[Federal Register: December 11, 2000 (Volume 65, Number 238)]
[Rules and Regulations]
[Page 77292-77302]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201
[Docket No. RM 2000-3B]
Public Performance of Sound Recordings: Definition of a Service
AGENCY: Copyright Office, Library of Congress.
ACTION: Final rule.
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SUMMARY: The Copyright Office is amending its regulatory definition of
a ``Service'' for purposes of the statutory license governing the
public performance of sound recordings by means of digital audio
transmissions in order to clarify that transmissions of a broadcast
signal over a digital communications network, such as the Internet, are
not exempt from copyright liability under section 114(d)(1)(A) of the
Copyright Act.
DATES: Effective December 11, 2000.
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, D.C. 20024. Telephone:
(202) 707-8380. Telefax: (202) 252-3423.
SUPPLEMENTARY INFORMATION:
Procedural History
On March 16, 2000, the Copyright Office published a notice of
proposed rulemaking (``NPRM'') seeking comment on whether the
transmission of an AM/FM radio broadcast signal over the Internet by
the broadcaster that originates the AM/FM signal is exempt from
copyright liability under the exemption to the digital performance
right in sound recordings set forth in section 114 of the Copyright
Act, title 17 of the United States Code. 65 FR 14227 (March 16, 2000).
The Office initiated this rulemaking proceeding in response to a
petition from the Recording Industry Association of America (``RIAA'').
In its petition, RIAA asked the Office to adopt a rule ``clarifying
that a broadcaster's transmission of its AM or FM radio station over
the Internet . . . is not exempt from copyright liability under section
114(d)(1)(A).'' RIAA also believes that ``until the Office rules, the
parties will not agree on who qualifies for the Section 114 performance
license.'' Petition at 7.
The Office agreed with RIAA's observation and postponed the pending
rate adjustment proceeding, the purpose of which is to set the rates
and terms for the public performance of a sound recording by means of
digital audio transmissions under the section 114 statutory license and
to establish the rates and terms for the making of an ephemeral
recording in accordance with the section 112 statutory license. See 63
FR 65555 (November 27, 1998); 64 FR 52107 (September 7, 1999). The
Office took this action because it recognized that the outcome of the
rulemaking would have the effect of deciding whether the rates and
terms set in that
[[Page 77293]]
proceeding would apply to broadcasters who stream their AM or FM radio
stations over the Internet. 65 FR 14227 (March 16 , 2000).
A finding that the section 114(d)(1)(A) exemption covered a digital
transmission of an AM or FM radio station made by an FCC-licensed
broadcaster, including transmissions made by the broadcaster over the
Internet, would likely mean that broadcasters, who are currently
parties to the rate adjustment proceeding, would withdraw from the
proceeding since the rates and terms to be decided would not apply to
any transmission made by an FCC-licensed broadcaster. This, in turn,
would narrow the scope of the issues and evidence presented to the
CARP.
After the publication of the NPRM, the National Association of
Broadcasters (``NAB'') filed an action in the U.S. District Court for
the Southern District of New York on behalf of its members, asking for
a declaratory judgment that nonsubscription simultaneous transmissions
of radio broadcasts via the Internet by FCC-licensed broadcasters are
exempt from the limited sound recording performance right. See National
Ass'n of Broadcasters v. Recording Indus. Ass'n of Am., No. 00 Civ.
2330 (S.D.N.Y., filed March 27, 2000). The NAB then moved to suspend
the rulemaking proceeding, Docket No. RM 2000-3, until the Court had
ruled in this case.
Before making a decision on the merits of the motion to suspend,
the Office published a second notice in which it requested comments on
whether to grant the motion to suspend the rulemaking proceeding and
await the decision of the U.S. District Court for the Southern District
of New York. 65 FR 17840 (April 5, 2000).
For the reasons set forth herein, the Copyright Office is denying
the NAB's motion to suspend this rulemaking and is announcing a final
rule to clarify that a transmission by an FCC-licensed broadcaster of
its AM or FM radio broadcast over the Internet is not exempt from the
limited public performance right for digital transmissions under
section 114(d)(1)(A).
The Commenters
In response to the NPRM, the Office received comments from the
following commenters: BroadcastAmerica.com, Inc.
(``BroadcastAmerica''); jointly, American Society of Composers, Authors
and Publishers, Broadcast Music, Inc., and SESAC, Inc. (collectively,
the ``Performing Rights Organizations''); Digital Media Association
(``DiMA''); jointly, Balogh Broadcasting Company, Inc., Big Mack
Broadcasting, Inc., Hall Communications, Inc., KSTP-AM, L.L.C., KSTP-
FM, L.L.C., LBJS Broadcasting Company, L.P., Lyle Broadcasting
Corporation, M&M Broadcasters, Ltd., Rice Capital Broadcasting Inc.,
Twin Lakes Communications, Inc., Zimmer Broadcasting Company, Inc.,
Zimmer Communications, Inc., Zimmer Radio of Mid-Missouri, Inc., and
ZRG of Illinois, Inc. (collectively, ``Broadcasters I''); jointly,
AMFM, Inc., Bonneville International Corporation, CBS Corporation,
Clear Channel Communications, Inc., Cox Radio, Inc., Emmis
Communications Corporation, and National Association of Broadcasters
(collectively, ``Broadcasters II''); State Broadcasters Associations
(``State Broadcasters''); Criswell Center For Biblical Studies
(``Criswell''); and jointly, The Recording Industry Association of
America, Inc., Association for Independent Music, American Federation
of Musicians, and American Federation of Television and Radio Artists
(collectively, ``Copyright Owners''), including a separate memorandum,
Copyright Liability of Broadcasters for Webcasting Their AM/FM Radio
Signals, prepared by Robert Gorman (``Gorman'').
Reply comments were filed by Entercom Communications Corp., and
five of the eight commenters: the Copyright Owners; Broadcasters I;
DiMA; State Broadcasters; and Broadcasters II.
The Copyright Office's Authority To Conduct This Rulemaking
a. Authority to act. The Copyright Office stated in the NPRM that
it initiated this proceeding under the rulemaking authority granted by
17 U.S.C. 702, to ``interpret the statute in accordance with Congress''
intentions and framework and, where Congress is silent, to provide
reasonable and permissible interpretations of the statute.'' 65 FR
14227, citing 57 FR 3284, 3292 (January 29, 1992). Our authority to act
is supported by Satellite Broadcasting and Communications Ass'n of Am.
v. Oman, 17 F.3d 344 (11th Cir. 1994) (``SBCA''), and Cablevision Sys.
Dev. Co. v. Motion Picture Ass'n of Am., Inc., 836 F.2d 599 (D.C.
Cir.), cert. denied, 487 U.S. 1235 (1988) (``Cablevision''), where the
Eleventh Circuit and the D.C. Circuit expressly acknowledged the
Office's authority to provide reasonable interpretations of the cable
statutory license. See, SBCA, 17 F.3d at 347 (``The Copyright Office is
a federal agency with authority to promulgate rules concerning the
meaning and application of section 111''); Cablevision, 836 F.2d at
608-09(same). See also, DeSylva v. Ballentine, 351 U.S. 570, 577-78
(1956)(recognizing that Copyright Office's interpretation of the
Copyright Act should ordinarily receive deference).
Most of the commenters do not challenge the Office's rulemaking
authority in this proceeding. However, the Broadcasters suggest that
the Office may be without authority to interpret the extent of the
section 114(d)(1)(A) exemption. They argue that the interpretation of
section 114(d)(1)(A) sought by RIAA in this proceeding--whether
copyright liability does or does not attach to transmissions of radio
stations over the Internet--is very different from previous rulemaking
proceedings of the Office interpreting provisions of other compulsory
licenses.
