Downtown Music Publishing LLC v. Peloton Interactive, Inc.

Background

Fifteen music publishers sued Peloton Interactive, Inc. for alleged willful copyright infringement involving musical works. Peloton asserted counterclaims against the music publishers and the National Music Publishers’ Association, Inc. (NMPA). It alleged that NMPA and the publishers violated Section 1 of the Sherman Act by negotiating collectively to obtain licensing terms above competitive levels and by collectively refusing to deal with Peloton. Peloton also alleged that NMPA tortiously interfered with Peloton’s prospective business relations under New York law.

Peloton alleged that NMPA insisted Peloton negotiate through NMPA rather than directly with individual member publishers and declined to provide a list of NMPA members. Peloton further alleged that, after it contacted several publishers directly, those publishers stopped responding and that NMPA communicated with or coordinated with them. Peloton also alleged that the Harry Fox Agency stopped providing services after pressure from sources in Washington, D.C., and New York, although the court’s ruling did not depend on resolving that allegation.

Legal Standards

The court applied Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a pleading does not state a legally sufficient claim. At this stage, the court accepted well-pleaded factual allegations as true and drew reasonable inferences in Peloton’s favor, but required enough facts to make the claims plausible rather than merely possible.

Sherman Act Counterclaim

The court rejected the counter-defendants’ argument that the Noerr-Pennington doctrine protected the alleged conduct. That doctrine generally shields petitioning activity from antitrust liability, including good-faith efforts to enforce copyrights and certain pre-lawsuit conduct. But the court explained that copyright holders may not agree to limit their individual freedom to negotiate future licenses. Based on NMPA’s alleged collective licensing efforts and Peloton’s unsuccessful attempts to negotiate separately with certain publishers, the court held that Peloton adequately alleged conduct outside that protection.

The court also held that Peloton plausibly alleged a conspiracy. Peloton alleged that NMPA demanded exclusive negotiations, withheld its membership list, and interfered with individual licensing efforts; that several publishers abruptly and simultaneously ended discussions; and that the publishers filed the copyright lawsuit soon afterward. The court found these allegations sufficient at the pleading stage to suggest an agreement rather than merely independent decisions or parallel conduct.

The antitrust counterclaim nevertheless failed because Peloton did not identify a legally sufficient relevant product market. Peloton defined the market as synchronization licenses for copyrighted works controlled by the publishers and collectively negotiated through NMPA. The court ruled that this definition did not include all reasonably interchangeable substitutes because Peloton did not explain why synchronization licenses for songs controlled by other publishers could not substitute for the licenses at issue. The court also rejected Peloton’s argument that songs were not interchangeable merely because each song has distinctive qualities, and distinguished a case involving television programming in which music was alleged to be effectively embedded in the programming.

Tortious-Interference Counterclaim

Under New York law, a claim for interference with prospective business relations requires, among other things, an allegation that the plaintiff would have entered an economic relationship but for the defendant’s wrongful conduct. The court held that Peloton failed to allege this required causation. Although Peloton alleged that NMPA interfered with its negotiations, it did not allege that the individual publishers would have continued or finalized licensing agreements with Peloton absent NMPA’s conduct. Because this deficiency was dispositive, the court did not decide whether Peloton adequately alleged wrongful means or a wrongful purpose.

Leave to Amend and Disposition

Peloton informally requested permission to amend its antitrust counterclaim by redefining the relevant market as the works controlled by NMPA members that had not licensed their rights to Peloton. The court denied that request. Peloton had not submitted proposed amended counterclaims, did not explain how the new definition would cure the interchangeability problem, and had not shown the diligence required to modify the scheduling order. The court also noted that allowing the amendment at that stage would require additional discovery and delay the case.

The court granted the counter-defendants’ October 25, 2019 motion to dismiss Peloton’s counterclaims. It also denied Peloton’s request to further amend its counterclaims.