# Appendix — Columbia Broadcasting System, Inc. v. American Society of Composers, Authors, & Publishers

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1980
- **Citation:** 449 U.S. 949

## Text

Supreme Court, US.

80-323 FILED
AUG2 9 1980

MICHAEL RODAK, JR., OLE

No.

IN THE
Supreme Court of the United States
October Term, 1980

COLUMBIA BROADCASTING SYSTEM, INC.,
Petitioner,
—against —

AMERICAN SOCIETY OF COMPOSERS, AUTHORS
AND PUBLISHERS, et al.,

Respondents.

APPENDIX TO PETITION
FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

ALAN J. HRUSKA
One Chase Manhattan Plaza
New York, N. Y. 10005
(212) 422-3000

Attorney for Petitioner

Of Counsel:
DAVID BOIES
LOUIS M. SOLOMON

CRAVATH, SWAINE & MOORE
One Chase Manhattan Plaza
New York, N. Y. 10005

August 29, 1980

TABLE OF CONTENTS

Opinion of the Court of Appeals Sought To Be
Reviewed, 620 F.2d 930 (2d Cir. 1980)

Opinion of the Court of Appeals Denying Defen-
dants’ Motions For Summary Affirmance, 607
F.2d 5438 (2d Cir. 1979)

Opinion of the Supreme Court, 441 U.S. 1 (1979)

[Initial Opinion of the Court of Appeals, 562 F.2d
130 (2d Cir. 1977)

Opinion of the District Court, 400 F.
(S.D.N.Y. 1975)

Judgment of the Court of Appeals Sought To Be
Reviewed

Supp. 737

Orders of the Court of Appeals Denying CBS’s
Petition for Rehearing and Suggestion for
Rehearing En Bane

3rief of the United States Submitted (on Remand)
to the Court of Appeals

grief of the United States Submitted to the Second
Circuit Court of Appeals in United States »
ASCAP (Application Of National Broadcasting
Company), Docket No. 71-1487

Page

A-]

APPENDIX A

OPINION OF THE
COURT OF APPEALS
SOUGHT TO BE REVIEWED

REPORTED AT 620 F.2d 930 (2d Cir. 1980)

APPENDIX A

UNITED STATES COURT OF APPEALS
FoR THE SECOND CIRCUIT

COLUMBIA BROADCASTING SYSTEM, INC.,
Plaintiff - Appellant,
—against—

AMERICAN SOCIETY OF COMPOSERS,
AUTHORS AND PUBLISHERS, et al.,
Defendanis- Appellees.

No. 120, Docket 75-7600
Argued Nov. 20, 1979
Decided April 3, 1980

Alan J. Hruska, New York City (Roger H. Cummings,
John N. Mayberry, Cravath, Swaine & Moore, and John D
Appel, Deputy Gen. Counsel, CBS Ine., New York City, on
the brief), for plaintiff-appellant.

Jay H. Topkis, New York City (Bernard Korman,
Herman Finkelstein, Allan Blumstein, Max Gitter, Rich-
ard Reimer, Fred Heather, Andrew Peck and Paul, Weiss,
Rifkind, Wharton & Garrison, New York City, on the
brief), for defendant-appellee ASCAP.

Robert J. Sisk, New York City (George A. Davidson,
Norman C. Kleinberg, Conley E. Brian, Jr., Michael E
Salzman, and Hughes, Hubbard & Reed, New York City,
on the brief), for defendant-appellee BMI, Ine.

David R. Hyde, New York City (Cahill, Gordon &
Reindel, New York City, on the brief), for NBC, Inc. as
amicus curiae.

A-2

Ira M. Millstein,. New York City (Weil, Gotshal &
Manges, New York City, on the brief), for All Industry
Television Station Music License Committee as amicus

curiae.

Robert H. Bork. New Haven, Conn., for Aaron Cop-
land, et al., as amici curiae.

Robert M. Lichtman, Washington, D.C. (Philip El-
man, Jerry D. Anker, and Wald, Harkrader & Ross,
Washington, D.C., Denis Defreitas, Legal Advisor, The
Performing Right Society, Ltd., London, England, and
Jean-Loup Tournier, Directeur Gen., Societe Des Auteurs,
Compositeurs et Editeurs de Musique, Paris, France, on
the brief). for The Performing Right Society, Ltd. and
Societe des Auteurs, Compositeurs et Editeurs de Musique
as amici curiae.

Barry Grossman, Washington, D.C. (John H.
Shenefield, Asst. Atty. Gen., John J. Powers, III, Andrea
Limmer, Washington, D.C., on the brief), for The United
States as amicus curiae.

Hawkins. Delafield & Wood, New York City (Philip R.
Forlenza and Rafael Pastor, New York City), submitted a
brief for ABC, Inc., as amicus curiae.

Before LUMBARD. MOORE AND NEWMAN, Circuit
Judges:

NEWMAN, Circuit Judge:

This is the fourth round of litigation in a lawsuit
brought by Columbia Broadcasting System, Inc. (CBS)
against the American Society of Composers, Authors and
Publishers (ASCAP), Broadcast Music, Inc. (BMI), and
their members and affiliates. The lawsuit seeks injunctive
relief to prevent ASCAP and BMI from using a blanket

license to convey to television networks non-dramatic

A-3

performing rights, that is, the right to “perform” copy-
righted music by transmitting it to the networks’ tele-
vision audiences. The blanket license permits the licensee
to use any music in the repertory of the licensor, as often
as desired, for a one-time license fee. The license lasts for
a stated term, usually but not necessarily one year. Pay-
ment is set at either a flat sum or a percentage of the
network’s revenue. Alternatively to barring use of the
blanket license, the CBS suit seeks modification to require
that ASCAP and BMI charge predetermined amounts for
each time copyrighted music is used on the air. The
blanket license in its present form is alleged to be an
agreement unreasonably restraining trade in violation of
§ 1 of the Sherman Act, 15 U.S.C. § 1.

The lawsuit was filed in 1969. Round one was an
eight-week bench trial in 1973 in the District Court for
the Southern District of New York (Morris Lasker,
Judge). In a comprehensive opinion, replete with detailed
findings, Judge Lasker found that CBS had failed to prove
its allegations and ordered the complaint dismissed.’ Co-
lumbia Broadcasting System, Inc. v. American Society of
Composers, 400 F.Supp. 737 (S.D.N.Y. 1975). Round two
was the prior appeal to this Court. In an opinion by Judge
Gurfein, the Court ruled that the blanket license was an
illegal price-fixing device, a per se violation of §1. The
matter was remanded to the District Court for formula-
tion of an appropriate remedy. Columbia Broadcasting
System, Inc. v. American Society of Composers, Authors and

That dismissal left pending a severed counterclaim of the defend-
ants, alleging antitrust violations on the part of CBS. The dismissal of
the complaint, disposing of less than all the claims, would ordinarily not
result in an appealable final judgment in the absence of a certification
pursuant to Fed.R.Civ.P. 54(b); however, the dismissal is appealable

under 28 U.S.C. § 1292(a)(1) because it is an order denying an
injunction.

A-4

Publishers, 562 F.2d 130 (2d Cir. 1977). Judge Moore
disagreed with the conclusion that the blanket license was
price-fixing, but concurred in the decision to remand so
that a “practical method” of “per use licensing”’ might be
developed. Jd. at 141. Round three occurred when the
Supreme Court reviewed the decision of this Court. Writ-
ing for an eight-member majority, Justice White con-
cluded that the blanket license was not a per se violation of
$1 and remanded the case to this Court for further
proceedings, including an assessment of the blanket li-
cense under the rule of reason. Broadcast Music, Inc. v.
Columbia Broadcasting System, Inc., 441 U.S. 1, 99 S.Ct.
1551, 60 L.Ed.2d 1 (1979). Justice Stevens dissented,
agreeing with the majority that the blanket license was
not a per se violation of § 1 but concluding that the record
and certain of Judge Lasker’s findings established a § 1
violation under the rule of reason. Jd. at 25, 99 8.Ct. at
1565.

The matter is now before a panel of this Court that
includes only Judge Moore from the prior panel.’ Addi-
tional briefs have been submitted in response to the
Court’s framing of specific issues, 607 F.2d 543, and
extensive oral argument was heard.’ We now affirm the
decision of the District Court.

Facts
The three prior opinions, especially Judge Lasker's,
have so fully set forth the facts that only the bare
essentials need be again recounted. ASCAP has a

‘ Judge Lumbard was assigned to the panel after the death of
Judge Anderson; Judge Newman was assigned to the panel after the
death of Judge Gurfein.

‘The oral argument was held before Judge Newman was assigned
to the panel, but he has had the benefit of a complete 234-page
transcript of that argument.

A-5

membership of approximately 6,000 music publishing com-
panies and 16,000 composers. BMI, a non-profit corpo-
ration, is affiliated with approximately 6,000 music
publishing companies and 20,000 composers. Composers of
virtually all music copyrighted in the United States have
granted to either ASCAP or BMI the non-exclusive right
to license users to perform their compositions. The reper-
tory of ASCAP has more than three million compositions,
and the repertory of BMI has more than one million
compositions. CBS and the other two major television
networks, NBC and ABC, have held blanket licenses from
both ASCAP and BMI for many years. CBS first obtained
its blanket license from ASCAP in 1946. At that time
ASCAP held exclusive rights to the music of its members,
and the blanket license it offered to broadcasters was the
only device whereby they could obtain performing rights
to copyrighted music.

As a matter of legal entitlement, licensing arrange-
ments were significantly changed in 1950 when a consent
decree, first entered in 1941 to settle Government litiga-
tion against ASCAP,' was reopened and substantially
modified.” The amended consent decree permits ASCAP
to obtain only non-exclusive rights from its member-
composers and enjoins ASCAP from limiting, restricting,
or interfering with the right of any member to issue
directly to any user a non-exclusive license for performing
rights. The composers thus retain the legal right to bypass
ASCAP and license performing rights directly to CBS.
The amended decree also requires ASCAP to offer to any
broadcaster either the blanket license, or, as an alterna-

‘United States v. ASCAP, 1940-1943 Trade Cas.956,104 (S.D.N-Y.
1941).

' United States v. ASCAP, 1950-1951 Trade Cas. 962,595 (S.D.N.Y.
1950).

A-6

tive, a per program license. Both types of licenses permit
the user to perform any music in the ASCAP repertory;
for the per program license the user pays only with
respect to programs on which copyrighted music is per-
formed, whereas, with the blanket license, the user pays a
one-time fee for the duration of the license. The decree
also provides that in the event of disputes concerning the
amount of license fees, the District Court for the Southern
District of New York is authorized to determine a reason-
able fee.

Similar, though not identical provisions govern the
licensing of performing rights by BMI. For purposes of
this litigation, the significant fact, stipulated to by the
parties, is that CBS could obtain non-exclusive licenses for
performing rights directly from copyright owners affil-
iated with BMI with the same ease or difficultly as it could
obtain such rights from copyright owners who are mem-
bers of ASCAP.

As a matter of factual occurrence, CBS has never
made any attempt to obtain performing rights directly
from a copyright owner.

Beyond these facts concerning licensing arrange-
ments and opportunities, some understanding is required
of the facts concerning CBS’s use of music. Two types of
classification are involved: one concerns the function of
the music, and the second concerns the circumstances
under which the selection of music is made. CBS, like all
broadcasters, uses music as theme, background, or feature.
Theme music is played at the start or conclusion of a
program and serves to enhance the identification of the
program. Background music accompanies some of the
action on the screen. Feature music is a principal focus of

A-7

audience attention, such as a popular song sung on a
variety show.

Music on network television is selected in one of three
ways. Most of it, as much as 90%, is selected by production
companies, or “packagers,” which produce television pro-
grams and sell them to the networks. The music on these
programs is almost always theme and background music,
much of it composed specially for the production company.
Typically the company employs a composer to write theme
and background music, acquires the copyright from him,
and assigns it to its own music publishing subsidiary.
Such music is called “inside” music. In some instances the
packager decides to use music that has already been
composed, so-called “outside” music. In these instances
the packager must acquire from the copyright owner the
right to record the music on the soundtrack of the pro-
gram’s film or tape. This right is known as a “synch”
right, the music often being carefully fitted to synchronize
with the action on the screen. Acquisition of the synch
right, however, does not carry with it the separate right to
perform the music on the air. That performing right
could be acquired by the packager when he acquires the
synch right, and reassigned to the network; however, the
industry practice has been that the network automatically
acquires the performing right for all music used on pack-
aged programs under the network’s blanket license for
the performing rights to all ASCAP music, and the
packager therefore has no need to acquire a performing
right for reassignment to the network.

A small portion of network music is selected by the
network itself, in those few instances when the network is
producing its own programs. A still smaller portion is

A-8

selected by the person or group performing the music, in
those very few instances where music is spontaneously
used. Examples are a football half-time show or a late
night talk show on which a guest sings an unscheduled
song.

