# Petition for Writ of Certiorari — Cablevision Co. v. Motion Picture Ass'n of America, Inc. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1580%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1988 - **Citation:** 487 U.S. 1235 ## Text - Supreme Court us re . L R ) ' SUPREME COURT, Ug FY = i '@ 4Z ae WASHINGTON, D.C, 094s 1908 ¥OSEPH F. SPANIOL, up. IN THE Supreme Court of the Gnited States OCTOBER TERM, 1987 CABLEVISION COMPANY, Petitioner, V. Motion PICTURE ASSOCIATION OF AMERICA, INC., et al., U.S. CopyRIGHT OFFICE AND ITS REGISTER, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT MARK J. TAUBER Counsel of Record Nora E. GARROTE PIPER & MARBURY 1200 19th Street, N.W. Washington, D.C. 20036 (202) 861-3900 MICHAEL A. SCHLANGER SHAW, PITTMAN, Potts & TROWBRIDGE 2300 N Street, N.W. Washington, D.C. 20037 (202) 663-8000 Counsel to Petitioner April 4, 1988 PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203 ee eal MO NT QUESTIONS PRESENTED 1. Whether the U.S. Copyright Office (the ‘‘Co- pyright Office’), a division of the Library of Con- gress, in light of its lack of statutory power to enforce the provisions of the Copyright Act of 1976, 17 U.S.C. §§ 101 et seg. (the ‘“‘Act’’), its lack of exnertise in applying traditional copyright principles to cable tel- evision, and its limited statutory mandate to imple- ment the provisions of the Act, has the authority to promulgate a binding regulation on the first impres- sion question of the proper construction of Section 111(d) of the Act, which creates a copyright compul- sory license for cable television. 2. Whether 37 C.F.R. § 201.17(b)(1), the regulation promulgated by the Copyright Office, is entitled to judicial deference under the principles of Chevron U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984) (‘‘Chevron’’), in circumstances where the regulation extends the reach of the statutory. scheme beyond that intended by Congress. LIST OF PARTIES AND RULE 28.1 STATEMENT The parties to the proceedings below were the petitioner Cablevision Company (plaintiff/anpellant/ cross-appellee below); the respondent Motion Picture Association of America, Inc. and its member com- panies Columbia Picture Industries, Inc., Embassy Communications, MGM/UA Entertainment Co., Orion Pictures Corporation, Paramount Pictures Corpora- tion, Twentieth Century-Fox Film Corporation, Turner Entertainment Company, Universal Pictures, and Warner Bros. Inc. (defendants/appellants below); the respondents Register of Copyrights and the Copyright Office of the United States Library of Congress (nec- essary party defendants/appe!lants below); and the National Cable Television Association, Inc., (plaintiff/ appellee below). The following Amici supported the position of the respondents in the court below: Major League Baseball National Basketball Association National Hockey League National Collegiate Athletic Association National Association of Broadcasters American Society of Composers, \uthors and Publishers Broadcast Music, Inc. Old-Time Gospel Hour Public Broadcasting Service National Public Radio Canadian Broadcasting Corporation Cablevision Systems Corporation is the parent com- pany of petitioner Cablevision Company. A list of petitioner’s subsidiaries and affiliates pursuant to Rule 28.1 of this Court is included in the Appendix hereto, pp. 84a-86a, infra. ne Bs PE one vee ill TABLE OF CONTENTS Page I oc cnsucedaeennenosens i LisT OF PARTIES AND RULE 28.1 STATEMENT ....... il MEETUP EUINETIEED .......cocodnccccvascacasenceddsccseoecs iv Nee csuuabunsunl 1 et istshaeaben l STATUTE AND REGULATIONS INVOLVED ...0.........000-- 1 I I cin ashowneomanans 2 REASONS FOR GRANTING THE WRIT ceeccccececcececeeeeees 11 I. The Decision of the D.C. Circuit is Incon- sistent in Principle With Decisions of This Court and Another Circuit Regarding the De- i to Which the Copyright Office Is En- NSCS ETERS CRANE Rea eee 12 II. Congress Did Not Charge the Copyright Of- fice With Other Than Ministerial Duties Un- der Section 111 and, Thus, the D.C. Circuit Erred in Deferring to It. ..............ccccccccccsses 14 III. The Decision of the D.C. Circuit Raises Sig- nificant Questions Regarding the Scope of This Court’s Decision in Chevron and the Role of Courts in Giving Effect to Congressional isles sini i crtisnin edinnetinidiesabtatenbinanes 20 IV. The Decision of the D.C. Circuit Dramatically Enhances the Imbalance Between Cable and Copyright Interests in the Future Adminis- tration of Section 111 of the Copyright RIN Belsieo Uisdesiptisstahapiansinabetadessobéaciocetenseusoncusens 27 iv TABLE OF AUTHORITIES CASEs: Page Atkins v. Rivera, 477 U.S. 154 (1986) «0... 20 Barlow v. Collins, 397 U.S. 159 (1970) ................. 21 Bartok v. Boosey & Hawkes, Inc., 523-F.2d 941 PIED ichnatienepicinininsadiislsibubiouniadilenslinenammenteuinals 13, 14, 20 Bethlehem Steel Corp. v. E.P.A., 723 F.2d 1303 (7th pen: MUU scbaidinsichnecouicesichalitaceieiatisin aati decodes 18 Bowen v. American Hospital Ass'n, 476 U.S. 610 CRIN: sesacdininasepennsdumhadbiedsschuscemmsouisuguecuaanesieaaaids 20 Board of Governors v. Dimension Financial Corp., CE Seas, Se CAD nthaciaschcccenuhicenestidtoouctbentbons 20 Boston Sand & Gravel Co. v. United States, 278 Sie ee EE ie canna ioe Googe nee een 24 Chevron U.S.A. Inc. v. Natural Resources Defense Counctl, 467 U.S. 837 (1964) ....ccccccccccrsssesseses passim Connecticut Dept. of Income Maintenance v. Heckler, a Ere ee CD da taeicdencaesishcin sckcecbnionaabae 20 Corning Glass Works v. Brennan, 417 U.S. 188 PIED daniecenccmansanicaeierectnenatbascicacke neuen ceiaahessoe 25 DeSylva v. Ballentine, 351 U.S. 570 2 REARS ASIESADSIS EES Pee ETA LR ARRAS ates aS a 13, 14, 20 District of Columbia v. Carter, 409 U.S. 418 I saiielik ce icelednsecistintes isda ain ree cetera dln 26 Eltra Corp. v. Ringer, 579 F.2d 294 (4th Cir. BIPM cai didsiasidthcscsbaleiasalsaatoninanmetvslamialsnisasiiaiak 13 Esquire v.-Ringer, 591 F.2d 796 (D.C. Cir.), cert. denied, 440 U.S. 908 (1978) ..............ccccccereeeees 13 Federal Deposit Ins. Corp. v. Philadelphia Gear eo WR Ra Re 20 Fortnightly Corp. v. United Artists Television, Inc., ee Rg I EE ic dcinienentanababbadedstadininaties 3 INS v. Cardoza-Fonseca, 107 S. Ct. 1207 (1987) .. 21 Klein v. Republic Steel Corp., 435 F.2d 762 (3rd Se re Acne dalcanhicevancscbasasidunsndeledtectinnaianees 26 Table of Authorities Continued Page Louisiana Public Service Comm'n v. FCC, 106 S. CR Te Ce hesiasitnasintatnasntincancemnerteras 26 Lyng v. Payne, 106 S. Ct. 2333 (1986) ................. 26 Mazer v. Stein, 347 U.S. 201 (1954) .................0006 13 Miller v. Butterfield, 125 U.S. 70 (1988) «0... 25 Miller v. United States, 294 U.S. 435 (1935) ........ 26 National Cable Television Ass'n v. Copyright Roy- alty Tribunal, 689 F.2d 1077 (D.C. Cir. SOIED cicacsstianncccscasicciotaisianusanseamaademien 5, 10 NLRB v. United Food and Commercial Workers Union, Local 23, 108 S. Ct. 413 (1987) ......... 21 Norris Industries v. ITT, 696 F.2d 918 (11th Cir. BOI cieisnsinssnintsieisscsaceksnsscsacaeiaeammasaie 13 Oscar Mayer & Co. v. Evans, 441 U.S. 750 CTT GD cicsscnincatatessctiesiansthidpuiandicnaimmapmnna santas 24 Office of Consumers’ Counsel v. FERC, 635 F.2d RiSS GO. Cie. SORE eicknceeeeiene 26 O'Hara v. Luckenback S.S. Co., 269 U.S. 364 (ROIS acividscccciinodinseistiienGthicsimaupeetianaaeamaae 25 Rockbridge v. Lincoln, 449 F.2d 567 (9th Cir. SFE) cicivecnsnnnéacucsannictmadiieiaaaneeasa apaceaa 26 Schnapper v. Foley, 667 F.2d 102 (D.C. Cir. 1981), cert. denied, 455 U.S. 948 (1982) ................66 13 Securities Industry Ass'n v. Board of Governors of Federal Reserve System, 468 U.S. 137 CRED gisccssccncssscneanscessnetecepacetadn iat anenmadaatasaaanias 20, 21 Seeberger v. Cahn, 137 U.S. 95 (1980) ........ ee. 25 Skidmore v. Swift & Co., 323 U.S. 134 (1944) ..... 17 Teleprompter Corp. v. CBS, Inc., 415 U.S. 394 CLTEY ciiccidiicsesctspcesetaeemennaasiavdadoameatak Tyng v. Grinnell, 92 U.S. 467 (1876) ....... ee 25 United States v. City of Fulton, 475 U.S. 657 CHEIGD scsnccscsstssankacicdpnidaheitecsinaunaaliendiaanionetind 20 vi Table of Authorities Continued BOG CEDEED ccccosccnsscocccesccsnsdutconnnseusoneciasbeniivtnninen: United States v. Riverside Bayview Homes, 474 U.S. BBE CRIED cccosssscssshetsntnssipesbisaenaiaaninie a v. Smith, 553 F.2d 1239 (10th Cir. FED cnucvneciblcusecesiasaldhncenabeae aati CRGIETD cnscincatsicntecenscnassabicidiaiaaneeee BEE CEDUED covccnesnsecscovessssinseciausnnstnonabenaiusaiians Worthington rv. Abbott, 124 U.S. 434 (1888) Young vr. Community Nutrition Inst., 476 U.S. 974 CREBED . cccocecconsruosisesnbiconeiiasennthieeiensiaastaneasicamaane STATUTES AND REGULATIONS: ET OBC. & DOD cccsncessininncsicnnnnemanaaiel RT UG. & BOD ccccsrcsesinnssinisvsmmnnasaenanalaaie RF WBA & BED ccccscnncnseesensitannialanaae RF UBC. B BEB accerccsecocsesscnisecsennsemenmaatannidiandionn AT Wei Re & UD scecacessessccesectsoniassepnmaianee BT UK. & TBD cccccssccnnincissssinictsignsipienaaiaiaa UT CL. & GRD ccrcccssesseessnsntvnsieanneitnempinaianinnaa AT DBL. © BBD cncccssssscersensstsiassonnieneniaamanaaats BT WK © GB accccrsosessscnscsetasssnnsvnicnsbensmnmmeaigulsais RT UG. © ORG ceccccssersmasiisnssaninciinnnaeeiaaed RT UBL. BR GOTEL ccecesssntasecessintmrenssmiontansintaanann AT UBAN § OOD nnmnircnvernnnaiiae AT WBA. TOD ccccescsncnctsssttenencsenntesentininnnnninnians BT UBC. GB TOG TED cccecsceccsncsscssosssepevenseseinesinsevenis RT UBC. OG GOR GID sniccsscitctenniniinnidiana se & & S & = — oor or —_ ~ oF or vil : Table of Authorities Continued Page OO) OG Be iccsecsacersscnnsicocieeensiniinines l Oe Oe 0 Fe ccenicicesccetettidnmnniinitainaciiamnianten l Op PE OE ccttncetarseeniccenintsninnincdontinseieninain 1 , SIR | 1,2 Oy UE AID ccicerecsicenidternevensiianiigubindaiiaaa 1, 2 OS TE 0 BE canicteehvieunnmendnas 1, 2 BB UBC. 6 BBB cecccccrecccscnscccccsccesscccsececscsssscnsssssssocess 1,2 BT UBC. BB UBL, 66 B06. cceccerecsccscccscsssscscsccccesssssess 27 Tyme (ot oe 27 fot J Tf 2 eae eee 8 BT CPR. © BORAT ccceccssccscccsccccsscscesescscsscsscosesseees 2. 9. 16 Be OTe 6 PI vicceccntaissinscisnrtntesntetsictsnteiaiaieain 15 LEGISLATIVE MATERIALS: H.R. Rep. No. 1476, 94th Cong., 2d Sess. 47, re- rinted in 1976 U.S. Code Cong. & Admin. NewS SEBO .....cccccccceccsccccscccscscssscncscooscesssscosooses passim Cable Antenna Television (CATV): Hearings Before the Subcomm. on Communications and Power of the House Comm. on Interstate and Foreign Commerce, 92nd Cong., 1st Sess. 7 (1971) ..... 5 Copyright Law Revision: Hearings on H.R.2223 Be- fore the Subcomm. on Courts, Civil Liberties and the Administration of Justice of the House Comm. on the Judiciary, 94th Cong., 1st Sess. 4D1 (1DTS) ..ncccccscccccccecccscscrccsccsccccccsccscccsccooccsesees 6, 17 Hearings on S.1361 Before the Senate Subcomm. on Patents, Trademarks and Copyrights, 93d Cong., Ist Sess. 312 (1973) ........-.ccsceeeeeeeeens 24 The Communications Act of 1979: Hearings on H.R.3333 Before the Subcomm. on Communi- cations of the House Comm. on Interstate and Foreign Commerce, 96th Cong., Ist Sess. 684 CRO GD Saccenesssinasctsninnsassansncuisnanseresapeseniousanenatenannte 4, 5. 6 Vill Table of Authorities Continued Page Oversight of the Copyright Act of 1976: Cable Tel- evision Hearings Before the Senate Comm. on the Judiciary 97th Cong., 1st Sess. 111 UTI ssciecehnssencchctapheebinenaiiiesamiadnaeinenipiinaiunntiaiadaiabsicisseinnits 4, 18 Oversight Hearings on Cable Television Before the Subcomm. on Communications of the Senate Com. on Commerce. Science and Transporta- tion, 95th Cong., 1st Sess. 104 (1977) ........... 5 B. Ringer, Second Supplementary Report to Con- MOPUEEL, Sas. W ‘sicssiuchiiisinaphaiattinidaphsattunibintesddddcamslinenkaamssses 4 ADMINISTRATIVE REPORTS AND PROCEEDINGS: Cable Proposals, 31 FCC 2d 115 (1971) ................ 24 Cable Television Report and Order, 36 FCC 2d 143 GREED stesictondanionis slaildtneadiiiasibentdnibligibcodamaduamtauniebiaias 24 Cable Television Syndicated Program Exclusivity Rules, 79 FCC 2d 633 (1980) .....................00... 5, 24 Community Cable TV, Inc., 95 FCC 2d 1204 (1983), aff'd, 98 FCC 2d 1180 (1984) .................0000000. 7 Copyright Office Circular Rlb (March 1979) .......... 8 Establishment of Domestic Communications Satellite Facilities, 35 FCC 2d 844 (1972) ................... 5 First Report and Order in Dockets 14895 and 15233, ee ee Ce ED cacensthericeectsstaichaapitibicbeitanieteel 24 Notice of Final Regulations in Docket RM 79-4, 45 Fed. Reg. 45270 (1980) .......cccccccccssesssesesesees 8, 15, 16 Notice of Interim Regulations in Docket RM 80-2, 47 i es Se IIE incr stsncuicsnichtanenbacinionndes 16 Notice of Final Regulations in Docket RM 80-2, 49 SS PRE see passim Notice of Proposed Rule Making and Notice of In- quiry in Docket 18397, 15 FCC 2d 417 RR aS LAE Raat a cook te eee 24 Second Report and Order, 2 FCC 2d 725 (1966) .. 24 ix Table of Authorities Continued Page MISCELLANEOUS: = Talks Flounder on Compulsory License ssue,"’ Cablevision, March 10, 1986 ............... 4 8 Communications Daily No. 4 (March 7, IED icasecibicihicdisdineiendinabseasiedinnitsackinnigentanteacimiabsoncsee 4, 27 Ladd, Schrader, Leibowitz, and Oler, “Copyright. Cable, the Compulsory License: A Second Chance,"’ Communications and the Law, Sum- I TI cthcccsanncsncndasscandeneerasiacases Re ne 16 + iY t | u ‘ i The petitioner Cablevision Company (‘‘Cablevision’’) re- spectfully prays that a writ of certiorari issue to review the judgment and opinion of the United States Court of Appeals for the District of Columbia Circuit (the ‘D.C. Circuit’) entered in the above-captioned proceeding on January 5, 1988. OPINIONS BELOW The opinion of the D.C. Circuit is reported at 836 F.2d 599 (pp. la-35a, infra). The opinion of the United States District Court for the District of Columbia (Green, J.L.) (the ‘‘district court’’) is reported at 641 F. Supp. 1154 (pp. 36a-59a, infra). JURISDICTION The consolidated actions of Cablevision and the National Cable Television Association, Inc. (‘“‘NCTA’’)! in the district court arose under 28 U.S.C. §§ 1338, 1400, 2201 and 2202. The counterclaims of the Motion Picture Association of America, Inc., et al. (“MPAA”), against Cablevision arose under 28 U.S.C. §§ 1331(a) and 1338(a). Review by the D.C. Circuit was sought pursuant to 28 U.S.C. § 1291. The decision of the D.C. Circuit was filed on January 5, 1988. The jurisdiction of this Court to review the judgment of the D.C. Circuit arises under 28 U.S.C. § 1254(1). STATUTES AND REGULATIONS INVOLVED This case of first impression involves the construction of the phrase ‘“‘gross receipts from subscribers to the cable service ... for the basic service of providing secondary transmissions of primary broadcast transmitters’ found in NCTA also intends to file a petition for a writ of certiorari in this case. Pursuant to an Order signed by the Chief Justice on March 22, 1988, NCTA’s time was extended to May 4, 1988. Section 111(d\2) of the Act, 17 U.S.C. § 111(d\2) (Section 111 is at pp. 59a-73a, infra). The Copyright Office’s con- struction of Section 111(dX2) is found at 37 C.F.R. § 201.17(bX1) (pp. 82a-83a, infra).” STATEMENT OF THE CASE In 1983 and 1984, Cablevision, an operator of cable tel- evision systems in New York and New Jersey, instituted two actions for declaratory and other relief in the district court, under 28 U.S.C. §§ 1338, 1400, 2201 and 2202, seeking judicial resolution of a dispute of first impression concerning the proper construction of Section 111(d\2) of the Act. That section grants a compulsory license to cable operators for the carriage of television broadcast signals upon the semi-annual payment of royalties calculated pur- suant to a statutorily-provided formula. The royalties, paid to the Copyright Office, are distributed each year by the Copyright Royalty Tribunal (the ““CRT’’) to copyright own- ers filing claims. 