New Copyright Royalty Board Chief Judge Named – Looking at the Issues Considered by the CRB of Importance to Media Companies

A new Chief Copyright Royalty Judge of the Copyright Royalty Board has just been named by the Librarian of Congress.  According to the Press Release announcing his appointment, David Shaw will fill that position after having previously served as an administrative law judge on the International Trade Commission for over 10 years.  There, he heard complex cases dealing with detailed financial matters – experience that sounds relevant to the kinds of cases he will be deciding on the CRB.  The Copyright Royalty Judges decide cases determining the marketplace value of music when  setting royalty rates, and that look at the relative value of programming when deciding the distribution of cable royalties to program copyright holders.  In addition to ITC experience, Shaw was a judge at the Social Security Administration and, according to his biography, worked in the General Counsel’s office at NPR early in his career.  With the appointment of this new Chief Judge, we thought that it would be worth looking at some of the specific areas in which the CRB makes decisions that affect media companies.

The CRB is principally charged with rates and distributions for copyrights governed by a “statutory licenses.”  A statutory license is created by Congress when it is believed that individual negotiations between copyright holders and copyright users would either be unduly complex so as to be almost unworkable or where an efficient market would not otherwise exist.  Essentially, the statutory license means that the copyright owner must license the work that they own – they cannot restrict its use – if the user pays the royalties set by law or established by the CRB and abides by the conditions for use set out in the law.  See our article here about music statutory licenses and our articles here and here on some of the issues with the TV statutory licenses.  The conditions of use are often carefully restricted so as to only cover very specific uses under the statutory license (see our article here on the conditions placed on the use of music under the statutory license for webcasting – the public performance right for sound recordings used by noninteractive services discussed below).

We’ve written on this blog most extensively about the CRB’s role in setting the royalty rates for the statutory license for the digital public performance of sound recordings (and the associated ephemeral rights involved in the transmission of those performances – see our article here about ephemeral copies of sound recordings made in their digital transmission).  For noninteractive online digital transmissions of sound recordings made by digital music services (including broadcasters who stream their audio programming on the Internet), the CRB sets the royalty rates paid by these “webcasting” services to SoundExchange, who then distributes the collected royalties to the copyright holders in the recordings (usually the record labels) and to the artists who appear on the recording.  As we’ve written before, noninteractive services include not only broadcasters that stream their programming on the Internet, but also digital music services where the listener does not know what songs they will be hearing when they tune in.  The listener may know the genre of the music that they will hear and may even have some limited influence over that music (see our article here), but they cannot dictate the songs that are being played.  The CRB last year set the royalty rates for the period 2021 through 2025 (see our article here) and will start its next proceeding to set those rates for 2026-2030 in early 2024.

Rates are also set by the CRB for the public performance of sound recordings by other noninteractive digital music services.  These include Sirius XM, whose current rates run through 2027 (an unusually long period as rate cases usually set rates 5 years at a time, but the rates to be set for 2018-2022 were extended by the Music Modernization Act through 2027) .  Royalty rates for other digital music services (such as the music services packaged with cable and satellite television) are also set by the CRB.  While there is no public performance right for the use of music by businesses (e.g., retail outlets, bars, restaurants, etc.), the CRB does set the rates for the ephemeral copies of sound recordings made by “business establishment services” – those music services that digitally transmit music to businesses to be played in their establishments.  The CRB earlier this year began a proceeding to set those rates for 2024-2028 (see our article here for a description of the CRB decision on the rates for 2019-2023).

The Copyright Royalty Judges also deal with certain copyrights in “musical works” – the words and music of a song, i.e., the musical composition.  The public performance rights to the musical work are paid to Performing Rights Organizations like ASCAP, BMI, SESAC and GMR (and see our article here about the potential for a copyright royalty for the public performance of the scripts for comedy recordings).  For ASCAP and BMI, their rates for most uses of music are not overseen by the CRB, but instead by US District Court Judges in the Southern District of New York who act as “rate courts” pursuant to the antitrust consent decrees under which ASCAP and BMI operate (see our article here on rate courts).  For commercial radio and TV, SESAC rates are also subject to consideration by an arbitration panel set up as part of a settlement of antitrust litigation.  Thus far, GMR has no oversight over its rates.  However, the CRB is charged by the Copyright Act to set royalty rates for the public performance rights for musical compositions where the performance is made by noncommercial broadcasters for their over-the-air broadcasts.  The CRB is currently considering rates for noncommercial broadcasters for 2023-2027 (see our article here on the CRB decision setting the rates for 2018-2022).  Settlements among all the parties have been filed with the CRB and are awaiting final approval.

The CRB also oversees the royalties paid for the reproduction and distribution of musical compositions – or what is known as the “mechanical rights” in musical works.  Traditionally, these royalties applied to physical copies of songs made when records or CDs were pressed.  These rights were extended in the digital world to music downloads.  Each time a record company presses a new recording of a song, the composer of that song (and the copyright holder, usually the publishing company) get a royalty set by the CRB.

In more recent years, the CRB has also been charged with determining the royalties to be paid by interactive digital music services for the reproduction and distribution rights to musical compositions. As we wrote here, a mechanical royalty has been required for “digital phonorecord deliveries (DPDs).” The determination that on-demand music services owed both a public performance royalty and one for the reproduction and distribution of a musical composition arose originally through case law and industry practice and has now been written into law through the Music Modernization Act (see our article here).  DPDs are the digital copies made of the musical work during the use of music by any on-demand music service, including services such as those provided by companies including Spotify, Amazon, and Apple.   The CRB at the very end of last month announced a decision following a Court remand of the rates set by the CRB for the period 2018 through 2022, and the CRB is now about to begin a hearing to take evidence as to what those rates should be for 2023-2027.

TV too is affected by the decisions of the CRB.  The CRB is charged with the distribution of the funds paid by cable and satellite television systems for the use of copyrighted materials contained in broadcast television transmissions – particularly the carriage of distant signals of television stations.  The Copyright Office collects those royalties, and the CRB decides how those royalties are distributed among various copyright holders in programming broadcast by television stations.  Claimants to these funds include syndicators, sports programmers, the performing rights organizations, and broadcast groups collecting for locally produced programming aired by over-the-air TV stations.  As we noted in our list of regulatory dates for broadcasters this month, television stations with locally-produced programming whose signals were carried as distant signals by at least one cable or satellite system in 2021 must file their copyright royalty claims with the Copyright Royalty Board (“CRB”) by August 1 so that their claims can be considered.

These are among the proceedings conducted by the CRB.  The Judges also conduct proceedings to set rules for many of these services and for the administration of its proceedings.  For a very small agency, this is a significant amount of work. For the most part, the work is complex.  On the music issues, the Judges, in setting royalty rates, need to determine what a willing buyer and willing seller would agree to in the marketplace.  This often involves significant expert witness testimony to determine what evidence there is as to what those rates would be – often by extrapolating them from other negotiated uses of music not subject to the statutory royalties administered by the CRB.  Business evidence and economic theory all go into CRB decisions (see our article here for an example of the kinds of issues evaluated by the CRB decision on webcasting royalties for 2016-2020). Similar issues are involved in the distribution of the cable and satellite royalty funds.  With the plethora of complex cases before the Judges, and with multi-millions of dollars at stake, the job of a Copyright Royalty Board Judge is not an easy one.  The new Chief Judge will no doubt find himself extremely busy very fast.

Courtesy Broadcast Law Blog