Beethoven Com v. Librarian Cong

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 13, 2004 Decided January 14, 2005

No. 02-1244

Beethoven.Com LLC., et al.,

Petitioners

v.

Librarian of Congress,

Respondent

American Federation of Television and Radio Artists, et al.,

Intervenors

Consolidated with

02-1246, 02-1247, 02-1248, 02-1249

On Petitions for Review of an Order of the

United States Department of Justice

Bruce G. Joseph argued the cause for Participant Licensee

petitioners. With him on the briefs were Karyn K. Ablin, Dineen

P. Wasylik, and Elizabeth H. Rader.

Elizabeth H. Rader and David Kushner argued the cause for

Non-Participant petitioners/intervenors. With them on the briefs

was Mark J. Prak.

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Michele J. Woods argued the cause for Copyright

Owners/Performers petitioners. With her on the briefs were

Ronald A. Schechter, Patricia Polach, Arthur Levine, and Laura

P. Masurovsky. Cary H. Sherman and Robert A. Garrett entered

appearances.

Mark W. Pennak, Attorney, U.S. Department of Justice,

argued the cause for respondent. With him on the brief were

Peter D. Keisler, Assistant Attorney General, and William

Kanter, Deputy Director.

Before: SENTELLE, HENDERSON and RANDOLPH, Circuit

Judges.

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

webcasters 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

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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 Non-Participants

have no standing and seek to intervene only to impermissibly

raise new issues, we deny 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

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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

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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/webcasting_rates.pdf (“CARP

Report”).

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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

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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.

The 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

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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

webcasting, 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 Non-Participants petitioned

this Court for review of the Librarian’s decision. Non-

Participants 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. 373, 377 (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

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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.”

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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 (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, No. 96-1062,

2004 U.S. App. LEXIS 25474 at *21 (D.C. Cir. Dec. 10, 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, 2004 U.S. App. LEXIS 25474 at *21. We will

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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.

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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

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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

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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 benchmark 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

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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¢ royalty rate for sound

recording performances and a rate of 8.8 percent of performance

royalties for ephemeral recordings. Id. at 45,251-53, 45,255,

45,261-62. Given the Librarian’s reliance on the RIAA-Yahoo!

agreement, the 25 other benchmark agreements–which both the

CARP and Librarian found to be unreliable–do not resonate as

evidence so compelling as to require “a substantially different

award.” NAB, 146 F.3d at 918.

Moreover, each of the Librarian’s specific decisions

challenged by the Owners is adequately explained and based on

record evidence. First, the Librarian thoroughly explained his

decisions to select a “unitary” rate for transmissions of sound

recordings – which he based on the finding that the

RIAA-Yahoo! agreement’s differential rate structure did not

reflect a true distinction in value between internet-only webcasts

and radio retransmissions – and to set the sound performance

royalty rate at the mid-point between the “blended” rate

established for the first period (1.5 billion transmissions) and

that set for the second period. See Final Rule, 67 Fed. Reg. at

45,252-53, 45,255. Furthermore, in setting the rate at the

mid-point of this “zone of reasonableness,” the Librarian

explained that “it makes more sense to use both values and take

the average of the two” because, “[i]n this way, the final unitary

rate captures the actual value of the performance made in the

initial period . . . and the projected value of the transmissions at

the agreed upon rates for the remainder of the license period;

and it falls within the range of acknowledged values for these

transmissions.” Id. at 45,255.

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Second, the Librarian explained that the CARP’s decision

to give any weight to eight of the 25 other RIAA benchmark

agreements in setting the ephemeral recording rate was arbitrary.

See id. at 45,262. Because the CARP had “previously

repudiated” these agreements, the Librarian explained that,

absent “a clear explanation,” it was arbitrary for the CARP to

use these agreements (which contained ephemeral recording

rates “around” 10 percent of the performance royalties) to justify

its decision to round the RIAA-Yahoo! 8.8 percent ephemeral

recording rate up to 9 percent. Id. at 45,261-62. As the CARP

did not clearly explain its about-face, the Librarian set the

ephemeral recording rate at 8.8 percent. See id. at 45,262. This

decision was not arbitrary because the rate was derived from the

RIAA-Yahoo! agreement, and the CARP had previously

determined that the other benchmark agreements containing

higher rates were unreliable and did not reflect going market

rates.

