D.C. Circuit Affirms APA Reviewability of Copyright Exemptions Rules

On June 7, the U.S. Court of Appeals for the District of Columbia issued its decision in Medical Imaging & Technology Alliance v. Library of Congress. The case presents the question of whether copyright rules adopted under the Digital Millennium Copyright Act (DMCA) are reviewable under the Administrative Procedure Act (APA). In a 2-1 decision that brought to the fore the unusual structure and operation of the U.S. Copyright Office, the court answered "Yes."

The court's opinion was authored by Judge Neomi Rao. At issue in the case was a legal challenge to an exemption from the DMCA's anti-circumvention provisions that were granted by the Librarian of Congress following a triennial DMCA rulemaking. The exemption allowed for independent service operators to bypass technological protective measures (TPMs) on medical devices for purposes of diagnosis, modification, or repair of those devices. The Library of Congress disputed that its rulemaking was subject to APA review.

According to the D.C. Circuit:

In the Copyright Act [of 1976], Congress provided that copyright regulations are reviewable under the APA. The Act expanded the Register's rulemaking authority and provided that, with one exception not relevant here, "all actions taken by the Register of Copyrights under [Title 17] are subject to the provisions of the Administrative Procedure Act." 17 U.S.C. § 701(e). We have previously reviewed actions of the Register based on this provision. See, e.g., Atari Games Corp. v. Oman, 888 F.2d 878, 879 & n.1 (D.C. Cir. 1989); Universal City Studios LLLP v. Peters, 402 F.3d 1238, 1242 (D.C. Cir. 2005). Although section 701(e) refers to actions of the Register, the Register is subordinate to the Librarian and 'shall act under the Librarian's ... direction and supervision." 17 U.S.C. § 701(a). More specifically, "[a]ll regulations established by the Register under [Title 17] are subject to the approval of the Librarian of Congress." Id. § 702…

Congress conferred authority for the triennial rules at issue here in the DMCA, which added the following provision to Title 17: "[T]he Librarian of Congress, upon the recommendation of the Register of Copyrights, ... shall make the determination in a rulemaking proceeding" whether to waive the anti-circumvention provision for certain classes of copyrighted works. Id. § 1201(a)(1)(C). In other words, the DMCA authorized a new type of copyright regulation that would be formulated by the Register and approved by the Librarian. 

 

Reading the two statutes as a comprehensive statutory scheme, DMCA rules are also subject to the APA under 17 U.S.C. § 701(e). The Copyright Act plainly applies the APA to "all actions" of the Register under Title 17, including rulemaking subject to the approval of the Librarian. See id. §§ 701(e), 702…

The court concluded that because Congress applied the APA's waiver of sovereign immunity to actions of the register and Librarian in adopting copyright regulations it is immaterial as to whether the Library is an "agency" under the APA. As the court recognizes, the Copyright Office is peculiarly subordinated to the Librarian of Congress and deemed an "agency" of Congress. The court acknowledged that the Librarian's decisions about the Library's internal workings are not reviewable under the APA, and the court's ruling in the case was limited to the issue of copyright regulation. But the essentially executive character of the copyright regulation adopted by the Librarian on the recommendation of the Register of Copyrights was noted in a commendable section on judicial review of administrative agency action for conformity with the law: 

Reading section 701(e) to provide for judicial review of triennial DMCA rules aligns with fundamental principles regarding the protection of individual rights against unlawful government action. To begin with, the Copyright Act and the DMCA give the Register and Librarian significant authority to "promulgate copyright regulations" and "apply the statute to affected parties.” See Intercollegiate [Broadcast System, Inc. v. Copyright Royalty Board, 684 F.3d 1332,1342 (D.C. Cir. 2012)]. As we have recognized, and no party disputes, these powers are "generally associated in modern times with executive agencies.” Id. When enacting regulations and enforcing the law, "the Library is undoubtedly a component of the Executive Branch." Id. (cleaned up). Moreover, the triennial rules directly affect valuable property rights, such as a copyright holder’s ability to limit access to a digital creation and to prevent intellectual property theft. The triennial rules also provide exemptions from civil and criminal liability that would otherwise attach to individuals who circumvent technological protective measures. 17 U.S.C. §§ 1201(a)(1)(B), 1203–04. The exemptions are not left solely to the Librarian's discretion, but instead must be determined according to specific statutory criteria. Id. § 1201(a)(1)(C). There is no indication in the DMCA that Congress, having allocated this substantial regulatory power to the Librarian and Register and identified the legal criteria they must apply, would leave such power unchecked by judicial review. 

