IN THE UNITED STATES DISTRICT COURT
Plaintiffs Bonneville International Corporation, Cox Radio, Inc., Emmis Communications Corporation, Entercom Communications Corp., Infinity Broadcasting Corporation, Susquehanna Radio Corp. (collectively, "Plaintiff Broadcasters"), and the National Association of Broadcasters ("NAB"), as and for their Complaint against Marybeth Peters, in her official capacity as Register of Copyrights for the United States Copyright Office at the Library of Congress, allege as follows:
NATURE OF ACTION
1. This action for declaratory relief presents a pure issue of statutory construction of Sections 106, 112, and 114 of the Copyright Act of 1976, 17 U.S.C. §§ 101 et seq., as amended. Plaintiffs seek judicial review of an administrative "final rule" [begin page 2] issued by the defendant on December 11, 2000 (see 65 Fed. Reg. 77292), which provides that AM/FM radio broadcast signals transmitted simultaneously over a digital communications network, such as the Internet, are subject to the sound recording copyright owner’s exclusive right of performance by means of digital audio transmission. The issuance of that rule exceeded defendant’s statutory authority, was arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law, and therefore is invalid. To hold otherwise could profoundly affect the ability of the radio broadcasting industry to keep abreast of modern technology by offering radio station programming on a nonsubscription basis over the Internet. As defendant would have it, Congress sub silentio intended, by passage of the Digital Millennium Copyright Act ("DMCA"), fundamentally to reorder the legal and economic relationships between the broadcast radio and recording industries in a manner that could wreak havoc with over-the-air broadcast radio formats and stifle the offer of streamed over-the-air radio broadcast programming over the Internet.
2. If subjected to liability under the DMCA, broadcasters desiring to stream their over-the-air programming would be forced either to engage in a multiplicity of individual negotiations with the copyright owners of every sound recording they stream (with the right of any such copyright owner to withhold license authority) or, if, but only if, they qualify, to secure a compulsory license covering such streaming. The conditions attendant to qualifying for compulsory licenses are, however, onerous, and plainly were not drafted with the formats of over-the-air broadcasters in mind. It is, accordingly, far from certain that nonsubscription, streamed over-the-air broadcasts would qualify for statutory license protection.
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3. Plaintiff Bonneville International Corporation is a corporation organized and existing under the laws of the State of Utah and having its principal place of business in Salt Lake City, Utah.
4. Plaintiff Cox Radio, Inc. is a corporation organized and existing under the laws of the State of Delaware and having its principal place of business in Atlanta, Georgia.
5. Plaintiff Emmis Communications Corporation is a corporation organized and existing under the laws of the State of Indiana and having its principal place of business in Indianapolis, Indiana.
6. Plaintiff Entercom Communications Corp. is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania and having its principal place of business in Bala Cynwyd, Pennsylvania.
7. Plaintiff Infinity Broadcasting Corporation is a corporation organized and existing under the laws of the State of Delaware and having its principal place of business in New York, New York.
8. Plaintiff Susquehanna Radio Corp. is a corporation organized and existing under the laws of the Commonwealth of Pennsylvania and having its principal place of business in York, Pennsylvania.
9. Plaintiff National Association of Broadcasters is a not-for-profit corporation organized and existing under the laws of the District of Columbia and having its principal place of business in the District of Columbia.
10. Defendant Marybeth Peters, referred to herein as "Copyright [begin page 4] Office" or the "defendant," is the Register of Copyrights for the United States Copyright Office at the Library of Congress in Washington, D.C.
JURISDICTION AND VENUE
11. This action arises under the Administrative Procedure Act, 5 U.S.C. §§ 551 et seq., as amended ("APA"), and the Copyright Act of 1976, 17 U.S.C. §§ 101 et seq., as amended ("Copyright Act" or "Act").
12. Jurisdiction of this Court is proper under Sections 702, 703, and 704 of the APA, 5 U.S.C. §§ 702-04, and Sections 1331 and 1338(a) of the Judicial Code, 28 U.S.C. §§ 1331, 1338(a). Declaratory relief is proper under Section 2201(a) of the Judicial Code, 28 U.S.C. § 2201(a).
13. Judicial review is not precluded by statute, nor is the administrative action under review committed to agency discretion by law. Appeal to a superior agency authority is neither necessary nor available.
14. Venue is proper in this district pursuant to 28 U.S.C. § 1391(e) because no real property is involved in the action and plaintiffs reside in this district.
I. Broadcaster Activities
15. Collectively, the Plaintiff Broadcasters operate and/or own hundreds of AM and FM radio stations across the country licensed by the Federal Communications Commission ("FCC") to transmit radio broadcast programming over the airwaves.