Specifically, the Broadcasters submit that SBCA and Cablevision are
poor precedent for supporting rulemaking authority in this case. In
SBCA, the Office determined that satellite carriers were not eligible
for the cable compulsory license for their retransmission of over-the-
air broadcast signals, thereby subjecting these retransmissions to
copyright owners' exclusive rights. In Cablevision, the Office
interpreted the meaning of the term ``gross receipts'' as it appeared
in the section 111 cable compulsory license. According to the
Broadcasters, the copyright liability of satellite carriers and cable
systems was already established, and the Office was merely sorting out
the terms of a compulsory license. In this proceeding, however, the
Office is being called upon to decide whether any copyright liability
exists at all for broadcasters who stream their radio signals over the
Internet. If, according to the Broadcasters, there is no copyright
liability for such activity because it is exempted by section
114(d)(1)(A), then the Copyright Office has no jurisdiction over that
activity because it does not implicate the copyright laws. The
Broadcasters conclude that the Copyright Office does not have any
authority to address the status of broadcaster transmissions of radio
signals over the Internet until such time as a federal court decides
the issue.
If the Broadcasters' position is accepted, the Copyright Office's
ability to administer section 114 of the Copyright Act will be
frustrated. Section 114 treats the public performance of sound
recordings by digital audio transmissions in one of three ways: the
performance is either exempt from copyright liability, subject to
copyright
[[Page 77294]]
owners' exclusive rights, or subject to statutory licensing. The
Library of Congress and the Copyright Office are charged with
conducting a copyright arbitration royalty panel (``CARP'') proceeding
to set the rates and terms of the statutory license, and the Library
has already begun the CARP process (and stayed its initiation pending
the resolution of this rulemaking proceeding). Many broadcasters, and
the NAB, have stayed out of the proceeding on the grounds that they
qualify for the section 114(d)(1)(A) exemption. If these parties are
not covered by the exemption (as the Office is determining today), they
should be afforded the opportunity to participate in the CARP
proceeding.\1\ CARP proceedings are adversarial in nature, making it
critical that the interests of all affected copyright owners and users
are represented in the proceeding so that the CARP has a full and
complete evidentiary record on which to render its determination.
Without such information, the CARP cannot render a complete and
accurate decision, thereby compromising the efficiency of the section
114 license.
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\1\ Any broadcaster who wishes to participate and has not yet
filed a notice of intention to do so in the pending proceeding
should file such notice in accordance with the requirements set
forth in a separate Federal Register notice addressing this issue.
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Under the Broadcasters' approach, copyright users of sound
recordings can effectively impede a CARP proceeding by claiming that
their activities are not implicated by the proceeding until a federal
court determines that they are. The Copyright Office would then be
forced either to go forward with the CARP proceeding with an incomplete
record, or to postpone the proceeding until after a ruling has been
obtained from a federal court. If no ruling is obtained through private
litigation, or conflicting decisions are handed down by the federal
courts, the Library may not be able to have a CARP at all. The
Copyright Office concludes that Congress intended no such result.
Broadcasters distinguish the SBCA case by observing that the issue
therein was whether a satellite carrier was a ``cable system'' for
purposes of Section 111 compulsory licensing. In contrast, according to
Broadcasters, the issue here is whether their ``particular conduct
falls under the purview of the Copyright Act.'' Broadcasters II Reply,
at 9-11. They argue that because the activities of the satellite
carriers in SBCA related to ``particular conduct admittedly implicating
copyright liability,'' the Office had the power to determine whether
that conduct was within the scope of the cable compulsory license. But
they contend that where the activity is exempt under a specific
statutory provision, the conduct may not be considered further by the
Office under its authority to promulgate regulations to administer a
compulsory license, the scope of which, but for the exemption, would
otherwise include such activity.
The Office finds this distinction artificial and unpersuasive.
Here, as in SBCA, the issue is whether a particular type of activity
falls within the scope of a statutory compulsory license. The fact that
Broadcasters claim to be exempt from the performance right for sound
recordings does not deprive the Office of the ability to determine
whether they are subject to the section 114 compulsory license. In
order to determine whether broadcasters transmitting performances of
their broadcast signals over the Internet are subject to the compulsory
license, it is necessary to address their claim that they enjoy the
exemption under section 114(d)(1)(A) when they engage in that activity.
If they are exempt, then the inquiry proceeds no further. If they are
not exempt, then there appears to be no dispute that their activity is
subject to the section 114(f) compulsory license. Broadcasters cite
absolutely no authority for the proposition that an agency may not
determine whether conduct falls within a particular regulatory scheme
administered by the agency when a claim of exemption is made by the
party whose conduct is in question.\2\
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\2\ We note as well that the Broadcasters' distinction does not
dispositively adjudicate the substantive rights of copyright users.
In both situations, a party aggrieved by a decision of the Office
can seek judicial review. Satellite carriers disagreed with the
Office's negative determination of their eligibility for the section
111 license and brought the SBCA litigation. If broadcasters do not
agree with the Office's determination in this proceeding, they
likewise can seek judicial review.
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In sum, the Copyright Office concludes that it does possess the
authority to conduct this rulemaking, based on our responsibility to
conduct a CARP proceeding to establish rates and terms for the section
114 license, as provided in section 114 itself and chapter 8 of the
Copyright Act, and the Office's general rulemaking authority granted by
section 702 of the Act.
b. Advisability of acting. Most of the comments address the
advisability of the Copyright Office's undertaking of this rulemaking
proceeding. Not surprisingly, those commenters representing
broadcasters favor postponement or cancellation of this proceeding,
pending the outcome of the NAB action in the Southern District of New
York. For the reasons described below, the Office believes that it is
appropriate to exercise its authority and resolve this rulemaking
proceeding now.
First, the Copyright Office disagrees with the assertion that a
federal court is better suited at this point to determine whether
broadcaster transmissions over the Internet are exempted by section
114(d)(1)(A) of the Copyright Act. We do not question the competence or
expertise of the United States District Court for the Southern District
of New York to interpret the copyright laws, and ultimately this issue
may be resolved by the courts following the Office's ruling. But in the
first instance, where the law is complex and requires clarification,
the general policy is to allow the agency to complete its action,
particularly ``where the function of the agency and the particular
decision sought to be reviewed involve exercise of discretionary powers
granted the agency by Congress, or require application of special
expertise.'' Miss America Organization v. Mattel, Inc., 945 F.2d 536,
540 (2nd Cir. 1991), citing McKart v. United States, 395 U.S. 185
(1969); see also, Cablevision, 836 F.2d at 608 (``The Copyright Office
certainly has greater expertise in such matters than do the federal
courts.'')
Moreover, the Office has a long and extensive history of
administering and interpreting the Copyright Act, especially the
statutory licensing provisions of the Copyright Act. See, e.g., 49 FR
13029 (April 2, 1984)(definition of gross receipts under section 111
license); 57 FR 3284 (January 29, 1992)(definition of a cable system
under section 111 license); 62 FR 18705 (April 17, 1997)(establishing
filing regulations for SMATV systems under section 111). The Office
also produced for Congress two studies on the advisability of adopting
a performance right for sound recordings. Copyright Implications of
Digital Audio Transmission Services: A Report of the Register of
Copyrights (1991); Subcomm. on Courts, Civil Liberties, and the
Administration of Justice of the Committee on the Judiciary House of
Representatives, 95th Cong., Performance Right in Sound Recordings
(Comm. Print 1978). And the Register of Copyrights testified before
both the Senate and House of Representatives on the legislation that
amended sections 106 and 114. See Digital Performance Right in Sound
Recordings Act of 1995: Hearings on S. 227 Before the Senate Comm. On
the Judiciary, 104th Cong., (March 9, 1995); Digital Performance Right
in Sound Recordings Act of 1995: Hearings on H.R. 1506 Before the
Subcomm. On Courts and Intellectual
[[Page 77295]]
Property of the House Comm. On the Judiciary, 104th Cong. (June 28,
1995). Thus, we believe we are well-suited to interpret section 114,
including the extent of the section 114(d)(1)(A) exemption.
