Summary
**SoundExchange, Inc. v. Copyright Royalty Bd., 904 F.3d 41 (D.C. Cir. 2018)** **Topics:** Copyright – statutory licenses for noninteractive webcasting; willing buyer/willing seller rate-setting standard; Chevron deference; effective competition in benchmark selection; rate differentiation between ad-based and subscription services; auditor qualification requirements; constitutional challenges under Copyright Clause and Due Process Clause. **Holding:** The D.C. Circuit affirmed the Copyright Royalty Board’s 2016–2020 rate determination for the webcasting statutory license. The Board reasonably adopted benchmark agreements containing “steered” rates, permissibly interpreted the “willing buyer/willing seller” standard to allow an effective-competition adjustment to SoundExchange’s proposed benchmark, adequately justified separate rates for ad-based and subscription-based services, and supported a new requirement that auditors be CPAs licensed in the jurisdiction of the verification. Constitutional challenges by pro se appellant Johnson were forfeited or lacked merit.
Topics
Practice areas
Questions Presented
- Whether the Board's adoption of the Pandora and iHeart benchmark agreements was arbitrary and capricious due to the statutory shadow and failure to account for nonmonetary terms.
- Whether the Board's adjustment of SoundExchange's proposed benchmark rate for subscription-based services to reflect an effective-competition standard was proper under the statute.
- Whether the Board's decision to set different rates for ad-based and subscription-based commercial webcasters was arbitrary and capricious.
- Whether the Board's revision of the auditor qualification requirement to require in-state CPA licensure was supported by the record.
- Whether the Board's determination violated George Johnson's constitutional rights under the Copyright Clause and Due Process Clause.
Holdings
- The Board reasonably exercised its discretion in selecting per-performance rates as the relevant metric for comparing benchmark agreements to the statutory rate, and in concluding that the statutory shadow did not meaningfully affect the benchmarks. The Board also adequately considered nonmonetary terms and reasonably declined to adjust benchmarks without record evidence.
- The Board's interpretation of § 114(f)(2)(B) as allowing it to consider effective competition is reasonable under Chevron, and the Board's application of a steering adjustment to SoundExchange's proposed benchmark was permissible.
- The Board adequately explained its decision based on record evidence showing a 'bimodal chasm' between listeners' willingness to pay, and the Board's analysis was consistent with its precedent regarding market segmentation.
- The Board's decision was supported by expert testimony from Professor Weil regarding the benefits of requiring CPAs to be licensed in the jurisdiction where they practice, and SoundExchange's argument about mobility laws was not preserved for review.
- The Board's extensive adversarial proceeding satisfied due process, and the Copyright Clause does not require Congress to grant absolute rights; the statutory license scheme is a permissible limitation on copyright holders' public performance rights.
Key quotations
“We review the Board's rate determinations under § 706 of the Administrative Procedure Act. The APA requires us to 'affirm the [Board's] decision unless it is 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.'”
“The statute speaks only of a 'willing buyer and a willing seller.'”
“For the foregoing reasons, we affirm the determination of the Copyright Royalty Board.”
“Our review of administratively determined rates is particularly deferential because of their highly technical nature.”
Factual background
Congress established a statutory copyright license for noninteractive webcasters, and the Copyright Royalty Board sets standard rates every five years. In the fourth proceeding, the Board set rates for 2016-2020, relying on benchmark agreements from Pandora and iHeartMedia that included 'steering' provisions allowing webcasters to reduce royalty rates in exchange for increased performances of certain record labels' music. The Board also adjusted SoundExchange's proposed benchmark from the interactive market to account for a perceived lack of effective competition. The resulting rates were $0.0017 per performance for ad-based services and $0.0022 per performance for subscription-based services.
Procedural history
The Copyright Royalty Board conducted its fourth ratesetting proceeding for webcasters, setting rates and terms for the statutory license for 2016-2020. After a six-week hearing, the Board issued a final determination. SoundExchange and Johnson moved for rehearing, which was denied. They appealed to the D.C. Circuit.