Copyright and Antitrust: The Effects of the Digital Performance Rights in Sound Recordings Act of 1995 in Foreign Markets

I. INTRODUCTION The language of the Copyright Clause of the U.S. Constitution(1) and antitrust laws that prohibit monopolies and restraints of trade(2) may seem contradictory. While the Copyright Clause empowers Congress to grant monopolies to authors as an incentive to create, the antitrust laws reflect a policy against monopolies. However, despite their apparent differences, the two bodies of law work together to encourage innovation, industry, and competition.(3) Competition and copyrights have long been recognized as a potential source of antitrust violations. Antitrust problems can arise in the case of copyright acquisition, licensing, and enforcement. The Supreme Court has stated that "the copyright laws confer no rights on copyright owners to fix prices among themselves or otherwise to violate antitrust laws."(4) In Data General Corp. v. Grumman Systems Support Corp.,(5) the First Circuit Court stated that "[a]lthough creation and protection of original works of authorship may be a national pastime, the [Sherman Antitrust Act (Sherman Act)] does not explicitly exempt such activity from antitrust scrutiny and courts should be wary of creating implied exemptions."(6) The Supreme Court has also stated that the "neither the Sherman Act nor the Copyright Act works as a partial repeal of the other."(7) Thus, the two laws must be harmonized. Attempts at harmonizing the two laws have been concentrated in the areas of refusal to license copyrighted material and blanket licensing of copyrighted music. The greatest area of concern is blanket licensing of copyrighted nondramatic music. Blanket licenses give licensees the right to perform any and all of the compositions owned by a particular performance rights society (PRS). The practice of issuing blanket licenses for a fee has come under fire as price fixing, which is a per se violation of the Sherman Act.(8) In 1995, Congress passed the Digital Performance Rights in Sound Recordings Act (DPRSRA)(9) in an effort to deal with the licensing problems associated with nondramatic musical works. The DPRSRA created a right in sound recordings to perform the copyrighted work publicly by means of a digital audio transmission, as well as established a compulsory licensing scheme.(10) However, the DPRSRA fails to address the problem of licensing of nondramatic works in foreign markets. Currently, in many foreign markets, regulation permit the network to broadcast nondramatic musical works, such as music videos, only if the network has a license for the right to perform the video--the public performance right.(11) Typically, the: music company or the various PRSs hold this right.(12) In many cases, the music companies control the various PRSs. In order to broadcast in many foreign countries, U.S. music programming services must pay a blanket-licensing fee to the PRS of the country in which they wish to broadcast. Because of the control by music companies, the practice in foreign countries has been subject to accusations of price fixing and restraint of trade.(13) In the United States, DPRSRA exempts noninteractive, nonsubscription services (networks supported by advertisement),(14) which eliminates the potential for alleging Sherman Act violations. This Note advocates extending the DPRSRA to foreign markets. Part II of this Note gives an overview of the development of sound recordings protection by the Copyright Act of 1976 (1976 Act)(15) and the DPRSRA. It further discusses the nature of antitrust and its application to the blanket licensing of sound recordings. Part III reports the status of PRSs in foreign countries and the possible violations of antitrust law. Part IV summarizes how courts have interpreted and applied antitrust law to copyright. Part V poses challenges and discusses the concerns that have arisen in light of the new legislation. II. BACKGROUND A. Traditional Copyright Protection of Sound Recordings Congress passed the first federal copyright act in 1790. …