Second, not only have the commenters to the NPRM not cited any
authority that the Copyright Office must defer to a federal court
action, but they have not cited any cases where a government agency has
deferred action to a federal court a matter before the agency. Goya
Foods, Inc. v. Tropicana Prods, Inc., 846 F.2d 848 (2d Cir. 1988), and
Nader v. Allegheny Airlines, Inc., 426 U.S. 290 (1976) are cited by the
Broadcasters for the proposition that the matter of the section
114(d)(1)(A) exemption ``lies within the traditional realm of judicial
competence.'' Goya, 846 F.2d at 851. Neither of these cases, however,
involved a government agency deferring judgment to a federal court on a
matter clearly within the agency's jurisdiction. In fact, both cases
involved just the opposite; a court's decision not to stay a judicial
proceeding pending the resolution of an agency proceeding. There is
not, therefore, any legal authority that compels or counsels the Office
to stay this proceeding in deference to the court in New York.
Third, there is a need to resolve the status of broadcast
transmissions over the Internet for purposes of the CARP proceeding to
establish rates and terms for the section 114 statutory license as
quickly as possible. As discussed above, the success of a CARP
proceeding depends upon a full and complete record. This means that all
parties who are potentially subject to the section 114 license must be
identified and given the opportunity to participate in the CARP
proceeding. The NAB/RIAA litigation in the Southern District of New
York may not be resolved for several years,\3\ which leaves the
Copyright Office two undesirable choices: postpone the CARP until that
litigation is resolved, or proceed with what we believe would be an
insufficient record and receive an incomplete decision from the CARP.
Neither of these choices is acceptable; therefore, the Office is now
deciding whether the simultaneous transmission of an over-the-air radio
broadcast transmission made by an FCC-licensed broadcaster over the
Internet is exempt from the digital performance right.
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\3\ At the time this Federal Register notice was prepared,
RIAA's motion to dismiss NAB's claims was still pending in the
court, and no further motions have been filed. It seems highly
unlikely that the court will resolve the merits of the declaratory
relief action in the near future.
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Fourth, NAB has sought a declaratory judgment from the New York
district court and is not currently being sued for copyright
infringement. There is considerable question whether NAB has presented
the district court with a live case and controversy, and the RIAA has
sought dismissal of the case on jurisdictional grounds. If the suit is
dismissed, there will be no opportunity for a court to interpret the
meaning of the section 114(d)(1)(A) exemption, at least until such time
as a copyright infringement action is brought against a broadcaster for
transmitting over-the-air radio broadcasts on the Internet. The Office
needs to act now to move the CARP proceeding forward.
Finally, even if the New York district court rules, and the case is
appealed through the Second Circuit, that is still not the final word
from the federal court system. Other suits may be brought in other
federal circuits, creating the potential for conflicting
determinations. Thus, we believe it makes far greater sense for the
Copyright Office to address the status of broadcast transmissions over
the Internet and the section 114(d)(1)(A) exemption, given that it is
the expert agency entrusted with the authority to interpret the meaning
of the provisions of the Copyright Act.
Scope of the Section 114(d)(1)(A) Exemption
In 1995, Congress enacted the Digital Performance Right in Sound
Recordings Act (``DPRA''), Public Law 104-39, which created an
exclusive right for copyright owners of sound recordings, subject to
certain limitations, to perform sound recordings publicly by means of
certain digital audio transmissions. Among the limitations on the
performance right was the creation of a new compulsory license for
nonexempt, noninteractive, digital subscription transmissions, 17
U.S.C. 114(f), and an exemption for certain nonsubscription
transmissions. 17 U.S.C. 114 (d)(1)(A)(i)-(iii) (1995).
Congress passed the DPRA in response to the growth in the use of
digital technology to provide recordings with superior sound quality
(e.g., digital phonorecord deliveries) and the growth of digital
transmission services that could offer a consumer a digital
transmission of a particular sound recording on demand. Congress
realized that these advancements offered new and better ways to
distribute music to the consumer, but at the same time, it recognized
that the current law was inadequate to protect the interests of the
copyright owners whose livelihoods depend upon the revenues generated
from the sales of their works. Thus, Congress created a limited
performance right in sound recordings. S. Rep. No. 104-128, at 14
(1995) (hereinafter ``1995 Senate Report'').
In drafting the DPRA, Congress tried to balance the interests of
the music industry,\4\ traditional users of sound recordings,\5\ and
those who wished to utilize the new technologies to make transmissions
of sound recordings. The expressed intent of Congress in passing the
Act was ``to provide copyright holders of sound recordings with the
ability to control the distribution of their product by digital
transmissions, without hampering the arrival of new technologies, and
without imposing new and unreasonable burdens on radio and television
broadcasters, which often promote, and appear to pose no threat to, the
distribution of sound recordings.'' 1995 Senate Report at 15. This
change, however, was not meant to alter or upset in any way the
longstanding relationship between the record industry and broadcasters.
Broadcasters II at 15, citing 1995 Senate Report, at 9; accord H.R.
Rep. No. 104-274, at 6 (1995) (hereinafter ``1995 House Report'').
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\4\ ``[T]he legislation is a narrowly crafted response to one of
the concerns expressed by representatives of the music community,
namely that certain types of subscription and interactive audio
services might adversely affect sales of sound recordings and erode
copyright owners' ability to control and be paid for the use of
their work.'' 1995 Senate Report at 15.
\5\ Prior to the passage of the DPRA, FCC-licensed broadcasters,
cable systems and satellite systems all transmitted or retransmitted
sound recordings in their programming without incurring any
copyright liability for the public performance of a sound recording.
Congress, in acknowledging the promotional value to the record
companies that flows to them through advertiser-supported, free
over-the-air broadcasting, included specific exemptions in the law
from the digital performance right for these users. See 17 U.S.C.
114(d)(1)(A), (B) and (C).
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To strike the proper balance between these parties, Congress
created three exemptions for nonsubscription transmissions, including
an express exemption for a nonsubscription broadcast transmission. 17
U.S.C. 114(d)(1)(A)(i)-(iii)(1995). It is the scope of this exemption,
which has been debated since the passage of the DPRA, see Reply
Comments of the National Association of Broadcasters at 9-12 (dated
June 20, 1997), submitted in Docket No. RM 97-1, that is the subject of
this proceeding.
Broadcasters take a broad view of the exemption. Their position is
that any transmission made by an FCC-licensed broadcaster, whether made
over-the-air or over the Internet, falls within the scope of the
section 114(d)(1)(A) exemption. Not surprisingly, Copyright Owners and
DiMA take a different view and interpret the scope of the exemption
more narrowly. Their position is that a
[[Page 77296]]
transmission of a radio signal over the Internet, generally referred to
as a webcast, is subject to the copyright owner's public performance
right, even when the transmission is made by an FCC-licensed
broadcaster and is identical to an over-the-air transmission. See 17
U.S.C. 106(6). They further argue that Congress could not possibly have
meant to exempt anything other than over-the-air broadcasts in the
DPRA, because Congress had not even yet considered transmissions of
sound recordings over the Internet and how they fit into the statutory
scheme. This is a critical point, because the scope of the exemption
did not change when Congress amended section 114 in 1998 with the
passage of the DMCA.
