Advertisement

April 18, 2014

The Fate of the Music Industry is Jeopardized by Copyright Decision

Decision Impacts Billions of Dollars in Royalties

A recent decision out of the Court of Appeals for the District of Columbia Circuit could have lasting implications on all Copyright Royalty Board rate determinations since 2004. In the case Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board, a unanimous panel at the D.C. Circuit found that the structure of the Royalty Board was unconstitutional under the Appointments Clause.

Intercollegiate Broadcasting is an association of “noncommercial” webcasters offering transmission of digitally recorded music over the internet at high schools and college campuses. These broadcasts constitute “performances” under the Copyright Act and thus require royalty payment to the song owners. When parties cannot agree upon the license terms, they can go before the Royalty Board for a determination of a fair royalty rate. Established in 2004, the Royalty Board is composed of three judges appointed to six-year terms by the Librarian of Congress.

After being unable to come to terms as to a royalty rate with a non-profit clearinghouse for musicians called Soundexchange, Inc., the parties took their dispute before the Royalty Board who issued a final determination setting a rate Intercollegiate would have to pay. Intercollegiate appealed the decision to the D.C. Circuit arguing, among other things, the unconstitutionality of the Royalty Board’s structure under the Appointments Clause.

Specifically, Intercollegiate argued that the Copyright Royalty Judges (“CRJs”) exercise significant ratemaking authority, without any effective means of control by a superior which qualified them as a “principal” officer under the Appointments Clause. All “principal” officers must be appointed by the President with Senate confirmation, which made the appointment of the CRJs unconstitutional.

The D.C. Circuit agreed, first finding that CRJ decisions can have considerable consequences that can affect the fates of entire industries and implicate billions of dollars in royalties. The panel also noted that CRJ decisions not only impact traditional forms of music media (e.g. CDs and vinyl) but also emerging technologies including digital downloads, non-commercial broadcasting, and certain cable transmissions. In light of the significant authority, the fact that the Librarian of Congress could not affect decisions of the CRJ’s or even remove them from office made them “principal” officers under the Appointments Clause.

Rather than wait for Congress to act, the D.C. Circuit chose to nullify language from the Copyright Act that originally had barred the Librarian from removing the Judges from office, thus making them “inferior” officers. In so doing, the D.C. Circuit held that the rate determination of the CRJs for Intercollegiate was vacated due to the unconstitutional nature of the Royalty Board’s structure.

Whether or not this has opened the door for entities to challenge rate decisions made by the Royalty Board as invalid since 2004 is still up for debate but copyright owners and broadcasters should certainly be prepared for a potential fight in the near future.

© 2013 Dinsmore & Shohl LLP. All rights reserved.

About the Author

Associate

April Besl is a member of the Intellectual Property Practice Group and Litigation Department. She focuses her practice on intellectual property issues including trademarks, copyrights, trade secrets, social media, advertising, and internet law. In addition, April has experience assiting clients with emerging issues related to the impact of social media, the web, and technology on their business and marketing strategies. She also has extensive experience in the prosecution, registration, and enforcement of trademarks and copyrights with the US Patent & Trademark Office and US...

513-977-8527

Boost: AJAX core statistics

Legal Disclaimer

You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's  Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on www.NatLawReview.com are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.  

Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is www.NatLawReview.com  intended to be  a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional.  NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. 

Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.

The National Law Review - National Law Forum LLC 4700 Gilbert Ave. Suite 47 #230 Western Springs, IL 60558  Telephone  (708) 357-3317 If you would ike to contact us via email please click here.