American Society of Composers, Authors and Publishers v. MobiTV, Incorporation, 681 F.3d 76 (2d Cir. May 22, 2012)
This appeal was brought in connection with a dispute between Plaintiff-Appellee MobiTV, Inc. (“Mobi”), which purchases programming from cable television networks and transmits it to wireless mobile telephone carriers, and Defendant-Appellant the American Society of Composers, Authors and Publishers (“ASCAP”) regarding royalty rates for performance rights to the music incorporated in programming Mobi offers.
By way of background, ASCAP is a performance-rights organization that issues blanket licenses to music broadcasters. By judicial decree ASCAP is required to set a reasonable royalty fee for music broadcasters who seek a license to use music in ASCAP’s repertoire. Furthermore, if ASCAP and the party seeking a license cannot reach an agreement on the royalty rate, either party can request the District Court for the Southern District of New York to determine a reasonable rate.
In the present case, ASCAP petitioned the District Court to determine a reasonable royalty fee for Mobi’s license request. To determine the reasonable royalty fees (i.e. the appropriate percentage rate to apply to the fair market value of the music), the District Court analyzed each aspect of Mobi’s offerings separately, namely, television channels (consisting of programming acquired directly from networks), radio channels (consisting of programming acquired from audio-only content providers) and music video channels (consisting of programming acquired from record labels).
In particular, ASCAP objected to the District Court’s royalty determination based on (1) the District Court’s finding that the revenue base is to be “the wholesale price of the musical content,” not the retail revenue of the musical content, (2) the District Court failing to “test” the resulting fee for reasonableness, and (3) the District Court failing to include in its fee determination the value of the licenses obtained by third parties (e.g. networks), the content of which is subsequently bought and streamed by Mobi.
The Second Circuit rejected ASCAP’s objections and affirmed the District Court’s royalty fee determinations. Specifically, the Circuit Court found that (1) the District Court did not err in using the wholesale price of the musical content as the revenue base, (2) the District Court is not required to test whether the fee it determines is reasonable, and (3) it would be unfair to require a middle-man, such as Mobi, to pay a second license fee for the same content its partner already paid for.
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