26798 Federal Register / Vol. 75, No. 91 / Wednesday, May 12, 2010 / Notices 

1Prior to the enactment of the Copyright Royalty 

and Distribution Reform Act of 2004, which 

established the Copyright Royalty Judges, final 

determinations as to the distribution of royalties 

collected under the Section 111 license were made 

by two other bodies. The first was the Copyright 

Royalty Tribunal, which made distributions 

beginning with the 1978 royalty year, the first year 

in which cable royalties were collected under the 

1976 Copyright Act. The Tribunal was eliminated 

in 1993 and replaced by the Copyright Arbitration 

Royalty Panel (‘‘CARP’’) system. Under this regime, 

the Librarian of Congress appointed a CARP, 

consisting of three arbitrators, who made a 

recommendation to the Librarian as to how the 

royalties should be distributed. Final distribution 

authority, however, rested with the Librarian. As 

noted above, the CARP system ended in 2004. 

2The cable license is premised upon the 

Congressional judgment that large cable systems 

should only pay royalties for the distant broadcast 

stations they bring to their subscribers and not for 

the local broadcast stations they provide. However, 

cable systems which carry only local stations and 

no distant ones are still required to submit a 

statement of account and pay a basic minimum fee. 

See infra n.6. 

Signed in Washington, DC, this 26th day of 

April, 2010. 

Del Min Amy Chen, 

Certifying Officer, Division of Trade 

Adjustment Assistance. 

[FR Doc. 2010–11274 Filed 5–11–10; 8:45 am] 

BILLING CODE 4510–FN–P 

LIBRARY OF CONGRESS 

Copyright Royalty Board 

[Docket No. 2008–2 CRB CD 2000–2003] 

Distribution of the 2000–2003 Cable 

Royalty Funds 

AGENCY: Copyright Royalty Board, 

Library of Congress. 

ACTION: Distribution order. 

SUMMARY: The Copyright Royalty Judges 

are announcing the final Phase I 

distribution of cable royalty funds for 

the years 2000, 2001, 2002, and 2003. 

DATES: Effective May 12, 2010. 

ADDRESSES: The final distribution order 

also is posted on the Copyright Royalty 

Board Web site at http://www.loc.gov/ 

crb/proceedings/2008–2/finaldistribution-order.pdf. 

FOR FURTHER INFORMATION CONTACT: 

Richard Strasser, Senior Attorney, or 

Gina Giuffreda, Attorney Advisor, by 

telephone at (202) 707–7658 or by email at crb@loc.gov. 

SUPPLEMENTARY INFORMATION: 

I. Subject of the Proceeding 

In 1976, Congress enacted a statutory 

license for cable television operators to 

enable them to clear the copyrights to 

over-the-air television and radio 

broadcast programming which they 

retransmit to their subscribers. Codified 

at 17 U.S.C. 111, the cable license 

requires cable operators to submit semiannual royalty payments, along with 

accompanying statements of account, to 

the Copyright Office for subsequent 

distribution to copyright owners of the 

broadcast programming retransmitted by 

those cable operators. In order to 

determine how the collected royalties 

are to be distributed amongst the many 

copyright owners filing claims for them, 

the Copyright Royalty Judges (‘‘Judges’’) 

conduct a distribution proceeding in 

accordance with chapter 8 of the 

Copyright Act. This order is the 

culmination of one of those 

proceedings.1

Proceedings for determining the 

distribution of the cable license 

royalties are conducted in two phases. 

In Phase I, the royalties are divided 

among programming categories. The 

claimants to the royalties have 

organized themselves into eight 

categories of programming retransmitted 

by cable systems: movies and 

syndicated television programming; 

sports programming; commercial 

broadcast programming; religious 

broadcast programming; noncommercial 

television broadcast programming; 

Canadian broadcast programming; 

noncommercial radio broadcast 

programming; and music contained on 

all broadcast programming. In Phase II, 

the royalties allotted to each category at 

Phase I are subdivided among the 

various copyright holders within that 

category. This proceeding is a Phase I 

proceeding for royalties collected from 

cable operators for the years 2000, 2001, 

2002 and 2003. 

The royalty payment scheme of the 

cable license involves several 

considerations. The license places cable 

systems into three classes based upon 

the amount of money they receive from 

their subscribers for the retransmission 

of over-the-air broadcast signals. Smalland medium-sized systems pay a flat 

fee. Large cable systems—whose royalty 

payments comprise the lion’s share of 

the royalties distributed in this 

proceeding—pay a percentage of the 

gross receipts they receive from their 

subscribers for each distant over-the-air 

broadcast station they retransmit.2 How 

much they pay for each broadcast 

station depends upon how the carriage 

of that station would have been 

regulated by the Federal 

Communications Commission (‘‘FCC’’) 

in 1976, the year in which the current 

Copyright Act was enacted. Distant 

signals are principally determined in 

accordance with two sets of FCC 

regulations: the mandatory carriage 

rules in effect on April 15, 1976, and 

their associated rulings and 

determinations; and the current FCC 

regulations defining television markets, 

and their associated rulings and 

determinations. 

The royalty scheme for large cable 

systems employs a statutory device 

known as the distant signal equivalent 

(‘‘DSE’’). The systems, other than those 

paying the minimum fee, pay royalties 

based upon the number of DSEs they 

incur. The statute defines a DSE as ‘‘the 

value assigned to the secondary 

transmission of any nonnetwork 

television programming carried by a 

cable system in whole or in part beyond 

the local service area of the primary 

transmitter of such programming.’’ 17 

U.S.C. 111(f). A DSE is computed by 

assigning a value of one to distant 

independent broadcast stations and a 

value of one-quarter to distant 

noncommercial educational and 

network stations, which do have a 

certain amount of nonnetwork 

programming during a typical broadcast 

day. The systems pay royalties based 

upon a sliding scale of percentages of 

their gross receipts depending upon the 

number of DSEs they incur. The greater 

the number of DSEs, the greater the total 

percentage of gross receipts and, 

consequently, the larger the total royalty 

payment. The monies collected under 

this payment scheme are received by the 

Copyright Office and identified as the 

‘‘Basic Fund.’’ 

The complexity of the royalty 

payment mechanism does not, however, 

end with the Basic Fund. As noted 

above, the operation of the cable license 

is intricately linked with how the FCC 

regulated the cable industry in 1976. 

The FCC restricted the number of 

distant signals that cable systems could 

carry (‘‘the distant signal carriage rules’’) 

and required them to black-out 

programming contained on a distant 

signal where the local broadcaster had 

purchased the exclusive right to that 

programming (‘‘the syndicated 

exclusivity rules’’). However, in 1980, 

the FCC took a decidedly deregulatory 

stance towards the cable industry and 

eliminated these sets of rules. See, 

Malrite T.V. v. FCC, 652 F.2d 1140 (2d 

Cir. 1981), cert. denied sub. nom., 

National Football League, Inc. v. FCC, 

454 U.S. 1143 (1982). Cable systems 

were now free to import as many distant 

signals as they desired without worry of 

communications law restrictions. 

Pursuant to its statutory authority and 

in reaction to the FCC’s action, the 

Copyright Royalty Tribunal (‘‘Tribunal’’) 

initiated a rate adjustment proceeding 

for the cable license to compensate 

copyright owners for royalties lost as a 

result of repeal of the distant signal 

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3The Judges also admitted the testimony of 

Alison Smith, correspondent for the Canadian 

Broadcasting Corporation, and Stephen Stohn, 

President of Epitome Pictures, on behalf of the 

Canadian Claimants without live testimony 

pursuant to the stipulation of the Canadian 

Claimants with the Settling Parties. 6/15/09 Tr. at 

520–21. 

carriage rules and the syndicated 

exclusivity rules. This rate adjustment 

proceeding produced two new rates 

applicable to large cable systems making 

Section 111 royalty payments. 

Adjustment of the Royalty Rate for 

Cable Systems; Federal 

Communications Commission’s 

Deregulation of the Cable Industry, 

Docket No. CRT–81–2, Final rule, 47 FR 

52146 (November 19, 1982). The first, to 

compensate for the elimination of the 

distant signal carriage rules, was the 

royalty rate of 3.75% of a large cable 

system’s gross receipts for carriage of 

each distant signal that would not have 

been previously permitted under the 

former distant signal carriage rules. 

Royalties which are paid at the 3.75% 

rate—sometimes referred to as the 

‘‘penalty fee’’ by the cable industry—are 

held by the Copyright Office in the 

‘‘3.75% Fund,’’ which is separate from 

those royalties kept in the Basic Fund. 

The second rate adopted by the 

Tribunal, to compensate for the 

elimination of the syndicated 

exclusivity (‘‘syndex’’) rules, is known as 

the ‘‘syndex surcharge.’’ Large cable 

operators must pay this additional fee 

when any programming contained on a 

distant signal retransmitted by the cable 

operator would have been subject to 

black-out protection under the FCC’s 

former syndex rules. Royalties 

comprising the syndex surcharge are 

segregated by the Copyright Office, into 

the ‘‘Syndex Fund.’’ 

The royalties in these three funds— 

Basic, 3.75% and Syndex—are the 

royalties that are eligible for distribution 

to copyright owners of nonnetwork 

broadcast programming in a Section 111 

cable license distribution proceeding. 

II. Procedural History of This 

Proceeding 

On April 2, 2008, the Copyright 

Royalty Judges published a notice in the 

Federal Register announcing the 

commencement of a proceeding to 

determine the Phase I distribution of the 

2000, 2001, 2002 and 2003 cable 

royalties. 73 FR 18004. The notice also 

requested interested parties to submit 

their Petitions to Participate in the 

proceeding no later than May 2, 2008. 

Petitions to Participate, all of which 

were joint petitions, were received from 

the following claimants: Devotional 

Claimants, Joint Sports Claimants, the 

National Association of Broadcasters for 

U.S. Commercial Television Broadcaster 

Claimants, Music Claimants, the Motion 

Picture Association of America, Inc. 

(‘‘MPAA’’) for Program Supplier 

Claimants, and Public Television 

Claimants (collectively, the ‘‘Settling 

Parties’’) and Canadian Claimants Group 

(‘‘Canadian Claimants’’). The Judges 

accepted these petitions. Order 

Announcing Negotiation Period, Docket 

No. 2008–2 CRB CD 2000–2003 (June 

30, 2008). 

After the expiration of the mandatory 

negotiation period, the parties were 

directed to submit their written direct 

statements on or before February 2, 

2009. The Judges received written direct 

statements from the Canadian Claimants 

and the Settling Parties. Discovery on 

these two written direct statements was 

conducted throughout February and the 

first half of March, and the hearings 

were conducted from June 11–16, 2009. 

The Canadian Claimants presented the 

following witnesses: Janice de Freitas, 

Manager of the Rights Administration 

Unit, the Canadian Broadcasting 

Corporation; and Professor Debra J. 

Ringold.3 The Settling Parties presented 

Marsha E. Kessler, Vice President of 

Retransmission Royalty Distribution, the 

MPAA; Jonda K. Martin, President of 

Cable Data Corporation (‘‘CDC’’); Linda 

McLaughlin, Special Consultant to 

National Economic Research Associates, 

Inc.; and Hal J. Singer, President, 

Empiris, LLC. A rebuttal phase to the 

proceeding was requested by the parties, 

and written rebuttal statements were 

submitted by July 24, 2009. After 

discovery on the written rebuttal 

statements, hearings were conducted on 

September 1 and 2, 2009. The Canadian 

Claimants presented John Calfee, 

Resident Scholar, American Enterprise 

Institute, and Jonda K. Martin. The 

Settling Parties presented Linda 

McLaughlin. 

Proposed Findings of Fact and 

Conclusions of Law were submitted by 

the parties by September 30, 2009, and 

reply findings were submitted by 

October 7, 2009. The parties also 

submitted a Joint Undisputed and 

Disputed Proposed Findings of Fact and 

Conclusions of Law (‘‘Joint Findings’’) 

by October 21, 2009. Closing arguments 

were held on October 28, 2009, and the 

record to the proceeding was closed. 

On March 3, 2010, the Judges issued 

the initial Distribution Order. Pursuant 

to 17 U.S.C. 803(c)(2)(B) and 37 CFR 

353.4, motions for rehearing were due to 

be filed no later than March 18, 2010. 

No motions were received. 

III. Scope of the Proceeding 

A. The Joint Stipulations 

When the Judges commenced this 

proceeding, the expectation was for a 

typical Phase I distribution. This 

expectation changed dramatically, 

however, with the filing of two joint 

motions by the parties. The first, filed 

on October 1, 2008, well before the 

submission of written direct statements, 

requested the Judges to adopt a joint 

stipulation regarding the scope of the 

proceeding. The joint stipulation 

provided in pertinent part: 

1. The Phase I Parties agree that the sole 

unresolved issue in the instant proceeding to 

be submitted to the Judges is the Phase I 

share that should be awarded to the Canadian 

Claimants Group from the 2000–03 Funds. 

2. The Phase I Parties will not seek, as a 

part of this proceeding, to have the Judges 

determine separate Phase I shares of the 

2000–03 Funds for the claimant groups that 

comprise the Settling Parties, and will 

instead seek a specific determination only as 

to the Phase I share to be awarded to the 

Canadian Claimants Group, with the 

remaining balance to be awarded to the 

Settling Parties. 

Motion of the Phase I Parties To 

Adopt Joint Stipulation at Exhibit A, 1– 

2 (October 1, 2008). 

The Judges adopted the parties’ 

request. Order Granting Motion on 

Stipulation, Docket No. 2008–2 CRB CD 

2000–2003 (October 15, 2008). The 

parties filed another request to adopt a 

further joint stipulation on February 2, 

2009, the date on which written direct 

statements were due. The further joint 

stipulation provided that 

the Judges need decide only whether the 

Canadians’ 2000–03 Share should (a) be no 

greater than the CCG’s [Canadian Claimants 

Group] average share awarded in the last 

litigated Phase I distribution proceeding, the 

1998–99 cable royalty distribution 

proceeding; or (b) be determined by applying 

the 1998–99 CARP Methodology to data from 

2000–2003. 

Motion of the Phase I Parties To 

Adopt Further Joint Stipulation at 

Exhibit A, 2 (February 2, 2009). The 

Judges granted this motion as well. 

Order Granting Motion on Further 

Stipulation, Docket No. 2008–2 CRB CD 

2000–2003 (February 9, 2009). 

The parties set forth their positions on 

the entitlement to royalties of the 

Canadian Claimants in Exhibit A of the 

Further Joint Stipulation. The Settling 

Parties submitted that the Canadians 

Claimants’ award should be the average 

of the two awards (1998 and 1999) that 

the CARP gave the Canadian Claimants 

in the 1998–99 Phase I distribution 

proceeding. These averages amount to 

1.84% of the Basic Fund for each of the 

years 2000–2003, and 0.25% of the 

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4The Canadian Claimants did not receive any 

award for the Syndex Fund and likewise do not 

seek such an award in this proceeding. 

5Only these three programming categories are 

considered because they comprise all of the 

programming offered on Canadian distant signals. 

6Cable systems with less than one DSE are still 

required to pay a minimum fee, which is equal to 

the same amount the system would pay if it carried 

one full DSE. 

3.75% Fund for each of those same 

years.4 The Canadian Claimants’ 

request, as set forth in the Further Joint 

Stipulation, was as follows: 

Year Basic fund 

(percent) 

3.75% Fund 

(percent) 

Syndex fund 

(percent) 

2000 ............................................................................................. 2.04383 0.33006 0 

2001 ............................................................................................. 2.35338 1.28069 0 

2002 ............................................................................................. 2.53544 1.88970 0 

2003 ............................................................................................. 2.58496 2.42881 0 

Motion of the Phase I Parties To 

Adopt Further Joint Stipulation at 

Exhibit A, 3, ¶ 3 (February 2, 2009). The 

Canadian Claimants’ request is more 

complicated. Its calculation for both the 

Basic and 3.75% Funds involves a fourstep process. First, the Canadian 

Claimants start by identifying the fees 

generated by Canadian distant signals 

for the year in question. This is known 

as ‘‘fee generation,’’ a task performed by 

CDC, and is a source of considerable 

disagreement between the Settling 

Parties and Canadian Claimants. 

Second, the Canadian Claimants 

identify the amount of fees attributable 

to Canadian Claimants’ programming, 

Program Suppliers’ programming and 

Joint Sports Claimants’ programming 5

based upon a survey presented by Dr. 

Ringold using the results of her constant 

sum valuation survey for cable operators 

carrying distant Canadian signals. The 

third step is to multiply the Ringold 

survey number for a given year for 

Canadian Claimants by the percentage 

of fees generated for Canadian distant 

signals. The final step is to apply a 

stipulated downward adjustment factor 

to account for the combination process 

in the context of a proceeding where all 

other parties have settled. Joint Findings 

at 187–188. 

While the joint stipulations 

demonstrated the parties’ desire to 

restrict this Phase I proceeding to a 

resolution solely of the amount that the 

Canadian Claimants would receive for 

the four distribution years at issue, the 

true meaning—and in particular the 

application—of the parties’ intentions 

did not become clear until much later in 

the proceeding. Indeed, even the parties 

themselves were uncertain as to the 

ramifications of their agreements. See, 

e.g. 10/28/09 Tr. at 1226 (Closing 

Argument) (the Further Joint Stipulation 

has ‘‘more complicated ramifications 

than we anticipated when we entered 

into it’’). The Settling Parties often 

asserted throughout the course of the 

proceeding that Canadian Claimants 

should not receive anything other than 

what the CARP awarded them in the 

1998–99 proceeding. This assertion is 

inaccurate because the CARP gave the 

Canadian Claimants one set of 

distribution percentages for 1998 and 

another for 1999 whereas the Settling 

Parties are now seeking an average of 

these percentages applied to each of the 

years 2000–2003. The Canadian 

Claimants, for their part, are seeking to 

use the data collected from CDC for the 

2000–2003 years and apply it to the 

four-step distribution methodology 

utilized by the CARP, as described 

above. In their view, by using the 2000– 

2003 data, the Canadian Claimants are 

updating the 1998–99 CARP results. 

What the CARP did in the 1998–99 

proceeding with respect to the Canadian 

Claimants’ award is the true focus of the 

parties in this proceeding. The Settling 

Parties challenge the CARP’s use of a fee 

generation methodology as the means 

for determining the Canadian Claimants’ 

award. See, 10/28/09 Tr. at 1170 

(Closing Argument) (counsel for Settling 

Parties stating ‘‘I think that the whole 

purpose of this proceeding here was to 

get an answer, a clear guidance from the 

Judges here on an issue that has—has 

really troubled the Claimants, has 

plagued these proceeding from the start, 

and this is, what do we do with fee 

generation? That’s what this proceeding 

is really focused on. Is fee generation a 

valid measure of relative marketplace 

value and one that the Judges should 

adopt?’’). The Canadian Claimants, 

accepting and defending that fee 

generation is the proper methodology to 

determine their award, seek to 

demonstrate in this proceeding that as a 

result of ‘‘changed circumstances’’ (a 

term of art in the long history of cable 

distribution proceedings under 17 

U.S.C. 111) the distribution percentages 

awarded them in the 1998–99 

proceeding should be adjusted upward 

for the 2000–2003 period. 

B. The 1998–99 CARP’s Determination 

of the Canadian Claimants’ Award 

The Canadian Claimants requested a 

royalty distribution of approximately 

2.25% of the Basic Fund and 0.2% of 

the 3.75% Fund for 1998, and 

approximately 2.50% of the Basic Fund 

and 0.4% of the 3.75% Fund for 1999. 

They relied principally on the fee 

generation approach to support these 

awards, along with citing changed 

circumstances to corroborate the 

substantial increase requested from the 

award they received in the 1990–92 

distribution proceeding (also litigated 

before a CARP). The CARP described fee 

generation as ‘‘a valuation method that 

attempts to measure the amount of 

royalties actually generated by a 

particular claimant group.’’ 

Report of the Copyright Arbitration 

Royalty Panel to the Librarian of 

Congress in Docket No. 2001–8 CARP 

CD 98–99 (hereinafter referred to as the 

‘‘CARP Report’’) at 60. The Canadian 

Claimants proposed using full-year data 

in accordance with a formula developed 

by CDC to identify the amount of fees 

generated by the carriage of distant 

Canadian signals by U.S. cable systems. 

The minimum fees 6 were excluded 

from the calculation and then, in 

accordance with historical practice, 

apportioned proportionally to the Basic 

Fund allocations for all claimants. 

The Canadian Claimants then 

presented two studies. The first was a 

time study for the purpose of showing 

how much programming time on distant 

Canadian signals was occupied by 

Canadian programming, Program 

Suppliers’ programming and Joint 

Sports Claimants’ programming. The 

second was a constant sum valuation 

survey presented by Dr. Ringold, 

averaged over four years, to determine 

the relative value of the three types of 

programming contained on distant 

Canadian signals. Canadian Claimants 

then used a midpoint between the value 

allocated to Canadian programming in 

the time study and the Ringold study to 

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7As previously noted, these specific percentages 

were not the ‘‘true’’ fee generated awards because it 

was necessary for the CARP to adjust them 

downward to incorporate other claimants’ awards 

without exceeding 100% of the funds. 

conclude that approximately 70% of the 

fees generated by Canadian distant 

signals were attributable to Canadian 

programming. CARP Report at 71–72. 

After noting that no other party in the 

proceeding, except the Public 

Television Claimants, objected to using 

the fee generation approach for 

determining the Canadian Claimants’ 

share of the Basic and 3.75% Funds, the 

CARP concluded: 

The Panel accepts the general methodology 

employed by the Canadians with two 

exceptions. First, in accord with our 

predecessor Panel, we decline to credit use 

of a midpoint between the values allocated 

to Canadians [sic] programming in Dr. 

Ringold’s survey and the volume of 

Canadians [sic] programming in Mr. 

Bennett’s time study. We reiterate here that 

time-based metrics are not reliable measures 

of relative value. Indeed, the Canadians’ own 

valuation survey confirms that the time 

associated with its programming category is 

not directly related to its value. The Ringold 

survey is the reliable means of determining 

the relative value of programming contained 

on Canadian signals. 

Second, the Panel is unpersuaded by Dr. 

Ringold’s advocacy of a four-year survey 

average. Perhaps the Panel reposes more 

confidence in her survey than Dr. Ringold 

herself. But we see no reason not to focus 

exclusively on the survey responses for 1998 

and 1999—the years for which we are 

distributing royalties. 

CARP Report at 72–73 (emphasis in 

original). 

The CARP then turned to the question 

of whether there were ‘‘changed 

circumstances’’ from the 1990–92 

proceeding and determined that there 

was one: ‘‘a substantial increase in 

relative shares of actual fees generated 

of both the Basic Fund and the 3.75% 

Fund.’’ Id. at 74. This led the CARP to 

conclude that ‘‘[a]n assessment of 

changed circumstances, based upon an 

approximate doubling of relative fees, 

implicates a substantial increase from 

the last award—when the Canadians 

[sic] award was determined based upon 

shares of fees generated.’’ Id. (emphasis 

in original). Using the 1990–92 

proceeding as a reference point, the 

CARP awarded the Canadian Claimants 

its fee-generated shares as follows: 

1.76% of the Basic Fund and 0.144% of 

the 3.75% Fund for 1998, and 1.91% of 

the Basic Fund and 0.35% of the 3.75% 

Fund for 1999.7 Id. at 92–93. 

It is significant to note, particularly 

for purposes of this proceeding, that the 

CARP expressly made its award ‘‘despite 

our expressed concerns respecting fee 

generation and changed circumstances.’’ 

Id. at 72. These concerns arose during 

the CARP’s resolution of the awards for 

Public Television Claimants who 

resisted an application of the fee 

generation approach for their awards. 

