Bonneville Intl Corp v. Peters

Opinions of the United

2003 Decisions States Court of Appeals

for the Third Circuit

10-17-2003

Bonneville Intl Corp v. Peters

Precedential or Non-Precedential: Precedential

Docket No. 01-3720

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PRECEDENTIAL

Filed October 17, 2003

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 01-3720

BONNEVILLE INTERNATIONAL CORPORATION; COX

RADIO, INC.; EMMIS COMMUNICATIONS CORPORATION;

ENTERCOM COMMUNICATIONS CORP.; INFINITY

BROADCASTING CORPORATION; SUSQUEHANA RADIO

CORP.; NATIONAL ASSOCIATION OF BROADCASTERS;

CLEAR CHANNEL COMMUNICATIONS, INC.

v.

MARYBETH PETERS, In Her Official Capacity As Register

of Copyrights for The United States Copyright Office At

The Library of Congress

RECORDING INDUSTRY ASSOCIATION OF

AMERICA, INC.,

Intervenor in D.C.

Bonneville International Corporation, Clear Channel

Communications, Inc., Cox Radio, Inc., Emmis

Communications Corporation, Entercom Communications

Corp., Susquehanna Radio Corp., and National

Association of Broadcasters,

Appellants

Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil Action No. 01-cv-00408)

District Judge: Honorable Berle M. Schiller

2

Argued on December 2, 2002

Before: ROTH, SMITH, and CUDAHY,* Circuit Judges

(Opinion filed: October 17, 2003)

COUNSEL FOR APPELLANTS

Mark A. Jacoby, Esquire

R. Bruce Rich, Esquire (Argued)

Caroline R. Clark, Esquire

Weil, Gotshal & Manges

767 Fifth Avenue

27th Floor

New York, NY 10153

Marguerite S. Walsh, Esquire

Andrew W. Allison, Esquire

Littler, Mendelson Law Office

1601 Cherry Street

Three Parkway, Suite 1400

Philadelphia, PA 19102

COUNSEL FOR APPELLEES

David O. Carson

General Counsel

Tanya M. Sandros

Senior Attorney

United States Copyright Office

Library of Congress

101 Independence Avenue, S.S.

Washington, DC 20559-6000

* The Honorable Richard D. Cudahy, Circuit Court Judge for the United

States Court of Appeals for the Seventh Circuit, sitting by designation.

3

Scott R. McIntosh (Argued)

Mark B. Stern

Attorney, Appellate Staff

Robert D. McCallum, Jr.

Assistant Attorney General

Patrick L. Meehan

United States Attorney

United States Department of Justice

Civil Division,

601 D. Street, N.W.

Washington, DC 20530

Cary H. Sherman, Esquire

Steven M. Marks, Esquire

Gary R. Greenstein, Esquire

Susan C. Munsat, Esquire

Recording Industry

Association of America, Inc.

1330 Connecticut Ave., N.W.

Washington, DE

Robert A. Garrett, Esquire

Ronald A. Schechter, Esquire

(Argued)

Jule L. Sigall, Esquire

Ellen Wasilausky, Esquire

Arnold & Porter

555 12th Street, N.W.

Washington, DC 20004

Vincent V. Carissimi, Esquire

Pepper Hamilton

18th & Arch Streets

3000 Two Logan Square

Philadelphia, PA 19103

OPINION OF THE COURT

CUDAHY, Circuit Judge:

Plaintiffs appeal from a grant of summary judgment. The

district court found that the Copyright Office’s rulemaking

4

with respect to the Internet “streaming” of AM/FM radio

broadcast programming was entitled to deference. The

plaintiffs argue that the exclusion from copyright protection

for “nonsubscription broadcast transmissions” of recorded

music is unambiguously intended to apply to their

simultaneous webcasting of their radio broadcast signal.

We conclude that, whether or not the Copyright Office’s

interpretation of § 114(d)(1)(A) is to be accorded deference

under Chevron U.S.A., Inc. v. National Resources Defense

Counsel, Inc., 467 U.S. 837 (1984) (“Chevron”), the

Copyright Office’s arguments in support of its position are

persuasive, see Skidmore v. Swift & Co., 323 U.S. 134

(1944), and our own independent interpretation of the

statute accords with that of the Copyright Office. We

therefore affirm.

I.

This case deals with copyright protection for sound

recordings. The creator of a musical composition has long

had a right of exclusive public performance of that musical

piece. 17 U.S.C. § 106(4). Therefore, every time you hear the

ubiquitous refrain from “Happy Birthday” in a public

performance, a subsidiary of AOL/TimeWarner cashes a

royalty check.1 However, the owner of a copyright in a

sound recording of a musical composition has long had very

little copyright protection. Until 1971 there was no

copyright protection at all. With the Sound Recording

Amendment of 1971, Pub. L. No. 92-140, 85 Stat. 391, a

limited copyright in the reproduction of sound recordings

was established in an effort to combat recording piracy.

However, there was still no right to public performance of

that sound recording. Therefore, while playing a compact

disc recording of “Happy Birthday” in a concert hall for the

1. Happy Birthday, originally penned by two Kentucky kindergarten

teachers in the late 19th century, remains a protected and highly

profitable copyright in the intellectual property portfolio of

AOL/TimeWarner. Purchased by the company in 1988 for an estimated

$25 million, it produces revenues estimated at $2 million per year.

Under the Copyright Term Extension Act of 1998, Pub. L. No. 105-298,

112 Stat. 2827, for better or for worse, the song will not enter the public

domain until at least the year 2030.

