Scope of the Copyright Royalty Judges' Continuing Jurisdiction, 58300-58307 [2015-24591]
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Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices
We will summarize and/or include in
the request for OMB approval of the
ICR, the comments received in response
to this comment request; they will also
become a matter of public record.
Portia Wu,
Assistant Secretary for Employment and
Training, Labor.
[FR Doc. 2015–24573 Filed 9–25–15; 8:45 am]
BILLING CODE 4510–FN–P
DEPARTMENT OF LABOR
Employment and Training
Administration
Comment Request for Information
Collection on the ETA 9048, Worker
Profiling and Reemployment Services
Activity, and the ETA 9049, Worker
Profiling and Reemployment Services
Outcomes, Extension Without
Revisions
Employment and Training
Administration (ETA), Labor.
ACTION: Notice.
AGENCY:
The Department of Labor
(Department), as part of its continuing
effort to reduce paperwork and
respondent burden, conducts a
preclearance consultation program to
provide the public and Federal agencies
with an opportunity to comment on
proposed and/or continuing collections
of information in accordance with the
Paperwork Reduction Act of 1995 [44
U.S.C. 3506(c)(2)(A)]. This program
helps ensure that requested data can be
provided in the desired format,
reporting burden (time and financial
resources) is minimized, collection
instruments are clearly understood, and
the impact of collection requirements on
respondents can be properly assessed.
Currently, ETA is soliciting comments
concerning the collection of data on the
ETA 9048, Worker Profiling and
Reemployment Services Activity, and
the ETA 9049, Worker Profiling and
Reemployment Services Outcomes,
which expires May 31, 2016.
DATES: Submit written comments to the
office listed in the addresses section
below on or before November 27, 2015.
ADDRESSES: Send written comments to
Diane Wood, Office of Unemployment
Insurance, Room S–4524, Employment
and Training Administration, U.S.
Department of Labor, 200 Constitution
Avenue NW., Washington, DC 20210.
Telephone number: 202–693–3212 (this
is not a toll-free number). Individuals
with hearing or speech impairments
may access the telephone number above
via TTY by calling the toll-free Federal
Information Relay Service at 1–877–
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SUMMARY:
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889–5627 (TTY/TDD). Email:
wood.diane@dol.gov. To obtain a copy
of the proposed information collection
request (ICR), please contact the person
listed above.
SUPPLEMENTARY INFORMATION:
I. Background
The Worker Profiling and
Reemployment Services (WPRS)
program allows for the targeting of
reemployment services to those most in
need of services. The ETA 9048 and
ETA 9049 are the only means of tracking
the activities in the WPRS program. The
ETA 9048 report describes flows of
claimants at various points in the WPRS
system from initial profiling through the
completion of specific reemployment
services. The ETA 9049 describes the
reemployment experience of profiled
claimants who were referred to services
by examining the state’s existing wage
record files to see in which quarter the
individuals who received reemployment
services became employed, what wages
they earned, and whether they changed
industries.
II. Review Focus
The Department is particularly
interested in comments which:
• Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
• evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used;
• enhance the quality, utility, and
clarity of the information to be
collected; and
• minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
e.g., permitting electronic submissions
of responses.
III. Current Actions
Type of Review: Extension without
changes.
Title: Worker Profiling and
Reemployment Services Activity and
Outcomes.
OMB Number: 1205–0353.
Affected Public: State Workforce
Agencies.
Form(s): ETA 9048, ETA 9049.
Estimated Total Annual Respondents:
53.
Annual Frequency: Quarterly.
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Estimated Total Annual Responses:
424.
Average Time per Response: 0.25
Hours.
Estimated Total Annual Burden
Hours: 106 Hours.
Total Estimated Annual Other Cost
Burden: There is no cost for
respondents.
We will summarize and/or include in
the request for OMB approval of the
ICR, the comments received in response
to this comment request; they will also
become a matter of public record.
Portia Wu,
Assistant Secretary for Employment and
Training, Labor.
[FR Doc. 2015–24572 Filed 9–25–15; 8:45 am]
BILLING CODE 4510–FW–P
LIBRARY OF CONGRESS
Copyright Office
[Docket No. 2015–4]
Scope of the Copyright Royalty
Judges’ Continuing Jurisdiction
Copyright Office, Library of
Congress.
ACTION: Final order.
AGENCY:
The Copyright Royalty Judges
(‘‘CRJs’’), acting pursuant to statute,
referred novel material questions of
substantive law to the Register of
Copyrights for resolution. Those
questions concerned the manner and
extent to which section 114(f)(5)(C) of
the Copyright Act bars the CRJs from
admitting into evidence or otherwise
considering the provisions contained in
settlement agreements reached pursuant
to the Webcaster Settlement Act of 2009.
The Register resolved those questions in
a written decision that was transmitted
to the CRJs. That decision is reproduced
below.
DATES: Effective Date: September 22,
2015.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Stephen Ruwe, Assistant General
Counsel, U.S. Copyright Office, P.O. Box
70400, Washington, DC 20024.
Telephone: (202) 707–8350.
SUPPLEMENTARY INFORMATION: The
Copyright Royalty Judges are tasked
with determining and adjusting rates
and terms of royalty payments for
statutory licenses under the Copyright
Act. See 17 U.S.C. 801. If, in the course
of proceedings before the CRJs, novel
material questions of substantive law
concerning the interpretation of
provisions of title 17 arise, the CRJs are
required by statute to refer those
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questions to the Register of Copyrights
for resolution. 17 U.S.C. 802(f)(1)(B).
On August 19, 2015, the CRJs, acting
pursuant to 17 U.S.C. 802(f)(1)(B),
referred novel material questions of
substantive law to the Register
concerning the manner and extent to
which section 114(f)(5)(C) of the
Copyright Act bars the CRJs from
admitting into evidence or otherwise
considering the provisions contained in
settlement agreements reached pursuant
to the Webcaster Settlement Act of 2009.
On September 18, 2015, the Register
resolved those questions in a
Memorandum Opinion that she
transmitted to the CRJs. To provide the
public with notice of the decision
rendered by the Register, the
Memorandum Opinion is reproduced in
its entirety below.
Dated: September 22, 2015.
Maria A. Pallante,
Register of Copyrights.
Before the U.S. Copyright Office,
Library of Congress, Washington, DC
20559
In the Matter of: DETERMINATION OF
ROYALTY RATES AND TERMS FOR
EPHEMERAL RECORDING AND
WEBCASTING DIGITAL PERFORMANCE OF
SOUND RECORDINGS (Web IV)
Docket No. 14–CRB–0001–WR(2016–2020)
(Web IV)
MEMORANDUM OPINION ON NOVEL
MATERIAL QUESTIONS OF LAW
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Section 114(f)(5)(C) of the Copyright
Act bars the Copyright Royalty Judges
(‘‘CRJs’’ or ‘‘Judges’’) from taking into
consideration in ratesetting proceedings
the provisions of agreements entered
into under the Webcaster Settlement Act
of 2009, which allowed the parties to
negotiate alternative rates and terms
from those established by the CRJs.
Questions have arisen in the pending
proceeding to set royalty rates and terms
for webcasters’ digital performance of
sound recordings and associated
ephemeral reproductions about the
proper interpretation of this provision.
The CRJs determined that these were
novel material questions of substantive
law and, as required under section
802(f)(1)(B) of the Copyright Act,
referred them to the Register of
Copyrights for resolution. The Register’s
determination follows.
I. Background
The instant proceeding will establish
royalty rates and terms for webcasters’
digital performance of sound recordings
and the making of ephemeral recordings
under the statutory licenses set forth in
sections 112(e) and 114(f)(2) of the
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Copyright Act for the period beginning
January 1, 2016 and ending on
December 31, 2020. Such rates and
terms are to be set under the ‘‘willing
buyer/willing seller standard,’’ meaning
that the rates and terms should 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.’’ 1
Royalties for the use of sound
recordings under these statutory
licenses are collected from webcasters
by the receiving agent SoundExchange,
Inc. (‘‘SoundExchange’’), which then
distributes them to sound recording
copyright owners.2
The rates and terms established in the
current proceeding will replace existing
royalty rates and terms applicable to
webcasters that were agreed to and
implemented under the Webcaster
Settlement Act of 2009 (‘‘2009 WSA’’).3
The 2009 WSA is the third webcaster
settlement act (‘‘WSA’’) passed by
Congress, following the Webcaster
Settlement Act of 2008 4 (‘‘2008 WSA’’)
and the Small Webcaster Settlement Act
of 2002 5 (‘‘2002 SWSA’’).
The 2002 SWSA was enacted to
address a group of small webcasters’
professed inability to pay the fees
established by the Librarian of Congress
(‘‘Librarian’’) under the Copyright
Arbitration Royalty Panel system, the
predecessor to the current CRJ process.6
The 2002 SWSA provided authority,
during a limited window of time, for
SoundExchange and small webcasters to
negotiate and enter into alternative
agreements to replace the rates set by
the Librarian.7 The 2008 WSA provided
the same authority as under the 2002
SWSA, but with regard to webcasters of
all sizes, and in relation to a 2007 rate
determination by the CRJs under the
revised ratesetting system adopted by
Congress in 2004.8 The 2007
determination was also perceived by
webcasters as establishing unduly high
rates.9 The 2009 WSA extended the
window of time during which the
parties were authorized to reach
settlements under the 2008 WSA.10
The 2002 and subsequent WSAs have
been codified in section 114 of the
1 17
U.S.C. § 114(f)(2)(B).
U.S.C. § 114(f)(2)(A), (g)(1); 37 CFR § 380.2.
3 Pub. L. 111–36, 123 Stat. 1926.
4 Pub. L. 110–435, 122 Stat. 4974.
5 Pub. L. 107–321, 116 Stat. 2780.
6 Pub. L. 107–321, § 2, 116 Stat. 2780, 2780–81
(2002).
7 Id. § 4, 116 Stat. at 2781–83.
8 See H.R. Rep. No. 111–139, at 2–3 (2009).
9 See 111 Cong. Rec. H10279 (daily ed. Sept. 27,
2008) (statement of Rep. Berman); H.R. Rep. No.
111–139, at 2 (2009).
10 H.R. Rep. No. 111–139, at 3 (2009).
2 17
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Copyright Act.11 In their current form,
the statutory provisions allow the
parties to agree to alternative rates in
lieu of those set by the CRJs for uses
through December 31, 2015, but also
foreclose consideration of the provisions
of those agreements by the CRJs in
ratesetting proceedings. More
specifically, section 114(f)(5)(C)
provides in pertinent part as follows:
(C) Neither subparagraph (A)
[allowing the parties to enter into
alternative agreements] nor any
provisions of any agreement entered
into pursuant to subparagraph (A),
including any rate structure, fees, terms,
conditions, or notice and recordkeeping
requirements set forth therein, shall be
admissible as evidence or otherwise
taken into account in any
administrative, judicial, or other
government proceeding involving the
setting or adjustment of the royalties
payable for the public performance or
reproduction in ephemeral
phonorecords or copies of sound
recordings, the determination of terms
or conditions related thereto, or the
establishment of notice or
recordkeeping requirements by the
Copyright Royalty Judges under
paragraph (4) or section 112(e)(4). It is
the intent of Congress that any royalty
rates, rate structure, definitions, terms,
conditions, or notice and recordkeeping
requirements, included in such
agreements shall be considered as a
compromise motivated by the unique
business, economic and political
circumstances of webcasters, copyright
owners, and performers rather than as
matters that would have been negotiated
in the marketplace between a willing
buyer and a willing seller, or otherwise
meet the objectives set forth in section
801(b).12
As permitted under the 2009 WSA,
SoundExchange entered into settlement
agreements (each, a ‘‘WSA agreement’’)
with various webcasters to replace the
rates set by the CRJs.13 Under the
enabling legislation, the rates and terms
in each of these WSA agreements are to
be made available ‘‘to any webcasters
meeting the respective eligibility
conditions of the agreements as an
alternative to the rates and terms of any
11 17
U.S.C. § 114(f)(5).
U.S.C. § 114(f)(5)(C).
13 See Notification of Agreements Under the
Webcaster Settlement Act of 2009, 74 FR 34,796,
34,797 (July 17, 2009) (publishing agreement
concerning commercial webcasters including small
pureplay webcasters); Notification of Agreements
Under the Webcaster Settlement Act of 2009, 74 FR
40,614, 40,614 (Aug. 12, 2009) (publishing
agreements with Sirius XM Radio Inc., College
Broadcasters, Inc., Corporation for Public
Broadcasting, and Northwestern College).
12 17
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determination by the [CRJs].’’14 One
such WSA agreement with
SoundExchange is known as the
‘‘Pureplay Agreement,’’ on which
Pandora Media, Inc. (‘‘Pandora’’) and
other webcasters currently rely for
certain uses of sound recordings.
Certain individual webcasters,
including Pandora and iHeartMedia,
Inc. (‘‘iHeartMedia’’), have also entered
into directly negotiated license
agreements with individual record
labels (‘‘direct agreements’’), rather than
with SoundExchange.15
According to SoundExchange, direct
agreements sought to be introduced by
the webcasting parties in the instant
ratesetting proceeding incorporate
substantive provisions and/or are
otherwise influenced by the Pureplay
Agreement entered into under the 2009
WSA.16 In a pretrial submission,
SoundExchange argued that section
114(f)(5)(C) prevents the CRJs from
considering the direct license
agreements submitted by the licensee
services, and that they should be
excluded from the current proceeding.17
In response to these concerns, the
CRJs issued an order inviting briefing
from the participants regarding five
novel material questions of substantive
law and, on July 29, 2015, referred the
following questions to the Register
pursuant to 17 U.S.C. 802(f)(1)(B):18
1. Does section 114(f)(5)(C) of the
[Copyright] Act bar the Judges from
considering in its entirety a license
agreement between a webcaster and a
record company if that agreement
includes any terms that are copied
verbatim from a [2009] WSA settlement
agreement?
