Is DOJ inadvertently creating “copyright trolls?”

Since just prior to World War II, the primary collectives for the major music publishers – the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Inc. (BMI) have operated under antitrust consent decrees with the Department of Justice (DoJ). These consent decrees allow ASCAP and BMI to operate as monopolists, but protect the marketplace from price manipulation.

ASCAP and BMI along with their major publisher affiliates rightly understand that these consent decrees limit their ability to obtain monopoly prices for the use of music. And despite no change in market concentration and a continued history of anticompetitive behavior, ASCAP, BMI, and their major publishers are lobbying DoJ to ease the protections in the consent decrees.

{mosads}Any relaxation of the consent decrees would raise costs on any business that licenses music – from radio stations to retail stores to gyms to restaurants, and everyone in between.

As DoJ wraps up its two year – long review of the consent decrees, the major publishers are making a new request that would turn music licensing completely on its head. About a month ago, in a piece in the Hill’s Congress Blog titled “Music industry presses DoJ to change rules of the game”, I wrote that the major publishers are lobbying DoJ to okay a practice known as “Fractional Licensing”. The major publishers are putting on a full court press in its push for fractional licensing, even enlisting the help of their allies at the US Copyright Office to lobby DoJ on their behalf.  

On its surface, fractional licensing doesn’t sound that revolutionary. It would simply require a business wanting to perform a song to first license the rights from each owner of the song, as opposed to current practice where a business would obtain a license from a collective, and its royalty payments would then be distributed to all rights holders. The problem with the major publishers’ proposal is that whether they intend to play a song or not, a business like a local bar must pay for the rights to tens of thousands, if not millions, of songs, and many of these songs have multiple, multiple owners. Licensing music in this manner would prove utterly impossible.

While the practice of fractional licensing would prove unworkable from the outset, a bigger concern would be the abuses that would be a natural bi-product of fractional licensing. Previously, I touched on the idea of the creation of something termed the “Copyright Troll” when I argued “in a world in which fractional licensing did exist, price manipulation would run rampant. Someone with a very minor stake in a song would possess the very same hold up power as the primary author…. In reality, the Copyright Office is supporting a position that will lead to a form of “copyright troll” – those who will buy up minor percentages in songs just to leverage higher prices against possible copyright infringement.”

A “Patent Troll” which has gained notoriety in patent law and in the halls of Congress is very similar to this new potential bad actor.  The “Patent Troll” is loosely defined as a person who enforces a right far beyond any contribution that person made to the creation of a patented work, and then leverages that claim through litigation or the threat of litigation into big paydays. The limitations of the Patent Troll’s “creativity” are ultimately to paralyze innovation and drive up the costs for consumers.

Despite the drain Patent Trolls have been to the economy, the major publishers are lobbying DoJ to create a similar environment in music licensing. Granting the ability to license on a fractional basis would allow Copyright Trolls to intentionally hold up the licensing process and leverage the prospect of copyright infringement into higher licensing fees. The major publisher realize that the introduction of Copyright Trolls into the marketplace would raise fees for everyone, and the major publishers are threatening DoJ that they will create turmoil in the marketplace by collapsing ASCAP and BMI. DoJ should make its decision based upon marketplace conditions, not based upon threats from the major publishers.

The DOJ should reject fractional licensing, because the last thing the marketplace needs is another type of troll manipulating prices and driving costs up for consumers.

Andrew Langer is president of the Institute for Liberty and Host of the LangerCast on the RELM Network.