In sum, the court held that DMCA triennial rulemakings are subject to APA review. Judge Rao deserves credit for writing a well-reasoned and perceptive judicial opinion. 

Free State Foundation President Randolph May and I explored the structural history of the U.S. Copyright Office and its relationship with the Library of Congress in our book Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (Carolina Academic Press, 2020).

FCC's Unreasonable Delay in Withholding 2.5 GHz Band Spectrum Licenses

In a July 19 blog post published by the Federalist Society, Joel Thayer made a convincing case that the FCC has statutory authority under of the Communications Act to issue licenses in the 2.5 GHz spectrum band to 2022 auction bid-winner T-Mobile, despite the expiration of the Commission's spectrum auction authority on March 1, 2023. Consider this also: The FCC's failure to issue to T-Mobile numerous licenses that it won and paid for pursuant to Commission rules appears to constitute agency action "unlawfully withheld or unreasonably delayed" under the Administrative Procedure Act (APA). 

The point of this blog post is not to address whether or not litigation should be pursued in this matter. Rather, the point is to show how the APA and court precedents regarding unreasonable delay and mandamus relief bring into sharper focus the Commission's affirmative legal duty to issue to T-Mobile the 2.5 GHz spectrum licenses. The agency should carry out its duty by promptly issuing the licenses.

 

Repurposing spectrum – especially mid-band (1 GHz to 7 GHz) spectrum – is essential for supporting 5G wireless services. The Commission recognized this when it adopted a 2019 order to put more 2.5 GHz band spectrum into the hands of wireless broadband providers to offer services using that spectrum. And in March 2022, the agency issued a public notice that set procedures by which it would conduct a competitive bidding auction and offer 2.5 GHz spectrum licenses to winning bidders. In August 2022, the FCC concluded its 2.5 GHz band auction, and the agency thereafter announced that over 7,800 county-sized licenses were won by 63 bidders. T-Mobile won over 7,100 such licenses. And by late September 2022, T-Mobile submitted long-form applications and paid $304 million to the FCC for those licenses.

Following the expiration of the FCC's spectrum license auction authority on March 1 of this year, the position of the Commission appears to be that it now lacks authority to issue the 2.5 GHz licenses to T-Mobile, even though T-Mobile has paid for them. However, Mr. Thayer's legal analysis makes a strong showing that the Commission still has authority to issue licenses to T-Mobile pursuant to Sections 307(a) as well as its special temporary authority (STA) contained in Sections 307(c) and 309(c)(2). 

 

If the FCC possesses the authority to issue the 2.5 GHz licenses, I suggest the agency also has a legal obligation to do so. Under the circumstances, the FCC's refusal to issue those licenses to T-Mobile appears to constitute an unreasonable delay by the agency in carrying out its duty, under Section 307(a) and the Commission's rules and procedures.  

 

Section 706(1) of the Administrative Procedure Act (APA) authorizes courts to "compel agency action unlawfully withheld or unreasonably delayed." According to the Supreme Court in Norton v. South Utah Wilderness Alliance (2004), "the only agency action that can be compelled under the APA is action legally required." As the court explained in Norton, "the APA carried forward the traditional practice" of writs of mandamus as codified in the All Writs Act. 

 

Decisions by the D.C. Circuit such as American Hospital Association v. Burwell (2016) treat mandamus petitions under the All Writs Act in conjunction with, or interchangeably with, agency delay claims under Section 706(1) of the APA. To establish the court's jurisdiction and entitlement to mandamus relief, a plaintiff must show: (1) that it has a clear right to the relief requested; (2) that the defendant agency has a clear, non-discretionary duty – owned specifically to the plaintiff – to perform the act in question; and (3) no other adequate remedy exists.

 

According to the D.C. Circuit in In re Core Communications (2008), if those requirements are satisfied, "[t]he central question in evaluating 'a claim of unreasonable delay' is whether the agency's delay is so egregious as to warrant mandamus." The D.C. Circuit applies, on a case-specific basis, one or more factors set forth in TRAC v. FCC (1984) – also known as the "TRAC factors" as "useful guidance" as to whether a delay warrants mandamus. In Burwell, the court stated that "in situations where plaintiffs allege that agency delay is unreasonable despite the absence of a specific statutory deadline, the entire TRAC factor analysis may go to the threshold jurisdictional question: does the agency's delay violate a clear duty?"

