Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd.

• Citation: 115 U.S.P.Q.2d 1933,796 F.3d 111
• Decision Date: 11 August 2015
• Docket Number: No. 14–1068.,14–1068.
• Parties: INTERCOLLEGIATE BROADCASTING SYSTEM, INC., Appellant v. COPYRIGHT ROYALTY BOARD and Librarian of Congress, Appellees College Broadcasters, Inc. and SoundExchange, Inc., Intervenors.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

796 F.3d 111

115 U.S.P.Q.2d 1933

INTERCOLLEGIATE BROADCASTING SYSTEM, INC., Appellant

v. COPYRIGHT ROYALTY BOARD and Librarian of Congress, AppelleesCollege Broadcasters, Inc. and SoundExchange, Inc., Intervenors.

No. 14–1068.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 12, 2015.

Decided Aug. 11, 2015.

John R. Grimm argued the cause for appellant. With him on the briefs were Timothy J. Simeone and Christopher J. Wright.

Sonia K. McNeil, Attorney, U.S. Department of Justice, argued the cause for appellees. With her on the brief was Mark R. Freeman, Attorney.

Matthew S. Hellman argued the cause for intervenor SoundExchange, Inc. With him on the brief were Michael B. DeSanctis and Ishan K. Bhabha. David A. Handzo entered an appearance.

David D. Golden and Catherine R. Gellis were on the brief for intervenor College Broadcasters, Inc. in support of appellees.

Before: GARLAND, Chief Judge, and SRINIVASAN and WILKINS, Circuit Judges.

Opinion

Opinion for the Court filed by Chief Judge GARLAND.

GARLAND, Chief Judge:

Intercollegiate Broadcasting System, Inc., appeals a determination by the Copyright Royalty Board setting royalty rates for webcasting. Three years ago, we vacated and remanded the Board's prior determination on this subject, concluding that its members had been appointed in violation of the Constitution's Appointments Clause. Thereafter, the Librarian of Congress appointed a new Board, which made the determination at issue here. Intercollegiate contends that the new Board's determination again violated the Appointments Clause because it was tainted by the previous Board's decision. The appellant also disputes the merits of the Board's determination. For the reasons set forth below, we reject both challenges.

I

Intercollegiate Broadcasting System (IBS) is a nonprofit association that represents college and high school radio stations, which historically broadcasted over the air. Many of its member stations are now involved in webcasting—the digital transmission of sound recordings over the Internet by, for example, Internet radio music services.

In 1995, Congress amended the Copyright Act to grant the owner of a sound recording copyright the exclusive right to publicly perform the copyrighted work by means of a digital audio transmission. See Digital Performance Right in Sound Recordings Act of 1995, sec. 2, § 106(6), Pub.L. No. 104–39, 109 Stat. 336, 336 (codified at 17 U.S.C. § 106(6) ). This right is now subject to certain limitations. Most relevant to this appeal, subsequent amendments in the Digital Millennium Copyright Act, Pub.L. No. 105–304, 112 Stat. 2860 (1998), “created a statutory license in performances by webcast, to serve Internet broadcasters and to provide a means of paying copyright owners.” Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd. (Intercollegiate I ), 574 F.3d 748, 753 (D.C.Cir.2009) (internal quotation marks omitted); see 17 U.S.C. § 114(d)(2). These licenses permit entities other than the copyright owner to use and perform the copyrighted sound recordings without the copyright holder's permission. In exchange, the licensees—here, webcasters—must pay royalty fees to the copyright owner as required by the statute. See Indep. Producers Grp. v. Library of Congress, 759 F.3d 100, 101 (D.C.Cir.2014). Such royalties are normally paid to copyright owners through third-party clearinghouses like the intervenor in this case, SoundExchange, Inc.

In the Copyright Royalty and Distribution Reform Act of 2004, Pub.L. No. 108–419, 118 Stat. 2341, Congress created the Copyright Royalty Board within the Library of Congress. The Board is composed of three Copyright Royalty Judges, appointed by the Librarian of Congress, and is authorized to determine rates and terms for the licensing and use of copyrighted works in (inter alia) webcasting. See 17 U.S.C. §§ 114(f), 801(b)(1). If the parties voluntarily agree on rates and terms, the Act directs the Board to adopt their agreement. See id. § 114(f)(3). If the parties fail to agree, the Board must hold adversarial proceedings governed by the statute and its regulations to determine “reasonable” royalty rates and terms for the license period in question. Id. § 114(f)(2)(A) ; see id. § 803; 37 C.F.R. §§ 351.1 et seq. The Board's final determination is governed by the standards set forth in the Act. As relevant here, the Board must “distinguish among the different types” of services and must determine “a minimum fee for each such type of service.” 17 U.S.C. § 114(f)(2)(B). The final rates and terms must be those that “most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.” Id. Following a review for legal error by the Register of Copyrights, id. § 802(f)(1)(D), the Librarian of Congress publishes the determination in the Federal Register, id. § 803(c)(6).

