OPINION AND ORDER
This copyright infringement action is before the Court on plaintiffs’ motion to dismiss the three-count antitrust and copy
BACKGROUND
Plaintiff Broadcast Music, Inc. (“BMI”) is engaged in the business of licensing performing rights in the copyrighted musical compositions of its affiliated composers and publishers. BMI currently represents over 53,000 affiliated coinposers and over 32,000 affiliated publishers who have granted BMI non-exclusive authority to license the performing rights in over 1.5 million musical compositions. Where the authority to license performing rights is non-exclusive, the copyright owner retains the right to license his works individually or on a cat-alogue-wide basis as if BMI did not exist. After BMI issues a license to a music user, 1 it collects the license fees and distributes all royalties to the composers and publishers after expenses and allowances for cash reserves. BMI also monitors unlicensed or unauthorized performances of music and, when able to join the copyright owner, brings infringement actions.
The thousands of individual copyright owners who have appointed BMI as their licensing agent have also authorized BMI to determine the types of licenses that it will offer and the prices at which these licenses will be available. BMI licenses its repertoire on an aggregate basis. That is, it issues a blanket license which entitles the licensee to use any or all of the works in the BMI repertoire as often as desired during the license term. The license is typically conveyed for a fee reflecting a percentage of the user-licensee’s revenue. In the television and radio field, BMI also offers a “per program” license which measures license fees based upon the popularity of particular programs or the time-periods in which BMI music is heard.
Lifetime is a cable television program service (in cable television parlance a “cable supplier”) that acquires, produces and markets video programming to subscribers, primarily through cable system operators located across the United States. Lifetime is available to tens of millions of Americans each day on their home televisions.
Like most other cable television program services, Lifetime produces little original programming. The bulk of its programming consists of theatrical movies and other pre-recorded programs which are licensed or purchased by Lifetime from third-party syndicators. Most of this programming features copyrighted music, which is selected by the program producer and recorded on the program soundtrack. The music is thus permanently integrated into the program and the cable service wishing to transmit the program must either transmit whatever music is incorporated in the program or not broadcast the program at all.
A pre-recorded television program or theatrical motion picture represents the collaborative efforts of numerous individuals: composers, actors, directors, editors, etc. In the cable television industry, all copyright rights — save one — are secured by the program suppliers at the time of production and are transferred to the broadcasting cable service as part of the program package. The one exception to this practice concerns the licensing of music performing rights. These rights are not obtained and conveyed by the producer/syndi-cator, but are reserved by the copyright owner or other licensor (such as BMI) for licensing in separate transactions with the cable program services.
' Defendant alleges that cable television music performing rights are not negotiated and licensed in a transaction between the producer and composer “at the source” be
Defendant maintains that the alternative of licensing performing rights directly from the copyright owner is a Hobson’s choice. The blanket license system, defendant submits, eliminates any incentive for BMI’s affiliates to license their works directly. BMI’s affiliates are insulated from the negotiations fostered by a competitive marketplace and assured the benefits of what defendant characterizes as “BMI’s take-it-or-leave-it licensing tactics.” Moreover, defendant claims that it would be prohibitively expensive to locate and obtain licenses from individual composers and publishers.
Plaintiffs allege that Lifetime has for several years willfully infringed numerous copyrights of musical compositions in the BMI repertoire by publicly performing them without a license from either BMI or the individual copyright owners. See 17 U.S.C. § 106(4) (1977 & Supp.1990). When plaintiff first became aware of the alleged copyright violations, it proffered an annual blanket license to Lifetime for a fee calculated at one percent of Lifetime’s gross revenues. Lifetime claims that the proffered fee would be three to four times greater than the blanket license fee charged to BMI’s “pay” cable television, 2 broadcast network and local broadcast station licensees. Lifetime rejected the blanket license offer and this suit followed.
The Consent Decree
In 1964, the United States commenced an anti-trust action against BMI alleging violations of the Sherman Anti-Trust Act. In 1966, the United States District Court for the Southern District of New York entered a consent decree in that action, see United States v. Broadcast Music, Inc., [1966] Trade Cas. (CCH) ¶[ 71,941 (S.D.N.Y.1966), which prohibits BMI from discriminating among similarly situated music users. The second major music licensing society in the United States, the American Society of Composers, Authors and Publishers (“AS-CAP”) 3 is governed by a separate consent decree which provides for a “rate court.” If any music user cannot negotiate an agreeable license with ASCAP, the user may apply to the district court supervising the decree to fix a reasonable fee. BMI’s licenses, on the other hand, are granted through private bargaining alone.
