[00:00:01] Speaker 02:
Case number 16-7041, Sound Exchange Inc.

[00:00:05] Speaker 02:
Appellant versus News Act LLC.

[00:00:07] Speaker 02:
Mr. Siegel for the appellant, Mr. Willin for the appellee.

[00:00:11] Speaker 02:
Good morning.

[00:00:22] Speaker 03:
Thank you, Your Honor.

[00:00:23] Speaker 03:
May it be used to court.

[00:00:25] Speaker 03:
When Congress changed the statutory license rate standard in 1998, it grandfathered certain services into below market rates to prevent disruption to their existing operations.

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The district court held that this grandfather provision actually means that when USAC acquires a service more than a decade and a half later, it can pay below market rates for that service, even though the service had already been held to no longer qualify for below market rates.

[00:00:52] Speaker 03:
That conclusion is contrary to the statute, the conference report that accompanied it, and the copyright offices ruling in 2006 addressing the scope of the grandfather provision.

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So both sides argue the plain text of the statute supports their view.

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And we do believe that the plain text of the statute supports our view.

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The key phrase here is such transmissions.

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And the key thing to keep in mind is that such transmissions refers back not to the phrase non-interactive audio-only subscription digital audio transmissions in a vacuum.

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Rather, it refers back to.

[00:01:34] Speaker 01:
I think that's an important point.

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I mean, that's a persuasive point, but it doesn't deal with whether it's a real issue, which is how you define service.

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Isn't that the key?

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Well, I'm not sure that is the key.

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I think it is certainly the case that throughout the statute, service is used in two different ways.

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But our position does not actually depend on holding that service in the text of 114J11 refers to something other than the business entity.

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No, but I think isn't the point that the text itself

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appears to refer to both the entity and

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Whatever.

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The program.

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Sometimes referred to as a program, sometimes referred to as provider, sometimes referred to as... And it performs.

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The service performs something.

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Business entities perform something, but do subscriptions to channels perform?

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When I watch NFL ticket, which I don't have, but if I did, would it be performing for me?

[00:02:41] Speaker 03:
Well, you're right that business entities do perform things, but again, going back to the phrase such transmissions, such transmissions refers back to the transmissions by means of which the service performs sound recordings today.

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That is, in order for there to be an entitlement,

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to these below market rates.

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There must be a correspondence between the transmissions that the service is making today and those that it made prior to July 31st, 1998.

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So council responds and says they're providing the very same transmission, just got new customers.

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Well, it is true that

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they're providing non-interactive audio-only subscription digital audio transmissions, except, again, the reference in such transmissions is not back to that phrase in a vacuum.

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The language such transmissions is preceded by this much longer phrase.

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I see the argument in brief.

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Let me ask you a couple of questions.

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Suppose Dish

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were to gain another 50,000 of customers.

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What's your response?

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Then Muzak's offering of the Dish CD service to those additional customers would indeed be subject to these below market rates.

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Suppose Dish bought

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eliminated the other company and just added those customers.

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So it might depend upon the precise structure of the resulting business entity.

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What do you mean?

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I'm saying DISH buys ECHO, as isn't it, that owns DISH, buys, instead of your hypothetical and your situation, DISH buys, what is the other one?

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Direct TV.

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I have a hell of a time.

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Incidently, the briefs are not very clear for a Luddite.

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I apologize, Your Honor.

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Explaining all these things.

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But it took me forever to figure out what a non-interactive, whatever it was, any event.

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But I suppose Dish Echo buys DirecTV.

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So in your hypothetical, if the company operating the DISH network were to buy DirecTV and to continue to operate DirecTV's satellite service, satellite television service, which includes music channels on it, as a separate entity... No, I was supposed to say merger.

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They truly merge it, and they're both served by the same satellite.

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That is, the direct TV customers are now simply dish customers getting television signals from the dish satellite.

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The grandfather works.

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Yes, the grandfather works.

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Absolutely.

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That's one of the thin distinctions.

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So this is an action that certainly does raise a federal question.

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And I suspect what Your Honor may be getting at is the question whether there is a private right of action.

[00:06:13] Speaker 01:
No.

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Well, not a private, not a right of action in the district court, because Congress very carefully provided a mechanism whereby you sound

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Sound exchange.

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Sound exchange could have gone to the royalty board.

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Number one, the royalty board seeing this as a rape dispute, but also embodied with a legal question, and the statute is quite clear on that, passes the legal question over to the copyright office.

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The copyright office decides the legal question, sends it back to the royalty board, and guess what happens after that?

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Do you know?

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So I suspect that what your honor is suggesting is that at that point, we would come back to a district court.

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Wrong.

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No.

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The statute specifically provides you go to the DC Circuit.

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So I want to know how the devil you have, you, nobody told the district court that he didn't have jurisdiction.

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Well, we don't read the statute to give the- You did read the statute pointing out that the appeals from the royalty board go to the DC Circuit.

[00:07:25] Speaker 03:
Yes, absolutely, Your Honor.

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The question of a new type of operation, you can go to the Royalty Board and complain.

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And the Royalty Board can, if it's a legal question, send it to the Copyright Office.

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The Copyright Office decides the legal question, sends it back to the Royalty Board, and then if you're unhappy, you appeal to the D.C.

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Circuit.

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Respectfully, Your Honor, that's in the context of initiating a new rate-setting proceeding, which this is not.

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No, this is a dispute about rates, is it not?

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No, the statute said

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The procedures under subsection A and B also show the initiative pursuant to a petition filed by any copyright owner, which is what you, or either side can do it, indicating that a new type of subscription digital audio transmission service on which sound recordings are performed is about to become operational.

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reasonable terms and rates of royalty payments.

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And then it goes on in the statute, different parts, to say, if there's a legal question, that goes to the copyright office.

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Then it goes back to the royalty board.

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And then if there's an objection, there's an appeal to the DC Circuit.

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Now, there are all kinds of cases holding that when Congress provides a mechanism to challenge an administrative agent

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district court doesn't have jurisdiction.

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If I respond to some of the points your honor has made, again, the statutory provision that you're quoting is a provision that allows for the initiation of a proceeding to set reasonable rates and terms.

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The situation here is that

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a rape structure has been put in place by the Copyright Royalty Board.

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We do not believe that would have been... This is a case about underpayment of royalties, right?

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Yes.

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And is it your view that disputes over the amount of royalty that's paid are properly brought to the district court in the first instance?

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Yes, absolutely, Your Honor.

[00:09:54] Speaker 01:
Where do you see that?

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The statute says specifically that if there's a new type, in any case where a novel material question of

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the subject of these proceedings is pursued, the copyright worldly judge shall request the decision of the register of copyrights in writing.

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Now, the fight here is what the proper rate is.

[00:10:21] Speaker 01:
You believe the rate should be the free market rate rather than the special rate for grandfather.

[00:10:29] Speaker 01:
Well, that's exactly what the statute calls for, and there's a legal question as to

[00:10:36] Speaker 01:
you're all fighting about.

[00:10:37] Speaker 01:
And that should, it seems to me, go to the Copyright Office.

