United States District Court, District of Columbia
SOUNDEXCHANGE, INC. Plaintiff
MUZAK, LLC Defendant
C. Lamberth United States District Judge.
before the Court is plaintiffs Motion for Summary Judgment as
to Liability [ECF No. 35]. Upon consideration, plaintiffs
motion is GRANTED IN PART and DENIED
IN PART. The Court grants the motion as to the
plaintiffs prima facie case, but believes a summary judgment
ruling on defendant's affirmative defenses would be
LLC ("Muzak" or "defendant") is a
provider of digital music that generates revenue by packaging
sound recordings into channels and providing those channels
to individuals who subscribe to cable and satellite
television system operators. Previously, subscription
services, such as Muzak, were not required to obtain a
license to publicly perform sound recordings because
copyright owners did not have an exclusive right to publicly
perform their work.
The Digital Performance Right in Sound Recordings
1995, that changed when Congress passed the Digital
Performance Right in Sound Recordings Act, giving copyright
owners an exclusive right "to perform the copyrighted
work publicly by means of a digital audio transmission."
See Pub. L. No. 104-39, § 2, 109 Stat. 336, 336 (1995)
(codified at 17 U.S.C. § 106(6)).
creating a new right and revenue stream for copyright owners,
the law also created a compulsory statutory license regime
for those wishing to transmit the copyrighted work. Under
this framework, any non-interactive digital subscription
service who wished to perform a sound recording publicly
could do so without infringing by complying with notice
requirements and by paying a royalty fee. See Pub.
L. No. 104-39, amending 17 U.S.C. § 114(f)(5). The
royalty rates were to be set every five years in adversarial
rule-making proceedings held by the Copyright Royalty Board.
See 17 U.S.C. § 114(f). The first of these
proceedings began in 1996 and three subscription
services-Muzak, Digital Cable Radio Associates (operating as
"Music Choice"), and DMX Music, Inc.-participated.
The resulting rates, some argued, favored the subscription
service providers over the copyright holders.
The Digital Millennium Copyright Act
1998, Congress revisited the compulsory license system, in
part, to make the royalty rate-setting more favorable to
copyright holders. It passed the Digital Millennium Copyright
Act (the "Act") which established a new statutory
scheme to determine royalties under Title 17 of the United
States Code. Pub. L. No. 105-304, 112 Stat. 2860 (Oct. 28,
1998); 17 U.S.C. §§ 101, et seq. The new
standard for calculating royalty rates under the Act
reflected what "would have been negotiated in the
marketplace between a willing buyer and a willing
seller." 17 U.S.C. § 114(f)(2)(B). This is referred
to as the willing buyer/willing seller standard. While the
DMCA established new standards for determining royalty rates,
it also created an exception for what it called a preexisting
subscription service ("PSS"). 17 U.S.C. §
114(j)(l 1). A PSS was defined as a "service that
performs sound recordings by means of noninteractive
audio-only subscription digital audio transmissions, which
was in existence and was making such transmissions to the
public for a fee on or before July 31, 1998 ...."
Id. The three subscription services that
participated in the original rate-making proceedings,
including Muzak, were grandfathered under this exception. A
PSS is not subject to the "willing buyer/willing
seller" standard, but instead enjoy generally more
favorable royalty rates set according to the old method.
Muzak and DMX
time of the Act, Muzak provided its service of music channels
only to customers of the satellite television provider the
Dish Network ("Dish"). The service was branded to
Dish customers as DishCD and Muzak has continued operating
this service from the time of the Act through this
litigation. Since the passage of the Act, Muzak has provided
its service at the PSS rate without objection.
2011, Mood Media Corporation ("Mood") purchased
Muzak and began operating it as a wholly owned subsidiary. A
year later, Mood acquired DMX, one of Muzak's
competitors. Like Muzak, DMX provided music channels to
customers of a satellite television provider-DirecTV.
DMX's service provided to DirecTV was branded as
SonicTap. Before Mood's acquisition of DMX, DMX was not
entitled to, nor did it pay, the PSS rates for its SonicTap
Mood purchased DMX, it began to consolidate its assets,
sunsetting the DMX service and assigning the DirecTV
agreement and agreements with 15 other small cable affiliates
and cooperatives from DMX to Muzak. In addition to putting
DMX under the Muzak corporate roof, Muzak transitioned the
SonicTap programming to be more like Muzak's offering
through DishCD. By May 2014, SonicTap's channels and
Muzak's channels were being programmed by Muzak. The
result were program offerings that Muzak describes as
"virtually identical." See Def.'s
Resp. at30, ECFNo.45.
SoundExchange Files Suit; this Court Dismisses; the ...