5

paying public would still enrich AOL/TimeWarner, the

person or company that owned the copyright on the CD

recording of the music would earn no remuneration beyond

the proceeds from the original sale of the recording. This

dichotomy of copyright protection has a significant impact

in the radio broadcasting industry. While radio stations

routinely pay copyright royalties to songwriters and

composers (through associations like the American Society

of Composers, Authors, and Publishers and Broadcast

Music, Inc. (“ASCAP”) and Broadcast Music, Inc. (“BMI”))2

for the privilege of broadcasting recorded performances of

popular music, they do not pay the recording industry

royalties for that same privilege. Perhaps surprisingly, this

state of affairs, until about ten years ago, produced

relatively high levels of contentment for all parties. The

recording industry and broadcasters existed in a sort of

symbiotic relationship wherein the recording industry

recognized that radio airplay was free advertising that lured

consumers to retail stores where they would purchase

recordings.3 And in return, the broadcasters paid no fees,

licensing or otherwise, to the recording industry for the

performance of those recordings. The recording industry

had repeatedly sought, however, additional copyright

protection in the form of a performance copyright. Until

1995, those efforts were rejected by Congress.

The 1990’s brought significant technological change. The

advance of digital recording technology and the prospect of

digital transmission capabilities created the possibility that

consumers would soon have access to services whereby

they could pay for high quality digital audio transmissions

(subscription services) or even pay for specific songs to be

2. Performing rights organizations such as ASCAP and BMI facilitate the

licensing and payment of royalties for composition copyrights by

centralizing the process for songwriters, composers, lyricists and

publishers.

3. We recognize that, in reality, the model is significantly more nuanced

than our “symbiosis” reference allows. As merely one example, the

possibility that radio broadcasters may be paid to play certain songs

(“payola”) complicates the characterization considerably. See, e.g., Clear

Channel to Eliminate Ties With Paid Promoters of Music, N.Y. Times, April

10, 2003, at C3.

6

played on demand (interactive services).4 The recording

industry was concerned that the traditional balance that

had existed with the broadcasters would be disturbed and

that new, alternative paths for consumers to purchase

recorded music (in ways that cut out the recording

industry’s products) would erode sales of recorded music.

Congress responded to these concerns with the Digital

Performance Right in Sound Recordings Act of 1995, Pub.

L. No. 104-39, 109 Stat. 336 (“DPRA”). The DPRA added to

the list of protectable rights a digital audio transmission

performance right.

[T]he owner of copyright under this title has the

exclusive rights to do and to authorize any of the

following:

* * *

(6) in the case of sound recordings, to perform the

copyrighted work publicly by means of a digital audio

transmission.

17 U.S.C. § 106(6). When creating this new right, however,

Congress also created exemptions from it. Of specific

application to the present case was the exemption added to

17 U.S.C. § 114(d)(1)(A)(iii) (Supp. I 1995) for a

noninteractive, “nonsubscription broadcast transmission.”5

4. At that time, however, the possible role of the still commercially-

nascent Internet in the transmission of music was not yet significant

enough to be considered.

5. The DPRA’s § 114(d) (Supp. I 1995) provided in part:

(1) Exempt transmissions and retransmissions.— The performance

of a sound recording publicly by means of a digital audio

transmission, other than as a part of an interactive service, is not

an infringement of section 106(6) if the performance is part of—

(A)(i) a nonsubscription transmission other than a

retransmission;

(ii) an initial nonsubscription retransmission made for direct

reception by members of the public of a prior or simultaneous

incidental transmission that is not made for direct reception by

members of the public; or

(iii) a nonsubscription broadcast transmission;

7

The paradigmatic “nonsubscription broadcast transmission”

was a traditional over-the-air radio broadcast. This

exemption was founded in Congress’s desire not to impose

“new and unreasonable burdens on radio and television

broadcasters, which often promote, and appear to pose no

threat to, the distribution of sound recordings.” H.R. Rep.

No. 104-274, at 14 (1995) (“1995 House Report”) (App. at

A779).6

Additionally, the DPRA, in section 3, codified at 17 U.S.C.

§§ 114(d)(2) (Supp. I 1995) and 114(f) (Supp. I 1995),

created a statutory licensing regime for noninteractive,

subscription services.7 Copyright holders were required to

grant licenses to eligible subscription services. In cases

where the copyright holder and the transmitter could not

agree on the royalty rate for the license, the DPRA outlined

an arbitration mechanism for determining a reasonable rate

—§ 114(f) authorized the Copyright Office to convene a

copyright arbitration royalty panel (“CARP”) to arbitrate

licensing rates.

But technology continued to advance, and the Internet

soon became a viable medium over which to transmit, in

real time, sound recordings. This real-time transmission of

sound recordings over the Internet is known as “streaming”8

6. Much of the legislative history relevant to the present case is collected

in the appendices to the parties’ briefs. When appropriate, the relevant

appendix page number will also be cited as “App. at A###.”

7. Interactive, on-demand services are subject to an almost

unconditional performance right in the copyright holder: the purveyors of

such services are required to negotiate individual, discretionary licenses

with individual copyright holders subject to certain time limitations for

exclusive licenses. See § 114(d)(3). The unconditional public digital

performance right with respect to interactive digital audio transmissions

corresponds to Congress’s perception that interactive digital audio

services pose the greatest threat to recording sales.

8. The subject matter of the present case, Internet streaming, should not

be confused with the use of the Internet to exchange digital copies of

entire songs through centralized or distributed peer-to-peer file exchange

mechanisms like Napster and KaZaA. The legal issues surrounding file

exchange of songs involve the established exclusive right to reproduction

of a sound recording. Similarly, technology exists whereby a sound

8

and “webcasting,” and the transmitter of an Internet stream

of music is known as a “webcaster.” Anyone with a

computer, a reasonably speedy connection to the Internet,

streaming software and the equipment to copy songs from

CDs to a computer in the popular and compressed MP3

format (“rip” the songs) could webcast sound recordings

through streaming. Additionally, established radio

broadcasters began to webcast simultaneously over the

Internet their AM/FM broadcast programming. It is this

AM/FM webcasting that is the principal concern in the

present case.

