In an opinion today, Judge Engelmayer granted in part and denied in part the summary judgment motion of SESAC, a company that, similar to BMI and ASCAP, offers the blanket music licenses that allow TV stations to broadcast programs that contain copyrighted music. The TV station plaintiffs allege that the SESAC charges exorbitant prices for “all or nothing” licenses. Judge Engelmayer rejected the plaintiffs’ claims that there was an unlawful conspiracy among the over 20,000 composers and musicians (referred to as “affiliates”) who licensed their music through SESAC, but held that the plaintiffs’ claims could proceed regarding the smaller subset of affiliates who, in exchange for large upfront payments, signed “supplemental” agreements that would discourage them from directly licensing their works. These affiliates were generally the “key” composers whose music was too ubiquitous for TV stations to avoid. As Judge Engelmayer explained:
Plaintiffs allege an unlawful agreement among SESAC and those affiliates (0.3% to 0.5%) who entered into supplemental agreements. Those agreements (1) imposed prohibitive penalties on the affiliate for issuing a direct license, or required that proceeds of any sales of direct licenses be forfeited to SESAC; (2) required the affiliate to refer requests to renew existing direct licenses, or for new direct licenses, to SESAC in the first instance; and (3) permitted the affiliate to issue renewals, or new direct licenses, only if SESAC did not reach agreement with the affiliate, and then, only at a price equal to that for which SESAC would offer such a license. A factfinder could reasonably find that any affiliate who assented to such a provision did so appreciating that it served to insulate SESAC’s blanket license from competition, for the benefit of all SESAC affiliates. Plaintiffs in fact adduced evidence of such an understanding on the part of composer Stephen Arnold, a signatory to a supplemental agreement. Arnold testified that he understood that “everybody at SESAC wanted everybody to stay on a blanket, to my knowledge. I didn’t have to convince anybody.” Arnold Dep. at 179. Further, in an email to Stephen Swid, a SESAC official, Arnold impliedly recognized that the penalty that he faced for direct licensing served to eliminate competition with the blanket license enjoyed by SESAC’s affiliates: “In my current agreement with SESAC, there is a $500,000 penalty if I execute a Direct License with a client-station. I agreed to that condition and I respect it, knowing it is in everyone’s best interest to keep my client stations on a Blanket License.” Hochstadt Decl. Ex. 194. The other affiliate with such an agreement who was deposed, David Catalano, gave similar testimony. . . . The direct licensing restrictions in these agreements, along with this testimony of these two affiliates, together supply a sufficient basis on which a jury could infer that the affiliates who entered into these agreements with SESAC were well aware that these terms tended to choke off a key avenue of competition with the blanket license. The inference logically follows from the fact of the restraint itself, and particularly from the prohibitive size of the direct-license penalty.