Discussion

Our starting point for determining whether the blan-
ket license violates § 1 is the decision of the Supreme Court
remanding the case to us. That decision obliges us to make
“an assessment under the rule of reason of the blanket
license as employed in the television industry.” 441 U.S. at
24-25, 99 S.Ct. at 1565. Since the parties are agreed that
the relevant market is the licensing of performing rights
to the television networks, we assume our consideration
should be similarly confined to the blanket license as
employed by the television networks.’ A rule of reason
analysis requires a determination of whether an agree-
ment is on balance an unreasonable restraint of trade,
that is, whether its anti-competitive effects outweigh its
pro-competitive effects. National Society of Professional
Engineers v. United States, 485 U.S. 679, 98 S.Ct. 1355, 55
L.Ed.2d 637 (1978); Continental T.V., Inc. v. GTE Sylvania,
Inc., 483 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977);
Chicago Board of Trade v. United States, 246 U.S. 231, 38
S.Ct. 242, 62 L.Ed. 683 (1918). In this case, however, we
are met with the threshold contention of the defendants
that the balancing of pro- and anti-competitive effects
need not be undertaken because Judge Lasker’s findings
of fact demonstrate that the blanket license has no
anticompetitive effect at all.

* The distinction may have significance, since the lawfulness of the
blanket license has also been challenged by non-network broadcasters.

A-9

Before examining that contention, we must consider
whether it is open to us under the Supreme Court’s
remand. It is possible to read the penultimate paragraph
of Justice White’s opinion—the one directing us to make a
rule of reason assessment—as if the Supreme Court had
concluded that the blanket license is a restraint of trade
and was requesting further consideration only as to
whether its restraining effect was unreasonable, 7. e., not
outweighed by pro-competitive advantages. Our reading
of the entire opinion, however, persuades us that no such
initial conclusion was reached. In the first place, the safer
course is to »ead judicial opinions as deciding only what
they purport to decide. That may not always be only the
narrow holding, for courts, especially appellate courts,
have an entirely legitimate function of elucidating prin-
ciples of law, fairly raised by litigation, even if the
resulting pronouncements are not absolutely required for
the precise decision reached. Appellate guidance is not
valueless because it is dictum. But appellate courts,
endeavoring to rule beyond the precise holding of a case,
normally make that intention unmistakably clear. In this
instance, the Supreme Court’s opinion purports to decide
only whether the blanket license is a per se violation of § l,
that is, a practice with such a high likelihood of having
unjustifiable anti-competitive effects that it is condemned
under the antitrust laws without the need to assess its
effect in a particular case. See Northern Pacific R. Co. v.
United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545
(1958). Once the Supreme Court decided that the blanket
license is not a per se violation of § 1, we believe it made no
decision concerning the effect of the license in the net-
work television industry at issue in this case, thereby
leaving open the question of whether the license has any

A-10

anti-competitive effect at all. Secondly, Justice White’s
opinion contains a specific observation that strongly sup-
ports our view of the decision’s reach. The opinion declares
that the majority is “uncertain whether the practice on its
face has the effect... of restraining competition among
the individual composers.” 441 U.S. at 13, 99 S.Ct. at 1559.
That observation leaves for consideration whether the
practice could have a restraining effect as applied to the
particular circumstances prevailing in the industry. To
that possibility we now turn, but in doing so, we examine
the record and Judge Lasker’s findings to see whether the
blanket license, on its face and as applied, is a restraint at
all.

There can be no dispute with the observation of
Justice Stevens, in his dissenting opinion, that “there is no
price competition between separate musical com-
positions.” 441 U.S. at 32, 99 S.Ct. at 1568-69. The blanket
license is the only device by which performing rights are
licensed to the networks, and, under a blanket license, no
selector of music to be performed on a network considers
what the price of using one song would be compared to the
price of using any other song. No price considerations
affect the choice among song's because the network holds a
blanket license to perform all songs.

The absence of price competition among songs, how-
ever, does not mean that the blanket license is a restraint
upon any potential competition. For price competition to
exist there must be at least one buyer interested in
purchasing a product from two or more sellers. In this
case, there is no evict ence that CBS has ever attempted to
purchase performing rights to any song from the copy-
right owners, either the composers or the music publishing

A-11

companies to which they may have assigned their co-
pyrights. If the opportunity to purchase performing
rights to individual songs is fully available, then it is
customer preference for the blanket license, and not the
license itself, that causes the lack of price competition
among songs. Of course, even customer preferences can-
not save some practices from illegality under the antitrust
law. If competing sellers fix the prices of their products,
they violate § 1 no matter how much a buyer may prefer
accepting their fixed price to negotiating with each for a
lower price. But a practice that is not a per se violation,
and this blanket license has authoritatively been found
not to be such, does not restrain trade when the com-
plaining customer elects to use it in preference to realisti-
cally available marketing alternatives.

Trade is restrained, frequently in an unreasonable
manner, when rights to use individual copyrights or
patents may be obtained only by payment for a pool of
such rights, United States v. Paramount Pictures, Inc., 334
U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260 (1948) (copyrighted
motion pictures); Alden-Rochelle, Inc. v. ASCAP, 80
F.Supp. 888 (S.D.N.Y.1948) (copyrighted music): Zenith
Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 89
S.Ct. 1562, 23 L.Ed.2d 129 (1969) (patents), but the
opportunity to acquire a pool of rights does not restrain.

Trade an alternative opportunity to acquire individ-
ual rights is fully available. Automatic Radio Manufac-
turing Co. v. Hazeltine Research, Inc., 339 U.S. 827, 70 S.Ct.
894, 94 L.Ed. 1312 (1950) (patents); Standard Oil Co. »v.
United States, 283 U.S. 163, 51 S.Ct. 429, 75 L.Ed. 999
(1931) (same).

CBS challenges this approach on the ground that some
alternatives can always be imagined that would satisfy

A-12

the market needs of an antitrust plaintiff. As CBS argues,
the blanket license cannot possibly be saved from illegality
under § 1 simply because CBS has the alternative of hiring
composers to fill its needs for music. CBS is right. An
antitrust plaintiff is not obliged to pursue any imaginable
alternative, regardless of cost or efficiency, before it can
complain that a practice has restrained competition. But
in this case the defendants do not suggest that CBS should
do anything more extraordinary than offer to buy from
competing sellers. We agree with the defendants that if
that opportunity is fully available, and if copyrigi:i own-
ers retain unimpaired independence to set competitive
prices for individual licenses to a licensee willing to deal
with them, the blanket license is not a restraint of trade.

In fact, if there is a realistic opportunity to obtain
performance rights from individual copyright holders,
then the remedy CBS seeks in this case—modification of
the blanket license into an option to use all songs plus a
charge for each use of any one song—would be a clear
instance of unjustified price-fixing in violation of § 1. If
ASCAP were to make a per use charge for each song, it
would have to determine a price to be charged. Whether
or not that price varied for each song,’ the determination
of any price for use of a song by a membership organiza-
tion of competing songwriters would be classic price-
fixing. See 441 U.S. at 17 n. 27, 99 S.Ct. at 1561 n. 27. If

‘Not the least of the ironies of the CBS claim is that the per use
charge it finds acceptable is simply the formula now used by ASCAP to
distribute royalties among its members. That formula, based on type of
music and frequency of use, does not value any song differently than
any other. Thus, if ASCAP were to base charges to CBS on the ASCAP
royalty formula, CBS would obtain no price competition whatsoever.
Neither CBS nor the packagers would be able to shop competitively for
cheaper songs when selecting music.

A-13

licensing directly from individual copyright owners were
not feasible, then it would be arguable that per use pricing
by ASCAP might be that rare instance when price-fixing
does not necessarily violate §1. But CBS’s proposed
remedy cannot possibly avoid the strictures of § 1 if direct
licensing is feasible. We therefore turn to an examination
of the feasibility of direct licensing.

It could be argued that the best evidence against the
feasibility of direct licensing is the fact that CBS has
brought this lawsuit at great expense to avoid taking the
blanket license. That surely suggests that the blanket
license is not something for which CBS has a preference.
But that argument ignores the principle that “the purpose
of the Sherman Act is to protect competition, not com-
petitors.”” Checker Motors Corp. v. Chrysler Corp., 283
F.Supp. 876, 885 (S.D.N.Y.1968) (Mansfield, J.), aff'd, 405
F.2d 319 (2d Cir.), cert. denied, $94 U.S. 999, 89 S.Ct. 1595,
22 L.Ed.2d 777 (1969). If the market for selling per-
forming rights to the television networks would be com-
petitive among copyright owners whenever any network
chose to deal with them, the antitrust laws are satisfied
even though one network has reasons of its own for
foregoing that competitive market in preference to the
blanket license. The defendants suggest that CBS’s pref-
erence for the blanket license derives from its unwilling-
ness to seek competitive prices from individual copyright
owners while its network competitors enjoy the advan-
tages of obtaining their performing rights under their
blanket licenses. In defendants’ view, CBS is bringing
this lawsuit, not because competition among songwriters
has been restrained, but because CBS wants protection
from the prospect of its competitors’ continuing with
blanket licenses. We need not determine whether defen-

A-14

dants’ speculation is correct, but we agree that the issue is
whether competition among copyright owners is realisti-
cally feasible, regardless of whether CBS may have some
business reason of its own for preferring not to enter an
available competitive market.

The entire trial in the District Court concerned
primarily the issue of whether direct licensing was fea-
sible. Judge Lasker piaced the burden of proof upon CBS,
as the plaintiff, to prove that it was not, for he concluded
that there was no restraint of trade if direct licensing was
feasible. After carefully analyzing the evidence CBS
offered, Judge Lasker concluded that “CBS has failed to
prove the factual predicate of its claims—the non-
availability of alternatives to the blanket license... .” 400
F.Supp. at 780-81. That ultimate finding is abundantly
supported by subsidiary findings and by the record, which
completely refute all of CBS’s allegations of barriers to
direct licensing.

CBS maintained that the existing market structure
created by the blanket license effectively prevented it
from seeking direct licensing because any money spent to
acquire performance rights from individual copyright
owners would be wasted once CBS had already paid
ASCAP and BMI for performance rights to all music.
However, nothing prevented CBS from attempting to
obtain from the copyright owners performance rights for
some interval following expiration of the term of the
blanket license.“

CBS also contended that there existed no machinery
to handle the numerous transactions that would be re-

‘We were advised at oral argument that at the present time CBS
holds no license from ASCAP and has held none since March 1978.

A-15

quired to obtain performance rights directly. The record
establishes that such machinery is entirely feasible; indeed
a single agency now serves as the broker for the thousands
of transactions in which copyright owners sell television
synch rights and motion picture performance rights.
Nevertheless, the claim is pressed that it would take some
amount of time and money to establish a similar mecha-
nism for the individual brokering of network television
performance rights. We note that Justice Stevens relied
on this circumstance to conclude that “real and signifi-
cant,” albeit not “insurmountable” barriers to direct li-
censing existed. 441 U.S. at 35, 99 S.Ct. at 1570. With
deference, we conclude that the evidence and Judge Las-
ker’s analysis of it demonstrate that neither the time nor
the expense of creating machinery for direct licensing
establishes a barrier of which CBS can complain. It must
be recalled that CBS has obtained its performance rights
by blanket licenses ever since the late 1940’s. Having
transacted business in that fashion for that length of
time, CBS cannot expect the antitrust laws to assure it
that a changeover to direct licensing can be accomplished
instantly or at no expense. Moreover, Judge Lasker found
that the changeover could be begun very rapidly with CBS
meeting its music needs as the machinery for direct
licensing was put into place. When Justice Stevens refers
to the machinery being created within a year, 441 U.S. at
35, 99 S.Ct. at 1570, he is citing the outer limit testified to
by a CBS witness, 400 F.Supp. at 764, whereas Judge
Lasker found that “the relatively modest machinery re-
quired could be developed during a reasonable planning
period.” /d. at 765. And when Justice Stevens refers to an
expenditure of millions of dollars by CBS, he does not
mean the cost of creating direct licensing machinery, but

A-16

only the payment CBS will make during the final term of
its blanket license. But that is an expense for which it
bargained and for which it has received considerable
value.

Next, CBS argued that individual copyright owners
would be reluctant to deal directly with CBS in the
licensing of performance rights. At trial this was the so-
called “disinclination” issue. Wholly apart from the
record, we have some difficulty even contemplating the
feared situation of individual songwriters displaying
reluctance to arrange to have their songs performed on a
national television network, especially one owned by “the
giant of the world in the use of music rights.” /d. at 771.
3ut we need not rely on an intuitive rejection of this CBS
claim. Judge Lasker found, after hearing substantial
evidence from composers and music publishers, that if CBS
were to seek direct licensing, ‘copyright proprietors would
wait at CBS’ door.” /d. at 779.