[00:10:42] Speaker 03:
Respectfully, Your Honor, you're absolutely right that in the context of a rate-setting proceeding, the Copyright Office is the entity to which a novel question... It's not a rate-setting proceeding.

[00:10:54] Speaker 01:
It's broader than that.

[00:10:56] Speaker 01:
It's broader than that.

[00:10:59] Speaker 02:
As I understand your response, it would be that if this went over to the Board,

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The board would say, we've already set the rate.

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And there's no legal question here.

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If they want to modify the rate, that's a whole other issue.

[00:11:16] Speaker 02:
But that's not what's happened here.

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We set the rate.

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It's in effect for five years or whatever the period is.

[00:11:23] Speaker 02:
And they're not paying the amount of royalty that's due under that rate.

[00:11:29] Speaker 02:
And you're just the debt collector, as it were.

[00:11:32] Speaker 01:
Would you see the statute?

[00:11:33] Speaker 02:
Yeah, I'm just asking.

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procedure, the rate making proceeding shall be initiated pursuant to a petition filed by any copyright owner or any other side too, indicating that a new type of subscription digital automated, excuse me, audio transmission service is about to become operational for the purpose of determining reasonable terms and rates of oily.

[00:12:08] Speaker 01:
Well, that's exactly what this issue is, whether the grandfather rate applies or not.

[00:12:12] Speaker 03:
Your Honor, a couple points in response.

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First, this is not a matter of a new type of service becoming operational.

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Second, the- Why?

[00:12:23] Speaker 01:
Because- Where do you see any definition of new type that doesn't include this?

[00:12:27] Speaker 01:
Well, because- We actually had a case like this.

[00:12:32] Speaker 03:
We had a case that was referred by the District Court to the Copyright Royalty Board under the doctrine of primary jurisdiction.

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When was that?

[00:12:44] Speaker 03:
That was several years ago.

[00:12:45] Speaker 01:
That's how the last case went to the case of who was the

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contender there?

[00:12:56] Speaker 03:
It was sound exchange in Sirius XM.

[00:12:58] Speaker 03:
Sirius?

[00:12:59] Speaker 03:
Yes.

[00:12:59] Speaker 03:
Yes.

[00:13:00] Speaker 01:
So you went to the district court first, and the district court sent it as a matter of primary jurisdiction.

[00:13:07] Speaker 01:
Well, why isn't that exactly the same issue?

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Although I don't think this is primary jurisdiction.

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I think this is actual jurisdiction.

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There are a lot of cases like this.

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So first, Your Honor, we actually disagree that

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that the district court's decision in the prior case was proper.

[00:13:28] Speaker 01:
But again... Why did anybody raise it to the district judge?

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If the district judge has seen it, he might well have concluded, as I do, hey, this isn't just a question of primary jurisdiction, it's a question of actual jurisdiction.

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So we didn't raise it in this case because, again, respectfully, Your Honor, we don't think that this is applicable.

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The procedures to determine reasonable rates and terms are... So you thought the prior case was incorrect

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No, we thought that the provision that you're referring to, FC,

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is just inapposite to the situation here.

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Procedures to determine.

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Well, whether it is, I don't think it is inapposite.

[00:14:17] Speaker 01:
It looks to me like it's exactly covered.

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But in any event, I simply do not understand why competent counsel wouldn't have alerted the district court about this concern.

[00:14:27] Speaker 03:
Two further points, Your Honor.

[00:14:28] Speaker 03:
With respect to the notion of a referral to the district court under the doctrine of primary jurisdiction, again, that's appropriate where – You mean referral to the copyright?

[00:14:41] Speaker 03:
Yes, referral to the Copyright Royalty Board under the doctrine of primary jurisdiction.

[00:14:44] Speaker 03:
That's appropriate where the agency has not ruled on the issue.

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Our position as set forth in the briefs is that, in fact, the Copyright Office has ruled on the issue.

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In its 2006 ruling, it confronted the question whether, and this is a direct quote, the question is whether the universally existing subscription services was limited to Music Choice, DMX, and News Act provided over the DISH network.

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And it said yes.

[00:15:11] Speaker 01:
If I may go back for a moment, though, to this question of proceedings to determine... Well, if they had decided in your favor, there's no reason not to bring a new action.

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And if they disagreed with you, pursuant to the statute, come to the D.C.

[00:15:26] Speaker 01:
Circuit.

[00:15:29] Speaker 03:
District courts in the circuit routinely do pass on

[00:15:35] Speaker 03:
matters of statutory construction and matters of... Of course, unless the D.C.

[00:15:39] Speaker 01:
Circuit's got jurisdiction, in which case they lose jurisdiction.

[00:15:43] Speaker 03:
Absolutely.

[00:15:43] Speaker 03:
If the D.C.

[00:15:44] Speaker 01:
Circuit would have had jurisdiction, then... Well, you know, the statute specifically provides review of legal conclusions by the Register of Copyrights.

[00:15:54] Speaker 01:
When a decision has been rendered pursuant to this subparagraph,

[00:16:02] Speaker 01:
Appeal is under 803D in the United States Court of Appeals to the District of Columbia Circuit.

[00:16:10] Speaker 01:
This is on D. You know about that.

[00:16:15] Speaker 01:
Yes, so.

[00:16:18] Speaker 01:
Even if you disagree with this, which I frankly think you're wrong, why wouldn't you bring this to the attention of the district judge?

[00:16:26] Speaker 01:
Number one, a prior court has done primary jurisdiction.

[00:16:30] Speaker 01:
Number two, there is at least a question here

[00:16:36] Speaker 03:
Again, Your Honor, I don't think there is a question whether the district court has jurisdiction.

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And if I may just take a moment to explain what the proceedings to determine reasonable rates and terms actually are.

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The proceedings to determine reasonable rates and terms happen at the beginning of or in the middle of a rate setting period.

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And they actually set forth the rate for this kind of service shall be $0.02 per play, $0.05 per subscriber.

[00:17:05] Speaker 01:
But whether the rate was one or the other depends entirely on whether there's a grandfather provision, right?

[00:17:14] Speaker 01:
Which is the legal question.

[00:17:16] Speaker 01:
It is a legal question, but it's a- That's what the statute says.

[00:17:20] Speaker 01:
Legal questions go to the Register of Copyrights, be them to the D.C.

[00:17:24] Speaker 01:
Circuit.

[00:17:24] Speaker 03:
The legal question goes to the Register of Copyrights only when it is

[00:17:31] Speaker 03:
brought in the context of a proceeding to determine reasonable rates and terms?

[00:17:38] Speaker 01:
No, in any case in which a novel material question of substantive law and you start and you go back and it says whenever there's a new type of service.

[00:17:47] Speaker 01:
This is clearly a new type of service.

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And I apologize, Your Honor, just that I'm reading from the correct place.

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The novel question of substance of law provision that you're reading from is 802.

[00:18:02] Speaker 01:
Yes, but I will go back.

[00:18:04] Speaker 01:
OK.

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The procedures under paragraph A and B shall also be initiated pursuant to a petition filed by any copyright owner, any pre-existent subscription service, or anybody else

[00:18:19] Speaker 01:
new type of subscription digital audio transmitted service in which sound recordings are performed is about to be operational for the purpose of determining what the reasonable rates and rates of royalty payments with respect to such new type shall apply.