DISCUSSION
A motion to dismiss for failure to state a claim may be granted only if it appears certain that no relief could be granted under any set of facts that could be proved consistent with the allegations.
See Hishon v. King & Spalding,
Section 1 of the Sherman Act
Defendant alleges violation of section 1 of the Sherman Anti-Trust Act, 15 U.S.C. § 1 (1982
&
Supp.1990) in count I of its counterclaim. Section 1 forbids “[ejvery contract, combination ... or conspiracy in restraint of trade or commerce among the several States.” The section 1 claimant must demonstrate (1) concerted action by two or more persons which (2) unreasonably restrains interstate trade or commerce.
See Telectronics Proprietary, Ltd. v. Medtronic, Inc.,
Defendant maintains that the nonexclusive agreements between BMI and its affiliates, which permit the use of the blanket license, represent a concerted effort to increase the prices of music performing rights and to restrict the market choices available to cable program services. Plaintiffs portray defendant’s counterclaim and affirmative defenses as substantively identical to a series of earlier profitless challenges to the blanket license, particularly
Buffalo Broadcasting Co. v. American Soc’y of Composers, Authors and Publishers,
Writing for a unanimous panel, Judge Newman concluded that given the availability of realistic licensing alternatives, the blanket license had no anti-competitive effect upon local television stations wishing to purchase music performing rights. See id. at 926-33. Plaintiffs argue that this ruling foreclosed all future challenges to the blanket license as an unreasonable restraint of trade. The Court disagrees.
Plaintiffs’ position misapprehends the plain import of the Second Circuit’s decision. Several passages from Judge Newman’s opinion bear out this point. In the decision’s preface, Judge Newman wrote:
“For reasons that follow, we conclude that the evidence was insufficient as a matter of law to show that the blanket license is an unlawful restraint of trade in the legal and factual context in which it currently exists.”
Id.
at 919 (emphasis added). In discussing the precedential effect of
BMI, Inc. v. CBS, Inc.,
“Without doubting that the context in which the blanket license is challenged can have a significant bearing on the outcome, we hold that the local television stations have not presented evidence in this case.... ”
Because the blanket license is not
per se
unlawful,
see BMI, Inc., supra,
If plaintiffs’ challenge to the sufficiency of defendant’s antitrust allegations were governed by the more stringent requirements of Fed.R.Civ.P. 9(b), a different result might obtain. See Christian Broadcasting Tr. at 6. Antitrust allegations, however, are governed by the “short and plain statement” requirement of Rule 8(a). Defendant has pleaded sufficient allegations of the material elements of a section 1 violation to survive a motion to dismiss.
Section 2 of the Sherman Act
Section 2 of the Sherman Act, 15 U.S.C. § 2 (1982 & Supp.1990), affords a basis for three distinct civil claims, each of which defendant alleges: (1) monopolization; (2) attempted monopolization; and (3) conspiring to monopolize.
See Medtronic, supra,
To establish a monopolization claim, the claimant must demonstrate monopolizing conduct coupled with monopoly power in the relevant market.
See Delaware & Hudson Railway Co. v. Consolidated Rail Corp.,
Defendant alleges that plaintiffs and their affiliates have agreed to accord BMI absolute authority to determine the types of licenses it will offer and the prices at which these licenses will be offered. Defendant further asserts that the affiliates have determined not to license their rights directly, thereby enabling plaintiff to employ the purportedly anti-competitive
Monopolizing power “is a matter of capacity — the possession of power to control prices or exclude competition.”
Id.
at 30. Before monopoly power may be assessed, the relevant geographic and product markets must be defined.
See Speed Auto Sales, Inc. v. American Motors Corp.,
The relevant geographic market is a national one, as BMI offers licenses to cable services across the country. Finally, defendant easily satisfies the requirement of pleading monopoly power within the relevant market. The majority of domestic copyrighted compositions are in either AS-CAP or BMI’s repertoire, but not in both. Crediting defendant’s allegations, a cable service wishing to transmit a program featuring a composition in BMI’s repertoire must apply to BMI for the right.
An attempted monopolization claim under section 2 of the Sherman Act comprises three elements: “(1) anticompetitive conduct; (2) intent to monopolize; and (3) a dangerous probability of obtaining monopoly power.”
