Eastman Kodak Co. v. Image
18
See E.I. du Pont Nemours & Co., 351 U.S. at 379, 391 (stating that control
of 75% of the relevant market would have constituted monopoly power).
38
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effect”).
CBS also brought § 2 claims. When the Supreme Court held in CBS
39
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also noted, and did not overrule, the district court's ruling
CONCLUSION
(14) days.
L~
~~~
40
Carrie M. Anderson,
Weil Gotshal & Manges LLP
1300 Eye St. N.W.,
Suite 900
Washington, DC 20005
41