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WTGD 105.1 FM v. Soundexchange

United States District Court, W.D. Virginia, Harrisonburg Division

February 13, 2015

WTGD 105.1 FM, et al., Plaintiffs,
v.
SOUNDEXCHANGE, INC., Defendant

For WTGD 105.1 FM, WQPO 100.7 FM, WJDV 96.1 FM, M. Belmont Verstandig, doing business as, VerStandig Broadcasting, Plaintiffs: Bryan M. Killian, David J. Butler, Stephanie Beth Schuster, LEAD ATTORNEYS, PRO HAC VICE, Morgan, Lewis & Bockius, Washington, DC; Maurice Belmont VerStandig, LEAD ATTORNEY, Offit Kurman, P.C., Tysons Corner, VA.

For SoundExchange, Inc., Defendant: David Stan Barnhill, LEAD ATTORNEY, WOODS ROGERS & HAZLEGROVE PLC, ROANOKE, VA; Emily L. Chapuis, Michael B. DeSanctis, LEAD ATTORNEYS, PRO HAC VICE, Jenner & Block LLP, Washington, DC.

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MEMORANDUM OPINION

Hon. Michael F. Urbanski, United States District Judge.

In this declaratory judgment action, three Harrisonburg FM radio stations ask the court to declare that broadcasts, made via a technology yet to be implemented, are exempt from liability for copyright

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royalties under sections 112 and 114 of the Copyright Act, 17 U.S.C. § 101 et seq. Plaintiffs' allegations are too speculative, indefinite and hypothetical to allow the court to make a judgment as to whether the proposed broadcasts will result in copyright infringement or not. As a result, the court lacks subject matter jurisdiction, and the case must be dismissed.

I.

The Copyright Act permits radio stations to broadcast copyrighted sound recordings if the broadcast is part of a " retransmission of a nonsubscription broadcast transmission," and the " transmission is not willfully or repeatedly transmitted more than a radius of 150 miles from the site of the [station's] radio broadcast transmitter." 17 U.S.C. § 114(d)(1)(B)(i). Should a station " willfully or repeatedly" retransmit recordings beyond that radius, it must pay for the privilege of using any copyrighted sound recording. 17 U.S.C. § § 114(d)(1)(B)(i), 114(f)(4)(B). The station can pay royalties either directly to the copyright owner or obtain a statutory license. 17 U.S.C. § § 112(e)(1), 112(e)(2), 114(f)(3), 114(f)(4)(B). Defendant Sound Exchange, Inc. (" SoundExchange" ) is a non-profit organization designated by the Copyright Royalty Board to collect royalties from broadcasters on behalf of copyright owners who join its membership. SoundExchange is the sole collector of royalties due under statutory licenses. 17 U.S.C. § 114(g); 37 C.F.R. § § 380.4(b), 380.13.

Plaintiffs are three radio stations located near Harrisonburg, Virginia, and their owner, VerStandig Broadcasting. Two of the radio stations, WXPO 100.7 FM and WJDV 96.1 FM, already live stream, or simulcast, their programming over the Internet and pay royalties to SoundExchange under statutory licenses. A third radio station, WTGD 105.1 FM, does not have a statutory license. The stations hope to implement a technology known as geofencing which they claim will allow them to restrict retransmitted broadcasts to listeners physically located within the 150-mile radius. The stations claim that they have not yet implemented this technology due to the substantial financial investment it would require and the unresolved legal question of whether geofencing will exempt them from copyright liability.

On February 28, 2014, counsel for VerStanding Broadcasting wrote SoundExchange a letter indicating that WTGD 105.1 FM " intends to commence internet streaming of its terrestrial radio broadcasts through a process known as 'geofencing.'" Dkt. No. 1-2. Counsel's letter stated that " [w]e believe that once a station constrains or 'geofences' its signal to 150 miles or less, it will conform to the exemption from the statutory license for sound recordings under Section 114 of the U.S. Copyright Act, so that it would owe no payment to SoundExchange." Id. The letter sought confirmation from SoundExchange that counsel's understanding of the Copyright Act's provisions was correct and the plan to simulcast WTGD 105.1 FM's programming using geofencing technology would not subject the station to any legal challenges from SoundExchange. On March 14, 2014, SoundExchange responded that it did not agree with WTGD 105.1 FM's viewpoint of the Copyright Act and provided a citation to a recent decision by the Copyright Office that the 150-mile exemption is not applicable to radio retransmissions over the Internet. Sound Exchange's letter did not mention litigation, yet " strongly urge[d] WTGD to seek licenses for its simulcasts." Dkt. No. 1-3. The stations filed this declaratory judgment action six weeks later.

