[Federal Register Volume 75, Number 90 (Tuesday, May 11, 2010)]
[Notices]
[Pages 26278-26280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11116]


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LIBRARY OF CONGRESS

Copyright Office

[Docket No. RF 2009-1B]


The Register of Copyrights' and the Copyright Royalty Judges' 
authority to determine the constitutionality of 17 U.S.C. 114(f)(5)

AGENCY: Copyright Office, Library of Congress.

ACTION: Final Order.

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SUMMARY: Two material questions of substantive law were referred to the 
Register of Copyrights concerning the authority of the Register of 
Copyrights and the Copyright Royalty Judges to determine the 
constitutionality of 17 U.S.C. 114(f)(5). The Register of Copyrights 
responded by delivering a Memorandum Opinion to the Copyright Royalty 
Board on April 30, 2010.

DATES: Effective Date: April 30, 2010.

FOR FURTHER INFORMATION CONTACT: Tanya Sandros, Deputy General Counsel, 
or Stephen Ruwe, Attorney Advisor, Copyright GC/I&R, P.O. Box 70400, 
Washington, DC 20024. Telephone: (202) 707-8380. Telefax: (202) 707-
8366.

SUPPLEMENTARY INFORMATION: In the Copyright Royalty and Distribution 
Reform Act of 2004, Congress amended Title 17 to replace the copyright 
arbitration royalty panels with the Copyright Royalty Judges 
(``CRJs''). One of the functions of the CRJs is to make determinations 
and adjustments of reasonable terms and rates of royalty payments as 
provided in sections 112(e), 114, 115, 116, 118, 119 and 1004 of the 
Copyright Act. The CRJs have the authority to request from the Register 
of Copyrights (``Register'') an interpretation of any material question 
of substantive law that relates to the construction of provisions of 
Title 17 and arises during the proceeding before the CRJs. See 17 
U.S.C. 802(f)(1)(A)(ii).
    On March 31, 2010, the Register received an Order from Copyright 
Royalty Judge William J. Roberts, Jr. referring the following two 
material questions of substantive law for her consideration:
     Does the Register of Copyrights have the authority under 
Chapter 7, or any other provisions of the Copyright Act, to 
determine the constitutionality of 17 U.S.C. 114(f)(5)?
     Do the Copyright Royalty Judges have the authority under 
Chapter 8, or any other provisions of the Copyright Act, to 
determine the constitutionality of 17 U.S.C. 114(f)(5)?
    The Register also received the briefs filed with the CRJs by 
RealNetworks,

[[Page 26279]]

Inc. and SoundExchange, Inc., in connection with a February 12, 2010, 
motion filed by RealNetworks, Inc. seeking referral of novel material 
questions of substantive law, which was initially denied by the CRJs.
    In the March 31, 2010, Order, Judge Roberts referred the questions 
to the Register on his own initiative pursuant to 17 U.S.C. 
802(f)(1)(A)(ii), which provides in pertinent part that ``[o]ne or more 
Copyright Royalty Judges may, or by motion to the Copyright Royalty 
Judges, any participant in a proceeding may, request from the Register 
of Copyrights an interpretation of any material questions of 
substantive law that relate to the construction of provisions of this 
title and arise in the course of the proceeding.'' Section 
802(f)(1)(A)(ii) allows a 14-day response period. However, section 
802(f)(1)(B)(i) provides that when the CRJs request a decision by the 
Register on ``a novel material question of substantive law concerning 
an interpretation of those provisions of this title that are the 
subject of the proceeding'' (emphasis added), the Register shall 
transmit her decision within a 30-day response period. A novel question 
of law is one that ``has not been determined in prior decisions, 
determinations, and rulings described in section 803(a).'' Id. On April 
20, 2010, the Register advised the CRJs that she had determined that 
the material questions of law that are the subject of the Order are 
novel because they have not been determined in prior decisions, 
determinations, and rulings described in 17 U.S.C. 803(a). See 17 
U.S.C. 802(f)(1)(B)(ii).
    On April 30, 2010, the Register responded in a Memorandum Opinion 
to the CRJs that addressed the novel material questions of law. To 
provide the public with notice of the decision rendered by the 
Register, the Memorandum Opinion is reproduced in its entirety, below. 
The timely delivery of the Register's response requires that ``the 
Copyright Royalty Judges shall apply the legal determinations embodied 
in the decision of the Register of Copyrights in resolving material 
questions of substantive law.'' See 17 U.S.C. 802(f)(1)(B)(i).

