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OPTIONAL (Spring 2018)
  • 1 Statement of Rick Carnes, President The Songwriters Guild of America Before the Subcommittee on Courts, the Intern and Intellectual Property of the House Committee on the Judiciary, "The Section 115 Reform Act of 2006" (May 16, 2005) (.pdf)

  • 2 U.S. Copyright Office, Circular 73, "Compulsory License for Making and Distributing Phonorecords" (.pdf)

  • 3 In Re: Mechanical and Digital Phonorecord Rate Adjustment Proceeding , Docket No. RF 2006-1, Delivery Rate Adjustment Proceeding, US Copyright Office (October 16, 2006) (.pdf)

  • 4 Live365, Inc. v. Copyright Royalty Board, 698 F. Supp. 2d 25 (D.D.C. 2010) (Excerpts)

    1

    698 F.Supp.2d 25 (2010)
    LIVE365, INC., Plaintiff,
    v.
    COPYRIGHT ROYALTY BOARD; James H. Billington, in his official capacity as Librarian of Congress; and James Scott Sledge, Stanley C. Wisniewski, and William J. Roberts, in their official capacities as Judges of the Copyright Royalty Board, Defendants.

    3

    Civil Action No. 09-01662 (RBW).
    United States District Court, District of Columbia.

    5

    February 23, 2010.

    7

    *28 Adam Shartzer Caldwell, Ronald G. London, Davis Wright Tremaine, LLP, Washington, DC, Kenneth David Freundlich, Freundlich Law, Beverly Hills, CA, for Plaintiff.

    9

    Brian G. Kennedy, Lisa Zeidner Marcus, U.S. Department of Justice, Washington, DC, for Defendants.

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    MEMORANDUM OPINION

    13

    REGGIE B. WALTON, District Judge.

    15

    This case was initiated by Live365 on August 31, 2009, seeking declaratory and injunctive relief through a facial challenge under the Appointments Clause of the Constitution against the Copyright Royalty Board (“CR Board” or “Board”),[1] the judges of the Board in their official capacities, as well as the Librarian of Congress (collectively referred to hereafter sometimes as “the government” or the “defendants”). Specifically, the plaintiff challenges *29 the creation of the CR Board as promulgated by “a 2004 amendment to the U.S. Copyright Act, 17 U.S.C. § 801.” Complaint (“Compl.”) ¶ 1. On September 2, 2009, the plaintiff filed a motion for a preliminary injunction asking the Court to “stay[][a] pending CR[Board] proceeding—In the Matter of Digital Performance Right in Sound Recordings and Ephemeral Recordings, Docket No. 2009-1(CRB Webcasting III)—until Live365’s Appointments Clause challenge to the CR[Board]’s makeup . . . can be resolved.” Plaintiff Live365, Inc.’s Motion/Application for Preliminary Injunction at 1. The government filed its opposition to the motion on September 14, 2009, along with filing its own Motion to Dismiss for Lack of Subject Matter Jurisdiction. Defendants’ Motion to Dismiss (“Defs.’ Mot.”). Also on September 14, SoundExchange, Inc. (“SoundExchange”) filed its motion to “intervene as of right as a defendant to protect its interest in this litigation,”[2] SoundExchange’s Motion for Leave to Intervene at 1, which was granted by the Court on September 18, 2009. As a result of these filings, the Court convened a hearing on September 22, 2009, and the matter was taken under advisement by the Court at the conclusion of the hearing. For the reasons that follow, both the plaintiff’s Motion for Preliminary Injunction and the defendants’ Motion to Dismiss for Lack of Subject Matter Jurisdiction are denied.

    17

    I. Background

    19

    A. Facts of the Case3

    21

    1. The Copyright Royalty Board

    23

    In 2004, Congress created the CR Board through the enactment of the Copyright Royalty and Distribution Reform Act of 2004, Pub.L. 108-419,118 Stat. 2341, which amended the Copyright Act, 17 U.S.C. § 801 (2006) (“Copyright Act”). The CR Board is comprised of three judges who serve staggered, six-year terms, and once appointed they may be removed only for “misconduct, neglect of duty, or any disqualifying physical or mental disability.” 17 U.S.C. §§ 802(c), (I) (2006). The appointment authority of these judges is vested in the Librarian of Congress (“Librarian”), who appoints the judges after consultation with the Register of Copyrights (“Register”), also an appointee of the Librarian. 17 U.S.C. § 801(a). The current judges were appointed in January 2006. 72 Fed.Reg. 24,084 (May 1, 2007).

    25

    The CR Board judges are responsible, inter alia,

    27

    [for setting] rates and terms that webcasters and other services pay to copyright owners and performers for the use of copyrighted sound recordings under a statutory compulsory license[, which] grant[s] eligible services a license to digitally stream copyrighted sound recordings, and grant[s] copyright owners and performers a right to be paid a royalty by the services for their use of sound recordings.
    SoundExchange’s Memorandum of Points and Authorities in Support of Its Motion for Leave to Intervene as a Defendant at 2 (citing 17 U.S.C. §§ 112, 114 (2006)). In performing their duties, the CR Board has broad discretion to commence hearings, 17 U.S.C. § 803(b)(1)(A)(I) (2006), issue subpoenas, id. § 803(b)(6)(C)(ix), render decisions, id. § 803(c)(1), grant protective orders, id. § 803(c)(5) and impose regulations governing the rates and *30 terms of copyright royalties, id. § 802(f)(1)(A)(i). However, all regulations issued by the CR Board judges are subject to approval by the Librarian, and the judges must act in accordance with the regulations issued by the Librarian. Id. §§ 803(b)(6)(A), (a)(1). The CR Board judges are also required to seek and obtain a written opinion from the Register whenever a novel area of substantive law arises. Id. § 802(f)(1)(B). Furthermore, their decisions are also subject to review for legal error by the Register, who may correct all errors they commit. Id. § 802(f)(1)(D). Finally, decisions made by the CR Board are appealable directly to the District of Columbia Circuit. Id. § 803(d)(1).

    29

    2. The Webcasting III Proceeding

    31

    The CR Board judges are required by statute to convene every five years to determine the royalty rates webcasters are required to pay for the use of copyrighted works, id. § 803(b), and Live365 is a participant in such a proceeding currently under consideration by the CR Board, In re Digital Performance Right in Sound Recordings and Ephemeral Recordings, Docket No. 2009-1 (CR Board Webcasting III) (the “Webcasting III” proceeding). Compl. ¶ 5. On January 5, 2009, pursuant to 17 U.S.C. § 803(b)(1)(A)(i), the Webcasting III proceeding was commenced through a request for Petitions to Participate. Id. ¶ 26. The Webcasting III proceeding is being conducted in order for the CR Board judges to designate the royalty rates for the next five-year statutory period for parties unable to reach a voluntary agreement and the next rate designations will be in effect from 2011 through 2015. Id.; Defs.’ Mot. at 7. The Webcasting III proceeding must be completed by December 16, 2010, id. ¶ 27, and on June 24, 2009, the CR Board issued an order setting September 29, 2009, as the deadline for parties to submit their written direct statements, which must address the participants’ concerns and views on what the rates should be for the period commencing in 2011. Id. ¶ 30.

    33

    “Live365 is an aggregator of digital radio stations that operates under compulsory licenses” that are regulated by the CR Board under 17 U.S.C. §§ 112 and 114. Compl. ¶ 5. According to the plaintiff, Live365 has paid approximately one million dollars per year in royalties for the use of copyrighted works since 2005. Plaintiff’s Memorandum of Points and Authorities in Support of Its Application for a Preliminary Injunction (“Pl.’s Mem.”) at 7. Live365 is among the various parties that have been unable to reach an agreement and thus has filed its Petition to Participate in the Webcasting III proceeding. Compl. ¶ 29; Defs’. Mot. at 7, 9.[4] As of September 29, 2009, other than the initial filing of the petition and the withdrawal of several parties from participation in the matter, no further action had taken place in the Webcasting III litigation. Compl. ¶ 29.

    35

    B. Plaintiff’s Claims

    37

    The plaintiff brings this lawsuit seeking declaratory and injunctive relief, claiming that the Librarian’s power to appoint the CR Board judges violates the Appointments Clause of the Constitution, U.S. *31 Const. art. II, § 2, cl. 2. Compl. ¶ 1. Specifically, the plaintiff claims that the CR Board judges are principal officers who may only be appointed by the President. Id. ¶ 39. Alternatively, they argue that if the CR Board judges are inferior officers their appointments are nonetheless unconstitutional because the Librarian of Congress is an officer of the Legislative Branch and not a Head of Department in the Executive Branch, and therefore, he lacks constitutional authority to appoint inferior officers. Id. Accordingly, plaintiff seeks to have the 2004 amendments to the Copyright Act, which authorizes the Librarian to appoint judges to the CR Board, held unconstitutional and the Webcasting III proceedings enjoined until its challenge to the constitutionality of the statute is resolved. Id.

    39

    II. Analysis

    41

    A. The Defendants’ Motion to Dismiss

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    Once a defendant has moved to dismiss a case pursuant to Federal Rule of Civil Procedure 12(b)(1), “the plaintiff bears the burden of establishing the factual predicates of jurisdiction by a preponderance of the evidence.” Erby v. United States, 424 F.Supp.2d 180, 182 (D.D.C. 2006) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)) (other citations omitted). “The [C]ourt, in turn, has an affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority.” Abu Ali v. Gonzales, 387 F.Supp.2d 16, 17 (D.D.C.2005) (internal quotation marks and citation omitted). Therefore, when ruling on a Rule 12(b)(1) motion to dismiss, courts “may consider materials outside the pleadings” to determine whether it has jurisdiction over the claims advanced by the plaintiff. Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C.Cir.2005) (citation omitted); see also Haase v. Sessions, 835 F.2d 902, 906 (D.C.Cir.1987) (stating that ”[i]n [Rule] 12(b)(1) proceedings, it has been long accepted that the judiciary may make appropriate inquiry beyond the pleadings to satisfy itself on [its] authority to entertain the case”) (internal citations and quotation marks omitted). Nonetheless, even where a defendant mounts a facial challenge to the complaint’s assertion of the court’s jurisdiction, “the court must still accept all of the factual allegations in the complaint as true.” Jerome Stevens Pharm., 402 F.3d at 1253 (internal quotation marks and citations omitted); see Erby, 424 F.Supp.2d at 182 (noting that where “a defendant mounts a `facial’ challenge to the legal sufficiency of the plaintiff’s jurisdictional allegations, the©ourt must accept as true the allegations in the complaint and consider the factual allegations of the complaint in the light most favorable to the non-moving party”) (citations omitted).

    45

    As an initial matter, the Court must address whether the defendants are entitled to dismissal under Rule 12(b)(1) of the Federal Rules of Civil Procedure based on the Court’s inability to exercise jurisdiction over the plaintiff’s Appointments Clause challenge. The defendants contend that this Court cannot entertain the plaintiff’s challenge, arguing that jurisdiction to review such a challenge lies exclusively with the District of Columbia Circuit. Defendants’ Memorandum of Points and Authorities 1) In Support of Its Motion to Dismiss and 2) In Opposition to the Plaintiff’s Motion for Preliminary Injunction (“Defs.’ Mem.”) at 10. As support for their position, the defendants argue that under 17 U.S.C. § 803(d)(1), ”`[a]ny determination’ of the Copyright Royalty Judges in the Webcasting III proceeding [is vested exclusively with] the District of Columbia Circuit.” Id. (internal quotation marks and citation omitted). Furthermore, the defendants contend that this case does not come within the exception that permits a *32 district court to exercise jurisdiction over ”`facial challenge[s]’ to the constitutionality of a statute under which the agency was proceeding,” id. at 12, because the plaintiff’s claim is a direct challenge to the Webcasting III proceeding itself, id. at 13. In this regard, the defendants argue that this case is distinguishable from Free Enterprise Fund v. Public Co. Accounting Oversight Bd., 537 F.3d 667, 676 (D.C.Cir. 2008), cert. granted, _ U.S. _, 129 S.Ct. 2378, 173 L.Ed.2d 1291 (2009), and Time Warner Entertainment Co. v. FCC, 93 F.3d 957 (D.C.Cir.1996), because here the plaintiff’s suit “is not independent of any administrative proceeding.” Id. Specifically, the defendants claim that, “among other things,” the plaintiff is seeking to have an order issued by the CR Board judges in the Webcasting III proceeding altered to extend a filing deadline imposed by that order. Id. Therefore, the defendants contend that jurisdiction rests exclusively with the District of Columbia Circuit. Id.

    47

    The plaintiff responds that this Court has jurisdiction over its Appointments Clause challenge because it “arises under, inter alia, 28 U.S.C. § 1331, which on its face states that `district courts shall have original jurisdiction of all civil actions arising under the Constitution.’” Plaintiff’s Consolidated Opposition to Motion to Dismiss and Reply to Oppositions to Motion for Preliminary Injunction (“Pl.’s Reply”) at 6 (internal citation omitted). And it notes that ”[t]he gravamen of the Complaint is a request for declaratory relief via a facial constitutional challenge to the [manner in which the CR Board judges are appointed, and does not] ask this Court to review any specific action the CR[Board] has taken or might take.” Id. Further, the plaintiff asserts that its claims are fully independent of the Webcasting III proceeding and ”[t]he fact that the preliminary injunction sought here merely pertains to a CR[Board] proceeding does not change that the underlying claim in the Complaint has no connection to any action by the CR[Board].” Id. at 9. Moreover, the plaintiff points out that while the relevant provision of the Copyright Act, 17 U.S.C. § 803(d)(1), specifically vests jurisdiction in the District of Columbia Circuit to consider all appeals of “determination[s] of the [CR Board] Judges,” Pl.’s Reply at 7 (internal citation omitted), it does not limit the jurisdiction of facial challenges to the constitutionality of the Copyright Act itself to the District of Columbia Circuit. Id. at 7-8. Thus, citing Free Enterprise as support for its position, the plaintiff argues that this Court has jurisdiction to entertain such facial constitutional challenges. Id. at 8-9.

    49

    Generally, “where a statute commits review of agency action to the Court of Appeals, any suit seeking relief that might affect the Circuit Court’s future jurisdiction is subject to the exclusive review of the Court of Appeals.” Telecomm. Research & Action Ctr. v. FCC (TRAC), 750 F.2d 70, 78-79 (D.C.Cir.1984). However, the constitutional facial challenges here “advance[] a `broad-scale attack’ ... to the [Copyright] Act itself that is not `of the type Congress intended to be reviewed within this statutory structure.’” Free Enter., 537 F.3d at 671 (quoting Nat’l Mining Ass’n v. Dep’t of Labor, 292 F.3d 849, 856 (D.C.Cir.2002) and Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 212, 114 S.Ct. 771, 127 L.Ed.2d 29 (1994)); cf. Am. Coal. for Competitive Trade v. Clinton, 128 F.3d 761, 765 (D.C.Cir.1997) (holding that a district court does not have jurisdiction to hear constitutional challenges if a statute specifically grants “exclusive original jurisdiction” to the Court of Appeals to consider such challenges). In such situations, district courts have

    51

    general federal question jurisdiction to consider a facial challenge to a statute’s *33 constitutionality so long as that challenge is not raised in a suit challenging the validity of agency action taken pursuant to the challenged statute or in a suit that is collateral to one challenging the validity of such agency action.
    Time Warner, 93 F.3d at 965. To fall within this category of challenges, the challenge must present “a `facial, or systemic’ challenge, and not an `as-applied, or particularized challenge[],’ ... and [cannot] attempt to bootstrap other claims regarding a[n] [administrative] Board[’s] order or rule.” Free Enter., 537 F.3d at 671 (citations omitted).

    53

    In Time Warner, the plaintiff sought an order from a district court enjoining the Federal Communications Commission (“FCC”) from issuing any regulations under provisions of the Cable Television Consumer Protection and Competition Act—”and two provisions of its predecessor”—(the “Cable Acts”), 47 U.S.C. § 402 (1992), which the plaintiff deemed unconstitutional. 93 F.3d at 963-64. The defendants and three intervenor defendants contested the district court’s jurisdiction to consider the plaintiff’s challenge stating that the relief the plaintiff requested “would circumvent the process for judicial review provided for by statute.” Id. at 964. The district court sided with the plaintiff, and the District of Columbia Circuit affirmed, finding that even though ”[t]he Communications Act, of which the Cable Acts are a part, vests the courts of appeals with jurisdiction to … enjoin, set aside, annul, or suspend any order of the [FCC] under the Act,” id. (citations and internal quotation marks omitted), the district court nonetheless had jurisdiction to hear the case because the plaintiff’s challenge was “entirely independent of any agency proceedings, whether actual or prospective.” Id. at 965. (citations and internal quotation marks omitted). Similarly, in Free Enterprise, the plaintiffs challenged the constitutionality of the Public Company Accounting Oversight Board, a board of judges created by the Securities Exchange Commission to enforce the provisions of the Sarbanes-Oxley Act of 2002, 15 U.S.C. §§ 7211-19. 537 F.3d at 668-70. The plaintiffs argue that the statute establishing the Board rendered the Board “unaccountable and divorced from Presidential control to a degree not previously countenanced in our constitutional structure … [making it] inconsistent with individual liberty.” Id. at 667-68. The District of Columbia Circuit again held that the challenge had been properly filed in the district court because it presented a facial challenge rather than an “as-applied, or particularized challenge.” Id. at 671 (citation omitted).

    55

    Here, the Copyright Act provides that ”[a]ny determination of the Copyright Royalty Judges … may … be appealed, to the United States District Court of Appeals for the District of Columbia Circuit, by any aggrieved participant in the proceeding.” 17 U.S.C. § 803(d)(1). The text of the statute therefore limits judicial review of determinations of the CR Board judges to the District of Columbia Circuit. The plaintiff’s Appointments Clause challenge is not a challenge of that nature, but rather is an attack on the 2004 amendment of the Copyright Act, which “establish[ed] the CR[Board, empowered] the Librarian of the Congress [with the authority to] appoint[the] three full-time [CR Board] Judges, [and] charged [its judges] with establishing rates and terms for various statutory compulsory licenses for use of certain copyrighted works.” Compl. ¶ 1. Moreover, the plaintiff seeks “a declaration that 17 U.S.C. § 801 … is unconstitutional [and] in violation of the Appointments Clause of the U.S. Constitution.” Id. ¶ 2. This action therefore falls squarely within the exception recognized by Time Warner and Free Enterprise, which authorizes this Court to exercise *34 jurisdiction over a facial challenge to the constitutionality of a statute. See Gen. Elec. Co. v. EPA, 360 F.3d 188, 190-91 (D.C.Cir.2004) (reversing district court’s refusal to exercise jurisdiction over pre-enforcement constitutional challenge of statute that “postpones judicial review of any [agency] action under [the statute at issue] until [the agency] seeks to enforce its remedial orders in court or [an authorized party] sues to recoup its expenses for undertaking [action covered by the statute]”).

