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Soundexchanges Opposition to Motions for Issuance of Subpoenas

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Soundexchanges Opposition to Motions for Issuance of Subpoenas Before the UNITED STATES COPYRIGHT ROYALTY JUDGE ~+/J Washington, D.C. Ig 4 F. In the Matter of: ) Determination of Royalty Rates for Digital ) Docket No. 14-CRB-0001-WR (2016-2020) Performance in Sound Recordings and ) CRB Webcasting IV Ephemeral Recordings (Web IV) ) SOUNDEXCHANGE'S OPPOSITION TO MOTIONS FOR jsSUANCE OF SUBPOENAS Glenn D. Pomerantz (CA Bar 112503) Kelly M. Klaus (CA Bar 161091) Anjan Choudhury (DC Bar 497271) MUNGER, TOLLES & OLSON LLP 355 S. Grand Avenue, 35th Floor Los Angeles, CA 90071-1560 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 [email protected] [email protected] [email protected] Counselfor SoundExchange, Inc. TABLE OF CONTENTS Pape I. INTRODUCTION II. ARGUMENT...... A. The Motions Seek to Subvert Precedent, Statutory Text and History to Transform the Subpoena Power into an Unprecedented Early Discovery Tool. 1. The Judges'nterpretation ofTheir Subpoena Power Disfavors the Motions. Section 803 and its History Underscore the Reasoning in the Judges'010 Decision Interpreting the Subpoena Power................. (a) The Discovery Period — Including the Service of Subpoenas — Follows the Submission ofthe Parties'irect Cases ......... (b) The Applicable Legislative History Supports Denying the Motions (c) The Motions Concede Party Discovery is Inappropriate Now and Yet Seek to Subpoena Information &om Parties or Obtainable Through Party Discovery 10 (d) Any Other Reading Would Undermine the Voluntary Negotiation Period. 13 The Motions Fail to Demonstrate the Requisite "Substantial Impairment" to the Resolution ofthe Proceedings. 14 The Subpoena Requests are Excessively Broad to Meet the Motions'rofessed Need.. 19 III. CONCLUSION. 19 TABLE OF AUTHORITIES ~Pa e CASES Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 684 F.3d 1332 (D.C. Cir. 2012) ....14 SoundExchange, Inc. v. Librarian ofCongress, 571 F.3d 1220 (D.C. Cir. 2009) STATUTES AND REGULATIONS 37 C.F.R. $ 351.9(e) 17 U.S.C. $ 802(f)(1)(a). 17 U.S.C. $ 803.. 4, 6, 7 17 U.S.C. $ 803(b). 17 U.S.C. $ 803(b)(1) 17 U.S.C. $ 803(b)(3)(B). 17 U.S.C. 5 803(b)(6)(C). 17 U.S.C. $ 803(b)(6)(C)(i)-(xi) . 17 U.S.C. $ 803(b)(6)(C)(ii)(I) 17 U.S.C. $ 803(b)(6)(C)(iv) 17 U.S.C. $ 803(b)(6)(C)(ix) . 17 U.S.C. $ 803(b)(C)(6)(ix) . ...1,2,14 17 U.S.C. $ 803(c) COPYRIGHT ROYALTY BOARD AUTHORITIES Copyright Royalty Judges'uthority to Subpoena a Nonparticipant to Appear and Give Testimony or to Produce and Permit Inspection of Documents or Tangible Things, Dkt. No. RF 2009-1, 75 Fed. Reg. 13306-01 (Mar. 19, 2010) 4,5 Determination After Remand of Rates and Terms for Royalty Years 2011-2015, Dkt. No. 2009-1 CRB Webcasting III (Jan. 9, 2014) 16 11 TABLE OF AUTHORITIES ~Pa e Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, Dkt. No. 2011-1 CRB PSS/Satellite II, 78 Fed. Reg. 23054 (Apr. 17, 2013). .16 Determination of Royalty Rates for Digital Performance in Sound Recordings and Ephemeral Recordings, Dkt. No. 14-CRB-0001-WR (2016-2020), 79 Fed. Reg. 412- 01, 413-14 (Jan. 3, 2014) . .15 Digital Performance Rights in Sound Recordings and Ephemeral Recordings, Dkt. No. 2005-1 CRB DTRA,72 Fed. Reg. 24084 (May 1, 2007) ....12 Direct Case Statement ofthe Digital Media Association and Its Member Companies America Online, Inc.; Live365; Microsoft Corporation and Yahoo!, Inc,, Dkt. No. 2005-1 CRB DTRA (Oct, 31, 2005) Order Denying Issuance of Subpoenas for Nonparty Witnesses, In the Matter of Digital Performance Right in Sound Recordings, Dkt. No, 2009-1 CRB Webcasting III (Mar. 5, 2010),,.....................„„..........,......,.„,.......,.„,....„„„........,.„,.....„„„..1, 2, 4, 5 Pandora's Opposition to Motion for Subpoenas, Dkt. No. 2009-1 CRB Webcasting III (Dec. 17, 2009) Summary ofthe Joint Written Direct Statement of Radio Broadcasters, Dkt, No. 2005-1 CRB DTRA (Oct. 31, 2005) . LEGISLATIVE MATERIAI.S 150 Coro. REc. S11422-03 (daily ed. Nov. 17, 2004) . ...7,8,10 H.R. REP. No. 108-408. ..9, 10 H.R. REP. No. 108-408. H.R. REP. No. 108-408. H.R. RFp. No. 108-408. H.R. REp. No. 108-408 (2004), reprinted in 2004 U.S.C.C.A.N. 2332 OTHER AUTHORITIES Statement of Digital Media Association on Passage of Copyright Royalty Distribution Reform Act of 2004, available athtt s://web.archive.or /web/20041129173020/ht://di media.or /. nl I. INTRODUCTION SoundExchange, Inc. ("SoundExchange") opposes the motions to issue subpoenas duces tecum "Motions" (the ) filed by Pandora Media, Inc. ("Pandora") and the National Association of Broadcasters "NAB"). (the The Copyright Royalty Judges ("Judges") made it clear in 2010 that, under the controlling statute, "[s]ubpoenas are not permitted for purposes ofbuilding one or more party's direct cases."'ut using the subpoena power to build their direct case is exactly what the moving parties — by their own admission — seek to do here. The Motions should be denied. The Motions seek to undo the limits that Congress established for discovery in these proceedings. The governing statute provides for a period of focused discovery after participants submit their direct cases. The subpoena power is a limited safety valve ifthe Judges find the record incomplete to a degree that information missing at that juncture could "substantially impair" the resolution ofthe proceeding. 