Appellate Defeat for Union Fighting Pandora

MANHATTAN (CN) - Licensing terms favoring Pandora in the online music-streaming service's copyright fight with a musician's union should be upheld, the 2nd Circuit ruled Wednesday.

Though it has been nearly three years since Pandora petitioned a federal judge here to set a reasonable licensing rate for streaming music, today's decision notes that the battle had been brewing years earlier.

Members of ASCAP, short for the American Society of Composers, Authors and Publishers, became concerned in 2010 that the union "was receiving below-market rates for public performance licenses to new media companies such as Pandora," the 17-page opinion states. "These members sought to withdraw from ASCAP the right to license their works to new media music users, preferring to negotiate with new media music users outside the ASCAP framework."

Before the case went to trial last year, U.S. District Judge Denise Cote credited Pandora's interpretation of a 2001 consent decree with ASCAP.

At the ensuing bench trial, Pandora proposed a 1.7 percent rate for all five years of the license, and ASCAP demanded an escalating rate that started at 1.85 percent and grew to 3 percent.

Splitting the difference in Pandora's favor, Cote set a rate of 1.85 percent for all five years.

Judges Pierre Leval, Chester Straub and Christopher Droney sat on the appellate panel that upheld the decision Wednesday.

"This outcome does not conflict with publishers' exclusive rights under the Copyright Act," the unsigned opinion states. "Individual copyright holders remain free to choose whether to license their works through ASCAP. They thus remain free to license - or to refuse to license - public performance rights to whomever they choose. Regardless of whether publishers choose to utilize ASCAP's services, however, ASCAP is still required to operate within the confines of the consent decree."

As for the set rate, the panel agreed that the "legal determinations underlying that ultimate conclusion - including its rejection of various alternative benchmarks proffered by ASCAP - were sound."

Pandora's attorney, Kenneth Steinthal with King & Spalding, said in a phone interview his client is "certainly gratified" that it will be able "to perform all of the works in the catalogues of all publishers who remain members of ASCAP."

"I think that was a big issue in the case," he added.

ASCAP's lawyer did not respond to a request for comment by press time.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit