(CN) – The D.C. Circuit vacated a $500 minimum yearly fee imposed on music webcasters, saying the Copyright Royalty Judges who imposed the fee had done so “in the absence of record evidence.”
The $500 fee was one of many aspects of the judges’ royalty-setting decision that were challenged on appeal.
The three Copyright Royalty Judges are appointed by the Library of Congress and are charged with setting “reasonable rates and terms” for royalty payments from digital performances.
After hearing 48 days of testimony from parties who owned and licensed rights to sound recordings, the judges designated per-play rates for commercial webcasters that would gradually increase from Jan. 1, 2006 to Dec. 31, 2010. They also established a $500 annual minimum fee to cover administrative costs, and set terms for royalty payments, including late payment fees. SoundExchange was designated as the company through which all royalty payments would be collected.
The ruling was appealed on numerous grounds. A group of commercial webcasters, led by the Digital Media Association, said the commercial rates were unreasonable and called for a cap on minimum fees paid per licensee.
Small commercial webcasters claimed they should be able to pay royalties as a percentage of their revenue.
Noncommercial broadcasters, including the Collegiate Broadcasters and the Intercollegiate Broadcasting System, said the judges set the $500 minimum fee per station without substantial evidence.
Finally, Royalty Logic, a contender for collecting royalty fees, challenged the judges’ decision to use SoundExchange as the exclusive clearinghouse.
The Copyright Royalty Board and SoundExchange joined the fray to defend the judges’ determination.
The Washington, D.C.-based federal appeals court upheld the judges on all but the $500 minimum fee per station, because it doesn’t limit the amount a single licensee could end up paying.
Most prior rulings and agreements contained such a cap, the court noted.
“The judges are free to depart from precedent if they provide reasoned explanations for their departures,” the court wrote. “But in only two footnotes do they appear aware of the possibility of individual licensees paying more than $500.”
The court vacated that portion of the judges’ decision and remanded, rejecting the remaining challenges.