Reply Brief of Appellant United States of America: U.S. v. Broadcast Music, Inc.


1 Case 16-3830, Document 171, 08/31/2017, 2114984, Page1 of 41 16-3830-cv T I HE N United States Court of Appeals Second for the Circuit TATES OF A MERICA , NITED S U Plaintiff- Appellant , v. B USIC I NC ., ROADCAST , M Defendant . -Appell ee On Appeal from the United States District Court for the Southern District of New York (Hon. ) cv-3787 Louis L. Stanton Case No. 1:64- REPLY BRIEF OF APPELLANT UNITED STATES OF AMERICA ATRICI A A. B RINK P Director of Civil Enforcement RISTEN C. L O WEN ENDLER K IMARZI K D J ANIEL AAR H E. REDRICKS AMES J. F B R ENNETT W IGGERS ATELSON M OBERT J. Attorneys M ARY H ELEN W IMBERLY U.S. Attorneys D EPARTMENT OF USTICE J U.S. A D EPARTMENT OF J USTICE IVISION D NTITRUST A NTITRUST D IVISION 950 Pennsylvania Ave., N.W. Room 3224 Washington, D.C. 20530 -00001 -2460 (202) 514 [email protected] Counsel for the United States

2 Case 16-3830, Document 171, 08/31/2017, 2114984, Page2 of 41 TABLE OF CONTENTS Page RI TABLE OF AUTHO TIES ... ii AND SUMMARY OF ARGUMENT ... 1 INTRODUCTION ARGUMENT ... 7 A. BMI Fails To Overcome The United States’ Plain -Text Reading Of The BMI Decree ... 7 B. The Extrinsic Evidence Properly Before The Court Confirms -Work Licensing ... 18 That The Decree Requires Full C. BMI’s Policy Arguments Are Improper And Wrong ... 28 ... 35 CONCLUSION CERTIFICATE OF COMPLIANCE CERTIFICATE OF SERVICE i

3 Case 16-3830, Document 171, 08/31/2017, 2114984, Page3 of 41 TABLE OF AUTHORITIES Page(s) ASES : C Am. Cas. Co. of Reading v. Nordic Leasing, Inc. , ... 42 F.3d 725 (2d Cir. 1994) 26 Bank of New York Mellon Tr. Co. v. Morgan Stanley , 821 F.3d 297 (2d Cir. 2016) ... 25 Mortg. Capital, Inc. Broad. Music, Inc. v. Columbia Broad. Sys., Inc. , 19, 23, 27, 32, 33 ... 441 U.S. 1 (1979) ., Broad. Music, Inc. v. DMX Inc 33 683 F.3d 32 (2d Cir. 2012) ... Broad. Music, Inc. v. Pandora Media, Inc. , 140 F. Supp. 3 ... 17 d 267 (S.D.N.Y. 2015) Buffalo Broad. Co. v. Am. Soc’y of Composers, Authors & ... 17 Publishers , 744 F.2d 917 (2d Cir. 1984) . Sys., Inc. v. Am. Soc’y of Composers, Columbia Broad , 620 F.2d 930 (2d Cir. 1980) ... 32 Authors & Publishers , In re Pandora Media, Inc. 1:12 -cv-8035- C, 2013 WL 5211927 No. DL 21 ... (S.D.N.Y. Sept. 17, 2013) , In re THP Capstar Acquisition Corp. 33 756 F. Supp. 2d 516 (S.D.N.Y. 2010) ... , Maryland Cas. Co. v. W.R. Grace & Co. 128 F.3d 794 (2d Cir. 1997) ... 26 Hampsh New , ire v. Maine 532 U.S. 742 (2001) 24 ... Media, Inc. Am. Soc’y of Composers, Authors & Pandora v. , 785 F.3d 73 (2d Cir. 2015) ... 2- 3, 9, 10, 11, 21 Publishers Powerex Corp. v. Reliant Energy Servs., Inc. , 551 U.S. 224 (2007) ... 25 ii

4 Case 16-3830, Document 171, 08/31/2017, 2114984, Page4 of 41 TABLE OF AUTHORITIES —Continued Page(s) Renz v. Grey Advert., Inc. , 13 135 F.3d 217 (2d Cir. 1997) ... United States v. Am. Soc’y of Composers, Authors & Publishers ( In re Applications of RealNetworks, Inc. & , 627 F.3d 64 (2d Cir. 2010) ... 20 Yahoo! Inc.) 19- United States v. Armour & Co. , 9, 22, 34 402 U.S. 673 (1971) ... Music, road. ( In re Application s of United States v. B Inc. AEI Music Net , Muzak LLC & work, Inc.) 275 F.3d 168 (2d Cir. 2001) ... 18, 22, 33 , United States v. ITT Cont’l Baking Co. ... 420 U.S. 223 (1975) 18 , United States v. Rybicki 12 354 F.3d 124 (2d Cir. 2003) ... : TATUTES S Copyright Act of 1909, 320, § 5(e), Pub. L. No. 60- 439, ch. 35 Stat. 1075, 1076 (repealed 1976) 25 ... Copyright Act of 1976, 102(a)(2) ... 25 17 U.S.C. § R : ULE Fed. R. Evid. 801(d)(2) ... 20 iii

5 Case 16-3830, Document 171, 08/31/2017, 2114984, Page5 of 41 D SUMMARY OF ARGUMENT INTRODUCTION AN 1 -work requires BMI to offer full The plain language of the Decree licenses for the compositions in its “repertory” as defined by the Decree; that is, licenses that authorize users to immediately and legally perform repertory compositions. This reading is confirmed by the parties’ stated , the Decree’s context, and its purpose. understanding of the Decree Fractional licenses for repertory compositions do not satisfy this requirement. That is why BMI’s likening of a fractional license to a slice of pizza misses the point. You can eat a sl ice of pizza, but you cannot perform a fractional interest in a song . In pizza terms, the fractional license is closer to a cup of flour. And anyone who delivers only a cup of flour after to deliver a pizza plainly is in breach. agreeing ith the United States in part, conceding that it 1. BMI agrees w must license songs on a full -work basis when it can do so. This means that the district court’s decision cannot stand because it holds that the Decree never requires B MI to provide full -work licenses for the compositions in its repertory. 1 Capitalized and abbreviated terms in this brief have the same meaning as set forth in the United States’ opening brief. 1

