[Federal Register: February 6, 2004 (Volume 69, Number 25)]
[Rules and Regulations]
[Page 5693-5702]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Parts 262 and 263
[Docket Nos. 2002-1 CARP DTRA3 and 2001-2 CARP DTNSRA]
Digital Performance Right in Sound Recordings and Ephemeral
Recordings
AGENCY: Copyright Office, Library of Congress.
ACTION: Final rule.
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SUMMARY: The Copyright Office of the Library of Congress is announcing
final regulations that set rates and terms for the public performance
of a sound recording made pursuant to a statutory license by means of
certain eligible nonsubscription transmissions and digital
transmissions made by a new type of subscription service. The final
rule also announces rates and terms for the making of related ephemeral
recordings. The rates and terms are for the 2003 and 2004 statutory
licensing period, except in the case of a new subscription service, in
which case the license period runs from 1998 through 2004.
DATES: Effective Date: March 8, 2004.
Applicability Dates: The regulations govern the license period
which commenced on January 1, 2003, and ends on December 31, 2004,
except in the case of a new subscription service, in which case the
regulations govern the license period which commenced on October 28,
1998, and ends on December 31, 2004.
FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or
Tanya M. Sandros, Senior Attorney, Copyright Arbitration Royalty Panel
(CARP), P.O. Box 70977, Southwest Station, Washington, DC 20024.
Telephone: (202) 707-8380; Telefax: (202) 252-3423.
[[Page 5694]]
SUPPLEMENTARY INFORMATION: With the passage of the Digital Performance
Right in Sound Recordings Act of 1995, as amended by the Digital
Millennium Copyright Act of 1998, copyright owners of sound recordings
have enjoyed an exclusive right to perform their works publicly by
means of certain digital audio transmissions, subject to certain
limitations. 17 U.S.C. 114. Among these limitations are certain
exemptions and a statutory license which allows for the public
performance of sound recordings as part of ``eligible nonsubscription
transmissions'' and digital transmissions made by ``new subscription
services.'' \1\
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\1\ For purposes of the section 114 license, an ``eligible
nonsubscription transmission'' is a noninteractive digital audio
transmission which, as the name implies, does not require a
subscription for receiving the transmission. The transmission must
also be made as part of a service that provides audio programming
consisting in whole or in part of performances of sound recordings
the purpose of which is to provide audio or entertainment
programming, but not to sell, advertise, or promote particular goods
or services. See 17 U.S.C. 114(j)(6). A ``new subscription service''
is ``a service that performs sound recordings by means of
noninteractive subscription digital audio transmissions and that is
not a preexisting subscription or a preexisting satellite digital
audio radio service.'' 17 U.S.C. 114(j)(8).
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The section 114 statutory license, however, does not necessarily
cover all the rights needed to effectuate a digital transmission. It is
often necessary for the licensee to first make a number of digital
copies of the sound recording in order to bring about the transmission.
For this reason, Congress created a new statutory license in 1998 with
the passage of the Digital Millennium Copyright Act of 1998, Public Law
105-304, to allow for the making of ephemeral reproductions for the
purpose of facilitating certain digital audio transmissions pursuant to
the section 114 statutory license, including those transmissions made
by eligible nonsubscription services and new subscription services. See
17 U.S.C. 112(e).
The procedure for setting the rates and terms for these two
statutory licenses is a two-step process. 17 U.S.C. 112(e)(3), (4), and
(6) and 17 U.S.C. 114(f)(2). The first step requires the Librarian of
Congress to initiate a voluntary negotiation period in order to give
interested parties an opportunity to reach consensus with respect to
the applicable rates and terms through an informal process. However, in
the event the parties are unable to reach an agreement during this
period, sections 112(e)(4) and 114(f)(2)(B) direct the Librarian of
Congress to convene a three-person Copyright Arbitration Royalty Panel
(``CARP'') for the purpose of determining the rates and terms for the
compulsory license, provided that an interested party files a petition
in accordance with 17 U.S.C. 803(a)(1), requesting the formal
proceeding.
The initial schedule of rates and terms for the sections 112 and
114 licenses applicable to eligible nonsubscription services for the
period from October 28, 1998, to December 31, 2002, was published on
July 8, 2002, after a formal hearing before a CARP. See 67 FR 45239
(July 8, 2002). Yet, this announcement did not settle the matter for
long. It only established rates and terms for the license period ending
December 31st of that year.
For this reason, the Library initiated a new proceeding to adjust
the rates and terms applicable to eligible nonsubscription
transmissions for the 2003-2004 license period by publishing a notice
in the Federal Register in January 2002 announcing the six-month
voluntary negotiation period that commences a rate adjustment
proceeding. See 67 FR 4472 (January 30, 2002). The Librarian took this
step even though the rates for 1998-2002 had not been announced, in
order to comply with the timetable set forth in sections 112(e)(7) and
114(f)(2)(C)(i)(II). Specifically, these sections require the Librarian
to publish a notice commencing the negotiation process in the first
week of January 2000 and at two year intervals thereafter, unless the
parties have agreed to an alternative schedule during the settlement
phase of the process. In any event, the parties did not negotiate a
proposed settlement during the specified period to cover the next
license period and opted instead to file petitions with the Office,
requesting that the Librarian of Congress convene a CARP to adjust the
rates and terms for the license period 2003-2004. Two such petitions
were filed with the Copyright Office. The Recording Industry
Association of America, Inc. (``RIAA'') filed one of the two petitions,
and IOMedia Partners, Inc., 3WK, Digitally Imported Radio, IM Networks,
Inc., Beethoven.com, LLC, All Bass Radio, Discombobulated, LLC, Wolf FM
and Integrity Media Group, Inc. d/b/a Boomer Radio, filed jointly a
second petition on behalf of certain licensees.