17 V.S.C. $ 803(b)(C)(6)(ix). The system is fair because ultimately all relevant information underlying each sides'conomic analyses is exchanged, just not in advance ofthe presentation ofthe parties'irect cases so that the discovery can be focused rather than speculative. Congress created this two-step procedure— presentation ofdirect cases first, defined discovery second — intentionally and not by accident. Numerous interested parties — including Pandora's own counsel — argued the pros and cons of having discovery akin to that used in federal court precede the submission ofparticipants'ritten direct cases. However, Congress enacted the compromise procedure that applies in Section 803(b)(C)(6)(ix) to make rate-setting proceedings "less expensive and more expeditious 'rder Denying Issuance of Subpoenas for Nonparty Witnesses, at 3, In the Matter of Digital Performance Right in Sound Recordings ("8'ebcasting III"), Dkt. No. 2009-1 CRB Webcasting IlI, (Mar. 5, 2010) ("Web III Subpoena Order"). and efficient." H.R. Rap. No. 108-408, at 21 (2004), reprinted in 2004 U.S.C.C.A.N. 2332, 2336. The result that Pandora and the NAB seek would undo the Congressional compromise and open up this proceeding — and future rate-setting proceedings — to wide-ranging, expensive and burdensome pre-written-direct-case discovery. That would be directly counter to the procedure that Congress enacted. The Motions fail entirely to establish that the subpoenas must issue to avoid the "substantial impairment" of the Judges'esolution ofthe proceeding. 17 U.S.C. $ 803(b)(C)(6)(ix). Indeed, until the parties submit their written direct cases, "it is not possible" to assess whether a proceeding's resolution would be "substantially impaired," as the Judges previously held. Web III Subpoena Order, at 3. Pandora, which previously has not participated in rate-setting proceedings, argues that this proceeding is sui generis because the stakes are high. But the stakes are always high for parties who participate in rate-setting proceedings. The fact that Pandora has an enormous market share does not give it the right to change the rules Congress established when Pandora decides to participate in these proceedings. Nor do the complaints by Pandora and the NAB about a purported "imbalance" of information justify changing the rules. Any party in any proceeding can always argue information asymmetry as the result of the procedure that Congress established. The fact of informational imbalance applies to both sides. Like Pandora and the NAB, SoundExchange also lacks necessary information at this juncture, and will have to rely on post-submission discovery for, among other things, internal documents including financial analyses, future advertising revenue prospects, the value of music curation versus the music itself, and so on. Until that discovery opportunity, Pandora and the NAB have considerable resources and information available to prepare their cases. If Pandora's and the NAB's requests meet the substantial impairment standard, then the Judges will face requests for subpoenas at the outset of every case, by every party. In all events, Pandora's and the NAB's assertions of an "information deficit" are overstated. As they have in the past through DiMA and the NAB, digital services and broadcasters will combine their own shared information with public information to build their case, as past proceedings and the declaration of Pandora's counsel (Mr. Larson) demonstrate. If the Judges later conclude on a more complete record that there is an absence ofkey information that substantially impairs their decision, the issue ofwhether subpoenas need be issued may be revised at that time. The parties should engage in negotiations during this period — not discovery battles by ambush. 17 U.S.C. $ 803(b)(3)(B); Notice ofParticipants, Commencement of Voluntary Negotiation Period, and Case (" Scheduling Order, Scheduling Order"), at 1 (Feb. 19, 2014) ("[a]ll participants shall engage directly or by counsel in good faith settlement negotiations aimed at resolving controversies"). Pandora initially engaged in confidential settlement negotiations with SoundExchange — but now has elected to use information gathered in those discussions to support their litigation position. SoundExchange had no advance notice that Pandora or the NAB were even contemplating the Motions. Urgency did not dictate the timing of these Motions; it appears from Pandora's papers that its Motion has been in the works for 2 some time.
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