    57

    The government’s argument that this case is distinguishable from Free Enterprise and Time Warner because the Complaint targets a specific ongoing proceeding is unpersuasive. In General Electric, the plaintiff’s due process challenge against the Environmental Protection Agency (“EPA”) pursued in this court was sanctioned by the Circuit despite there having been “ongoing interactions over remediation at several locations” between the parties, because “the lawsuit [did] not challenge any particular action or order by the EPA.” Id. at 191. Thus, although the plaintiff’s injunction request could have the effect of extending the September 29, 2009 deadline set by the CR Board judges and could inevitably impact the progression of the Webcasting III proceeding, their request for the injunction is derived from their constitutional facial challenge to the appointment of the CR Board judges, which is wholly independent of any action actually taken or expected to be taken in the future by the CR Board judges. Time Warner, 93 F.3d at 965 (noting that the facial constitutional challenge there could be entertained by the district court because the challenge was “entirely independent of any agency proceedings, whether actual or prospective”). And this is true despite the collateral impact this Court’s exercise of jurisdiction over the plaintiff’s constitutional challenge would have on the already initiated Webcasting III proceeding. Id. at 963 (district court’s exercise of jurisdiction over facial constitutional challenge held proper even though agency was enjoined from proceeding with already initiated rule-making process). Furthermore, refusing to exercise jurisdiction here “would do nothing to advance the primary policy” objective for vesting exclusive jurisdiction with courts of appeals. Id. at 965. This policy objective of according exclusive jurisdiction to appellate courts due to the expertise they have developed “concerning the agencies assigned [to] them for review,” and therefore “promot[ing] judicial economy and fairness to litigants by taking advantage of that expertise,” id. (citing TRAC, 750 F.2d at 78), does not dictate a different result because ”[q]uestions concerning the constitutionality of an agency’s enabling statute … do not require any particular agency expertise,” id. Accordingly, the plaintiff is “not jurisdictionally barred from bringing this action in [this Court] ... because TRAC does not deprive [this] [C]ourt of its general federal question jurisdiction to consider a facial challenge to a statute’s constitutionality so long as that challenge is not [being] raised in a suit challenging the validity of agency action taken pursuant to the challenged statute or in a suit that is collateral to one challenging the validity of such agency action.” Id. Therefore, the government’s motion to dismiss is denied.

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    B. The Plaintiff’s Motion for Preliminary Injunction

    61

    A preliminary injunction “is an extraordinary remedy that should be granted only when the party seeking the relief, by a clear showing, carries the burden of persuasion.” Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C.Cir.2006) (internal citation and quotation marks omitted). In deciding whether to order preliminary injunctive relief, the Court “must examine whether *35 `(1) there is a substantial likelihood that the plaintiff will succeed on the merits; (2)[the] plaintiff will be irreparably injured if an injunction is not granted; (3) an injunction will substantially injure the other party; and (4) the public interest will be furthered by the injunction.’” Ellipso, Inc. v. Mann, 480 F.3d 1153, 1157 (D.C.Cir.2007) (quoting Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1317-18 (D.C.Cir.1998)). These factors should be balanced against each other and ”[i]f the arguments for one factor are particularly strong, an injunction may issue even if the arguments in other areas are rather weak.” Id. (quoting Serono Labs., 158 F.3d at 1318). Thus, ”[a]n injunction may be justified, for example, where there is a particularly strong likelihood of success of the merits even if there is a relatively slight showing of irreparable injury.” CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 747 (D.C.Cir.1995). However, the party seeking injunctive relief must “demonstrate at least some injury,” id. (emphasis added, internal citation and quotation marks omitted), but even if the party seeking the injunction “satisf[ies] the irreparable harm prong, ... a preliminary injunction will not issue unless the moving party also shows, on the same facts, a substantial likelihood of success on the merits.” Chaplaincy, 454 F.3d at 304; see also Apotex, Inc. v. FDA, 449 F.3d 1249, 1253-54 (D.C.Cir.2006) (finding that if the plaintiff “has little likelihood of succeeding on the merits of its claim[, there is] no need to address the other [factors necessary to issue a preliminary injunction]”) (citing City of Las Vegas v. Lujan, 891 F.2d 927, 935 (D.C.Cir.1989)).

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    1. The Substantial Likelihood the Plaintiff will Prevail on the Merits

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    The plaintiff advances two arguments for why it will succeed on the merits of its request for declaratory relief. First, the plaintiff argues that the CR Board judges are “principal officers” under the Appointments Clause of the Constitution, and therefore, must be appointed by the President. Compl. ¶ 39; Pl.’s Mem. at 11-14. Second, the plaintiff argues that even if the CR Board judges are only “inferior officers” under the Constitution, they were appointed to their positions in violation of the Appointments Clause because the Librarian of Congress is a Legislative Officer rather than a Head of Department of the Executive Branch, and therefore lacks authority under the Constitution to appoint inferior officers. Compl. ¶ 39; Pl.’s Mem. at 14-17. For the reasons that follow, the plaintiff has failed to demonstrate there is a substantial likelihood it will succeed on either theory.

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    a. The Plaintiff’s Principal Officer Theory

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    The plaintiff first argues that the CR Board judges are principal officers and therefore must be appointed by the President. Pl.’s Mem. at 11. Specifically, the plaintiff argues that the judges function independently without the supervision of the Librarian, and that the relevant provisions of the Copyright Act indicate that they function as principal officers. Id. at 11-12. To further support this contention, the plaintiff relies on Morrison v. Olson, 487 U.S. 654, 671-73, 108 S.Ct. 2597, 101 L.Ed.2d 569 (1988), which observed that some of the indicia of “inferior” officers are their limited duties, limited jurisdiction, temporary tenure, and the ability to be removed from office by the appointing officer. Id. at 12. The plaintiff asserts that the CR Board judges have no such limitations, noting that “in setting rates and terms under the various statutory compulsory licenses in the Copyright Act, [the CR Board judges] exercise significant [legal] authority … to create their own rules of procedure, ... which are subject only to review by the Librarian, and there *36 is no evidence the Librarian has actually exercised such review[, they] may not be removed without substantial cause … [, and they] have the authority to issue final rate decisions with `full independence’ and their decisions are not subject to reversal by any other executive branch office, but instead are appealed directly to the D.C. Circuit.” Pl.’s Reply at 25-26. The plaintiff further points to the CR Board judges not being subject to performance appraisals by their superiors, and their ability to monitor discovery, question witnesses, make evidentiary rulings, issue subpoenas, and grant protective orders in conjunction with their decision-making authority. Pl.’s Mem. at 12-14. Additionally, the plaintiff contends that further proof that the CR Board judges are principal officers is the fact that any of their findings determined to be incorrect by the Register of Copyrights are binding as precedent only on subsequent proceedings. Id. at 13-14; see generally 17 U.S.C. § 801. Finally, the plaintiff points out that many of the responsibilities now vested in the CR Board judges were also vested in the Copyright Royalty Tribunal, the predecessor of the CR Board, and the members of that body were not appointed by the Librarian of Congress, but rather by the President as principal officers. Pl.’s Mem. at 14.

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    Conversely, the defendants argue that while there is no bright line distinguishing principal officers from inferior officers,[5] Def.s’ Mem. at 18, ”[t]he critical factor for determining” whether an individual is a principal officer for purposes of the Appointments Clause “is whether the officer is `supervised at some level’” by others “who are appointed directly by the President.” Defs.’ Mem. at 20 (quoting Edmond v. United States, 520 U.S. 651, 663, 117 S.Ct. 1573, 137 L.Ed.2d 917 (1997); Intervenor-Applicant SoundExchange’s Opposition to Plaintiff Live365, Inc.’s Motion/Application for Preliminary Injunction (“Int. Defs.’ Opp’n”) at 12-14. Citing Morrison, Edmond, and Freytag v. Comm’r of Internal Revenue, 501 U.S. 868, 884, 111 S.Ct. 2631, 115 L.Ed.2d 764 (1991), all cases in which the appointees in question exercised a fair amount of authority in the administration of their duties, the defendants note that the Supreme Court nonetheless found those officers had inferior status, despite their considerable authority and limited supervision. Defs.’ Mem. at 20-22; Int. Def.’s’s Opp’n at 11-13. The defendants argue that under the standard for assessing principal versus inferior officer status, it is insufficient to base that determination on the fact that the CR Board judges are accorded some level of autonomy, but rather the determination that the CR Board judges are inferior officers is controlled by the fact that their work is directed and “supervised at some level by other officers who are appointed directly by the President.” Defs.’ Mem. at 20 (quoting Edmond, 520 U.S. at 663, 117 S.Ct. 1573); see also Int. Def.’s Opp’n at 11-13. Specifically, they argue that the CR Board judges are expressly required to abide by the regulations issued by the Librarian of Congress, Defs.’ Mem. at 20; Int. Def.’s Opp’n at 13, and the Librarian also has authority through the Register of Copyrights, who is also appointed by the Librarian, to review and correct the substantive determinations of the CR Board judges. Defs.’ Mem. at 21; Int. Def.’s Opp’n at 14. Additionally, and in opposition to the plaintiff’s claim to the contrary, the defendants assert that merely because the Librarian may only remove the CR Board judges for cause is not dispositive of their status as principal officers, *37 Defs.’ Mem. at 22; Int. Def.’s Opp’n at 12, noting that the officers in Morrison and Free Enterprise could not be removed without cause either, but nonetheless were deemed to be inferior officers because a superior officer appointed by the President had authority, albeit limited, to remove them from office. Defs.’ Mem. at 22; Int. Def.’s Opp’n at 12-13.

    73

    In further support of their argument, the defendants state that under the Copyright Act, the judges are also required to obtain a written opinion from the Register of Copyrights “on all novel and material questions of copyright law,” and the judges are required to apply the Register’s conclusions in making all future determinations. Defs.’ Mem. at 21; Int. Def.’s Opp’n at 14. Further, SoundExchange notes that the CR Board judges “have very narrow jurisdiction and limited duties,” as the scope of their power is confined to “the establishment of royalty rates and the distribution of royalties for a small number of compulsory licenses.” Int. Def.’s Opp’n at 14. Thus, SoundExchange asserts that the CR Board judges are similar in this respect to the independent counsel in Morrison and the judges in Edmond and Freytag, all whom were deemed inferior officers for purposes of the Appointments Clause. Id. 14-15. Lastly, the defendants refute the significance the plaintiff seeks to draw from the status the members of the Copyright Royalty Tribunal (the CR Board’s predecessor) held as principal officers, noting that unlike the CR Board, the Copyright Royalty Tribunal had been specifically established by Congress as “a freestanding administrative agency, not subject to supervision by the Librarian or any other principal officer,” Defs.’ Mem. at 31, thus distinguishing it from the CR Board for Appointments Clause purposes. Id. at 32.

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    Article II, Section 2, clause 2 of the Constitution provides:

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    [The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other Public Ministers and Consuls, Judges of the Supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.
    U.S. Const. art. II, § 2, cl. 2. Thus, the Appointments Clause divides all officers of the United States into two categories: principal officers and inferior officers. The Appointments Clause “is more than a matter of `etiquette or protocol’; it is among the significant structural safeguards of the constitutional scheme.” Edmond, 520 U.S. at 659, 117 S.Ct. 1573. Principal officers must be appointed by the President with the advice and consent of the Senate, while Congress may authorize the appointment of inferior officers by the President acting alone, independently by the Courts of Law or the Heads of Departments. Buckley v. Valeo, 424 U.S. 1, 132, 96 S.Ct. 612, 46 L.Ed.2d 659 (1976). Although there is no bright line rule distinguishing principal and inferior officers, inferior officers usually have “a relationship with some higher ranking officer or officers below the President,” and their “work is directed and supervised at some level by others who were appointed by Presidential nomination with the advise and consent of the Senate.” Edmond, 520 U.S. at 662-63, 117 S.Ct. 1573. Furthermore, ”[t]he exercise of significant authority pursuant to the laws of the United States marks, not the line between principal and inferior officer for Appointments Clause purposes, but rather … the line between officer and nonofficer.” Id. at 662, 117 S.Ct. 1573 *38 (internal quotation marks and citation omitted).

    79

    In Morrison, a case in which the Supreme Court addressed whether the appointment of an independent counsel violated the Appointments Clause, the plaintiffs argued that the appointment was invalid because the position had principal officer status and the independent counsel had been appointed by a statutorily created court at the request of the Attorney General and not by the President with the consent of the Senate. 487 U.S. at 660-61, 108 S.Ct. 2597. The Morrison Court concluded that the independent counsel was an inferior officer because she was “subject to removal by a higher Executive Branch official,” id. at 671, 108 S.Ct. 2597; “she was empowered by [statute] to perform only certain, limited duties,” id.; ”[her] office was limited in jurisdiction,” id. at 672, 108 S.Ct. 2597; and her “office [was] limited in tenure,” id. However, the Morrison Court found it unnecessary “to decide exactly where the line falls between the two types of officers,” concluding that the independent counsel “clearly [fell] on the `inferior officer’ side of that line.” Id. at 671, 108 S.Ct. 2597.

    81

    Attempting to distinguish Morrison, the petitioners in Edmond argued that civilian judges appointed to the Coast Guard Court of Appeals by the Secretary of Transportation were principal officers because two of the factors considered significant by the Morrison Court—limited jurisdiction and limited tenure—were not the situation in Edmond. 520 U.S. at 661, 117 S.Ct. 1573. The Supreme Court found the absence of these two factors not determinative, emphasizing that Morrison “did not purport to set forth a definitive test for whether an office is `inferior’ under the Appointments Clause.” Id. The Court held that the Coast Guard judges were inferior officers because their work was supervised at some level by the Judge Advocate General, who among other things, had the power to remove them without cause, and also the Court of Appeals for the Armed Forces, an Executive Branch entity, which had the power to reverse decisions of Coast Guard judges. Id. at 664, 117 S.Ct. 1573. Accordingly, an officer can be considered “inferior” if his or her “work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate, ... and, if not, might still be considered [an] inferior officer[] if the nature of their work suggests sufficient limitations of responsibility and authority.” United States v. Hilario, 218 F.3d 19, 25 (1st Cir.2000) (internal quotation marks and citation omitted).

    83

    Here, the CR Board judges receive direction and supervision by both the Librarian of Congress and the Register of Copyrights. Among the Librarian’s oversight powers is his authority to promulgate binding ethical rules and to enforce those rules against the judges, 17 U.S.C. § 802(h), sanction or remove a Copyright Royalty Judge for violation of these rules, id. § 802(i), provide administrative resources for the judges, id. §§ 801(d), 801(e), and assign other duties to the judges as he deems appropriate, id. § 801(b)(8), so long as they do not “conflict with [the judges’] duties and responsibilities as a Copyright Royalty Judge,” id. at § 802(g). Furthermore, the Register’s authority over the CRB judges includes the power to review any decisions by the judges for “legal error,” id. § 802(f)(1)(D), and provide written opinions on all novel and material questions of copyright law which then becomes binding on the judges, id. § 802(f)(1)(B). Lastly, the judges are required to act in accordance with prior determinations and interpretations of the Copyright Royalty Tribunal, the Librarian *39 of Congress, and the Register of Copyrights. Id. § 803(a)(1).

    85

    Despite these checks on the authority of the CR Board judges, the plaintiff insists that the judges are “free-standing, independent, and unsupervised fact finders” and therefore qualify as “Principal Officers.” Pl.’s Mem. at 12-14. Moreover, they point to the observations of District of Columbia Circuit Judge Kavanaugh in his concurrence in SoundExchange, Inc. v. Librarian of Congress, 571 F.3d 1220, 1226 (D.C.Cir.2009), as support for their position that the CR Board judges are principal officers, wherein he stated:

    87

    [B]illions of dollars and the fates of entire industries can ride on the Copyright Royalty Board’s decisions. The Board thus exercises expansive executive authority analogous to that of, for example, FERC, the FCC, the NLRB, and the SEC. But unlike the members of those similarly powerful agencies, since 2004 Copyright Royalty Board members have not been nominated by the President and confirmed by the Senate. Instead… Board members are appointed by the Librarian of Congress alone … Th[is] new statutory structure raises a serious constitutional issue.
    Id. However, while Judge Kavanaugh viewed the CR Board judges’ exercise of “executive authority” as “expansive,” this alone is insufficient to invalidate the constitutionality of the appointment of the CR Board judges under the test adopted by the Supreme Court. See Edmond, 520 U.S. at 662, 117 S.Ct. 1573 (noting that despite the significant authority exercised by many officers in prior cases, the Court had nonetheless held those positions to be inferior “within the meaning of the Appointments Clause … [because] [t]he exercise of significant authority pursuant to the laws of the United States marks, not the line between principal and inferior officer for Appointments Clause purposes, but rather, as we said in Buckley, the line between officer and nonofficer”). Nonetheless, Judge Kavanaugh’s observations are understandable. The current state of the law has essentially created a gray area where cases like this case will inevitably fall due to the case-by-case analysis lower courts are required to conduct as result of the limited guidance the Framers of the Constitution provide as to where ”[t]he line between `inferior’ and `principal’ officers… should be drawn,” and the Supreme Court’s refusal to “decide exactly where the line falls between the two types of officers.” Morrison, 487 U.S. at 671, 108 S.Ct. 2597; see also Edmond, 520 U.S. at 661, 117 S.Ct. 1573 (“Our cases have not set forth an exclusive criterion for distinguishing between principal and inferior officers for Appointments Clause purposes [and] Morrison did not purport to set forth a definitive test for whether an officer is `inferior’ under the Appointments Clause.”). All this Court can do is consider those factors identified by the Supreme Court as relevant to the assessment of an officer’s status under the Appointments Clause, Morrison, 487 U.S. at 671-73, 108 S.Ct. 2597, with the appreciation that none of them are necessarily dispositive, as illustrated by Edmond, 520 U.S. at 661, 117 S.Ct. 1573.

    89

    Upon careful examination of these factors and facts in this case, it appears that the CR Board judges are in fact sufficiently subordinate to both the Librarian of Congress and the Register of Copyrights to qualify as inferior officers, and thus, their appointments by the Librarian do not offend the Appointments Clause. In making this assessment, the Court finds that the conclusions reached in Edmond, Freytag, and Free Enterprise seem to support this position. In both Edmond and Freytag, the judges were held to be inferior officers despite the fact that their duties included taking testimony, ruling on the *40 admissibility of evidence, issuing protective orders, and issuing subpoenas, and the CR Board judges exercise many of those same responsibilities. Thus, the guiding precedent of the Supreme Court seemingly requires the conclusion that despite the level of autonomy the CR Board judges exercise, the degree of direction and supervision exercised over them by the Librarian and the Register renders them inferior rather than principal officers.

    91

    b. The Plaintiff’s Inferior Officer Appointments Challenge

    93

    The plaintiff argues alternatively that even if the CR Board judges are inferior officers, the Appointments Clause requires that they be appointed either by the President, a Head of Department, or a Court of Law, and because this did not occur, their appointments are unconstitutional. Pl.’s Mem. at 14. The plaintiff posits that for the appointment of an inferior officer to be constitutional, “a Head of Department must be a cabinet-level department head in the [Executive B]ranch of government who reports and is directly accountable to the President.” Id. at 15-16. The plaintiff opines that the Librarian of Congress is part of the Legislative Branch, not the Executive Branch, because the Librarian reports to Congress and does not share the same accountability to the President as do other cabinet-level department heads. Id. The plaintiff therefore argues that the Librarian is not a Head of Department of the Executive Branch as required for Appointments Clause purposes. Id. at 15-17.