[00:18:39] Speaker 03:
Again, Your Honor, that is a circumstance where a new type is scheduled to become operational.

[00:18:46] Speaker 03:
This is not a situation where a new type was scheduled to become operational.

[00:18:50] Speaker 01:
Why?

[00:18:52] Speaker 01:
Basically, that's exactly your argument, isn't it?

[00:18:56] Speaker 01:
No.

[00:18:57] Speaker 01:
That's why the grandfather shouldn't apply, because you say it's a new type.

[00:19:01] Speaker 03:
Your Honor, we think the grandfather shouldn't apply, because this is a service that existed before as a new subscription service operated by DMX and is brought within the MUSAC heading.

[00:19:15] Speaker 01:
Oh, so you say it's not a new type, but the other side says it's a new type, right?

[00:19:19] Speaker 01:
We haven't argued anything with respect to... That's what you're just saying.

[00:19:23] Speaker 01:
This is not a new type, but they think it's a new type.

[00:19:27] Speaker 03:
I'm not sure that they think it's a new type.

[00:19:29] Speaker 01:
Well, it's certainly true that for some reason that is absolutely beyond my comprehension, nobody raised the jurisdictional question with the district judge.

[00:19:39] Speaker 01:
I don't know why the other side didn't.

[00:19:42] Speaker 01:
But not everybody on either side trusted the royalty board.

[00:19:46] Speaker 03:
Again, Your Honor, it's not a matter of not trusting the Royalty Board.

[00:19:51] Speaker 01:
But is it not true that the Royalty Board faced almost this exact same issue involving sound exchange in series?

[00:19:59] Speaker 03:
Yes, and if indeed... Excuse me.

[00:20:04] Speaker 03:
I apologize, Your Honor.

[00:20:06] Speaker 03:
I thought you were referring back to the 2006 decision.

[00:20:08] Speaker 03:
No, it was not the exact same issue by any stretch of the imagination.

[00:20:11] Speaker 03:
It sounds exchange and serious.

[00:20:12] Speaker 03:
It was a matter of the Copyright Royalty Board interpreting its own regulations.

[00:20:18] Speaker 03:
It was not a matter of it interpreting a statute.

[00:20:21] Speaker 03:
And we believe that the Copyright Royalty Board actually did not have jurisdiction to engage in that subsequent reinterpretation.

[00:20:30] Speaker 01:
Ah, so you challenged the jurisdiction in that prior case.

[00:20:34] Speaker 01:
In other words, you don't think it was a new type.

[00:20:38] Speaker 03:
That prior case went to the Copyright Royalty Board under a provision completely separate from the new type provision.

[00:20:44] Speaker 01:
And then over to the Copyright Office for the legal question.

[00:20:47] Speaker 03:
No, not over to the Copyright Office for a legal question, except as to the jurisdiction of the Copyright Royalty Board to interpret its own regulations, which is something that's not an issue at all here.

[00:21:00] Speaker 01:
a different, but the ultimate question, whether or not series could get the grandfather.

[00:21:08] Speaker 03:
So now it sounds like you're, and I apologize if I misunderstood your questions, your honor.

[00:21:14] Speaker 01:
Well, you'll first forgive me for pressing so hard, because there's nothing more important for a court of appeals is a question of whether or not we have jurisdiction.

[00:21:24] Speaker 01:
Now, we would clearly have jurisdiction if it was coming from the

[00:21:30] Speaker 01:
And typically, when Congress does that, and there are a lot of cases to this extent, it is in.

[00:21:38] Speaker 03:
So if I may respond to your question about the serious question going to the Copyright Office.

[00:21:46] Speaker 03:
That took place in the context of a rate-setting proceeding.

[00:21:51] Speaker 03:
There was a proceeding that was ongoing to set royalty rates and terms for, among other things, pre-existing services.

[00:21:59] Speaker 03:
That is, to set the schedule.

[00:22:01] Speaker 03:
This gets 2 cents.

[00:22:02] Speaker 03:
This gets 3 cents.

[00:22:03] Speaker 03:
This is per subscriber.

[00:22:05] Speaker 01:
And it was... Well, I don't understand your interpretation.

[00:22:08] Speaker 01:
of C, which was clearly designed, A and B deal with setting rates.

[00:22:14] Speaker 01:
But C deals with a new type.

[00:22:16] Speaker 01:
And the question is, do the rates apply to this new type?

[00:22:20] Speaker 01:
Which is exactly the issue we have.

[00:22:23] Speaker 03:
So A and B do concern setting rates.

[00:22:26] Speaker 03:
The difference between C and A and B is C refers to a mid-cycle rate setting proceeding.

[00:22:32] Speaker 01:
No, it doesn't say mid-cycle.

[00:22:34] Speaker 01:
It says a new type of suspicion.

[00:22:37] Speaker 01:
He's talking about A. No, I'm talking about C. I'm sorry.

[00:22:45] Speaker 02:
No, you two are just talking past each other at this point.

[00:22:48] Speaker 03:
I thought you were talking about C. Yes, I absolutely was talking about C. I'm sorry.

[00:22:56] Speaker 01:
Where did you get this mid-cycle notion?

[00:22:58] Speaker 01:
That term is not in C.

[00:23:09] Speaker 01:
It's clearly designed to see, OK, you've got a new type, so what grade applies.

[00:23:16] Speaker 01:
Right.

[00:23:16] Speaker 03:
So A and B are the rates.

[00:23:25] Speaker 01:
Yeah, the normal rate setting situation.

[00:23:27] Speaker 03:
I'm looking at C. C, the procedures under subparagraphs A and B also

[00:23:35] Speaker 03:
Shall be initiated.

[00:23:37] Speaker 01:
Meaning it's a different kind of problem.

[00:23:39] Speaker 01:
Yes.

[00:23:40] Speaker 03:
Yes, but it's still the same sorts of procedures.

[00:23:43] Speaker 03:
That is, procedures to determine reasonable rates and terms.

[00:23:46] Speaker 03:
And these procedures are set forth in copious detail in Chapter 8.

[00:23:50] Speaker 03:
These are full-blown trial-type proceedings that last multiple weeks with discovery and witnesses.

[00:23:57] Speaker 01:
But in this case, it's just as

[00:24:05] Speaker 01:
whether the grandfather rates apply or not.

[00:24:09] Speaker 01:
So this is exactly, it seems to me, exactly what the draftsman contemplated.

[00:24:14] Speaker 01:
That would go over to the Copyright Office.

[00:24:15] Speaker 01:
The Copyright Office would make the legal judgment, send it back to the Royalty Board.

[00:24:20] Speaker 01:
The Royalty Board would incorporate it.

[00:24:22] Speaker 01:
And if anybody objected, it would go to the DC Circuit.

[00:24:24] Speaker 03:
Again, Your Honor, that's just not how we understand

[00:24:34] Speaker 03:
And I don't think it even occurred to us that FC might provide an avenue for sound exchange or for MUSAC to bring this matter before the Copyright Royalty Board or the Copyright Office.