Third, the Librarian’s “application of rounding” was not

arbitrary. As explained above, the Librarian declined to increase

the ephemeral recording rate to 9 percent, because the CARP did

so based on agreements that it had found unreliable for

establishing marketplace rates. See id. at 45,261-62; CARP

Report at 60 (“The Panel concludes that the 25 non-Yahoo!

license agreements . . . are unreliable benchmarks.”). The

Librarian also did not act in an arbitrary manner in setting the

sound performance royalty rate at 0.07¢, rather than at 0.074¢.

As noted above, the Librarian explained why he set the zone of

reasonableness for the sound recording performance rate where

he did, and he ultimately selected a rate that fell within that

identified zone. We can require no more. See NAB, 147 F.3d at

918, 929 (“Our job, rather, is to determine whether the royalty

awards are within a ‘zone of reasonableness.’”) (citation

omitted).

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3. Minimum fee

The Owners next challenge the Librarian’s selection of a

$500 minimum fee for eligible non-subscription services. They

contend that, in accepting the CARP’s determination, the

Librarian arbitrarily failed to consider the full range of minimum

fees established in the licenses RIAA negotiated in the

marketplace, or base the annual minimum fee on the

RIAA-Yahoo! agreement. Accordingly, the Owners ask the

court to modify the Librarian’s decision by increasing the annual

minimum fee to $5,000. Because the Librarian did not act in an

“arbitrary manner” in determining the fee, we have no power to

modify it. See 17 U.S.C. § 802(g).

After examining the marketplace agreements offered by

RIAA, the CARP set the minimum fee based on the “lowest

value” that RIAA had accepted in one of its prior agreements.

See Final Rule, 67 Fed. Reg. at 45,262-63. This choice was not

arbitrary, as the Librarian explained, because it comported with

the CARP’s understanding of the fee’s purpose: to cover the

license administrator’s administrative costs and the value of

access to all of the sound recordings “up to the cost of the

minimum fee.” Id. at 45,262. As the Librarian observed,

“RIAA would not have negotiated a minimum fee that failed to

cover at least its administrative costs and the value of access to

all the works up to the cost of the minimum fee.” Id. The

Librarian therefore concluded, as the CARP had itself

concluded, that $500 was the appropriate minimum fee because,

“[h]ad RIAA truly believed that the $500 minimum fee was

inadequate to cover at least the administrative costs and the

value of access, . . . it would have required a higher fee.” Id. at

45,263. Accordingly, because the Librarian “plausibly

explained” his decision to adopt the CARP’s $500 minimum fee,

and because that determination “bears a rational relationship to

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the record evidence,” see NAB, 146 F.3d at 924, he did not act

in an “arbitrary manner” in setting a $500 minimum license fee.

See 17 U.S.C. § 802(g).

4. Setting an effective date for the payment of royalty rates

Finally, the Owners raise two challenges to the effective

date the Librarian set for the royalty rates, which, in turn,

established the deadline for full payment of arrears. They

initially maintain that, by setting an effective date different from

the date of Federal Register publication, the Librarian violated

the explicit dictates of the Copyright Act. As they see it, 17

U.S.C. § 114(f)(4)(C), which provides that “[a]ny royalty

payments in arrears shall be made on or before the twentieth day

of the month next succeeding the month in which the royalty

fees are set”(emphasis added), must be read together with §

802(f), which states that “the Librarian shall . . . issue an order

setting the royalty fee” (emphasis added), to mean that the

Librarian “sets” the royalty rate on the date it is published by the

Federal Register. Thus, in their view, by setting September 1,

2002 as the effective date instead July 8, 2002–and,

consequently, requiring full payment of arrears on October 20,

2002 instead of August 20, 2002–the Librarian violated §

114(f)(4)(C)’s plain command. The Owners additionally

maintain that, even if the Librarian is authorized by statute to

delay the effective date of a royalty rate, his decision to do so

here was nevertheless arbitrary, because it is not supported by

any record evidence.

Before determining the merits of the Owners’ contentions,

we must first determine whether we have jurisdiction to do so.