    95

    In support of the plaintiff’s argument concerning the status of the Librarian, it notes that “the Librarian reports to Congress,” that the ”[L]egislative [B]ranch funds the Library,” and that “the Librarian cannot be removed without cause by the President because the statute is silent as to [his or her] removal. Pl.’s Mem. at 16. Further, the plaintiff contends that various sections of Title 2 of the United States Code reflects “Congress’ intent that the Library of Congress [be] an instrumentality of Congress.” Pl.’s Reply at 17. In addition, the plaintiff posits that the Librarian does not fall under the Executive Branch even under the more expansive view of Heads of Department taken by the Supreme Court in Freytag because aside from the President’s appointment power, the Librarian does not report directly to the President. Pl.’s Mem at 16. Moreover, it argues that the Library portrays itself as a part of the Legislative Branch. Id. at 17. Specifically, the plaintiff references the Library’s website, which indicates that it considers itself an “agency of the legislative branch of the U.S. government.” Id. The plaintiff further contends that District of Columbia Circuit precedent has recognized the Library of Congress as part of the Legislative Branch. Id. at 16. Namely, it notes that the District of Columbia Circuit has exempted the Library from the Administrative Procedure Act (“APA”), 5 U.S.C. § 551 (2006), on the grounds that the provisions of the APA do not apply to the Legislative Branch, id. (citing Washington Legal Found. v. U.S. Sentencing Comm’n, 17 F.3d 1446, 1449 (D.C.Cir.1994)), and precluded a former Library employee from bringing a Rehabilitation Act, 29 U.S.C. § 701 (2008), claim, concluding that the Rehabilitation Act applies only to employees in the Executive Branch, id. (citing Judd v. Billington, 863 F.2d 103, 105 (D.C.Cir.1988)). Lastly, it notes that although the Librarian is appointed by the President and serves at the President’s pleasure, the current Librarian has served since 1987 and seems to enjoy lifetime tenure. Pl.’s Reply at 18-19.

    97

    The defendants respond that the Librarian is a Head of Department within the meaning of the Appointments Clause, Defs.’ Mem. at 22; Int. Def.’s Opp’n at 15, and therefore even if the CR Board judges *41 are inferior officers, the Librarian had constitutional authority to appoint them. As support for their position the defendants advance a number of theories, Defs.’ Mem. at 22-27; Int. Def.’s Opp’n at 15-16. First, they note that the President was granted authority by Congress to appoint the Librarian, and that Congress placed ”[n]o … limits [on] the President’s oversight of the Librarian, nor … reserved to itself the power to review or influence the Librarian’s conduct [while] in office. Defs.’ Mem. at 23; see also Int. Def.’s Opp’n at 17. In this regard, they note that the President has unlimited “power to remove the Librarian, which is an incident of the power of appointment,” Defs.’ Mem. at 23; see also Int. Def.’s Opp’n at 17, drawing on the history of the Library as support for their position. Defs.’ Mem. at 24-25; Int. Def.’s Opp’n at 17. Next, the defendants argue that the Library functions as an Executive Department for Appointments Clause purposes. Defs.’ Mem. at 25-28; Int. Def.’s Opp’n at 18-20. They direct the Court to the congressional history of the Copyright Act, which indicates that Congress considered the legislative and executive functions of the Librarian before vesting him with appointment power of the Register of Copyrights, and argue that Congress considered the constitutional validity of the Librarian’s appointment power and concluded that the Library is a department in the Executive Branch. Defs.’ Mem. at 24-25; Int. Def.’s Opp’n at 17-20. They contend that the “Library possesses all of the features that traditionally distinguish the executive departments,” including being “a free-standing entity, not contained within any other administrative agency,” ”[i]t performs executive functions, including … administration of the copyright laws,” and it “is headed by a principal `Officer[] of the United States’ who is appointed by the President and removable at his will.” Defs.’ Mem. at 26; see also Int. Def.’s Opp’n at 19-20. Furthermore, SoundExchange notes that the Fourth Circuit has stated that ”[i]t is irrelevant that the Office of the Librarian of Congress is codified under the legislative branch or that it receives its appropriation as a part of the legislative branch [because] the Librarian performs certain functions which may be regarded as legislative … and other functions… which are executive or administrative.”[6] Int. Def.’s Opp’n at 19-20 (internal citation omitted and emphasis in original). Thus, the defendants refute the plaintiff’s argument that because the Library is designated for statutory purposes as a Legislative entity it is not an executive office, noting that other agencies, like the Federal Election Commission, are codified in the Legislative Branch, but have nonetheless been determined to “wield[] executive authority.” Int. Def.’s Opp’n at 19; see also Defs.’ Mem. at 30. Accordingly, the defendants claim that the Librarian is a principal officer that heads an Executive Department and therefore has the power to appoint inferior officers. Defs.’ Mem. at 22; Int. Def.’s Opp’n at 20.

    99

    “Any appointee exercising significant authority pursuant to the laws of the United States is an `Officer of the United States’ and must, therefore, be appointed in the manner prescribed by § 2, cl. 2 of Article II [of the Constitution].” Freytag, 501 U.S. at 881, 111 S.Ct. 2631 (quoting Buckley, 424 U.S. at 126, 96 S.Ct. 612). Accordingly, the appointment of inferior officers must be made either by the President alone, the courts of law, or by the Heads of Departments. See Buckley, 424 *42 U.S. at 132, 96 S.Ct. 612. In Freytag, the Court limited the term “Heads of Department” to “a part or division of the executive governments, [such] as the Department of State, or of the Treasury.” 501 U.S. at 886, 111 S.Ct. 2631 (quoting United States v. Germaine, 99 U.S. 508, 510-11, 25 L.Ed. 482 (1878)). However, in a footnote, the Court refused to address “any question involving an appointment of an inferior officer by the head of one of the principal agencies, such as the Federal Trade Commission, the Securities Exchange Commission, the Federal Energy Regulatory Commission, the Central Intelligence Agency, and the Federal Reserve Bank of St. Louis.” Id. at 887, n. 4, 111 S.Ct. 2631. Although the appointment of the Librarian has not been addressed by the Supreme Court or the District of Columbia Circuit, the Fourth Circuit held that “the Office of the Register of Copyrights is not open to any charge that it is violative of the Appointments Clause,” because ”[t]he Register is appointed by the Librarian of Congress, who in turn is appointed by the President with the advice and consent of the Senate.” Eltra Corp. v. Ringer, 579 F.2d 294, 300 (4th Cir.1978).

    101

    In Free Enterprise, the plaintiffs, like Live365, attempted to prevail on the theory that even if the Public Company Accounting Oversight Board created by the Sarbanes-Oxley Act was an inferior office, its members were unconstitutionally appointed by the Security and Exchange Commission (“SEC”) because it “is not a `Department[]’ and the Commissioners are not its `Head[]’” for purposes of the Appointments Clause. 537 F.3d at 672. One of the arguments advanced by the plaintiffs in Free Enterprise was that because the SEC was comprised of more than one person, it could not be a Head of Department for appointment purposes. Id. at 676. Relying on Freytag, the District of Columbia Circuit held:

    103

    Just as independent agencies are `Departments’ capable of receiving appointment powers even though they are structured to give the President less control over their functioning … [,] heads of independent agencies need not be wholly controlled by the President as long as they are principal officers appointed (with the advice and consent of the Senate) and removable by the President.
    Free Enter., 537 F.3d at 677. Holding that the SEC is a principal office with appointment power, the court pointed out that Congress specifically vested the SEC with authority to control the administration of the securities laws, including the power to promulgate rules, review disciplinary sanctions, appoint Board members, approve Board rules and the Board’s budget, and censure and remove Board members. Id. at 677-78.

    105

    Here, there are several critical factors that indicate that the Library is an executive department for purposes of the Appointments Clause. Most importantly, the Librarian is appointed by the President with the advice and consent of the Senate. 2 U.S.C. § 136. In addition, the President, not Congress, has the power to remove the Librarian at will. Id. While the plaintiff is correct that the Library is codified under Title 2 of the United States Code, which addresses specifically the Legislative Branch, the court in Eltra found this irrelevant, holding that “such code-grouping cannot determine whether a given function is executive or legislative.” 579 F.2d at 301. Moreover, the court in Eltra also noted that ”[t]he Librarian performs certain functions which may be regarded as legislative (i.e., Congressional Research Service) and other functions (such as the Copyright Office) which are executive or administrative,” and ”[b]ecause of its hybrid character, it could have *43 been grouped code-wise under either the legislative or executive department.” Id. But, the court found “such code-grouping” not to be dispositive, concluding “that the Copyright Office is an executive office, operating under the direction of an Officer of the United States and as such is operating in conformity with the Appointments Clause.” Id. Furthermore, the Buckley Court stated in the same vein:

    107

    Unless their selection is elsewhere provided for, all Officers of the United States are to be appointed in accordance with the [Appointments] Clause. Principal officers are selected by the President with the advice and consent of the Senate. Inferior officers Congress may allow to be appointed by the President alone, by the heads of departments, or by the Judiciary. No class or type of officer is excluded because of its special functions. The President appoints judicial as well as executive officers. Neither has it been disputed and apparently it is not now disputed that the Clause controls the appointment of the members of a typical administrative agency even though its functions, as this Court recognized in Humphrey’s Executor v. United States, 295 U.S. 602, 624, 55 S.Ct. 869, 79 L.Ed. 1611 (1935), may be “predominantly quasijudicial and quasilegislative” rather than executive. The Court in that case carefully emphasized that although the members of such agencies were to be independent of the Executive in their day-to-day operations, the Executive was not excluded from selecting them.
    424 U.S. at 132-34, 96 S.Ct. 612 (quoting Humphrey’s, 295 U.S. at 625-26, 55 S.Ct. 869). Following the reasoning of Buckley and Eltra, this Court finds that even though the Library is codified under Title II and is a free standing entity that operates independently from the Executive Branch in conducting its daily operations, the Librarian appears to nonetheless qualify as a Head of Department with executive authority to appoint inferior officers. See Freytag, 501 U.S. at 920, 111 S.Ct. 2631 (Scalia, J., concurring) (stating that “there is no reason, in text, judicial decision, history, or policy, to limit the phrase `the Heads of Departments’ in the Appointments Clause to those officials who are members of the President’s Cabinet…. [Instead,] a department is [a] separate allotment or part of business; a distinct province, in which a class of duties are allotted to a particular person…. [The Founders [of the Constitution] chose the word `Departmen[t],’ however, not to connote size or function (much less Cabinet status), but [a] separate organization…)(internal citation and quotation marks omitted). As the court stated in Eltra:

    109

    The Register is appointed by the Librarian of Congress, who in turn is appointed by the president with the advice and consent of the Senate. By the nature of his appointment the Librarian is a[] [principal] [o]fficer of the United States, with the usual power of such officer to appoint `such inferior [o]fficers (i.e., the Register [and the CR Board judges]), as (he) think(s) proper.
    579 F.2d at 300 (internal citation and quotation marks omitted). Accordingly, the Librarian is seemingly a principal officer that heads an Executive Department, and therefore, has the power to appoint inferior officers. Thus, given the manner in which the Librarian is appointed and considering many of the functions assigned to him, the plaintiff has not met its burden of showing that there is a substantial likelihood that it will succeed on the merits of its alternative Appointments Clause challenge.

    111

    2. Irreparably Harmed

    113

    The plaintiff argues that it will suffer irreparable harm in several ways if an injunction is not granted, primarily resulting from being required to participate in *44 the Webcasting III proceeding if the CR Board judges “are later determined to have been unconstitutionally seated in derogation of the Appointments Clause.” Pl.’s Mem. at 17-18. The plaintiff notes that where constitutional rights are involved, many courts have found that no further showing of irreparable injury is necessary, citing a series of cases where First, Fifth, and Fourteenth Amendment rights were at issue. Id. at 17 & n. 12. The plaintiff also argues that it will incur significant legal costs if it is forced to participate in the Webcasting III proceeding. Id. at 18. Specifically, the plaintiff argued that if the proceedings were not stayed before September 29, 2009, it would be required to potentially expend over one million dollars preparing “its written direct case on [the] 2011-2015 webcasting royalty rates”[7] and otherwise preparing and presenting its case before the CR Board judges, which would include “locating, retaining and paying expert witnesses, preparing written statements to support the case in chief, and all other ensuing costs of discovery, cross-examination, briefing, [and] preparing and presenting testimony.” Id. at 18-19. And it notes that even if this Court ultimately rules in its favor on its constitutional challenge, without an injunction it will incur the expenses related to these activities without any potential of recovering them from the defendants due to the Eleventh Amendment’s grant of governmental immunity from suit for the recovery of monetary damages. Id. at 19. Finally, the plaintiff contends that while the payment of litigation expenses is generally not grounds for an irreparable harm finding, the rule is inapplicable where the plaintiff is forced to incur expense as a result of having to participate in an unconstitutional proceeding. Pl.’s Reply at 29-30.

    115

    The defendants respond that a plaintiff seeking an injunction must show that irreparable injury is likely, rather than just merely possible. Defs.’ Mem. at 32. The defendants argue that the plaintiff’s mere assertion that it will suffer litigation expenses is insufficient to constitute irreparable harm, Defs.’ Mem. at 33; Int. Def.’s Opp’n at 20-21, and that the Supreme Court has already closed the door on the plaintiff’s position to the contrary. Defs.’ Mem. at 33; Int. Def.’s Opp’n at 20. Further, the defendants opine that proceedings allegedly tainted by a violation of the Appointments Clause is an insufficient basis for establishing irreparable harm, considering that the plaintiff relies solely on cases that have found irreparable harm based on alleged constitutional violations falling under the First, Fourth, Fifth, and Fourteenth Amendments. Defs.’ Mem. at 34-36. Finally, the defendants contend that the plaintiff’s financial expenditure based argument is factually misleading, arguing that much of the litigation costs the plaintiff will incur through participating in the Webcasting III proceeding have already been incurred. Defs.’ Mem. at 37-38; Int. Def.’s Opp’n at 21-23. Specifically, they state that the plaintiff would have already undertaken the effort of locating expert witnesses to support its economic theories and commenced the process of preparing the papers that were scheduled to be filed on September 29, 2009. Defs.’ Mem. at 37; Int. Def.’s Opp’n at 22. Furthermore, they note, the evidentiary hearings and discovery that Live365 will participate in had not yet been scheduled when its request for injunctive relief was made *45 and at that time it was several months before these events would have occurred. Defs.’ Mem. at 37; Int. Def.’s Opp’n at 23. SoundExchange also notes that Live365 is not being forced to incur litigation costs because its “participation in the [Webcasting III] proceeding is entirely voluntary.” Int. Def.’s Opp’n at 21.

    117

    The Supreme Court has held that ”[m]ere litigation expense, even substantial and unrecoupable cost, does not constitute irreparable injury,” FTC v. Standard Oil Co., 449 U.S. 232, 244, 101 S.Ct. 488, 66 L.Ed.2d 416 (1980) (citation and internal quotation marks omitted), and in this case the plaintiff has alleged nothing more than the potential expenditure of unrecoverable litigation costs. While these expenses are likely to be substantial based on the plaintiff’s representations, the Supreme Court has clearly held that this alone is insufficient to establish irreparable harm. Moreover, the defendants are logically correct in noting that much of the plaintiff’s preparation should have already been completed by the time the request for the injunction was made. Finally, the Court disagrees with the plaintiff’s assertion that this Court should conclude that the mere allegation of a constitutional violation is sufficient to constitute irreparable injury, even if the injury is merely financial. Pl.’s Mem. at 17; Pl.’s Reply Mem. at 28-29. The treatise authored by Wright, Miller & Kane is often cited for the proposition that ”[w]hen an alleged deprivation of a constitutional right is involved, most courts hold that no further showing of irreparable injury is necessary.” Fed. Prac. & Proc. 11A § 2948.1 (1995). However, plaintiffs relying on this principle usually assert personal denial of a constitutional right. For example, in McCormick v. Hirsch, 460 F.Supp. 1337, 1349 (M.D.Pa.1978), one of the cases relied upon by the plaintiff, the court found that the plaintiff’s assertion of a constitutional violation depriving him personally of his First Amendment right had sufficiently demonstrated irreparable harm, but that finding was made in conjunction with the court’s conclusion that ”[the] plaintiff ha[d] made a substantial showing that his First Amendment rights [would] be infringed if an injunction [was] not entered.” Id. at 1349. Therefore, the alleged constitutional violation was found to constitute irreparable injury per se, but only because the plaintiff had also demonstrated that he was likely to succeed on the merits of his constitutional claim. Id. Here, however, not only is the plaintiff not asserting that it is being deprived personally of a constitutional right, but it has also failed to make a showing that it is substantially likely to succeed on the merits of its constitutional challenge.[8] The plaintiff has *46 therefore failed to demonstrate that it will suffer irreparable harm if its request for an injunction is not granted.

    119

    3. Injury to the Defendants

    121

    Although the government defendants barely address this prong of the test, they do represent that a preliminary injunction will further compress the already tight schedule confronting the CR Board judges to complete the Webcasting III proceeding due to the Copyright Act’s statutory deadline for the issuance of a decision in the proceeding by December 16, 2010. Defs.’ Mem. 41-42. The plaintiff counters this concern, asserting that the defendants are exaggerating the impact a preliminary injunction will have on the Webcasting III proceeding. Pl.’s Reply at 33. Specifically, the plaintiff asserts:

    123

    To the extent the CR[Board] as a matter of course takes the time necessary, as circumstances dictate, to conduct such proceedings, with resulting rates not applying until all its work is complete, even if that means the statutory royalty period is already underway, the risk of “compressing” Webcasting III is illusory. If Webcasting III is delayed by a preliminary injunction, the CR[Board] (if it survives this litigation) can and will, just as it always has, take whatever time it needs before allowing new rates to take effect, even if it means that occurs after the statutory deadline.
    Id. at 33-34. Moreover, they argue that the September 29, 2009, deadline was a fiction created by the CR Board judges, who in fact ordered the submissions a month sooner than what was legislatively mandated. Id. at 34.

    125

    SoundExchange, on the other hand, specifically argues that it would be substantially harmed for several reasons if the injunction is granted. Int. Def.’s Opp’n at 29. First, SoundExchange contends that delaying the Webcasting III proceeding would likely prevent the CR Board judges from establishing rates, which it is relying on being issued by the date of the statutory deadline because ”[e]ven assuming this *47 Court elects to proceed in an expedited manner, [the] losing party is likely to appeal” any ruling issued by this Court further delaying when the new rates will take effect. Id. at 30. Second, it notes that failing to set the royalty rates prior to the statutory deadline would have a disruptive impact on the music industry. Id. at 31. As proof for this proposition, SoundExchange directs the Court’s attention to the fact that the rates for the current term were not set until seventeen months after the statutory deadline, resulting in many copyright owners sustaining significant economic hardship because webcasters, like Live365, were able to utilize transmitted digital copyrighted sound recordings during the period of the delay without ever having to pay the new royalty rates. Id. at 31-32. Third, SoundExchange speculates that staying the Webcasting III proceeding “likely will cause some webcasters to stop paying the appropriate statutory rates, or otherwise complying with the terms of the statutory license, under a mistaken interpretation of the impact of the injunction.” Id. at 33.

    127

    The Court agrees that there would be some adverse impact on SoundExchange and the copyright owners if the plaintiff’s request for an injunction were granted. At the very least, the delay in setting new rates and terms would deny copyright owners the ability to timely receive the new royalty rates. And consistent with SoundExchange’s second argument that the industry as a whole would be disrupted by a stay, the District of Columbia Circuit in Intercollegiate Broadcast System v. Copyright Royalty Bd. noted that ”[t]o hold the Librarian is not the head of a department … would invalidate the Judges’ determinations and call into question the status of every registered American copyright.” 574 F.3d 748, 756 (D.C.Cir.2009). Considering the individual harm SoundExchange will suffer and the injury the music industry as a whole would potentially sustain if an injunction were issued, the Court finds that the third prong of the injunction standard weighs against granting the plaintiff’s request for an injunction.