 

Section 307(a) of the Communications Act states that if "public convenience, interest, or necessity is served thereby" the FCC "shall grant" to any applicant a "station license." By complying with the FCC's requirements in winning the 2.5 GHz spectrum licenses at auction and timely making payment, T-Mobile has a clear right to those licenses. The Commission now has a clear and non-discretionary duty to issue them. If the agency continues to fail to issue the licenses, or at least grant the special temporary authority that T-Mobile has requested, there appears to be no remedy available other than mandamus and Section 706(1) that would achieve the result of putting those withheld licenses into the hands of the party that won and paid for them. 

 

T-Mobile reasonably relied to its detriment on the Commission's rules, the 2019 order, and the agency's auction procedures. And T-Mobile is materially prejudiced by the agency's indefinite withholding of licenses worth $304 million, as it is being denied the benefit of using the spectrum to offer 5G services to consumers. Thus, all the elements for mandamus relief based on a claim of agency action unlawfully withheld or unreasonably delayed are present. 

 

None of this is to suggest that litigation should be necessary to resolve the problem posed by the FCC's withholding of 2.5 GHz licenses that T-Mobile won at auction. But it does suggest that the APA's "unlawfully withheld/unreasonably delayed" provision offers a useful lens for discerning the Commission's obligation to issue licenses that were validly won at auction and timely purchased. Indeed, it suggests that the case for the Commission to act by issuing the 2.5 GHz licenses, or at least granting T-Mobile's request for special temporary authority, and enabling use for 5G services is stronger than the case for the agency to continue doing nothing except hang onto the money of a private party that followed the rules. 

Constitutional Challenge to USF's System for Subsidy Fees Filed in the 11th Circuit

On October 3, a constitutional challenge to the Universal Service system of surcharge fees – which are effectively taxes on voice consumers – was filed in the U.S. Court of Appeals in the Eleventh Circuit. The plaintiffs in Consumers' Research v. FCC raise several non-delegation claims in their petition based on Article I, Section 1 of the U.S. Constitution. Additionally, the plaintiffs challenge the statutory authority of the Universal Service Administrative Authority (USAC) to administer the subsidy fee system, and they also raise an alternative claim against the USAC's authority pursuant to the Appointments Clause in Article II, Section 2 of the Constitution. Plaintiffs also challenge the USF Tax Factor for failure to comply with the Administrative Procedures Act regarding rulemakings and for failure to be published in the Federal Register.

The claims raised in the plaintiffs' petition to the Eleventh Circuit in Consumers' Research v. FCC are similar to claims raised in pending cases in the Fifth and Sixth Circuits. The Free State Foundation and FSF President Randolph May have joined amicus curiae briefs filed by the Competitive Enterprise Institute (CEI) in both the Fifth and Sixth Circuit cases. The amicus brief joined by FSF and FSF President May was the subject of a blog post from April 19 of this year. And the other amicus brief was filed in the Sixth Circuit on September 29. Many thanks go to CEI. According to court docket records, the Fifth Circuit has tentatively scheduled oral arguments for December 5, 2022.

The constitutional and statutory challenges raised by Consumers' Research and others to the Universal Service Fund's system for imposing and administering surcharge fees are principled, thoughtful, and deserving of careful consideration by the judiciary. 

 

P.S. For recent takes on the need for Congress to modernize the Universal Service system, be sure to check out FSF President Randolph May's August 2022 Perspectives from FSF Scholars, "The FCC's USF Report: Unprecedented Broadband Funding Requires Fundamental Universal Service Reforms" as well as FSF Senior Fellow Andrew Long's August 30 blog post, "A True Assessment of the USF's Future Relevance Demands a Full Accounting of Broadband Subsidies."

FCC Rule Removing Barriers to Fixed Wireless Broadband Deployments Upheld

On Friday, in Children's Health Defense v. FCC, the D.C. Circuit upheld the FCC's 2021 OTARD Order that expanded the scope of its rule preempting restrictions on broadband Internet rooftop antennas to include all "hub and relay" antennas. Free from such unreasonable deployment barriers, fixed wireless broadband providers are better able to compete against other distribution technologies and serve the needs of consumers.

For background, the Telecommunications Act of 1996 directed the Commission to adopt rules that promote intermodal competition in the video market by preempting state, local, and covenant-based restrictions on the installation of rooftop antennas. Congress mandated this rulemaking because states, localities, multitenant building owners, and home owners' associations often banned rooftop antennas needed for "wireless cable" and satellite TV services, or at minimum saddled them with unreasonably burdensome compliance costs and other obligations.




