Independent Producers Group v. Librarian of Congress

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 27, 2015 Decided June 30, 2015
No. 13-1274
INDEPENDENT PRODUCERS GROUP,
APPELLANT
v.
LIBRARIAN OF CONGRESS, REGISTER OF COPYRIGHTS, AND
COPYRIGHT ROYALTY BOARD,
APPELLEES
MOTION PICTURE ASSOCIATION OF AMERICA, INC., ET AL.,
INTERVENORS
Consolidated with 13-1296
On Appeal From The Copyright Royalty Board
Brian D. Boydston argued the cause and filed the briefs
for appellant Independent Producers Group.
Sonia K. McNeil, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief were
Stuart F. Delery, Assistant Attorney General at the time the
brief was filed, and Mark R. Freeman, Attorney.
2
Charles G. Curtis, Jr. argued the cause for intervenor-
appellees Joint Sports Claimants. Gregory O. Olaniran
argued the cause for intervenor-appellees MPAA-Represented
Program Suppliers. With them on the joint brief were Robert
Alan Garrett and Lucy Holmes Plovnick.
Ronald G. Dove, Jr., Lindsey L. Tonsager, John I.
Stewart, Jr., Jennifer Burdman, Ann Mace, L. Kendall
Satterfield, Victor J. Cosentino, Gregory A. Lewis, and
Samuel Mosenkis were on the joint brief for amici curiae
Commercial Television Claimants, Public Television
Claimants, Music Claimants, Canadian Claimants Group, and
National Public Radio in support of appellees.
Brian D. Boydston was on the brief for intervenor
Independent Producers Group in support of appellees.
Before: BROWN, KAVANAUGH, and MILLETT, Circuit
Judges.
Opinion for the Court filed by Circuit Judge
KAVANAUGH.
KAVANAUGH, Circuit Judge: Under the Copyright Act,
cable systems may retransmit over-the-air broadcasts of
copyrighted material so long as they pay compulsory royalty
fees for using that copyrighted material. The Librarian of
Congress supervises the process of collecting, allocating, and
distributing those fees. As part of the process, the Copyright
Royalty Board – which is appointed by the Librarian of
Congress – conducts regular proceedings to determine how to
distribute royalty fees. Independent Producers Group, known
as IPG, represented several copyright owners in the 2000-03
royalty fee distribution proceeding. According to IPG, the
Board erred in determining IPG’s royalty fees in the sports
3
programming and program suppliers categories. IPG now
appeals. We affirm the Board’s determination as to IPG’s
royalty fees in those categories.
I
The Copyright Act balances two important policies:
“ensuring the protection of intellectual property and
encouraging the free flow of information.” National Cable
Television Association v. Copyright Royalty Tribunal, 689
F.2d 1077, 1078-79 (D.C. Cir. 1982).
That balancing act is evident in the royalty fee provision
at issue in this case. Under 17 U.S.C. § 111(c), after a
broadcast television station transmits copyrighted material to
its viewers, cable systems may retransmit that material
without first obtaining the copyright owner’s permission. In
exchange for that privilege, cable systems must deposit
statutorily prescribed royalty fees with the Register of
Copyrights. Id. § 111(c), (d).
The Copyright Royalty Board is responsible for
determining how to distribute those fees to the appropriate
copyright owners. Id. § 801(b)(3). In July of each year, any
copyright owner who claims part of that year’s pot of royalty
fees – or an agent of that copyright owner – must file a claim
with the Board. Id. § 111(d)(4)(A). Based on those claims,
the Board determines “whether there exists a controversy
concerning the distribution of royalty fees.” Id.
§ 111(d)(4)(B).
If all claimants agree how to distribute the royalty fees,
then the Board authorizes the Librarian of Congress to
distribute the fees. Id. §§ 111(d)(4)(B)-(d)(4)(C), 801(b)(7).
If the claimants cannot reach an agreement, however, the
4
Board must “conduct a proceeding to determine the
distribution of royalty fees.” Id. § 111(d)(4)(B); see id.
