WTGDVSoundexchange - Plaintiff's Opposition to Motion to Dismiss

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA

HARRISONBURG DIVISION

WTGD 105.1 FM, WQPO 100.7 FM, WJ DV
96.1 FM, and M. BELMONT VERSTANDIG
INC., d/b/a VerStandig Broadcasting,

Plaintiffs,

v.

SOUNDEXCHANGE, INC.,

Defendant.

Case No. 5:14-cv-00015-MFU-J CH

DISTRICT J UDGE
MICHAEL F. URBANSKI

MAGISTRATE J UDGE
J OEL C. HOPPE

PLAINTIFFS MEMORANDUM OF LAW IN
OPPOSITION TO DEFENDANTS MOTION TO DISMISS

BINGHAM MCCUTCHEN LLP
David J . Butler (pro hac vice)
Bryan M. Killian (pro hac vice)
Stephanie Schuster (pro hac vice)
2020 K Street NW
Washington, DC 20006
Tel: (202) 373-6000
Fax: (202) 373-6001
david.butler@bingham.com
bryan.killian@bingham.com
stephanie.schuster@bingham.com

OFFIT KURMAN
Maurice VerStandig
Virginia Bar No. 81556
8000 Towers Crescent Drive
Suite 1450
Tysons Corner, VA 22182
Tel: (240) 507-1714
Fax: (240) 507-1735
mverstandig@offitkurman.com

Counsel for Plaintiffs
Dated: J uly 17, 2014

Case 5:14-cv-00015-MFU-JCH Document 28 Filed 07/17/14 Page 1 of 34 Pageid#: 126
i
TABLE OF CONTENTS

TABLE OF AUTHORITIES..ii
INTRODUCTION..1
FACTUAL BACKGROUND....2
ARGUMENT..3
I. THIS DECLARATORY J UDGMENT ACTION IS RIPE ........................................... 3
A. Plaintiffs And SoundExchange Have Adverse Legal Interests. ............................. 4
B. The Parties Dispute Over The 150-Mile Exemption Is Immediate. ..................... 5
C. The Parties Dispute Over The 150-Mile Exemption Is Real. ............................... 8
II. THE COURT HAS PERSONAL J URISDICTION OVER SOUNDEXCHANGE. ....... 10
A. SoundExchange Voluntarily Engages In Extensive And Deliberate
Dealings That Are Substantially Related To Virginia And Are In
Furtherance Of The Statutory Licensing Scheme At the Heart Of This
Case. ..................................................................................................................... 11
1. SoundExchange engages in ongoing business relationships with
two Plaintiffs concerning their in-state activities. .................................... 11
2. SoundExchange has extensive business dealings with other
Virginia residents, pursuant to the same statutory license. ...................... 13
B. SoundExchange Conducts Business With Plaintiffs And Other Virginia
Residents Through An Interactive Website Hosted In The Commonwealth. ...... 14
III. PLAINTIFFS ALLEGE A CLAIM FOR WHICH RELIEF MAY BE GRANTED....... 16
A. By The Plain Language And Purpose Of Section 114, Plaintiffs Planned
Retransmissions Come Under The 150-Mile Exemption .................................... 16
B. The Registers Interpretation Is Neither Controlling Nor Persuasive. ................. 20
1. The Registers view of the 150-mile exemption does not bind
courts. ....................................................................................................... 21
2. The Registers interpretation is unpersuasive. ......................................... 24
CONCLUSION25

ii
TABLE OF AUTHORITIES
CASES

3M Co. v. Avery Dennison Corp.,
673 F.3d 1372 (Fed. Cir. 2012)6

ABC, Inc. v. Aereo, Inc.,
134 S. Ct. 2498 (2014).17, 19

Air Products & Controls, Inc. v. Safetech Intl, Inc.,
503 F.3d 544 (6th Cir. 2007).....12

Alpharma, Inc. v. Purdue Pharma L.P.,
634 F. Supp. 2d 626 (W.D. Va. 2009).....6

Arkema Inc. v. Honeywell Intl., Inc.,
706 F.3d 1351 (Fed. Cir. 2013)....7

Assn of Molecular Pathology v. U.S. Patent & Trademark Office,
689 F.3d 1303 (Fed. Cir. 2012)8

A.T. Massey Coal Co. v. Holland,
472 F.3d 148 (4th Cir. 2006).20, 21, 23

Benitec Austl., Ltd. v. Nucleonics, Inc.,
495 F.3d 1340 (Fed. Cir. 2007)....8

Bochan v. La Fontaine,
68 F. Supp. 2d 692 (E.D. Va. 1999)..15

Bonneville Intl Corp. v. Peters,
347 F.3d 485 (3d Cir. 2003).....23, 24

Brown v. Kerkhoff,
504 F. Supp. 2d 464 (S.D. Iowa 2007)..15

Burger King Corp. v. Rudzewicz,
471 U.S. 462 (1985).10, 11

Cablevision Sys. Dev. Co. v. Motion Picture Assn,
836 F.2d 599 (D.C. Cir. 1988)...21

Calder v. Jones,
465 U.S. 783 (1984)...12


iii
Capo, Inc. v. Dioptics Med. Prods., Inc.,
387 F.3d 1352 (Fed. Cir. 2004)....5

Cardinal Chem. Co. v. Morton Intl,
508 U.S. 83 (1993)....6

Cat Tech LLC v. TubeMaster, Inc.,
528 F.3d 871 (Fed. Cir. 2008)..7

Cent. Freight Lines Inc. v. APA Transp. Corp.,
322 F.3d 376 (5th Cir. 2003).13

Christensen v. Harris Cnty.,
529 U.S. 576 (2000)...24

Christian Sci. Bd. v. Nolan,
259 F.3d 209 (4th Cir. 2001)...14, 15

Citibank, N.A. v. Data Lease Fin. Corp.,
904 F.2d 1498 (11th Cir. 1990)...4

Coastal Video Commcns, Corp. v. Staywell Corp.,
59 F. Supp. 2d 562 (E.D. Va. 1999)..11

Combs v. Bakker,
886 F.2d 673 (4th Cir. 1989).....10

CompuServe, Inc. v. Patterson,
89 F.3d 1257 (6th Cir. 1996).14

Conn. Natl Bank v. Germain,
503 U.S. 249 (1992)...16

Danisco U.S. Inc. v. Novozymes A/S,
744 F.3d 1325 (Fed. Cir. 2014)5

Dean v. United States,
556 U.S. 568 (2009)...17

Dudnikov v. Chalk & Vermilion Fine Arts,
514 F.3d 1063 (10th Cir. 2008).13

English & Smith v. Metzger,
901 F.2d 36 (4th Cir. 1990)...10


iv
ePlus Tech., Inc. v. Aboud,
313 F.3d 166 (4th Cir. 2002).10

Exxon Mobil Corp. v. Allapattah Servs., Inc.,
545 U.S. 546 (2005)...18

First Am. First, Inc. v. Natl Assn of Bank Women,
802 F.2d 1511 (4th Cir. 1986)...10

Google Inc. v. Rockstar Consortium U.S. LP,
No. C 13-5933, 2014 WL 1571807 (N.D. Cal. Apr. 17, 2014).12

Hewlett-Packard Co. v. Acceleron LLC,
587 F.3d 1358 (Fed. Cir. 2009)....6

Intercollegiate Broad. Sys., Inc v. Copyright Royalty Bd.,
684 F.3d 1332 (D.C. Cir. 2012).17

Intercon, Inc. v. Bell Atl. Internet Solutions, Inc.,
205 F.3d 1244 (10th Cir. 2000).....15