    129

    4. The Public Interest

    131

    The plaintiff primarily contends that the public interest would be served by precluding the CR Board judges from moving forward in violation of the Appointments Clause, Pl.’s Mem. at 21, arguing that the public interest in promoting judicial economy will be advanced by not forcing it (and others similarly situated) to litigate the Webcasting III proceeding, “with the public bearing the CR[Board]’s costs of conducting the proceeding, only to have the fruits of the proceeding—the CR[Board]’s determination—set aside because the [CR Board] Judges have been unconstitutionally appointed.” Id. at 21-22. The defendants argue in response that the costs to the public that will possibly be saved by preventing an “unconstitutional” proceeding from going forward overlooks the point that “Congress set forth specific time periods for the various procedural and substantive steps participants [in the Webcasting III proceeding] must complete throughout a ratesetting or distribution proceeding in order to have new rates in place by the time old ones expire,” and to disregard this legislative mandate and issue an injunction harms the public interest and “undermines the specific procedures that Congress has established.” Defs.’ Mem. at 42-43 (internal citation, quotation marks, and alteration omitted). Furthermore, SoundExchange asserts that a number of copyright owners and statutory licensees will be adversely affected if the Webcasting III proceeding is stayed because without newly adopted rates ”[l]icensees will not know what rates to pay, and some undoubtedly will simply refrain from paying … even as they continue to take *48 full advantage of the compulsory license.” Int. Def.’s Opp’n at 37. The Court finds that all parties have presented compelling reasons why the public interest will be advanced by either granting or denying an injunction in this case. Therefore, the parties’ positions are essentially in equipoise as to this fourth prong of the injunction standard.

    133

    III. Conclusion

    135

    The granting of a preliminary injunction is a drastic remedy. Here, issuing an injunction would, at a minimum, disrupt the progression of in the Webcasting III proceeding, and therefore inevitably delay its completion for an extended period of time. And because the plaintiff is unlikely to succeed on the merits of its constitutional challenges to the appointments of the CR Board judges, the absence of any non-financial injury it will suffer if an injunction is not granted, the harm the defendants would occasion as a result of the issuance of an injunction, and the public interest prong of the injunction standard not favoring either party, the plaintiff has failed to meet the high burden required to obtain injunction. The motion for a preliminary injunction it therefore denied.

    137

    In addition, for the reasons set forth above, the Court also denies the government’s Motion to Dismiss for Lack of Subject Matter Jurisdiction.

    139

    SO ORDERED this 23rd day of February, 2010.[9]

    141

    [1] “The Copyright Royalty Board is the institutional entity in the Library of Congress that. . . house[s] the Copyright Royalty Judges, appointed pursuant to 17 U.S.C. [§] 801(a), and their staff.” Copyright Royalty Board, 37 C.F.R. § 301.1 (2010).

    143

    [2] SoundExchange is a “not-for-profit organization that represents the interests of the recipients of the royalties set by the [CR Board].” SoundExchange’s Memorandum of Points and Authorities in Support of Its Motion for Leave to Intervene as a Defendant at 2.

    145

    [3] The following facts are either not in dispute or are matters of public record.

    147

    [4] While Live365 is a single webcaster among many in the Webcasting III proceeding, SoundExchange alone represents thousands of copyright owners. Int. Def.’s’s Mem. at 3-4. Furthermore, SoundExchange is the only party in the Webcasting III proceeding representing the interests of copyright owners. Id. at 3. Thus, the numerous webcasters, like Live365, that are a party to this litigation represent interests contrary to SoundExchange’s. Id. at 4. Therefore, SoundExchange moved to intervene to represent the private interests at stake in this litigation. Id.

    149

    [5] The term “defendants” refers to both the government and intervenor SoundExchange where each party raised identical arguments.

    151

    [6] The Fourth Circuit ruled that the Register of Copyrights is constitutionally appointed by the Librarian under the Appointments Clause because the Library is an executive office. Eltra Corp. v. Ringer, 579 F.2d 294, 300 (4th Cir.1978).

    153

    [7] Obviously, the September 29 date has long passed. However, the application for injunctive relief was not submitted to the Court until September 2, 2009, and the motion was calendared for a hearing as soon thereafter as possible. And due to the complexity of the issues raised by the parties and the press of other cases on this Court’s docket, the motion has been addressed as expeditiously as possible.

    155

    [8] SoundExchange also claims that the plaintiff’s delay in filing its motion precludes it from obtaining injunctive relief based on the doctrine of laches. Int. Def.’s Opp’n at 23. SoundExchange argues that under the laches doctrine, a court should not grant relief where the moving party failed to exercise due diligence and the party asserting the defense would be prejudiced. Id. at 24. SoundExchange claims that the plaintiff should have filed its complaint in January 2009 when the Webcasting III proceeding commenced, which would have allowed the court to adjudicate the matter before the July 10, 2009 decision by the District of Columbia Circuit not to address the constitutionality of the CR Board judges’ appointments in Intercollegiate Broadcast System, Inc., 574 F.3d at 755-56 (refusing to address the constitutional challenge of the CR Board judges’ appointments because the issue had not been raised until the filing of a supplemental brief, which the court found was an “incomplete treatment of the Appointments Clause issue”). Int. Def.’s Opp’n at 25-26. Furthermore, SoundExchange rejects the validity of the plaintiff’s position that it did not file this action earlier because it was attempting to negotiate a settlement under the Webcaster Settlement Act of 2009, arguing that the plaintiff could have initiated this litigation while also pursuing an administrative settlement. Id. at 25. And, it points out that the plaintiff waited almost two additional months following the Circuit Court’s decision in Intercollegiate Broadcast System, Inc., before initiating this lawsuit. Id.

    157

    The Court finds the laches doctrine inapplicable here. Successful reliance on the laches defense requires that the movant prove ”(1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense.” Pro-Football, Inc. v. Harjo, 567 F.Supp.2d 46, 53 (D.D.C.2008) (citations omitted). Here, as Live365 correctly asserts, ”[w]hen the CR [Board] announced commencement of the [Webcasting III proceeding] in January [last year], the Webcasting II appeal—where another party had raised the Appointment Clause [challenge]—was still pending, and it was as likely as not the D.C. Circuit would decide the issue.” Pl.’s Reply at 11. That being the case, it was not unreasonable for Live365 to conclude that any separate Appointments Clause challenge would have “either [been] unsound or moot” by the time the separate challenge would have been addressed. Id. Live365 then waited only two months after the District of Columbia Circuit refused to rule on this issue in Intercollegiate Broad. System, Inc., and only several weeks after negotiations with SoundExchange failed, causing it to opt to participate in the Webcasting III proceeding before initiating this proceeding. These periods of time—the delay prior to the issuance of the ruling in Intercollegiate Broadcast System, Inc., the delay after the ruling, and the several weeks after negotiations failed—are far shorter than what has traditionally been found to constitute an unreasonable delay under the laches doctrine by courts in this Circuit. See, e.g., N.A.A.C.P. v. N.A.A.C.P. Legal Defense & Educational Fund, Inc., 753 F.2d 131, 137 (D.C.Cir.1985) (holding that thirteen year delay in resuming negotiations with defendant constituted unreasonable delay); Pro-Football, Inc., 567 F.Supp.2d at 54 (finding an almost eight year delay in bringing trademark claim unreasonable delay). The Court therefore declines to reject the plaintiff’s request for injunctive relief on this ground.

    159

    [9] This Memorandum Opinion accompanies the Order that was issued on September 29, 2009 and the Final Order issued on February 23, 2010.

  • 5 "Music Publishers to Join YouTube Suit," The New York Times (August 7, 2007)

  • 6 ASCAP's Survey and Distribution System: Rules & Policies (.pdf)

  • 7 Jacqui Cheng, "Judge: ringtones aren’t performances, so no royalties," Ars Technica (October 15, 2009)

  • 8 Evan Brown, "Downloading a song is not a performance under the Copyright Act," Internet Cases (September 29, 2010)

  • 9 US v. ASCAP (In re Cellco Partnership), 663 F.Supp.2d 363 (SDNY 2009) (Excerpts)

    1

    663 F.Supp.2d 363 (2009)
    In re Application of CELLCO PARTNERSHIP d/b/a Verizon Wireless.
    Related to United States of America, Plaintiff,
    v.
    American Society of Composers, Authors, and Publishers, Defendant.
    Nos. 09 Civ. 7074(DLC)(MHD), 41 Civ. 1395(DLC).

    3

    United States District Court, S.D. New York.
    October 14, 2009.

    5

    *366 David Leichtman, Hillel Parness, Eleanor Lackman, Lovells LLP, Richard Reimer, Christine Pepe, American Society of Composers, Authors, and Publishers, New York, NY, for American Society of Composers, Authors, and Publishers.

    7

    Bruce Joseph, Andrew McBride, Michael Sturm, Wiley Rein LLP, Washington, DC, for Cellco Partnership d/b/a Verizon Wireless.

    9

    Michael Salzman, Jessica Feldman, Hughes Hubbard & Reed LLP, Marvin Berenson, Joseph DiMona, John Coletta, Broadcast Music, Inc., New York, NY, for Amicus Curiae Broadcast Music, Inc.

    11

    Andrea Williams, CTIA—The Wireless Association, Washington, DC, Bruce Keller, Jeffrey Cunard, Michael Potenza, Richard Lee, Debevoise & Plimpton LLP, New York, NY, for Amicus Curiae CTIA— The Wireless Association.

    13

    Gary Shapiro, Consumer Electronics Association, Arlington, VA, for Amicus Curiae Consumer Electronics Association.

    15

    Lee Knife, Digital Media Association, Washington, DC, for Amicus Curiae Digital Media Association.

    17

    Michael Elkin, Thomas Lane, Winston & Strawn, New York, NY, Fred von Lohman, Electronic Frontier Foundation, San Francisco, CA, for Amici Curiae Electronic Frontier Foundation, Public Knowledge, and Center for Democracy and Technology.

    19

    Heidi Salow, DLA Piper, Washington, DC, for Amicus Curiae Internet Commerce Coalition.

    21

    C. Paul Spurgeon, Society of Composers, Authors, and Music Publishers of Canada, Toronto, Ontario, Canada, Al Daniel, Jr., Toby Butterfield, Christopher Marino, New York, NY, for Amicus Curiae Society of Composers, Authors, and Music Publishers of Canada.

    23

    Kenan Popwell, Society of European Stage Authors & Composers, Inc., New York, NY, John Beiter, Zumwalt, Almon & Hayes PLLC, Nashville, TN, for Amicus Curiae Society of European Stage Authors & Composers, Inc.

    25

    Jonathan Banks, United States Telecom Association, Washington, DC, for Amicus Curiae United States Telecom Association.

    27

    OPINION & ORDER

    29

    DENISE COTE, District Judge:

    31

    This summary judgment motion presents the question of whether a retail wireless communications company requires a public performance license for musical compositions because it provides ringtones to its customers. For the following reasons, it does not.

    33

    BACKGROUND

    35

    Cellco Partnership d/b/a Verizon Wireless (“Verizon”) began this proceeding by filing its January 23, 2009 application for a determination of reasonable fees for a blanket license for the public performance of musical compositions in the repertory of the American Society of Composers, Authors, and Publishers (“ASCAP”).[1] *367 Verizon is a retail wireless communications company. ASCAP is a performing rights organization that licenses on a non-exclusive basis the non-dramatic public performance rights to musical works.[2]

    37

    Verizon sells ringtones, amongst other products and services. A ringtone is “a digital file of a portion of a musical composition or other sound” that is designed to be played by a customer’s telephone in order to signal an incoming call in the same manner as would a telephone ring. A customer can download a ringtone either from the internet or through a Verizon telephone. To obtain a ringtone from Verizon, a customer must purchase it and download it to a cellular telephone.[3] Downloading a typical thirty-second ringtone takes a matter of seconds. A ringtone cannot be played while it is being downloaded. After a ringtone has been downloaded, a digital file appears on the customer’s telephone. The customer can listen to the downloaded ringtone by clicking on the digital file, but only after it has been fully downloaded.

    39

    After a ringtone is downloaded, the underlying audio file is stored on the telephone. A customer can then set her telephone to play the ringtone when her telephone receives an incoming call. The customer determines whether and where a ringtone will play when she receives a call by controlling whether her telephone is on or off, whether the telephone is set to indicate an incoming call by playing a ringtone or by some other method (e.g., normal ringing, vibrating), and where the telephone is at any given point. When a ringtone rings, the music or sound clip plays from the file stored on the telephone.

    41

    Verizon’s role in playing a ringtone is that it sends a signal to a customer’s telephone to indicate an incoming call. That signal is the same regardless of whether or not the customer has set her telephone to indicate an incoming call with a ringtone. Verizon does not monitor when and where customers’ ringtones play, and it does not earn any money from ringtones beyond the fee paid for the initial download transaction.

    43

    On May 22, 2009, Verizon filed this motion for summary judgment on the question of whether it must pay public performance licensing fees for ringtones.[4] *368 Verizon filed its reply on June 25. On July 22, this case was reassigned to this Court. Parties were given leave to file supplemental letters discussing recent developments in the law, which became fully submitted on August 28.

    45

    DISCUSSION

    47

    ASCAP argues that Verizon engages in public performances of musical works when it downloads ringtones to customers. In addition, ASCAP argues that Verizon is both directly and secondarily liable for public performances of musical works when customers play ringtones on their telephones. Verizon seeks summary judgment in its favor on each theory of liability.

    49

    Summary judgment may not be granted unless all of the submissions taken together “show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c);. The moving party bears the burden of demonstrating the absence of a material factual question, and in making this determination, the court must view all facts in the light most favorable to the non-moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Roe v. City of Waterbury, 542 F.3d 31, 35-36 (2d Cir.2008). When the moving party has asserted facts showing that the non-movant’s claims cannot be sustained, the opposing party must “set forth specific facts showing that there is a genuine issue for trial,” and cannot rest on the “mere allegations or denials” contained in the pleadings. Fed.R.Civ.P. 56(e); accord Wright v. Goord, 554 F.3d 255, 266 (2d Cir.2009). That is, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Only disputes over material facts—facts that might affect the outcome of the suit under the governing law—will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); accord Roe, 542 F.3d at 35.

    51

    The protection given to copyrights is wholly statutory. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 431, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). The Copyright Act does not give a copyright owner control over all uses of his work, but instead grants ”`ex-clusive’ rights to use and to authorize the use of his work” in the specific ways enumerated in the statute. Id. at 432-33, 104 S.Ct. 774.

    53

    The rights at issue in this litigation constitute only one of the many rights created by the copyright statute. To begin with, there are separate bundles of rights in a musical composition and in its embodiment in a sound recording. “Copyright protection subsists … in original works of authorship fixed in any tangible medium of expression,” including “musical works” and “sound recordings.”[5] 17 U.S.C. § 102. “Sound recordings and their underlying musical compositions are separate works with their own distinct copyrights.” Palladium Music, Inc. v. EatSleepMusic, Inc., 398 F.3d 1193, 1197 *369 n. 3 (10th Cir.2005). Whereas ”[t]he author of a musical composition is generally the composer, and the lyricist, if any,” ”[t]he author of a sound recording is the performer(s) whose performance is fixed, or the record producer who processes the sounds and fixes them in the final recording, or both.” Copyright Office Circular 56A at 1 (“Copyright Registration of Musical Compositions and Sound Recordings”) (available at http://www.copyright.gov/ circs/circ56a.pdf); see also Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 571 F.3d 69, 72-73 (D.C.Cir.2009) (per curiam). ASCAP represents owners of the copyright in the musical composition only and therefore does not negotiate licenses in sound recordings.[6]

    55

    A copyright owner may hold as many as six exclusive rights. They are the rights

    57

    17 U.S.C. § 106 (emphasis supplied).

    59

    Each of these six rights may be owned and conveyed separately. 17 U.S.C. § 201. The rights to reproduce and to distribute musical works, see 17 U.S.C. § 106(1) and (3), which are often referred to as mechanical rights, are governed by 17 U.S.C. § 115. See 9 Melville B. and David Nimmer, Nimmer on Copyright Appendix 16 (2009) (Chapter IX of Second Supplementary Register’s Report on the General Revision of the U.S. Copyright Law (1975), entitled “Compulsory License for Making and Distributing Phonorecords (“The Mechanical Royalty’)”). Disagreements over license fees for mechanical rights in a musical work are resolved by Copyright Royalty Judges, 17 U.S.C. § 115(c);(3)(C), and are not at issue here. It is only the fourth right in 17 U.S.C. § 106 that will be addressed in this Opinion.

    61

    ASCAP licenses only the public performance right in musical works established in 17 U.S.C. § 106(4). Buffalo Broad. Co., Inc. v. Am. Soc’y of Composers, Authors and Publishers, 744 F.2d 917, 920 (2d Cir.1984). This Opinion addresses whether 17 U.S.C. § 106(4) requires Verizon to pay ASCAP a public performance license fee for ringtones.

    63

    *370 Several of the terms relevant to a construction of § 106(4) are defined in 17 U.S.C. § 101. Under § 101, to “perform” a work means “to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.” To perform a work “publicly” means:

    65

    17 U.S.C. § 101 (emphasis supplied). To “transmit” a performance is “to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent.” Id.

    67

    The Copyright Act includes exemptions for certain public performances of copyrighted music. Subsection 110(4) of Title 17 provides that the following performances do not constitute a public performance for the purposes of the Copyright Act and therefore do not require a public performance license:

    69

    17 U.S.C. § 110(4).

    71

    To be held liable for direct infringement of the public performance right, a defendant must have engaged in conduct that is volitional or causally related to that purported infringement. Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121, 130-31 (2d Cir.2008) (considering infringement under 17 U.S.C. § 106(1)). In other words, to impose direct liability, there must be a “nexus sufficiently close and causal to the illegal [infringement] that one could conclude that the [defendant] himself trespassed on the exclusive domain of the copyright owner.” Id. at 130 (citation omitted).

    73

    A defendant may also be secondarily liable for another’s public performance of a copyrighted musical work. While ”[t]he Copyright Act does not expressly render anyone liable for infringement committed by another,” it “does not preclude the imposition of liability for copyright infringements on certain parties who have not themselves engaged in the infringing activity.” Sony, 464 U.S. at 434-35, 104 S.Ct. 774. Through contributory infringement, one infringes “by intentionally inducing or encouraging direct infringement.” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005). Vicarious infringement exists where one “profit[s] from direct infringement while declining to exercise a right to stop or limit it.” Id. As these definitions suggest, in order to hold a defendant secondarily liable someone else must have directly infringed the public performance right. See id. at 940, 125 S.Ct. 2764 (”[T]he inducement theory of course requires evidence of actual infringement by recipients of the device.”); Faulkner v. Nat’l Geographic Enters. Inc., 409 F.3d *371 26, 40 (2d Cir.2005) (”[T]here can be no contributory infringement absent actual infringement.”); Matthew Bender & Co. v. West Publ’g Co., 158 F.3d 693, 706 (2d Cir.1998) (rejecting plaintiff’s contributory infringement claim, in part, because the plaintiff “has failed to identify any primary infringer”).