Again, the recording industry became concerned that

technology would erode recording sales by providing

alternative sources of high quality recorded performances.

In 1998 Congress responded by amending the DPRA’s

amendments to the Copyright Act with the Digital

Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat.

2860 (1998) (“DMCA”). The DMCA expanded the class of

transmissions available for the statutory licensing regime

under the DPRA to include eligible nonsubscription

webcasting, and eliminated from § 114(d) two of the

nonsubscription, noninteractive exemptions to the digital

audio transmission performance right. The exemption for

“nonsubscription broadcast transmissions” was, however,

left intact and moved to its current location at

§ 114(d)(1)(A). “The deletion of [the other] two exemptions

[wa]s not intended to affect the exemption for

nonsubscription broadcast transmissions.” H.R. Conf. Rep.

No. 105-796, at 80 (1998) (“1998 Conference Report”) (App.

at A1197).

In March of 2000, the Recording Industry Association of

America (“RIAA”) petitioned the Copyright Office for a

recording performance streamed over the Internet can be “recorded” by

a listener, duplicated (infinitely, with no drop-off in the original

recording’s quality because of the digital medium of the recording) and

distributed. Again, however, this issue pertains to the exclusive right of

reproduction and not to the interpretation of the digital audio

transmission performance right in § 106(6). Our concern is with the right

of the copyright holder for the sound recording to limit the public digital

audio transmission performance of that sound recording in the first

instance.

9

Rulemaking to clarify whether AM/FM webcasting (the

simultaneous Internet streaming by radio broadcasters of

their AM/FM broadcast programming) was a

“nonsubscription broadcast transmission” that was exempt

from the § 106(6) digital audio transmission performance

right. After a Notice and Comment procedure, in December

of 2000 the Copyright Office promulgated a rule stating

that AM/FM webcasting is not an exempt transmission

under § 114(d)(1)(A). Public Performance of Sound

Recordings: Definition of a Service, Final Rule, 65 Fed. Reg.

77292 (Dec. 11, 2000) (“Streaming Regulation”) (App. at

A69).

The plaintiffs—the National Association of Broadcasters,

along with some of its more prominent members—sued the

Register of Copyrights in the present action seeking judicial

review of the rulemaking. The RIAA joined the case as an

intervenor-defendant. The district court granted summary

judgment for the Copyright Office and the RIAA. The district

court found the scope of the exemption in § 114(d)(1)(A) to

be ambiguous and that the Copyright Office was

empowered by Congress to interpret that ambiguity in order

to administer the statutory licensing scheme of § 114(f).

Therefore, because the Copyright Office’s rule was

reasonable, the court found that the rulemaking was

entitled to deference under Chevron, and, hence, the rule

was enforced. This appeal followed.

II.

Our review of the district court’s grant of summary

judgment is plenary. Sutton v. Rasheed, 323 F.3d 236, 248

(3d Cir. 2003).

A.

We have determined that, in this appeal, we do not need

to decide whether Chevron or Skidmore deference should

apply to our review of the Copyright Office’s interpretation

of § 114(d)(1)(A). We come to this conclusion because,

whichever standard of deference is accorded, we agree with

the Copyright Office.

10

If we had determined under United States v. Mead Corp.,

533 U.S. 218 (2001), that the Copyright Office had been

delegated authority by Congress to regulate the scope of the

digital audio transmission performance copyright, we would

afford Chevron deference to the Copyright Office’s

interpretation of that statute. If, on the other hand, we were

to conclude that the Copyright Office had not been

authorized by Congress to enact rules with the force of law

on the issue whether the exclusion from copyright

protection for “nonsubscription broadcast transmissions”

applies to simultaneous webcasting of radio broadcast

signals, we would, under Mead, afford the Copyright

Office’s interpretation of the statute only Skidmore

deference. See Skidmore, 323 U.S. at 140. Under Skidmore,

the Copyright Office’s determination can be a useful tool for

interpreting the statute as an original matter. Because we

find that the Copyright Office’s interpretation is persuasive

even under the less demanding standard of Skidmore

deference, we need not go on to parse out whether Chevron

deference should, in fact, be accorded the Copyright Office’s

regulation here.9

9. The Supreme Court in Mead altered the judicial landscape of Chevron

deference, limiting previously strong presumptions of deference to formal

agency actions and promoting a more searching threshold inquiry into

the existence of Congressional authorization. See MCI Telecommunication

Corp. v. Bell Atlantic Pennsylvania, 271 F.3d 491, 517 (3d Cir. 2001)

(“[Mead] suggests that not every formal agency act involving

interpretation of a federal statute is entitled to deference.”). After Mead,

the existence of a general delegation of authority and the use of a formal

notice-and-comment procedure is no longer sufficient to trigger Chevron

deference—instead we must look for express or implied indications that

“Congress ever thought of [giving the agency actions] the deference

claimed for them here.” Mead, 533 U.S. at 231; see, e.g., Ebbert v.

Daimler-Chrysler Corp., 319 F.3d 103, 110-11 (3rd Cir. 2003) (finding

that general delegation of authority to EEOC to “carry out the provisions

of [Title 42]” did not impliedly authorize EEOC to interpret “notice” with

respect to the timeliness of court filings in 42 U.S.C. § 2000e-5(f)(1));

Robert Wood Johnson Univ. Hosp. v. Thompson, 297 F.3d 273, 281-82

(3d Cir. 2002) (finding express delegation of authority to Secretary of

Health & Human Services to promulgate guidelines for Medicare

reimbursement reclassification of hospitals was “adequate indication of

congressional intent” supporting Chevron deference).

11

B.

We begin the process of statutory interpretation with the

plain meaning of the statute—we must first consider the

text. New Rock Asset Partners, L.P. v. Preferred Entity

Advancements, Inc., 101 F.3d 1492, 1498 (3d Cir. 1996).