2. Does section 114(f)(5)(C) of the
[Copyright] Act bar the Judges from
considering in its entirety a license
14 Notification of Agreements Under the
Webcaster Settlement Act of 2009, 74 FR 34,796,
34,797 (July 17, 2009); Notification of Agreements
Under the Webcaster Settlement Act of 2009, 74 FR
40,614, 40,614 (Aug. 12, 2009); 17 U.S.C.
114(f)(5)(B) (‘‘[T]he terms of such [a WSA]
agreement shall be available, as an option, to any
commercial webcaster or noncommercial webcaster
meeting the eligibility conditions of such
agreement.’’).
15 See iHeartMedia Initial Br. at 6; Pandora Initial
Br. at 1–2.
16 Order Referring Novel Question of Law and
Setting Briefing Schedule, Docket No. 14–CRB–
0001–WR (2016–2020) (July 29, 2015) (‘‘Referral
Order’’) at 1–2.
17 Referral Order at 2 (citing SoundExchange
Proposed Conclusions of Law ¶ 48).
18 See Referral Order at 1. Section 802(f)(1)(B)
provides that ‘‘[i]n any case in which a novel
material question of substantive law concerning an
interpretation of those provisions of this title that
are the subject of the proceeding is presented, the
Copyright Royalty Judges shall request a decision of
the Register of Copyrights, in writing, to resolve
such novel question.’’ 17 U.S.C. 802(f)(1)(B).
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agreement between a webcaster and a
record company if that agreement
includes any terms that are
substantively identical to terms of a
[2009] WSA settlement agreement?
3. Does section 114(f)(5)(C) of the
[Copyright] Act bar the Judges from
considering in its entirety a license
agreement between a webcaster and a
record company if that agreement
includes terms that the [Copyright
Royalty] Judges conclude have been
influenced by terms of a [2009] WSA
settlement agreement?
4. Does section 114(f)(5)(C) of the
[Copyright] Act bar the Judges from
considering in its entirety a license
agreement between a webcaster and a
record company if that agreement refers
to a [2009] WSA settlement agreement
in provisions unrelated to the rate
structure, fees, terms, conditions, or
notice and recordkeeping requirements
set forth therein?
5. If the answer to any of the previous
questions is ‘‘no,’’ does section
114(f)(5)(C) of the [Copyright] Act bar
the Judges from considering specific
provisions of a license agreement
between a webcaster and a record
company that are the same as, are
copied from, influenced by or refer to
provisions of a [2009] WSA settlement
agreement?
II. Summary of the Parties’ Arguments
All parties agree that section
114(f)(5)(C) bars the CRJs from admitting
into evidence or otherwise considering
provisions of the actual settlement
agreements reached pursuant to the
2009 WSA.19 The issue at hand instead
concerns directly negotiated licensing
agreements that allegedly incorporate
portions of, or the terms of which were
influenced by, the WSA agreements.
SoundExchange argues that each of
the referred questions should be
answered in the affirmative, and that the
direct license agreements should be
excluded from consideration. On the
other side of the issue, the webcasting
parties, namely Pandora, iHeartMedia,
and the National Association of
Broadcasters and National Religious
Broadcasters Noncommercial Music
License Committee (together, the
‘‘Broadcasters,’’ and all of the licensee
parties collectively, the ‘‘Webcasters’’),
assert that the questions should be
answered in the negative, and that the
CRJs should be able to take these
agreements into consideration as
19 SoundExchange Initial Br. at 1; Pandora Initial
Br. at 1; iHeartMedia Initial Br. at 2–3; Broadcasters
Initial Br. at 1.
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benchmarks or corroborative evidence
in the current proceeding.20
A. SoundExchange’s Position
SoundExchange reads the statutory
bar broadly, arguing that if a direct
license agreement incorporates any
terms of, is based upon, or is influenced
by, the provisions of a WSA agreement,
then the CRJs should refrain from
considering that agreement pursuant to
section 114(f)(5)(C).21 SoundExchange
offers three primary arguments in
support of this contention.
First, SoundExchange claims that
section 114(f)(5)(C)’s inclusion of the
phrase ‘‘otherwise taken into account’’
demonstrates that the statute’s scope is
broader than a mere bar against the
admission of evidence.22
SoundExchange maintains that the
Webcasters’ interpretation is faulty
because it ‘‘reads entirely out of the
statute Congress’s bar on the [CRJs] from
‘tak[ing] into account’ the WSA
agreements.’’23 SoundExchange urges
that if Congress intended only to
preclude the admissibility of the WSA
agreements, this language would be
unnecessary, and that interpreting a
statute so as to render language
inoperative or superfluous is
improper.24
Second, SoundExchange argues that
Congress enacted a ‘‘very broad rule of
exclusion’’ to prevent the terms of a
WSA agreement from being used against
a settling party in subsequent
proceedings, including in cases where
these terms appear in subsequently
negotiated agreements.25
SoundExchange contends that Congress
was not solely interested in the
admissibility of the WSA agreements
themselves, but more broadly wanted to
allow the parties ‘‘to enter into
‘compromise’ agreements, ‘motivated by
the unique business, economic and
political circumstances’ then facing the
settling parties, without fear that the
20 Initial Brief for SoundExchange at 8, 12, 13, 15,
17, No. 14–CRB–0001–WR (2016–2020) (Web IV)
(Aug. 7, 2015) (‘‘SoundExchange Initial Br.’’); Initial
Brief for Pandora at 25, No. 14–CRB–0001–WR
(2016–2020) (Web IV) (Aug. 7, 2015) (‘‘Pandora
Initial Br.); Initial Brief for iHeartMedia at 17, No.
14–CRB–0001–WR (2016–2020) (Web IV) (Aug. 7,
2015) (‘‘iHeartMedia Initial Br.’’); Initial Brief for
the Broadcasters at 17–18, No. 14–CRB–0001–WR
(2016–2020) (Web IV) (Aug. 7, 2015) (‘‘Broadcasters
Initial Br.’’).
21 SoundExchange Initial Br. at 1.
22 Id. at 3. SoundExchange argues that this phrase
means to ‘‘take into consideration; allow for.’’ Id.
at 4.
23 Responsive Brief for SoundExchange at 1, No.
14–CRB–0001–WR (2016–2020) (Web IV) (Aug. 14,
2015) (‘‘SoundExchange Responsive Br.’’)
(emphasis and alteration in original).
24 Id. at 3.
25 SoundExchange Initial Br. at 4, 8.
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agreement or any of its terms and
conditions would later be used in any
way to be indicative of terms to which
willing buyers and willing sellers would
agree.’’26 SoundExchange also notes that
the legislative history of the 2002
SWSA, which first introduced the
language in section 114(f)(5)(C),
expressly states that to facilitate
settlement, the parties needed
assurances that their agreements could
not later be used against them in future
rate proceedings.27
Third, SoundExchange argues that
any contrary interpretation of the statute
would be fundamentally unfair because
it would permit a party to introduce a
licensing agreement that was directly
influenced by a WSA agreement, while
preventing an opposing party from
introducing the WSA agreement itself to
show the extent of its influence and to
demonstrate why the license agreement
should not be given weight as evidence
of a market rate.28 SoundExchange
argues that such use of WSA agreements
as both ‘‘a sword and a shield’’ is
impermissible.29
Regarding each of the referred
questions specifically, SoundExchange
asserts that section 114(f)(5)(C) bars the
CRJs from considering terms copied
verbatim from a direct license
agreement because ‘‘[w]here a license
agreement is simply a verbatim copy of
a WSA settlement agreement,
considering the terms of the license
agreement is effectively considering all
the terms of the WSA agreement from
which these terms were copied.’’30
SoundExchange further asserts that
where only some terms of a direct
agreement were copied verbatim from a
WSA agreement, the entire direct
license agreement nonetheless cannot be
considered because as a ‘‘fundamental
rule of contract interpretation . . . the
terms of any agreement are presumed to
be dependent and interrelated,’’
meaning the CRJs should not consider
the non-copied terms without also
taking into account the copied terms.31
SoundExchange additionally argues that
in every case where a webcaster was
eligible for the WSA agreement, it
26 Id. at 5 (quoting 17 U.S.C. 114(f)(5)(C)); see also
SoundExchange Responsive Br at 6.
27 SoundExchange Initial Br. at 6–7 (citing 2002
SWSA, § 2(7), 116 Stat. at 2781).
28 Id. at 2, 6; see also SoundExchange Responsive
Br. at 6 (For the CRJs to ‘‘take account of the direct
influence of the shadow of the WSA agreement on
the negotiation of the direct license, the [CRJs]
would be forced to consider the WSA agreement
and its terms[, y]et this necessary step of evaluating
the probative value of the direct license would run
headlong into § 114(f)(5)(C)’s bar.’’).
29 SoundExchange Initial Br. at 6.
30 Id. at 8.
31 Id. at 8–12.
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should be presumed that the entire
license agreement was directly affected
by the WSA agreement because ‘‘the
overarching shadow of the WSA
agreement rates would have affected the
entire negotiation’’ and, therefore, the
statute should ‘‘bar[] consideration of
the agreement as a whole.’’32
SoundExchange next argues that if a
direct agreement’s terms are
substantively identical to the terms of a
WSA agreement, the entire agreement
should be barred for the same reasons as
direct agreements with terms copied
verbatim from a WSA agreement;
‘‘[o]therwise the party seeking to submit
the license agreement could simply
slightly re-word the relevant terms.’’33
Recognizing that substantively identical
terms could have been arrived at
independently of a WSA agreement,
SoundExchange proposes a test for the
CRJs to employ: (i) if the proffering
party was eligible for and could opt into
the WSA agreement, that fact should be
conclusive proof that the substantively
identical terms were derived directly
from the WSA agreement; and (ii) if the
proffering party was not eligible to opt
into the WSA agreement, that party
could attempt to show the independent
derivation of its agreement through
evidence of the parties’ negotiating
history.34
Sound Exchange contends that if the
terms of a license agreement have been
directly influenced by the terms of a
WSA agreement, then the entire license
agreement should be barred because its
consideration ‘‘would take ‘into
account’ the terms of the WSA
agreement, in violation of’’ the statute.35
Recognizing that ‘‘the shadow of a WSA
settlement agreement [does not]
influence[] all negotiations to an equal
extent,’’ SoundExchange proposes that
only agreements evidencing ‘‘direct
influence’’ should be barred, and that
there should be a ‘‘very strong
presumption’’ of such influence where a
webcaster was eligible for and could opt
into the WSA agreement and could fall
back on that option in the absence of the
direct agreement.36 SoundExchange
maintains that its interpretation would
not bar the consideration of all
marketplace agreements that are in any
way influenced by WSA agreements.37
Rather, SoundExchange contends that
its interpretation is limited to those
agreements that have been ‘‘directly
32 Id.
at 8–12.
at 12; see also SoundExchange Responsive
Br. at 4.
34 SoundExchange Initial Br. at 13.
35 Id.; see also SoundExchange Responsive Br at
2–3, 9–11.
36 SoundExchange Initial Br. at 14.
37 Id. at 2.
33 Id.
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influenced’’ by a WSA agreement.38
SoundExchange argues that its test is
‘‘straightforward’’ and ‘‘does not involve
‘arbitrary line-drawing’ or ‘secondguessing regarding parties’ intent.’’’39
SoundExchange next argues that a
direct agreement should be barred in its
entirety if it refers to a WSA agreement,
including to provisions unrelated to rate
structure, fees, terms, conditions, or
notice and recordkeeping requirements,
because ‘‘a reference to a WSA
agreement in any provision of a license
is a reference to a WSA agreement’s
‘terms’ and ‘conditions’ [because] [t]here
are no provisions of a license that are
‘unrelated’ to its ‘terms’ and
‘conditions.’’’40 SoundExchange points
to the ‘‘broad language’’ of section
114(f)(5)(C) to claim that it should
‘‘apply expansively, effectively
encompassing all provisions in a WSA
agreement.’’41 As SoundExchange puts
it, ‘‘[i]t is difficult to imagine that a
license could make a reference to a term
or condition of a WSA agreement
without incorporating that term or
condition or otherwise being directly
influenced by that term or condition.’’42
SoundExchange vigorously disputes
the Webcasters’ interpretation of section
114(f)(5)(C), suggesting that under their
view, a party could skirt the statutory
prohibition by using its option to join a
WSA agreement ‘‘as leverage’’ to
negotiate and enter into a slightly
modified agreement, thereafter
presenting this modified agreement to
the CRJs as ‘‘competent marketplace
evidence.’’ 43 Additionally, addressing
the Webcasters’ argument that
SoundExchange’s interpretation of
section 114(f)(5)(C) conflicts with
section 114(f)(2)(B)— which provides
that the CRJs may consider certain
voluntary license agreements in
establishing rates and terms under the
willing buyer/willing seller
standard44—SoundExchange contends
that the terms of the WSA agreements
are the result of compromise and, as
such, are not marketplace evidence, and
do not become marketplace evidence by
38 Id.
at 2–3, 9–11.
at 11.
