INTERCOLLEGIATE BROADCASTING SYSTEM, INC., Appellant v. COPYRIGHT ROYALTY BOARD and Librarian of Congress, Appellees College Broadcasters, Inc. and SoundExchange, Inc., Intervenors.
No. 14-1068.
United States Court of Appeals, District of Columbia Circuit.
Argued Jan. 12, 2015. Decided Aug. 11, 2015.
796 F.3d 111
Sonia K. McNeil, Attorney, U.S. Department of Justice, argued the cause for appellees., With her on the brief was Mark R. Freeman, Attorney.
Matthew S. Hellman argued the cause for intervenor SoundExchange, Inc. With him on the brief were Michael B. DeSantis and Ishan K. Bhabha. David A. Handzo entered an appearance.
David D. Golden and Catherine R. Gellis were on the brief for intervenor College Broadcasters, Inc. in support of appellees.
Before: GARLAND, Chief Judge, and SRINIVASAN and WILKINS, Circuit Judges.
Opinion for the Court filed by Chief Judge GARLAND.
GARLAND, Chief Judge:
Intercollegiate Broadcasting System; Inc., appeals a determination by the Copyright Royalty Board setting royalty rates for webcasting. Three years ago, we vacated and remanded the Board‘s prior determination on this subject, concluding that its members had been appointed in violation of the Constitution‘s Appointments Clause. Thereafter, the Librarian of Congress appointed a new Board, which made the determination at issue here. Intercollegiate contends that the new Board‘s determination again violated the Appointments Clause because it was tainted by the previous Board‘s decision. The appellant also disputes the merits of the Board‘s determination. For the reasons set forth below, we reject both challenges.
I
Intercollegiate Broadcasting System (IBS) is a nonprofit association that represents college and high school radio stations, which historically broadcasted over the air. Many of its member stations are now involved in webcasting—the digital transmission of sound recordings over the Internet by, for example, Internet radio music services.
In 1995, Congress amended the Copyright Act to grant the owner of a sound recording copyright the exclusive right to publicly perform the copyrighted work by means of a digital audio transmission. See Digital Performance Right in Sound Recordings Act of 1995, sec. 2, § 106(6),
In the Copyright Royalty and Distribution Reform Act of 2004,
In January 2009, the Board initiated a proceeding to establish the rates and terms for the public performance of digital sound recordings for the 2011–2015 period. Most participants reached settlements during the voluntary negotiation period prescribed by the statute. See Determination of Royalty Rates for Digital Performance Right in Sound Recordings and Ephemeral Recordings, 79 Fed.Reg. 23,102, 23,102 (Apr. 25, 2014) [hereinafter 2014 Final Determination]; see also
Intercollegiate appealed the 2011 final determination, contending both that the Judges were appointed in violation of the Appointments Clause, and that the minimum fee was unlawful as applied to “small” and “very small” noncommercial webcasters. This court agreed with the former challenge and did not reach the latter. See Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd. (Intercollegiate II), 684 F.3d 1332 (D.C.Cir.2012). We determined that Congress had vested the Judges, who could not be removed except for cause, with sufficient authority and independence to qualify as “principal” officers of the United States. Id. at 1336-41. Under the Appointments Clause, however, principal officers must be appointed by the President and confirmed by the Senate. See
Thereafter, the Librarian appointed three new Copyright Royalty Judges to replace the previous Judges. The new Judges directed the parties to submit proposals regarding how to proceed on the remand. Unsurprisingly, the parties proposed nearly opposite ways forward. SoundExchange initially proposed that the Judges “reinstate the Final Determination in its entirety without undertaking further proceedings.” SoundExchange‘s Mot. Concerning Conduct of Proceedings on Remand 1 (J.A. 173). Intercollegiate said the Judges should reopen proceedings and permit additional written and oral testimony and briefing. See IBS‘s Proposal for Conduct of Remand 1 (J.A. 194).
After reviewing the parties’ proposals, the Board issued a preliminary Notice of Intention to Conduct a Paper Proceeding on Remand. The Notice contained several key points. First, the Board interpreted this court‘s remand as directing it to review the entire record and to issue a new determination on all issues, not just the $500 minimum fee that Intercollegiate had challenged on appeal. Notice of Intention to Conduct Paper Proceeding on Remand 4 (J.A. 221) [hereinafter Notice]. Second, because the court did not reach the merits of the dispute, the Board understood that it “could, after an appropriate process, issue a new final determination that reaches the same conclusions ... as the prior Final Determination.”