Likewise, in accordance with the time frame set forth in the law
for the purpose of setting rates and terms for use of the section 114
license by new subscription services, the Library initiated a six-month
voluntary negotiation period to adjust the rates and terms for new
subscription services. See 66 FR 9881 (February 12, 2001). Again, no
settlement was reached by the end of the six-month period.
Consequently, Music Choice and the RIAA filed separate petitions with
the Copyright Office requesting that a CARP be convened in order to set
the rates and terms for the public performance of sound recordings by
new subscription services.
Proposed Settlement Agreements
The parties in both proceedings continued to negotiate in good
faith beyond the statutorily mandated six-month negotiation periods in
hopes of reaching an industry wide settlement. Ultimately, they
succeeded, as evidenced by the adoption of the proposed rates and terms
as final rules. The process, however, required the consideration of
three separate agreements, explained herein.
On May 1, 2003, the Copyright Office published a notice in the
Federal Register, requesting comment on proposed regulations that set
rates and terms for the use of sound recordings in certain eligible
nonsubscription transmissions made pursuant to section 114 during the
2003 and 2004 statutory licensing period, as well as for the making of
ephemeral recordings necessary for the facilitation of such
transmissions in accordance with the section 112(e) license. The
proposal also included rates and terms for the use of sound recordings
in transmissions made by new subscription services from 1998 through
December 31, 2004, and the making of the related ephemeral recordings
under these same statutory licenses. 68 FR 23241 (May 1, 2003). These
proposed rates and terms were part of a settlement agreement negotiated
by SoundExchange, a division of the RIAA, the American Federation of
Television and Radio Artists (``AFTRA''), the American Federation of
Musicians of the United States and Canada (``AFM''), and the Digital
Media Association (``DiMA'') and were submitted to the Copyright Office
on April 14, 2003, along with a petition requesting that the Office
publish the proposed rates and terms pursuant to Sec. 251.63(b) of
title 37 of the Code of Federal Regulations, which the Office did. Id.
See 68 FR 23241 (May 1, 2003).
The April 14 proposal was later superseded by a second proposal
which was submitted to the Copyright Office on May 8, 2003. The new
agreement amended the proposal in the April 14 submission with the
approval of the parties to the first agreement and included, for the
first time, rates and terms for simulcasts of AM and FM radio broadcast
programming. These new rates were the result of an agreement between
SoundExchange,
[[Page 5695]]
AFM, and AFTRA (collectively, ``Copyright Owners and Performers''), on
the one hand, and Broadcasters,\2\ on the other hand. The May 8
agreement also included proposed rates and terms applicable to business
establishment services that make ephemeral phonorecords pursuant to
section 112(e) for the purpose of transmitting a public performance of
a sound recording under the limitation on exclusive rights specified by
section 114(d)(1)(C)(iv). These rates and terms were agreed to by the
Copyright Owners and Performers and Music Choice, the only business
establishment service participating in this proceeding, and cover the
2003 and 2004 statutory license period. As before, the Petitioners
requested that the Office publish the amended proposed rates and terms
for public comment pursuant to 37 CFR 251.63(b). See 68 FR 27506 (May
20, 2003).
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\2\ Those entities who negotiated on behalf of the broadcasters
include Bonneville International Corporation, Clear Channel
Communications, Inc., the National Religious Broadcasters Music
License Committee, Salem Communications Corporation, and Susquehanna
Radio Corporation.
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On July 3, 2003, SoundExchange, the American Council on Education,
and the Intercollegiate Broadcasting System, Inc., jointly with Harvard
Radio Broadcasting Co., Inc. submitted the third and final proposal to
the Copyright Office. It proposed rates and terms for use of the
section 112 and section 114 statutory licenses by noncommercial
licensees during the 2003-2004 license period that are identical to the
statutory rates and terms adopted by the Librarian for the period
ending December 31, 2002. See 67 FR 45239 (July 8, 2002). It should be
noted, however, that many noncommercial webcasters will not be using
these rates and terms for this time period. Instead, certain
noncommercial licensees will operate under the rate structure adopted
in a separate license, negotiated with RIAA in accordance with the
Small Webcaster Settlement Act of 2002. See 68 FR 35008 (June 11,
2003).
Objections to the Proposed Rates and Terms
The Copyright Office received objections to the proposals announced
in the May 20 and the August 21 notices from four entities:
Live365.com, Lester Chambers (``Chambers''), Royalty Logic, Inc.
(``RLI'') and SRN Broadcasting & Marketing, Inc. (``SRN'').
Specifically, Live365.com objected to the rates and terms applicable to
commercial webcasters, but withdrew its objections early in the
process, obviating the need to consider its concerns further.