By constitutional design, a federal court is authorized only to

adjudicate “actual, ongoing controversies,” Honig v. Doe, 484

U.S. 305, 317 (1988), and thus may not “give opinions upon

moot questions or abstract propositions, or . . . declare principles

19

or rules of law which cannot affect the matter in issue in the case

before it.” Mills v. Green, 159 U.S. 651, 653 (1895), quoted in

Church of Scientology of Cal. v. United States, 506 U.S. 9, 12

(1992). Accordingly, if an event occurs while a case is pending

on appeal that makes it impossible for the court to grant “any

effectual relief whatever” to a prevailing party, the appeal must

be dismissed. See Mills, 159 U.S. at 653; accord, e.g., McBryde

v. Comm. to Review, 264 F.3d 52, 55 (D.C. Cir. 2001) (“If

events outrun the controversy such that the court can grant no

meaningful relief, the case must be dismissed as moot.”). As the

Owners candidly admit, the Librarian’s deadline for making

payments in arrears, as well as the earlier one desired by the

Owners, has long since passed. Because even the most

favorable of rulings could not turn back the clock on either

deadline we can offer the Owners no meaningful relief. The

issue is thus moot and this Court is without authority to address

it.

While acknowledging that the issue is ostensibly moot, the

Owners maintain that the Court may nevertheless address it

because it falls within the “capable of repetition yet evading

review” exception to the mootness doctrine. See Southern

Pacific Terminal Co. v. ICC, 219 U.S. 498, 515 (1911). In order

to invoke this exception, however, the Owners must demonstrate

that “(1) the challenged action [is] in its duration too short to be

fully litigated prior to its cessation or expiration, and (2) there

[is] a reasonable expectation that the same complaining party

[will] be subjected to the same action again.” Weinstein v.

Bradford, 423 U.S. 147, 149 (1975) (per curiam). While the

Owners may satisfy the “evading review” element, they do not

satisfy the “capable of repetition” one.

The Supreme Court and this Court have held that “orders of

less than two years’ duration ordinarily evade review.”

Burlington N. R. Co. v. STB, 75 F.3d 685, 690 (D.C. Cir. 1996);

20

see Southern Pacific, 219 U.S. at 514-16. Because the

Librarian’s deadline for full payment of arrears followed

publication of the royalty rate in the Federal Register by only a

few months, it was a virtual certainty that the deadline would

pass before the Owners’ challenge to it could be fully litigated

and resolved by the court. Cf. Burlington, 75 F.3d at 690 (“The

agency action here would also evade review, because of the

virtual certainty that contracts giving rise to such action will

expire before the conclusion of judicial review of the action . .

. .”). The Owners therefore meet the first element of this

exception to the mootness doctrine.

They fail, however, to satisfy their burden under the second

half of the test. For an action to be “capable of repetition” there

must be “a reasonable expectation that the same complaining

party would be subjected to the same action again.” Weinstein,

423 U.S. at 149. Courts have “interpreted ‘same action’ to refer

to particular agency policies, regulations, guidelines, or

recurrent identical agency actions.” Public Utilities Comm’n of

Cal. v. FERC, 236 F.3d 708, 714-15 (D.C. Cir. 2001). In an

effort to satisfy this element of the exception, the Owners offer

that “royalty payments in arrears may be due for 2003-04,

because certain statutory licensees take the position that rates are

not yet in place. When rates are set, the Librarian might choose

once again to delay the payment deadline.” Owners’ Br. at 30

n.16. Because the Librarian must initiate royalty rate adjustment

proceedings at two-year intervals following January 2000, there

is at least a theoretical possibility that, in a proceeding in which

the Owners will almost certainly be involved, the Librarian will

again set an effective date for the royalty rate that is later than

the Federal Register publication date. See 17 U.S.C. §§

112(e)(7) & 114(f)(2)(C)(i)(II). A “theoretical possibility,”

however, is not sufficient to qualify as “capable of repetition.”

Murphy v. Hunt, 455 U.S. 478, 482 (1982); accord Public

Utilities Comm’n of Cal., 236 F.3d at 714. There must instead

21

be a “reasonable expectation” or “demonstrated probability” that

the action will recur. Murphy, 455 U.S. at 482; Public Utilities

Comm’n of Cal., 236 F.3d at 714. Given that the Librarian’s

choice of the challenged effective date was apparently motivated

by factors unique to this proceeding and unlikely to recur–i.e.,

the burden placed on licensees who must pay all royalties owed

since October 1998 and the need for the Copyright Office to

promulgate rules necessary for distributing royalty fees, see

Final Rule, 67 Fed. Reg. at 45,271–the Owners have failed to

demonstrate that there is any “reasonable expectation” that the

Librarian will alter payment dates again. Thus this issue is

moot. “[A]s a matter of course, [we] vacate[] agency orders in

cases that have become moot by the time of judicial review.”

American Family Life Assur. Co. v. FCC, 129 F.3d 625, 630

(D.C. Cir. 1997), citing A. L. Mechling Barge Lines, Inc. v.