The parties do not dispute that, under § 106(6), AM/FM

webcasting comprises a public digital audio transmission.10

Judges Roth and Cudahy would both have concluded that, under

Mead, the Copyright Office’s interpretation of § 114(d)(1)(A) should be

given Skidmore deference because the only express delegation of

authority in Title 17 that can be construed to cover the Copyright

Office’s Streaming Regulation is the broad general authority under § 702

“to establish regulations not inconsistent with law for the administration

of the functions and duties made the responsibility of the Register under

this title.” They find this language insufficient to shift the responsibility

of interpreting what is copyright-protected from the courts, the

traditional stewards of such property rights, to the Copyright Office,

which has no history of, or significant expertise in, such a role. Judge

Smith, on the other hand, maintains that this approach reads too much

into Mead. He believes that Mead, in considering what was an essentially

adjudicative determination of an agency, merely created a limited

exception to Chevron. He notes that the Supreme Court has continued

to apply the basic framework of Chevron, and has reiterated the

obligation of courts to afford Chevron deference to a vast array of

legislative decisions made by agencies. See Barnhart v. Walton, 122 S.Ct.

1265, 1269-72 (2002)(noting that even where an “[a]gency previously

reached its interpretation through means less formal than ‘notice and

comment’ rulemaking, see 5 U.S.C. Section 553,” this “does not

automatically deprive that interpretation of the judicial deference

otherwise its due.”)(citing Chevron, 467 U.S. at 843). He would conclude

that, even in the wake of Mead, the product of notice and comment

rulemaking pursuant to express statutory authority (even of the general

kind present here) should still be accorded Chevron deference.

10. 17 U.S.C. § 101, which defines terms as used in Title 17, defines

“transmit”: “To ‘transmit’ a performance or display is to communicate it

by any device or process whereby images or sounds are received beyond

the place from which they are sent.” Additionally, legislative history

makes clear that “transmit” is to be interpreted very broadly. See S. Rep.

No. 94-473, at 61 (1975) (“1975 Senate Report”) (App. at A474) (“The

definition of ‘transmit’ . . . is broad enough to include all conceivable

forms and combinations of wired or wireless communication media

. . . .”).

12

Thus, in order for AM/FM webcasting to be exempt under

§ 114(d)(1)(A) from the digital audio transmission

performance copyright, it must be 1) noninteractive, 2)

nonsubscription and 3) broadcast. The parties agree that

AM/FM webcasting is not part of an interactive service.11

There is equally no dispute that AM/FM webcasting is a

nonsubscription transmission.12 Thus, the question

11. 17 U.S.C. § 114(j)(7) provides that:

An “interactive service” is one that enables a member of the public

to receive a transmission of a program specially created for the

recipient, or on request, a transmission of a particular sound

recording, whether or not as part of a program, which is selected by

or on behalf of the recipient. The ability of individuals to request

that particular sound recordings be performed for reception by the

public at large, or in the case of a subscription service, by all

subscribers of the service, does not make a service interactive, if the

programming on each channel of the service does not substantially

consist of sound recordings that are performed within 1 hour of the

request or at a time designated by either the transmitting entity or

the individual making such request. If an entity offers both

interactive and noninteractive services (either concurrently or at

different times), the noninteractive component shall not be treated

as part of an interactive service.

12. 17 U.S.C. § 114(j) provides in relevant part:

(9) A “nonsubscription” transmission is any transmission that is

not a subscription transmission.

* * *

(14) A “subscription” transmission is a transmission that is

controlled and limited to particular recipients, and for which

consideration is required to be paid or otherwise given by or on

behalf of the recipient to receive the transmission or a package of

transmissions including the transmission.

Additionally, the legislative history makes clear that Internet

transmissions can be either subscription or nonsubscription. See S. Rep.

No. 104-128, at 36 (1995) (“1995 Senate Report”) (App. at A735) (“It does

not matter what the mechanism might be for the delivery of the

transmission; thus, a digital transmission, whether delivered by cable,

wire, satellite or terrestrial microwave, video dialtone, the Internet or any

other digital transmission mechanism, could be a subscription

transmission if the requirements cited above are satisfied.”)

13

becomes whether AM/FM webcasting is a “broadcast

transmission.”

For a definition of “broadcast transmission,” we look to

§ 114(j), which defines terms as used in the section. Section

114(j)(3) tells us that a “ ‘broadcast’ transmission is a

transmission made by a terrestrial broadcast station

licensed as such by the Federal Communications

Commission.” This merely moves us to a new inquiry: what

is a “terrestrial broadcast station licensed as such by the

[FCC]”? “Terrestrial” we give its natural and logical meaning

of earthbound. The appellees seek to import a sense of

limitation of a transmission’s geographic range into the

meaning of “terrestrial.” See Peters Opening Br. at 31

(“Thus, the use of the word ‘terrestrial’ suggests that

Congress had in mind transmissions . . . within limited

geographic ranges. . . .”). This reading of “terrestrial” is

unnaturally strained, and we will not distort the plain

meaning so. We believe that the present case deals only

with “terrestrial” broadcast stations (whatever “broadcast

station” may be determined to mean). Therefore, a more

nuanced parsing of the exact parameters of “terrestrial” is

not necessary for the resolution of the present case.

The nub of the interpretive disagreement between the two

sides is whether a “broadcast station” refers to the

broadcaster as a business entity that operates broadcasting

facilities or to the broadcasting facilities themselves (and by

extension the mode of transmission). If the appellants are

correct then a “broadcast station” refers to the broadcasting

entity and not to the physical transmitting facility. As a

result, for example, any transmission (including

webcasting) by any facility operated by Clear Channel

Communications, Inc. (an entity operating a radio

broadcasting facility under an FCC license) would qualify as

a broadcast transmission. So long as the transmission was

noninteractive and nonsubscription (e.g., AM/FM

webcasting), it would be an exempt transmission under

§ 114(d)(1)(A). In comparison, if the Copyright Office’s

interpretation is correct, then § 114(j)(3)’s “broadcast

station” is limited to a radio broadcasting facility, and all

forms of webcasting of recorded music, whether AM/FM

webcasting or webcasting in some other form, are covered

14

by the digital audio transmission performance copyright in

§ 106(6) and are not exempt.