§ 801(b)(3)(B).
Royalty fee distribution proceedings have two phases.
During Phase I, claimants may group themselves into
categories based on the kind of programming that they own.
See 37 C.F.R. § 351.1(b)(2)(ii) (permitting claimants to file
joint petitions to participate in Phase I proceeding); 75 Fed.
Reg. 26,798, 26,798 (May 12, 2010) (listing categories for
2000-03 Phase I distribution proceeding). Using evidence
supplied by the claimants, the Board calculates the
marketplace value of each category. It then assigns a
percentage of the total royalty fee fund to each category based
on its value relative to other categories. See, e.g., id. at
26,807 (assigning percentages); see also 37 C.F.R.
§ 351.1(b)(2)(i)(B). During Phase II, the Board subdivides
the fees allotted to each category among the individual
claimants within that category. See id. § 351.1(b)(2)(i)(B).
Phase I and Phase II proceedings follow the same set of
procedures. First, the Board publishes a notice of the
proceeding in the Federal Register. 17 U.S.C.
§ 803(b)(1)(A)(i); see 73 Fed. Reg. 18,004 (Apr. 2, 2008)
(notice of Phase I proceeding for 2000-03); 76 Fed. Reg.
7,590 (Feb. 10, 2011) (notice of Phase II proceeding for 2000-
03). Claimants then petition to participate in the proceeding.
See 17 U.S.C. § 803(b)(1). A three-month voluntary
negotiation period ensues, during which the participating
claimants attempt to reach an agreement without assistance
from the Board. Id. § 803(b)(3).
At the end of the voluntary negotiation period, if any
disputes remain, the Board plays a more active role in the
process. See 37 C.F.R. § 351.3(a). The Board accepts written
5
statements from the participating claimants, allows the
participating claimants to conduct discovery, and orders a
post-discovery settlement conference. See 17 U.S.C.
§ 803(b)(6)(C); 37 C.F.R. §§ 351.4-351.7. If the participating
claimants are still unable to resolve their differences, the
Board then conducts a hearing and issues a final
determination. See 17 U.S.C. § 803(c)(1); 37 C.F.R.
§§ 351.8-351.12. Finally, the Librarian of Congress publishes
the Board’s determination in the Federal Register and
distributes the royalty fees. See 17 U.S.C. § 803(c)(6).
The Board’s published determinations are subject to
judicial review in this Court under 17 U.S.C. § 803(d)(1). We
may set aside a determination “only if it is arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law, or if the facts relied upon by the agency
have no basis in the record.” SoundExchange, Inc. v.
Librarian of Congress, 571 F.3d 1220, 1223 (D.C. Cir. 2009)
(citations and internal quotation marks omitted); see 17
U.S.C. § 803(d)(3) (Section 706 of the Administrative
Procedure Act applies to judicial review of royalty fee
distribution determinations).
II
Independent Producers Group, or IPG, represents several
claimants who, by IPG’s tally, own the copyrights for over
1,000 television programs. IPG challenges the Board’s 2000-
03 Phase II determination in the sports programming and
program suppliers categories. 1
1
In broad strokes, the sports programming category includes
live telecasts of professional and college team sports, and the
program suppliers category includes syndicated series, specials, and
movies.
6
IPG chose not to participate in Phase I of the 2000-03
distribution proceeding. See 75 Fed. Reg. 26,798, 26,799
(May 12, 2010) (listing participants). During Phase I, the
participating claimants grouped themselves into eight
categories, relying on the traditional definitions of those
categories, and reached a partial settlement. They were not,
however, able to reach a full settlement concerning the
allocation of royalty fees across the eight categories. The
Board therefore conducted a hearing and published a Phase I
determination that allocated the royalty fees. See id. at
26,798-99.
