SoundExchange, Inc. v. Copyright Royalty Bd.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 8, 2018 Decided September 18, 2018

No. 16-1159

SOUNDEXCHANGE, INC.,

APPELLANT

v.

COPYRIGHT ROYALTY BOARD AND LIBRARIAN OF CONGRESS,

APPELLEES

GEORGE JOHNSON, ET AL.,

INTERVENORS

Consolidated with 16-1162

On Appeal from a Final Determination of the Copyright

Royalty Board

Benjamin J. Horwich argued the cause for appellant

SoundExchange, Inc. With him on the briefs were Glenn D.

Pomerantz, Kelly M. Klaus, and Rose Leda Ehler.

George D. Johnson, pro se, argued the cause and filed

briefs for appellant.

2

Sonia M. Carson, Attorney, U.S. Department of Justice,

argued the cause for appellees. On the brief were Mark R.

Freeman and Jennifer L. Utrecht, Attorneys.

Scott H. Angstreich argued the cause for intervenors

National Association of Broadcasters, et al. With him on the

joint brief were Michael K. Kellogg, John Thorne, Leslie V.

Pope, R. Bruce Rich, Todd D. Larson, and Gregory S. Silbert.

Catherine R. Gellis was on the brief for intervenor College

Broadcasters, Inc. in support of appellees.

Before: ROGERS, GRIFFITH and SRINIVASAN, Circuit

Judges.

Opinion for the Court filed by Circuit Judge SRINIVASAN.

SRINIVASAN, Circuit Judge: This case concerns the rates

paid by webcasters to license copyrights in digital sound

recordings. Webcasters stream digital sound recordings to

listeners over the Internet. A so-called “noninteractive”

webcasting service chooses the recordings to play for listeners,

whereas an “interactive” service allows an individual listener

to select music on demand.

Congress established a statutory copyright license for

noninteractive webcasters in the Copyright Act. The statutory

license enables noninteractive webcasters to transmit

recordings by paying a standard royalty rate rather than

negotiating licensing agreements with copyright holders.

Every five years, the Copyright Royalty Board sets the standard

rates noninteractive webcasters must pay to play recordings

over the Internet under the statutory license.

3

This appeal raises challenges to the Board’s most recent

rate determination on a number of grounds. We sustain the

Board’s determination in all respects.

I.

A.

Congress set out the statutory scheme for the protection

and regulation of copyrights in the Copyright Act, 17 U.S.C.

§ 101 et seq. While the owner of a copyright in a musical work

has long enjoyed an exclusive right to perform it to the public,

id. § 106(4), the owner of a copyright in a particular sound

recording of the work—e.g., a specific performance by a given

artist—traditionally lacked an exclusive performance right. In

1995, Congress amended the Act to grant owners of copyrights

in sound recordings the exclusive right “to perform the

copyrighted work publicly by means of a digital audio

transmission.” Digital Performance Right in Sound

Recordings Act of 1995, Pub. L. No. 104-39, § 2, 109 Stat. 336,

336 (codified at 17 U.S.C. § 106(6)).

Congress, though, subjected that right to a system of

statutory licenses. The statutory licenses enable digital audio

services to perform copyrighted sound recordings by paying

predetermined royalty fees, without separately securing a

copyright holder’s permission. See Intercollegiate Broad. Sys.,

Inc. v. Copyright Royalty Bd., 796 F.3d 111, 114 (D.C. Cir.

2015) (citing Digital Millennium Copyright Act, Pub. L. No.

105-304, 112 Stat. 2860 (1998)).

The authority to set rates and terms for the statutory

licenses resides with the Copyright Royalty Board, a group of

three Copyright Royalty Judges appointed by the Librarian of

Congress. 17 U.S.C. § 801. When the Board undertakes the

4

process of setting a statutory license, it first allows interested

parties to negotiate private license rates and terms. See id.

§ 803(b)(3); 37 C.F.R. § 351.2. For parties that do not reach a

voluntary agreement, the Board holds adversarial proceedings

to determine the standard rates and terms of the statutory

license. See 37 C.F.R. § 351.3 et seq.

At the conclusion of its proceedings, the Board issues a

final determination establishing the rates and terms and

explaining its decisionmaking. Id. § 803(c)(3). The Board’s

determination is reviewed by the Register of Copyrights for

legal error, id. § 802(f)(1)(D), and published by the Librarian

of Congress in the Federal Register, id. § 803(c)(6). The

determination is subject to review in this court. Id. § 803(d)(1).

B.

The Board conducts a separate ratesetting proceeding for

each statutory license it administers, and each license pertains

to a distinct category of transmission service. See 17 U.S.C.

§ 801(b)(1). One license covers webcasters. Every five years,

the Board holds proceedings to determine the “reasonable rates

and terms of royalty payments” governing the webcaster

statutory license for the ensuing five-year period. Id.

§ 114(f)(2)(A).

The statutory license for webcasters applies solely to

noninteractive services, i.e., services that select the songs they

play for listeners. Id. One example of a noninteractive

webcaster is a Pandora music channel. By contrast, an

interactive webcaster—i.e., one that allows each listener to

pick particular songs to hear on demand—must negotiate its

copyright licenses on the open market. Id. § 114(d)(2)(A)(i).

An example of an interactive service is Spotify’s basic service.

5

The Board must “establish rates and terms” for the

webcaster statutory license “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 Act further directs the Board to base its

“decision on economic, competitive and programming

information presented by the parties.” Id. The Board may also

consider the rates and terms negotiated for comparable services

and “comparable circumstances under voluntary license

agreements.” Id. Additionally, the rates and terms set by the

Board “shall distinguish among the different types of”

webcaster services, id. § 114(f)(2)(A), meaning that distinct

segments of webcasters—such as noncommercial services—

receive their own rates and terms.

In carrying out those statutory directives, the Board has

developed a benchmark-based process. See Determination of

Royalty Rates for Digital Performance Right in Sound

Recordings and Ephemeral Recordings (Web III Remand), 79

Fed. Reg. 23,102, 23,110 (Apr. 25, 2014). First, interested

parties submit information they think should guide the Board’s

ratesetting. That information includes “voluntary license

agreements” negotiated for comparable services, 17 U.S.C.

§ 114(f)(2)(B), which the parties believe the Board can use as

benchmark rates. The Board assesses whether the voluntary

agreements adequately reflect rates “that would have been

negotiated in the marketplace between a willing buyer and a

willing seller.” Id. If not, the Board determines whether it can

adjust the agreements to render them useful benchmarks. See

Web III Remand, 79 Fed. Reg. at 23,115.