Although not dispositive, we can initially point to some

obvious and irreconcilable consequences of the appellants’

argument that “broadcast station” refers to the entity, not

the facility. One such consequence would be that any entity

that operates at least one FCC-licensed radio station would

have carte blanche to digitally perform recordings via any

conceivable transmission medium (in a noninteractive,

nonsubscription manner) without limitation or copyright

liability under § 106(6). For example, the “sound recording

performance complement,” which limits statutory licensees’

ability to transmit performances of multiple recorded songs

from the same artist or from the same “phonorecord” within

a short time of each other, would not apply to any

transmission by an FCC-licensed broadcaster. See 17

U.S.C. § 114(d)(2)(C)(i), (j)(13). Additionally, the appellants

in the present case could hypothetically expand their

webcasting to include original programming unrelated to

their AM/FM programming, and their interpretation of

“nonsubscription broadcast transmission” would serve to

exempt that webcasting from the digital audio transmission

performance copyright as well. Against that possibility,

appellants argue that the “sole issue before the Copyright

Office for rulemaking, and the sole issue presented in this

declaratory judgment action, is whether the simultaneous

Internet streaming of the same program fare as offered by

broadcasters pursuant to their FCC licenses qualifies for

the Section 114(d)(1)(A) exemption.” Appellants’ Br. at 35

(emphasis in original). But appellants put forward (and we

can find) no limiting principle in their argument with

respect to the definition of “broadcast station” that would

restrict the product of their argument to “simultaneous

Internet streaming” of AM/FM programming.

Another ramification of the broadcasters’ interpretation

about which they are quite pointedly silent, is that the

meaning of the modifier “terrestrial” becomes absurd.

Under the appellants’ argument, a terrestrial broadcast

station means a business entity that is earthbound—in

contrast, we must assume, to one that is space-borne. To

our knowledge, there are not, presently, any broadcasting

15

companies incorporated in outer space—nor can there be.

An interpretation of “terrestrial broadcast station” that

distinguishes between earthbound and orbiting

broadcasting entities is unpersuasive—especially when

there is a far more natural interpretation available. But it

is entirely plausible to postulate entirely earthbound

broadcasting facilities as opposed to broadcasting done

through satellites.

Because the “broadcast station” in question is one that

must be “licensed as such by the [FCC],” our interpretive

quest leads us next to the licensing regime of the FCC. The

Federal Communications Act, 47 U.S.C. §§ 151 et seq.

(“FCA”)13 is the source of such licensing.

For the relevant definitions, we look to 47 U.S.C. § 153:

(5) Broadcast station. The term “broadcast station”,

“broadcasting station”, or “radio broadcast station”

means a radio station equipped to engage in

broadcasting as herein defined.

13. The broadcasters complain that it is inappropriate to cross-reference

to the Federal Communications Act. Other sections of Title 17 refer

expressly to the Federal Communication Act. See, e.g., 17 U.S.C.

§§ 114(b), (d)(1)(B)(iv), (d)(1)(C)(iii) (referring to 47 U.S.C. §§ 397, 396(k)

and 522(12), respectively); 17 U.S.C. § 1202(e)(3)(A) (“As used in this

subsection, the term ‘broadcast station’ has the meaning given that term

in section 3 of the Communications Act of 1934.”). The broadcasters

argue that if Congress had intended to cross-reference to Title 47, it

could have done so explicitly. We believe that Congress in fact did so. By

demanding that the broadcast station of § 114(d)(1)(A) be licensed by the

FCC as a broadcast station, Congress quite clearly incorporated by

reference definitions from the Federal Communications Act. Additionally,

the broadcasters have, in other parts of their argument, acknowledged

that the Federal Communications Act (and other related statutes) are

relevant to our understanding of the copyright provisions at issue. See,

e.g., Appellants’ Br. at 37 n.14, 43 n.17 (using Title 47 to help define

“terrestrial” and “public interest” in Title 17). We have held that a “prior

statute’s definition of [a] term will control if it is natural and reasonable

to think that the members of the legislature, in drafting the new statute,

were influenced by the prior statute.” Liberty Lincoln-Mercury, Inc. v. Ford

Motor Co., 171 F.3d 818, 823-24 (3d Cir. 1999). We believe such is the

case here.

16

(6) Broadcasting. The term “broadcasting” means the

dissemination of radio communications intended to be

received by the public, directly or by the intermediary

of relay stations.

The combination of § 153(5) and § 153(6) of the FCA would

limit a “broadcast station” to a physical facility that

transmits radio communications—appellees’ position

exactly. However, we must consider the entirety of the

relevant phrase—“broadcast station licensed as such by the

[FCC]”—and determine whether the FCA provides any

guidance with respect to what it means by the phrase

“licensed as such.” Appellants seek to have us equate a

“licensee” with the “broadcast station licensed as such by

the [FCC].” A licensee under the FCA is a person (or entity),

not a facility. See, e.g., 47 U.S.C. §§ 153(24) (“The term

‘licensee’ means the holder of a radio station license. . . .”),

301 (“No person” shall transmit radio except “with a

license.”), 307(c)(1) (licenses are “granted for the operation

of a broadcasting station”), 310 (restricting the ownership

and transfer of licenses by and to certain individuals). This

argument affords a superficial appeal, since a common

usage of the term “licensed” often has as its subject a

person seeking to perform a sanctioned act. A person, for

example, is the “licensee” who is “licensed” to drive a car.

