National Broadcasting Co., Inc. v. Copyright Royalty Tribunal
| Decision Date | 21 June 1988 |
| Docket Number | No. 87-1157,87-1157 |
| Parties | , 1988 Copr.L.Dec. P 26,289, 7 U.S.P.Q.2d 1309 NATIONAL BROADCASTING COMPANY, INC., Petitioner, v. COPYRIGHT ROYALTY TRIBUNAL, Respondent, Worldvision Enterprises, Inc., Old Time Gospel Hour, Warner Communications, Inc., et al., Multimedia Entertainment, Inc., Intervenors. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Jerome J. Shestack, Philadelphia, Pa., with whom W. Drew Kastner, New York City, was on the brief, for petitioner.
Jeffrey Clair, Dept. of Justice, with whom Richard K. Willard, Asst. Atty. Gen., and William Kanter, Dept. of Justice, Washington, D.C., were on the brief, for respondent.
Margot Polivy, with whom Katrina Renouf, Washington, D.C., was on the brief, for intervenor Worldvision Enterprises, Inc.
John H. Midlen, Jr., Washington, D.C., was on the brief for intervenor, Old Time Gospel Hour.
Arnold P. Lutzker, Washington, D.C., entered on appearance for intervenor, Multimedia Entertainment, Inc.
Bernard R. Sorkin, New York City, entered an appearance for intervenor, Warner Communications, Inc., et al.
Before MIKVA, RUTH BADER GINSBURG and SILBERMAN, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
Under a mechanism created by the Copyright Act of 1976, 17 U.S.C. Secs. 101 et seq. (1982 & Supp. IV 1986), cable television companies pay a fee for the privilege of retransmitting conventional broadcast television signals. See id. Sec. 111. These cable royalty fees are earmarked as compensation for the owners of the copyrights on the retransmitted programming, and the statute assigns the Copyright Royalty Tribunal ("CRT" or "Tribunal") the task of distributing these royalty fees to the copyright owners. Id. Secs. 111(d)(4), 801(b)(3). In distributing the fund for calendar year 1984, the CRT faced competing claims by two copyright owners to the sum allocated as royalties for retransmission of "Little House on the Prairie." 1 The National Broadcasting Company ("NBC") asserted its claim as creator and producer of the show, as against Worldvision Enterprises, Inc., which had purchased from NBC the exclusive domestic distribution rights to "Little House" for "conventional free television."
The CRT awarded the royalty fees to Worldvision, relying on its perception that Congress intended the syndicator of non-network programming to be the recipient. NBC petitioned this court for review, pursuant to 17 U.S.C. Sec. 810. It argues Congress actually intended that the creator of a program receive the royalty fee, and suggests the CRT both went beyond its competence in construing the contract between NBC and Worldvision and read the contract incorrectly in awarding the royalties to Worldvision. We deny the petition for review and uphold the distribution to Worldvision. In doing so, however, we emphasize that the CRT has no authority to provide a legally significant interpretation of contracts conveying copyrights, and that parties to such contracts have full recourse to normal contractual remedies notwithstanding any distribution by the CRT.
As our previous cases have described in great detail, see cases cited supra note 1; see also Cablevision Sys. Dev. Co. v. Motion Picture Ass'n of Am., 836 F.2d 599 (D.C.Cir.1988), the Copyright Act of 1976 allows cable television operators to retransmit to their subscribers--without negotiating with those who hold programming copyrights--the primary signals of conventional, over-the-air broadcasters. In exchange for the exercise of this right, cable operators must pay a royalty fee to the Register of Copyrights. See Cablevision, 836 F.2d at 603-04 (). The fund thus created is distributed annually by the Copyright Royalty Tribunal to the copyright owners whose properties were retransmitted. See 17 U.S.C. Sec. 111. The purpose of this regulatory structure is to facilitate the exploitation of copyrighted materials by removing the prohibitive transaction costs that would attend direct negotiations between cable operators and copyright holders, while at the same time assuring copyright holders compensation for the use of their property. See Cablevision, 836 F.2d at 603.