Delaware & Hudson Railway, supra,
The conspiracy to monopolize claim entails two components: “ ‘(1) proof of a concerted action deliberately entered into with the specific intent to achieve an unlawful monopoly, and (2) the commission of an overt act in furtherance of the conspiracy.’ ”
Walsh Trucking, supra,
Viewing the allegations in the light most favorable to defendant, the counterclaim alleges an agreement between BMI and its affiliates which facilitated the purportedly anti-competitive blanket license, and that BMI has unreasonably offered only the blanket license to defendant in furtherance of the agreement to deprive music users of less costly licensing arrangements.
Copyright Misuse Counterclaim and Affirmative Defense
The third count of the counterclaim seeks a declaratory judgment that plaintiffs “have misused, extended and enlarged the copyrights they license and such copyrights are ... unenforceable until such misuse is purged_” Similarly, defendant’s third affirmative defense asserts that plaintiffs’ alleged copyright misuse
The copyright misuse doctrine has been ill-received in the lower courts. Some courts have flatly rejected the existence of the doctrine.
See, e.g., Rural Tel. Serv. Co., Inc. v. Feist Publications, Inc.,
Defendant alleges that BMI has used its legal monopoly power to force cable program services to purchase the blanket license at exorbitant prices. If proven, this would constitute an illegal extension of BMPs monopoly. Although recovery appears remote, the Court is persuaded by the more recent cases that the affirmative defense of copyright misuse is cognizable.
The Court rejects, however, defendant’s assertion of the copyright misuse doctrine as a vehicle for affirmative relief. Such a claim is unprecedented and the Court declines to create the claim. Therefore, the Court dismisses count three of the counterclaim.
Public Performance
Defendant claims in its first affirmative defense that the complaint must be dismissed because it does not publicly perform the musical compositions which are the subject of the complaint. Rather, Lifetime asserts that it transmits its programming to cable operators who in turn relay the signal to the television sets of its viewers. Thus, the argument runs, only the cable operators publicly perform the compositions.
Public performance of the copyrighted composition is an element of a pri-ma facie copyright infringement claim. 7 Under the Copyright Act, public performance is defined as either (1) performing the work “at a place open to the public.... or (2) “transmit[ting] or communicatpng] a performance ... to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.” 17 U.S.C. § 101 (1977 & Supp.1990). Plaintiffs submit that the second definition encompasses defendant’s provision of programming services to cable system operators. The Court agrees.
Judge Tenney thoroughly addressed this precise question in
David v. Showtime/The Movie Channel, Inc.,
“it seems apparent from the scope of the examples provided in the legislative history that Congress intended the definitions of public and performance to encompass each step in the process by which a protected work wends its way to its audience. Moreover, it would strain logic to conclude that Congress would have intended the degree of copyright protection to turn on the mere method by which television signals are transmitted to the public.”
Id. at 759.
The Court dismisses the affirmative defense that no public performance has occurred.
Equitable Estoppel and Unclean Hands
As a second affirmative defense, defendant asserts that BMI is equitably estopped from bringing its copyright infringement claim by virtue of anticompetitive and unlawful behavior. The fourth affirmative defense alleges that the same behavior constitutes unclean hands barring recovery. Although the two doctrines raised by these affirmative defenses have considerable overlap, the Court will discuss them separately-
“[EJquitable estoppel applies both in law and in equity to deny a party the right to plead or prove an otherwise important fact —here, the act of infringement — because of something he has done or omitted to do.”
Tempo Music, Inc. v. Myers,
Crucial to application of the doctrine of equitable estoppel in the copyright infringement context, therefore, is at least partial responsibility of the party seeking recovery for the alleged infringement.
See Broadcast Music, Inc. v. CBS, Inc.,
[1983-2]
The Fourth Circuit characterized the
Tempo
defendant’s position as “impossible” because it could only avoid infringement by playing no music at all or by paying what it regarded “as an exorbitant licensing fee.”
Tempo,
The unclean hands doctrine “is a limited device, invoked by a court only when a plaintiff otherwise entitled to relief has acted so improperly with respect to the controversy at bar that the public interest in punishing the plaintiff outweighs the need to prevent defendant’s tortious conduct.”
Playboy Enter., Inc. v. Chuckleberry Publishing,
Dismissal of the Third-Party Complaint
Defendant alleges that Frances W. Preston, the President and Chief Executive Officer of BMI, “has authorized the unlawful conduct of BMI” asserted in the counterclaim and affirmative defenses. Paragraph 13 of the Counterclaim and Third-Party Complaint, which contains the sole direct reference to Preston, purports to incorporate Preston into all references to BMI or counterclaim defendants in the pleading. Preston moves pursuant to Fed. R.Civ.P. 12(b)(6) to dismiss the third-party complaint.