[00:24:53] Speaker 03:
The procedures under subparagraphs A and B, again, these are intricate procedures that the industry is... You're lying around in circles because I'm looking at C, not A and B.

[00:25:05] Speaker 03:
And again, these are for the purpose of determining reasonable terms and rates of royalty payments.

[00:25:12] Speaker 03:
Reasonable terms and rates of royalty payments.

[00:25:15] Speaker 01:
Well, with respect to such new type of transmission service.

[00:25:19] Speaker 01:
So its question is whether the grandfather clause applies or not.

[00:25:23] Speaker 03:
But again, Your Honor, this is not

[00:25:28] Speaker 03:
This is not a new type of subscription digital audio transmission service.

[00:25:33] Speaker 01:
This is... Of course, new type is not defined.

[00:25:36] Speaker 01:
That's true.

[00:25:37] Speaker 01:
But it sure looks like a new type to me.

[00:25:40] Speaker 01:
And we do have the previous case involving Ceres, where it seems to me the world had made the decision that you would like made here.

[00:25:52] Speaker 01:
I'm sorry.

[00:25:52] Speaker 01:
I'm sorry.

[00:25:54] Speaker 01:
I don't want to overuse my time.

[00:25:56] Speaker 01:
I apologize.

[00:25:58] Speaker 02:
Maybe what we ought to do, I mean, obviously we're here for the other side, but get briefing on the jurisdictional issue rather than try to sort it out.

[00:26:07] Speaker 03:
We'd be happy to submit that, Your Honor.

[00:26:09] Speaker 02:
Yeah, all right.

[00:26:09] Speaker 02:
Let's hear from Council for Epoley.

[00:26:25] Speaker 01:
You were the defendant in this case.

[00:26:27] Speaker 01:
Why in the devil did you not raise this case?

[00:26:31] Speaker 06:
Good morning, Your Honor.

[00:26:32] Speaker 06:
Oh, I hate to be in the position of agreeing with the other side in this case, but we actually agree with them on this jurisdictional question that the Court has raised.

[00:26:42] Speaker 06:
So a couple of things.

[00:26:44] Speaker 06:
So there is no ongoing royalty procedure happening right now.

[00:26:49] Speaker 06:
So the only way that there could be a jurisdiction in the royalty board is under C. And it's our view that what's happening here, this is not a new type of subscription service.

[00:27:03] Speaker 06:
This is simply MUSAC operating as a PES, operating under the PES royalty, providing — Okay, I see why you wouldn't want to raise it.

[00:27:12] Speaker 01:
I don't see why you wouldn't raise it, because you don't want to concede that there's a new type.

[00:27:18] Speaker 06:
So it's not so much a concession with respect to our legal argument, because actually I think that F1C is highly relevant to the actual legal issue that's presented in this case.

[00:27:27] Speaker 06:
What F1C tells you is that you can be a pre-existing subscription service and make available a new type of subscription service and still pay for that service as a PES, at the PES pre-existing subscription service rate.

[00:27:42] Speaker 01:
Even if this was not exclusive jurisdiction, which I think it is, why isn't it primary jurisdiction?

[00:27:48] Speaker 01:
Well, so why you have, why you both avoiding the royalty board?

[00:27:52] Speaker 01:
I don't get when a serious case, uh, you want to rely on the serious case, don't you?

[00:27:59] Speaker 06:
Sure.

[00:27:59] Speaker 06:
We think that the 2006 decision supports our position.

[00:28:03] Speaker 01:
You want to get back to the royalty board and say, look,

[00:28:13] Speaker 01:
is the entity involved.

[00:28:16] Speaker 01:
So you want us to defer to the royalty board's interpretation, don't you?

[00:28:21] Speaker 01:
You have said that.

[00:28:23] Speaker 06:
Your brief says that.

[00:28:24] Speaker 01:
So you want us to defer to the royalty board's interpretation.

[00:28:29] Speaker 01:
But you don't want to go back to the Royalty Board.

[00:28:31] Speaker 06:
Well, it's not a question of not wanting to be in front of the Royalty Board.

[00:28:34] Speaker 06:
It's not a question of desire.

[00:28:36] Speaker 01:
But you are arguing we should defer to the interpretation, the Royalty Board's interpretation, or the Copyright Office's interpretation.

[00:28:43] Speaker 06:
Well, with respect to the question of whether service means business entity, our position is first that that's clear from the face of the statute.

[00:28:49] Speaker 01:
Well, I know that.

[00:28:50] Speaker 01:
But you argue a card of argument is

[00:28:58] Speaker 01:
It's in your face.

[00:28:59] Speaker 06:
Yeah, it's clear as day that they held at the term service.

[00:29:01] Speaker 01:
It was way maybe a slight exaggeration.

[00:29:06] Speaker 01:
But it was clear day.

[00:29:07] Speaker 01:
Why wouldn't you want to go back to him?

[00:29:09] Speaker 06:
As I say, it's really not about where we want to be.

[00:29:13] Speaker 01:
It's about where we think jurisdiction lies and our reading of 114, even though in the prior case, the district judge sent it to the board as an exercise of primary jurisdiction.

[00:29:25] Speaker 06:
Well, the royalty board has the authority to set rates, as Mr. Siegel said, to determine what rates apply.

[00:29:33] Speaker 06:
That is, under the different formulations, whether you're talking about the PES formulation or you're talking about the willing buyer willing seller formulation.

[00:29:39] Speaker 01:
I'm having difficulty understanding why this case doesn't involve the question as to what rate applies.

[00:29:47] Speaker 06:
Well, it involves the question, it involves the legal question of whether MUSAC operates as a pre-existing subscription service with respect to these transmissions.

[00:29:56] Speaker 01:
I could agree, but it's still based on the question of whether there's a new typing.

[00:30:01] Speaker 06:
No, I actually don't think so.

[00:30:03] Speaker 06:
So the new type of subscription service language in 114 F1C is, as Mr. Siegel says, a provision that is designed to allow the parties, when a truly new kind of service comes into the market, to get a rate set for- So it truly is the key.

[00:30:19] Speaker 01:
This is a new type, but not a truly new type.

[00:30:24] Speaker 06:
No, I apologize if there's confusion.

[00:30:25] Speaker 06:
No, I wasn't confused.

[00:30:29] Speaker 06:
Our position is that what's happening here with respect to the transmissions that Muzak is making to DirecTV and the other cable systems that it's servicing, those are not new types of subscription services.

[00:30:40] Speaker 06:
They're new customers.

[00:30:40] Speaker 06:
They're new customers, exactly.

[00:30:42] Speaker 06:
They're basically the same as our existing service that we've been providing to DISH for many years, involving the same types of works and the same type of service.

[00:30:50] Speaker 06:
We're just servicing an additional set of customers.

[00:30:52] Speaker 06:
And it's our position that that clearly is covered by the definition of pre-existing subscription service.

[00:30:58] Speaker 06:
You don't even have to address the question of new type of subscription service.

[00:31:01] Speaker 06:
It's not a new type of subscription service, in our view.

[00:31:04] Speaker 06:
So, in our view, 114F1C has no direct applicability to this case.

