Live365 Inc v. Copyright Royalty Bd.

• Decision Date: 23 February 2010
• Docket Number: Civil Action No. 09-01662 (RBW).
• Parties: LIVE365, INC., Plaintiff,v.COPYRIGHT ROYALTY BOARD; James H. Billington, in his official capacity as Librarian of Congress; and James Scott Sledge, Stanley C. Wisniewski, and William J. Roberts, in their official capacities as Judges of the Copyright Royalty Board, Defendants.
• Court: U.S. District Court — District of Columbia

698 F.Supp.2d 25

LIVE365, INC., Plaintiff,v.COPYRIGHT ROYALTY BOARD; James H. Billington, in his official capacity as Librarian of Congress; and James Scott Sledge, Stanley C. Wisniewski, and William J. Roberts, in their official capacities as Judges of the Copyright Royalty Board, Defendants.

Civil Action No. 09-01662 (RBW).

United States District Court District of Columbia.

Feb. 23, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Adam Shartzer Caldwell, Ronald G. London, Davis Wright Tremaine, LLP, Washington, DC, Kenneth David Freundlich, Freundlich Law, Beverly Hills, CA, for Plaintiff.

Brian G. Kennedy, Lisa Zeidner Marcus, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

REGGIE B. WALTON, District Judge.

This case was initiated by Live365 on August 31, 2009, seeking declaratory and injunctive relief through a facial challenge under the Appointments Clause of the Constitution against the Copyright Royalty Board (“CR Board” or “Board”),¹ the judges of the Board in their official capacities, as well as the Librarian of Congress (collectively referred to hereafter sometimes as “the government” or the “defendants”). Specifically, the plaintiff challenges the creation of the CR Board as promulgated by “a 2004 amendment to the U.S. Copyright Act, 17 U.S.C. § 801.” Complaint (“Compl.”) ¶ 1. On September 2, 2009, the plaintiff filed a motion for a preliminary injunction asking the Court to “stay[ ][a] pending CR[Board] proceeding-In the Matter of Digital Performance Right in Sound Recordings and Ephemeral Recordings, Docket No. 2009-1(CRB Webcasting III)-until Live365's Appointments Clause challenge to the CR[Board]'s makeup ... can be resolved.” Plaintiff Live365, Inc.'s Motion/Application for Preliminary Injunction at 1. The government filed its opposition to the motion on September 14, 2009, along with filing its own Motion to Dismiss for Lack of Subject Matter Jurisdiction. Defendants' Motion to Dismiss (“Defs.' Mot.”). Also on September 14, SoundExchange, Inc. (“SoundExchange”) filed its motion to “intervene as of right as a defendant to protect its interest in this litigation,” ² SoundExchange's Motion for Leave to Intervene at 1, which was granted by the Court on September 18, 2009. As a result of these filings, the Court convened a hearing on September 22, 2009, and the matter was taken under advisement by the Court at the conclusion of the hearing. For the reasons that follow, both the plaintiff's Motion for Preliminary Injunction and the defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction are denied.

I. Background

A. Facts of the Case ³

1. The Copyright Royalty Board

In 2004, Congress created the CR Board through the enactment of the Copyright Royalty and Distribution Reform Act of 2004, Pub.L. 108-419, 118 Stat. 2341, which amended the Copyright Act, 17 U.S.C. § 801 (2006) (“Copyright Act”). The CR Board is comprised of three judges who serve staggered, six-year terms, and once appointed they may be removed only for “misconduct, neglect of duty, or any disqualifying physical or mental disability.” 17 U.S.C. §§ 802(c), (I) (2006). The appointment authority of these judges is vested in the Librarian of Congress (“Librarian”), who appoints the judges after consultation with the Register of Copyrights (“Register”), also an appointee of the Librarian. 17 U.S.C. § 801(a). The current judges were appointed in January 2006. 72 Fed.Reg. 24,084 (May 1, 2007).

The CR Board judges are responsible, inter alia,

[for setting] rates and terms that webcasters and other services pay to copyright owners and performers for the use of copyrighted sound recordings under a statutory compulsory license[, which] grant[s] eligible services a license to digitally stream copyrighted sound recordings, and grant[s] copyright owners and performers a right to be paid a royalty by the services for their use of sound recordings.

SoundExchange's Memorandum of Points and Authorities in Support of Its Motion for Leave to Intervene as a Defendant at 2 (citing 17 U.S.C. §§ 112, 114 (2006)). In performing their duties, the CR Board has broad discretion to commence hearings, 17 U.S.C. § 803(b)(1)(A)(I) (2006), issue subpoenas, id. § 803(b)(6)(C)(ix), render decisions, id. § 803(c)(1), grant protective orders, id. § 803(c)(5) and impose regulations governing the rates and terms of copyright royalties, id. § 802(f)(1)(A)(i). However, all regulations issued by the CR Board judges are subject to approval by the Librarian, and the judges must act in accordance with the regulations issued by the Librarian. Id. §§ 803(b)(6)(A), (a)(1). The CR Board judges are also required to seek and obtain a written opinion from the Register whenever a novel area of substantive law arises. Id. § 802(f)(1)(B). Furthermore, their decisions are also subject to review for legal error by the Register, who may correct all errors they commit. Id. § 802(f)(1)(D). Finally, decisions made by the CR Board are appealable directly to the District of Columbia Circuit. Id. § 803(d)(1).

