RMLC Seeks PI; Attempts to Stay in PA, Avoid CA

(As end of GMR Interim License Period Approaches, fight over GMR's refusal to deal with Pennsylvania radio stations has implications for others around the country)

We've written (and talked) plenty about the fight between the Radio Music License Committee (RMLC) - which represents the interests of the commercial radio industry in negotiating licenses with performing rights organizations ("PROs") to perform musical works - and Global Music Rights (GMR) - the newest PRO representing the owners of musical works (mainly publishers and songwriters). Although GMR was originally founded in 2013, it really became a presence in late 2016 when negotiations with the RMLC broke down, exposing commercial radio stations around the country to potential copyright infringement lawsuits as of January 2017.

The RMLC ended up suing GMR in Pennsylvania (the U.S. District Court for the Eastern District of Pennsylvania, to be precise) in November 2016, alleging that the PRO had engaged in anticompetitive behavior that violated the Sherman Act (a key antitrust law in the United States). The RMLC immediately filed a Motion for Preliminary Injunction seeking, among other things, that GMR immediately grant licenses to commercial radio stations while fees are being negotiated. GMR then followed suit (literally!) by suing the RMLC in GMR's home state - California - just one month later, alleging that it was the RMLC, not GMR, who had committed antitrust violations by conspiring to lower music license pricing for radio stations.

Imminent danger of infringement suits against radio stations was avoided when the RMLC and GMR reached an interim license agreement in late December, whereby the RMLC dropped its request for preliminary injunction in exchange for: (1) GMR's agreement it would not sue any commercial radio station before January 31, 2017 and (2) the offer to stations of an interim license agreement that would allow them to play GMR music over the air and online through September 30, 2017. The underlying litigation about GMR's anticompetitive behavior chugged along at a snail's pace that often is characteristic of federal court cases.

While we heard a few complaints about the seemingly high rate of this interim license and some hiccups in actually getting the license signed and payments submitted, thing seem to have been proceeding more or less smoothly. At least that's how it appeared on the surface; under the water, well"let's just say the fact that this happened during "Shark Week" isn't lost on us.

Negotiations between the RMLC and GMR regarding a possible extension of the interim license agreement have broken down, and the RMLC has returned to court in Pennsylvania seeking another Preliminary Injunction. Because we have been asked with increasing frequency in recent weeks "what happens to my GMR license come September 30," we'll note that the RMLC's main ask is for the court to order GMR to:

continue to offer to all U.S. commercial radio stations an interim license to GMR's entire repertory on the same terms as the previous interim license that GMR agreed to offer in order to resolve Plaintiff's previous Motion for a Preliminary Injunction.

In other words, RMLC has asked the court to extend the interim license, without change in rates or terms, until the underlying litigation has ended. If granted, commercial radio stations would not have to re-negotiate anything with GMR for the time being.

With that out of the way, let's look at how we got here, what the RMLC is arguing, and what other interesting tidbits we learned from the RMLC's Motion for Preliminary Injunction, associated Memorandum of Law filed in support of that Motion and other supporting documents.

GMR had publicly stated via its website that it would be willing to offer interim extensions to all interested stations - inviting radio stations to reach out and begin this process. There was, however, one catch: all bets are off for Pennsylvania stations. In a "Notice to All Radio Broadcasters," GMR said that:

radio station owners interested in securing the rights to perform works in GMR's catalog should contact GMR using the form below to negotiate the terms of a license or the extension of an existing license. Due to pending litigation with the RMLC, however, we cannot negotiate or enter licenses with stations owned by companies headquartered or based in Pennsylvania.(emphasis added).

At the same time, according to the RMLC's filing, GMR's counsel privately told the RMLC's counsel that GMR might be willing to deal with Pennsylvania-based companies if those companies and the RMLC agreed that: (1) they would not use those licenses to fight GMR's attempt to transfer the case out of Pennsylvania AND (2) they would not later argue that the terms of those licenses were anti-competitive.

Why is Pennsylvania so important? Because, while the RMLC filed its action in Pennsylvania, GMR has reason to want the entire matter to be decided in the California case that it brought Not only is California GMR's home turf, but the United States District Court for the Eastern District of Pennsylvania has proven friendly to the RMLC (and unfriendly to PROs) in the past, handing key rulings to the RMLC when it sued SESAC in a similar antitrust case that was eventually settled and recently has been resolved by an arbitration ruling highly favorable to the RMLC. (In case you missed our recent blog post on that development, you can access it here.). The RMLC, for its part, did not take too kindly to GMR's strategy of attacking Quaker State companies and stations. Among other descriptions, it accused GMR of engaging in "retaliation," "public intimidation tactics," and "abuse""" designed to frustrate this litigation."

