[Federal Register: January 30, 2003 (Volume 68, Number 20)]
[Proposed Rules]
[Page 4744-4747]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ja03-24]
=======================================================================
-----------------------------------------------------------------------
LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 260
[Docket No. 2001-1 CARP DSTRA2]
Determination of Reasonable Rates and Terms for the Digital
Performance of Sound Recordings by Preexisting Subscription Services
AGENCY: Copyright Office, Library of Congress.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Copyright Office is requesting comment on proposed
regulations that set rates and terms for the use of sound recordings by
preexisting subscription services for the period January 1, 2002
through December 31, 2007.
DATES: Comments are due no later than March 3, 2003.
ADDRESSES: An original and five copies of any comment shall be
delivered by hand to: Office of the General Counsel, Copyright Office,
James Madison Building, Room LM-403, First and Independence Avenue, SE.
Washington, DC; or mailed to: Copyright Arbitration Royalty Panel
(CARP), P.O. Box 70977, Southwest Station, Washington, DC 20024-0977.
FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or
Tanya M. Sandros, Senior Attorney, Copyright Arbitration Royalty Panel,
P.O. Box 70977, Southwest Station, Washington, DC 20024. Telephone:
(202) 707-8380. Telefax: (202) 252-3423.
SUPPLEMENTARY INFORMATION:
Background
Section 106(6) of the Copyright Act, title 17 of the United States
Code, gives a copyright owner of sound recordings an exclusive right to
perform the copyrighted works publicly by means of a digital audio
transmission. This right is limited by section 114(d), which allows
certain non-interactive digital audio services to make digital
transmissions of a sound recording under a compulsory license, provided
that the services pay a reasonable royalty fee and comply with the
terms of the license. Moreover, these services may make any necessary
ephemeral
[[Page 4745]]
reproductions to facilitate the digital transmission of the sound
recording under a second license set forth in section 112(e) of the
Copyright Act.
The procedure for setting the rates and terms for these two
statutory licenses is a two-step process. 17 U.S.C. 112(e)(3),(4) and
(6) and 17 U.S.C. 114(f)(1). The first step requires the Librarian of
Congress to initiate a voluntary negotiation period to give interested
parties an opportunity to determine the applicable rates and terms
through a less formal process. However, if the parties are unable to
reach an agreement during this period, sections 112(e)(4) and
114(f)(1)(B) directs the Librarian of Congress to convene a three-
person Copyright Arbitration Royalty Panel (``CARP'') for the purpose
of determining the rates and terms for the compulsory license upon
receipt of a petition filed in accordance with 17 U.S.C. 803(a)(1).
The first proceeding to set rates and terms for the section 114
license for preexisting subscription services began in 1995 and
concluded with the issuance of a final rule and order by the Librarian
of Congress on May 8, 1998. See 63 FR 25394 (May 8, 1998). The parties
in that proceeding numbered four: the Recording Industry Association of
America (``RIAA''); Digital Cable Radio Associates, now known as Music
Choice; DMX Music, Inc. (``DMX''); and Muzak, L.P. (``Muzak'').
Later that same year, Congress passed the Digital Millennium
Copyright Act (``DMCA''), amending the section 114 statutory license to
cover additional transmission services and extending the term of the
existing section 114 license rate as it applies to preexisting
subscription services \1\ through December 31, 2001. The DMCA also
created a new statutory license to allow for the making of ephemeral
reproductions for the purpose of facilitating certain digital audio
transmissions, including those made by preexisting subscription
services.
---------------------------------------------------------------------------
\1\ In the DMCA, Congress recognized two types of subscription
services that were either in operation on or before July 31, 1998,
or licensed by the Federal Communications Commission pursuant to a
satellite digital audio radio service license on or before July 31,
1998. The former were designated as ``preexisting subscription
services'' and the latter were termed a ``preexisting satellite
digital audio radio service.'' See 17 U.S.C. 114(j)(10) and (11).