Finally, CBS alleged a barrier to direct licensing
based upon what was called the music-in-the-can prob-
lem. CBS apprehended that, without a blanket license, it
would be subject to demands for unconscionably high fees
from the owners of copyrighted music already recorded on
the soundtracks of taped programs and feature films in
CBS's inventory. Judge Lasker properly rejected this
claim both on the facts and the law. As a matter of fact,
he found, based on the testimony, that “holdups” were not
realistically to be feared, that synch rights were regularly

obtained at fair prices after the recording had been
accomplished, that copyright proprietors would not wish
to incur CBS’s disfavor by attempting a “holdup,” and
that the whole claim was undercut by the turnover in the
8. Apart from the lack of

rr- -
‘

CBS inventory. Jd. at 775—

A-17

factual support for the argument, Judge Lasker also
correctly rejected it on the ground that it is not a
consequence of the blanket license. If CBS would be
vulnerable to a “hold-up” when it tries to acquire per-
formance rights for music on a feature film it wishes to
rerun, that is a consequence of CBS’s failure to acquire
rerun performance rights at the time it acquired the film.
At that time CBS accepted the risk that it would one day
have to purchase performance rights for reruns, either as
part of the purchase price for a blanket license or at a
separate price for a license obtained directly from the
copyright owner.’

Pervading these assessments of each of the CBS
contentions of alleged barriers to direct licensing is one
indisputable fact that perhaps overshadows all others. If
CBS were to forgo the blanket license, seek direct licenses,
and then discover, contrary to the facts found by Judge
Lasker, that a competitive market among copyright own-
ers was not a feasible alternative to the blanket license, it
would be entitled, under the consent decree, to assure
itself of continued performing rights by immediately
obtaining a renewed blanket license. Indeed, Paragraph
IX of the ASCAP decree permits CBS to use any music
covered by a license application, without payment of fee,
subject to whatever fees are subsequently negotiated or
determined to be reasonable by the court if negotiations

‘CBS also contends that the blanket license impairs its ability to
add films to its inventory. Asserting a disadvantage vis-a-vis its
network competitors, CBS alleges that, lacking performance rights, it
would be precluded from bidding on films available to networks holding
blanket licenses. Apart from the fact that this argument concerns
competition among networks, not among copyright owners, it fails to
reckon with the possibility that CBS can negotiate an individual license
for the performance rights to music on a film, with the license to
become effective only upon CBS's acquisition of the film.

A-18

fail. Jd. at 743 n. 3. In short, the District Court has found
that CBS can feasibly obtain individual licenses from
competing copyright owners and that it incurs no risk in
endeavoring to do so. There is no basis in the record for
concluding that these findings by the District Court are
clearly erroneous.

Of course, the fact that CBS has failed to prove that
the blanket license restrains competition among copyright
owners does not guarantee that such competition will
occur if CBS or the other networks elect to forgo their
blanket licenses in the future. Uncertainty is created not
only by the normal risks of predicting the future bt also
by the special circumstances currently governing the
selection of music for network television programs. As
previously mentioned, approximately 90% of this music is
elected by the program packagers. If CBS forgoes its
blanket license, we cannot predict—indeed, the record
gives us no adequate basis for making a prediction—as to
how performance rights for this 90% will be purchased.
Perhaps CBS will inform the packagers that it will buy
programs only when performance rights have been ac-
quired by the production company. That would create an
incentive for the packagers to consider price of perform-
ance rights for individual songs in selecting music, espe-
cially outside theme or feature music. But the packagers
might decline to buy performance rights, preferring to
sell their programs to other networks that continue to
hold blanket licenses. To the extent that happ2ned, CBS, if
it wanted a program for which performance rights had
not been purchased, would have to purchase the rights for
music already selected and recorded, in which event no

meaningful price competition among copyright owners

A-19

would occur. Or it may happen that packagers will be so
anxious to sell their programs to CBS that they will
acquire performance rights, even though that might not
be their initial preference.

Another situation for which prediction is hazardous
concerns the CBS-produced programs that use music
spontaneously selected by the performers. The blanket
license, among its other virtues, assures CBS of the right
to air such programs, regardless of what music the per-
formers elect to play. Without a blanket license, CBS
would have to purchase performance rights after the
program was aired, or negotiate with ASCAP for some
modified form of program license to secure the right
perform any music in the ASCAP repertory only on
designated programs where music is spontaneously se-
lected, or forgo the telecasting of such programs.

We mention these alternatives (and there are surely
others) not to express any judgment upon them, but
simply to point out the difficulty of determining what the
market for performance rights will look like if CBS elects
to forgo the blanket license. Neither the District Court
nor we can predict that perfect competition will ensue.
But what the District Court has found, and what we
affirm, is that CBS has failed to prove that the existence of
the blanket license has restrained competition. Since the
blanket license is not a per se unlawful arrangement, its
restraining effect must be proved before § 1 liability can
be found. When, after a full trial, such proof is lacking,
the challenge to the blanket license is properly dismissed.

Affirmed.

APPENDIX B

OPINION OF THE COURT OF APPEALS
DENYING DEFENDANTS’ MOTIONS
FOR SUMMARY AFFIRMANCE

REPORTED AT 607 F.2d 543 (2d Cir. 1979)

APPENDIX B

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

COLUMBIA BROADCASTING SYSTEM, INC.,
Plaintiff- Appellant,
—against—
AMERICAN SOCIETY OF COMPOSERS,
AUTHORS & PUBLISHERS, et al.,
Defendants -Appellees.

No. 1389, Docket 75-7600
July 6, 1979

Before LUMBARD,* MOORE and GURFEIN, Circuit
Judges.

MOTION FOR SUMMARY JUDGMENT

Following remand from the Supreme Court, 441 U.S.
1,99 S.Ct. 1551, 60 L.Ed.2d 1 to this court upon review on
certiorari of our opinion filed August 8, 1977, 562 F.2d 130,
BMI and ASCAP move for summary judgment on the
ground that CBS failed to raise in this court ‘the legality
of defendants’ licensing practices under the rule of rea-
son.” Four considerations, among others, impel us to a
broad construction of the CBS position in this court.

“Hon. J. Edward Lumbard, Senior Circuit Judge, has been designated
in place of Judge Robert P. Anderson, deceased.

B-2

First, the majority opirion by Mr. Justice White
“remand[s] the cause for further appropriate proceed-
ings” (99S.Ct. at 1556) and states that the blanket license
“should be subjected to a more discriminatory exam-
ination under the rule of reason. It may not ultimately
survive the attack, but that is not the issue before us
today.” 99 S.Ct. at 1565.

Second, the dissenting justice, Mr. Justice Stevens,
the only justice to address the merits under the rule of
reason standard, actually found the blanket license to be
an unreasonable restraint of trade.

Third, the United States in its amicus brief in the
Supreme Court took “no position, however, on whether the
practice is an unreasonable restraint of trade in the
context of the network television industry.” 99 S.Ct. at
1560.

Fourth, this court found a lack of market necessity for
the blanket license in dealing with the network.

After noting that [w]e have never examined a prac-
tice like this one before” (99 S.Ct. at 1557), the Supreme
Court did not rule that price-fixing was not involved,
which would have been the end of the matter.

Accordingly, we think that, in the interests of an
ultimate solution of the question, we must scrutinize CBS’
arguments in terms of whether it intended to waive a
claim under the rule of reason standard, considering the
breadth of its arguments. We find no such intent. The
emphasis was simply on the harder point, per se unlawful-
ness, but CBS did argue the practical effects of the blanket
license, and did not exclude an application of the rule of
reason standard thereto.

B-3

We will not, at this time, expand on the relationship
between the standard which we set that market necessity
(limited to television networks) might justify the price-
fixing aspect of the exclusive blanket license and a rule of
reason standard, since we do not wish to foreclose unre-
stricted arguments on the issue.

We are convinced, moreover, that in the state of the
law on price-fixing per se in 1977 and in the light of the
CBS economic impact arguments relating to the alleged
unreasonable restraint of the exclusive blanket license,
both in terms of tie-in and price effect, the issue was
presented clearly enough to this court for us to have
passed on the question under the rule of reason.

We conclude, in the circumstances, that it would be
inequitable to hold, on narrow, technical or semantic
grounds that appellant did not raise the question ade-
quately.

We, accordingly, deny the motion for summary judg-
ment, and issue a scheduling order for briefing.

SCHEDULING ORDER

On remand from the Supreme Court, having denied
summary judgment of the decision of the District Court,
we order:

(1) that the parties address the issue of whether on
the present record in the District Court, this court is in a
position to decide whether the exclusive blanket license
tendered to CBS television network by ASCAP and BMI is
unlawful price-fixing and an unreasonable restraint of
trade under the rule of reason or as a misuse of copyright?

(2) if such record is inadequate, what is proposed for
the further progress of the case?

B-4

(3) if the record is adequate, should the exclusive
tender of a blanket or program license to the CBS tele-
vision network be prohibited or limited under the rule of
reason, or as a misuse of copyright?

(4) if, under the rule of reason or copyright misuse, it
should be determined that it is an antitrust violation for
ASCAP or BMI to issue a blanket license to a television
network for a single fee, would it necessarily be illegal to
negotiate and issue blanket licenses to individual radio or
television stations or to other users who perform copy-
righted music for profit? See 99 S.Ct. at 1561.

(5) if, under the rule of reason or copyright misuse, it
should be determined that it is an antitrust violation for
ASCAP and BMI to issue a blanket license to a television
network for a single fee, would it be equally illegal for the
members to authorize ASCAP to issue licenses for individ -
ual compositions based on prices determined by the copy-
right owners?

It is further requested that the United States,
pursuant to the suggestion of the Supreme Court (99 S.Ct.
at 1565 n. 44) continue in its role as amicus curiae and file
a brief concerning these issues at the time when appellee’s
brief is to be filed.

We note that if a party should desire to seek relief
with respect to the interim arrangement for license fees
payable to CBS, application may be made to Judge Lasker
or, if there be doubt as to his jurisdiction, application may
be made to this court for a remand for that purpose.

The parties will confer on a scheduling arrangement
for briefs and oral argument with the Office of Staff
Counsel.

APPENDIX C

OPINION OF THE SUPREME COURT

REPORTED AT 441 U.S. 1 (1979)

APPENDIX C
IN THE
SUPREME COURT OF THE UNITED STATES
AT

OCTOBER TERM, 1978

BROADCAST MUSIC, INC., ET AL.

Petitioners,
—against—
COLUMBIA BROADCASTING SYSTEM, INC.,
Respondent.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT

No. 77-1578
Argued January 15, 1979
Decided April 17, 1979*

WHITE, J., delivered the opinion of the Court, in which
BURGER, C. J., and BRENNAN, STEWART, MARSHALL,
BLACKMUN, POWELL, and REHNQUIST, JJ., joined. STEVENS,
J., filed a dissenting opinion, post, p. C-26.

Amalya L. Kearse argued the cause for petitioners in
No. 77-1578. With her on the briefs were George A.
Davidson and Conley BE. Brian, Jr. Jay Topkis argued the
cause for petitioners in No. 77-1583. With him on the
briefs were Bi rnard Korma n, Simon H. Rifkind, Herman
Finkelstein, and Allan Blumstein.

* Together with No. 77-1583, American Society of Composers, Au-

thors and Publishers et al. v. Columbia Broadcasting System, Inc. et al.,

also on certiorari to the same court

Alan J. Hruska argued the cause for respondents in
both cases. With him on the briefs were John D. Appel and
Robert M. Sondak.

Deputy Solicitor General Easterbrook argued the cause
for the United States as amicus curiae urging reversal.
With him on the briefs were Solicitor General McCree.,
Assistant Attorney General Shenefield, William Alsup, John
J. Powers III, and Andrea Limmer.+

Mr. JUSTICE WHITE delivered the opinion of the
Court.

This case involves an action under the antitrust and
copyright laws brought by respondent Columbia Broad-
casting System, Inc. (CBS), against petitioners, American
Society of Composers, Authors and Publishers (ASCAP)
and Broadcast Music, Inc. (BMI), and their members and
affiliates.’ The basic question presented is whether the
issuance by ASCAP and BMI to CBS of blanket licenses to
copyrighted musical compositions at fees negotiated by
them is price fixing per se unlawful under the antitrust
laws.

+ Briefs of amici curiae urging reversal were filed by Irwin Karp
for the Authors League of America, Inc.; by Philip Elman and Robert
M. Lichtman for the Performing Right Society, Ltd., et al.: and by
Robert H. Bork for Aaron Copland et al.

Briefs of amici curiae urging affirmance were filed by Jra M.
Millstein for the All-Industry Television Music License Committee: by
Clarence Fried for American Broadcasting Companies, Ine. by David R.
Hyde for National Broadcasting Company, Inc.; by John H. Midlen. Jr..
for National Religious Broadcasters, Inc.; and by John L. Hill. Attorney
General of Texas, David M. Kendall, First Assistant Attorney General,
and Robert S. Bickerstaff and Susan Dasher, Assistant Attorneys
General, for the Universities of the State of Texas et al.

Irving Moskovitz filed a brief for the All-Industry Radio Music
License Committee as amicus curiae

‘The District Court certified the case as a defendant class action,
400 F. Supp. 737, 741 n. 2 (SDNY 1975).