6 Case 16-3830, Document 171, 08/31/2017, 2114984, Page6 of 41 The parties’ dispute thus a narrow one : whether split - on appeal is compositions for which BMI cannot offer full in work -work licenses are BMI’s repertory. The plain language of the Decree answers this in the negative by making clear that a license for “the right of question -work license. defines public performance” is a full Article II(C) thus - BMI’s repertory as those compositions for which BMI has secured full applies work licenses, and Article XIV(A) ull- work licensing BMI’s f obligation to its entire repertory. BMI’s concession confirms th is reading . If, as the United States argues and BMI concedes, the Decree’s requirement that BMI license “the right of public performance” obligates BMI to grant full licenses when it can, a license for “the -work a full -work license. right of public performance” must always mean Otherwise, a fractional license would satisfy BMI’s obligation to license “the right of public performance,” even if BMI had the ability to offer a full- work license. Instead of acknowledging this logic, BMI argues that the Decree does not prohibit fractional licensing because it does not spell that out prohibition in “thou shalt not” terms. B ut this Court rejected just that argument in the partial- withdrawals case, Pandora Media, Inc. v. 2

7 Case 16-3830, Document 171, 08/31/2017, 2114984, Page7 of 41 ASCAP , 78 he Court should again 5 F.3d 73 (2d Cir. 2015), and t reject it . F ractional licensing indisputably does not grant users the here , which right to immediately and legally perform a song, is irreconcilable with the Decree’s requirement that BMI license the right of public for all songs performance . in its repertory BMI’s textual arguments are similarly flawed. BMI abandons the sole textual argument it raised in its written submissions to the district court ; namely, that the word “composition” includes partial interests in musical works. On appeal, BMI discusses only the meaning of “the .” I t argues that the use of the definite right of public performance article “the” ight of public performance” identifies in the phrase “the r not a single and complete right, but a particular type of right. BMI is correct in saying that the word “the” particularizes “the right of public performance,” and that is one of the reasons why it was error for the district court to meaning to that phrase. BMI is refuse to give any wrong , however, that this proposition refutes the United States’ argument that “the right of public performance” licensed under the Decree must be a right complete unto itself. The language used in 3

8 Case 16-3830, Document 171, 08/31/2017, 2114984, Page8 of 41 Articles II(C), XIV(A), and throughout the Decree establishes t hat the licenses BMI must offer under the Decree are full -work licenses. BMI also leads its brief by attacking a position that the United States is not taking: that the Decree prohibits BMI from offering fractional licenses to users in any context. The United States’ argument is that (1) BMI’s repertory consists of those compositions, and only those compositions, for which it can provide full the -work licenses, and (2) Decree requires full -work licensing, and thus prohibits fractional licensing, of compositions in the repertory so defined. The relief sought by the United States is limited to “revers [ing] the district court’s , the declaratory judgment that, with respect to works in BMI’s repertory -work consent decree ‘neither bars fractional licensing nor requires full licensing.’” U.S. Br. 5 (quoting JA12 (Op. 6)) (emphasis added); see id. at 51. The United States is not arguing that the Decree prohibits BMI from offering fractional licenses for works outside that repertory, separate from the blanket licenses covered by the Decree. This appeal presents a different question: w hether BMI can offer fractional licenses under the collective -licensing regime regulate d by the Decree. And the answer to that question is no. 4

9 Case 16-3830, Document 171, 08/31/2017, 2114984, Page9 of 41 2. BMI and the United States agree on a second point: the Court should not consider extrinsic evidence if it finds the Decree’s language to be unambiguous. BMI goes too far, however, when it argues , if that the Court were to find the Decree ambiguous, there is no extrinsic properly before it. evidence provided evidence Below, the United States of the parties’ intent, the Decree’s context, and its purpose. B y contrast, BMI promised to offer extrinsic evidence of trade usage in its written submissions, failed to do so, but nevertheless consented to the district court ’s deciding the case on the existing record. BMI’s failure to does not preclude this introduce evidence when it had the opportunity Court from considering materials that are either in the record or are judicially noticeable. The extrinsic evidence properly before the Court supports the conclusion that the parties intended the Decree to require full- work licensing. For example, BMI ’s licensing agreements purport to grant full- work licenses to BMI’s users. And BMI has many times represented to courts that the blanket licenses required by the Decree confer benefits unique to full -work licensing. To the extent that the 5

10 Case 16-3830, Document 171, 08/31/2017, 2114984, Page10 of 41 Court finds th e D ould be interpreted ecree’s text ambiguous, that text sh with this understanding . in a manner consistent 3. The parties agree on yet a third point: p olicy arguments about competitive consequences speculating before this are not properly Court. Nonethel ess, BMI’s brief includes almost ten pages of policy arguments for which there is no factual record , claiming that the United States opened the door. The United States did no such thing, which is why BMI ’s policy arguments can cite only the United States’ explanation of the well -documented historical context and purpose of those portions of the Statement that outline the United the Decree, or States’ review of fractional licensing . administrative BMI’s assertions are wrong, in any event. Although BMI now claims that m andatory full- work licensing for repertory songs will cause massive on, it told the district court that the majority of its disrupti works would be unaffected. There is no support for BMI’s claim that affected works will now be wholly excluded from licensing. And BMI’s licensing agreements already purport to offer full -work licenses for repertory songs, so mandatory full -work licensing for those songs simply requires BMI to continue to do what it always has done. BMI’s 6