To resolve this question, we examine the legislative history of the
DPRA and the DMCA to discern what Congress intended to do and when it
intended to do it. From this examination, it is clear that in 1995,
Congress' focus was not on Internet transmissions of sound recordings,
but rather on the emerging interactive services, e.g., the pay-per-
listen, audio-on-demand, or ``dial-up'' services for a particular
recording or artist, and the existing noninteractive subscription
services that offered nearly continuous play of music through cable and
satellite services. See 1995 Senate Report at 22.
Consideration of Internet services came later once it became clear
that the DPRA did not adequately address their operations. The House
Manager's Report for the DMCA makes this point clearly:
At the time the DPRSRA [Digital Performance Right in Sound
Recordings Act] was crafted, Internet transmissions of music were
not the focus of Congress' effort. Thus, while the DPRSRA created a
statutory license for certain subscription services that existed at
the time, not enough was known about how nonsubscription music
services would evolve on the Internet or in other digital media.
However, given the proliferation and evolution of such services as
well as the licensing complexities described above, it is now
appropriate to address the licensing of nonexempt nonsubscription
digital audio transmissions.
Staff of the House of Representatives Comm. on the Judiciary, 105th
Cong., 2d Sess., Section-by-Section Analysis of H.R. 2281 as Passed by
the United States House of Representatives on August 4, 1998 at 51
(Comm. Print, Serial No. 6, 1998) (hereinafter ``House Manager's
Report'').
It was during the DMCA debate in 1998 that Congress focused on the
need to clarify how the law applied to the transmission of a sound
recording by a noninteractive, nonsubscription service streaming music
over the Internet. These services, now known in the industry as
webcasters, had argued that they, like the broadcasters, were non-
infringing users because noninteractive, nonsubscription transmissions
were exempt under section 114(d)(1)(A)(i) (1995). The record industry
did not agree, arguing that the transmissions were subject to the newly
created digital performance right. DiMA at 4.
Congress revisited the issue and, ultimately, amended sections 114
and 112 to clarify ``that the digital sound recording performance right
applies to nonsubscription digital audio services such as webcasting,
addresses unique programming and other issues raised by Internet
transmissions, and creates statutory licensing to ease the
administrative and legal burdens of constructing efficient licensing
systems.'' House Manager's Report at 50.
These changes were part of the Digital Millennium Copyright Act of
1998 (``DMCA''), Public Law 105-304, which among other things, amended
section 114 by creating a new statutory license for nonexempt eligible
nonsubscription transmissions (e.g., webcasting) and nonexempt
transmissions by preexisting satellite digital audio radio services to
perform sound recordings publicly in accordance with the terms and
rates of the statutory license. 17 U.S.C. 114(f)(1998). The DMCA also
amended section 114(d)(1)(A) to ``delete two exemptions that were
either the cause of confusion as to the application of the DPRA to
certain nonsubscription services (especially webcasters) or which
overlapped with other exemptions (such as the exemption in subsection
(A)(iii) for nonsubscription broadcast transmissions). The deletion of
these two exemptions [was] not intended to affect the exemption for
nonsubscription broadcast transmissions.'' 1998 House Report at 80.
The question, however, is what constitutes a nonsubscription
broadcast transmission for purposes of the DPRA, since its meaning
remained unchanged when Congress amended section 114 in 1998. Both
Copyright Owners and DiMA maintain that a ``nonsubscription broadcast
transmission'' is nothing more than a traditional over-the-air
broadcast made by an FCC-licensed broadcaster. Broadcasters disagree
and argue that the definition of a ``broadcast transmission'' for
purposes of the section 114 license is not so limited, but includes all
transmissions of an AM or FM radio signal, even those over the
Internet, if made by the FCC-licensed broadcaster.
In answering this question, Broadcasters and Copyright Owners each
argue that the statutory language and licensing scheme, the legislative
histories of the DPRA and the DMCA, and public policy considerations
support its respective position.
Statutory Language and Legislative History
a. Statutory definitions. The DPRA established three exemptions
from the digital performance right for certain nonsubscription
transmissions, including an express exemption for a ``nonsubscription
broadcast transmission.'' It read, in relevant part, as follows:
(1) Exempt Transmissions and Retransmissions.--The performance
of a sound recording publicly by means of a digital audio
transmission, other than as a part of an interactive service, is not
an infringement of section 106(6) if the performance is part of--
(A)(iii) a nonsubscription broadcast transmission.
17 U.S.C. 114(d)(1)(A)(iii) (1995).
Broadcasters assert that the statutory language is clear and
unambiguous on its face and that where this is so, one need not resort
to the legislative history to discern the meaning of the statutory
terms. Broadcasters I at 7; Broadcasters II at 18. Broadcasters II also
rely on the well-established proposition that where a term is defined
by the statute, an agency and the courts are constrained to adhere to
this definition when interpreting the provisions of the act, citing Fox
v. Standard Oil, 294 U.S. 87, 95-96 (1935).
Using these principles, the Broadcasters analyze the statutory
definitions of the relevant terms set forth in section 114(j) to
determine whether a webcast of an AM/FM radio station's programming is
exempt. These terms were defined in the DPRA as follows:
A ``broadcast'' transmission is a transmission made by a
terrestrial broadcast station licensed as such by the Federal
Communications Commission.
17 U.S.C. 114(j)(2) (1995).
A ``digital audio transmission'' is a digital transmission as
defined in section 101, that embodies the transmission of a sound
recording. This term does not include the transmission of any
audiovisual work.
17 U.S.C. 114(j)(3)( (1995).
A ``nonsubscription'' transmission is any transmission that is
not a subscription transmission.
17 U.S.C. 114(j)(5) (1995)
A ``transmission'' includes both an initial transmission and a
retransmission.
17 U.S.C. 114(j)(9) (1995).\6\
\6\ The definition ``transmission'' was amended in the DMCA. It
now reads: ``A `transmission' is either an initial transmission or a
retransmission.'' 17 U.S.C. 114(j)(15) (1998).
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[[Page 77297]]
All commenters agree that the statutory definitions for a
``transmission,'' a ``digital audio transmission,'' and a
``nonsubscription transmission'' are clear and that the transmissions
in dispute qualify as nonsubscription, non-interactive, digital audio
transmissions for purposes of the DPRA. See Broadcasters II at 20;
Gorman at 28 n.89. The dispute lies with the definition of a
``broadcast transmission.''
Broadcasters argue that the pivotal element in the definition is the
designation of the nature of the entity making the transmission--not
the method of the transmission. In other words, the fact that an FCC-
licensed broadcast station makes the transmission is dispositive. Thus,
Broadcasters reason that any transmission made by a terrestrial
broadcast station licensed by the FCC, whether disseminated over-the-
air or transmitted over the Internet, fits the statutory definition of
a ``nonsubscription broadcast transmission'' and therefore, is
expressly exempt under the section 114(d)(1)(A)(iii) (1995) exemption
and remains exempt under the current section 114(d)(1)(A) (1998)
provision. Broadcasters I Reply at 6; Broadcasters II Reply at 17.
Furthermore, they contend that transmissions made by FCC-licensed
broadcasters ``do, in fact, comply with FCC content requirements to
promote the public interest and serve the local community.''
Broadcasters II Reply at 17.
