Background
Music Choice provides copyrighted sound recordings to businesses for background music and must pay royalties for the ephemeral recordings used to make those transmissions. SoundExchange sued Music Choice in federal district court in 2019, alleging that Music Choice had underreported gross proceeds and underpaid royalties under 37 C.F.R. § 384.3(a).
The district court stayed the litigation under the primary-jurisdiction doctrine so the parties could seek the Copyright Royalty Board’s interpretation of the regulation. The Board later agreed with SoundExchange that Music Choice generally must include all revenue from its business-service transmissions, even when the same ephemeral recordings also facilitate subscription-service transmissions. Music Choice petitioned the D.C. Circuit directly for review rather than returning to the district court.
The Court’s Holding
The D.C. Circuit dismissed the petition for lack of jurisdiction. Under 17 U.S.C. § 803(d)(1), direct appellate review is available only for a Board determination under § 803(c), at the request of a qualifying participant in a § 803(b)(2) proceeding who is bound by the determination. The Board’s regulatory interpretation met none of those requirements.
The court held that § 803(c)(4), which permits amendments correcting technical or clerical errors, does not authorize post hoc rulings resolving substantive regulatory ambiguities. The Board neither amended a prior determination nor corrected a minor drafting or transcription error, and it did not issue the required written addendum. Music Choice also had not participated through the statutory procedures applicable to a § 803(b)(2) proceeding, and the interpretive ruling did not bind Music Choice or carry the force of law.
The court left Music Choice and SoundExchange free to resume their pending district-court litigation over the meaning of the gross-proceeds regulation. It left for the district court to determine what weight, if any, the Board’s nonbinding interpretation should receive.
Key Takeaways
- The D.C. Circuit lacks direct-review jurisdiction over a Copyright Royalty Board interpretation that is not a determination authorized by 17 U.S.C. § 803(c).
- The Board’s authority to correct “technical or clerical errors” does not extend to resolving a consequential substantive ambiguity in an existing regulation.
- The Board’s interpretation is nonbinding, and the parties may litigate the regulation’s meaning in their still-pending district-court case.
Why It Matters
The decision limits the Copyright Royalty Board’s ability to issue binding interpretations of old royalty determinations outside Congress’s prescribed procedures. A dispute involving the substantive meaning of a royalty regulation cannot be converted into a directly reviewable Board determination by labeling the interpretation a correction of a technical error.
For copyright licensees and royalty administrators, the ruling directs disputes over nonbinding Board guidance back to trial courts, while preserving questions about the regulation’s correct interpretation and Music Choice’s ultimate royalty liability.