D.C. Circuit Strikes Down FCC's "Broadcast Flag" Regulations on Narrow Grounds; Legislation to Similar Effect of Regulations Proposed

The U.S. Court of Appeals for the District of Columbia Circuit recently struck down the Federal Communications Commission's ("FCC") "broadcast flag" regulations, which would have required digital television receivers and other devices capable of receiving digital television broadcast signals, manufactured on or after July 1, 2005, to include technology that prevents the redistribution of broadcast content. American Library Ass'n v. Federal Communications Comm'n.

The United States is currently transitioning from analog to digital television service ("DTV"). DTV permits broadcasters to transmit more information, at better audiovisual quality, than is possible through analog broadcasting. The U.S. Congress has set December 31, 2006 as the target date for the replacement of analog television service with DTV within the United States.

Copyright owners have feared that DTV transmission of copyrighted content will allow for the easy copying and redistribution of the broadcasts without authorization, to the obvious detriment of copyright holders. A variety of groups, including the Motion Picture Association of America, Inc. ("MPAA"), had urged the FCC to require DTV reception equipment to be manufactured with the broadcast flag capability to prevent unauthorized redistribution of digital content. The broadcast flag is a digital code embedded in a DTV broadcasting stream that prevents digital television reception equipment from redistributing broadcast content. The effectiveness of the broadcast flag regime is dependent on programming being flagged and on devices being able to recognize and give effect to the flag. The broadcast flag is not acted upon until after a DTV transmission is completed.

In November 2003, the FCC adopted broadcast flag regulations. However, the American Library Association, an organization representing libraries and consumers, challenged the regulations on the grounds that they were enacted by the FCC outside its authority. As an administrative agency, the FCC's powers are defined and limited by Congress. The FCC contended that it was acting within its ancillary power, which is limited to circumstances where (1) the FCC's general power covers the subject of the regulations and (2) the regulations are reasonably ancillary to the FCC's effective performance of its statutorily mandated responsibilities.

The D.C. Circuit held that, because the broadcast flag regulations do not require receiver devices to give effect to the broadcast flag until after the DTV broadcast transmission has been completed, the regulations did not fall within the scope of the FCC's general powers. In other words, the FCC is not allowed to regulate equipment that can receive television broadcasts when the equipment is not engaged in the process of receiving a broadcast transmission.

Since the D.C. Circuit's decision in American Library Ass'n, the MPAA has circulated proposed legislation that would enact the broadcast flag regulations.