In response, the Commission adopted its "over-the-air reception device" (OTARD) rule, which preempts regulations that "unreasonably delay or prevent installation" or "unreasonably increase the cost" of rooftop antennas smaller than 1 meter in diameter and no higher than 12 feet above the roofline. In subsequent years, the Commission has updated the OTARD rule multiple times, including expanding the scope of the rule to cover rooftop antennas used for fixed wireless broadband service.

The 2021 OTARD Order is the latest of these updates, revising the OTARD rule to conform with current technical realities of fixed wireless broadband offerings, many of which involve "mesh" networks that rely upon a greater number of smaller antennas. Pursuant to the Order, the OTARD rule now preempts regulation of all "hub" rooftop antennas used for fixed wireless broadband service that fall within the rule's dimension limits. Prior to this Order, the OTARD rule only protected hub antennas used to serve the specific location to which they were attached.

Consumers stand to benefit from the 2021 OTARD Order because it enables fixed wireless providers to deploy the equipment needed to improve and expand network performance.

The D.C. Circuit upheld the 2021 OTARD Order against multiple attacks from petitioners. First, the court rejected petitioners' claim that the FCC lacked authority to expand the OTARD rule, holding that the text of Section 303 of the Communications Act and the Commission's interpretation of this section provided authority and a reasoned basis for its Order. According to the Court, Section 303 grants the Commission authority to regulate radio "stations," which the Commission has interpreted to mean individual antennas using radiofrequency (RF) spectrum. The Order is a lawful use of this authority.

Next, the court rejected petitioners' Administrative Procedures Act challenge that the Commission failed to consider health effects from RF exposure, concluding that this issue was outside the scope of the Order and best addressed in the Commission's RF proceedings. The court reasoned that federal agencies can designate specific proceedings to address specific issues, as the Commission had done in a 2019 rulemaking on RF exposure.

The court also rejected petitioners claim that the Order facially violates the Americans with Disabilities Act (ADA) and Fair Housing Act (FHA), determining that petitioners failed to show that the Order is unlawful in every application and because their arguments again relied on the supposed health effects of RF exposure. A facial challenge to an agency order requires that the order be invalid in every instance, and since the petitioners' claims here involved specific individuals protected by the ADA and FHA, they could not meet this burden. Further, even if petitioners could meet that burden, the claims involved assertions about the health effects of RF exposure that the Commission addressed in a separate proceeding.

Lastly, the court rejected petitioners' claim that the Commission unlawfully preempted state and local law, holding that Section 303 empowers it to do so.

However, the court noted in dicta that the Commission is "treading on thin ice" by preempting state and local statutes mandating community notice prior to the construction of commercial grade antennas, pointing out that such preemption may implicate the First Amendment. But because petitioners in this case relied on a facial challenge to the 2021 OTARD Order, the court did not rule on this narrower preemption issue.

Free State Foundation scholars are pleased to see the D.C. Circuit uphold a sound policy that fosters intermodal broadband competition by removing unreasonable barriers to the deployment of fixed wireless broadband equipment. Director of Policy Studies Seth Cooper wrote FSF Blog posts supporting the 2021 OTARD Order and proceeding. We hope to see more infrastructure reforms that remove broadband deployment barriers.

6 GHz Order on Unlicensed Spectrum Upheld by D.C. Circuit

Today, in AT&T Services, Inc. v. FCC, the D.C. Circuit largely upheld the FCC's order that opened the 6 GHz band for use by unlicensed devices. The 6 GHz Order (2020) cleared 1200 MHz of spectrum for unlicensed use, which quadrupled the total amount of spectrum available for unlicensed devices, most notably Wi-Fi routers and Internet of Things (IoT) devices that use Wi-Fi.

The D.C. Circuit's decision greenlights the next generation of unlicensed devices, dubbed "Wi-Fi 6E." Consumers likely experience faster speeds and lower network congestion with Wi-Fi 6E, which makes use of the 6 GHz band's higher capacity than 2.4 GHz and 5 GHz bands that previously were allocated for unlicensed use. Consumers also are likely to be able to connect more devices to home Wi-Fi routers due to the increased capacity. Free State Foundation Senior Fellow Andrew Long discussed the benefits of and need for Wi-Fi 6E prior to release of the 6 GHz Order.

Licensees operating in the 6 GHz band challenged the 6 GHz Order under the Communications Act and Administrative Procedures Act (APA), arguing that the order would cause harmful interference with their licensed operations despite the order's mitigating measures. The court dismissed all but one of these challenges because the FCC adequately explained its reasoning, the Commission met its obligations under the APA, or the challenges relied on a "zero interference" standard that the agency never adopted. However, the court did remand one aspect of the 6 GHz Order to the Commission, based on its conclusion that the agency failed to address arguments made by the National Association of Broadcasters regarding interference with mobile operators. Because the court remanded the 6 GHz Order in response to this challenge, and did not vacate it, the order remains in effect and the Commission will have opportunity to address the issue on remand.

Throughout the opinion, the court remarked that the FCC's decisionmaking for preventing signal interference in the 6 GHz Order "requires a high level of technical expertise meriting deference to the Commission’s informed discretion." And the court also remarked that the FCC's interference mitigations aim to make the risk of harmful interference "insignificant," not "zero." Court challenges to FCC spectrum allocations do not prevail solely by showing potential interference, as long as the Commission adequately explains why it believes the risk of interference is low—a technical judgment that the court will not second-guess.

Court Upholds FCC Efforts to Combat New Forms of Access Arbitrage

On July 7, the U.S. Court of Appeals for the D.C. Circuit upheld the FCC's 2019 Eliminate Access Arbitrage Order to combat gaming of the access charge system by competitive carriers that route calls to rural areas and encourage toll-free conference call centers operate in those areas. The order is intended to counteract unintended incentives for access stimulation schemes caused by peculiarities of the interstate access. The court observed: 

As a result of these incentives, some sparsely populated rural areas receive a disproportionate and overwhelming number of calls. The Commission credited AT&T's observation, for instance, that twice as many calling minutes were routed in a month to Redfield, South Dakota (population 2,300) and one end office as were routed to Verizon's facilities in New York City (population 8,500,000) and 90 end offices. Similarly, Sprint explained that Iowa, with 1% of the U.S. population, accounts for 48% of Sprint’s access fee payments. In addition to higher fees, the Commission notes that access stimulation may result in overloaded networks, call blocking, and dropped calls. 

In Great Lakes Communication Corp. v. FCC, a unanimous panel of the D.C. Circuit rejected Administrative Procedure Act-related challenges to the 2019 Order. The court concluded, the order was within the scope of the Commission's authority, it was reasonable, and it was a logical outgrowth of the notice of rulemaking. 

MEDIA ADVISORY: FSF's Seth Cooper Reacts to Supreme Court's Decision on Media Ownership Rules

The following statement may be attributed to the Free State Foundation's Director of Policy Studies and Senior Fellow Seth Cooper regarding the U.S. Supreme Court's decision in FCC v. Prometheus Radio Project:

Today's unanimous decision by the Supreme Court rightly upholds the FCC's sensible decision to reform media ownership rules that date back to the 1970s. In an era of broadcast, cable, satellite, and Internet-enabled media abundance, government-imposed ownership restrictions on select legacy media outlets are arbitrary and they effectively restrict speech in tension with the First Amendment. As the Court found, the Commission's 2017 decision to remove some of its old media ownership rules was a reasonable exercise of the agency's statutory duty to periodically review and update those rules to fit with current marketplace conditions. Thankfully, Court's decision puts an end to the years-long analysis paralysis over media ownership regulation in the lower court.  

President Trump Issues Executive Order for Agency Regulatory Accountability

On January 18, President Trump issued an Executive Order intended to increase the democratic accountability of executive branch agencies' regulatory activities. It requires senior appointees of the President to initiate the  Administrative Procedure Act (APA) process process at their agency, to sign finalized rules, and to approve their agency's regulatory agenda. The idea behind this executive order is to help ensure that federal agency heads chosen by the President – officials at least indirectly accountable through national elections – take responsibility for the actions of the agencies they oversee rather than pass of significant rulemaking and regulatory implementation decisions to subordinates who are insulated from the democratic process. Since federal agency heads chosen by the President are removable by the President, the Executive Order is thus a measure for increasing the President's responsibility for regulatory undertakings by the executive branch.

President Trump's Executive Order is consonant with the constitutional separation of powers. It doesn't reduce the powers of any particular executive branch agency, nor does it transfer any power away from the executive branch to the other branches. No lengthy or expensive process requirements are involved. Indeed, the Executive Order appears to be a common-sense measure for democratic accountability. Despite the late hour of the Executive Order's release, it would be to the next Administration's credit to retain and follow the Order.