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Recently, the U.S. Court of Appeals for the District of Columbia Circuit issued a precedential opinion in <a href="https://www.cadc.uscourts.gov/internet/opinions.nsf/315C9AEE856359AC852589FA00516DC8/$file/21-1243-2009989.pdf"><em>National Religious Broadcasters Noncommercial Music License Committee v. Copyright Royalty Board</em>, No. 21-1243 (July 28, 2023)</a>, affirming the royalty rates “noninteractive” digital music streaming services must pay owners of the copyrighted sound recordings they stream.&nbsp;

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Under the Copyright Act, on-demand (“interactive”) streaming services like Spotify take licenses directly from copyright owners. “Noninteractive” streaming services like Pandora, which are not on-demand, pay compulsory royalties to a nonprofit collective that distributes license income to copyright owners. The compulsory rates, which are set by the Copyright Royalty Board, vary depending on whether the service is commercial, noncommercial, or subscription. The Board reassesses rates every five years to ensure they represent what “would have been negotiated in the marketplace between a willing buyer and a willing seller.” 17 U.S.C. § 114(f)(1)(B).

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The Committee, along with AM/FM radio stations that simulcast programing, challenged the Board’s fees and rates for 2021-2025 on multiple grounds related to the noncommercial nature of their services. The Board rejected the challenge, finding no evidence the fees and rates did not meet the willing buyer/willing seller standard.

The Committee appealed the decision directly to the D.C. Circuit under the Administrative Procedures Act. The Court affirmed. First, it rejected the Committee’s argument that simulcasters warrant a different royalty rate under the willing buyer/willing seller standard, noting that simulcasters have never been distinguished from other streaming services and that significant evidence showed that simulcasters and commercial nonsubscription webcasters competed in the same market. Next, it affirmed the Board’s minimum fee, rejecting the Committee’s argument that the increase should be limited to the incremental cost of administering the webcasting license; this argument, it found, lacked support from statutes, prior Board determinations, or precedent showing that the minimum fee may reflect average – as opposed to incremental – administrative costs. The Court also found no error in the rate set for noncommercial webcasters, finding the rate was not arbitrary. It noted that the Committee’s proposed benchmark agreement was not only inaccurate because it did not account for traditional costs that were negotiated out of the agreement, but also unsupported by expert testimony. Lastly, the Court declined to address whether the Board violated the willing buyer/willing seller standard by setting a rate below an asserted definitive measure of opportunity cost, where the measure asserted was found to be inaccurate.

Coauthored by John Winemiller &amp; Emily Threatt.

D.C. Court of Appeals Upholds Copyright Royalty Board’s Fees and Rates Amid Challenges by Webcasters

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