Intl Shoe Co. v. Washington,
326 U.S. 310 (1945).....11, 14

Kerns v. United States,
585 F.3d 187 (4th Cir. 2009)...9

McGee v. Intl Life Ins. Co.,
355 U.S. 220 (1957).....11, 14

MedImmune, Inc. v. Genentech, Inc.,
549 U.S. 118 (2007).3, 4, 5, 7

Miller v. Brown,
462 F.3d 312 (4th Cir. 2006)...8

Natl Cable Television Assn, Inc. v. Copyright Royalty Tribunal,
724 F.2d 176 (D.C. Cir. 1983).4

Revell v. Lidov,
317 F.3d 467 (5th Cir. 2002).....15

SanDisk Corp. v. STMicroelectronics, Inc.,
480 F.3d 1372 (Fed. Cir. 2007)....5


v
Satellite Bd. & Commns Assn v. Oman,
17 F.3d 344 (11th Cir. 1994).....21

Skidmore v. Swift & Co.,
323 U.S. 134 (1944)...24

Taylor v. Sturgell,
553 U.S. 880 (2008).4

Tuteur v. Crosley-Corcoran,
961 F. Supp. 2d 333 (D. Mass. 2013)13

United States v. Mead Corp.,
533 U.S. 218 (2001)...20, 21, 23

Vitol, S.A. v. Primerose Shipping Co.,
708 F.3d 527 (4th Cir. 2013)...9

Vt. Agency of Nat. Res. v. U.S. ex rel. Stevens,
529 U.S. 765 (2002).4

Walden v. Fiore,
134 S. Ct. 1115 (2014).10, 12

Watson v. United States,
552 U.S. 74 (2007).17

WPIX, Inc. v. ivi, Inc.,
691 F.3d 275 (2d Cir. 2012)...21

Zippo Mfg. Co. v. Zippo Dot Com, Inc.,
952 F. Supp. 1119 (W.D. Pa. 1997)...14

STATUTES & REGULATIONS
17 U.S.C. 101..17
17 U.S.C. 112... 2
17 U.S.C. 112(e).11
17 U.S.C. 114....2
17 U.S.C. 114(d)(1)(B)(i).10, 16
17 U.S.C. 114(d)(1)(B)(ii)(I)..17
17 U.S.C. 114(d)(1)(B)(iii).18

vi
17 U.S.C. 114(d)(1)(B)(iv).18
17 U.S.C. 114(d)(1)(C)(iii).18
17 U.S.C. 114(f)....11, 21
17 U.S.C. 114(g)(2)......2
17 U.S.C. 114(g)(3)......2
17 U.S.C. 114(j)..16
17 U.S.C. 504(c)...7
17 U.S.C. 802(c) (2002)..22
17 U.S.C. 802(f) (2002)..22
37 C.F.R. 370.2...13
37 C.F.R. 380.4.....2
37 C.F.R. 380.13...2
37 C.F.R. 380.13(b)..2
37 C.F.R. 380.13(c).....12
37 C.F.R. 380.13(d)....12
37 C.F.R. 380.13(e).....12
37 C.F.R. 380.13(f).12
37 C.F.R. 380.13(g)12
37 C.F.R. 380.15.2, 12
VA. CODE ANN. 8.01-328.1(B)...15

OTHER AUTHORITIES

141 Cong. Rec. 22,781...18

Determination of Reasonable Rates & Terms for the Digital Performance of Sound Recordings
& Ephemeral Recordings, 67 Fed. Reg. 45240 (J uly 8, 2002)..20, 21, 21, 22, 24

Digital Performance Right in Sound Recordings & Ephemeral Recordings, 72 Fed. Reg. 24084
(May 1, 2007)...5

H.R. Rep. 104274.20

vii

H.R. Rep. 105976.25

SoundExchange | Broadcaster, www.soundexchange.com/service-provider/commercial-
webcaster/broadcaster (2013)..........................................................................................................6

SoundExchange, Inc. v. Sirius XM Radio Inc., No. 1:13-cv-01290 (D.D.C. filed Aug. 26,
2013)....6

S. Rep. 104128.10, 19, 20

Va. Quick Facts, http://quickfacts.census.gov/qfd/states/51000.html (last visited J uly 8,
2014)..14

1
INTRODUCTION
This case presents a legal dispute about Section 114 of the Copyright Act, which grants
owners of copyrights in sound recordings a digital performance right. That right is limited.
There are several exemptions, including one for digital retransmissions of over-the-air AM/FM
broadcasts to listeners within 150 miles of the originating radio transmitter. There also is a statu-
tory license, with take-it-or-leave-it rates and terms, available for nonexempt performances.
Plaintiffs are three Harrisonburg radio stations and their owner. Two stations simulcast
their FM broadcasts to listeners over the Internet pursuant to the statutory license; one is getting
ready to do so. Plaintiffs all believe that the 150-mile exemption protects them from copyright
liability, making the statutory license unnecessary, as long as only local listeners receive their
webcasts. Plaintiffs are ready to limit their webcasts using a technology called geo-fencing,
which restricts a persons access to content over the Internet based on his or her physical location.
Plaintiffs want to webcast their broadcasts in this way to better serve their local community, ac-
commodate the growing number of listeners who prefer to tune-in on Internet-connected devices,
and provide quality access to listeners who live or work in places that obscure FM signals.
Defendant SoundExchange opposes them. SoundExchange is the sole collective that
administers Section 114s statutory license; it collects royalty payments under the license, keeps
a share, then distributes the remainder to copyright owners. SoundExchanges position is that
every webcast of an FM broadcast needs the statutory license because the 150-mile exemption
covers no Internet transmissions of any kind. So when Plaintiffs alerted SoundExchange of their
geo-fencing plans, it strongly urged them to adhere to the statutory license instead.
Confronting a dilemma between abandoning their rights under the 150-mile exemption
and exposing themselves to liability by running geo-fenced simulcasts, Plaintiffs seek declarato-

2
ry relief from this Court. SoundExchange has filed a motion to dismiss, which should be denied
for many reasons, two most notably. First, SoundExchange is no mere bystander in this dispute.
As the sole collective, it gets paid to serve as the intermediary between webcasters and copyright
owners concerning the statutory license, and makes money from its cramped interpretation of the
150-mile exemption. It also regulates webcasts in Virginia using computers located here. Sec-
ond, SoundExchange gives almost no attention to the text of Section 114. The text proves Plain-
tiffs interpretation of the 150-mile exemption and disproves SoundExchanges assertion that the
Court is bound to follow the erroneous interpretation of the Register of Copyrights.
FACTUAL BACKGROUND
SoundExchange is the sole collective responsible for administering and enforcing statu-
tory licenses for sound recording copyrights. See Compl. 18; 17 U.S.C. 112, 114; 37 C.F.R.
380.13(b). SoundExchange speaks on behalf of copyright owners in copyright proceedings,
and it keeps a share of the royalties it collects. See Compl. 19; 17 U.S.C. 114 (g)(2)(3);
37 C.F.R. 380.4, 380.13. SoundExchange also can enforce the copyrights covered by the
statutory licenses. See 17 U.S.C. 114(g)(3); Compl. 22 & Ex. A; see also MTD at 4.
Plaintiffs WQPO and WJ DV are statutory licensees. Compl. 78. SoundExchange
has been regulating their webcasting activities in Virginia since April 2010. Id.; Decl. of Avery
Mason (Mason Decl.) 6. Plaintiffs many ongoing obligations under the statutory license run
exclusively to SoundExchange. See id. 712; 37 C.F.R. 380.13, 380.15. SoundExchange
monitors their in-state activities for compliance and has threatened them with liability (when they
inadvertently submitted the wrong monthly report). Mason Decl. 1314. SoundExchange typi-
cally communicates with Plaintiffs about compliance by telephoning or e-mailing the stations in
Virginia. Id. 12. SoundExchange does the rest of its business with Plaintiffs (and others in

3
Virginia) through its website, which it runs from servers located in Virginia. See Compl. 24;
Mason Decl. 10, 1416; Decl. of J onathan Bender (Bender Decl.) 5.
All Plaintiffs plan to webcast their FM broadcasts only to local listeners within 150 miles
of each stations transmitter by geo-fencing, a technology that restricts a persons access to In-
ternet content based upon his or her real-world location. Compl. 3135. Geo-fencing tech-
nology works the same way regardless of the type of content it is applied to. And so, geo-
fencing has been successful in the online gaming and Internet advertising industries to limit ac-
cess to Internet content based upon a users geographic location. Id. 34.
Because geo-fencing is expensive, Plaintiffs wrote to SoundExchange in February to con-
firm that it would not pursue infringement claims against them for their planned geo-fenced
webcasts. See id. 3637, 49, & Ex. B. SoundExchange responded two weeks later, asserting
that Plaintiffs need the statutory licenseand thus need to pay royalties to SoundExchangefor
any webcast of their FM broadcasts, even if geo-fenced. Id. 38 & Ex. C. SoundExchanges
letter left Plaintiffs with an impossible choice. They could either abandon their rights under the
exemption and pay SoundExchange or expend significant resources to geo-fence webcasts that
SoundExchange contends would be infringing. Id. 4950.
ARGUMENT
I. THIS DECLARATORY JUDGMENT ACTION IS RIPE.
SoundExchanges motion to dismiss this case as unripe mischaracterizes the law and
Plaintiffs allegations. This case is ripe because there now is a substantial controversy, between
parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance
of a declaratory judgment. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).

4
A. Plaintiffs And SoundExchange Have Adverse Legal Interests.
SoundExchange and Plaintiffs are legally adverse over the central dispute in this case
whether a radio station that simulcasts its AM/FM broadcast over the Internet avoids copyright
liability when the webcasts listeners all are within 150 miles of the radio transmitter. In its role
as the sole collective, SoundExchange collects and keeps a share of royalties for webcasts. See
supra p. 2. Plaintiffs WQPO and WJ DV pay SoundExchange royalties for webcasts; Plaintiff
WTGD is on the verge of doing so. Compl. 25, 36. The parties dispute over the 150-mile
exemption, therefore, is no contrivance. See Vt. Agency of Nat. Res. v. U.S. ex rel. Stevens, 529
U.S. 765, 772 (2002). The outcome affects their present and future economic dealings with each
other. As such, Plaintiffs and SoundExchange are as legally adverse as the licensee and patentee
in MedImmune. See MedImmune, 549 U.S. at 128.
The adversity between Plaintiffs and SoundExchange is not diminished by the possibility
that Plaintiffs are also legally adverse to the copyright holders whose sound recordings Plaintiffs
stream. See MTD at 12, 13 & n.5; see also id. at 7 (claiming the dispute does not directly im-
plicate SoundExchange). Indeed, if anything, Plaintiffs possible adversity to copyright holders
heightens Plaintiffs adversity to SoundExchange. SoundExchange not only enforces the statuto-
ry licenses for copyright holders; it even can enforce their copyrights. See supra p. 2. So on the
question of the meaning of the 150-mile exemption, the interests of SoundExchange and copy-
right holders are fully aligned. Since SoundExchange is in privity with copyright holders, a
judgment against SoundExchange can have a wide effect. See Citibank, N.A. v. Data Lease Fin.
Corp., 904 F.2d 1498, 1502 (11th Cir. 1990) (noting that most circuits hold that agency relation-
ships form a basis for preclusion); see generally Taylor v. Sturgell, 553 U.S. 880, 89395 (2008).
This should not surprise SoundExchange. Countless broadcasters and countless copy-
right holders cannot practically or efficiently interact in the marketplace. See Natl Cable Televi-

5
sion Assn, Inc. v. Copyright Royalty Tribunal, 724 F.2d 176, 179 (D.C. Cir. 1983); see also
Compl. 10, 18. Statutory licenses administered by a sole collective solve that market di-
lemma. See Digital Performance Right in Sound Recordings & Ephemeral Recordings, 72 Fed.
Reg. 24084, 24102103 (May 1, 2007). Plaintiffs suit against SoundExchange serves the same
purpose: the stakes are too small (and the transaction costs too high) for a lone broadcaster to sue
a lone copyright holder (or vice versa) over the scope of the digital performance right and the
150-mile exemption in particular.
1
Suit against the sole collective therefore makes sense.
B. The Parties Dispute Over The 150-Mile Exemption Is Immediate.
SoundExchange contends that Plaintiffs dispute is not immediate because they have not
alleged that SoundExchange is ready to sue them and because they have not yet geo-fenced In-
ternet simulcasts. Both contentions lack merit. A party may obtain declaratory relief without
waiting for his opponent to sue and without first exposing himself to potential liability.
MedImmune rejected the notion that a dispute over infringement or royalties is immediate
only if the licensee is likely to be sued. See MedImmune, 549 U.S. at 132 n.11. The dispute in
MedImmune was ripe even though there was no chance the patentee was going to sue. See id. at
128. Article III simply does not mandate that the declaratory judgment defendant have threat-
ened litigation or otherwise taken action to enforce its rights before a justiciable controversy can
arise . Danisco U.S. Inc. v. Novozymes A/S, 744 F.3d 1325, 1330 (Fed. Cir. 2014).
Plaintiffs dispute with SoundExchange is immediate because SoundExchange has
take[n] a position on the 150-mile exemption that forces Plaintiffs either to pursu[e] arguably
illegal behavior or abandon[] that which [they] claim a right to do. SanDisk Corp. v. STMicroe-

1
In passing, SoundExchange asks the Court to exercise discretion to dismiss because Plaintiffs (supposedly)
should have sued copyright holders. See MTD at 13 n.5. Because SoundExchanges premise lacks merit, the Court
should decline to dismiss. [D]ismissal is rarely proper when, as here, a declaration would serve a useful purpose,
clarify legal relations, and terminate the dispute between the parties. Capo, Inc. v. Dioptics Med. Prods., Inc., 387
F.3d 1352, 1355 (Fed. Cir. 2004); see id. at 1357 (citing Borchard, DECLARATORY J UDGMENTS 299 (2d ed. 1941)).

6
lectronics, Inc., 480 F.3d 1372, 1381 (Fed. Cir. 2007). SoundExchanges consistent position is
that simulcasts are never exempt from the digital performance copyright in sound recordings but
are always subject to the statutory license it administers. See Compl. Ex. C; MTD at 2128; see
also SoundExchange | Broadcaster, www.soundexchange.com/service-provider/commercial-
webcaster/broadcaster (2013) (detailing obligations for webcasts of AM/FM broadcasts). In its
letter to Plaintiffs, therefore, SoundExchange strongly urge[d] Plaintiffs to abandon geo-
fencing, enter into the statutory license, and pay royalties. Compl. Ex. C. That letter did not
have to use magic words such as litigation or infringement to ripen the dispute. Hewlett-
Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed. Cir. 2009).
2
The position is what
matters, not the words. Here, SoundExchanges position that Plaintiffs proposed simulcasting is
not exempt and needs to be licensed is tantamount to charging Plaintiffs with infringement. That
creates a justiciable controversy. See Cardinal Chem. Co. v. Morton Intl, 508 U.S. 83, 96 (1993).
Other circumstances confirm the immediacy of the dispute. SoundExchange is solely a
licensing entity that receives no benefits except by those rights. Hewlett-Packard Co., 587
F.3d at 1364. To that end, it has sued other licensees for (allegedly) underpaying royalties. See
SoundExchange, Inc. v. Sirius XM Radio Inc., No. 1:13-cv-01290 (D.D.C. filed Aug. 26, 2013).
It even has threatened Plaintiffs in connection with the statutory license. See Mason Decl. 14.
If Plaintiffs failure to file the right paperwork led SoundExchange to threaten them with copy-

2
Hewlett-Packard does not hold, as SoundExchange contends, that correspondence alone never can estab-
lish jurisdiction. MTD at 11. It held only that one type of correspondence is insufficienta communication from a
patent owner to another party, merely identifying its patent and the other partys product line, without more, cannot
establish jurisdiction. 587 F.3d at 1362 (emphasis added). How much more is required is determined on a case-
by-case analysis. 3M Co. v. Avery Dennison Corp., 673 F.3d 1372, 1379 (Fed. Cir. 2012). Here, for instance,
SoundExchanges letter was sent by Brienne Elpert, Senior Counsel, Licensing & Enforcement, Compl Ex. C, not
a friendly customer service representative as SoundExchange implies, see MTD at 12. There would be no need for
the lawyers to confer if the defendant did not believe that this difference in opinion did not touch the legal interests
of the parties. Alpharma, Inc. v. Purdue Pharma L.P., 634 F. Supp. 2d 626, 630 (W.D. Va. 2009).