Similarly, SRN objected to these same rates. However, SRN was
eventually dismissed from the proceedings for its failure to comply
with the Orders issued in this proceeding and the rules governing this
process. See Order in Docket No. 2002-1 CARP DTRA3, dated August 15,
2003. That left the objections of RLI and RLI's client, Lester
Chambers, which, in both cases, concerned the appointment and
responsibilities of those agents designated to collect and distribute
the royalty fees.
An objection, however, can only be considered if the party filing
the objection has a significant interest in the outcome of the
proceeding. In the case of RLI, the Office determined that RLI had no
independent standing to pursue its own objections but held that RLI
could represent the interests of its client, Lester Chambers, provided
that Chambers expressly authorized RLI to represent its interest in
these proceedings. See Order in Docket Nos. 2002-1 CARP DTRA3 and 2001-
2 CARP DTNSRA, dated August 18, 2003. Consequently, at the beginning of
the hearing phase of this proceeding, Chambers, as represented by RLI,
was the only remaining party that had filed an objection to the
proposed rates and terms. This objection, however, became moot on
January 8, 2003, when RLI filed a notice with the Copyright Office
withdrawing its Notice of Intent to Participate in these proceedings
and its Direct Case.
Because there are no longer any parties objecting to the proposed
rates and terms, the Librarian is adopting as final regulations the
rates and terms for the section 112(e) and section 114 licenses
proposed in the May 20 and August 21 notices. The rates and terms apply
to the public performance of a sound recording by means of certain
eligible nonsubscription transmissions and digital transmissions made
by a new type of subscription service. The final rules also announce
rates and terms for the making of related ephemeral recordings. The
rates and terms are for the 2003 and 2004 license period, except in the
case of new subscription services, in which case the license period
runs from 1998 through 2004.
Adoption of the rules presented herein as final regulations
concludes the above-captioned proceedings.
List of Subjects in 37 CFR Parts 262 and 263
Copyright, Digital audio transmissions, Performance right, Sound
recordings.
Final Regulation
0
In consideration of the foregoing, the Copyright Office adds parts 262
and 263 to 37 CFR to read as follows:
PART 262--RATES AND TERMS FOR CERTAIN ELIGIBLE NONSUBSCRIPTION
TRANSMISSIONS, NEW SUBSCRIPTION SERVICES AND THE MAKING OF
EPHEMERAL REPRODUCTIONS
Sec.
262.1 General.
262.2 Definitions.
262.3 Royalty fees for public performance of sound recordings and
for ephemeral recordings.
262.4 Terms for making payment of royalty fees and statements of
account.
262.5 Confidential information.
262.6 Verification of statements of account.
262.7 Verification of royalty payments.
262.8 Unclaimed funds.
Authority: 17 U.S.C. 112(e), 114, 801(b)(1).
Sec. 262.1 General.
(a) Scope. This part 262 establishes rates and terms of royalty
payments for the public performance of sound recordings in certain
digital transmissions by certain Licensees in accordance with the
provisions of 17 U.S.C. 114, and the making of Ephemeral Recordings by
certain Licensees in accordance with the provisions of 17 U.S.C.
112(e), during the period 2003-2004 and in the case of Subscription
Services 1998-2004 (the ``License Period'').
(b) Legal compliance. Licensees relying upon the statutory licenses
set forth in 17 U.S.C. 112 and 114 shall comply with the requirements
of those sections, the rates and terms of this part and any other
applicable regulations.
(c) Relationship to voluntary agreements. Notwithstanding the
royalty rates and terms established in this part, the rates and terms
of any license agreements entered into by Copyright Owners and services
shall apply in lieu of the rates and terms of this part to
transmissions within the scope of such agreements.
Sec. 262.2 Definitions.
For purposes of this part, the following definitions shall apply:
(a) Aggregate Tuning Hours means the total hours of programming
that the Licensee has transmitted during the relevant period to all
Listeners within the United States from all channels and stations that
provide audio programming consisting, in whole or in part, of eligible
nonsubscription transmissions or noninteractive digital audio
transmissions as part of a new subscription service, less the actual
[[Page 5696]]
running time of any sound recordings for which the Licensee has
obtained direct licenses apart from 17 U.S.C. 114(d)(2) or which do not
require a license under United States copyright law. By way of example,
if a service transmitted one hour of programming to 10 simultaneous
Listeners, the service's Aggregate Tuning Hours would equal 10. If 30
minutes of that hour consisted of transmission of a directly licensed
recording, the service's Aggregate Tuning Hours would equal 9 hours and
30 minutes. As an additional example, if one Listener listened to a
service for 10 hours (and none of the recordings transmitted during
that time was directly licensed), the service's Aggregate Tuning Hours
would equal 10.
(b) Broadcast Simulcast means
(1) A simultaneous Internet transmission or retransmission of an
over-the-air terrestrial AM or FM radio broadcast, including one with
previously broadcast programming substituted for programming for which
requisite licenses or clearances to transmit over the Internet have not
been obtained and one with substitute advertisements, and
(2) An Internet transmission in accordance with 17 U.S.C.
114(d)(2)(C)(iii) of an archived program, which program was previously
broadcast over-the-air by a terrestrial AM or FM broadcast radio
station, in either case whether such Internet transmission or
retransmission is made by the owner and operator of the AM or FM radio
station that makes the broadcast or by a third party.