The Board uses the accepted benchmarks to establish a

“zone of reasonableness” and fixes the statutory license rate

within that zone. See id. at 23,110. The Board then repeats

6

that process for each segment of webcaster services for which

it sets distinct rates.

C.

The Board’s previous ratesetting determinations for the

webcaster statutory license have been reviewed (and largely

upheld) by this court. See Intercollegiate Broad. Sys., Inc., 796

F.3d 111 (D.C. Cir. 2015); Intercollegiate Broad. Sys., Inc. v.

Copyright Royalty Bd., 574 F.3d 748 (D.C. Cir. 2009);

Beethoven.com LLC v. Librarian of Cong., 394 F.3d 939 (D.C.

Cir. 2005). This case concerns the Board’s fourth ratesetting

proceeding for webcasters, which set the rates and terms of the

statutory license for 2016 to 2020.

The proceeding included a six-week hearing, in which the

Board admitted some 660 exhibits consisting of more than

12,000 pages of documents and heard the oral testimony of 47

witnesses. Determination of Royalty Rates and Terms for

Ephemeral Recording and Webcasting Digital Performance of

Sound Recordings (Web IV), 81 Fed. Reg. 26,316, 26,317 (May

2, 2016). Fifteen parties participated, id. at 26,316–17,

including the two parties who bring this appeal: (i)

SoundExchange, Inc., a collective management organization

representing holders of copyrights in sound recordings, which

receives royalty payments under the webcaster statutory

license and distributes the payments to copyright holders; and

(ii) George Johnson (dba GEO Music), an independent

singer/songwriter.

Several parties submitted voluntarily negotiated

agreements for the Board to consult as benchmarks. The Board

adopted several of those proposed benchmarks, using them to

set distinct rates for (i) ad-based commercial noninteractive

webcaster services and (ii) subscription-based commercial

7

noninteractive webcaster services. Id. at 26,404. Ad-based

services do not charge listeners a fee and earn revenue by

broadcasting advertisements between songs. Subscription-

based services charge listeners a fee and play music streams

uninterrupted by advertisements.

1. With respect to the rates for ad-based services, two

webcaster companies that offer such services—Pandora Media

and iHeartMedia—each proposed a benchmark agreement

derived from the ad-based, noninteractive services market.

Pandora based its proposal on a royalty agreement it had

negotiated with Merlin, an agency representing thousands of

independent record companies. 81 Fed. Reg. at 26,355–56.

iHeart based its proposal on an agreement it had negotiated

with Warner, a major record label. 81 Fed. Reg. at 26,375.

Both Pandora’s and iHeart’s proposed ad-based

benchmark agreements contained a feature known as

“steering.” “Steering” involves technology enabling a

webcaster to alter the natural frequency of performances under

its algorithm. If a webcaster chooses to “steer” in favor of a

given record label, it will play songs from artists on the label

more often than its algorithm would otherwise yield. Steering

benefits a record label because broader exposure can help

attract additional listeners to the label’s artists and generate

revenue for the label from traditional sources like music sales

and merchandise.

Pandora and other webcasters began incorporating

steering capability into their services fairly recently. In the

Pandora-Merlin and iHeart-Warner agreements, the parties

agreed that if the webcaster steered in favor of the record

company—increasing the number of plays for the record

company’s artists by a certain percentage—the webcaster

8

could reduce the per-performance license rate it paid to the

record company. See 81 Fed. Reg. at 26,356, 26,375.

SoundExchange opposed the use of the Pandora and iHeart

agreements as benchmarks. The Board rejected

SoundExchange’s concerns and accepted rates from the

Pandora and iHeart agreements as probative of the rates

noninteractive services would pay in the ad-based webcaster

market. The Board thus used those benchmarks to establish its

zone of reasonableness. The Board then set the statutory

royalty rate for ad-based commercial noninteractive

webcasters within that range at $0.0017 per song performance

for 2016, to be adjusted in later years to account for inflation.

81 Fed. Reg. at 26,405.

2. With respect to the rates for subscription-based

services, the Board again considered benchmarks that would be

probative of rates negotiated in that segment of the webcaster

market. Pandora proposed as a benchmark the steered rates

negotiated in its agreement with Merlin for its subscription-

based service (which it offers in addition to its ad-based

service). See 81 Fed. Reg. at 26,356. The Board, as noted,

rejected SoundExchange’s arguments against relying on the

Pandora-Merlin agreement and accepted the agreement’s

steered rates as a benchmark for subscription-based services.

81 Fed. Reg. at 26,374–75.

SoundExchange proposed its own benchmark agreement

for the Board to consider. SoundExchange’s proposal, though,

involved agreements negotiated between interactive webcaster

services and copyright owners. As discussed, interactive

webcasters—which allow on-demand streaming—cannot rely

on the statutory license and must negotiate their licenses on the

open market. 17 U.S.C. § 114(d)(2)(A)(i). To derive its

proposed benchmark, SoundExchange adjusted the average

9

royalty rate negotiated by interactive webcaster services to

account for differences between the interactive and

noninteractive markets.

The Board concluded that SoundExchange’s proposed rate

would serve as a useful benchmark for subscription webcaster

services. 81 Fed. Reg. at 26,344. The Board, though,

determined that SoundExchange’s proposed rates needed to be

further adjusted because the interactive services market is not

“effectively competitive.” 81 Fed. Reg. at 26,344, 26,353. In

the Board’s view, the statute calls for setting rates based on a

“sufficiently competitive market, i.e., an ‘effectively

competitive’ market.” 81 Fed. Reg. at 26,332.

Because the Board believed that “the interactive services

market is not effectively competitive,” the Board concluded

that SoundExchange’s proposed benchmark from that market

needed to be adapted “to render it . . . usable as an ‘effectively

competitive’ rate in . . . the noninteractive subscription

market.” 81 Fed. Reg. at 26,344. The Board did so by

discounting SoundExchange’s proposed benchmark based on a

“steering adjustment” grounded in the steered rates in the

Pandora-Merlin agreement, which the Board believed was a

useful proxy for the effects of price competition. 81 Fed. Reg.

at 26,343–44, 26,404–05.

The Board used the SoundExchange benchmark (with the

steering adjustment) and the Pandora benchmark (which

already accounted for steering) to set the zone of reasonable

rates for the subscription-based webcasters. 81 Fed. Reg. at

26,405. Selecting a rate within that range, the Board set the

statutory royalty rate for subscription-based commercial

noninteractive webcasters at $0.0022 per song performance for

2016, to be adjusted in ensuing years to account for inflation.

Id.

10

3. SoundExchange and George Johnson moved for

rehearing of the Board’s determination under 17 U.S.C.