However, it is also clear that a “station” that is “licensed”

is something other than a “licensee,” and, in fact, means a

physical broadcasting facility. The acquisition (or

modification or renewal) of a broadcast station license

under the FCA is inextricably linked to the operation of a

specific broadcast facility (referred to, harmoniously, as a

broadcast or broadcasting station), and more specifically to

the location and broadcasting qualities of that facility. 47

U.S.C. §§ 307(c)(1) (“Each license granted for the operation

of a broadcasting station. . . .”), 308(b) (“All applications for

station licenses . . . shall set forth . . . the ownership and

location of the proposed station and of the stations, if any,

with which it is proposed to communicate; the frequencies

and the power desired to be used; . . . the purposes for

which the station is to be used . . . .”), 309(h)(1) (“The

station license shall not vest in the licensee any right to

operate the station . . . . in any other manner than

17

authorized therein . . . .”); 47 C.F.R. § 73.1020(a) (“Initial

licenses for broadcast stations . . . .) (emphasis added); 47

C.F.R. § 73.3538 (implemented by FCC Form 302) (detailing

the types of changes in a broadcasting facility that require

an application for license modification, including a

multitude of technical changes affecting the nature and

quality of the radio transmissions by the broadcasting

facility). In this sense the FCA, when authorizing the

issuance of a license, exercises a licensing power over the

facility that will be operated under the license. The license,

while not literally held by the transmitting facility is

inseparable from that facility—and that connection (and

concomitant regulation) makes the station “licensed.”

Therefore, a “licensee” means something distinct from a

“broadcast station licensed as such.” The licensee is the

person (or entity) holding the license, and the licensed

station is the facility that the licensee is permitted to

operate under the license. Based on this examination of the

FCA, we believe it clear that a “broadcast station licensed

as such by the [FCC],” as the term is used in 17 U.S.C.

§ 114(j)(3), refers to the physical radio station facility that

broadcasts radio signals over the air, and not to the

business entity that operates the radio station. A

“broadcast transmission” under § 114(d)(1)(A) would

therefore be a radio transmission by a radio station facility

operated subject to an FCC license and would not include

a webcast. AM/FM webcasting does not meet the definition

of a “nonsubscription broadcast transmission” and does

not, therefore, qualify under § 114(d)(1)(A) for an exemption

from the digital audio transmission performance copyright

of § 106(6).

C.

Additionally, further examination of the statute using the

remaining tools of statutory interpretation only confirms

what follows from the statute’s language. For example, we

consider other parts of § 114 to see if our interpretation of

§ 114(d)(1)(A) harmonizes with the section as a whole.

United States v. Morton, 467 U.S. 822, 828 (1984) (noting

that, generally, statutes should be read as a whole). Also,

we consider legislative history to gain an indication of

18

unambiguous Congressional intent that may aid our

interpretation. See New Rock Asset Partners, 101 F.3d at

1498.

First, we consider the remainder of 17 U.S.C. § 114. Of

particular interest is § 114(d)(1)(B), which lays out an

exemption from the digital audio transmission performance

right for retransmissions of nonsubscription broadcast

transmissions.14 The appellees argue that the § 114(d)(1)(A)

broadcast exemption as interpreted by the broadcasters is

inconsistent with this retransmission exemption.

Subsection (d)(1)(B)(i)(I) refers to retransmission by “a

terrestrial broadcast station, terrestrial translator, or

terrestrial repeater licensed by the [FCC].” Translators and

repeaters are, first of all, technical equipment—a form of

facilities. See 47 C.F.R. §§ 21.2, 74.1201(a) (definitions).

The inclusion of “broadcast station” as a means of

retransmission in this list together with “translator” and

“repeater” suggests that a broadcast station is also a

physical facility. Plus, interpreting “broadcast station” as an

FCC-licensed business entity would render superfluous the

use of “translator” and “repeater.” Any translators or

repeaters “licensed as such by the [FCC]” would necessarily

be owned by a licensee. Under the appellants’

interpretation, that licensee, as an entity that operates

broadcasting facilities, would be a “broadcast station.”

Therefore, the phrase “broadcast station” would include the

14. The retransmissions listed in 17 U.S.C. § 114(d)(1)(B) as exempt from

the performance right of § 106(6) include:

(B) a retransmission of a nonsubscription broadcast transmission:

Provided, That, in the case of a retransmission of a radio station’s

broadcast transmission—

(i) the radio station’s broadcast transmission is not willfully or

repeatedly retransmitted more than a radius of 150 miles from

the site of the radio broadcast transmitter, however—

(I) the 150 mile limitation under this clause shall not apply when

a nonsubscription broadcast transmission by a radio station

licensed by the Federal Communications Commission is

retransmitted on a nonsubscription basis by a terrestrial

broadcast station, terrestrial translator, or terrestrial repeater

licensed by the Federal Communications Commission;

19

facilities of a repeater or translator, and make their listing

superfluous. See United States v. Menasche, 348 U.S. 528,

538-39 (1955) (listing familiar canon of statutory

interpretation that statutes should be interpreted to give

meaning to each word). Additionally, the words “broadcast

station,” “translator” and “repeater” are all modified by the

phrase “licensed by the [FCC].” That translators and

repeaters (both physical facilities) are described as

licensable by the FCC further supports the textual

conclusion, above, that the broadcast station licensed as

such by the FCC in § 114(j)(3) is the physical transmitting

facility.

Likewise, § 114(d)(1)(B) limits the retransmission of a

nonsubscription broadcast transmission to a radius of 150-

miles. As the district court sagely recognized, it makes little

sense to exempt AM/FM webcasting, which is global in

nature, while simultaneously limiting retransmission to a

150-mile radius. Bonneville Int’l Corp. v. Peters, 153 F.