In sum, the Board concluded that “it would be neither fair, nor efficient, nor economical to proceed ... with additional submissions, discovery, and evidentiary hearings.” Notice at 78 (J.A. 224-25). Accordingly, as authorized by
After the end of the comment period, the Board announced that it would “proceed with [its] consideration de novo on the existing record” and would “accept no further submissions.” Order Following Notice of Intention to Conduct Paper Proceeding (J.A. 233). The Board issued its preliminary written determination on January 9, 2014. See 2014 Final Determination, 79 Fed.Reg. at 23,103. On April 25, 2014, the Board issued the final determination at issue on this appeal. See
Intercollegiate filed a timely appeal of the Board‘s final determination to this court, which has jurisdiction pursuant to
II
Intercollegiate‘s principal contention is that the new Board‘s determination violated the Appointments Clause because it was “still tainted by the Appointments Clause violation that originally led this Court to remand” the previous Board‘s determination. Intercollegiate Br. 15. We consider that constitutional challenge de novo. See Am. Bus. Ass‘n v. Rogoff, 649 F.3d 734, 737 (D.C.Cir.2011).
The Appointments Clause provides that the President “shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... Officers of the United States, ... but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”
Intercollegiate does not dispute that the three new Judges were properly appointed by the Librarian under the Appointments Clause. Rather, it contends that, “[b]y merely reviewing de novo their predecessors’ proceedings instead of conducting their own proceeding permitting firsthand credibility determinations and evidentiary rulings, the Judges did nothing more than enshrine the constitutional violations that this Court sought to cure.” Intercollegiate Br. 15. We disagree.
A
This court has twice before considered the validity of decisions made after the replacement of an improperly appointed official. Both cases support the validity of a subsequent determination when—as here—a properly appointed official has the power to conduct an independent evaluation of the merits and does so.
In Doolin Security Savings Bank, F.S.B. v. Office of Thrift Supervision, 139 F.3d 203 (D.C.Cir.1998), we again affirmed the ability of a properly appointed officer to uphold the decision of one who was not. 139 F.3d 203, 213-14 (D.C.Cir.1998). There, the agency persuaded us that a validly appointed agency director had “made a detached and considered judgment” in ratifying the previous director‘s decision. Id. Because the new director “effectively ratified the [previous director‘s] Notice of Charges ... at a time when he could have initiated the charges himself,” it was not even necessary to decide whether the previous director had “lawfully occupied the position.” Id. at 214.
These precedents make clear that the new Board‘s de novo determination that a $500 annual fee was proper did not violate the Appointments Clause. Intercollegiate seeks to avoid this result by overstating the importance of particular facts in each case.
Intercollegiate argues that Legi-Tech is distinguishable because it was based in part on the practical futility of remanding to the Commission for new proceedings because the Commission‘s voting membership had not changed. Under such circumstances, we said, “forcing the Commission to start at the beginning of the administrative process, given human nature, promises no more detached and ‘pure’ consideration of the merits.” Legi-Tech, 75 F.3d at 709. But Intercollegiate‘s argument proves too much. It implies that the Board‘s determination would be less vulnerable had the Librarian retained the three original Judges—who, we held, became “validly appointed inferior officers” once “the limitations on the Librarian‘s removal authority [were] nullified,” Intercollegiate II, 684 F.3d at 1341—rather than replaced them with new individuals. We doubt that Intercollegiate would regard those original Judges as more independent than their replacements. Indeed, because Legi-Tech held that ratification by a reconstituted Commission with the same voting members was sufficient to satisfy the Appointments Clause, it follows a fortiori that a de novo determination by a Copyright Royalty
Intercollegiate also seeks to distinguish both Legi-Tech and Doolin on the ground that they involved administrative enforcement actions—“an area of traditionally broad discretion“—rather than the exercise of judicial authority in an adversarial proceeding. Intercollegiate Br. 25-26 & n. 52. But neither Legi-Tech nor Doolin rested its holding on that ground.2 Moreover, this court subsequently suggested that the logic of Legi-Tech and Doolin would apply in the adjudication context as well: in a case vacating an order issued by a two-person National Labor Relations Board (NLRB) that we found lacked a statutory quorum, we suggested that ratification by a properly constituted Board would be appropriate. See Laurel Baye Healthcare of Lake Lanier, Inc. v. NLRB, 564 F.3d 469, 476 (D.C.Cir.2009) (citing Legi-Tech, 75 F.3d 704); cf. Fortuna Enters., LP v. NLRB, 789 F.3d 154, 158 (D.C.Cir.2015) (reviewing an NLRB decision that “reinstat[ed] and incorporat[ed] by reference” a prior decision issued by a two-person Board).3
2. Intercollegiate maintains that two Supreme Court cases stand for the proposition that the only way to remedy the exercise of judicial authority by invalidly appointed judges is for the new judges to “conduct a new hearing, not merely a de novo review of the record assembled by the constitutionally invalid tribunal.” Intercollegiate Br. 20. Neither case stands for that proposition.
