[Federal Register: July 13, 2004 (Volume 69, Number 133)]
[Proposed Rules]
[Page 42007-42010]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13jy04-31]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 270
[Docket No. RM 2002-1F]
Notice and Recordkeeping for Use of Sound Recordings Under
Statutory License
AGENCY: Copyright Office, Library of Congress.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Copyright Office of the Library of Congress is proposing
to amend its regulations to provide for the reporting of uses of sound
recordings performed by means of digital audio transmissions pursuant
to statutory license for the period October 28, 1998, through March 31,
2004.
DATES: Comments are due no later than August 12, 2004.
ADDRESSES: If hand delivered by a private party, an original and five
copies of any comment should be brought to: Room LM-401 of the James
Madison Memorial Building and addressed as follows: Office of the
General Counsel, U.S. Copyright Office, James Madison Memorial
Building, Room LM-401, 101 Independence Avenue, S.E., Washington, D.C.
20559-6000. If delivered by a commercial, non-government courier or
messenger, an original and five copies of any comment must be delivered
to the Congressional Courier Acceptance Site located at 2nd and D
Streets, N.E. between 8:30 a.m. and 4 p.m. The envelope should be
addressed as follows: Copyright Office General Counsel, Room LM-403,
James Madison Memorial Building, 101 Independence Avenue, S.E.,
Washington, D.C. If sent by mail, an original and five copies of any
comment should be addressed to: GC/I&R, P.O. Box 70400, Southwest
Station, Washington D.C. 20024-0400. Comments may not be delivered by
means of overnight delivery services such as Federal Express, United
Parcel Service, etc., due to delays in processing receipt of such
deliveries.
FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or
William J. Roberts, Jr., Senior Attorney, P.O. Box 70977, Southwest
Station, Washington, DC 20024. Telephone: (202) 707-8380; Telefax:
(202) 252-3423.
SUPPLEMENTARY INFORMATION:
Background
The Copyright Act grants copyright owners of sound recordings the
exclusive right to perform their works publicly by means of digital
audio transmissions subject to certain limitations and exceptions.
Among the limitations placed on the performance right for sound
recordings is a statutory license that permits certain eligible
subscription, nonsubscription, satellite digital audio radio, and
business establishment services to perform those sound recordings
publicly by means of digital audio transmissions. 17 U.S.C. 114.
Similarly, copyright owners of sound recordings are granted the
exclusive right to make copies of their works subject to certain
limitations and exceptions. Among the limitations placed on the
reproduction right for sound recordings is a statutory license that
permits certain eligible subscription, nonsubscription, satellite
digital audio, and business establishment services to make ephemeral
copies of those sound recordings to facilitate their digital
transmission. 17 U.S.C. 112(e).
Both the section 114 and 112 licenses require services to, among
other things, report to copyright owners of sound recordings on the use
of their works. Both licenses direct the Librarian of Congress to
establish regulations to give copyright owners reasonable notice of the
use of their works and create and maintain records of use for delivery
to copyright owners. 17 U.S.C. 114(f)(4)(A) and 17 U.S.C. 112(e)(4).
The purpose of this notice and recordkeeping requirement is to ensure
that the royalties collected under the statutory licenses are
distributed to the correct recipients.
On March 11, 2004, the Copyright Office published interim
regulations specifying notice and recordkeeping requirements for use of
sound recordings under the section 112 and 114 licenses. See 69 FR
11515 (March 11, 2004).\1\ Those interim regulations, however, apply
only prospectively to the use of sound recordings commencing during the
second calendar quarter of 2004, leaving the question of what records
of use must be prescribed for uses of sound recordings from October 28,
1998 (the date the statutory licenses first became available for
services other than preexisting subscription services), to March 31,
2004 (the ``historic period'').\2\
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\1\ Those regulations did not apply to preexisting subscription
services, which are defined in section 114 as services that perform
sound recordings by means of noninteractive audio-only subscription
digital audio transmissions which were in existence and were making
such transmissions to the public for a fee on or before July 31,
1998. 17 U.S.C. 114(j)(11). Requirements for preexisting
subscriptions services were announced in 1998, See64 FR 34289 (June
24, 1998), and will not be affected by the rules proposed in this
notice.
\2\ The Office noted that the interim regulations also did not
address the format in which records of use should be preserved
because of the highly technical nature of delivery of
data in an electronic format and the widespread disagreement among
SoundExchange and the users of the statutory licenses over
formatting. 69 FR at 11517, n.7. As stated on March 11,
the Office will deal with such requirements in the future.
