National Cable Television Ass'n v. Copyright Royalty Tribunal, s. 81-1005
| Decision Date | 10 September 1982 |
| Docket Number | 81-1081,Nos. 81-1005,s. 81-1005 |
| Parties | , 217 U.S.P.Q. 323, 1982 Copr.L.Dec. P 25,444 NATIONAL CABLE TELEVISION ASSOCIATION, Petitioner, v. COPYRIGHT ROYALTY TRIBUNAL, Respondent, American Society of Composers, et al., Intervenors. AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, et al., Petitioners, v. COPYRIGHT ROYALTY TRIBUNAL, Respondent, National Cable Television Association, Petitioner. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Petitions for Review of Orders of the Copyright Royalty tribunal.
Stuart F. Feldstein, with whom Brenda L. Fox and Robert St. John Roper, Washington, D. C., on brief, for Nat. Cable Television Ass'n petitioner in No. 81-1005 and intervenor in No. 81-1081.
Arthur Scheiner with whom John H. Vetne and James J. Popham and Frederick E. Attaway, Washington, D. C. were on the brief for American Society of Composers, et al., petitioners in No. 81-1081 and intervenors in No. 81-1005. Phillip H. Hochberg, Robert A. Garrett and David H. Lloyd, Washington, D. C., also entered appearances for American Society of Composers, et al.
Howard Scher, Atty., Dept. of Justice with whom Charles F. C. Ruff, U. S. Atty. and William Kanter, Atty., Dept. of Justice, Washington, D. C., on brief, for respondent. Mary A. McReynolds, Attorney, Dept. of Justice, Washington, D. C., also entered an appearance for respondent.
Before ROBINSON, Chief Judge, BAZELON, Senior Circuit Judge, and WRIGHT, Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge BAZELON.
Under the Copyright Act of 1976, 1 the creators of programming carried initially by television broadcasters must, on request, grant cable television systems permission to retransmit the material. 2 In exchange for this "compulsory license," cable operators must pay royalty fees which are distributed by the Copyright Royalty Tribunal (Tribunal) to the owners of the copyright in the programming. 3 The Act establishes a formula for determining the royalties for the first four years after its enactment and provides for the Tribunal to review the rate structure at periodic intervals thereafter. This case arises out of the first such rate adjustment proceeding. Both of the principal parties to the proceeding challenge the Tribunal's final decision. Cable television operators, represented by the National Cable Television Association (NCTA), identify a number of alleged errors which they contend led the Tribunal to set the fees too high. On the other hand, several organizations representing the owners of copyrighted programming (referred to collectively as "Copyright Owners") 4 claim the Tribunal made a series of mistakes resulting in fees that are too low. With one minor exception, 5 we affirm the decision of the Tribunal.
The development of cable television, like other advances in the "new media," has heightened the tension between two communications policies grounded in the Constitution-ensuring the protection of intellectual property 6 and encouraging the free flow of information. 7 From its beginnings, cable technology has been used primarily to extend broadcast signals to areas beyond the reach of conventional "over-the-air" facilities. 8 When the Supreme Court decided that such "retransmission" did not violate the Copyright Act of 1909, 9 Congress began a long and difficult struggle to safeguard the interests of program producers while achieving the benefits of the new technology. 10
That struggle culminated in the Copyright Act of 1976 which permitted cable operators to offer "secondary transmission" of copyrighted material carried initially by broadcast stations. 11 The Act's compulsory license enables cable systems to offer subscribers essentially three types of "basic" service: 12 (a) the signals of local stations that are otherwise poorly received, (b) national programming from affiliates of the three commercial networks, regardless of the location of the broadcast station, and (c) non-network or "syndicated," programming originating in a community distant 13 from the cable system. 14 As a result of secondary transmissions, advertisers supporting the first two types of programming reach a larger portion of their intended audience (local and national, respectively). Thus, cable carriage permits the originating station to raise its advertising rates and thereby increase its payments to program producers. 15 The market does not, however, as naturally compensate the owners of syndicated programming initially broadcast in communities remote from the cable system. Such programming is generally sponsored by local advertisers with little or no interest in the distant cable audience. 16
