Besides for IBS noncomm streamers, Court finding on CRB has little effect, Oxenford says

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Issue Date: 
Jul 9 2012 - 11:30am

From Issue:

On Friday RAIN reported (here) on the U.S. Appeals Court finding that the appointments of judges to the Copyright Royalty Board were unconstitutional. We have follow-up today from industry attorney David Oxenford:

This case involved the last webcasting case, which set royalties for the period 2011-2015. Every party had settled out of the case, but for the Intercollegiate Broadcasting System (IBS), which represents certain small webcasters associated with colleges and high schools. It challenged the constitutionality of the Copyright Royalty Board (taking up the argument that Live365 made earlier in the case, before itself settling out of the case -– note that I was counsel for Live365), that the Board’s structure was impermissible under the Appointments Clause of the U.S. Constitution (see RAIN's coverage here). The Court ruled that the CRB was in fact unconstitutional, but the ruling will likely have little practical effect.

The constitutional issue was whether the Board was properly appointed by the Librarian of Congress. Under the constitution, "principal officers" of the U.S. have to be appointed by the President. The Court determined that the CRB, as originally set up, had enough power so that its Judges were principal officers and should have been appointed by the President.

But rather than striking down the whole scheme and sending it back to Congress to straighten out, the Court took it upon itself to remedy the problem: simply by striking the portions of the statute that limit the power of the Librarian of Congress to remove the Copyright Royalty Judges without cause. By determining that this single provision was the provision that gave the CRB too much power, the Court decided that it was this section that was unconstitutional.

So while the Judges were improperly appointed, by striking that section of the law, the Court determined that it could remedy the constitutional issues. Going forward, it seems like the Board can function as it has -– the only difference being that, theoretically, the Judges can now be removed by the Librarian at any time.

All in all, it appears to have been much controversy with little practical effect. IBS will get a remand, as their case was decided by a Board that was unconstitutional. But it looks like other cases can go forward in the normal course, including the next webcasting royalty proceeding that will begin in 2014, and the satellite radio royalty case that is currently under consideration.

Many webcasters had thought that this case might force Congress to take another look at the CRB process. The CRB not only sets webcasting royalties, but also the royalties paid by background music services, satellite radio, and others. It also distributes the royalties collected by the Copyright Office by cable and satellite television distributors (which are paid to copyright owners of programs on TV stations distributed by these systems). If the Court had found the Board to be unconstitutional, and had not applied the "fix," Congress would have had to act so that these matters could be resolved. Many had hoped that Congress would look at many of the other issues that parties have had with the CRB and the rates that it has set. But, by applying the "fix," that impetus for Congress to act immediately has been removed.

This decision can be appealed -– through a request for a rehearing by all of the judges on the D.C. Circuit of the Court of Appeals, or to the Supreme Court. If not appealed, the issue of the CRB’s constitutionality may have finally been settled.

Finally, IBS CEO/COO Fritz Katz said after the decision, "This is another big win for IBS and the second time the D.C. Circuit has vacated the $500 minimum fee for IBS noncommercial webcasters... IBS will also be moving to remove the CRB requirement for 'census' (100%) reporting of use, which is uneconomic for the artist as it costs more to process the data than the now vacated $500 minimum, and certainly much more than the actual use of the statutory license by IBS Members which is about $20 a year."

David Oxenford is a Washington, D.C.-based partner at Wilkinson, Barker, Knauer, LLP.

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CRB judges appointments unconstitutional

David will be one of several industry attorneys at the CBI Electronic Student Media Convention this coming October to discuss these issue and other relevant issues to student stations. See atlanta.askcbi.org for more details.

Those interested in this issue can read the CBI reaction at www.askcbi.org/?page_id=3292 for more complete coverage of the case at hand.

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