7
right infringement, id., there can be no doubt that Plaintiffs use of geo-fencing and withholding
of all royalty payments would spark at least the same level of response.
Moreover, this dispute is no less immediate because Plaintiffs have not yet installed geo-
fencing technology. See MTD at 8. The rule that a plaintiff must destroy a large building, bet
the farm, or risk treble damages before seeking a declaration of its actively contested legal
rights finds no support in Article III. MedImmune, 549 U.S. at 134. Even when a declaratory
judgment plaintiff is simply not doing what he claim[s] the right to do, his action may be ripe
when his threat-eliminating behavior [is] effectively coerced. Id. at 129.
That is happening here. Plaintiffs want to geo-fence their simulcasts within 150 miles of
their transmitters. Compl. 35. But they are unwilling to take that last, expensive step while
SoundExchange posits that it will have no impact on the royalties they owe. Id. 4950. Thus
they face the sort of dilemma that it was the very purpose of the Declaratory J udgment Act to
ameliorate. MedImmune, 546 U.S. at 129. They either must abandon their simulcasting rights
(by continuing to pay royalties or foregoing webcasts altogether) or must expose themselves to
copyright liability (by installing geo-fencing and making no royalty payments). See, e.g.,
Arkema Inc. v. Honeywell Intl., Inc., 706 F.3d 1351, 1359 (Fed. Cir. 2013). The potential liabil-
ity is large; statutory damages can run up to $150,000 per infringement. See 17 U.S.C. 504(c).
Contrary to SoundExchanges argument, see MTD at 9, Plaintiffs have shown meaning-
ful preparationsignificant, concrete stepstoward simulcasting their FM broadcasts only to
local listeners, Cat Tech LLC v. TubeMaster, Inc., 528 F.3d 871, 881 (Fed. Cir. 2008). Two
Plaintiffs already are webcasting. All have seriously investigated geo-fencing technology. Decl.
of J ohn VerStandig 47. They have conferred with companies that successfully provide the
technology to others and learned that it is so costly to adopt that it makes sense to do so only if it

8
exempts them from copyright liability and having to pay royalties. Id. Thus, Plaintiffs have
done more than merely consider undertaking arguably infringing activities. See e.g., Assn of
Molecular Pathology v. U.S. Patent & Trademark Office, 689 F.3d 1303, 1321 (Fed. Cir. 2012)
(holding that doctors who alleged only that they would consider potentially infringing activi-
ties lacked standing); Benitec Austl., Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 134650 (Fed. Cir.
2007) (holding that a declaratory judgment plaintiff lacked standing because it did not anticipate
pursuing infringing activity for several years, if ever).
SoundExchanges assertion that Plaintiffs have not taken concrete steps to pursue geo-
fencing is belied by more than Plaintiffs allegations. See MTD at 9. SoundExchange has not
identified any other step Plaintiffs could have taken before bringing suitshort of entering into
contracts to install geo-fencing and performing the very activity that SoundExchange contends
would expose them to copyright liability. SoundExchanges theory is that the only way for
Plaintiffs to find out if running geographically restricted webcasts complies with the Copyright
Act is to run one. The Declaratory J udgment Act protects Plaintiffs from that Catch 22.
C. The Parties Dispute Over The 150-Mile Exemption Is Real.
The parties to this case have a real dispute about the meaning of the 150-mile exemption.
Plaintiffs contend that an FM radio program that is simulcast over the Internet is exempt under
Section 114 of the Copyright Act if all of the webcasts listeners are within 150 miles of the ra-
dio transmitter. SoundExchange contends that Internet simulcasts are never exempt. That dis-
pute is a legal dispute about the meaning of a statute and is, therefore, quintessentially fit for
judicial review. See Miller v. Brown, 462 F.3d 312, 319 (4th Cir. 2006).
Trying to make that dispute appear hypothetical, SoundExchange argues that Plaintiffs
must install and use geo-fencing to make it real. Indeed, a major premise of SoundExchanges
motion is that geo-fencing is a hypothetical technology. See, e.g., MTD at 7 (calling geo-fencing

9
new and untested). Plaintiffs allege, however, that geo-fencing technology is not a pipe
dream; several industries successfully use it today. Compl. 34. Those allegations are not con-
clusory allegationsi.e. allegations that contain legal conclusions couched as factual allega-
tionswhich the Court may ignore. Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 548
(4th Cir. 2013). They are factual allegations, which the Court must accept as true. See Kerns v.
United States, 585 F.3d 187, 192 (4th Cir. 2009).
The questions SoundExchange asks in its effort to make geo-fencing technology look
fluid and indeterminate, MTD at 10 (quoting Alpharma, 634 F. Supp. 2d at 632), do not un-
dermine the reality of the parties dispute over the meaning of the 150-mile exemption. The dis-
pute would not be more real if Plaintiffs had alleged the technical details of a particular service
providers solution or if they had alleged that another broadcaster had ever attempted to use
geo-fencing to limit the geographic reach of an internet stream of radio programming. Id. In
SoundExchanges view, Plaintiffs are never protected by the exemptionno matter how they
implement geo-fencing or how many times others have implemented it.
At most, SoundExchanges questions show the parties have a ripe factual dispute to go
along with their ripe legal dispute, both of which can be resolved now. A thought-experiment
helps sharpen the point. Imagine that SoundExchange had sued Plaintiffs after they ran a geo-
fenced simulcast, seeking money damages on the ground that the simulcast infringed and
breached the statutory license. That hypothetical case would pose the same legal and factual
disputes as this case; the Court would first decide the meaning of the 150-mile exemption and
then decide whether Plaintiffs geo-fenced simulcast satisfied it. If the Court found that geo-

10
fencing was ineffective at keeping simulcasts within a 150-mile radius, Plaintiffs might lose that
hypothetical case on the merits, but the Court would still have jurisdiction.
3
So too here.
II. THE COURT HAS PERSONAL JURISDICTION OVER SOUNDEXCHANGE.
A court in Virginia may exercise personal jurisdiction over a defendant so long as doing
so comports with due process. See ePlus Tech., Inc. v. Aboud, 313 F.3d 166, 176 (4th Cir. 2002).
Due process requires the defendant to purposefully establish[] minimum contacts in the forum
State. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). That means a substantial
connection to Virginia, and even a single act can be substantial. Id. at 475 & n.18 (citing
McGee v. Intl Life Ins. Co., 355 U.S. 220, 223 (1957)); accord English & Smith v. Metzger, 901
F.2d 36, 39 (4th Cir. 1990) (The relevant question is not where the contacts predominate, but
only whether enough minimum contacts exist [to] satisf[y] due process.).
Personal jurisdiction comes in two shapes: specific and general. See Walden v. Fiore,
134 S. Ct. 1115, 1121 n.6 (2014). Specific jurisdiction exists when a plaintiffs claim arises out
of or relates to the defendants jurisdictional contacts. See First Am. First, Inc. v. Natl Assn of
Bank Women, 802 F.2d 1511, 1516 (4th Cir. 1986). General jurisdiction exists when the defend-
ants contacts with the forum are so systematic and continuous that a plaintiff can assert claims
against the defendant that have no relation to the contacts. Id. Construing the pleadings, decla-
rations, and affidavits in Plaintiffs favor, see Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.
1989), SoundExchange is subject to specific jurisdiction in Virginia because the subject of its
dealings with Plaintiffs is their in-state activities, because it regularly and deliberately reaches

