Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board
Alison F. Pollack, Esq.

On July 6, 2012, the United States Court of Appeals for the District of Columbia Circuit ruled that the Copyright Royalty Board (“CRB”) violated the Appointments Clause of the U.S. Constitution. The CRB consists of three CRB Judges (“CRJs”) appointed to six-year terms by the Librarian of Congress. The Copyright Act requires a statutory license for webcasting and encourages voluntary rate negotiations among the parties, but provides for CRJ intervention if the parties cannot agree on reasonable terms. In 2008, SoundExchange, Inc., initiated a ratemaking proceeding before the CRB to establish reasonable rates and terms for Internet webcasting for royalty years 2011-2015. Intercollegiate Broadcasting Systems, Inc. (“IBS”), an association of noncommercial webcasters that digitally retransmits music over the Internet in educational environments, appealed the CRB’s final determination in this proceeding. The CRB rejected IBS’ proposal and IBS appealed.

IBS argued the CRB violated the Appointments Clause because (1) the CRJs possess considerable ratemaking authority, without a superior’s control, which designates them as “principal officers” who must be appointed by the President with Senate confirmation; and (2) even if the CRJs are “inferior officers,” the Librarian of Congress is not a “Head of Department” who possesses Appointment Power. The Court accepted IBS’ first claim and rejected its second claim, providing a remedy for the constitutional issue. The D.C. Circuit found that the Librarian of Congress and Register of Copyrights exercise supervision over the CRJs. However, the CRJs are not removable and have broad discretion in making determinations, which makes them fall short of “inferior officers.” Thus, the D.C. Circuit determined that the CRJs were “principal officers” who must be appointed by the President with Senate confirmation.

To remedy the constitutional issue, the D.C. Circuit granted the Librarian of Congress unfettered removal power over the CRJs, making the CRJs “inferior officers.” The D.C. Circuit found that contrary to IBS’ argument, the Librarian of Congress qualified as a Head of Department under the Appointments Clause. The Librarian of Congress is a Head of Department because the Library of Congress is a freestanding part of the Executive Branch with powers usually associated with executive agencies. The President, with Senate confirmation, appoints the Librarian of Congress, making the Librarian a Head of Department who is permitted to appoint inferior officers such as the CRJs.

However, the Court of Appeals vacated and remanded the CRB’s determination for further proceedings because the CRB violated the Appointments Clause at the time of their ratemaking decision.

It is unlikely that the D.C. Circuit’s decision in this case will effect copyright royalty claimants. The D.C. Circuit believed its remedy, which validates the CRB’s constitutionality, provided the least amount of disruption to the copyright royalty process. In fact, it may only effect this case, royalty rates and terms for Internet webcasting for royalty years 2011-2015, which has no effect on broadcast, cable or satellite retransmission royalty claims. It is possible that the D.C. Circuit’s ruling may incite other challenges to the validity of prior CRB decisions and that the Librarian of Congress may have a greater impact on future royalty proceedings.

For more information, see:
Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board