    75

    1. Downloading Ringtones

    77

    ASCAP contends that Verizon’s transmission of a ringtone to a customer’s cellular telephone requires a public performance license. While it is undisputed that the act of reproducing and distributing a ringtone implicates the mechanical rights in a musical work created by the Copyright Act, ASCAP asserts that the transmission of a ringtone to a customer’s cellular telephone is also a public performance of a musical work governed by 17 U.S.C. § 106(4). Based on undisputed facts, however, Verizon has shown that its transmission of a ringtone to a cellular telephone customer does not constitute a performance of a musical work “publicly,” as that term is defined in 17 U.S.C. § 101.

    79

    The parties agree that this question does not implicate the first clause of the definition of the term “publicly” contained in § 101, and focus their arguments instead on its second clause (hereinafter “Transmission Clause”), which reads in pertinent part:

    81

    17 U.S.C. § 101. Boiled down to its essence, the question becomes whether in downloading a ringtone to a customer’s cellular telephone Verizon transmits a performance of the work to the public.

    83

    In analyzing whether the transmission to a cellular telephone qualifies as a transmission of the work to the public, the focus is on the transmission itself and its potential recipients, and not on the potential audience of the underlying work or ringtone that rests on Verizon’s file servers.[8] Cartoon Network, 536 F.3d at 134-35. As the Second Circuit has explained, since the Transmission Clause speaks of those “capable of receiving the performance,” instead of those “capable of receiving the transmission,” it is the “transmission of a performance that is itself a performance” for purposes of § 101. Id. at 134. Because only one subscriber is capable of receiving this transmission or performance, the transmission is not made to the public and is not covered by the Transmission Clause, at least when considered by itself. This transmission of a “unique copy … limit[s] the potential audience of a transmission and is therefore relevant to whether that transmission is made `to the public.’” Id. at 138.

    85

    Because the Transmission Clause “directs us to identify the potential audience of a given transmission, i.e., the person `capable of receiving’ it, to determine whether that transmission is made `to the *372 public,’” id. at 139, and because one may look downstream and consider whether the transmission of the ringtone to the cellular telephone is but one link in a chain of transmissions to the public, id. at 137, ASCAP also urges that the downloading of the ringtone is but the first link in a chain of transmission to the public. As described below, however, there is no qualifying public performance under § 106(4) when the customer uses the ringtone to alert her to an incoming call. Thus, even when the downloading of a ringtone is considered as the first link in a chain of transmissions, it does not qualify as a public performance.[9]

    87

    This analysis flows from the Court of Appeals’ recent decision in Cartoon Network, 536 F.3d 121. There, owners of copyrighted television programs alleged that Cablevision’s Remote Storage Digital Video Recorder (“RS-DVR”) system infringed their exclusive rights to the reproduction and public performance of the copyrighted works. The RS-DVR system allowed a Cablevision customer to record cable television programs onto hard drives stored in a remote location, and to receive a playback transmission of the recorded programs from the remote hard drive to his home television. The Second Circuit considered whether the recording of the program on the RS-DVR constituted an unauthorized reproduction and whether the playback of the program constituted an unauthorized public performance, in violation of §§ 106(1) and (4), respectively.

    89

    While Cartoon Network was not required to address the public performance right in the context of the transmission of the program to the RS-DVR, the act most analogous to the downloading of a ringtone,[10] its discussion of the Transmission Clause has important ramifications for that step in the transmission to the customer as well.[11] Indeed, in its discussion of National Football League v. PrimeTime 24 Joint *373 Venture, 211 F.3d 10 (2d Cir.2000) (“NFL”), the Court of Appeals observed that the transmission to the RS-DVR could only be considered a transmission “to the public” where it is but one link in a chain whose “final link was undisputedly a public performance.” Cartoon Network, 536 F.3d at 137.[12]

    91

    Over a year before the decision in Cartoon Network was issued, the Honorable William C. Conner, who presided over this litigation with distinction for many years, used a different analysis of the Transmission Clause to arrive at a similar result. He held that downloading music from server computers (operated by AOL LLC and others) to a client computer was not a public performance of a musical work. United States v. Am. Soc’y of Composers, Authors and Publishers, 485 F.Supp.2d 438, 441-42 (S.D.N.Y.2007) (hereinafter “Download Decision”). Judge Conner began with the Transmission Clause’s requirement that a “performance” of the work had to be transmitted, then turned to the Copyright Act’s definition of “perform,” 17 U.S.C. § 101, and concluded that “in order for a song to be performed, it must be transmitted in a manner designed for contemporaneous perception.” Id. at 443 (emphasis supplied). Since the downloading of music was effected by copying a digital file “from one computer to another in the absence of any perceptible rendition,” id. at 444,[13] Judge Conner classified the transaction as “a data transmission rather than a musical broadcast” or performance, id. at 446, and an act more properly categorized as a reproduction of a work governed by § 106(1), id. at 444, or a digital phonorecord delivery as described in 17 U.S.C. § 115(d). Id. at 447.

    93

    Both the Cartoon Network decision and the Download Decision required the plaintiff to show a linkage between the transmission and a public performance. The application of the line of analysis used in each case, would have led to the same finding in both cases, to wit, that the respective transmissions were not covered by the Transmission Clause because the transmissions did not cause a public performance to take place. And, although Cartoon Network relies on the meaning of the phrase “the public” and the Download Decision explores the meaning of the term “performance,” application of the analysis used in either decision would result in an identical conclusion here: the downloading of a ringtone is not a public performance encompassed by the Transmission Clause.

    95

    In sum, where there is a transmission of the performance of a musical *374 work directly to the public, that transmission is governed by § 106(4). Where the transmission itself does not allow the public to perceive the performance as a work that is being rendered, but is only an intervening transmission in the downstream delivery of the performance to the means by which the public will be capable of receiving the performance, then that transmission may also be governed by § 106(4).[14] ASCAP has failed to raise a question of fact that the downloading of a ringtone from Verizon to a customer’s cellular telephone is a public performance of a musical work under either branch of this analysis.

    97

    ASCAP’s effort to escape the implications of the foregoing analysis fails. ASCAP argues that ringtones are “capable of” being heard during the downloading process. ASCAP does not contend, however, that a Verizon customer can actually listen to a ringtone while she is downloading it; it acknowledges that the ringtone cannot be played before the transmission is concluded because Verizon has constructed the transmitted file “that way.” ASCAP’s argument amounts to a claim that Verizon could change or enable its technology to allow a user to listen to a ringtone while downloading it. This argument is not addressed to the technology at issue in this case and does not present a factual context that is ripe for review. In any event, the Cartoon Network decision presents an insurmountable impediment to this argument. Even if the customer could listen to the download as it was being received, and contemporaneously perceive it as the musical work, that would not constitute a public performance.

    99

    2. Playing Ringtones

    101

    ASCAP next argues that there is a public performance of musical works when cellular telephones play ringtones to signal incoming calls. It contends that Verizon is either directly or secondarily liable for copyright infringement for these public performances. Verizon has shown that it is entitled to summary judgement as well on these claims. When a ringtone plays on a cellular telephone, even when that occurs in public, the user is exempt from copyright liability, and Verizon is not liable either secondarily or directly.[15]

    103

    a. Secondary Liability

    105

    ASCAP asserts that Verizon is secondarily liable when a ringtone plays. Secondary liability depends upon a finding that there has been a direct or primary infringement, and Verizon has shown that the cellular telephone user is not liable for copyright infringement even when the telephone rings in a public setting.

    107

    As already noted, the Copyright Act exempts from 17 U.S.C. § 106(4) those performances of a musical work that occur within the “normal circle of a family and its social acquaintances,” 17 U.S.C. § 101 (definition of “publicly”), and further exempts

    109

    17 U.S.C. § 110(4).

    111

    The expectation of profit is important to determining whether a performance fits within the § 110(4) exemption. If a performance occurs with no expectation of profit, it might qualify for this exemption if all of the statutory requirements are met; if, however, a performance occurs with the expectation of profit, even if no profit is made, the performance may not fall within this exemption. Herbert v. Shanley Co., 242 U.S. 591, 595, 37 S.Ct. 232, 61 L.Ed. 511 (1917) (“Whether [the performance of music] pays or not, the purpose of employing it is profit, and that is enough.”); accord Broadcast Music, Inc. v. 315 West 44th St. Rest. Corp., No. 93 Civ. 8082(MBM), 1995 WL 408399, *3 (S.D.N.Y. July 11, 1995).

    113

    The playing of ringtones fits comfortably within these statutory exemptions. When a ringtone plays only in the presence of the “normal circle of a family and its social acquaintances” this performance would not count as a public performance under 17 U.S.C. § 101. On occasions when Verizon customers have activated their ringtones, the telephone rings in the presence of a broader audience, and it rings at a level to be heard by others, that playing of a musical work satisfies all of the requirements of the § 110(4) exemption: Verizon customers are not playing the ringtones for any “commercial advantage;” they do not get paid any fee or compensation for these performances; and they do not charge admission. In sum, customers do not play ringtones with any expectation of profit. The playing of a ringtone by any Verizon customers in public is thus exempt under 17 U.S.C. § 110(4) and does not require them to obtain a public performance license.

    115

    ASCAP argues that the § 110(4) exemption should not apply since “the customer benefits by purchasing a product and service it desires.” This personal, non-monetary benefit does not vitiate the application of the § 110(4) exemption. The only commercial advantage that ASCAP identifies as being associated with the playing of a ringtone is a commercial benefit to Verizon, specifically, the possibility that others may be encouraged to purchase ringtones when they hear ringtones.[16] A potential commercial advantage to Verizon, however, does not suggest that its customers may not qualify for the § 110(4) exemption. To paraphrase the Sony Court, ”[o]ne may search the Copyright Act in vain for any sign that the elected representatives of the millions of people” who own cellular telephones “have made it unlawful” to allow that telephone to ring in a public setting. Sony, 464 U.S. at 456, 104 S.Ct. 774.

    117

    The fact that cellular telephone users are not infringers of ASCAP’s rights in the public performance of musical works defeats ASCAP’s claim that Verizon is secondarily *376 liable for their infringement. ”[T]he concept of contributory infringement is merely a species of the broader problem of identifying the circumstances in which it is just to hold one individual accountable for the actions of another.” Id. at 435, 104 S.Ct. 774. Thus, “one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a `contributory’ infringer.” Faulkner, 409 F.3d at 40 (citation omitted); see also Softel, Inc. v. Dragon Med. & Scientific Communc’ns, Inc., 118 F.3d 955, 971 (2d Cir.1997). As already described, however, secondary liability depends on a finding that there has been a direct or primary infringement of the rights established under the Copyright Act. Grokster, 545 U.S. at 940, 125 S.Ct. 2764; Faulkner, 409 F.3d at 40; Matthew Bender & Co., 158 F.3d at 706.[17]

    119

    ASCAP argues that Verizon is secondarily liable for its customers’ public performances because it has failed to show that “each and every customer would be able to meet its burden of proof to show that his or her `performance’ of ringtones would satisfy the § 110(4) exemption.” While a proponent of an affirmative defense ordinarily bears the burden of proving that it applies, Infinity Broad. Corp. v. Kirkwood, 150 F.3d 104, 107 (2d Cir. 1998), since ASCAP is seeking to impose secondary liability on Verizon for its customers’ conduct, it is likely that the burden of proving that that conduct is not exempt from liability rests on ASCAP. It is unnecessary to resolve this issue, however, since if Verizon bears the burden of showing that the § 110(4) exemption applies to its customers, it has carried that burden. The law does not impose an insurmountable burden on Verizon to show precisely how each of its customers has actually used her telephone, but only requires it to demonstrate that customers as a group do not exhibit any expectation of profit when they permit the telephones to ring in public. ASCAP having failed to raise a question of fact that Verizon customers do engage in performances that require licenses,[18] Verizon cannot be held secondarily liable for its customers’ ringtone “performances.”[19]

    121

    b. Direct Liability

    123

    The heart of ASCAP’s opposition to this motion for summary judgment rests on its contention that Verizon itself engages in a public performance of copyrighted musical works when ringtones play in public on customers’ cellular telephones. ASCAP’s theory of direct liability for infringement is that Verizon “controls the entire series of steps that allow and trigger” the cellular telephone to perform the musical work in public. It contends that these actions constitute the performance “publicly” of a musical work under both prongs of § 101’s definition of the term “publicly,” i.e., that it is both a performance of a musical work “at a place open to the public,” see id. at (1), and a communication of a performance to the public, see *377 id. at (2). Insofar as the second prong is concerned, ASCAP admits that Verizon does not “transmit” a musical work when a cellular telephone rings in public,[20] it relies instead on that prong’s alternative requirement that the defendant “transmit or otherwise communicate a performance … to the public.” Id. (emphasis supplied).[21]

    125

    ASCAP identifies the following actions by Verizon as constituting the control over the performance process which renders Verizon liable for direct infringement: Verizon supplies the ringtones; it encourages customers to purchase ringtones for public playback; it transmits the ringtones to the subscribers’ telephones; it places a code on the ringtones that prevents customers from forwarding them; it provides and supports a cellular telephone network; it “commands, enables and controls” the playing of ringtones “by triggering the tones when calls are received;” and it is able to terminate a customer’s cellular telephone service at any time.

    127

    ASCAP has failed to identify an issue of fact which prevents entry of judgment in Verizon’s favor on ASCAP’s theory that Verizon is directly liable for infringement of § 106(4) when ringtones downloaded from Verizon play in public on a Verizon telephone.[22] Verizon does not “recite, render, play, dance, or act [the ringtone] either directly or by means of any device,” and thus does not “perform” the music, as that term is defined in the Copyright Act. 17 U.S.C. § 101. Nor does Verizon engage in conduct that can be said to cause a ringtone to be played in public. See Cartoon Network, 536 F.3d at 130-31. Verizon’s only role in the playing of a ringtone is the sending of a signal to alert a customer’s telephone to an incoming call. That signal is the same whether the customer has downloaded a ringtone or not, whether she has set her telephone to play a ringtone when she receives a call or not, whether she is in a public setting or not, and whether she has the ringtone volume turned high or low. Once the customer has downloaded the ringtone onto her telephone, she controls the telephone and makes the decisions that determine whether that ringtone will be triggered by an incoming call signal. And, of course, it is someone else entirely—the caller—who has initiated this entire process.

    129

    The other components of Verizon’s putative “control” over the playing of the ringtone in public are too attenuated from that “performance” to render Verizon liable.[23] *378 These include its operation of a cellular telephone network and its ability to disconnect a customer from that service. The marketing of ringtones and the transmission of individual unique copies of ringtones to a customer’s cellular telephone certainly implicate rights protected by the Copyright Act, but they are not sufficiently connected to the public performance of the downloaded ringtone to implicate the right protected by § 106(4).[24]

    131

    ASCAP relies heavily on the recent decision in Arista Records LLC v. Usenet.com, Inc., 633 F.Supp.2d 124 (S.D.N.Y.2009), for the proposition that a company’s provision of a network and its active encouragement of use of the network provides the nexus supporting direct liability. In Usenet.com, the defendants ran online bulletin boards on which users posted sound recordings and other messages that could be “read” by others. Id. at 130. Users regularly downloaded the sound recordings as music files, a practice that the court found was among “the most popular” of the services provided by the defendants. Id. at 148. The court held that the defendants were “actively engaged” in the “exchange of content between users who upload infringing content and users who download such content.” Id. at 149.

    133

    ASCAP’s reliance on this case fails. For starters, the defendant’s volitional conduct in Usenet.com rendered them liable for infringement of the distribution rights protected by § 106(3). Those rights are not at issue here; it is undisputed that Verizon pays mechanical license fees to ASCAP’s members. Usenet.com simply does not elucidate the degree of volitional conduct that would render a transmitter of music files liable for a public performance of musical works. While it is undisputed that “Verizon markets ringtones as a way of expressing one’s tastes and personality to the outside world,” that fact falls far short of showing Verizon’s participation in the customer’s playing of ringtones in public. To find Verizon directly liable, there must be conduct by Verizon that is “sufficiently close and causal” to its customer’s decision to activate the ringtone in a public setting. See Cartoon Networks, 536 F.3d at 130 (citation omitted).

    135

    ASCAP argues that the fact that Verizon takes no particular step to cause a ringtone to be played in public should not be determinative of its liability since many infringers like Napster, Aimster and Grokster rely on automated systems that require no human intervention by the party enjoying the revenue. This argument skips over the careful analysis of the statutory framework and the individual factual settings in each case that is necessary to determine liability. The three cases on which ASCAP relies all imposed secondary liability on the defendants, not direct liability. Grokster, 545 U.S. 913, 929-31, 125 S.Ct. 2764; In re Aimster Copyright Litig., 334 F.3d 643, 645, 651 (7th Cir.2003); A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1011, 1019, 1027 (9th Cir.2001). In addition, despite the accusation that Verizon enjoys revenue from publicly played ringtones, Verizon makes no revenue from the playing of ringtones, in public or elsewhere. It makes revenue from selling ringtones, and it already pays a mechanical licensing fee in connection with those sales. This litigation will resolve whether it must pay as well for the previewing of ringtones. While Verizon may *379 theoretically have a duty to pay licensing fees under two separate provisions of § 106 for the same underlying activity, the issue remains whether its conduct creates direct liability for the playing of ringtones in public. In that connection, its use of an automated system to signal the receipt of an incoming call on a customer’s cellular telephone remains highly relevant to an evaluation of whether there is a sufficient nexus between Verizon’s conduct and the ringing of that telephone in public to require Verizon to pay as well for a § 106(4) license. As already described, there is no sufficient nexus.

    137

    Finally, ASCAP argues that Verizon exerts sufficient “control” over the playing of the musical works in public because it has the ability to avoid the infringement by simply not including ASCAP ringtones in its library or paying ASCAP for a performance license. This argument begs the question. ASCAP has not shown any infringement of its members’ rights by the playing of ringtones in public from Verizon’s customers’ telephones. The customers are not liable for copyright infringement, and neither is Verizon.

    139

    CONCLUSION

    141

    Verizon’s May 22, 2009 motion for summary judgment is granted.

    143

    SO ORDERED.

    145

    [1] Pursuant to a consent decree stemming from antitrust litigation filed by the United States Department of Justice against ASCAP in 1941, this Court sits as a rate court to resolve disputes over ASCAP’s licensing fees for the public performance of its members’ musical works.

    147

    The Second Amended Final Judgment entered in the United States’ civil antitrust action against ASCAP (“AFJ2”) provides in Section IX that anyone desiring a license for the public performance of any ASCAP musical composition may apply to ASCAP therefor and, upon such application, may perform the music for fees to be determined later. Section IX further provides that if the parties cannot agree on the fee for such license, either party may apply to this Court to set reasonable interim and final fees.

    149

    United States v. Am. Soc’y of Composers, Authors and Publishers, 616 F.Supp.2d 447, 448 (S.D.N.Y. May 13, 2009) (Conner, J.) (citation omitted).

    151

    [2] ASCAP is prohibited from “acquiring exclusive music performing rights” from its members and from “interfering with the right of any member to issue to any user a non-exclusive license for music performing rights.” Buffalo Broad. Co., Inc. v. Am. Soc’y of Composers, Authors and Publishers, 744 F.2d 917, 923 (2d Cir.1984).

    153

    [3] Pursuant to a ruling by Copyright Royalty Judges, Verizon pays songwriters and music publishers a royalty of 24 cents per each download of a ringtone for the reproduction and distribution of their musical works. This is more than two times the royalty rate it pays them for permanent downloads of entire songs through programs such as iTunes. That royalty rate is 9.1 cents per each download of a song. In the Matter of Mech. & Digital Phonorecord Delivery Rate Adjustment Proceeding, No. RF 2006-3, 74 Fed.Reg. 4510, 4510 & 4526 (C.R.B. Jan. 26, 2009); 37 C.F.R. § 385.3(b).

