Citations
- 394 F.3d 939
Full opinion text
Opinion for the Court filed by Circuit Judge SENTELLE.
SENTELLE, Circuit Judge.
Three groups of Petitioners seek review of a final rule issued by Respondent Librarian of Congress (“Librarian”), setting copyright license rates for webcasters. See Determination of Reasonable Rates and Terms for the Digital Performance of Sound Recordings and Ephemeral Recordings, 67 Fed. Reg. 45,240 (July 8, 2002) (“Final Rule”). The Librarian’s decision was based on proceedings before a Copyright Arbitration Royalty Panel (“CARP”). One group of Non-Participant Petitioners-Intervenors (“Non-Participants”) did not participate formally in the CARP proceedings, but challenges the rates set by the Librarian based on the CARP’s recommendations. The Non-Participants also argue that the CARP process itself was flawed because it excluded small webcast-ers and those who could not afford arbitration fees, violating their rights to due process and freedom of expression. The Non-Participants include Beethoven.com and three other entities who seek to join or intervene in this case, as well as one, Education Information Corporation (“EIC”) that only seeks- to intervene. A second group of Petitioners — copyright owners and performers that include the Recording Industry Association of America (“RIAA”) and other industry groups (jointly, “Owners”) — argue that the Librarian set rates arbitrarily low by not adequately considering past agreements he had on the record. The third group of Participant Licensee Petitioners includes (1) radio broadcasters who simulcast via radio and internet (“Simulcasters”) and (2) internet webcasters who broadcast solely over the internet (“Webcasters”) (jointly, “Broadcasters”). These Broadcasters, who were parties to the CARP proceedings, claim that the Librarian’s rates were arbitrary, contending that rates should be lowered because they were not based on real market factors. Respondent Librarian attacks the standing of the Non-Participants, while defending his rate determinations. Because we hold that the ■ NonParticipants have no standing and seek to intervene only to impermissibly raise new issues, we dismiss their petition for review and do not permit intervention. As to the issues properly before us, raised by the Owners and Broadcasters, we find no reversible error and therefore deny their petitions for review. The Owners’ challenge to the payment date set by the Librarian is moot.
I. Background
A. Statutory Background
Since the enactment of the Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39 (amending 17 U.S.C. §§ 106 & 114), copyright owners have had exclusive rights in performances of their works by digital audio transmission. The Digital Millennium Copyright Act of 1998 (“DMCA”), Pub. L. No. 105-304 (amending scattered sections of 17 U.S.C.), expanded copyright protection to non-subscription “webcasting” and created a statutory license in performances by webcast. 17 U.S.C. § 114(f)(2). The DMCA creates a six-month negotiation period for copyright owners and statutory licensees to privately determine rates and fees for these licenses. Id. § 114(f)(2)(A). If no agreement is reached at that time, the Librarian convenes a CARP to set 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.” Id. § 114(f)(2)(B). The CARP decision is to be based on “economic, competitive and programming information presented by the parties,” including
(i) whether use of the service may substitute for or may promote the sales of phonorecords or otherwise may interfere with or may enhance the sound recording copyright owner’s other streams of revenue from its sound recordings; and
(ii) the relative roles of the copyright owner and the transmitting entity in the copyrighted work and the service made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, and risk.
Id. The same standards are to be used to determine the statutory license rate for “ephemeral recordings,” the temporary copies necessary to facilitate the transmission of sound recordings during internet broadcasting. Id. § 112(e).
Any person entitled to a statutory license may become a party to the CARP rate-setting proceedings by submitting “relevant information and proposals” to the CARP. 17 U.S.C. § 802(c). Parties are entitled to discovery, presentation of evidence and witnesses, and a formal trial-type hearing before an arbitrator. 37 C.F.R. §§ 251.41, 251.43, 251.45. The CARP then acts on the basis of the written record and precedent from the Copyright Royalty Tribunal, other CARP decisions, and the Librarian. Costs of the arbitration are imposed on the parties to the CARP proceeding, with the CARP determining the allocation of costs among the parties. 17 U.S.C. § 802(c).