In January 2009, the Board initiated a proceeding to establish the rates and terms for the public performance of digital sound recordings for the 2011–2015 period. Most participants reached settlements during the voluntary negotiation period prescribed by the statute. See Determination of Royalty Rates for Digital Performance Right in Sound Recordings and Ephemeral Recordings, 79 Fed.Reg. 23,102, 23,102 (Apr. 25, 2014) [hereinafter 2014 Final Determination]; see also 17 U.S.C. § 803(b)(3). The Board held an evidentiary hearing for the remaining participants, including Intercollegiate. The Board received written and live testimony from fifteen witnesses and admitted sixty exhibits into evidence. See 79 Fed.Reg. at 23,104. The record also included written and oral argument of counsel. See id. The Board issued a final determination on March 9, 2011. See Digital Performance Right in Sound Recordings and Ephemeral Recordings, 76 Fed.Reg. 13,026 (Mar. 9, 2011) [hereinafter 2011 Final Determination]. Among other things, the determination included a $500 per station or per channel annual minimum fee for all commercial and noncommercial webcasters.

Intercollegiate appealed the 2011 final determination, contending both that the Judges were appointed in violation of the Appointments Clause, and that the minimum fee was unlawful as applied to “small” and “very small” noncommercial webcasters. This court agreed with the former challenge and did not reach the latter. See Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd. (Intercollegiate II ), 684 F.3d 1332 (D.C.Cir.2012). We determined that Congress had vested the Judges, who could not be removed except for cause, with sufficient authority and independence to qualify as “principal” officers of the United States. Id. at 1336–41. Under the Appointments Clause, however, principal officers must be appointed by the President and confirmed by the Senate. See U.S. Const. Art. II, § 2, cl. 2. To “cure[ ] the constitutional defect with as little disruption as possible,” we declared invalid and severed the statutory provision that barred the Librarian of Congress from removing the Judges without cause. Intercollegiate II, 684 F.3d at 1336–37, 1340. “Once the limitations on the Librarian's removal authority are nullified,” we said, the Judges “become validly appointed inferior officers.” Id. at 1341. Because the Judges were not validly appointed at the time they issued the challenged determination, however, we vacated and remanded that determination without reaching the merits of Intercollegiate's challenge. Id. at 1342.

Thereafter, the Librarian appointed three new Copyright Royalty Judges to replace the previous Judges. The new Judges directed the parties to submit proposals regarding how to proceed on the remand. Unsurprisingly, the parties proposed nearly opposite ways forward. SoundExchange initially proposed that the Judges “reinstate the Final Determination in its entirety without undertaking further proceedings.” SoundExchange's Mot. Concerning Conduct of Proceedings on Remand 1 (J.A. 173). Intercollegiate said the Judges should reopen proceedings and permit additional written and oral testimony and briefing. See IBS's Proposal for Conduct of Remand 1 (J.A. 194).

After reviewing the parties' proposals, the Board issued a preliminary Notice of Intention to Conduct a Paper Proceeding on Remand. The Notice contained several key points. First, the Board interpreted this court's remand as directing it to review the entire record and to issue a new determination on all issues, not just the $500 minimum fee that Intercollegiate had challenged on appeal. Notice of Intention to Conduct Paper Proceeding on Remand 4 (J.A. 221) [hereinafter Notice]. Second, because the court did not reach the merits of the dispute, the Board understood that it “could, after an appropriate process, issue a new final determination that ... reaches the same conclusions ... as the prior Final Determination.” Id. at 5 (J.A. 222). The Board recognized, however, that it was “also free to reach completely different conclusions in [its] new final determination.” Id. Third, the Board decided neither to “rubber stamp” the prior Board's decision, nor to conduct a “complete ‘do over’ of the entire original process.” Id. at 6 (J.A. 223). Instead, it would conduct an independent, de novo review of the entire written record of the proceeding. Id. at 7 (J.A. 224). The Board decided not to hold new evidentiary hearings because Intercollegiate had “fail[ed] ... to point to any instance of an exclusion of relevant evidence that affected the outcome of the proceeding, or to any portion of the Final Determination that turned on witness credibility.” Id. Likewise, the Board decided not to accept additional submissions because “no party ha[d] provided any specific reason ... to reopen the record,” and because each party “had ample opportunity to present its case.” Id.

In sum, the Board concluded that “it would be neither fair, nor efficient, nor economical to proceed ... with additional submissions,...