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16. For the past 75 years, the NAB has acted as the principal trade association for the radio and television broadcast industries. The NAB has represented the interests of these industries before Congress and various federal agencies and courts. NAB members operate more than five thousand (5,000) AM and FM radio stations licensed by the FCC to deliver over-the-air radio broadcasts to the public. The Plaintiff Broadcasters are all members of the NAB.
17. In addition to transmitting their radio broadcasts over-the-air, many FCC-licensed radio stations now transmit their radio broadcast programming simultaneously to listeners via the Internet. This activity is known as the "streaming" of radio broadcasts over the Internet.
18. Plaintiff Broadcasters, as well as many other NAB radio broadcast members, either have engaged in simultaneous streaming of radio broadcasts over the Internet or have the ability to do so.
19. No additional license is required for an FCC-licensed radio station to stream its over-the-air radio broadcast simultaneously over the Internet. Plaintiff Broadcasters do not charge listeners any fee for receiving such streamed radio broadcasts.
II. Background of Performance Rights in Sound Recordings
20. U.S. copyright law confers a series of enumerated rights upon the owners of various works of creative expression. These are set forth in Section 106 of the Copyright Act. These enumerated rights are, in turn, subject to a series of limitations and exemptions, which are set forth in Sections 107 through 121 of the Act.
21. With respect to musical works, the copyright law long has recognized an exclusive right of public performance in a musical composition (i.e., the [begin page 6] work of a composer). See 17 U.S.C. § 106(4). However, prior to 1971, U.S. copyright law did not recognize any copyright in sound recordings embodying such musical compositions.
22. In 1971, Congress first extended limited federal copyright protection to sound recordings on a provisional basis with the Sound Recording Amendment of 1971, Pub. L. No. 92-140, 85 Stat. 391 (1971). The Sound Recording Amendment of 1971 created a limited copyright in reproductions and the distribution of reproductions of sound recordings, for the purpose of preventing widespread record piracy (unauthorized commercial copying and sale of sound recordings) that resulted from advances in duplicating technology. Congress further made clear that sound recordings were not granted a public performance right and that the reproduction right was limited to direct recapture of the actual sounds of the original recording. Congress made the provisional sound recording reproduction right permanent with enactment of the 1976 Copyright Act.
23. For more than two decades, from 1971 to 1995, the sound recording copyright remained the very limited right, described above, that applied only to sound recordings fixed in a phonorecord on or after February 15, 1972, and that did not include any right in public performances of such sound recordings. Thus, although a public performance of a sound recording might require a license from the owner of the underlying musical composition (i.e., the composer or administering music publisher), no license was required from the owner of the copyright in the sound recording itself (i.e., the record label) with respect to such performance.
24. Until 1995, Congress repeatedly rebuffed efforts by the recording [begin page 7] industry to expand the copyright rights in sound recordings to encompass public performances of those works, including performances by radio broadcasters. Congress recognized that performances of sound recordings by broadcasters provide mass audience exposure to artists and recordings, stimulating sales of those recordings. Congress properly regarded imposition of a new performance right obligation on broadcasters as an unwarranted windfall to the record industry. Congress also recognized that granting such a right would interfere with the long-standing, mutually beneficial relationship between the record and radio industries.
25. In 1995, with enactment of the Digital Performance Right in Sound Recordings Act ("DPRA"), Congress incrementally expanded the scope of copyright protection afforded to sound recordings to include a new – but very limited – right for public performances of sound recordings by means of certain types of digital audio transmission. See 17 U.S.C. § 106(6). The DPRA set forth in Section 114 of the Copyright Act exemptions from and other limitations on this right.
26. Much like the enactment of the Sound Recording Amendment of 1971, the DPRA was a limited and circumscribed response to technological advances, specifically, the emergence of digital audio services capable of delivering high-quality, digital audio transmissions of sound recordings to subscribers in their homes, generally without commercial interruption, and the anticipated advent of interactive "audio-on-demand" services, such as so-called "celestial jukeboxes" or "pay-per-listen" services, which would enable listeners to obtain a direct, time-certain transmission of a specific sound recording. Congress’s concern was that such services might directly substitute for [begin page 8] consumer record purchases or increase the potential for at-home reproduction of sound recordings that would diminish the sale of sound recordings by the record labels. H. Rep. No. 104-274, at 5-9 (1995).
27. Consistent with the identified areas of concern and the perceived commercial threat of each, Congress adopted, in amended Section 114, a carefully calibrated, three-tiered approach to the new digital performance right. Those transmissions perceived to have the highest potential to replace sales, such as those engaged in by "interactive" services, were made subject to discretionary licenses from individual rights holders. With respect to such transmissions, the transmitting entity was required to obtain a license directly from the individual rights holders on mutually agreed terms and conditions. Any individual rights holder had the authority, in its sole discretion, to refuse to license the proposed transmission.
