854 F.3d 713
D.C. Cir.2017Background
- SoundExchange (royalty-collecting agent for recording artists) sued Muzak for underpaying royalties under the DMCA statutory license, alleging Muzak improperly applied a grandfathered (pre-1998) rate to transmissions that were not eligible.
- The statutory question turns on the DMCA definition of a “preexisting subscription service” (PSS) — specifically whether the grandfather status applies to the business entity alone or is limited to the particular program offering(s) the entity provided before July 31, 1998.
- Muzak had provided DishCD to Dish Network subscribers in 1998 and later (after corporate acquisitions) transmitted similar music channels under the SonicTap brand to DirecTV subscribers; Muzak treated all transmissions as grandfather-eligible.
- SoundExchange challenged Muzak’s post-acquisition use of the grandfather rate for SonicTap transmissions, and the district court dismissed SoundExchange’s complaint.
- The D.C. Circuit reversed, holding the statute is best read to require a “double limitation”: both the business (entity) and the specific program offering (the service as offered in the relevant medium/pre-1998 form) must qualify for grandfathered rates.
- The court also explained the Copyright Register’s 2006 opinion favored narrow construction of the grandfather clause but was not controlling in this non-rate-proceeding; the court’s interpretation could differ if the issue arose in a Copyright Royalty Board proceeding where the Register’s Chevron-backed view might apply.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of “preexisting subscription service” / whether grandfather status attaches to the business entity or to the specific program offering | SoundExchange: grandfather protection limited to the particular program offerings an entity was providing before July 31, 1998 (program-level limitation) | Muzak: grandfather protection attaches to the business/entity; any transmissions by that entity that fit the generic transmission description qualify (entity-level) | Court: statute ambiguous but better read to require both entity and program offering to match pre-1998 operations (double limitation). |
| Role and weight of the Register of Copyrights’ 2006 opinion and proper forum for Register review | SoundExchange: legislative history and Register guidance support narrow grandfathering; such interpretive guidance is pertinent | Muzak: points to Register language as supportive of entity-based entitlement; argues district court’s approach consistent | Court: Register’s 2006 views support narrow reading but were issued in a rate-making context; Register’s views carry deference in Board proceedings but do not control this private suit; Court reached its own statutory interpretation (reversing dismissal). |
Key Cases Cited
- Middle S. Energy, Inc. v. FERC, 747 F.2d 763 (D.C. Cir. 1984) (textual interpretation principles)
- Cablevision Sys. Dev. Co. v. Motion Picture Ass’n of Am., 836 F.2d 599 (D.C. Cir. 1988) (deference to Register of Copyrights in appropriate proceedings)
- Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005) (agency interpretations can displace prior judicial constructions when reasonable)
- Patagonia Corp. v. Bd. of Governors, 517 F.2d 803 (9th Cir. 1975) (grandfather clauses construed narrowly when they derogate statutory purpose)
- Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 541 U.S. 246 (2004) (use ordinary meaning absent contrary indication)
- Sierra Club v. EPA, 358 F.3d 976 (D.C. Cir. 2004) (legislative history consulted when text ambiguous)
- Am. Bankers Ass’n v. Nat’l Credit Union Admin., 271 F.3d 262 (D.C. Cir. 2001) (use of legislative history to resolve statutory ambiguity)