40 Id. at 15.
41 Id. at 16.
42 Id. at 17.
43 SoundExchange Responsive Br. at 4.
44 17 U.S.C. 114(f)(2)(B) states, in relevant part:
‘‘Copyright Royalty Judges shall establish rates and
terms that most clearly represent the rates and
terms that would have been negotiated in the
marketplace between a willing buyer and a willing
seller. . . . In establishing such rates and terms, the
Copyright Royalty Judges may consider the rates
and terms for comparable types of digital audio
transmission services and comparable
circumstances under voluntary license
agreements. . . .’’
39 Id.
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being incorporated into new contracts.45
SoundExchange maintains that even if
there is tension between the statutory
provisions as the Webcasters claim, this
still does not permit section
114(f)(5)(C)’s plain text to be ignored.46
B. The Webcasters’ Position
The various Webcasters’ arguments
largely parallel one another. Each of the
Webcasters asserts that section
114(f)(5)(C) applies only to the specific
settlement agreements entered into with
SoundExchange pursuant to the 2009
WSA, and not to any subsequent direct
license agreements between a
webcasting service and a sound
recording owner.47
Looking to the text of the statute, the
Webcasters urge that, in contrast to the
WSA agreements, the direct agreements
were not entered into with
SoundExchange as contemplated by the
statute.48 They point out that they were
not entered into during the time period
for settlements authorized by the
statute, do not bind all copyright owners
as provided in the statute, were not
published in the Federal Register as
required by the statute, and do not
provide any immunities from liability to
the record companies as provided in the
statute.49 The Broadcasters and
iHeartMedia add that, unlike the WSA
agreements, the direct agreements were
not motivated by the encouragement of
Congress to reach an accommodation,
and do not represent compromises
motivated by the unique business,
economic, and political circumstances
of webcasters, copyright owners, or
performers, as Congress specifically
intended in passing the WSAs.50
The Webcasters reject
SoundExchange’s interpretation of the
phrase ‘‘taken into account’’ as
precluding the consideration of direct
license agreements that may contain
terms identical to or influenced by a
WSA agreement. They argue that
SoundExchange’s interpretation would
require disregarding every benchmark
agreement proposed by the parties, as
all license agreements are to some
degree impacted by the prevailing rates
and terms set under the statute.51
Pandora contends that its reading does
not render the phrase meaningless as
SoundExchange claims, but rather offers
a ‘‘far more natural and plausible
reading’’ that ‘‘simply prevents a party
from end-running, or the [CRJs] from
indirectly circumventing, the statutory
admissibility proscription by invoking
or relying upon the terms of a WSA
agreement without that agreement
having actually been moved into
evidence.’’ 52 iHeartMedia suggests that
the phrase merely means that the CRJs
‘‘may not take administrative or judicial
notice’’ of the WSA agreements.53
The Broadcasters add that if the
preclusion in subparagraph (C) is
applied to direct agreements, ‘‘it would
force the [CRJs] to engage in arbitrary
line-drawing and second-guessing
regarding parties’ intent in entering into
license agreements in a manner
nowhere contemplated or discussed in
the statutory prohibition.’’ 54
Additionally, iHeartMedia asserts that a
recent opinion from a federal district
court in the Southern District of New
York considering section 114(i)—an
allegedly ‘‘parallel provision’’ which
contains the same ‘‘taken into account’’
language as section 114(f)(5)(C)—
interpreted section 114(i) as precluding
‘‘only consideration of the [other] rates
themselves’’ and not ‘‘consideration of
how these rates influenced the market
for musical works.’’ 55
Concerning the statute’s legislative
history, Pandora argues that Congress
passed the WSA in order to encourage
SoundExchange to negotiate ‘‘less
onerous rates’’ than those announced by
the CRJs, and that the bar on subsequent
CRJ consideration of the WSA
agreements was imposed specifically so
that SoundExchange ‘‘would not be
construed as a ‘willing seller’’’ in
relation to those rates in future CRB
proceedings.56 Pandora claims that
Congress did not intend to limit the
CRJs’ ability to consider subsequent
marketplace agreements that may be
somehow derived from or influenced by
a WSA agreement.57 iHeartMedia
similarly asserts that in enacting the
2002 SWSA, Congress indicated that ‘‘it
would be ‘in the public interest’ to be
‘clear that the agreement will not be
52 Pandora
45 SoundExchange
Responsive Br. at 8–9.
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46 Id.
47 Pandora Initial Br. at 1; iHeartMedia Initial Br.
at 2–3; Broadcasters Initial Br. at 1.
48 Broadcasters Initial Br. at 7; Pandora Initial Br.
at 7; iHeartMedia Initial Br. at 8.
49 Broadcasters Initial Br. at 7; Pandora Initial Br.
at 7–9; iHeartMedia Initial Br. at 8.
50 Broadcasters Initial Br. at 11; iHeartMedia
Initial Br. at 10–11.
51 Pandora Initial Br. at 4, 10; iHeartMedia
Responsive Br. at 8; see also Pandora Responsive
Br. at 1.
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Responsive Br. at 5.
Responsive Br. at 2, 5–7.
54 Broadcasters Initial Br. at 9.
55 iHeartMedia Initial Br. at 16 (citing In re
Pandora Media, Inc., 6 F. Supp. 3d 317, 366–67
(S.D.N.Y. 2014)).
56 Pandora Initial Br. at 3–4, 14–15.
57 Id. at 4, 9, 15–16; see also iHeartMedia Initial
Br. at 9 (‘‘Congress in § 114(f)(5)(C) did not preclude
consideration of provisions found outside of a
Webcaster Settlement Agreement, even where a
provisions is, for example, copied from or
influenced by a provision in an agreement made
pursuant to § 114(f)(5)(A).’’) .
53 iHeartMedia
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admissible as evidence or otherwise
taken into account’ in future rate-setting
proceedings.’’ 58 iHeartMedia argues
that this legislative history demonstrates
that Congress was only concerned with
consideration of the WSA settlement
agreements themselves, and not
subsequent direct license agreements.59
The Webcasters also argue that
SoundExchange’s interpretation
conflicts with section 114(f)(2)(B),
which provides that the CRJs may
consider voluntary license agreements
to further the objective of establishing
rates and terms that most clearly
represent those that would have been
negotiated in the marketplace between a
willing buyer and a willing seller.60 As
Pandora puts it, that provision
‘‘explicitly encourages the [CRJs] to
consider marketplace agreements
between statutory services and
rightsholders.’’ 61 Pandora argues that
section 114(f)(2)(B) ‘‘does not qualify
that invitation with language excepting
agreements that were ‘influenced by’ the
statutory rates set forth in . . . WSA
agreements, and any such gloss would
contravene the settled canon of statutory
construction that requires courts to give
effect to all provisions of a statute as a
‘harmonious whole.’ ’’ 62 In
iHeartMedia’s view, ‘‘[a]greements
involving the same sellers, the same
buyers, and the same statutory services
not only are the very agreements
Congress authorized the [CRJs] to
consider, but also are critical to
determining rates and terms that ‘most
clearly’ represent what a willing buyer
and willing seller in this market would
negotiate in the absence of the statutory
license.’’ 63 iHeartMedia further asserts
that an interpretation that would
preclude the CRJs from considering the
direct licenses would put section
114(f)(5)(C) into ‘‘irreconcilable
conflict’’ with section 114(f)(2)(B),
‘‘because every direct license agreement
is necessarily negotiated against the
background—or in the ‘shadow’—of the
statutory regime, which includes the
Webcaster Settlement Agreements.’’ 64
58 iHeartMedia Initial Br. at 10 (quoting 2002
SWSA, § 2(1)–(7), 116 Stat. at 2780–81).
59 Id.
60 17 U.S.C. § 114(f)(2)(B) states, in relevant part:
‘‘Copyright Royalty Judges shall establish rates and
terms that most clearly represent the rates and
terms that would have been negotiated in the
marketplace between a willing buyer and a willing
seller. . . . In establishing such rates and terms, the
Copyright Royalty Judges may consider the rates
and terms for comparable types of digital audio
transmission services and comparable
circumstances under voluntary license agreements
. . . .’’
61 Pandora Initial Br. at 12.
62 Id.
63 Id.
64 Id. at 13.
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Pandora additionally asserts that
SoundExchange’s position that the
statutory licenses and the WSA
agreements cast a ‘‘shadow’’ upon the
direct license agreements ‘‘conflates
admissibility under Section 114(f)(5)(C)
with the weight that should be given to
the parties’ competing benchmark
agreements.’’ 65 iHeartMedia agrees,
stating ‘‘[t]he need to remove the effect
of the shadow [cast by the WSA
agreements on direct licenses] is part of
the analysis under § 114(f)(2)(B), and
provides no basis to discard from the
evidentiary record—in whole or in
part—any voluntarily negotiated direct
license between a statutory service and
an individual record label.’’ 66 Pandora
further adds that if, as SoundExchange
posits, a party ever attempted to evade
section 114(f)(5)(C) by entering into a
direct license that copies a WSA
agreement for the purpose of admitting
it as a benchmark, the CRJs ‘‘would be
more than capable of issuing rulings
assuring a lack of prejudice . . . and
assigning such an agreement the
evidentiary weight it deserved.’’ 67
Finally, the Broadcasters assert that
the Register is not authorized to render
an opinion on the referred questions,
because section 802(f)(1)(B) only allows
for the referral of ‘‘a novel material
question of substantive law,’’ and the
admissibility of evidence is, in the
Broadcasters’ view, a purely procedural
question.68
A. The Questions Were Properly
Referred
Under 17 U.S.C. § 802(f)(1)(B), the
CRJs are required to refer to the Register
‘‘novel material question[s] of
substantive law.’’ 69 The Broadcasters
raise a threshold concern that the
referred questions were improperly
referred by the CRJs because they
‘‘relat[e] primarily to the admissibility
of evidence,’’ and are therefore
procedural in nature.70
The Register finds the questions to be
substantive rather than procedural, and
that they were therefore properly
referred by the CRJs. The referred
questions require the Register to
interpret the scope of section
114(f)(5)(C)’s prohibition, including
what it means to take various types of
agreements and their provisions ‘‘into
account’’ for purposes of the ratesetting
proceeding.71 This goes well beyond a
mere matter of procedure, as the
interpretation of this statutory provision
speaks to the benchmark evidence that
the CRJs may appropriately consider, a
core concern of the ratesetting process.
The referred questions are thus readily
distinguishable from simple issues of
admissibility arising under the CRJs’
evidence-related rules, such as whether
proffered evidence is properly
authenticated or whether an application
of the hearsay rule is appropriate.72 The
questions were thus properly referred by
the CRJs.
III. Register’s Determination
Having considered the relevant
statutory language and the input from
the parties, the Register determines that
it is appropriate to opine on the referred
questions, and that the answer to each
of the referred questions is ‘‘no.’’ The
Register finds that section 114(f)(5)(C)
prohibits consideration of the
provisions of the WSA agreements by
the CRJs but does not bar the CRJs from
considering directly negotiated license
agreements that incorporate or
otherwise reflect provisions in a WSA
agreement. The Register further
concludes, however, that the statutory
bar does not preclude SoundExchange
from introducing evidence or argument
concerning the existence of the WSA
agreements themselves, including their
general influence or impact on the
negotiation of the direct agreements,
provided that individual provisions of
the WSA are not introduced in the
proceeding.
B. Analysis of the Referred Questions
As noted above, the Register
concludes that section 114(f)(5)(C)
prohibits consideration of provisions of
settlement agreements entered into
pursuant to the 2009 WSA and does not
bar the CRJs from considering direct
license agreements containing
provisions that are copied from, are
substantively identical to, have been
influenced by, or refer to, the provisions
of a WSA agreement. This result is
compelled not only by the language of
section 114(f)(5)(C), but by the
legislative intent behind that statute as
well.
1. Section 114(f)(5)(C) Does Not Bar
Consideration of Direct License
Agreements
A reading of the entirety of section
114(f)(5) makes clear that the material
excluded under subparagraph (C) is
U.S.C. § 802(f)(1)(B).
see also Broadcasters Responsive Br. at 6
(comparing section 802(f)(1)(B) with section 801(c),
which states that ‘‘[t]he Copyright Royalty Judges
may make any necessary procedural or evidentiary
rulings’’).
71 Referral Order at 1–3.
72 See 37 CFR 351.10(a).
70 Id.;
65 Pandora Responsive Br. at 10 (emphasis in
original).
66 iHeartMedia Responsive Br. at 12.
67 Pandora Responsive Br. at 11.
68 Broadcasters Initial Br. at 17; Broadcasters
Responsive Br. at 6.
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limited to the provisions of actual
settlement agreements entered into
pursuant to the WSA. Subparagraph (C)
bars consideration of ‘‘subparagraph
(A)’’ and ‘‘any provisions of any
agreement entered into pursuant to
subparagraph (A).’’ 73 Subparagraph (A),
in turn, permits SoundExchange and
webcasters to enter into the WSA
agreements.74 Subparagraph (B) requires
that any such agreement will ‘‘be
published in the Federal Register’’ and
that ‘‘the terms of such agreement shall
be available, as an option, to any
commercial webcaster or
noncommercial webcaster meeting the
eligibility conditions of such
agreement.’’75 Subparagraph (F) adds
that ‘‘[t]he authority to make settlements
pursuant to subparagraph (A) shall
expire at 11:59 p.m. Eastern time on the
30th day after the date of the enactment
of the Webcaster Settlement Act of
2009.’’ 76
Accordingly, the ‘‘provisions of . . .
agreement[s]’’ barred under section
114(f)(5)(C) must be contained within
agreements: (i) between SoundExchange
and webcasters; (ii) that are binding on
all copyright owners; (iii) that are
published in the Federal Register; (iv)
that are available as an option to any
eligible webcasters; and (v) that were
entered into on or before July 30,
2009.77 Based only on the requirement
to publish in the Federal Register, the
only agreements meeting these criteria
are the WSA agreements themselves. A
direct license agreement’s provisions
cannot be the subject of the statute’s
prohibition because the direct
agreement containing them cannot
satisfy these criteria—such a direct
agreement was not ‘‘entered into
pursuant to subparagraph (A).’’ This is
true regardless of whether the direct
license’s provisions are copied from or
influenced by a WSA agreement’s
provisions.
