Columbia Broadcasting System, Inc. v. ASCAP

In 1969 the Columbia Broadcasting System, Inc. (CBS) (plaintiff) filed a lawsuit against the American Society of Composers Authors and Publishers (ASCAP) (defendant), alleging that ASCAP’s practice of pooling copyrighted music and selling blanket licenses to television networks was a restraint on trade in violation of antitrust laws. A district court ruled that blanket licenses did not restrain trade unlawfully. However, the Second Circuit reversed and found that price-fixing resulting from issuing blanket licenses to television stations was a per se violation of the Sherman Act. The Supreme Court reversed and remanded the case to the Second Circuit to analyze blanket licensing under the rule of reason. Analysis under this rule required assessing whether an agreement’s positive effects on trade outweighed its negative effects. The Second Circuit focused its analysis on the licensing to networks of rights to perform songs on the air. Under the blanket-licensing system, networks had no need to secure performing rights from individual owners because the performing rights were covered by the blanket license. Before the district court, CBS argued that the blanket license meant that one who purchased a license from ASCAP never considered the price of one song over another because they were all included anyway. CBS saw this lack of competition for the price of individual songs as a trade restraint. CBS argued that direct licensing of individual songs from copyright holders, although available, was not a feasible alternative because seeking performing rights would be a waste of money under the current structure. CBS argued there was no mechanism in place to facilitate a switch to direct licensing. However, there was evidence indicating such a switch could be implemented quickly. CBS argued that copyright owners might not want to interact with CBS directly, and that the owners might try to charge exorbitant prices for performance rights to music already recorded on television shows and films that CBS might want to rebroadcast. Yet evidence indicated copyright owners would jump at the chance to license to CBS. The district court found that each argument failed. On remand, the Second Circuit also reviewed the issue of feasibility of direct licensing.