Addressing royalties under the US Copyright Act’s compulsory licensing scheme, the US Court of Appeals for the District of Columbia Circuit vacated the Copyright Royalty Board’s royalty allocation for 2014 through 2017 and remanded for the Board to further explain how the royalty rates were calculated and allocated. Office of the Commissioner of Baseball v. Librarian of Congress, Case Nos. 24-1259; -1260 (DC Cir. Sept. 22, 2026) (Srinivasan, Childs, Rogers, JJ.) (Rogers, J., concurring in part and dissenting in part).
The compulsory licensing scheme at issue relates to cable systems that pay statutorily prescribed royalties in exchange for permission to distantly retransmit television broadcast programming. The cable systems calculate and deposit those royalties with the Register of Copyrights. If copyright claimants cannot agree on how to distribute the resulting royalty pool, the Board conducts proceedings to determine the appropriate allocation.
In phase one of the royalty calculation proceedings, the copyright claimants group themselves into categories based on the programming they own, and the Board allocates the overall royalty pot among those categories based on their relative marketplace value. In this case, the Board relied on two principal valuation methodologies, the Bortz Survey and a regression analysis, to determine the relative marketplace value of the programming categories and allocate the royalty pool among them. The Board’s phase one allocation was at issue on appeal. The Joint Sports Claimants (JSC), which included the Office of the Commissioner of Baseball, along with Public Television (PTV), which included the Public Broadcasting Service, separately challenged the Board’s allocation of the royalty pool as arbitrary and capricious.
PTV argued that the Board’s reliance on an expert’s sensitivity test was arbitrary and capricious because:
- It departed from the Board’s precedent without explanation.
- It contradicted the evidence and nearly every expert’s testimony that minimum-fee signals retain value.
- It was applied inconsistently across the copyright claimants.
In response to the first point, the DC Circuit found that the Board did not depart from precedent but instead properly changed its valuation method based on the changed circumstances in the compulsory licensing marketplace that occurred during the 2014 to 2017 time period. Regarding the second point, the Court found that the Board reasonably excluded minimum-fee cable systems because their programming preferences could not be meaningfully captured by a regression designed to measure incremental willingness to pay. As to the third point, the Court found that the Board correctly applied adjustments to certain programming groups to correct distortions in the regression data.
PTV further argued that the sensitivity test’s exclusion of cable systems that were required to carry certain programming was arbitrary and disproportionately affected PTV. The DC Circuit disagreed, explaining that the Copyright Act does not establish the marketplace value of must-carry programming, the evidence did not establish the value PTV attributed to such programming, and the Board reasonably relied on an expert’s estimate of the number of must-carry signals.
JSC argued that the Board’s reliance on an expert’s regression analysis and a Bortz Survey was arbitrary and capricious because:
- The regression failed to accurately measure relative marketplace value of programming.
- The regression drew from an unrepresentative dataset limited to a small number of cable systems that pay above the statutory minimum fee.
- The regression produced implausible and statistically insignificant results that were exacerbated by the Board’s adjustments.
- The Bortz Survey (an alternative to the regression method) was not properly adjusted.
In addressing the first point, the DC Circuit found that the regressions reasonably relied on the statutory royalty rate as a dependent variable and the minutes of programming as an independent variable to determine relative marketplace value of the programming. Regarding the second argument, the Court found that the Board reasonably relied on an expert in excluding cable systems that pay the minimum fee because the regression sought to measure the willingness of cable systems to pay for programming, and cable systems that paid above the statutory minimum fee were the most probative of that willingness to pay for programming. In addressing the third point, the Court found that the regression models used by the Board resulted in useful information that the Board then used to produce an estimate for each category of programming with the confidence interval reflecting any uncertainty surrounding the estimate. In addressing the fourth point, the Court found that the Board reasonably used a longstanding adjustment method for the Bortz Survey to address its known limitation and did not err in rejecting JSC’s proposed alternative adjustment.
JSC further argued that the Board acted arbitrarily and capriciously in the way it combined the two valuation methodologies to determine the final royalty allocations. Although the Board concluded that neither the regression analysis nor the Bortz Survey alone could produce the necessary royalty allocations and therefore synthesized the two methodologies, the DC Circuit found that the Board failed to adequately explain how it weighted and combined the results to arrive at the final allocations, rendering the final determination arbitrary and capricious. In doing so, the Court pointed to several anomalies in the royalty allocations that contradicted the record and statements by the Board. The Court vacated the final royalty allocation determination and remanded for the Board to further explain how it combined the methodologies to arrive at the final royalty allocations.
Judge Rogers concurred in part and dissented in part, writing that because the Board had not adequately explained how it arrived at the final royalty allocations, the majority’s resolution of nearly all of JSC’s and PTV’s other challenges was tentative, if not premature.