Additionally, section 114(f)(5)(C)
includes an explicit statement of
Congress’s intent concerning the
evidentiary bar:
It is the intent of Congress that any
royalty rates, rate structure, definitions,
terms, conditions, or notice and
recordkeeping requirements, included
in such agreements shall be considered
as a compromise motivated by the
73 Id.
(emphasis added)
U.S.C. 114(f)(5)(A). Note, subparagraph (A)
refers to the ‘‘receiving agent,’’ which is identified
as SoundExchange by 37 CFR 261.2 and 261.4(b).
75 17 U.S.C. 114(f)(5)(B).
76 17 U.S.C. 114(f)(5)(F).
77 See 17 U.S.C. 114(f)(5). The 2009 WSA was
enacted on June 30, 2009. Webcaster Settlement Act
of 2009, Pub. L. 111–36, 123 Stat. 1926 (2009).
Thirty days thereafter was July 30, 2009.
74 17
69 17
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unique business, economic and political
circumstances of webcasters, copyright
owners, and performers rather than as
matters that would have been negotiated
in the marketplace between a willing
buyer and a willing seller, or otherwise
meet the objectives set forth in section
801(b).78
The reference to ‘‘such agreements’’
subparagraph (C) clearly refers to the
WSA agreements Congress was
authorizing under subparagraph (A).
The provisions that are barred from
consideration are thus those ‘‘included’’
in WSA agreements—not other
agreements.
This interpretation is confirmed by
relevant legislative history as well.
When Congress enacted the 2002
SWSA, which first contained this
statutory language, it explained that it
intended to make ‘‘clear that the
agreement will not be admissible as
evidence or otherwise taken into
account.’’ 79 In referencing ‘‘the
agreement,’’ Congress was clearly
referring to a specific agreement—
namely, the alternative agreement with
SoundExchange it was authorizing
under that legislation.80 There was no
suggestion that Congress was
referencing other agreements as well.
The Register further observes that
section 114(f)(5)(C) is addressed to
individual provisions contained in the
WSA agreements, rather than the
agreements as a whole. Section
114(f)(5)(C) provides that no ‘‘provisions
of any agreement entered into pursuant
to subparagraph (A), including any rate
structure, fees, terms, conditions, or
notice and recordkeeping requirements
set forth therein,’’ shall be taken into
consideration.81 It is apparent from both
this language enumerating specific
examples of rates and terms, and the
language setting forth Congress’ intent
quoted above, that Congress meant to
exclude from consideration in future
proceedings the particular rates and
terms ‘‘included’’ in a WSA
agreement—rather than the existence or
fact of the agreement itself. Had
Congress intended to bar any
consideration of the WSA agreements
whatsoever, it could have easily have
said so. But it did not. Instead, Congress
made clear it was referring to the
individual ‘‘provisions of’’—i.e., the
rates and terms contained in—the WSA
agreements.
Section 114(f)(5)(C) also provides that
‘‘subparagraph (A)’’ itself shall not be
78 17
U.S.C. 114(f)(5)(C) (emphasis added).
Webcaster Settlement Act of 2002, Pub.
L. 107–321, § 2(7), 116 Stat. at 2781 (2002)
(emphasis added).
80 See id.
81 17 U.S.C. 114(f)(5)(C).
79 Small
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admissible as evidence or otherwise
taken into account.82 Based on a plain
reading of the statute, the Register
determines that this simply means that
the language of subparagraph (A)
cannot—either in whole or in part—be
introduced into evidence or otherwise
considered in a CRJ proceeding.
Accordingly, the reference to
subparagraph (A) in section 114(f)(5)(C)
does not preclude consideration of the
existence or effects of the WSAs entered
into as a result of subparagraph (A) so
long as the language of subparagraph (A)
is not introduced. Again, had Congress
wished to articulate a broader
proscription, it could have done so. The
Register will not read section
114(f)(5)(C) more broadly than it is
written.
Contrary to SoundExchange’s
assertions, the phrase ‘‘taken into
account’’ in section 114(f)(5)(C) does not
alter the Register’s reading of the
statutory language. SoundExchange’s
interpretation—that consideration of the
terms of a direct license agreement that
have been copied from or directly
influenced by the terms of a WSA
agreement would impermissibly ‘‘take
into account’’ the terms of the WSA
agreement—is overreaching. The
Register agrees with the Webcasters that
such a reading could effectively exclude
all potentially probative benchmark
agreements from consideration because
virtually every voluntary agreement
could be said to be is influenced to
some extent by the background statutory
scheme—which includes the WSA
agreements.83 Indeed, this is the nature
of a compulsory licensing regime in
general; the existence of a statutory
‘‘fallback’’ can influence the direct
agreements that are entered into in its
shadow. While the Register is
sympathetic to SoundExchange’s
argument that the direct agreements
have been shaped by the availability of
the Pureplay Agreement as an
alternative option for licensees, the
same would be true of direct agreements
entered into with CRJ-determined rates
as a fallback.
The far more plausible reading of the
‘‘otherwise take into account’’ language,
82 Id.
83 See, e.g., Determination of Rates and Terms for
Preexisting Subscription Services and Satellite
Digital Audio Radio Services, 78 FR 23054, 23065
n.32 (Apr. 17, 2013) (noting that although the CRJs
‘‘question whether any agreements regarding sound
recording rights could be purely market-based given
the current statutory framework,’’ they ‘‘do not have
the luxury of ignoring record evidence of the
contemporaneous results of arm’s length
negotiations between the same buyers and sellers
and rights involved in the market for which the
Judges are charged to determine a reasonable
rate.’’).
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which the Register determines is what
Congress intended, is simply that the
CRJs are not only barred from admitting
WSA agreement terms into evidence,
but that they also cannot consider the
provisions of WSA agreements even if
not offered as evidence. For example,
the broader ‘‘taken into account’’
language would prohibit the CRJs from
taking notice of provisions of the WSA
agreements that have been published in
the Federal Register, even if not
introduced into evidence.84 Thus the
phrase is not superfluous, as
SoundExchange suggests.
To interpret section 114(f)(5)(C) as
preventing the CRJs from taking direct
license agreements into consideration
would seemingly undermine Congress’
directive in section 114(f)(2)(B), which
encourages the CRJs to ‘‘consider the
rates and terms for comparable types of
digital audio transmission services and
comparable circumstances under
voluntary license agreements.’’ 85 Direct
agreements between sound recording
owners and webcasters for uses covered
by the section 112 and 114 licenses
would appear to be very the type of
evidence that section 114(f)(2)(B)
Congress had in mind. Had Congress
intended the exclusionary rule to extend
to directly negotiated agreements as
SoundExchange suggests, it presumably
would also have acted to reconcile
section 114(f)(5)(C) with section
114(f)(2)(B).
Finally, the Register agrees with the
Webcasters that as a practical matter, it
could be very difficult to draw lines
between negotiated agreements that
were ‘‘directly influenced’’ by WSA
agreements and those that were not.
SoundExchange’s suggested rule would
require the CRJs to sort admissible from
inadmissible agreements based on
amorphous criteria, which would be a
challenging task to say the least.
2. Section 114(f)(5)(C) Does Not
Preclude Consideration of the General
Effect of WSA Agreements on Direct
License Agreements
Although the Register finds that the
CRJs may take into consideration direct
84 See 5 U.S.C. 556(e) (acknowledging that ‘‘an
agency decision [can] rest[] on official notice of a
material fact not appearing in the evidence in the
record’’); 17 U.S.C. 803(b)(6)(C)(xi) (noting that
‘‘[n]o evidence, including exhibits, may be
submitted in the written direct statement or written
rebuttal statement of a participant without a
sponsoring witness, except where the Copyright
Royalty Judges have taken official notice’’)
(emphasis added).
85 See 17 U.S.C. 114(f)(2)(B). The Register notes
that this section does not restrict this consideration
to only those agreements that do not contain terms
that are copied verbatim from, are substantively
identical to, have been influenced by, or refer to
terms of a WSA settlement agreement.
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licenses that incorporate or otherwise
reflect WSA agreement terms, it is also
the case that they are entitled to weigh
the value of any such evidence in light
of the overall circumstances of the
marketplace, including any general
impact of the WSA agreements.
As discussed above, in rate
determinations, the CRJs are tasked with
replicating a ‘‘hypothetical market’’
where ‘‘the webcasting statutory license
[does] not exist.’’ 86 Among the tools at
the CRJs’ disposal to accomplish this
task are ‘‘the rates and terms for
comparable types of digital audio
transmission services and comparable
circumstances under voluntary license
agreements.’’ 87 As Webcasters seem to
acknowledge, when considering a
voluntary agreement, the CRJs may
consider whether an agreement was
made in the ‘‘shadow’’ of a statutory rate
or WSA agreement in evaluating its
worth as a benchmark.88 As the U.S.
Court of Appeals for the D.C. Circuit has
stressed, ‘‘[i]t is generally within the
discretion of the Judges to assess
evidence of an agreement’s
comparability and to decide whether to
look to its rates and terms for
guidance.’’ 89 This ‘‘broad discretion’’
includes the ability to ‘‘discount . . .
benchmarks’’ offered by the parties.90
Although section 114(f)(5)(C) may
preclude the consideration or
comparison of individual rates and
terms contained in the WSA
agreements, it does not prevent the CRJs
from considering the agreements at all.
Section 114(f)(5)(C) bars the CRJs from
considering the terms of agreements
negotiated under the 2009 WSA.
Nowhere does the statute suggest that
the mere existence of such agreements,
or their general effect on the
marketplace or particular negotiations,
may not be considered. As noted above,
the statutory language is specific in
limiting the scope of the prohibition to
the ‘‘provisions of any [WSA]
agreement.’’ 91 Section 114(f)(5)(C)
provides examples of the types of
provisions Congress had in mind: ‘‘rate
structure, fees, terms, conditions, or
notice and recordkeeping
requirements.’’ 92 This list, which
appears twice in subparagraph (C),93
makes clear that the ban applies only to
a WSA agreement’s specific terms, as
embodied in particular provisions.
A recent case from federal district
court in the Southern District of New
York speaks to this issue.94 As part of
a rate determination for the performance
of musical compositions by Pandora in
a ratesetting proceeding conducted
under a federal consent decree, the
court discussed section 114(i) of the
Copyright Act, which contains the same
‘‘taken into account’’ language as
section 114(f)(5)(C).95 Section 114(i)
provides relevant part:
License fees payable for the public
performance of sound recordings under
section 106(6) shall not be taken into
account in any administrative, judicial,
or other governmental proceeding to set
or adjust the royalties payable to
copyright owners of musical works for
the public performance of their works.96
During the course of the federal court
proceeding, the licensing organization,
ASCAP, the licensor, proposed a variety
of benchmarks for the court to consider,
including a series of licensing
agreements negotiated directly between
copyright owners and licensees outside
of the consent decree process.97 At trial,
the parties disputed the extent to which
the court could consider evidence
relating to the rate for the public
performance of sound recordings (as
opposed to musical works).98 While the
presiding judge noted that she could
‘‘not take the [sound recording rate] into
account in determining the fair market
rate for a public performance license
[for musical compositions],’’ she went
on to state that ‘‘one observation may be
safely made’’: 99
I don’t understand that that testimony
about motive in negotiations and
turmoil within ASCAP over these
different rates [for sound recordings]
would be inadmissible pursuant to
Section 114. Indeed, I think it would be
difficult to deal with the facts on the
ground as they exist and to set a rate
that is reasonable in the context of the
facts . . . without knowing about
that.100
93 17
U.S.C. 114(f)(5)(C).
94 See
tkelley on DSK3SPTVN1PROD with NOTICES
86 Intercollegiate
Broad. Sys., Inc. v. Copyright
Royalty Bd., 796 F.3d 111, 131 (D.C. Cir. 2015)
(internal alterations omitted).
87 17 U.S.C. 114(f)(2)(B).
88 See Pandora Responsive Br. at 10–11;
iHeartMedia Responsive Br. at 12.
89 Intercollegiate Broad. Sys. v. Copyright Royalty
Bd., 574 F.3d 748, 759 (D.C. Cir. 2009).
90 Music Choice v. Copyright Royalty Bd., 774
F.3d 1000, 1009 (D.C. Cir. 2014).
91 See 17 U.S.C. 114(f)(5)(C) (emphasis added).
92 See id.
VerDate Sep<11>2014
17:19 Sep 25, 2015
Jkt 235001
In re Pandora Media, Inc., 6 F. Supp. 3d
317 (S.D.N.Y. 2014).
95 See id. at 366–67.
96 17 U.S.C. 114(i).
97 In re Pandora Media, Inc., 6 F. Supp. 3d at 320.
98 Transcript of Trial at 729:18–733:1, In re
Pandora Media, Inc., 6 F. Supp. 3d 317 (S.D.N.Y.
2014) (Nos. 12 Civ. 8035, 41 Civ. 1395).
99 In re Pandora Media, Inc., 6 F. Supp. 3d at
366–67.