Claimants in the sports programming and program
suppliers categories were subsequently unable to agree on
how to divide up the royalty fees within those categories. See
76 Fed. Reg. 7,590, 7,591 (Feb. 10, 2011). 2 The Board
therefore commenced a Phase II proceeding. This time, IPG
participated in the proceeding. See 78 Fed. Reg. 64,984,
64,984 (Oct. 30, 2013). Two other entities also participated:
the Motion Picture Association of America, or MPAA, which
represents non-IPG claimants in the program suppliers
category, and the Joint Sports Claimants, a consortium of
non-IPG claimants in the sports programming category.
As a threshold matter, MPAA and the Joint Sports
Claimants disputed IPG’s authority to represent certain
claimants in the sports programming and program suppliers
categories. The Board held a preliminary evidentiary hearing
2
Claimants in the devotional programming category were also
unable to reach an agreement and therefore participated in the
Phase II proceeding. See 76 Fed. Reg. at 7,591. IPG’s appeal does
not involve the devotional programming category.
7
on that subject and issued two orders resolving the dispute.
See id. at 64,987.
The orders disposed of all of IPG’s sports programming
claims. See id. at 64,984 n.2, 64,987. The Board concluded
that IPG had not established its authority to represent the
Fédération Internationale de Football Association (better
known as FIFA) and dismissed IPG’s claims on behalf of
FIFA. The Board also determined that IPG’s claims on behalf
of the U.S. Olympic Committee belonged in the program
suppliers category, not the sports programming category.
Because IPG had no remaining claims in the sports
programming category, the Board subsequently distributed all
royalty fees in that category to the Joint Sports Claimants.
The orders also dismissed some, but not all, of IPG’s
claims in the program suppliers category. The Board
therefore held a full evidentiary hearing to divide up the
royalty fees in that category. See id. at 64,985. IPG and
MPAA proposed competing methodologies for calculating the
marketplace value of their claims and allocating royalty fees.
In its final Phase II determination, the Board largely adopted
MPAA’s methodology. See id. at 64,993-65,002.
IPG promptly appealed the Phase II determination with
respect to both the sports programming and program suppliers
categories. MPAA and the Joint Sports Claimants intervened.
III
IPG appeals the rejection of its sports programming
claims as arbitrary and capricious, and as a violation of the
8
Board’s statutory mandate to follow precedent established by
prior determinations. 3
A
The Board disposed of IPG’s sports programming claims
in two orders, and then authorized the distribution of royalty
fees for that category to the Joint Sports Claimants. The
Board now contends that its orders are not subject to judicial
review because they are not final determinations published in
the Federal Register. We disagree and conclude that we have
authority to proceed.
Under 17 U.S.C. § 803(d)(1), we may review appeals
from any “determination” of the Board under 17 U.S.C.
§ 803(c), so long as the appeal occurs within thirty days after
publication in the Federal Register. The appellant must be an
“aggrieved participant in the proceeding under [17 U.S.C.
§ 803(b)(2)] who fully participated in the proceeding and who
would be bound by the determination.” Id. § 803(d)(1). In
Independent Producers Group v. Library of Congress, we
construed Section 803(d)(1) to permit judicial review when
the Board resolves a contested proceeding and publishes a
determination, but not when royalty fee claimants reach a
settlement agreement and the Board merely gives effect to
that agreement. See 759 F.3d 100, 105-07 (D.C. Cir. 2014).
In this case, there is no question that the Board issued a
final determination distributing royalty fees under Section
803(c). See 78 Fed. Reg. 64,984 (Oct. 30, 2013). There is
3
The Board must act in accordance with “prior determinations
and interpretations of the Copyright Royalty Tribunal, Librarian of
Congress, the Register of Copyrights, copyright arbitration royalty
panels . . . , and the Copyright Royalty Judges . . . , and decisions of
the court of appeals under this chapter.” 17 U.S.C. § 803(a)(1).
9
similarly no question that IPG is an “aggrieved participant”
who participated fully in the Phase II proceeding. IPG
properly petitioned to participate in the proceeding, appears to
have paid the requisite fees, and had its contentious dispute
with the Joint Sports Claimants resolved by the Board. See 17
U.S.C. § 803(b)(2). Thus, the sole question is whether the
Board’s orders disposing of IPG’s claims are part and parcel
of the final determination, such that we may review them, or
instead are protected from judicial review.
