Copyright Supremacy: SONA’s Unsound Legal TheorySeptember 14, 2016
Yesterday, the Songwriters of North America (SONA), a songwriter advocacy group, sued the Department of Justice over its interpretation of the antitrust consent decrees governing ASCAP and BMI, the two largest U.S. performance rights organizations (PROs). The lawsuit alleges that the DoJ has, by simply reading the words of the consent decrees, unconstitutionally seized their property. While heavy on rhetoric, the complaint is light on actionable facts. It not only misunderstands the DoJ’s mandate, but is anchored in a breathtakingly overbroad vision of copyright law that should give any sensible observer pause, and serves as a reminder of the Copyright Office’s problematic relationship with industry.
This is What You Came For
Performance rights organizations like ASCAP and BMI serve as intermediaries in the music licensing marketplace. Songwriters and publishers can assign their rights to the PRO, which in turn offers its entire catalog for license to users, and then collects and distributes royalties back to the songwriters and publishers. Songwriters and users benefit from the ease and efficiency of licensing rights from PROs. However, ASCAP and BMI operate under antitrust consent decrees. In the past they had leveraged their size in abusive and anticompetitive ways, and were sued by the Department of Justice for violations of antitrust law. In order to resolve the dispute and address the anticompetitive harms posed by the PROs, they reached settlement agreements with the DoJ, in which they agreed to certain conditions in order to continue operating. These agreements are the consent decrees, and those conditions preserve the benefits for both songwriters and users in having an efficient one-stop-shop for licensing, while prohibiting the kinds of harmful behavior that large-scale entities like the PROs can engage in. The decrees are enforced by the DoJ, and overseen by federal judges.
ASCAP and BMI asked the DoJ (at the behest of their music publisher members) to consider certain amendments to the consent decrees. Under existing consent decree rules, the PROs cannot discriminate between users (like restaurants, bars, radio stations, yoga studios, etc.), and must treat similarly situated users alike. This rule ensures that the PROs cannot use their size to pick winners and losers or play favorites in the user marketplace. The PROs asked to be allowed to abandon the non-discrimination rules and be given the power to refuse licenses to some users — particularly digital streaming services — to force those users to negotiate deals directly with the music industry, without the protections of the consent decree. This has been dubbed “partial withdrawal.” Ironically, the catalyst for requesting this review was prior music publisher misbehavior in striking direct deals, which cost songwriters tens of millions of dollars.
In the course of reviewing this request, the DoJ asked a simple question — if a song has multiple authors, and the authors are members of different PROs, what does a PRO license allow a user to do? Do they allow the user to perform any song listed in the PROs catalog, even if not all authors are a member of the PRO (a “100%” license)? Or do they only grant the user “fractional” shares of the songs in the catalog and require the user to identify, locate, and negotiate with all other authors before performing? Looking at the language of the consent decrees, the impact either answer would have on the marketplace, as well as the statements of the PROs, the DoJ concluded that the language and intent of the consent decrees require the PROs to offer “100%” licenses.
Just Because It’s “Longstanding” Doesn’t Make It Legal
The first clue that the lawsuit filed yesterday has serious shortcomings is in how the plaintiffs repeatedly characterize their problem with the DoJ’s decision: that it is “contrary to the longstanding practice of the music industry.” Leaving aside whether or not this is accurate (there is ample evidence to suggest that it's not), this indicates that the plaintiffs have badly misunderstood the DoJ’s job.
The DoJ is responsible for ensuring that parties to consent decrees, like ASCAP and BMI, are in compliance with the terms of the decree. The plaintiffs seem to erroneously believe that if there’s a “longstanding practice”, then that trumps any antitrust consideration. But if any company or industry could overcome antitrust concerns by saying “but we’ve always done it that way”, then there may as well be no antitrust law. Fortunately that’s not how it works. In fact, in the course of its review the DoJ discovered other consent decree violations at ASCAP, and issued a $1.75 million fine.
The belief that historical practice is a defense to antitrust concerns is what leads the plaintiffs assert that the DoJ has “announced an extraordinary new rule.” Of course, it’s nothing of the sort. After being invited by music publishers to scrutinize the operation of the PROs, the DoJ has explained what it believes the the PROs are currently required to do under the consent decrees as they exist.