C-3

CBS operates one of three national commercial tele-
vision networks, supplying programs to approximately 200
affiliated stations and telecasting approximately 7,500
network programs per year. Many, but not all, of these
programs make use of copyrighted music recorded on the
soundtrack. CBS also owns television and radio stations in

various cities. It is “ ‘the giant of the world in the use of
music rights,’” the “‘No. 1 outlet in the history of

999

entertainment.’ ”

Since 1897, the copyright laws have vested in the
owner of a copyrighted musical composition the exclusive
right to perform the work publicly for profit,’ but the legal
right is not self-enforcing. In 1914, Victor Herbert and a
handfu! of other composers organized ASCAP because
those who performed copyrighted music for profit were so
numerous and widespread, and most performances so
fleeting, that as a practical matter it was impossible for
the many individual copyright owners to negotiate with
and license the users and to detect unauthorized uses.
“ASCAP was organized as a ‘clearing- house’ for copyright
owners and users to solve these problems” associated with
the licensing of music. 400 F. Supp. 737, 741 (SDNY 1975).
As ASCAP operates today, its 22,000 members grant it
nonexclusive rights to license nondramatic performances
of their works, and ASCAP issues licenses and distributes
royalties to copyright owners in accordance with a sched-
ule reflecting the nature and amount of the use of their
music and other factors.

Id., at 771, quoting a CBS witness. CBS is also a leading music
publisher, with publishing subsidiaries affiliated with both ASCAP and
BMI, and is the world’s largest manufacturer and seller of records and
tapes. Jhid.

Act of Jan. 6, 1897, 29 Stat. 481.

C-4

BMI, a nonprofit corporation owned by members of
the broadcasting industry,‘ was organized in 1939, is
affiliated with or represents some 10,000 publishing com-
panies and 20,000 authors and composers, and operates in
much the same manner as ASCAP. Almost every domestic
copyrighted composition is in the repertory either of
ASCAP, with a total of three million compositions, or of
BMI, with one million. )

Both organizations operate primarily through blanket
-licenses, which give the licensees the right to perform any
and all of the compositions owned by the members or
affiliates as often as the licensees desire for a stated term.
Fees for blanket licenses are ordinarily a percentage of
total revenues or a flat dollar amount, and do not directly
depend on the amount or type of music used. Radio and
television broadcasters are the largest users of music, and
almost all of them hold blanket licenses from both ASCAP
and BMI. Until this litigation, CBS held blanket licenses
from both organizations for its television network on a
continuous basis since the late 1940’s and had never
attempted to secure any other form of license from either
ASCAP* or any of its members. /d., at 752-754.

The complaint filed by CBS charged various violations
of the Sherman Act‘ and the copyright laws.’ CBS argued
that ASCAP and BMI are unlawful monopolies and that
the blanket license is illegal price fixing, an unlawful

‘CBS was a leader of the broadcasters who formed BMI. but it
disposed of all of its interest in the corporation in 1959. 400 F. Supp., at
742.

* Unless the context indicates otherwise, references to ASCAP
alone in this opinion usually apply to BMI as well. See n. 20. infra

*°15 U.S.C. §8§1 and 2.

“CBS seeks injunctive relief for the antitrust violations and a
declaration of copyright misuse. 400 F. Supp., at 741.

C-5

tying arrangement, a concerted refusal to deal, and a
misuse of copyrights. The District Court, though denying
summary judgmert to certain defendants, ruled that the
practice did not fail within the per se rule. 337 F. Supp.
394, 398 (SDNY 1972). After an 8-week trial, limited to
the issue of liability, the court dismissed the complaint,
rejecting again the claim that the blanket license was
price fixing and a per se violation of § 1 of the Sherman
Act, and holding that since direct negotiation with indi-
vidual copyright owners is available and feasible there is
no undue restraint of trade, illegal tying, misuse of
copyrights, or monopolization. 400 F. Supp., at 781-783.

Though agreeing with the District Court’s factfind-
ing and not disturbing its legal conclusions on the other
antitrust theories of liability,” the Court of Appeals held
that the blanket license issued to television networks was
a form of price fixing illegal per se under the Sherman
Act. 562 F. 2d 130, 140 (CA2 1977). This conclusion,
without more, settled the issue of liability under the
Sherman Act, established copyright misuse,’ and required
reversal of the District Court’s judgment, as well as a
remand to consider the appropriate remedy.”

‘The Court of Appeals affirmed the District Court’s rejection of
CBS's monopolization and tying contentions but did not rule on the
District Court's conclusion that the blanket license was not an unrea
sonable restraint of trade. See 562 F. 2d 130, 132, 135, 141 n. 29 (CA2
1977 )

‘At CBS's suggestion, the Court of Appeals held that the chal-
lenged conduct constituted misuse of copyrights solely on the basis of
its finding of unlawful price fixing. /d., at 141 n. 29.

The Court of Appeals went on to suggest some guidelines as to
remedy, indicating that despite its conclusion on liability the blanket
license was not totally forbidden. The Court of Appeals said:

“Normally, after a finding of price-fixing, the remedy is an
injunction against the price-fixing—in this case, the blanket license.
We think. however, that if on remand a remedy can be fashioned which
will ensure that the blanket lic: will not affect the price or

C-6

ASCAP and BMI petitioned for certiorari, presenting
the questions of the applicability of the per se rule and of
whether this constitutes misuse of copyrights. CBS did
not cross petition to challenge the failure to sustain its
other antitrust claims. We granted certiorari because of
the importance of the issues to the antitrust and copyright
laws. 489 U.S. 817 (1978). Because we disagree with the
Court of Appeals’ conclusions with respect to the per se
illegality of the blanket license, we reverse its judgment
and remand the cause for further appropriate proceed-
ings.

In construing and applying the Sherman Act’s ban
against contracts, conspiracies, and combinations in re-
straint of trade, the Court has held that certain agree-
ments or practices are so “plainly anticompetitive,” Na-
tional Society of Professional Engineers v. United States,
435 U.S. 679, 692 (1978); Continental T. V., Inc. v. GTE
Sylvania Inc., 483 U. S. 36, 50 (1977), and so often
“lack ...any redeeming virtue,” Northern Pac. R. Co. v.

negotiations for direct licenses, the blanket license need not be prohib-
ited in all circumstances. The blanket license is not simply a ‘naked
restraint’ ineluctably doomed to extinction. There is not enough
evidence in the present record to compel a finding that the blanket
license does not serve a market need for those who wish full protection
against infringement suits or who, for some other business reason,
deem the blanket license desirable. The blanket license includes a
practical covenant not to sue for infringement of any ASCAP copy-
right as well as an indemnification against suits by others.

“Our objection to the blanket license is that it reduces price
competition among the members and provides a disinclination to
compete. We think that these objections may be removed if ASCAP
itself is required to provide some form of per use licensing which will
ensure competition among the individual members with respect to
those networks which wish to engage in per use licensing.” Jd, at 440
(footnotes omitted).

C-7

United States, 356 U. S. 1, 5 (1958), that they are con-
clusively presumed illegal without further examination
under the rule of reason generally applied in Sherman Act
cases. This per se rule is a valid and useful tool of antitrust
policy and enforcement.''’ And agreements among com-
petitors to fix prices on their individual goods or services
are among those concerted activities that the Court has
held to be within the per se category.'’* But easy labels do
not always supply ready answers.

A

To the Court of Appeals and CBS, the blanket license
involves “price fixing” in the literal sense: the composers
and publishing houses have joined together into an or-
ganization that sets its price for the blanket license it
sells.’ But this is not a question simply of determining

11] ¢¢

This principle of per se unreasonableness not only makes the
type of restraints which are proscribed by the Sherman Act more
certain to the benefit of everyone concerned, but it also avoids the
necessity for an incredibly complicated and prolonged economic in-
vestigation into the entire history of the industry involved, as well as
related industries, in an effort to determine at large whether a
particular restraint has been unreasonable—an inquiry so often wholly
fruitless when undertaken.” Northern Pac. R. Co. v. United States, 356
U.S. 1, 5 (1958).

See Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50 n. 16
(1977); United States v. Topco Associates, Inc., 405 U.S. 596, 609 n. 10
(1972).

‘* See cases discussed in n. 14, infra.

CBS also complains that it pays a flat fee regardless of the
amount of use it makes of ASCAP compositions and even though many
of its programs contain little or no music. We are unable to see how
that alone could make out an antitrust violation or misuse of copy-
rights:

“Sound business judgment could indicate that such payment represents
the most convenient method of fixing the business value of the
privileges granted by the licensing agreement... . Petitioner cannot
complain because it must pay royalties whether it uses Hazeltine

C-8

whether two or more potential competitors have literally
“fixed” a “price.” As generally used in the antitrust field,
“price fixing” is a shorthand way of describing certain
categories of business behavior to which the per se rule has
been held applicable. The Court of Appeals’ literal
approach does not alone establish that this particular
practice is one of those types or that it is “plainly
anticompetitive” and very likely without “redeeming
virtue.” Literalness is overly simplistic and often over-
broad. When two partners set the price of their goods or
services they are literally “price fixing,” but they are not
per se in violation of the Sherman Act. See United States
v. Addyston Pipe & Steel Co., 85 F. 271, 280 (CA6 1898),
aff'd, 175 U. S. 211 (1899). Thus, it is necessary to
characterize the challenged conduct as falling within or
without that category of behavior to which we apply the
label ‘per se price fixing.” That will often, but not always,
be a simple matter."

Consequently, as we recognized in United States v.
Topco Associates, Inc., 405 U. 8. 596, 607-608 (1972), “[i]t
is only after considerable experience with certain
business relationships that courts classify them as per se

patents or not. What it acquired by the agreement into which it
entered was the privilege to use any or all of the patents and
developments as it desired to use them.” Automatic Radio Mfg. Co. v.
Hazeltine Research, Inc., 339 U.S. 827, 834 (1950).

See also Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100
(1969).

“ Cf., e.g., United States v. McKesson & Robbins, Inc., 351 U.S. 305
(1956) (manufacturer/wholesaler agreed with independent whole-
salers on prices to be charged on products it manufactured); United
States v. Socony- Vacuum Oil Co., 310 U.S. 150 (1940) (firms controlling
a substantial part of an industry agreed to purchase “surplus” gasoline
with the intent and necessary effect of increasing the price); United
States v. Trenton Potteries Co., 273 U.S. 392 (1927) (manufacturers and
distributors of 82% of certain vitreous pottery fixtures agreed to sell at
uniform prices).

C-9

violations... .”’ See White Motor Co. v. United States, 372
U.S. 253, 263 (1963). We have never examined a practice
like this one before; indeed, tne Court of Appeals recog-
nized that “[{i]n dealing with performing rights in the
music industry we confront conditions both in copyright
law and in antitrust law which are sui generis.” 562 F. 2d,
at 1832. And though there has been rather intensive
antitrust scrutiny of ASCAP and its blanket licenses, that
experience hardly counsels that we should outlaw the
blanket license as a ver se restraint of trade.

B

This and other cases involving ASCAP and its licens-
ing practices have arisen out of the efforts of the creators
of copyrighted musical compositions to collect for the
public performance of their works, as they are entitled to
do under the Copyright Act. As already indicated,
ASCAP and BMI originated to make possible and to
facilitate dealings between copyright owners and those
who desire to use their music. Both organizations plainly
involve concerted action in a large and active line of
commerce, and it is not surprising that, as the District
Court found, “|n]Jeither ASCAP nor BMI is a stranger to
antitrust litigation.” 400 F. Supp., at 743.

The Department of Justice first investigated allega-
tions of anticompetitive conduct by ASCAP over 50 years
ago.'’ A criminal complaint was filed in 1934, but the
Government was granted a midtrial continuance and
never returned to the courtroom. In separate complaints
in 1941, the United States charged that the blanket

Cohn, Music, Radio Broadcasters and the Sherman Act, 29 Geo. L.
J. 407, 424 n. 91 (1941).

C-10

license, which was then the only license offered by ASCAP
and BMI, was an illegal restraint of trade and that
arbitrary prices were being charged as the result of an
illegal copyright pool.'’ The Government sought to enjoin
ASCAP’s exclusive licensing powers and to require a
different form of licensing by that organization. The case
was settled by a consent decree that imposed tight re-
strictions on ASCAP’s operations." Following complaints
relating to the television industry, successful private liti-
gation against ASCAP by movie theatres,"* and a Govern-
ment challenge to ASCAP’s arrangements with similar
foreign organizations, the 1941 decree was reopened and
extensively amended in 1950."

Under the amended decree, which still substantially
controls the activities of ASCAP, members may grant
ASCAP only nonexclusive rights to license their works for
public performance. Members, therefore, retain the
rights individually to license public performances, along
with the rights to license the use of their compositions for
other purposes. ASCAP itself is forbidden to grant any
license to perform one or more specified compositions in
the ASCAP repertory unless both the user and the owner
have requested it in writing to do so. ASCAP is required
to grant to any user making written application a
nonexclusive license to perform all ASCAP compositions,

EF. g., complaint in United States vy. ASCAP, Civ. No. 18-95 (SDNY
1941), pp. 3-4.

" United States v. ASCAP, 1940-1943 Trade Cases 9 56,104 (SDNY
1941).

See Alden- Rochelle, Inc. v. ASCAP, 80 F. Supp. 888 (SDNY 1948):
M. Witmark & Sons v. Jenson, 80 F. Supp. 843 (Minn. 1948), appeal
dismissed sub nom. M. Witmark & Sons v. Berger Amusement Co., 177 F.
2d 515 (CA8 1949).

' United States v. ASCAP, 1950-1951 Trade Cases 9 62,595 (SDNY
1950).