We conclude that the orders are subject to judicial review
as part of the Board’s final determination. The Board issued
its orders during an active distribution proceeding under its
authority to issue “necessary procedural or evidentiary
rulings” at any stage of a distribution proceeding. Id.
§ 801(c). Such interlocutory orders in an agency proceeding
are normally reviewable at the end of the proceeding. See
CSX Transportation, Inc. v. Surface Transportation Board,
774 F.3d 25, 28 (D.C. Cir. 2014) (agency interlocutory
decision reviewable at conclusion of adjudication). The
parties point to nothing in the Copyright Act that suggests that
the Board’s interlocutory orders are subject to a different rule.
If we were to conclude otherwise, we would frustrate the
statutory scheme for judicial review of royalty fee distribution
proceedings. The Board would be able to insulate hotly
contested decisions from judicial review simply by fast-
tracking those decisions and excluding them from its
published determination.
We have jurisdiction to review the merits of IPG’s
claims.
10
B
We now turn to IPG’s objections to the Board’s
determination respecting the sports programming category.
IPG first contests an evidentiary sanction that the Board
imposed during the preliminary evidentiary hearing. In IPG’s
view, that sanction was arbitrary and capricious because: (1)
IPG had complied with its discovery obligations, and (2) even
if IPG’s conduct warranted a sanction, the sanction chosen by
the Board was too severe.
During discovery, the Board ordered IPG to produce
materials relevant to its relationship with FIFA. See
November 13, 2012 Hearing Tr. at 269, Joint Appendix at
2800 (“IPG is directed to produce, to the extent it has not
already done so, all documents regarding its authority to claim
royalties on FIFA’s behalf or state that no additional
documents exist.”). IPG interpreted that order as requiring it
to produce only documents that helped – rather than hurt – its
claim of authority to represent FIFA. At the preliminary
evidentiary hearing, the Joint Sports Claimants objected that
IPG had withheld responsive materials. IPG responded that
its production complied with the plain terms of the discovery
order and with the law governing discovery in distribution
proceedings. The Board disagreed and sanctioned IPG by
excluding several of its exhibits.
That sanction was not arbitrary and capricious. The
Board reasonably responded to a blatant discovery violation
by IPG. 4
4
The Board may impose discovery sanctions as a consequence
of its statutory grant of authority to oversee discovery. See 17
U.S.C. §§ 801(c), 803(b)(6)(C) (granting Board authority to order
discovery and compel production of documents); Atlantic Richfield
Co. v. Department of Energy, 769 F.2d 771, 775, 795-96 (D.C. Cir.
11
First, an evidentiary sanction was an entirely appropriate
response to IPG’s discovery violation. We review the
Board’s determination that IPG did not comply with its
discovery obligations with “extreme deference” because the
“conduct and extent of discovery in agency proceedings is a
matter ordinarily entrusted to the expert agency in the first
instance.” Hi-Tech Furnace Systems, Inc. v. FCC, 224 F.3d
781, 789 (D.C. Cir. 2000) (internal quotation marks omitted).
Reviewed in that deferential light, the evidence makes clear
that IPG had no cause to believe that it could withhold
prejudicial evidence. The discovery order directed IPG to
produce “all documents regarding its authority to claim
royalties on FIFA’s behalf.” November 13, 2012 Hearing Tr.
at 269, Joint Appendix at 2800. The order plainly required
IPG to produce evidence that might undermine its assertion of
authority to represent FIFA. The Copyright Act and the
Board’s regulations are consistent with the understanding that
discovery related to an opposing party’s claim encompasses
all relevant evidence – including evidence that may tend to
undermine that claim. 17 U.S.C. § 803(b)(6) (discovery “in
connection with” participating claimants’ written statements
permitted); 37 C.F.R. § 351.6 (parties “may request of an
opposing party nonprivileged underlying documents related to
the written exhibits and testimony”). It was therefore not
arbitrary and capricious for the Board to sanction IPG for
violating the discovery order.
