Music Choice v. Copyright Royalty Board — Court Rejects Direct Review of Nonbinding Royalty Interpretation

Background

Music Choice transmits copyrighted sound recordings to businesses as background music. Under the Copyright Act’s statutory licensing system, it pays a percentage of qualifying revenue to SoundExchange, which distributes royalties to copyright owners. SoundExchange sued Music Choice in 2019, alleging that Music Choice had underreported revenue covered by the royalty regulation.

The district court stayed that litigation under the primary-jurisdiction doctrine so the parties could seek the Copyright Royalty Board’s view of the regulation. The Board later issued a “Ruling on Regulatory Interpretation” agreeing with SoundExchange’s broader calculation. Rather than return to district court, Music Choice petitioned the D.C. Circuit to review the ruling directly.

The Court’s Holding

The D.C. Circuit dismissed the petition for lack of jurisdiction. Section 803(d)(1) permits direct appellate review only of a qualifying Board determination under Section 803(c), at the request of a participant in the prescribed proceeding who is bound by that determination. The Board’s interpretive ruling satisfied none of those requirements.

Section 803(c)(4) lets the Board amend a written determination to correct technical or clerical errors. The panel held that this narrow housekeeping power does not authorize a post hoc ruling resolving a substantive regulatory ambiguity involving tens of millions of dollars. The Board neither amended the regulation’s text nor issued the required written addendum. The court independently interpreted the statute and rejected the Copyright Register’s broader view of that authority.

Music Choice also had not participated in the kind of formally commenced proceeding Section 803(b)(2) describes. And the ruling could not bind Music Choice because it was not produced through a ratemaking settlement or a determination after the required hearing and record. At most, the ruling was nonbinding guidance. Music Choice and SoundExchange may return to their still-pending district-court case, where the court can decide what the royalty regulation means and what weight, if any, the Board’s interpretation deserves.

Key Takeaways

• The Copyright Royalty Board cannot use its power to correct technical or clerical errors to resolve major substantive ambiguities after the fact.
• Direct D.C. Circuit review depends on the decision, proceeding, participation, and binding-effect requirements Congress specified.
• A primary-jurisdiction stay does not automatically convert an agency’s response into a directly reviewable order.

Why It Matters

The ruling limits the Board’s ability to reshape past royalty arrangements through informal interpretation. That protects licensees and copyright owners from being bound by a later agency view announced without the participation and procedural protections required for a formal determination.

The decision does not resolve how Music Choice’s gross proceeds should be calculated. Instead, it sends that dispute back to the district court and clarifies that the Board’s interpretation has no force of law. The practical stakes remain substantial for digital music services, SoundExchange, recording artists, and labels whose payments depend on the royalty base.