100 Transcript of Trial at 731:1–7, In re Pandora
Media, Inc., 6 F. Supp. 3d 317 (S.D.N.Y. 2014) (Nos.
12 Civ. 8035, 41 Civ. 1395).
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
58307
This commentary in the consent decree
case further supports the Register’s
determination that evidence concerning
the general impact and influence of the
WSA agreements—and the statutory
licensing regime that gave rise to them—
may appropriately be considered by the
CRJs in evaluating the probative value of
the direct agreements.
September 18, 2015
Maria A. Pallante
Register of Copyrights and Director, United
States Copyright Office.
[FR Doc. 2015–24591 Filed 9–25–15; 8:45 am]
BILLING CODE 1410–30–P
MILLENNIUM CHALLENGE
CORPORATION
[MCC FR 15–03]
Report on the Criteria and
Methodology for Determining the
Eligibility of Candidate Countries for
Millennium Challenge Account
Assistance in Fiscal Year 2016
Millennium Challenge
Corporation.
ACTION: Notice.
AGENCY:
This report to Congress is
provided in accordance with Section
608(b) of the Millennium Challenge Act
of 2003, as amended, 22 U.S.C. 7707(b)
(the ‘‘Act’’).
SUMMARY:
Dated: September 22, 2015.
Maame Ewusi-Mensah Frimpong,
VP/General Counsel and Corporate Secretary,
Millennium Challenge Corporation.
Report on the Criteria and Methodology
for Determining the Eligibility of
Candidate Countries for Millennium
Challenge Account Assistance in Fiscal
Year 2016
Summary
In accordance with section 608(b)(2)
of the Millennium Challenge Act of
2003 (the ‘‘Act’’, 22 U.S.C. 7707(b)(1)),
the Millennium Challenge Corporation
(MCC) is submitting the following
report. This report identifies the criteria
and methodology that the Millennium
Challenge Corporation (MCC) intends to
use to determine which candidate
countries may be eligible to be
considered for assistance under the Act
for FY 2016.
Under section 608 (c)(1) of the Act,
MCC will, for a thirty-day period
following publication, accept and
consider public comment for purposes
of determining eligible countries under
section 607 of the Act (22 U.S.C. 7706).
E:\FR\FM\28SEN1.SGM
28SEN1
]]>Agencies
[Federal Register Volume 80, Number 187 (Monday, September 28, 2015)]
[Notices]
[Pages 58300-58307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24591]
=======================================================================
-----------------------------------------------------------------------
LIBRARY OF CONGRESS
Copyright Office
[Docket No. 2015-4]
Scope of the Copyright Royalty Judges' Continuing Jurisdiction
AGENCY: Copyright Office, Library of Congress.
ACTION: Final order.
-----------------------------------------------------------------------
SUMMARY: The Copyright Royalty Judges (``CRJs''), acting pursuant to
statute, referred novel material questions of substantive law to the
Register of Copyrights for resolution. Those questions concerned the
manner and extent to which section 114(f)(5)(C) of the Copyright Act
bars the CRJs from admitting into evidence or otherwise considering the
provisions contained in settlement agreements reached pursuant to the
Webcaster Settlement Act of 2009. The Register resolved those questions
in a written decision that was transmitted to the CRJs. That decision
is reproduced below.
DATES: Effective Date: September 22, 2015.
FOR FURTHER INFORMATION CONTACT: Stephen Ruwe, Assistant General
Counsel, U.S. Copyright Office, P.O. Box 70400, Washington, DC 20024.
Telephone: (202) 707-8350.
SUPPLEMENTARY INFORMATION: The Copyright Royalty Judges are tasked with
determining and adjusting rates and terms of royalty payments for
statutory licenses under the Copyright Act. See 17 U.S.C. 801. If, in
the course of proceedings before the CRJs, novel material questions of
substantive law concerning the interpretation of provisions of title 17
arise, the CRJs are required by statute to refer those
[[Page 58301]]
questions to the Register of Copyrights for resolution. 17 U.S.C.
802(f)(1)(B).
On August 19, 2015, the CRJs, acting pursuant to 17 U.S.C.
802(f)(1)(B), referred novel material questions of substantive law to
the Register concerning the manner and extent to which section
114(f)(5)(C) of the Copyright Act bars the CRJs from admitting into
evidence or otherwise considering the provisions contained in
settlement agreements reached pursuant to the Webcaster Settlement Act
of 2009. On September 18, 2015, the Register resolved those questions
in a Memorandum Opinion that she transmitted to the CRJs. To provide
the public with notice of the decision rendered by the Register, the
Memorandum Opinion is reproduced in its entirety below.
Dated: September 22, 2015.
Maria A. Pallante,
Register of Copyrights.
Before the U.S. Copyright Office, Library of Congress, Washington, DC
20559
In the Matter of: DETERMINATION OF ROYALTY RATES AND TERMS FOR
EPHEMERAL RECORDING AND WEBCASTING DIGITAL PERFORMANCE OF SOUND
RECORDINGS (Web IV)
Docket No. 14-CRB-0001-WR(2016-2020) (Web IV)
MEMORANDUM OPINION ON NOVEL MATERIAL QUESTIONS OF LAW
Section 114(f)(5)(C) of the Copyright Act bars the Copyright
Royalty Judges (``CRJs'' or ``Judges'') from taking into consideration
in ratesetting proceedings the provisions of agreements entered into
under the Webcaster Settlement Act of 2009, which allowed the parties
to negotiate alternative rates and terms from those established by the
CRJs. Questions have arisen in the pending proceeding to set royalty
rates and terms for webcasters' digital performance of sound recordings
and associated ephemeral reproductions about the proper interpretation
of this provision. The CRJs determined that these were novel material
questions of substantive law and, as required under section
802(f)(1)(B) of the Copyright Act, referred them to the Register of
Copyrights for resolution. The Register's determination follows.
I. Background
The instant proceeding will establish royalty rates and terms for
webcasters' digital performance of sound recordings and the making of
ephemeral recordings under the statutory licenses set forth in sections
112(e) and 114(f)(2) of the Copyright Act for the period beginning
January 1, 2016 and ending on December 31, 2020. Such rates and terms
are to be set under the ``willing buyer/willing seller standard,''
meaning that the rates and terms should 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.'' \1\
Royalties for the use of sound recordings under these statutory
licenses are collected from webcasters by the receiving agent
SoundExchange, Inc. (``SoundExchange''), which then distributes them to
sound recording copyright owners.\2\
---------------------------------------------------------------------------
\1\ 17 U.S.C. Sec. 114(f)(2)(B).
\2\ 17 U.S.C. Sec. 114(f)(2)(A), (g)(1); 37 CFR Sec. 380.2.
---------------------------------------------------------------------------
The rates and terms established in the current proceeding will
replace existing royalty rates and terms applicable to webcasters that
were agreed to and implemented under the Webcaster Settlement Act of
2009 (``2009 WSA'').\3\ The 2009 WSA is the third webcaster settlement
act (``WSA'') passed by Congress, following the Webcaster Settlement
Act of 2008 \4\ (``2008 WSA'') and the Small Webcaster Settlement Act
of 2002 \5\ (``2002 SWSA'').
---------------------------------------------------------------------------
\3\ Pub. L. 111-36, 123 Stat. 1926.
\4\ Pub. L. 110-435, 122 Stat. 4974.
\5\ Pub. L. 107-321, 116 Stat. 2780.
---------------------------------------------------------------------------
The 2002 SWSA was enacted to address a group of small webcasters'
professed inability to pay the fees established by the Librarian of
Congress (``Librarian'') under the Copyright Arbitration Royalty Panel
system, the predecessor to the current CRJ process.\6\ The 2002 SWSA
provided authority, during a limited window of time, for SoundExchange
and small webcasters to negotiate and enter into alternative agreements
to replace the rates set by the Librarian.\7\ The 2008 WSA provided the
same authority as under the 2002 SWSA, but with regard to webcasters of
all sizes, and in relation to a 2007 rate determination by the CRJs
under the revised ratesetting system adopted by Congress in 2004.\8\
The 2007 determination was also perceived by webcasters as establishing
unduly high rates.\9\ The 2009 WSA extended the window of time during
which the parties were authorized to reach settlements under the 2008
WSA.\10\
---------------------------------------------------------------------------
\6\ Pub. L. 107-321, Sec. 2, 116 Stat. 2780, 2780-81 (2002).
\7\ Id. Sec. 4, 116 Stat. at 2781-83.
\8\ See H.R. Rep. No. 111-139, at 2-3 (2009).
\9\ See 111 Cong. Rec. H10279 (daily ed. Sept. 27, 2008)
(statement of Rep. Berman); H.R. Rep. No. 111-139, at 2 (2009).
\10\ H.R. Rep. No. 111-139, at 3 (2009).
---------------------------------------------------------------------------
The 2002 and subsequent WSAs have been codified in section 114 of
the Copyright Act.\11\ In their current form, the statutory provisions
allow the parties to agree to alternative rates in lieu of those set by
the CRJs for uses through December 31, 2015, but also foreclose
consideration of the provisions of those agreements by the CRJs in
ratesetting proceedings. More specifically, section 114(f)(5)(C)
provides in pertinent part as follows:
---------------------------------------------------------------------------
\11\ 17 U.S.C. Sec. 114(f)(5).
---------------------------------------------------------------------------
(C) Neither subparagraph (A) [allowing the parties to enter into
alternative agreements] nor any provisions of any agreement entered
into pursuant to subparagraph (A), including any rate structure, fees,
terms, conditions, or notice and recordkeeping requirements set forth
therein, shall be admissible as evidence or otherwise taken into
account in any administrative, judicial, or other government proceeding
involving the setting or adjustment of the royalties payable for the
public performance or reproduction in ephemeral phonorecords or copies
of sound recordings, the determination of terms or conditions related
thereto, or the establishment of notice or recordkeeping requirements
by the Copyright Royalty Judges under paragraph (4) or section
112(e)(4). It is the intent of Congress that any royalty rates, rate
structure, definitions, terms, conditions, or notice and recordkeeping
requirements, included in such agreements shall be considered as a
compromise motivated by the unique business, economic and political
circumstances of webcasters, copyright owners, and performers rather
than as matters that would have been negotiated in the marketplace
between a willing buyer and a willing seller, or otherwise meet the
objectives set forth in section 801(b).\12\
---------------------------------------------------------------------------
\12\ 17 U.S.C. Sec. 114(f)(5)(C).
---------------------------------------------------------------------------
As permitted under the 2009 WSA, SoundExchange entered into
settlement agreements (each, a ``WSA agreement'') with various
webcasters to replace the rates set by the CRJs.\13\ Under the enabling
legislation, the rates and terms in each of these WSA agreements are to
be made available ``to any webcasters meeting the respective
eligibility conditions of the agreements as an alternative to the rates
and terms of any
[[Page 58302]]
determination by the [CRJs].''\14\ One such WSA agreement with
SoundExchange is known as the ``Pureplay Agreement,'' on which Pandora
Media, Inc. (``Pandora'') and other webcasters currently rely for
certain uses of sound recordings. Certain individual webcasters,
including Pandora and iHeartMedia, Inc. (``iHeartMedia''), have also
entered into directly negotiated license agreements with individual
record labels (``direct agreements''), rather than with
SoundExchange.\15\
---------------------------------------------------------------------------
\13\ See Notification of Agreements Under the Webcaster
Settlement Act of 2009, 74 FR 34,796, 34,797 (July 17, 2009)
(publishing agreement concerning commercial webcasters including
small pureplay webcasters); Notification of Agreements Under the
Webcaster Settlement Act of 2009, 74 FR 40,614, 40,614 (Aug. 12,
2009) (publishing agreements with Sirius XM Radio Inc., College
Broadcasters, Inc., Corporation for Public Broadcasting, and
Northwestern College).
\14\ Notification of Agreements Under the Webcaster Settlement
Act of 2009, 74 FR 34,796, 34,797 (July 17, 2009); Notification of
Agreements Under the Webcaster Settlement Act of 2009, 74 FR 40,614,
40,614 (Aug. 12, 2009); 17 U.S.C. 114(f)(5)(B) (``[T]he terms of
such [a WSA] agreement shall be available, as an option, to any
commercial webcaster or noncommercial webcaster meeting the
eligibility conditions of such agreement.'').
\15\ See iHeartMedia Initial Br. at 6; Pandora Initial Br. at 1-
2.
---------------------------------------------------------------------------
According to SoundExchange, direct agreements sought to be
introduced by the webcasting parties in the instant ratesetting
proceeding incorporate substantive provisions and/or are otherwise
influenced by the Pureplay Agreement entered into under the 2009
WSA.\16\ In a pretrial submission, SoundExchange argued that section
114(f)(5)(C) prevents the CRJs from considering the direct license
agreements submitted by the licensee services, and that they should be
excluded from the current proceeding.\17\
---------------------------------------------------------------------------
\16\ Order Referring Novel Question of Law and Setting Briefing
Schedule, Docket No. 14-CRB-0001-WR (2016-2020) (July 29, 2015)
(``Referral Order'') at 1-2.
\17\ Referral Order at 2 (citing SoundExchange Proposed
Conclusions of Law ] 48).
---------------------------------------------------------------------------
In response to these concerns, the CRJs issued an order inviting
briefing from the participants regarding five novel material questions
of substantive law and, on July 29, 2015, referred the following
questions to the Register pursuant to 17 U.S.C. 802(f)(1)(B):\18\
---------------------------------------------------------------------------
\18\ See Referral Order at 1. Section 802(f)(1)(B) provides that
``[i]n any case in which a novel material question of substantive
law concerning an interpretation of those provisions of this title
that are the subject of the proceeding is presented, the Copyright
Royalty Judges shall request a decision of the Register of
Copyrights, in writing, to resolve such novel question.'' 17 U.S.C.
