1152 652 FEDERAL REPORTER, 2d SERIES mass audiences are divided up among the several stations, programming will be purchased to capture the next largest share, selective audiences, see R. Noll, et al., supra at 151; Spence & Owen, supra, and programs will be supplied when revenues exceed cost and not only when a specified audience size is attained, as under the advertiser-supported system. The Commission's repeal of the distant signal and syndicated exclusivity rules, after widespread participation of all industry segments and comprehensive evaluation of technical data, reflects the "rational weighing of competing policies" Congress intended to be exercised by the agency and to be sustained by a reviewing court." See FCC v. National Citizens Committee for Broadcasting, supra, 436 U.S. at 803, 98 S.Ct. at 2116. Burden of Proof in the Proceedings [9] Petitioners raise one further contention that merits attention. They argue that the FCC impermissibly shifted the burden of proof in its rulemaking proceeding to those parties seeking retention of the regulations. We disagree. After an extended inquiry into the effect of the existing regulations and the state of the industry that encompassed several years of investigation, and thorough consideration of the vast material compiled, the FCC concluded that the existing regulations should be repealed. Only after receiving that evidence did the FCC ask members of the public who disagreed with its findings to produce data showing how they would be injured by deregulation since it had not found any evidence to that effect. Such action did not reverse the burden of proof because the FCC had already produced an overwhelming mass of evidence supporting elimination of the rules. Rather, its request for data, evincing a desire for widespread participation from all interested segments of the public who might be aware of information that the agency's intensive inquiry did not 17. As one commentator has noted, the more the question of agency choice comes to resemble a political process, weighing claims of competing interest groups, the less the apparent justification for judicial supervision of Con uncover, reflects the proper exercise of reasoned decisionmaking. The petition to set aside the Report and Order is denied. NATIONAL CABLE TV v. COPYRIGHT ROYALTY TRIBUNAL 1077 Cite as 689 F.2d 1077 (1982) television operators retransmitting copyrighted programming, properly refused to adopt an inflation adjustment mechanism. 17 U.S.C.A. § 804(a)(2)(A). 3. Copyrights and Intellectual Property 48.1 Copyright Royalty Tribunal, in reviewing rate structure for royalty fees paid by cable television operators retransmitting copyrighted programming, did not abuse its discretion in basing its recalculation on data relevant to January 1, 1980, the date prescribed by the Copyright Act for commencement of the rulemaking, even though the Tribunal initially requested inflation and subscriber data current to April 1, 1980, and even though a high rate of inflation occurred between January and April of 1980. 17 U.S.C.A. § 804(a)(2)(A). 4. Copyrights and Intellectual Property 48.1 In reviewing rate structure for royalty fees paid by cable television operators retransmitting programming, the Copyright Royalty Tribunal acted reasonably and within its range of discretion in concluding that the evidence did not presently warrant an accommodation for tiering in the rate schedule. 17 U.S.C.A. § 804(a)(2)(A). 5. Copyrights and Intellectual Property 48.1 Approach taken by the Copyright Royalty Tribunal, in reviewing rate structure for royalty fees paid by cable television operators retransmitting programming, did not account for the fact that, even without an adjustment proceeding, the rates established in the Copyright Act would produce fees in 1980 that reflected at least some of the impact of inflation; rather, the Tribunal proceeded as though the new rates had to account for the difference between inflation and the fees produced by 1976 revenues; accordingly, this portion of the case had to be remanded for the Tribunal to correct or explain its apparent mathematical error. 17 U.S.C.A. §§ 101-810, 804(a)(2)(A). 6. Copyrights and Intellectual Property 48.1 Because of the technical and discretionary nature of the Copyright Royalty Tribunal's work in reviewing the rate structure for royalty fees paid by cable operators retransmitting programming, it must weigh all relevant considerations and set out its conclusions in a form that permits the 1078 689 FEDERAL REPORTER, 2d SERIES Court of Appeals to determine whether it has exercised its responsibilities lawfully. 17 U.S.C.A. §§ 101-810, 804(a)(2)(A). Petitions for Review of Orders of the Copyright Royalty Tribunal. Stuart F. Feldstein, with whom Brenda L. Fox and Robert St. John Roper, Washington, D. C., on brief, for Nat. Cable Television Ass'n petitioner in No. 81-1005 and intervenor in No. 81-1081. Arthur Scheiner with whom John H. Vetne and James J. Popham and Frederick E. Attaway, Washington, D. C. were on the brief for American Society of Composers, et al., petitioners in No. 81-1081 and intervenors in No. 81-1005. Phillip H. Hochberg, Robert A. Garrett and David H. Lloyd, Washington, D. C., also entered appearances for American Society of Composers, et al. Howard Scher, Atty., Dept. of Justice with whom Charles F. C. Ruff, U. S. Atty. and William Kanter, Atty., Dept. of Justice, Washington, D. C., on brief, for respondent. Mary A. McReynolds, Atty., Dept. of Justice, Washington, D. C., also entered an appearance for respondent. Before ROBINSON, Chief Judge, BAZELON, Senior Circuit Judge, and WRIGHT, Circuit Judge. Opinion for the Court filed by Senior Circuit Judge BAZELON. 1. Pub. L. 94-553, 90 Stat. 2541 (1976) (codified at 17 U.S.C. §§ 101-810 (Supp. III 1979)) (hereinafter referred to as "Act"). All statutory references in this opinion are to sections of 17 U.S.C. unless otherwise noted. 2. Section 111(c). 3. Section 111(d)(2). 4. The Copyright Owners include the Motion Picture Association of America, Inc.; the American Society of Composers, Authors, and Publishers; Broadcast Music, Inc.; National Basketball Association; National Hockey League; North American Soccer League; and Major League Baseball. 5. See pp. 1090-1091 infra. 6. Article I, section 8 of the Constitution grants Congress power to "promote the Progress of Science and useful Arts by securing for limited times to Authors and Inventors the exclusive BAZELON, Senior Circuit Judge: Under the Copyright Act of 1976,1 the creators of programming carried initially by television broadcasters must, on request, grant cable television systems permission to retransmit the material. In exchange for this "compulsory license," cable operators must pay royalty fees which are distributed by the Copyright Royalty Tribunal (Tribunal) to the owners of the copyright in the programming. The Act establishes a formula for determining the royalties for the first four years after its enactment and provides for the Tribunal to review the rate structure at periodic intervals thereafter. This case arises out of the first such rate adjustment proceeding. Both of the principal parties to the proceeding challenge the Tribunal's final decision. Cable television operators, represented by the National Cable Television Association (NCTA), identify a number of alleged errors which they contend led the Tribunal to set the fees too high. On the other hand, several organizations representing the owners of copyrighted programming (referred to collectively as "Copyright Owners") claim the Tribunal made a series of mistakes resulting in fees that are too low. With one minor exception, we affirm the decision of the Tribunal. I. BACKGROUND A. The Statutory Scheme The development of cable television, like other advances in the "new media," has heightened the tension between two communications policies grounded in the Constitution ensuring the protection of intellectual property and encouraging the free 6 Right to their respective Writings and Discoveries." As the language suggests, copyright is intended to encourage the development and dissemination of knowledge by providing incentives to creators. See Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2043, 45 L.Ed.2d 84 (1975). To this extent, the aims of copyright law are, of course, harmonious with those of the first amendment. On the other hand, the right to control information may include the right to suppress it. In that respect, copyright policy may conflict with some of the purposes of free expression. See Nimmer, Does Copyright Abridge the First Amendment Guarantees of Free Speech and Press?, 17 U.C.L.A. L. Rev., 1180 (1970). See also Lee v. Runge, 404 U.S. 887, 887-93, 92 S.Ct. 197, 197-201, 30 L.Ed.2d 169 (1971) (Douglas, J., dissenting from denial of petition for certiorari); Rosemont Enterprises, Inc. v. Random House, Inc., 366 F.2d 303 (2d Cir. NATIONAL CABLE TV v. COPYRIGHT ROYALTY TRIBUNAL flow of information. From its beginnings, That struggle culminated in the Copyright Act of 1976 which