The cable industry's main trade group is suing the U.S. Copyright Office, challenging an agency rule it says inflates the royalties cable providers must pay for carrying broadcast television by requiring them to report revenue they never actually receive.

The Internet & Television Association argued in a lawsuit filed Friday in D.C. federal court that a 2024 Copyright Office rule violates the law by forcing operators to report that they collected the full sticker price for cable, even when customers buy TV service as a part of discounted bundles that combine TV, broadband, and phone service. The group used to be called the National Cable & Telecommunications Association.

"The statute makes clear that the term 'gross receipts' is meant to capture only the 'actual gross receipts' 'for' that 'basic service,'" said the trade group, referring to Section 111 of the Copyright Act.

That section of the Copyright Act requires cable companies to pay fees to the Copyright Office for the right to retransmit over-the-air television broadcasts to cable subscribers — fees that the government agency then distributes to copyright owners, according to the complaint. The cable group argued that the Copyright Office's rule results in "phantom" revenue and royalty payments based on money cable providers do not receive.

The suit also names the Library of Congress, which houses the Copyright Office; Shira Perlmutter, the agency's chief; and Robert Newlen, the acting librarian. Press officials for the Copyright Office and Library of Congress declined to comment.

The cable group argued that the Copyright Office has ignored widely used accounting standards requiring that discounts be split proportionately across all parts of a bundle.

"For instance, if cable, internet and voice services are each available at a standalone price of $40, but a bundle of the three is sold at a discounted price of $99, then according to [generally accepted accounting principles], the revenue attributable to the cable television service when sold within that bundle is $33," cable group said. "In other words, if the bundled price reflects a $21 discount, that discount must be allocated proportionally among the three services ($7 for each service)."

The complaint also challenges the Copyright Office's decision to treat equipment fees as part of a cable operator's gross receipts, even though the cable group said many subscribers now access the same broadcast channels through free apps on smart TVs or streaming devices. It said the Copyright Office is relying on logic that made more sense in the 1970s, when gross receipts included fees "for equipment like cable converters" that were necessary for cable service.

"But as NCTA explained, by definition, equipment fees are not receipts for the service of providing broadcast programming," the group said.

The cable group is asking the U.S. District Court for the District of Columbia to declare the Copyright Office's rule unlawful under the Administrative Procedure Act and order the agency to adopt a new rule that ties royalties to actual cable revenue within bundles while excluding equipment fees unless the hardware is truly essential.

Counsel information for the defendants was not immediately available.

The Internet & Television Association is represented by Sarang V. Damle, Matthew A. Brill, Brent T.F. Murphy, and Hasala K. Ariyaratne of Latham & Watkins LLP, and by Robert K. Kry and Jackson A. Myers of MoloLamken LLP.

The case is Internet & Television Association v. U.S. Copyright Office et al., case number 1:26-cv-00713, in the U.S. District Court for the District of Columbia.