In the first case Intercollegiate cites, Ryder v. United States, 515 U.S. 177 (1995), the Supreme Court held only that an Appointments Clause violation arising out of a decision rendered by an improperly constituted tribunal was not remedied through appellate review by a properly constituted body with a narrower scope of authority. 515 U.S. 177, 187-88 (1995). Ryder involved a member of the United States Coast Guard who was convicted by a court-martial. Two appellate courts—the Coast Guard Court of Military Review, followed by the United States Court of Military Appeals—affirmed his conviction. Ryder argued to the Court of Military Appeals that two members of the Coast Guard Court had been appointed in violation of the Appointments Clause. Id. at 179. Although the Court of Military Appeals agreed that the appointments violated the Clause, it nonetheless affirmed the intermediate court‘s ruling. Id. at 179-80.
The Supreme Court reversed, rejecting the government‘s argument that any defect in the Coast Guard Court “was in effect cured by the review available to petitioner in the Court of Military Appeals.” Id. at 186. Because the Coast Guard Court “had broader discretion to review claims of error, revise factual determinations, and revise sentences than” the Court of Military Appeals did, the Supreme Court concluded it “simply cannot be said ... that review by the properly constituted Court of Military Ap-
We agree with Intercollegiate insofar as it argues Ryder stands for the proposition that review by a properly appointed body can be insufficient to cure an Appointments Clause violation. But it does not stand for the proposition that de novo review is insufficient. To the contrary, the problem Ryder identified was that the reviewing court (the Court of Military Appeals) did not have authority to conduct a de novo review (as did the Coast Guard Court). Id. at 187. Nor does Ryder stand for the proposition that the only remedy for an Appointments Clause violation is a new evidentiary hearing regardless of the scope of the reviewing court‘s authority. Intercollegiate‘s only support for that claim is a single sentence at the end of the Court‘s opinion, which stated that Ryder was “entitled to a hearing before a properly appointed panel.” Id. at 188. Nothing in that sentence suggests that a new hearing would have been required if the reviewing court had possessed de novo authority. Nor does anything suggest that such a hearing would have to involve live witnesses or additional evidence.4
In the case before us, the original Copyright Royalty Board did not have “broader discretion,” Ryder, 515 U.S. at 187-88, than did the new Board. To the contrary, the new Board had full authority to make its own determination, including the discretion to do so after a completely new proceeding or a de novo review of the record. Although it chose the latter, it did so of its own accord. Thus, unlike in Ryder, here it can be said that “review by the properly constituted [Board] gave [Intercollegiate] all the possibility for relief that review by a properly constituted [original Board] would have given [it].” Id. at 187-88. Accordingly, Intercollegiate did indeed have “a hearing before a properly appointed panel,” id. at 188, of Copyright Royalty Judges.
The second case Intercollegiate cites, Wingo v. Wedding, 418 U.S. 461 (1974), did not involve the Appointments Clause at all and is even further afield. In Wingo, the Court held that a court‘s local rule authorizing magistrate judges to conduct evidentiary hearings in federal habeas corpus proceedings was invalid because it was precluded by the Federal Magistrates Act. Id. at 472. The Court further held that, because the Act required a district court judge to “personally hold evidentiary hearings,” the invalidity of the rule was not cured by a provision requiring the district court to review a recording of the evidentiary hearing de novo. Id. at 472-74.