Second, IPG contends that the sanction that the Board
chose was needlessly draconian. Excluding evidence,
however, is a permissible response to discovery order
1985) (plenary grant of adjudicative authority to agency extends to
imposition of sanctions when necessary to ensure fairness and
maintain integrity of adjudicative process).
12
violations in certain circumstances. See, e.g., Perdue Farms,
Inc., Cookin’ Good Division v. National Labor Relations
Board, 144 F.3d 830, 834 (D.C. Cir. 1998); cf. Fed. R. Civ. P.
37(b)(2)(A) (listing exclusion of evidence as acceptable
sanction for failure to comply with discovery order). An
exclusion order “prevents the party frustrating discovery from
introducing evidence in support of his position on the factual
issue respecting which discovery was sought.” Perdue
Farms, 144 F.3d at 834 (internal quotation marks omitted).
Without such a rule, “a party served with a discovery order in
the course of an administrative adjudicatory proceeding has
no incentive to comply, and ofttimes has every incentive to
refuse to comply.” Id. (internal quotation marks omitted).
IPG offers no basis for concluding that such a run-of-the-mill
sanction was unduly harsh, let alone arbitrary and capricious,
in this case. 5
C
The Board determined that IPG’s claims on behalf of the
U.S. Olympic Committee did not belong in the sports
programming category, based on the category definitions to
which the Phase I participants had agreed. 6 The Board
declined to permit IPG to challenge those category definitions
during the Phase II proceeding. IPG contends that the
Board’s refusal to reopen the category definitions during the
Phase II proceeding was arbitrary and capricious, and violated
5
IPG also alleges that the sanction violated its due process
rights. But the sanction was consistent with due process principles.
IPG received sufficient notice that it might be sanctioned. IPG then
had the opportunity to defend itself at a Board hearing.
6
The Phase I participants defined sports programming as
“Live telecasts of professional and college team sports broadcast by
U.S. and Canadian television stations, except for programs coming
within the Canadian Claimants category.”
13
the Board’s obligation to adhere to precedent established by
prior determinations. Neither contention has merit.
The Board’s refusal to allow IPG to belatedly challenge
the Phase I category definitions during Phase II was not
arbitrary and capricious. During Phase I, the Board assigns
each category a percentage of a fixed pot of royalty fees based
on the value of the claims in that category. If the Board were
to revise the category definitions during Phase II, some claims
could shift between categories. The relative value of those
categories would therefore change. That change in relative
value would require the Board to revise its Phase I royalty fee
allocation (and possibly even to claw back past royalty fee
distributions). 7 There would, in short, be no purpose to
holding a separate Phase I proceeding if it were impossible to
finalize the allocation of royalty fees across categories before
moving on to Phase II.
Nor did the Board violate its statutory obligation to
adhere to precedent established by prior determinations when
it applied the agreed-upon definition of “sports
programming.” See 17 U.S.C. § 803(a)(1). IPG argues that
the Board departed from precedent established in a past
distribution determination. In that determination, the
Copyright Royalty Tribunal (a predecessor of the Board),
specified that Phase I categories apply “to generic categories
of programs.” 49 Fed. Reg. 37,653, 37,656 (Sept. 25, 1984).
IPG takes that to mean that, under binding precedent, “sports
programming” must include any programming of any sporting
event. But IPG takes the statement out of context. Read in
context, it is evident that the Tribunal was not establishing a
7
The Board may authorize the partial distribution of royalty
fees even if some disputes have yet to be resolved. See 17 U.S.C.
§§ 111(d)(4)(C), 801(b)(3)(C).
14
definition of “sports programming,” but was simply
acknowledging that “sports programming” – whatever its
contours – was a generic category. IPG points to no Board
precedent that has said that the “sports programming”
category encompasses all programming of any sporting event.