17 U.S.C. §§ 111(d\2), (4) and (5), and 801-810 (pp. 63a, 66a, 73a-81la, infra). In particular, Ca- blevision sought the district court’s guidance to determine the revenue base against which this statutorily-provided formula is to be applied. Both complaints alleged that Cablevision had been threatened with copyright infringement litigation by MPAA, one of the largest groups of copyright owners and recipient of a substantial portion of the royalties collected under Section 111(dX2), on the ground that Cablevision was underpaying copyright royalty fees for the retrans- mission of broadcast signals and had, therefore, not qual- ified for the compulsory license. Under Section 111(d\2\B), the compulsory license fee paid by a cable system is cal- culated as a percentage of the system’s “gross receipts - All unpublished legislative and administrative materials cited in this petition were reproduced in the Joint Appendix submitted to the D.C. Circuit. from subscribers ... for the basic service of providing secondary transmissions of primary broadcast transmit- ters.” Cablevision calculated and paid its semi-annual royalty fees on the belief that the ‘‘gross receipts’’ revenue base upon which the royalty percentage is calculated does not vary. This belief stemmed from the understanding that, by its reference to the “‘basic service of providing second- ary transmissions,’ Congress intended that only revenues from a cable system's “‘basic service’’ tier, as it was then known in the trade, the lowest tier of programming pro- vided to all subscribers, be usedin the computation of the royalty. MPAA, on the other hand, contended that, when- ever a cable system places a distant broadcast signal on a higher, optional tier of service, all revenues from that tier as well as the basic service tier must be included in the “gross receipts’’ fee base for calculation of the royalty, even though non-broadcast programming, for which a cable system pays copyright royalties outside the purview of the compulsory licensing scheme, may also be included on the higher, optional tier. It is the nature of this formula which has been in dispute in the litigation. The origin of the controversy dates back to the passage of the Act in 1976 and the inclusion therein for the first time ever in a copyright statute of provisions creating a compulsory licensing system for cable television operators retransmitting broadcast programming. Prior to 1976, this Court had ruled, in Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968), and Teleprompter Corp. v. CBS, Inc., 415 U.S. 394 (1974), that secondary transmissions of broadcast signals by cable systems were not subject to copyright protection. Although Congress began to consider cable copyright issues as early as 1967, it did not pass legislation until 1976, after several attempts. One of the greatest difficul- ties faced by Congress was the impracticability of requiring cable operators to negotiate directly with each of the thou- sands of copyright owners whose works were included in the broadcast signals being retransmitted. H.R. Rep. No. 1476, 94th Cong., 2d Sess. 47, 89, reprinted in 1976 U.S. Code Cong. & Admin. News 5659, 5703-04 (hereinafter, “H. Rep. at _____”’). The lengthy legislative debate on the issue was fueled by extensive lobbying efforts in which MPAA and NCTA played central roles. Throughout the years, this debate dealt with the scope of the compulsory license, the adaptability of the royalty mechanism to future changes, and how great or small the royalty amount should be. See B. Ringer, Second Supplementary Report to Con- gress, Ch. V. The result of the process was a written compromise agreement between the motion picture and cable television industries, embodying a compulsory licen- sing mechanism, which was adopted by Congress as Sec- tion 111 of the Act’. The structure of Section 111 reflects the compromise. Under Section 111(c\1), a cable system may retransmit, pursuant to a compulsory license, any broadcast signal that it is otherwise authorized to carry by the rules of the Federal Communications Commission (‘‘FCC’’), regardless ‘Congress intended a system under which ‘‘payments are modest and will not retard the orderly development of the cable television industry or the service it provides to subscribers.” H. Rep. at 91. Congress predicted, at the time of enactment, that Section 111 would generate a royalty pool of $8.7 million for the first year. Jd. at 175. Copyright owners received $12.6 million the first year. See The Communications Act of 1979: Hearings on H.R.3333 Before the Subcomm. on Commu- nications of the House Comm. on Interstate and Foreign Commerce, 96th Cong., lst Sess. 684, 693 (1979) (the ‘““H.R.3333 Hearings’). In 1979 and 1980, they received $18,572,623 and $19,532,881, respectively. Oversight of the Copyright Act of 1976: Cable Television Hearings Before the Senate Comm. on the Judiciary, 97th Cong., 1st Sess. 111-12 (1981) (the ‘7981 Oversight’). In 1984, the royalty pool was $86,951,796. ‘‘Co- pyright Talks Flounder on Compulsory License Issue,’ Cablevision, March 10, 1986, at 11. In 1987. it exceeded $100 million. 8 Commu- nications Daily No. 4, p. 3 (March 7, 1988). OE ee ee Fee en ey of origin, without copyright liability. Under Section 111(d\2XB), the consideration for the license is payment of a statutorily-fixed royalty fee for the privilege of car- rying distant, non-network programming that Congress recognized could cause harm to copyright owners if it went uncompensated. H. Rep. at 90. The fee must be paid by all cable systems regardless of whether they carry any distant broadcast signals. Sections 111(d\2\(C) and (D); H. Rep. at 96. For larger cable systems, such as those owned by Ca- blevision, Congress inserted into the industry compromise, at Sections 111(d)(2)(b\ii)-(iv), a mechanism, called ‘‘distant signal equivalent” or ‘““DSE,” requiring additional royalty fees for each distant or non-local broadcast signal actually carried by the system. Depending on the type and number of distant signals carried, the DSE values differ. At the time of the enactment of Section 111, even though Con- gress and the industries were aware that “‘tiering’’ and other new marketing practices for cable services would develop,’ all parties agreed that the proposed copyright royalty schedule did not attempt to approximate the com- pensation which copyright owners could have obtained had they negotiated the royalties in the marketplace.* ‘ See, e.g., Cable Television Syndicated Program Erclusivity Rules, 79 FCC 2d 633, 807-08 (1980); Micro Cable Communications Corp., 54 FCC 2d 888 (1975); Establishment of Domestic Communications Satellite Facilities, 35 FCC 2d 844 (1972): Cable Antenna Television (CATV): Hearings Before the Subcomm. on Communications and Power of the House Comm. on Interstate and Foreign Commerce, 92nd Cong., lst Sess. 7, 21, 27 (1971) (statement of D. Burch, Chairman. FCC) (the “CATV Hearings’’); H.R.3333 Hearings at 78 (testimony of T. Brennan, Commissioner, CRT). See also National Cable Television Ass'n v. Co- pyright Royalty Tribunal, 689 F.2d 1077. 1089 (D.C. Cir. 1982) (agree- ing ‘‘tiering’’ was contemplated by Congress). *H. Rep. at 96-97; Oversight Hearings on Cable Television Berore the Subcomm. on Communications of the Senate Comm. on Commerce, Sci- ence and Transportation, 95th Cong., 1st Sess. 104 (1977) (statement Regardless of the number of distant signals carried by a cable system, Section 111 ties the royalty computation to the same revenue base: the ‘‘gross receipts from sub- scribers ... for the basic service of providing secondary transmissions of primary transmitters.’ This precise lan- guage was used to describe the revenue base since the early copyright legislative proposals surfaced in 1969. See Amended 8.543, 91st Cong., Ist Sess. § 111(d\2)A) (1969); S.644, 92nd Cong., lst Sess., § 111(d\2)A) (1971); S.1361, 93rd Cong., 2nd Sess., § 111(dX2\B) (1973); S.22, 94th Cong., Ist Sess., § 111(dX2\B) (1975); H.R. 2223, 94th Cong., Ist Sess., § 111(d\2\B) (1975). This revenue base also tracks similar language found in legislative and ad- ministrative proposals regulating the minimum carriage re- quirements for broadcast signals on cable television systems which were contemporaneous with Congress’ consideration of the cable copyright issue. See n. 18, infra. The revenue base is expressly tied to the cable operator’s “‘basic ser- vice. To implement the compulsory license, Congress created the CRT (pp. 73a-77a, infra), wholly independent of the Copyright Office, and explicitly delegated to it, not to the Copyright Office, the exclusive responsibility of distribut- ing to copyright owners the royalties collected and ad- justing the royalty rates to account for future economic conditions in the cable industry. See H. Rep. at 173-174. In determining whether to adjust the royalty rates in Sec- tion 111(dX2\B) and the ‘gross receipts’ thresholds set forth in Sections 111(dX2\XC) and (D), Congress directed the CRT to evaluate, among other things, ‘‘changes in the average rates charged cable system subscribers for the of J. Valenti, President, MPAA); H.R.3333 Hearings at 63 (statement of T. Brennan, Commissioner, CRT); Copyright Law Revision: Hearings on H.R.2223 Before the Subcomm. on Courts, Civil Liberties and the Administration of Justice of the House Comm. on the Judiciary, 94th Cong., Ist Sess. 491-92 (1975) (statement of R. Bradley, Chairman, NCTA) (the ‘‘H.R.2223 Hearings’’). ~ basic service of providing secondary transmissions” to the extent that they result in reduced revenues (emphasis added).* Sections 801(bX2\A) and (D). Periodic rate adjustments were to be based on changes in the average rates charged for ‘‘basic service’’ nation- wide (Sections 801(b\2\A) and (D)) and could only be trig- gered by changes in the FCC signal carriage rules. Congress restricted the CRT’s authority to changes in rates, and did not empower the CRT to tamper with the statutorily defined revenue base itself. An earlier version of Section 801 had contained a provision author‘zing the CRT to ‘‘change the royalty rate or the basis on which the royalty fee shall be assessed or both’ but Congress deleted it prior to final enactment of Section 111. See S.1361 at Section 801(b\1). In juxtaposition with the CRT’s authority over rates, the Copyright Office was given the specific mandate only to require information from cable operators (Sections 111(dX1), (2A)) and to receive the royalties paid by the operators (Section 111(d\3)), which are to be deposited, along with a statement of account, “in accordance with requirements that the Register shall, after consultation with the [CRT], prescribe by regulation.”’ Section 111(d)(2). The Copyright Office’s primary role in connection with Section 111 has been to receive statements of account and * Congress gave the CRT these adjustment powers to counteract the reduction in copyright royalty fees that might result from any decrease in basic service (i.e., lowest tier) subscriber charges. H. Rep. at 175. Congress allowed the CRT to consider all factors relating to the main- tenance of such level of payments including, as an extenuating factor, whether the cable industry has been restrained by subscriber rate reg- ulating authorities from increasing the rates for the basic service of providing secondary transmissions. Section 801(bx2\A). Under well-es- tablished FCC policy at the time, state and local rate regulating authorities were not permitted to regulate any rates charged by cable operators ercept those charged for the first tier. See Community Cable TV. Inc., 95 FCC 2d 1204 (1983), aff'd, 98 FCC 2d 1180 (1984). collect royalty payments. Under Section 702 (p. 73a, infra), the Register has the authority to adopt regulations ‘‘for the administration of [these] functions and duties.”’ The Copyright Office has no power to enforce the copyright laws or to give legal opinions or advice on matters dealing with the sufficiency, extent or scope of compliance with the copyright law. Copyright Office Circular Rlb (March 1979); 37 C.F.R. § 201.2(aX31984) (p. 82a, infra); Notice of Final Regulations in Docket RM 79-4, 45 Fed. Reg. 45270, 45271 (1980). Relying on the express language of the statute, its leg- islative history, and contemporaneous regulatory develop- ments by the FCC affecting cable, Cablevision sought from the district court a declaration that its construction of the term “‘basic service’ and, consequently, the statutory rev- enue base, was proper. The complaint prayed that, without an adjudication of this issue, Cablevision would be placed in continued uncertainty as to its obligations under the Act to its peril. MPAA filed counterclaims against Cable- vision alleging infringement of thousands of copyrights owned by its member companies and seeking damages of up to $50,000 per work infringed. In light of the number of secondary broadcast transmissions made over a typical cable system, Cablevision’s potential infringement liability could be in the range of billions of dollars. In September, 1983, NCTA, a major trade association for cable television operators, filed a similar action. Claim- ing a court adjudication on this issue was necessary to end the in terrorem effect on the industry of MPAA’s consistent threats of infringement litigation to operators who did not acquiesce to MPAA’s construction of the Act, NCTA took yet a third position on the issue—if a tier of programming offered by a cable television operator con- sists of both broadcast and non-broadcast signals, the op- erator may allocate all of its revenues from that tier among the various signals and include in its revenue base only that portion attributable to broadcast signals. Ee In April, 1984, aware of the pending litigation, without discussing in any detail the legislative history of Section 111, and willing to allow the courts to be “‘the final ar- biters of what the law rneans,’’ the Copyright Office pro- mulgated a self-styled “‘interpretive” regulation, 37 C.F.R. §201.17(b\1), adopting the MPAA position. Notice of Final Regulations in Docket RM 80-2, 49 Fed. Reg. 13029, 13031 (1984) (the ‘““NFR’’). The NFR did not directly address Cablevision’s construction of the Act and, prior to its 1984 pronouncement, there had been no regulation on this issue. The parties disagree as to whether the Copyright Office had ever before taken a position on the issue. The issuance of the regulation, adopted eight years after the enactment of the Act, six years after it went into effect and nearly a year after Cablevision sought a judicial declaration on the proper construction of the Act, caused the district court, on July 17, 1984, to order the Copyright Office involuntarily joined as a necessary party defendant to the NCTA action. The Copyright Office claimed judicial deference for its 1984 interpretation. Cablevision and NCTA challenged the Copyright Office’s authority to issue a binding regulation interpreting the statutory revenue base. On February 18, 1985, the Cablevision and NCTA actions were consolidated. Declining to defer to the Copyright Office’s construction of the Act on the ground that it did not “‘have a reasonable basis in law and frustrates the underlying congressional policy” (p. 48a, infra), the district court adopted NCTA’s construction of Section 111(d). Of particular importance, the district court refused to accord any significance to, or even mention, Cablevision’s submission of 27 industry- member affidavits offered to establish that the term ‘‘basic service,’ integral to the statutory phrase in question, had a specific industry meaning at the time of the passage of the Act. Nor did the court agree with Cablevision that the FCC’s regulatory scheme with respect to the provision of “minimum” or ‘‘adequate’’ service by cable operators, as 10 that scheme existed in 1976, provided to Congress an awareness of what was regarded as “‘basic’’ cable service. See p. 52a, infra. Instead, the district court adopted a post-enactment definition of “‘basic service’’ developed in National Cable Television Ass'n v. Copyright Royalty Tri- bunal, 689 F.2d 1077 (D.C. Cir. 1982), in the unrelated context of a copyright royalty distribution controversy not involving the construction of Section 111(d). Jd. Cablevision, MPAA and the Copyright Office filed appeals to the D.C. Circuit. At respondents’ urging, the D.C. Circuit found that the Copyright Office had the au- thority to issue a regulation interpreting Section 111(d) and, solely in the context of Section 111, was due judicial deference under the principles stated by this Court in Cher- ron. Significantly, the D.C. Circuit agreed that Cablevi- sion’s understanding of the term “‘basic service’’ was an understanding shared by Congress in 1976 (p. 10a, infra) an examination of the reports on the legislation evokes a fairly sharp image of the model that Congress had in mind at the time of enactment. According to that picture, the cable subscriber had available from the system a single package for a flat fee containing a number of retrans- mitted broadcast signals and some channels pro- duced just for cable—the “basic service’’ that every subscriber received—and beyond that, in- dividually priced specialty channels available only on cable from which the subscriber to the basic service could pick and choose .... In this par- adigmatic case, the definition of gross receipts from basic service was simple; gross receipts were the flat fee for the initial package .. The meaning of gross receipts only became problematic, the court said, after the enactment of the Act “‘as reality 1] diverged from the model on which the Act was based”’ (>. lla, infra). Despite Cablevision’s submission of leg- islative, administrative and judicial support for the con- trary proposition (see n. 4, supra), the D.C. Circuit concluded that Congress never considered the develop- ment of “‘tiering’’ practices by cable operators (pp. 27a- 28a, infra). In light of this, the court ended its analysis under the first prong of Cherron—whether Congress has spoken on the precise issue at hand—concluding, without any dis- cussion or citing any support from the legislative history, that Congress ‘saw a need for a continuing interpretation of Section 111 and gave the Copyright Office the sta- tutory authority to fill that role’ (p. 21a, infra). It then proceeded to analyze the case under the second prong of Cherron—is the Copyright Office regulation a reasonable interpretation of the Act? Finding that “Congress never contemplated a precise congruence of the royalties paid and the amount of distant .. . programming actually car- ried" and that Congress had actually picked a ‘‘conve- nient revenue base” (p. 23a, infra), the D.C. Circuit declared the Copyright Office's non-contemporaneous reg- ulation to be reasonable and entitled to deference (p. 30a, infra). REASONS FOR GRANTING THE WRIT Prior to the D.C. Circuit's decision in this case, no federal court had given deference to a first impression statutory interpretation of the Copyright Office in areas other than the registrability of copyrights. Indeed, in the two cases discussed by the D.C. Circuit where the issue of deference was raised, this Court and a circuit court refused to defer to a Copyright Office interpretation of the Act for reasons which are quite applicable to this case. To reach the same result in this case would not only provide for uniformity in principle of decisions in this area, but would be the only approach consistent with 12 this Court's pronouncement in Chevron. This Court’s in- tervention is also required to ensure that Congress’ intent at the time of the enactment of Section 111, and not the later-found accommodation of policies undertaken by the ~ D.C. Circuit, is effectuated. The decision of the D.C. Circuit has implications which transcend the interests of the parties to this case. It may have extended dramatically the Copyright Office's limited powers to implement the substance of the cable television compulsory licensing system under the guise of ‘‘con- struing’’ the terms of the Act. If allowed to stand, this decision can be expected to result in new, more overt attempts by the Copyright Office, at the copyright own- ers’ insistence, to rewrite the 1976 industry compromise that led to enactment of the Act. While Section 111 was designed to achieve a compromise between the two in- dustries and preserve a very delicate balance, the agency entrusted to administer the cable television compulsory licensing scheme admits to a belief that it has a near- constitutional mandate to represent solely the interests of the copyright owners. The D.C. Circuit’s decision to vest broad power in a biased agency will create additional cost and uncertainty to the cable industry. It will both increase copyright royalty payments on a semi-annual ba- sis and expose cable operators to copyright infringement actions by copyright owners who may seek billions of dollars in statutory damages from any cable system that advances a construction of its license obligations less onerous to it than the copyright owners’ interpretation. I. THE DECISION OF THE D.C. CIRCUIT IS IN- CONSISTENT IN PRINCIPLE WITH DECISIONS OF THIS COURT AND ANOTHER CIRCUIT RE- GARDING THE DEFERENCE TO WHICH THE CO- PYRIGHT OFFICE IS ENTITLED. In an unprecedented fashion, the D.C. Circuit has en- larged the traditionally limited power of the Copyright Office to construe the Act and issue binding regulations 13 based on such construction. Until the decision below, there had been no reported instance where a court has deferred to the Copyright Office in any matter not involving the issue of “‘copyrightability.""* On such matters, the Copy- right Office has always had express enforcement powers under the copyright laws through its power to refuse reg- istration. The ruling below, vesting the Copyright Office with equally broad authority to construe Section 111, con- flicts in principle with this Court's decision in DeSylva v. Ballentine, 351 U.S. 570 (1956) and the Second Circuit’s decision in Bartok v. Boosey & Hawkes, Inc., 523 F.2d 941 (1975). DeSylva involved the issue of whether the illegitimate child of a deceased author had any right to renew copy- rights owned by the author during the lifetime of the author’s widow. The courts below had disagreed on the answer to the statutory construction issue of whether both the widow and the child or only one of them were entitled to ownership of the copyrights upon the author’s death. This Court. after acknowledging that the Copyright Office had a longstanding practice, refused to defer to the Co- pyright Office’s construction because it was ‘‘more the result of a decision that there is substantial doubt over the question, rather than the result of a confident inter- pretation of the statute.’ 351 U.S. at 572. The Court proceeded to determine the issue using traditional statu- tory construction tools. ’ The Copyright Office has sometimes been accorded deference in the one area over which it has always had unquestioned authority under both the current and preceding copyright acts: copyrightability. See Mazer v. Stein, 347 U.S. 201- (1954); Norris Industries v. ITT, 696 F.2d 918 (11th Cir. 1983); Schnapper rv. Foley, 667 F.2d 102 (D.C. Cir. 1981), cert. denied, 455 U.S. 948 (1982); Esquire v. Ringer, 591 F.2d 796 (D.C. Cir.), cert. denied, 440 U.S. 908 (1978); Eltra Corp. v. Ringer, 579 F.2d 294 (4th Cir. 1978). In all of these cases, the courts noted both the Copyright Office's decades of experience, and the fact that Congress had approved and ratified the Office's position when it revised the copyright laws in 1976. 14 Similarly, in Bartok, the Second Circuit refused to adopt the Copyright Office’s definition of the statutory term ‘‘posthumous work.”’ Since the Copyright Office itself had in its regulations recognized that it had no authority to give legal opinions or define legal terms, the Second Cir- cuit followed this Court’s decision in DeSylva and held that the Copyright Office’s interpretation of an issue never before decided should not be given controlling weight. This was particularly so since the Copyright Office had pro- claimed itself to be primarily an office of record; merely a place where claims to copyrights are registered. The D.C. Circuit was controlled by DeSylva and should have been persuaded by Bartok. The D.C. Circuit, in fact, agreed (p. 20a, infra) that ‘tthe Copyright Office in this case may have come close to the point of excessive dif- fidence’’ which had prevented deference to its interpre- tations in DeSylva. Yet, the D.C. Circuit failed to give due regard to, or even mention, the substantial record containing almost every possible indicia that the Copy- right Office, until it became a party to this litigation, did not expect and could not have expected judicial deference. There was no indication in the record before the court that the Copyright Office’s 1984 regulation construing Section 111(d) was anything other than the ‘‘result of a decision that there is substantial doubt over the question, rather than ... a confident interpretation of the statute” on an issue ‘‘never before decided.” In refusing to follow these precedents, the D.C. Circuit created a ‘‘new’’ Co- pyright Office with broad authority to construe the Act and, in the process, to modify the compromise embodied in Section 111. II. CONGRESS DID NOT CHARGE THE COPYRIGHT OFFICE WITH OTHER THAN MINISTERIAL DU- TIES UNDER SECTION 111 AND, THUS, THE D.C. CIRCUIT ERRED IN DEFERRING TO IT. The Act confers only the most limited rulemaking power on the Copyright Office. The Copyright Office is not the 15 typical administrative agency; it is an ‘‘office’’ within the Library of Congress, functioning primarily to register and record copyrighted works, and to administer the clerical functions of the compulsory license mechanism established by the Act. While, under Section 702, the Register has the authority to adopt regulations ‘‘for the administration of [his] functions and duties,’’ these functions and duties are specified in detail throughout the Act and are quite limited and purely ‘‘administrative’ (37 C.F.R. § 701; p. 73a, infra).° As the Copyright Office itself has repeatedly acknowledged, it has no power to enforce the copyright laws, or even to issue legal opinions in compliance with those laws. See p. 8a, supra. The Copyright Office’s ‘‘gen- eral’ rulemaking powers under Section 702 cannot extend to a “function[] [or] dut[y]’’ that is explicitly beyond Of- fice’s authority. In the compulsory licensing area, the Copyright Office has equally narrow regulatory powers, enabling it to ad- minister, but not to alter, the detailed compulsory licen- sing scheme created by Congress.” The authority ~ See, e.g., 17 U.S.C. §§ 108(d)(2), 108(e%2), 110(4X Bill), 115¢b)1), 203(aW4\B), 304(c 4B), 411(b\1). 302(d), 408(d), 409 (prescribe forms and the contents of statutory notices); 707(b) (publish brochures and bibliographies); 708(b) (waive agency fees); 205(b), 302(c) and (d), 304(c 4A), 508(c), 705(a) (record keeping duties); 116(c1), 118(b)2) and (e), 407(c), 408(c), 704(b), 706(b) (collect and handle royalty and document deposits); 116(b\1)A) and (B) (handle filing of jukebox li- cense applications and issue certificates); 115(c3) and (4) (collection of phonorecord payments and statements of account); and 304(a), 410, 707(a) (issue registrations and catalogue them). “In the various rulemakings regarding Section 111, the Copyright Office has concluded that the Act would not permit any adjustments in the statutory formula other than those expressly provided for. It has stressed the specificity of the Act, the lack of extensive authority granted to it, and the underlying assumption of Congress that the compulsory license royalty is primarily a fee for the privilege of re- transmitting broadcast signals, not a payment for actual transmis- sions. Notice of Final Regulations in Docket RM 79-4, 45 Fed. Reg. 16 conferred on the Copyright Office relates strictly to com- pulsory license filing procedures and information-gather- ing.” Senior officials of the Copyright Office have acknowledged that the Office functions mainly as an of- fice of record. Ladd, Schrader, Leibowitz, and Oler, ‘*Co- pyright, Cable, the Compulsory License: A Second Chance,” Communications and the Law, Summer 1981, at 3, 14. The Copyright Office’s rules merely govern the form, content, and timing of filings which the Act re- quires cable operators to make; the Office has recognized that its regulatory authority extends no further." The Office acknowledged the non-binding nature of the regulation involved in this litigation when it labelled it 45270, 45271-45272 (1980); Notice of Interim Regulations in Docket RM 80-2, 47 Fed. Reg. 21786, 21788-21789 (1982); NFR at 13035. Section 111(dX1) requires any cable operator to provide notice and information to the Copyright Office about secondary transmissions carried by the system. The operator must also furnish ‘“‘such further information as the Register of Copyrights, after consultation with the [CRT] .... shallprescribe by regulation to carry out the purpose of the clause’. Subsection (d\2) requires the semiannual deposit of a statement of account and royalty fee ‘in accordance with require- ments that the Register shall ... prescribe by regulation” after con- sultation with the CRT. The statute specifies both the royalty fee formula, and certain information to be provided on the statement of account. Subsection (d42MA) authorizes the Register to require dis- closure of ‘‘other data’ on the account form. The royalty fee provision (subsection (d\(2\8)-(D)) contains no specific reference to rulemaking power. ‘The Copyright Office has consistently stated that the ‘‘principal obligation for enforcement of ... Section 111 rests with the affected copyright owners, not the Copyright Office.’’ Notice of Final Requ- lations in Docket RM 79-5, 45 Fed. Reg. 45270, 45271 (1980). Any enforcement activity, beyond the correction of ‘obvious errors and omissions’ in submissions by cable systems, ‘“‘would be beyond our statutory authority."’ Jd. The Copyright Office’s own rules make clear that acceptance of statement of account filings done by cable oper- ators ‘‘shall in no case be considered a determination that ... any .. requirements to qualify for a compulsory license have been sat- isfied.”” 37 C.F.R. § 201.17(c2) (1987) (p. 83a, infra). 17 “interpretive” and ‘“‘welcome[d] the guidance of the courts’’ on this issue as “the final arbiters of what the law means.”’ NFR at 13031. Given the undisputed facts that the Co- pyright Office has no power to enforce its own construc- tion of Section 111 or to even provide legal advice as to how compliance with Section 111 may be accomplished, the attribution by the D.C. Circuit of broad rulemaking powers under Section 111 is unfounded. The Copyright Office regulation is also lacking in ‘‘those factors which give it power to persuade, if lacking power to control.” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). As the then Register of Copyrights, Barbara Ringer. testified before Congress, the Office is a biased agency— it represents the interests of copyright owners: My feeling as the head of the Copyright Office is that my responsibility is to one group and one group only, and that is the group that is iden- tified as the sole and only beneficiary of the co- pyright law of the United States under the Constitution, the authors of the so-called writ- ings. In other words, the creator of copyrighted works. H.R. 2223 Hearings at 106.* Its 1984 interpretation is not a contemporaneous construction of the Act, consistently It was, thus, the responsibility of the D.C. Circuit to enforce the industry compromise: {[Wyhere a statute strikes a political balance but administration of the statute is entrusted to an agency that may not embody that balance, it is dangerous to defer automatically to the agency’s view. An agency that may be dominated by one faction in the legislative struggle that led to enactment of a compromise is not authorized to hand that faction a victory that was denied it in the legislative arena through the efforts of the other faction. The court must enforce the compromise, not the maximum position of one of the interest groups among which the compromise was struck. 18 applied, thoroughly considered, and validly reasoned. The regulation—promulgated eight years after enactment of the statute—followed several years during which the Office either avoided cr expressed contradictory views on the tiering issue.’ Since the cable television compulsory license was the result of an industry compromise in a highly tech- nical area never before regulated by the Office, there is little support for a finding of agency ‘‘expertise.’’! Bethlehem Steel Corp. v. EPA, 723 F.2d 1303, 1309 (7th Cir. 1983). The Copyright Office has shown remarkable consistency in upholding the positions advanced by MPAA in successive rulemakings involving Section 111. Cablevision can only note the obvious closeness of interest and frequency of contact between the Copyright Office and copyright owner interests over the years. See, e.g., Memorandum from Fritz At- taway to members of the Cable Copyright Committee (November 30, 1977) (enclosing prepublication copy of Copyright Office Notice of Pro- posed Rulemaking in Docket No. 77-2, and noting ‘‘private{ ]'’ views of agency on part of proposal); Memorandum from Becky Raphael, MPAA, to Jon Baumgarten, et al.. Copyright Office (December 21, 1978) (thanking agency staff for ‘‘consideration and help’’ in making cable system reporting data available to MPAA). MPAA has frequently employed departing Copyright Office personnel responsible for cable matters. ‘’ See Notice of Final Regulations, 45 Fed. Reg. 45270, 45273 (1980). The Office’s inconsistent understanding of Section 111 was also high- lighted in 1981 Copyright Office testimony before Congress recom. mending that Section 111 be abolished or modified—in part because it did not require cable systems to pay royalties based on revenues from higher programming tiers that included broadcast signals, the position taken by Cablevision since 1978 and now disavowed by the Copyright Office. See 1981 Oversight at 135 (statement of D. Ladd, Register of Copyrights). ‘* The Office had before it the analysis of its hired consultant. Charles Woodard, that “‘basic service,’’ as used in Section 111, should be con- strued ‘‘in accordance with industry practice and FCC rules and reg- ulations” to include revenues for services provided to all subscribers, but not other revenues, such as pay cable, which were clearly distin- guished by FCC rules. Memorandum of Charles Woodard Addressing Issues in Docket RM 77-2 (Attachment to Memorandum from Joan 19 The NFR did not discuss the extensive legislative history surrounding Section 111. It also did not address Cable- vision’s statutory construction based on the express lan- guage of the statute or the alleged trade meaning of the term ‘‘basic service,” evidence of which Cablevision had submitted to both courts below.'* The Copyright Office has, in fact, yet to explain what ‘‘basic service’ means in the statutory context.'* Moreover, while the Copyright Office found it had authority to construe statutory terms, the bases for that authority are barely discussed. In the NF'R, the Copyright Office did not claim any “‘expertise’’ in the cable copyright field. Doherty, Head. Task Group on New Functions, to Jon Baumgarten, General Counsel, Copyright Office (August 1. 1977)) at 31-32. This analysis, which reflects Cablevision’s position, was unaccountably omit- ted from the Copyright Office ‘‘record’’ below, and is not discussed in the Office's decision. ' The rationale of the NFR in adopting the copyright owners’ inter- pretation was that proration or allocation of gross receipts (the position espoused by NCTA) is not permitted by Section 111. This rationale has no applicability to Cablevision’s construction, which is not grounded on a “proration’’ theory but rather, on the convenience and practicality that Congress saw in selecting ‘‘basic service’ as the revenue base for the royalty calculation. ~ Nowhere in the entire record submitted below by the Copyright Office. or in any of its regulations or comments, is there any indication that, in its consideration of tiering. it even asked the obvious threshold question: What did Congress mean by the term “basic service’’? Con- sidering the importance that the Copyright Office attaches to the plain language and literal meaning of the Act in other contexts, the failure to consider this question deserves attention. The lack of discussion is all the more peculiar in light of the Office’s own use of the term ‘basic service’’ specifically to refer to the first tier of service. See, e.g., Letter from Willie A. Adams, Senior Examining & Processing Technician, Copyright Office, to James F. Ackerman, Connersville Cable TV, Inc. (November 5, 1980) (Copyright Office Record at 2033); Letter from Patricia K. Johnson, Senior Examining & Processing Technician, Co- pyright Office, to Donna C. Gregg, Dow, Lohnes & Albertson (July 20, 1982) (Copyright Office Record at 2035), which were submitted to both courts below. 20 With virtually all the indicia traditionally associated with judicial deference to an administrative interpretation of a controlling statute absent, this case falls within the zone of doubtful, first impression agency interpretations con- sidered in DeSylva and Bartok. In failing to recognize the controlling nature of these cases, the decision of the D.C. Circuit creates irreconcilable tension. III. THE DECISION OF THE D.C. CIRCUIT RAISES SIGNIFICANT QUESTIONS REGARDING THE SCOPE OF THIS COURT’S DECISION IN CHEV- RON AND THE ROLE OF COURTS IN GIVING EFFECT TO CONGRESSIONAL INTENT. In light of the unusual circumstances surrounding the promulgation of the Copyright Office regulation and the lack of a persuasive history of deference to such regula- tions by the courts, the ruling of the D.C. Circuit conflicts with this Court’s pronouncement in Chevron. Neither Chev- ron nor any subsequent decision of this Court applying Chevron has involved a largely clerical ‘‘office,”’ with no broad statutory delegation of power, no specific statutory mandate to exercise discretion in the implementation of the statute, no enforcement powers or substantive exper- tise on the matters in question, and which issues a non- contemporaneous, interpretive ruling embodying a policy that is not the result of consistent agency practice.'’ The ~ This Court's application of Chevron has involved statutes vesting broad delegation to an agency to implement equally broad and complex Congressional purposes, where the agency's interpretation has been longstanding or consistent and it was evident that Congress chose a regulatory approach to the subject. See, e.g., Atkins v. Rivera, 477 U-S. 154 (1986); Young v. Community Nutrition Inst.. 476 U.S. 974 (1986); Federal Deposit Ins. Corp. v. Philadelphia Gear Corp., 476 U.S. 426 (1986); United States v. City of Fulton, 475 U.S. 657 (1986): United States v. Riverside Bayview Homes, 474 U.S. 121 (1985): Connecticut Dept. of Income Maintenance v. Heckler, 471 U.S. 524 (1985). Cf Bowen . American Hospital Ass'n, 476 U.S. 610 (1986); Board of Governors v. Dimension Financial Corp., 474 U.S. 361 (1986), and Securities 21 D.C. Circuit ruling extends Chevron to the point where it erases longstanding principles of statutory construction and deference which Chevron was not meant to disturb.’* The D.C. Circuit found Congress’ intent at the time of enactment: to calculate the royalty payments based on rev- enues collected from the “‘basic’”’ or first tier of service. See p. 10a, supra. This should have been the end of the analysis under the first prong of Chevron. The court, in- stead, considered the argument that the ‘‘marketplace’’ in which cable systems operate has changed since 1978. See p. lla, infra. Unable to make Congress’ intent meet the present ‘‘marketplace,”’ the D.C. Circuit presumed, without citation to or support in the Act, its legislative history or case precedent, that Congress must have also intended to Industry Ass'n v. Board-of Governors of Federal Reserve System, 468 U.S. 137 (1984), where this Court declined to exercise deference to agency regulations. ~The decision below does not effect the Congressional intent em- bodied in the term “basic service,”’ fails to ascribe a meaning to each word in Section 111(d\2). ignores the trade meaning of the critical statutory terms, and fails to look in pari materia at the interplay between FCC regulation of cable and the Congressional efforts to pass cable copyright legislation. Before and after Chevron, statutory con- struction has always been the ultimate responsibility of the courts and deference has never been intended to substitute for thorough judicial review of administrative actions. See Securities Industry Ass'n v. Boa rd of Governors of the Federal Reserve System, 468 U.S. 137 (1984); Barlow r. Collins. 397 U.S. 159, 166 (1970); Zuber v. Allen, 396 U.S. 168, 193 (1969). Had the D.C. Circuit undertaken a more searching review, it would have concluded that Cherron was not meant to require deference to an agency in a case like this one, which presents a first impression issue of the proper construction of a statute. In INS v. Cardoza - Fonseca, 107 S. Ct. 1207, 1220-21 (1987), this Court suggested that, in such a case. a court, faced with “a pure question of statutory con- struction,” may substitute its interpretation for that of an agency. Contrary to the opinion of the D.C. Circuit (pp. 16a-17a, infra), in NLRB v. United Food and Commercial Workers Union, Local 23, 108 S. Ct. 413. 421 (1987), the majority of this Court did not retreat from that proposition. 22 allow the Copyright Office to change the ‘“‘basic service’’ revenue base to reflect marketplace developments.'* This ruling, which is facially erroneous in light of the undisputed fact that the political compromise embodied in Section 111 did not, as it could not, mirror the marketplace (p. 5 n.5, supra), distorts, to the point of near extinction, the first prong of Chevron. It sets the precedent that Con- gress’ intent, once found, need not be effected if the court or an agency deems such intent to be outmoded. It allows an agency to modify critical statutory terms, which Con- gress took great pains to detail, without the delegation of authority to do so. It permits courts to impute to Congress an intent to delegate power to an agency without any evidence in the controlling statute or its legislative history that Congress intended to do so. This significant extension of Chevron merits the Court’s attention. The D.C. Circuit ruling also raises legitimate questions regarding the propriety of exercising judicial deference in circumstances where there is substantial indicia that an agency’s regulation extends the reach of its statutory man- date beyond that intended by Congress. Cablevision sub- mitted to both courts below legislative, regulatory and affidavit evidence supporting the proposition that ‘‘basic service,’ the crucial term in the statutory description of the royalty revenue base, had an established meaning dur- ‘One of the justifications for exercising deference under Chevron is that Congress delegated power to the agency to choose among com- peting policies. 