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J L T:) Public Information Office l E C L l 'j L t:) Public Information Office Before the UNITED STATES COPYRIGHT ROYALTY JUDGES COPYRIGHT OFFICE Library of Congress Washington, D.C. In the Matter of: Determination of Royalty Rates Docket No. 16—CRB—0001 —SR/PSSR and Terms for Transmission of (201S-2022) Sound Recordings by Satellite Radio and "Preexisting" Subscri tion Services SDARS III INDEX Tab I Motion to Compel Tab 2 Declaration of Jackson Toof Tab 3 Exhibits Tab 4 Certificate of Service e e e e e % % 0 0 0 0 P 0 0 0 0 0 0 0 4 gag .~ ~ ~ ~ a IMI ~ Il& Before the UNITED STATES COPYRIGHT ROYALTY JUDGES Library of Congress Washington, D.C. In the Matter of: Determination ofRoyalty Rates and Terms Docket No. 16-CRB-0001-SIUPSSR (2018-2022) for Transmission of Sound Recordings by Satellite Radio and "Preexisting" Subscription Services (SDARS III) MUSIC CHOICE'S MOTION TO COMPEL SOUNDEXCHANGE TO PRODUCE AUDIT DOCUMENTS AND CABSAT SKTTLKMKNT DOCUMENTS Pursuant to 17 U.S.C. $ 803(b)(6)(C)(v) and 37 C.F.R. $351.5(b), Music Choice respectfully requests that the Copyright Royalty Judges (the "Judges") compel SoundExchange, Inc. ("SoundExchange") to produce two narrow categories of documents: (1) documents relating to SoundExchange's audits of its CABSAT'icensees that were commenced, conducted or completed in the years 2013-present, and (2) documents relating to the negotiation ofthe settlement that led to the current CABSAT royalty rates and the submission ofthat settlement to the Copyright Royalty Board for approval. SoundExchange has proposed the current CABSAT rates as its sole benchmark for the PSS royalty rates to be set in this proceeding. As such, the requested documents directly relate 'apitalized terms used but not defined in this Motion will have the meaning set forth in the Requests for Production ofDocuments to the Copyright Owner Participants trom Sirius XM and Music Choice, which was served on SoundExchange on October 24, 2016 (the "Request"). The Request is attached as Exhibit A to the Declaration ofJackson D. Toof, dated December 16, 2016 (the "ToofDecl."). The Request was a joint effort between Sirius XM Radio Inc. ("Sirius XM") and Music Choice; however, Request Nos. 2, 8 and 9 that were directed to SoundExchange and are at issue here pertain only to SoundExchange's case against PSS licensees. SoundExchange served its Responses and Objections to the Second Set ofRequests for Production ofDocuments to the Copyright Owner Participants trom Sirius XM and Music Choice on November 14, 2016 (the "Response"). The Response is attached as Exhibit B to the Toof Decl. to SoundExchange's Written Direct Statement and are highly probative of issues central to the Judges'ask of setting PSS royalty rates. Music Choice is entitled to discovery of these documents. CERTIFICATION Pursuant to 37 C.F.R. g 351.5(b)(1), Music Choice certifies that the parties have met and conferred on these issues in a good faith effort to resolve the discovery disputes raised in this Motion, including by teleconference on December 7, 2016, and through emails dated December 2, 9 and 13, 2016. See ToofDecl. $g 6-8. Although the parties resolved many of their disputes, they have been unable to reach agreement on those raised in this Motion, necessitating the involvement of the Judges to resolve these issues. LEGAL STANDARD The discovery standard governing this phase of this proceeding authorizes a participant to request non-privileged documents that directly relate to the written direct statement of an opposing participant. See 17 U.S.C. $ 803(b)(6)(C)(v); 37 C.F.R. $ 351.5(b). A party's written direct statement includes witness statements, exhibits, designated testimony from prior proceedings, and the party's rate proposal. See 17 U.S.C. g 803(b)(6)(ii)(II); 37 C.F.R. $ 351.4(b). The Judges'rior rulings in past proceedings have made clear that the "directly related" standard goes beyond documents that are directly reviewed or relied upon in preparing a participant's written direct statement, or documents that are expressly referenced therein. For example, in the Satellite II proceeding, the Judges found that the "directly related" standard encompassed documents that, although not expressly referenced, were related to a topic a participant had put "in issue" in its written testimony. Order Granting in Part and Denying in Part SoundExchange 's Motion to Compel Music Choice to Produce Documents and Respond to Interrogatories, Docket No. 2011-1 CRB PSS!Satellite II (Aug. 8, 2012); see also Order Grantingin Part and Denying in Part Sirius XM's Motion to Compel SoundExchange to Produce Communications Between and Among SoundExchange, AFM, A2IMand Other Industry Groups Regarding Sirius XM's Direct License Initiative, Docket No. 2011-1 CRB PSSISatellite II (Mar. 29, 2012) (compelling production of industry communications concerning Sirius XM's direct licensing initiative as directly related to SoundExchange's proffered expert testimony asserting that he was "aware of no direct evidence on what rates might be negotiated between Sirius XM and copyright holders in an arm's length setting"); Order Granting in Part and Denying in Part Services 'otion to Compel SoundExchange to Provide Digital Music Agreements, Docket No. 2011-1 CRB PSSISatellite II (Mar. 13, 2012) (compelling production of license agreements for all digital distribution services in a given license category, even where certain such agreements were not considered by SoundExchange's expert or mentioned in its Written Direct Statement). ARGUMENT THK JUDGES SHOULD ORDER SOUNDEXCHANGE TO PRODUCE DOCUMENTS RELATING TO AUDITS OF CABSAT SERVICES. Music Choice propounded the following document request to SoundExchange: Request No. 2: For any audit of a CABSAT or PSS licensee (including audits of those licensees'on-CABSAT and non-PSS license payments) by SoundExchange commenced, conducted, or completed in the years 2013 to present, including but not limited to the audit of Stingray Digital's CABSAT and BES payments for the years 2011-2013 and DMX's CABSAT payments for the years 2012-2014, all Documents concerning such audits, including all audit reports, drafts of audit reports, internal communications, external communications, notes, working papers, internal analyses, spreadsheets, and financial Documents. See Toof Decl. g 4 and Ex. A, at 9-10 (Request No. 2 to Sound Exchange ). SoundExchange objected to the production of the requested documents on various grounds, including that Music Choice seeks documents not "directly related" to SoundExchange's written direct statement and not reasonably limited to issues in this proceeding, and that the request for drafts, working papers and internal communications is unduly burdensome. See Toof Decl. $ 5 and Ex. B, at 20 (written objections to Request No. 2 to SoundExchange). A. SoundExchange's Audit's of Sirius XM, Music Choice and Muzak During the meet and confer process, SoundExchange indicated that for the 2013-present time period, it completed audits of Sirius XM, Music Choice and Muzak 2 and that it has produced {or will produce) the final audit report and communications with these audited parties concerning these audits. See Toof Decl. $ 8 and Ex. D (email from J. Freedman on Dec. 13 at 6:35pm). SoundExchange, however, continues to refuse to produce any drafts of audit reports, internal (as opposed to external) communications concerning the audits, notes, working papers, internal analysis, spreadsheets and financial documents concerning the audits. See id. Music Choice believes such materials should be produced, but in order to lessen any burden on SoundExchange in connection with producing such documents concerning the audits of Sirius XM, Music Choice and Muzak—although Music Choice cannot imagine there is much burden— Music Choice will not seek an order from the Judges to compel SoundExchange to produce these materials.3 2 SoundExchange also agreed during the parties'ecember 7 telephonic meet and confer that to the extent it produces documents responsive to Request No. 2, SoundExchange would not withhold documents ifthey were created or dated prior to January 1, 2013, if the documents related to an audit that was finalized after January 1, 2013. See Toof Decl. $ 7.a. 3 Music Choice understands that Sirius XM and SoundExchange are still conferring regarding communications related to SoundExchange's audit of Sirius XM, and that Sirius XM has indicated it may raise this issue with the Judges. B. SoundKxchange's Audit of Stingray or other CABSAT services On the other hand, Music Choice must seek an order from the Judges compelling SoundExchange to produce documents relating to SoundExchange's audits of any CABSAT service, including Stingray and DMX, in view of the fact that SoundExchange has proposed the current CABSAT rates as its sole benchmark for the PSS royalty rates to be set in this proceeding. See Toof Decl. )$ 9-10 and Exs. E and F (Introductory Memorandum to the Written Direct Statement of SoundExchange, Inc., and Copyright Owner and Artist Participants at 7-8; Written Direct Testimony of Paul Wazzan at 28). Specifically, during the meet and confer process, SoundExchange indicated that it audited Stingray, a CABSAT service, during the 2013-present time period, but the parties resolved that audit by agreement instead ofproducing a final audit report. See ToofDecl. $ 8 and Ex. D (email from J. Freedman on Dec. 13 at 6:35pm}. SoundExchange has agreed to produce the letter that purportedly memorializes the resolution ofthis audit, the supporting schedules, and any communications with Stingray concerning this audit. See id. But, SoundExchange again refuses to produce any drafts ofthe audit report that were being prepared prior to or at the time ofthe settlement, internal (as opposed to external) communications concerning the audits, notes, working papers, internal analysis, spreadsheets and financial documents concerning the audit. See id.
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