[00:31:10] Speaker 06:
Now, the existence of that provision is very important for our legal argument, because I think it completely undermines the understanding of 114J11 that sound exchange has offered, and I'm happy to discuss that.

[00:31:23] Speaker 06:
Sure.

[00:31:24] Speaker 06:
So their position is that the term such transmissions in 114J11 refers to the same service offering, right, essentially the narrow historically defined service offering.

[00:31:37] Speaker 06:
And if you're not providing transmissions in connection with that historic service offering, you can't be a PES, can't be a pre-existing subscription service.

[00:31:45] Speaker 06:
Now 114-F1C makes clear that that can't be right, because what 114-F1C does is it says that you can be a pre-existing subscription service and offer a new type of subscription service and still qualify for PES treatment.

[00:32:01] Speaker 01:
If this were a new type of subscription service.

[00:32:07] Speaker 06:
Yes, so if Musac had actually come up with a new type of subscription service, for example, if it wanted to stop making transmissions through Dish or DirecTV but provide transmissions directly to customers, that might be an example through the Internet.

[00:32:24] Speaker 06:
In that case, arguably, that would be a new type of subscription service.

[00:32:29] Speaker 01:
So, in other words, your view also is the prior

[00:32:34] Speaker 01:
exercise the district court to send it to the worldly court was also incorrect.

[00:32:40] Speaker 06:
I think it was a different situation.

[00:32:41] Speaker 01:
But you say it was incorrect.

[00:32:44] Speaker 06:
I don't know that we have a position on it.

[00:32:46] Speaker 01:
Now, wait a minute.

[00:32:47] Speaker 01:
I'm asking for your position.

[00:32:49] Speaker 01:
You have to.

[00:32:52] Speaker 06:
It may have been.

[00:32:53] Speaker 06:
It may not.

[00:32:54] Speaker 06:
It may have been under the circumstances incorrect.

[00:32:56] Speaker 06:
It may have been under the circumstances correct.

[00:32:59] Speaker 06:
This is an area where, if the court would like to get supplemental briefing on that kind of question, we'd be happy to provide it.

[00:33:06] Speaker 01:
Occasionally, we have cases where both parties wish to avoid a jurisdictional hurdle for their own reasons, and that it's up to the court to conclude on its own.

[00:33:19] Speaker 01:
Since these are both excellent law firms, I can't help but conclude there is a good reason why

[00:33:28] Speaker 01:
Any doubt, but if you'd taken this to the Royalty Board, they would have decided it.

[00:33:32] Speaker 06:
Well, so I don't want to keep pressing on the same point, but I think it is important.

[00:33:37] Speaker 01:
You don't have anything interpreting new type by the Royalty Board.

[00:33:42] Speaker 01:
At worst, you pointed out we should defer to the Royalty Board and the Copyright Office.

[00:33:48] Speaker 01:
You don't have anything defining new type, do you?

[00:33:51] Speaker 06:
Yeah, well, we don't.

[00:33:52] Speaker 06:
It's not a term that's defined in the statute, and I'm not sure that there's been decisions from the royalty board or the Copyright Office that actually define what it means.

[00:34:00] Speaker 01:
What if this case involved a new type?

[00:34:03] Speaker 01:
We would not have jurisdiction.

[00:34:04] Speaker 06:
Do you agree with that?

[00:34:05] Speaker 06:
I agree with that.

[00:34:06] Speaker 06:
I think that then we would have to use the procedure, or sound exchange would have to use the procedure, in 114-F1C.

[00:34:13] Speaker 01:
But this is not... I understand why you wouldn't want to argue about jurisdiction now, because you won in the difference.

[00:34:20] Speaker 06:
I respect the jurisdiction of the court, and if we thought that there was a serious jurisdictional hurdle, of course, we would not hesitate to tell the court that.

[00:34:29] Speaker 06:
But I think in this case, this was not a matter of some sort of collusion between the parties to get this case in the district court.

[00:34:37] Speaker 06:
So this is a matter of trying to understand what the scheme that exists in 114-F1 provides.

[00:34:45] Speaker 06:
And in our understanding, where you have an ongoing rate-making procedure, then, of course, novel questions of law that are relevant to that procedure can be kicked up to the Copyright Office, as happened in 2006.

[00:34:59] Speaker 01:
Don't you think that your opponent is arguing, essentially, that there's a new type of service?

[00:35:06] Speaker 06:
Well, I think they are reluctant to make that argument.

[00:35:10] Speaker 01:
But isn't that the argument they're making?

[00:35:11] Speaker 01:
That it's a new type of service?

[00:35:13] Speaker 06:
Well, here's the problem for them making that argument.

[00:35:15] Speaker 01:
But isn't that what they're arguing?

[00:35:17] Speaker 01:
You may reject it, but isn't that what you basically, I read your brief as,

[00:35:21] Speaker 06:
Yeah, I mean, I think this goes to the essential problem with their legal argument, is that they don't want to say this is a new type of subscription service.

[00:35:31] Speaker 06:
And the reason they don't want to say that is because it's clear from 111F1C that you can offer a new type of subscription service as a pre-existing subscription service and pay at the PES royalty.

[00:35:42] Speaker 06:
So they don't want to say that because it undermines the legal position that they're taking.

[00:35:46] Speaker 01:
I understand.

[00:35:46] Speaker 06:
That makes sense.

[00:35:50] Speaker 04:
Can I direct you back to the statutory argument about the meaning of service and why you think it's clear that service means business entity?

[00:35:59] Speaker 06:
Sure.

[00:36:00] Speaker 06:
So there's two primary reasons for that.

[00:36:02] Speaker 06:
One is, I think, what you pointed out, Jack Griffith, which is that the statute refers to a service that performs.

[00:36:09] Speaker 04:
So the active use of the... Because the ordinary meaning of service wouldn't lead one to think it's a business entity, right?

[00:36:17] Speaker 06:
I think perhaps the term in the abstract could be read either way, as the Copyright Office said in 2006.

[00:36:22] Speaker 06:
But what the Copyright Office said in 2006 is that in the context of determining who a pre-existing subscription service is and who gets to pay the PES royalty, the statute can only be read as referring to the business entity.

[00:36:38] Speaker 06:
And I think that's consistent.

[00:36:39] Speaker 04:
Is that what was going on in the 2006?

[00:36:40] Speaker 04:
It's part of what was going on.

[00:36:44] Speaker 06:
Because they didn't really address the issue we have to address.

[00:36:47] Speaker 06:
That's exactly right.

[00:36:49] Speaker 06:
The 2006 proceeding was limited on this issue to the question of whether Sirius could

[00:36:56] Speaker 06:
get access to the PES royalty in connection.

[00:36:59] Speaker 04:
Right, right.

[00:37:00] Speaker 06:
Yes, in connection with the Transmissions Day.

[00:37:01] Speaker 04:
That's important for us, isn't it?

[00:37:04] Speaker 04:
Because there's not a matter of us deferring to the Copyright Law.

[00:37:08] Speaker 04:
I mean, this is us deciding for the first time whether the meaning of service is clear or not, right?

[00:37:16] Speaker 06:
Yes, I quite agree with that.