Within 90 days after receiving the CARP report, the Librarian must either adopt or reject its determination, adopting it unless the rates and terms are “arbitrary or contrary to the applicable provisions” of the statute. 17 U.S.C. § 802(f). If the Librarian rejects the report he may set a fee based on the record before the CARP. Id. “[A]ny aggrieved party who would be bound by the determination” may challenge the Librarian’s decision before this Court. Id. § 802(g). This Court then has jurisdiction to “modify or vacate a decision of the Librarian only if it finds, on the basis of the record before the Librarian, that the Librarian acted in an arbitrary manner.” Id.
B. The CARP and the Librarian’s Decision
The CARP proceeding at issue here was instituted to set rates and terms for statutory licenses during the period between October 28, 1998 and December 31, 2002, after the period for voluntary negotiation had expired. None of the Non-Participants took steps to join the CARP proceedings by filing Notices of Intent to Participate. One Non-Participant, EIC, wrote a letter to the CARP asking permission to present an amicus-type pleading because it had only limited interest in the results and could not afford to participate in the full proceedings. This request was denied. The Owners and Broadcasters did take part in the CARP arbitration. The CARP completed its proceedings on February 1, 2002 and presented its report to the Librarian on February 20, 2002. See Rate Setting for Digital Performance Right in Sound Recordings and Ephemeral Recordings, Docket No. 2000-9, available at http://www.copyright.gov/carp/webcast-ing_nates.pdf (“CARP Report”).
During the private negotiation period prior to the CARP arbitration, the RIAA formed a committee of five major record labels to develop and carry out a common strategy for engaging in collective negotiations with prospective licensees. This committee ultimately negotiated 26 agreements which RIAA submitted to the CARP as evidence of market valuation of the licenses. The CARP determined that the RIAA strategy was targeted at supra-competitive licensing fees to conform with its view of the “sweet spot” for the royalty rates. CARP Report at 48. RIAA then would only close deals that hit its “sweet spot” to create a favorable record before the CARP, generally with businesses driven by factors other than the value of the sound performance rights. Id. The CARP found that the rates in 25 of these agreements were higher than the majority of buyers was willing to pay and thus did not establish a reliable benchmark. Id. at 51. Nonetheless, it did accord them some weight by using them to justify rounding ephemeral recording rates from 8.8 percent of performance fees up to 9 percent. Id. at 104. To corroborate the rates in the '26 benchmark agreements, RIAA also submitted 115 record label licensing agreements between individual record companies and licensees. The CARP disregarded all of these agreements because they did not involve the same digital performance rights at issue in the proceeding. Id. at 71.
The one RIAA benchmark given “great weight” by the CARP was an agreement between RIAA and Yahoo!, Inc. (‘Yahoo!”), a company recognized to be a “major player” in making sound recording transmissions (the “RIAA-Yahoo! agreement”). CARP ' Report at 60-61. This weight was not without qualifications, however. The CARP found that due to Yahoo!’s dominant role in the industry it stood to bear a substantial portion of any arbitration costs and thus was willing to accept an inflated royalty rate to avoid these costs. Id. at 68. Yahoo! also testified that it anticipated significant savings in arbitration fees and opportunity costs by making an agreement with RIAA. Id. Even so, the rates negotiated by Yahoo! were considerably lower than those of the 25 other agreements offered by RIAA as benchmarks. Id. at 60. The terms of the RIAA-Yahoo! agreement provided that Yahoo! pay $1.25 million for the first 1.5 billion performances and after that 0.05$ per radio retransmission performance and 0.2$ per internet-only performance. Final Rule, 67 Fed. Reg. at 45,251.
The Broadcasters also submitted a proposed benchmark for determining the fair market value of the performance right based on a computation of the performance fees paid by over 800 radio stations for rights to musical works. Using this analysis, their expert concluded that 0.008$ per radio retransmission and 0.014$ per internet-only performance was appropriate. The CARP determined that actual marketplace agreements for webcasting were a better benchmark than a theoretical model. CARP Report at 43. Thus it relied entirely on the RIAA-Yahoo! agreement to set its rates and terms, while acknowledging that this agreement was inflated. Id. at 67-69.