See Kenneth Leventhal & Co. v. Joyner Wholesale Co.,
Preston advances a congeries of arguments in urging dismissal of the third-party-complaint. Her first argument con-cededly rises and falls with BMI's motion to dismiss the antitrust claims pressed against it. Therefore, this argument is unavailing.
Preston next correctly points out that officers and employees of a corporation cannot conspire with the corporation for purposes of the joint action essential to a violation of section 1 of the Sherman Act.
See Copperweld Corp. v. Independence Tube Corp.,
Fed.R.Civ.P. 14(a), which governs third-party impleader, provides in relevant part:
“a defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiffs claim against the third-party plaintiff (emphasis added).”
Thus, in order for Lifetime to assert a third-party claim, it must be “attempting to transfer to the third-party defendant liability that may be imposed upon [it] in the main action.”
Tri-Ex Enter., Inc. v. Morgan Guaranty Trust Co.,
Lifetime may properly assert a third-party complaint against Preston only if she is or may be liable to Lifetime for all or part of Lifetime’s copyright infringement liability to BMI. The only ways the Court can conceive Preston could be a proper third-party defendant would be if she were a co-infringer or a contributory infringer of the copyrights in BMI’s repertoire. Plainly she is not. Accordingly the third-party complaint is dismissed.
Conceding its error, Lifetime maintains that Preston may be properly joined as a counterclaim defendant pursuant to Fed.R.Civ.P. 13 and 20. Rule 13(h) provides that “persons other than those made parties to the original action may be made parties to a counterclaim or crossclaim in accordance with ... Rules 19 and 20.” Rule 20(a) permits the joinder as defendants of all persons against whom is asserted any claim arising out of the same transaction “and if any question of law or fact common to all defendants will arise in the action.” Since Lifetime seeks to allege the same wrongdoing against BMI and Preston, Rule 20(a) is satisfied and Preston may be joined as a counterclaim defendant.
CONCLUSION
For the reasons explained above, the Court grants and denies in part BMI’s motion to dismiss. Lifetime is directed to file an amended counterclaim within 20 days of this decision. Reciprocal discovery is to proceed. The parties are to appear for a status conference on November 5, 1990 at 11:00 a.m. in courtroom 228.
SO ORDERED.
Notes
. BMI licenses the works in its repertoire to the three major television networks, cable program suppliers, and thousands of local television and radio stations. Other licensees include concert halls, nightclubs, bars and skating rinks.
. "Pay” cable program services typically are offered by cable system operators to subscribers for a monthly premium over the basic monthly cable service fee. Lifetime's cable service is labelled "basic" because it is generally offered by cable operators to subscribers as part of a routine cable package.
. Virtually every domestic copyrighted composition is in the repertory of either ASCAP or BMI, but not both. Consequently, defendant asserts, ASCAP and BMI do not compete in the same marketplace. Lifetime must, as a practical matter, seek license relationships with both organizations.
. In BMI, the Supreme Court held that the blanket license is not a per se section 1 violation.
. The Court does not dispute that Judge Winter, who concurred in Buffalo Broadcasting, maintains that absent evidence of agreement among composers or producers to refrain from licensing performing rights independently, "a non-exclusive blanket license cannot restrain competition." Id. at 934 (Winter, J., concurring). The majority decision of the panel, however, is not that broad. See BMI, Inc. v. The Christian Broadcasting Network, Inc., 89 Civ. 6246 (JES) (Transcript of May 11, 1990 Oral Argument on BMI’s motion to dismiss identical antitrust counterclaims of another basic cable television program service, pp. 8-9).
. As acknowledged by the Buffalo Broadcasting majority, virtually no alleged concerted action has ever been ruled lawful per se. See Posner, The Next Step in the Antitrust Treatment of Restricted Distribution: Per Se Legality, 48 U.Chi.L.Rev. 6, 23 and n. 62 (1981).
. A copyright plaintiff must make sufficient allegations concerning (1) originality and authorship of compositions; (2) compliance with formalities required to secure a copyright; (3) ownership of the copyrighted compositions; and (4) unauthorized public performance of the copyrighted compositions by defendant.
See Boz Scaggs Music v. KND Corp.,
. For example, a plain reading of the present pleading reveals such bemusing allegations as: BMI and Preston each have composers and publishers as affiliates, BMI and Preston each control the copyrights which BMI licenses, BMI and Preston were both sued by the United States in 1964, and both BMI and Preston possess unrestrained ability to exert enormous market power.