With respect to fee generation, the 

CARP noted that there were two 

historical criticisms of the approach: (1) 

that the DSE fee structure of the Section 

111 license renders any fee generation 

arbitrary; and (2) because royalties are 

generated according to statutorily 

prescribed rates, the fees do not truly 

represent relative market value. Id. at 

62. The CARP dismissed the first 

criticism, stating that while it cannot be 

known whether a particular Canadian 

distant signal is paid for at the highest 

DSE rate or the lowest, the range of 

those rates can be determined which 

places them within a zone of 

reasonableness. The second criticism, 

which the CARP described as ‘‘more 

nuanced,’’ was nevertheless reconcilable 

because while fee generation may 

undervalue Public Television and 

Canadian distant signals in absolute 

terms, it does not follow that the fees 

generated are undervalued relative to 

the under-valuation of the remaining 

claimant groups. Id. at 63. Fee 

generation, therefore, ‘‘should be 

accorded some weight,’’ and, with 

respect to Canadian Claimants, more 

weight because the 1990–92 decision 

used fee generation as well, an approach 

that was expressly adopted by the 

Librarian of Congress’ review of that 

decision. Id. at 64, 74 n.45. 

With respect to changed 

circumstances, the CARP noted that 

their assessment is often difficult and 

involves subjective judgment. Id. at 65. 

Particularly difficult is determining the 

correct reference point award from 

which to assess changed circumstances. 

Once again, this concern was assuaged 

with respect to the Canadian Claimants’ 

award because the 1990–92 decision 

adopted the fee generation approach, 

thereby allowing a correct apples-toapples comparison between the 

reference point award and the newly 

adjusted award. Id. at 74 n.45. 

This is how the 1998–99 CARP 

decided the Canadian Claimants’ award. 

The Settling Parties now attack the fee 

generation approach and urge the Judges 

not to follow it in this proceeding. The 

Canadian Claimants not only defend the 

approach, but urge us to find that 

changed circumstances from the 1998– 

99 period merit a substantial increase 

from the CARP-set levels. Before we can 

evaluate their positions, the Judges must 

determine the correct standards 

governing the distribution to be 

determined in this proceeding. 

C. The Governing Distribution 

Standards for This Proceeding 

Section 803(a)(1) of the Copyright Act 

provides: 

The Copyright Royalty Judges shall act in 

accordance with this title, and to the extent 

not inconsistent with this title, in accordance 

with subchapter II of chapter 5 of title 5, in 

carrying out the purposes set forth in section 

801. The Copyright Royalty Judges shall act 

in accordance with regulations issued by the 

Copyright Royalty Judges and the Librarian of 

Congress, and on the basis of a written 

record, prior determinations and 

interpretations of the Copyright Royalty 

Tribunal, Librarian of Congress, the Register 

of Copyrights, copyright arbitration royalty 

panels (to the extent those determinations are 

not inconsistent with a decision of the 

Librarian of Congress or the Register of 

Copyrights), and the Copyright Royalty 

Judges (to the extent those determinations are 

not inconsistent with a decision of the 

Register of Copyrights that was timely 

delivered to the Copyright Royalty Judges 

pursuant to section 802(f)(1)(A) or (B), or 

with a decision of the Register of Copyrights 

pursuant to section 802(f)(1)(D)), under this 

chapter, and decisions of the court of appeals 

under this chapter before, on, or after the 

effective date of the Copyright Royalty and 

Distribution Reform Act of 2004. 

17 U.S.C. 803(a)(1). 

Both the Settling Parties and the 

Canadian Claimants acknowledge that 

Congress did not set forth a statutory 

standard for cable royalty allocations. 

Joint Findings at 151. In fact, the 

standards for determining distribution 

awards have changed dramatically since 

the inception of the license. In the first 

Phase I distribution proceeding, the 

Copyright Royalty Tribunal identified 

three primary factors to guide its 

determinations: (1) The harm to 

copyright owners caused by distant 

signal retransmissions; (2) the benefit 

derived by cable systems from those 

retransmissions; and (3) the marketplace 

value of the copyrighted works 

retransmitted. 45 FR 63026, 63035 

(September 23, 1980). The Tribunal also 

identified two secondary factors: (1) The 

quality of the retransmitted material; 

and (2) time-related considerations. Id. 

By the time of the last fully litigated 

Tribunal determination, the Tribunal 

dropped its consideration of the two 

secondary factors. 57 FR 15286 (April 

27, 1992). The first CARP to undertake 

a Phase I distribution, the 1990–92 

proceeding, discarded the ‘‘harm’’ 

criterion in its consideration, much to 

the consternation of one of the Settling 

Parties in this proceeding. That action 

was upheld by the Librarian of Congress 

and, subsequently, the Court of Appeals. 

Nat’l Ass’n of Broadcasters v. Librarian 

of Congress, 146 F.3d 907 (DC Cir. 

1998). The 1998–99 CARP refined the 

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8We note that the fee generation approach 

employed by CDC in this proceeding is not 

precisely identical with the one presented to the 

CARP. Subsequent to the CARP’s determination, 

CDC changed its protocol with respect to allocation 

of the minimum fee collected from cable systems. 

Martin Written Direct Testimony (‘‘WDT’’) at 6–7. 

The parties, however, do not dispute this change as 

applied to this proceeding. 

approach further still, noting that ‘‘every 

party to this proceeding appears to 

accept ‘relative marketplace value’ as 

the sole relevant criterion that should be 

applied by the Panel.’’ CARP Report at 

10 (emphasis in original). As a 

consequence, the CARP announced that 

its ‘‘primary objective is to ‘simulate 

[relative] market valuation’ as if no 

compulsory license existed.’’ Id. The 

Librarian upheld this conclusion as 

well, and the Court of Appeals once 

again affirmed. Program Suppliers v. 

Librarian of Congress, 409 F.3d 395 (DC 

Cir. 2005). 

This proceeding is unlike any other 

conducted in the 32-year history of 

cable distributions. 10/28/09 Tr. 1182– 

83 (Closing Argument). Through the 

stipulations, the parties have presented 

the Judges with only two possible 

choices: Either the average of the 1998– 

99 Canadian Claimants’ awards, or the 

numbers produced by the fee generation 

approach (as only done by the 1998–99 

CARP) applied to 2000–2003 data, and 

then reduced to fit other 1998–99 

claimants’ awards. Neither of these 

choices can be the relative marketplace 

value for Canadian programming during 

2000–2003. The numbers offered by the 

Settling Parties are not the distribution 

percentages that the 1998–99 CARP 

determined were representative of 

Canadian programming’s relative market 

value, but are averages of those numbers 

for the Basic and 3.75% Fund, and then 

applied equally across all four years of 

this proceeding. At the closing 

argument, counsel for the Settling 

Parties acknowledged that their request 

for the average of the 1998–99 Canadian 

Claimants’ award would not represent 

the relative marketplace value of 

Canadian programming. 

THE JUDGES: Mr. Garrett, how can we find 

relative marketplace value in this proceeding 

when we are given only two alternatives? 

We are given that the award is either going 

to be the average of the ’98–’99 proceeding, 

which can’t be relative marketplace value for 

the period of 2000 to 2003. It’s an average of 

a prior award, which, in itself, is not relative 

marketplace value. 

Or we are given the number that is yielded 

through the data presented by the Canadian 

Claimants to the fee-generation approach. 

We don’t have any other tools that are 

presented to us to examine what the relative 

marketplace value of Canadian programming 

is. 

So how can we possibly be finding relative 

marketplace value in this proceeding? 

MR. GARRETT: It’s a fair question, Your 

Honor. 

I think that the whole purpose of this 

proceeding here was to get an answer, a clear 

guidance from the Judges here on an issue 

that has–has really troubled the Claimants, 

has plagued these proceedings from the start, 

and that is, what do we do with fee 

generation? 

10/28/09 Tr. at 1169–70 (Closing 

Argument). Despite their argument that 

the Judges are tasked with determining 

the relative marketplace value of 

Canadian Claimants’ programming in 

this proceeding, the Settling Parties 

concede that they have not made a 

claim, nor presented evidence, as to 

what is the relative marketplace value. 

Accord, id. at 1207–08 (not legal error 

if Judges accept that average of 1998–99 

Canadian Claimants’ award not 

representative of relative marketplace 

value). Rather, the Settling Parties are 

requesting that the Judges find that the 

1998–99 CARP’s fee generation 

approach 8 does not reliably reflect the 

relative marketplace value of Canadian 

signals and (by itself) does not allow the 

Judges to discern changes in that value 

from one period to the next. Joint 

Findings at 10. The governing standard 

for distribution in this proceeding, 

therefore, is not whether the 1998–99 

CARP’s fee generation approach 

demonstrates the relative marketplace 

value for Canadian Claimants’ 

programming, but whether the CARP’s 

fee generation approach can ever be 

representative of relative marketplace 

value. 