Thé CARP determination was challenged by several parties. The Librarian rejected it in part on May 21, 2002. See Final Rule, 67 Fed. Reg. at 45,243, citing Order, Docket No. 2000-9 CARP DTRA 1 & 2 (May 21, 2002). The Librarian agreed with the CARP that the benchmark and record label agreements were generally unreliable, but found that the CARP’s minimal reliance on the 26 benchmark agreements to round ephemeral rates up was arbitrary. Final Rule, 67 Fed. Reg. at 45,262. Because he did not consider benchmarks from the 25 non-Yahoo! agreements, he lowered ephemeral royalty rates from the CARP’s recommendation of 9 percent of the royalty fees paid to 8.8 percent.. Id. The Librarian based his decision solely on the RIAA-Yahoo! agreement, refusing to reduce its value to account for any litigation cost savings Yahoo! might have realized by avoiding the CARP process. Id. at 45,255. The Librarian abandoned the dual-rate structure adopted by CARP to differentiate between radio retransmission and internet-only webcast-ing, adopting instead a rounded-down average of the two rates, 0.07$ per performance. Id. at 45,255. .The Librarian did accept the $500 minimum fee recommended by the CARP — the lowest such fee in all the benchmark submissions— reasoning that RIAA would not have agreed to it if it was not at least sufficient to meet costs. Id. at 45,263. Finally, although no parties had requested the change, the Librarian altered the terms of the CARP agreement to move the due date for royalty payments back two months to October 20, 2002. Id. at 45,271.
The Broadcasters, Owners, and NonParticipants petitioned this Court for review of the Librarian’s decision. NonParticipants also sought in the alternative to intervene in the case. These issues have been consolidated for review.
II. Analysis
A Status of the Non-Participants
1. Standing
As a preliminary question we must consider whether Non-Participants have standing before this Court. The Supreme Court has repeatedly observed that “[f]ederal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 1675, 128 L.Ed.2d 391 (1994) (citations omitted). The statutory grant of jurisdiction under which we review this order of the Librarian provides for appeals “by any aggrieved party who would be bound by the determination.” 17 U.S.C. § 802(g). Non-Participants claim that they should be allowed to petition for review because they are aggrieved by the order, and the word “party” should encompass them and all other entities both aggrieved and “bound by the determination.” The Librarian counters that “party” refers to a party to the CARP proceeding below.
The language of § 802(g) has not been interpreted by any federal court of appeals. This Court has, however, considered similar language in other contexts. We have consistently interpreted the Hobbs Act’s grant of jurisdiction, to “any party aggrieved” to be limited to parties to the agency proceedings giving rise to the order. See Simmons v. ICC, 716 F.2d 40, 42 (D.C.Cir.1983) (interpreting 28 U.S.C. § 2344). We have held that identical language in the Bank Holding Company Act similarly limits jurisdiction to parties to the agency proceedings. Jones v. Board of Governors, 79 F.3d 1168, 1171 (D.C.Cir.1996) (interpreting 12 U.S.C. § 1848). We note that the D.C. District Court has also held that the plain meaning of this language in the context of the Federal Election Campaign Act limits it to parties to the administrative complaint. Judicial Watch, Inc. v. FEC, 293 F.Supp.2d 41 (D.D.C.2003) (interpreting 2 U.S.C. § 437g(a)(8)(A)). It is thus consistent with precedent to similarly construe 17 U.S.C. § 802(g).
The plain language also mandates such a construction. Because Congress chose to grant review to “parties,” we have no reason to believe it meant “persons” or anything else other than parties to the proceeding. When it means to grant broader review, it says so, as in the Administrative Procedure Act, which accords judicial review to any “person ... aggrieved.” 5 U.S.C. § 702 (emphasis added); see Simmons, 716 F.2d at 43. We can find no instance where Congress has used “party” to simply mean “person.”