(c) Business Establishment Service means a service making
transmissions of sound recordings under the limitation on exclusive
rights specified by 17 U.S.C. 114(d)(1)(C)(iv).
(d) Copyright Owner is a sound recording copyright owner who is
entitled to receive royalty payments made under this part pursuant to
the statutory licenses under 17 U.S.C. 112(e) or 114.
(e) Designated Agent is the agent designated by the Librarian of
Congress as provided in Sec. 262.4(b).
(f) Ephemeral Recording is a phonorecord created for the purpose of
facilitating a transmission of a public performance of a sound
recording under the limitations on exclusive rights specified by 17
U.S.C. 114(d)(1)(C)(iv) or for the purpose of facilitating a
transmission of a public performance of a sound recording under a
statutory license in accordance with 17 U.S.C. 114(f), and subject to
the limitations specified in 17 U.S.C. 112(e).
(g) Licensee is a person or entity that
(1) Has obtained a compulsory license under 17 U.S.C. 114 and the
implementing regulations therefor to make eligible nonsubscription
transmissions, or noninteractive digital audio transmissions as part of
a new subscription service (as defined in 17 U.S.C. 114(j)(8)), or that
has obtained a compulsory license under 17 U.S.C. 112(e) and the
implementing regulations therefor to make Ephemeral Recordings for use
in facilitating such transmissions, or
(2) Is a Business Establishment Service that has obtained a
compulsory license under 17 U.S.C. 112(e) and the implementing
regulations therefor to make Ephemeral Recordings, but not a person or
entity that:
(i) Is exempt from taxation under section 501 of the Internal
Revenue Code of 1986 (26 U.S.C. 501);
(ii) Has applied in good faith to the Internal Revenue Service for
exemption from taxation under section 501 of the Internal Revenue Code
and has a commercially reasonable expectation that such exemption shall
be granted; or
(iii) Is a State or possession or any governmental entity or
subordinate thereof, or the United States or District of Columbia,
making transmissions for exclusively public purposes.
(h) Listener is a player, receiving device or other point receiving
and rendering a transmission of a public performance of a sound
recording made by a Licensee, irrespective of the number of individuals
present to hear the transmission.
(i) Nonsubscription Service means a service making eligible
nonsubscription transmissions.
(j) Performance is each instance in which any portion of a sound
recording is publicly performed to a Listener by means of a digital
audio transmission or retransmission (e.g., the delivery of any portion
of a single track from a compact disc to one Listener) but excluding
the following:
(1) A performance of a sound recording that does not require a
license (e.g., the sound recording is not copyrighted);
(2) A performance of a sound recording for which the service has
previously obtained a license from the Copyright Owner of such sound
recording; and
(3) An incidental performance that both:
(i) Makes no more than incidental use of sound recordings
including, but not limited to, brief musical transitions in and out of
commercials or program segments, brief performances during news, talk
and sports programming, brief background performances during disk
jockey announcements, brief performances during commercials of sixty
seconds or less in duration, or brief performances during sporting or
other public events and
(ii) Other than ambient music that is background at a public event,
does not contain an entire sound recording and does not feature a
particular sound recording of more than thirty seconds (as in the case
of a sound recording used as a theme song).
(k) Performers means the independent administrators identified in
17 U.S.C. 114(g)(2)(B) and (C) and the parties identified in 17 U.S.C.
114(g)(2)(D).
(l) Subscription Service means a new subscription service (as
defined in 17 U.S.C. 114(j)(8)) making noninteractive digital audio
transmissions.
(m) Subscription Service Revenues shall mean all monies and other
consideration paid or payable, including the fair market value of non-
cash or in-kind consideration paid or payable by third parties, from
the operation of a Subscription Service, as comprised of the following:
(1) Subscription fees and other monies and consideration paid for
access to the Subscription Service by or on behalf of subscribers
receiving within the United States transmissions made as part of the
Subscription Service;
(2) Monies and other consideration (including without limitation
customer acquisition fees) from audio or visual advertising,
promotions, sponsorships, time or space exclusively or predominantly
targeted to subscribers of the Subscription Service, whether
(i) On or through the Subscription Service media player, or on
pages accessible only by subscribers or that are predominantly targeted
to subscribers, or
(ii) In e-mails addressed exclusively or predominantly to
subscribers of the Subscription Service, or
(iii) Delivered exclusively or predominantly to subscribers of the
Subscription Service in some other manner, in each case less
advertising agency commissions (not to exceed 15% of those monies and
other consideration) actually paid to a recognized advertising agency
not owned or controlled by Licensee;
(3) Monies and other consideration (including without limitation
the proceeds of any revenue-sharing or commission arrangements with any
fulfillment company or other third party, and any charge for shipping
or handling) from the sale of any product or service directly through
the Subscription Service media player or through pages or
advertisements
[[Page 5697]]
accessible only by subscribers or that are predominantly targeted to
subscribers (but not pages or advertisements that are not predominantly
targeted to subscribers), less
(i) Monies and other consideration from the sale of phonorecords
and digital phonorecord deliveries of sound recordings,
(ii) The Licensee's actual, out-of-pocket cost to purchase for
resale the products or services (except phonorecords and digital
