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United States v. American Society of Composers, Authors, and Publishers

United States District Court, Second Circuit

December 13, 2013

IN RE PETITION OF PANDORA MEDIA, INC. Related to UNITED STATES OF AMERICA, Plaintiff
v.
AMERICAN SOCIETY OF COMPOSERS, AUTHORS, AND PUBLISHERS, Defendant.

Kenneth L. Steinthal, Joseph R. Wetzel, King & Spalding, LLP, San Francisco, CA, for Pandora Media, Inc, For the movant Publishers Sony/ATV Music Publishing, LLC, and the EMI Music Publishing Companies.

Donlad S. Zakarin, Frank P. Scibilia, Erich C. Carey, Pryor Cashman LLP, New York, NY.

OPINION & ORDER

DENISE COTE, District Judge.

On September 30, 2013 Sony/ATV Music Publishing LLC and the EMI Music Publishing Companies filed a motion to intervene in the above captioned matter nunc pro tunc to September 13, 2013. For the reasons that follow, the motion is granted with the restrictions described below.

BACKGROUND

Sony/ATV Music Publishing LLC and the EMI Music Publishing Companies (collectively, the "Publishers") are business entities that own catalogues of copyrighted music compositions. Pandora is a company that provides streaming internet radio services using songs licensed from artists and their agents and licensees. The Publishers are not parties to this underlying rate court action, In Re Petition of Pandora Media Inc., 12 Civ. 8035 (DLC). The parties to the action are Pandora and the American Society of Authors and Composers ("ASCAP"). ASCAP is a performing rights organization ("PRO") composed of voluntary writer and publisher-members, which exists in part to facilitate licensing of artists' works to third parties. Since 1941, ASCAP has been operating under a consent decree stemming from a Department of Justice antitrust lawsuit that alleged monopolization of performance rights licenses. The most recent iteration of the consent decree is called the Second Amended Final Judgment ("AFJ2"), which restricts how ASCAP may issue licenses in a variety of ways. One such restraint is that AFJ2 provides a mechanism whereby a judge on the United States District Court for the Southern District of New York (the "rate court") will determine a reasonable fee for ASCAP licenses when ASCAP and an applicant for a license cannot reach an agreement. See AFJ2 ยง IX(D). Trial to set a rate for Pandora's use of the ASCAP repertory is set for January 21, 2014.

AFJ2 also contains other restraints on ASCAP's freedom to license song rights. This motion for intervention arises out of a summary judgment opinion issued on September 17, 2013 in which this Court held that AFJ2 prevented ASCAP from withholding from Pandora the rights to compositions in its repertory while licensing those compositions to other users. In re Pandora Media, Inc., 12 Civ. 8035 (DLC), 2013 WL 5211927 (S.D.N.Y. Sept. 17, 2013) ("September 17 Opinion"). The summary judgment practice was precipitated by putative publisher partial withdrawals of rights from ASCAP.

In April 2011, ASCAP adopted a Compendium Modification which allowed music publisher members like the petitioners here to withdraw from ASCAP the right to license certain compositions in "New Media" outlets, while allowing ASCAP to retain the right to license those works to other outlets. The modified Compendium defined "New Media" outlets as:

[A]ny standalone offering by a Music User' by which a New Media Transmission of musical compositions is made available or accessible (i) exclusively by means of the Internet, a wireless mobile telecommunications network, and/or a computer network and (ii) to the public, whether or not, in exchange for a subscription fee, other fee or charge.

In practice, New Media outlets include entities like Pandora.

Following the Compendium Modification, several publishers, including Sony/ATV and some EMI Music Publishing companies, purported to withdraw from ASCAP their rights to license their copyrighted compositions to New Media outlets like Pandora while allowing ASCAP to retain the right to license those same songs to other outlets. Following the publisher withdrawal of rights from ASCAP, Pandora then entered into separate licensing agreements with some publishers. On June 11, 2013, Pandora moved for summary judgment seeking a determination that the ASCAP Compendium Modification did not affect the scope of the ASCAP repertory of songs subject to Pandora's license.

The Publisher's Actions Subsequent to Pandora's June 11 Filing of its Summary Judgment Motion

After Pandora moved for summary judgment on June 11, the Publishers expressed concern that arguments in Pandora's briefing might implicate an anticipatory repudiation of the direct licenses that Pandora had negotiated following the Publishers' withdrawals from ASCAP. Following email correspondence with counsel for Pandora, the Publishers wrote a letter to the Court dated June 27 in which they indicated that they were "gravely concerned because the motion appeared to directly challenge our clients' rights, including the validity of their direct licenses with Pandora and their withdrawal of certain rights from ASCAP." The Publishers asserted that counsel for Pandora had refused to clearly answer whether its motion implicated the Publishers' rights and they argued that Pandora's motion constituted an anticipatory repudiation of the direct licenses. They further contended that

We do not understand, as a matter of jurisdiction and procedure, in a rate proceeding in which our clients are not parties [how] Pandora can seek to invalidate direct licenses and adjudicate the consequences of our clients' withdrawal of rights from ASCAP... we do not believe it can be done in a proceeding in which our clients are not parties.

By letter also dated June 27, Pandora responded that it was "not seeking here to repudiate or void the prior licenses entered into with EMI or Sony." And that "Pandora's motion does not seek to secure a declaration that [the Publishers'] withdrawal of certain new media rights from ASCAP is a nullity....' Rather... the relief requested by Pandora's motion is limited to the scope of Pandora's Consent Decree License."

By letter to the Court dated June 28, the Publishers replied that they "[did] not understand [Pandora's argument as to]... how [the Publishers'] catalogues can be subject to [Pandora's] supposed Consent Decree License if, as [Pandora] states, Pandora is not seeking to repudiate or void the direct licenses with [the Publishers]." The Publishers reiterated that "to the extent that Pandora is seeking relief that impacts our clients' rights and would adjudicate their rights in a proceeding in which they are not parties, we think it is improper." Pandora replied to that letter, also on June 28, with an inquiry as to whether any further letters would be necessary in light of Pandora's view that there was "no ripe issue presented for [the Court's] determination."

In response to the above described letters, on July 1, the Court ordered Pandora, ASCAP and the Publishers to make submissions to the Court "regarding whether Sony/EMI should formally participate in the ongoing summary judgment motion practice between Pandora and [ASCAP], or in any other way in this litigation." By letter of July 8 the Publishers stated that

[B]ased on [Pandora's] representation that Pandora is not seeking to repudiate or disavow the direct licenses with [the Publishers] and is not challenging their withdrawal of certain rights from ASCAP, we accept [Pandora's] representation that the rate proceeding is not intended to and will not affect our clients' rights... as such, even assuming that [the Publishers] had the right to intervene (and we believe there are jurisdictional impediments to their doing so), it appears that their rights are not at risk in this rate proceeding and intervention or participation is inappropriate and unnecessary.

ASCAP's letter in response to the July 1 Order similarly stated that it saw no reason for the Publishers to intervene, explaining that:

Because Pandora has now represented to the Court that it is not seeking to repudiate the prior licenses it entered into with [the Publishers] and is not challenging Sony/EMI's withdrawal of their new media rights from ASCAP, there does not appear to be any need for [the Publishers] to participate in the summary judgment motion. Moreover, to the extent that Pandora attempts to change its position, we understand that [the Publishers] would seek to resolve such a dispute in a separate state court action, not in this proceeding.

The Publishers' Actions Subsequent to the September 11 Oral Argument

On September 5, 2013, the Court issued an order scheduling oral argument on Pandora's summary judgment motion and certifying certain questions to be addressed at argument. The questions made clear that the Court was considering a ruling that would prevent ASCAP from licensing works to certain licensees but not others. At oral argument on September 11, the Court indicated that it found the text of AFJ2 clear in prohibiting ASCAP's Compendium Modification. On September 12, the Publishers sent a letter to the Court which said that:

[B]ased on yesterday's argument, contrary to [Pandora's] representations, it now appears that [the Court] is considering a decision that most dramatically would affect our clients' rights without our clients having any opportunity to be heard. To be clear, our clients, not ASCAP are the copyright owners of the songs in question, possessed of exclusive rights under Section 106 of the Copyright Act, which include, under Section 106(4) the exclusive right to publically perform the songs or to authorize others to do so.

The Publishers did not, by that letter, request to intervene in the summary judgment practice. In response to the letter, the Court ...


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