802(f)(1)(B).
---------------------------------------------------------------------------
1. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges
from considering in its entirety a license agreement between a
webcaster and a record company if that agreement includes any terms
that are copied verbatim from a [2009] WSA settlement agreement?
2. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges
from considering in its entirety a license agreement between a
webcaster and a record company if that agreement includes any terms
that are substantively identical to terms of a [2009] WSA settlement
agreement?
3. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges
from considering in its entirety a license agreement between a
webcaster and a record company if that agreement includes terms that
the [Copyright Royalty] Judges conclude have been influenced by terms
of a [2009] WSA settlement agreement?
4. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges
from considering in its entirety a license agreement between a
webcaster and a record company if that agreement refers to a [2009] WSA
settlement agreement in provisions unrelated to the rate structure,
fees, terms, conditions, or notice and recordkeeping requirements set
forth therein?
5. If the answer to any of the previous questions is ``no,'' does
section 114(f)(5)(C) of the [Copyright] Act bar the Judges from
considering specific provisions of a license agreement between a
webcaster and a record company that are the same as, are copied from,
influenced by or refer to provisions of a [2009] WSA settlement
agreement?
II. Summary of the Parties' Arguments
All parties agree that section 114(f)(5)(C) bars the CRJs from
admitting into evidence or otherwise considering provisions of the
actual settlement agreements reached pursuant to the 2009 WSA.\19\ The
issue at hand instead concerns directly negotiated licensing agreements
that allegedly incorporate portions of, or the terms of which were
influenced by, the WSA agreements.
---------------------------------------------------------------------------
\19\ SoundExchange Initial Br. at 1; Pandora Initial Br. at 1;
iHeartMedia Initial Br. at 2-3; Broadcasters Initial Br. at 1.
---------------------------------------------------------------------------
SoundExchange argues that each of the referred questions should be
answered in the affirmative, and that the direct license agreements
should be excluded from consideration. On the other side of the issue,
the webcasting parties, namely Pandora, iHeartMedia, and the National
Association of Broadcasters and National Religious Broadcasters
Noncommercial Music License Committee (together, the ``Broadcasters,''
and all of the licensee parties collectively, the ``Webcasters''),
assert that the questions should be answered in the negative, and that
the CRJs should be able to take these agreements into consideration as
benchmarks or corroborative evidence in the current proceeding.\20\
---------------------------------------------------------------------------
\20\ Initial Brief for SoundExchange at 8, 12, 13, 15, 17, No.
14-CRB-0001-WR (2016-2020) (Web IV) (Aug. 7, 2015) (``SoundExchange
Initial Br.''); Initial Brief for Pandora at 25, No. 14-CRB-0001-WR
(2016-2020) (Web IV) (Aug. 7, 2015) (``Pandora Initial Br.); Initial
Brief for iHeartMedia at 17, No. 14-CRB-0001-WR (2016-2020) (Web IV)
(Aug. 7, 2015) (``iHeartMedia Initial Br.''); Initial Brief for the
Broadcasters at 17-18, No. 14-CRB-0001-WR (2016-2020) (Web IV) (Aug.
7, 2015) (``Broadcasters Initial Br.'').
---------------------------------------------------------------------------
A. SoundExchange's Position
SoundExchange reads the statutory bar broadly, arguing that if a
direct license agreement incorporates any terms of, is based upon, or
is influenced by, the provisions of a WSA agreement, then the CRJs
should refrain from considering that agreement pursuant to section
114(f)(5)(C).\21\ SoundExchange offers three primary arguments in
support of this contention.
---------------------------------------------------------------------------
\21\ SoundExchange Initial Br. at 1.
---------------------------------------------------------------------------
First, SoundExchange claims that section 114(f)(5)(C)'s inclusion
of the phrase ``otherwise taken into account'' demonstrates that the
statute's scope is broader than a mere bar against the admission of
evidence.\22\ SoundExchange maintains that the Webcasters'
interpretation is faulty because it ``reads entirely out of the statute
Congress's bar on the [CRJs] from `tak[ing] into account' the WSA
agreements.''\23\ SoundExchange urges that if Congress intended only to
preclude the admissibility of the WSA agreements, this language would
be unnecessary, and that interpreting a statute so as to render
language inoperative or superfluous is improper.\24\
---------------------------------------------------------------------------
\22\ Id. at 3. SoundExchange argues that this phrase means to
``take into consideration; allow for.'' Id. at 4.
\23\ Responsive Brief for SoundExchange at 1, No. 14-CRB-0001-WR
(2016-2020) (Web IV) (Aug. 14, 2015) (``SoundExchange Responsive
Br.'') (emphasis and alteration in original).
\24\ Id. at 3.
---------------------------------------------------------------------------
Second, SoundExchange argues that Congress enacted a ``very broad
rule of exclusion'' to prevent the terms of a WSA agreement from being
used against a settling party in subsequent proceedings, including in
cases where these terms appear in subsequently negotiated
agreements.\25\ SoundExchange contends that Congress was not solely
interested in the admissibility of the WSA agreements themselves, but
more broadly wanted to allow the parties ``to enter into `compromise'
agreements, `motivated by the unique business, economic and political
circumstances' then facing the settling parties, without fear that the
[[Page 58303]]
agreement or any of its terms and conditions would later be used in any
way to be indicative of terms to which willing buyers and willing
sellers would agree.''\26\ SoundExchange also notes that the
legislative history of the 2002 SWSA, which first introduced the
language in section 114(f)(5)(C), expressly states that to facilitate
settlement, the parties needed assurances that their agreements could
not later be used against them in future rate proceedings.\27\
---------------------------------------------------------------------------
\25\ SoundExchange Initial Br. at 4, 8.
\26\ Id. at 5 (quoting 17 U.S.C. 114(f)(5)(C)); see also
SoundExchange Responsive Br at 6.
\27\ SoundExchange Initial Br. at 6-7 (citing 2002 SWSA, Sec.
2(7), 116 Stat. at 2781).
---------------------------------------------------------------------------
Third, SoundExchange argues that any contrary interpretation of the
statute would be fundamentally unfair because it would permit a party
to introduce a licensing agreement that was directly influenced by a
WSA agreement, while preventing an opposing party from introducing the
WSA agreement itself to show the extent of its influence and to
demonstrate why the license agreement should not be given weight as
evidence of a market rate.\28\ SoundExchange argues that such use of
WSA agreements as both ``a sword and a shield'' is impermissible.\29\
---------------------------------------------------------------------------
\28\ Id. at 2, 6; see also SoundExchange Responsive Br. at 6
(For the CRJs to ``take account of the direct influence of the
shadow of the WSA agreement on the negotiation of the direct
license, the [CRJs] would be forced to consider the WSA agreement
and its terms[, y]et this necessary step of evaluating the probative
value of the direct license would run headlong into Sec.
114(f)(5)(C)'s bar.'').
\29\ SoundExchange Initial Br. at 6.
---------------------------------------------------------------------------
Regarding each of the referred questions specifically,
SoundExchange asserts that section 114(f)(5)(C) bars the CRJs from
considering terms copied verbatim from a direct license agreement
because ``[w]here a license agreement is simply a verbatim copy of a
WSA settlement agreement, considering the terms of the license
agreement is effectively considering all the terms of the WSA agreement
from which these terms were copied.''\30\ SoundExchange further asserts
that where only some terms of a direct agreement were copied verbatim
from a WSA agreement, the entire direct license agreement nonetheless
cannot be considered because as a ``fundamental rule of contract
interpretation . . . the terms of any agreement are presumed to be
dependent and interrelated,'' meaning the CRJs should not consider the
non-copied terms without also taking into account the copied terms.\31\
SoundExchange additionally argues that in every case where a webcaster
was eligible for the WSA agreement, it should be presumed that the
entire license agreement was directly affected by the WSA agreement
because ``the overarching shadow of the WSA agreement rates would have
affected the entire negotiation'' and, therefore, the statute should
``bar[] consideration of the agreement as a whole.''\32\
---------------------------------------------------------------------------
\30\ Id. at 8.
\31\ Id. at 8-12.
\32\ Id. at 8-12.
---------------------------------------------------------------------------
SoundExchange next argues that if a direct agreement's terms are
substantively identical to the terms of a WSA agreement, the entire
agreement should be barred for the same reasons as direct agreements
with terms copied verbatim from a WSA agreement; ``[o]therwise the
party seeking to submit the license agreement could simply slightly re-
word the relevant terms.''\33\ Recognizing that substantively identical
terms could have been arrived at independently of a WSA agreement,
SoundExchange proposes a test for the CRJs to employ: (i) if the
proffering party was eligible for and could opt into the WSA agreement,
that fact should be conclusive proof that the substantively identical
terms were derived directly from the WSA agreement; and (ii) if the
proffering party was not eligible to opt into the WSA agreement, that
party could attempt to show the independent derivation of its agreement
through evidence of the parties' negotiating history.\34\
---------------------------------------------------------------------------
\33\ Id. at 12; see also SoundExchange Responsive Br. at 4.
\34\ SoundExchange Initial Br. at 13.
---------------------------------------------------------------------------
Sound Exchange contends that if the terms of a license agreement
have been directly influenced by the terms of a WSA agreement, then the
entire license agreement should be barred because its consideration
``would take `into account' the terms of the WSA agreement, in
violation of'' the statute.\35\ Recognizing that ``the shadow of a WSA
settlement agreement [does not] influence[] all negotiations to an
equal extent,'' SoundExchange proposes that only agreements evidencing
``direct influence'' should be barred, and that there should be a
``very strong presumption'' of such influence where a webcaster was
eligible for and could opt into the WSA agreement and could fall back
on that option in the absence of the direct agreement.\36\
SoundExchange maintains that its interpretation would not bar the
consideration of all marketplace agreements that are in any way
influenced by WSA agreements.\37\ Rather, SoundExchange contends that
its interpretation is limited to those agreements that have been
``directly influenced'' by a WSA agreement.\38\ SoundExchange argues
that its test is ``straightforward'' and ``does not involve `arbitrary
line-drawing' or `second-guessing regarding parties' intent.'''\39\
---------------------------------------------------------------------------
\35\ Id.; see also SoundExchange Responsive Br at 2-3, 9-11.
\36\ SoundExchange Initial Br. at 14.
\37\ Id. at 2.
\38\ Id. at 2-3, 9-11.
\39\ Id. at 11.
---------------------------------------------------------------------------
SoundExchange next argues that a direct agreement should be barred
in its entirety if it refers to a WSA agreement, including to
provisions unrelated to rate structure, fees, terms, conditions, or
notice and recordkeeping requirements, because ``a reference to a WSA
agreement in any provision of a license is a reference to a WSA
agreement's `terms' and `conditions' [because] [t]here are no
provisions of a license that are `unrelated' to its `terms' and
`conditions.'''\40\ SoundExchange points to the ``broad language'' of
section 114(f)(5)(C) to claim that it should ``apply expansively,
effectively encompassing all provisions in a WSA agreement.''\41\ As
SoundExchange puts it, ``[i]t is difficult to imagine that a license
could make a reference to a term or condition of a WSA agreement
without incorporating that term or condition or otherwise being
directly influenced by that term or condition.''\42\
---------------------------------------------------------------------------
\40\ Id. at 15.
\41\ Id. at 16.
\42\ Id. at 17.
---------------------------------------------------------------------------
SoundExchange vigorously disputes the Webcasters' interpretation of
section 114(f)(5)(C), suggesting that under their view, a party could
skirt the statutory prohibition by using its option to join a WSA
agreement ``as leverage'' to negotiate and enter into a slightly
modified agreement, thereafter presenting this modified agreement to
the CRJs as ``competent marketplace evidence.'' \43\ Additionally,
addressing the Webcasters' argument that SoundExchange's interpretation
of section 114(f)(5)(C) conflicts with section 114(f)(2)(B)-- which
provides that the CRJs may consider certain voluntary license
agreements in establishing rates and terms under the willing buyer/
willing seller standard\44\--SoundExchange contends that the terms of
the WSA agreements are the result of compromise and, as such, are not
marketplace evidence, and do not become marketplace evidence by
[[Page 58304]]
being incorporated into new contracts.\45\ SoundExchange maintains that
even if there is tension between the statutory provisions as the
Webcasters claim, this still does not permit section 114(f)(5)(C)'s
plain text to be ignored.\46\
---------------------------------------------------------------------------
\43\ SoundExchange Responsive Br. at 4.
\44\ 17 U.S.C. 114(f)(2)(B) states, in relevant part:
``Copyright Royalty Judges shall establish rates and terms that most
clearly represent the rates and terms that would have been
negotiated in the marketplace between a willing buyer and a willing
seller. . . . In establishing such rates and terms, the Copyright
Royalty Judges may consider the rates and terms for comparable types
of digital audio transmission services and comparable circumstances
under voluntary license agreements. . . .''
\45\ SoundExchange Responsive Br. at 8-9.
\46\ Id.
---------------------------------------------------------------------------
B. The Webcasters' Position
The various Webcasters' arguments largely parallel one another.
Each of the Webcasters asserts that section 114(f)(5)(C) applies only
to the specific settlement agreements entered into with SoundExchange
pursuant to the 2009 WSA, and not to any subsequent direct license
agreements between a webcasting service and a sound recording
owner.\47\
---------------------------------------------------------------------------
\47\ Pandora Initial Br. at 1; iHeartMedia Initial Br. at 2-3;
Broadcasters Initial Br. at 1.