    Dated: May 3, 2010
David O. Carson,
General Counsel.

     Before the
     U.S. Copyright Office
     Library of Congress
     Washington, D.C. 20559


    In the Matter of


    Digital Performance Right in Sound
    Recordings and Ephemeral
    Recordings


    Docket No. RF 2009-1B
    CRB Webcasting III


     MEMORANDUM OPINION
     ON MATERIAL QUESTIONS OF SUBSTANTIVE LAW

I. Procedural Background

    On February 12, 2010, RealNetworks, Inc. (``RealNetworks'') filed a 
motion requesting referral to the Register of Copyrights of what it 
identified as two novel material questions of substantive law. That 
motion was denied by the Copyright Royalty Judges on March 30, 2010. 
Order Denying Motion Requesting Referral of Novel Material Questions of 
Substantive Law, Docket No. 2009-1 CRB Webcasting 111.
    The second question proposed in RealNetworks' motion sought to 
identify whether the Register of Copyrights (``Register'') or the 
Copyright Royalty Judges (``CRJs''), or both, have the authority to 
determine the constitutionality of 17 U.S.C. Sec.  114(f)(5), a 
provision that inter alia calls upon the CRJs to allow agreements made 
pursuant to the Webcaster Settlement Acts to be admitted into evidence 
or otherwise considered only if both parties to such agreements 
authorize submission of the agreements in a CRJ proceeding. While 
RealNetworks' motion did not properly frame that question as novel 
within the meaning of 17 U.S.C. Sec.  802(f)(l)(B), Copyright Royalty 
Judge William J. Roberts Jr., in an order issued subsequent to the 
CRJs' initial denial of RealNetworks' motion, determined that there 
were referable questions within the meaning of 17 U.S.C. Sec.  
802(f)(l)(A)(ii). That subsection provides, in pertinent part, that 
``one or more Copyright Royalty Judges may ... request from the 
Register of Copyrights an interpretation of any material questions of 
substantive law that relate to the construction of provisions of this 
title and arise in the course of the proceeding.'' On March 31, 2010, 
pursuant to 17 U.S.C. Sec.  802(f)(1), Judge Roberts referred the 
following two questions of law to the Register of Copyrights.\1\
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    \1\ On April 20, 2010, the Register informed the CRJs that the 
referred questions are novel questions of law because they have not 
been determined in prior decisions, determinations or rulings (17 
USC Sec.  803(a)).
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     Does the Register of Copyrights have the authority under 
Chapter 7, or any other provisions of the Copyright Act, to 
determine the constitutionality of 17 U.S.C. Sec.  114(f)(5)?
     Do the Copyright Royalty Judges have the authority under 
chapter 8, or any other provisions of the Copyright Act, to 
determine the constitutionality of 17 U.S.C. Sec.  
114(f)(5)?*COM019*
    The order referring the two questions was accompanied by the briefs 
that had been submitted by the parties as part of the pleading cycle on 
RealNetworks' motion for referral.
    As required by 17 U.S.C. Sec.  802(f)(1)(B)(i), the Register hereby 
provides her response to the novel material questions of substantive 
law that were referred to her by Judge Roberts.

