Indep. Producers Grp. v. Copyright Royalty Bd.
| Decision Date | 21 July 2020 |
| Docket Number | No. 18-1337,C/w 19-1116,18-1337 |
| Citation | 966 F.3d 799 |
| Parties | INDEPENDENT PRODUCERS GROUP, Appellant v. COPYRIGHT ROYALTY BOARD and Librarian of Congress, Appellees Amazing Facts, Inc., et al., Intervenors |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Brian D. Boydston, Los Angeles, CA, argued the cause and filed the briefs for appellant.
Martin V. Totaro, Attorney, U.S. Department of Justice, New York, NY, argued the cause for appellees. With him on the brief was Daniel Tenny, Attorney. Mark R. Freeman, Attorney, entered an appearance.
Matthew J. MacLean, Jessica T. Nyman, Michael A. Warley, Gregory O. Olaniran, Lucy Holmes Plovnick, Daniel A. Cantor, R. Stanton Jones, Michael Kientzle, Washington, DC, Philip R. Hochberg, Potomac, MD, and Jeremy W. Dutra, Washington, DC, were on the brief for intervenors in support of appellees.
Before: Griffith and Pillard, Circuit Judges, and Silberman, Senior Circuit Judge.
Under the Copyright Act, when a cable or satellite company retransmits programs initially aired on broadcast stations, the Register of Copyrights collects royalty fees under a compulsory licensing scheme and later redistributes the fees to the appropriate copyright owners. The Copyright Royalty Judges (the Judges) preside over royalty distribution proceedings and settle disputes among royalty fee claimants. Appellant Worldwide Subsidy Group LLC dba Independent Producers Group (IPG), an agent for royalty claimants in these proceedings, challenges a series of decisions by the Copyright Royalty Judges denying most of its clients’ royalty fee claims for programming in the devotional and program suppliers’ categories that was retransmitted by cable for 2004-2009 and by satellite for 1999-2009. IPG lost the right to pursue many of its clients’ claims as a result of a discovery sanction and because, after the Judges held that IPG was not entitled to a "presumption of validity" for either its representative role or the validity of the royalty claims it proffered, IPG failed to establish for certain claims that it was a duly appointed agent pressing valid claims. IPG challenges the factual grounds for those determinations and contends they are so disproportionately harsh as to be an abuse of discretion. It also challenges as arbitrary the Judges’ final distribution methodologies for allocating the royalties to all eligible claimants.
We affirm the Copyright Royalty Judges on all three challenges: the revocation of the presumption of validity, the imposition of discovery sanctions, and the final distribution of royalties.
Congress has prescribed a centralized clearinghouse system for collecting royalty fees from anyone who retransmits a copyrighted television program and for distributing the fees to the program's copyright holder. The Copyright Act allows cable and satellite operators to retransmit copyrighted programs without permission, requiring only that the operators deposit a statutorily prescribed royalty fee with the Register of Copyrights every six months for programs retransmitted during that period. See 17 U.S.C. § 111(c), (d) (cable) ; id. § 119(a), (b) (satellite). The Copyright Royalty Judges annually decide how to distribute the resulting pool of funds to the relevant copyright holders. Id. § 801(b)(3).
Every July, copyright owners (or their agents) who assert entitlement to certain royalties for transmission of their programming during the preceding year file claims with the Judges. Id. § 111(d)(4)(A) ; 37 C.F.R. § 360.3. Each filing entity must certify that it is authorized to file the claim. See U.S. Copyright Royalty Judges, In re Distribution of 2004, 2005, 2006, 2007, 2008, & 2009 Cable Royalty Funds , In re Distribution of 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, & 2009 Satellite Royalty Funds , Nos. 2012-6 CRB CD 2004-09 (Phase II); 2012-7 CRB SD 1999-2009 (Phase II), Memorandum Opinion and Ruling on Validity and Categorization of Claims 5 (Mar. 13, 2015) (Claims Ruling). Absent any challenge to that certification, the Judges afford the filed claim a "presumption of validity," meaning they treat the claim as facially valid and the filer as duly authorized. Id. The Judges review these claims and "determine whether there exists a controversy concerning the distribution of royalty fees." 17 U.S.C. § 111(d)(4)(B). If there are no disputed claims, the Judges authorize the Librarian of Congress to distribute the fees to the claimants on a proportional basis. Id. Only if there is a controversy must the Judges conduct a proceeding to resolve disputes regarding the appropriate distribution. Id.