---------------------------------------------------------------------------
Looking to the text of the statute, the Webcasters urge that, in
contrast to the WSA agreements, the direct agreements were not entered
into with SoundExchange as contemplated by the statute.\48\ They point
out that they were not entered into during the time period for
settlements authorized by the statute, do not bind all copyright owners
as provided in the statute, were not published in the Federal Register
as required by the statute, and do not provide any immunities from
liability to the record companies as provided in the statute.\49\ The
Broadcasters and iHeartMedia add that, unlike the WSA agreements, the
direct agreements were not motivated by the encouragement of Congress
to reach an accommodation, and do not represent compromises motivated
by the unique business, economic, and political circumstances of
webcasters, copyright owners, or performers, as Congress specifically
intended in passing the WSAs.\50\
---------------------------------------------------------------------------
\48\ Broadcasters Initial Br. at 7; Pandora Initial Br. at 7;
iHeartMedia Initial Br. at 8.
\49\ Broadcasters Initial Br. at 7; Pandora Initial Br. at 7-9;
iHeartMedia Initial Br. at 8.
\50\ Broadcasters Initial Br. at 11; iHeartMedia Initial Br. at
10-11.
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The Webcasters reject SoundExchange's interpretation of the phrase
``taken into account'' as precluding the consideration of direct
license agreements that may contain terms identical to or influenced by
a WSA agreement. They argue that SoundExchange's interpretation would
require disregarding every benchmark agreement proposed by the parties,
as all license agreements are to some degree impacted by the prevailing
rates and terms set under the statute.\51\ Pandora contends that its
reading does not render the phrase meaningless as SoundExchange claims,
but rather offers a ``far more natural and plausible reading'' that
``simply prevents a party from end-running, or the [CRJs] from
indirectly circumventing, the statutory admissibility proscription by
invoking or relying upon the terms of a WSA agreement without that
agreement having actually been moved into evidence.'' \52\ iHeartMedia
suggests that the phrase merely means that the CRJs ``may not take
administrative or judicial notice'' of the WSA agreements.\53\
---------------------------------------------------------------------------
\51\ Pandora Initial Br. at 4, 10; iHeartMedia Responsive Br. at
8; see also Pandora Responsive Br. at 1.
\52\ Pandora Responsive Br. at 5.
\53\ iHeartMedia Responsive Br. at 2, 5-7.
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The Broadcasters add that if the preclusion in subparagraph (C) is
applied to direct agreements, ``it would force the [CRJs] to engage in
arbitrary line-drawing and second-guessing regarding parties' intent in
entering into license agreements in a manner nowhere contemplated or
discussed in the statutory prohibition.'' \54\ Additionally,
iHeartMedia asserts that a recent opinion from a federal district court
in the Southern District of New York considering section 114(i)--an
allegedly ``parallel provision'' which contains the same ``taken into
account'' language as section 114(f)(5)(C)--interpreted section 114(i)
as precluding ``only consideration of the [other] rates themselves''
and not ``consideration of how these rates influenced the market for
musical works.'' \55\
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\54\ Broadcasters Initial Br. at 9.
\55\ iHeartMedia Initial Br. at 16 (citing In re Pandora Media,
Inc., 6 F. Supp. 3d 317, 366-67 (S.D.N.Y. 2014)).
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Concerning the statute's legislative history, Pandora argues that
Congress passed the WSA in order to encourage SoundExchange to
negotiate ``less onerous rates'' than those announced by the CRJs, and
that the bar on subsequent CRJ consideration of the WSA agreements was
imposed specifically so that SoundExchange ``would not be construed as
a `willing seller''' in relation to those rates in future CRB
proceedings.\56\ Pandora claims that Congress did not intend to limit
the CRJs' ability to consider subsequent marketplace agreements that
may be somehow derived from or influenced by a WSA agreement.\57\
iHeartMedia similarly asserts that in enacting the 2002 SWSA, Congress
indicated that ``it would be `in the public interest' to be `clear that
the agreement will not be admissible as evidence or otherwise taken
into account' in future rate-setting proceedings.'' \58\ iHeartMedia
argues that this legislative history demonstrates that Congress was
only concerned with consideration of the WSA settlement agreements
themselves, and not subsequent direct license agreements.\59\
---------------------------------------------------------------------------
\56\ Pandora Initial Br. at 3-4, 14-15.
\57\ Id. at 4, 9, 15-16; see also iHeartMedia Initial Br. at 9
(``Congress in Sec. 114(f)(5)(C) did not preclude consideration of
provisions found outside of a Webcaster Settlement Agreement, even
where a provisions is, for example, copied from or influenced by a
provision in an agreement made pursuant to Sec. 114(f)(5)(A).'') .
\58\ iHeartMedia Initial Br. at 10 (quoting 2002 SWSA, Sec.
2(1)-(7), 116 Stat. at 2780-81).
\59\ Id.
---------------------------------------------------------------------------
The Webcasters also argue that SoundExchange's interpretation
conflicts with section 114(f)(2)(B), which provides that the CRJs may
consider voluntary license agreements to further the objective of
establishing rates and terms that most clearly represent those that
would have been negotiated in the marketplace between a willing buyer
and a willing seller.\60\ As Pandora puts it, that provision
``explicitly encourages the [CRJs] to consider marketplace agreements
between statutory services and rightsholders.'' \61\ Pandora argues
that section 114(f)(2)(B) ``does not qualify that invitation with
language excepting agreements that were `influenced by' the statutory
rates set forth in . . . WSA agreements, and any such gloss would
contravene the settled canon of statutory construction that requires
courts to give effect to all provisions of a statute as a `harmonious
whole.' '' \62\ In iHeartMedia's view, ``[a]greements involving the
same sellers, the same buyers, and the same statutory services not only
are the very agreements Congress authorized the [CRJs] to consider, but
also are critical to determining rates and terms that `most clearly'
represent what a willing buyer and willing seller in this market would
negotiate in the absence of the statutory license.'' \63\ iHeartMedia
further asserts that an interpretation that would preclude the CRJs
from considering the direct licenses would put section 114(f)(5)(C)
into ``irreconcilable conflict'' with section 114(f)(2)(B), ``because
every direct license agreement is necessarily negotiated against the
background--or in the `shadow'--of the statutory regime, which includes
the Webcaster Settlement Agreements.'' \64\
---------------------------------------------------------------------------
\60\ 17 U.S.C. Sec. 114(f)(2)(B) states, in relevant part:
``Copyright Royalty Judges shall establish rates and terms that most
clearly represent the rates and terms that would have been
negotiated in the marketplace between a willing buyer and a willing
seller. . . . In establishing such rates and terms, the Copyright
Royalty Judges may consider the rates and terms for comparable types
of digital audio transmission services and comparable circumstances
under voluntary license agreements . . . .''
\61\ Pandora Initial Br. at 12.
\62\ Id.
\63\ Id.
\64\ Id. at 13.
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[[Page 58305]]
Pandora additionally asserts that SoundExchange's position that the
statutory licenses and the WSA agreements cast a ``shadow'' upon the
direct license agreements ``conflates admissibility under Section
114(f)(5)(C) with the weight that should be given to the parties'
competing benchmark agreements.'' \65\ iHeartMedia agrees, stating
``[t]he need to remove the effect of the shadow [cast by the WSA
agreements on direct licenses] is part of the analysis under Sec.
114(f)(2)(B), and provides no basis to discard from the evidentiary
record--in whole or in part--any voluntarily negotiated direct license
between a statutory service and an individual record label.'' \66\
Pandora further adds that if, as SoundExchange posits, a party ever
attempted to evade section 114(f)(5)(C) by entering into a direct
license that copies a WSA agreement for the purpose of admitting it as
a benchmark, the CRJs ``would be more than capable of issuing rulings
assuring a lack of prejudice . . . and assigning such an agreement the
evidentiary weight it deserved.'' \67\
---------------------------------------------------------------------------
\65\ Pandora Responsive Br. at 10 (emphasis in original).
\66\ iHeartMedia Responsive Br. at 12.
\67\ Pandora Responsive Br. at 11.
---------------------------------------------------------------------------
Finally, the Broadcasters assert that the Register is not
authorized to render an opinion on the referred questions, because
section 802(f)(1)(B) only allows for the referral of ``a novel material
question of substantive law,'' and the admissibility of evidence is, in
the Broadcasters' view, a purely procedural question.\68\
---------------------------------------------------------------------------
\68\ Broadcasters Initial Br. at 17; Broadcasters Responsive Br.
at 6.
---------------------------------------------------------------------------
III. Register's Determination
Having considered the relevant statutory language and the input
from the parties, the Register determines that it is appropriate to
opine on the referred questions, and that the answer to each of the
referred questions is ``no.'' The Register finds that section
114(f)(5)(C) prohibits consideration of the provisions of the WSA
agreements by the CRJs but does not bar the CRJs from considering
directly negotiated license agreements that incorporate or otherwise
reflect provisions in a WSA agreement. The Register further concludes,
however, that the statutory bar does not preclude SoundExchange from
introducing evidence or argument concerning the existence of the WSA
agreements themselves, including their general influence or impact on
the negotiation of the direct agreements, provided that individual
provisions of the WSA are not introduced in the proceeding.
A. The Questions Were Properly Referred
Under 17 U.S.C. Sec. 802(f)(1)(B), the CRJs are required to refer
to the Register ``novel material question[s] of substantive law.'' \69\
The Broadcasters raise a threshold concern that the referred questions
were improperly referred by the CRJs because they ``relat[e] primarily
to the admissibility of evidence,'' and are therefore procedural in
nature.\70\
---------------------------------------------------------------------------
\69\ 17 U.S.C. Sec. 802(f)(1)(B).
\70\ Id.; see also Broadcasters Responsive Br. at 6 (comparing
section 802(f)(1)(B) with section 801(c), which states that ``[t]he
Copyright Royalty Judges may make any necessary procedural or
evidentiary rulings'').
---------------------------------------------------------------------------
The Register finds the questions to be substantive rather than
procedural, and that they were therefore properly referred by the CRJs.
The referred questions require the Register to interpret the scope of
section 114(f)(5)(C)'s prohibition, including what it means to take
various types of agreements and their provisions ``into account'' for
purposes of the ratesetting proceeding.\71\ This goes well beyond a
mere matter of procedure, as the interpretation of this statutory
provision speaks to the benchmark evidence that the CRJs may
appropriately consider, a core concern of the ratesetting process. The
referred questions are thus readily distinguishable from simple issues
of admissibility arising under the CRJs' evidence-related rules, such
as whether proffered evidence is properly authenticated or whether an
application of the hearsay rule is appropriate.\72\ The questions were
thus properly referred by the CRJs.
---------------------------------------------------------------------------
\71\ Referral Order at 1-3.
\72\ See 37 CFR 351.10(a).
---------------------------------------------------------------------------
B. Analysis of the Referred Questions
As noted above, the Register concludes that section 114(f)(5)(C)
prohibits consideration of provisions of settlement agreements entered
into pursuant to the 2009 WSA and does not bar the CRJs from
considering direct license agreements containing provisions that are
copied from, are substantively identical to, have been influenced by,
or refer to, the provisions of a WSA agreement. This result is
compelled not only by the language of section 114(f)(5)(C), but by the
legislative intent behind that statute as well.
1. Section 114(f)(5)(C) Does Not Bar Consideration of Direct License
Agreements
A reading of the entirety of section 114(f)(5) makes clear that the
material excluded under subparagraph (C) is limited to the provisions
of actual settlement agreements entered into pursuant to the WSA.
Subparagraph (C) bars consideration of ``subparagraph (A)'' and ``any
provisions of any agreement entered into pursuant to subparagraph
(A).'' \73\ Subparagraph (A), in turn, permits SoundExchange and
webcasters to enter into the WSA agreements.\74\ Subparagraph (B)
requires that any such agreement will ``be published in the Federal
Register'' and that ``the terms of such agreement shall be available,
as an option, to any commercial webcaster or noncommercial webcaster
meeting the eligibility conditions of such agreement.''\75\
Subparagraph (F) adds that ``[t]he authority to make settlements
pursuant to subparagraph (A) shall expire at 11:59 p.m. Eastern time on
the 30th day after the date of the enactment of the Webcaster
Settlement Act of 2009.'' \76\
---------------------------------------------------------------------------
\73\ Id. (emphasis added)
\74\ 17 U.S.C. 114(f)(5)(A). Note, subparagraph (A) refers to
the ``receiving agent,'' which is identified as SoundExchange by 37
CFR 261.2 and 261.4(b).
\75\ 17 U.S.C. 114(f)(5)(B).
\76\ 17 U.S.C. 114(f)(5)(F).
---------------------------------------------------------------------------
Accordingly, the ``provisions of . . . agreement[s]'' barred under
section 114(f)(5)(C) must be contained within agreements: (i) between
SoundExchange and webcasters; (ii) that are binding on all copyright
owners; (iii) that are published in the Federal Register; (iv) that are
available as an option to any eligible webcasters; and (v) that were
entered into on or before July 30, 2009.\77\ Based only on the
requirement to publish in the Federal Register, the only agreements
meeting these criteria are the WSA agreements themselves. A direct
license agreement's provisions cannot be the subject of the statute's
prohibition because the direct agreement containing them cannot satisfy
these criteria--such a direct agreement was not ``entered into pursuant
to subparagraph (A).'' This is true regardless of whether the direct
license's provisions are copied from or influenced by a WSA agreement's
provisions.