C-11

either for a period of time or on a per-program basis.
ASCAP may not insist on the blanket license, and the fee
for the per-program license, which is to be based on the
revenues for the program on which ASCAP music is
played, must offer the applicant a genuine economic choice
between the per-program license and the more common
blanket license. If ASCAP and a putative licensee are
unable to agree on a fee within 60 days, the applicant may
apply to the District Court for a determination of a
reasonable fee, with ASCAP having the burden of proving
reasonableness.”

The 1950 decree, as amended from time to time,
continues in effect, and the blanket license continues to be
the primary instrument through which ASCAP conducts
its business under the decree. The courts have twice
construed the decree not to require ASCAP to issue
licenses for selected portions of its repertory.’ It also
remains true that the decree guarantees the legal avail-
ability of direct licensing of performance rights by
ASCAP members; and the District Court found, and in

“BMI is ina similar situation. The original decree against BMI is
reported as United States v. BMI, 1940-1943 Trade Cases 4 56,096 (ED
Wis. 1941). A new consent judgment was entered in 1966 following a
monopolization complaint filed in 1964. United Stites v. BMI, 1966
Trade Cases § 71,941 (SDNY). The ASCAP and BMI decrees do vary in
some respects. The BMI decree does not specify that BMI may only
obtain nonexclusive rights from its affiliates or that the District Court
may set the fee if the parties are unable to agree. Nonetheless, the
parties stipulated, and the courts below accepted, ‘that CBS could
secure direct licenses from BMI affiliates with the same ease or
difficulty, as the case may be, as from ASCAP members.” 400 F. Supp.,
at 745.

*' United States v. ASCAP (Application of Shenandoah Valley
Broadcasting, Inc.), 208 F. Supp. 896 (SDNY 1962), aff’d, 331 F.2d 117
(CA2), cert. denied, 377 U. S. 997 (1964); United States v. ASCAP
(Application of National Broadcasting Co.), 1971 Trade Cases §] 73,491
(SDNY 1970). See also United States v. ASCAP ( Motion of Metromedia,
Inc.), 341 F.2d 1003 (CA2 1965).

C-12

this respect the Court of Appeals agreed, that there are no
practical impediments preventing direct dealing by the
television networks if they so desire. Historically, they
have not done so. Since 1946, CBS and other television
networks have taken blanket licenses from ASCAP and
BMI. It was not until this suit arose that the CBS network
demanded any other kind of license.”

Of course, a consent judgment, even one entered at
the behest of the Antitrust Division, does not immunize
the defendant from liability for actions, including those
contemplated by the decree, that violate the rights of
nonparties. See Sam Fox Publishing Co. v. United States,
366 U.S. 683, 690 (1961), which involved this same decree.
But it cannot be ignored that the Federal Executive and
Judiciary have carefully scrutinized ASCAP and the chal-
lenged conduct, have imposed restrictions on various of
ASCAP’s practices, and, by the terms of the decree, stand
ready to provide further consideration, supervision, and
perhaps invalidation of asserted anticompetitive prac-
tices.” In these circumstances, we have a unique indicator
that the challenged practice may have redeeming com-
petitive virtues and that the search for those values is not
almost sure to be in vain.*' Thus, although CBS is not
bound by the Antitrust Division’s actions, the decree is a

* NBC did, in 1971, request an annual blanket license for 2,217
specific ASCAP compositions most frequently used on its variety shows.
It intended to acquire the remaining rights to background and theme
music through direct transactions by it and its program packagers. See
United States v. ASCAP (Application of National Broadcasting Co.),
supra,

“1950-1951 Trade Cases §] 62,595, p. 63,756.

“Cf. Continental T. V., Inc. v. GTE Sylvania Ine., 483 U.S., at 50 n.
16. Moreover, unthinking application of the per se rule might upset the

balancing of economic power and of procompetitive and anticompeti-
tive effects presumably worked out in the decree.

C-13

fact of economic and legal life in this industry, and the
Court of Appeals should not have ignored it completely in
analyzing the practice. See id., at 694-695. That fact
alone might not remove a naked price-fixing scheme from
the ambit of the per se rule, but, as discussed infra, Part
III, here we are uncertain whether the practice on its face
has the effect, or could have been spurred by the purpose,
of restraining competition among the individual com-
posers.

After the consent decrees, the legality of the blanket
license was challenged in suits brought by certain ASCAP
members against individual radio stations for copyright
infringement. The stations raised as a defense that the
blanket license was a form of price fixing illegal under the
Sherman Act. The parties stipulated that it would be
nearly impossible for each radio station to negotiate with
each copyright holder separate licenses for the perform-
ance of his works on radio. Against this background, and
relying heavily on the 1950 consent judgment, the Court
of Appeals for the Ninth Circuit rejected claims that
ASCAP was a combination in restraint of trade and that
the blanket license constituted illegal price fixing. KA 91,
Inc. v. Gershwin Publishing Corp., 372 F. 2d 1 (1967), cert.
denied, 389 U.S. 1045 (1968).

The Department of Justice, with the principal respon-
sibility for enforcing the Sherman Act and administering
the consent decrees relevant to this case, agreed with the
result reached by the Ninth Circuit. In a submission
amicus curiae opposing one station’s petition for certio-
rari in this Court, the Department stated that there must
be “some kind of central licensing agency by which
copyright holders may offer their works in a common pool

to all who wish to use them.” Memorandum for United

C-14

States as Amicus Curiae on Pet. for Cert. in K-91, Ine. v.
Gershwin Publishing Corp., O. T. 1967, No. 147, pp. 10-11.
And the Department elaborated on what it thought that
fact meant for the proper application of the antitrust laws
in this area:

“The Sherman Act has always been dis-
criminatingly applied in the light of economic reali-
ties. There are situations in which competitors have
been permitted to form joint selling agencies or other
pooled activities, subject to strict limitations under
the antitrust laws to guarantee against abuse of the
collective power thus created. Associated Press v.
United States, 326 U.S. 1; United States v. St. Louis
Terminal, 224 U. S. 383; Appalachian Coals, Inc. v.
United States, 288 U.S. 344; Chicago Board of Trade v.
United States, 246 U.S. 231. This case appears to us to
involve such a situation. The extraordinary number of
users spread across the land, the ease with which a
performance may be broadcast, the sheer volume of
copyrighted compositions, the enormous quantity of
separate performances each year, the impracticability
of negotiating individual licenses for each com-
position, and the ephemeral! nature of each perform-
ance all combine to create unique market conditions
for performance rights to recorded music.” Jd., at 10
(footnote omitted).

The Depa. tment concluded that, in the circumstances
of that case, the blanket licenses issued by ASCAP to
individual radio stations were neither a per se violation of
the Sherman Act nor an unreasonable restraint of trade.

As evidenced by its amicus brief in the present case,
the Department remains of that view. Furthermore, the

C-15

United States disagrees with the Court of Appeals in this
case and urges that the blanket licenses, which the con-
sent decree authorizes ASCAP to issue to television net-
works, are not per se violations of the Sherman Act. It
takes no position, however, on whether the practice is an
unreasonable restraint of trade in the context of the
network television industry.

Finally, we note that Congress itself, in the new
Copyright Act, has chosen to employ the blanket license
and similar practices. Congress created a compulsory
blanket license for secondary transmissions by cable tele-
vision systems and provided that “[n]otwithstanding any
provisions of the antitrust laws, ... any claimants may
agree among themselves as to the proportionate division
of compulsory licensing fees among them, may lump their
claims together and file them jointly or as a single claim,
or may designate a common agent to receive payment on
their behalf.” 17 U.S.C. App. § 111 (d)(5)(A). And the
newly created compulsory license for the use of copy-
righted compositions in jukeboxes is also a blanket license,
which is payable to the performing-rights societies such as
ASCAP unless an individual copyright holder can prove
his entitlement to a share, § 116(c)(4). Moreover, in
requiring noncommercial broadcasters to pay for their use
of copyrighted music, Congress again provided that
“(njotwithstanding any provision of the antitrust laws”
copyright owners “may designate common agents to
negotiate, agree to, pay, or receive payments.” § 118(b).
Though these provisions are not directly controlling, they
do reflect an opinion that the blanket license, and ASCAP,
are economically beneficial in at least some circumstances.

There have been District Court cases holding various
ASCAP practices, including its licensing practices, to be

C-16

violative of the Sherman Act,” but even so, there is no
nearly universal view that either the blanket or the per-
program licenses issued by ASCAP at prices negotiated by
it are a form of price fixing subject to automatic con-
demnation under the Sherman Act, rather than to a
careful assessment under the rule of reason.

Of course, we are no more bound than is CBS by the
views of the Department of Justice, the results in the prior
lower court cases, or the opinions of various experts about
the merits of the blanket license. But while we must
independently examine this practice, all those factors
should caution us against too easily finding blanket licens-
ing subject to per se invalidation.

A

As a preliminary matter, we are mindful that the
Court of Appeals’ holding would appear to be quite diffi-
cult to contain. If, as the court held, there is a per se
antitrust violation whenever ASCAP issues a blanket
license to a television network for a single fee, why would
it not also be automatically illegal for ASCAP to negotiate
and issue blanket licenses to individual radio or television
stations or to other users who perform copyrighted music

See cases cited n, 18, supra. Those cases involved licenses sold to
individual movie theaters to “perform” compositions already on the
motion pictures’ soundtracks. ASCAP had barred its members from
assigning performing rights to movie producers at the same time
recording rights were licensed, and the theaters were effectively unable
to engage in direct transactions for performing rights with individual
copyright owners.

C-17

for profit?’ Likewise, if the present network licenses
issued through ASCAP on behalf of its members are per se
violations, why would it not be equally illegal for the
members to authorize ASCAP to issue licenses estab-
lishing various categories of uses that a network might
have for copyrighted music and setting a standard fee for
“ach described use”

Although the Court of Appeals apparently thought
the blanket license could be saved in some or even many
applications, it seems to us that the per se rule does not
accommodate itself to such flexibility and that the obser-
vations of the Court of Appeals with respect to remedy
tend to impeach the per se basis for the holding of
liability.’

“ Certain individual television and radio stations, appearing here
as amici curiae, argue that the per se rule should extend to ASCAP’s
blanket licenses with them as well. The television stations have filed an
antitrust suit to that effect. Buffalo Broadcasting Co. v, ASCAP, 78 Civ
5670 (SDNY, filed Nov, 27, 1978).

“See n. 10, supra. The Court of Appeals would apparently not
outlaw the blanket license across the board but would permit it in
various circumstances where it is deemed necessary or sufficiently
desirable. It did not even enjoin blanket licensing with the television
networks, the relief it realized would normally follow a finding of per se
illegality of the license in that context. Instead, as requested by CBS, it
remanded to the District Court to require ASCAP to offer in addition to
blanket licensing some competitive form of per-use licensing. But per-
use licensing by ASCAP, as recognized in the consent decrees, might be
even more susceptible to the per se rule than blanket licensing.

The rationale for this unusual relief in a per se case was that [t]he
blanket license is not simply a ‘naked restraint’ ineluctably doomed to
extinction,” 562 F.2d, at 140. To the contrary, the Court of Appeals
found that the blanket license might well “serve a market need” for
some, /hid. This, it seems to us, is not the per se approach, which does
not yield so readily to circumstances, but in effect is a rather bobtailed
application of the rule of reason, bobtailed in the sense that it is
unaccompanied by the necessary analysis demonstrating why the
particular licensing system is an undue competitive restraint,

C-18

CBS would prefer that ASCAP be authorized, indeed
directed, to make all its compositions available at standard
per-use rates within negotiated categories of use. 400 F.
Supp., at 747 n. 7." But if this in itself or in conjunction
with blanket licensing constitutes illegal price fixing by
copyright owners, CBS urges that an injunction issue
forbidding ASCAP to issue any blanket license or to
negotiate any fee except on behalf of an individual mem-
ber for the use of his own copyrighted work or works.”"
Thus, we are called upon to determine that blanket licens-
ing is unlawful across the board. We are quite sure,
however, that the per se rule does not require any such
holding.

B

In the first place, the line of commerce allegedly being
restrained, the performing rights to copyrighted music.
exists at all only because of the copyright laws. Those who
would use copyrighted music in public performances must
secure consent from the copyright owner or be liable at
least for the statutory damages for each infringement
and, if the conduct is willful and for the purpose of
financial gain, to criminal penalties.” Furthermore, noth-

“Surely, if ASCAP abandoned the issuance of all licenses and
confined its activities to policing the market and suing infringers, it
could hardly be said that member copyright owners would be in
violation of the antitrust laws by not having a common agent issue per
use licenses. Under the copyright laws, those who publicly perform
copyrighted music have the burden of obtaining prior consent, Cf
Zenith Radio Corp v. Hazeltine Research, Inc.. 895 U. S., at 189-140

“In its complaint, CBS alleged that it would be “wholly impracti
cable” for it to obtain individual licenses directly from the composers
and publishing houses, but it now says that it would be willing to do
exactly that if ASCAP were enjoined from granting blanket licenses to
CBS or its competitors in the network television business

"17 U.S. C. App. § 506.

