Addressing the reasonableness of the Copyright Royalty Board’s (Board) decision allocating a pool of royalties among several parties for the retransmission of copyrighted material by cable system operators, the U.S. Court of Appeals for the District of Columbia Circuit reversed the Board’s allocation decision as arbitrary and capricious, instructing the Board to present a well-reasoned allocation based on a reasonable record. Settling Devotional Claimants v. Copyright Royalty Board and Library of Congress, Case No. 13-1276 (D.C. Cir., Aug. 14, 2015) (Millett, J.).
Congress designed a compulsory licensing scheme for cable retransmission, allowing a cable system operator to retransmit to its viewers copyrighted materials initially aired on a broadcast station without obtaining permission of the relevant copyright owners for the second transmission. The cable system operators must deposit a statutorily prescribed royalty fee with the Register of Copyrights and the pool of funds is distributed annually by the Copyright Royalty Judges to copyright owners and their agents who file a claim asserting entitlement to those royalties.
This appeal challenges a determination of the Copyright Royalty Judges for the years 2000 to 2003, with respect to an allocation of royalties within the devotional programming category. Both Settling Devotional Claimants (Devotional Claimants) and Intervenor Independent Producers Group (IPG) filed petitions to participate in the proceedings, arguing entitlement to at least a portion of the royalties. The main issue in this appeal is the Royalty Judges’ ultimate royalty allocation.
The Royalty Judges found that there was at least “some degree” of agreement between the parties with respect to royalties from the year 2000 to the extent that IPG’s proposed allocation percentages fell within the range proposed by the Devotional Claimants and relied on this apparent agreement to reach a determination on royalty allocations. In subsequent years, the Royalty Judges either chose IPG’s proposed allocation solely because it was deemed to be close enough to the lower bound proposed by the Devotional Claimants or simply split the difference of the allocations, without providing any explanation for these decisions.
The D.C. Circuit found that any intersection of the two parties’ numbers in this case was the product of accident, not agreement, as evidenced by the fact that the Devotional Claimants were awarded almost 5 percent less of the total fund than they had requested. The court explained that the Royalty Judges failed to satisfy their obligation to make a reasoned decision supported by the written record before them, but presented a decision lacking even minimal foundation. Thus, the Court found the royalty allocation was arbitrary and capricious, vacated that portion of the determination and remanded the matter back to the Board.