11 Case 16-3830, Document 171, 08/31/2017, 2114984, Page11 of 41 claims that the requirement will chill artist collaboration or decrease c . ompetition are thus pure speculation, untethered to established facts ARGUMENT BMI Fails To Overcome The United States’ Plain -Text A. Of T he BMI Decree Reading 1. Based on the concessions in BMI’s brief, the parties’ Below, BMI represented disagreement has narrowed on appeal. in its written submissions that owned works it licensed only the shares of co- affiliated with BMI . that belong to the copyright holders U.S. See Br. 38- 39 (quoting BMI’s letters to the district court). E ven if its affiliate(s) granted BMI a full , BMI -work license for a split work claimed it could nonetheless license to users only the fractional erests owned by its affiliate(s) sers to secure additional int , requiring u -affiliated co- owner(s) before they could perform th licenses from non e song lawfully. Now, by contrast, BMI agrees “it must license, on a full -work basis, those works for which it can in fact do so. ” BMI Br. 26. This concession the district court’s holding that the exposes the flaw in Decree never requires full -work licensing . See JA12 (Op. 6) (“The [BMI] Decree neither bars fractional licensing nor requires full- work 7

12 Case 16-3830, Document 171, 08/31/2017, 2114984, Page12 of 41 licensing.”) . B , at least in part, but MI has effectively confessed error for its argument fails to appreciate the consequences of that confession that it may fractionally license some under the Decree. compositions Article II(C) limits BMI’s repertory to those compositions for which BMI has the right to license “the right of public performance,” Article XIV(A) requires and to offer licenses for “the right of public BMI performance” for all compositions in its repertory. JA26, 31 -32. If See the Decree were , both fractional agnostic about fractional licensing licenses and full -work licenses would qualif y as licenses for “the right of public performance. ” BMI thus could offer fractional licenses even for songs for which it had the right to offer full -work T his is not licenses. , as BMI recognizes, though it never explains why. The reason the case a license “for the right of public performance” does not mean is that a fractional either a full -work license; it means only a full -work or license. Accordingly, the compositions in BMI’s repertory are limited to those work licenses, and BMI for which BMI has the right to grant full- must offer full -work licenses for all repertory compositions. 2. BMI claims that the Decree should not be interpreted to exclude fractional ly licensed compositions from BMI’s repertory because 8

13 Case 16-3830, Document 171, 08/31/2017, 2114984, Page13 of 41 the Decree does not expressly and unambiguously prohibit their . BMI Br. 21 -27 United States v. inclusion (citing, among other things, the Decree , 402 U.S. 673 (1971)). But Armour & Co. does just that when it requires BMI ’s license s to confer on users the right to and lawfully perform immediately compositions in BMI’s repertory. the See (Arts. IV(A), VIII(B), IX(A) -(C) , XIV(A) JA26, 29-32 26- 30. ); U.S. Br. This requirement is irreconcilable with fractional licensing, which would require users to enter individual negotiations and secure licenses from every co- owner of a song (or their representatives) before lawfully playing it. U.S. Br. 30. 29- has already considered and rejected an argument This Court Pandora Media, Inc. v. ASCAP almost identical to BMI’s in , 785 F.3d 73 (2d Cir. 2015) ( Pandora v. ASCAP ) . In that case, ASCAP (as appellant) and BMI (as amicus) arg ued that their respective consent decrees sh ould not be construed to prohibit partial withdrawals because there was no “express prohibition against partial grants or withdrawals” in the decrees. Br . for BMI as Amicus Curiae in Supp. of Resp’ t 19, Pandora v. ASCAP , No. 14-1158 -cv, 2014 WL 3887401 (2d Cir. Aug. 4, 9

14 Case 16-3830, Document 171, 08/31/2017, 2114984, Page14 of 41 2 Both claimed 2014) ( Amicus Br.) ; at 13- 15. Pandora BMI accord id. the decrees required only that BMI and ASCAP license whatever that rights they had received from copyright holders, even if they had received only partial rights that did not authorize all users to perform BMI Pandora Amicus Br. 14- 15; ASCAP all repertory compositions. Pandora Br. 35; see also BMI Pandora Mem. 17- 18 (making same 33- withdrawals case) . Like District Judges argument in BMI partial- Stanton and Cote before it, this Court disagreed with ASCAP and BMI . The plain language of ASCAP’s Decree required ASCAP “to license its entire repertory to all eligible users,” and thus, it “unambiguously preclude[d] ASCAP from accepting . . . partial withdrawals.” Pandora v. ASCAP , 785 F.3d at 77. ’s reasoning applies here. BMI that the Pandora again argues subset of performance rights in Decree allows it to license only a repertory songs corresponding to BMI’s affiliates’ —this time, those 2 See Br. of Resp.- Appellant 30- 33, Pandora v. ASCAP , No. 14- 1158- cv (2d Cir. Aug. 4, 2014) (Dkt. No. Pandora Br.); see also BMI 143) (ASCAP Mem. of Law in Opp. to Pandora’s Mot. for Partial Summ. J. 14- 15, No. 1:13- cv-4037- LLS, 2013 WL 7021820 (S.D.N.Y. Dec. 6, 2013) (BMI Pandora Mem.) (making same argument in BMI partial- withdrawals case). 10

15 Case 16-3830, Document 171, 08/31/2017, 2114984, Page15 of 41 fractional interests in their songs . BMI Br. 21- with Compare 36, Pandora 29- 40. But the plain language of the BMI Decree ASCAP Br. requires it to license the right of public performance. Thus for songs in BMI’s “repertory” as defined by the Decree, unambiguously the Decree precludes BMI from providing only See a subset of performance rights. v. ASCAP Pandora , 785 F.3d at 77. 3. BMI argues against the United States’ reading of the Decree, but never provides a cogent how fractional licensing is explanation for consistent with the Decree’s text. BMI offered only one such argument , when it claimed that the term in its letters to the district court n with music licensing to “composition” “is commonly used in connectio include fractional interests in musical works.” J A58 (BMI Aug. 4, 2016 Letter accord JA166 (BMI Aug. 12, 2016 Letter 3) . This argument 4); was not based on any plain language, but on supposed trade usage and custom in the music industry, for which BMI offered no See evidence. infra p. 19. As the United States explained, the district court properly rejected BMI’s argument. See U.S. Br. 36 (quoting JA182 (Tr. 15)). BMI concedes this point by not contesting it, and effectively disavow s 11

