And Your Little Dog, Too: Second Circuit Continues ASCAP Rate Court’s Crusade to Destroy the Only Thing That’s Working in Online Music Licensing

“[A] private property right includes the right to delegate, rent, or sell any portion of the rights by exchange or gift at whatever price the owner determines.”

Armen A. Alchian, Property Rights

We understand why Pandora wants to destroy ASCAP and BMI–the Man 2.0 doesn’t like uppity songwriters who want to be paid fairly.  Pandora and its fellow travelers in its many lobbying groups (Digital Media Association, Consumer Electronics Association, National Association of Broadcasters and the McCoalition) would like very much to destroy collective licensing.

And make no mistake–that’s exactly what they are trying to do.  By trying to stop publishers from withdrawing rights from the broken rate court system that dictates terms to songwriters affiliated with ASCAP and BMI, Pandora knows full well that they can use the consent decrees to force big publishers to withdraw from ASCAP and BMI thus substantially weakening the PROs for everyone left behind.

The Pandora ruling from the ASCAP rate court came up with what many view as a truly whacky interpretation of the ASCAP consent decree.  That ruling ignores the clear legislative language and intent of Congress in drafting the Copyright Act and somehow freezes the bundle of rights that is copyright but only if a songwriter joins ASCAP–and consents to be governed by a 74 year old government mandate that bears no resemblance to reality.

ASCAP naturally appealed this bizarre Pandora ruling from the one judge with exclusive jurisdiction over ASCAP songwriters and the Second Circuit has ruled against those songwriters.  We can only hope that the Department of Justice stops the madness in its review of the consent decrees and that the courts will follow the DOJ’s modifications.

Unfortunately, the one modification we  probably won’t see from the DOJ will be to take the fate of ASCAP and BMI songwriters out of the hands of a single judge.

Pandora should make no mistake–this is not over.

This is part of what I wrote in my comments to the Department of Justice on the consent decree review from last summer:

What Happened to the Bundle of Rights?

It is axiomatic that under the 1976 Copyright Act, copyright is a bundle of rights. Copyright owners are largely free to exploit their rights or subdivisions of copyright in whole or in part. This is arguably the fundamental reason why PROs exist—to administer the performance right subdivision of the bundle.

Methods of monetizing songs have evolved with technology as the marketplace identifies new methods of exploitation. Generally speaking, promoting licensing of these new methods seems to be the broad policy goal of the consent decrees. The government has also determined that promoting licensing is so important that it effectively trumps the songwriter’s right to say “no,” a provision of the consent decrees that the regulated PROs were required to agree.

After the last Pandora decision in the ASCAP rate court, it appears that the consent decree is being interpreted to require that copyright owners withdraw from ASCAP altogether in order to enjoy the right to license a subdivision of their bundle of exclusive rights, replacing the songwriter’s decision with the Court’s own interpretation of the government’s requirements. (The same applies to BMI.)

Respectfully, I fail to see the logic, utility or authority for the government establishing an arbitrary bright line limit on how far the copyright bundle can be subdivided.

If the government permits copyright owners to license all of the performance right through regulated PROs, why should the government take a songwriter’s right to license a subdivision of the performance right outside of the consent decree? This is particularly true of digital performance rights that were barely commercialized or did not exist at all at the time of the last modifications of the respective consent decrees.

I understand why the music users would like us to believe that the government intended to regulate uses that did not exist at the time of the modifications, but I hope you can empathize with songwriters who find this rather stunning logic and take a contrary view.

This arbitrary limitation on the statutory right to subdivision essentially dares copyright owners to disassociate themselves from the regulated PROs, a course that I fully believe they will eventually follow. If enough copyright owners are effectively forced to withdraw from the regulated PROs in order to enjoy an actual free market for subdivisions of their rights permitted by the Copyright Act, both ASCAP and BMI surely will be diminished to the great disadvantage of songwriters.

I suggest that the market should be trusted to do a better job of creating licensing opportunities as likely would occur if copyright owners were free to decide how to license their property. The rate courts’ position seems at odds with the elegance of the bundle of rights solution that underpins our private property traditions of personal liberty.