§ 803(c)(2). In March 2016, the Board denied the motions for

rehearing, made certain clarifications, and issued its final

determination. In May 2016, the Librarian of Congress

published the final determination in the Federal Register. Web

IV, 81 Fed. Reg. 26,316. SoundExchange and George Johnson

now appeal the Board’s determination to this court.

II.

SoundExchange challenges four aspects of the Copyright

Royalty Board’s webcaster license determination: (i) the

adoption of the Pandora and iHeart benchmarks over

SoundExchange’s objections; (ii) the adjustment downward of

SoundExchange’s proposed benchmark rate for subscription-

based services in an effort to capture “effective competition”;

(iii) the decision to set separate license rates for ad-based and

subscription-based commercial webcasters; and (iv) the

revision of the requirements for auditors to qualify to perform

verification of royalty payments.

We review the Board’s rate determinations under § 706 of

the Administrative Procedure Act. 17 U.S.C. § 803(d)(3). The

APA requires us to “affirm the [Board’s] decision unless it is

‘arbitrary, capricious, an abuse of discretion, or otherwise not

in accordance with law.’” Dodge v. Comptroller of Currency,

744 F.3d 148, 155 (D.C. Cir. 2014) (quoting 5 U.S.C.

§ 706(2)(A)). Our review of “administratively determined

rates is particularly deferential because of their highly technical

nature.” Intercollegiate Broad. Sys., Inc., 796 F.3d at 127.

Applying that standard, we sustain the Board’s determination

against SoundExchange’s challenges.

11

A.

We first address SoundExchange’s arguments that the

Board’s acceptance of the Pandora and iHeart benchmark

agreements was arbitrary and capricious.

1.

SoundExchange contends that the Board arbitrarily failed

to account for the impact of the statutory license on the rates

negotiated in the Pandora and iHeart benchmark agreements.

It is undisputed that, in setting rates for the statutory license,

the Board must aim to approximate rates that would have been

negotiated “if the webcasting statutory license did not exist.”

Id. at 131. The hypothetical marketplace, that is, must be “free

of the influence of compulsory, statutory licenses.” Web IV, 81

Fed. Reg. at 26,316.

In approximating the rates that would be negotiated in the

hypothetical marketplace, though, the Board relies on actual,

real-world agreements. And parties in the actual marketplace,

SoundExchange emphasizes, generally negotiate with the

knowledge that they can simply fall back on the statutory rate

if they fail to strike a bargain. The parties refer to the effect of

the statutory license on market negotiations as the “shadow” of

the statutory license.

In the proceedings before the Board, SoundExchange

argued against the proposed Pandora and iHeart benchmarks

on the ground that they were affected by the shadow of the

statutory license. The Board disagreed, concluding that any

statutory shadow “did not meaningfully affect” the benchmark

rates on which it opted to rely. 81 Fed. Reg. at 26,329. Rather,

the Board reasoned, its accepted benchmarks were “sufficiently

representative” of the “particular segments of the statutory

12

market” they were chosen to reflect. Id. at 26,330 (emphasis

omitted).

The Board further explained that there was no “‘shadow’

problem” for the iHeart or Pandora benchmarks because the

pertinent rates in those agreements were “below the otherwise

applicable statutory rates.” Id. at 26,331. And when licensors

“voluntarily agreed to rates below the applicable statutory

rates . . . rather than defaulting to the higher statutory rate,” the

Board reasoned, the rates could not have been affected by the

shadow of the statutory license. Id.; see id. at 26,383.

In its determination, the Board compared the per-

performance royalty rate in the Pandora and iHeart agreements

to the per-performance rate in the statutory license. See id. at

26,331. SoundExchange now contends that the Board’s focus

on per-performance rates was flawed in that the Board instead

should have compared the total compensation the record

companies expected to receive under the benchmark

agreements to the total compensation anticipated under the

statutory license.

SoundExchange faces an uphill battle in challenging the

Board’s selection of its benchmarks. We have repeatedly

recognized that it is “within the discretion of the [Board] to

assess evidence of an agreement’s comparability and to decide

whether to look to its rates and terms for guidance.”

Intercollegiate Broad. Sys., Inc., 574 F.3d at 759. The Board’s

“broad discretion” encompasses its selection or rejection of

benchmarks, as well as its adjustment of benchmarks to “render

them useful.” Music Choice v. Copyright Royalty Bd., 774

F.3d 1000, 1009 (D.C. Cir. 2014). The Board’s discretion thus

includes determining how to respond to the potential effect of

the statutory shadow on a proposed benchmark. See Scope of

13

the Copyright Royalty Judges’ Continuing Jurisdiction, 80 Fed.

Reg. 58,300, 58,307 (Sept. 28, 2015).

Here, the Board decided to use per-performance rates as

the relevant point of comparison in determining whether a

benchmark agreement had been affected by the statutory

license. SoundExchange cites no Board precedent or other

authority supporting its contention that the Board was instead

obligated to use total compensation as the comparator. Nor did

SoundExchange propose to the Board a feasible way to

measure the “total compensation” supplied by a negotiated

bundle of rates and terms. We thus conclude that the Board

reasonably exercised its discretion to select per-performance

rates as the relevant metric of comparison.

Relatedly, SoundExchange faults the Board for failing to

assign value to nonmonetary terms in the Pandora and iHeart

agreements, which precluded the Board from adjusting the

benchmark rates accordingly. For instance, the copyright

holders negotiated promises of free advertising slots and

minimum shares of certain revenues. According to

SoundExchange, the Board would have better approximated

the benchmark rates under the agreements if it had accounted

for those sorts of terms.

The Board, though, examined those terms at length in its

determination and rejected the notion that they supported

raising the benchmark rates. See 81 Fed. Reg. at 26,359–63,

26,369–70, 26,384–88. In particular, because the parties

neglected to put evidence in the record about how to value the

other terms in the agreements, the Board had no basis on which

to account for their value in adjusting the benchmarks. See,

e.g., id. at 26,369, 26,387. The Board reasoned that it “cannot

arbitrarily adjust or ignore [an] otherwise proper and

reasonable benchmark.” Id. at 26,387. In its arguments before

14

us, SoundExchange again fails to point to any evidence in the

record on which the Board could have relied in adjusting the

benchmark per-performance rates. In that context, we

conclude that the Board reasonably declined to substitute its

own speculation for evidence that the parties could have made

part of the “written record.” 17 U.S.C. § 803(c)(3).

More generally, the Board gave extensive attention to

arguments about the statutory shadow in its determination, and

it concluded that the Pandora and iHeart benchmarks were

unaffected. 81 Fed. Reg. at 26,329–31, 26,383. That was a

permissible and adequately explained exercise of the Board’s

discretion.

2.