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The task of crafting regulations to govern records of prior use is
complicated by the fact that many services have maintained few or, in
many instances, no records of such use. As a result, the Office
published a notice of inquiry seeking public comment on the form and
content that such regulations should take. 68 FR 58054 (October 8,
2003). Specifically, the Office sought comment on the following: how it
should deal with the problem of incomplete or absent records for prior
uses; whether licensees should be required to report actual performance
data for the historical period, if available, so that copyright owners
and performers whose works were performed could be identified; and
whether any proxies could be used in lieu of incomplete or missing
prior records, taking into account the attendant costs and who should
bear such costs. Id.
Before discussing the comments filed in response to the notice of
inquiry, the Office notes that as a threshold matter, the National
Association of Broadcasters (``NAB'') argues that the Office is without
authority to conduct this phase of the rulemaking as any resultant rule
would apply retroactively. NAB asserts that neither the ``general
rulemaking power of the Copyright Office nor the recordkeeping
rulemaking authority provided in Sections 112 or 114 provides'' the
express authority to promulgate retroactive rules as required under
Bowen v. Georgetown University Hospital, 488 U.S. 204 (1988), and
Motion Picture Association of America, Inc. v. Oman, 969 F.2d 1154
(D.C. Cir. 1992). NAB comment at 2. Furthermore, if the Office were to
promulgate such a rule, it would be unenforceable ``as the Copyright
Office cannot retroactively turn licensed performances into
infringement.'' Accordingly, NAB argues that ``as a matter of law and
as a matter of policy,'' the Office should
[[Page 42008]]
not issue retroactive regulations. NAB comment at 1; NAB reply at 1. As
will be discussed below, the Office is not imposing any retroactive
requirements, but is proposing to use a proxy in lieu of imposing
reporting requirements on licensees for the historical period. Since
the Office's proposal does not require a licensee to file or report
historical data under specific rules, it is not enacting retroactive
rules. Thus, there is no need to address NAB's argument at this time.
Discussion
The Office received comments from: the Digital Media Association
(``DiMA''); Music Choice; Royalty Logic, Inc. (``RLI''); Sirius
Satellite Radio, Inc. (``Sirius'') and XM Satellite Radio, Inc. (``XM
Satellite''), jointly; Montpelier Communications LLC d.b.a. Onion River
Radio (``Montpelier''); SoundExchange, Inc.; the National Association
of Broadcasters (``NAB''); and Intercollegiate Broadcasting System,
Inc. (``IBS'') and Harvard Radio Broadcasting Co., Inc. (WHRB [FM])
(``Harvard Radio''), jointly. Reply comments were filed by Collegiate
Broadcasters Inc. (``CBI''); DiMA; NAB; SoundExchange; and IBS and
Harvard Radio, jointly.
The comments confirmed that the Office faces a formidable task in
fashioning regulations governing the reporting of uses of sound
recordings that have occurred over the last five years that on the one
hand provide copyright owners and performers with sufficient
information to identify such use and that on the other hand are not
overly burdensome to licensees or too costly to either side. After
careful review and consideration of the comments, the Office concludes
that there is no effective way to establish reporting requirements for
the historic period that would achieve this goal by requiring licensees
to report actual performance data.
The primary obstacle in achieving this goal is the fact that few,
if any, records of prior use have been maintained to date and those
that do exist will be of little or no use in forming the basis of
distribution of royalties for the historic period. In other words, in
many instances, the information simply does not exist. Therefore, it
would make no difference whether services were required to report
sample data for up to one week per quarter, as suggested by DiMA,
whether the services report only the information actually available to
them, as proposed by RLI, or whether the reporting requirements were to
be of a more comprehensive nature, as advocated by SoundExchange. The
likelihood of obtaining any useful and meaningful data is small. Even
assuming that specific reporting requirements for the historic period
could be imposed, the comments make clear that some services would be
able to provide reports of prior uses with varying degrees of
compliance with such requirements while others would not be able to
provide any reports at all. This creates inequity among the services.
SeeDiMA comment at 3; SoundExchange reply at 4. In addition, the cost
and effort that would be required of SoundExchange to process such
inconsistent data would be disproportionate to the amount of useful
data that would result. Thus, there simply is no way to fully and
accurately reflect actual performances for the historical period. Any
attempt to do so would impose significant costs on the services and
SoundExchange and ultimately would not result in any meaningful or
useful data upon which to base a distribution.
