Bonneville Intern. Corp. v. Peters, 01-3720.

• Decision Date: 17 October 2003
• Docket Number: No. 01-3720.,01-3720.
• Citation: 347 F.3d 485
• Parties: BONNEVILLE INTERNATIONAL CORPORATION; Cox Radio, Inc.; Emmis Communications Corporation; Entercom Communications Corp.; Infinity Broadcasting Corporation; Susquehana Radio Corp.; National Association of Broadcasters; Clear Channel Communications, Inc. v. Marybeth PETERS, In Her Official Capacity As Register of Copyrights for The United States Copyright Office At The Library of Congress Recording Industry Association of America, Inc., Intervenor in D.C. Bonneville International Corporation, Clear Channel Communications, Inc., Cox Radio, Inc., Emmis Communications Corporation, Entercom Communications Corp., Susquehanna Radio Corp., and National Association of Broadcasters, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

347 F.3d 485

BONNEVILLE INTERNATIONAL CORPORATION; Cox Radio, Inc.; Emmis Communications Corporation; Entercom Communications Corp.; Infinity Broadcasting Corporation; Susquehana Radio Corp.; National Association of Broadcasters; Clear Channel Communications, Inc. v. Marybeth PETERS, In Her Official Capacity As Register of Copyrights for The United States Copyright Office At The Library of Congress Recording Industry Association of America, Inc., Intervenor in D.C.

Bonneville International Corporation, Clear Channel Communications, Inc., Cox Radio, Inc., Emmis Communications Corporation, Entercom Communications Corp., Susquehanna Radio Corp., and National Association of Broadcasters, Appellants.

No. 01-3720.

United States Court of Appeals, Third Circuit.

Argued December 2, 2002.

Opinion Filed October 17, 2003.

Mark A. Jacoby, R. Bruce Rich (Argued), Caroline R. Clark, Weil, Gotshal & Manges, New York, NY, Marguerite S. Walsh, Andrew W. Allison, Littler, Mendelson Law Office, Philadelphia, PA, for Appellants.

David O. Carson, General Counsel, Tanya M. Sandros, Senior Attorney, United States Copyright Office, Library of Congress, Washington, DC, Scott R. McIntosh (Argued), Mark B. Stern, Attorney, Appellate Staff, Robert D. McCallum, Jr., Assistant Attorney General, Patrick L. Meehan, United States Attorney, United States Department of Justice, Civil Division, Washington, DC, Cary H. Sherman, Steven M. Marks, Gary R. Greenstein, Susan C. Munsat, Recording Industry, Association of America, Inc., Washington, DE, Robert A. Garrett, Ronald A. Schechter, (Argued), Jule L. Sigall, Ellen Wasilausky, Arnold & Porter, Washington, DC, Vincent V. Carissimi, Pepper Hamilton, Philadelphia, PA, for Appellees.

Before: ROTH, SMITH, and CUDAHY,^* Circuit Judges.

OPINION OF THE COURT

CUDAHY, Circuit Judge.

Plaintiffs appeal from a grant of summary judgment. The district court found that the Copyright Office's rulemaking with respect to the Internet "streaming" of AM/FM radio broadcast programming was entitled to deference. The plaintiffs argue that the exclusion from copyright protection for "nonsubscription broadcast transmissions" of recorded music is unambiguously intended to apply to their simultaneous webcasting of their radio broadcast signal. We conclude that, whether or not the Copyright Office's interpretation of § 114(d)(1)(A) is to be accorded deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984) ("Chevron"), the Copyright Office's arguments in support of its position are persuasive, see Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944), and our own independent interpretation of the statute accords with that of the Copyright Office. We therefore affirm.

I.

This case deals with copyright protection for sound recordings. The creator of a musical composition has long had a right of exclusive public performance of that musical piece. 17 U.S.C. § 106(4). Therefore, every time you hear the ubiquitous refrain from "Happy Birthday" in a public performance, a subsidiary of AOL/Time-Warner cashes a royalty check.¹ However, the owner of a copyright in a sound recording of a musical composition has long had very little copyright protection. Until 1971 there was no copyright protection at all. With the Sound Recording Amendment of 1971, Pub.L. No. 92-140, 85 Stat. 391, a limited copyright in the reproduction of sound recordings was established in an effort to combat recording piracy. However, there was still no right to public performance of that sound recording. Therefore, while playing a compact disc recording of "Happy Birthday" in a concert hall for the paying public would still enrich AOL/TimeWarner, the person or company that owned the copyright on the CD recording of the music would earn no remuneration beyond the proceeds from the original sale of the recording. This dichotomy of copyright protection has a significant impact in the radio broadcasting industry. While radio stations routinely pay copyright royalties to songwriters and composers (through associations like the American Society of Composers, Authors, and Publishers and Broadcast Music, Inc. ("ASCAP") and Broadcast Music, Inc. ("BMI"))² for the privilege of broadcasting recorded performances of popular music, they do not pay the recording industry royalties for that same privilege. Perhaps surprisingly, this state of affairs, until about ten years ago, produced relatively high levels of contentment for all parties. The recording industry and broadcasters existed in a sort of symbiotic relationship wherein the recording industry recognized that radio airplay was free advertising that lured consumers to retail stores where they would purchase recordings.³ And in return, the broadcasters paid no fees, licensing or otherwise, to the recording industry for the performance of those recordings. The recording industry had repeatedly sought, however, additional copyright protection in the form of a performance copyright. Until 1995, those efforts were rejected by Congress.