C-19

ing in the Copyright Act of 1976 indicates in the slightest
that Congress intended to weaken the rights of copyright
owners to control the public performance of musical com-
positions. Quite the contrary is true.”’ Although the
copyright laws confer no rights on copyright owners to fix
prices among themselves or otherwise to violate the anti-
trust laws, we would not expect that any market arrange-
ments reasonably necessary to effectuate the rights that
are granted would be deemed a per se violation of the
Sherman Act. Otherwise, the commerce anticipated by
the Copyright Act and protected against restraint by the
Sherman Act would not exist at all or would exist only asa
pale reminder of what Congress envisioned.”

More generally, in characterizing this conduct under
the per se rule,” our inquiry must focus on whether the
effect and, here because it tends to show effect, see United
State x Vv. [nited State Ss Gypsu nei Co.. 438 U. -. 422, 436 iB 13

See Koenigsberg, The 1976 Copyright Act: Advances for the
Creator, 26 Cleve. St. L. Rev. 515, 524, 528 ( 1977)
(‘f » ery Neu York Stor ke Bre handge, 373 i. .. 341 ( 1963).
Because a musical composition can be “consumed” by many differ-
t people at the same time and without the creator’s knowledge, the
ner’ has no real way to demand reimbursement for the use of his
property except through the copyright laws and an effective way to

niorce those leva rights See Tue ntieth Co ntury Musi Corp V Atke n,

22 |S. 151, 162 (1975). It takes an organization of rather large size

monitor most or all uses and to deal with users on behalf of the

mposer Moreover, it is inefficient to have too many such organiza-
juplicating each other's monitoring of use

The serutiny occasionally required must not merely subsume the

indensome analysis required under the rule of reason, see National

| Engineer United States, 435 U.S. 679, 690-692

‘Tp ri ve should apply the rule of reason from the start. That is

hy the per x rule not employed until after considerable experience

th the ¢ ‘ { } wor red restr: rit
, » , ss ;

C-20

(1978), the purpose of the practice are to threaten the
proper operation of our predominantly free-market econ-
omy—that is, whether the practice facially appears to be
one that would always or almost always tend to restrict
competition and decrease output, and in what portion of
the market, or instead one designed to “increase economic
efficiency and render markets more, rather than less,
competitive.” Jd., at 441 n. 16; see National Society of
Professional Engineers v. United States, 435 U. S., at 688;
Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S., at 50
n. 16; Northern Pac. R. Co. v. United States, 356 U. S., at 4.

The blanket license, as we see it, is not a “naked
restrain[t] of trade with no purpose except stifling of
competition,” White Motor Co. v. United States. 372 U. S.
253, 263 (1963), but rather accompanies the integration of
sales, monitoring, and enforcement against unauthorized
copyright use. See L. Sullivan, Handbook of the Law of
Antitrust § 59, p. 154 (1977). As we have already
indicated, ASCAP and the blanket license developed to-
gether out of the practical situation in the marketplace:
thousands of users, thousands of copyright owners, and
millions ef compositions. Most users want unplanned,
rapid, and indemnified access to any and all of the reper-
tory of compositions, and the owners want a reliable
method of collecting for the use of their copyrights.
Individual sales transactions in this industry are quite
expensive, as would be individual monitoring and enforce-
ment, especially in light of the resources of single com-
posers. Indeed, as both the Court of Appeals and CBS
recognize, the costs are prohibitive for licenses with indi-
vidual radio stations, nightclubs, and restaurants, 562 F.
2d, at 140 n. 26, and it was in that milieu that the blanket
license arose.

C-21

A middleman with a blanket license was an obvious
necessity if the thousands of individual negotiations, a
virtual impossibility, were to be avoided. Also, individual
fees for the use of individual compositions would pre-
suppose an intricate schedule of fees and uses, as well as a
difficult and expensive reporting problem for the user and
policing task for the copyright owner. Historically, the
market for public-performance rights organized itself
largely around the single-fee blanket license, which gave
unlimited access to the repertory and reliable protection
against infringement. When ASCAP’s major and user-
created competitor, BMI, came on the scene, it also turned
to the blanket license.

With the advent of radio and television networks,
market conditions changed, and the necessity for and
advantages of a blanket license for those users may be far
less obvious than is the case when the potential users are
individual television or radio stations, or the thousands of
other individuals and organizations performing copy-
righted compositions in public.** But even for television
network licenses, ASCAP reduces costs absolutely by
creating a blanket license that is sold only a few, instead
of thousands,*” of times, and that obviates the need for
closely monitoring the networks to see that they do not
use more than they pay for.** ASCAP also provides the
necessary resources for blanket sales and enforcement,

“ And of course changes brought about by new technology or new
marketing techniques might also undercut the justification for the
practice.

* The District Court found that CBS would require between 4,000
and 8,000 individual license transactions per year. 400 F. Supp., at 762.

* To operate its system for distributing the license revenues to its
members, ASCAP relies primarily on the networks’ records of which
compositions are used.

C-22

resources unavailable to the vast majority of composers
and publishing houses. Moreover, a bulk license of some
type is a necessary consequence of the integration neces-
sary to achieve these efficiencies, and a necessary con-
sequence of an aggregate license is that its price must be
established.

D

This substantial lowering of costs, which is of course
potentially beneficial to both sellers and buyers, differ-
entiates the blanket license from individual use licenses.
The blanket license is composed of the individual com-
positions plus the aggregating s: rvice. Here, the whole is
truly greater than the sum of its parts; it is, to some
extent, a different product. The blanket license has
certain unique characteristics: It allows the licensee
immediate use of covered compositions, without the delay
of prior individual negotiations,” and great flexibility in
the choice of musical material. Many consumers clearly
prefer the characteristics and cost advantages of this
marketable package,” and even small performing-rights
societies that have occasionally arisen to compete with

See Timberg, The Antitrust Aspects of Merchandising Modern
Music: The ASCAP Consent Judgment of 1950, 19 Law & Contemp.
Prob. 294, 297 (1954) (“The disk-jockey’s itchy fingers and the band-
leader’s restive baton, it is said, cannot wait for contracts to be drawn
with ASCAP’s individual publisher members, much less for the formal
acquiescence of a characteristically unavailable composer or author’’).
Significantly, ASCAP deals only with nondramatic performance rights.
Because of their nature, dramatic rights, such as for musicals, can be
negotiated individually and well in advance of the time of perform-
ance. The same is true of various other rights, such as sheet music,
recording, and synchronization, which are licensed on an individual
hasis

“Cf. United States v. Grinnell Corp , oe
L'nited States Philadelphia Nat Bank. 37.

S$. 563, 572-573 (1966):

tu
1U.S. 321, 356-357 (1963)

C-23

ASCAP and BMI have offered blanket licenses.” Thus, to
the extent the blanket license is a different product,
ASCAP is not really a joint sales agency offering the
individual goods of many sellers, but is a separate seller
offering its blanket license, of which the individual com-
positions are raw material.” ASCAP, in short, made a
market in which individual composers are inherently
unable to compete fully effectively."

E

Finally, we have some doubt—enough to counsel
against application of the per se rule—about the extent to
which this practice threatens the “central nervous system
of the economy,” United States v. Socony- Vacuum Oil Co.,
310 U.S. 150, 226 n. 59 (1940), that is, competitive pricing
as the free market’s means of allocating resources. Not all

“ Comment, Music Copyright Associations and the Antitrust Laws,
25 Ind. L. J. 168, 170 (1950). See also Garner, United States v. ASCAP:
The Licensing Provisions of the Amended Final Judgment of 1950, 23
Bull. Copyright Soc. 119, 149 (1975) (“no performing rights are
licensed on other than a blanket basis in any nation in the world”).

" Moreover, because of the nature of the product—a composition
can be simultaneously “consumed” by many users—composers have
numerous markets and numerous incentives to produce, so the blanket
license is unlikely to cause decreased output, one of the normal
undesirable effects of a cartel. And since popular songs get an
increased share of ASCAP’s revenue distributions, composers compete
even within the blanket license in terms of productivity and consumer
satisfaction.

"Cf. United States v. Socony-Vacuum Oil Co., 310 U. S., at 217
(distinguishing Chicago Bd. of Trade v. United States, 246 U. 5. 231
(1918), on the ground that among the effects of the challenged rule
there ‘was the creation of a public market”); United States v. Trenton
Potteries Co., 273 U.S., at 401 (distinguishing Chicago Bd. of Trade on
the ground that it did not involve “a price agreement among com-
petitors in an open market”).

C-24 /

have an impact on price are per se violations of the
Sherman Act or even unreasonable restraints. Mergers
among competitors eliminate competition, including price
competition, but they are not per se illegal, and many of
them withstand attack unger any existing antitrust
standard. Joint ventures and other cooperative arrange-
ments are also not usually’ unlawful, at least not as price-
fixing schemes, where the agreement on price is necessary
to market the product at all.

Here, the blanket-license fee is not set by competition
among individual copyright owners, and it is a fee for the
use of any of the compositions covered by the license. But
the blanket license cannot be wholly equated with a simple
horizontal arrangement among competitors. ASCAP does
set the price for its blanket license, but that license is
quite different from anything any individual owner could
issue. The individual composers and authors have not
agreed either to sell individually in any other market or to
use the blanket license to mask price fixing in such other
markets.” Moreover, the substantial restraints placed on
ASCAP and its members by the consent decree must not
be ignored. The District Court found that there was no
legal, practical, or conspiratorial impediment to CBS’s
obtaining individual licenses; CBS, in short, had a real
choice.

With this background in mind, which plainly enough
indicates that over the years, and in the face of available
alternatives, the blanket license has provided an accept-
able mechanism for at least a large part of the market for
the performing rights to copyrighted musical com-

" “CBS does not claim that the individual members and affiliates
(‘sellers’) of ASCAP and BMI have agreed among themselves as to the

prices to be charged for the particular ‘products’ (compositions) offered
by each of them.” 400 F. Supp., at 748.

positions, we cannot agree that it should automatically be
declared illegal in all of its many manifestations. Rather,
when attacked, it should be subjected to a more dis-
criminating examination under the rule of reason. It may
not ultimately survive that attack, but that is not the issue
before us today.

IV

As we have noted, n. 27, supra, the enigmatic remarks
of the Court of Appeals with respect to remedy appear to
have departed from the court’s strict, per se approach and
to have invited @ more careful analysis. But this left the
general import of its judgment that the licensing prac-
tices of ASCAP and BMI under the consent decree are per
se violations of the Sherman Act. We reverse that judg-
ment, and the copyright misuse judgment dependent
upon it, see n. 9, supra, and remand for further proceed -
ings to consider any unresolved issues that CBS may have
properly brought to the Court of Appeals.” Of course, this
will include an assessment under the rule of reason of the
blanket license as employed in the television industry, if
that issue was preserved by CBS in the Court of Appeals."

“Tt is argued that the judgment of the Court of Appeals should
nevertheless be affirmed on the ground that the blanket license is a
tying arrangement in violation of § 1 of the Sherman Act or on the
ground that ASCAP and BMI have monopolized the relevant market
contrary to § 2. The District Court and the Court of Appeals rejected
both submissions, and we do not disturb the latter’s judgment in these
respects, particularly since CBS did not file its own petition for
certiorari challenging the Court of Appeals’ failure to sustain its tying
and monopolization claims.

"The Court of Appeals did not address the rule-of-reason issue,
and BMI insists that CBS did not preserve the question in that court.
In any event, if the issue is open in the Court of Appeals, we prefer that
that court first address the matter. Because of the United States’
interest in the enforcement of the consent decree, we assume it will
continue to play a role in this litigation on remand

C-26

The judgment of the Court of Appeals is reversed and
the case is remanded to that court for further proceedings
consistent with this opinion.

It is so ordered.
MR. JUSTICE STEVENS, dissenting.

The Court holds that ASCAP’s blanket license is not a
species of price fixing categorically forbidden by the
Sherman Act. I agree with that holding. The Court
remands the case to the Court of Appeals, leaving open the
question whether the blanket license as employed by
ASCAP and BMI is unlawful under a rule-of-reason
inquiry. I think that question is properly before us now
and should be answered affirmatively.

There is ample precedent for affirmance of the judg-
ment of the Court of Appeals on a ground that differs
from its rationale, provided of course that we do not
modify its judgment.' In this case, the judgment of the
Court of Appeals was not that blanket licenses may never
be offered by ASCAP and BMI. Rather, its judgment
directed the District Court to fashion relief requiring
them to offer additional forms of license as well.? Even
though that judgment may not be consistent with its
stated conclusion that the blanket license is “illegal per se”’
as a kind of price fixing, it is entirely consistent with a
conclusion that petitioners’ exclusive all or-nothing
blanket-license policy violates the rule of reason.’

‘See United States v. New York Telephone Co., 434 U.S. 159, 166 n. 8:
Dayton Board of Education v. Brinkman, 433 U.S. 406, 419; Massachu-
setts Mutual Life Ins. Co. v. Ludwig, 426 U.S. 479, 480-481; United States
v. American Railway Express Co., 265 U.S. 425, 435.