In creating a safe harbor for radio broadcasts, Congress identified
key factors that ``place[d] such programming beyond the concerns that
animated the creation of the limited public performance right in sound
recordings in Section 106(6). Specifically, radio programs that (1) are
available without subscription; (2) do not rely upon interactive
delivery; (3) provide a mix of entertainment and non-entertainment
programming and other public interest activities to local communities
to fulfill FCC licensing conditions; (4) promote, rather than replace,
record sales; and (5) do not constitute ``multichannel offerings of
various music formats.'''' Broadcasters II at 26-27 (footnote omitted),
citing 1995 Senate Report at 15. Broadcasters argue that these
characteristics apply equally to the transmission of a local radio
broadcast signal whether transmitted over-the-air or streamed via the
Internet; and consequently, all transmissions of radio broadcasts
should be exempt without regard to the method of transmission.
Copyright Owners and DiMA disagree with the Broadcasters' approach.
They argue that the exemption for a ``nonsubscription broadcast
transmission'' was adopted in order to shelter broadcasters from the
new digital performance right, if and when they converted their over-
the-air signals from an analog to a digital format. Gorman at 9; DiMA
at 3. In direct opposition to the Broadcasters' approach, Copyright
Owners focus on how the word ``terrestrial'' and the phrase ``licensed
as such by the FCC'' are used in the definition of a ``broadcast
station.'' See also, DiMA Reply at 2.
They contend that use of the word ``terrestrial'' limits the exemption
to over-the-air transmissions made by a broadcast station and, thus, by
implication, excludes from the exemption any nationwide transmissions
by radio stations that broadcast via satellite. Gorman at 29. They
point out numerous citations in the legislative history which make it
abundantly clear that Congress meant to protect traditional over-the-
air broadcast transmissions. For example,
The sale of many sound recordings and the careers of many
performers have benefitted considerably from airplay and other
promotional activities provided by both noncommercial and
advertiser-supported, free over-the-air broadcasting. * * * H.R.
1506 does not change or jeopardize the mutually beneficial economic
relationship between the recording and traditional broadcasting
industries.
1995 House Report, at 13 (emphasis added).
[F]ree over-the-air broadcasts are available without
subscription, do not rely on interactive delivery, and provide a mix
of entertainment and non-entertainment programming and other public
interest activities to local communities to fulfill a condition of
the broadcasters' license. The Committee has considered these
factors in concluding not to include free over-the-air broadcast
services in the legislation.
Id. (emphasis added).
The classic example of such an exempt transmission is a
transmission to the general public by a free over-the-air broadcast
station, such as a traditional radio or television station, and the
Committee intends that such transmissions be exempt regardless of
whether they are in a digital or nondigital format, in whole or in
part.
1995 Senate Report at 19 (emphasis added).
They also argue that use of the phrase ``licensed as such by the
FCC'' ``reflects Congressional intent to limit the scope of the
exemption to those activities for which a broadcast station needs an
FCC license.'' Gorman at 29 (footnote omitted). The focus here is on
the nature of the transmission and not the characterization of the
entity making the transmission. From this perspective, the only
transmissions which are exempt under section 114(d)(1)(A) are those
made by an FCC-licensed broadcaster under the terms of its license. In
general, such transmissions are over-the-air transmissions made within
the broadcaster's local service area. Webcasts of AM/FM radio signals
are not so limited and, therefore, do not fit the statutory definition
of a ``broadcast'' transmission for purposes of the DPRA. Id. at 29-30;
see also DiMA Reply at 2.
Copyright Owners acknowledge that their interpretation of the
exemption is narrower than the Broadcasters' but argue that the
exemption for ``broadcast transmissions'' must be construed in this
manner because the statute provides a complete exemption from the
digital performance right in sound recordings. In making this argument,
they rely upon the general rule of statutory construction that
exemptions must be construed narrowly, ``and any doubt must be resolved
against the one asserting the exemption,'' in order to preserve the
purpose of the provision. Tasini v. New York Times Co., 206 F.3d 161,
168 (2nd Cir. 2000). Specifically, they argue that a narrow
interpretation of the exemption is particularly warranted in this
context ``where denying the exemption would still leave AM/FM Webcasts
eligible for a statutory license (rather than subjecting them to full
copyright liability).'' Gorman at 19.
Broadcasters dispute Copyright Owners' contention that it is
appropriate to read the exemption for broadcast transmission so
narrowly. They claim that Copyright Owners ignore Congress' intent to
construe the digital performance right narrowly and limit the right
only to certain digital transmissions of sound recordings. Broadcasters
II Reply at 24-25. Broadcasters argue further that it is inconceivable
that after refusing for decades to grant copyright owners of sound
recordings a sound recording performance right, Congress ``intended to
sweep within a newly-created and narrowly-circumscribed performance
right broadcaster transmissions over the Internet of their broadcast
programming.'' Broadcasters II Reply at 21 (emphasis omitted).
Historically, the Copyright Office construes limitations on
copyright narrowly, especially those rights constrained by a compulsory
license. See 49 FR 14944, 14950 (April 16, 1984) and 57 FR 3284, 3293
(January 29, 1992). This tenet is fully consistent with the rules of
statutory construction which require ``[s]tatutes granting exemptions
from their general operation [to] be strictly construed, and any doubt
must be resolved against the one asserting the exemption.'' See 73 Am.
Jur. 2d 313 (1991); Tasini, supra.
[[Page 77298]]
Broadcasters argue that this precept favors their interpretation,
asserting that the newly created digital performance right was narrowly
crafted and not meant to disturb the traditional broadcasting system in
place at the time the DPRA was passed. But once created, the right is
to be defined by reference to the statute, and there is no reason to
depart from the general rule that the exemption to the right must be
narrowly construed. The key to determining the scope of the exemption
is an understanding of the meaning of the term ``broadcast
transmission.''
As previously discussed, Broadcasters assert that the exemption
from the digital performance rights applies not only to traditional
over-the-air broadcast transmissions, but also to transmissions of
these signals over the Internet. The Broadcasters interpret the
exemption in the broadest possible manner based upon their reading of
the statutory definition for a ``broadcast transmission'' which defines
the transmission solely on the basis that it was made by an FCC-
licensed broadcaster. They argue that the language is clear and
unambiguous and so the analysis ends here.
The Copyright Office does not agree. The use of the descriptive
phrase ``terrestrial broadcast station licensed as such by the Federal
Communications Commission'' involves much more than the mere
designation of a particular entity. In fact, as the Copyright Owners
argue, Congress appears to have chosen these words not only as a
convenient way in which to identify the entity entitled to make a
broadcast transmission, but also as a way to circumscribe which actions
the entity may legally undertake within the scope of the section 114
exemption. Even if the Broadcasters' reading of the definition is a
plausible one, the Copyright Owners' more limited interpretation,
seconded by DiMA, is at least equally plausible. For this reason, the
Office turns to the relevant legislative history in order to understand
how Congress intended the law to operate.
Turning to the legislative history is appropriate where, as here,
the precise meaning is not apparent and a clear understanding of what
Congress meant is crucial to an accurate determination of how Congress
intended the digital performance right and the statutory scheme to
operate. See also, 57 FR 3284, 3293 (1992). Consequently, we place
great weight on the passages in the 1995 House and Senate Reports which
discuss and characterize broadcast transmissions.
As noted above, Congress used the descriptive term ``over-the-air''
frequently to identify those broadcasts it sought to protect under the
exemption. Such transmissions are made in accordance with the terms of
the FCC license issued to the broadcaster. If Congress had discussed or
referenced any other type of transmission made by an FCC-licensed
broadcaster, we might be more inclined to support the Broadcasters'
interpretation of the statutory definition. This is not the case, and
the Office concludes that Congress used the phrase ``licensed as such''
to serve two purposes. First, it identifies the entity entitled to make
a broadcast transmission under an exemption to the digital performance
right; and second, it specifies which transmissions made by the
broadcaster are exempt, that is, those transmissions made over-the-air
by the broadcasting entity under the terms of the FCC license.
b. Additional exemptions. Copyright Owners do not limit their
analysis of the statutory language to the statutory exemption under
consideration. This is only their starting point. They continue their
analysis of section 114 under a second well-established rule of
statutory construction which requires interpretation of each provision
in a section in such a way as to produce a harmonious whole. 2A
Sutherland, Stat. Const.Sec. 46.05 (6th ed. 2000); see also 57 FR 3284,
3292 (1992).
Of particular interest are the exemptions for a ``retransmission of
a radio station's broadcast transmission'' set forth in sections
114(d)(1)(B) and (C) (1995). Section 114(d)(1)(B) restricts
retransmissions to a 150-mile radius from the site of the radio
broadcast transmitter, to the local communities served by the
retransmitter, and those carried by a cable system or a noncommercial
educational broadcast station. Similarly, section 114(d)(1)(C) exempts
certain incidental transmissions, transmissions to and within business
establishments, and those retransmissions made to deliver licensed
programming to the user.
Copyright Owners argue that these provisions merely reflect
congressional intent to grandfather existing retransmission services at
the time of the passage of the DPRA. Gorman at 10; DiMA Reply at 2-3;
see also, 1995 Senate Report at 22 (noting that a retransmission over
the Internet which is being used to facilitate an exempt transmission
or retransmission, would not qualify as an ``incidental''
retransmission under section 114(d)(1)(C)(1)).
Similarly, DiMA argues that Congress never intended to exempt
broadcast retransmissions via the Internet; otherwise it would have
enlarged these exemptions when it passed the DMCA, which it chose not
to do. See DiMA at 5. In addition, DiMA argues that Congress would not
have limited the exemption for a ``retransmission'' of a ``broadcast
transmission'' by differentiating between radio transmissions made by
terrestrial and non-terrestrial broadcast technologies, if it was
content with exempting any transmission made by an FCC-licensed
broadcaster. DiMA Reply at 2. Copyright Owners concur with DiMA on this
point. In addition, they argue that the definition of an ``eligible
nonsubscription transmission'' supports this interpretation because it
includes retransmissions of broadcast signals. Had Congress meant to
exempt any and all transmissions of a broadcast signal, it would not
have included this wording in the definition of an ``eligible
nonsubscription transmission,'' the newly created class of
transmissions subject to the statutory license. DiMA Reply at 3.
Broadcasters counter the Copyright Owners' interpretation in regard
to these exemptions, noting an exception to the 150-mile limitation for
nonsubscription retransmissions by ``a terrestrial broadcast station.''
They also suggest that the limitations on retransmissions were directed
only to those made by third parties, and not to a simultaneous
transmission made directly by the FCC-licensed broadcaster.
Broadcasters II Reply at 25. In addition, Broadcasters stress that a
transmission of a radio program, even via the Internet, serves the
needs and interests of the local community as required under the FCC
license. For these reasons, Broadcasters argue that Congress created a
specific exemption for certain retransmissions of nonsubscription radio
broadcast transmissions, including those that are transmitted ``by a
terrestrial broadcast station, terrestrial translator, or terrestrial
repeater licensed by the Federal Communications Commission.''
While it is clear that a broadcast transmission is exempt, it is
equally clear that a retransmission of a radio signal (though
technically a transmission) \7\ is exempt only under certain
circumstances. This fact alone undermines the Broadcasters' assertion
that any transmission made by an FCC-licensed broadcaster is
immediately and totally exempt. In addition, their
[[Page 77299]]
specific arguments on this point do not withstand scrutiny.
---------------------------------------------------------------------------
\7\ A ``transmission'' is either an initial transmission or a
retransmission. 17 U.S.C. 114(j)(15).
---------------------------------------------------------------------------
First, the exception to the 150-mile limitation is only for
retransmissions made by ``a terrestrial broadcast station, terrestrial
translator, or terrestrial repeater licensed by the Federal
Communications Commission.'' 17 U.S.C. 114(d)(1)(B)(i)(I). Again, the
fact that the entity making the retransmission must be licensed by the
FCC sets limits on how far each retransmission can reach. In no case,
however, could these retransmissions parallel the reach of the Internet
or a retransmission made by a satellite. Second, the suggestion that
the retransmissions discussed in section 114(d)(1)(B) refer only to
those made by third parties and not to simultaneous retransmissions
made by the originating broadcaster is groundless. There is no such
distinction set forth in the statute. And finally, we see no
significance to the fact that the retransmission of a radio signal may
meet the license requirements for service to a local community, when in
fact such a transmission exceeds the geographical limits established
for the broadcast under the FCC license.
c. Expansion of the statutory license. Copyright Owners and DiMA
contend that the original licensing scheme was conceived without any
significant thought to the transmission of sound recordings by means
other than the conventional over-the-air transmissions in use at the
time. Copyright Owners at 12-13; DiMA at 4; See also House Manager's
Report at 51. This became an obvious problem with the growth of the
Internet and the rapid increase in the use of the new streaming
technology to transmit sound recordings over the Internet.\8\
---------------------------------------------------------------------------
\8\ In fact, streaming was a novel and little recognized--much
less used--technology in 1995. According to one radio analyst cited
by DiMA, the number of worldwide radio broadcasts over the Internet
has grown from a meager 56 stations in 1995 to more than 3500 today.
DiMA Rely at 4 n.10.
---------------------------------------------------------------------------
Copyright Owners contend that, in order to address this problem,
Congress made a significant change to section 114 when it passed the
DMCA. For example, it amended section 114(d)(2) to extend the statutory
license to ``eligible nonsubscription transmissions'' and defined the
term to include retransmissions of broadcast transmissions. 17 U.S.C.
114(j)(6). Copyright Owners argue that these changes support its
position that the statutory scheme militates against exempting
transmissions of AM/FM radio signals over the Internet.
First, they note that when Congress expanded the statutory license,
it specifically considered the needs of the emerging services that
wanted to stream sound recordings over the Internet. See 1998 House
Report at 80, 82 and 84. They then claim that Congress never ``intended
to single out any class of webcasters for special treatment, or for
some webcasters to be exempt and others to be liable.'' Gorman at 24.
Instead, they argue that Congress amended the DPRA to make all
webcasters, including those who are also FCC-licensed broadcasters,
eligible for the statutory license.
In addition, they note that in the case where the transmitting
entity does not have the right or ability to control the programming of
the broadcast station, special terms apply. Congress made these
transmissions subject to the compulsory license but chose not to make
these transmissions immediately subject to certain restrictions
otherwise applicable to a nonexempt, nonsubscription transmission,
except in the case where the broadcast station regularly violates the
restriction and the copyright owners give notice to the service making
the retransmission. See 17 U.S.C. 114(d)(2)(C)(i)-(iii), (ix).
Copyright Owners argue that ``[t]his language implies that where
the transmitter can control the content of the signal, [it] must meet
the conditions of the statutory license. Because the content of AM/FM
signals can be controlled by the broadcaster, this suggests that
Congress intended broadcast transmissions to be subject to the
statutory license.'' Gorman at 25-26 (footnotes omitted). Otherwise, as
DiMA points out, ``why would Congress have imposed licensing and
`notice and takedown' requirements on third parties that retransmit
radio broadcasts, if the broadcaster itself could transmit the same
programming over the Internet without a license and without
restriction?'' DiMA Reply at 4 (footnote omitted).