Supp. 2d 763, 776 (E.D. Pa. 2001). The absurdity of this

construction is apparent when one considers that, under

the appellants’ interpretation, the webcasting of AM/FM

programming by the original broadcaster would be exempt

under § 114(d)(1)(A) and transmissible world wide over the

Internet without any § 106(6) limitations. However, if a

third party webcaster (that did not hold any FCC licenses),

such as Yahoo, were to retransmit via webcast the exact

same AM/FM programming, that third party would

unavoidably be covered by the digital audio transmission

performance right in § 106(6), and not exempt. If, as the

broadcasters protest, congressional intent were simply to

protect the broadcaster-recording industry relationship

wherein “the sale of sound recordings has been promoted

by the airplay decisions of radio broadcasters,” what

possible purpose could be served by distinguishing between

different purveyors of that exact same airplay decision?

Appellants’ Br. at 55. We are not convinced that there is a

coherent principle distinguishing a third party

retransmitter of the same programming and requiring that

the third-party “stand on a different footing.” Id. at 56. A

common-sense reading of § 114(d)(1)(B) in light of

§ 114(d)(1)(A) is that the express geographic limitation on

third party retransmissions in § 114(d)(1)(B) cannot coexist

20

with the unlimited geographic reach of AM/FM webcasting

proposed by the appellants for § 114(d)(1)(A). A far more

harmonious reading of § 114 is achieved if § 114(d)(1)(A) is

limited to over-the-air broadcasting, and all forms of

webcasting are nonexempt from § 106(6). The

retransmission provisions of § 114(d)(1)(B) strongly favor the

Copyright Office’s interpretation of § 114(d)(1)(A).

D.

A consideration of the legislative history of the DPRA and

the DMCA also reinforces our conclusions. Starting with

the DPRA, it is apparent that the public performance right

of § 106(6) was originally intended to be limited in scope.

See 1995 Senate Report, at 19 (App. at A718) (“[U]nder

[§ 114(d)(1)(A)], any transmission to members of the public

that is neither a subscription transmission . . . nor part of

an interactive service is exempt from the new digital

performance right.”). This new right was expressly limited

in knowing opposition to policies preferred by the Copyright

Office at the time:

Notwithstanding the views of the Copyright Office . . .

that it is appropriate to create a comprehensive

performance right for sound recordings, the Committee

has sought to address the concerns of record

producers and performers regarding the effects that

new digital technology and distribution systems might

have on their core business without upsetting the

longstanding business and contractual relationships

among record producers and performers, music

composers and publishers and broadcasters that have

served all of these industries well for decades.

Accordingly, the Committee has chosen to create a

carefully crafted and narrow performance right,

applicable only to certain digital transmissions of

sound recordings.

Id. at 13 (App. at A712) (emphasis added). See also 1995

House Report, at 13-14 (App. at A777). Congress had in

mind the symbiotic relationship between the recording

industry and broadcasters, and did not seek to change the

existing relationship. See 1995 Senate Report, at 15 (App.

21

at A714) (“It is the Committee’s intent to provide copyright

holders of sound recordings with the ability to control the

distribution of their product by digital transmissions,

without hampering the arrival of new technologies, and

without imposing new and unreasonable burdens on radio

and television broadcasters, which often promote, and

appear to pose no threat to, the distribution of sound

recordings.”). To that end, the DPRA, as enacted, contained

a much broader exemption from the § 106(6) performance

right than is presently the case. See note 5, supra. The

legislation did “not affect the interests of broadcasters, as

that industry has traditionally been understood.” 141 Cong.

Rec. 1292 (1995) (Sen. Hatch, introducing the bill that

became the DPRA). “If the technological status quo could be

maintained, it might well be that the current laws could be

tolerated. But, we know that technological developments

such as satellite and digital transmission of recordings

make sound recordings vulnerable to exposure to a vast

audience through the initial sale of only a potential handful

of records.” Id. at 1293

Intervening technological developments did, ultimately,

require further legislation. Section 114(d)(1)(A) was

amended in the DMCA “to delete two exemptions that were

either the cause of confusion as to the application of the

DPRA to certain nonsubscription services (especially

webcasters) or which overlapped with other exemptions

(such as the exemption in subsection (A)(iii) for

nonsubscription broadcast transmissions). The deletion of

these two exemptions is not intended to affect the

exemption for nonsubscription broadcast transmissions.”

1998 Conference Report, at 80 (App. at A1197). Congress

sought to “clarif[y] that the digital sound recording

performance right applies to nonsubscription digital audio

services such as webcasting.” Staff of the House Comm. on

the Judiciary, Section-by-Section Analysis of H.R. 2281 As

Passed by the United States House of Representatives on

August 4, 1998, 105th Cong., 2d Sess., at 50 (Committee

Print, Serial No. 6, 1998) (“1998 House Manager’s Report”)

(App. at 1087).

In 1995, while the DPRA was being crafted, no serious

attention was paid to the specific possibility that radio

22

broadcasters would simultaneously stream their AM/FM

programming over the Internet. The central question then is

somewhat broader: whether, in exempting “nonsubscription

broadcast transmissions,” Congress intended the DPRA to

exempt nontraditional transmissions by broadcasters. The

answer appears to be solidly in the negative. Congress

decided “not to include free over-the-air broadcast services

in this legislation” in part because broadcasters provide

“public interest activities to local communities to fulfill a

condition of the broadcasters’ license.” 1995 Senate Report,

at 15 (App. at 714) (emphasis added); 1995 House Report,

at 13 (App. at A778). Referring to the benefits of “free over-

the-air broadcasting,” the same reports reiterate that the

“legislation should do nothing to change or jeopardize the

mutually beneficial economic relationship between the

recording and traditional broadcasting industries.” Id.

(emphasis added). “The classic example of [an exempt

transmission under section 114(d)(1)(A)] is a transmission

to the general public by a free over-the-air broadcast

station, such as a traditional radio or television station, and

the Committee intends that such transmissions be exempt

regardless of whether they are in a digital or nondigital

format, in whole or in part.” 1995 Senate Report, at 19

(App. at 718) (emphasis added).

