There are two important lessons in U.S. District Court Judge Denise Cote's 116-page ruling in the dispute between ASCAP and MobiTV over music royalties. The first is, as the old saying goes, if it walks like a duck and quacks like a duck, it is a duck. The second is make sure your expert witnesses are actually experts in the subjects they're testifying about — in this case, copyright and media law.
In 2008, musicians’ association ASCAP sued mobile TV provider MobiTV for $41 million in royalties. ASCAP claimed it was owed this based on a new framework that the performance rights company was applying to new streaming media such as mobile TV and Internet radio. Cote disagreed that new media justified a new structure for levying fees and that, instead of $41 million, MobiTV owes ASCAP $301,000.
Setting an important precedent, Cote ruled that streaming mobile content is covered by existing cable TV music licensing agreements — "post-Turner licenses," referring to decreasing pricing tiers depending on whether programming is music intensive, general entertainment or news and sports.
The judge minced no words in describing the fees ASCAP was demanding as "demonstrably unreasonable" and "a gargantuan, poorly understood figure that was vastly overinclusive." And further, "The fair market value for a … license for the public performance of music cannot cost more money than the combined price demanded by every other contributor to that content."
Cote also ruled that MobiTV shouldn't be charged royalties when its role in distributing music is limited to simply delivery technology. "Generally, program content contributors are compensated with upfront fees and with a percentage of revenue received by the owner of the audio-visual work from the exploitation of the program, including through returns in syndication or rerun markets … (They) do not customarily receive compensation tied to the advertising or affiliate license fee revenues that cable television networks generate or to the down-the-line revenues."
ASCAP's case also was undermined, it seems, by expert witness economist Jennifer Vanderhart's inexperience in the subject at hand. "Vanderhart … has comparatively limited expertise as an economist on the types of issues that lie at the heart of this case," Cote wrote. "She has little or no experience with copyright issues or the music, cable or television industries." And while Vanderhart "worked extremely hard to make and present her complex calculations," she didn't "rest her calculations on an explanation of guiding economic principles or any coherent theory."
One example of this flawed reasoning was ASCAP's blanket conversion from kilobytes of data to minutes of viewing. "This single assumption – that the conversion ratio from kilobytes to minutes for audio-visual products could be applied to all Sprint kilobytes because all types of Sprint customer data plan usage consumed data at the same rate –m is an error of significant proportions…Each of those layers of calculations was laden with unsupported and faulty assumptions."