Thus, Wingo does not, as Intercollegiate insists, stand for the general proposition that “de novo review of an existing record is an inadequate remedy where a validly appointed judge exceeds the scope of his legal authority.” Intercollegiate Br. 23. Rather, it stands for the proposition that such review is inadequate when a statute
B
Intercollegiate further maintains that, even if independent review of a prior record by a properly constituted Board may be sufficient to cure an Appointments Clause violation, the Board‘s determination on remand was “not independent of the earlier Board‘s reasoning, but rather was incurably tainted by it.” Intercollegiate Br. 24. The appellant‘s arguments about the Board‘s lack of independence are unpersuasive.
1. First, Intercollegiate makes a number of general arguments. It argues that the fact that the new Judges’ determination was “substantially identical” to that of the prior Judges “undermine[s] the pretense that the Judges’ decision was fully independent.” Reply Br. 10. Although Intercollegiate acknowledges that the new determination differs from the previous one on a number of points that it does not challenge on this appeal, see
Intercollegiate next seeks to infer a lack of independence from the way the Judges characterized their task. Noting that, in denying Intercollegiate‘s motion for rehearing, the Judges described their role as “‘pick[ing] up the process where th[e] earlier Judges left off,” Intercollegiate insists that they thus “implicitly validate[d] every decision that led to the point where the ‘earlier Judges left off.” Intercollegiate Br. 30 (emphasis omitted) (quoting Order Denying Mot. for Reh‘g 2 (J.A. 235)). But this takes the Judges’ statement badly out of context. The Judges made that remark in rejecting Intercollegiate‘s assertion that the new panel had “improperly delegated responsibility for holding hearings” to the prior panel. Order Denying Mot. for Reh‘g 2 (J.A. 235). As the Judges explained:
This assertion confuses “delegation” with “succession.” This is not a case where the Judges delegated the job of holding hearings to a subordinate administrative law judge. The current Judges succeeded to the positions of the earlier Judges and picked up the process where those earlier Judges left off.
The Judges had earlier declared, in their Notice of Intention to Conduct a Paper Proceeding, that they were “free to reach completely different conclusions in their new final determination” than the prior Judges reached. Notice at 5 (J.A. 222). After completion of the comment period that followed that notice, the Judges an-
2. We find equally unpersuasive Intercollegiate‘s miscellaneous attempts to identify specific indications of the previous Judges’ hidden influence on their successors.
Intercollegiate notes that, although the regulations permit the Board to conduct a papers-only hearing, here the Board “did not conduct a review of just the papers,” but instead also reviewed the record and transcripts from the prior proceeding. Intercollegiate Br. 31-32 (emphasis omitted). But if this is a problem of any kind, it is not a constitutional problem; nothing in the Appointments Clause instructs properly appointed officials to conduct proceedings in any particular way. Whether it constitutes a problem of administrative procedure is a question we address below. See infra Part III.
Intercollegiate attempts to transmute this procedural issue into a constitutional one by focusing on the relationship between the new Judges and their predecessors. In particular, Intercollegiate argues that “the new Judges refused to consider any argument or evidence not assembled by their unconstitutionally appointed predecessors.” Reply Br. 1 (emphasis added). But the phrase “assembled by” is misleading. As the Board emphasized in denying rehearing, “the parties to that hearing created the record,” based on the evidence that they themselves, including Intercollegiate, submitted. Order Denying Mot. for Reh‘g 2 (J.A. 235). There is no Appointments Clause problem in limiting Intercollegiate to the evidence that it decided, on its own volition, to submit to the previous Board.
Relatedly, Intercollegiate maintains that it has “never had an opportunity to oppose the fee before a panel of judges whose appointment does not offend the Constitution.” Reply Br. 2. But again, that is incorrect. All of its original arguments were presented, in paper form, to the new Board. And the Board gave Intercollegiate the further opportunity to argue that such a paper proceeding was insufficient: the Board expressly invited the parties to identify any reason why they should not proceed on the prior record. See Notice at 2, 9 (J.A. 219, 226). Intercollegiate did submit comments arguing for a new evidentiary hearing, but the new Board rejected those arguments, concluding that “[e]ach party has had ample opportunity to present its case.”
Intercollegiate also insists that the “oral testimony the Judges reviewed was taken by the original Board, subject to the original Judges’ evidentiary rulings, and is therefore tainted by the original Board‘s constitutional infirmity.” Intercollegiate Br. 32. But that, too, is incorrect. Intercollegiate maintains that, “if the new Judges disagree[d] with an evidentiary ruling excluding testimony, they ha[d] no way of reversing it.”