SoundExchange next contends that the Board arbitrarily

ignored how the statutory license generally prevents parties

from negotiating rates above the statutory royalty. An expert

witness for SoundExchange testified that the existence of the

statutory license has the effect of crowding out agreements that

would otherwise contain higher negotiated rates. See id. at

26,330. In SoundExchange’s view, that dynamic skews the

evidence before the Board, in that the field of potential

benchmark agreements negotiated in the actual market will

necessarily contain a per-performance royalty below the

statutory rate.

Addressing the expert’s testimony, the Board concluded

that, although his observation was “rational,” it was “too

untethered from the facts to be predictive or useful in adjusting

for the supposed shadow of the existing statutory rate.” Id. at

26,330. The Board thus chose to adhere to the “sufficiently

representative benchmarks” it had identified, without

attempting to account for the hypothetical, “missing”

15

agreements that might have rendered the expert’s theory a more

useful one in practice. Id.

As the Board noted elsewhere in its determination, the

Board “cannot arbitrarily adjust or ignore [an] otherwise proper

and reasonable benchmark.” Id. at 26,387. The Board was not

obligated to adjust its benchmarks based on what it considered

to be the expert’s “factual[ly] indetermina[te]” theory, id. at

26,330, in the absence of additional “written record” evidence

supporting the necessity for, and magnitude of, any associated

adjustments. 17 U.S.C. § 803(c)(3); see Settling Devotional

Claimants v. Copyright Royalty Bd., 797 F.3d 1106, 1121 (D.C.

Cir. 2015). The Board’s decision to rely on the concrete

evidence before it—instead of a theory the Board reasonably

thought could not be translated into practice—was permissible.

3.

SoundExchange also challenges the Board’s decision to

use steered rates as benchmarks. SoundExchange observes that

the discounted steered rates came with the promise of increased

performance of the record company’s recordings; and that

promise, SoundExchange notes, by nature could not be

extended to the entire marketplace (because it would be

impossible to increase the share of performances for all

copyright holders). As a result, SoundExchange asserts, it is

arbitrary to incorporate steered rates into the across-the-board

statutory license. See 81 Fed. Reg. at 26,363–65.

We disagree. The Board permissibly determined that,

although SoundExchange’s argument about steered rates is

“mathematically correct” in a “static sense,” it is not

“economically correct” in a “dynamic sense.” Id. at 26,366. A

webcaster of course cannot actually engage in steering for

every copyright holder. But the Board determined that the

16

mere threat of steering would introduce price competition into

the market. For instance, a webcaster’s threat to steer in favor

of a copyright holder’s competitors can induce the copyright

holder to agree to lower per-performance rates. That

competitive effect occurs, the Board reasoned, even if the

threat of steering is never realized. Id. at 26,366–67. We see

no basis to set aside the Board’s determination in that regard as

arbitrary.

The Board further concluded that “[s]teering is

synonymous with price competition in this market” and

adopted the steered rates as benchmarks. Id. at 26,366. We

afford the Board “broad discretion” when it “mak[es]

predictive judgments” about the music marketplace. Music

Choice, 774 F.3d at 1015. The Board acted within this

discretion in concluding that the likely effect of steering in the

music industry would be to promote price competition.

B.

We now turn to the Board’s decision to adjust

SoundExchange’s proposed benchmark rates to offset a

perceived lack of effective competitiveness in the interactive-

services market. Whereas noninteractive webcasters can make

use of the statutory license, interactive services must negotiate

licensing agreements with copyright holders in the market. See

17 U.S.C. §§ 114(d)(2)(A)(i), (f)(2)(A). The benchmark rate

for subscription services proposed by SoundExchange came

from the interactive-services market, see 81 Fed. Reg. at

26,335, not the noninteractive market for which the Board

sought to set rates and terms.

As a threshold step before incorporating SoundExchange’s

proposed benchmark rates into the ratesetting for the

noninteractive services market, the Board examined the

17

“[l]egal [i]ssue” of whether it was obligated “to set a rate that

reflects an ‘effectively competitive’ market populated by

willing buyers and willing sellers.” Id. at 26,331. The Board

concluded that the statute required setting “a rate that reflects a

market that is effectively competitive.” Id. at 26,332. But the

Board went on to explain that, even if the statute were

“ambiguous” in that regard, the Board “can and should

determine whether the proffered rates reflect a sufficiently

competitive market, i.e., an ‘effectively competitive’ market,”

and that such an approach is “certainly a permissible,

reasonable, and rational application of [17 U.S.C.] § 114 for a

number of reasons.” Id. at 26,332.

The Board then applied its “effective competition”

interpretation to SoundExchange’s proposed benchmark rates.

The Board found that the interactive services market giving rise

to SoundExchange’s benchmark was inadequately competitive

due to the possession of oligopoly power by certain copyright

holders, and that an adjustment was needed to “eliminate the

complementary oligopoly effect.” Id. at 26,353; see id. at

26,343–44. The Board concluded that the discount for steered

rates in the Pandora-Merlin agreement served as a suitable

proxy for estimating the effects of price competition, id. at

26,344; and it thus applied a corresponding discount factor to

SoundExchange’s proposed rates, id. at 26,404–05.

SoundExchange challenges the Board’s adoption of an

effective-competition standard when determining 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). SoundExchange’s objection is one of design,

not of application. That is, SoundExchange’s challenge is

confined to the Board’s threshold understanding that the statute

incorporates (or can incorporate) an effective-competition

requirement. SoundExchange does not go on to argue that, if

18

the statute can accommodate the Board’s interpretation, then

the specific way in which the Board implemented that

understanding—by discerning that the interactive-services

market lacked effective competition and by applying a steered-

rate adjustment as a fix—was nonetheless flawed.

We first consider whether the Board’s interpretation of the

statute is subject to review under the familiar Chevron

framework. See Chevron U.S.A. Inc. v. Nat. Res. Def. Council,

Inc., 467 U.S. 837 (1984). Answering the question yes, we

then review—and sustain—the Board’s interpretation under

Chevron.

1.

We have previously applied the Chevron framework when

reviewing the Board’s interpretation of the same statutory

provision at issue here: the requirement to determine royalty

rates that “most clearly represent the rates . . . that would have

been negotiated in the marketplace between a willing buyer and

a willing seller.” 17 U.S.C. § 114(f)(2)(B); see Intercollegiate

Broad. Sys., Inc., 574 F.3d at 756–57. Our precedent thus

would seem to call for applying Chevron in this case as well.