The commenters reached the same conclusion as evidenced by their
reply comments in which they advocated that a proxy be used in lieu of
reporting requirements for the historic period. The proxy that emerged
as the one most favored by the commenters was the data already provided
by the preexisting subscription services to SoundExchange under the
regulations announced in 1998 and now codified at 37 CFR 270.2 for
transmissions made under section 114(f). SoundExchange reply at 3-4;
DiMA reply at 6; NAB reply at 2. Specifically, SoundExchange would take
the royalties paid for a given period in the historic timeframe and
then would ``allocate those royalties according to the same percentages
used for the allocation of royalties paid by the preexisting
subscription services for the corresponding period.'' SoundExchange
comment at 19.
The commenters identified several advantages to using this proxy.
First, DiMA notes that the transmissions made by preexisting
subscription services are the most analogous to the statutorily
licensed webcaster transmissions, as both offer ``multiple themed and
genre-based channels, and many channels programming varied styles of
music within particular genres.'' DiMA reply at 6-7. Similarly,
SoundExchange points out that ``royalties paid by one class of
statutory licensee can be matched up with a corresponding period'' from
the preexisting subscription services, thus providing ``some comfort
that new releases and popular songs likely to have been performed by
webcasters . . . would be captured in the reports of use'' of the
preexisting subscription services. SoundExchange comment at 20.
Furthermore, the preexisting subscription services ``transmitted a
diverse number of individual sound recordings'' during the historic
period so the royalties paid by the licensees here can be allocated
among many copyright owners and performers. Id.
Another advantage of using reports of the preexisting subscription
services as a proxy is that it is cost effective for both licensees and
copyright owners and performers. Licensees do not have to spend time
and money to compile information that likely would be incomplete or
inconsistent. SeeNAB reply at 2. Likewise, since the preexisting
subscription services have been providing their reports of use to
SoundExchange in a ``standardized, electronic format'' since 1998,
these reports have already been ``cleaned up'' and therefore require no
additional processing by SoundExchange. Consequently, administrative
costs will be lower, which will result in more money being available
for distribution. SoundExchange comment at 19; DiMA reply at 7-8.
Moreover, adoption of the reports provided by the preexisting
subscription services as a proxy for reporting for the historic period
would also level the ``reporting playing field'' among licensees so
that ``certain licensees would not be burdened with having to provide
reports of use while competitors were permitted to provide no reports
of use.'' SoundExchange reply at 4. Therefore, this eliminates any
disproportionate burden on licensees that would result from the
imposition of reporting requirements for the historic period.
Finally, use of the reports of the preexisting subscription
services as a proxy for records of prior use does not impose any
reporting requirements on licensees for the historic period. DiMA reply
at 8. Therefore, NAB's concerns about the Office engaging in
retroactive rulemaking are allayed. Id.
While the use of reports of the preexisting subscription services
as a proxy for reporting for the historic period has many advantages,
the commenters acknowledged the existence of certain disadvantages. For
instance, while the reports of the preexisting subscription services
may be a reasonably close approximation of the performances of sound
recordings for the historic period, it is unavoidable that some
copyright owners and performers will not receive full compensation for
use of their works and others will receive no compensation at all if
their works were performed by webcasters but not by any of the
preexisting subscription services.
[[Page 42009]]
SoundExchange comment at 16 n.7, 20; SoundExchange reply at 2; DiMA
reply at 6. However, there is no good alternative method for
identifying and accounting for such performances. As a result, the
commenters felt that the benefits of using the reports of the
preexisting subscription services as a proxy outweighed the unavoidable
drawbacks associated with the use of these reports. Id.
Because there is no feasible way to obtain meaningful and useful
data through the imposition of reporting requirements, the Office
agrees with the commenters that use of a proxy in lieu thereof is the
proper course to take. Furthermore, the Office is persuaded by the
comments that the reports of the preexisting subscription services
represent the most appropriate proxy. Therefore, the Office is
proposing to adopt regulations specifying that the records of use
submitted by the preexisting subscription services during the period
between October 28, 1998 and March 31, 2004, shall be considered the
records of use for all services operating under the section 112(e) and
section 114 licenses and that no additional records need be filed by
the nonsubscription services, the satellite digital radio audio
services or new types of subscription services.
In so proposing, the Office acknowledges that use of such a proxy,
indeed any proxy, is far from a perfect solution to the problems posed
by historical reporting. However, given the futility that would result
in requiring licensees to report information that most simply do not
have, the Office must conclude that the perfect solution does not
exist, and that use of the data from the preexisting subscription
services is the optimal method to ensure that royalties collected for
the historic period are equitably distributed to copyright owners and
performers with minimal delay, cost, and effort. For the reasons set
forth in the comments, the Office believes that use of the reports of
the preexisting subscription services as a proxy represents the
simplest, most practical and most cost-effective solution.
Parties Affected
When the Copyright Office issued interim regulations governing the
notice and recordkeeping regulations on a prospective basis, it
rejected a request that those regulations not be applicable to the
preexisting satellite digital audio radio services which had reached an
agreement with SoundExchange. See69 FR 11515, 11517 (March 11, 2004).
Sirius, XM Satellite and SoundExchange make the same request here that
any regulations governing prior uses not apply to preexisting satellite
digital audio radio services because of an agreement between those
services and SoundExchange ``address[ing] prospective and retroactive
notice and recordkeeping requirements.'' Sirius/XM Satellite comment at
1; SoundExchange reply at 3-4.
The Office again denies this request for the reasons set forth in
the March 11 Federal Register document, specifically that ``it is the
Library's responsibility, and the Library's alone'' to promulgate
notice and recordkeeping requirements for all services, including the
preexisting satellite digital audio radio services that operate under
sections 112 and 114. 69 FR at 11518 citing Letter to RIAA, AFM, AFTRA,
XM Satellite, and Sirius from the Copyright Office at 1-2 (May 8,
2003). The Office reiterates that the parties to this agreement could
have requested that the Office adopt the agreed-upon terms regarding
historical reporting, but they did not do so. 69 FR at 11518.
Consequently, the proposed regulation governing prior uses will apply
to preexisting satellite digital audio services,\3\ as well as to non-
subscription services, business establishment services, and new
subscription services. We once again note that presumably no copyright
owner or performer who is a party to the negotiated agreement would be
in a position to complain of the failure by a service that is also a
party to the agreement to comply with the proposed regulation announced
today, assuming that the regulation is adopted as final. Id.
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\3\ The Office notes that currently no statutory rate exists for
transmissions made by preexisting satellite digital audio radio
services. Therefore, conceivably a question could be raised whether
any royalties paid by such services are covered by the license. The
Office takes no position, however, regarding the status of these
royalties.
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Moreover, the proposed regulation announced today will not apply to
those entities, such as Montpelier, IBS/Harvard Radio, and CBI, who are
signatories to either of the agreements published by the Office on
December 24, 2002, (67 FR 78510), or June 11, 2003, (68 FR 35008), in
accordance with the Small Webcaster Settlement Act of 2002, Public Law
107-321, 116 Stat. 2780.\4\ See also 69 FR at 11517 (March 11, 2004).
The proposed regulations will also not apply to the three preexisting
subscription services because they have already reported their records
of use for the relevant license period under the notice and
recordkeeping requirements set forth in Sec. 270.2. See69 FR at 11517
(March 11, 2004).\5\
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\4\ The Small Webcaster Settlement Act provided in pertinent
part that SoundExchange could enter into agreements with small
commercial webcasters and noncommercial webcasters that would, among
other things, provide that for a period ending on December 31, 2004,
small commercial webcasters and noncommercial webcasters would be
governed by notice and recordkeeping provisions other than those
established by the Library of Congress.
\5\ Music Choice has also asked the Office to apply the same
notice and recordkeeping requirements to any eligible subscription,
satellite digital audio, business establishment or new subscription
services operated by a pre-existing subscription service. Since the
adopted rules apply to all licensees who were operating under the
section 112(e) and section 114 statutory licenses prior to the
second calendar quarter of 2004, its request is moot with respect to
the historical time period. Moreover, consideration of the request
on a going forward basis has already been addressed. In the Office's
earlier notice announcing its interim regulations, it stated that
the recordkeeping interim regulations announced today
will not apply to preexisting subscription services, thus
making it clear that preexisting subscription services are the only
services not covered by the interim regulations. 69 FR at 11518.
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Designated Agents
SoundExchange was designated by the Librarian of Congress as the
Receiving Agent to receive statements of account and royalty payments
from licensees for the license period October 28, 1998, through
December 31, 2002. 37 CFR 261.4(b). Additionally, the Librarian
designated SoundExchange and RLI as Designated Agents to distribute
said royalty payments to copyright owners and performers. Id. However,
RLI would serve as a designated agent only for those copyright owners
and performers who expressly elected RLI as their agent for the
distribution of royalties. 37 CFR 261.4(c). In order to make such
election, a copyright owner or performer had to notify SoundExchange in
writing of his or her desire to elect RLI as their designated agent by
``no later than thirty days prior to the receipt by the Receiving Agent
of that royalty payment.'' Id. Otherwise, SoundExchange would be the
default designated agent. Id.
