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College Radio Stations Lose Challenge to Online Royalties

By Casey C. Sullivan, Esq. on August 14, 2015 | Last updated on March 21, 2019

American music would be much worse without college radio. College radio stations helped bring us The Pixies and music-snob mags like CMJ. Your local college radio station is one of the few places willing to let kids spin avant-garde African pop for an hour every week.

But college radio is much less actual radio, these days. Many college radio stations have taken to streaming their music live over the Internet, to potentially much larger audiences. That means more royalty fees, fees the D.C. Circuit just upheld this Tuesday.

You've Got to Pay to Play

Pretty much anyone can stream copyrighted sound recordings online, so long as they pay royalty fees. Those default royalty rates are set by the Copyright Royalty Board, composed of three Copyright Royalty Judges. The board is part of the Library of Congress and the Library appoints the judges. Of course, parties can negotiate rates between themselves, which the Board must approve, but when such an agreement isn't made, the Board sets a "reasonable" rate and terms. Those rates may vary depending on the type of broadcast and are supposed to reflect reasonable market rates.

When the Board began setting royalty rates for 2011 to 2015, most broadcasters and copyright owners reached private deals. The Intercollegiate Broadcasting System, which represents college and high school radio, did not. When rates were set, it sued, arguing that the Board's judges were unconstitutionally appointed. The D.C. Circuit agreed. After the Library of Congress reappointed new judges, IBS sued again.

College Radio Plays an Unpopular Tune

Instead of restarting the decision making process, the new judges simply reviewed the existing record and adopted an almost identical royalty system. This time around, IBS maintained that the judges' determination was impermissibly influenced by the previous judges' findings and wrong on the merits.

The original three judges had been appointed in violation of the Constitution's Appointments Clause. IBS did not suggest that the replacement judges were also appointed unconstitutionally. Rather, since those judges merely reviewed the previous judges' proceedings, they "did nothing more than enshrine the constitutional violations" the D.C. Circuit had already rejected, IBS argued.

The D.C. Circuit disagreed. The court had recognized, almost 20 years earlier, that a reconstituted FEC could reauthorize enforcement actions initiated by an unconstitutionally appointed Commission. There's nothing wrong with rubberstamping decisions by those improperly appointed, the court explained. The new Board was able to make its own decision, even if it chose not to, and that is all that matters.

As for their objections to the merits of the royalty decision, IBS fared no better. IBS argued that the Board's imposition of a $500 annual fee for all noncommercial webcasters was arbitrary and capricious, since it didn't distinguish between different types of services, including the size of broadcasters. The Board distinguished between only two types of webcasters, commercial and noncommercial. Once again, that was enough for the D.C. Circuit, which found that the law allowed the Board leeway to make very precise or very broad differentiations, as it so chose.

That's bad news for college radio, which will now be forced to hand over both an annual fee and regular royalties if it wants to stay on the Internet.

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