If the Judges determine that the 

CARP’s fee generation approach can be 

indicative of relative marketplace value, 

this does not automatically mean that 

we must adopt the Canadian Claimants’ 

approach. The Canadian Claimants must 

still sufficiently demonstrate that there 

are changed circumstances that warrant 

an application of the 2000–2003 data 

they have presented. Even if the 

Canadian Claimants are successful, their 

awards in this proceeding are still not 

representative of the relative 

marketplace value of their programming 

in this proceeding for at least three 

reasons. First, the awards given the 

Canadian Claimants by the CARP are 

not the true product of the fee 

generation approach employed by the 

CARP. Rather, they are the fee 

generation numbers adjusted downward 

to accommodate the awards of other 

claimants and equalize the distribution 

to one hundred percent of the funds. 

The Canadian Claimants vigorously 

protested this reduction by the CARP to 

the Librarian of Congress and lost. 69 FR 

3606, 3619 (January 26, 2004). Second, 

the fee generation approach utilized by 

the CARP is not the sole method in 

which fee generation may be employed. 

The Canadian Claimants themselves 

have presented alternative ways of 

conducting fee generation in this 

proceeding. See, e.g. Min/Max 

approach, and the alternative way of 

generating 3.75% Fund royalties, 

Canadian Claimants’ Proposed Findings 

of Fact and Conclusions of Law (‘‘CCG 

PPF & PCL’’) at 24–26 (Min/Max) and 

28–30 (3.75%). Third, and perhaps most 

importantly, the Judges are not being 

offered any evidentiary alternatives to 

the fee generation approach. It very well 

may be that there are other methods or 

other evidence that best represent the 

relative marketplace value of Canadian 

Claimants’ programming as well as the 

programming of other claimant groups. 

Such is not the case in this proceeding, 

where the parties have presented us 

with only two choices. The Judges, 

therefore, do not opine as to what may 

be the best means of determining the 

relative marketplace value of Canadian 

Claimants’ programming, or other 

claimant groups’ programming, in future 

proceedings. 

IV. The 1998–99 Fee CARP’s 

Generation Approach and Relative 

Marketplace Value 

As the Judges stated in the previous 

section, our first task is to determine 

whether the 1998–99 CARP’s fee 

generation approach can ever be 

demonstrative of relative marketplace 

value. 

A. Origins of Fee Generation 

Fee generation–the effort to determine 

the amount of monies paid into the 

royalty funds by cable systems for the 

retransmission of particular distant 

broadcast signals, and hence particular 

types of programming–was introduced 

at the beginning of distribution 

proceedings for cable royalties. The 

approach was offered by certain 

claimants, particularly the Canadian 

Claimants, whose programming was 

retransmitted by cable systems as 

discreet, intact distant signals. While 

the history of fee generation in 

distribution proceedings is long, its 

treatment has at times been uneven, 

particularly in the earlier proceedings. 

While the Copyright Royalty Tribunal 

never flatly rejected fee generation as a 

methodology, it often chose not to rely 

heavily upon the approach. In the 1978 

distribution proceeding, the Tribunal 

stated that ‘‘[b]ecause we find that the 

rate cable systems pay under 

compulsory license is not a clear or true 

reflection of the direct marketplace 

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9Furthermore, the Public Television Claimants’ 

objection to fee generation focused on its 

application to the Public Television Claimants, not 

the Canadian Claimants. 

value of the work, additional 

considerations, adjusted as appropriate, 

were used by the Tribunal to determine 

the marketplace value of the copyright 

owner’s work.’’ 45 FR 63026, 63036 

(September 23, 1980). In the 1979 

proceeding, the Tribunal stated that it 

was ‘‘declin[ing] to employ feegenerated formulas, as urged upon us by 

the Canadians,’’ 47 FR 9879, 9894 

(March 8, 1982), and in the 1980 

proceeding the Tribunal stated that fee 

generation was ‘‘based upon a 

methodology which the Tribunal has 

repeatedly indicated fails to lend itself 

to an application of the Tribunal’s 

criteria.’’ 48 FR 9552, 9569 (March 7, 

1983). In the 1983 distribution 

proceeding, the Tribunal appeared to be 

on the brink of casting fee generation 

aside forever when it stated that ‘‘we 

have rejected fee generation formulas as 

a mechanical means toward making our 

allocations,’’ but then used the fee 

generation rationale as grounds for 

excluding the Public Television 

Claimants from receiving royalties from 

the 3.75% Fund; to wit, a claimant 

whose programming does not generate 

any royalties to a particular fund should 

not share in a distribution of that fund. 

51 FR 12792, 12808, 1213 (April 15, 

1986). And in the 1989 proceeding, the 

Tribunal expressly noted the low level 

of fees generated by the Public 

Television Claimants in reducing their 

award. 57 FR 15286, 15303 (April 27, 

1992). 

The Copyright Royalty Tribunal was 

abolished in 1993 and replaced by the 

CARP system as administered by the 

Librarian of Congress. In the first Phase 

I distribution proceeding under that 

system, the 1990–92 proceeding, the 

Canadian Claimants litigated their 

award and presented a fee generation 

methodology quite similar to the one at 

issue in this proceeding. Although the 

CARP did not award the Canadian 

Claimants precisely their fee-generated 

distribution percentages, the CARP 

plainly did heavily rely upon it. Report 

of the Copyright Arbitration Royalty 

Panel in Docket No. 94–3 CARP CD 90– 

92, 141 (June 3, 1996) (‘‘While there is 

a great deal of criticism, particularly by 

[Public Television Claimants], 

concerning acceptance of the feegenerated method, we see no other 

significant evidence to dispute the claim 

of the Canadians’’). In his review of the 

CARP’s determination, the Librarian 

specifically identified what appeared to 

be a discrepancy in the CARP’s use of 

fee generation in the Basic Fund; 

namely, that the CARP determined a fee 

generation share of 1.1% but only 

awarded the Canadian Claimants 1.0%. 

In response to certified questions from 

the Librarian to discern the CARP’s 

intent, the CARP responded that 

‘‘[w]hile we tried to distance ourselves 

from the fee generated [sic] method 

* * * we certainly used that method in 

reaching our conclusion.’’ 61 FR 55653, 

55667 (October 28, 1996). The Librarian 

did not question the CARP’s use of a fee 

generation approach and determined 

that the ultimate award of 1% fell 

within the ‘‘zone of reasonableness’’ for 

making a distribution award, as 

permitted by Nat’l Ass’n of Broadcasters 

v. Copyright Royalty Tribunal, 772 F.2d 

922 (DC Cir. 1985). The matter of the 

Canadian Claimants’ award was not 

appealed to the Court of Appeals. See, 

Nat’l Ass’n of Broadcasters v. Librarian 

of Congress, 146 F. 3d 907 (DC Cir. 

1998). 

The Judges have already discussed the 

1998–99 CARP’s treatment of the fee 

generation approach in detail in section 

III.B. of this decision and we will not 

repeat it here. We note, however, that 

the 1998–99 CARP was heavily 

influenced by the 1990–92 CARP’s use 

of fee generation to arrive at the 

Canadian Claimants’ award, and 

especially the Librarian’s examination 

and acceptance of the use of fee 

generation. We also note that, other than 

the Public Television Claimants, none of 

the other Settling Parties in this 

proceeding challenged the 1998–99 

CARP’s use of fee generation.9 We now 

turn to the challenges of the Settling 

Parties with respect to the fee generation 

approach as used by the 1998–99 CARP. 

B. Presentation of the Parties 

The Settling Parties level four 

principal criticisms of the fee generation 

approach. First, they charge that the 

term ‘‘fee generation’’ is a misnomer and 

is nothing more than an allocation 

method developed by CDC for 

attempting to associate a certain amount 

of royalties to each broadcast station 

carried as a distant signal. In their crossexamination of Jonda Martin, the 

sponsor of the Canadian Claimants’ fee 

generation data in this proceeding, the 

Settling Parties presented other means 

in which CDC could have credited 

Canadian distant broadcast signals with 

royalties, resulting in variances that the 

Settling Parties assert could be more 

than $2 million. Joint Findings at 9–10. 