467 U.S. at 844-845. In this case, Section 111 was the result of a hard-fought compromise between copyright owners. whom this Court had said had no copyright protection for cable retransmis- sions, and cable operators, who were freely retransmitting programming without compensating the owners. The industry compromise—as any compromise would do—created the desired balance among these com- peting interests. To conclude otherwise, as did the-D.C. Circuit, is to erase the compromise nature of Section 111 and to forget the historical bargaining positions of the industries involved at the time of the en- actment. 23 ing the time Congress was considering Section 111 and that Congress intended to adopt that meaning. Behind the shield of Chevron, the D.C. Circuit largely ignored that evidence. Despite the multiplicity of viewpoints expressed by in- terested persons after Cablevision filed suit in the district court, Cablevision’s construction of Section 111 is fully supported by both the plain meaning and the legislative history of the Act.2° As confirmed by 27 affidavits sub- mitted without disinterested party disputation in the dis- trict court,2) when Congress used the term ‘“‘basic service” to define the revenue base, the term and its synonyms had a universally-accepted meaning within the cable in- * Even MPAA agreed that, at the time Congress adopted Section 111 in 1976, ‘‘basic service’’ meant what Cablevision said it meant. [W]hen we reached the famous agreement that eventually led to the adoption of Section 111, ... there was obviously a discussion of what revenues constitute basic revenues ... and ... it was accepted by all of this [sic] at the time that the basic revenues were the revenues from the so-called basic package of program- ming. Deposition of F. Attaway, Vice President, MPAA, May 22, 1986, Tr. at 152. 2! The industry witnesses testified in almost identical words that: Between the year 1970 and 1976, the term “‘basic service” had a recognized meaning within the cable television industry. It was the lowest tier of service offered by a cable television system, to which all subscribers were required to subscribe before they were permitted to subscribe to any additional tiers of service. The term “basic service’ was synonymous with and used interchangeably by the industry with such terms as “minimum level of service,” ‘‘in- itial package’’ and “‘regular subscriber service.”’ See also H. Rep. at 88 (in describing a cable system, Congress ac- knowledged that ‘‘{iJn addition to an installation charge, the subscribers pay a monthly charge for the basic service averaging about six dollars. A large number of these systems provide automated programming .. . [and] also originate programs ....’’) (emphasis added). 24 dustry and the FCC, the only federal agency to have and exercise regulatory and surrogate copyright policy power during cable’s early development.” In large part taking the cable marketplace as it found it, Congress structured the compulsory license provisions of the Act to guarantee a fixed revenue base from the “basic” tier, with fixed =The term “basic service," as used by Congress in the copyright context, dates back to 1969, when S.543, a comprehensive copyright revision bill, was introduced. Throughout the succession of bills that followed, up to enactment of the Act in 1976, Congress used the phrase “basic service of providing secondary transmissions” to describe the revenue base upon which cable compulsory license fee calculations were to take place. See p. 6, supra. The use of this specific language was triggered in part by the devel- opment during the same time period by the FCC of signal carriage rules that required or permitted cable operators to provide subscribers with sufficient television signals to constitute a defined “‘adequate ser- vice.” This concept was referred to variously as “minimal level of service,” “initial package’’ and “regular subscriber service,”’ and ulti- mately became known in the trade as “basic service."’ See Cable Tel- evision Syndicated Program Exclusivity Rules, 79 FCC 2d 663, 816-26 (Appendix A) (1980); Cable Television Report and Order, 36 FCC 2d 143 (1972); Cable Proposals, 31 FCC 2d at 115, 116, 120 (1971); Notice of Proposed Rule Making and Notice of Inquiry in Docket 18397, 15 FCC 2d 417, 429, 431-32, Appendix C at 461 (1968); Second Report and Order, 2 FCC 2d 725 (1966); First Report and Order in Dockets 14895 and 15233, 38 FCC 683 (1965); Hearings on S.1361 Before the Senate Subcomm. on Patents, Trademarks and Copyrights, 93d Cong., Ist Sess. 312 (1973) (statement of J. Valenti, President, MPAA). Ap- plying the doctrine of in pari materia, it would have been proper for the D.C. Circuit to consider the interplay between the FCC regulatory environment and the developing copyright policy. See, e.g., Oscar Mayer & Co. v. Evans, 441 U.S. 750, 756 (1979); United States v. Congress of Indus. Orgs., 335 U.S. 106, 112-13 (1948); Boston Sand & Gravel Co. v. United States, 278 U.S. 41, 47-8 (1928) Congress was not unaware of the manner in which the FCC had af- fected the development of the cable television industry and closely coordinated its statutory language with the FCC’s communications pol- icies. H. Rep. at 89. In that light, it is not surprising that Congress based the CRT’s powers to revise rates on FCC regulatory changes and trends in operators’ “basic service” (p. 7, supra). 25 adjustments in royalties, through the DSE mechanism, de- pending on the number of imported signals carried by the system. To provide for flexibility in the royalty scheme, it delegated authority to the CRT to adjust royalty rates. See p. 6, supra. Thus, the characteristics of the Copyright Office interpretation found persuasive by the D.C. Cir- cuit—the lack of congruence between signals carried and royalties paid, and the convenience of a fixed revenue base—are also integral to Cablevision’s position. This Court's decisions establish that, absent express leg- islative intent evidencing another meaning, trade terms are presumed to be employed in statutory language with the meaning ascribed to them in trade usage at the time of the passage of the act. See, e.g., Corning Glass Works v. Brennan, 417 U.S. 188, 201-02 (1974); United States rv. Stone & Downer Co., 274 U.S. 225, 239, 247 (1927); O'Hara rv. Luckenback S. S. Co., 269 U.S. 364 (1926); Seeberger v. Cahn, 137 U.S. 95, 98 (1890); Worthington v. Abbott, 124 U.S. 434, 436 (1888); Miller v. Butterfield, 125 U.S. 70, 75 (1888); Tyng v. Grinnell, 92 U.S. 467, 469-70 (1876). The D.C. Circuit erred in not following these precedents. While technological developments since the enactment of the Act have made additional programming available and allowed cable operators flexibility in packaging the traditional basic tier of service, the statutory scheme, which Congress and the industries affected took great pains to delineate to the most minimal detail, continues to tie the revenue base to “basic service.’ The D.C. Circuit, through the exercise of deference to the Copyright Office, cannot * It is unlikely that Congress would have taken the time to delineate with specificity the extent of the CRT’s powers to increase the amount of royaities collected and then left it to the Copyright Office to de- termine the most critical issue of which revenue base would be appli- cable. This is particularly unlikely in light of the fact that, by rejecting provisions in previous bills which would have allowed the CRT to revise the revenue base (p. 7, supra), Congress expressed its intent to retain full control over the revenue base and account for future changes solely through rate adjustments. 26 modify this express statutory mandate and adopt what it considers to be a more suitable, practical or convenient revenue base on the ground that changes in the cable marketplace may have altered the content of the basic service. The issue in this litigation is not which compen- sation is adequate, as the decision below suggests, but, rather, which compensation was intended by Congress. The D.C. Circuit had no support for allowing the Copyright Office to write the term “basic service” out of the statute and adopt a definition of the statutory revenue base which is inconsistent with the express language of the Act and its underlying legislative history. If Section 111 is not a satisfactory answer to the cable copyright problem, redress may be sought from Congress. The two industries have, in fact, variously attempted to do so since 1978. It is, however, beyond the powers of courts and agencies to rewrite a clear statute because there may be a better approach to the problem at that time. See generally Lyng v. Payne, 106 S. Ct. 2333, 2341 (1986); Louisiana Public Service Comm'n v. FCC, 106 S. Ct. 1890, 1901-02 (1986); District of Columbia v. Carter, 409 U.S. 418 (1973); Miller v. United States, 294 U.S. 435, 439-440 (1935) United States v. United Verde Copper Co.., 196 U.S. 207 (1905); Office of Consumers’ Counsel v. FERC, 655 F.2d 1132, 1152 (D.C. Cir. 1980). This novel reallo- cation of legislative power sanctioned by the D.C. Circuit poses an important question, which this Court should ad- dress. retain full control over the revenue base and account for future changes solely through rate adjustments. «It is a cardinal principle that statutes are to be interpreted so that no word is rendered superfluous. See. e.g.. United States vr. Smith, 553 F.2d 1239, 1242 (10th Cir. 1977); Rockbridge rv. Lincoln, 449 F.2d 567. 571 (9th Cir. 1971); Klein vr. Republic Steel Corp., 435 F.2d 762, 766 (3rd Cir. 1970). 27 IV. THE DECISION OF THE D.C. CIRCUIT DRA- MATICALLY ENHANCES THE IMBALANCE BE- TWEEN CABLE AND COPYRIGHT INTERESTS IN THE FUTURE ADMINISTRATION OF SEC- TION 111. The definition of the revenue base under Section 111(dX2XB) is key to a determination of cable operators’ liability for royalties under the Act. When Section 111 was enacted, Congress and the industries affected hoped to create a modest, affordable pool of $8.7 million in royalties for distribution among copyright owners. H. Rep. at 91. Annual copyright royalties collected at the present time under Section 111 exceed $100 million and all Congres- sional expectations. The Copyright Office/MPAA construc- tion of Section 111(d) cost the cable industry an additional $40 million this past year alone. 8 Communications Daily, No. 4, p. 3 (March 7, 1988). These windfall payments will continue to grow, year after year, as the gross receipts of cable operators increase. The exorbitant cost of the copyright compulsory license under Section 111 is becoming a significant factor in cable operators’ marketing determinations. Excessive copyright liability is already resulting in decisions by cable operators to curtail carriage of broadcast signals on their systems unless the broadcast stations are willing to pay for the added copyright liability resulting from such carriage. Ex- cessive royalties will ultimately necessitate higher sub- scriber fees for cable programming, particularly now that almost total rate deregulation under the Cable Commu- nications Policy Act of 1984, 47 U.S.C. § 543, has come into effect. All these factors adversely affect the goal of diversity of viewpoints and programming which the FCC, under the Communications Act of 1934, 47 U.S.C. §§ 151, et seq., has traditionally undertaken to promote in the pub- lie interest. 28 Section 111 was not designed as, but is rapidly becom- ing, a measure to vest in the Copyright Office the ability to regulate the development of cable television. The sudden attribution to the Copyright Office of expansive substan- tive authority to construe Section 111, and the resulting judicial deference to it, will create an administrative night- mare for the cable television industry. MPAA and other copyright owners will continue to ask the Office to expand the statutory scheme for their benefit through the issuance of substantive regulations. Attempts in that direction were, in fact, quick to follow the D.C. Circuit’s decision. MPAA asked the Copyright Office to issue a regulation requiring that any underpay- ments of cable copyright royalties during the pendency of this proceeding be made up with interest. The main issue presented to the Court in this case will again be deter- minative—even though neither Section 111 nor its legis- lative history mentions the collection of interest, does the Copyright Office have the power to construe the statute so as to issue a binding regulation assessing interest on multimillion dollar payments to be made by cable opera- tors? Unless the Court settles the matter, the D.C. Cir- cuit’s decision will provide the bases for the continued and unwarranted expansion of Copyright Office powers, which Congress specifically limited in the Act, and will ultimately provide copyright owners with the tools to unilaterally re- write the 1976 industry compromise. Enormous liabilities will flow from the decision below beyond increased royalty payments. As the Copyright Of- fice ventures into exercising its newly-found powers, the exposure of cable operators to infringement actions founded on Copyright Office interpretations of Section 111 ad- vanced after infringement litigation has commenced, with potential resulting liability in the billions of dollars, will concomittantly escalate. Copyright owners will continue to threaten cable operators with infringement litigation based . on new, overreaching interpretations of Section 111. Since 29 the Copyright Office, by its own regulations, cannot pro- vide operators with legal advice on how to achieve com- pliance, cable systems fearful of the exponential monetary exposure and litigation costs will have to acquiesce to the higher royalty payments. CONCLUSION For the foregoing reasons, this petition for certiorari should be granted. If Cablevision is ultimately correct in urging that its construction of Section 111(d) of the Act is the one which accurately reflects and promotes Con* gress’ intent, the matter should be remanded to the district court for appropriate disposition of the MPAA counter- claims. Respectfully submitted, MarRK J. TAUBER Counsel of Record Nora E. GARROTE PIPER & MARBURY 1200 19th Street, N.W. Washington, D.C. 20036 (202) 861-3900 MICHAEL A. SCHLANGER SHAW, PITTMAN, Potts & TROWBRIDGE 2300 N Street, N.W. Washington, D.C. 20037 (202) 663-8000 Counsel to Petitioner la United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT No. 86-5552 CABLEVISION SYSTEMS DEVELOPMENT COMPANY we MOTION PICTURE ASSOCIATION OF AMERICA, INC., et al., APPELLANTS U.S. COPYRIGHT OFFICE AND ITS REGISTER And Consolidated Case Nos. 86-5553, 86-5554, 86-5597, 86-5635, 86-5636 and 86-5637 Appeals from the United States District Court for the District of Columbia (Civil Action Nos. 83-01655, 83-02785 and 84-03097) Argued October 15, 1987 Decided January 5, 1988 2a Stuart H. Newberger, Assistant United States Attor- ney, with whom Joseph E. diGenova, United States Attor- ney, Dorothy Schrader, General Counsel, United States