A federal appellate court has dealt the entertainment industry a blow with its decision to toss out the Federal Communication Commission's "broadcast flag" regulation designed as an offensive measure

WASHINGTON, D.C. (The Hollywood Reporter) -- A federal appellate court has dealt the entertainment industry a blow with its decision to toss out the Federal Communication Commission's "broadcast flag" regulation designed as an offensive measure to guard against piracy concerns once the nation's broadcast TV stations make the transition to digital in the coming years.

In its unanimous decision, the U.S. Circuit Court of Appeals for the District of Columbia ruled that the commission overstepped its authority when it ordered set manufacturers to include technology to prevent the unauthorized copying of DTV programs.

"In this case, all relevant materials concerning the FCC's jurisdiction -- including the words of the Communications Act of 1934, its legislative history, subsequent legislation, relevant case law, and commission practices -- confirm that the FCC has no authority to regulate consumer electronic devices that can be used for receipt of wire or radio communication when those devices are not engaged in the process of radio or wire transmission," Judge Harry T. Edwards wrote for the court.

The decision released May 6 is not just a setback for the entertainment industry's antipiracy agenda, but it also is likely to complicate what is becoming a complex legislative agenda that covers everything from digital TV to copyright protection on the Internet.

Edwards minced few words in his decision, saying that the court could "find nothing in the statute, its legislative history, the applicable case law, or agency practice indicating that Congress meant to provide the sweeping authority the FCC now claims over receiver apparatus. And the agency's strained and implausible interpretations of the definition provisions of the Communications Act of 1934 do not lend credence to its position."

In throwing out the case, the court shut the door on the FCC and the entertainment industry for a rewrite at the agency. The industry's only avenue would be for it to get Congress to give the commission the specific authority to write a new rule.

While some entertainment industry executives on May 6 were coy about their strategy, National Assn. of Broadcasters president/CEO Edward O. Fritts said that his organization was prepared to go to Congress.

"Without a broadcast flag, consumers may lose access to the very best programming offered on local television," he said. "This remedy is designed to protect against unauthorized indiscriminate redistribution of programming over the Internet. We will work with Congress to authorize implementation of a broadcast flag that preserves the uniquely American system of free, local television."

While industry executives are readying a legislative alternative, so are the rule's opponents. Already emboldened by their victory, they are likely to become a potent force, particularly as they often line up with and get support from such powerful high-technology companies as Intel and Microsoft.

"It's expected that the motion picture studios will probably want to go to Congress to finally get the FCC the authority they never had," said Fred von Lohmann, senior attorney for the Electronic Freedom Foundation. "I look forward to Congress hearing from the public interest side of this debate, a side that wasn't adequately heard from during the development of the broadcast flag before it was submitted to the commission or after it was submitted to the commission. The voices of libraries, of innovators, of tinkerers, a whole host of important public interest voices were not heard in this process, and we look forward to having them heard now."

Adding broadcast-flag legislation to Congress' plate packs an already overflowing agenda since lawmakers also want to rewrite the 1996 Telecommunications Act, set a "hard date" for the transition to digital TV, toughen the nation's laws for indecent programming and likely will be asked to reopen the nation's copyright law after the Supreme Court decides the Grokster case.

Gene Kimmelman, Consumers Union's Washington director, said that the decision likely will complicate the attempt by House Commerce Committee chairman Rep. Joe Barton, R-Texas, to set a drop-dead date for TV broadcasters to end their current analog broadcasts and switch to digital.

"This will now become front and center in the DTV transition legislation," he said. "Because obviously the broadcast industry will claim that they can't move to digital, putting aside the date issue and all the complexity for consumers, because they can't protect

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