The Copyright Office believes that the narrowly drawn safe harbors
for retransmissions of radio signals illustrate Congressional intent to
distinguish between a traditional over-the-air broadcast transmission
of an AM/FM radio signal and a retransmission of that signal. Even
though the statutory definition of a transmission includes both an
initial transmission and a retransmission, Congress clearly chose to
treat retransmissions of a radio signal differently. ``Retransmissions
of radio station broadcast transmissions * * * are exempt only if they
are not part of an interactive service and fall within certain
specified categories.'' 1995 Senate Report at 19 (emphasis added).
These restrictions limit the reach of a retransmission of an AM/FM
radio signal and neither suggest nor allow for retransmission of an AM/
FM radio signal to a national audience. Had Congress meant to exempt
without limitation a further broadcast of a radio station's signal
beyond the limits prescribed by its FCC license, it would not have
restricted its retransmissions beyond the 150-mile limit to only those
entities who make such transmissions under the terms of an FCC license,
or limited subsequent retransmissions to the reach of a terrestrial
broadcast station, terrestrial translator, or terrestrial repeater. 17
U.S.C. 114(d)(B)(i).
d. Ephemeral recordings. The DMCA amended section 112 to adjust for
changes Congress made to section 114. Copyright Owners argue that
Congress amended section 112(a) to make clear that a broadcast radio or
televison station, licensed as such by the FCC, may make a single
ephemeral copy of a sound recording in furtherance of its transmissions
within its local service area even when those transmissions are made in
a digital format. For purposes of section 112(a)(1), the term ``local
service area'' is used as defined in section 111(f) of the Copyright
Act. See, H.R. Rep. No. 94-1476, at 103 (1976). This provision limits
the geographic reach of the signal and makes clear that it is not
subject to worldwide distribution. In addition, Congress created a
second statutory license in order to give those entities eligible for a
section 114 statutory license and those exempt under section
114(d)(1)(C)(iv) \9\ the right to make one or more ephemeral recordings
to facilitate their transmissions under the section 112 statutory
license. See 17 U.S.C. 112(e).
---------------------------------------------------------------------------
\9\ Section 114(d)(1)(C)(iv) provides that:
The performance of a sound recording publicly by means of a
digital audio transmission, other than as a part of an interactive
service, is not an infringement of section 106(6) if the performance
is part of--
(C) a transmission that comes within [] the following
categor[y]--
(iv) a transmission to a business establishment for use in the
ordinary course of its business: Provided, That the business
recipient does not retransmit the transmission outside of its
premises or the immediately surrounding vicinity, and that the
transmission does not exceed the sound recording complement. 17
U.S.C. 114(d)(1)(C)(iv).
---------------------------------------------------------------------------
Under the Copyright Owners' construction of the section 112
amendments, a broadcaster would be unable to make ephemeral recordings
under the exemption set forth in section 112(a)(1) for the purpose of
streaming its radio signal because the transmission could not be
limited to the station's ``local service area.'' Likewise,
[[Page 77300]]
broadcasters would be ineligible for the section 112(e) statutory
license if AM/FM radio transmissions are exempt, since only a
transmitting organization entitled to make transmissions under the
section 114 license or the section 114(d)(1)(C)(iv) business exemption
can make ephemeral recordings under the statutory license. Because
Congress' intent was not to prevent broadcasters from making ephemeral
recordings, Copyright Owners believe the only plausible construction of
the statute requires the exemption for a ``nonsubscription broadcast
transmission'' to exclude AM/FM webcasts. Gorman at 27.
Broadcasters offer a different interpretation of the effect of the
new amendments. They contend they are eligible to make an ephemeral
recording under section 112(a) because the ``local service area'' for a
transmission over the Internet is global in scope. Broadcasters II
Reply at 26. DiMA agrees with the Broadcasters on this point, citing
the Conference Report to the DMCA:
The addition to section 112(a) of a reference to section 114(f)
is intended to make clear that subscription music services,
webcasters, satellite digital audio radio services and others with
statutory licenses for the performance of sound recordings under
section 114(f) are entitled to the benefits of section 112(a) with
respect to the sound recordings they transmit.
1998 House Report at 79. DiMA notes that each of the listed services
has a ``local service area'' that extends beyond the traditional local
community served by a terrestrial radio station and is either
``inherently national or global in scope.'' DiMA at 7.
Fortunately, the Copyright Office need not reach the question
concerning the scope of the ``local service area'' for an Internet-
originated program to resolve the question as it affects this
proceeding, since it is the ``local service area'' of the FCC-licensed
broadcaster that is relevant. The change to section 112(a) was made
``to extend explicitly to broadcasters the same privilege they already
enjoy with respect to analog broadcasts.'' 1998 House Report at 78. The
``local service area'' of a broadcaster is defined by the terms of the
FCC license under which it operates. The fact that an FCC-licensed
broadcaster may choose to transmit its signal simultaneously over the
Internet does not, by virtue of this action, enhance the ``local
service area'' associated with the initial broadcast of the radio
signal. To do otherwise would mean that the broadcasting area for a
particular radio signal as defined by the terms of an FCC license would
be totally meaningless, since the simultaneous transmission of a radio
signal over the Internet makes the transmission instantly available
anywhere in the world.
Consequently, we agree with the Copyright Owners that section
112(a) provides an exemption for making an ephemeral recording to a
broadcaster who is transmitting its signal over-the-air in a digital
format. It does not allow for the making of an ephemeral recording for
the purpose of streaming that same signal over the Internet unless the
transmission is made under the statutory license set forth in section
114. This interpretation is consistent with our analysis of the
exemption for a broadcast transmission.
Policy Considerations
Industry analysts have questioned whether it would have been
logical for Congress to craft a statutory licensing scheme which
subjects a third party that licenses a radio station signal for
streaming purposes to the statutory licensing provisions when the radio
station itself could perform the same operation without any
restrictions or restraints under a general exemption. See David J.
Wittenstein & M. Larrane Ford, The Webcasting Wars, 2 J. Internet. L.
1,8 (1998); M. Powers, Broadcasters Sue Recording Industry; http://
radio.about.com/entertainment/radio/library/weekly/aa/33000b.htm)
(March 30, 2000).
Copyright Owners have asked the same question and conclude that it
would be illogical to allow broadcasters to stream their AM/FM radio
signal under an exemption but impose copyright liability on a third
party when it retransmits the identical programming. Furthermore, they
argue that ``[t]here is certainly nothing in the DPRA or DMCA to
suggest that the right of a sound recording copyright owner to
compensation should turn on whether the same transmission is made by
the broadcaster or the broadcaster's agent.'' Gorman at 23; see also
Wittenstein & Ford, supra at 8.
More importantly, however, DiMA argues that by allowing
broadcasters to stream their programming over the Internet,
broadcasters get a free pass to engage in the very activity that
compelled Congress to pass the DPRA. For example, the law forbids an
online service, subject to the statutory license, from playing multiple
selections by the same recording artist during any three-hour period.
DiMA states that should broadcasters be allowed to stream their
programming over the Internet under the section 114(d)(1)(A) exemption,
they could ignore the very program restrictions put into place to
thwart unauthorized copying with impunity and gain market share--and a
competitive advantage over non-broadcasting webcasters--by virtue of
these practices. DiMA at 6; DiMA Reply at 4.
