Independent Producers Grp. v. Librarian of Cong.

• Decision Date: 30 June 2015
• Docket Number: Nos. 13–1274,13–1296.,s. 13–1274
• Citation: 792 F.3d 132,115 U.S.P.Q.2d 1252
• Parties: INDEPENDENT PRODUCERS GROUP, Appellant v. LIBRARIAN OF CONGRESS, Register of Copyrights, and Copyright Royalty Board, Appellees Motion Picture Association of America, Inc., et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

792 F.3d 132

115 U.S.P.Q.2d 1252

INDEPENDENT PRODUCERS GROUP, Appellant

v. LIBRARIAN OF CONGRESS, Register of Copyrights, and Copyright Royalty Board, AppelleesMotion Picture Association of America, Inc., et al., Intervenors.

Nos. 13–1274

13–1296.

United States Court of Appeals, District of Columbia Circuit.

Argued March 27, 2015.

Decided June 30, 2015.

Brian D. Boydston argued the cause and filed the briefs for appellant Independent Producers Group.

Sonia K. McNeil, Attorney, U.S. Department of Justice, argued the cause for appellees. With her on the brief were Stuart F. Delery, Assistant Attorney General at the time the brief was filed, and Mark R. Freeman, Attorney.

Charles G. Curtis, Jr. argued the cause for intervenor-appellees Joint Sports Claimants. Gregory O. Olaniran argued the cause for intervenor-appellees MPAA–Represented Program Suppliers. With them on the joint brief were Robert Alan Garrett and Lucy Holmes Plovnick.

Ronald G. Dove, Jr., Lindsey L. Tonsager, John I. Stewart, Jr., Jennifer Burdman, Ann Mace, L. Kendall Satterfield, Victor J. Cosentino, Gregory A. Lewis, and Samuel Mosenkis were on the joint brief for amici curiae Commercial Television Claimants, Public Television Claimants, Music Claimants, Canadian Claimants Group, and National Public Radio in support of appellees.

Brian D. Boydston was on the brief for intervenor Independent Producers Group in support of appellees.

Before: BROWN, KAVANAUGH, and MILLETT, Circuit Judges.

Opinion

Opinion for the Court filed by Circuit Judge KAVANAUGH.

KAVANAUGH, Circuit Judge:

Under the Copyright Act, cable systems may retransmit over-the-air broadcasts of copyrighted material so long as they pay compulsory royalty fees for using that copyrighted material. The Librarian of Congress supervises the process of collecting, allocating, and distributing those fees. As part of the process, the Copyright Royalty Board—which is appointed by the Librarian of Congress—conducts regular proceedings to determine how to distribute royalty fees. Independent Producers Group, known as IPG, represented several copyright owners in the 2000–03 royalty fee distribution proceeding. According to IPG, the Board erred in determining IPG's royalty fees in the sports programming and program suppliers categories. IPG now appeals. We affirm the Board's determination as to IPG's royalty fees in those categories.

I

The Copyright Act balances two important policies: “ensuring the protection of intellectual property and encouraging the free flow of information.” National Cable Television Association v. Copyright Royalty Tribunal, 689 F.2d 1077, 1078–79 (D.C.Cir.1982).

That balancing act is evident in the royalty fee provision at issue in this case. Under 17 U.S.C. § 111(c), after a broadcast television station transmits copyrighted material to its viewers, cable systems may retransmit that material without first obtaining the copyright owner's permission. In exchange for that privilege, cable systems must deposit statutorily prescribed royalty fees with the Register of Copyrights. Id. § 111(c), (d).

The Copyright Royalty Board is responsible for determining how to distribute those fees to the appropriate copyright owners. Id. § 801(b)(3). In July of each year, any copyright owner who claims part of that year's pot of royalty fees—or an agent of that copyright owner—must file a claim with the Board. Id. § 111(d)(4)(A). Based on those claims, the Board determines “whether there exists a controversy concerning the distribution of royalty fees.” Id. § 111(d)(4)(B).

If all claimants agree how to distribute the royalty fees, then the Board authorizes the Librarian of Congress to distribute the fees. Id. §§ 111(d)(4)(B) -(d)(4)(C), 801(b)(7). If the claimants cannot reach an agreement, however, the Board must “conduct a proceeding to determine the distribution of royalty fees.” Id. § 111(d)(4)(B) ; see id. § 801(b)(3)(B).

Royalty fee distribution proceedings have two phases. During Phase I, claimants may group themselves into categories based on the kind of programming that they own. See 37 C.F.R. § 351.1(b)(2)(ii) (permitting claimants to file joint petitions to participate in Phase I proceeding); 75 Fed.Reg. 26,798, 26,798 (May 12, 2010) (listing categories for 2000–03 Phase I distribution proceeding). Using evidence supplied by the claimants, the Board calculates the marketplace value of each category. It then assigns a percentage of the total royalty fee fund to each category based on its value relative to other categories.See, e.g., id. at 26,807 (assigning percentages); see also 37 C.F.R. § 351.1(b)(2)(i)(B). During Phase II, the Board subdivides the fees allotted to each category among the individual claimants within that category. See id. § 351.1(b)(2)(i)(B).