The appellants argue, however, that the unambiguous

intent of Congress to exempt AM/FM webcasting is clear in

the 1995 Senate Report, which stated that “[t]he underlying

rationale for creation of this limited [digital audio recorded

performance] right is grounded in the way the market for

prerecorded music has developed, and the potential impact

on that market posed by subscription and interactive

services—but not by broadcasting and related

transmissions.” Id. at 17 (App. at A716) (emphasis added).

This, they argue, favors a broad interpretation of the scope

of Congress’s intended protection of the broadcaster-

recording industry relationship. We believe that this single

sentence, out of context, provides little support for the

broadcasters’ position. An interpretation of this sentence

more in harmony with the remainder of the DPRA is that a

“related transmission” refers to the other types of

transmissions (other than a broadcast transmission)

expressly exempted in § 114(d), such as retransmissions.

23

Appellants argue that this narrow reading of broadcast

transmission makes the word “nonsubscription” in the

phrase “nonsubscription broadcast transmission”

surplusage, since all over-the-air broadcasts are currently

nonsubscription broadcasts. See Bailey v. United States,

516 U.S. 137, 146 (1995) (holding that each term in a

statute should have a “particular, nonsuperfluous

meaning”). We disagree. All over-the-air broadcasts are

currently nonsubscription because they are analog. It is our

understanding that analog radio technology is not capable

of providing a subscription broadcast transmission. In

comparison, §§ 106 and 114 are concerned with digital

transmissions. With digital over-the-air transmission

technology it is possible for transmitters to provide their

transmission services on a subscription basis.15 Inasmuch

as the legislative history indicates that Congress was

anticipating the technology of digital radio when it

formulated § 114(d)(1)(A), 1995 Senate Report, at 19 (App.

at A718) (“[T]he Committee intends that [over-the-air]

transmissions be exempt regardless of whether they are in

a digital or nondigital format, in whole or in part.”), we find

it perfectly reasonable to conclude that Congress was also

anticipating that digital radio potentially could give rise to

subscription radio services and chose expressly to

distinguish such services from nonsubscription digital over-

the-air radio services.

Appellants also make much of the fact that “webcasting,”

as it was generally defined at the time of DMCA, referred to

“public multiple highly-themed genre channels of sound

recordings on a nonsubscription basis.” 1998 House

Manager’s Report, at 50 (App. at A1087). Under the

appellants’ theory, the performance right in § 106(6) must

15. For example, XM Radio, which provides a digital radio signal through

a satellite broadcasting mechanism, charges a monthly subscription fee

for access to its digital radio service. A digital radio over-the-air signal,

unlike traditional analog radio, is not unavoidably free of cost to

consumers. For commercial reasons it appears, however, that non-

satellite digital radio will likely debut in this country in a

nonsubscription format. See Justin Hibbard, Top Ten Trends 2003 —

Broadcasting, Red Herring, Nov. 15, 2002, at 48 (available at 2002 WL

16030972).

24

be construed as narrowly as possible and the exemption in

§ 114(d)(1)(A) as broadly as possible. The changes wrought

by the DMCA to reduce the § 114(d)(1) exemptions to the

digital audio transmission performance right, under the

appellants’ theory, must also be construed narrowly in

order to preserve the intended, narrow scope of the § 106(6)

copyright. Therefore, in interpreting the DMCA, according

to the appellants, the scope of the DMCA’s reductions in

the § 114(d)(1) exemptions (and the corresponding

expansion of the scope of the digital audio transmission

performance copyright) must be narrowly defined to include

only the precise type of webcasting contemplated by

Congress at that time. Under this argument, because

AM/FM webcasting was not exactly what Congress

contemplated when it adopted the DMCA, AM/FM

webcasting was not meant to be included in the § 106(6)

performance right.16 But it is clear to us that Congress did

not intend to tie the scope of the DMCA to such a narrow

definition. “While an impetus for this legislation was the

licensing difficulties and legal issues raised by webcasters

in particular, it is Congress’ intent that this legislation

apply generally to otherwise nonexempt nonsubscription

digital audio services on the Internet and in other media.”

1998 House Manager’s Report, at 50 (App. at A1087).

Additionally, we have already noted that the exemptions

the DPRA afforded to radio broadcasters were specifically

intended to protect only traditional radio broadcasting, and

did not contemplate protecting AM/FM webcasting. The

DMCA’s silence on AM/FM webcasting gives us no

affirmative grounds to believe that Congress intended to

expand the protections contemplated by the DPRA. The

appellants must show something more than congressional

silence to argue convincingly that Congress intended to

lump AM/FM webcasting with over-the-air broadcasting in

§ 114(d)(1)(A)’s exemption.

The legislative history shows that DPRA § 114(d)(1)(A)(iii)

created a nonsubscription broadcast transmission

16. This argument operates in tandem with appellants’ plain language

argument, which gives “nonsubscription broadcast transmission” a

broad scope. See discussion, supra at § II(B).

25

exemption for traditional over-the-air broadcasting in order

to preserve the symbiotic relationship between broadcasters

and the recording industry. And the DMCA’s amendments

to § 114(d) were “not intended to affect the exemption for

nonsubscription broadcast transmissions.” 1998

Conference Report, at 80 (App. at A1197). Therefore, the

purpose of Congress was to limit the exemption for

nonsubscription broadcast transmissions to traditional,

over-the-air broadcasts.

III.

For the reasons stated above, our analysis of

§ 114(d)(1)(A) convinces us that the Copyright Office’s

arguments are persuasive. Section 114(d)(1)(A)’s

nonsubscription broadcast transmission’s exemption

implicates only over-the-air radio broadcast transmissions,

and does not cover the internet streaming of AM/FM

broadcast signals. Therefore, we AFFIRM.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit