The Librarian of Congress successfully defended his webcaster royalty rates from attack on three separate fronts in Beethoven.com v. Librarian of Congress. Beethoven reads like an accounting audit report, as it deals with the financial calculus employed by the Copyright Arbitration Royalty Panel (CARP), the group charged with setting webcasting rates and terms "that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller," as outlined in § 114(f)(2)(B) of the DMCA.

Beethoven's complexity is only increased by the multiplicity of petitioners lining up to take issue with the Librarian's decision, which was largely based on the CARP’s recommendations. The petitioners are:

1) Non-Participants. These are entities (including Beethoven.com) that did not formally participate in the CARP's proceedings, but seek to intervene or join the action to a) challenge the rates, and b) argue that the CARP process was flawed because it excluded small webcasters and those who could not afford arbitration fees, violating their rights to due process and freedom of expression.

2) Copyright Owners. Made up of the Recording Industry Association of America (RIAA) and other industry groups, the Owners contend that the Librarian set rates arbitrarily low by not adequately considering past agreements he had on the record. The "past agreements" refer to 115 record label deals between record labels and licensees, which were purportedly created to guide CARP’s recommendations to the Librarian.

3) Broadcasters. This final group consists of radio/internet simulcasters and internet webcasters that claim that the Librarian’s rates were arbitrary, and that rates should be lowered because they were not based on real market factors.

As sound battle strategy dictates, an entity under siege should try to limit the number of attack fronts. The Librarian of Congress did just that when he successfully moved to eliminate the Non-Participants. Judge Sentelle, who authored the unanimous decision, ruled that the Non-Participants do not have standing to join the litigation. Further, they are not entitled to intervene and raise new issues because their First Amendment and Due Process claims were not sufficiently plead to bring them "into the purview of this action." Once again, Civil Procedure was skillfully used to disarm a potentially persuasive opponent.

With the Non-Participants out of the action, the remainder of the opinion focused on the related yet opposite claims of the Owners and Broadcasters. "Understandably, the Owners challenge the Librarian’s ruling as setting rates too low, and the Broadcasters argue that the rates have been set too high."

The Owners' primary contention is that the CARP, in setting benchmark valuations for licenses, disregarded a substantial portion of evidence when it chose to ignore 115 label agreements without sufficient explanation. Presumably, these label agreements contained terms highly favorable to the RIAA constituents.

The CARP explained that the label agreements were not relied upon in their royalty benchmark analysis because they did not involve the same digital performance rights at issue in the proceeding. Instead, the CARP gave considerable benchmark weight to an actual marketplace agreement between the RIAA and Yahoo! Under the "exceptionally deferential" standard of review, the Court did not find the Librarian's or the CARP's treatment of the 115 label agreements arbitrary.

On the opposite side of the coin, the Broadcasters claim that the CARP acted arbitrarily when it ignored the Broadcasters' proposed benchmark for determining the fair market value of the performance right. This proposal, which was based on a computation of the performance fees paid by over 800 radio stations for rights to musical works, was ultimately rejected in favor of the amounts used in the RIAA-Yahoo! agreement.

According to the Broadcasters, the RIAA-Yahoo! agreement is a disingenuous agreement, "negotiated in a nascent market controlled by an allegedly monopolistic group that employed market power to set fees it knew would be used as CARP evidence." Reiterating the low standard of appelate review of an administrative decision, the Court rejected the Broadcasters' argument because it rests on a challenge to the merits of the Librarian’s decision to rely on the RIAA-Yahoo! agreement as competitive. The Court's only role in this action is to determine only whether the Librarian explained his decision on comparability in "facially plausible" terms according to record evidence.

Other objections to the benchmarks, the minimum fee, and the effective dates of the rates, met with similar fate under the D.C. Circuit's arbitrary standard analysis. At the end of the day, the Librarian's chosen royalty rates remain fully intact.

The details of the CARP’s pricing decisions are published in the "CARP Report." The Librarian, however, did not follow every CARP royalty reccommendation. He abandonned the CARP's dual-rate structure used to distinguish between radio retransmission and internet-only webcasting, in favor of an average of the two rates, .07 cents per performance. The Librarian accepted the CARP's suggested minimum fee of $500 (the RIAA wanted a minimum fee of $5,000).

Bruce G. Joseph argued the cause for Participant Licensee petitioners. Michele J. Woods argued the cause for Copyright Owners/Performers petitioners. Mark W. Pennak, Attorney, U.S. Department of Justice, argued the cause for respondent.