United States, 368 U.S. 324, 329 (1961).

5. Broadcasters’ challenge to reliance on the RIAA-Yahoo!

agreement

The Broadcasters claim that the Librarian acted arbitrarily

by adopting the CARP’s use of the RIAA-Yahoo! agreement

because it was not comparable to market rates. The Librarian

must 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.” 17

U.S.C. § 114(f)(2)(B). “In establishing such rates and terms, the

[CARP] may consider the rates and terms for comparable types

of digital audio transmission services and comparable

circumstances under voluntary license agreements . . . .” 17

U.S.C. § 114(f)(2)(B)(ii) (emphasis added).

The Broadcasters argue the RIAA-Yahoo! agreement is not

comparable because it was negotiated in a nascent market

controlled by an allegedly monopolistic group that employed

22

market power to set fees it knew would be used as CARP

evidence. Specifically, the Broadcasters claim that there was no

direct evidence of a competitive market because the RIAA

Negotiating Committee represented over 90% of all copyrighted

sound recordings. Broadcasters point to the “cartel’s” inability

to conclude agreements with more than merely 26 of the

hundreds of broadcasters in the marketplace, and its inability to

reach agreement with any radio broadcaster, as evidence of its

monopolistic power. Broadcasters’ Br. at 21 (citing CARP

Report at 50).

The Broadcasters’ argument ultimately fails because it rests

simply on a challenge to the merits of the Librarian’s decision

to rely on the RIAA-Yahoo! agreement as competitive. Again,

we do not examine the correctness of the Librarian’s decision

regarding Yahoo!’s competitiveness or the weight the CARP

afforded witnesses testifying about the RIAA-Yahoo!

agreement, but question only whether the Librarian explained

his decision on comparability in “facially plausible” terms

according to record evidence. See NAB, 146 F.3d at 918. The

Librarian discussed this issue at some length. See Final Rule, 67

Fed. Reg. at 45,246-56.

The Librarian noted that the RIAA-Yahoo! agreement

merited significant weight because “(1) Yahoo! was a successful

and sophisticated business which, to date, had made well over

half of all DMCA-compliant performances; [and] (2) it had

comparable resources and bargaining power to those RIAA

brought to the table.” Id. at 45,248. The Librarian did not

merely parrot the CARP’s conclusions, but criticized the weight

it gave to the RIAA-Yahoo! agreement’s rate distinction

between webcasting and simulcasting. Id. He concluded that

“the different rates do not actually represent the parties’

understanding of the value of the performance right for these

types of transmissions,” but resulted from other interests of the

23

parties during negotiations. Id. at 45,248, 45,251. The Librarian

also cited record facts supporting a finding that the Yahoo!

agreement was statutorily comparable, noting RIAA’s assertions

that “many webcasters affirmatively stated that Yahoo! is a

competitor” and that “the number of the performances made by

Yahoo! on its Internet-only channels is roughly equivalent to the

number of performances made by the other webcasters in this

proceeding . . . .” Id. at 45,249. The Librarian’s consideration

of the record evidence and explanation of his reasoning are

certainly “facially plausible” and sufficient to withstand our

“exceptionally deferential” review. NAB, 146 F.3d at 918, 930.

6. Failure to include litigation costs in the valuation of the

RIAA-Yahoo! agreement

The Broadcasters next argue the Librarian acted in an

arbitrary manner by refusing to adjust the weight given to the

RIAA-Yahoo! agreement to account for savings in litigation

costs that Yahoo! achieved by negotiating its rate before the

CARP convened.

The Broadcasters assert that the Librarian refused to make

an adjustment to account for litigation cost savings while

acknowledging that it would be appropriate. They cite Yahoo!

testimony from the sealed record giving an estimate of costs the

company saved by avoiding the CARP proceeding, maintaining

that this savings put the effective rate of the RIAA-Yahoo!

agreement well below the “zone of reasonableness” determined

by the Librarian. This misstates the Librarian’s position, which

is that any adjustment from such savings is so uncertain that

even without the adjustment the rate was likely already within

the statutory zone of reasonableness. Specifically, the Librarian

found that although “Webcasters had argued for a downward

adjustment . . . to compensate for litigation cost savings” and “it

is reasonable to assume that the rates in the Yahoo! agreement

24

are slightly higher” because of the litigation cost savings, “there

is a problem in making an adjustment to the proposed rate where

the record contains no information quantifying the added value

of the factors that purportedly resulted in inflated rates.” Final

Rule, 67 Fed. Reg. at 45,255. He concluded that, “because the

Register is recommending a rate in the middle of the ‘zone of

reasonableness,’ it is safe to conclude that the recommended rate

falls into that zone of reasonableness even taking these factors

into account.” Id.