The Settling Parties conclude this 

challenge by asserting ‘‘[t]he issue before 

the Judges is not whether CDC’s 

protocols are reasonable but whether 

CDC’s ‘fee generation’ methodology 

reliably reflects the relative marketplace 

value of Canadian signals and (by itself) 

allows the Judges to discern changes in 

that value from one period to the next.’’ 

Id. at 10. 

Second, the Settling Parties argue that 

the Canadian Claimants presented no 

evidence that demonstrates that fee 

generation reflects relative marketplace 

value or shows changes in that value. 

They criticize the statements and 

qualifications of Dr. John Calfee, the 

expert economist presented by the 

Canadian Claimants, who asserted that 

there were strong relationships between 

fee generation and relative marketplace 

value, even though those relationships 

were ‘‘rough, ‘‘far from perfect,’’ and 

‘‘crude.’’ Id. at 11. The Settling Parties 

further charge that the 1998–99 CARP’s 

use of fee generation is particularly 

arbitrary in its application to the 3.75% 

Fund, and that the efforts of the 

Canadian Claimants to correct such 

arbitrariness through introduction of a 

new method of allocation of the 3.75% 

Fund fee should not be permitted. Id. at 

12. 

Third, the Settling Parties submit that 

the testimony of their own witnesses, 

Linda McLaughlin and Hal Singer, 

establish that fee generation is not a 

reliable means for determining the 

relative marketplace value of Canadian 

Claimants’ programming. Ms. 

McLaughlin testified as to the effects of 

tiers of broadcast programming offered 

by cable systems and their potential 

effects on fees generated, and how, in 

her view, it was impossible to properly 

allocate fees received from cable 

systems that only paid the minimum 

Section 111 fee. Settling Parties 

Proposed Findings of Fact and 

Conclusions of Law (‘‘SP PFF & PCL’’) at 

50–53. Ms. McLaughlin also testified 

that the regulatory structure of the 

Section 111 license does not comport 

with marketplace dynamics. Id. at 54– 

59. Dr. Singer testified that mere 

increases in fee generation levels of 

Canadian Claimants’ programming 

between 1998–99 and 2000–2003, 

without more, do not provide a reliable 

basis for concluding that there has been 

any increase in the relative marketplace 

value of that programming. Id. at 60–62. 

The fourth argument was not offered 

by the Settling Parties until the final 

stages of the pleadings. They assert that 

the fee generation approach of the 1998– 

99 CARP was applied to all royalties 

paid by cable systems without regard to 

whether those systems had the right to 

retransmit Canadian broadcast signals 

pursuant to the Section 111 license. See 

17 U.S.C. 111(c)(4) (limiting geographic 

region within which cable systems may 

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retransmit Canadian broadcast signals). 

The Settling Parties conclude that 

Section 111(c)(4) makes the 1998–99 

CARP’s application of the fee generation 

approach ‘‘deficient as a matter of law.’’ 

Joint Findings at 15. 

Canadian Claimants point to the use 

of the fee generation approach by both 

the 1990–92 CARP and the 1998–99 

CARP as persuasive grounds for 

accepting that the approach is reliably 

predictive of relative marketplace value 

when applied to the Canadian 

Claimants’ programming. For the first 

time, at closing argument, counsel for 

the Canadian Claimants asserted that 

these decisions are binding legal 

precedent upon the Judges. 10/28/09 Tr. 

1217 (Closing Argument). Canadian 

Claimants submit that the testimony of 

Dr. Calfee confirms that there is a 

relationship between fee generation and 

relative marketplace value sufficient to 

demonstrate both relative value and 

changes in that value. Joint Findings at 

26–27. Canadian Claimants 

acknowledge that fee generation does 

not explain why changes in relative 

value occur, but argue that such 

explanatory power is not necessary. Id. 

at 28–31. 

Canadian Claimants also point to the 

testimony of Jonda Martin regarding two 

analyses she performed with respect to 

the Basic Fund and the 3.75% Fund, 

respectively. For the Basic Fund, Ms. 

Martin conducted what she described as 

a ‘‘Min/Max’’ analysis. Ms. Martin first 

took distant Canadian broadcast signals 

as if it were the last distant signal that 

cable systems were paying for (and 

hence at the lowest royalty rate, i.e. The 

‘‘Min’’) and determined the fees 

generated, then took the same distant 

Canadian broadcast signals as if they 

were the first distant signal that cable 

systems paid for (at the highest royalty 

rate, i.e. the ‘‘Max’’). She then compared 

the results of this ‘‘Min/Max’’ analyses to 

the 1998–99 CARP’s fee generation 

approach, using 2000–03 data. CCG PFF 

& PCL at 24–26. The purpose of this 

testimony, according to the Canadian 

Claimants, was to confirm that there 

were not wide variances in the fees 

generated for distant Canadian signals 

dependent upon the regulatory structure 

of the Section 111 license. Joint 

Findings at 34. Ms. Martin performed a 

similar analysis with respect to the 

3.75% Fund by examining the fees 

generated by presuming the Canadian 

distant signal to be the nonpermitted 

(and hence 3.75%) signal and then the 

permitted signal (non 3.75%). The 

purpose was ‘‘to eliminate any arbitrary 

effect on fees-generated by reallocating 

the 3.75% fees and base fees paid for 

these carriage instances on a 

proportional DSE basis.’’ CCG PFF & 

PCL at 28. Canadian Claimants submit 

that these analyses are not ‘‘new’’ 

evidence, because they are bound by the 

Further Joint Stipulation to the 

methodology of the 1998–99 CARP, but 

merely rebut the notion that the fee 

generation approach is ambiguous. Joint 

Findings at 33. 

C. Determination of the Judges 

The governing distribution standard 

for this proceeding that the Settling 

Parties must satisfy to successfully 

challenge the 1998–99 CARP’s fee 

generation approach is high. They now 

must demonstrate what they chose not 

to in the 1998–99 distribution 

proceeding: that the fee generation 

approach is so arbitrary, so meritless, 

that it is without probative value with 

respect to determining the Canadian 

Claimants’ royalty share. For the reasons 

stated below, they have not met their 

burden. 

There is a compelling reason for 

establishing a high standard for 

evaluating the fee generation approach. 

The approach has endured the scrutiny 

of litigation and review not just once, 

but twice. Despite admitted 

shortcomings, the 1990–92 CARP 

plainly did rely on the approach to 

determine the Canadian Claimants’ 

share. The Librarian of Congress 

confirmed that the 1990–92 CARP did 

use fee generation and embraced it as 

the means of determining the relative 

marketplace value for the Canadian 

Claimants in that proceeding. The 1998– 

99 CARP took a considered look at fee 

generation and discussed in detail 

several criticisms of the methodology, 

most of which are being offered again in 

this proceeding. And it should not be 

forgotten that the Settling Parties 

themselves, with the exception of the 

Public Television Claimants, agreed that 

the 1998–99 CARP should use fee 

generation to determine the Canadian 

Claimants’ award. CARP Report at 62. 

The Canadian Claimants asserted at 

closing argument that the 1998–99 

CARP fee generation approach is legal 

precedent that we are bound to follow. 

While we do not adopt this unsupported 

contention, we do conclude that the 

1998–99 CARP’s fee generation 

approach should be accorded deference, 

not as the methodology to determine the 

relative marketplace value of the 

Canadian Claimants’ programming, but 

as a methodology to determine that 

value. Once again, given that we are 

confined to an either/or choice in this 

proceeding, we do not opine as to 

whether the 1998–99 CARP’s fee 

generation approach, or fee generation 

in general, is the best means of 

determining the relative marketplace 

value of the Canadian Claimants’ 

programming. We only conclude, for 

purposes of this proceeding, that the 

1998–99 CARP’s fee generation 

approach has been sufficiently vetted in 

both the 1990–92 and 1998–99 

proceedings that it deserves deference. 

Given that the approach deserves 

deference, it is incumbent upon the 

Settling Parties to demonstrate that fee 

generation is so terribly flawed that it 

cannot be considered; i.e., that the 

1998–99 CARP got it completely wrong. 