Everything the Light Touches Is Not Copyright's Kingdom
The headline claim in the SONA lawsuit is that the Department of Justice has violated the plaintiffs’ Fifth Amendment rights in by depriving them of their property, namely their copyright interests. A cursory examination of the claim reveals its weaknesses. But more troubling than the claim itself is the breathtaking scope of the theory of copyright that it’s grounded in.
The Fifth Amendment of the Constitution provides that “No person shall… be deprived of … property, without due process of law; nor shall private property be taken for public use, without just compensation.” There are two ways to think of “takings” – one is eminent domain, where the government takes away your title of ownership to a piece of property; another is a “regulatory taking,” where the government either uses your property in a way that physically prevents you from using it, e.g. by placing equipment on the land, or “where regulation denies all economically beneficial or productive use.”
What is the plaintiff songwriters’ property? Their copyrights in their songs. Let’s accept for the sake of argument that copyrights are property subject to the protections of the Fifth Amendment. Do the consent decrees, as interpreted by the DoJ, take away their title of ownership to the copyrights? No. Do the consent decrees deny all economic benefit from the copyrights? Hardly. They do not even deny them the benefits of the public performance right – the plaintiffs are welcome to license those rights through any other channel they want if they don’t like the conditions on licensing through a PRO. And saving the most obvious question for last: do the consent decrees even regulate the plaintiffs in the first place? They do not. So what are the plaintiffs upset about?
The plaintiffs aren’t just arguing that their property interest in their copyrights shields them from any government-imposed limits on those rights (which would also be farcical, given that copyrights are subject to a number of limitations, from fair use, to first sale, to exceptions for educators and libraries) – they’re upset because they think they are entitled under the law to bar the government from imposing any regulations or limits on any potential licensee. Do they also believe that local ordinances that set a closing time for bars, which generate royalties for songwriters by playing music, deprives them of their property? They are demanding that any downstream user they wish to work with be free to accept any condition the copyright owner imposes – regardless of how harmful to users and consumers or anticompetitive those conditions are.
This is a staggering claim. In this instance SONA claim that the government is powerless to impose a limit on the services offered by the PROs, i.e. someone a copyright owner might do business with. In case this argument sounds familiar, it’s because it’s the same argument advanced by copyright-owning video programmers in opposition to the FCC’s proposal to free consumers from a de facto monopoly exercised by pay-TV providers over the set-top-box marketplace. Programmers argue that the government is powerless to regulate pay-TV providers, if those regulations conflict with a condition the programmers want to impose on the pay-TV providers. What about Congress’s mandate that consumers have choice in how they access the TV programming they’ve paid for? Irrelevant, say the programmers, “because copyright.” Similar thinking once led courts to strike down worker protection laws as unlawful interference.
Taken to its conclusion, the extreme view of property rights advanced by SONA in this lawsuit, and the video programmers in the FCC proceeding, means that the government is powerless to regulate in any way that even secondarily affects a property owner. Thankfully, courts have carefully limited the idea of takings to prevent just this sort of outcome, by requiring a total elimination of value, and not just incidental impact, before considering a regulation a “taking.”
Contrary to what copyright holders like SONA and video programmers may believe, the law does not bless copyright owners to ignore other areas of law and policy, as Microsoft discovered years ago when it attempted to shield itself from antitrust liability by asserting it was just exercising its copyrights. It’s not a large leap to conclude that the copyright exemption from antitrust law imagined by SONA does not extend to third parties, like the PROs, either.
Hold the Door
In addition to showcasing a belief that copyright interests take precedence over all other legal and policy considerations, the lawsuit also serves as a conspicuous example of the revolving door between the Copyright Office and industry that we highlighted in our recent report on the Office and its history of problematic policy recommendations. SONA is being represented in this lawsuit by Jacqueline Charlesworth, who served as General Counsel to the Copyright Office until seven weeks ago. Earlier this year the Copyright Office offered its views on the consent decrees to Congress, endorsing the preferred interpretation of the music publishing industry, without actually engaging with the relevant marketplace harm issues. Coincidentally, the Copyright Office’s letter to Congress about the FCC set-top-box proceeding from six weeks ago also slips in the same Fifth Amendment takings theory featured in yesterday’s SONA lawsuit.
While the SONA lawsuit’s astonishing claims are tenuous, they represent a worrying trend of co-opting extreme anti-regulatory arguments in defense of property rights to expand the scope of intellectual property.
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