3
There is no merit to SoundExchanges argument that the 150-mile exemption is available only for radio
stations that perfectly geo-fence all of their webcasts. See MTD at 10. A station with geo-fencing technology can
turn it on or off at will, and its choice to pay royalties for an un-fenced simulcast does not prevent it from withhold-
ing royalties for a fenced simulcast. Whats more, the exemption can still protect a geo-fenced simulcast that es-
cape[s] outside the fence, id., because the statute requires only that the retransmission not be willfully or repeated-
ly sent beyond the 150-mile radius, 17 U.S.C. 114(d)(1)(B)(i). Congress did not intend the 150-mile limit to
serve as a dangerous trap for the uninitiated or inattentive. S. Rep. 104128 at 20 (citing H.R. Rep. 941476).

11
into Virginia pursuant to the statutory license, and because it conducts its business with Plaintiffs
and others from computers located in Virginia.
4

A. SoundExchange Voluntarily Engages In Extensive And Deliberate Dealings
That Are Substantially Related To Virginia And Are In Furtherance Of The
Statutory Licensing Scheme At the Heart Of This Case.
An out-of-state entity has minimum contacts with a forum when it engages a forum resi-
dent in an ongoing business relationship that involves continuing obligations between the two.
Burger King, 471 U.S. at 476. The out-of-state entity thereby submits to the forum courts for
any claims that arise out of or relate to the ongoing relationship. Id. at 472. By regularly
reaching beyond the borders of its home state to conduct business with citizens of another state,
an out-of-state entity enjoys the benefits and protections of the laws of that [other] state, Intl
Shoe Co. v. Washington, 326 U.S. 310, 319 (1945), and otherwise puts itself on notice that it may
be subject to suit there, see Burger King, 471 U.S. at 473; McGee, 355 U.S. at 22324.
SoundExchange is the sole entity responsible for administering and enforcing the terms
of the statutory licenses provided for in 17 U.S.C. 112(e) and 114(f)the licenses at issue in
this case. See supra p. 2. To that end, SoundExchange conducts extensive business activities
directed to and within the Commonwealth of Virginia, from which Plaintiffs claims arise.
1. SoundExchange engages in ongoing business relationships with two
Plaintiffs concerning their in-state activities.
SoundExchange and Plaintiffs WQPO and WJ DV have been engaged in ongoing, bilat-
eral business dealings for more than four years. Compl. 7(b), 8(b); Mason Decl. 612.
Those relationships are governed by the statutory license, under which SoundExchange regulates
Plaintiffs Virginia-based webcasts and about which the parties regularly communicate into and

4
If the Court disagrees, Plaintiffs respectfully request that it not dismiss, but instead allow Plaintiffs to con-
duct jurisdictional discovery regarding general jurisdiction. See Coastal Video Commcns, Corp. v. Staywell Corp.,
59 F. Supp. 2d 562, 572 (E.D. Va. 1999). Without discovery, Plaintiffs are not able to evaluate whether
SoundExchanges contacts with Virginia are sufficiently systematic and continuous.

12
from Virginia. Mason Decl. 12. SoundExchanges attempt to minimize the quality and import
of those relationshipsand its role in themshould be rejected.
Plaintiffs obligations under the statutory license concern SoundExchanges regulation
and supervision of Plaintiffs webcasting in Virginia and, accordingly, create a substantial con-
nection between SoundExchange and the Commonwealth. See Air Products & Controls, Inc. v.
Safetech Intl, Inc., 503 F.3d 544, 551 (6th Cir. 2007); Google Inc. v. Rockstar Consortium U.S.
LP, No. C 13-5933, 2014 WL 1571807, at *6 (N.D. Cal. Apr. 17, 2014). They include:
Paying SoundExchange at least $500 a year for the right to webcast from Virginia,
37 C.F.R. 380.13(d);

Paying SoundExchange monthly royalties (and sometimes late fees), based upon the
quantity of sound recordings Plaintiffs webcast from Virginia, id. 380.13(c), (e);

Submitting monthly usage reports and statements of account to SoundExchange, detailing
the songs Plaintiffs webcast from Virginia, id. 380.13(c), (f)(g); and

Acquiescing to SoundExchanges audits in Virginia of their royalty payments and rec-
ords, 37 C.F.R. 380.15.

See Compl. 24. SoundExchange also requires Plaintiffs to respond to ad hoc requests related to
their in-state activities; SoundExchange initiates those requests by sending e-mails or letters (or
making calls) into Virginia. Mason Decl. 12; Bender Decl. 1112; see Walden, 134 S. Ct. at
1122 (a defendants physical entry into the State through mail, or some other means[] is
certainly a relevant contact).
SoundExchange tries to disown Plaintiffs obligations to it and its contacts with Virginia.
As SoundExchange puts it, Plaintiffs unilaterally initiated a relationship with SoundExchange
when they filed Notices of Use with the Copyright Office. MTD at 17. But it would offend
traditional notions of fair play and substantial justice, Calder v. Jones, 465 U.S. 783, 788
(1984), to ignore SoundExchanges substantial contacts with Virginia solely because they fol-

13
lowed Plaintiffs contact with the Copyright Office. SoundExchange is responsible for its con-
tacts even if Plaintiffs are responsible for the relationshipand Plaintiffs are not even solely
responsible for it. Federal law required Plaintiffs to file a notice with the Copyright Office in
order to enter into the statutory license that SoundExchange volunteered to administer and en-
force. See 37 C.F.R. 370.2. SoundExchange took purposeful and affirmative action, the ef-
fect of which is to cause [foreseeable] business activity in Virginia whenever Virginia
webcasters contact the Copyright Office. Cent. Freight Lines Inc. v. APA Transp. Corp., 322
F.3d 376, 382 & n.6 (5th Cir. 2003).
This is not a case where Plaintiffs surprised SoundExchange by unilaterally sending it
envelopes full of money and comprehensive reports about their Virginia webcasts every month
for the last four years. SoundExchange engages Plaintiffs in long-term, ongoing licensing rela-
tionships and has imposed significant, continuing obligations on Plaintiffs concerning their activ-
ities in Virginia. In so doing, SoundExchange created a substantial connection between itself
and Virginia related to the statutory license at the center of this dispute. Subjecting
SoundExchange to suit in Virginia does not offend due process.
2. SoundExchange has extensive business dealings with other Virginia
residents, pursuant to the same statutory license.
In intellectual property cases, personal jurisdiction may be based on activities that do not
implicate the plaintiff specifically but that are related to the plaintiffs claim. See Google, 2014
WL 1571807, at *6; see also Dudnikov v. Chalk & Vermilion Fine Arts, 514 F.3d 1063, 1082
(10th Cir. 2008); Tuteur v. Crosley-Corcoran, 961 F. Supp. 2d 333, 339 (D. Mass. 2013).
SoundExchanges jurisdictional contacts include other activities it performs in, and directs to-
ward, Virginia under the statutory license. It collects royalties from other Virginia residents