16 Case 16-3830, Document 171, 08/31/2017, 2114984, Page16 of 41 its prior argument by chiding the United States for discussing the m . BMI Br. 25 n.21. eaning of “compositions” at all See This leaves BMI with an argument about “the right of public based almost exclusively on the meaning of the performance” single word “the.” contends that case law supports the view that the BMI that the identified definite article “the” signals “right” has a specific, particularized meaning , but not the United States’ argument that the “right” referenced need be complete and unitary . Id. at 29- 32. The United States agrees with BMI that the definite article in the phrase “the right of public performance” signals that the phrase has a “‘specific meaning’” under the Decree the right of and distinguishes rights identified by the public performance from other possible . Id. at 30 (quoting United States v. Rybicki , 354 F.3d Copyright Act 124, 137- 38 (2d Cir. 2003)). BMI is incorrect, however, that its authorities the United States’ position. None uses “the” to conflict with indicate that the noun following “the” is merely a portion of something that must be combined with other things to form a complete whole. See id. at 29 -30 & nn.24- 25. BMI’s authorities are thus entirely consistent with the United States’ explanation that the definite article “‘connotes 12

17 Case 16-3830, Document 171, 08/31/2017, 2114984, Page17 of 41 the singularity’” of the word modified . U Renz v. Grey .S. Br. 30 (quoting , 135 F.3d 217, 222 (2d Cir. 1997)). Advert., Inc. In any event, the word “the” is just one of several textual signal s that a license for “the right of public performance” requires -work a full license because that is the only type of license that confers the immediate right to perform a composition. The United States detailed the other provisions of the Decree that show this to be true. See id. a t 26- 30, 35- 36. BMI recognizes that the Decree should be read as a whole, BMI Br. 26 but it fails to put that principle into practice . -27, es those other provisions only in cursory footnotes. Instead it address BMI’s footnotes are unpersuasive. For example, BMI dismisses the portion of Article XIV(A) that confers on applicants an immediate right to use the compositions in BMI’s repertory while rate negotiations are ongoing using entirely circular logic: Article XIV(A) does not require full- work licensing because it was never intended to do so. Id. at 36 n.33. BMI also purports to distinguish Articles VIII(B) and IX(A) of the Decree from Articles II(C) and XIV(A), but it never contests the relevant point: that Articles VIII(B) and IX(A) plainly contemplate that BMI’s licenses confer on users the immediate right to play repertory songs, 13

18 Case 16-3830, Document 171, 08/31/2017, 2114984, Page18 of 41 and Articles II(C) and XIV(A) use the same language as those other provisions. at 31 n.27. See id. 4. The United States agrees with BMI that the Decree does not prohibit BMI from offering fractional licenses in all contexts. BMI See -27. In particular, the Decree does not prohibit BMI from Br. 24 providing fractional licenses for songs that are outside the repertory, as defined by the Decree, and separate from the blanket license. Such licenses would be outside the auspices of the Decree and, thus, not subject to its requirements or its protections. For example, the rate court could not determine the reasonableness of rates for fractional licenses, nor for any per -program or blanket licenses that included fractional licenses. And if BMI engaged in collective licensing of fractional interests of songs outside the repertory, the United States would have to determine whether to investigate that conduct and, if so, determine whether such collective licensing violates the antitrust laws. 3 But that issue is not presented here. 3 Some passages in the Closing Statement suggested that BMI was prohibited from engaging in fractional licensing in all circumstances. See, e.g. , JA76 (Closing Statement 13) (stating that the Antitrust Division “has concluded that it would not be in the public interest to modify the ASCAP and BMI consent decrees to permit ASCAP and BMI 14

19 Case 16-3830, Document 171, 08/31/2017, 2114984, Page19 of 41 5. BMI echoes the district court’s concern that, under the United States’ view, BMI’s accidental licensing of invalid copyrights would be a 32. Of course possibility is not peculiar Decree violation. BMI Br. , this work licensing. Even if the Decree authorized fractional to full- licensing, inadvertently license more than it actually BMI could still ha d. BMI’s argument therefore adds nothing to the question of full - work licensing versus fractional licensing under the Decree. BMI argues that the district court’s treatment of “the right of public performance” as “‘descriptive, not prescriptive’” is the pro per )). To at 33 (quoting JA12 ( solution to avoid this situation. Id. Op. 6 deprive the Decree of its plain meaning out of concern over hypothetical enforcement actions against inadvertent violations is to allow the JA82 ( . at 19 ) (suggesting that split to offer fractional licenses”); id works are “unlicensable by ASCAP or BMI”). Those passages did not ade the proposition that the consent quately distinguish between (a) decree itself prohibits BMI from engaging i n fractional licensing, and (b) the proposition that fractional licensing cannot occur under the auspices of the consent decree, s o that ( inter alia ) the decree does not immunize fractional licensing from any constraints the antitrust laws would otherwise impose. To clarify, the position of the United States is that only the second proposition is correct. Accordingly, the United States has asked this Court to “reverse the district court’s declaratory judgment that, with respect to works in BMI’s repertory , the consent decree ‘neither bars fractional licensing nor requires full -work licensing.’” U.S. Br. 5 (emphasis added); see id. at 51. 15

20 Case 16-3830, Document 171, 08/31/2017, 2114984, Page20 of 41 smallest tail to wag the largest dog. And BMI’s argument is wholly - inconsistent with its acknowledgement that “it must license, on a full Id. at 26 ; see also work basis, those works for which it can in fact do so.” of Def. BMI Mem. in Supp. of Mot. to Modify Consent Decree, 1994 WL 16189513 (S.D.N.Y. June 27, 1994) (BMI 1994 Modification Mem.) (second paragraph in Argument § I.B) (recognizing that the 1994 amendments obligate BMI to provide users licenses on request, “eliminating BMI’s copyright law -derived right to withhold access to its creates an enforceable obligation on the part repertoire”) the Decree . If -work licenses in at least some contexts , the of BMI to provide full phrase “the right of public performance” cannot be merely descriptive. Moreover , the phrase “the right of public performance” must have some discernible and prescribed meaning under the Decree because it defines the types of licenses regulated by the Decree. Only those licenses are subject to the jurisdiction of the rate court, and only those licenses are shielded from U.S. antitrust enforcement under the settlement that resulted in the Decree. Identifying the meaning of “the right of public performance” is , thus , necessary to give effect to the 16