The path is not so straightforward, though, because the

Board does not invoke—or even cite—Chevron in its briefing

to us. To the contrary, whereas SoundExchange treats (and

challenges) the Board’s adoption of an effective-competition

standard as a matter of statutory interpretation, the Board’s

briefing does not engage the issue on the same terms. The

Board does not defend its adjustment of SoundExchange’s

proposed benchmark rates as a reasonable understanding that

the statute calls for identifying rates that would prevail in a

hypothetical, effectively competitive market. The Board

instead treats the adjustment solely as a case-specific effort to

19

adapt the conditions in the interactive market to the actual

conditions in the noninteractive market. That approach is

difficult to square with the Board’s treatment of the issue in its

order under review. Indeed, the Board’s determination

contains a separate section at the outset entitled: “The Legal

Issue of Whether Effective Competition is a Required Element

of the Statutory Rate.” 81 Fed. Reg. 26,331–34.

Does the Board’s failure to reference the Chevron

framework in its briefing in our court mean that we should

disregard Chevron when reviewing the Board’s challenged

interpretation? We recently held that an agency can forfeit its

ability to obtain deferential review under Chevron by failing to

invoke Chevron in its briefing. Neustar, Inc. v. FCC, 857 F.3d

886, 893–94 (D.C. Cir. 2017). Before Neustar, we had held

that a party challenging an agency’s interpretation of a statute

could forfeit an objection to Chevron deference. See Lubow v.

U.S. Dep’t of State, 783 F.3d 877, 884 (D.C. Cir. 2015). But

we had not addressed the converse question of whether an

agency defending its decision could forfeit an entitlement to

Chevron deference. In Neustar, the “FCC’s brief nominally

reference[d] Chevron’s deferential standard in its standard of

review but did not invoke this standard with respect to” the

challenged statutory interpretation at issue. 857 F.3d at 893–

94. We held that the agency had thereby “forfeited any claims

to Chevron deference.” Id. at 894.

If that were all we said in Neustar, the Board seemingly

would have forfeited its ability to benefit from Chevron

deference here as well. But in Neustar, we grounded our

finding of forfeiture on an additional observation beyond the

agency’s failure to invoke Chevron in its briefing to us:

“Similarly,” we explained, “review of the relevant agency

orders shows no invocation of Chevron deference for this

matter.” Id.

20

By that observation, we did not indicate a “magic words”

requirement. We do not anticipate agencies would reference

the Chevron framework by name in the course of their own

decisionmaking: Chevron is a standard of judicial review, not

of agency action. See Braintree Elec. Light Dep’t v. FERC,

667 F.3d 1284, 1288 (D.C. Cir. 2012) (“[T]he Chevron two-

step is a dance for the court, not the Commission.”). We

instead indicated that, if an agency manifests its engagement in

the kind of interpretive exercise to which review under

Chevron generally applies—i.e., interpreting a statute it is

charged with administering in a manner (and through a

process) evincing an exercise of its lawmaking authority—we

can apply Chevron deference to the agency’s interpretation

even if there is no invocation of Chevron in the briefing in our

court. After all, “it is the expertise of the agency, not its

lawyers,” that ultimately matters. Peter Pan Bus Lines, Inc. v.

Fed. Motor Carrier Safety Admin., 471 F.3d 1350, 1354 n.3

(D.C. Cir. 2006).

Here, the Board’s determination amply manifests the

requisite engagement in an exercise of interpretive authority.

Indeed, the Board explicitly considered “the plain meaning of

the statute, the clear statutory purpose, applicable prior

decisions, and the relevant legislative history.” 81 Fed. Reg. at

26,332. The Board in fact essentially incanted the language of

the Chevron framework (even though, as we have said, an

agency need not parrot the language of Chevron in order to

receive deference). While the Board first read the statute to

compel it to determine rates that would prevail in a market

characterized by effective competition, the Board did not stop

there. The Board went on to explain that, even if the statute

were “ambiguous” on that score, it “can and should determine

whether the proffered rates reflect a sufficiently competitive

market, i.e., an ‘effectively competitive’ market.” Id. at

26,332. And while that alone confirms the agency’s

21

involvement in an interpretive enterprise implicating Chevron,

the Board even echoed the language of Chevron review in

explaining that its interpretation “is certainly a permissible,

reasonable, and rational application of § 114.” Id.; see, e.g.,

Jacoby v. NLRB, 325 F.3d 301, 310 (D.C. Cir. 2003) (“We

are . . . required by Chevron to defer to [the agency’s]

reasonable and permissible interpretation of the Act.”).

In sum, consistent with our previous application of

Chevron to the Board’s interpretation of the same statute,

Intercollegiate Broad. Sys., Inc., 574 F.3d at 757, we will again

apply the Chevron framework in reviewing the Board’s

interpretation of § 114(f)(2)(B)—this time with regard to the

Board’s application of an effective-competition standard.

2.

Under Chevron review, we first assess whether the statute

directly speaks “to the precise question at issue” so as to

foreclose (or compel) the agency’s interpretation. Chevron,

467 U.S. at 842. If so, we “must give effect to the

unambiguously expressed intent of Congress.” Id. at 843. But

if not, we defer to the agency’s resolution of the statute’s

ambiguity as long as its interpretation is reasonable. See id.;

Intercollegiate Broad. Sys., Inc., 574 F.3d at 757.

a. SoundExchange contends that the Board’s application

of an effective-competition standard is foreclosed by the

statute. The Board reached the opposite conclusion in its

determination, reasoning that its effective-competition

interpretation is compelled by the statute. We disagree with

both propositions.

The notion that § 114(f)(2)(B) either forecloses or compels

the Board’s effective-competition interpretation stands in

22

considerable tension with our decision in Intercollegiate

Broadcast System. There, we rejected an argument by

webcasters that the same statute “requires the [Board] to base

rates on a perfectly competitive market.” 574 F.3d at 757. The

statute, we concluded, “does not require that the market

assumed by the [Board] achieve metaphysical perfection in

competitiveness.” Id. We said that the “statute speaks only of

a ‘willing buyer and a willing seller.’” Id. That is the standard

the Board must “apply in evaluating whether a market

benchmark [is] an appropriate model on which to base [its] own

rate determination.” Id. Ultimately, we explained, there is an

“inherent ambiguity in the statute’s mandate.” Id.

In Intercollegiate Broadcast System, we deemed

§ 114(f)(2)(B) inherently ambiguous with regard to the degree

of “competitiveness” in the “market assumed by the” Board

when assessing “whether a market benchmark [is] an

appropriate model on which to base [its] own rate

determination.” Id. That description perfectly captures the

Board’s interpretive exercise in this case. And in

Intercollegiate Broadcast System, we held that the statute did

not require the Board to assume a “perfectly competitive

market” when assessing the suitability of a “market

benchmark.” Id. Instead, the statute left that decision to the

agency’s discretion. Here, by the same token, the statute leaves

to the agency’s discretion whether to assume an “effectively

competitive market” when assessing the suitability of

SoundExchange’s proposed benchmark rates.