phonorecord deliveries of sound recordings) from third parties, or in
the case of products produced or services provided by the Licensee, the
Licensee's actual cost to produce the product or provide the service
(but not more than the fair market wholesale value of the product or
service), and
(iii) Sales and use taxes, shipping, and credit card and
fulfillment service fees actually paid to unrelated third parties;
provided that:
(A) The fact that a transaction is consummated on a different page
than the page/location where a potential customer responds to a ``buy
button'' or other purchase opportunity for a product or service
advertised directly through such player, pages or advertisements shall
not render such purchase outside the scope of Subscription Service
Revenues hereunder, and
(B) Monies and other consideration paid by or on behalf of
subscribers for software or any other access device owned by Licensee
(or any subsidiary or other affiliate of the Licensee, but excluding,
for the avoidance of doubt, any entity that sells a third-party
product, whether or not bearing the Licensee's brand) to access the
Licensee's Subscription Service shall not be deemed part of
Subscription Service Revenues, unless such software or access device is
required as a condition to access the Subscription Service and either
is purchased by a subscriber contemporaneously with or after
subscribing or has no independent function other than to access the
Subscription Service;
(4) Monies and other consideration for the use or exploitation of
data specifically and separately concerning subscribers or the
Subscription Service, but not monies and other consideration for the
use or exploitation of data wherein information concerning subscribers
or the Subscription Service is commingled with and not separated or
distinguished from data that predominantly concern nonsubscribers or
other services; and
(5) Bad debts recovered with respect to paragraphs (m)(1) through
(4) of this section; provided that the Subscription Service shall be
permitted to deduct bad debts actually written off during a reporting
period.
Sec. 262.3 Royalty fees for public performances of sound recordings
and for ephemeral recordings.
(a) Basic royalty rate. Royalty rates and fees for eligible
nonsubscription transmissions made by Licensees pursuant to 17 U.S.C.
114(d)(2) during the period January 1, 2003, through December 31, 2004,
and the making of Ephemeral Recordings pursuant to 17 U.S.C. 112(e) to
facilitate such transmissions; noninteractive digital audio
transmissions made by Licensees pursuant to 17 U.S.C. 114(d)(2) as part
of a new subscription service during the period October 28, 1998,
through December 31, 2004, and the making of Ephemeral Recordings
pursuant to 17 U.S.C. 112(e) to facilitate such transmissions; and the
making of Ephemeral Recordings by Business Establishment Services
pursuant to 17 U.S.C. 112(e) during the period January 1, 2003, through
December 31, 2004, shall be as follows:
(1) Nonsubscription Services. For their operation of
Nonsubscription Services, Licensees other than Business Establishment
Services shall, at their election as provided in paragraph (b) of this
section, pay at one of the following rates:
(i) Per Performance Option. $0.000762 (0.0762[cent]) per
Performance for all digital audio transmissions, except that 4% of
Performances shall bear no royalty to approximate the number of partial
Performances of nominal duration made by a Licensee due to, for
example, technical interruptions, the closing down of a media player or
channel switching; Provided that this provision is not intended to
imply that permitting users of a service to ``skip'' a recording is or
is not permitted under 17 U.S.C. 114(d)(2). For the avoidance of doubt,
this 4% exclusion shall apply to all Licensees electing this payment
option irrespective of the Licensee's actual experience in respect of
partial Performances.
(ii) Aggregate Tuning Hour Option. (A) Non-Music Programming.
$0.000762 (0.0762[cent]) per Aggregate Tuning Hour for programming
reasonably classified as news, talk, sports or business programming.
(B) Broadcast Simulcasts. $0.0088 (0.88[cent]) per Aggregate Tuning
Hour for Broadcast Simulcast programming not reasonably classified as
news, talk, sports or business programming.
(C) Other Programming. $0.0117 (1.17[cent]) per Aggregate Tuning
Hour for programming other than Broadcast Simulcast programming and
programming reasonably classified as news, talk, sports or business
programming.
(2) Subscription Services. For their operation of Subscription
Services, Licensees other than Business Establishment Services shall,
at their election as provided in paragraph (b) of this section, pay at
one of the following rates:
(i) Per Performance Option. $0.000762 (0.0762[cent]) per
Performance for all digital audio transmissions, except that 4% of
Performances shall bear no royalty to approximate the number of partial
Performances of nominal duration made by a Licensee due to, for
example, technical interruptions, the closing down of a media player or
channel switching; Provided that this provision is not intended to
imply that permitting users of a service to ``skip'' a recording is or
is not permitted under 17 U.S.C. 114(d)(2). For the avoidance of doubt,
this 4% exclusion shall apply to all Licensees electing this payment
option irrespective of the Licensee's actual experience in respect of
partial performances.
(ii) Aggregate Tuning Hour Option.--
(A) Non-Music Programming. $0.000762 (0.0762[cent]) per Aggregate
Tuning Hour for programming reasonably classified as news, talk, sports
or business programming.
(B) Broadcast Simulcasts. $0.0088 (0.88[cent]) per Aggregate Tuning
Hour for Broadcast Simulcast programming not reasonably classified as
news, talk, sports or business programming.
(C) Other Programming. $0.0117 (1.17[cent]) per Aggregate Tuning
Hour for programming other than Broadcast Simulcast programming and
programming reasonably classified as news, talk, sports or business
programming.