562 F. 2d 130, 140-141 (CA2 1977).

‘See ante, at {C-17 n.27 | (describing relief ordered by Court of

Appeals as “unusual” for a per se case, and suggesting that that court's
decision appears more consistent with a rule-of-reason approach)

C-27

The Court of Appeals may well so decide on remand.
In my judgment, however, a remand is not necessary.’ The
record before this Court is a full one, reflecting extensive
discovery and eight weeks of trial. The District Court’s
findings of fact are thorough and well supported. They
clearly reveal that the challenged policy does have a
significant adverse impact on competition. I would there-
fore affirm the judgment of the Court of Appeals.

In December 1969, the president of the CBS television
network wrote to ASCAP and BMI requesting that each
“promptly ... grant a new performance rights license
which will provide, effective January 1, 1970, for payments
measured by the actual use of your music.’”® ASCAP and
BMI each responded by stating that it considered CBS’s
request to be an application for a license in accordance
with the provisions of its consent decree and would treat it
as such,’ even though neither decree provides for licensing

‘That the rule-of-reason issues have been raised and preserved
throughout seems to me clear. See 562 F. 2d, at 184. (“CBS contends
that the blanket licensing method is not only an illegal tie-in or
blockbooking which in practical terms is coercive in effect, but is also an
illegal price-fixing device, a per se violation... .”’): id., at 141 n. 29 ("As
noted, CBS also claims violation of § 2 of the Sherman Act. We need
not go into the legal arguments on this point because they are
grounded on its factual claim that there are barriers to direct licensing
and ‘bypass’ of the ASCAP blanket license. The District Court, as
noted, rejected this contention and its findings are not clearly er-
roneous. The § 2 claim must therefore fail at this time and on this
record’); Brief for Respondents 41.

400 F. Supp. 737, 753 (SDNY 1975)

" ASCAP responded in a letter from its general counsel, stating
that it would consider the request at its next board of directors
meeting, and that it regarded it as an application for a license
consistent with the decree. The letter from BMI’s president stated
"The BMI Consent Decree provides for several alternative licenses and
we are ready to explore any of these with you.” /d., at 758-754

C-28

on a per-composition or per-use basis.’ Rather than
pursuing further discussion, CBS instituted this suit.

Whether or not the CBS letter is considered a proper
demand for per-use licensing is relevant, if at all, only on
the question of relief. For the fact is, and it cannot
seriously be questioned, that ASCAP and BMI have stead-
fastly adhered to the policy of only offering overall blan-
ket or per-program licenses, notwithstanding requests
for more limited authorizations. Thus, ASCAP rejected a
1971 request by NBC for licenses for 2,217 specific com-
positions,’ as well as an earlier request by a group of
television stations for more limited authority than the
blanket licenses which they were then purchasing.'’ Nei-
ther ASCAP nor BMI has ever offered to license anything
less than its entire portfolio, even on an experimental
basis. Moreover, if the response to the CBS letter were not
sufficient to characterize their consistent policy, the de-
fense of this lawsuit surely is. It is the refusal to license
anything less than the entire repertoire—rather than the

decision to offer blanket licenses themselves—that raises

the serious antitrust questions in this case

‘See ante, at (C-11 & n.21]

‘The 1941 decree requires ASCAP to offer per-program licenses as
an alternative to the blanket license. United States v. ASCAP, 1940-
1943 Trade Cases § 56,104, p. 404 (SDNY). Analytically, however, there
is little difference between the two. A per-program license also covers
the entire ASCAP repertoire; it is therefore simply a miniblanket
license. As is true of a long-term blanket license, the fees set are in no
way dependent on the quantity or quality of the music used. See intra.
at 30-33

‘i

‘See [> ited State 3s \ AS , jp | 1) Dp prio if N lhiana Broadcasti) q
’ -~ ny ’ eo ‘ ' ¥ , =
Co.), 1971 Trade Cases © 73,491 (SDNY 1970)
See l’nited States \ 1SC.4 PP 1p} 7) n ot Shenandoah Valle /

Broadcasting, Inc.), 208 F. Supp. 896 (SDNY 1962), aff'd, 331 F. 2d 117
(CA2 1964), cert. denied, 377 U.S. 997

Under our prior cases, there would be no question
about the illegality of the blanket-only licensing policy if
ASCAP and BMI were the exclusive sources of all licenses.
A copyright, like a patent, is a statutory grant of monop-
oly privileges. The rules which prohibit a patentee from
enlarging his statutory monopoly by conditioning a li-
cense on the purchase of unpatented goods,'' or by refus-
ing to grant a license under one patent unless the licensee
also takes a license under another, are equally applicable
to copyrights.”

It is clear, however, that the mere fact that the holder
of several patents has granted a single package license
covering them all does not establish any illegality. This
point was settled by Automatic Radio Mfg. Co. v. Hazeltine
Research, Inc., 339 U. S. 827, 834, and reconfirmed in
Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S.
100, 187-138. The Court is therefore unquestionably
correct in its conclusion that ASCAP’s issuance of blanket
licenses covering its entire inventory is not, standing
alone, automatically unlawful. But both of those cases
identify an important limitation on this rule. In the
former, the Court was careful to point out that the record
did not present the question whether the package license
would have been unlawful if Hazeltine had refused to
license on any other basis. 339 U.S., at 831. And in the

'' Mercoid Corp. v. Mid-Continent Investment Co., 320 U. S. 661;
Ethyl Gasoline Corp. v. United States, 309 U. S. 436; International
Business Machines Corp. v. United States, 298 U.S. 131; United Shoe
Machinery Corp. v. United States, 258 U.S. 451.

* Indeed, the leading cases condemning the practice of ‘“block-
booking” involved copyrighted motion pictures, rather than patents.
See United States v. Paramount Picturcs, 334 U.S. 131; United States v
Loew's Inc., 371 U.S. 38.

C-30

latter case, the Court held that the package license was
illegal because of such a refusal. 395 U.S., at 140-141.

Since ASCAP offers only blanket licenses, its licensing
practices fall on the illegal side of the line drawn by the
two Hazeltine cases. But there is a significant distinction:
unlike Hazeltine, ASCAP does not have exclusive control
of the copyrights in its portfolio, and it is perfectly
possible—at least as a legal matter—for a user of music to
negotiate directly with composers and publishers for
whatever rights he may desire. The availability of a
practical alternative alters the competitive effect of a
blockbooking or blanket-licensing policy. ASCAP is
therefore quite correct in its insistence that its blanket
license cannot be categorically condemned on the author-
ity of the blockbooking and package-licensing cases.
While these cases are instructive, they do not directly
answer the question whether the ASCAP practice is
unlawful.

The answer to that question depends on an evaluation
of the effect of the practice on competition in the relevant
market. And, of course, it is well settled that a sales
practice that is permissible for a small vendor, at least
when no coercion is present, may be unreasonable when
employed by a company that dominates the market.'* We

see Tampa Electric Co. v. Nashville Coal Co., 865 U.S. 320, 334
(upholding requirements contract on the ground that “[t|here is here
neither a seller with a dominant position in the market as in Standard
Fashion |Co. v. Magrane- Houston Co., 258 U.S. 346]; nor myriad outlets
with substantial sales volume, coupled with an industry-wide practice
of relying upon exclusive contracts, as in Standard Oil | Co. v. United
States, 887 U.S. 293]; nor a plainly restrictive tying arrangement as in
International Salt | Co Vv. United States, 382 U. S. 392]"); Times-
Picayune Publishing Co. vo United States, 845 U.S 594, 610-612 (up-
holding challenged advertising practice because, while the volume of
commerce affected was not “insignificant or insubstantial,” seller

C-31

therefore must consider what the record tells us about the
competitive character of this market.

The market for music at issue here is wholly domi-
nated by ASCAP-issued blanket licenses.'' Virtually
every domestic copyrighted composition is in the reper-
toire of either ASCAP or BMI. And again, virtually
without exception, the only means that has been used to
secure authority to perform such compositions is the
blanket license.

The blanket all-or-nothing license is patently dis-
criminatory.'> The user purchases full access to ASCAP’s
entire repertoire, even though his needs could be satisfied
by a far more limited selection. The price he pays for this
access is unrelated either to the quantity or the quality of

was found not to occupy a “dominant position” in the relevant
market). While our cases make clear that a violation of the Sherman
Act requires both that the volume of commerce affected be substantial
and that the seller enjoy a dominant position, see id., at 608-609, proof
of actual compulsion has not been required, but cf. Royster Drive-In
Theatres, Inc. v. American Broadcasting- Paramount Theatres, Inc., 268
I’, 2d 246, 251 (CA2 1959), cert. denied, 361 U.S. 885; Milwaukee Towne
Corp. v. Loew's, Inc., 190 F. 2d 561 (CAT 1951), cert. denied, 342 U.S.
909. The critical question is one of the likely practicai effect of the
arrangement: whether the “court believes it probable that performance
of the contract will foreclose competition in a substantial share of the
line of commerce affected.” Tampa Electric Co. v. Nashville Coal Co.,
supra, at 327

‘As in the majority opinion, my references to ASCAP generally
encompass BMI as well.

‘See Cirace, CBS v. ASCAP: An Economic Analysis of A Political
Problem, 47 Ford. L. Rev. 277, 286 (1978) (“the all-or-nothing bargain
allows the monopolist to reap the benefits of perfect price dis-
crimination without confronting the problems posed by dealing with
different buyers on different terms’’)

> -32

the music he actually uses, or, indeed, to what he would
probably use in a competitive system. Rather, in this
unique all-or-nothing system, the price is based on a
percentage of the user’s advertising revenues,'* a measure
that reflects the customer’s ability to pay" but is totally
unrelated to factors—such as the cost, quality, or quantity
of the product—that normally affect price in a competitive
market. The ASCAP system requires users to buy more
music than they want at a price which, while not beyond
their ability to pay and perhaps not even beyond what is
“reasonable” for the access they are getting,'* may well be
far higher than what they would choose to spend for music
in a competitive system. It is a classic example of
economic discrimination.

‘For many years prior to the commencement of this action, the
BMI blanket-license fee amounted to 1.09% of net receipts from
sponsors after certain specified deductions. 400 F. Supp., at 743. The
fee for access to ASCAP’s larger repertory was set at 2.5% of net
receipts; in recent years, however, CBS has paid a flat negotiated fee,
rather than a percentage, to ASCAP. 23 Jt. App. in CA2 No. 75-7600,
pp. F1051-FE1052, E1135.

See Cirace, supra, at 288:

“This history indicates that, from its inception, ASCAP exhibited a
tendency to discriminate in price. A license fee based upon a per-
centage of gross revenue is discriminatory in that it grants the same
number of rights to different licensees for different total dollar
amounts, depending upon their ability to pay. The effectiveness of
price discrimination is significantly enhanced by the all-or-nothing
blanket license.”

“ Under the ASCAP consent decree, on receipt of an application,
ASCAP is required to “advise the applicant in writing of the fee which
it deems reasonable for the licciise requested.” If the parties are unable
to agree on the fee within 60 days of the application, the applicant may
apply to the United States District Court for the Southern District of
New York for the determination of a “reasonable fee.” United States \
ASCAP, 1950-1951 Trade Cases 962,595, p. 63,754 (SDNY 1950). The
BMI decree contains no similar provision for judicial determination of a
reasonable fee.

C-33

The record plainly establishes that there is no price
competition between separate musical compositions."
Under a blanket license, it is no more expensive for a
network to play the most popular current hit in prime
time than it is to use an unknown composition as
background music in a soap opera. Because the cost to the
user is unaffected by the amount used on any program or
on all programs, the user has no incentive to economize by,
for example, substituting what would otherwise be less
expensive songs for established favorites or by reducing
the quantity of music used on a program. The blanket
license thereby tends to encourage the use of more music,
and also of a larger share of what is really more valuable
music, than would be expected in a competitive system
characterized by separate licenses. And since revenues are
passed on to composers on a basis reflecting the character
and frequency of the use of their music,” the tendency is
to increase the rewards of the established composers at the
expense of those less well known. Perhaps the prospect is
in any event unlikely, but the blanket license does not
present a new songwriter with any opportunity to try to
break into the market by offering his product for sale at
an unusually low price. The absence of that opportunity,

‘ASCAP’s economic expert, Robert Nathan, was unequivocal on
this point:

"Q. Is there price competition under this system between separate
musical compositions?
“A. Nosir.” Tr. 3983.

See 562 F. 2d, at 136 n. 15. In determining royalties ASCAP
distinguishes between feature, theme, and background uses of music.
The 1950 amended decree requires ASCAP to distribute royalties on “a
hasis which gives primary consideration to the performance of the
compositions.” The 1960 decree provided for the additional option of
receiving royalties under a deferred plan which provides additional
compensation based on length of membership and the recognized

tatus of the individual’s works. See United States v. ASCAP, 1960
Trade Cases © 69,612, pp. 76,469-76,470 (SDNY 1960).

C-34

however unlikely it may be, is characteristic of a cartelized
rather than a competitive market.”