14
who, like Plaintiffs, are statutory licensees webcasting from Virginia. MTD at 19. And
SoundExchange pays a portion of those royalties to Virginia residents who own copyrights. Id.
SoundExchange tries to cast those related contacts aside. It contends that, proportionally
speaking, Virginia is neither a large source of its royalty revenue, nor home to a large number of
the copyright owners it represents, because it does only 2% of its business here. MTD at 19.
That figure is not as small as SoundExchange implies: from many angles, Virginia is 2% of the
United States.
5
And, more importantly, the proportion of SoundExchanges business activity in
Virginia is irrelevant to specific jurisdiction. The minimum contacts analysis turns on the na-
ture and quality of SoundExchanges contacts, regardless of their number or relative value.
Intl Shoe, 326 U.S. at 318; see McGee, 355 U.S. at 223 (finding personal jurisdiction based on a
single contact); see also CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1265 (6th Cir. 1996)
(holding that deliberate and repeated contacts can satisfy due process even if they yield[] little
revenue). The fact that a nationwide business like SoundExchange does 98% of its business
elsewhere does not render the 2% that it does in Virginia insubstantial.
B. SoundExchange Conducts Business With Plaintiffs And Other Virginia Res-
idents Through An Interactive Website Hosted In The Commonwealth.
A defendants contacts with forum residents through an interactive Internet website can
establish specific jurisdiction. See Christian Sci. Bd. v. Nolan, 259 F.3d 209, 218 (4th Cir. 2001).
SoundExchange contends that its website has no bearing on personal jurisdiction because the
website is passive, not interactive. MTD at 20. SoundExchange misunderstands those concepts.
Websites have varying degrees of interactivity, depending on the degree to which users can ma-
nipulate and interface with the website and its features. See Zippo Mfg. Co. v. Zippo Dot Com,

5
Virginia is, of course, 1 of 50 states (2%), and about 2% of the United States population lives in Virginia.
See Va. Quick Facts, http://quickfacts.census.gov/qfd/states/51000.html (last visited J uly 8, 2014).

15
Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997). Passive websites are ones that merely allow[]
the owner to post information. Revell v. Lidov, 317 F.3d 467, 470 (5th Cir. 2002). Interactive
websites are ones through which the defendant and in-state users interact, like by exchanging
information. A website that invites visitors to e-mail questions and information requests to
the defendant is interactive and helps demonstrate his contacts with the forum state. Christian
Sci. Bd., 253 F.3d at 218 n.11; see Brown v. Kerkhoff, 504 F. Supp. 2d 464, 508 (S.D. Iowa 2007)
([E]ach time the company responds to an e-mail from an Iowa member who asks a question ,
the company intentionally establishes a contact with the state of Iowa.).
SoundExchanges website is interactive. It is the hub of SoundExchanges dealings with
Plainitffs WQPO and WJ DV, as well as other in-state licensees and copyright owners. The web-
site is the primary way in which SoundExchange instructs Plaintiffs and other licensees how to
comply with their continuing (and changing) obligations under the statutory licenses. See Mason
Decl. 16. SoundExchange emails Plaintiffs and other licensees when it posts new information
on the website about statutory licensing. Id. Monthly usage reports must be compiled using a
standard form developed by SoundExchange and available for download on its website. Id. 15.
Usage reports must be submitted to SoundExchange by email or FTP upload. Id. 10. To use
the FTP option, licensees must get credentials from SoundExchange through the website. Id.
Adding to the personal jurisdiction analysis, SoundExchange hosts its website from serv-
ers located in Virginia. Bender Decl. 5. A website used to conduct business with forum resi-
dents, hosted from servers located in the forum, gives rise to specific jurisdiction. See Intercon,
Inc. v. Bell Atl. Internet Solutions, Inc., 205 F.3d 1244, 1248 (10th Cir. 2000) (collecting cases);
Bochan v. La Fontaine, 68 F. Supp. 2d 692, 699 (E.D. Va. 1999); see also VA. CODE ANN.

16
8.01-328.1(B) (Using a computer or computer network located in the Commonwealth shall
constitute an act in the Commonwealth.).
III. PLAINTIFFS ALLEGE A CLAIM FOR WHICH RELIEF MAY BE GRANTED.
A. By The Plain Language And Purpose Of Section 114, Plaintiffs Planned Re-
transmissions Come Under The 150-Mile Exemption.
When interpreting a statute, its text is the starting point and, if unambiguous, the ending
point as well. See Conn. Natl Bank v. Germain, 503 U.S. 249, 25354 (1992). The interpreta-
tion of Section 114 that SoundExchange advances, however, is not based on statutory text, but on
legislative history (MTD at 26) and the view of the Register of Copyrights (MTD at 2225, 27
29)whose view is addressed below. Plaintiffs start (and end) with the text of the 150-mile
exemption, Section 114(d)(1)(B)(i):
6

(d) Limitations on Exclusive RightNotwithstanding the provisions of section
106(6)
(1) Exempt transmissions and retransmissionsThe performance of a sound
recording publicly by means of a digital audio transmission, other than as a
part of an interactive service, is not an infringement of section 106(6) if the
performance is part of

(B) a retransmission of a nonsubscription broadcast transmission: Provid-
ed, That, in the case of a retransmission of a radio stations broadcast
transmission
(i) the radio stations broadcast transmission is not willfully or repeat-
edly retransmitted more than a radius of 150 miles from the site of the
radio broadcast transmitter .
The 150-mile exemption has two main partsa rule (Section 114(d)(1)(B)) and a proviso
(Section 114(d)(1)(B)(i)). The rule is that a simultaneous digital transmission of a broadcast
does not infringe sound recording copyrights. The proviso adds a condition to the rule: a re-
transmission of an AM/FM radio broadcast is non-infringing only if restricted to 150 miles of the

6
The terms digital audio transmission, interactive service, nonsubscription, and retransmission are
defined elsewhere. See 17 U.S.C. 101, 114(j)(5), (7), (9), (12), (14).

17
radio stations transmitter. Put together, the rule plus the proviso are unambiguous. A simulta-
neous digital transmission of an AM/FM radio broadcast that is not transmitted more than 150
miles from the radio stations transmitter is not infringing.
What the text does not say is as significant as what it says. The proviso does not say that
retransmissions of an AM/FM radio broadcast cannot be over the Internet. On the contrary, the
text refers categorically to performance of a sound recording publicly by means of a digital au-
dio transmission. All parties agree that Internet transmissions are digital audio transmissions.
See MTD at 22; see also Intercollegiate Broad. Sys., Inc v. Copyright Royalty Bd., 684 F.3d
1332, 1334 (D.C. Cir. 2012); cf. ABC, Inc. v. Aereo, Inc., 134 S. Ct. 2498, 2510 (2014) (holding
that Internet transmissions of television programming are public performances). They certainly
are non-analog. 17 U.S.C. 101. If Congress meant for the 150-mile exemption not to apply
to Internet streams, it would have said so.
7

The text also does not say that the identity of the entity doing the retransmission or the
nature of its business bears on the 150-mile exemption, and it certainly does not say that radio
stations or their owners (i.e., entities like Plaintiffs) cannot invoke the exemption. The exemp-
tion applies to the performance and the retransmission, not the performer. That word choice,
along with the passive voice of the proviso (is not willfully or repeatedly retransmitted), indi-
cate that facts about the entity claiming the benefit of the exemption are irrelevant. See Dean v.
United States, 556 U.S. 568, 572 (2009); Watson v. United States, 552 U.S. 74, 81 (2007). That

7
SoundExchange does not dispute the meaning of the word retransmission but contends that live internet
streams are not retransmissions if executed in a particular waynamely, if they do not pull an analog radio
broadcast from the air and convert it to a digital signal. MTD at 22 n.9. SoundExchange concedes this argument is
so fact-intensive that it cannot be considered at the pleading stage. Id. Later on, Plaintiffs will show why the argu-
ment is wrong; part of the answer is that SoundExchanges argument nullifies a different provision in Section 114,
one that specifically addresses retransmissions of radio programs obtained by the retransmitter over the air.
17 U.S.C. 114(d)(1)(B)(ii)(I). For now, Plaintiffs allegations regarding the simultaneity of their Internet trans-
missions are sufficient. See Compl. 2629, 42.