    155

    [4] Verizon’s 2009 application to ASCAP for a non-exclusive blanket license for the public performance of musical works sought a license for ringback tones and content streamed over its “VCAST” service. The application did not identify ringtones.

    157

    [5] Sound recordings are “works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied.” 17 U.S.C. § 101.

    159

    [6] Sound recordings are “derivative” works of the preexisting musical composition, and to obtain a copyright in a sound recording one must secure a license from the copyright owner of the underlying work. The mechanical rights for sound recordings under § 106(1) and (3) are subject to compulsory licensing under the regime established in 17 U.S.C. § 115. See Palladium, 398 F.3d at 1197, 1199.

    161

    [7] The sound recording copyright did not include a right of performance until recently. See Arista Records v. Launch Media, Inc., 578 F.3d 148, 152-55 (2d Cir.2009) (describing statutes creating public performance rights in sound recordings).

    163

    [8] In Buffalo Broadcasting, the Court of Appeals observed in passing, while considering whether local television stations needed to obtain a public performance license for musical works contained in syndicated programs, that a producer of a syndicated program did not need to acquire such a license to either make or sell the program to the television station. Buffalo Broad., 744 F.2d at 921-22. Only the station needed to obtain such a license, and it usually did so by obtaining a blanket license from ASCAP and ASCAP’s rival BMI. Id. at 922. This example illustrates that the distribution and sale of a musical work and the public performance of the work implicate separate rights, and it is only the last which requires a public performance license under § 106(4).

    165

    [9] ASCAP refers to several decisions for the proposition that Verizon is liable for each step in the transmission process leading to a public performance since it has “control over the entirety of the process from server to listening ears.” As discussed infra, Verizon does not control when or where the ringtone will be played and whether it will be heard “publicly.” Its lack of control at the point of performance stands in sharp contrast to several of the cases on which ASCAP relies for this proposition; in every instance but one, these courts also found or assumed that a public performance license was necessary at the point at which the performance was displayed to the public. See National Football League v. Primetime 24 Joint Venture, 211 F.3d 10, 13 (2d Cir.2000) (satellite broadcast to television audience); WGN Cont’s Broad. Co. v. United Video, Inc. 693 F.2d 622, 625 (7th Cir.1982) (delivery of television programs over cable television systems); Columbia Pictures Indus, v. Aveco, 800 F.2d 59, 62 (3d Cir.1986) (video cassettes shown in individual viewing rooms within video store which rented the rooms and cassettes); David v. Showtime/The Movie Channel, Inc., 697 F.Supp. 752 (S.D.N.Y. 1988) (transmission of programming to cable system operators); Hubbard Broad., Inc. v. Southern Satellite Sys., 593 F.Supp. 808, 813 (D.Minn. 1984) (transmission of television programming to cable television systems). The sole exception to the requirement of a license at the point of performance is NFL, 211 F.3d 10, which is discussed further infra.

    167

    [10] It bears noting, however, that Verizon’s ringtone is downloaded to a customer’s telephone while the programming at issue in Cartoon Network resided in Cablevision’s hard drives.

    169

    [11] Cartoon Network distinguished cases in which the same copy of a copyrighted work was watched by a succession of individuals. Cartoon Network, 536 F.3d at 138-39 (distinguishing Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154, 159 (3d Cir. 1984) (video rental store played videotapes in private booths); On Command Video Corp. v. Columbia Pictures Indus., 777 F.Supp. 787 (N.D.Cal.1991) (hotel plays videotapes for guests in their individual hotel rooms in seriatim)).

    171

    [12] Cartoon Network, 536 F.3d 121, discussed in passim NFL, 211 F.3d 10, choosing to reconcile its holding with NFL and declining to revisit NFL’s reliability in addressing these complex issues. In NFL, copyrighted television programming was “uplinked” in the United States to a satellite system and then downlinked to home subscribers of the satellite service in Canada. The satellite company asserted that it needed no public performance license since there was no public display or performance of the transmission in the United States and American copyright laws have no extraterritorial applicability. The Court of Appeals found an infringement under § 106(4) since “a public performance or display includes each step in the process by which a protected work wends its way to its audience.” NFL, 211 F.3d at 13 (citation omitted). There is a strong argument to be made that there must be a public performance that infringes rights established by the Copyright Act before an upstream transmission that is a link to that performance can itself be found to infringe § 106(4). See 2 Melville B. and David Nimmer, Nimmer on Copyright § 8.14(c);[2] (2009).

    173

    [13] Streaming, in contrast to downloading, allows the real-time playing of a work through a constant link maintained between the provider’s server and the client. A replay is not possible without streaming the work again. Download Decision, 485 F.Supp.2d at 442.

    175

    [14] Where a transmission is of a digital file rather than a performance that can be contemporaneously observed or heard, and where that transmission is but a link in a chain to a downstream public performance, it may be that the transmission is not an act of infringement for which the transmitter is directly liable under § 106(4), but rather an act that may subject the transmitter to contributory liability under § 106(4) for the infringement created by any ultimate public performance.

    177

    [15] Verizon also contends that any public performance of a ringtone constitutes fair use under the Copyright Act, but does not rely on that argument in seeking summary judgment.

    179

    [16] ASCAP’s solitary example of customers playing their ringtones for what it argues was commercial advantage was the audience’s use of their cellular telephones as part of the 2006 Chicago Sinfonietta “Concerto for Orchestra and Cell Phones.” Even if ASCAP were able to allege that Verizon customers were in the audience of that performance, ASCAP does not allege that the Verizon customers themselves had any “purpose of commercial advantage,” received any fees, or charged admission. Rather, it appears the Chicago Sinfonietta is the entity that had the commercial purpose, received any payment or fees, and charged admission for the performance of music. And, as Verizon points out, the orchestra was licensed by ASCAP at the time of its performance.

    181

    [17] It is therefore unnecessary to discuss whether Verizon meets the criteria for any theory of secondary liability.

    183

    [18] ASCAP has not resorted to Rule 56(f), Fed. R.Civ.P., procedures in order to argue that this issue or any other is not ripe for decision.

    185

    [19] ASCAP and its amici Broadcast Music, Inc. and Society of European Stage Authors & Composers, Inc. argue that Verizon may not stand in the shoes of its customers when determining whether the § 110(4) exception applies to performances of ringtones. Verizon does no such thing. Verizon argues only that its customers’ performances are exempt under § 110(4), and Verizon therefore cannot be held secondarily liable for these non-infringing public performances.

    187

    [20] A transmission requires the delivery of images or sounds “beyond the place from which they are sent.” 17 U.S.C. § 101 (definition of “transmit”).

    189

    [21] The parties debate whether any activity by Verizon could be said to “otherwise communicate” a public performance of a musical work under the Transmission Clause. 17 U.S.C. § 101 (definition of “publicly”). ASCAP does not identify any principles that would limit the scope of its broad construction of that phrase. In any event, Verizon’s sending of a signal to alert a customer’s telephone to an incoming call is a signal sent to an individual, not to the public, and could not constitute “otherwise communicat[ing] a performance” to the public. Because ASCAP has failed to raise a question of fact, however, that Verizon engages in conduct that constitutes a sufficient nexus to the public playing of a ringtone it is unnecessary to grapple further with ASCAP’s creative reading of § 101’s definition of the term “publicly.”

    191

    [22] ASCAP’s arguments focus on the playing of ringtones downloaded from Verizon as opposed to those purchased by Verizon cellular telephone subscribers over the internet. The rulings herein would necessarily govern the latter category of ringtones as well.

    193

    [23] This Opinion assumes without deciding that a customer’s playing of a ringtone “outside of a normal circle of a family and its social acquaintances” is a performance to the public. 17 U.S.C. § 101.

    195

    [24] To the extent that ASCAP argues that Verizon is directly liable because it is jointly and severally liable along with its customers for any public performance that occurs when a ringtone plays, that argument is rejected. Joint and several liability is not an independent basis for liability, but a means of allocating responsibility for an award of damages where multiple actors have already been found liable. See, e.g., 17 U.S.C. § 504(c);(1).

  • 10 US v. ASCAP (In Re AT&T Wireless f/k/a Cingular Wireless), 599 F.Supp.2d 415 (SDNY 2009) (Excerpts)

    1

    599 F.Supp.2d 415 (2009)
    UNITED STATES of America, Plaintiff,
    v.
    AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, et al., Defendants.
    In the Matter of the Application for the Determination of Reasonable License Fees for Performances via Wireless Transmissions and Internet Transmissions by AT & T Wireless f/k/a Cingular Wireless.
    Civil Action No. 41-1395(WCC).

    3

    United States District Court, S.D. New York.
    January 30, 2009.

    5

    *418 Lovells LLP, David Leichtman, Esq., Hillel I. Parness, Esq., Aviva J. Halpern, Esq., Of Counsel, American Society of Composers, Authors and Publishers, Richard H. Reimer, Esq., Of Counsel, New York, NY, for Defendant American Society of Composers, Authors and Publishers.

    7

    Kilpatrick Stockton LLP, Joseph Peterson, Esq., Of Counsel, New York, NY, Joseph M. Beck, Esq., James A. Trigg, Esq., W. Andrew Pequignot, Esq., Atlanta, GA, for Applicant AT & T Mobility LLC.

    9

    Harris, Wiltshire & Grannis LLP, Mark A. Grannis, Esq., Fernando R. Laguarda, Esq., S. Roberts Carter, Esq., Kelley A. Shields, Esq., Of Counsel, Washington, D.C., for Amicus Curiae, The Digital Media Association and The National Association of Recording Merchandisers.

    11

    Hughes Hubbard & Reed LLP, Michael E. Salzman, Esq., Jessica A. Feldman, Esq., Of Counsel, Marvin L. Berenson, Esq., Joseph J. DiMona, Esq., New York, NY, for Amicus Curiae, Broadcast Music, Inc.

    13

    Loeb & Loeb, LLP, John C. Beiter, Esq., Of Counsel, Nashville, TN, for Amicus Curiae, SESAC, Inc.

    15

    *419 OPINION AND ORDER

    17

    WILLIAM C. CONNER, Senior District Judge:

    19

    In 1941, the United States’ civil action against the American Society of Composers, Authors and Publishers (“ASCAP”) for alleged violations of the Sherman Antitrust Act was settled by the entry of a consent decree. See United States v. Am. Soc’y of Composers, Authors & Publishers, 1941 U.S. Dist. LEXIS 3944 (S.D.N.Y. Mar. 4, 1941). The 1941 consent decree was amended on March 14, 1950 to form the Amended Final Judgment (as again amended on January 7, 1960, the “AFJ”). The terms of these orders regulated the manner in which ASCAP could operate within the music industry and provided this Court with exclusive jurisdiction under Section XVII of the AFJ to oversee the implementation of these provisions. The AFJ was again amended on June 11, 2001 (the “AFJ2”), familiarity with which is presumed. See United States v. Am. Soc’y of Composers, Authors & Publishers, 2001 WL 1589999, 2001 U.S. Dist. LEXIS 23707 (S.D.N.Y. June 11, 2001) (Conner, J.).

    21

    The AFJ2 became effective on September 11, 2001 and, subsequently, applicant AT & T Mobility LLC, incorrectly named AT & T Wireless in the case caption, (“applicant”) made a request to ASCAP for a blanket license for the public performance of ASCAP music via wireless and internet transmissions for a period commencing October 28, 2004. (ASCAP Applic. Deter. Reasonable Lie. Fees ¶ 5.) Because the parties were unable to agree on licensing fees, ASCAP applied to this Court, pursuant to Section IX of the AFJ2, for a determination of interim blanket license fees and reasonable final blanket license fees “for public performances of ASCAP music by [applicant] by way of wireless transmissions and through [applicant’s] websites, including but not limited to wireless transmissions by way of ringback tones … and other streaming audio and audio-visual content.” (Id. ¶¶ 7-8.) Applicant now moves for summary judgment on the issue of whether its use of ASCAP music in its “ringtone” and “ringback tone” previews constitute fair use within the meaning of the United States Copyright Act, 17 U.S.C. §§ 101, et seq. (2000) such that licensing fees are not required for applicant’s use of these previews. ASCAP cross moves for discovery pursuant to Fed. R.Civ.P. 56(1). The Court, having reviewed the materials submitted by the parties, as well as the briefs of amici curiae,[1] denies applicant’s motion for summary judgment in its entirety. The Court declines to decide ASCAP’s motion for discovery because there is sufficient evidence in the record already before the Court to decide applicant’s motion.

    23

    BACKGROUND

    25

    Unless otherwise indicated, the following facts are undisputed. ASCAP is “a membership association of more than 320,000 songwriters, composers, lyricists and music publishers on whose behalf ASCAP licenses the nondramatic public performances of their copyrighted works in the United States.” (ASCAP Applic. Deter. Reasonable Lie. Fees ¶ 1.) ASCAP also licenses in the United States the nondramatic public performances of the copyrighted musical works of certain members of affiliated foreign performing rights organizations around the world. (Id.) Applicant is a wireless company in the United States with more than 70 million subscribers “who use the nation’s largest digital voice and data network.” (Id. ¶ 2.) Applicant *420 makes ringtones and ringback tones available for purchase and offers previews of each to its customers prior to purchase. (AT & T Mem. Supp. Summ. J. at 1.) A ringtone is a tune that plays when an individual who has purchased a ringtone receives a telephone call.[2] (AT & T R. 56.1 Stmt. ¶ 1.) Ringback tones (applicant calls them “Answer Tones”[3]) substitute a tune for the sound a caller normally hears while waiting for the person called to answer the phone. (Id. ¶ 6.)

    27

    According to applicant, the ringtones that it offers can be purchased in one of two ways: either through its “MEdia Mall” website or through its MEdia Mall mobile application. (Id. ¶ 2.) However, ASCAP contends that it may be possible for ringtones to be played on AT & T phones through other methods and directs the Court to internet websites that provide instructions as to the conversion of music files into ringtones without first purchasing them from applicant.[4] (ASCAP R. 56.1 Counterstmt. ¶ 2.) Before purchasing a particular ringtone, a customer may listen to a preview, which, applicant states, plays for ten to thirty seconds. (AT & T R. 56.1 Stmt. ¶ 3.) ASCAP contends that it lacks sufficient discovery to determine the duration of applicant’s previews. (ASCAP R. 56.1 Counterstmt. ¶ 4.) Sometimes multiple versions of a particular composition are available as a ringtone.[5] (AT & T R. 56.1 Stmt. ¶ 4.) For example, if a user who wants to purchase a ringtone of “Somewhere Over the Rainbow” visits the MEdia Mall website and enters the search term “somewhere over the rainbow,” the search results may yield a list of up to seven versions of the song by various artists. (Id.) According to applicant, the only way for a user to listen to a preview is to click on an icon symbolized by a speaker illustration that appears next to each song listed in the search results next to the word “BUY.” (Id. ¶ 5.) After a customer clicks on the “BUY” icon, another window opens and the preview, which, applicant contends, “is transitory and not stored,” is streamed. (Id.) ASCAP admits that applicant performs previews in this manner, but contends that it may be possible for previews to be played in other ways, again directing the Court to the internet websites that provide instructions on how to convert music files into ringtones without purchasing them from applicant. (ASCAP R. 56.1 Counterstmt. ¶ 5.)

    29

    According to applicant, like its ringtones, ringback tones can be purchased in one of two ways: either through the MEdia Mall website or through the MEdia Mall mobile application. (AT & T R. 56.1 Stmt. ¶ 7.) ASCAP admits that ringback tones can be purchased in these two ways, but contends that it lacks sufficient discovery to determine whether these are the only ways in which ringback tones can be *421 purchased. (ASCAP R. 56.1 Counterstmt. ¶ 7.) Furthermore, according to applicant, like ringtones, ringback tones can be previewed before purchase; however, unlike ringtones, ringback tone previews are currently available only on the MEdia Mall website. (AT & T R. 56.1 Stmt. ¶ 8.)[6] Applicant states that ringback tone previews play for up to 30 seconds, although, while ASCAP admits that applicant performs previews, it contends that it lacks sufficient discovery to determine their duration. (Id. ¶ 9; ASCAP R. 56.1 Counterstmt. ¶ 9.)

    31

    Applicant states that previews allow customers to listen to “brief excerpts of tunes and select a particular track for purchase.” (AT & T R. 56.1 Stmt. ¶ 10.) ASCAP “admits that [applicant] performs previews to encourage purchases,” but contends that it lacks sufficient discovery to determine whether these excerpts are “brief.” (ACAP R. 56.1 Counterstmt. ¶ 10.) Rather, ASCAP contends that previews may be “rather close approximations of the ringtones and [ringback tones] for purchase, and sometimes actually longer in length than the product they are promoting.” (Id.) Applicant states further that it neither charges for previews nor generates any revenue from them “aside from the possibility of indirect revenue from an eventual sale of a ringtone or ringback tone track.” (AT & T R. 56.1 Stmt. ¶ 11.) ASCAP states that it lacks sufficient discovery to determine the accuracy of this statement, adding that applicant “receives commercial benefits from previews in a variety of ways, including, at minimum, the sale of ringtones and [ringback tones], ecommerce revenue from advertising on the MEdia Mall website, and other e-commerce revenues.” (ASCAP R. 56.1 Counterstmt. ¶ 11.) Applicant states that there are no third-party advertisements on the MEdia Mall website, however, ASCAP disagrees, asserting that there are advertisements on the site that direct access to other sites and “at a minimum, promote services offered by third parties such as The Weather Channel.” (AT & T R. 56.1 Stmt. ¶ 12; ASCAP R. 56.1 Counterstmt. ¶ 12.) Applicant also states that the previews cannot be downloaded or distributed, although ASCAP contends that it may be possible for previews to be copied to other locations, and directs the Court to a website that sets forth instructions on how to copy a streaming ringtone preview to a computer and then use it on a cellular phone.[7] (AT & TR. 56.1 Stmt. ¶ 13; ACAP R. 56.1 Counterstmt. ¶ 13.)

    33

    ASCAP, in opposition to applicant’s Rule 56.1 Statement and in support of its Rule 56(f) cross-motion for discovery, contends that there are a number of additional material facts as to which there exist genuine issues to be tried. (ASCAP R. 56.1 Counterstmt. at 6.)[8] As to all of these facts, which are as follows, applicant states that it does not have sufficient knowledge to comment on their accuracy and contends that they are immaterial and irrelevant to a determination of the issues raised in this *422 motion. (AT & T Ans. R. 56.1 Stmt. ¶¶ 8, 9, 10, 11, 13, 15, 16, 20, 21, 22.)

    35

    ASCAP sets forth examples of third parties other than applicant that make previews of music available over the internet. ASCAP states that “production music library companies” maintain internet websites that allow visitors to search their libraries, which contain pre-recorded music for various media, and “listen to streams of the music they offer, or samples or previews of their music.” (ASCAP R. 56.1 Stmt. ¶ 8.) The samples are provided “to attract new customers and to encourage existing customers to license or use more of their music.” (Id.) ASCAP also contends that its major music publisher members similarly offer streaming samples of their music over the internet “to encourage people to purchase the synchronization rights of their music for use in film, television, advertising commercials and other media.” (Id. ¶ 9.) In addition, ASCAP’s writer members make samples of their work available on their websites for promotional purposes, and ASCAP provides space on its own website for members to promote their music “through various types of musical performances.” (Id. ¶¶ 10, 16.)

