The Copyright Royalty Board sets royalty rates for Satellite Digital Audio Radio Services (SDARS) and Preexisting Subscription Services (PSS). SoundExchange, a nonprofit performance rights organization, collects and distributes digital performance royalties to copyright owners. SoundExchange appealed the rates set by the Copyright Royalty Board in 2013, arguing that the Board arbitrarily set SDARS and PSS rates too low. Music Choice, a PSS, provides music-only television channels to its subscribers. Music Choice argued that the Board arbitrary set PSS rates too high. The Court of Appeals, D.C. Circuit, upheld the Board’s royalty rates determinations.
Intercollegiate Broadcasting System, Inc. is an association of webcasters who use the Internet to transmit digitally recorded music on high school and college campuses, analogous to a closed circuit campus radio station. Since the digital transmissions are “performances” under the Copyright Act, the copyright owners of the songs are entitled to receive royalty payments. The Copyright Act provides a statutory license for webcasting: 17 USC §114(d)(2), (f)(2)-(3). If the webcasters and the copyright owners (or the owners’ clearinghouse) cannot agree on licensing terms, Copyright Royalty Judges (CRJs) determine reasonable terms and rates for royalty payments. The Copyright Act, Sections 801 – 805, describes the functions and duties of the CRJs.
Intercollegiate challenged the constitutionality of the CRJs on the basis of Article III, judicial power, and Article II, §2, cl. 2, Appointments Clause, violations. The U.S. Court of Appeals for the District of Columbia Circuit ruled that the current form of the CRJ provisions do violate the Appointments Clause, art. II, §2, cl. 2. The D.C. Circuit corrected the violation by invalidating and severing the portions of the statute that restrict the Librarian of Congress’ ability to remove the CRJs. Because the form of the CRJs that made the rate decision leading to Intercollegiate’s challenge violated the Constitution, that rate decision was vacated and the case was remanded to the CRJs.