The current state of the market cannot be explained
on the ground that it could not operate competitively, or
that issuance of more limited—and thus less restric-
tive—licenses by ASCAP is not feasible. The District
Court’s findings disclose no reason why music- performing
rights could not be negotiated on a per-composition or
per-use basis, either with the composer or publisher di-
rectly or with an agent such as ASCAP. In fact, ASCAP
now compensates composers and publishers on precisely
those bases.” If distributions of royalties can be calculated
on a per-use and per-composition basis, it is difficult to see
why royalties could not also be collected in the same way.
Moreover, the record also shows that where ASCAP’s
blanket-license scheme does not govern, competitive mar-
kets do. A competitive market for “synch” rights exists,”
and after the use of blanket licenses in the motion picture
industry was discontinued," such a market promptly
developed in that industry.” In sum, the record demon-
strates that the market at issue here is one that could be
highly competitive, but is not competitive at all.

*! See generally 2 P. Areeda & D. Turner, Antitrust Law 280-281,
342-345 (1978); Cirace, supra n. 15, at 286-292.

2 See n. 20, supra.

* The “synch” right is the right to record a copyrighted song in
synchronization with the film or videotape, and is obtained separately
from the right to perform the music. It is the latter which is controlled
by ASCAP and BMI. See CBS, Inc. v. ASCAP, 400 F. Supp., at 743.

** See Alden- Rochelle, Inc. v. ASCAP, 80 F. Supp. 888 (SDNY 1948).

** See 400 F. Supp., at 759-763; 5 Jt. App. in CA2 No. 75-7600, pp.
775-777 (testimony of Albert Berman, managing director of the Harry
Fox Agency, Inc.). Television synch rights and movie performance and
synch rights are handled by the Fox Agency, which serves as the broker
for thousands of music publishers.

IV

Since the record describes a market that could be
competitive and is not, and since that market is domi-
nated by two firms engaged in a single, blanket method of
dealing, it surely seems logical to conclude that trade has
been restrained unreasonably. ASCAP argues, however,
that at least as to CBS, there has been no restraint at all
since the network is free to deal directly with copyright
holders.

The District Court found that CBS had failed to
establish that it was compelled to take a blanket license
from ASCAP. While CBS introduced evidence suggesting
that a significant number of composers and publishers,
satisfied as they are with the ASCAP system, would be
“disinclined” to deal directly with the network, the court
found such evidence unpersuasive in light of CBS’s
substantial market power in the music industry and the
importance to copyright holders of network television
exposure.” Moreover, it is arguable that CBS could go
further and, along with the other television networks, use
its economic resources to exploit destructive competition
among purveyors of music by driving the price of per-
formance rights down to a far lower level. But none of
this demonstrates that ASCAP’s practices are lawful, or
that ASCAP cannot be held liable for injunctive relief at
CBS’s request.

The fact that CBS has substantial market power does
not deprive it of the right to complain when trade is
restrained. Large buyers, as well as small, are protected
by the antitrust laws. Indeed, even if the victim of a
conspiracy is himself a wrongdoer, he has not forfeited the

“See 400 F. Supp., at 767-771.

C-36

protection of the law.*’ Moreover, a conclusion that ex-
cessive competition would cause one side of the market
more harm than good may justify a legislative exemption
from the antitrust laws, but does not constitute a defense
to a violation of the Sherman Act.” Even though charac-
terizing CBS as an oligopolist may be relevant to the

»

question of remedy, and even though free competition
might adversely affect the income of a good many com-
posers and publishers, these considerations do not affect
the legality of ASCAP’s conduct.

More basically, ASCAP’s underlying argument that
CBS must be viewed as having acted with complete
freedom in choosing the blanket license is not supported
by the District Court’s findings. The District Court did
not find that CBS could cancel its blanket license ‘‘tomor-
row” and continue to use music in its programming and
compete with the other networks. Nor did the District
Court find that such a course was without any risk or
expense. Rather, the District Court’s finding was that
within a year, during which it would continue to pay some
millions of dollars for its annual blanket license, CBS
would be able to develop the needed machinery and enter
into the necessary contracts.” In other words, although
the barriers to direct dealing by CBS as an alternative to
paying for a blanket license are real and significant, they
are not insurmountable.

Far from establishing ASCAP’s immunity from lia-
bility, these District Court findings, in my judgment,

“See Perma Life Mufile rs, Inc. v. International Parts Corp., 392
u. & 134, 138-140: Simpson v. Union Oil Co., 377 U. S. 13, 16- ef he Kiet r-
Stewart Co. v. Joseph E. Seagram & Sons, Inc., 8340 U.S. 211, 214.

*See National Society of Professional Engineers v. United States
435 U.S. 679, 689-690.

“See 400 F. Supp., at 762-765.

C-37

confirm the illegality of its conduct. Neither CBS nor any
other user has been willing to assume the costs and risks
associated with an attempt to purchase music on a com-
petitive basis. The fact that an attempt by CBS to break
down the ASCAP monopoly might well succeed does not
preclude the conclusion that smaller and less powerful
buyers are totally foreclosed from a competitive market.”
Despite its size, CBS itself may not obtain music on a
competitive basis without incurring unprecedented costs
and risks. The fear of unpredictable consequences, coupled
with the certain and predictable costs and delays associ-
ated with a change in its method of purchasing music,
unquestionably inhibits any CBS management decision to
embark on a competitive crusade. Even if ASCAP offered
CBS a special bargain to forestall any such crusade, that
special arrangement would not cure the market-wide
restraint.

Whatever management decision CBS should or might
have made, it is perfectly clear that the question whether
competition in the market has been unduly restrained is
not one that any single company’s management is author-
ized to answer. It is often the case that an arrangement
among competitors will not serve to eliminate competition
forever, but only to delay its appearance or to increase the
costs of new entry. That may well be the state of this
market. Even without judicial intervention, the ASCAP

* For an individual user, the transaction costs involved in direct
dealing with individual copyright holders may well be prohibitively
high, at least in the absence of any broker or agency routinely handling
such requests. Moreover, the District Court found that writers and
publishers support and prefer the ASCAP system to direct dealing. Jd.,
at 767. While their apprehension at direct dealing with CBS could be
overcome, the District Court found, by CBS’s market power and the
importance of television exposure, a similar conclusion is far less likely
with respect to other users.

C-38

monopoly might eventually be broken by CBS, if the
benefits of doing so outweigh the significant costs and
risks involved in commencing direct dealing.*' But that
hardly means that the blanket-licensing policy at issue
here is lawful. An arrangement that produces market-
wide price discrimination and significant barriers to entry
unreasonably restrains trade even if the discrimination
and the barriers have only a limited life expectancy.
History suggests, however, that these restraints have an
enduring character.

The risks involved in such a venture appear to be substantial.
One significant risk, which may be traced directly to ASCAP and its
members, relates to music “in the can’’—music which has been per-
formed on shows and movies already in the network’s inventory, but
for which the network must still secure performing rights. The
networks accumulate substantial inventories of shows “in the can.”
And, as the Government has pointed out as amicus curiae:
“If they [the networks and television stations] were to discontinue the
blanket license, they then would be required to obtain performance
rights for these already-produced shows. This attempt would create an
opportunity for the copyright owners, as a condition of granting
performing rights, to attempt to obtain the entire value of the shows
‘in the ean.’ It would produce, in other words, a case of bilateral
monopoly. Because pricing is indeterminate in a bilateral monopoly,
television networks would not terminate their blanket licenses until
they had concluded an agreement with every owner of copyrighted
music ‘in the can’ to allow future performance for an identified price;
the networks then would determine whether that price was sufficiently
low that termination of the blanket license would be profitable. But the
prospect of such negotiations offers the copyrights owners an ability to
misuse their rights in a way that ensures the continuation of blanket
licensing despite a change in market conditions that may make other
forms of licensing preferable.” Brief for United States as Amicus
Curiae 24-25.
This analysis is in no sense inconsistent with the findings of the
District Court. The District Court did reject CBS’s coercion argument
as to music “in the can.” But as the Government again points out, the
District Court's findings were addressed essentially to a tie-in claim:
“the court did not consider the possibility that the copyright owners’
self-interested, non-coercive demands for compensation might never-
theless make the cost of CBS’ dropping the blanket license sufficiently
high that ASCAP and BMI could take this ‘termination penalty’ into
account In setting fees for the blanket license.” J/d., at 25 n. 23.

C-39

Antitrust policy requires that great aggregations of
economic power be closely scrutinized. That duty is
especially important when the aggregation is composed of
statutory monopoly privileges. Our cases have repeatedly
stressed the need to limit the privileges conferred by
patent and copyright strictly to the scope of the statutory
grant. The record in this case plainly discloses that the
limits have been exceeded and that ASCAP and BMI
exercise monopoly powers that far exceed the sum of the
privileges of the individual copyright holders. Indeed,
ASCAP itself argues that its blanket license constitutes a
product that is significantly different from the sum of its
component parts. I agree with that premise, but I
conclude that the aggregate is a monopolistic restraint of
trade proscribed by the Sherman Act.

APPENDIX D

INITIAL OPINION OF THE
COURT OF APPEALS

REPORTED AT 562 F.2d 130 (2d Cir. 1977)

APPENDIX D

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

COLUMBIA BROADCASTING SYSTEM, INC.,
Plaintiff-Appellant,
—against—
AMERICAN SOCIETY OF COMPOSERS,
AUTHORS AND PUBLISHERS, et al.,
Defendants- Appellees.

No. 24, Docket 75-7600
Argued October 14, 1976
Decided August 8, 1977

Alan J. Hruska, New York City (Robert K. Baker,
J. Barclay Collins, II, Robert M. Sondak, Kenneth M.
Kramer, Cravath, Swaine & Moore, and John D. Appel,
New York City, of counsel), for plaintiff-appellant.

Amalya L. Kearse, New York City (George A. David-
son, Pamela R. Chepiga and Hughes, Hubbard & Reed,
New York City, of counsel), for defendants-appellees,
Broadcast Music, Inc., et al.

Jay H. Topkis, New York City (Allan L. Blumstein,
Max Gitter, Richard Reimer, Paul, Weiss, Rifkind, Whar-
ton & Garrison, Bernard Korman, New York City, of

counsel), for defendants-appellees, American Society of
Composers, Authors and Publishers, et al.

Before MOORE, ANDERSON and GURFEIN, Circuit Judges.

D-2

GurFeIn, Circuit Judge:

The subject-matter of this appeal has been painstak-
ingly set forth with clarity in the opinion of the District
Court (Honorable Morris E. Lasker, Judge), 400 F.Supp.
737 (S.D.N.Y. 1975), and we refrain from restating the
details of the evidence adduced at trial. We refer to that
opinion for the evidence supporting the findings.

Columbia Broadcasting System, Inc. (‘‘CBS’’) is a na-
tional television network, of which there are two others,
National Broadcasting Company (‘‘NBC’’) and American
Broadcasting Company (‘‘ABC’’). CBS has brought this
antitrust action against the American Society of Com-
posers, Authors and Publishers (‘‘ASCAP’’), Broadcast
Music, Ine. (‘‘BMI’’), and their members and affiliates.
These members and affiliates are writers and publishers of
musical compositions.» ASCAP and BMI license the non-

dramatic performance rights in their compositions.’

1. The references hereafter to ASCAP or appellant shall be taken
to include BMI, unless the context clearly indicates otherwise. CBS
was one of the founders of BMI in 1939. It gave up its stock interest
in BMI in 1959, as have the other two networks. BML in [sic] still
owned by individual broadcasters. CBS is the parent of CTN, the
Columbia Television Network.

2. “Writers” is a generic term which describes both those who
supply the music, the composers, and those who supply the lyrics, the
authors. See Schwartz v. Broadcast Music, Inc., 180 F. Supp. 322,
326 n.5 (S.D.N.Y. 1959).

3. These non-dramatic rights are called the “small” rights of
musical compositions as opposed to the “grand” or dramatic rights.
For a discussion of the distinction between these terms, see 2 Nimmer
on Copyright $125.6 (1976). For our purposes it is enough to
note that while ASCAP could normally license the performance of
a song from, for example, My Fair Lady, it could not license the

(footnote continued on next page)

D-3

ASCAP and BMI issue blanket licenses for the right to
perform any or all of the compositions in their repertories
over the CBS network in exchange for a negotiated fixed
annual fee. CBS contends that this method of licensing
violates §§1 and 2 of the Sherman Act, 15 U.S.C. §§1 and 2,
and constitutes copyright misuse.‘ CBS sought an injunc-
tion under 416 of the Clayton Act, 15 U.S.C. §26, directing
ASCAP and BMI to offer CBS performing rights licenses
on terms which reflect the actual use of musie by CBS, or,
alternatively, enjoining them from offering blanket licenses
to any television network. CBS also sought a declaration
of copyright misuse under the Declaratory Judgment Act,
28 U.S.C. §§2201, 2202. The District Court, after a trial
without a jury on liability alone, dismissed the complaint,
and CBS appeals.

In dealing with performing rights in the music industry
we confront conditions both in copyright law and in anti-
trust law which are sui generis. Analogy may be sought in

each field, but the practical complexities of licensing musical

song in the context of a performance in whole or part of the play
itself. Apparently, most uses of a musical composition by broad-
casters, nightclubs and restaurants would be considered non-dramatic
and therefore subject to license by ASCAP. Throughout th

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_0342%3A02. Public record. Not legal advice.