A copyright royalty distribution proceeding has two phases. During Phase I, the claimants group themselves into categories based on the type of retransmitted broadcasting. See 37 C.F.R. § 351.1(b)(2)(i)(B) ; id. § 351.1(b)(ii)(C). The two categories relevant here are "program suppliers" and "devotional" programming. Claims Ruling at 1. The Judges then calculate the total market value of all programming in each category during the relevant year and, based on its relative value, assign each category a percentage of the annual pool of royalty fees. see id. § 351.1(b)(2)(i)(B). During Phase II, at issue here, the Judges subdivide the fees due to a particular category among the individual claimants in that category. Id.
Each phase follows the same set of procedures, designed to promote expeditious and amicable resolution among the claimants. After the Judges announce the commencement of distribution proceedings in the Federal Register, 17 U.S.C. § 803(b)(1)(A)(i), claimants petition to participate, see id. § 803(b)(1). A claimant may file an individual petition or join with other claimants and share representation. 37 C.F.R. § 351.1(b)(2). The Act imposes a three-month "voluntary negotiation period" during which participating claimants must attempt to reach agreement on their relative shares. 17 U.S.C. § 803(b)(3).
As to disputes the claimants are unable to resolve through negotiation, the Judges accept written submissions, oversee a period for discovery, and order a post-discovery settlement period. see id. § 803(b)(6)(C) ; 37 C.F.R. §§ 351.4 - 351.7. For Phase I, discovery usually involves expert testimony categorizing programs and their market shares. For Phase II, discovery involves both proof that individual claimants in fact represent the copyright holders and expert testimony proposing methodologies for subdividing fees among claimants in specific program categories. After the post-discovery settlement period, the Judges hear any remaining disputes and issue final determinations on the merits. See 17 U.S.C. § 803(c)(1) ; 37 C.F.R. §§ 351.8 - 351.12. The Librarian of Congress publishes those determinations in the Federal Register and distributes the royalty fees accordingly. 17 U.S.C. § 803(c)(6).
As noted at the outset, at issue here are royalty fees for retransmission of programming in the devotional and program suppliers categories by cable providers during 2004-2009 and by satellite providers during 1999-2009. There are three repeat players who claim to represent the copyright holders of programs retransmitted via both cable and satellite in these categories: Appellant IPG, claiming royalties for programs in both categories; Intervenors Settling Devotional Claimants (SDC), claiming only for devotional programming; and Intervenors Motion Picture Association (MPA),1 claiming only in the program suppliers category.
IPG, the SDC, and MPA did not participate in the Phase I proceedings but successfully petitioned to participate in Phase II. See 78 Fed. Reg. 50,113, 50,114 (Aug. 16, 2013) (cable retransmissions); 78 Fed. Reg. 50,114, 50,115 (Aug. 16, 2013) (satellite retransmissions). On December 8, 2014, the Copyright Royalty Judges held a five-day evidentiary hearing to resolve disputes over the validity and categorization of claims. They heard live testimony from five witnesses and admitted 180 exhibits.
The SDC argued that IPG should be disqualified from participating, or at least denied the presumption of validity, because one of the claims advanced by IPG was a fraudulent one on behalf of "Tracee Productions," a fictitious entity. IPG had purported to represent Tracee Productions in an earlier proceeding and the Copyright Royalty Judges denied IPG's proffered claims the presumption of validity. In response to the fraudulent Tracee Productions claim in the proceeding at issue here, the Judges stopped short of debarring IPG from representing claimants, instead again denying a presumption of validity to IPG's certification of its authority to represent claimants. The Judges based that decision on two grounds: IPG's failure to purge its filing of false claims and the Judges’ sua sponte conclusion that Raul Galaz, IPG's principal witness, gave false testimony concerning a document IPG produced in discovery.
The fraudulent "Tracee Productions" claim has a history in which Galaz played a prominent role. Galaz in 2002 was criminally convicted of defrauding the Copyright Office in order to obtain cable retransmission royalties belonging to others, and among the criminal acts to which he admitted was fraudulent filing in several proceedings on behalf of the nonexistent "Tracee Productions." See U.S. Copyright Royalty Judges, In re Distribution of 1998 and 1999 Cable Royalty Funds , No. 2008-1 CRB CD 98-99 (Phase II), Ruling and Order Regarding Claims 3 (June 18, 2014) (2014 Claims Ruling); Judgment and Commitment, United States v. Galaz , No. 02-cr-230 (HHK) (D.D.C. Dec. 23, 2002). Before that fraud came to light, Galaz had filed a fraudulent claim on behalf of Tracee Productions as part of his claims to the 1999 cable royalty funds for devotional programming. 2014 Claims Ruling at 3. The fraudulent 1999 filing was not part of his criminal...
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