(iii) Percentage of Subscription Service Revenues Option. 10.9% of
Subscription Service Revenues, but in no event less than 27[cent] per
month for each person who subscribes to the Subscription Service for
all or any part of the month or to whom the Subscription Service
otherwise is delivered by Licensee without a fee (e.g., during a free
trial period), subject to the following reduction associated with the
transmission of directly licensed sound recordings (if applicable). For
any given payment period, the fee due from Licensee shall be the amount
calculated under the formula described in the immediately preceding
sentence multiplied by the
[[Page 5698]]
following fraction: the total number of Performances (as defined under
Sec. 262.2(j), which excludes directly licensed sound recordings) made
by the Subscription Service during the period in question, divided by
the total number of digital audio transmissions of sound recordings
made by the Subscription Service during the period in question
(inclusive of Performances and equivalent transmissions of directly
licensed sound recordings). Any Licensee paying on such basis shall
report to the Designated Agent on its statements of account the
pertinent music use information upon which such reduction has been
calculated. This option shall not be available to a Subscription
Service where--
(A) A particular computer software product or other access device
must be purchased for a separate fee from the Licensee as a condition
of receiving transmissions of sound recordings through the Subscription
Service, and the Licensee chooses not to include sales of such software
product or other device to subscribers as part of Subscription Service
Revenues in accordance with Sec. 262.2(m)(3), or
(B) The consideration paid or given to receive the Subscription
Service also entitles the subscriber to receive or have access to
material, products or services other than the Subscription Service (for
example, as in the case of a ``bundled service'' consisting of access
to the Subscription Service and also access to the Internet in
general). In all events, in order to be eligible for this payment
option, a Licensee may not engage in pricing practices whereby the
Subscription Service is offered to subscribers on a ``loss leader''
basis or whereby the price of the Subscription Service is materially
subsidized by payments made by the subscribers for other products or
services.
(3) Business Establishment Services. For the making of any number
of Ephemeral Recordings in the operation of a service pursuant to the
limitation on exclusive rights specified by 17 U.S.C. 114(d)(1)(C)(iv),
a Licensee that is a Business Establishment Service shall pay 10% of
such Licensee's ``Gross Proceeds'' derived from the use in such service
of musical programs that are attributable to copyrighted recordings.
``Gross Proceeds'' as used in paragraph (a)(3) of this section means
all fees and payments, including those made in kind, received from any
source before, during or after the License Period that are derived from
the use of copyrighted sound recordings pursuant to 17 U.S.C. 112(e)
for the sole purpose of facilitating a transmission to the public of a
performance of a sound recording under the limitation on exclusive
rights specified in 17 U.S.C. 114(d)(1)(C)(iv). The attribution of
Gross Proceeds to copyrighted recordings may be made on the basis of:
(i) For classical programs, the proportion that the playing time of
copyrighted classical recordings bears to the total playing time of all
classical recordings in the program, and
(ii) For all other programs, the proportion that the number of
copyrighted recordings bears to the total number of all recordings in
the program.
(b) Election process. A Licensee other than a Business
Establishment Service shall elect the particular Nonsubscription
Service and/or Subscription Service royalty rate categories it chooses
(that is, among paragraph (a)(1)(i) or (ii) of this section and/or
paragraph (a)(2)(i), (ii) or (iii) of this section) for the License
Period by no later than March 8, 2004. Notwithstanding the preceding
sentence, where a Licensee has not previously provided a
Nonsubscription Service or Subscription Service, as the case may be,
the Licensee may make its election by no later than thirty (30) days
after the new service first makes a digital audio transmission of a
sound recording under the 17 U.S.C. 114 statutory license. Each such
election shall be made by notifying the Designated Agent in writing of
such election, using an election form provided by the Designated Agent.
A Licensee that fails to make a timely election shall pay royalties as
provided in paragraphs (a)(1)(i) and (a)(2)(i) of this section, as
applicable. Notwithstanding the foregoing, a Licensee eligible to make
royalty payments under an agreement entered into pursuant to the Small
Webcaster Settlement Act of 2002 may elect to make payments under such
agreement as specified in such agreement.
(c) Ephemeral Recordings. The royalty payable under 17 U.S.C.
112(e) for any reproduction of a phonorecord made by a Licensee other
than a Business Establishment Service during the License Period, and
used solely by the Licensee to facilitate transmissions for which it
pays royalties as and when provided in this section and Sec. 262.4
shall be deemed to be included within, and to comprise 8.8% of, such
royalty payments. The royalty payable under 17 U.S.C. 112(e) for the
reproduction of phonorecords by a Business Establishment Service shall
be as set forth in paragraph (a)(3) of this section.
(d) Minimum fee. (1) Business Establishment Services. Each Licensee
that is a Business Establishment Service shall pay a minimum fee of
$10,000 for each calendar year in which it makes Ephemeral Recordings
for use to facilitate transmissions under the limitation on exclusive
rights specified by 17 U.S.C. 114(d)(1)(C)(iv), whether or not it does
so for all or any part of the year.