As a sort of "reverse ratemaking," the CRT's distributions are necessarily inexact, see National Cable Television Ass'n v. Copyright Royalty Tribunal, 724 F.2d 176, 182 (D.C.Cir.1983); NAB I, 675 F.2d at 374, and reviewing courts have faced a number of complaints from copyright owners claiming the Tribunal should have allocated to them some additional portion of the fund. See, e.g., NAB II, 772 F.2d at 940; NAB III, 809 F.2d at 174. Although this case appears to be only the latest in this series of challenges to royalty distributions by the CRT, it is unique in that it involves a dispute over who is to receive a particular slice of the pie rather than over the size of the slice.
Section 111(d)(3) directs the Tribunal to distribute the royalty fees to the "copyright owners who claim that their works were the subject of secondary transmissions by cable systems." (emphasis added). 2 As presented to the CRT, this case was a legal dispute between NBC and Worldvision over which was the "owner" of the copyright on "Little House on the Prairie" for purposes of the royalty distribution. NBC created and produced "Little House," a series based on children's books by Laura Ingalls Wilder, for broadcast over its network beginning in the 1973-74 season. NBC received a certificate of copyright registration, in its name alone, for each episode. In 1979 and 1982, NBC entered two distribution agreements--which differed materially only respecting which episodes of "Little House" they covered--with Worldvision Enterprises, Inc. These contracts "transfer[red] and grant[ed]" to Worldvision "the full and exclusive domestic distribution and profit participation rights" in "Little House" for a period of thirty-five years. The rights granted Worldvision were to "extend solely to exhibition over conventional free television on other than a national network prime-time basis"; the "Agreement grant[ed] no rights to [Worldvision], and place[d] no restrictions on NBC, regarding any means of distribution or exhibition other than by conventional free, television broadcasts." The contracts mentioned neither cable transmissions nor copyright royalties administered by the CRT. They designated California law as controlling.
NBC based its claim to ownership of the copyright relevant to royalty distribution on its status as creator and producer of "Little House." It argued that it had borne the risks of production and that Congress intended to compensate precisely such creative efforts in passing section 111. Although NBC conceded that a creator can transfer the portion of its copyright that confers a right to cable copyright royalties, it claimed such a transfer must be explicit and unambiguous. NBC contended that the assignments to Worldvision, by omitting all mention of cable royalties and transferring only a right to distribute for conventional free television, left the relevant rights in NBC; the network offered testimony to show it intended to retain its royalty rights when it entered the agreements. Worldvision responded that Congress intended section 111 to favor the syndicator of a program, who was responsible for exploitation of the work, over the producer. It further noted that cable retransmission royalties can arise only if there has been a primary broadcast over conventional television, so that the royalties in question were necessarily linked to Worldvision's distribution rights and activities. Finally, Worldvision argued California law would prohibit consideration of NBC's parol evidence and would require construction of any ambiguity against the drafter, NBC.
The CRT distributed the royalties to Worldvision, concluding program syndicators "were the ones most directly harmed by the distant signal importation by cable systems ... because they could not orderly control the marketing of their product," 52 Fed.Reg. 8408, 8411 (1987), and further concluding Congress intended to remedy this harm by enacting section 111. The Tribunal identified "the exclusive syndicator of off-network programming, among all those parties in the chain of production and distribution, as the party to whom the Tribunal has in the past and will consistently in the future distribute Section 111 royalties." Id. It further justified this ruling both in terms of the predictable functioning of the marketplace, asserting the ruling reflected general industry understanding, and on the basis of an implied contractual analysis (termed "equity"), stating that "Worldvision reimbursed NBC entirely for their interest in off-network syndication." Id.
The CRT was careful to point out, however, that its ruling did not "foreclose the syndicator from remitting the cable copyright royalties up or down the chain of production and distribution pursuant to private contractual arrangement." The CRT stated it did not consider itself "the proper forum for the resolution of contract disputes," since its expertise lies in "distribution determinations and ratesetting." Id. It left "to private litigation whether the proper construction of the two NBC-Worldvision agreements imposes any obligation on Worldvision to remit royalties to NBC, or whether the actual terms used in the contracts fail to convey to Worldvision the pertinent copyright for cable royalty distribution." Id. at 8411-12.
The Tribunal did observe, however, that section 111(d)(3) directed it to distribute royalties to copyright owners, and accordingly concluded it had a duty to examine challenges to copyright ownership. It satisfied itself on this point by...
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