The U.S. Court of Appeals has ruled that the Federal Communications Commission does not have jurisdiction to impose the broadcast flag. The digital flag is aimed at enforcing content protection on the reception of high-definition terrestrial television transmissions to prevent unregulated distribution over the internet.

Under the FCC broadcast flag proposals, which were to come into effect from July, any high-definition digital television receiver sold in the United States would have been required to detect the presence of a digital code embedded in the broadcast signal and limit output either using copy protection or downscaling to standard resolution.

A coalition of nine public interest groups, consumer bodies and library organisations argued that the rule would interfere with the legitimate activities of technology innovators, librarians, archivists, and academics, and that the FCC exceeded its regulatory authority by imposing technological restrictions on what consumers can do with television shows after they receive them.

The court agreed, three judges ruling unanimously that the FCC “exceeded the scope of its delegated authority”. It found that the broadcast flag imposed regulations on devices that receive communications after the communications have occurred. In its opinion the appeals court panel stated “We can 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.”

“In the seven decades of its existence, the FCC has never before asserted such sweeping authority,” said the judges. They said they found no statutory foundation for the broadcast flag rules, saying that the Commission “overstepped the limits of its delegated authority”. Consequently they granted petition for review and reversed the Flag Order, “insofar as it requires demodulator products manufactured on or after July 1, 2005 to recognize and give effect to the broadcast flag”.

The American Libraries Association said “We are happy the court has restored the rights of libraries and consumers by ruling that the FCC does not have the right to mandate technological copy protections”.

The decision is something of a setback for content owners, including the Motion Picture Association of America that had been among those pressing for the introduction of the technology. “This is a disappointing decision and could create a digital television divide by slowing or eliminating access to high quality digital programming for some consumers,” said Dan Glikman, president of the MPAA. “If the broadcast flag cannot be used, program providers will have to weigh whether the risk of theft is too great over free, off-air broadcasting and could limit such high quality programming to only cable, satellite and other more secure delivery systems.”

It had seemed like a done deal, until February of this year when an appeal court judge ruled that the FCC had “crossed the line” in attempting to regulate receivers in this way.

The FCC offered no immediate comment on the ruling. Ed Fritts, president of the National Association of Broadcasters said that without the broadcast flag, consumers may lose access to some programming. He said that the NAB would “work with Congress to authorize implementation of a broadcast flag that preserves the uniquely American system of free, local television.”

“This case is a great win for consumers and for technology innovation,” said Gigi Sohn, president and co-founder of Public Knowledge, one of the groups that had appealed against the FCC regulation. “It’s about more than simply broadcasting. It is about how far the FCC can go in its regulations without permission from Congress. While we recognize that the content industries may ask Congress to overturn this ruling, we also recognize that Congress will have to think very hard before it puts restrictions on how constituents use their televisions.”

“The broadcast flag was designed to protect over-the-air television broadcast content from mass, anonymous redistribution over the Internet,” said Gary Shapiro, president of the Consumer Electronics Association. “Courts are right to be wary when government institutions seek to regulate the specific features and functions of safe, useful consumer technology.”