The Board, in nonetheless concluding that § 114(f)(2)(B)

compels it to assume an effectively competitive market, located

that understanding primarily in the statute’s requirement that

the Board base the determination of rates “on economic,

competitive and programming information presented by the

parties.” 17 U.S.C. § 114(f)(2)(B) (emphasis added); see 81

23

Fed. Reg. at 26,331–32. But the requirement to consider

“competitive information” does not say how to consider the

information. Just as the Board must consider “competitive

information” but retains discretion whether to assume a

perfectively competitive market, Intercollegiate Broad. Sys.,

Inc., 574 F.3d at 757, it likewise must consider “competitive

information” but retains discretion whether to assume an

effectively competitive market.

SoundExchange, for its part, contends that § 114(f)(2)(B)

compels the Board to adopt rates that would be negotiated in

the actual market, without any adjustment to account for how

the rates might vary if the market were effectively competitive.

But as we indicated in Intercollegiate Broadcast System, the

statute does not compel any particular level of competitiveness,

including the level existing in the actual market.

For instance, as the Board suggested in its determination,

§ 114(f)(2)(B)’s reference to rates negotiated “between a

willing buyer and a willing seller” could be understood to allow

adjustments to offset the existence of market power: “neither

sellers nor buyers can be said to be ‘willing’ partners to an

agreement if they are coerced to agree to a price through the

exercise of overwhelming market power.” 81 Fed Reg. 26,331

(internal quotation marks omitted). In that sense, “the ‘willing

seller/willing buyer’ standard” can be read to “call[] for rates

that would have been set in a ‘competitive marketplace.’” Id.

at 26,333.

SoundExchange also relies on a separate provision in the

Copyright Act that authorizes the Board to consider certain

policy objectives when setting rates for services other than

webcasting. See 17 U.S.C. § 801(b)(1). Congress’s express

mandate to consider policy objectives in that provision,

SoundExchange asserts, means that the absence of any such

24

mandate in § 114(f)(2)(B) forecloses consideration of external

policy objectives vis-à-vis the license for webcasters. But the

consideration of market competitiveness under § 114(f)(2)(B)

does not involve policy objectives external to that provision’s

mandate. Rather, it is an implementation of the “willing

buyer/willing seller” standard itself.

We thus reject SoundExchange’s and the Board’s

competing efforts to see unambiguous clarity where we have

previously seen meaningful ambiguity. In light of “the inherent

ambiguity in the statute’s mandate,” we proceed to “assess the

reasonableness of the [Board’s] interpretation” under the

second step of the Chevron framework. Intercollegiate Broad.

Sys., Inc., 574 F.3d at 757.

b. As we explained in Intercollegiate Broadcasting

System, the Board, “not this court, bear[s] the initial

responsibility for interpreting the statute.” Id. We perceived

“nothing in the [Board’s] interpretation to establish

unreasonableness” in that case, id., and we reach the same

conclusion here.

The Board, as set out above, interpreted the “willing

buyer/willing seller” standard to authorize the setting of rates

at levels that would prevail in a market characterized by

effective competition. The Board’s understanding to that effect

is reasonable. The Board relied on one of its prior

determinations in reasoning that, “[b]etween the extremes of a

market with ‘metaphysically perfect competition’ and a

monopoly (or collusive oligopoly) market devoid of

competition there exists in the real world . . . a mind-boggling

array of different markets, all of which possess varying

characteristics of a ‘competitive marketplace.’” 81 Fed. Reg.

at 26,333 (internal quotation marks and citation omitted). The

“willing buyer/willing seller” standard, the Board permissibly

25

believes, gives it discretion to identify the relevant

characteristics of competitiveness on which to base its

determination of the statutory royalty rates.

The Board also found support for its interpretation in the

statute’s integrally associated requirement to consider

“competitive information” submitted by the parties. 17 U.S.C.

§ 114(f)(2)(B). While that obligation does not compel the

Board to determine rates through the lens of an effective-

competition standard, it does support the Board’s decision to

do so in its discretion. As the Board explained in its

determination, the requirement to weigh “competitive

information” is “consistent with the idea that Congress

intended to delegate discretion to the [Board] to determine

whether the rates [it] set[s] reflect[] an appropriate level of

competitiveness.” 81 Fed. Reg. at 26,334. In other words, “the

statutory charge that the [Board] weigh ‘competitive

information’ indicates that the [Board is] empowered to make

judgments and decide whether the rates proposed adequately

provide for an effective level of competition.” Id. And here,

the Board believed it was “presented with highly specific facts

regarding how to use the impact of steering on rate setting in

order to measure and account for the ‘complementary

oligopoly’ power . . . that serves to prevent effective

competition” in the interactive-services market. Id.

The Board, on that basis, found it necessary to adjust

SoundExchange’s proposed benchmark rates from the

interactive-services market. We see no ground for rejecting the

Board’s interpretation of § 114(f)(2)(B) giving rise to its

decision to adjust SoundExchange’s proposal.

26

C.

We now turn to the Board’s decision to set different

statutory rates for ad-based and subscription-based

noninteractive webcasters. SoundExchange claims that the

Board’s establishment of different rates for those two services

was arbitrary and capricious because the Board inadequately

examined the propriety of distinct rates under the approach

prescribed by its precedents. We reject that challenge and

uphold the Board’s decision.

The Copyright Act specifically contemplates the Board’s

ability to adopt different rates for distinct market segments in

the provision of webcasting services. The Act directs the

Board to “distinguish among the different types of eligible

nonsubscription transmission services and new subscription

services.” 17 U.S.C. § 114(f)(2)(A). Exercising that authority,

the Board has previously set different rates for commercial and

noncommercial noninteractive webcasting services. See

Digital Performance Right in Sound Recordings and

Ephemeral Recordings (Web II), 72 Fed. Reg. 24,084, 24,097

(May 1, 2007); Web III Remand, 79 Fed. Reg. at 23,122. And

the express grant of authority to draw distinctions between

“nonsubscription transmission services” and “new subscription

services,” 17 U.S.C. § 114(f)(2)(A), necessarily means the

Board can distinguish between nonsubscription services, on

one hand, and subscription services, on the other.

In the Board’s previous webcaster ratesetting proceedings,

it considered rate differentiation between two services to be

appropriate when the services occupied “distinct segment[s] of

the noninteractive webcasting market.” Web II, 72 Fed. Reg. at

24,097. The Board examined whether the services compete

with each other for listeners, id. at 24,098, or whether one

service instead “operate[d] in a submarket separate from and

27

noncompetitive with” the other, id. at 24,095. And in

ascertaining whether market segmentation exists, the Board

looks to a number of factors, including whether comparable

agreements have been negotiated in which one service paid a

lower rate than the other. Id. at 24,097; Web IV, 81 Fed. Reg.

at 26,319–20.