In sum, no basis exists for overturning the Board’s
reasoned decision to reject IPG’s sports programming claims
on behalf of FIFA and the U.S. Olympic Committee.
IV
IPG also appeals three aspects of the Board’s
determination related to the program suppliers category: (1)
the Board’s decision to allow MPAA to represent certain
claimants without submitting additional documentation of its
authority to do so; (2) the Board’s dismissal of several of
IPG’s claims; and (3) the Board’s reliance on MPAA’s
methodology for allocating royalty fees among claimants.
A
IPG objects to the Board’s decision to allow MPAA to
proceed with claims on behalf of 615 claimants without first
producing additional evidence of its authority to represent
those claimants.
The Board required IPG to provide evidence of its
agreements with the claimants IPG purported to directly
represent. The Board did not, by contrast, require MPAA to
provide evidence of its agreements with the 615 claimants
challenged by IPG. Instead, MPAA supplied only
representation agreements with agents who in turn
represented the claimants. IPG argues that this alleged
15
discrepancy in treatment was arbitrary and capricious, and a
violation of due process.
IPG’s contention fails because the Board did not in fact
apply different standards to IPG and MPAA. The Board’s
practice was first to require a minimum level of
documentation and then to request more if any evidence
called “into question” a participant’s authority to act as an
agent, such as “a disavowal of representation by an
underlying claimant or evidence that the claimant is
represented by another party.” 78 Fed. Reg. 64,984, 64,988
(Oct. 30, 2013). No claimant objected to MPAA’s authority
to act, via an agent, on the claimant’s behalf. See id. By
contrast, several claimants disavowed IPG’s representation.
See id. The Board’s decision to require additional
documentation from IPG but not from MPAA was therefore
not arbitrary and capricious, or a violation of due process.
IPG also contends that the Board’s practice itself violated
the Board’s statutory obligation to follow precedent
established by prior determinations. See 17 U.S.C.
§ 803(a)(1). But no contrary precedent binds the Board. IPG
cites one past proceeding in which MPAA was required to
produce individual “program certifications” to substantiate its
authority to represent various claimants. See 66 Fed. Reg.
66,433, 66,449 (Dec. 26, 2001). In that proceeding, however,
MPAA had apparently provided no evidence of its authority
to represent the claimants before it was required to do so. See
id. Here, in contrast, MPAA supplied agreements with the
claimants’ agents, and the Board had no reason to doubt the
authenticity of those agreements.
16
B
IPG also challenges as arbitrary and capricious the
Board’s dismissal of several of IPG’s claims in the program
suppliers category. That contention lacks merit for several
reasons. First, the Board reasonably found that IPG’s flimsy
evidence – including ambiguous emails and unexecuted
copies of agreements – was insufficient to establish IPG’s
authority to represent certain claimants. Second, as we have
already explained, the Board did not hold IPG to a higher
standard than it held MPAA.
IPG also claims that the Board’s treatment of IPG’s
claims violated IPG’s procedural and substantive due process
rights. But IPG raises those arguments in a cursory fashion,
without relevant citations to the record or references to
relevant case law or other authority. We therefore decline to
entertain those arguments. See Davis v. Pension Benefit
Guaranty Corp., 734 F.3d 1161, 1166-67 (D.C. Cir. 2013)
(party may not “mention a possible argument in the most
skeletal way, leaving the court to do counsel’s work, create
the ossature for the argument, and put flesh on its bones”)
(internal quotation marks omitted); Railway Labor
Executives’ Association v. Railroad Retirement Board, 749
F.2d 856, 859 n.6 (D.C. Cir. 1984) (court may decline to
address cursorily raised issue where party fails to discuss
relevant statutory text or case law).
C
During the Phase II proceeding, IPG and MPAA
proposed dueling methodologies for calculating the relative
marketplace value of their claims and allocating royalty fees
within the program suppliers category. See 78 Fed. Reg. at
64,993-65,003. The Board ultimately relied heavily on
17
MPAA’s methodology. See id. at 65,002. IPG argues that the
Board was wrong to do so for five reasons.