permitted cable operators to offer "secondary transmission" of copyrighted material carried initially by broadcast stations." The Act's compulsory license enables cable systems to offer subscribers essentially three types of "basic" service: 12 (a) the signals of local stations that are otherwise poorly received, (b) national programming from affiliates of the 1966) (biography of Howard Hughes); Time, Inc. v. Bernard Geis Associates, 293 F.Supp. 130 (S.D.N.Y.1968) ("Zapruder film" of Kennedy assassination); King v. Mister Maestro, Inc., 224 F.Supp. 101 (S.D.N.Y.1963) (speeches of Martin Luther King). In this regard, it is noteworthy that the government relied in part on copyright law in seeking to prevent publication of the "Pentagon Papers." See B. KAPLAN & R. BROWN, CASES ON COPYRIGHT 21 (2d ed. 1974). 7. "Congress shall make no law ... abridging the freedom of speech, or of the press U.S. CONST., amend. I. For another illustration of the increased tensions between copyright and free expression produced by new technologies, see Universal City Studios v. Sony Corp. of America, 659 F.2d 963 (9th Cir. 1981). 8. See H.R. REP. No. 1476, 94th Cong., 2d Sess. 88-89 (1976) ("1976 House Report"); Inquiry into the Economic Relationship Between Television Broadcasting and Cable Television, 71 F.C.C.2d 632, 644-57, 662-63 (1979) ("Economic Inquiry"): Greene, The Cable Television Provisions of the Revised Copyright Act, 27 CATH. U. L. REV. 263, 263 n. 3 (1978) ("Cable Television Provisions"). 9. Teleprompter Corp. v. CBS. Inc., 415 U.S. 394. 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974); Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968). The Court in these cases concluded that retransmission of television broadcasts did not constitute a "performance" within the meaning of the Copyright Act of 1909. In Teleprompter, the Court specifically noted that "any ultimate resolution of the many sensitive and important problems in this field ... must be left to Congress." 415 U.S. at 414, 94 S.Ct. at 1141. 1079 three commercial networks, regardless of the location of the broadcast station, and (c) non-network or "syndicated," programming originating in a community distant 13 from the cable system. As a result of secondary transmissions, advertisers supporting the first two types of programming reach a larger portion of their intended audience (local and national, respectively). Thus, cable carriage permits the originating station to raise its advertising rates and thereby increase its payments to program producers.1 15 The market does not, however, as naturally compensate the owners of syndicated programming initially broadcast in communities remote from the cable system. Such programming is generally sponsored by local advertisers with little or no interest in the distant cable audience.16 Consequently, the Copyright Act requires cable operators to pay royalties as a func10. See pp. 1084-1086 infra. 11. As to cable sy. ems operating within the continental United States, Hawaii, and Puerto Rico, the Act defines "secondary transmissions" as those occurring simultaneously with the "primary transmission" of the programming. The quoted phrases, as well as "cable systems," "distant signal equivalent" and other relevant terms of art, are defined in section 111(f). See also note 17 infra. 12. "Basic" service, which consists of secondary transmissions, must be distinguished from "pay" service. The latter, also known as "payTV," consists of programs acquired by cable systems directly from copyright holders and resold to subscribers. Today, "pay-TV" consists mainly of motion pictures and sporting events. See generally Home Box Office. Inc. v. FCC, 567 F.2d 9 (D.C.Cir.), cert. denied. 434 U.S. 829, 98 S.Ct. 111, 54 L.Ed.2d 89 (1977). 13. A cable system retransmits signals from a distant community when the system is located outside of the local service area of the FCC-licensed television station in that community. Section 111(f). See 47 C.F.R. § 76.5(f) (1981). 14. 1976 House Report at 88-90. 15. Id. at 90. 16. Id.; Cable Television Provisions, 27 CATH U.L. REV. at 288 n.106 & 289. It should be noted that empirical research has failed to validate many common assumptions about the economic relationships between broadcasting and cablecasting. See generally Economic Inquiry, supra n. 8; Cable Television Syndicated Program Exclusivity Rules, 71 F.C.C.2d 951 (1979) ("Syndicated Rules"). 