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Is the Copyright Royalty Board Unconstitutional? - Take Two:

On Tuesday, I noted the U.S. Court of Appeals for the D.C. Circuit's decision in SoundExchange, Inc. v. Librarian of Congress, in which it largely rejected a challenge to royalty rates set by the Copyright Royalty Board. Judge Kavanaugh wrote a separate concurrence noting that the manner of the CRB's appointment raises constitutional concerns. Yet SoundExchange had not challenged the constitutionality of the CRB, so the question was not before the court.

If SoundExchange wanted to challenge the royalty rates set by the CRB, why did it fail to press the constitutional challenge? Invalidating the CRB would seem to be an effective way of voiding the royalty rates at issue. Was it bad lawyering? I don't think so. Rather, it appears that SoundExchange made a strategic decision because invalidating the CRB altogether would be adverse to its economic interests and compromised its position in other proceedings.

Yesterday, a separate panel of the D.C. Circuit decided Intercollegiate Broadcast System, Inc. v. Copyright Review Board. SoundExchange was again a party, this time as an intervenor on the side of the CRB. In this case, the Intercollegiate Broadcast System (IBS) and others challenged the CRB's decisions setting rates and terms relating to webcasting and designating SoundExchange as the sole royalty collective. At some point in the litigation, petitioners argued the appointment of Copyright Royalty Judges to the CRB is unconstitutional, because the judges are appointed by the Librarian of Congress. Here, SoundExchange defended the CRB's constitutionality and argued the petitioners had forfeited the argument by not raising it in a timely fashion.

Had SoundExchange pressed the constitutional challenge in the first case, it could have produced an adverse result in the second -- and SoundExchange may have had more to lose from this result than it had to gain. Moreover, as a repeat player in copyright royalty disputes, SoundExchange could prefer fighting over the merits of individual decisions than forcing a complete restructuring of the administrative structure governing copyright royalties. Repeat players in other regulatory contexts often behave the same way, and larger challenges to administrative proceedings, whether constitutional or otherwise, are often brought by marginal industry players who are less invested in the structure of the status quo.

In any event, the D.C. Circuit again passed on the constitutional question, concluding the petitioners had forfeited the constitutional argument. Instead, the D.C. Circuit addressed petitioners' challenges to the CRB decisions on the merits, vacating the $500 minimum fee for both noncommercials and commercials but otherwise upholding the CRB's determinations. And so, resolution of the underlying constitutional question will have to wait for another day.

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