[00:37:18] Speaker 01:
And indeed, the Copyright Office said specifically

[00:37:21] Speaker 01:
that the statute uses service in two different, at least two different meetings.

[00:37:28] Speaker 01:
I think it's three.

[00:37:29] Speaker 01:
So the Copyright Office, which we should defer to according to everybody,

[00:37:34] Speaker 01:
says that service is an ambiguous term.

[00:37:37] Speaker 06:
Well, it did say that, but if I could read what I think is the key passage from the Copyright Office's decision.

[00:37:42] Speaker 06:
It says, while usage of the term pre-existing subscription service is ambiguous in some instances, it's used to identify who receives the benefits of the designation

[00:37:53] Speaker 06:
and has the authority to operate under the statutory license and enter into negotiations to set rates and terms can only be read as referring to the business entity identified as the pre-existing subscription service.

[00:38:06] Speaker 06:
So it's... What does operate mean?

[00:38:08] Speaker 06:
Excuse me?

[00:38:09] Speaker 00:
What does the word operate mean?

[00:38:10] Speaker 00:
I couldn't figure that out.

[00:38:12] Speaker 00:
What does operate mean?

[00:38:13] Speaker 06:
Oh, I think what that means is simply provide, make transmissions under the statutory license.

[00:38:20] Speaker 06:
So the business entity operating its service.

[00:38:22] Speaker 01:
At some point, they talk about the dish being the operator, which confuses me.

[00:38:30] Speaker 06:
Well, yes.

[00:38:31] Speaker 06:
There certainly was some confusion that I think was created by some of the legislative history references to Dish.

[00:38:38] Speaker 06:
Now, that was, I think.

[00:38:39] Speaker 01:
No, but I mean, even the Copyright Office refers to the operator as Dish at some point.

[00:38:43] Speaker 01:
So I can't figure out whether the operator

[00:38:45] Speaker 01:
Is Muzak or Ditch?

[00:38:47] Speaker 06:
Yeah, I think it's very clear from what the Copyright Office ultimately says is that the operator of the service, the entity that provides the service is Muzak, and therefore it's Muzak that is entitled to the pre-existing subscription service.

[00:38:59] Speaker 04:
But isn't the question for us whether Muzak's entitled, whether all of its offerings are entitled to that, right?

[00:39:06] Speaker 04:
And that's not an issue that was decided by the Copyright Office.

[00:39:09] Speaker 06:
That is absolutely right.

[00:39:10] Speaker 06:
That is 100% correct.

[00:39:11] Speaker 01:
So your position is that Muzak buys every single

[00:39:15] Speaker 01:
or the company that owns Muzak, buys every single entity, I'll use entity, that is in the business of providing the transmission.

[00:39:29] Speaker 01:
How do you describe what, and it's my confusion, how do you describe what Dish does?

[00:39:38] Speaker 06:
So Dish has the customers, right?

[00:39:41] Speaker 01:
Yes, but what does it do?

[00:39:42] Speaker 06:
Well, there's essentially a set of transmissions that Muzak has of music channels.

[00:39:47] Speaker 01:
No, I'm asking what Dish does.

[00:39:48] Speaker 06:
Right.

[00:39:49] Speaker 06:
And so what Dish does generally is provide satellite television programming to its end user customers.

[00:39:55] Speaker 01:
And you're like, you provide gasoline for the trucks.

[00:39:58] Speaker 01:
You provide music for those.

[00:40:01] Speaker 06:
Isn't it?

[00:40:01] Speaker 06:
You provide content for the channels.

[00:40:03] Speaker 01:
Yeah, that's right.

[00:40:03] Speaker 06:
We're essentially a service provider for Dish.

[00:40:06] Speaker 01:
And who pays who on this?

[00:40:08] Speaker 06:
Dish pays us.

[00:40:09] Speaker 06:
And who listens to the channels?

[00:40:12] Speaker 06:
Right, I mean, I don't know whether anyone is a subscriber of cable or satellite, but what these are, are essentially audio-only music channels that you would be able to watch through your television.

[00:40:23] Speaker 01:
There are competing companies, right?

[00:40:26] Speaker 06:
Yeah, DirecTV and others.

[00:40:28] Speaker 06:
How many are there?

[00:40:29] Speaker 06:
Oh, how many satellite MVPD providers are there?

[00:40:32] Speaker 01:
I'm not sure, I don't know.

[00:40:37] Speaker 06:
I think there's probably two primary satellite providers, and then you have a host of cable services.

[00:40:41] Speaker 01:
If you were to buy a mall, then your grandfather rates applied on everything, right?

[00:40:50] Speaker 01:
Yeah.

[00:40:50] Speaker 01:
So you buy a mall and you merge, and there's only one satellite or whatever it is that your music goes across.

[00:41:00] Speaker 06:
Right.

[00:41:01] Speaker 01:
So you would then have grandfather status for everything.

[00:41:05] Speaker 06:
Well, we are entitled as a... Yes or no?

[00:41:09] Speaker 06:
Yes, if the transmissions that we are making take the form set out in section 114, J11.

[00:41:17] Speaker 01:
So you could buy up everybody, and you could have one massive operation, and you would be the sole transmission agent, whatever you call it, with the music.

[00:41:34] Speaker 01:
And the rate would be the grandfather rate.

[00:41:38] Speaker 06:
The rate would, for Muzak, if Muzak is the answer.

[00:41:40] Speaker 04:
That would clearly be contravening what Congress was trying to do here, right?

[00:41:44] Speaker 06:
No, I don't think so.

[00:41:45] Speaker 04:
Congress was siding with the copyright holders, right?

[00:41:48] Speaker 04:
You all won the first round.

[00:41:49] Speaker 04:
They were trying to help the copyright holders.

[00:41:52] Speaker 04:
And under Judge Silverman's hypothetical, as I understand it, the copyright holders are right back where they were before the digital millennium copyright act.

[00:42:01] Speaker 06:
No, not at all.

[00:42:02] Speaker 06:
Let me try to address what Congress was doing.

[00:42:05] Speaker 06:
So Congress recognized in 1998 that there had been a small number of pioneering services that had entered into this nascent market, had taken a risk to come into this market at a time where it was uncertain.

[00:42:17] Speaker 06:
And when Congress enacted the DMCA, it was going to provide a rate formula that was going to... Which was to protect the copyright holders, right?

[00:42:26] Speaker 06:
Well, the DMCA is a very complicated statute.

[00:42:27] Speaker 06:
It was due to balance it a lot.

[00:42:29] Speaker 04:
Yes, at least this part of it.

[00:42:30] Speaker 06:
Well, I think what this provision should be understood as is a balance.

[00:42:33] Speaker 04:
Protect is not the right word, perhaps, but to help the copyright holders.

[00:42:39] Speaker 06:
I'm not sure that I would say help the copyright owners.

[00:42:42] Speaker 04:
I think what I would say is provide... But they got more money at it than they were getting before, right?

[00:42:46] Speaker 06:
If you were a copyright holder, you got more money than you did before.

[00:42:49] Speaker 06:
Well, one thing that's important to point out about that is Congress in the DMCA didn't set the rates.