It is the Office's understanding that no copyright owners or
performers have elected RLI as their designated agent in accordance
with Sec. 261.4(c). If that understanding is incorrect, SoundExchange
and RLI are requested to correct it in their comments to this notice of
proposed rulemaking. In the meantime, the Office presumes that such an
election of RLI as a designated agent has not been made and therefore
the proposed regulation does not require SoundExchange to provide to
RLI any data from the preexisting subscription services.
Limitation of Liability
In its comments, SoundExchange requested that in the event the
Office
[[Page 42010]]
decided to use the reports of the preexisting subscription services as
a proxy for historical reporting, the Office should also adopt
regulations ``holding SoundExchange harmless from any under- or over-
payments resulting from the use of such data for distribution
purposes.'' SoundExchange comment at 20. The Copyright Office does not
have the power to excuse SoundExchange, or anyone else, from liability
for a breach of a legal obligation. See67 FR 45239, 45269 (July 8,
2002). Therefore, we cannot comply with SoundExchange's request.
However, we believe that regulations already exist that provide
SoundExchange with the reassurance it seeks. Specifically, Sec. Sec.
261.4(h) and 262.4(g) require that the designated agent distribute
royalty payments on a basis that values all performances equally based
upon information obtained pursuant to regulations governing records of
use. Because the rules proposed today would provide that the reports of
the preexisting subscription services shall constitute the records of
use for the other services for the historic period, SoundExchange may-
indeed, it has no choice but to-rely on those reports in making its
distributions.\6\
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\6\ Because the Librarian's decision setting rates and terms for
the license period from October 28, 1998 through December 31, 2002
is the subject of an appeal pending before the United States Court
of Appeals for the District of Columbia Circuit, the only royalties
from the historic period that can be distributed prior to the
resolution of that appeal are those collected for the period from
January 1, 2003 through March 31, 2004, a period for which final
rates and terms have been established. See 69 FR 5693 (February 6,
2004).
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Comments on the Proposed Regulation
Any party objecting to the proposal to use the reports of the
preexisting subscription services as a proxy for reporting requirements
for the historic period is requested to set forth in detail how the
Office can obtain more accurate information for the historic period and
respond to NAB's argument that the Copyright Office does not have the
authority to promulgate retroactive recordkeeping regulations.
List of Subjects
Copyright, Sound recordings.
Proposed Regulation
In consideration of the foregoing, the Copyright Office proposes to
amend part 270 of 37 CFR to read as follows:
1. The authority citation for part 270 continues to read as
follows:
Authority: 17 U.S.C. 702.
PART 270--NOTICE AND RECORDKEEPING REQUIREMENTS FOR STATUTORY
LICENSEES
2. Part 270 is proposed to be amended as follows:
a. By redesignating Sec. 270.4 as Sec. 270.5; and
b. By adding a new Sec. 270.4 to read as follows:
Sec. 270.4 Reports of use of sound recordings under statutory license
prior to April 1, 2004.
(a) General. This section prescribes the rules which govern reports
of use of sound recordings by nonsubscription transmission services,
preexisting satellite digital audio radio services, new subscription
services, and business establishment services under section 112(e) or
section 114(d)(2) of title 17 of the United States Code, or both, for
the period from October 28, 1998, through March 31 , 2004.
(b) Reports of use. Reports of use filed by preexisting
subscription services for transmissions made under 17 U.S.C. 114(f)
pursuant to Sec. 270.2 for use of sound recordings under section
112(e) or section 114(d)(2) of title 17 of the United States Code, or
both, for the period October 28, 1998, through March 31, 2004, shall
serve as the reports of use for nonsubscription transmission services,
preexisting satellite digital audio radio services, new subscription
services, and business establishment services for their use of sound
recordings under section 112(e) or section 114(d)(2) of title 17 of the
United States Code, or both, for the period from October 28, 1998,
through March 31, 2004.
Dated: July 8, 2004
Marybeth Peters,
Register of Copyrights.
[FR Doc. 04-15854 Filed 7-12-04; 8:45 am]
BILLING CODE 1410-33-S