Copyright Office Punts Ruling on Differentiated Rate Structure for 2016-2020 Webcasting Proceeding
A Copyright Office ruling that declined to opine if the Copyright Royalty Board was prohibited from setting differentiated webcasting royalty rates in its ongoing 2016-2020 webcasting rate-setting proceeding is more of a loss for some major record labels than a true win for webcasters, copyright lawyers told us Wednesday. Sony and other major labels argued the CRB could adopt different royalty rates for different music copyright owners, while independent labels aligned with webcasters in arguing that Congress hadn’t allowed for anything but a uniform rate structure. Webcaster Pandora released a copy of Register of Copyrights Maria Pallante’s ruling Tuesday. The CO won’t formally release the ruling until it’s published in the Federal Register next week, a Library of Congress spokesman said. Pallante’s ruling is unlikely to have a major effect on the CRB’s expected mid-December decision on the webcasting rate-setting proceeding, copyright lawyers said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Pallante said she couldn’t “render an opinion” on whether the CRB could create a differentiated rate structure based on the status of each record label since the question wasn’t posed while the proceeding was still open for comment. The CRB hasn’t “previously adopted rates and terms for webcasting services that distinguish among licensors” and the participants in the webcasting rate-setting proceeding all commented “on the assumption that the outcome would be an undifferentiated rate structure for licensors,” Pallante said. “As significant as the question of a differentiated rate structure for licensors might be under different circumstances, the Register does not believe that the statute contemplates the issuance of a written opinion when the inquiry is wholly theoretical in nature,” Pallante said. “She leaves the answer for another day.”
Pallante “correctly makes the point that nobody involved” in the webcasting rate-setting proceeding “understood that segmentation based on licensor was even a possibility, so no one presented that case,” said music industry attorney Chris Castle. “Segmenting by licensor not only is not supported by the written record, but also could produce a mind-numbing number of permutations” that would send the entire rate-setting process down a “slippery slope,” he said.
Pallante’s ruling is more of a “loss for the major labels, who appear to have overplayed their hands” in pushing for a differentiated rate structure, said Public Knowledge Policy Counsel Raza Panjwani. “This was something that would have clearly benefitted them at the expense of other license holders, and you see that in the fact that other license holders joined with the webcasters.” Pallante’s ruling is in some ways a follow-up to a September CO ruling that the 2009 Webcaster Settlement Act doesn’t prohibit the admissibility of direct licenses that are clearly influenced by WSA terms from consideration in the webcasting rate-setting proceeding, Panjwani said. The CO’s September ruling was a procedural victory for Pandora since the webcaster has sought to have CRB consider its past deals with independent music label rights consortium Merlin and independent label Naxos as possible benchmarks in the rate-setting proceeding (see 1509210054).
Castle and Panjwani said they don’t believe Pallante’s Tuesday ruling will affect the outcome of the webcasting rate-setting proceeding. The ruling “doesn't change anything at all about” the calculus for the proceeding since it didn’t change the status quo, Castle said. “It seems like the major labels thought that splitting the rates would allow them to get a higher rate than they’re thinking is going to come out when you blend together all of the license holders,” Panjwani said. “That makes sense since we’re talking about the licensing of music. It doesn’t matter whether the song master is owned by a major label or an independent label. If Congress wanted the market power of the record labels to control what the rates should be, they wouldn’t have put the rate-setting power with the CRB.”
Pandora “supports a uniform rate structure for all musicians,” said Director-Public Affairs Dave Grimaldi in a news release. “We look forward to the certainty the CRB’s December decision will bring to the music industry, particularly as Pandora continues to improve our partnerships with music makers.” SoundExchange continues “to have confidence in the strength” of the case it presented to the CRB in the webcasting rate-setting proceeding, a spokesman said in a statement. “SoundExchange remains committed to working with our constituents on our shared mission: pursuing fair payment for all creators across all platforms.” SoundExchange represented both the major and independent labels in the rate-setting proceeding but didn’t take a position on a differentiated rate structure.