The appeals of last year’s Copyright Royalty Board decision on the royalties paid for the use of sound recordings by Internet radio stations continue on, and one recent filing raises interesting questions of whether or not the CRB was properly appointed.  Last week, the Department of Justice, which represents the CRB in defending its decision in the Court of Appeals, filed its brief in opposition to the briefs of the webcasters, which we summarized here.  The DOJ brief essentially argued that the webcasters’ briefs were insufficient to satisfy the requirement for a successful appeal – that the CRB decision was arbitrary and capricious or otherwise contrary to law.  Essentially, a Court need not revisit the decision and substitute its judgment as to whether the it believes that the decision was correct, but instead, to overturn a decision, the Court must find that the CRB (the expert agency) either violated the law or could not, on the fact, have logically come up with the decision that it did.  Thus, the DOJ brief made arguments that there was enough factual evidence for the CRB to decide in the way that it did, and made arguments that the webcasters had not offered contrary arguments or evidence on certain points during the CRB proceeding and were therefore barred from raising those arguments now.  Just before the DOJ brief was filed, another pleading raised the fundamental question of whether the Copyright Royalty Board was properly appointed and, if not, whether it has the constitutional authority to decide the cases that it has been considering.

This new argument about the CRB’s authority comes in a request filed with the Court of Appeals by Royalty Logic, a party to the CRB proceeding.  Royalty Logic is not a webcaster, but instead is seeking to be an alternative collection agency to SoundExchange.  Its pleading seeks supplemental briefing on the question of whether the Copyright Royalty Judges are “inferior officers” of the Federal government who, under the Constitution, can only be appointed by the President, by the Courts or by the head of a Department of the government. In a recent Supreme Court case, the Court found that certain tax court judges, who were appointed by a chief judge and not by a cabinet-level officer (the head of a “department”) violated this Appointments Clause of the Constitution. There has been much press coverage in the past few weeks as to whether this decision also applies to patent judges, and whether it could invalidate hundreds of patents approved by these judges (see the NY Times article on this issue, and listen to an NPR piece about the controversy). Royalty Logic contends that the same logic should apply to the appointment of the Copyright Royalty Judges who make up the CRB.  The Copyright Royalty Judges are appointed by the Librarian of Congress.  One question would be whether the Librarian is the equivalent to the head of a department though, technically, the Library of Congress is not even in the Executive Branch of government, but instead part of Congress.  In any event, Royalty Logic notes that the Copyright Royalty Tribunal, a predecessor agency done away with during the Clinton administration as part of their "Reinventing Government" program (one of the few agencies that was "reinvented"), had members appointed by the President.

In an order released last week, the Court permitted Royalty Logic to brief the issue, and gave the DOJ the right to respond.  However, the Court specifically did not make any determination as to whether it will consider the issue, as both the DOJ and SoundExchange have opposed the Royalty Logic motion as having been filed too late to be considered in this proceeding.

Obviously, if the Court does decide to hear the issue, and does decide that the CRB was not properly appointed, the results may fundamentally change the argument  – potentially requiring the re-hearing of the recently decided CRB cases or a legislative solution to provide a new process or even to set the rates.  And if Congress gets involved, who knows what else could happen?

In fact, recently, in connection with an unrelated bill in Congress on a matter having nothing to do with music royalties, The Internet Radio Equality Act, about which we wrote here, resurfaced as a potential rider. Eventually, as it threatened to derail the bill, the rider was withdrawn.  The new CRB royalties have now been effective for almost eleven months (see our reminder, here). While the recent action on IREA was predictably been greeted with skepticism by SoundExchange, it should not come as a shock that the bill is being revived as there have been no announced mutually-negotiated settlements of the royalty dispute over the past year, even though there have been discussions, and even though most Internet radio companies have claimed that there businesses are in jeopardy should these royalties continue to be in effect, and as they continue to substantially increase over the next two years. 

Unless there is legislative intervention, the appeal will go on.  Not only will the briefs be filed on the question of the CRB’s status, but SoundExchange will also be filing a brief in support of the CRB decision later this month.  The webcasters will respond in July, and oral arguments will be held at a date to be set later in the year.  A decision is probably on tap for 2009 – just in time for the commencement of the next proceeding for royalties for 2011-2015.