---------------------------------------------------------------------------
In accordance with the time frame set forth in the law for the
purpose of setting rates and terms for use of the section 114 license
by preexisting services, the Copyright Office published a notice in the
Federal Register on January 9, 2001. 66 FR 1700 (January 9, 2001). This
notice initiated a six-month negotiation period the purpose of which
was to provide an opportunity for interested parties to set rates and
terms for use of the section 114 license as it applied to both the
preexisting subscription services and the preexisting satellite digital
audio radio services. Unfortunately, no agreement was reached by the
end of that period. Consequently, Music Choice and RIAA filed separate
petitions with the Copyright Office, requesting that the Librarian of
Congress convene a CARP to determine the rates and terms for both
categories of preexisting services.
On November 13, 2001, the Copyright Office initiated the next phase
of the rate adjustment proceeding with the publication of a notice in
the Federal Register calling for Notices of Intent to Participate. 66
FR 58180 (November 13, 2001). Music Choice, DMX, Muzak, RIAA, the
American Federation of Television and Radio Artists (``AFTRA''), the
American Federation of Musicians of the United States and Canada
(``AFM''), XM Satellite Radio, Inc., and Sirius Satellite Radio, Inc.
filed the requisite notices with the Office, and the Office scheduled
the 45-day precontroversy discovery period. Initially, it set the date
for the filing of direct cases for December 2, 2002. Order in Docket
No. 2001-1 CARP DSTRA2, dated September 12, 2002. However, at the
request of the parties, the Office readjusted the schedule and set
February 24, 2003, as the new date for the filing of direct cases.
Order in Docket No. 2001-1 CARP DSTRA2, dated December 16, 2003.
However, in light of a petition filed with the Copyright Office, a
hearing may not be necessary to establish rates and terms for the use
of sound recordings by the preexisting services.
Joint Petition for Adjustment of Rates and Terms Applicable to
Preexisting Subscription Services
On January 17, 2003, RIAA, AFTRA, AFM, Music Choice, DMX Music,
Inc. and Muzak, LLC (collectively, ``Petitioners'') filed a joint
petition for adjustment of rates and terms for statutory licenses
applicable to preexisting subscription services and a request for an
immediate stay of the obligation to file direct cases on February 24,
2002.\2\ Having reached agreement on the rates and terms for the use of
sound recordings by preexisting services for the period January 1,
2002, through December 31, 2007, the petitioners request that the
Office publish the proposed rates and terms for public comment in lieu
of convening a CARP to determine the rates and terms for this period.
---------------------------------------------------------------------------
\2\ The request for an immediate stay of the petitioners'
obligation to file direct cases on February 24, 2002, will be
addressed in a separate order.
---------------------------------------------------------------------------
Pursuant to Sec. 251.63(b) of title 37 of the Code of Federal
Regulations, the Librarian can adopt the parties' proposed terms
without convening a CARP, provided that the proposed terms are
published in the Federal Register and no interested party with an
intent to participate in the proceeding files a comment objecting to
the proposed terms. In other words, unless there is an objection from a
person with a significant interest in the proceeding who is prepared
and eligible to participate in a CARP proceeding, the purpose of which
is to adopt rates and terms for preexisting subscription services that
use sound recordings to make digital audio transmissions pursuant to
the section 112 and section 114 statutory licenses, the Librarian can
adopt the rates and terms in the proposed settlement in final
regulations without convening a CARP. This procedure to adopt
negotiated rates and terms in the case where an agreement has been
reached has been specifically endorsed by Congress.
If an agreement as to rates and terms is reached and there is no
controversy as to these matters, it would make no sense to subject
the interested parties to the needless expense of an arbitration
proceeding conducted under (section 114(f)(2) (1995)). Thus, it is
the Committee's intention that in such a case, as under the
Copyright Office's current regulations concerning rate adjustment
proceedings, the Librarian of Congress should notify the public of
the proposed agreement in a notice-and-comment proceeding and, if no
opposing comment is received from a party with a substantial
interest and an intent to participate in an arbitration proceeding,
the Librarian of Congress should adopt the rates embodied in the
agreement without convening an arbitration panel.