    37

    ASCAP also describes the demand for licensing of “short forms of music.” (Id. ¶¶ 11-17.) ASCAP states that ”[i]n many areas of music licensing, the licensee will specifically seek a license for a limited-duration excerpt from the longer musical work,” and that ”[i]n license agreements across different areas of the music business, it is often standard industry practice to expressly grant the right to make … limited use of `samples’ or `previews’ of longer musical compositions for promotional purposes.” (Id. ¶¶ 11, 13.) Even contracts addressing the use of music in video games “will typically include a grant of the right to use the music for limited-duration… promotional trailers … on the Internet, and/or a grant to place limited duration… streaming clips of the music … on the game’s website.” (Id. ¶ 15.)

    39

    ASCAP also provides information on its own licenses with third parties for shortform music. (Id. ¶¶ 20-23.) According to ASCAP, it has 54 licensees under its “standard wireless agreement for ringtones and ringback tones,” pursuant to which ACAP receives a certain percentage of the “revenue rate” for the tones, and ASCAP “is in negotiations with other parties that have yet to be licensed.” (Id. ¶ 20.) ACAP licenses 18 “sampling” services and is negotiating two additional agreements. (Id. ¶¶ 22.) One company is licensed “to perform music `samples’ of between 30-60 seconds in length” and ASCAP receives a set percentage of the company’s revenues under the agreement. (Id. ¶ 21.) In March 2007, ASCAP received two requests from a company for licenses for ringtones and “ringback tunes” that specifically included “clip samples” of the tunes. (Id. ¶ 22.)

    41

    Following the initiation of a rate proceeding before this Court, applicant moved for summary judgment on the issue of whether ringtone and ringback tone previews (collectively, “previews”) constitute fair use within the meaning of the United States Copyright Act, 17 U.S.C. § 101. We conclude that they do not constitute fair use and, therefore, deny the motion in its entirety.

    43

    DISCUSSION

    45

    I. Standard of Review

    47

    Under Fed.R.Civ.P. 56, summary judgment may be granted where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c);; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-50, *423 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is material only if, based on that fact, a reasonable jury could find in favor of the non-moving party. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The burden rests on the movant to demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In deciding whether summary judgment is appropriate, the court resolves all ambiguities and draws all permissible factual inferences against the movant. See Anderson, 477 U.S. at 255, 106 S.Ct. 2505. However, to defeat summary judgment, the non-movant must go beyond the pleadings and “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The Court’s role at this stage of the litigation is not to decide issues of material fact, but to discern whether any exist. See Gallo v. Prudential Residential Servs. L.P., 22 F.3d 1219, 1224 (2d Cir.1994).

    49

    II. Fair Use

    51

    “ASCAP has no right to demand royalty payments for the use of music that is exempt from copyright liability.” United States v. Am. Soc’y of Composers, Authors & Publishers, 157 F.R.D. 173, 207 (S.D.N.Y.1994) (Conner, J.). Applicant argues that its use of ASCAP music in previews is exempt from copyright liability under the fair use exception of the Copyright Act and, therefore, it does not owe ASCAP royalty payments for the previews. (AT & T Mem. Supp. Summ. J. at 2.) ASCAP contends that applicant’s previews do not constitute fair use and that it is entitled to royalty payments from applicant for the previews under the blanket license that applicant seeks from ASCAP. (ASCAP Mem. Opp. Summ. J. at 2, 10.)

    53

    The fair use doctrine is codified in the Copyright Act, which sets forth four factors that must be considered in determining whether a given use of copyrighted material falls under the fair use exception. Blanch v. Koons, 467 F.3d 244, 250 (2d Cir.2006). The statutory preamble states that “the fair use of a copyrighted work… for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.” 17 U.S.C. § 107. The Act then provides that

    55

    Id. “This listing was not intended to be exhaustive … or to single out any particular use as presumptively a `fair’ use.” Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 561, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985) (internal citation omitted). Rather, courts must undertake a case-by-case analysis to determine whether a given secondary use of a copyrighted work is a fair use. Id.; see also Blanch, 467 F.3d at 251 (”[D]etermination of fair use is an open-ended and context-sensitive inquiry.”). No single factor is outcome-determinative and courts must analyze each factor and weigh the results together “in light of the purposes of copyright.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994). “The ultimate test of *424 fair use … is whether the copyright law’s goal of promoting the Progress of Science and the useful Arts, U.S. Const., art. I, § 8, cl. 8, would be better served by allowing the use than by preventing it.” Blanch, 467 F.3d at 251 (internal quotation marks and citations omitted; alteration in original). Furthermore, ”[s]ince fair use is an affirmative defense to a claim of infringement, the burden of proof is on its proponent,” which, in the case at bar, is applicant. Infinity Broad. Corp. v. Kirkwood, 150 F.3d 104, 107 (2d Cir.1998).

    57

    A. Factor One: The Purpose and Character of the Use

    59

    “The heart of the fair use inquiry is into the first specified statutory factor identified as `the purpose and character of the use.’” On Davis v. The Gap, Inc., 246 F.3d 152, 174 (2d Cir.2001). In Campbell, the Supreme Court instructed that ”[t]he enquiry here may be guided by the examples given in the preamble to § 107, looking to whether the use is for criticism, or comment, or news reporting, and the like.” 510 U.S. at 578-79, 114 S.Ct. 1164 (citing 17 U.S.C. § 107). The Court explained that ”[t]he central purpose of this investigation is to see … whether the new work merely supersedes the objects of the original creation … or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks … whether and to what extent the new work is `transformative.’” Id. at 579, 114 S.Ct. 1164 (internal quotation marks and citations omitted).

    61

    Furthermore, the statute specifies that in analyzing this factor, courts should consider whether the new use “is of a commercial nature or is for nonprofit educational purposes.” 17 U.S.C. § 107. “The crux of the profit/nonprofit distinction is not whether the sole motive of the use is monetary gain but whether the user stands to profit from exploitation of the copyrighted material without paying the customary price.” Harper & Row, 471 U.S. at 562, 105 S.Ct. 2218.

    63

    Applicant’s use of previews is not transformative. It is undisputed that the music segments used in applicant’s previews are exact copies of ASCAP music. As applicant correctly notes, in some cases, courts have found that a work is transformative even though no expressive changes were made to the original work because the new work has an “entirely different purpose and meaning.” Blanch, 467 F.3d at 253; see AT & T Mem. Supp. Summ. J. at 5-6. Applicant, directing the Court to the “new purpose and meaning” line of fair use cases, argues that its use of ASCAP music in previews is transformative because the previews serve the purpose of “inform[ing] customers,” which is “entirely different” from the entertainment purpose of the original works. (AT & T Mem. Supp. Summ. J. at 1.) To support this argument, applicant relies on Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605 (2d Cir.2006), and Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir.2003).

    65

    In Bill Graham Archives, the Second Circuit held that the use of “artistic concert posters reproduced in reduced size in a biography of the musical group [whose concerts the posters advertised]” constituted fair use. 448 F.3d at 606-07. Applicant argues that just as the Bill Graham Archives defendants’ use of the posters (to illustrate the history of the band) was found to be “transformatively different from the original expressive purpose” of the copyrighted posters (to inform concert-goers of the times and places for the band’s performances), applicant’s “informational use of snippets of songs is `transformatively different from the original expressive purpose’ of the recorded compositions.” (AT & T Mem. *425 Supp. Summ. J. at 6, 8.) However, in Bill Graham Archives the Circuit relied on the fact that the copyrighted works (the poster images) were used as “historical artifacts” to illustrate a biographical work, a use that fell within the scope of the statutory preamble of 17 U.S.C. § 107. 448 F.3d at 609 (noting that “courts have frequently afforded fair use protection to the use of copyrighted material in biographies, recognizing such works as forms of historic scholarship, criticism, and comment that requires incorporation of original source material for optimum treatment of their subjects” (citing 17 U.S.C. § 107)). By contrast, applicant’s use of previews, for the purpose of allowing its customers to sample a ringtone or ringback tone before purchasing it, cannot fairly be described as “criticism, comment, news reporting, teaching… scholarship, or research.” 17 U.S.C. § 107.

    67

    Moreover, the Bill Graham Archives court reasoned that, because the defendants had significantly reduced the size of the posters so that they served only to “enrich the presentation of the cultural history of the [band]” rather than “to exploit copyrighted artwork for commercial gain,” and because these images constituted “an inconsequential portion” of the book in which they were reproduced, the first factor weighed in favor of finding fair use. 448 F.3d at 611. By contrast, although applicant’s previews are comprised of shortened versions of the musical works from which they are copied, they do not “enrich” a separate work protected by the Copyright Act, but rather serve only to facilitate applicant’s sales of ringtones and ringback tones from applicant’s website and wireless device application “for commercial gain.”[9] Id. Furthermore, ASCAP music is not an inconsequential portion of the previews but rather each preview at issue here is made up entirely of ASCAP music. Because of these significant factual distinctions, Bill Graham Archives does not govern the outcome of our inquiry into whether applicant’s use of previews is transformative.

    69

    Kelly can also be distinguished. That case involved an internet search engine that displayed its results “in the form of small pictures rather than the more usual form of text.” 336 F.3d at 815. The computer program “crawl[ed]” the internet “looking for images to index,” downloaded these images, and generated “smaller, lower-resolution thumbnails of the images,” which appeared as search results. 336 F.3d at 815. The plaintiff photographer discovered that his copyrighted photographs had been reproduced as thumbnail images without his consent and sued for copyright infringement. 336 F.3d at 816. The Ninth Circuit, finding for the defendant, Arriba, held that the “creation and use of the thumbnails in the search engine is a fair use” and that the use of the copyrighted images was transformative because it was “unrelated to any aesthetic purpose” but rather served to facilitate access to images on the internet. 336 F.3d *426 at 815, 818. Applicant argues that, similarly, its use of ASCAP music in its previews “serves an entirely different purpose than the entertainment purpose of the original works,” and that, ”[j]ust as Arriba offered its thumbnails in effect as an advertisement enabling customers to shop for, select and purchase a particular photograph from the copyright proprietor, so [applicant]’s previews permit its customers to shop for, select and purchase ringtones and ringback tones.” (AT & T Mem. Supp. Summ. J. at 7-8 (internal quotation marks omitted).)

    71

    Applicant’s analogy is misplaced. Applicant mischaracterizes the “thumbnails” in Kelly as “advertisements.” Unlike applicant’s deliberate use of ASCAP music, all of which is copyrighted, to sell applicant’s own product, the thumbnails produced by the search engine in Kelly, only some of which incidentally were copyrighted images, did not serve to advertise the defendant’s product. Rather, it served the useful purpose of assisting users in navigation of the multitude of information on the world wide web. The Ninth Circuit, emphasizing the purpose of the Copyright Act “to promote creativity, thereby benefitting the artist and the public alike,” reasoned that the thumbnails did not “stifle artistic creativity,” and, further, even “benefit[ed] the public by enhancing information-gathering techniques on the internet.” 336 F.3d at 820.[10] The Circuit noted that “Arriba was neither using Kelly’s images to directly promote its web site nor trying to profit by selling Kelly’s images.” Kelly, 336 F.3d at 818. While Arriba’s search engine helped users navigate a sea of information including images already publicly available on the internet, applicant’s previews merely allow users to sample selections of a database of copyrighted information, collected, organized and provided to users by applicant. It is difficult to characterize applicant’s use of previews as serving a “public benefit” when the previews’ purpose is to benefit applicant by facilitating sales of its own product. Again, applicant fails to establish that its use of ASCAP music serves a transformative use under the fair use doctrine.

    73

    Regarding the “transformative” nature of applicant’s previews, Infinity Broadcast Corp. and Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 342 F.3d 191 (3d Cir.2003) provide guidance that is more on point. In Infinity Broadcast Corp., a radio broadcast company brought a copyright infringement action against the operator of a service that retransmitted its radio broadcasts over the telephone. 150 F.3d at 106. The defendant did not alter or edit the radio transmissions, which it marketed to “radio stations, advertisers, talent scouts and others in the entertainment and advertising industry for purposes such as auditioning on-air talent, verifying the broadcast of commercials, and listening to a station’s programming format and feel.” Id. (internal quotation marks omitted). The Second Circuit held that the defendant’s retransmissions of the copyrighted broadcasts did not constitute fair use, rejecting the defendant’s argument that its use was transformative because its customers used the broadcasts for informative rather than entertainment purposes, an argument similar to that made by applicant in the instant case. Id. Although the Circuit acknowledged that the defendant’s informational purpose for *427 making the transmissions was different from the original entertainment purpose of the radio broadcasts, it explained that “difference in purpose is not quite the same thing as transformation, and … transformativeness is the critical inquiry under this factor.” Id. at 108. The Circuit reasoned that ”[the defendant]’s retransmissions leave the character of the original broadcasts unchanged. There is neither new expression, new meaning nor new message…. In short, there is no transformation.” Id. (internal quotation marks and citation omitted). Similarly, in the case at bar, any difference in applicant’s informational purpose in streaming previews of ASCAP music from the original entertainment purpose of the music is insufficient, by itself, to render applicant’s use transformative.

    75

    The Infinity Broadcast Corp. court also emphasized that it was the defendant’s “own retransmission of the broadcasts, not the acts of his end-users, that is at issue here and all [the defendant] does is sell access to unaltered radio broadcasts. Also, it is not clear that all of [the defendant’s] target audience `transforms’ the broadcasts as he suggests.” Id. The Circuit noted that, for example, ”[t]alent scouts, who admittedly would not be listening in order to be entertained themselves, would nevertheless be listening for the entertainment value of the broadcasts rather than the factual content.” Id. Similarly, here, applicant provides access to unaltered clips of ASCAP music. Although the clips are shorter than the fulllength versions of the musical works from which they are copied, applicant has not demonstrated that its customers use previews solely for informational purposes, and not also to assess the musical quality and entertainment value of the ringtones and ringback tones before making purchases.[11] Following the reasoning of the Second Circuit in Infinity Broadcast Corp., applicant’s previews are not transformative.

    77

    In Video Pipeline, the Third Circuit affirmed a decision that held that the plaintiff had failed to show that it would likely prevail on its claim that its use of the copyrighted films of subsidiaries of The Walt Disney Co. (“Disney”) in its “clip previews” was fair use. 342 F.3d at 194, 196. A “clip preview” was defined as “an approximately two-minute segment of a movie, copied without authorization from the film’s copyright holder, and used in the same way as an authorized movie `trailer.’” Id. at 194. The plaintiff sold clip previews to retail websites that sold home videos; visitors to these websites could click on a “preview” button for a particular film, and plaintiffs clip preview would be streamed. Id. at 195. The plaintiff made a similar argument to that of applicant in the case at bar that its previews were transformative because “the original works have an aesthetic and entertainment purpose while the clip previews serve only to provide information about the movies to internet users or as advertisements for the company’s retail web site clients.” Id. at 198. In rejecting this argument and finding that the clip previews “lack[ed] any significant transformative quality,” the Circuit reasoned that the preview clips “share the same character and purpose as Disney’s derivative trailers,” explaining that the preview clips were “part of—not information about—Disney’s expressive *428 creations” and noting that “it is not clear to us that the use of a copy—not accompanied by any creative expression on the part of the copier—as an advertisement for the original would qualify as a type of use intended to be recognized by the fair use doctrine.” Id. at 199, 199 n. 5, 200. The Circuit distinguished Kelly, noting that the Video Pipeline plaintiffs database of preview clips ”[did] not improve access to authorized previews located on other web sites. Rather, it indexe[d] and display[ed] unauthorized copies of copyrighted works.” Id. at 199. Finally, the Circuit noted that the clip previews ”[did] not add significantly to Disney’s original expression,” and that “it is dubious what `new expression, meaning, or message’ [the plaintiff] has brought to its copies.” Id. at 199-200 (citing Campbell, 510 U.S. at 579, 114 S.Ct. 1164). Following Video Pipeline’s reasoning, applicant’s previews are not transformative.

    79

    Courts must also consider whether a use is commercial in determining whether the first factor weighs in favor of finding fair use. To be sure, “commerciality has only limited usefulness to a fair use inquiry; most secondary uses of copyrighted material, including nearly all of the uses listed in the statutory preamble, are commercial.” Infinity Broad. Corp., 150 F.3d at 109. However, the Second Circuit has held that if the secondary use made of the underlying work is not transformative, the issue of whether it is commercial takes on a heightened importance. On Davis, 246 F.3d at 175. In analyzing whether a use is commercial, the Second Circuit has examined whether the secondary user had a “genuine creative rationale” for copying the original work, or whether the secondary user was using the original work “merely to get attention or to avoid the drudgery in working up something fresh.” Blanch, 467 F.3d at 255. When the work is an advertisement, it is “at the outer limit of commercialism.” On Davis, 246 F.3d at 175. And the Supreme Court has suggested, in dicta, that using a copyrighted work for advertising purposes may be less likely to be fair use than using the work for other purposes more reflective of the statutory preamble. Campbell, 510 U.S. at 585, 114 S.Ct. 1164 (“use … of a copy-righted work to advertise a product, even in a parody, will be entitled to less indulgence under the first factor of the fair use enquiry than the sale of a parody for its own sake.”).

    81

    Applicant concedes that its use of previews is “not strictly non-commercial,” [12] but relies on the Supreme Court’s *429 proposition that ”`the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.’” (AT & T Mem. Supp. Summ. J. at 8-9 (quoting Campbell, 510 U.S. at 579, 114 S.Ct. 1164).) As noted above, however, applicant’s use of previews is not transformative, and, thus, the significance of its commercial use is not reduced, but instead takes on greater importance. On Davis, 246 F.3d at 175. Because the previews constitute a form of advertisement for applicant’s ringtones and ringback tones (see AT & T Mem. Supp. Summ. J. at 7 (analogizing applicant’s use of previews to the Kelly defendant’s use of thumbnails “in effect as an advertisement”)), applicant’s use of ASCAP music to increase revenues from sales of ringtones and ringback tones is commercial. On Davis, 246 F.3d at 175; Campbell, 510 U.S. at 585, 114 S.Ct. 1164.[13] In addition, although applicant contends that there are no third-party advertisements on its MEdia Mall website, ASCAP introduces computer printouts of the website with advertisements that direct access to other sites and promote services offered by third parties such as The Weather Channel and various pop artists. Viewing the evidence in the light most favorable to the non-moving party, ASCAP, as we must on a motion for summary judgment, we infer that applicant is compensated for these advertisements; the previews, by attracting consumers to the MEdia Mall website, in effect serve to advertise these advertisements. The Court finds that applicant’s use of previews is not transformative and that it is commercial. Therefore, the first factor weighs against a finding of fair use.

    83

    B. Factor Two: The Nature of the Copyrighted Work

    85

    The second factor in the fair use inquiry, the “nature of the copyrighted work,” § 107(2), “calls for recognition that some works are closer to the core of intended copyright protection than others, with the consequence that fair use is more difficult to establish when the former works are copied.” Campbell, 510 U.S. at 586, 114 S.Ct. 1164. When analyzing this factor, courts consider ”`(1) whether the work is expressive or creative, such as a work of fiction, or more factual, with a greater leeway being allowed to a claim for fair use where the work is factual or informational, and (2) whether the work is published or unpublished, with the scope for fair use involving unpublished works being considerably narrower.’” Blanch, 467 F.3d at 256 (citing 2 Howard B. Abrams, The Law of Copyright, § 15:52 (2006)).