In its proceedings in this case, the Board decided to

distinguish between ad-based and subscription-based services.

It recounted the existence of “overwhelming” “record

evidence” of a “sharp dichotomy between listeners” willing to

pay for subscription services and those instead willing to use

only ad-based (and cost-free) services. 81 Fed. Reg. at 26,345.

The “bimodal chasm” separating consumers based on their

willingness to pay, the Board explained, established a

“dichotomized market” as between ad-based and subscription-

based services. Id. Based on that evidence, the Board

determined that “ad-supported (free-to-the-listener) internet

webcasting appeals to a different segment of the market,

compared to subscription internet webcasting, and therefore the

two products [are] differentiated by this attribute.” Id. at

26,346. The Board then set distinct statutory rates for each

service. Id. at 26,404–05.

SoundExchange contends that the Board failed to explain

its decision to differentiate, instead skipping to the conclusion

that distinct rates were appropriate. It is true that the Board did

not include its analysis of the difference between ad-based and

subscription-based services in the section of its determination

entitled “Rate Differentiation.” Id. at 26,319–23. But the

Board’s analysis cannot be considered arbitrary based merely

on the title of the section in which it is found, and the Board

devoted ample attention to the issue elsewhere in the

determination. See id. at 26,344–46.

28

SoundExchange argues that the Board’s decision to adopt

different rates was nonetheless arbitrary because the Board

departed from the approach established by its precedents. We

see no such inconsistency. In Web II, the Board established

that the key question in ascertaining the propriety of

differentiation is whether the services occupy “distinct

segment[s]” of the market or instead compete for listeners. 72

Fed. Reg. at 24,097–98. That question forms the core of the

Board’s analysis in this case, including its extensive discussion

of listeners’ divergent attitudes with regard to their willingness

to pay for webcasting services. 81 Fed. Reg. at 26,345–46.

And the determination concludes on that basis that ad-based

services make up “a different segment of the market” than

subscription-based services. Id. at 26,346. In addition, the

Pandora and iHeart benchmark agreements afforded the Board

concrete examples of buyers and sellers negotiating lower rates

for ad-based services than subscription services, and the Board

relied on those benchmarks to establish a lower statutory

license rate for ad-based services. See id. at 26,356, 26,404–

05.

We thus conclude that the Board adequately and

reasonably explained its decision to set different rates for ad-

based and subscription noninteractive webcasting services.

D.

SoundExchange’s final challenge concerns the Board’s

decision to amend a license term setting forth the requirements

to qualify as an auditor that can verify royalty payments.

Recall that, in addition to determining rates for the statutory

license, the Board also establishes other “terms that would have

been negotiated in the marketplace.” 17 U.S.C. § 114(f)(2)(B).

Since the first webcaster ratesetting, each statutory license has

included a term enabling copyright holders to conduct an audit

29

to verify webcasters’ royalty payments. See, e.g.,

Determination of Reasonable Rates and Terms for the Digital

Performance of Sound Recordings and Ephemeral Recordings

(Web I), 67 Fed. Reg. 45,240, 45,276 (July 8, 2002); 37 C.F.R.

§ 380.6. And since Web II, the Board’s regulations have

provided that, to be “qualified” to conduct the verification

process, an auditor must be a certified public accountant. 72

Fed. Reg. at 24,109, 24,111; see 37 C.F.R. § 380.7.

A number of parties petitioned the Board to amend that

term in the proceedings for this ratesetting cycle.

SoundExchange proposed amending the definition of

“qualified auditor” to embrace auditors with “specialized

experience,” even if not a CPA. SX Proposed Findings of Fact

451, J.A. 1252. The National Association of Broadcasters

(NAB) and the National Religious Broadcasters

Noncommercial Music License Committee (NRBNMLC)

made a proposal in the opposite direction: they opposed

SoundExchange’s proposal to relax the requirements to qualify

as an auditor and instead proposed restricting them. Those

parties suggested requiring that an auditor not only be a CPA

but also be “licensed in the jurisdiction where it seeks to

conduct a verification.” NAB Proposed Rates and Terms 3,

J.A. 146; NRBNMLC Proposed Noncommerical Webcaster

Rates and Terms 3 (Oct. 7, 2014),

https://www.crb.gov/rate/14-CRB-0001-WR/statements/

NRBNMLC.pdf.

The Board adopted that proposal, defining “qualified

auditor” to mean “an independent Certified Public Accountant

licensed in the jurisdiction where it seeks to conduct a

verification.” 81 Fed. Reg. at 26,404, 26,409; 37 C.F.R.

§ 380.7. The Board explained that the new requirement

“provides assurance that the auditor will be accountable and

30

amenable to local governance in the jurisdiction in which it

operates.” 81 Fed. Reg. at 26,404.

SoundExchange challenges the Board’s revised definition

of “qualified auditor” on the grounds that its adoption was

unsupported by evidence in the record. The Board’s

determination relies on the expert testimony of Professor

Roman Weil in support of the new licensure requirement. Id.

at 26,404. SoundExchange objects that Professor Weil’s

testimony did not speak to in-state licensure in particular. His

testimony, however, addressed the benefits of using CPAs due

to the application of local standards of professional conduct

and oversight. See Written Rebuttal Testimony of Roman L.

Weil 11–13, J.A. 1098–100. In particular, he noted that CPAs

are “governed by the principles, rules, and requirements

promulgated by their applicable state accountancy boards,” id.

at 11, J.A. 1098, and “face professional consequences” for

misconduct, including the ability of state accountancy boards

to “take action with respect to the CPA’s license,” id. at 13 &

n.16, J.A. 1100.

To the extent the importance of local boards in governing

the conduct of CPAs is not self-evident, Weil’s testimony

sufficiently brings the point home. And on that basis, the

Board reasonably concluded that requiring auditors to be

licensed where they practice would ensure that they are subject

“to the jurisdiction of the local CPA governing bodies and local

courts.” 81 Fed. Reg. at 26,404. The Board’s explanation, in

conjunction with Weil’s testimony, establishes that the

determination is adequately “supported by the written record.”

17 U.S.C. § 803(c)(3).

SoundExchange nonetheless argues that the revised

definition lacks support because the Board ignored the

existence of CPA “mobility laws.” Mobility laws permit CPAs

31

certified in one state to practice in another state, so long as they

submit to the disciplinary authority of the other state.