28. In a middle category, Section 114 of the Copyright Act, as amended by the DPRA, provided that certain non-interactive, subscription digital transmissions covered by and not exempt from the new Section 106(6) copyright in the public performance of sound recordings were subject to a statutory license, which compelled individual copyright owners to grant permission, upon request, for qualifying performances that comply with enumerated conditions. In the event representatives of the copyright owners and representatives of the potential users could not agree on a negotiated license rate, any interested party was permitted to petition the Library of Congress to convene a Copyright Arbitration Royalty Panel ("CARP") for a determination of what constitutes a "reasonable" rate for a compulsory license for the intended use.
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29. Amended Section 114’s final category entailed transmissions that were exempted from the new sound recording performance right, principally because such transmissions were viewed as posing little or no threat to replace sales of sound recordings. Congress made clear, in particular, that it did not wish to make any changes to the law that would adversely affect the long-standing, mutually beneficial relationship that existed between the record and radio industries. Thus, in addition to a broad, general exemption for nonsubscription transmissions, Congress specifically exempted "nonsubscription broadcast transmissions." As amended by the DPRA, Section 114(d)(1)(A) of the Copyright Act provided as follows:
(d) LIMITATIONS ON EXCLUSIVE RIGHT. – Notwithstanding the provisions of section 106(6) –
(1) EXEMPT TRANSMISSIONS AND RETRANSMISSIONS. – The performance of a sound recording publicly by means of a digital audio transmission, other than as part of an interactive service, is not an infringement of section 106(6) if the performance is part of –
(A) * * * *
(iii) a nonsubscription broadcast transmission[.] Section 114(j) of the Act, as amended by the DPRA, defined a "nonsubscription" transmission as "any transmission that is not a subscription transmission" and in turn defined a "subscription" transmission as "a transmission that is controlled and limited to particular recipients, and for which consideration is required to be paid or otherwise given by or on behalf of the recipient to receive the transmission or a package of [begin page 10] transmissions including the transmission." Section 114(j), as amended by the DPRA, specifically defined a "broadcast" transmission as "a transmission made by a terrestrial broadcast station licensed as such by the Federal Communications Commission."
30. In the Digital Millennium Copyright Act of 1998 ("DMCA"), Congress retained the three-tiered licensing framework created by the DPRA, which reflected the graduated scale of perceived risks to sound recording sales posed by different categories of digital audio transmissions. While the DMCA expanded the sound recording public performance right to cover certain nonsubscription digital audio transmissions not previously subject to copyright protection, and added even more conditions to the statutory license, Congress did not subject all nonsubscription digital transmissions of sound recordings to the new performance right. Specifically, Congress left intact the DPRA’s provisions exempting "nonsubscription broadcast transmission[s]." Apart from some re-numbering, the relevant provisions in Section 114 – set forth in paragraph 29 above – were left completely unchanged.
31. Thus, in the DMCA, the nonsubscription, simultaneous streaming activities of FCC-licensed radio broadcasters – which were "nonsubscription broadcast transmission[s]" within the meaning of amended Section 114(d)(1)(A) – remained exempt from the limited public performance right in sound recordings set forth in Section 106(6) of the Act. Because the nonsubscription, simultaneous streaming of over-the-air broadcasts by FCC-licensed radio broadcasters is exempt from the digital performance right of amended Section 106(6), such activity requires neither a compulsory license under Section 114 nor a discretionary license by individual copyright holders.
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III. The Copyright Office’s Rulemaking
32. The Recording Industry Association of America ("RIAA") is a trade association representing the major record labels and numerous additional record companies in a variety of record industry matters. On March 1, 2000, the RIAA filed with the Copyright Office a Petition for Rulemaking (the "Petition") requesting the defendant to adopt a rule stating that "a broadcaster’s transmission of its AM or FM radio station over the Internet is not exempt from copyright liability under Section 114(d)(1)(A) of the Copyright Act" and that such transmissions must either qualify for the compulsory license or be authorized by the individual copyright owners. In response to the Petition, the Copyright Office, on March 16, 2000, published in the Federal Register a Notice of Proposed Rulemaking seeking comments on whether the matter should be addressed in a rulemaking and, if so, what the rule should provide.
33. On December 11, 2000, the defendant promulgated a final rule reflecting her decision that AM/FM broadcast signals transmitted simultaneously over a digital communications network, such as the Internet, are not exempt from the Office’s regulatory authority (see 65 Fed. Reg. 77292) (the "Rule"). Specifically, the defendant amended 37 C.F.R. § 201.35(b)(2) ("Initial Notice of Digital Transmission of Sound Recordings under Statutory License"), which requires any "Service" to submit a notice to copyright owners of the Service’s intended use of the owners’ sound recordings pursuant to the statutory license of Section 114(f) ("Licenses for Certain Nonexempt Transmissions"). The defendant changed the definition of "Service" under 37 C.F.R. § 201.35(b)(2) to include, without limitation, "any entity that transmits an AM/FM broadcast signal over a digital communications network such as the Internet, regardless [begin page 12] of whether the transmission is made by the broadcaster that originates the AM/FM signal or by a third party, provided that such transmission meets the applicable requirements of the statutory license set forth in 17 U.S.C. 114(d)(2)."
34. The Rule is flatly inconsistent with Section 114(d)(1)(A), by which Congress exempted from copyright liability FCC-licensed radio broadcasters’ transmission of radio station broadcasts on a nonsubscription basis over the Internet. The Rule cannot be reconciled with Congress’s legislative scheme to exempt from liability nonsubscription broadcast transmissions posing no threat to the sale of sound recordings, and its intent to leave unaltered the mutually beneficial relationship between the radio and record industries.
35. In the course of her rulemaking decision, the defendant also asserted that radio broadcasters who stream their over-the-air broadcast programming via the Internet would no longer be eligible, under Section 112(a) of the Copyright Act, to make a single ephemeral recording in aid of the transmission without infringing the sound recording copyright. Defendant’s reading of Section 112(a) is plainly inconsistent with the language of the provision and with the legislative history, which makes it clear that both "webcasters" licensed under Section 114(f) and radio broadcasters streaming their over-the-air broadcasts via the Internet on a nonsubscription basis are eligible for the single ephemeral copy exemption provided in Section 112(a).
36. The defendant’s issuance of the Rule was and is in excess of statutory authority, arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law.
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37. Plaintiff Broadcasters and other NAB members are adversely affected and aggrieved by the Rule in that many FCC-licensed radio broadcasters have engaged, are engaging, or have the ability to engage in radio broadcast streaming activities that, according to the Rule, are subject to the digital performance right in sound recordings and ineligible for the Section 112(a) single ephemeral copy exemption.
38. As a result of the Copyright Office’s issuance of the Rule, the plaintiffs have suffered a legal wrong to interests that are within the zone of interests protected or regulated by the Copyright Act.
39. This action presents a substantial, real, and immediate controversy between parties having adverse legal interests, such that declaratory relief is warranted. Absent declaratory relief, Plaintiff Broadcasters and other NAB members will suffer substantial hardship in that they may incur considerable potential copyright liability – whether in the form of compelled royalties pursuant to compulsory licenses or arising under actual or threatened copyright infringement claims by individual rights holders.
40. Plaintiffs are entitled to a declaratory judgment invalidating the Rule and declaring (i) that Section 114(d)(1)(A) exempts FCC-licensed radio broadcasters who engage in the nonsubscription, simultaneous transmission of their over-the-air radio programming from the digital performance right set forth in Section 106(6) of the Copyright Act with respect to such streaming activities, and that such broadcasters require neither a compulsory license under Section 114 nor a discretionary license by individual copyright holders of such sound recordings to engage in such nonsubscription [begin page 14] streaming activities and (ii) that FCC-licensed radio broadcasters who engage in the simultaneous, nonsubscription streaming of their over-the-air radio programming are eligible for the single ephemeral copy exemption provided in Section 112(a) of the Copyright Act.
WHEREFORE, plaintiffs pray that the Court:
A. Declare, adjudge, and decree that the Rule issued December 11, 2000 (see 65 Fed. Reg. 77292), by the defendant is inconsistent with Section 114(d)(1)(A) of the Copyright Act, in excess of the Copyright Office’s statutory authority, arbitrary, capricious, an abuse of discretion, and invalid as a matter of law;
B. Declare, adjudge, and decree that, pursuant to Section 114(d)(1)(A) of the Copyright Act, the simultaneous, nonsubscription streaming by FCC-licensed radio broadcasters of their over-the-air radio broadcast programming is exempt from the digital performance right in sound recordings set forth in Section 106(6) of the Copyright Act, and thus does not require either a compulsory license under Section 114 of the Copyright Act or a discretionary license by owners of the digital performance right in sound recordings set forth in Section 106(6) of the Copyright Act;
C. Declare, adjudge, and decree that FCC-licensed radio broadcasters who engage in the simultaneous, nonsubscription streaming of their over-the-air radio programming are eligible for the single ephemeral copy exemption provided in Section 112(a) of the Copyright Act; and
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D. Award such additional and further relief, in law and equity, as the Court may deem just and proper.