1080 17 689 FEDERAL REPORTER, 2d SERIES tion of the "distant signal equivalents" (DSEs) they carry." Since it would be impractical for each cable operator to pay the copyright owners of syndicated programming directly, 18 the Act obliges the operators to pay fees into a royalty pool controlled by the Tribunal which, in turn, determines the appropriate share for different types of copyright owners. 19 The fees are calculated as a percentage of gross receipts from basic subscriber charges, varying according to the number of DSES carried. Thus, the rates set by the statute for the first four years of payments consist of 0.675% of the cable system's gross receipts from basic services for the first DSE, 0.425% for each of the second through fourth DSE, and .02% for each additional DSE.20 The Act further provides that cable systems earning less than a set amount of gross receipts pay a flat fee, unadjusted for DSES, and sets the "gross receipts limitations" applicable to the first four years.21 The original royalty schedule derived from agreements between representatives of the cable operators and program producers.22 Congress recognized, however, that changes in the industry and in the national economy, as well as experience with the new scheme, might warrant modifications in the rate structure over time.23 Accord17. "Distant signal equivalents" are defined in section 111(f). A greater DSE value is assigned independent television stations since they almost exclusively carry nonnetwork programming; a lesser value is assigned to network affiliates since they carry only a limited amount of nonnetwork programming. See also Cable Television Provisions, 27 CATH. U.L. Rev at 288 & n. 106. 19. Sections 111(c), (d)(2)(A), (d)(5) & 801(b)(3). Cable systems must report revenues to the Register of Copyrights on a semiannual basis. Section 111(d)(2)(A). The royalty rates are based on receipts for each accounting period. See note 21 infra. Distribution follows either agreement among the claimants or hearings conducted by the Tribunal Section 111(d)(5). The first distribution of royalty fees was the subject of National Association of Broadcasters v. Copyright Royalty Tribunal, 675 F.2d 367 (D.C.Cir. 1982). 20. Section 111(d)(2)(B). 21. Section 111(d)(2)(C) & (D). Subsection (C) establishes a flat royalty rate of .05 percent of semiannual gross receipts under $80,000 (but not less than $15). For systems with semiannual receipts between $80,000 and $160,000, ingly, the Act requires the Tribunal to review the rates beginning on January 1, 1980 and, at the request of a party in interest, every five years thereafter.24 Section 801(b)(2)(A), which governs the adjustment proceedings, permits the Tribunal to modify the rates so they reflect (i) national monetary inflation or deflation or (ii) changes in the average rates charged cable subscribers for the basic service of providing secondary transmissions to maintain the real constant dollar level of the royalty fee per subscriber which existed as of the date of enactment of this Act The statute allows the Tribunal to “consider all factors relating to the maintenance of such level of payments including, as an extenuating factor, whether the cable industry has been restrained by subscriber rate regulating authorities from increasing the rates for the basic service of providing secondary transmissions." 25 Section 801(b)(2)(D) permits the Tribunal to adjust the gross receipt limitations according to similar criteria.26 B. The Tribunal's Decision The Tribunal announced the commencement of the first rate adjustment proceeding on January 2, 1980.27 In an effort to subsection (D) establishes flat rates of .05 percent for receipts up to $80,000 and 1 (one) percent of receipts over $80,000. Thus, only systems with semiannual gross receipts above $160,000 are subject to rates based on DSES. These systems, known as "Form 3" systems, pay about 90 percent of the total fees collected. Joint Appendix (J.A.) 146. 22. Cable Television Provisions, 27 CATH UL. REV. at 279 & n. 65. See also pp. 1084-1085 infra. 24. 25. Sections 801(b)(2)(A) & 804(a)(1) & (2)(A). 26. That section provides: The gross receipts limitations established by section 111(d)(2)(C) and (D) shall be adjusted to reflect national monetary inflation or deflation or changes in the average rates charged cable system subscribers for the basic service of providing secondary transmissions to maintain the real constant dollar value of the exemption provided by such section; and the royalty rate specified therein shall not be subject to adjustment; See also note 21 supra. 27. 45 Fed. Reg. 63 (1980). |