United States of America, et al. v. Broadcast Music, Inc.

This appeal arises from a decision of the United States District Court for the Southern
District of New York (Stanton, J.), acting under the Broadcast Music, Inc. ("BMI") Consent
Decree,1 to set a rate for Music Choice's licensing of BMI's music. The license would apply to
BMI music used by Music Choice on its cable, satellite, and Internet services between October 1, 1994 and September 30, 2004. Since BMI and Music Choice were unable to agree on a rate, the Consent Decree required the court to set one.

The District Court entered its first decision setting a rate in 2001. See United States v.
Broad. Music, Inc., No. 64 Civ. 3787 (LLS), 2001 U.S. Dist. LEXIS 10368 (S.D.N.Y. July 23,
2001) ("Music Choice I"). In that decision, the District Court rejected BMI's proposed blanket
license fee of 3.75%, and fixed the rate at 1.75%, less than half the rate established in a deal
between BMI and, DMX, a competitor of Music Choice. The District Court reasoned that the
price paid for music by retail customers that was the basis for the rate set under BMI's agreement
with DMX did not reflect the fair market value of the music to the extent that price included both
the cost of the music itself as well as the cost of actually delivering the music to retail customers.
The Court concluded that the fair market value of the music was better expressed by the
wholesale price at which Music Choice sold to cable and satellite operators. Id. at *21-23. On
appeal, we vacated and remanded the decision to permit the District Court to reassess its
calculation of the fair market value of the disputed music rights. See United States v. Broad.
Music, Inc., 316 F.3d 189 (2d Cir. 2003) ("Music Choice II"). On remand, the District Court set
the rate incorporating retail value as a component of the value of the music rights. See United
States v. Broad. Music, Inc., No. 64 Civ. 3787 (LLS), 2004 U.S. Dist. LEXIS 9461 (S.D.N.Y.
May 26, 2004) ("Music Choice III"). This appeal followed. Because we believe that the District
Court misinterpreted the scope of our previous opinion, we again remand to permit the District
Court to exercise its unconstrained reconsideration.

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