The U. S. Court of Appeals for the Second Circuit affirmed a district court ruling that composers and music publishers cannot partially withdraw from the American Society of Composers, Authors and Publishers (ASCAP) licensing scheme to attempt to negotiate or coerce direct deals with new media companies. The 2d Circuit also affirmed the royalty rate found by the district court. American Society of Composers, Authors and Publishers et al. v. Pandora Media Inc., Case Nos. 14-1158, -1161, -1246. (2d Cir., May 6, 2015) (Leval, J.; Straub, J.; Droney, J.) (per curiam).

ASCAP is a performing rights organization that represents almost half of all composers and music publishers in the United States. The composers represented granted ASCAP a non-exclusive right to license public performances of their music. ASCAP is subject to a consent decree because of concerns that ASCAP’s size grants it monopoly power in the performance rights market. According to the consent decree, ASCAP must grant any music user making a written request a non-exclusive license to perform all of the works in the ASCAP repertory. The definition of “ASCAP repertory” in the consent decree is “those works the right of public performance of which ASCAP has or hereafter shall have the right to license at the relevant point of time.” The “right of public performance” is defined as “the right to perform a work publicly in a nondramatic manner.”

In 2010, some ASCAP members became concerned that ASCAP was receiving below-market rates for public performance licenses to new media companies such as Pandora. The members wanted to withdraw from ASCAP the right to license their works to new media users and instead negotiate with new media users outside of the ASCAP framework. ASCAP changed its rules accordingly to permit this practice. Shortly thereafter, Sony, EMI and Universal withdrew their new media licensing rights from ASCAP and entered into a direct license with Pandora. Pandora terminated its existing ASCAP license and requested a new license for the period running from January 1, 2011 to December 31, 2015.

Pandora filed a rate court petition in 2012. In 2013 Pandora moved for summary judgement on the issue of the partial withdrawals. The district court granted Pandora’s motion and set the rate for all five years to 1.85 percent. ASCAP, Sony, EMI and Universal each appealed.

The U. S. Court of Appeals for the 2d Circuit affirmed the district court’s ruling holding that the plain language of the consent decree precluded ASCAP from accepting partial withdrawals. The circuit court explained that the “decree’s definition of “ASCAP repertory” and other provisions of the decree establish that ASCAP has essentially equivalent rights across all of the works licensed to it.” The circuit court further stated that “as ASCAP is required to license its entire repertory to all eligible users, publishers may not license works to ASCAP for licensing to some eligible users but not others.” The 2d Circuit also affirmed the district court’s determination that the proper rate for Pandora’s license was 1.85 percent.