II. Summary of Parties' Arguments

    In its motion requesting referral of novel material questions of 
law, RealNetworks argues that the CRJs and the Register lack authority 
to determine that section 114(f)(5) is unconstitutional. In doing so, 
it observes that the Supreme Court has repeatedly stated that 
``adjudication of the constitutionality of congressional enactments has 
generally been thought beyond the jurisdiction of administrative 
agencies.'' Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 215 (1994) 
(citing Johnson v. Robison, 415 U.S. 361, 368 (1974)). Additionally, 
RealNetworks notes the D.C. Circuit's observation that agencies may 
lack the institutional competence to resolve certain issues, such as 
the constitutionality of a statute. Hettinga v. United States, 560 F.3d 
498, 506 (D.C. Cir. 2009) (citing, McCarthy v. Madigan, 503 U.S. 140, 
147 (1992)).
    SoundExchange Inc. (``SoundExchange'') filed a brief opposing 
RealNetworks' motion requesting referral of novel material questions of 
law in which it echoed RealNetworks' views that the CRJs and the 
Register lack authority to determine that section 114(f)(5) is 
unconstitutional. In doing so, SoundExchange notes that RealNetworks 
does not attempt to argue that the present circumstances offer an 
exception to the general rule, set forth in Thunder Basin, that 
agencies do not have the authority to determine the constitutionality 
of congressional enactments.
    In RealNetworks' reply in support of its motion for referral of 
novel material questions of law, it observes that RealNetworks and 
SoundExchange both cited Thunder Basin for the proposition that 
adjudication of the constitutionality of congressional enactments is 
generally beyond the jurisdiction of an administrative body. 
RealNetworks

[[Page 26280]]

asserts that while the private parties agree that the general rule 
should apply in this case, the Court held in Thunder Basin that the 
general rule did not apply in that case, explaining: ``This rule is not 
mandatory, however, and is perhaps of less consequence where, as here, 
the reviewing body is not the agency itself but an independent 
Commission'' that ``has addressed constitutional questions in previous 
enforcement proceedings.'' Thunder Basin, 510 U.S. at 215 (1994).