It is no big mystery why GMR is so concerned about engaging in further activities in Pennsylvania - its California case is at serious risk of being transferred there. In an April 7, 2017 decision regarding a motion filed by the RMLC in California to do exactly that, the California court stated that the RMLC case had been filed first and that under the so-called "first-to-file" rule, GMR's later lawsuit, which involved the same parties and substantially similar issues, should be decided in Pennsylvania if that suit remained active. Rather than transferring GMR's case immediately, the court stayed the case until the Eastern District of Pennsylvania court had the opportunity to rule on GMR's own motion to move that case to California. (On August 1, the court referred that motion to the same magistrate who handled key parts of the RMLC/SESAC litigation.) In other words, the RMLC and GMR are engaged in a giant game of jurisdictional ping pong at the moment to decide in which court the litigation ball will ultimately land, which has impeded the resolution of the underlying substantive issues that caused the parties to bring their lawsuits in the first place.

Speaking of substantive issues, we'll outline briefly the arguments the RMLC raises in support of its call for a preliminary injunction forcing GMR to continue to offer an interim license agreement with radio stations. Those argument track the standard four factors widely used by courts to decide whether to issue a preliminary injunction:

1. the movant is likely to succeed on the merits of the underlying litigation;
2. the movant will suffer irreparable harm (i.e., not reparable by monetary compensation) without preliminary injunctive relief;
3. the balance of harms favors the movant; and
4. the public interest will be served by the injunction.

Now, on to the RMLC's argumentse. It has alleged that:

• RMLC is likely to win on the merits of its antitrust claim because it can show that:

GMR has monopoly power (or at a minimum has attempted to exert monopoly power and has acted anticompetitively such that it is dangerously close to achieving monopoly power); and

GMR has engaged in exclusionary conduct by:

"strategically handpicking its affiliates and promising to pay them greater royalties than the other PROs could afford (at least 30% more), given their rate regulation";

"engag[ing] in exclusive dealing with its affiliates that prohibits their direct licensing with radio stations";

preventing radio stations from reliably determining, "at any given time, the specific works in GMR's repertory that require a license from GMR";

"refus[ing] to offer stations alternatives to its blanket licenses, such as an adjustable fee blanket license, and before this litigation refused to offer any alternatives at all";

"misrepresent[ing] the extent of the rights that its licenses provide";

"misleading stations about the songs in its repertory"; and

"conditionally refusing to deal with Pennsylvania-based stations."

• Failure to grant the Preliminary Injunction would irreparably harm the RMLC (by "frustrate[ing] this litigation" and harming the RMLC's reputation) and commercial radio stations (by preventing them and the RMLC from fighting GMR's monopolistic abuses).
• The balance of harms to each side favors the RMLC, as the RMLC would be forced to waive critical rights, but any potential harm to GMR could be undone by retroactive adjustment of any interim license fees.
• The public interest favors entry of an injunction by ensuring unobstructed commerce and preserving listener choice in radio offerings.

Among the interesting points tucked away in the RMLC's filings:

• GMR's repertory currently contains 28,000 essential works from more than 70 songwriters, including songs written or performed by "Adele, Aerosmith, the Beatles, Bruno Mars, Jay-Z, Madonna, Pharrell Williams, Ryan Tedder, Steve Miller Band, Taylor Swift, Tom Petty & The Heartbreakers, and U2"; the Prince catalog was added in January 2017.
• GMR only controls 100% of the public performance rights for a small percentage of its works. In other words, the majority of its rights are "fractional" - a fact that it doesn't readily disclose and that requires radio stations to obtain one or more separate licenses to remaining fractional ownership interests.
• GMR does not offer the same adjustable fee blanket licenses offered by other PROs or price reductions for stations that reduce the number of GMR plays - in fact before the RMLC filed its lawsuit, offered no alternatives to its blanket license at all.

We know that many of you are worried about what happens on October 1, 2017, when your interim licenses are scheduled to expire. We share your concerns. Please check back for updates on this case and feel free to contact us with questions before the interim license period ends on September 30.