SoundExchange Royalties Case Against Muzak Reinstated By Appellate Court
/SoundExchange v. Muzak, No. 16-7041 (D.C. Cir. Apr. 25, 2017).
The D.C. Court of Appeals reversed the dismissal of SoundExchange's complaint against Muzak, which alleges that Muzak underpaid royalties. SoundExchange is a nonprofit entity charged with the responsibility of collecting royalties for performing artists and copyright owners of music; Muzak is a company that supplies digital music channels to satellite television networks who, in turn, sell to subscribers. Muzak argued that it was permitted to pay lower, "grandfathered," rates that had been set by a copyright royalties board even after certain corporate changes. There had been a statutory change in the 1990s as part of the DMCA-compromise, and the case turned on the statutory definition of a "preexisting subscription service." The Court concluded:
The grandfather provisions were intended to protect prior investments the three business entities had made during a more favorable pre-1998 rate-setting regulatory climate. “Muzak was [a] pioneer music service that incurred both the benefits and risks that came with its investment,” specifically its investment in DishCD. 71 Fed. Reg. at 64,646. But when Muzak expands its operations and provides additional transmissions to subscribers to a different “service,” (i.e., SonicTap), this is an entirely new investment. * * * We conclude, therefore, that the better interpretation of the statute is that the term “service” contemplates a double limitation; both the business and the program offering must qualify before the transmissions are eligible for the favorable rate.
