U.S. Justice Department loses music licensing appeal

FILE PHOTO - Rapper T-Pain poses as he arrives at BMI's annual Urban Music Awards at the Saban theatre in Beverly Hills, California September 7, 2012. REUTERS/Mario Anzuoni

WASHINGTON (Reuters) - A U.S. federal appeals court on Tuesday ruled that music licensing giant BMI did not have to abide by the Obama administration’s more restrictive interpretation of how royalties should be collected.

The decision dealt a setback to the Justice Department’s effort to require Broadcast Music Inc, or BMI, and the American Society of Composers, Authors and Publishers, or ASCAP, to only license music to digital streaming services, radio and television stations, bars and other music users if they could issue a “full-work” license.

That push affected both BMI and ASCAP, though only BMI challenged it in court. ASCAP and BMI license about 90 percent of music heard online and in movies, TV shows and bars.

ASCAP and BMI argued the requirement raised problems in situations where songs were co-authored but did not specifically authorize licensing by both authors. The licensing services had issued “fractional” licenses for those songs and assumed that all royalties would be paid if licensees paid BMI and ASCAP.

In its ruling, the U.S. Court of Appeals for the Second Circuit upheld a New York district court decision that found the consent decree with BMI did not require the licensing company to only issue full-work licenses.

“We have said from the very beginning that BMI’s consent decree allowed for fractional licensing, and we are incredibly gratified that Judge (Louis) Stanton and the Second Circuit agreed with our position,” BMI President Mike O’Neill said in a statement.

ASCAP also said it was pleased with the appeals court decision. The Justice Department had no immediate comment.

BMI has some 800,000 U.S. composers, songwriters and music publishers among its members, while ASCAP counts some 640,000.

ASCAP represents artists such as Kelly Clarkson, Paul McCartney, Katy Perry and Hans Zimmer, while BMI is home to Willie Nelson, John Legend and Ed Sheeran among others.

Reporting by Diane Bartz; Editing by Paul Simao