On the other hand, Broadcasters contend that it would be absurd to
embrace the Webcasters and Copyright Owners' interpretation of the
statute because it would mean that radio broadcasters would have to
alter radically their programming practices in order to fit the
requirements of the statutory license, negotiate voluntary licenses to
do what they already do over-the-air, or cease streaming activities
altogether. Broadcasters II at 13; Broadcasters II Reply at 28. They
argue that such a harsh reading of the statute flies in the face of the
stated intent of the DPRA because it would alter dramatically the
longstanding relationship between the record industry and the
broadcasters that Congress meant to preserve; a relationship which
historically has had a beneficial and a promotional effect on the sale
of records. Broadcasters I Reply at 11. Therefore, Broadcasters
maintain that all streamed broadcasts of AM/FM radio signals made by an
FCC-licensed broadcaster, whether over-the-air or via the Internet,
fall within the safe harbor created in the section 114(d)(1)(A)
exemption.
Broadcasters also assert that the acknowledged benefits that flow
from the longstanding relationship between the record industry and
broadcasters are not lost because a radio program is streamed over the
Internet. ``If radio broadcasts are beneficial to the record industry
on a local scale due to the public exposure afforded sound recordings
from their airplay, that same broadcasting activity is all the more
beneficial to the record industry on a national or global scale due to
the even greater public exposure (leading to increased record sales)
that those recordings will receive.'' Broadcasters II Reply at 32
(emphasis omitted).
DiMA disagrees. It argues that a broadcaster would receive the
greater benefit if allowed to transmit its radio signal over the
Internet under the section 114(a) exemption because webcasts create an
additional revenue stream for a broadcaster apart from the advertising
revenues that flow from the traditional over-the-air broadcast. Since
all services competing in the Internet market compete for the same
audience share and advertising dollars, DiMA argues that they should do
business on the same basis and be subject to the same licensing
requirements. Broadcasters counter this argument by focusing on the
restrictions placed on
[[Page 77301]]
the type of advertising that broadcasters are allowed to do under their
license, e.g., restrictions on tobacco advertising and on promotions
and contests, and the costs incurred in meeting their obligations to
serve the needs of their communities. State Broadcasters Reply at 4. In
fact, broadcasters argue that they will be at a competitive
disadvantage if they cannot transmit sound recordings over the Internet
under an exemption and, instead, are subject to potentially prohibitive
license fees. Id. at 5.
Interestingly, Broadcasters rely on the fact that the programming
on a transmission of an AM/FM radio signal over the Internet is
identical to the programming transmitted on an over-the-air broadcast
to support their position that these signals are, in both instances,
exempt. They contend that Congress exempted broadcast transmissions
because they ``comply with FCC content requirements to promote the
public interest and serve the local community.'' Broadcasters II Reply
at 17, 22. In addition, they argue that much of the value of the
Internet transmission comes from the ability to retain listener
loyalty, both those within the local community served by the over-the-
air transmission and those ``who are traveling away from their home
listening areas.'' Broadcasters I Reply at 3. Broadcasters also
distinguish radio broadcast streams from Internet-originated programs
on the basis that the radio stations generally program only a single
channel, unlike the multiple channels of music programming offered by
Internet-only services. Broadcasters II Reply at 27 n.14.
Yet, this distinction does not explain why a broadcaster licensed
by the FCC can freely stream its radio programming over the Internet,
but a third-party licensee of its content is subject to the statutory
license. Both transmitting entities are providing exactly the same
programming which must comply with FCC restrictions and serve the local
communities. To resolve this apparent paradox, we believe that Congress
defined discrete categories of transmissions (rather than
transmitters), then evaluated the potential for displacement of record
sales on the basis of the characteristics of those transmissions and
applied the statutory restrictions and exemptions accordingly.
Using this approach, the Office has determined that the section
114(d)(1)(A) exemption does not cover transmissions of an AM/FM radio
signal over the Internet. This conclusion is apparent when one
considers that under the Broadcasters' entity-based interpretation, a
broadcaster that created an Internet-only service indistinguishable
from the services offered by non-broadcaster webcasters would be exempt
from the digital public performance right, even though its
transmissions are never part of an over-the-air broadcast. In fact,
under the Broadcasters' interpretation, a broadcaster could cease
broadcasting altogether, but continue to enjoy the exemption so long as
it held the FCC license.
When Congress crafted the DPRA, it intended that the law would
accommodate foreseeable technological changes and drafted the bill
accordingly. At the same time, Congress understood that it could not
predict how technology would develop or how it would alter the ways in
which sound recordings were performed or distributed. Nevertheless, its
intent was clear: ``[I]t is the Committee's intention that both the
rights and the exemptions and limitations created by the bill be
interpreted in order to achieve their intended purposes.'' 1995 Senate
Report at 14.
The purpose for enacting the DPRA was two-fold: ``first, * * * to
ensure that recording artists and recording companies will be protected
as new technologies affect the ways in which their creative works are
used; and second, to create fair and efficient licensing mechanisms
that address the complex issues facing copyright owners and copyright
users as a result of the rapid growth of digital audio services.''
House Manager's Report at 49.
The Copyright Office's determination to read the statutory
definition of a ``broadcast transmission'' as including only over-the-
air transmissions made by an FCC-licensed broadcaster under the terms
of that license is consistent with Congress' intent in passing the
DPRA. This approach preserves the traditional relationship between the
record companies and the radio broadcasters as it existed in 1995. In
effect, it allows for the continued transmission of an over-the-air
radio broadcast signal without regard to whether the transmission is
made in an analog or a digital format. Such signals, however, are
limited geographically under the licensing standards of the FCC. At the
same time, it subjects all other digital transmissions made by a
noninteractive, nonsubscription service to the terms and conditions of
the statutory license in order to compensate record companies for the
increased risk that a listener may make a high-quality unauthorized
reproduction of a sound recording directly from the transmission
instead of purchasing a legitimate copy in the marketplace, a risk that
is clearly greater when the recipient is receiving the transmission on
a computer, which can instantly replicate and retransmit the
transmission.
Congress' intent would be thwarted if an FCC-licensed radio
broadcaster was allowed to transmit its radio signal over a digital
communication network, such as the Internet, without any restrictions
on the programming format. For example, as DiMA suggests, an FCC-
licensed broadcaster could tailor its program to highlight a particular
artist and announce its intent to do so in advance, thereby increasing
the likelihood that a listener would be prepared to make a copy of the
sound recording at the appointed time. Such a result would violate not
only the letter of the law under our interpretation of the statute, but
also the very spirit and intent of the law. For these reasons, the
definition of the term ``Service'' shall be amended to reflect the
determination of the Copyright Office that any entity that transmits an
AM/FM radio signal over a digital communications network is subject to
the terms of the statutory license set forth in 17 U.S.C. 114(d)(2).
List of Subjects in 37 CFR Part 201
Copyright.
In consideration of the foregoing, part 201 of 37 CFR is amended in
the manner set forth below.
PART 201--GENERAL PROVISIONS
1. The authority citation for part 201 continues to read as
follows:
Authority: 17 U.S.C. 702.
2. Section 201.35(b)(2) is revised to read as follows:
Sec. 201.35 Initial Notice of Digital Transmission of Sound Recordings
under Statutory License.
* * * * *
(b) * * *
(2) A Service is an entity engaged in the digital transmission of
sound recordings, pursuant to section 114(f) of title 17 of the United
States Code, and includes, without limitation, any entity that
transmits an AM/FM broadcast signal over a digital communications
network such as the Internet, regardless of whether the transmission is
made by the broadcaster that originates the AM/FM signal or by a third
party, provided that such transmission meets the applicable
requirements of the statutory license set forth in 17 U.S.C. 114(d)(2).
* * * * *
[[Page 77302]]
Dated: November 21, 2000.
Marybeth Peters,
Register of Copyrights.
James H. Billington,
The Librarian of Congress.
[FR Doc. 00-31457 Filed 12-8-00; 8:45 am]
BILLING CODE 1410-31-P