[00:42:56] Speaker 06:
It created a rate formula, right?

[00:42:58] Speaker 06:
One was based on statutory factors and the other was based on a willing buyer, willing seller formulation.

[00:43:03] Speaker 06:
Now, there's no necessary reason that that dictates what any given rate is in a rate-making procedure.

[00:43:10] Speaker 06:
The parties negotiate those rates.

[00:43:12] Speaker 06:
They're ultimately determined by copyright royalty judges.

[00:43:14] Speaker 06:
That happens every five years.

[00:43:16] Speaker 06:
Now, historically, it's certainly true that the pre-existing subscription service rate has been lower than the willing buyer willing seller rate.

[00:43:23] Speaker 06:
But that's not something that's enshrined by the statute.

[00:43:26] Speaker 06:
What the statute enshrines is a particular way of making that determination, a particular set of factors that are going to be used.

[00:43:33] Speaker 06:
So the question of what the ultimate rate is, is one that the parties have the ability to negotiate, and that gets re-examined every five years.

[00:43:42] Speaker 06:
So to your question, what Congress wanted to do is make sure that the entities, the pioneering entities, MUSAC obviously being one of them, that were in the space prior to the enactment of the DMCA, were able to- The low market rates.

[00:43:58] Speaker 06:
Right.

[00:43:58] Speaker 06:
Well, they were not based on a willing-buyer-willing seller formulation.

[00:44:02] Speaker 04:
The fact of the matter is that the ALJs had established below market rates, right?

[00:44:07] Speaker 04:
Yeah, that's fair.

[00:44:07] Speaker 04:
And Congress was acting to...

[00:44:11] Speaker 06:
Address that.

[00:44:12] Speaker 06:
It was definitely acting to create a different rate formula for new entities and new services that were not subject to the pre-existing subscription service formulation.

[00:44:24] Speaker 06:
But what I reject is the idea that Congress didn't intend or anticipate that those entities that were providing service prior to 1998 wouldn't be allowed to develop and expand their businesses.

[00:44:37] Speaker 06:
There's no support for the idea that those services were meant to be frozen in amber, were meant to only be allowed to provide the same set of transmissions to the same customers that they were servicing prior to 1998.

[00:44:49] Speaker 04:
Well, unless we disagree with your meaning of such transmissions, right?

[00:44:51] Speaker 06:
Well, I think the phrase is – it's hard for me to read it any other way.

[00:44:56] Speaker 06:
What you have in 114J11 is a list of means by which transmissions are made, by means of non-interactive, audio-only, subscription digital audio transmissions.

[00:45:10] Speaker 06:
That's the thing that has to be done in the present day.

[00:45:14] Speaker 06:
You have to make transmissions by those means.

[00:45:16] Speaker 06:
And then the statute goes on and says that the service, meaning entity, we know it means entity because the grammar doesn't work any other way and because the copyright office has told us that it has to mean entity, was in existence and making such transmissions to the public.

[00:45:33] Speaker 06:
So the phrase such transmissions simply refers back to the form of the transmissions in the first clause.

[00:45:39] Speaker 01:
Let me go back and ask another question.

[00:45:41] Speaker 01:
Do you think, do you understand the plaintiff's case here?

[00:45:47] Speaker 01:
to demand underpayment of fees that they're entitled to under the royalty provisions?

[00:45:56] Speaker 06:
So yeah, that's their theory of the case.

[00:45:58] Speaker 06:
That's the claim that they've brought.

[00:46:00] Speaker 01:
Are you aware of the provision on the jurisdiction of our court that specifically says Section 706 of Title V shall apply?

[00:46:08] Speaker 01:
That's the administrative procedure with respect to

[00:46:13] Speaker 01:
under this subsection.

[00:46:15] Speaker 01:
If the court modifies or vacates the determination of the copyright royalty judges, the court may enter its own determination with respect to the amount or distribution of royalty fees and costs and order the repayment of any excess fees or the payment of underpaid fees.

[00:46:36] Speaker 01:
Isn't that exactly what's involved in this case?

[00:46:40] Speaker 06:
Well, that is certainly the claim that they're making.

[00:46:43] Speaker 06:
That's certainly what they're seeking.

[00:46:45] Speaker 01:
That's our jurisdiction.

[00:46:48] Speaker 01:
That's another provision of the statute that says jurisdiction of court.

[00:46:52] Speaker 06:
Right.

[00:46:52] Speaker 06:
So it's certainly possible that if there had been an ongoing rate-making procedure or if this were a new type of subscription service where F1C applied, that the process that you outlined would be perfectly appropriate and then the court would have the jurisdiction to... Let me ask this question.

[00:47:18] Speaker 01:
for their view as to what jurisdiction.

[00:47:24] Speaker 01:
But I suppose we, as an exercise of primary jurisdiction, but with the concern about whether we have jurisdiction at all, sent it over to the royalty board copyright office, because they both get it then, and they concluded, yeah, this is exactly our jurisdiction.

[00:47:44] Speaker 01:
Then what?

[00:47:45] Speaker 06:
Well, then I think we would have to accept that.

[00:47:48] Speaker 06:
I'm not sure that there is a basis in the statute for them to reach that conclusion.

[00:47:53] Speaker 01:
Well, it's only a question of what type means.

[00:47:55] Speaker 06:
Yeah, I mean, and certainly it's our position that this is, though the new type of subscription service language.

[00:48:01] Speaker 01:
But anyway, if they concluded, yes, that's exactly what our authority is, then you

[00:48:10] Speaker 01:
include the district court did not have jurisdiction?

[00:48:13] Speaker 01:
I know you're trying to hold on to an opinion.

[00:48:16] Speaker 06:
No, no, no.

[00:48:17] Speaker 06:
We certainly like what the district court did.

[00:48:20] Speaker 06:
I would say two things about that.

[00:48:22] Speaker 06:
So one is, yes, if the royalty board or the Copyright Office decided somehow that what was an issue in this case was actually a new type of subscription service that was covered by F1C, and on that basis took jurisdiction over the dispute between the parties,

[00:48:39] Speaker 06:
that absolutely could happen.

[00:48:42] Speaker 06:
Now, I would say that if they did that, it would confirm that we are entitled to pay as the pre-existing subscription service and at that rate for those transmissions, because that's what the statute expressly says.

[00:48:56] Speaker 06:
Well, I mean, the whole reason that that provision exists... I know your point.

[00:49:00] Speaker 06:
Yeah.

[00:49:01] Speaker 01:
I know your point about it.

[00:49:02] Speaker 01:
But if the Copyright Office disagreed with you, you'd be up the creek.

[00:49:06] Speaker 01:
Or at least you'd be back in this court on appeal.

[00:49:09] Speaker 06:
Well, yes, they would have to say two things that I think are simultaneously impossible to say.

[00:49:13] Speaker 06:
One is that it's a new type of service, and the other that somehow it doesn't fall within that statute, which makes clear that a pre-existing subscription service is entitled to be a pre-existing subscription service when it makes a new type of subscription service.

[00:49:26] Speaker 06:
So I don't know how they would square that circle, but I suppose they could come up with something.