---------------------------------------------------------------------------
\77\ See 17 U.S.C. 114(f)(5). The 2009 WSA was enacted on June
30, 2009. Webcaster Settlement Act of 2009, Pub. L. 111-36, 123
Stat. 1926 (2009). Thirty days thereafter was July 30, 2009.
---------------------------------------------------------------------------
Additionally, section 114(f)(5)(C) includes an explicit statement
of Congress's intent concerning the evidentiary bar:
It is the intent of Congress that any royalty rates, rate
structure, definitions, terms, conditions, or notice and recordkeeping
requirements, included in such agreements shall be considered as a
compromise motivated by the
[[Page 58306]]
unique business, economic and political circumstances of webcasters,
copyright owners, and performers rather than as matters that would have
been negotiated in the marketplace between a willing buyer and a
willing seller, or otherwise meet the objectives set forth in section
801(b).\78\
---------------------------------------------------------------------------
\78\ 17 U.S.C. 114(f)(5)(C) (emphasis added).
---------------------------------------------------------------------------
The reference to ``such agreements'' subparagraph (C) clearly
refers to the WSA agreements Congress was authorizing under
subparagraph (A). The provisions that are barred from consideration are
thus those ``included'' in WSA agreements--not other agreements.
This interpretation is confirmed by relevant legislative history as
well. When Congress enacted the 2002 SWSA, which first contained this
statutory language, it explained that it intended to make ``clear that
the agreement will not be admissible as evidence or otherwise taken
into account.'' \79\ In referencing ``the agreement,'' Congress was
clearly referring to a specific agreement--namely, the alternative
agreement with SoundExchange it was authorizing under that
legislation.\80\ There was no suggestion that Congress was referencing
other agreements as well.
---------------------------------------------------------------------------
\79\ Small Webcaster Settlement Act of 2002, Pub. L. 107-321,
Sec. 2(7), 116 Stat. at 2781 (2002) (emphasis added).
\80\ See id.
---------------------------------------------------------------------------
The Register further observes that section 114(f)(5)(C) is
addressed to individual provisions contained in the WSA agreements,
rather than the agreements as a whole. Section 114(f)(5)(C) provides
that no ``provisions of any agreement entered into pursuant to
subparagraph (A), including any rate structure, fees, terms,
conditions, or notice and recordkeeping requirements set forth
therein,'' shall be taken into consideration.\81\ It is apparent from
both this language enumerating specific examples of rates and terms,
and the language setting forth Congress' intent quoted above, that
Congress meant to exclude from consideration in future proceedings the
particular rates and terms ``included'' in a WSA agreement--rather than
the existence or fact of the agreement itself. Had Congress intended to
bar any consideration of the WSA agreements whatsoever, it could have
easily have said so. But it did not. Instead, Congress made clear it
was referring to the individual ``provisions of''--i.e., the rates and
terms contained in--the WSA agreements.
---------------------------------------------------------------------------
\81\ 17 U.S.C. 114(f)(5)(C).
---------------------------------------------------------------------------
Section 114(f)(5)(C) also provides that ``subparagraph (A)'' itself
shall not be admissible as evidence or otherwise taken into
account.\82\ Based on a plain reading of the statute, the Register
determines that this simply means that the language of subparagraph (A)
cannot--either in whole or in part--be introduced into evidence or
otherwise considered in a CRJ proceeding. Accordingly, the reference to
subparagraph (A) in section 114(f)(5)(C) does not preclude
consideration of the existence or effects of the WSAs entered into as a
result of subparagraph (A) so long as the language of subparagraph (A)
is not introduced. Again, had Congress wished to articulate a broader
proscription, it could have done so. The Register will not read section
114(f)(5)(C) more broadly than it is written.
---------------------------------------------------------------------------
\82\ Id.
---------------------------------------------------------------------------
Contrary to SoundExchange's assertions, the phrase ``taken into
account'' in section 114(f)(5)(C) does not alter the Register's reading
of the statutory language. SoundExchange's interpretation--that
consideration of the terms of a direct license agreement that have been
copied from or directly influenced by the terms of a WSA agreement
would impermissibly ``take into account'' the terms of the WSA
agreement--is overreaching. The Register agrees with the Webcasters
that such a reading could effectively exclude all potentially probative
benchmark agreements from consideration because virtually every
voluntary agreement could be said to be is influenced to some extent by
the background statutory scheme--which includes the WSA agreements.\83\
Indeed, this is the nature of a compulsory licensing regime in general;
the existence of a statutory ``fallback'' can influence the direct
agreements that are entered into in its shadow. While the Register is
sympathetic to SoundExchange's argument that the direct agreements have
been shaped by the availability of the Pureplay Agreement as an
alternative option for licensees, the same would be true of direct
agreements entered into with CRJ-determined rates as a fallback.
---------------------------------------------------------------------------
\83\ See, e.g., Determination of Rates and Terms for Preexisting
Subscription Services and Satellite Digital Audio Radio Services, 78
FR 23054, 23065 n.32 (Apr. 17, 2013) (noting that although the CRJs
``question whether any agreements regarding sound recording rights
could be purely market-based given the current statutory
framework,'' they ``do not have the luxury of ignoring record
evidence of the contemporaneous results of arm's length negotiations
between the same buyers and sellers and rights involved in the
market for which the Judges are charged to determine a reasonable
rate.'').
---------------------------------------------------------------------------
The far more plausible reading of the ``otherwise take into
account'' language, which the Register determines is what Congress
intended, is simply that the CRJs are not only barred from admitting
WSA agreement terms into evidence, but that they also cannot consider
the provisions of WSA agreements even if not offered as evidence. For
example, the broader ``taken into account'' language would prohibit the
CRJs from taking notice of provisions of the WSA agreements that have
been published in the Federal Register, even if not introduced into
evidence.\84\ Thus the phrase is not superfluous, as SoundExchange
suggests.
---------------------------------------------------------------------------
\84\ See 5 U.S.C. 556(e) (acknowledging that ``an agency
decision [can] rest[] on official notice of a material fact not
appearing in the evidence in the record''); 17 U.S.C.
803(b)(6)(C)(xi) (noting that ``[n]o evidence, including exhibits,
may be submitted in the written direct statement or written rebuttal
statement of a participant without a sponsoring witness, except
where the Copyright Royalty Judges have taken official notice'')
(emphasis added).
---------------------------------------------------------------------------
To interpret section 114(f)(5)(C) as preventing the CRJs from
taking direct license agreements into consideration would seemingly
undermine Congress' directive in section 114(f)(2)(B), which encourages
the CRJs to ``consider the rates and terms for comparable types of
digital audio transmission services and comparable circumstances under
voluntary license agreements.'' \85\ Direct agreements between sound
recording owners and webcasters for uses covered by the section 112 and
114 licenses would appear to be very the type of evidence that section
114(f)(2)(B) Congress had in mind. Had Congress intended the
exclusionary rule to extend to directly negotiated agreements as
SoundExchange suggests, it presumably would also have acted to
reconcile section 114(f)(5)(C) with section 114(f)(2)(B).
---------------------------------------------------------------------------
\85\ See 17 U.S.C. 114(f)(2)(B). The Register notes that this
section does not restrict this consideration to only those
agreements that do not contain terms that are copied verbatim from,
are substantively identical to, have been influenced by, or refer to
terms of a WSA settlement agreement.
---------------------------------------------------------------------------
Finally, the Register agrees with the Webcasters that as a
practical matter, it could be very difficult to draw lines between
negotiated agreements that were ``directly influenced'' by WSA
agreements and those that were not. SoundExchange's suggested rule
would require the CRJs to sort admissible from inadmissible agreements
based on amorphous criteria, which would be a challenging task to say
the least.
2. Section 114(f)(5)(C) Does Not Preclude Consideration of the General
Effect of WSA Agreements on Direct License Agreements
Although the Register finds that the CRJs may take into
consideration direct
[[Page 58307]]
licenses that incorporate or otherwise reflect WSA agreement terms, it
is also the case that they are entitled to weigh the value of any such
evidence in light of the overall circumstances of the marketplace,
including any general impact of the WSA agreements.
As discussed above, in rate determinations, the CRJs are tasked
with replicating a ``hypothetical market'' where ``the webcasting
statutory license [does] not exist.'' \86\ Among the tools at the CRJs'
disposal to accomplish this task are ``the rates and terms for
comparable types of digital audio transmission services and comparable
circumstances under voluntary license agreements.'' \87\ As Webcasters
seem to acknowledge, when considering a voluntary agreement, the CRJs
may consider whether an agreement was made in the ``shadow'' of a
statutory rate or WSA agreement in evaluating its worth as a
benchmark.\88\ As the U.S. Court of Appeals for the D.C. Circuit has
stressed, ``[i]t is generally within the discretion of the Judges to
assess evidence of an agreement's comparability and to decide whether
to look to its rates and terms for guidance.'' \89\ This ``broad
discretion'' includes the ability to ``discount . . . benchmarks''
offered by the parties.\90\ Although section 114(f)(5)(C) may preclude
the consideration or comparison of individual rates and terms contained
in the WSA agreements, it does not prevent the CRJs from considering
the agreements at all.
---------------------------------------------------------------------------
\86\ Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd.,
796 F.3d 111, 131 (D.C. Cir. 2015) (internal alterations omitted).
\87\ 17 U.S.C. 114(f)(2)(B).
\88\ See Pandora Responsive Br. at 10-11; iHeartMedia Responsive
Br. at 12.
\89\ Intercollegiate Broad. Sys. v. Copyright Royalty Bd., 574
F.3d 748, 759 (D.C. Cir. 2009).
\90\ Music Choice v. Copyright Royalty Bd., 774 F.3d 1000, 1009
(D.C. Cir. 2014).
---------------------------------------------------------------------------
Section 114(f)(5)(C) bars the CRJs from considering the terms of
agreements negotiated under the 2009 WSA. Nowhere does the statute
suggest that the mere existence of such agreements, or their general
effect on the marketplace or particular negotiations, may not be
considered. As noted above, the statutory language is specific in
limiting the scope of the prohibition to the ``provisions of any [WSA]
agreement.'' \91\ Section 114(f)(5)(C) provides examples of the types
of provisions Congress had in mind: ``rate structure, fees, terms,
conditions, or notice and recordkeeping requirements.'' \92\ This list,
which appears twice in subparagraph (C),\93\ makes clear that the ban
applies only to a WSA agreement's specific terms, as embodied in
particular provisions.
---------------------------------------------------------------------------
\91\ See 17 U.S.C. 114(f)(5)(C) (emphasis added).
\92\ See id.
\93\ 17 U.S.C. 114(f)(5)(C).
---------------------------------------------------------------------------
A recent case from federal district court in the Southern District
of New York speaks to this issue.\94\ As part of a rate determination
for the performance of musical compositions by Pandora in a ratesetting
proceeding conducted under a federal consent decree, the court
discussed section 114(i) of the Copyright Act, which contains the same
``taken into account'' language as section 114(f)(5)(C).\95\ Section
114(i) provides relevant part:
\94\ See In re Pandora Media, Inc., 6 F. Supp. 3d 317 (S.D.N.Y.
2014).
\95\ See id. at 366-67.
---------------------------------------------------------------------------
License fees payable for the public performance of sound recordings
under section 106(6) shall not be taken into account in any
administrative, judicial, or other governmental proceeding to set or
adjust the royalties payable to copyright owners of musical works for
the public performance of their works.\96\
---------------------------------------------------------------------------
\96\ 17 U.S.C. 114(i).
During the course of the federal court proceeding, the licensing
organization, ASCAP, the licensor, proposed a variety of benchmarks for
the court to consider, including a series of licensing agreements
negotiated directly between copyright owners and licensees outside of
the consent decree process.\97\ At trial, the parties disputed the
extent to which the court could consider evidence relating to the rate
for the public performance of sound recordings (as opposed to musical
works).\98\ While the presiding judge noted that she could ``not take
the [sound recording rate] into account in determining the fair market
rate for a public performance license [for musical compositions],'' she
went on to state that ``one observation may be safely made'': \99\
---------------------------------------------------------------------------
\97\ In re Pandora Media, Inc., 6 F. Supp. 3d at 320.
\98\ Transcript of Trial at 729:18-733:1, In re Pandora Media,
Inc., 6 F. Supp. 3d 317 (S.D.N.Y. 2014) (Nos. 12 Civ. 8035, 41 Civ.
1395).
\99\ In re Pandora Media, Inc., 6 F. Supp. 3d at 366-67.
I don't understand that that testimony about motive in negotiations
and turmoil within ASCAP over these different rates [for sound
recordings] would be inadmissible pursuant to Section 114. Indeed, I
think it would be difficult to deal with the facts on the ground as
they exist and to set a rate that is reasonable in the context of the
facts . . . without knowing about that.\100\
---------------------------------------------------------------------------
\100\ Transcript of Trial at 731:1-7, In re Pandora Media, Inc.,
6 F. Supp. 3d 317 (S.D.N.Y. 2014) (Nos. 12 Civ. 8035, 41 Civ. 1395).
---------------------------------------------------------------------------
This commentary in the consent decree case further supports the
Register's determination that evidence concerning the general impact
and influence of the WSA agreements--and the statutory licensing regime
that gave rise to them--may appropriately be considered by the CRJs in
evaluating the probative value of the direct agreements.
September 18, 2015
Maria A. Pallante
Register of Copyrights and Director, United States Copyright Office.
[FR Doc. 2015-24591 Filed 9-25-15; 8:45 am]
BILLING CODE 1410-30-P