Intercollegiate further contends that the Board‘s determination lacked independence because it included quotations from a “colloquy between the earlier Judges and counsel” during oral argument in the prior proceeding. Intercollegiate Br. 31 (citing 2014 Final Determination, 79 Fed.Reg. at 23,121 n. 56). But that colloquy was in the written record, and nothing about the Appointments Clause barred the Board from relying on it—any more than it would bar it from relying on a colloquy between two counsel, neither of whom was appointed by anyone. In any event, the colloquy in question was on a topic not challenged on this appeal. See 79 Fed.Reg. at 23,121 n. 56 (discussing the adoption of the voluntary settlement for noncommercial educational webcasters).
Finally, Intercollegiate complains that the new Board was not independent because its failure to conduct live hearings deprived the Board of the ability to make its own assessments of witness credibility based on demeanor. To the extent this complaint implies that the Board relied on the prior Board‘s assessments of witness demeanor, that is unsupported. We do not see any instances in which the new or the prior Board made credibility determinations based on demeanor, and Intercollegiate‘s briefs do not describe any such instances. And to the extent this is a claim that the Board was required to hear oral testimony rather than rely on hearsay or a paper record, that is at most a statutory claim, which we address below. See infra Part III. As we said above, there is nothing in the Appointments Clause that requires live hearings.
3. In sum, we find nothing in the proceedings leading up to and including the new Board‘s determination that suggests a lack of independence from the previous, constitutionally defective determination.5
C
Intercollegiate maintains that even asking for evidence of ongoing taint from the previous proceeding amounts to improperly applying a harmless-error test. Because an Appointments Clause violation is a structural error that warrants reversal regardless of whether prejudice can be shown, see Landry v. FDIC, 204 F.3d 1125, 1131 (D.C.Cir.2000) (“There is certainly no rule that a party claiming constitutional error in the vesting authority must show a direct causal link between the error and the authority‘s adverse decision.“), Intercollegiate maintains that it is not required to show any taint. But Intercollegiate‘s invocation of this principle is misplaced. In our prior decision in this matter, we concluded that the appointment of the Judges constituted error under the Appointments Clause, and (consistent with Landry) we vacated their decision without any consideration of whether that error
Landry, repeatedly cited by Intercollegiate, only reinforces the point. The case involved an Appointments Clause challenge to the Administrative Law Judge (ALJ) who presided over the petitioner‘s disciplinary hearing. 204 F.3d at 1130. That challenge, we held, was not precluded simply because the properly appointed members of the agency had affirmed the ALJ‘s decision upon direct, de novo review. Id. at 1130-31. An important basis for our decision was the “catch-22” the case posed: “If the process of final de novo review could cleanse the [Appointments Clause] violation of its harmful impact, then all such arrangements would escape judicial review.” Id. Here, however, the unconstitutional arrangement did not escape judicial review. In our previous decision, we found an Appointments Clause violation, and then remedied it by both invalidating the offending statutory provision and vacating the prior determination—all without requiring any showing of prejudice.
Indeed, for all its protest, the overall gravamen of Intercollegiate‘s challenge is that “the Judges’ Determination is still tainted by the Appointments Clause violation that originally led this Court to remand” the previous determination. Intercollegiate Br. 15 (emphasis added); see Reply Br. 4. It thus implicitly acknowledges that, in the absence of taint, it would have no claim. Intercollegiate also acknowledges that not every possible kind of taint is fatal because, if it were, there would be no way to remedy an Appointments Clause violation. It is always possible, for example, that a subsequent judge will affirm a former judge‘s decision simply out of agency solidarity. But even Intercollegiate acknowledges that this kind of speculative taint would be insufficient to render the second judge‘s decision invalid. See Oral Arg. Recording at 40:04-42:32.6
As we said above, a court‘s holding that there has been an Appointments Clause violation does not mean that the violation cannot be remedied by a new, proper appointment. And once there has been such an appointment, the subsequent proceeding is constitutionally suspect only if there is sufficient continuing taint arising from the first. See Legi-Tech, 75 F.3d at 708 n. 5 (“[T]he issue is not whether Legi-Tech was prejudiced by the original [decision], which it undoubtedly was, but whether, given the FEC‘s remedial actions, there is sufficient remaining prejudice to warrant dismissal.“).