2. The Webcasting III Proceeding

The CR Board judges are required by statute to convene every five years to determine the royalty rates webcasters are required to pay for the use of copyrighted works, id. § 803(b), and Live365 is a participant in such a proceeding currently under consideration by the CR Board, In re Digital Performance Right in Sound Recordings and Ephemeral Recordings, Docket No. 2009-1 (CR Board Webcasting III) (the “ Webcasting III ” proceeding). Compl. ¶ 5. On January 5, 2009, pursuant to 17 U.S.C. § 803(b)(1)(A)(i), the Webcasting III proceeding was commenced through a request for Petitions to Participate. Id. ¶ 26. The Webcasting III proceeding is being conducted in order for the CR Board judges to designate the royalty rates for the next five-year statutory period for parties unable to reach a voluntary agreement and the next rate designations will be in effect from 2011 through 2015. Id.; Defs.' Mot. at 7. The Webcasting III proceeding must be completed by December 16, 2010, id. ¶ 27, and on June 24, 2009, the CR Board issued an order setting September 29, 2009, as the deadline for parties to submit their written direct statements, which must address the participants' concerns and views on what the rates should be for the period commencing in 2011. Id. ¶ 30.

“Live365 is an aggregator of digital radio stations that operates under compulsory licenses” that are regulated by the CR Board under 17 U.S.C. §§ 112 and 114. Compl. ¶ 5. According to the plaintiff, Live365 has paid approximately one million dollars per year in royalties for the use of copyrighted works since 2005. Plaintiff's Memorandum of Points and Authorities in Support of Its Application for a Preliminary Injunction (“Pl.'s Mem.”) at 7. Live365 is among the various parties that have been unable to reach an agreement and thus has filed its Petition to Participate in the Webcasting III proceeding. Compl. ¶ 29; Defs'. Mot. at 7, 9.⁴ As of September 29, 2009, other than the initial filing of the petition and the withdrawal of several parties from participation in the matter, no further action had taken place in the Webcasting III litigation. Compl. ¶ 29.

B. Plaintiff's Claims

The plaintiff brings this lawsuit seeking declaratory and injunctive relief, claiming that the Librarian's power to appoint the CR Board judges violates the Appointments Clause of the Constitution, U.S. Const. art. II, § 2, cl. 2. Compl. ¶ 1. Specifically, the plaintiff claims that the CR Board judges are principal officers who may only be appointed by the President. Id. ¶ 39. Alternatively, they argue that if the CR Board judges are inferior officers their appointments are nonetheless unconstitutional because the Librarian of Congress is an officer of the Legislative Branch and not a Head of Department in the Executive Branch, and therefore, he lacks constitutional authority to appoint inferior officers. Id. Accordingly, plaintiff seeks to have the 2004 amendments to the Copyright Act, which authorizes the Librarian to appoint judges to the CR Board, held unconstitutional and the Webcasting III proceedings enjoined until its challenge to the constitutionality of the statute is resolved. Id.

II. Analysis

A. The Defendants' Motion to Dismiss

Once a defendant has moved to dismiss a case pursuant to Federal Rule of Civil Procedure 12(b)(1), “the plaintiff bears the burden of establishing the factual predicates of jurisdiction by a preponderance of the evidence.” Erby v. United States, 424 F.Supp.2d 180, 182 (D.D.C.2006) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)) (other citations omitted). “The [C]ourt, in turn, has an affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority.” Abu Ali v. Gonzales, 387 F.Supp.2d 16, 17 (D.D.C.2005) (internal quotation marks and citation omitted). Therefore, when ruling on a Rule 12(b)(1) motion to dismiss, courts “may consider materials outside the pleadings” to determine whether it has jurisdiction over the claims advanced by the plaintiff. Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C.Cir.2005) (citation omitted); see also Haase v. Sessions, 835 F.2d 902, 906 (D.C.Cir.1987) (stating that “[i]n [Rule] 12(b)(1) proceedings, it has been long accepted that the judiciary may make appropriate inquiry beyond the pleadings to satisfy itself on [its] authority to entertain the case”) (internal citations and quotation marks omitted). Nonetheless, even where a defendant mounts a facial challenge to the complaint's assertion of the court's jurisdiction, “the court must still accept all of the factual allegations in the complaint as true.” Jerome Stevens Pharm., 402 F.3d at 1253 (internal quotation marks and citations omitted); see Erby, 424 F.Supp.2d at 182 (noting that where “a defendant mounts a ‘facial’ challenge to the legal sufficiency of the...