III.Register's Determination

    The Register acknowledges the rule set forth in Thunder Basin that 
adjudication of the constitutionality of congressional enactments is 
generally beyond the jurisdiction of administrative agencies. Thunder 
Basin, 510 U.S. at 215 (1994) (citing Johnson v. Robison, 415 U.S. 361, 
368 (1974) (adjudication of the constitutionality of congressional 
enactments has generally been thought beyond the jurisdiction of 
administrative agencies)); See also Motor & Equipment Mfrs. Asso. v. 
Environmental Protection Agency, 627 F.2d 1095, 1115 (D.C. Cir. 
1979).\2\ The parties are in agreement that this general rule applies 
to foreclose the Register and the CRJs from determining the 
constitutionality of 17 U.S.C. Sec.  114(f)(5). However, in order to 
determine whether the Register or the CRJs do not have the authority 
under the provisions of the Copyright Act to determine the 
constitutionality of 17 U.S.C. Sec.  114(f)(5), the exceptions to the 
general rule must be considered.
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    \2\ Various administrative agencies have come to the same 
conclusion when confronted with questions regarding their authority 
to determine the constitutionality of statutory provisions. 63 Fed. 
Reg. 6614, 6620 (February 9, 1998) (Department of Labor finding 
that, as the agency given the administrative authority to implement 
a statutory provision, it has no authority to question the 
constitutionality of the statute); 56 Fed. Reg. 11653, 11660 (March 
20, 1991) (Federal Trade Commission finding that it does not have 
authority to determine the constitutionality of the statutes it 
enforces); 50 Fed. Reg. 35418, 35422 (August 30, 1985) (Federal 
Communications Commission finding that administrative agencies are 
not tasked with the duty to adjudicate the constitutionality of a 
federal statute, citing Johnson v. Robison, 415 U.S. at 368).
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    While the case law regarding exceptions to the general rule against 
agency adjudication of the constitutionality of congressional 
enactments is slim, in Thunder Basin, the general rule was not found to 
apply because the reviewing body was not the agency itself. Rather the 
Federal Mine Safety and Health Review Commission was an independent 
Commission established exclusively to adjudicate disputed enforcement 
measures undertaken by the Mine Safety and Health Administration 
pursuant to the statute in question. The court also observed that even 
if the agency or independent Commission were not authorized to 
determine the constitutionality of congressional enactments, the 
constitutional claims could be meaningfully addressed in the Court of 
Appeals, thus avoiding the ``serious constitutional question'' that 
would arise if an agency's organic statute were construed to preclude 
all judicial review of a constitutional claim. Id.
    Case law reveals additional considerations that are relevant in 
determining whether it is proper to apply the general rule against 
agency adjudication of the constitutionality of congressional 
enactments. For instance, the general rule ``is subject to Congress's 
allocation of adjudicative responsibility.'' Riggin v. Office of Senate 
Fair Employment Practices, 61 F.3d 1563, 1569 (Fed. Cir. 1995) (citing 
Thunder Basin, 510 U.S. at 215 (1994)). Additionally, a finding that 
the agency lacks jurisdiction to decide constitutional questions is 
especially likely when the constitutional claim asks the agency to act 
contrary to its statutory charter. Riggin, 61 F.3d at 1569; See also 
Weinberger v. Salfi, 422 U.S. 749, 765 (1975); Johnson v. Robison, 415 
at 367; Public Utilities Commission v. United States, 355 U.S. 534, 539 
(1958). In the Riggin case, the general rule was not applied in part 
because the constitutional issue did not require the agency to question 
its own statutory authority or to disregard any instructions Congress 
had given it.
    In the case at hand, the established exceptions to the general rule 
against agency adjudication of the constitutionality of congressional 
enactments are not applicable. Nowhere in title 17 are either the 
Register or the CRJs allocated any adjudicative responsibility to 
determine the constitutionality of statutory provisions. Additionally, 
the CRJs are not the type of independent Commission at issue in Thunder 
Basin, which was established to review agency actions. While it is true 
that 17 U.S.C. Sec.  802(f)(1) calls upon the Register to, in certain 
circumstances, offer either ``an interpretation of any material 
questions of substantive law that relate to the construction of 
provisions of this title and arise in the course of the proceeding'' or 
``an interpretation of those provisions of this title that are the 
subject of the proceeding,'' these provisions address interpretation of 
statutory provisions themselves and do not authorize determinations as 
to the constitutionality of such provisions. 17 U.S.C. Sec.  
802(f)(1)(A)&(B). Similarly, the Register's authority to review the 
CRJs' final determinations for errors of law is also directed toward 
material questions of substantive law under title 17, not toward the 
constitutionality of such provisions. 17 U.S.C. Sec.  802(f)(1)(D). 
Like the Mine Safety and Health Administration (``MSHA'') in Thunder 
Basin, the CRJs are tasked with carrying out statutory duties 
prescribed by Congress. However, unlike the independent Commission in 
Thunder Basin, which had broad authority to review the actions of the 
MSHA, the Register, as indicated above, has a narrower authority in 
these proceedings, which allows her only to determine issues of 
substantive law under title 17. Finally, unlike the constitutional 
claim in Riggin, a determination by the CRJs that 17 U.S.C. Sec.  
114(f)(5) is unconstitutional would necessarily require the CRJs to act 
contrary to their statutory charter, which pointedly directs the CRJs 
to act in accordance with the provisions of section 114(f)(5).\3\ Under 
that provision, the CRJs may allow agreements made pursuant to the 
Webcaster Settlement Acts to be admitted into evidence or otherwise 
considered only if both parties to such agreements authorize submission 
of the agreements in a CRJ proceeding.
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    \3\ 17 U.S.C. Sec.  801(b)(1) calls upon the CRJs to ``make 
determinations and adjustments of reasonable terms and rates of 
royalty payments as provided in sections 112(e), 114, 115, 116, 118, 
119, and 1004.'' (emphasis added).
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    As neither the Register nor the CRJs have any specific authority 
under Chapter 7, or any other provisions of the Copyright Act, to 
determine the constitutionality of 17 U.S.C. Sec.  114(f)(5), and 
because no other established exceptions to the general rule against 
agency adjudication of the constitutionality of congressional 
enactments are applicable, the Register concludes that neither the 
Register nor the CRJs have the authority under the Copyright Act to 
determine the constitutionality of 17 U.S.C. Sec.  114(f)(5).

    April 30, 2010
Marybeth Peters,
Register of Copyrights.
[FR Doc. 2010-11116 Filed 5-10-10; 8:45 am]
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