S. Rep. No. 104-128, at 29 (1995)(citations omitted).
Accordingly, the Copyright Office is granting the joint petition
and is publishing for public comment the proposed rates and terms
embodied in the January 17, 2003, joint petition. Any party who objects
to the proposed rates and terms set forth herein must file a written
objection with the Copyright Office and an accompanying Notice of
Intent to Participate, if the party has not already done so. The
content of the written challenge should describe the party's interest
in the proceeding, the proposed rule the party finds objectionable, and
the reasons for the challenge. If no comments are received, the
regulations shall become final upon
[[Page 4746]]
publication of a final rule, and shall cover the period from January 1,
2002, to December 31, 2007.
List of Subjects in 37 CFR Part 260
Copyright, Digital Audio Transmissions, Performance Right, Sound
Recordings.
Proposed Regulation
In consideration of the foregoing, the Copyright Office proposes
amending part 260 of 37 CFR as follows:
PART 260--USE OF SOUND RECORDINGS IN A DIGITAL PERFORMANCE
1. The authority citation for part 260 continues to read as
follows:
Authority: 17 U.S.C. 114, 801(b)(1)
2. The heading of Part 260 is revised as follows:
PART 260--RATES AND TERMS FOR PREEXISTING SUBSCRIPTION SERVICES'
DIGITAL TRANSMISSIONS OF SOUND RECORDINGS AND THE MAKING OF
EPHEMERAL PHONORECORDS
3. Section 260.1 is revised to read as follows:
Sec. 260.1 General
(a) This part 260 establishes rates and terms of royalty payments
for the public performance of sound recordings by nonexempt preexisting
subscription services in accordance with the provisions of 17 U.S.C.
114(d)(2), and the making of ephemeral phonorecords in connection with
the public performance of sound recordings by nonexempt preexisting
subscription services in accordance with the provisions of 17 U.S.C.
112(e).
(b) Upon compliance with 17 U.S.C. 114 and the terms and rates of
this part, nonexempt preexisting subscription services may engage in
the activities set forth in 17 U.S.C. 114(d)(2).
(c) Upon compliance with 17 U.S.C. 112(e) and the terms and rates
of this part, nonexempt preexisting subscription services may engage in
the activities set forth in 17 U.S.C. 112(e) without limit to the
number of ephemeral phonorecords made.
(d) For purposes of this part, Licensee means any preexisting
subscription service as defined in 17 U.S.C. 114(j)(11).
4. Section 260.2 is amended as follows:
a. By revising the section heading;
b. By revising paragraphs (a) and (b);
c. By redesignating paragraph (c) as paragraph (e), and adding a
new paragraph (c);
d. By redesignating paragraph (d) as paragraph (f), and adding a
new paragraph (d);
e. In redesignated paragraph (e)(1)(ii) by adding ``a'' before
``recognized advertising agency'';
f. In redesignated paragraphs (e)(1)(iii) and (vi), by removing
``Programming Service'' and adding ``programming service'' in its
place; and
g. In redesignated paragraphs (e)(1)(viii) and (e)(2), by removing
``(c)'' and adding ``(e)'' in its place.
The additions and revisions to Sec. 260.2 read as follows:
Sec. 260.2 Royalty fees for the digital performance of sound
recordings and the making of ephemeral phonorecords by preexisting
subscription services.
(a) Commencing January 1, 2002 and continuing through December 31,
2003, a Licensee's monthly royalty fee for the public performance of
sound recordings pursuant to 17 U.S.C. 114(d)(2) and the making of any
number of ephemeral phonorecords to facilitate such performances
pursuant to 17 U.S.C. 112(e) shall be 7.0% of such Licensee's monthly
gross revenues resulting from residential services in the United
States.
(b) Commencing January 1, 2004 and continuing through December 31,
2007, a Licensee's monthly royalty fee for the public performance of
sound recordings pursuant to 17 U.S.C. 114(d)(2) and the making of any
number of ephemeral phonorecords to facilitate such performances
pursuant to 17 U.S.C. 112(e) shall be 7.25% of such Licensee's monthly
gross revenues resulting from residential services in the United
States.