18
conclusion is confirmed by the texts of other provisions in Section 114, whichunlike the 150-
mile exemptionare limited to particular entities. See 17 U.S.C. 114(d)(1)(B)(iii) (cable sys-
tems and satellite carriers); id. 114(d)(1)(B)(iv) (noncommercial educational broadcast sta-
tions); id. 114(d)(1)(C)(iii) (multichannel video programming distributors).
SoundExchange nevertheless contends that a snippet of Section 114s legislative history
makes clear that the exemption was not intended to apply to internet transmissions but was
only for cable radio and similar specific satellite transmission technologies. MTD at 23, 26.
Legislative history, no matter how clear, cannot change the meaning of unambiguous statutory
text. See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005). By its text, the
150-mile exemption is not limited to cable radio, cable systems, satellite companies, or the like.
Anyone who simultaneously retransmits a radio broadcast digitally within the 150-mile radius,
whether on a proprietary network or on a public network like the Internet, can claim the benefit.
The quoted legislative history does not even say what SoundExchange claims. See MTD
at 26 (quoting 141 Cong. Rec. 22,781 (1995)). It announces the drafting Committees explana-
tion that it created the 150-mile exemption to encompass cable systems, id., so the quote shows
(at most) that Congress understood that cable systems would invoke the exemption. Nowhere in
the legislative history did Congress bespeak an understanding that the exemption was only for
cable systems. On the contrary, in the very same portion of the legislative history
SoundExchange cites, Congress expressed a broader understanding of the 150-mile exemption
because it referred to retransmissions made by a cable system (or other retransmission ser-
vice). 141 Cong. Rec. 22,781 (emphasis added). (In its brief, SoundExchange dodges those
problematic words by replacing them with an ellipsis. See MTD at 26.) Congress codified that

19
broader understanding in the text of Section 114(d)(1)(B)(i), which is not drawn so narrowly,
while the texts of other provisions in Section 114 are.
8

The cable-system-only interpretation of the 150-mile exemption also generates implausi-
ble results. Everyone agrees that a radio station may transmit its programming locally over the
AM/FM airwaves without infringing sound recording copyrights because those broadcasts are
not even digital to begin with. Yet on SoundExchanges view, when it comes to retransmitting
the exact same content digitally to the exact same local audience, the originating radio station
infringes copyrights (even if it offers the retransmission for free) while its cable-system competi-
tors do not (even if they charge listeners a fee). See S. Rep. 104128 at 19. SoundExchange
offers no reason why that disparate outcome makes sense.
That disparity is all the more unbelievable in light of the privileged position that radio
stations historically have had, and still have, under federal law. Before Congress granted digital
performance rights to owners of sound recordings in 1995, radio stations never owed royalties
for their local, public performances of sound recordings. Radio stations carried out their public
missions by performing the recordings for free (making money from advertising), and copyright
owners made money from selling records (which radio broadcasts basically advertised for free).
See Compl. 14. The 1995 amendments were not meant to disrupt that symbiosis and hurt radio
stations, but to preserve the balance and help radio stations and copyright owners survive the
expected advent of new digital song-delivery services. Thus, the new digital performance copy-
right was meant to address the potential impact on th[e] market [for the sale of sound recordings]
posed by subscription and interactive servicesbut not by broadcasting and related transmis-

8
The Supreme Courts recent opinion in the Aereo case complicates SoundExchanges interpretation of the
150-mile exemption. The opinion equates a companys transmission of a program over the Internet with a cable
companys transmission of the same program over its proprietary network. See Aereo, Inc., 134 S. Ct. at 2507.

20
sions. S. Rep. 104128 at 17 (emphasis added). Congress specifically disclaimed any intent for
the 1995 amendments to jeopardize the mutually beneficial economic relationship between the
recording and traditional broadcasting industries. H.R. Rep. 104274 at 13.
Plaintiffs interpretation of the 150-mile exemptionas allowing radio stations to re-
transmit their programming over the Internet as long as it goes only to their local listeners
reflects the ordinary meaning of Section 114 and fulfills its undisputed purposes.
SoundExchanges interpretation is the mirror opposite. It ignores the text of the Act and produc-
es an exemption that makes radio stations worse off than the local competitors from whom Con-
gress wanted to protect radio stations. If not for the fact that SoundExchanges interpretation
lines its pockets, the interpretation would have nothing going for it.
B. The Registers Interpretation Is Neither Controlling Nor Persuasive.
In support of its atextual interpretation of the 150-mile exemption, SoundExchange points
to the Register of Copyrights, who once articulated a similar interpretation in a rate-setting order,
and asks the Court to defer to it. See MTD at 2225, 2729; see also Determination of Reasona-
ble Rates & Terms for the Digital Performance of Sound Recordings & Ephemeral Recordings,
67 Fed. Reg. 45240, 45256 (J uly 8, 2002) (2002 Rate-Setting Order). The Registers view
does not bind the Court. Nothing in the Copyright Act indicates that Congress expected the Reg-
ister to speak with the force of law when opining on the meaning of the 150-mile exemption.
United States v. Mead Corp., 533 U.S. 218, 229 (2001); see A.T. Massey Coal Co. v. Holland,
472 F.3d 148, 154 (4th Cir. 2006). At most, the Court may give the Registers view respect
proportional to its power to persuade. Mead, 533 U.S. at 235 (quoting Skidmore v. Swift &
Co., 323 U.S. 134, 140 (1944)). Here, that means no respect at all, as the Registers view is ut-
terly unpersuasive. It is contrary to the text and purpose of Section 114 (a failing that disquali-

21
fies it from deference under any standard) and based on a mischaracterization of the legislative
history and on a characterization of Internet transmissions which is not true now (if it ever was).
1. The Registers view of the 150-mile exemption does not bind courts.
Agencies applying federal statutes make lots of interpretive choices, but not all of those
choices bind judges to follow them. Id. at 227. Courts are bound only when Congress gave the
agency authority to speak with the force of law on the particular issue in question. Id. at 232
(holding that agency rulings on a particular issue were not controlling even though the agency
had authority to render some regulation with the force of law) (emphasis added). The analysis
requires an examination of the whole statute. A.T. Massey Coal, 472 F.3d at 167.
But SoundExchange does not examine the Copyright Act, and the few opinions it cites
are irrelevant. See MTD 25. None addressed an interpretation of the 150-mile exemption or
Section 114, let alone an interpretation rendered in a rate-setting order. Indeed, two of the opin-
ions were decided before Section 114 was enacted. See Satellite Bd. & Commns Assn v. Oman,
17 F.3d 344 (11th Cir. 1994); Cablevision Sys. Dev. Co. v. Motion Picture Assn, 836 F.2d 599
(D.C. Cir. 1988). The third decision actually supports Plaintiffs: instead of holding that Copy-
right Office interpretations are controlling, it held that the weight accorded to the Copyright
Offices interpretations depends upon all those factors which give it power to persuade.
WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 283 (2d Cir. 2012) (quoting Skidmore, 323 U.S. at 140).
The interpretation of the Register of Copyrights that SoundExchange relies on is not con-
trolling, as its history and the statutory context make clear. The Register announced the interpre-
tation in an order reviewing a rate-setting arbitration by the Copyright Arbitration Royalty Panel.
See 2002 Rate-Setting Order at 45256. Section 114(f) required the arbitration to set rates and
terms for Section 114s statutory licenses. See id. at 45240; see also 17 U.S.C. 114(f). Noth-
ing in Section 114(f) purported to grant the arbitrators lawmaking authority. Nor did Section