(2) Other Services. Each Licensee other than a Business
Establishment Service shall pay a minimum fee of $2,500, or $500 per
channel or station (excluding archived programs, but in no event less
than $500 per Licensee), whichever is less, for each calendar year in
which it makes eligible nonsubscription transmissions, noninteractive
digital audio transmissions as part of a new subscription service or
Ephemeral Recordings for use to facilitate such transmissions, whether
or not it does the foregoing for all or any part of the year; except
that the minimum annual fee for a Licensee electing to pay under
paragraph (a)(2)(iii) of this section shall be $5,000.
(3) In General. These minimum fees shall be nonrefundable, but
shall be fully creditable to royalty payments due under paragraph (a)
of this section for the same calendar year (but not any subsequent
calendar year).
(e) Continuing Obligation. For the limited purpose of the period
immediately following the License Period, and on an entirely without
prejudice and nonprecedential basis relative to other time periods and
proceedings, if successor statutory royalty rates for Licensees for the
period beginning January 1, 2005, have not been established by January
1, 2005, then Licensees shall pay to the Designated Agent, effective
January 1, 2005, and continuing for the period through April 30, 2005,
or until successor rates and terms are established, whichever is
earlier, an interim royalty pursuant to the same rates and terms as are
provided for the License Period. Such interim royalties shall be
subject to retroactive adjustment based on the final successor rates.
Any overpayment shall be fully creditable to future payments, and any
underpayment shall be paid within 30 days after establishment of the
successor rates and terms, except as may otherwise be provided in the
successor terms. If there is a period of such interim payments,
Licensees shall elect the particular royalty rate categories it chooses
for the interim period as described in paragraph (b) of this section,
except that the election for a service that is in operation shall be
made by no later than January 15, 2005.
(f) Other royalty rates and terms. This part 262 does not apply to
persons or
[[Page 5699]]
entities other than Licensees, or to Licensees to the extent that they
make other types of transmissions beyond those set forth in paragraph
(a) of this section. For transmissions other than those governed by
paragraph (a) of this section, or the use of Ephemeral Recordings to
facilitate such transmissions, persons making such transmissions must
pay royalties, to the extent (if at all) applicable, under 17 U.S.C.
112(e) and 114 or as prescribed by other law, regulation or agreement.
Sec. 262.4 Terms for making payment of royalty fees and statements of
account.
(a) Payment to designated agent. A Licensee shall make the royalty
payments due under Sec. 262.3 to the Designated Agent.
(b) Designation of agent and potential successor designated agents.
(1) Until such time as a new designation is made, SoundExchange,
presently an unincorporated division of the Recording Industry
Association of America, Inc. (``RIAA''), is designated as the
Designated Agent to receive statements of account and royalty payments
from Licensees due under Sec. 262.3 and to distribute such royalty
payments to each Copyright Owner and Performer entitled to receive
royalties under 17 U.S.C. 112(e) or 114(g). SoundExchange shall
continue to be designated after its separate incorporation.
(2) If SoundExchange should fail to incorporate by July 1, 2003,
dissolve or cease to be governed by a board consisting of equal numbers
of representatives of Copyright Owners and Performers, then it shall be
replaced by successor entities upon the fulfillment of the requirements
set forth in paragraphs (b)(2)(i) and (ii) of this section.
(i) By a majority vote of the nine copyright owner representatives
on the SoundExchange Board as of the last day preceding the condition
precedent in paragraph (b)(2) of this section, such representatives
shall file a petition with the Copyright Office designating a successor
Designated Agent to distribute royalty payments to Copyright Owners and
Performers entitled to receive royalties under 17 U.S.C. 112(e) or
114(g) that have themselves authorized such Designated Agent.
(ii) By a majority vote of the nine performer representatives on
the SoundExchange Board as of the last day preceding the condition
precedent in paragraph (b)(2) of this section, such representatives
shall file a petition with the Copyright Office designating a successor
Designated Agent to distribute royalty payments to Copyright Owners and
Performers entitled to receive royalties under 17 U.S.C. 112(e) or
114(g) that have themselves authorized such Designated Agent.
(iii) The Copyright Office shall publish in the Federal Register
within 30 days of receipt of a petition filed under paragraph (b)(2)(i)
or (ii) of this section an order designating the Designated Agents
named in such petitions. Nothing contained in this section shall
prohibit the petitions filed under paragraphs (b)(2)(i) and (ii) of
this section from naming the same successor Designated Agent.
(3) If petitions are filed under paragraphs (b)(2)(i) and (ii) of
this section, then, following the actions of the Copyright Office in
accordance with paragraph (b)(2)(iii) of this section:
(i) Each of the successor entities shall have all the rights and
responsibilities of a Designated Agent under this part 262, except as
specifically set forth in this paragraph (b)(3).
(ii) Licensees shall make their royalty payments to the successor
entity named by the copyright owner representatives under paragraph
(b)(2)(i) of this section (the ``Receiving Agent'') and shall provide
statements of account on a form prepared by the Receiving Agent.
Licensees shall submit a copy of each statement of account to the
collective named by the performer representatives under paragraph
(b)(2)(ii) of this section at the same time such statement of account
is delivered to the Receiving Agent.