Furthermore, the Congress that first enacted this language in 1976 as 17 U.S.C. § 810 knew of our interpretation of “party aggrieved.” See, e.g., Gage v. U.S. Atomic Energy Comm’n, 479 F.2d 1214, 1219 (D.C.Cir.1973) (interpreting the Hobbs Act); Easton Utilities Comm’n v. Atomic Energy Comm’n, 424 F.2d 847, 853 (D.C.Cir.1970) (referring to interpretation of Hobbs Act); Outward Continental North Pac. Freight Conference v. Federal Maritime Comm’n, 385 F.2d 981, 982 n. 3 (D.C.Cir.1967) (Hobbs Act); see also First Nat. Bank of St. Charles v. Board of Governors of Federal Reserve System, 509 F.2d 1004, 1008 (8th Cir.1975) (Bank Holding Company Act). Assuming as “is always appropriate ... that our elected representatives, like other citizens, know the law,” we take Congress’ use of “any aggrieved party” to mean that judicial review is limited to parties to the proceeding below, as similar language has consistently been interpreted. Cannon v. Univ. of Chicago, 441 U.S. 677, 696-99, 99 S.Ct. 1946, 1957-59, 60 L.Ed.2d 560 (1979).
2. Intervention
Although Non-Participants do not have standing before this Court as petitioners, they have, in the alternative, requested leave to intervene. However, “[a]n intervening party may join issue only on a , matter that has been brought before the court by another party.” Edison Electric Institute v. EPA, 391 F.3d 1267, 1274 (D.C.Cir.2004). Non-Participants’ brief makes First Amendment and due process claims not addressed by any of the other petitioners properly before this Court. The bare assertion in Non-Participants’ reply brief that the other copyright licensee petitioners shared their First Amendment and due process concerns, and that the briefs “intentionally address different arguments to avoid repetitious submissions” is not sufficient to bring Non-Participants’ claims into the purview of this action. Non-Particip. Reply Br. at 4; see Edison Electric, 391 F.3d at 1274. We will not permit intervention for the purpose of raising these new issues.
B. Review of the Librarian’s Decision
We turn to the issues raised by parties properly before us. This Court has “jurisdiction to modify or vacate a decision of the Librarian only if it finds, on the basis of the record before the Librarian, that the Librarian acted in an arbitrary manner.” 17 U.S.C. § 802(g). This standard is “exceptionally deferential.” Recording Indus. Ass’n of Am. v. Librarian of Congress, 176 F.3d 528, 532 (D.C.Cir. 1999). We “will uphold a royalty award if the Librarian has offered a facially plausible explanation for it in terms of the record evidence.” National Ass’n of Broadcasters v. Librarian of Congress, 146 F.3d 907, 918 (D.C.Cir.1998) (“NAB”).
Understandably, the Owners challenge the Librarian’s ruling as setting rates too low, and the Broadcasters argue that the rates have been set too high. The Owners initially argue that the Librarian failed to adequately consider the 115 label agreements and 26 RIAA benchmark agreements in setting the royalty rates for sound recording performances and ephemeral recordings. They also criticize the Librarian’s choices of minimum fee and due date for payments in arrears. Broadcasters argue that the Librarian’s reliance on the RIAA-Yahoo! agreement was inappropriate, that he should have adjusted rates further downward because of litigation cost savings in that agreement, and that the rejection of the CARP’s different rates for Simulcasters and Webcasters was inappropriate. Under our deferential standard of review, we find no reversible error in the Librarian’s decision.
1. Failure to consider the RIAA’s proposed alternate benchmarks
The Owners argue that the Librarian acted arbitrarily by rejecting the 115 label agreements without sufficient explanation. In their view, these agreements “provide corroboration for RIAA’s benchmark analysis from rates reached in the actual marketplace, unconstrained by the statutory license.” Owners’ Br. at 23. Accordingly, the Owners maintain that, by failing to consider the label agreements, “the Librarian arbitrarily neglected a tremendous amount of economic and competitive information that would have permitted him to make a far more informed decision on rates for use of copyrighted sound recordings.” Id. This claim is without merit.
The CARP rejected these label agreements as useful benchmarks for two reasons. It first explained that, unlike the 26 RIAA benchmark agreements, all of which addressed the “precise rights at issue here,” the label agreements involved rights not subject to a statutory license. CARP Report at 71. The CARP additionally explained that, were it inclined to rely on these agreements, “the effect would likely be to undermine, not corroborate, RIAA’s proposals in that many of the agreements reflect rates below those which RIAA is proposing.” Id. The Librarian accepted these rationales, see Final Rule at 45,248 n. 20, and in so doing was not obligated to “fully recapitulat[e]” the CARP’s analysis. NAB, 146 F.3d at 926; see 17 U.S.C. § 802(f). The Owners nevertheless maintain that the Librarian should have looked harder at — and ultimately relied on — these label agreements.
