United States v. Broadcast Music, Inc.

426 F.3d 91 (2005)

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United States v. Broadcast Music, Inc.

United States Court of Appeals for the Second Circuit
426 F.3d 91 (2005)

Facts

Broadcast Music, Inc. (BMI) (defendant) was one of two major performing-rights societies that licensed the public performing rights to most copyrighted music. Because of the anticompetitive nature of the industry, the government (plaintiff) subjected BMI and its lone competitor to regulation via court-approved consent decrees. In the event that a party seeking to license the performance rights to BMI’s catalogue of musical works could not agree with BMI on a rate, the district court had the authority to set the rate based on the fair market value of the license. Music Choice (plaintiff) was a company that transmitted music across many channels and sought to obtain a license to certain performance rights from BMI. The parties could not agree on a rate and thus turned to the district court to set a rate at a reasonable fair market value. BMI sought to have the court use a rate previously set by the district court between BMI and DMX, a Music Choice competitor, of 3.75 percent of the licensee’s gross revenues. Music Choice argued that the rate was not reasonable because DMX agreed to that rate structure because it was more financially disadvantaged at the time of negotiation than Music Choice was at present and thus the two companies faced different market pressures. The district court concluded that the fair market value of the music was expressed by the wholesale price rather than the retail value. BMI appealed. On appeal, the United States Court of Appeals for the Second Circuit reversed the holding and on remand instructed the district court to consider the retail price of music as an indication of fair market value. On remand, the district court adopted the 3.75 percent DMX rate but did not explain why its previous rejection of that rate was incorrect. Music Choice appealed.

Rule of Law

Issue

Holding and Reasoning (Parker, J.)

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