First, IPG claims that during discovery MPAA withheld
important information underlying its methodology. In IPG’s
view, the Board’s denial of IPG’s motions to compel
production of that data – and the Board’s subsequent reliance
on MPAA’s methodology – was arbitrary and capricious.
In royalty fee distribution proceedings, when
methodologies are offered into evidence, the “facts and
judgments upon which conclusions” drawn from the
methodologies “are based shall be stated clearly, together
with any alternative courses of action considered.
Summarized descriptions of input data, tabulations of input
data and the input data themselves shall be retained.” 37
C.F.R. § 351.10(e). A party may object “that an opposing
party has not furnished unprivileged underlying documents.”
Id. § 351.10(f).
According to IPG, MPAA flouted its obligation to
preserve and produce information about its methodology in
two respects: by withholding certain relevant files, and by
failing to produce a document that IPG referred to as MPAA’s
“final integrated study.” IPG Br. 45. IPG’s expert witness
described those materials as necessary to test the validity of
MPAA’s methodology. But MPAA’s expert witness
contested that conclusion. He explained that MPAA had
“turned over” the “exact specification” of its methodology,
and that an independent team had been able to replicate his
work using the same materials. June 4, 2013 Hearing Tr. at
509-11, Joint Appendix at 3564. MPAA’s expert witness also
denied that a final integrated study existed and clarified that
IPG’s request was based on a misunderstanding of MPAA’s
methodology.
18
We review the Board’s discovery determinations with
“extreme deference.” Cf. Hi-Tech Furnace Systems, Inc. v.
FCC, 224 F.3d 781, 789 (D.C. Cir. 2000) (internal quotation
marks omitted). Applying that deferential standard, we
conclude that the Board reasonably credited MPAA’s expert
witness’s testimony that MPAA had complied with its duty to
preserve and produce information related to its methodology.
As a result, the Board’s denial of IPG’s motions to compel
was not arbitrary and capricious.
Second, IPG contends that MPAA’s methodology
employed an approach barred by prior determinations and that
the Board therefore erred by adopting that methodology. See
17 U.S.C. § 803(a)(1). Because the Board complied with the
applicable precedent, IPG’s claim fails.
MPAA’s methodology relied on household viewership
data to allocate royalty fees in the program suppliers category.
See 78 Fed. Reg. at 64,993. The Board (or its predecessor
entities) has previously questioned the appropriateness of
relying exclusively on viewership data in the Phase I context.
See, e.g., 69 Fed. Reg. 3,606, 3,609, 3,612-16 (Jan. 26, 2004);
57 Fed. Reg. 15,286, 15,301-302 (Apr. 27, 1992). But as the
Librarian has explained, different considerations apply in
Phase I and Phase II proceedings. See 66 Fed. Reg. 66,433,
66,453 (Dec. 26, 2001) (approach to calculating marketplace
value favored in Phase I proceedings “does not translate well
to a Phase II proceeding dealing with one program category”).
In the Phase II context, viewership remains “significant to
determining the marketplace value” of programming. Id. at
66,447; see id. at 66,451 (viewership of programs “is
probative in assessing their value in a Phase II proceeding”).
19
The Board’s acceptance of MPAA’s viewership-based
methodology was therefore consistent with precedent from
past Phase II proceedings. 8
Third, IPG asserts that the Board ignored yet another line
of precedent in reaching its decision to adopt MPAA’s
methodology. Once again, however, the Board appropriately
followed precedent established by prior determinations in
reaching its final determination in the 2000-03 proceeding.
The precedent cited by IPG involves the so-called “zero
viewing problem.” 78 Fed. Reg. at 64,995 (internal quotation
marks omitted). The problem is this: Viewership surveys –
MPAA’s source of data – occasionally indicate that no
viewers watched a particular program. See 66 Fed. Reg. at
66,449. But a “zero viewing” result does not mean that no
one actually watched the program. Instead, zero viewing
simply indicates that no one recorded in the viewership
survey that they watched the program. See id.