Whatever the force of SoundExchange’s objection, however,

we cannot set aside the Board’s determination on those grounds

because SoundExchange failed to present the argument at a

time the Board could give it consideration.

As we have explained, a “reviewing court generally will

not consider an argument that was not raised before the agency

at the time appropriate under its practice.” BNSF Ry. Co. v.

Surface Transp. Bd., 453 F.3d 473, 479 (D.C. Cir. 2006)

(internal quotation marks omitted). Here, SoundExchange

made an argument against the licensure requirement in its

request for rehearing. But SoundExchange failed to give the

Board the opportunity to address the argument it now presses

before us: that an additional licensure requirement is irrational

because state CPA “mobility” laws already subject CPAs to the

disciplinary authority of the various local jurisdictions in which

they practice.

The rehearing request instead merely referenced the

existence of CPA mobility laws (in a footnote) to demonstrate

that the new requirement differed from requirements generally

imposed on CPAs. See SX Pet. for Rehearing 9 n.14, J.A.

1269. To be sure, at the time of SoundExchange’s rehearing

petition, the Board had not yet explicitly referenced Weil’s

testimony in support of the new licensure requirement. It did

so in responding to the rehearing petition. But the Board had

adopted the new licensure requirement, which gave

SoundExchange the opportunity to object to it on the ground

that state mobility laws rendered it unnecessary. Yet while

SoundExchange noted the existence of state mobility laws in a

footnote in its rehearing petition, it made no suggestion that the

laws rendered the new licensure requirement unnecessary. Cf.

BNSF Ry. Co., 453 F.3d at 478 (treating claim as forfeited in

32

part because the claimant “first made the argument in a

footnote to its petition for reconsideration” to the agency).

Notably, it remains possible that the Board could interpret

its new definition of “qualified auditor” such that CPA mobility

laws would serve to “satisfy the local-licensing requirement.”

Board Br. 60; see also NAB Br. 41. The Board has confirmed

that SoundExchange can ask the Board to address the issue “on

a prospective basis.” Board Br. 61. If SoundExchange pursues

that course, the Board could clarify its regulation in a manner

favorable to SoundExchange in that respect, or could amend

the regulation to align with its definition of “qualified auditor”

in other ratesetting proceedings.

As a result, SoundExchange might be able to secure its

preferred understanding of the “qualified auditor” licensure

requirement through other means. Its effort to obtain relief

here, however, is unsuccessful.

III.

The final challenge before us, brought by pro se appellant

George Johnson, concerns the constitutionality of the Board’s

determination. During the Web IV proceedings, Johnson asked

the Board to refer several questions to the Register of

Copyrights for resolution, including whether the ratesetting

proceeding violated Johnson’s “exclusive rights” in his

copyrights or his due process rights in his property under the

Constitution. Mot. of George Johnson Requesting Referral of

Material Questions of Substantive Law 3, J.A. 351. The Board

denied Johnson’s motion to refer the questions. Johnson then

presented his constitutional concerns to the Board after its

initial determination, in his petition for rehearing.

33

The Board rejected Johnson’s rehearing petition. The

Board found it “difficult to discern [his] argument,” stating

that, while the petition “seems to suggest that the [Board] gave

insufficient weight to copyright owners’ exclusive rights,” it

“does not develop that assertion into a coherent legal

argument.” Order Denying GEO Motion for Reh’g 5, J.A. 374.

The Board further explained that, insofar as Johnson sought “to

challenge the constitutionality of the [Copyright] Act,” the

Board “decline[d] to rule on that challenge.” Id. The Board

explained that the issue had been raised for the first time only

on rehearing, that the Board’s authority to rule on the Act’s

constitutionality was unclear, and that the Board would decline

to do so in any event “on the basis of such inadequate

argumentation.” Id.

On appeal, Johnson contends that the Board improperly

failed to address his constitutional arguments. As the Board

correctly argues, however, Johnson did not properly preserve

his constitutional challenge. Under the Copyright Act, the

Board has “considerable freedom to determine its own

procedures.” Settling Devotional Claimants, 797 F.3d at 1118

(internal quotation marks omitted). The Board has established

that “[a] party waives any objection to a provision in the

determination unless the provision conflicts with a proposed

finding of fact or conclusion of law filed by the party.” 37

C.F.R. § 351.14(b). As a result, an argument presented to the

Board for the first time at rehearing is considered forfeited. See

Intercollegiate Broad. Sys., Inc., 574 F.3d at 760.

Although Johnson requested referral of his constitutional

concerns to the Register and quoted general “copyright law

principles” in his proposed findings of fact, he did not direct a

constitutional argument to the Board until his petition for

rehearing. Order Denying GEO Mot. for Reh’g 5, J.A. 374.

Under the Board’s regulations and precedent, that was too late,

34

and the Board reasonably denied Johnson’s petition for

rehearing in part on that basis. See Settling Devotional

Claimants, 797 F.3d at 1122.

Notwithstanding the Board’s denial of Johnson’s petition

in part on the ground that his arguments were untimely, the

Board also gave some consideration to Johnson’s arguments on

the merits. We thus will do the same.

Johnson contends that the Board set royalty rates so low as

to deprive copyright holders of their property rights in violation

of the Constitution’s Copyright Clause and Due Process

Clause. With regard to due process, the Board held an

extensive adversarial proceeding in determining the

webcasting rates. Johnson had the opportunity to testify,

submit exhibits, file motions and statements, and propose his

preferred royalty rate. No more process was due. Addressing

a similar procedure for setting royalties that was applied by the

Board’s predecessor, we characterized “the suggestion that the

Panel’s process fell below the minimum constitutional

requirements of the Due Process Clause” as “specious.” Nat’l

Ass’n of Broads. v. Librarian of Cong., 146 F.3d 907, 929 n.20

(D.C. Cir. 1998) (affirming the Copyright Arbitration Royalty

Panel). Johnson has given us no reason to reach a different

conclusion here.

The Copyright Clause, U.S. Const. art. I, § 8, cl. 8, is

equally unhelpful to him. The clause gives Congress the power

to grant copyrights, but the grant of that power has never been

understood to require Congress to establish absolute rights in

intellectual property. Congress established copyright

protections for sound recordings but then created a regime of

statutory licenses as a limitation on copyright holders’ public

performance rights. See Intercollegiate Broad. Sys., Inc., 796

F.3d at 114. The Copyright Clause gives Congress the

35

responsibility to account for and balance the interests of

copyright holders and the public. And with regard to

noninteractive webcasting services, Congress made clear that

the Board was to approximate rates that would be negotiated in

the marketplace by willing buyers and sellers. The Board

carried out Congress’s design.

* * * * *

For the foregoing reasons, we affirm the determination of

the Copyright Royalty Board.

So ordered.