21 Case 16-3830, Document 171, 08/31/2017, 2114984, Page21 of 41 Decree’s provisions — ” that BMI fears. hardly the “absurd result[] See BMI Br. 32. * * * The unambiguous meaning of “the right of public performance” in the Decree is “the right to perform a musical composition.” Buffalo Broad. Co. v. ASCAP , 744 F.2d 917, 920 n.1 (2d Cir. 1984); accord BMI d 267, 275 (S.D.N.Y. 2015) (“the v. Pandora , 140 F. Supp. 3 Media, Inc. right of public performance in a composition is the right to use the underlying musical composition itself”). BMI understands this. Before the district court, BMI asserted that “music users have obtained the right to public ly perform split works for which BMI can only license a fraction by obtaining licenses from the other domestic PROs and effectively aggregating the fractional interests into a full work license.” JA57 (BMI Aug. 4, 2016 Letter 3) (emphasis added). BMI’s prior statement makes clear what BMI well knows: a fractional license does not convey the right of public performance required by the plain language of the Decree. Only a full- work license does. 17

22 Case 16-3830, Document 171, 08/31/2017, 2114984, Page22 of 41 B. Th e Extrinsic Evidence Properly Before The Court -Work Licensing Confirms That The Decree Requires Full Both parties agree that the Court should not consider extrinsic evidence if it finds the Decree to be unambiguous. U.S. Br. 22, 39; BMI 33. The parties disagree, however, on what happens if this Court Br. concludes that the Decree is ambiguous. BMI claims that “there is no extrinsic evidence of the parties’ intent” and therefore nothing for this . BMI Br. BMI is wrong. The government put Court to consider 34. extrinsic evidence of the parties’ intent in the record , even if BMI did not, and this Court may take this evidence into account if it finds the Decree is ambiguous . See United States v. ITT Cont’l Baking Co ., 420 U.S. 223, 238 (1975); United States v. BMI (In re Applications of Muzak , 275 F.3d 168, 175 (2d Cir. 2001) LLC & AEI Music Network, Inc.) AEI ). T his evidence shows that the parties understood the Decree to ( require work licensing . full- 1. Before the district court, the United States offered evidence that BMI has long held itself out as offering full -work licenses : BMI purports to receive full- work licenses from its affiliates, see, e.g. , JA148 - (BMI Writer Agreement §§ 4(a)), and likewise purports to grant full 3, work licenses to its users , see, e.g. , JA131 (BMI Radio Station Blanket / 18

23 Case 16-3830, Document 171, 08/31/2017, 2114984, Page23 of 41 Per Program License Agreement § 3(A he United States showed )). T represented the same to courts . See, e.g. , JA112- BMI has that 13, 116- 9, 11, 23, 26). And the United States 17 (BMI ESPN Resp. ¶¶ 8- explained the historical purpose and context of the Decree by way of the BMI v. Supreme Court’s discussion of that purpose and context in Broadcasting Columbia 441 U.S. 1 (1979) ( BMI v. CBS ). Systems, Inc., See, e.g. JA88 (U.S. Aug. 9, 2016 Letter 3). , BMI, on the other hand, included only the United States’ Closing Statement with its initial submission. See JA63- 85. BMI declared that it “intends to present evidence” about “trade practice and custom. ” 58 (BMI Aug. 4, 2016 Letter 4). But JA BMI never offered any such evidence , even after repeating its intention to do so at the pre -motion conference. JA178 (Tr. 11). BMI’s counsel nonetheless “accept [ed] the Court’s suggestion that we proceed on the basis of the submissions and t already made, ” without any qualification . JA185 (Tr. 18). argumen BMI’s failure to offer extrinsic evidence before the district court does not preclude this Court from considering the evidence that the United States offered below or the judicially noticeable party statements from court filings. See United States v. ASCAP (In re Applications of 19

24 Case 16-3830, Document 171, 08/31/2017, 2114984, Page24 of 41 RealNetworks, Inc. & Yahoo! Inc.) , 627 F.3d 64, 69 n. 2 (2d Cir. 2010) see also, e.g. , (this Court may “take judicial notice” of “[p]ublic filings”); Fed. R. Evid. 801(d)(2) (opposing party’s statement is not hearsay). the only evidence BMI said it would offer —evidence of Moreover, others in the industry —has no the supposed licensing practices of bearing on the supposed technical meaning of any words in the Decree or BMI’s licensing practices. BMI represents that it “has always licensed all public performance rights that it receives from its Affiliates.” BMI Br. n.1 . Although BMI qualifies this by saying it 2 -work or fractional,” id. , BMI ’s does so whether those rights are “full representations below showed that it was not aware of any affiliates that had ed rights in songs by granting it less than full- work reserv , licenses U.S. Br. 42 (citing JA148 (BMI Writer Agreement § 3), see JA 165 (BMI Aug. 12, 2016 Letter 2 n.3)). BMI does not dispute this fact in its brief. It follows, then, that BMI has always offered only full- work licenses. 2. BMI attempts to explain away the United States’ evidence of the parties’ intent. First , BMI claims that , because the parties indisputably did not contemplate fractional licensing when they agreed 20

25 Case 16-3830, Document 171, 08/31/2017, 2114984, Page25 of 41 to any version of the Decree, all such evidence is irrelevant. BMI See 35. Incorrect. The pa rties may not have contemplated how Br. 34- BMI’s obligations would apply in all possible circumstances, but that does not change the basic requirements of the Decree. The Department of Justice, BMI, and ASCAP presumably did not contemplate the ubiquity of new me dia services like Pandora when they entered or last amended the BMI and ASCAP decrees, but two district judges and, for , held that the d ecree s applied to the unforeseen ASCAP, this Court technology withdrawals case, for just the same. In the ASCAP partial- example, Judge Cote expressly acknowledged that “[i]t is certainly imaginable that in 2001 DOJ and ASCAP simply did not contemplate” and partial withdrawals , for new media services or anyone else, therefore did not include a specific prohibition against s uch In re Pandora Media, Inc. , No. 1:12- withdrawals in the ASCAP Decree. DL C, 2013 WL 5211927, at *10 (S.D.N.Y. Sept. 17, 2013), aff’d cv-8035- sub nom , Pandora Media, Inc. v. ASCAP , 785 F.3d 73. But “such a failure is immaterial when the language of [the decree] so clearly Pandora Id. Contra BMI forecloses” the practice. Amicus Br. 17 (quoting same language and arguing Judge Cote was wrong). 21

26 Case 16-3830, Document 171, 08/31/2017, 2114984, Page26 of 41 Arguments about unforeseen circumstances do not justify re eting the plain language of a consent decree. , 402 interpr See Armour U.S. at 681. If anything, they address whether modification of a nt decree is appropriate. conse Because modification is not an issue Id. before this Court on appeal , BMI’s arguments about un foreseen circumstances are misplaced . Second BMI describes as “strained” the United States’ , -work explanation that fractional payments may coexist with full See BMI Br. 35 & n.32. But BMI’s own statements prove that licenses. the United States’ explanation is correct . As BMI now concedes, it is required to, and does, offer full -work licenses for songs when it can, including for -in- common . See that are held as tenancies id. split works at 2 n.1, 26. At the same time, BMI makes fractional paymen ts to its affiliates for those songs, based on their proportional ownership interests. See JA150 (BMI Writer Agreement § 6(a)(ii)); U.S. Br. 42- 45 (citing, among other things, , 275 F.3d 168). This proves that BMI AEI has provided, and does provide , fractional payments to its affiliates, even when it licenses their songs on a full- work basis. 22

27 Case 16-3830, Document 171, 08/31/2017, 2114984, Page27 of 41 3. BMI also suggests statements that are not that any party contemporaneous with the 1994 amendments to the Decree, which added Articles II(C) and XIV(A), are See BMI Br. 34- 36. not relevant. This argument does not help BMI because its 1994 statements also -work demonstrate that BMI understood the Decree to require full licensing. When BMI asked the district court to modify the Decree, BMI described its histor ical licensing practices in a manner that is consistent only with full- work licensing. BMI explained that its blanket licenses “facilitate[] the licensing of performing rights to millions of compositions for many thousands of music and users without the delay expense of individual negotiations” and “provide unfettered, indemnified, and instantaneous access to millions of compositions for one fee.” BMI 1994 Modification Mem. (last paragraph in “BMI’s Business” section of Statement of Facts; citing BMI v. CBS , 441 U.S. at 22). These benefits do not extend to fractional licenses, which provide only fettered, potentially not fully indemnified, and not- instantaneous access to songs, the performance of which would require multiple fees. See is forced to concede as much on appeal. BMI BMI Br. 40. 23

28 Case 16-3830, Document 171, 08/31/2017, 2114984, Page28 of 41 BMI is also wrong abou t the relevance of the parties’ prior statements. Its specific pre -1994 statements is based challenge to the supposed fact that the Decree’s 1994 amendments incorporated on the changes to copyright law enacted through the Copyright Act of 1976. According to BMI, that is when the law first allowed fractional licensing. See at 3 5 & n.31 . T o accept BMI’s argument, however, id. the Court would have to find that this greater flexibility to license songs on a fractional basis was incorporated into the 1994 Decree amendments. T his argument is directly contrary to the one BMI pressed when it sought modification of the Decree in 1994, representing that “th e modification requested will serve to further constrain BMI’s licensing practices .” BMI 1994 Modification Mem. (first paragraph under Argument § I.A; emphasis in original). The United States relied on this interpretation when it consented to BMI’s proposal, as did the be district court when it adopted the modification. BMI should not now heard to make a contradictory argument because it would allow BMI to “‘play[] fast and loose with the courts,’” as well as the United States, its counterparty to the De cree. New Hamp sh ire v. Maine , 532 U.S. 742, 750 (2001) (some quotation marks omitted). 24

29 Case 16-3830, Document 171, 08/31/2017, 2114984, Page29 of 41 In any event, nothing i n the BMI Decree suggests that the meaning of terms such as “composition,” “public performance,” or “ the right of public performance” changed in 1994. Variations of these terms have existed since the 1941 and 1966 versions of the Decree, in almost every substantive provision of the Decree. See, e.g. , JA14- 16 (1941 B MI III); JA18- 21 (1966 BMI Decree Arts. IV Decree Arts. II- ; U.S. Br. 26- -X) 30. The 1994 amendments used these same terms in Articles II(C) and . See XIV(A) 24 (1994 BMI Order) (describing 1994 amendments JA22- to 1966 BMI Decree). Even when the 1976 Copyright Act shifted from the term “musical compositions” to “musical works,” the BM I Decree retained the “composition s” language of the 1909 Copyright Act. 17 U.S.C. § with Copyright Act of 1909, ch. 320, Compare 102(a)(2), § 5(e), Pub. L. No. 439, 35 Stat. 1075, 1076 (repealed 1976). 60- In the context of both statutory construction and contract construction, courts have long applied the “standard principle . . . that identical words and phrases within the same statute should normally Powerex Corp. v. Reliant Energy Servs., be given the same meaning.” Inc. , 551 U.S. 224, 232 (2007); see Bank of New York Mellon Tr. Co. v. Morgan Stanley Mortg. Capital, Inc. , 821 F.3d 297, 306- 07 (2d Cir. 25

30 Case 16-3830, Document 171, 08/31/2017, 2114984, Page30 of 41 2016) (applying same principle to contracts); Marylan d Cas. Co. v. W.R. Grace & Co. as amended (Nov. 18, , 128 F.3d 794, 799 (2d Cir. 1997), 1997) (same). “ Where sections of a statute have been amended but certain provisions have been left unchanged, [the Court] must generally assume that the legislature intended to leave the untouched provisions’ original meaning intact.” Am. Cas. Co. of Reading c Leasing, v. Nordi , 42 F.3d 725, 732 n.7 (2d Cir. 1994). Inc. Pursuant to this basic interpretive principle, and contrary to BMI’s argument, the fact that the parties used the same terms in the 1994 amendments without expressly altering the terms’ definitions indi cates that the parties meant the terms to have the meanings they have always had. that evidence of the parties’ pre- It follows, therefore, 1994 understanding of the Decree is relevant to show the meaning of the same language added in 1994. And t his evidence shows that the parties have historically understood that BMI offers full -work licenses under the Decree. Only those types of licenses “ can offer to music users a single license which covers all the works of all [BMI’s] affiliates.” Br. -1578, 77 for P 7, BM I v. CBS, Nos. 77 et’rs -1583, 1978 WL 207040 (S. Ct. Nov. 17, 1978). 26

31 Case 16-3830, Document 171, 08/31/2017, 2114984, Page31 of 41 Evidence of the parties’ understanding of the Decree after the 1994 am that endments is also relevant because it confirms the parties understood the 1994 amendments did not c hange the nature of the licenses BMI is required to offer under the Decree. BMI has repeatedly told courts, including this Court, that its blanket licenses offer “immediate access to music from virtually any source without advance negotiation and indemnif ication against claims of copyright infringement” and “provide what ‘most users want’: ‘unplanned, rapid, and indemnified access to any and all of the repertory of compositions.’” [Corrected ] Br. for Pet’r- Appellant 39, BMI v. DMX Inc. , No. 10 -3429 -cv (Dkt. No. 61) (quoting BMI v. CBS , 441 U.S. at (2d Cir. Jan. 5, 2011) 20). That is what distinguishes blanket licenses from direct licenses, negotiations for which cost time and money. “ With a blanket license, this expense is incurred on ly once [.] ” Id. at 38 . In short, the available extrinsic evidence shows that the parties intended, and have long understood, the Decree to require BMI to offer full- work licenses for repertory songs . 27

32 Case 16-3830, Document 171, 08/31/2017, 2114984, Page32 of 41 C. B MI’s Policy Arguments Are Improper And Wrong 1. To resolve this appeal, the Court may consider the plain text of the Decree and, if the Decree is ambiguous, extrinsic evidence of the speculating parties’ intent. Both parties agree that policy arguments the competiti ve consequences of fractional licensing have no place about s analysis of the meaning of the Decree. See in the Court’ BMI Br. 41. BMI, however, accuses the United States of opening the door to such arguments in its brief. See id. at 41 -42. BMI broadly cites the United States’ discussion of courts’ and the parties’ historical 45, justifications for the Decree. id. at 42 & n.34 (quoting U.S. Br. See 46, 48 , the United States recognized that fractional ). In that discussion licenses can impose informational -liability and potential copyright burdens on users that are inconsistent with the parties’ intent and understanding of the Decree. S ee id. (citing U.S. Br. 48). To the extent the United States’ historical assessment of potential burdens on users qualifies as “policy,” it is based on com mon sense that BMI never bothers to dispute. Indeed, BMI falls silent when it comes to the United States’ observation that BMI does not offer any comprehensive, reliable 28

33 Case 16-3830, Document 171, 08/31/2017, 2114984, Page33 of 41 means for its users to identify wh ic songs are split h of its licensed -owners of those songs. See U.S. Br. 47- works , or the co 48. Rather than engaging with those entirely proper arguments, BMI speculates about how full -work licensing would affect the market and musical collaboration . , based on unproven (and disputed) allegations See Br. 42- 51. These are not responses to the United States. BMI ation to the United States’ brief in BMI’s substantive policy Every cit discussion references portions of the United States’ Statement that — outlined the history of its administrative review of fractional licensing and not a single page of the United States’ actual argument. at See id. 14, 15, 18, 19- 20). BMI’s attempt to back -door 43, 49 (citing U.S. Br. policy arguments is improper. 2. BMI is also wrong. To begin, BMI’s contention that the government’s interpretation of the Decree would cause widespread harm in the market , id. at 42-49, is speculative at best, and contrary to BMI’s prior representations at worst . BMI has already represented that “[t]he majority of works in BMI’s repertoire are works created by a single writer or composer or co -written by two or more creators who are all affiliates of BMI” and therefore “would not be affected by a full work 29

34 Case 16-3830, Document 171, 08/31/2017, 2114984, Page34 of 41 licensing requirement.” J 3 ). A57 (BMI Aug. 4, 2016 Letter n.3 Moreover , BMI acknowledged below that it did not discover that co - owners supposedly “often” restricted licensing between them until the See JA165 (BMI Aug. 12, 2016 government’s investigation in 2016. BMI’s concern for widespread market disruption is thus Letter 2 n.3). allegation that requiring BMI to offer full- newfound. It is based on an either require new work licensing for its repertory songs would and among “thousands of rights holder s globally ,” negotiations with , rendering BMI Br. , or eliminate many works from BMI ’s repertory 44 those works “‘wholly excluded from licensing ,’” id. so -called “stranded” at 43. As BMI acknowledged below, however, the number of works that would require such negotiations is “unknowable.” JA57 (BMI Aug. 4, 2016 Letter 3). And BMI’s claim that so -called stranded works would be rendered unlicensable is unsupported never explains why co- . BMI owners of restricted split works who want their works included in BMI’s repertor y would not be able to solve this problem. Nor does BMI explain why “stranded” works would be “‘wholly excluded from licensing,’” even by copyright holders or their representatives. 30