    87

    Applicant dismisses the importance of the second factor, citing legal authority for the proposition that this factor “may be of limited usefulness where the creative work of art is being used for a transformative purpose.” (AT & T Mem. Supp. Summ. J. at 9 (internal quotation marks and citation omitted).) However, as discussed above, applicant’s use of previews is not transformative. *430 The ASCAP music used in applicant’s previews is undisputably creative. See id. at 9 (referring to “the creative nature of the musical compositions” while arguing that this factor is “largely irrelevant”); see also Campbell, 510 U.S. at 573, 586, 114 S.Ct. 1164 (a rap song was “creative expression” that fell “within the core of the copyright’s protective purposes”); UMG Recordings, 92 F.Supp.2d at 351 (creative recordings copied from “popular CDs” were “close to the core of intended copyright protection”) (internal quotation marks and citations omitted). Thus, although most of the ASCAP music in applicant’s previews[14] is published, a fact that favors applicant, the expressive and creative nature of the music favors ASCAP. We find the creative nature of ASCAP’s music more significant to our inquiry than the fact that the music is published, given that the use that applicant makes of the music is not transformative. See UMG Recordings, 92 F.Supp.2d at 352 (No discussion of published nature of copies of music recordings, which were not transformative, in finding that music recordings were creative and, therefore, factor weighed against finding of fair use.). Therefore, this factor weighs against a finding of fair use. We note, however, that ”[t]he second statutory factor … is rarely found to be determinative.” On Davis, 246 F.3d at 175 (citing 17 U.S.C. § 107(2)).

    89

    C. Factor Three: The Amount and Substantiality of the Portion Used

    91

    The third factor in the fair use inquiry, the amount and substantiality of the portion used, § 107(3), “recognizes that the more of a copyrighted work that is taken, the less likely the use is to be fair, and that even a less substantial taking may be unfair if it captures the essence of the copyrighted work.” Infinity Broad. Corp., 150 F.3d at 109. The factor “calls for thought not only about the quantity of the materials used, but about their quality and importance, too.” Campbell, 510 U.S. at 587, 114 S.Ct. 1164. Applicant asserts that its previews last 10 to 30 seconds, however, ASCAP contends that it does not have sufficient discovery to assess this contention. Applicant “concedes that the duration of the previews may be approximately the same as the associated [ringback tone] or ringtone.” (AT & T Reply Mem. Supp. Summ. J. at 15.) Assuming, without making any finding of fact, that applicant’s asserted 10-to-30-second range is accurate, and that, thus, the previews only copy segments of ASCAP songs that are short in relation to the entire length of the song, applicant has still failed to establish that its previews do not copy the “essence” of the songs, that is, the most readily identifiable parts of the songs. Rather, applicant admits that its previews typically incorporate “repetitive portions of songs, which are sometimes deemed the most significant,” indicating that applicant intentionally copies qualitatively substantial portions of ASCAP music. (AT & T Mem. Supp. Summ. J. at 11.)[15] Even though these segments might be short, they are of high “quality and importance.” Campbell, 510 U.S. at 587, *431 114 S.Ct. 1164. See Iowa State Univ. Research Found., Inc. v. Am. Broad. Cos., 621 F.2d 57, 61-62 (2d Cir.1980) (holding that copying two-and-one-half-minute segment of 28-minute copyrighted film, amounting to 8% of the film, was not fair use, and noting that ”[o]bviously [the defendant] found this footage essential, or at least of some importance.”).

    93

    Furthermore, the Supreme Court instructs that “the fact that a substantial portion of the infringing work was copied verbatim is evidence of the qualitative value of the copied material, both to the originator and to the plagiarist who seeks to profit from marketing someone else’s copyrighted expression.” Harper & Row, 471 U.S. at 565, 105 S.Ct. 2218. Here, each preview was comprised entirely of ASCAP music. Thus, a substantial portion of the infringing work (the previews) was “copied verbatim,” which is “evidence of the qualitative value of the copied material” (the copied ASCAP music). Id. Because the expressive value of the music was copied and because that expressive value constitutes the previews in their entirety, we find that applicant copied a substantial amount of ASCAP music, and, therefore, the third factor weighs in favor of ASCAP. See Harper & Row, 471 U.S. at 566, 105 S.Ct. 2218.

    95

    D. Factor Four: Market Effects

    97

    The fourth factor in the fair use inquiry, the effect of the use upon the potential market for or value of the copyrighted work, § 107(4), “is aimed at the copier who attempts to usurp the demand for the original work.” Consumers Union, 724 F.2d at 1050. The Second Circuit explains:

    99

    On Davis, 246 F.3d at 175-76. Thus, this factor must be analyzed in light of whether the new use is “transformative” or merely “supersedes the original.” Id. at 176. ”[W]hen a commercial use amounts to mere duplication of the entirety of an original, it clearly supersedes the objects of the original and serves as a market replacement for it, making it likely that cognizable market harm to the original will occur.” Campbell, 510 U.S. at 591, 114 S.Ct. 1164 (internal quotation marks and citation omitted). Furthermore, “to negate fair use one need only show that if the challenged use should become widespread, it would adversely affect the potential market for the copyrighted work…. This inquiry must take account not only of harm to the original but also of harm to the market for derivative works.” Harper & Row, 471 U.S. at 568, 105 S.Ct. 2218 (internal quotation marks and citations *432 omitted; emphasis in original). But, ”[o]nly an impact on potential licensing revenues for traditional, reasonable, or likely to be developed markets should be legally cognizable when evaluating a secondary use’s `effect upon the potential market for or value of the copyrighted work.’” Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 930 (2d Cir.1994).

    101

    In this case, as discussed above, applicant’s use is not transformative. Rather, it supersedes and, therefore, “it [is] likely that cognizable market harm to the original will occur.” Campbell, 510 U.S. at 591, 114 S.Ct. 1164. By using ASCAP music without compensating ACAP, applicant avoids paying the “customary price” ASCAP is entitled to charge for the use of its songs. See On Davis, 246 F.3d at 176 (“By taking for free [plaintiff]’s design for its ad, [defendant] avoided paying `the customary price’ [plaintiff] was entitled to charge for the use of his design.”) [16]

    103

    Furthermore, ASCAP has established the existence of markets for licenses of preview performances and other short segments of its music. Nineteen companies pay ASCAP for the right to deliver short segments of ASCAP music to their customers, and ASCAP’s members use preview-like clips for promotional purposes. (ASCAP Mem. Opp. Summ. J. at 21.) Furthermore, ASCAP requires other businesses to pay licensing fees to use previews to sell music purchases. (Id. at 22.) Thus, there is a market for, or other value in, short segments of ASCAP music which could be adversely impacted by applicant’s free use of such segments. See Video Pipeline, 342 F.3d at 202 (recognizing market for movie previews on which use of infringing clip previews could have a harmful effect).

    105

    These markets are “traditional” and “reasonable” markets for derivative works of original ASCAP music and, therefore, the impact of applicant’s use on the potential licensing revenues from these markets is legally cognizable in weighing the fourth factor. Am. Geophysical Union, 60 F.3d at 930. The existence of these markets militates against a finding of fair use. Id. at 931. (”[A] particular unauthorized use should be considered `more fair’ when there is no ready market or means to pay for the use, while such an unauthorized use should be considered `less fair’ when there is a ready market or means to pay for the use.”). We recognize the strong possibility that ASCAP and its members lose current and future revenue when consumers access free previews from a website or wireless *433 application to listen to, and possibly copy, previews of ASCAP music in lieu of accessing music segments from sources that pay licensing fees to ASCAP. However, there is insufficient evidence in the record to determine the actual effect of applicant’s previews on ASCAP’s markets for licenses of preview performances and other short segments of its music. Applicant, as the party arguing for fair use here, has the burden of proving that its use of ASCAP music will not harm these markets. Infinity Broad. Corp., 150 F.3d at 107. Applicant has failed to meet this burden. Therefore, from ASCAP’s standpoint, at worst, this factor is neutral.

    107

    E. Aggregate Assessment

    109

    At least three of the statutory factors point toward infringement and lack of fair use. However, the statutory factors are not exclusive, Harper & Row, 471 U.S. at 560, 105 S.Ct. 2218, and the parties raise another point that we now consider. Applicant directs the Court to section 110(7) of the Copyright Act, which provides a limited exemption from copyright liability for the public performance of “nondramatic musical work[s]” in “vending establishment[s] open to the public” (or what applicant refers to as ”`brick-andmortar’ record stores”) so long as the performance “is not transmitted beyond the place where the establishment is located and is within the immediate area where the sale is occurring.” 17 U.S.C. § 110(7). (AT & T Mem. Supp. Summ. J. at 13.) Applicant argues that although it does not qualify for this exemption, “Congress’s conclusion that previews in a traditional record store are a fair, non-substitutional use supports a finding that [applicant]’s use of previews is similarly fair.” (Id. at 14.) In response, ASCAP points out that this statutory provision “only applies to physical stores and does not extend to virtual points-of-purchase such as [applicant]’s MEdia Mall,” and argues that “if Congress had intended to except Internet sites from this type of use, it knew how to do so and could have done so, yet it chose to decline such an invitation,” noting that “amicus DiMA argued unsuccessfully for the extension of Section 110(7) to the Internet” in a report submitted to Congress in 2000. (ASCAP Mem. Opp. Summ. J. at 25 (citing Comments of Digital Media Association, U.S. Copyright Office Report to Congress Pursuant to Section 104 of the Digital Millennium Copyright Act, Docket No. 000522150-0150-01 (Aug. 4, 2000) at 21).)

    111

    We agree with ASCAP that § 110(7) does not weigh in favor of finding fair use here. The statutory language unequivocally indicates that the exemption was intended only for previews of music in physical record stores. Congress may have had many reasons for limiting the provision in this way and we will not endeavor to divine the Congressional intent behind it. We see no reason to override Congress’s intentionally restrictive wording. Moreover, the statutory provision governs a situation that differs in a significant way from the facts of this case: while live music in a record store can be enjoyed only while the customer is in the store, music streamed over the internet can be accessed from practically anywhere in the world.[17] This *434 distinction implicates the fourth fair use factor, since the easier it is for a user to access an infringing work, the greater the likelihood of market harm to the original, as a public performance played from a computer or mobile device could potentially reach a much greater number of people than a public performance in a record store. See Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 907 F.Supp. 1361, 1380 (N.D.Cal.1995) (noting plaintiffs argument that “the Internet’s extremely widespread distribution … multiplies the effects of market substitution”).

    113

    Because all four fair use factors favor a finding against fair use, and there are no other factors that weigh in favor of fair use, applicant’s motion for summary judgment is denied.[18]

    115

    CONCLUSION

    117

    For all of the foregoing reasons, applicant’s motion for summary judgment is denied in its entirety. Because the parties submitted enough evidence for this Court to decide applicant’s motion for summary judgment, it is not necessary for us to decide ASCAP’s cross motion for discovery. The parties may proceed with discovery as this rate court proceeding moves forward.

    119

    SO ORDERED.

    121

    [1] The Court received briefs from Broadcast Music, Inc., the Digital Media Association and the National Association of Recording Merchandisers, and SESAC, Inc. as amici curiae.

    123

    [2] ASCAP concedes only that a ringtone “reasonably includes, but is not necessarily limited to” this definition. (ASCAP R. 56.1 Counterstmt. ¶ 1.) However, ASCAP does not provide an example of a ringtone that does not fall within this definition. The Court accepts this definition for the purposes of this motion.

    125

    [3] The Court adopts the more generic term “ringback tones” for purposes of this Opinion.

    127

    [4] While the Court accepts as fact the existence of these instructions, there is no evidence in the record indicating that by following these instructions, music files are indeed converted to ringtones.

    129

    [5] Applicant states that this happens “often,” however, ASCAP states that while it admits that “ringtones of [a] particular composition are sometimes available by more than one artist … ASCAP lacks sufficient discovery to admit or deny whether such ringtones are `often’ available.” (AT & T R. 56.1 Stmt. ¶ 4; ASCAP R. 56.1 Counterstmt. ¶ 4.)

    131

    [6] ASCAP admits that applicant performs ringback tone previews, but again contends that it lacks sufficient discovery to confirm that these previews are only available via the methods related by applicant. (ASCAP R. 56.1 Counterstmt. ¶ 8.)

    133

    [7] While the Court accepts as fact the existence of these instructions, there is no evidence in the record that when these instructions are followed streaming ringtone previews are indeed copied to a computer for use on a cellular phone.

    135

    [8] Not all of the facts set forth in ASCAP’s statement of additional facts are necessary to decide this motion, therefore, we recount only the facts from the statement upon which this Opinion relies.

    137

    [9] We address the commercial nature of applicant’s use of previews below. Regarding the exploitation of copyrighted works for commercial gain, applicant asserts that “the fact that [applicant] does not charge for previews is further evidence that [applicant]’s use is not exploitive of the copyrighted works as would be the case, for instance, if [applicant] were in the business of selling previews to others for direct financial gain.” (AT & T Reply Mem. Supp. Summ. J. at 2 (emphasis added).) However, while applicant may not receive a direct financial gain by providing previews to its customers free of charge, ”[applicant] admits that its use is indirectly commercial.” (Id. at 1.) This Court does not find the distinction between direct and indirect financial gain dispositive of a determination of whether applicant’s deliberate use of copyrighted ASCAP music is exploitive.

    139

    [10] Other courts have also recognized that search engines aid internet users in navigating the world wide web, thereby helping to inform the public. See, e.g. Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1165 (9th Cir.2007) (“a search engine provides social benefit by incorporating an original work into a new work, namely, an electronic reference tool.”)

    141

    [11] Applicant contends that ”[o]nly an unusual person would be primarily entertained rather than informed by repetitively clicking [applicant]’s music preview icons.” (AT & T Mem. Supp. Summ. J. at 8.) However, if the user did not find the preview entertaining, he or she would not purchase and use the tune as a ringtone or ringback tone. Thus, applicant’s objective in making the preview available must be not merely to inform but to entertain.

    143

    [12] Applicant notes that its use of previews is commercial “in the sense that it may aid sales of the original work,” but argues that “it is also consistent with the public interest to the extent that it provides information that allows consumers to make educated purchasing decisions,” citing Consumers Union of U.S., Inc. v. General Signal Corp., 724 F.2d 1044, 1049 (2d Cir.1983) for the proposition that “consumer product reviews [are] of significant public interest” and, therefore, have been found to be fair use (AT & T Mem. Supp. Summ. J. at 8 n. 3). However, product reviews must be distinguished from previews. While product reviews offer a critique or further information about a consumer good and, thus, are creative in that they add to the public body of knowledge about that good, samples are just copies of something that already exists. Applicant has not set forth a “creative” (as opposed to commercial) reason for using previews. See UMG Recordings, Inc. v. MP3.com, Inc., 92 F.Supp.2d 349, 352 (S.D.N.Y.2000) (rejecting defendant’s argument that providing plaintiff’s music in MP3 format was fair use because it “provides a useful service to consumers,” stating that ”[c]opyright, however, is not designed to afford consumer protection or convenience but, rather, to protect the copyrighters’ property interests…. Stripped to its essence, defendant’s `consumer protection’ argument amounts to nothing more than a bald claim that defendant should be able to misappropriate plaintiffs’ property simply because there is a consumer demand for it.”)

    145

    [13] Applicant also emphasizes to the Court that it does not charge its users for accessing its previews. (AT & T Mem. Supp. Summ. J. at 8.) However, ”[d]irect economic benefit is not required to demonstrate a commercial use. Rather, repeated and exploitative copying of copyrighted works, even if the copies are not offered for sale, may constitute a commercial use.” A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1015 (9th Cir. 2001) (finding that internet service that facilitated transmission and retention of digital audio files by its users had a commercial purpose even though service did not charge users for these files). Thus, in the case at bar, the indirect commercial benefits applicant receives by providing free previews, in the form of sales of ringtones and ringback tones, render the use commercial for purposes of the first fair use factor.

    147

    [14] Although neither party addresses the issue of whether the ASCAP music in applicant’s previews is published before it is streamed as a preview, the record suggests that in some instances, applicant’s previews may contain music that has not yet been released to the public. (Vanderhart Decl., ¶ 17.)

    149

    [15] Applicant asserts that ”[i]n some cases, it maybe `necessary’ to copy an entire work in order to make a transformative use; in such a case, the third factor is neutral.” (AT & T Mem. Supp. Summ. J. at 10) citing Bill Graham Archives, 448 F.3d at 609-11, Kelly, 336 F.3d at 821, Perfect 10, Inc. v. Amazon.com, Inc., 487 F.3d 701, 724 (9th Cir.2007), Nunez v. Caribbean Int’l News Corp., 235 F.3d 18, 24 (1st Cir.2000). In the cases that applicant cites, the new use made of the copyrighted work was found to be transformative. See Bill Graham Archives, 448 F.3d at 610; Kelly, 336 F.3d at 818; Perfect 10, 487 F.3d at 721; Nunez, 235 F.3d at 23. Since in this case applicant’s use is not transformative, applicant’s argument for the necessity of copying a substantial portion of ASCAP music to make a transformative use of that music is not applicable.

    151

    [16] Applicant again relies on the erroneous conclusion that its previews are a transformative use of ASCAP music, making the bald assertion that its “transformative, non-substitutional use of previews results in no harm to the market for musical compositions,” but rather that “previews sell ringtones and ringback tones for which composers are compensated and may increase sales of CDs for which composers are also compensated.” (AT & T Mem. Supp. Summ. J. at 14.) Applicant’s use of previews is not transformative. Moreover, even if applicant’s use of ASCAP music were transformative, applicant does not support its assertion with any evidence as to the effect of previews on the market for ASCAP music, whether in the form of the full song from which the previews are taken or a segment of that song. In addition, the suggestion that previews may increase sales of ringtones, ringback tones and CDs, for which artists are compensated as holders of the reproduction right of their music, is irrelevant to an analysis of the effect on the market for the public performance of ASCAP music; ACAP is not compensated for any increase in sales of the recordings of its members. See UMG Recordings, 92 F.Supp.2d at 352 (“Any allegedly positive impact of defendant’s activities on plaintiffs prior market in no way frees defendant to usurp a further market that directly derives from reproduction of the plaintiffs’ copyrighted works.”)

    153

    [17] Applicant argues that “consumers cannot listen to [its] ringtone and ringback tone previews anywhere other than the MEdia Mall website or, in the case of ringtone preview, the MEdia Mall … application on consumers’ wireless devices.” (AT & T Mem. Supp. Summ. J. at 14.) While we recognize that in a virtual, technical sense applicant’s previews can only be listened to in these two “places,” in a physical sense applicant’s previews can be listened to just about anywhere. While a website and wireless device application are portable, a record store is not.

    155

    [18] ASCAP also argues that applicant’s motion should be denied because it is non-dispositive, “since it does not even address all the performances available on the MEdia Mall service.” (ASCAP Mem. Summ. J. at 2.) ASCAP contends that the motion “would resolve absolutely nothing of consequence in the larger context of this proceeding,” because it fails to address the several other internet websites for which applicant seeks a blanket license and “does not even mention the videos (which include music) that are also residing on the very same MEdia Mall website at issue here.” (Id. at 26-27.) Since the Court denies applicant’s motion on the merits, we do not address this argument set forth by ASCAP.

  • 11 Whitney Broussard, "The Promise and Peril of Collective Licensing," 17 Journal of Intellectual Property Law 1 (2009) (.pdf)

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