Consequently, the Copyright Act requires cable operators to pay royalties as a function of the "distant signal equivalents" (DSEs) they carry. 17 Since it would be impractical for each cable operator to pay the copyright owners of syndicated programming directly, 18 the Act obliges the operators to pay fees into a royalty pool controlled by the Tribunal which, in turn, determines the appropriate share for different types of copyright owners. 19 The fees are calculated as a percentage of gross receipts from basic subscriber charges, varying according to the number of DSEs carried. Thus, the rates set by the statute for the first four years of payments consist of 0.675% of the cable system's gross receipts from basic services for the first DSE, 0.425% for each of the second through fourth DSE, and .02% for each additional DSE. 20 The Act further provides that cable systems earning less than a set amount of gross receipts pay a flat fee, unadjusted for DSEs, and sets the "gross receipts limitations" applicable to the first four years. 21
The original royalty schedule derived from agreements between representatives of the cable operators and program producers. 22 Congress recognized, however, that changes in the industry and in the national economy, as well as experience with the new scheme, might warrant modifications in the rate structure over time. 23 Accordingly, the Act requires the Tribunal to review the rates beginning on January 1, 1980 and, at the request of a party in interest, every five years thereafter. 24 Section 801(b)(2)(A), which governs the adjustment proceedings, permits the Tribunal to modify the rates so they
reflect (i) national monetary inflation or deflation or (ii) changes in the average rates charged cable subscribers for the basic service of providing secondary transmissions to maintain the real constant dollar level of the royalty fee per subscriber which existed as of the date of enactment of this Act ....
The statute allows the Tribunal to "consider all factors relating to the maintenance of such level of payments including, as an extenuating factor, whether the cable industry has been restrained by subscriber rate regulating authorities from increasing the rates for the basic service of providing secondary transmissions." 25 Section 801(b)(2)(D) permits the Tribunal to adjust the gross receipt limitations according to similar criteria. 26
The Tribunal announced the commencement of the first rate adjustment proceeding on January 2, 1980. 27 In an effort to determine changes in subscriber rates since the Act had taken effect, the Tribunal issued a questionnaire to all the cable operators who had filed royalty account forms with the Copyright Office of the Library of Congress. 28 The questionnaire, prepared in consultation with all interested parties, asked the operators to list their basic service charges as of October 19, 1976, when the statute was enacted, and April 1, 1980. It also inquired about the nature and extent of local rate regulation of the cable systems. After receiving 2251 replies, the Tribunal conducted hearings and reviewed economic studies submitted by NCTA and the Copyright Owners. The Tribunal reviewed further pleadings from the parties and issued its final decision on January 5, 1981. 29
Relying on the Consumer Price Index (CPI), the Tribunal concluded that inflation had exceeded by 21% the increase in subscriber charges from October 19, 1976 to January 1, 1980. 30 Accordingly, the Tribunal raised by that percentage the royalty rates for systems earning more than the amount specified in the gross receipts limitations. 31 The Tribunal declined to adopt a proposed semi-annual adjustment for inflation that would operate until the next modification proceeding in 1985 nor did it accept various other contentions of the parties, raised again on appeal. 32 Finally, the Tribunal decided to raise the gross receipts limitations by 33.81%, the increase in inflation since 1976. 33
As noted above, NCTA claims the Tribunal set the rates too high while the Copyright Owners take the equally unsurprising position that the rates chosen were too low. Only the latter's contention that the Tribunal should have adopted a semiannual inflation adjustment merits extended discussion. After considering that issue, we will briefly treat the other arguments made by the parties.
The Copyright Owners, concerned that inflation would diminish the value of their royalty receipts before the next statutory review proceeding in 1985, asked the Tribunal to adopt an adjustment mechanism that would modify the royalty rates in light of semiannual changes in the CPI. Specifically, the owners proposed that the Tribunal adjust the royalty rates every six months according to the difference between the "current subscriber rate and a current CPI factor." 34 They found authority for such a procedure in the Act's requirement that the Tribunal "maintain the real constant dollar level of the royalty fee per subscriber." 35 The Tribunal rejected the proposal, concluding that its power to change the rates...
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