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Music Trademarks: What Is Fractional Licensing?

By Christopher Coble, Esq. | Last updated on

Between internet streaming, rights to deceased artists' work, politicians stealing songs for rallies, and remixes and sampling, music licensing has become a hot legal topic over the past decade. And in a time when so many artists are co-writing, co-performing, featuring, and guest appearing on other artists' work, figuring out who owns how much of a song can get pretty heated, especially when someone wants to use the song.

But a federal appeals court recently ended a standoff between the Department of Justice and songwriters and music publishers, ruling that a consent decree between the government and the publishers permits "fractional licensing," meaning that instead of one license for a song with multiple writers, users must obtain a license to use a song from each of the songwriters in order to use it. So how does that work?

Full-Works v. Fractional

The two largest performance rights organizations in the country, BMI and ASCAP, have been subject to a consent decree signed to resolve a government antitrust investigation in 1941. The DOJ reviewed the decree a few years ago and decided it required 100% licensing, or "full-works licensing" for works with multiple authors.

BMI, on the other hand, adamantly supported fractional licensing, which allowed a co-owner of a work to license only their own share, and receive direct payment for that share. "To put it simply," BMI asserted to songwriters, "we collect and pay you, as a BMI affiliate, for your share of a co-written song under our specific valuation system." BMI also warned of the dangers of full-works licensing

100% licensing would allow any one co-owner of a work to license 100% of the work without needing the permission of the other co-owners. Essentially, your writing partner could have 100% control over the licensing of your song, without your say, subject only to an obligation to account to you for your share of licensing revenues.

Clear and Unambiguous Command

While the DOJ had already softened their stance on the consent decrees, conceding they don't prohibit fractional licensing, the U.S. Second Circuit Court of Appeals took it one step further, holding the decree "does not address the issue of fractional versus full work licensing, and the parties agree that the issue did not arise at the time of the 1966 and 1994 amendments."

"[S]ince the decree is silent on fractional licensing," the court ruled, "BMI may (and perhaps must) offer them unless a clear and unambiguous command of the decree would thereby be violated."

Not welcome news for those, like Google, Netflix, and Spotify, that want to license songs and may have some extra work to do to obtain those licenses, it is a victory for the publishers, and, perhaps more importantly, the songwriters.

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