Their challenge cannot succeed under the deferential standard of review applicable here. NAB, 146 F.3d at 924. The Owners purport to attack the sufficiency of the Librarian’s explanation for eschewing reliance on the label agreements. But at the bottom, their challenge seeks to undermine the substance of the CARP’s and Librarian’s determinations regarding the weight to ascribe to these agreements. As the NAB court explained, “it is emphatically not [the court’s] role to independently weigh the evidence .... ” 146 F.3d at 930. Even to the extent that the Owners argue that the Librarian set rates in an arbitrary manner by failing to place some greater emphasis on the label agreements, their contentions are unpersuasive.
Under the applicable “exceptionally deferential” standard of review, we conclude that there is nothing “compelling” in the label agreements, or in the CARP’s and Librarian’s treatment of them, that would allow the court to hold that the Librarian set the rates in an “arbitrary manner.” See NAB, 146 F.3d at 931. The Librarian’s decision to eschew reliance on the label agreements in favor of the RIAA-Yahoo! agreement seems perfectly sensible because the label agreements, unlike the RIAA-Yahoo! agreement, indisputably cover rights not subject to the statutory licenses involved in this proceeding. Furthermore, as the Librarian explained, the RIAA-Yahoo! agreement was “particularly reliable and probative” not only because it was an “actual marketplace agreement ] pertaining to the same rights for comparable services,” but also because it involved a successful and sophisticated market participant with resources and bargaining power comparable to RIAA’s own. Final Rule, 67 Fed. Reg. at 45,247-48.
At oral argument, the Owners asserted that the Librarian inaccurately described the content of the label agreements in a footnote, and, therefore, his estimation of the value of these agreements was necessarily arbitrary and cannot have been based on an in-depth analysis of the agreements. Final Rule, 67 Fed. Reg. at 45,248 n. 20. The details of the Librarian’s description are in the sealed record and redacted from the Federal Register to protect trade secrets, but are ultimately not significant in our determination. The description of the agreements was at worst harmless error, if error at all, as the agreements were never tendered for anything more than corroborative evidence of evidence upon which the Librarian chose not to place great reliance. Even if described properly, the agreements could have been no more than that — essentially a shadow of a shadow.
2. Owners’ challenges to the treatment of RIAA’s 26 benchmark agreements
The Owners’ claims concerning the Librarian’s treatment of the 26 RIAA-bench-mark agreements likewise fail. They maintain that the Librarian acted arbitrarily, and contrary to 17 U.S.C. §§ 112 and 114, by only relying on the RIAA-Yahoo! agreement and not the other 25 RIAA benchmark agreements. More specifically, they assert that the Librarian acted in an arbitrary manner by: (1) ignoring the weight the CARP gave the other 25 benchmark agreements by adopting a unitary rate instead of a dual rate structure; (2) rejecting the CARP’s reliance on the ephemeral recording rate contained in eight of the 25 other agreements to set an ephemeral recording rate of 9 percent; and (3) adjusting both the sound recording performance rate and ephemeral recording rate downward through the “application of rounding.” Owners’ Br. at 26. These claims all fail.
The Owners’ contentions, like the ones addressed above, are unpersuasive under the applicable standard of review. See NAB, 146 F.3d at 924, 930. In deploying this standard, the court “will set aside a royalty award only if [it] determine[s] that the evidence before the Librarian compels a substantially different award.” Id. at 918. Despite the Owners’ arguments to the contrary, the Librarian has offered a “facially plausible explanation ... in terms of the record evidence” for the royalty rates under review. Id. The Librarian thoroughly explained his decision to base the sound recording performance rate and ephemeral recording rate on the terms of the RIAA-Yahoo! agreement, as that agreement was “particularly reliable and probative” because it reflected actual marketplace rates. See Final Rule, 67 Fed. Reg. at 45,247-49. The Librarian further explained how, based on the terms of the RIAA-Yahoo! agreement, he arrived at a unitary 0.07