[00:49:31] Speaker 01:
I see.

[00:49:32] Speaker 01:
That's based on your statutory interpretation.

[00:49:34] Speaker 01:
I'm sorry to call my colleagues to raise this issue, but I'd say it's really quite confusing.

[00:49:43] Speaker 06:
Well, yeah.

[00:49:44] Speaker 06:
If the Court would like supplemental briefing, obviously that's something we prepared to provide.

[00:50:10] Speaker 01:
something similar to this.

[00:50:14] Speaker 01:
Anyway.

[00:50:16] Speaker 01:
Well, the NLRB is one of them.

[00:50:19] Speaker 01:
District courts do not have jurisdiction to decide various cases under the NLRB.

[00:50:25] Speaker 01:
They go to the Court of Appeals with language similar to this.

[00:50:29] Speaker 06:
Right, except for the fact that we have this problem of whether this is a new type of service.

[00:50:36] Speaker 06:
And in our view, and I think this is basically the position that SoundExchange has taken all along, this is not a new type of service because in their view it's a service that had been provided by somebody else.

[00:50:50] Speaker 06:
In our view, that makes no difference.

[00:50:51] Speaker 06:
What matters is the nature and form of the transmissions and the fact that MUSAC as an entity is providing it.

[00:50:57] Speaker 06:
And I think that, you know, that question is a pure statutory interpretation question properly presented to this court.

[00:51:04] Speaker 06:
But if there are no further questions, I will sit down.

[00:51:07] Speaker 02:
All right, thank you.

[00:51:10] Speaker 02:
All right, Council for Appellant, do you want to take maybe a minute?

[00:51:14] Speaker 02:
All right.

[00:51:21] Speaker 03:
Let me just respond very quickly.

[00:51:23] Speaker 03:
Yes, it is absolutely our position that this is not a new type of subscription service.

[00:51:29] Speaker 03:
This is a service that had been around, that had been a PES, that had ceased to be a PES, and that... What?

[00:51:39] Speaker 03:
Excuse me.

[00:51:42] Speaker 03:
Industry speak for pre-existing subscription service.

[00:51:45] Speaker 03:
Sometimes PES is... Oh, PES.

[00:51:49] Speaker 03:
I apologize, Your Honor.

[00:51:52] Speaker 04:
That's my first point.

[00:51:53] Speaker 04:
He doesn't like acronyms, as you may know.

[00:51:57] Speaker 01:
In this case, I just didn't understand.

[00:51:59] Speaker 03:
Again, I apologize, Your Honor.

[00:52:02] Speaker 03:
And the second point I'd like to make is that I think the Copyright Office's ruling in 2006 is actually fairly clear on what they understand the scope of below market rate eligibility to be.

[00:52:17] Speaker 01:
They say... You mean what the scope of the grandfather clause is?

[00:52:22] Speaker 03:
Yes, yes, the same thing.

[00:52:24] Speaker 03:
And this is on page 64646 of the Copyright Office's ruling.

[00:52:29] Speaker 03:
MUSAC was the pioneer music service that incurred both the benefits and the risks that came with its investment.

[00:52:33] Speaker 03:
And one such benefit was its status as a re-existing subscription service so long as it provided its music offerings over the DISH network.

[00:52:41] Speaker 03:
There's that, and there's also the fact that several times in the decision, the Copyright Office restates the question posed and that question concerns what... Your view is there are two conditions.

[00:52:55] Speaker 01:
One, the business entity.

[00:52:58] Speaker 01:
I think you call it the performance.

[00:53:01] Speaker 03:
Or service offering.

[00:53:02] Speaker 01:
Both of those have to be true.

[00:53:05] Speaker 01:
Yes, absolutely.

[00:53:06] Speaker 01:
Now suppose Dish bought every other operant, then you still say the grandfather

[00:53:16] Speaker 03:
Again, it depends upon the circumstances of that.

[00:53:21] Speaker 01:
I'm giving you a hypothetical.

[00:53:22] Speaker 01:
DISH, ECHO, whatever it is, buys everybody else.

[00:53:25] Speaker 03:
So DISH simply buys everybody else, then everybody else, the service offerings provided via everybody else are not within the scope of the grandfather.

[00:53:41] Speaker 01:
Well, you asked us just two conditions, USAC plus DISH.

[00:53:46] Speaker 03:
So, again, Your Honor, if what DISH has done is use its satellites, that is, the DISH satellite system to serve those customers, then yes, it's within the scope of the grandfather.

[00:54:02] Speaker 01:
Again, Congress, in the conference — So they could buy up everybody and have all the customers.

[00:54:08] Speaker 03:
If, however — Yes or no?

[00:54:10] Speaker 03:
Again, it depends on whether it's simply buying up everybody or actually serving those customers via DISH satellite.

[00:54:19] Speaker 03:
If, for instance, DISH were to buy, I'm just going to... So DISH buys all the other satellites and combines them into one satellite.

[00:54:28] Speaker 01:
My knowledge of technology is rather rudimentary, but it seems to me conceivable that DISH could do that and have a monopoly of all the satellites or all the mechanisms

[00:54:38] Speaker 01:
to distribute music?

[00:54:39] Speaker 03:
Well, so there are other ways to distribute music in this fashion besides satellite.

[00:54:46] Speaker 03:
So hypothetically, your honor, if Dish were to buy a cable provider, Comcast for instance, and

[00:54:57] Speaker 03:
Muzak were to serve Comcast's customers music channels, then those transmissions would not be subject to pre-existing subscription service rates.

[00:55:11] Speaker 03:
Why?

[00:55:11] Speaker 01:
Dish got bigger.

[00:55:13] Speaker 01:
Dish got bigger.

[00:55:14] Speaker 01:
Your argument is there's two conditions.

[00:55:17] Speaker 01:
The business entity, which is Muzak, and the operator, I guess, which

[00:55:25] Speaker 01:
Again, if it's merely... That is your position.

[00:55:28] Speaker 03:
There are two conditions, right?

[00:55:30] Speaker 03:
Is that right?

[00:55:31] Speaker 03:
So business entity is the first condition.

[00:55:33] Speaker 03:
And the other condition is... The second condition is it has to be the same service offering which Congress, in the conference report, made clear... Okay, so this just got bigger.

[00:55:41] Speaker 01:
Dish got monstrously bigger.

[00:55:43] Speaker 03:
If it's dish getting bigger and the dish satellites serving all the customers, then yes, that's within the scope.

[00:55:49] Speaker 03:
If it's dish getting bigger as a corporate entity by virtue of acquiring a cable system as opposed to a satellite system and Muzak serving... Why is that not included?

[00:56:02] Speaker 03:
That's not included because... It's not the same transmission.

[00:56:09] Speaker 03:
In that circumstance, it would not be a new type of pre-existing subscription service.

[00:56:18] Speaker 03:
In that circumstance... It would be a different reading.

[00:56:21] Speaker 03:
I'm sorry, I didn't... I see, I see, okay.

[00:56:25] Speaker 03:
And if there are no further questions... Thank you.

[00:56:27] Speaker 03:
Thank you.

[00:56:27] Speaker 02:
All right, we'll take that case under advisement.