The 1990's brought significant technological change. The advance of digital recording technology and the prospect of digital transmission capabilities created the possibility that consumers would soon have access to services whereby they could pay for high quality digital audio transmissions (subscription services) or even pay for specific songs to be played on demand (interactive services).⁴ The recording industry was concerned that the traditional balance that had existed with the broadcasters would be disturbed and that new, alternative paths for consumers to purchase recorded music (in ways that cut out the recording industry's products) would erode sales of recorded music. Congress responded to these concerns with the Digital Performance Right in Sound Recordings Act of 1995, Pub.L. No. 104-39, 109 Stat. 336 ("DPRA"). The DPRA added to the list of protectable rights a digital audio transmission performance right.

[T]he owner of copyright under this title has the exclusive rights to do and to authorize any of the following:

* * * * * *

(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

17 U.S.C. § 106(6). When creating this new right, however, Congress also created exemptions from it. Of specific application to the present case was the exemption added to 17 U.S.C. § 114(d)(1)(A)(iii) (Supp. I 1995) for a noninteractive, "nonsubscription broadcast transmission."⁵ The paradigmatic "nonsubscription broadcast transmission" was a traditional over-the-air radio broadcast. This exemption was founded in Congress's desire not to impose "new and unreasonable burdens on radio and television broadcasters, which often promote, and appear to pose no threat to, the distribution of sound recordings." H.R.Rep. No. 104-274, at 14 (1995) ("1995 House Report") (App. at A779).⁶

Additionally, the DPRA, in section 3, codified at 17 U.S.C. §§ 114(d)(2) (Supp. I 1995) and 114(f) (Supp. I 1995), created a statutory licensing regime for noninteractive, subscription services.⁷ Copyright holders were required to grant licenses to eligible subscription services. In cases where the copyright holder and the transmitter could not agree on the royalty rate for the license, the DPRA outlined an arbitration mechanism for determining a reasonable rate — § 114(f) authorized the Copyright Office to convene a copyright arbitration royalty panel ("CARP") to arbitrate licensing rates.

But technology continued to advance, and the Internet soon became a viable medium over which to transmit, in real time, sound recordings. This real-time transmission of sound recordings over the Internet is known as "streaming"⁸ and "webcasting," and the transmitter of an Internet stream of music is known as a "webcaster." Anyone with a computer, a reasonably speedy connection to the Internet, streaming software and the equipment to copy songs from CDs to a computer in the popular and compressed MP3 format ("rip" the songs) could webcast sound recordings through streaming. Additionally, established radio broadcasters began to webcast simultaneously over the Internet their AM/FM broadcast programming. It is this AM/FM webcasting that is the principal concern in the present case.

Again, the recording industry became concerned that technology would erode recording sales by providing alternative sources of high quality recorded performances. In 1998 Congress responded by amending the DPRA's amendments to the Copyright Act with the Digital Millennium Copyright Act, Pub.L. No. 105-304, 112 Stat. 2860 (1998) ("DMCA"). The DMCA expanded the class of transmissions available for the statutory licensing regime under the DPRA to include eligible nonsubscription webcasting, and eliminated from § 114(d) two of the nonsubscription, noninteractive exemptions to the digital audio transmission performance right. The exemption for "nonsubscription broadcast transmissions" was, however, left intact and moved to its current location at § 114(d)(1)(A). "The deletion of [the other] two exemptions [wa]s not intended to affect the exemption for nonsubscription broadcast transmissions." H.R. Conf. Rep. No. 105-796, at 80 (1998), U.S. Code Cong. & Admin. News at 639, 656 ("1998 Conference Report") (App. at A1197).

In March of 2000, the Recording Industry Association of America ("RIAA") petitioned the Copyright Office for a Rulemaking to clarify whether AM/FM webcasting (the simultaneous Internet streaming by radio broadcasters of their AM/FM broadcast programming) was a "nonsubscription broadcast transmission" that was exempt from the § 106(6) digital audio transmission performance right. After a Notice and Comment procedure, in December of 2000 the Copyright Office promulgated a rule stating that AM/FM webcasting is not an exempt transmission under § 114(d)(1)(A). Public Performance of Sound...