In sum, because the Judges’ determination was an independent, de novo decision by a properly appointed panel seized with the full authority of the prior Board, we reject Intercollegiate‘s challenge to its constitutionality.
III
In its reply brief, Intercollegiate argues that the Board‘s determination was also improper because it failed to give effect to this court‘s vacatur of the previ-
The precedent upon which Intercollegiate relies is Action on Smoking & Health v. Civil Aeronautics Board, 713 F.2d 795 (D.C.Cir.1983). There, an agency had repromulgated a previously vacated rule without reopening the rulemaking for additional notice and comment. We admonished the agency that the word “vacate” means, among other things, “to cancel or rescind” and “to make of no authority or validity.” Id. at 797. And we required the agency to initiate new rulemaking proceedings before re-promulgating the vacated rule. Id. at 798.
Intercollegiate reads too much into Action on Smoking. In that case, we required the agency to begin new notice-and-comment proceedings because the relevant statute, the Administrative Procedure Act (APA), required them for a new rulemaking. See id. at 798, 800 (citing
In this case, as Intercollegiate acknowledges, the Board is not governed by the notice-and-comment rulemaking requirements of the APA, but rather by the procedures set forth in the Copyright Act. See Reply Br. 8 n. 7. Consequently, at most our vacatur required the Board to conduct a remand proceeding that complied with those procedures, which it did.
First, neither the Copyright Act nor the Board‘s regulations prescribe any particular procedures on remand. See
Second, even assuming that the entirety of the procedural requirements for initial determinations applied, a record review would still pass muster. The statute gives the Board two ways to evaluate the parties’ evidence and establish appropriate rates. The Board may conduct a live, trial-like adversarial hearing, thereby permitting the cross-examination of witnesses and the introduction of trial exhibits. See
That determination was reasonable. As the Board explained, “[e]ach party had ample opportunity to present its case” in the initial proceedings, and “no party has provided any specific reason why it is necessary to reopen the record and take further evidence.”
Intercollegiate further maintains that the Board violated the statute by conducting a papers-only proceeding that in fact went beyond the usual papers by including transcripts of oral testimony taken by the earlier Board. The papers-only proceeding described in the statute consists of “written direct statement[s] ..., the response by any opposing participant, and one additional response by each such participant.”
In sum, because neither this court‘s vacatur order nor any statute bars the procedural approach the Board took on remand, we reject Intercollegiate‘s claim that the Board‘s approach contravened our order.
IV
Intercollegiate also challenges the merits of the Board‘s imposition of a $500 annual minimum fee for all noncommercial webcasters, including “small” and “very small” webcasters. We consider such a challenge under the judicial review standards of the APA. See
Intercollegiate argues that the $500 minimum fee was arbitrary, capricious, and contrary to law because the Judges: (A) failed to consider the statutorily prescribed factors; and (B) ignored the record evidence.
A
Intercollegiate contends that the Board failed to honor the statutory requirement that, in setting reasonable royalty rates, it “distinguish among the different types of eligible nonsubscription transmission services then in operation” and determine “a minimum fee for each such type of service.”
In fact, the Board did acknowledge the statutory requirement that it distinguish among different types of webcasters. See 2014 Final Determination, 79 Fed.Reg. at 23,122. And it did distinguish between two types—that is, between commercial and noncommercial webcasting services—“because there is a good economic foundation for maintaining this dichotomy.”
What the Board declined to do was adopt Intercollegiate‘s “proposal to make further distinctions among noncommercial webcasters based on the quantity of sound recordings they transmit under the statutory license (as measured by ATH [Aggregate Tuning Hours]).” 2014 Final Determination, 79 Fed.Reg. at 23,122. Intercollegiate‘s proposal was to create two new categories of noncommercial webcasters: “small” noncommercial webcasters (defined as noncommercial webcasters with usage up to 15,914 ATH per month) and “very small” noncommercial webcasters (defined as noncommercial webcasters with usage up to 6,365 ATH per month).
The statute does direct that, in distinguishing among different types of services, “such differences [are] to be based on criteria including, but not limited to, the quantity and nature of the use of sound recordings.”
Intercollegiate maintains that, far from relying on the willing-buyer/willing-seller factor, the Board effectively disregarded it. According to Intercollegiate, Congress “required the [Judges] to set a rate that webcasters would willingly agree to in the marketplace, and there is no substantial evidence that any webcaster, regardless of its financial means, would agree to a $500 annual fee.” Intercollegiate Br. 38-39 (emphasis omitted). Indeed, Intercollegiate insists that “the very fact that it objected to the universal $500 fee is evidence that some webcasters would not” agree to that fee.