During the 1993-97 distribution proceeding, MPAA
presented evidence riddled with zero viewing data points.
The Librarian of Congress described that as an “egregious”
deficiency in MPAA’s methodology. Id. After MPAA failed
to account for the zero viewing problem with persuasive
expert testimony, the Librarian concluded that MPAA’s
methodology was unreliable. See id. at 66,450. The Librarian
advised MPAA that in the future it should
8
The Board did not accept MPAA’s methodology wholesale,
however. It recognized that the viewership-based approach suffers
from certain limitations. See 78 Fed. Reg. at 64,995. In response to
some of IPG’s objections to MPAA’s methodology, the Board
adjusted the royalty fee allocation in IPG’s favor. Id. at 65,003.
 20
present convincing evidence, backed by testimony of
a statistical expert, that demonstrates the causes for
the large amounts of zero viewing and explains in
detail the effect of the zero viewing on the reliability
of the results of the survey. In addition, MPAA
needs to take steps to improve the measurement of
broadcasts in the survey to reduce the number of
zero viewing hours, thereby increasing the reliability
of its study.
Id.
In the 2000-03 proceeding, the Board concluded that
MPAA had heeded the Librarian’s advice. MPAA “provided
adequate evidence to demonstrate, to the satisfaction of the
[Board], that the incidence of so-called ‘zero viewing’ does
not preclude the [Board’s] reliance” on viewership data,
“subject to adjustments in the allocations to acknowledge
some imprecision arising out of the ‘zero viewing’ sample
points.” 78 Fed. Reg. at 64,995. The Board gave credence to
MPAA’s explanation that zero viewing results are “important
elements of information, rather than defects in the process.”
Id. The Board also accepted expert witness testimony that
“when those zeros are included with non-zero data from the
sample in a regression that correlates local and distant
viewing, the zeros are placed in an appropriate statistical
context.” Id. Ultimately, after weighing all of IPG’s
objections, the Board gave substantial weight to MPAA’s
methodology, subject to adjustment to account for “certain
imperfections” in that methodology. Id. at 65,002.
All in all, the Board reasonably concluded that MPAA
presented the sort of “convincing evidence” that precedent
required. 66 Fed. Reg. at 66,450. The Board therefore did
not violate its statutory obligation to follow precedent
21
established by prior determinations by accepting the results of
MPAA’s methodology.
Fourth, IPG contends that the Board ignored a significant
defect in MPAA’s methodology. MPAA mistakenly failed to
include certain data related to Canadian and Mexican
television stations in its calculations. See 78 Fed. Reg. at
64,997. When the Board reviewed the data provided by IPG,
however, the Board concluded that the error did not
disproportionately harm IPG and skew the royalty fee
allocation in MPAA’s favor. Id. at 64,998 (error “did not
have a significant effect on the relative shares computed by
MPAA”). In other words, the Board found that MPAA’s
error was harmless and declined to increase IPG’s royalty fee
award. In IPG’s view, the Board’s conclusion was arbitrary
and capricious.
Should MPAA have fixed its error? Perhaps. But the
Board reasonably concluded that IPG did not suffer harm
from the error. The Board “examine[d] the relevant data and
articulate[d] a satisfactory explanation for its action including
a rational connection between the facts found and the choice
made.” Motor Vehicles Manufacturers Association of the
United States, Inc. v. State Farm Mutual Automobile
Insurance Co., 463 U.S. 29, 43 (1983) (internal quotation
marks omitted). Thus, the Board permissibly elected not to
increase IPG’s award in response to a minor error in MPAA’s
methodology.
Fifth, IPG claims that by accepting MPAA’s
methodology the Board improperly attributed several
programs to MPAA, rather than to IPG. IPG cites one
example (“Critter Gitters”). But IPG does not develop that
argument, and we see no basis for upsetting the Board’s
determination on that ground.
22
***
We affirm the Board’s determination as to IPG’s royalty
fees in the sports programming and program suppliers
categories.
So ordered.