Opinion ID: 788880
Heading Depth: 3
Heading Rank: 2

Heading: Owners' challenges to the treatment of RIAA's 26 benchmark agreements

Text: 28 The Owners' claims concerning the Librarian's treatment of the 26 RIAA benchmark agreements likewise fail. They maintain that the Librarian acted arbitrarily, and contrary to 17 U.S.C. §§ 112 and 114, by only relying on the RIAA-Yahoo! agreement and not the other 25 RIAA benchmark agreements. More specifically, they assert that the Librarian acted in an arbitrary manner by: (1) ignoring the weight the CARP gave the other 25 benchmark agreements by adopting a unitary rate instead of a dual rate structure; (2) rejecting the CARP's reliance on the ephemeral recording rate contained in eight of the 25 other agreements to set an ephemeral recording rate of 9 percent; and (3) adjusting both the sound recording performance rate and ephemeral recording rate downward through the application of rounding. Owners' Br. at 26. These claims all fail. 29 The Owners' contentions, like the ones addressed above, are unpersuasive under the applicable standard of review. See NAB, 146 F.3d at 924, 930. In deploying this standard, the court will set aside a royalty award only if [it] determine[s] that the evidence before the Librarian compels a substantially different award. Id. at 918. Despite the Owners' arguments to the contrary, the Librarian has offered a facially plausible explanation ... in terms of the record evidence for the royalty rates under review. Id. The Librarian thoroughly explained his decision to base the sound recording performance rate and ephemeral recording rate on the terms of the RIAA-Yahoo! agreement, as that agreement was particularly reliable and probative because it reflected actual marketplace rates. See Final Rule, 67 Fed. Reg. at 45,247-49. The Librarian further explained how, based on the terms of the RIAA-Yahoo! agreement, he arrived at a unitary 0.07¢ royalty rate for sound recording performances and a rate of 8.8 percent of performance royalties for ephemeral recordings. Id. at 45,251-53, 45,255, 45,261-62. Given the Librarian's reliance on the RIAA-Yahoo! agreement, the 25 other benchmark agreements-which both the CARP and Librarian found to be unreliable-do not resonate as evidence so compelling as to require a substantially different award. NAB, 146 F.3d at 918. 30 Moreover, each of the Librarian's specific decisions challenged by the Owners is adequately explained and based on record evidence. First, the Librarian thoroughly explained his decisions to select a unitary rate for transmissions of sound recordings — which he based on the finding that the RIAA-Yahoo! agreement's differential rate structure did not reflect a true distinction in value between internet-only webcasts and radio retransmissions — and to set the sound performance royalty rate at the mid-point between the blended rate established for the first period (1.5 billion transmissions) and that set for the second period. See Final Rule, 67 Fed. Reg. at 45,252-53, 45,255. Furthermore, in setting the rate at the mid-point of this zone of reasonableness, the Librarian explained that it makes more sense to use both values and take the average of the two because, [i]n this way, the final unitary rate captures the actual value of the performance made in the initial period... and the projected value of the transmissions at the agreed upon rates for the remainder of the license period; and it falls within the range of acknowledged values for these transmissions. Id. at 45,255. 31 Second, the Librarian explained that the CARP's decision to give any weight to eight of the 25 other RIAA benchmark agreements in setting the ephemeral recording rate was arbitrary. See id. at 45,262. Because the CARP had previously repudiated these agreements, the Librarian explained that, absent a clear explanation, it was arbitrary for the CARP to use these agreements (which contained ephemeral recording rates around 10 percent of the performance royalties) to justify its decision to round the RIAA-Yahoo! 8.8 percent ephemeral recording rate up to 9 percent. Id. at 45,261-62. As the CARP did not clearly explain its about-face, the Librarian set the ephemeral recording rate at 8.8 percent. See id. at 45,262. This decision was not arbitrary because the rate was derived from the RIAA-Yahoo! agreement, and the CARP had previously determined that the other benchmark agreements containing higher rates were unreliable and did not reflect going market rates. 32 Third, the Librarian's application of rounding was not arbitrary. As explained above, the Librarian declined to increase the ephemeral recording rate to 9 percent, because the CARP did so based on agreements that it had found unreliable for establishing marketplace rates. See id. at 45,261-62; CARP Report at 60 (The Panel concludes that the 25 non-Yahoo! license agreements ... are unreliable benchmarks.). The Librarian also did not act in an arbitrary manner in setting the sound performance royalty rate at 0.07¢, rather than at 0.074¢. As noted above, the Librarian explained why he set the zone of reasonableness for the sound recording performance rate where he did, and he ultimately selected a rate that fell within that identified zone. We can require no more. See NAB, 146 F.3d at 918, 929 (Our job, rather, is to determine whether the royalty awards are within a `zone of reasonableness.') (citation omitted).