(c) Commencing in the year 2003 and continuing through the year
2007, each Licensee making digital performances of sound recordings
pursuant to 17 U.S.C. 114(d)(2) and ephemeral phonorecords pursuant to
17 U.S.C. 112(e) shall make an advance payment of $100,000 per year,
payable no later than January 20th of each year; Provided, however,
that for 2003, the annual advance payment shall be due on [the 20th day
following the month in which these rates and terms are published in the
Federal Register notice as a final rule]. The annual advance payment
shall be nonrefundable, but the royalties due and payable for a given
year or any month therein under paragraphs (a) and (b) of this section
shall be recoupable against the annual advance payment for such year;
Provided, however, that any unused annual advance payment for a given
year shall not carry over into a subsequent year.
(d) A Licensee shall pay a late fee of 1.5% per month, or the
highest lawful rate, whichever is lower, for any payment received after
the due date. Late fees shall accrue from the due date until payment is
received.
* * * * *
5. Section 260.3 is amended as follows:
a. In paragraph (b), by removing ``twentieth'' and adding ``forty-
fifth'' in its place;
b. By revising paragraphs (d) and (e); and
c. By adding a new paragraph (f).
The additions and revisions to Sec. 260.3 read as follows:
Sec. 260.3 Terms for making payments of royalty fees.
* * * * *
(d) The designated agent may deduct from any of its receipts paid
by Licensees under Sec. 260.2, prior to the distribution of such
receipts to any person or entity entitled thereto, the reasonable costs
permitted to be deducted under 17 U.S.C. 114(g)(3); Provided, however,
that the parties entitled to receive royalty payments according to the
provisions set forth at 17 U.S.C. 114(g)(1) & (2) who have authorized a
designated agent may agree to deduct such other costs agreed to by such
other parties and the designated agent.
(e) Until such time as a new designation is made, SoundExchange,
which initially is an unincorporated division of the Recording Industry
Association of America, Inc., shall be the agent receiving royalty
payments and statements of account and shall continue to be designated
if it should be separately incorporated.
(f) A Licensee shall make any payments due under Sec. 260.2(a) for
digital transmissions or ephemeral phonorecords made between January 1,
2002, and [last day of the month in which these rates and terms are
published in the Federal Register as a final rule] 2003, to the
Designated Agent, less any amounts previously paid by such period to
the Recording Industry Association of America, Inc., or SoundExchange
by [the 45th day following the month in which these rates and terms are
published in the Federal Register notice as a final rule].
6. Section 260.4 is amended as follows:
a. In paragraphs (a) and (b), by removing ``nonexempt subscription
digital transmission service'' in each place it appears and adding
``nonexempt preexisting subscription service'' in its place; and
b. By revising paragraphs (d)(1) and (e).
The revisions to Sec. 260.4 read as follows:
[[Page 4747]]
Sec. 260.4 Confidential information and statements of account.
* * * * *
(d)(1)Those employees, agents, consultants and independent
contractors of the designated agent, subject to an appropriate
confidentiality agreement, who are engaged in the collection and
distribution of royalty payments hereunder and activities directly
related hereto, who are not also employees or officers of a sound
recording copyright owner or performing artist, and who, for the
purpose of performing such duties during the ordinary course of
employment, require access to the records; and
* * * * *
(e) The designated agent or any person identified in paragraph (d)
of this section shall implement procedures to safeguard all
confidential financial and business information, including, but not
limited to royalty payments, submitted as part of the statements of
account, using a reasonable standard of care, but no less than the same
degree of security used to protect confidential financial and business
information or similarly sensitive information belonging to the
designated agent or such person.
* * * * *
Sec. 260.5 [Amended]
7. Section 260.5(b) is amended by removing ``nonexempt subscription
digital transmission service'' and adding ``nonexempt preexisting
subscription service'' in its place.
Sec. 260.6 [Amended]
8. Section 260.6(g) is amended by removing ``copyright owners''.
Sec. 260.7 [Amended]
9. Section 260.7 is amended by removing ``the cost of the
administration of the collection and distribution of the royalty fees'
and adding ``any costs deductible under 17 U.S.C. 114(g)(3)'' in its
place.
Dated: January 24, 2003.
David O. Carson,
General Counsel.
[FR Doc. 03-2081 Filed 1-29-03; 8:45 am]
BILLING CODE 1410-33-P