Downtown Music Publishing LLC v. Peloton Interactive, Inc.

Background

Fifteen music publishers sued Peloton for alleged copyright infringement. Peloton answered and asserted counterclaims against the publishers and the National Music Publishers’ Association, Inc. (NMPA). Peloton alleged that NMPA sought to obtain excessive licensing terms by negotiating collectively for its publisher members and that the publishers collectively refused to negotiate individual licenses with Peloton. Peloton also alleged that NMPA interfered with Peloton’s prospective business relationships with individual publishers under New York law.

Peloton’s service used music in live-streamed and archived fitness classes. Peloton alleged that its instructors selected music only days or hours before classes, making traditional composition-by-composition synchronization licensing impractical. Peloton said it had obtained broad synchronization licenses from all major music publishers and many independent publishers, but that NMPA insisted Peloton negotiate with all NMPA members through NMPA rather than contacting them individually. Peloton also alleged that several publishers stopped responding after it contacted them directly.

Legal standards

The court applied the standard for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). At this stage, the court accepts well-pleaded factual allegations as true and asks whether they plausibly state a claim for relief. Conclusory statements are not enough.

Sherman Act counterclaim

The court first considered the Noerr-Pennington doctrine, which generally protects efforts to petition the government from antitrust liability, including certain litigation, settlement offers, and pre-litigation conduct. The court held that the doctrine did not protect the alleged concerted refusal to license future rights. Although copyright holders may coordinate efforts to enforce copyrights against a common alleged infringer, they may not agree to limit their individual freedom to negotiate future licenses. Peloton’s allegations that NMPA negotiated on behalf of its members and that Peloton’s efforts to negotiate with individual publishers failed were sufficient at the pleading stage to avoid dismissal on this ground.

The court also held that Peloton plausibly alleged a conspiracy under Section 1 of the Sherman Act. Peloton alleged that NMPA demanded exclusive negotiations, refused to provide a list of its members, and impeded individual licensing efforts. It further alleged that several publishers abruptly and simultaneously ended discussions with Peloton, followed by the filing of the copyright lawsuit and public statements by NMPA. The court found these allegations sufficient to suggest an agreement rather than merely independent decisions.

The antitrust counterclaim nevertheless failed because Peloton did not adequately identify a relevant product market. Peloton defined the market as synchronization licenses for works controlled by the publishers and collectively negotiated through NMPA. The court found that this definition did not include all reasonably interchangeable substitutes because Peloton did not explain why songs controlled by other publishers could not substitute for the songs controlled by the counter-defendant publishers in fitness programming. The court rejected Peloton’s argument that the songs’ unique qualities made them noninterchangeable and distinguished a case involving television programming in which music was alleged to be embedded in the programming and unavoidable.

Tortious-interference counterclaim

Peloton alleged that NMPA interfered with its prospective business relationships with individual music publishers. Under New York law, this claim required, among other things, an allegation that Peloton would have entered into an economic relationship with the publishers but for NMPA’s wrongful conduct. The court held that Peloton had not alleged that the publishers reciprocated its interest in continuing or finalizing licensing agreements. Because the counterclaim lacked sufficient allegations of but-for causation, the court did not decide whether Peloton adequately alleged wrongful means or a wrongful purpose.

Request to amend

Peloton asked for permission to amend its antitrust counterclaim by redefining the relevant market as all NMPA members that had not licensed their rights to Peloton. The court denied that request. Peloton made the request informally in its opposition brief, did not submit proposed amended counterclaims, and did not explain how the proposed market would cure the interchangeability problem. The court also found that Peloton had not shown the diligence required to modify the scheduling order because it had had earlier opportunities to revise its market definition. The court concluded that the proposed amendment appeared futile and that allowing it would require additional discovery and expense.

Disposition

The court granted the Counter-Defendants’ October 25, 2019 motion to dismiss Peloton’s counterclaims. It also denied Peloton’s request to further amend the counterclaims. The opinion does not specify that either ruling was with or without prejudice.