Copyright Office, Royce C. Lamberth and Michael J. Ryan, Assistant United States Attorneys, were on the brief for federal appellants ‘cross-appellees. Richard M. Cooper, with whom Edward Bennett Wil- liams, Robert W. Hamilton, Paul Mogin, Arthur Scheiner and Dennis Lane were on the brief for appellants cross- appellees, Motion Picture Association of America, Inc., et al. Jay E. Ricks, with whom David J. Saylor, Gardner F. Gillespie, Steven J. Horvitz and Brenda L. Fox, were on the brief for appellee, National Cable Television Associa- tion, Ine. Michael S. Schooler also entered an appearance for appellee, National Cable Television Association, Inc. Mark J. Tauber and Michael A. Schlanger, with whom Deborah C. Costlow and Nora E. Garrote were on the brief for appellee cross-appellant, Cablevision Company. Phillip R. Hochberg, for National Basketball Associa- tion and National Hockey League, Ritchie T. Thomas and Judith Jurin Semo, for National Collegiate Athletic Asso- ciation, David H. Lloyd, Robert Alan Garrett, Terri A. Southwick, and Edwin M. Durso, for Major League Base- ball, Victor E. Ferrall, Jr. and John I. Stewart, Jr. for National Association of Broadcasters, Bernard Korman and |. Fred Koenigsberg, for American Society of Com- posers, Authors and Publishers, Charles T. Duncan and Michael Faber for Broadcast Music, Inc., Nicholas Arco- mano for SESAC, Inc., Gene A. Bechtel for Public Broad- casting Service, James S. Gorelick for National Public Radio, John H. Midlen, Jr. for Old-Time Gospel Hour, and Douglas G. Thompson, Jr. for Canadian Broadcast- ing Corp., were on the brief for amici curiae, National Basketball Association, et al. 3a Robert W. Coll also entered an appearance for amici curiae, National Hockey League. Before: ROBINSON, RUTH B. GIsSBURG and SILBER- MAN, Circuit Judges. Opinion for the Court filed by Circuit Judge SILBER- MAN. SILBERMAN, Circuit Judge: The Copyright Act of 1976, 17 U.S.C. §§ 101 et seg. (1982 & Supp. IV 1986), grants cable television systems a license to retransmit copyrighted broadcast ' programming to their subscribers, id. §111(c) (1), and requires in return that the systems deposit with the Copyright Office a fee equal to a “spe- cified percentage[] of the gross receipts from subscribers to the cable service . . . for the basic service of provid- ing secondary transmissions of primary broadcast trans- miiters,” id. § 111(d)(1)(B).2 In a series of complaints consolidated for trial, a trade association representing the cable television industry and Cablevision, an individ- ual cable company, sued several copyright owners seeking a declaration of the meaning of the above-quoted lan- guage. The copyright owners filed counterclaims against Cablevision for copyright infringement, alleging that Cablevision’s interpretation of the statutory phrase led to an underpayment of the required fee and thus made 1 Throughout this opinion, a “broadcast” program is one originally propagated by traditional over-the-air television signals for receipt by antenna, and a “cable-originated” or “non-broadcast” program is one produced solely for cable sys- tems and disseminated only through them. ‘Transmission’ is a general term denoting any means of delivering program- ming. Thus, a broadcast program could be retransmitted over cable. 2In 1986, Congress amended 17 U.S.C. § 111(d) by elimi- nating old § 111(d)(1) and redesignating accordingly. Pub. L. No. 99-397, §2(a). The subsection at issue here, new § 111(d) (1), appears as §111(d)(2) in the district court’s opinion. 4a the company an infringer. On the district court’s order, the trade association joined the Copyright Office as a de- fendant. On cross motions for summary judgment, the district court rejected the Copyright Office’s interpretation of the statute—that gross receipts “include the full amount of monthly (or other periodic) service fees for any and all services or tiers of services which include one or more secondary transmissions of television or radio broadcast signals,” 37 C.F.R. § 201.17(b) (1) (1987)—as incon- sistent with congressional intent and endorsed instead the position of the trade association. Cablevision Co. v. Motion Picture Ass’n of Am., 641 F. Supp. 1154, 1161 (D.D.C. 1986). The court ordered the Copyright Office to modify its regulation to accord with the court’s per- ception of congressional intent. The district court then dismissed the counterclaims for infringement on grounds that there had been no violation of “the spirit of the law.” Id. at 1163. The copyright owners, the Copyright Office, and Cablevision appeal, putting forward a wide variety of arguments for reversal or modification of the district court’s order. We hold that the Copyright Office has the authority to issue regulations interpreting the statutory language at issue and that its interpretation was a reasonable one. We agree with the district court’s rejection of Cablevision’s reading of the statutory term “basic service,” but hold that the district court erred in declining to defer to the Copyright Office’s regulation as to what revenues make up “gross receipts.” We also reverse and remand for further proceedings regard- ing the counterclaims. The basis for the district court’s dismissal is unclear, and the record before us is insuffi- cient to allow us to rule as a matter of law on whether infringement occurred. I. This case presents a dispute over the structure of a statutory fee that cable television operators must pay for 5a the right to retransmit broadcast television program- ming. Those who pay the fee, the cable systems, advocate a construction that the eventual recipients of the fee, the copyright owners, find objectionable. The dispute arose because, after governmental intervention designed to cor- rect a market imperfection, the market evolved in un- anticipated directions. The disagreement has its roots in two Supreme Court decisions, Teleprompter Corp. v. Columbia Broadcasting System, 415 U.S. 394 (1974), and Fortnightly Corp. v. United Artists Television, 392 U.S. 390 (1968), that held retransmissions by cable tele- vision systems of broadcast programming, whether of local or distant origin, did not constitute “performances” under the copyright law and thus did not give rise to liability for infringement. The Teleprompter Court con- cluded that if the Copyright Act of 1909 was inadequate to govern the commercial relationships that had emerged in the interim, it was for Congress to create a substitute. 415 US. at 414. Thus prompted, Congress, as part of its revision of the copyright laws, addressed in particular this problem of “secondary transmissions.”” When a cable system takes a broadeast signal (“primary transmission”) and de- livers it to the system’s subscribers (‘“‘secondary trans- mission”), the system is earning money by selling to its customers the copyrighted material licensed only for the primary broadcast transmission. Under Fortnightly and Teleprompter, the copyright owner was unable to share directly in those revenues. Congress was of the view that the copyright holders should receive direct compensation for the use of their rights. But Congress also recognized that the transaction costs accompanying the usual scheme of private negotiation that controls the use of copyrighted materials could be prohibitively high. H.R. Rep. No. 1476, 94th Cong., 2d Sess. 89, reprinted in 1976 U.S. CoDE Conc. & ADMIN. NEWS 5659, 5704. The operator of a small cable system in a rural area, for 6a instance, might find it more profitable to forgo rebroad- casting a wide variety of signals rather than to negotiate with various copyright owners in Atlanta, Chicago, and Los Angeles; cable operators, subscribers, and copyright holders would all be worse off under such circumstances than in a world where the retransmission rights could change hands at a lower cost. Congress saw that neither the situation as it existed after Fortnightly and Tele- prompter nor a replication of classic copyright arrange- ments would be entirely satisfactory. The response was a new regime, embodied in section 111 of the revised Act. Congress first abandoned the no- tion of individual negotiation in favor of a compulsory license. Under § 111/c) of the Act, a cable system may retransmit to its customers any primary transmission made by a broadcast station licensed by the Federal Com- munications Commission.’ In exchange for this privilege, however, the cable systems are required to pay a fee, to be distributed to the copyright owners as surrogate for the royalties for which they might have negotiated under a pure market scheme. In devising that fee, Congress drew a crucial distinc- tion between local and distant broadcast signals. The House Judiciary Committee observed that “there was no evidence that the retransmission of ‘local’ broadcast sig- nals... threatens the existing market for copyright program owners.” H.R. Rep. No. 94-1476, supra, at 90. Because local‘ retransmission does not carry the signal 3 /.e., the familiar network and local programming that can be received with an antenna. The words “station” and “chan- nel” are synonymous for purposes of this opinion and refer to an entity that transmits by broadcast or cable a single regular schedule of programming. For example, a local affiliate of a network is a station or channel, as is a cable-originated entity such as ESPN that offers a single complete bill of fare. ‘The technical definition of local, which appears at 17 U.S.C. §111(f), is not at issue in this case. For conceptual to households beyond those local acvertisers would be willing to pay to reach, the advertising revenue base will be increased by any expansion of the scope of the dis- semination due to the retransmission, and copyright owners will be able to negotiate with the broadcaster to receive appropriate compensation. By the same token, the retransmission of network signals, from whatever distance, causes no difficulty. Advertisers on national network television—such as CBS—expect to reach au- diences nationwide and pay accordingly. Because na- tional advertisers will pay to reach any incremental viewers, networks will be willing and able to pay copy- right holders the full value placed on the receipt of the program by viewers (as measured by the willingness of advertisers to buy time during the program!. /d. Dis- tant non-network programming is altogether another matter. Local advertisers will not pay extra to reach viewers who cannot reasonably be expected to patronize their businesses, so the revenue base from which to com- pensate the owners understates the value of the use of the materials, and the copyright holders would, absent an adjustment mechanism, be undercompensated. /d.; see also National Cable Television Ass'n v. Copyright Royalty Tribunal, 689 F.2d 1077, 1079 (D.C. Cir. 1982). The Act therefore allows the copyright owners of distant non-network programs to receive a portion of the fees paid to the cable systems by subscribers. 17 U.S.C. § 111(d) (3) (A) Congress’ broad purpose was thus to approximate ideal market conditions more closely than would either the Teleprompter or individual negotiation models; the com- pulsory license would allow the retransmission of signals for which cable systems would not negotiate because of purposes, a signal is “local,” as opposed to “distant,” if the subscribers of a particular cable system can receive the broad- cast signal with an antenna. See, e.g., Teleprompter, 415 U.S. at 401 & n.7. 8a high transaction costs, and the owners of copyrights for non-network programs carried on cable systems far from the original area of broadcast—who could not receive full value out of advertising revenues—would receive compensation out of the fees paid by the systems. The disputed fee computation comprises two parts and is deceptively simple in principle. The cable system first calculates “‘the gross receipts from subscribers to the cable service during [the applicable] period for the basic service of providing secondary transmissions of primary broadcast transmitters.” 17 U.S.C. § 111(d)(1)(B). By using one of three formulas, selected according to the amount of gross receipts, the system then determines what percentage of gross receipts is due as a fee. For larger cable systems, the percentage of gross receipts owed depends upon the number of distant signal equivalents (“DSEs”) carried by the system.’ The DSE figure is calculated by assigning a value of 1.0 to each distant independent station carried and 0.25 to each distant network station or distant noncommercial educa- tional station, and summing. /d. §111/f). The lower value is assigned to distant network affiliates because the bulk of their programming is provided by the net- works and, as described above, copyright owners of net- work broadcasts are presumed to be fully compensated out of revenues from advertisers seeking to reach the national market. The fee owed rises by a certain per- * Congress was concerned about the potential impact of the fees on smaller systems, especially since many such systems must carry more distant signals to compensate for sparse local broadcasting, and therefore provided them special relief. See H.R. Rep. No. 1476, supra, at 96-97; S. Rep. No. 473, 94th Cong., Ist Sess. 81 (1975). Systems with semiannual gross receipts of $75,800 or less pay a flat fee of $28. Systems with semiannual gross receipts of more than $75,800 but less than $292,000 pay a fee based on set percentages of gross receipts without regard to DSEs. See 17 U.S.C. § 111(d) (1) (C), (D); 37 C.F.R. § 308.2(b). 9a centage of gross receipts—which percentage, established by regulation, declines as the number of DSEs rises— for each incremental DSE. See id. § 111(d)(1)(B); 37 C.F.R. § 308.2(a).° Thus, a large (gross receipts greater than $292,000) cable system that carried one distant signal equivalent would pay 0.893% of gross receipts, a comparable system with a DSE of 2.0 would pay 1.4565, and a similar system with a DSE of 5.0 would pay 2.847%. A system with a DSE of less than one, however, would also pay 0.893%. 37 C.F.R. § 308.2 (a) (1): see also H.R. Rep. No. 94-1476, supra, at 96. The Act does not require perfect correlation between the number of distant signals retransmitted and the fee paid, but it operates roughly to charge systems according to the number of distant signals they use. See supra note 5 (small systems pay regardless of signal use). Fi- nally, the fees are distributed to the designated copyright owners by the Copyright Royalty Tribunal (“CRT”), a body created by the Copyright Act to administer cer- tain of its provisions.’ * The declining proportion of gross receipts added to the fee for each additional DSE is appropriate since, ceteris paribus, the revenues of a large system, see supra note 5, could be expected to rise with each new signal. The mechanism pro- vides for a more uniform dollar-per-subscriber-per-signal fee. 717 U.S.C. § 801. The CRT performs two main tasks rele- vant here. The first is the quasi-judicial function of distribut- ing among copyright owners the fees paid to the Copyright Office under section 111, thus completing the statutory substi- tute for market transactions. Jd. § 801(b) (3); see also id. § 111(d) (3), (4). Second, the CRT has the quasi-legislative responsibility to adjust the fee rates to reflect inflation or cable system subscription rate changes in order to maintain the real per-subscriber royalty fee which existed at the date of enactment. Jd. § 801(b) (2) (A). The CRT also has the power to adjust overall rates to maintain reasonableness in the light of FCC rule changes. 17 U.S.C. § 801(b) (2)(B), (C). The CRT has no responsibility or authority to define gross receipts or otherwise to determine the relative share of the total fund 10a The foregoing description of the-operation of section 111 is common ground for the parties. The dispute cen- ters on the definition of “gross receipts . . . for the basic service of providing secondary transmissions,” the base amount from which the fee is calculated and on which depends the size of the fund the CRT distributes. Con- gress did not define “gross receipts” or ‘‘basic service” in the 1976 Copyright Act, but an examination of the reports on the legislation evokes a fairly sharp image of the model that Congress had in mind at the time of en- actment. According to that picture, the cable subscriber had available from the system a single package for a flat fee containing a number of retransmitted broadcast signals and some channels produced just for cable—the “basie service” that every subscriber received—and be- yond that, individually priced specialty channels avail- able only on cable from which the subscriber to the basic service could pick and choose—“pay cable.” See, e.g., H.R. Rep No. 94-1476, supra, at 88.* In this paradig- matic case, the definition of gross receipts from basic service was simple; gross receipts were the flat fee for the initial package multiplied by the number of sub- scribers. It was clear from the outset that receipts for pay cable and other charges unrelated to programming, such as those for installation, were not to be a part of gross receipts, see H.R. REP. No. 99-1476, supra, at 96, and that proposition is undisputed before us. to be contributed by individual cable systems. See 17 U.S.C. § 803 (a). ® The legislative history does not make it absolutely clear whether Congress understood the term pay cable to encom- pass only individually priced non-broadcast stations—the usual content of the term, see Home Box Office, Inc. v. FCC, 567 F.2d 9, 18 & n.8 (D.C. Cir.), cert. denied, 434 U.S. 829 (1977)—or to include the possibility of a package of several cable-originated channels offered for one price. As the re- mainder of this opinion will indicate, we need not reach the question and therefore leave it unanswered. — i lla Primarily because of technological constraints, the initial package consisted largely of the retransmission of local broadcast signals and of certain rather rudimentary eable-originated programming—mostly automated time, weather, and news services and access channels available to local citizens as an outlet for speech, see 47 C.F.R. § 76.254 (1976). As a rule, such cable-originated serv- ices were not greatly prized by subscribers and whether they were included in the gross receipts pool was a mat- ter of negligible concern. Evolution of the cable industry and its marketing prac- tices rather quickly made the meaning of gross receipts problematic, however, as reality diverged from the model on which the Act was based. As improvements in ter- restrial technology gave cable systems increased channel capacity, advanced satellite services allowed cable trans- missions to be offered nationwide. These developments ushered in such familiar and popular cable-originated stations as ESPN and CNN and made possible the de- velopment of “sunerstations,” stations broadcast in one location but carried nationwide by cable, such as WTBS from Atlanta and WGN from Chicago.® Because the initial package offered to subscribers might now contain, for one price, local broadcast programming, distant broadcast programming (e.g., WTBS), and highly de- sirable cable-originated programming (e.g., FSPN), the question arose whether cable companies could allocate part of the initial package’s subscription price to cable- * As advertisers recognize that the superstations reach na- tional audiences, one would expect the charges for advertising time to rise, allowing copyright owners to negotiate appro- priate royalty fees from superstations as they do from net- works. The statutory scheme could thus become superfluous for perhaps the most important category of distant broadcast programming. See Operators Rate WTBS, ESPN Most Valu- able Basic Services, Multichannel News, July 4, 1983, at 1 (listing superstation WTBS as one of the most lucrative cable properties other than pay cable). 12a originated programming and exclude that amount from gross receipts. Changes in the marketing of cable serv- ices added to the confusion. The practice of selling a single initial package plus individually priced pay cable stations gave way to tiering: the offering of several different packages, or tiers, of stations, with each tier separately priced.’° And each tier might contain both broadeast_and_ cable-originated stations. The question soon arose of whether entire tiers could be excluded from gross receipts as well as whether it was permissible to exclude revenues from non-broadcast channels within a “mixed” tier that contained both broadcast and non- broadcast channels. Because the congressional debates centerel on a model of the cable industry that omitted such complexities, no obvious answers were available. We thus arrive at the crux of this case—whether reve- nues from all tiers other than pay cable and from all channels within each included tier must be included in gross receipts. The cable companies argue that, since the statute was not meant to reimburse the copyright owners of non-broadcast programming, and since advertisers buy time on cable-originated stations that are carried nation- wide such as CNN and ESPN just as they do on the broadcast networks, with the desire to address the entire audience actually reached, there can be no reason to in- clude receipts for subscriptions to cable-originated chan- nels in a fund designed to reimburse the owners of copy- rights on distant broadcast programming. Therefore, the cable companies reason, revenues from non-broadcast channels or tiers that do not resemble the initial package envisioned by Congress should not be included in gross receipts. ’ For example, tier 1 could offer four local broadcast sta- tions and an automated weather service plus ESPN and WTRS for 86, tier 2 could carry WGN and CNN for 83, and tier 3 could carry eight more cable-originated channels for $5. 13a The germ of a regulatory answer to these contentions appeared in 1978 in a revision of the Copyright Office's regulations implementing section 111. Those regulations emphasized that gross receipts included “the full amount of monthly ‘or other periodic) service fees,’ 43 Fed. Reg. 27,827, 27,832 (1978). The preamble explained that systems that furnished to subscribers “for a single monthly fee, a service that includes retransmission of radio and television signals and local origination (such as time and weather and automated news services), id. at 27,828 ‘emphasis added), could not allocate a por- tion of the fee to the local origination services (and thereafter exclude that portion from gross receipts) be- cause the Copyright Office could find “no statutory jus- tification or basis for allocating” the fee. Jd. The Office thus determined early on, albeit without considering the ease of more valuable non-broadcast properties such as ESPN, that intra-tier allocation was impermissible. In response to changes in the cable industry, and, most important for our purposes, to comments from cable sys- tem operators that a review of the definition of gross receipts was desirable, the Copyright Office undertook an exhaustive reevaluation of its regulations in 1981. 46 Fed. Reg. 30,649, 30,650 (1981). Among other items, it proposed to examine whether gross receipts from a par- ticular tier could be prorated when that tier contained non-broadecast components and whether a system that of- fered tiered service should be required to include any, all, or part of revenues from tiers not received by all subserivers in gross receipts from basic service. Id. at 30,651. In the public hearing, Robert W. Ross, Vice President for Legal Affairs and Government Relations of the Na- tional Cable Television Association (‘NCTA’), a trade association for cable system operators, admitted that at- tempts to prorate revenues among channels offered on the same tier “would add an undue complication to the pro- l4a cess, and might well be a subject for substantial litigation and dispute.... [Attempting proration] is not the posi- tion that reflects the attitude of the Association. . . . I think vou could create a regulatory monster... .” Hearings of July 28, 1981, Joint Appendix at 325-27. The resulting regulation issued some time later, in April of 1984. 49 Fed. Reg. 13,029 (1984). No doubt in- fluenced in part by the NCTA’s position, the regulation provides that “[g]ross receipts for the ‘basic service of providing secondary transmissions of primary broadcast transmitters’ include the full amount of monthly (or other periodic! service fees for any and all services or tiers of services which include one or more secondary transmissions of television or radio broadcast signals.” 37 C.F.R. §$ 201.17'b' (1). In short, if a tier contains a broadcast signal, all subscription revenues from the tier are to be included in gross receipts. This lawsuit cannot accurately be styled solely a chal- lenge to that interpretation, for the first complaint was filed almost one year before the regulation took effect. Cablevision, a New York cable system operator, sought a declaratory judgment regarding the proper definition of gross receipts from basic service. Cablevision had since 1979, when it moved distant broadcast programming from the initial tier those channels occupied with local broadcast programming to an optional, higher tier, in- terpreted the term to include only those monies received for subscriptions to the first, or lowest, tier to which all customers were required to subscribe before electing higher tiers. Cablevision argued that its interpretation was correct because its definition of “basic service’’ com- ported with trade usage of the term and a consistent line of FCC and congressional use.” The defendants to that declaratory action, the Motion Picture Association of America and eight of its member 11 Cablevision later filed a second complaint on behalf of three of its other systems that engaged in the same reporting practices. 15a companies (“Copyright Owners”) filed counterclaims charging Cablevision with copyright infringement under section 111 for retransmitting broadcasts without paying the proper statutory fee. See 17 U.S.C. § 111ic) (2). The district court bifurcated the case; the first phase was to deal with the proper definition of gross receipts, the second, to follow if it was determined that Cable- vision had not complied with the law, with the question of what copyrights had been infringed and what reme- dies were due. The NCTA entered the battle in September of 1983 by filing a complaint for declaratory judgment regarding the meaning of the Act against the same defendants. It was the NCTA’s position that cable systems should be allowed to attribute a portion of the revenues received as subscribers’ fees for each tier containing both broadcast and cable-originated programming to the latter program- ming and to exclude that amount from gross receipts. In effect. the NCTA was challenging the decision of the 1978 regulations not to allow allocation and abandoning —indeed reversing—its posxion in the 1981 hearings be- fore the Copyright Office. The district court ordered the NCTA to join the Copyright Office and the Register of Copyrights as necessary parties and then consolidated the cases and ruled on motions for summary judgment. The district court declined to accord deference to the Copyright Office’s regulation, holding that the regula- tion’s definition of gross receipts did “not have a reason- able basis in law and frustrate[d] the underlying con- gressional policy.” 641 F. Supp. at 1160. The district judge concluded that it “seem[ed] unfair” to require a cable system to pay the section 111 royalty fee on non- broadeast transmissions for which it had already paid merely because the channel was in the same tier with broadcast programming. 7d. The court however rejected Cablevision’s attempt to equate “basic service” with “first tier” as also inconsistent with Congress’ purpose and as 16a inviting manipulation. It instead agreed with the NCTA that the statute requires revenues attributable to non- broadeast programming to be excluded from gross re- ceipts and ordered the Copyright Office to devise a means of performing this allocation. Jd. at 1162-63. Finally, the court dismissed the counterclaims, finding that Cable- vision “did comply with the spirit of the law.” Jd. at 1163. On appeal, all parties but the NCTA attack the district court’s definition of . oss receipts, and the Copy- right Owners seek reversal of the dismissal of their counterclaims. II. We agree with government counsel’s statement at oral argument that, as applied to the cable industry as now constituted, section 111 is “not a model of clar- ity.” The statute fails to define the basic terms at issue here, and the legislative history strongly indicates that Congress never considered the arguments now be- fore us. The instant case thus would seem to be con- trolled by Chevron U.S.A. Inc. v. Natural Resources De- fense Council, 467 U.S. 837 (1984), in which the Su- preme Court addressed the “bubble concept” for defining “stationary source” within the Clean Air Act Amend- ments of 1977 and concluded that an examination of the legislation and its history revealed that Congress had no specific intention regarding the matter. Jd. at 851, 862. The Court held that, in the face of such legislative silence, “the question for the court is whether the agen- cy’s answer is based on a permissible construction of the statute.” Jd. at 843.'