The key question is not whether the Librarian’s decision to

refrain from adjusting for litigation costs was correct, but

whether he based his decision not to adjust the rates on a

“facially plausible” explanation of the record evidence. See

NAB, 146 F.3d at 918. This question is a close one, because the

Librarian devoted only the above-quoted sentences to the issue

and did not discuss it at length. However, because of our

extremely deferential review we find that the Librarian’s

explanation at least provides a “facially plausible” account of

the reasons for his decision.

7. The use of different rates for Simulcasters and

Webcasters

Broadcasters finally argue that the Librarian acted in an

arbitrary manner by rejecting the portion of the CARP’s

decision that set different rates for Simulcasters and Webcasters.

Broadcasters point to record evidence showing that Yahoo! did

not believe it could pass on the rates it had negotiated to its

simulcasters. Final Rule, 67 Fed. Reg. at 45,254. They also

highlight that the CARP found “essentially undisputed

testimony that traditional over-the-air radio play has a

tremendous promotional impact on phonorecord sales.” CARP

Report at 74-75. On the basis of such record evidence, they

claim that the Librarian was bound to accept the CARP’s

25

recommendation to apply lower rates to Simulcasters than

Webcasters, and that to reject the CARP’s decision on this point

was arbitrary.

These contentions fail because the Librarian adequately

cites and explains record evidence to support his contrary

decision. The Librarian rejected the CARP’s reasoning,

pointing out that “the Yahoo! agreement established rates for

retransmissions of the same types of radio station signals as

those directly streamed by commercial broadcasters” such that

the “burden of proof” was put on the Broadcasters to

“distinguish between the direct transmission of their programs

over the Internet and the retransmission of the same

programming made by a third-party.” Id. at 45,254. Finding

that they were “unable to offer any compelling evidence on this

point,” the Librarian concluded that the “Panel was unable to

distinguish between commercial broadcasters and radio

retransmissions,” and therefore should have set the same rates

for the two. Id. The Librarian plausibly reasoned that the rates

should be the same, stating

an examination of the record clearly shows that both

[Simulcasters’ and Webcasters’] business models are

fundamentally comparable in at least one all-important

way: they simulcast AM/FM programs over the Internet to

anyone anywhere in the world who chooses to listen. Even

accepting the fact that [Simulcasters] say their fundamental

business is to provide programming to their local audiences,

the potential for reaching a wider audience cannot be

denied. Given that the record indicates that 70% of

Yahoo!’s radio retransmissions are to listeners within 150

miles of the originating radio station’s transmitter, Yahoo!’s

business with respect to radio retransmissions seems to be

very similar.

26

Id. Whether correct or not, the Librarian’s decision to counter

the CARP on this point is plausibly explained in terms of the

record before him.

Broadcasters nonetheless further argue that the Librarian

arbitrarily disregarded their contention that the RIAA-Yahoo!

rates were not representative of market prices because

Broadcasters “never would have agreed to the rates that Yahoo!

paid because their purposes for streaming differ from Yahoo!’s

purposes.” Id. In support of this argument, Broadcasters

similarly cite record testimony that “Yahoo! feared broadcasters

[using its services] would be unwilling to absorb the rates

Yahoo! negotiated for streaming AM/FM programming.” Id.

Contrary to the Broadcasters’ assertions, the Librarian did not

avoid grappling with this evidence, but plausibly explained that

it was not persuasive because, since Yahoo! concluded no

agreements with the Broadcasters on this point, “no

determination could be made as to whether the broadcasters

would have accepted the rate and paid it, or rejected it out of

hand.” Id. at 45,255. We do not examine the correctness of this

contention, but simply affirm that the Librarian adequately

explained his decision based on record evidence. He acted

within his prerogative to find the RIAA’s arguments more

persuasive than the Broadcasters’. Thus, the Librarian did not

act arbitrarily in accepting the Register’s decision, in opposition

to the CARP’s, to set the same rate for Simulcasters and

Webcasters.

III. Conclusion

For the reasons given above we deny intervention to the

Non-Participants, deny the petition for review, and vacate the

Librarian’s determination of the effective date for payment as

moot.