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`UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF VIRGINIA
`Harrisonburg Division
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`WTGD 105.1 FM, et al.,
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`Plaintiffs,
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`v.
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`SOUNDEXCHANGE, INC.,
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`Defendant.
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`Civil Action No. 5:14-cv-00015
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`By:
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`Joel C. Hoppe
`United States Magistrate Judge
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`REPORT & RECOMMENDATION
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`This matter is before me for a report and recommendation on the defendant’s Motion to
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`Dismiss the Complaint, ECF No. 19, under Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the Federal
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`Rules of Civil Procedure. Having considered the parties’ pleadings and briefs, oral arguments,
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`and the applicable law, I respectfully recommend that the presiding district judge grant the
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`motion and dismiss this action because the Complaint, ECF No. 1, fails to allege a justiciable
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`case or controversy between the parties.1
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` See Fed. R. Civ. P. 12(b)(1), (h)(3).
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`I. Background
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`
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`Plaintiffs are three Harrisonburg-area radio stations, WTGD 105.1 FM, WQPO 100.7
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`FM, WJDV 96.1 FM, and their corporate owner, M. Belmont VerStandig, Inc. (together,
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`“Plaintiffs”). Compl. ¶¶ 1, 6–9. Plaintiffs filed a declaratory judgment action in this Court against
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`SoundExchange, Inc. (“SoundExchange”) on April 30, 2014. Id. ¶¶ 1, 10. The case involves a
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`1 Accordingly, this Report and Recommendation does not address the motion to dismiss under
`Rules 12(b)(2) and 12(b)(6). See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998)
`(“Without jurisdiction the court cannot proceed at all in any cause. Jurisdiction is power to
`declare the law, and when it ceases to exist, the only function remaining to the court is that of
`announcing the fact and dismissing the cause.” (quoting Ex parte McCardle, 7 Wall. 506, 514
`(1869)).
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`1
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`Case 5:14-cv-00015-MFU-JCH Document 46 Filed 09/12/14 Page 2 of 27 Pageid#: 425
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`disagreement over whether sections 112 and 114 of the Copyright Act, 17 U.S.C. §§ 101–1332,
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`allow radio stations to retransmit their broadcast transmissions over the Internet exclusively to
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`their local listeners without paying statutory licensing fees or royalties on copyrighted sound
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`recordings that are part of those simulcasts.2
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` See id. ¶¶ 47–48.
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`Plaintiffs believe that their local simulcasts will satisfy the Copyright Act’s criteria for
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`“non-infringing” performances so that they have no obligation to obtain statutory licenses or pay
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`royalties to SoundExchange for the privilege of performing copyrighted sound recordings. See
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`id. ¶¶ 40–48; Compl. Ex. B, at 2, ECF No. 1-2. SoundExchange believes that radio stations’
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`simulcasts are never exempt from the Copyright Act’s licensing and royalty requirements. See
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`Compl. ¶¶ 47–48; Compl. Ex. C, at 2, ECF No. 1-3. SoundExchange, however, has not taken a
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`position on whether Plaintiffs should obtain statutory licenses and pay it royalties, rather than
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`negotiating private licenses and paying royalties directly to individual copyright owners. See
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`Compl. Ex. C, at 2.
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`A.
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`The Statutory & Regulatory Framework
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`The Copyright Act grants owners of copyrights in sound recordings the exclusive right
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`“to perform the copyrighted work publicly by means of a digital audio transmission.” 17 U.S.C.
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`§ 106(6); accord Compl. ¶ 1. That right is limited in its scope, however. See 17 U.S.C. § 114(d);
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`Compl. ¶¶ 14, 16, 17. For example, radio stations can perform copyrighted sound recordings
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`“publicly by means of a digital audio transmission” if: (1) that “performance is part of . . . a
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`retransmission of a nonsubscription broadcast transmission”; and (2) “the radio station’s
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`2 In this Report and Recommendation, I use “local” to indicate the geographic area within a 150
`mile radius from the site of the station’s radio broadcast transmitter. See 17 U.S.C. §
`114(d)(1)(B)(i). “Simulcast” means to “digitally and simultaneously” retransmit a radio
`broadcast transmission over the Internet. Compl. Ex. B, at 2, ECF No. 1-2; accord Compl. Ex. C,
`at 2, ECF No. 1-3.
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`2
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`broadcast transmission is not willfully or repeatedly retransmitted more than a radius of 150
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`miles from the site of the [station’s] radio broadcast transmitter.” 17 U.S.C. § 114(d)(1)(B)(i);
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`accord Compl. ¶¶ 17, 40.
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`A copyright owner’s exclusive right of public performance is not “infringed” as long as
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`the “retransmission of a radio station’s broadcast transmission” stays within that 150 mile zone.
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`17 U.S.C. § 114(d)(1); accord Compl. ¶ 17. But once the radio station “willfully or repeatedly”
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`retransmits its broadcast transmissions beyond that boundary, the station must pay for the
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`privilege of performing any copyrighted sound recording that is part of the infringing
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`retransmission. See 17 U.S.C. § 114(d)(1)(B)(i), (f)(1)(4)(B); accord Compl. ¶¶ 14–18.
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`Copyright owners also have an exclusive right to authorize another “to reproduce the
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`copyrighted work in copies or phonorecords.”3
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` 17 U.S.C. § 106(1). A federally licensed radio
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`station that “makes a broadcast transmission of a performance of a sound recording in a digital
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`format on a nonsubscription basis,” however, can produce “one copy or phonorecord of a
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`particular transmission program embodying the performance” if the copy or phonorecord: (1) “is
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`retained and used solely by” the station “for [its] own transmissions within its local service
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`area”; and (2) “unless preserved exclusively for archival purposes, . . . is destroyed within six
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`months from the date the transmission program was first transmitted to the public.” Id. §
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`112(a)(1), (e)(1). Otherwise, the radio station must pay for the privilege of reproducing a
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`copyrighted sound recording. See id. § 112(e).
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`Royalties can be paid directly to copyright owners under privately negotiated licenses or
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`to a designated collective organization under statutory licenses. See generally 17 U.S.C.
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`3 A “phonorecord” is a “material object[] in which sounds . . . are fixed by any method now
`known or later developed, and from which the sounds can be perceived, reproduced, or otherwise
`communicated, either directly or with the aid of a machine or device.” 17 U.S.C. § 101.
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`3
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`Case 5:14-cv-00015-MFU-JCH Document 46 Filed 09/12/14 Page 4 of 27 Pageid#: 427
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`§§ 112(e)(2), 114(f)(3) (private licenses); id. §§ 112(e)(1), 114(f)(4)(B) (statutory licenses); 37
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`C.F.R. §§ 380.1–380.17 (setting the rates and terms for statutory licenses under 17 U.S.C. §§ 112
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`and 114); see also Compl. ¶ 18. “Statutory licensees pay royalties, but [they] do not have to
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`negotiate with individual copyright owners for every recording [that] they want to broadcast.”
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`SoundExchange, Inc. v. Sirius XM Radio, Inc., --- F. Supp. 2d ---, 2014 WL 4219591, at *1
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`(D.D.C. Aug. 26, 2014). “Any person” who wants to reproduce or publicly perform a
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`copyrighted sound recording “under a statutory license . . . may do so without infringing the
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`exclusive right[s] of the copyright owner” under 17 U.S.C. § 106 “by complying with such
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`notice requirements as . . . prescribe[d] by regulation and by paying royalty fees in accordance
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`with [sections 112(e) and 114(f)].” 17 U.S.C. §§ 112(e)(6)(A)(i), 114(f)(4)(B)(i); accord 37
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`C.F.R. § 370.2 (establishing the procedures for filing a “notice of use of sound recording under
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`statutory license”).
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`Defendant SoundExchange is the “sole collective,” Compl. ¶ 10, in charge of collecting
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`and distributing royalties due to the owners of copyrights in sound recordings from broadcasters
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`who choose to operate under statutory licenses. See C.F.R. §§ 380.4(b), 380.13; cf. Sirius XM
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`Radio, 2014 WL 4219591, at *1 (“[R]egulations implementing the Copyright Act charge
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`SoundExchange, an independent non-profit organization, with collecting the performance
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`royalties from statutory license users . . . and distributing those royalties to the copyright owners
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`in accordance with 17 U.S.C. § 114(g)(2)(A)–(D).”). SoundExchange has no apparent authority
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`to compel broadcasters to take statutory licenses,4
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` to enforce the terms of privately negotiated
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`4 The complaint alleges that SoundExchange “administer[s] compulsory licenses in sound
`recordings,” Compl. ¶ 10, which could be understood to imply that broadcasters can be
`“compelled” to take statutory licenses under 17 U.S.C. §§ 112 and 114. In its brief,
`SoundExchange explains that a statutory license is “also known as a ‘compulsory license’
`because it cannot be withheld by the copyright owners.” Def. Br. in Supp. 3. The Copyright Act’s
`4
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`licenses, or to enforce copyrights generally. See, e.g., 17 U.S.C. § 114(g)(3); 37 C.F.R. § 380.4;
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`Compl. Ex. A, at 2–3 ¶¶ 1, 6, ECF No. 1-1. However, it can sue to collect royalties and other fees
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`if a broadcaster does not comply with the terms of its statutory license. See, e.g., Sirius XM
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`Radio, 2014 WL 4219591, at *1–2 (staying SoundExchange’s civil action to collect underpaid
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`royalties and unpaid late fees under 37 C.F.R. § 382.13 pending further administrative
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`proceedings).
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`SoundExchange is a non-profit organization funded by a portion of the royalties that it
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`collects from broadcasters on behalf of copyright owners who register with the organization. See
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`17 U.S.C. § 114(g)(3); Compl. ¶ 21. Copyright owners also can opt-in to SoundExchange’s
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`“membership” services by expressly appointing SoundExchange as their “nonexclusive”
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`licensor, collection agency, lobbyist, and law firm. See generally Compl. Ex. A, at 2–3 ¶¶ 1, 2, 5,
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`6. For example, copyright owners who become SoundExchange “Members” contractually
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`authorize the organization:
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`to enforce nonexclusively the rights of public performance, communication, and
`reproduction granted under [statutory licenses defined in 17 U.S.C. §§ 112(e) and
`114] with respect to the sound records owned or (controlled by) Member. With
`Member’s consent, Member authorizes SoundExchange in SoundExchange’s sole
`judgment (i)
`to commence and prosecute
`litigation,
`in
`the name of
`SoundExchange, Member, or others in whose name the sound recordings owned
`(or controlled) by Member may be held; (ii) to collect and receive damages
`arising from infringement of the foregoing rights; (iii) to join Member or others in
`whose names sound recordings owned (or controlled) by Member may be held as
`parties plaintiff or defendant in any litigation involving such rights; or (iv) to
`release, compromise, or refer to arbitration any claims or actions involving
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`plain language supports SoundExchange’s explanation. See 17 U.S.C. § 114(f)(4)(B)(i), (f)(3);
`see also 37 C.F.R. § 262.2(g)(1); Webcaster Alliance, Inc. v. Recording Indus. Ass’n of Am., Inc.,
`No. C 03-3948 WHA, 2004 WL 1465722, at *1 (N.D. Cal. Apr. 1, 2004) (“The [Digital
`Millennium Copyright Act of 1998] establishes a statutory right for webcasters to be eligible for
`a license for copyrighted sound recordings. 17 U.S.C. § 114(d)(2). This license is ‘compulsory’
`as to the copyright holders but ‘voluntary’ as to the webcasters.”).
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`5
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`infringement of such rights, in the same manner and to the same extent as the
`Member could.
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`With Member’s consent, Member hereby makes, constitutes and appoints
`SoundExchange or its successor as Member’s true and lawful attorney,
`irrevocably during the term of the Agreement, to do all acts, take all proceedings,
`and execute, acknowledge and deliver any and all instruments, papers, documents,
`process and pleadings that may be necessary, proper or expedient to restrain
`infringements and recover damages relating to the infringement or other violation
`of such rights and to discontinue, compromise or refer to arbitration any such
`proceedings or actions, or to make any other disposition of the differences in
`relation thereto, in the name of SoundExchange or its successor, or in the name of
`Member or otherwise.
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`Id. at 3 ¶ 6; see also id. at 2 ¶ 1. SoundExchange can only collect royalties on performances or
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`reproductions of sound recordings by broadcasters who first elect to operate under the statutory
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`licenses defined in 17 U.S.C. §§ 112 and 114. See id. at 2–3 ¶¶ 1, 6. Even then, copyright owners
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`retain broad authority to enforce their rights under 17 U.S.C. § 106 against broadcasters who
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`violate the terms of statutory licenses. See id.; see also 17 U.S.C. § 114(d)(4).
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`B.
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`The Dispute
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`When they filed this suit, WQPO and WJDV paid royalties to SoundExchange under
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`statutory licenses because they simulcast their FM radio programming without geographic
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`restriction. Compl. ¶¶ 7, 8, 25. WTGD did not simulcast its FM radio programming as of April
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`30, 2014. Id. ¶ 6. All three radio stations want to simulcast their FM radio programming
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`exclusively to their local listeners using geo-fencing technology. Id. ¶¶ 4, 35, 44.
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`According to the Complaint, “[g]eo-fencing is a proven technology” used by the gaming
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`industry “to restrict access to online gaming to recipients physically located in jurisdictions
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`where [on-line] gaming is legal.” Id. ¶ 34. Before filing this lawsuit, Plaintiffs “consulted with
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`geo-fencing experts and service providers.” Id. ¶ 35. Plaintiffs believe that setting up geo-fenced
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`simulcasts “require[s] a substantial financial investment,” id. ¶ 49, that “makes sense . . . only if
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`6
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`it exempts them from copyright liability and having to pay royalties,” Pl. Br. in Opp. 7–8, ECF
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`No. 28.
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`In a letter dated February 28, 2014, WTGD’s attorney advised SoundExchange of
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`WTGD’s intent to set up a simulcast that was available exclusively to its local listeners. See
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`Compl. ¶¶ 37, 44, 47; Compl. Ex. B, at 2–3. Counsel wrote “that a copyright owner’s exclusive
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`performance right is not infringed” when a radio station’s “broadcast transmission is
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`retransmitted, digitally and simultaneously, only within a radius of 150 miles or less from the site
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`of the station’s radio broadcast transmitter.” Compl. Ex. B, at 2. He explained that WTGD
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`intended to use geo-fencing technology to “exclude” access by Internet users located more than
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`75 miles from its broadcast transmitter, which “would be within the 150 mile exemption.” Id.
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`Thus, counsel believed that WTGD’s simulcasts would “conform to the exemption from the
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`statutory license for sound recordings under [17 U.S.C. § 114(d)(1)(B)(i)], so that it would owe
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`no payments to SoundExchange.” Id. But WTGD also wanted “to insure [sic] that its
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`understanding of the Act [was] correct” and sought “confirmation” from SoundExchange “that
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`WTGD [would] not face a legal challenge to its intended geofenced Internet streaming.” Id. at 2–
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`3. WTGD noted that it “want[ed] to commence its new Internet streaming in the very near
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`future” and asked SoundExchange to respond by March 14, 2014. Id. at 3.
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`SoundExchange’s Senior Counsel for Licensing & Enforcement responded to WTGD’s
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`letter on March 14, 2014. See Compl. ¶ 38; Compl. Ex. C, at 2. She noted that “SoundExchange
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`[did] not share [WTGD’s] view concerning Section 114(d)(1)(B)(i)” because, in
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`SoundExchange’s view, the 150 mile exemption “does not apply when broadcasters simulcast
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`their own programming over the internet.” Compl. Ex. C, at 2; see also Compl. ¶ 38. Counsel
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`also explained that, even “if Section 114(d)(1)(B)(i) did apply to WTGD’s proposed simulcasting
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`7
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`(which it does not),” WTGD would still need a “statutory mechanism for clearing rights to the
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`reproductions necessary to enable its simulcasts.” Compl. Ex. C, at 2.