35 Case 16-3830, Document 171, 08/31/2017, 2114984, Page35 of 41 BM I also -work licensing requirement will contends that a full change the distribution of royalties in a way that will “chill” creative collaborations between members of different PROs, BMI Br. 46, but it has given no reason to believe that any such change wi ll occur. On its face, the standard BMI user license is already a full -work license. JA131 (BMI Radio Station Blanket/Per Program License Agreement § 3.A) (“BMI grants LICENSEE a non- to-the - exclusive Through- Audience License to perform publicly in the U. S. Territory, by Radio Broadcasting and New Media Transmissions, non -dramatic performances of all musical works in the BMI Repertoire during the Term.”). At the same time, BMI makes fractional payments to its her pro rata share of members; that is, it agrees to pay a member hi s or the royalties for multi See JA15 -writer works. 0 (BMI Writer Agreement § 6(a)(ii )). But that agreement with the member about payment is independent from the type of license granted to the user. The Decree’s requirement to grant full -work licenses is thus entirely consistent with BMI’s existing practice of fractional payments, BMI Br. 44- 46, and does not by itself affect the distribution of royalties among its affiliates or the members of other PROs for fully licensed works. 31

36 Case 16-3830, Document 171, 08/31/2017, 2114984, Page36 of 41 Finally, BMI contends that the government’s interpretation is anticompetitive because it would reduce the number of license at 46 -48. Requiring a user to obtain multiple licenses for providers. Id. the same composition, however, is not pro -competitive. Competition are reasonable substitute exists when two products s for each other, and the buyer can cho ose one or the other based on price and quality. If a radio station wants to play a co -owned song, on the other hand, the co- owners’ respective fractional interests can no more be substituted for each other than a left shoe and a right shoe. , 620 F.2d Citing Columbia Broadcasting System, Inc. v. ASCAP 930 (2d Cir. 1980), the case on remand, BMI suggests that BMI v. CBS the direct licensing that the court found to mitigate the anticompetitive effects of the blanket license there is equivalent to the access to other it claims that fractional licenses would allow here. BMI Br . 47. PROs But while direct licensing adds competition, fractional licensing does not. F ractional licenses from others for the same works are complements to, not competitive substitutes for, those offered by BMI. In any event, history shows that some users wil l pursue direct licenses for songs even when blanket licenses for those songs are also available. 32

37 Case 16-3830, Document 171, 08/31/2017, 2114984, Page37 of 41 See, e.g. , I n re THP Capstar Acquisition Corp. , 756 F. Supp. 2d 516, 528 683 F.3d 32 (2d Cir. (S.D.N.Y. 2010), aff’d sub nom. BMI v. DMX Inc., 4 2012). BMI’s comparison to the market for mechanical rights and synchronization rights, BMI Br. 50- 51, is likewise flawed. Entities ronization rights are not already tied to a seeking mechanical and synch ds only a few given composition. A film maker, for example, usually nee shop among the millions of available , or even songs and can songs BMI v. CBS , commission original music. As the Court noted in of public however, that is not a practical option for most users performance rights, who need “unplanned, rapid, a nd indemnified access to any and all of the repertory of compositions .” 441 U.S. at 20. The ability of the blanket license to provide that benefit was a large part of the justification for treating the PROs’ collective rate making under the rule of reason rather than as per se unlawful. 4 Capstar case “acknowledged the existence of ASCAP claims the fractional licensing under the ASCAP decree.” Br. of ASCAP as Amicus Curiae in Supp. of Def. -Appellee 18 n.6 . In fact, the court stated just the opposite. It quoted , 275 F.3d at 1 71, to explain that the AEI applicant, DMX , was making “‘a request not for a new type of license, but for a blanket license with a different fee basis .’” In re THP Capstar Acquisition Corp. , 756 F. Supp. 2d at 540. 33

38 Case 16-3830, Document 171, 08/31/2017, 2114984, Page38 of 41 3. According to BMI and its amici, full- work licensing imposes substantial transaction costs and logistical difficulties because many songs are now the product of collaboration among multiple writers. This change in the music industry is not a problem created by the Decree , however . And arguments about c hanged circumstances go to the propriety of modification of the Decree; they are not grounds for s BMI recognizes, reinterpretation See Armour , 402 U.S. at 681. A . such arguments require a factual record that does not exist and are not properly before this Court . BMI Br. 42, 51. 34

39 Case 16-3830, Document 171, 08/31/2017, 2114984, Page39 of 41 CONCLUSION For these reasons, the Court should reverse the decision of the district court and hold that the BMI Decree requires BMI to provide users full -work licenses for the compositions in its repertory . Respectfully submitted. /s/ Robert J. Wiggers P RINK B A. ATRICIA Director of Civil Enforcement IMARZI L C. RISTEN K REDRICKS F J. AMES J WEN K ENDLER O IGGERS W J. OBERT R H E. ANIEL AAR D IMBERLY W ELEN H ARY M M ATELSON ENNETT B Attorneys Attorneys EPARTMENT OF USTICE J D U.S. USTICE D EPARTMENT OF J U.S. NTITRUST D IVISION A IVISION NTITRUST D A 950 Pennsylvania Ave., N.W. Room 3224 -00001 Washington, D.C. 20530 (202) 514 -2460 [email protected] Aug ust 31 , 2017 Counsel for the United States 35

40 Case 16-3830, Document 171, 08/31/2017, 2114984, Page40 of 41 CERTIFICATE OF COMPLIANCE Pursuant to Fed. R. App. P. 32(g)(1), I certify that this Brief complies with the type -volume limitation of Fed. R. App. P. 32(a)(7)(B) , because this Brief contains 6, 824 as modified by Circuit Rule 32.1(a)(4), words, excluding the part s of the Brief exempted by Fed. R. App. P. 32(f ). I further certify that this Brief complies with the typeface of Fed. R. App. P. 32(a)(5) and the type style requirements requirements of Fed. R. App. P. 32(a)(6) because the Brief has been prepared in New Century Schoolbook, 14- point font, using Microsoft Office Word 2013. /s/ Robert J. Wiggers Counsel for the United States

41 Case 16-3830, Document 171, 08/31/2017, 2114984, Page41 of 41 CERTIFICATE OF SERVICE I certify that on August 31, 2017, I caused the foregoing to be filed through this Court’s CM/ECF filer system, which will serve a notice of electronic filing on all registered users, including counsel for Appellee. /s/ Robert J. Wiggers Counsel for the United States

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