? But before we examine the reason- 12 We are urged to undertake a more searching review on the strength of language in JNS v. Cardoza-Fonseca, 107 S. Ct. 1207 (1987). Cablevision in particular argues that this case means that a court owes no deference to an agency whenever “a pure question of statutory construction,” id. at 1221, is involved. The Supreme Court has recently confirmed, how- ever, that the language in Cardoza-Fonseca does not alter the Chevron test—courts are to use the “traditional tools of statu- 17a ableness of the Copyright Office's interpretation, we must first deal with an anterior question: Does the promul- gating agency, the Copyright Office, have authority to interpret the statute and are its interpretive regulations due judicial deference if reasonable? Cablevision and the NCTA contend that the Copyright Office’s interpretation is owed no deference because the Office has no authority to issue such a substantive regula- tion. The NCTA’s position on this point, however, is paradoxical; it argues that “the Copyright Office lacks the legal authority and expertise to issue binding inter- pretations of the Copyright Act,” yet at the same time asks us to direct that same Office to issue regulations (forms) to implement its general intra-tier allocation proposal. The awkwardness of the NCTA’s position serves to emphasize that this statute is not self-executing. Given Congress’ awareness of the rapid changes taking place in the cable industry, we cannot believe that Con- gress intended that there be no administrative overseer of this scheme. The statute’s language is not to the con- trary. Section 702 of title 17 of the United States Code authorizes the Register of Copyrights “to establish regu- lations . . . for the administration of the functions and duties made the responsibility of the Register under this title.” More specifically, section 111(d)(1) of that title directs that cable systems deposit their compulsory li- cense royalty fees with the Register of Copyrights, “in accordance with requirements that the Register shall, after consultation with the Copyright Royalty Tribunal . ., prescribe by regulation.” Cablevision and the NCTA resist the obvious import of these passages by contending that this rulemaking tory construction” to determine congressional intent, and to defer to the agency’s permissible construction when the statute is “silent or ambiguous.” NLRB v. United Food & Commercial Workers Union, Local 28, 56 U.S.L.W. 4037, 4040- 11 (U.S. Dec. 15, 1987); see also id. at 4043 (Scalia, J., concurring). SE 18a power is limited to the ministerial task of designing forms, and they present authority asserted to stand for the proposition that the Copyright Office is unusual among government agencies in that its interpretations of the statutes it administers are due no judicial deference. Of course, designing forms to implement the NCTA’s pro- posal has a substantial policy component. But, more to the point, we observe that this case is fundamentally one of first impression regarding section 111 and hold that the cases cited do not, for reasons we will discuss, es- tablish the general principle that the Copyright Office’s interpretation of that statute can be ignored. Our hold- ing on deference due the Office does not extend beyond the bounds of its interpretation of section ill, but we do believe the Office’s construction of at least that section is due deference. We have emphasized that the compulsory licensing scheme was a break from the traditional copyright regime of individual contracts enforced in individual lawsuits. If we agreed that the Copyright Office had no power to interpret the statute, every dispute over the meaning of the statute could give rise to an infringement action where, as this case suggests, enormous damage claims are commonplace.'* If, on the other hand, reasonable inter- pretations of the statute by the Copyright Office are due judicial deference, a copyright holder’s incentive to bring infringement actions that are based on interpretations other than those of the Copyright Office would be reduced. Since Congress consciously rejected traditional, contract- based implementation as unworkable, a holding that forced resolution of every dispute in an infringement or declaratory judgment action would be unfaithful to this 13. No party argues that the CRT or the FCC, or anyone other than the Copyright Office or the judiciary, has authority to interpret the language in question. '4 Cablevision suggests it could be subject to a $3 billion judgment. 19a policy choice and antithetical to Congress’ central concern of providing a low cost transfer of copyrighted materials. We are also unpersuaded by the suggestion that no deference is due the Office because it lacks expertise in vhis field. The Copyright Office certainly has greater expertise in such matters than do the federal courts; and while watching over the cable industry may have been a novel brief for the Copyright Office when the new Act was passed, that agency has had time to accumulate experience. But, in any event, Chevron’s rationale for deference is based on more than agency expertise. [A]n agency to which Congress has delegated policy- making responsibilities may, within the limits of that delegation, properly rely upon the incumbent administration’s views of wise policy to inform its judgments. ... [I]t is entirely appropriate for this political branch of the Government to make such policy choices—resolving the competing inter- ests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities. Chevron, 467 U.S. at 865-66. Like the Court in Chevron, we are faced with several interpretations of ambiguous language which really involve competing policies among which Congress did not explicitly choose. We see no reason to deny the Copyright Office’s legitimacy in-select- ing, as the EPA did in Chevron, among those choices so long as the interpretation selected is reasonable. The Supreme Court implicitly considered whether def- erence is due the Copyright Office’s construction of the Copyright Act in DeSylva v. Ballentine, 351 U.S. 570 (1956). Resolving a dispute between an author’s widow and his illegitimate child, the Court took note of Copy- right Office wegulations, recently rescinded though ap- parently still followed in practice, that ostensibly gov- erned the issue. The Court stated that it “would ordi- 20a narily give weight to the interpretation of an ambiguous statute by the agency charged with its administration,” id. at 577-78, but declined to rely on the interpretation because the fact that the practice was “more the result of a decision that there is substantial doubt over the ques- tion, rather than the result of a confident interpretation of the statute” deprived the practice “of any force as an interpretation of the statute,” i”. The Supreme Court has thus indicated that it would defer to the Copyright Office when the latter actually interpreted the statute. undermining the notion that the Office is never owed deference."* To be sure, the Copyright Office in this case may have come close to the point of excessive diffidence identified in DeSylva. In its statement promulgating the 1984 regu- lations, the Office “‘welcome[d] the guidance of the courts on ‘tiering,’” but concluded it could not justify further delay in issuing regulations in light of requests from “the major interests affected by the compulsory license” that the agency take a position. 49 Fed. Reg. 13,029, 13,031 (1984). The Office also stated it could not “provide the flexibility requested by cable systems absent guidance from the Congress or the courts.” Jd. at 13,035. On balance, however. we conclude that the Office did see it- self as having the authority to issue regulations and did make “a confident interpretation of the statute.” De- Sylva, 351 U.S. at 577. The Office stated that “[wlith respect to administration of the Copyright Act in gen- eral and the compulsory licenses in particular, the Copy- right Office must and does, however, interpret the Act.” 49 Fed. Reg. 13,029, 13,031 (1984). After weighing the potential administrative costs of intra-tier allocation. it concluded that “the Copyright Act does not permit any proration or other allocations of either DSE’s or gross re- The DeSylra Court may also have been unwilling to at- tribute to Congress an intent to delegate to the Copyright Office authority over a matter such as the descent of property that is traditionally entrusted to the states. 2la ceipts,” id. at 13,035 ‘emphasis added!—not that the Office did not have the power to order the allocation._ The Office thus did interpret the statute with the meaning of DeSylva. Cablevision and the NCTA also rely on Bartok v. Boosey & Hawkes, Inc., 523 F.2d 941 (2d Cir. 1975). The Second Circuit there refused to give weight to a definition of “posthumous” appearing on a Copyright Office form, stating flatly that “the Copyright Office has no authority to give opinions or define legal terms and its interpretation on an issue never before decided should not be given controlling weight.” Jd. at 946-47 ‘| foot- notes omitted). But the court held the interpretation put forward by the Office was inconsistent with legis- lative intent, so its statement on the deference due the Office would seem to be a dictum. In any event, the Sec- ond Circuit was not considering section 111, and we can- not agree with Cablevision and the NCTA that the court’s proposition, even if generally sound, should be extended te cover that section. We think Congress saw a need for continuing interpretation of section 111 and thereby gave the Copyright Office statutory authority to fill that role. Its interpretations are therefore due the same deference given those of any other agency. We thus turn to the reasonableness of the construction at issue. III. The regulation applies the language of 17 U.S.C. § 111 (d)(1)(B): “the gross receipts from subscribers .. . for the basic service of providing secondary transmissions of primary broadcast transmitters.” We find it telling that the interpretations of that language offered by Cablevision and the NCTA as alternatives to the Copy- right Office’s regulation violate the canon of construction '* The Bartok court cites DeSylva. As our discussion of the latter case indicates, we do not believe it stands for this proposition. 22a that effect should be given to every word of the statute so that no part is rendered “inoperative or superfiuous.”’ Norfolk & W. Ry. v. United States, 768 F.2d 373, 379 (D.C. Cir. 1985), cert. denied, 107 S. Ct. 270 (1986). The NCTA’s interpretation, adopted by the district court, would allow cable companies to assign monetary values to non-broadcast programming that is combined with broad- cast programming in a mixed tier and to exclude those amounts from gross receipts. This approach reads “basic service” out of the statute; under this view, the language could as easily be “gross receipts from subscribers . . . for secondary transmissions of primary broadcast trans- mitters.” By emphasizing only the delivery of discrete stations, this reading ignores the clear implication of the phrase “basic service’ that cable services are typ- ically provided in packages. Cablevision, conversely, contends that “basic service” is a well defined term of art, meaning the first or lowest tier. But a necessary consequence of this interpretation is that all language that follows that term is superfluous. Indeed, since Cablevision contends basic service can con- tain anything the cable system chooses, and not neces- sarily just—or even any—broadcast retransmissions, sce infra p. 29, the phrase “of providing secondary trans- missions of primary broadcast transmitters,” which would seem to serve the purpose in the statute of ex- plaining “basic service.” could actually contradict “basic service.” The Copyright Office’s regulation is thus the interpretation before us that best accounts for the statu- tory language. The regulation also evinces a full understanding of the structure and purpose that underlie that language. In holding the regulation to be inconsistent with the will of Congress and adopting the interpretation espoused by the NCTA, the district court in our view misunderstood a fundamental mechanism of the statute. The court cor- rectly observed that liability under the compulsory license 23a was to be limited to the retransmission of distant non- network programming, 641 F. Supp. at 1161; see H.R. Rep. No. 94-1476, supra, at 90, but failed to appreciate how the distant signal equivalents satisfy that intention. Because the DSE value—and hence the percentage of the fixed gross receipts base due as a fee—rises with each distant broadcast channel retransmitted, the cable system pays only for distant non-network ' programming ac- tually broadcast. That Congress intended the DSEs to correlate the number of distant signals carried and fees paid can be further established by examining the divergences of the content of the revenue base and the programs eligible for reimbursement from the CRT. Congress never contem- plated a precise congruence of the royalties paid and the amount of distant non-network programming actually carried. Instead, Congress picked a convenient revenue base and used the DSEs to discount it in a reasonable manner. Attempting to fine tune the gross receipts base to include only revenues from items reimbursable by the CRT is a plausible approach a priori, but it ignores Con- gress’ actual decision and would ultimately render the DSE mechanism superfluous. Congress’ clear understand- ing that gross receipts were to include revenues from sub- scription fees paid in part for the retransmission of local broadeasts (that much is apparent from the statutory language alone) is, since such local broadcasts are pro- gramming not eligible to draw from the fund adminis- tered by the CRT, a strong indication of its approach."* 17 Recall that a DSE of 0.25 is assigned to the retransmis- sion of a distant network affiliate’s signal, to approximate the proportion of non-network programming carried by such a station. 18 The same is true of network programming on distant net- work affiliates. Gross receipts are not reduced to account for the payment copyright owners already receive for network programming, DSEs are. See supra text accompanying note 6. 24a If an allocation between broadcast and non-brvadcast programming revenues in each tier were required by the statutory scheme, one would wonder why Congress did not call for a further allocation, to remove local broad- cast revenues from gross receipts, and do away with the DSE system altogether. The answer, it seems to us, must be that DSE calculations were considered more practical and were therefore adopted in lieu of attempts at such allocation. All cable systems, moreover, pay a section 111 fee regardless of whether they carry any distant signals. See supra note 5. A payment scheme that reflected usage exactly would not impose such a_ requirement. Finally, it should be noted that the Act was an attempt to simulate the m [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385019_1580%3A1. Public record. Not legal advice.