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`Thus, SoundExchange “strongly urge[d] WTGD to seek licenses for its simulcasts.” Id.
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`The letter noted that, “[s]hould WTGD choose to rely on the statutory performance and
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`reproduction licenses that SoundExchange administers,” WTGD could submit to the Copyright
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`Office a “Notice of Use of Sound Recordings Under Statutory License,” which was available on
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`SoundExchange’s website. Id. There WTGD could find “further information concerning
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`compliance with the statutory licenses.” Id.; Compl. ¶ 38. SoundExchange’s counsel also offered
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`to make herself available if WTGD’s counsel had any questions. See Compl. Ex. C, at 2.
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`Plaintiffs filed this declaratory judgment action against SoundExchange six weeks later.
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`WTGD is concerned that its intended investment in geo-fenced Internet streaming “will be for
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`naught if [it] owes SoundExchange royalties for a live stream of [an] FM broadcast whether or
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`not the live stream is geo-fenced.” Compl. ¶ 49. WQPO and WJDV also “fear that
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`SoundExchange will demand royalties” even if they geo-fence their current simulcasts. Id. ¶ 50.
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`Plaintiffs ask this Court to “clarify [their] rights and obligations under 17 U.S.C. §§ 112 and 114”
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`before they take the next step towards geo-fencing. Id. ¶¶ 52, 35.
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`SoundExchange moved to dismiss the Complaint under Rules 12(b)(1), 12(b)(2), and
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`12(b)(6) of the Federal Rules of Civil Procedure. SoundExchange argues that this Court lacks
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`subject matter jurisdiction under the Declaratory Judgment Act and personal jurisdiction over it
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`as a non-resident defendant and that the Complaint fails to state a claim for which relief can be
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`granted under the Copyright Act. See generally Def. Br. in Supp. 1–2, ECF No. 19; Def. Reply
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`1–3, ECF No. 29. I held a motions hearing on August 15, 2014. See Hr’g Tr. 1–2, ECF No. 45.
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`8
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`II. Discussion
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`A defendant can challenge a court’s subject matter jurisdiction in “two critically different
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`ways.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982); accord Kerns v. United States, 585
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`F.3d 187, 192 (4th Cir. 2009). First, the defendant can argue that the “complaint simply fails to
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`allege facts upon which subject matter jurisdiction can be based.” Kerns, 585 F.3d at 192. In that
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`situation, the court accepts all well-pleaded factual allegations as true, and the plaintiff is
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`afforded the same procedural protections as under Rule 12(b)(6).5
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` Id. The court will dismiss an
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`action under Rule 12(b)(1) only when “the complaint and the documents upon which it is based,”
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`Chesapeake Bay Found., Inc. v. Severstal Sparrows Point, LLC, 794 F. Supp. 2d 602, 610 n.3 (D.
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`Md. 2011) (citing Adams, 697 F.2d at 1219), do not “plausibly allege” general facts sufficient to
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`invoke the court’s authority to resolve the dispute, Liberty Univ. v. Lew, 733 F.3d 72, 89, 90 (4th
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`Cir. 2013) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see Lujan v. Defenders
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`of Wildlife, 504 U.S. 555, 561 (1992) (“[O]n a motion to dismiss we presum[e] that general
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`allegations embrace those specific facts that are necessary to support the claim.”).
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`Second, the defendant can argue that the jurisdictional facts alleged in the complaint are
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`false. Kerns, 585 F.3d at 192. In that situation, the court “regards the pleadings as mere evidence
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`on the issue and may consider evidence outside the pleadings without converting the defendant’s
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`motion to one for summary judgment.” Velasco v. Gov’t of Indonesia, 370 F.3d 392, 398 (4th Cir.
`
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`5 In reviewing a motion to dismiss under Rule 12(b)(6), the court must accept all well-pleaded
`factual allegations as true and construe those allegations in a light most favorable to the plaintiff.
`Hash v. Close, 968 F. Supp. 2d 825, 828–29 (W.D. Va. 2013) (citing Mylan Labs., Inc. v.
`Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). The court need not accept legal conclusions drawn
`from those facts, unwarranted inferences, or unreasonable conclusions or arguments. See Philips
`v. Pitt Cnty. Mem’l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
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`
`
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`9
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`2004). The court generally is free to weigh that evidence and to resolve factual disputes in order
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`to determine its authority to decide the case. See Kerns, 585 F.3d at 192.
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`SoundExchange’s 12(b)(1) motion is a facial challenge to the Complaint. See Sierra Club
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`v. Kempthorne, 589 F. Supp. 2d 720, 725 (W.D. Va. 2008) (noting that “the court must initially
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`consider” whether a Rule 12(b)(1) motion presents “a facial challenge or a factual challenge” in
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`order to apply the proper standard of review). Accordingly, I will focus my inquiry on whether
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`the facts alleged in the Complaint and exhibits (ECF Nos. 1 to 1-3) are sufficient to invoke this
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`Court’s authority to entertain Plaintiffs’ claim for declaratory relief against SoundExchange. See
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`Robb Evans & Assocs., LLC v. Holibaugh, 609 F.3d 359, 362 (4th Cir. 2010) (holding that the
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`party seeking to invoke the court’s subject matter jurisdiction bears the burden of proving it
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`exists). For the reasons that follow, I respectfully recommend that they are not.
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`A.
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`The Declaratory Judgment Act
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`The Declaratory Judgment Act (“DJA”) allows a federal court, in “a case of actual
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`controversy within its jurisdiction,” to “declare the rights and other legal relations of any
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`interested party seeking such declaration, whether or not further relief is or could be sought.” 28
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`U.S.C. § 2201(a). The DJA is not an independent source of jurisdiction. See Skelly Oil Co. v.
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`Phillips Petro. Co., 339 U.S. 667, 671–72 (1950). It provides an additional, discretionary remedy
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`in appropriate cases of “actual controversy” where the court has subject matter jurisdiction from
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`some other source. See MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007); Volvo
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`Const. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 594 (4th Cir. 2004).
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`The phrase “actual controversy” includes any case or controversy over which the court
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`may exercise jurisdiction under Article III of the United States Constitution. See MedImmune,
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`549 U.S. at 127. Article III authorizes federal courts to resolve “definite and concrete,” “real and
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`10
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`substantial” disputes “touching the legal relations of parties having adverse legal interests” and
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`“admit[ting] of specific relief through a decree of a conclusive character.” Id. There is no bright-
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`line test for determining whether a particular declaratory judgment action presents a justiciable
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`controversy. See Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). A court’s
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`analysis must take into account the totality of the facts alleged in the complaint. MedImmune,
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`549 U.S. at 127. The court may entertain a declaratory judgment action if the facts alleged, under
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`all circumstances, demonstrate: (1) a substantial controversy; (2) between parties having adverse
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`legal interests; (3) of sufficient immediacy and reality to warrant the issuance of a declaratory
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`judgment. Id.
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`This standard is similar to the standards used to determine the existence of related, but
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`more specific, elements of Article III’s case-or-controversy requirement, such as standing and
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`ripeness. See Prasco, LLC v. Medicis Pharma. Corp., 537 F.3d 1329, 1336 (Fed. Cir. 2008) (“As
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`satisfying these doctrines represents the absolute constitutional minimum for a justiciable
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`controversy, they can be a helpful guide in applying the all-the-circumstances test.”); see also
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`MedImmune, 549 U.S. at 128 n.8. At bottom, each standard ensures that federal courts respect
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`their “proper—and properly limited—role . . . in [our] democratic society.” DaimlerChrysler
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`Corp. v. Cuno, 547 U.S. 332, 341 (2006). For “[i]f a dispute is not a proper case or controversy,
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`the courts have no business deciding it, or expounding the law in the course of doing so.” Id.
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`B.
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`Analysis
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`This case involves a disagreement over whether sections 112 and 114 of the Copyright
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`Act allow radio stations to retransmit their broadcast transmissions over the Internet exclusively
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`to their local listeners without paying statutory licensing fees or royalties on copyrighted sound
`
`recordings that are part of those simulcasts. See Compl. ¶¶ 47–48. Plaintiffs allege that their geo-
`
`
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`11
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`fenced simulcasts will satisfy the statute’s criteria for non-infringing performances so that they
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`have no obligation to obtain statutory licenses or pay royalties to SoundExchange. Id. ¶¶ 47–48,
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`Compl. Ex. B, at 2–3; see also Pl. Br. in Opp. 4. But Plaintiffs are unwilling to invest in geo-
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`fencing until they know that it will “exempt[] them from copyright liability and having to pay
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`royalties.” Pl. Br. in Opp. 8; accord Compl. ¶¶ 49, 50.
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`Plaintiffs’ counsel solicited SoundExchange’s assent that Plaintiffs’ “understanding of the
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`[Copyright] Act [was] correct” before they invested in geo-fencing technology. Compl. Ex. B, at
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`2–3; see also Compl. ¶¶ 36–38. Having been informed that SoundExchange “does not share
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`[their] view” of the law, Compl. Ex. C, at 2, Plaintiffs now insist that judicial intervention is
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`necessary to clarify their rights and obligations under sections 112 and 114. Compl. ¶ 52.
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`SoundExchange argues that “the Complaint fails to allege any real and immediate controversy
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`between the parties.” Def. Br. in Supp. 6. Indeed, it believes that Plaintiffs allege nothing more
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`than “an illusory dispute” that “does not directly implicate SoundExchange.” Def. Br. in Supp.
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`6–7; see also id. at 11. These arguments evoke principles of Article III standing.6
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`Standing concerns whether the proper parties are before the court. Simon v. E. Ky. Welfare
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`Rights Org., 426 U.S. 26, 41–42 (1976) (holding that, even when a plaintiff has been injured,
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`Article III’s “‘case or controversy’ limitation . . . still requires that a federal court act only to
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`redress injury that fairly can be traced to the challenged action of the defendant, and not injury
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`that results from the independent action of some third party not before the court”). To establish
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`standing at the pleading stage, a plaintiff must plausibly allege that: (1) it has suffered an
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`6 Both parties frame their arguments mostly in terms “ripeness” rather than “standing.” See, e.g.,
`Def. Br. in Supp. 8; Def. Reply 4; Compl. ¶¶ 51–52; Pl. Br. in Opp. 3, 5, 6, 7, 9. Ripeness
`concerns whether a plaintiff properly before the court has filed suit at an appropriate time. See
`Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580 (1985). Plaintiffs in this case are
`not properly before the court because a favorable judgment would not redress any injury fairly
`traceable to SoundExchange’s authority to enforce the terms of statutory licenses.
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`Case 5:14-cv-00015-MFU-JCH Document 46 Filed 09/12/14 Page 13 of 27 Pageid#: 436
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`injury—i.e., an invasion of a legally protected interest—that is (a) concrete and particularized
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`and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the
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`defendant’s challenged conduct; and (3) it is likely, as opposed to merely speculative, that the
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`alleged injury will be redressed by a favorable decision. Lujan, 504 U.S. at 560–61; Liberty
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`Univ., 733 F.3d at 89, 90.
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`In cases involving a threat of future harm, the plaintiff must show that its alleged injury
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`“is certainly impending,” and not just the anticipated consequence of its “‘some day’ intentions.”
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`Lujan, 504 U.S. at 564, 565 n.2 (emphasis omitted); Doe v. Obama, 631 F.3d 157, 163 (4th Cir.
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`2011) (“[T]he Supreme Court has ‘insisted that the injury proceed with a high degree of
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`immediacy, so as to reduce the possibility of deciding a case in which no injury would have
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`occurred at all.’” (quoting Lujan, 504 U.S. at 565 n.2)). At the pleading stage, a plaintiff can
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`satisfy this requirement by plausibly alleging that it has “some concrete plan” to act in a way that
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`will cause it to suffer harm fairly traceable to the defendant’s challenged conduct. Obama, 631
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`F.3d at 163. The facts alleged in this Complaint do not establish that Plaintiffs’ fear of future
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`harm is fairly traceable to SoundExchange’s challenged conduct or likely to be redressed by the
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`relief Plaintiffs seek from this Court.
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`1.
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`Injury & Causation
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`A declaratory-judgment plaintiff is injured when “an assertion of rights by the defendant”
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`forces the plaintiff either to pursue “arguably illegal behavior or abandon[] that which he claims
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`a right to do.”Alpharma, Inc. v. Purdue Pharma., L.P., 634 F. Supp. 2d 626, 631 (W.D. Va. 2009)
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`(Jones, J.); accord MedImmune, 549 U.S. at 129–31 (collecting cases). “[S]elf-avoidance of
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`imminent injury” alone, MedImmune, 549 U.S. at 130, will not defeat standing when the
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`plaintiff’s “threat-eliminating behavior [is] effectively coerced” by the defendant’s challenged
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`conduct, id. at 129. This is an objective standard that cannot be met with allegations of purely
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`subjective or speculative fear of harm. Cooksey v. Futrell, 721 F.3d 226, 236 (4th Cir. 2013).
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`In this case, Plaintiffs claim a right to simulcast their radio programming exclusively to
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`local listeners without obtaining statutory licenses or paying royalties to SoundExchange. See
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`Compl. ¶¶ 47–50; Compl. Ex. B, at 2. Plaintiffs believe that geo-fencing “is so costly to adopt
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`that it makes sense to do so only if it exempts them from copyright liability and having to pay
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`royalties.” Pl. Br. in Opp. 7–8. Thus, “they are unwilling to take that last, expensive step while
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`SoundExchange posits that it will have no impact on the royalties they owe.” Id. at 7; accord
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`Compl. ¶¶ 49, 50.
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`SoundExchange argues that Plaintiffs’ alleged injury is hypothetical because they have
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`not implemented the geo-fencing technology, and, thus, whether the technology would work
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`remains “fluid and indeterminate.” See Def. Br. in Supp. 8–10 (citing Alpharma, 634 F. Supp. 2d
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`at 631–32). Specifically, SoundExchange argues that the Plaintiffs cannot show that the
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`technology will effectively contain their local Internet retransmissions so that they are not
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`“‘willfully or repeatedly retransmitted’” beyond 150 miles. Id. at 10 (quoting 17 U.S.C. §
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`114(d)(1)(B)(i)).
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`Plaintiffs respond that their dispute with SoundExchange is “no less immediate because
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`[they] have not yet installed geo-fencing technology” because they need not “bet the farm” to
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`sustain a declaratory judgment action. Pl. Br. in Opp. 7 (citing MedImmune, 549 U.S. at 134).
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`Rather, it is enough that they are “‘simply not doing what [they] claim a right to do’” because
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`their “‘threat-eliminating behavior is effectively coerced’” by SoundExchange’s interpretation of
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`the Copyright Act. Id. (quoting MedImmune, 549 U.S. at 129).
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`This is indeed “a legal dispute” about whether a statute, by its terms, applies to radio
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`broadcast transmissions retransmitted over the Internet exclusively to a radio station’s local
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`listeners. Pl. Br. in Opp. 8. Plaintiffs allege that their geo-fenced simulcasts will satisfy the
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`statute’s criteria for non-infringing unlicensed performances. Compl. ¶¶ 47–48. SoundExchange
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`“does not share [Plaintiffs’] view” of the law and has “strongly urge[d] WTGD to seek licenses
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`for its simulcasts.” Compl. Ex. C, at 2. On a motion to dismiss, the court must accept that
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`Plaintiffs, as is alleged, intend to install a technology that could plausibly keep their simulcasts
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`within a 150 mile virtual boundary. See Liberty Univ., 733 F.3d at 90. Plaintiffs allege that the
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`on-line gaming