None of the Settling Parties’ criticisms 

rise to this level. The first, that fee 

generation is nothing more than an 

accounting artifice or allocation scheme, 

was considered in large part by the 

1998–99 CARP and rejected. CARP 

Report at 62–63. Further, the ‘‘Min/Max’’ 

analysis for the Basic Fund, which was 

not presented in the 1998–99 

proceeding, demonstrates that the fee 

generation approach applied by the 

CARP was not so dependent upon the 

Section 111 regulatory scheme as to 

make fee generation a completely 

arbitrary exercise. There are variations 

in the amounts of fees generated 

depending whether a Canadian 

broadcast signal is treated as the first or 

last DSE. However, as demonstrated by 

the ‘‘Min/Max’’ analysis, the range of the 

variation is not so wide or wild as to 

make it unreasonable. The same can be 

said for the 3.75% Fund and the new 

3.75% analysis offered by the Canadian 

Claimants in this proceeding. These two 

analyses corroborate the reasonableness 

of the approach and fall within the 

‘‘zone of reasonableness’’ that guided the 

Librarian’s hand in his analysis of fee 

generation in the 1990–92 proceeding. 

61 FR at 55663. 

The Settling Parties’ second criticism, 

that the Canadian Claimants failed to 

present evidence establishing that the 

fee generation approach reflects the 

relative marketplace value of their 

programming or changes in that value, 

is also unavailing. The Canadian 

Claimants did supply testimony that 

linked the compulsory license system 

with the fee generation approach. Dr. 

Calfee stated that the Section 111 

license ‘‘had various elements which 

were designed and, I think, succeeded 

in establishing a rough relationship, far 

from perfect, but a rough relationship 

between the fees and the allocation of 

fees and the relative value of the various 

signals.’’ 9/1/09 Tr. at 878–79 (Calfee). 

While the relationship may be ‘‘rough’’ 

or ‘‘crude,’’ the Settling Parties would 

have to prove that it was nonexistent in 

order to overcome the deference we are 

giving the 1998–99 CARP’s fee 

generation approach. 

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10The challenge is surprising in that by asserting 

that the 1998–99 CARP committed an error of law 

by adopting its fee generation approach, the Settling 

Parties are arguing that it would be an error of law 

for the Judges in this proceeding to select the 

approach. This is contrary to Settling Parties’ 

counsel’s closing argument that it would be ‘‘pretty 

hard for the Judges to commit legal error.’’ 10/28/ 

09 Tr. at 1208 (Closing Argument). 

The third criticism, the testimony of 

Ms. McLaughlin and Dr. Singer, does 

not overcome Dr. Calfee’s conclusion. 

Ms. McLaughlin offered several 

observations as to how royalty payments 

under the compulsory license may be 

divorced from how programming would 

be bought and sold in the free 

marketplace. It also may be reasonable 

to conclude from Ms. McLaughlin’s and 

Dr. Singer’s observations that the 

connections between the license and the 

marketplace are wobbly. Of course, the 

Judges are precluded by the Joint 

Stipulations and the parties’ 

presentations from considering how the 

free marketplace might work and what 

bearing that might have on relative 

marketplace value. In any event, we are 

not persuaded that we are precluded 

from ever considering fee generation as 

a distribution methodology, let alone 

the one used by the 1998–99 CARP. 

The Settling Parties’ final criticism is 

surprising.10 The Settling Parties argue 

that the 1998–99 CARP committed legal 

error by including in its fee generation 

approach the royalties from cable 

systems in the United States that are 

precluded from retransmitting distant 

Canadian signals. It is surprising that if 

there were such a legal error it was not 

identified by the Register of Copyrights, 

who reviewed the 1998–99 CARP 

decision and made her recommendation 

to the Librarian of Congress that it be 

adopted. The Register, of course, has the 

power to review our determination in 

this proceeding for legal error. 17 U.S.C. 

803(f)(1)(D). That aside, we do not view 

17 U.S.C. 111(c)(4) as creating a legal 

impediment to the 1998–99 CARP’s fee 

generation approach. That provision 

provides that it is an act of copyright 

infringement for cable systems to 

retransmit a Canadian broadcast signal 

if ‘‘the community of the cable system is 

located more than 150 miles from the 

United States-Canadian border and is 

also located south of the forty-second 

parallel of latitude.’’ 17 U.S.C. 111(c)(4). 

This provision of the Copyright Act 

governs infringement liability and, as 

such, is a limitation on the use of the 

Section 111 license by cable systems. It 

does not relate in any way to copyright 

royalties collected under that license, let 

alone their distribution. One could 

debate the advisability of including or 

excluding the royalties generated by 

cable systems that were precluded by 

the terms of the Section 111 license 

from retransmitting Canadian signals, 

but we determine the 1998–99 CARP 

did not run afoul of Section 111(c)(4) by 

choosing to include them. 

V. Changed Circumstances 

As previously stated, the Judges’ 

rejection of the Settling Parties’ 

challenge of the 1998–99 CARP’s fee 

generation approach does not 

automatically mean the Canadian 

Claimants receive their requested 

award. There was a second part to the 

1998–99 CARP’s decision: ‘‘changed 

circumstances.’’ Unless the Canadian 

Claimants can adequately demonstrate 

‘‘changed circumstances’’ from the 

1998–99 period to the 2000–2003 

period, they have not proven 

entitlement to their claim. 

A. The 1998–99 CARP’s Handling of 

Changed Circumstances 

Although the fee generation approach 

established the numbers for the 1998–99 

CARP’s consideration, the numbers 

alone did not secure the entitlement for 

the Canadian Claimants’ award. The 

CARP articulated that for the Canadian 

Claimants (as well as several other 

claimant groups), it would use the 

1990–92 CARP’s distribution 

percentages as a starting point, and then 

perform an assessment of changed 

circumstances from the 1990–92 to 

1998–99 periods. CARP Report at 14–16. 

The CARP found the following: 

Other than a substantial increase in relative 

shares of actual fees generated of both the 

Basic Fund and the 3.75% Fund, the Panel 

does not discern any changed circumstances 

that would significantly affect the Canadians 

[sic] award. However, it is the very change 

in shares of fees generated that is impressive. 

Shares of fees generated approximately 

doubled since the last litigated proceeding. 

We use a similar approach as we employed 

for [Public Television Claimants], except 

there is no Bortz floor to establish a 

minimum value. The fee generation approach 

produces the relative valuations * * *. An 

assessment of changed circumstances, based 

upon an approximate doubling of relative 

fees, implicates a substantial increase from 

the last award—when the Canadians [sic] 

award was determined based upon share of 

fees generated. Using the last net CARP 

award as a reference point (and cognizant of 

our previously articulated caveats respecting 

the reliability of the fee generation approach 

and an assessment of changed 

circumstances), we award Canadians its fee 

generated shares of the Basic Fund and the 

3.75% Fund * * *. 

Id. at 74–75 (citations and footnote 

omitted) (emphasis in original). 

B. Presentation of the Parties 

Janice de Freitas, testifying on behalf 

of the Canadian Claimants, presented 

the fees-generated evidence obtained 

from CDC, broken down by year from 

1998–2003. In a series of tables, she 

offered data summarizing the royalties 

paid for the Basic and 3.75% Funds, 

and data concerning the relative growth 

of Canadian signals for both those 

funds: 

SUMMARY OF BASIC FUND ROYALTIES

Year Canadian signals All signals 

(including Canadian) 

Canadian signal 

royalties as a 

percentage of all signal 

royalties 

1998 ............................................................................................. $2,230,717 $67,387,814 3.31027

1999 ............................................................................................. 2,585,328 70,967,638 3.64297 

2000 ............................................................................................. 2,847,858 74,082,435 3.84417 

2001 ............................................................................................. 3,058,354 75,273,898 4.06297 

2002 ............................................................................................. 3,817,598 79,397,334 4.80822 

2003 ............................................................................................. 3,835,003 80,975,978 4.73598 

de Freitas WDT at Tab P. 