This misstates the statutory directive in two ways. First, the Act requires the Board to impose a “minimum fee for each such type of service,”
As we discuss below, the Board did in fact base its decision on the willing-buyer/willing-seller factor. And it had substantial evidence to support its conclusion that the $500 minimum fee was appropriate.
B
In the proceedings below, Intercollegiate‘s primary argument in support of its proposal was that small and very small noncommercial webcasters are unable to pay the $500 minimum fee and hence would not willingly agree to it. As the Board noted, however, there was no record evidence to support that argument. See 2014 Final Determination, 79 Fed.Reg. at 23,123. Intercollegiate did not offer testimony from any member claiming to be adversely affected by the $500 fee, “in spite of the Judges’ invitation to do so.”
The only evidence that Intercollegiate points to now, or that it relied on before the Board, is “a reference by Captain Kass [its chief operating officer] to a survey that showed that IBS members had an average annual operating budget of $9,000.” 79 Fed.Reg. at 23,123; see Intercollegiate Br. 37. Intercollegiate complains that “[t]he Judges improperly chose not to credit this testimony—not because it was not probative or persuasive, but because they [improperly] considered it inadmissible.” Intercollegiate Br. 37. But that is wrong on two counts. First, the Board properly excluded Kass’ reference to the survey because Intercollegiate did not offer the survey itself into evidence, and without that evidence, the Board could not assess its validity. See 79 Fed.Reg. at 23,123 (citing
By contrast, the Board found affirmative evidence that noncommercial webcasters were indeed both “able and
The Board also found corroboration in the fact that “24 noncommercial webcasters filed comments with the Judges stating that they support[ed] the rates and terms of [that] Agreement, which they found reasonable and affordable.” 79 Fed.Reg. at 23,121; see
Finally, the Board also relied on testimony from SoundExchange‘s chief operating officer, who testified that its average annual administrative cost per station or channel was approximately $825. 79 Fed.Reg. at 23,124. Intercollegiate “offered no persuasive evidence to dispute this estimate.”
Intercollegiate claims that, in relying on the absence of evidence to dispute SoundExchange‘s evidence of average cost, the Board made the same mistake it made in the rate proceeding for 2006–2010, when it also set a $500 minimum fee on “the theory that [it] covered the costs of administering the statutory license.” Intercollegiate Br. 38 (citing Intercollegiate I, 574 F.3d at 767). In Intercollegiate I, this court vacated that fee because the Board‘s conclusion about SoundExchange‘s administrative costs was based largely on the fact that SoundExchange had proposed the fee, coupled with a “lack of evidence” that the fee did not reflect the organization‘s costs. 574 F.3d at 767. “[R]ational decisionmaking,” we said, “requires more than an absence of contrary evidence; it requires substantial evidence to support a decision.”
Evidence of average cost may not be perfect, but nothing in Intercollegiate I bars its use. It is true, as Intercollegiate notes, that there was evidence that “[t]he exact cost imposed by any particular licensee varies widely.” Reply Br. 18 (quoting Kessler Test. at 25 (J.A. 26)). But that is often the case with average cost. And as we discussed above, and made clear in Intercollegiate I itself, the statute does not require the Board to set royalty fees licensee by licensee.13 To the contrary, the statute instructs the Board to impose a “minimum fee for each such type of service.”
As we have noted, the Copyright Act directs the Board to “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” if the webcasting statutory license did not exist.
V
For the foregoing reasons, we affirm the determination of the Copyright Royalty Board.
So ordered.
1 2 3 4 5 6 7 8 9 10 11 12 13Notes
Order Denying Mot. for Reh‘g 4 (J.A. 237). The Board was not unreasonable in concluding that this “single anecdotal reference to ‘some’ webcasters with miniscule operating budgets [was] insufficient to demonstrate the existence of a distinct segment of the noninteractive webcasting market.”Captain Kass did not testify that any of those IBS members would fall into either of IBS‘s proposed categories of “small” and “very small” noncommercial webcasters (which are defined based on their ATH usage, not on the size of their operating budgets). Nor did IBS present any evidence as to how many IBS members had similarly small operating budgets. Nor did IBS disclose the basis for this statement.