22
802, the background provision on copyright arbitrations, as it directed the arbitrators to rely only
on the written record and prior rulingsnot policy. See 17 U.S.C. 802(c) (2002). Unsurpris-
ingly, the arbitrators did not opine on the meaning of the 150-mile exemption.
Pursuant to Section 802(f), the arbitrators decision was reviewed by the Librarian of
Congress and the Register of Copyrights. See 2002 Rate-Setting Order at 45242.
SoundExchange cites Section 802(f), see MTD at 24, but missed that it was completely rewritten
after the 2002 Rate-Setting Order. The version then in effect called for narrow review: [U]pon
the recommendation of the Register, the Librarian could either adopt or reject the determina-
tion of the arbitration panel. He had to adopt it unless he found it was arbitrary or contrary to
the applicable provisions of this title. And if he rejected it, he could only issue an order setting
the royalty fee based on a full examination of the record created in the arbitration proceeding.
See 17 U.S.C. 802(f) (2002); see also 2002 Rate-Setting Order at 45242. Significantly, Section
802(f) did not authorize the Register or Librarian to reject an arbitration award for policy rea-
sons, nor did it authorize them to undertake notice-and-comment rulemaking.
Nevertheless, because one of the parties to the arbitration had considerable doubts on
the meaning of the 150-mile exemption (it believed that the interpretation SoundExchange now
proffers was weak), the Register felt compelled to opine on it and so asked the parties to
submit briefs expressing their views. 2002 Rate-Setting Order at 45251, 45256. Only then did
she opine that the 150-mile exemption is not applicable to radio retransmissions made over the
Internet. Id. When the Librarian adopted the Registers recommendations on rates and terms,
he did not address the 150-mile exemption; indeed, his published regulations say nothing about
it. Id. at 45272276.

23
The Registers opinion on the 150-mile exemption is not binding. In Section 114(f),
Congress limited the 2002 proceeding to setting royalty rates and license termsformulaic tasks
that do not ordinarily entail broad policymaking. Cf. A.T. Massey Coal, 472 F.3d at 167 (holding
that a delegation to calculate premium payments was not a delegation to make policy). Congress
could not have anticipated that the proceeding would define the scope of the 150-mile exemp-
tion, as that question is logically and legally antecedent to the question of what royalty rates
should be for nonexempt transmissions. The topic was interjected only because one private party
and the Register wanted to address it. As the old Section 802(f) expresses, however, Congress
did not want the Register to stray beyond the arbitrators record or review their decision except
for arbitrariness. To that end, Congress subjected the Registers recommendation to independ-
ent review by the Librarian, which further cuts against finding a delegation. Mead, 533 U.S. at
232. Congress, in other words, gave no indication that it meant to delegate anyone the authority
to issue interpretations of the 150-mile exemption with the force of law. Id. at 23132. That
the Register requested briefing before giving her opinion makes no difference; an agency that
tries to create the appearance of delegation through the use of legislative-type processes does
not create delegation where none exists. A.T. Massey Coal, 472 F.3d at 16667.
When the Third Circuit considered an actual rule promulgated by the Copyright Office
about the meaning of a different Section 114 exemption, two judges believed that the Offices
interpretation of Section 114 is not binding on courts. See Bonneville Intl Corp. v. Peters, 347
F.3d 485, 490 n.9 (3d Cir. 2003). The rule in question was issued pursuant to the Offices au-
thority under Sections 701 and 702 of the Act, and the two judges stated their view that the lan-
guage of those sections was insufficient to shift the responsibility of interpreting what is copy-
right-protected from the courts, the traditional stewards of such property rights, to the Copyright

24
Office, which has no history of, or significant expertise in, such a role. Id. If the Office cannot
authoritatively interpret Section 114s exemptions during formal notice-and-comment rulemak-
ing pursuant to an express delegation of authority, it certainly cannot authoritatively interpret
Section 114s exemptions in an unauthorized, ad hoc rate-making proceeding.
2. The Registers interpretation is unpersuasive.
An agency interpretation that does not bind courts nevertheless may deserve some
weight, depending on the thoroughness evident in its consideration, the validity of its reasoning,
its consistency with earlier and later pronouncements, and all those factors which give it power
to persuade, if lacking power to control. Skidmore, 323 U.S. at 140. The Registers interpreta-
tion of the 150-mile exemption is unpersuasive for several reasons.
First, no agency interpretation of a statute that conflicts with the statutes plain meaning
can be persuasive, let alone controlling. See Christensen v. Harris Cnty., 529 U.S. 576, 588
(2000). The Registers interpretation of the 150-mile exemption contradicts the text of Section
114. See supra pp. 1620. It therefore deserves no weight.
Second, the Registers reasoning is invalid. She stated that the critical piece of her in-
terpretation of the 150-mile exemption was Section 112(e), the provision that authorizes statuto-
ry licenses for ephemeral recordingsthat is, copies of sound recordings made for later trans-
mission. In her view, an entity performing a simulcast of a radio stations AM/FM broadcast
needs a Section 112 statutory license (because technology supposedly requires multiple ephem-
eral recordings to accomplish a simulcast) but is ineligible for the license (because Section
112(e) does not refer to ephemeral recordings used in exempt transmissions). See 2002 Rate-
Setting Order at 45257; see also MTD at 2728. But Plaintiffs planned webcasts can be accom-
plished with at most one copy, which is allowed under Section 112(a) without a statutory license.
See Compl. 48. The House Report the Register cited is not to the contrary. It does not say that

25
multiple copies are necessary for Internet retransmissions; it simply recognized that, for quality
reasons, a webcaster might wish to reproduce multiple copies of a sound recording to use on
different servers or to make transmissions at different transmission rates or using different
transmission software. H.R. Rep. 105976 at 90 (emphasis added).
Third, technology has changed. Whatever technical basis the Registers interpretation
may have had in 2002, advances in Internet transmitting technologylike geo-fencing and buff-
eringrender it obsolete. Plaintiffs allege and will prove that their planned simulcasts will
comply with Section 114s 150-mile requirement and Section 112s no-more-than-one-copy re-
quirement, so Plaintiffs do not need a statutory license under either section. An interpretation by
the Register that does not account for technological development and that, as SoundExchange
concedes, ignores the unique licensing situation of radio stations like Plaintiffs, MTD at 28
n.11, is no longer persuasive (if it ever was).
CONCLUSION
Defendants Motion to Dismiss the Complaint (Dkt. No. 19) should be denied.

Dated: J uly 17, 2014 Respectfully submitted,

OFFIT KURMAN
Maurice VerStandig
Virginia Bar No. 81556
8000 Towers Crescent Drive
Suite 1450
Tysons Corner, VA 22182
Tel: (240) 507-1714
Fax: (240) 507-1735
mverstandig@offitkurman.com

s/ David J . Butler _____
David J . Butler (pro hac vice)
Bryan M. Killian (pro hac vice)
Stephanie Schuster (pro hac vice)
BINGHAM MCCUTCHEN LLP
2020 K Street NW
Washington, DC 20006
Tel: (202) 373-6000
Fax: (202) 373-6001
david.butler@bingham.com
bryan.killian@bingham.com
stephanie.schuster@bingham.com

Counsel for Plaintiffs

26
CERTIFICATE OF SERVICE

I hereby certify that on J uly 17, 2014, a true and correct copy of the foregoing was served
upon counsel for all parties via the Courts ECF system.

s/ David J . Butler _____
David J . Butler


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