BMI Rate-Court Judge Rules Against Dept. of Justice's '100 Percent' Licensing Decision

In a surprise move, BMI’s rate court judge ruled on Friday that fractional licensing is allowed under the consent decree the performing-rights organization operates under, according to a statement from BMI.

According to Stanton’s ruling, “The consent decree neither bars fractional licensing nor requires full-work licensing,” which is the exact opposite of what the DOJ argued when it gave ASCAP and BMI one year to employ full-works licensing.

In making that ruling, Judge Louis Stanton ruled against the Dept. of Justice’s controversial decision on June 30 -- which insisted that the consent decree mandated full-works licensing (also known as 100 percent licensing) and gave both ASCAP and BMI a year to adopt that type of licensing. The decision was roundly criticized by the publishing industry and embraced by licensees, including digital services and radio networks.

The difference between fractionalized licensing and full-works licensing is that in the former case a licensee must obtain a license from each copyright owner of a song -- no matter how many authors it may have -- in order for the user, say radio, to play that song. The music publishing industry says that fractionalized licensing is the way it has worked for decades.

In full-works licensing, a licensee or music user would need a license from only one of the songwriters -- and licensees claim that’s they way they have been operating too for decades.

The argument came to a head when the DOJ was asked to review the consent decree to modify for the modern music environment. But instead of modifying it, the DOJ instead made the consent decree even more onerous to music publishers and songwriters.

In response, the two PROs, ASCAP and BMI said they were going to fight it, BMI through its rate court, which held its hearing today, while ASCAP would lobby Congress to seek a legislative correction, if the court case failed.

According to a BMI statement, federal Judge Louis Stanton issued an order rejecting the US Department of Justice’s recent interpretation of the BMI consent decree, and concluded that BMI is free to engage in the fractional licensing of musical works. This decision immediately followed oral arguments heard today from both parties.  Judge Stanton’s ruling is now the controlling interpretation of the BMI consent decree.”

“As we have said from the very beginning, we believed our consent decree allowed for the decades-long practice of fractional licensing and today we are gratified that Judge Stanton confirmed that belief," BMI CEO and president Mike O’Neill said in a statement. “Our mission has always been to protect the interests of our songwriters, composers and publishers, and we feel we have done just that. Today’s decision is a victory for the entire music community.”

ASCAP CEO Beth Matthaws applauded the BMI rate court decision."This is terrific news for all of us in the songwriting community as we continue to work on modernizing the consent decrees to reflect the real world,” she said in a statement.

National Music Publishers’ Assn. president & CEO David Israelite too lauded the decision. "Thanks to the courage of Mike O'Neill, BMI, and the entire songwriting and music publishing community, the DOJ's disastrous views on 100% licensing have been rejected by a federal Judge,” Israelite said in a statement. “This is a huge win for songwriters and a huge win for the rule of copyright law." 

Added Universal Music Publishing Group chairman and CEO Jody Gerson: "We are delighted that our songwriters received a great victory today." 

Sony/ATV Music Publishing chairman and CEO Martin Bandier labeled Stanton’s decision a common sense interpretation of the consent decree which clarifies that BMI is not required to grant 100% licenses. “[Stanton’s] statement that ‘nothing in the consent decree gives support to the [DOJ’s antitrust ]division’s views’ could not be clearer,” Bandier said in a statement. “While the DOJ’s interpretation would have upended decades of licensing practices and caused uncertainty and disorder to everyone in the marketplace, Judge Stanton’s ruling is in the public interest and will benefit all interested parties in the music industry, including songwriters, music publishers and licensors.”

And Warner/Chappell chairman/CEO John Platt said the decision represented a big win, not just for BMI, but for all publishers and songwriters. “While I'm sure this story will continue to unfold, this is a fantastic result which should give us hope that the status quo for US performance rights licensing will not be upended,” Platt said in a statement.

Meanwhile, a new songwriter group, Songwriters Of North America, have also filed a lawsuit against the U.S. Dept. of Justice over its decision. That lawsuit stated that the 100-percent ruling is "an illegitimate assertion of agency power in gross violation of plaintiffs’ due process rights, copyright interests, and freedom of contract, and needs to be set aside."

In the BMI court case, the two sides were supposed to have a hearing in the Judge’s chambers setting forth the schedule on how BMI’s case against the DOJ would proceed. But because so many representatives from both sides were present, they held the hearing in court, where testimony was heard from both sides, each putting forth their position on why full-works licensing or fractionalized licensing should be the way licensing is conducted.

Moreover, since the ASCAP and BMI consent decrees are similar, some hope that the ASCAP rate court Judge Denise Cote will follow suit, should the matter come before her.

Now the question becomes, will the Dept. of Justice turn to Court of Appeals for the Second Circuit?  “The Department of Justice has received the Order and is reviewing it," a DOJ spokesperson said in a statement.

“We hope that the DOJ has had enough of people telling them they are wrong and give up their pursuit of their interpretation of how licensing should work,” says one senior music publishing executive. “If enough people tell you that you are wrong, maybe you will start believing them."