The three-judge U.S. Court of Appeals for the District of Columbia ruled that the Federal Communications Commission (FCC) exceeded its authority by requiring that digital TVs, PCs and digital recorders sold after July 1 include a "broadcast flag" anti-copying capability. Broadcasters and studios fearful of digital copies of programming proliferating on the Internet heavily lobbied the FCC for the rules.

The FCC had argued that the rules were needed to speed the U.S. digital TV transition that has been slowed by a lack of premium content.

The appeals court rejected the FCC's assertion that Congress did not explicitly limit its authority to impose rules covering broadcast signals after they are transmitted to U.S. households. Observers said the ruling shifts the debate to Congress, where industry lobbyist will urge lawmakers to approve a digital copyright protection law.

The lobbying effort has already begun.

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

Shapiro said the broadcast flag ruling would have no impact on the U.S. digital TV transition.