Phase I and Phase II proceedings follow the same set of procedures. First, the Board publishes a notice of the proceeding in the Federal Register. 17 U.S.C. § 803(b)(1)(A)(i) ; see 73 Fed.Reg. 18,004 (Apr. 2, 2008) (notice of Phase I proceeding for 2000–03); 76 Fed.Reg. 7,590 (Feb. 10, 2011) (notice of Phase II proceeding for 200003). Claimants then petition to participate in the proceeding. See 17 U.S.C. § 803(b)(1). A three-month voluntary negotiation period ensues, during which the participating claimants attempt to reach an agreement without assistance from the Board. Id. § 803(b)(3).

At the end of the voluntary negotiation period, if any disputes remain, the Board plays a more active role in the process. See 37 C.F.R. § 351.3(a). The Board accepts written statements from the participating claimants, allows the participating claimants to conduct discovery, and orders a post-discovery settlement conference. See 17 U.S.C. § 803(b)(6)(C) ; 37 C.F.R. §§ 351.4 –351.7. If the participating claimants are still unable to resolve their differences, the Board then conducts a hearing and issues a final determination. See 17 U.S.C. § 803(c)(1) ; 37 C.F.R. §§ 351.8 –351.12. Finally, the Librarian of Congress publishes the Board's determination in the Federal Register and distributes the royalty fees. See 17 U.S.C. § 803(c)(6).

The Board's published determinations are subject to judicial review in this Court under 17 U.S.C. § 803(d)(1). We may set aside a determination “only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, or if the facts relied upon by the agency have no basis in the record.” SoundExchange, Inc. v. Librarian of Congress, 571 F.3d 1220, 1223 (D.C.Cir.2009) (citations and internal quotation marks omitted); see 17 U.S.C. § 803(d)(3) (Section 706 of the Administrative Procedure Act applies to judicial review of royalty fee distribution determinations).

II

Independent Producers Group, or IPG, represents several claimants who, by IPG's tally, own the copyrights for over 1,000 television programs. IPG challenges the Board's 2000–03 Phase II determination in the sports programming and program suppliers categories.¹

IPG chose not to participate in Phase I of the 2000–03 distribution proceeding. See 75 Fed.Reg. 26,798, 26,799 (May 12, 2010) (listing participants). During Phase I, the participating claimants grouped themselves into eight categories, relying on the traditional definitions of those categories, and reached a partial settlement. They were not, however, able to reach a full settlement concerning the allocation of royalty fees across the eight categories. The Board therefore conducted a hearing and published a Phase I determination that allocated the royalty fees. See id. at 26,798 –99.

Claimants in the sports programming and program suppliers categories were subsequently unable to agree on how to divide up the royalty fees within those categories. See 76 Fed.Reg. 7,590, 7,591 (Feb. 10, 2011).² The Board therefore commenced a Phase II proceeding. This time, IPG participated in the proceeding. See 78 Fed.Reg. 64,984, 64,984 (Oct. 30, 2013). Two other entities also participated: the Motion Picture Association of America, or MPAA, which represents non-IPG claimants in the program suppliers category, and the Joint Sports Claimants, a consortium of non-IPG claimants in the sports programming category.

As a threshold matter, MPAA and the Joint Sports Claimants disputed IPG's authority to represent certain claimants in the sports programming and program suppliers categories. The Board held a preliminary evidentiary hearing on that subject and issued two orders resolving the dispute. See id. at 64,987.

The orders disposed of all of IPG's sports programming claims. See id. at 64,984 n. 2, 64,987. The Board concluded that IPG had not established its authority to represent the Fédération Internationale de Football Association (better known as FIFA) and dismissed IPG's claims on behalf of FIFA. The Board also determined that IPG's claims on behalf of the U.S. Olympic Committee belonged in the program suppliers category, not the sports programming category. Because IPG had no remaining claims in the sports programming category, the Board subsequently distributed all royalty fees in that category to the Joint Sports Claimants.

The orders also dismissed some, but not all, of IPG's claims in the program suppliers category. The Board therefore held a full evidentiary hearing to divide up the royalty fees in that category. See id. at 64,985. IPG and MPAA proposed competing methodologies for calculating the marketplace value of their claims and allocating royalty fees. In its final Phase II determination, the Board largely adopted MPAA's methodology. See id. at 64,993–65,002.

IPG promptly appealed the Phase II determination with respect to both the sports programming and program suppliers categories. MPAA and the Joint Sports Claimants intervened.

III

IPG appeals the rejection of its sports programming claims as arbitrary and capricious, and as a violation of the Board's statutory mandate to follow precedent established by prior determinations.³

A

The Board disposed of IPG's sports programming claims in two orders, and...