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II.

SoundExchange filed motions to dismiss under Rules 12(b)(1), 12(b)(2), and 12(b)(6). The matter was referred to United States Magistrate Judge Joel C. Hoppe for a report and recommendation, and the magistrate judge recommended dismissal of the complaint without prejudice pursuant to Rule 12(b)(1). Dkt. No. 46. Finding no case or controversy, the magistrate judge concluded that the court lacked subject matter jurisdiction. The stations timely filed an objection to the report and recommendation, SoundExchange responded, and the court heard oral argument on October 24, 2014. For the reasons that follow, the court will adopt the report and recommendation of the magistrate judge.

Rule 72(b) of the Federal Rules of Civil Procedure permits a party to " serve and file specific, written objections" to a magistrate judge's proposed findings and recommendations within fourteen days of being served with a copy of the report. See 28 U.S.C. § 636(b)(1). The district court must determine de novo any portion of the magistrate judge's report and recommendation to which a proper objection has been made and " may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed.R.Civ.P. 72(b)(3); accord 28 U.S.C. § 636(b)(1).

A.

In his report and recommendation, the magistrate judge recommends granting SoundExchange's motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. The magistrate judge found that while the parties disagreed as to the interpretation of the Copyright Act, the stations failed to allege any cognizable injury fairly traceable to SoundExchange. Dkt. No. 46 at *15-16. Because the stations seek a declaration that their geofencing technology would make them exempt from the Copyright Act, not just royalties due under the statutory license, the magistrate judge concluded that the proper party defendant would be the copyright owners, not SoundExchange. The injury here, according to the magistrate judge, is the stations' " fear of incurring liability for infringing copyright owners' rights of public performance and reproduction if they simulcast exclusively to their local listeners without first obtaining statutory licenses." Id. at *16. Thus, any cognizable injury under the Copyright Act would be traceable to the copyright owners, not SoundExchange. The magistrate judge also concluded that the letters exchanged between the parties did not create a justiciable controversy.

Plaintiffs object to the magistrate judge's report, contending that because he focused on liability for copyright infringement, he overlooked potential contract liability for the two stations operating under the statutory license. Focusing their objections as they do on the issue of potential contractual liability, the stations effectively abandon any objection to the magistrate judge's report and recommendation as to the claim raised by the one station lacking a statutory license, WTGD 105.1 FM. Under 28 U.S.C. § 636(b)(1), the court must review de novo only " those portions of the report . . . to which objection is made." Because Plaintiffs failed to object to the magistrate judge's analysis as to WTGD 105.1 FM, they have waived any such objection. See United States v. Midgette, 478 F.3d 616, 621 (4th Cir. 2007). Thus, the court will limit its review only to the issue of the so-called contract based claim as to the other two stations, a claim which was neither raised in the letter giving rise to this suit nor pleaded in the complaint.

B.

The Declaratory Judgment Act is not an independent source of jurisdiction

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and requires an actual case or controversy before a court may declare " the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a); see MedImmune, Inc. v. Genentech, Inc.,549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007); Skelly Oil Co. v. Phillips Petro. Co.,339 U.S. 667, 671-72, 70 S.Ct. 876, 94 L.Ed. 1194 (1950). To determine if a declaratory action is justiciable, the court must consider whether the facts alleged under " 'all the circumstances'" demonstrate " 'a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'" MedImmune, 549 U.S. at 127 (quoting Md. Cas. Co. v. Pac. Coal & Oil Co.,312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941)). The minimum requirements of ...


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