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RELATIVE GROWTH BASIC FUND ROYALTIES

Year 

Basic fund royalties Relative change 

from 1998–1999 average 

Canadian signals Total all other signal types Canadian signals 

(percent) 

Total all other signal types 

(percent) 

1998–1999 Annual Average .................................................... $2,408,023 $66,769,704 

2000 ......................................................................................... 2,847,858 71,234,577 18 7 

2001 ......................................................................................... 3,058,354 72,215,544 27 8 

2002 ......................................................................................... 3,817,598 75,579,736 59 13 

2003 ......................................................................................... 3,835,003 77,140,975 59 16 

de Freitas WDT at 9, Tab 1–N. 

SUMMARY OF 3.75% ROYALTIES

Year Canadian signals All signals 

(including Canadian) 

Canadian signal royalties as a 

percentage of all signal 

royalties 

1998 ............................................................................................. $24,539 $9,671,797 0.25372 

1999 ............................................................................................. 65,555 10,408,844 0.62980 

2000 ............................................................................................. 70,077 12,018,489 0.58308 

2001 ............................................................................................. 279,779 13,472,358 2.07669 

2002 ............................................................................................. 549,960 16,339,148 3.36590 

2003 ............................................................................................. 698,567 16,714,091 4.17951 

de Freitas WDT at Tab 1–P. 

RELATIVE GROWTH 3.75% FUND ROYALTIES

Year 

3.75% Fund royalties Relative change 

from 1998–1999 average 

Canadian 

signals 

Total all other 

signal types 

Canadian 

signals 

(percent) 

Total all other 

signal types 

(percent) 

1998–1999 Annual Average .................................................... $45,047 $9,995,274 

2000 ......................................................................................... 70,077 11,948,412 56 20 

2001 ......................................................................................... 279,779 13,192,579 521 32 

2002 ......................................................................................... 549,960 15,789,188 1,121 58 

2003 ......................................................................................... 698,567 16,015,524 1,451 60 

de Freitas WDT at Tab 1–N. 

The reason for the growth displayed 

in these charts is, in the Canadian 

Claimants’ view, a substantial increase 

in the number of ‘‘subscriber instances’’ 

attributable to Canadian signals from the 

1998–99 period to 2000–2003. CCG PFF 

& PCL at 30. In other words, Canadian 

broadcast signals were available to more 

U.S. cable subscribers in 2000–2003 

than they were in 1998–99, thereby 

generating more royalties during the 

period. Furthermore, the Canadian 

Claimants submit the relative increases 

in subscriber instances attributable to 

Canadian signals were greater as 

compared to other distant signals. These 

differences are summarized below: 

CHANGE IN SUBSCRIBER INSTANCES

Year 

Subscriber instances Relative change 

from 1998–1999 average 

Canadian 

signals 

Total all other 

signal types 

Canadian 

signals 

(percent) 

Total all other 

signal types 

(percent) 

1998–1999 Annual Average .................................................... 4,865,128 130,764,183 

2000 ......................................................................................... 5,254,398 133,795,743 8 2 

2001 ......................................................................................... 5,566,783 133,917,668 14 2 

2002 ......................................................................................... 5,743,710 138,170,878 18 6 

2003 ......................................................................................... 6,184,495 132,908,509 27 2 

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Federal Register / Vol. 75, No. 91 / Wednesday, May 12, 2010 / Notices 26807 

11We are persuaded that Nat’l Ass’n of 

Broadcasters v. Copyright Royalty Tribunal, 772 

F.2d 922, 932 (DC Cir. 1985), cert. denied, 475 U.S. 1035 (1986), is not a bar to our consideration of 

changed circumstances. 

de Freitas WDT at 11–12, Tab 1–R. 

Dr. Singer conceded the percentage 

increase in subscriber instances was 

greater for Canadian distant signals 

relative to all other distant signals. 6/15/ 

09 Tr. at 762–63 (Singer). The Settling 

Parties do not contest that there has 

been increases in the subscriber 

instances for Canadian signals, and that 

the relative increases are greater for 

Canadian signals, other than to contend 

that such increases are not indicative of 

increases in relative marketplace value. 

Joint Findings at 15–16. 

C. Determination of the Judges 

As with our consideration of the fee 

generation approach, we are required by 

the Joint Stipulations to consider the 

Canadian Claimants’ ‘‘changed 

circumstances’’ in accordance with the 

1998–99 CARP’s determination.11 The 

question arises: Must we find an 

approximate doubling of fees generated, 

as the CARP did, in order to find there 

are sufficient changed circumstances to 

award the Canadian Claimants their 

requested share of the royalties? 

We answer that question in the 

negative. We are required to apply the 

1998–99 CARP’s methodology–fee 

generation approach plus changed 

circumstances—but there is a difference 

between the methodology of fee 

generation and the evidence of changed 

circumstances. We have given the 

former considerable deference, but the 

latter is a factual inquiry. The 1998–99 

CARP’s determination of an 

approximate doubling of fees generated 

was a factual finding, not a methodology 

in and of itself, and we therefore do not 

require the Canadian Claimants in this 

proceeding to demonstrate a similar 

increase in fees generated. 

Examining the information contained 

in the charts above, we conclude that 

the data reflects a meaningful increase 

in the relative growth of the fees 

generated for both the Basic and 3.75% 

Funds for the Canadian Claimants’ 

programming from the 1998–99 to 

2000–03 period. This is confirmed 

through examination not only of this 

period alone, but from 1990–92 as well, 

a comparison that heavily influenced 

the 1998–99 CARP’s decision. In finding 

the relative increase for 2000–2003 to be 

meaningful, and therefore sufficient for 

the Canadian Claimants to sustain their 

burden of demonstrating changed 

circumstances, we also note that the 

proportional increase in subscriber 

instances for Canadian distant signals, 

relative to all other signals, is significant 

as well. Even though the CARP did not 

address proportional increases for 

subscriber instances, this is an 

evidentiary finding (not a 

methodological one) that further 

supports an identification of changed 

circumstances. Therefore, we conclude 

that the available evidence as a whole, 

when applied to the two choices offered 

by the parties’ Joint Stipulations, merits 

the increase in royalties sought by the 

Canadian Claimants. 

VI. Order of the Copyright Royalty 

Judges 

Having fully considered the record 

and for the reasons set forth herein, the 

Copyright Royalty Judges order that the 

Canadian Claimants’ shares of the 2000, 

2001, 2002, and 2003 cable royalties 

shall be distributed according to the 

following percentages: 

Year Basic fund 

(percent) 

3.75% Fund 

(percent) 

Syndex fund 

(percent) 

2000 ............................................................................................. 2.04383 0.33006 0 

2001 ............................................................................................. 2.35338 1.28069 0 

2002 ............................................................................................. 2.53544 1.88970 0 

2003 ............................................................................................. 2.58496 2.42881 0 

Per the terms of the Joint Stipulation, 

the remaining balance of the 2000–2003 

royalty fees is awarded to the Settling 

Parties. 

So ordered. 

James Scott Sledge 

Chief Copyright Royalty Judge 

William J. Roberts, Jr. 

Copyright Royalty Judge 

Stanley C. Wisniewski 

Copyright Royalty Judge 

Dated: March 30, 2010. 

James Scott Sledge, 

Chief, U.S. Copyright Royalty Judge. 

Approved by: 

James H. Billington, 

Librarian of Congress. 

[FR Doc. 2010–11231 Filed 5–11–10; 8:45 am] 

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4:45 p.m. 

May 14, 2010, 8:30 a.m.–10:30 a.m. 

PLACE: Key Bridge Marriott, 1401 Lee 

Highway, Arlington, VA. 

STATUS: Parts of this meeting will be 

open to the public. The rest of the 

meeting will be closed to the public. 

MATTERS TO BE CONSIDERED: National 

Summit on Disability Policy 2010. 

PORTIONS OPEN TO THE PUBLIC: Thursday, 

May 13, 2010, 9 a.m.–4:45 p.m. 

MATTERS TO BE CONSIDERED: Closed 

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PORTIONS CLOSED TO THE PUBLIC: Friday, 

May 14, 2010, 8:30 a.m.–10:30 a.m. 

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Communications, NCD, 1331 F Street, 

NW., Suite 850, Washington, DC 20004; 

202–272–2004, 202–272–2074 (TTY). 

Dated: May 4, 2010. 

Joan M. Durocher, 

Executive Director. 

[FR Doc. 2010–11392 Filed 5–10–10; 11:15 am] 

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