(iii) The Designated Agents shall agree between themselves
concerning responsibility for distributing royalty payments to
Copyright Owners and Performers that have not themselves authorized
either Designated Agent. The Designated Agents also shall agree to a
corresponding methodology for allocating royalty payments between them
using the information provided by the Licensee pursuant to the
regulations governing records of use of performances for the period for
which the royalty payment was made. Such methodology shall value all
performances equally. Within 30 days after their agreement concerning
such responsibility and methodology, the Designated Agents shall inform
the Register of Copyrights thereof.
(iv) With respect to any royalty payment received by the Receiving
Agent from a Licensee, a designation by a Copyright Owner or Performer
of a Designated Agent must be made no later than 30 days prior to the
receipt by the Receiving Agent of that royalty payment.
(v) The Receiving Agent shall promptly allocate the royalty
payments it receives between the two Designated Agents in accordance
with the agreed methodology. A final adjustment, if necessary, shall be
agreed and paid or refunded, as the case may be, between the Receiving
Agent and the collectives named under paragraph (b)(2) of this section
for each calendar year no later than 180 days following the end of each
calendar year. The Designated Agents shall agree on a reasonable basis
for the sharing on a pro-rata basis of any costs associated with the
allocations set forth in paragraph (b)(3)(iii) of this section.
(vi) If a Designated Agent is unable to locate a Copyright Owner or
Performer that the Designated Agent otherwise would be required to pay
under this paragraph (b) within 3 years from the date of payment by
Licensee, such Copyright Owner's or Performer's share of the payments
made by Licensees may first be applied to the costs directly
attributable to the administration of the royalty payments due such
Copyright Owners and Performers by that Designated Agent and shall
thereafter be allocated between the Designated Agents on a pro rata
basis (based on distributions to entitled parties) to offset any costs
permitted to be deducted by a designated agent under 17 U.S.C.
114(g)(3). The foregoing shall apply notwithstanding the common law or
statutes of any State.
(c) Monthly payments. A Licensee shall make any payments due under
Sec. 262.3(a) by the 45th day after the end of each month for that
month, except that payments due under Sec. 262.3(a) for the period
from the beginning of the License Period through the last day of the
month in which these rates and terms are adopted by the Librarian of
Congress and published in the Federal Register shall be due 45 days
after the end of such period. All monthly payments shall be rounded to
the nearest cent.
(d) Minimum payments. A Licensee shall make any payment due under
Sec. 262.3(d) by January 31 of the applicable calendar year, except
that:
(1) Payment due under Sec. 262.3(d) for 2003, and in the case of a
Subscription Service any earlier year, shall be due 45 days after the
last day of the month in which these rates and terms are adopted by the
Librarian of Congress and published in the Federal Register; and
(2) Payment for a Licensee that has not previously made eligible
nonsubscription transmissions, noninteractive digital audio
transmissions as part of a new subscription service or Ephemeral
Recordings pursuant to licenses under 17 U.S.C. 114(f) and/or 17 U.S.C.
112(e) shall be due by the 45th day after the
[[Page 5700]]
end of the month in which the Licensee commences to do so.
(e) Late payments. A Licensee shall pay a late fee of 0.75% per
month, or the highest lawful rate, whichever is lower, for any payment
received by the Designated Agent after the due date. Late fees shall
accrue from the due date until payment is received by the Designated
Agent.
(f) Statements of account. For any part of the period beginning on
the date these rates and terms are adopted by the Librarian of Congress
and published in the Federal Register and ending on December 31, 2004,
during which a Licensee operates a service, by 45 days after the end of
each month during the period, the Licensee shall deliver to the
Designated Agent a statement of account containing the information set
forth in this paragraph (f) on a form prepared, and made available to
Licensees, by the Designated Agent. If a payment is owed for such
month, the statement of account shall accompany the payment. A
statement of account shall include only the following information:
(1) Such information as is necessary to calculate the accompanying
royalty payment, or if no payment is owed for the month, to calculate
any portion of the minimum fee recouped during the month, including, as
applicable, the Performances, Aggregate Tuning Hours (to the nearest
minute) or Subscription Service Revenues for the month;
(2) The name, address, business title, telephone number, facsimile
number, electronic mail address and other contact information of the
individual or individuals to be contacted for information or questions
concerning the content of the statement of account;
(3) The handwritten signature of:
(i) The owner of the Licensee or a duly authorized agent of the
owner, if the Licensee is not a partnership or a corporation;
(ii) A partner or delegee, if the Licensee is a partnership; or
(iii) An officer of the corporation, if the Licensee is a
corporation;
(4) The printed or typewritten name of the person signing the
statement of account;
(5) The date of signature;
(6) If the Licensee is a partnership or a corporation, the title or
official position held in the partnership or corporation by the person
signing the statement of account;
(7) A certification of the capacity of the person signing; and
(8) A statement to the following effect:
I, the undersigned owner or agent of the Licensee, or officer or
partner, if the Licensee is a corporation or partnership, have
examined this statement of account and hereby state that it is true,
accurate and complete to my knowledge after reasonable due
diligence.
(g) Distribution of payments.--(1) The Designated Agent shall
distribute royalty payments directly to Copyright Owners and
Performers, according to 17 U.S.C. 114(g)(2); Provided that the
Designated Agent shall only be responsible for making distributions to
those Copyright Owners and Performers who provide the Designated Agent
with such information as is necessary to identify and pay the correct
recipient of such payments. The agent shall distribute royalty payments
on a basis that values all performances by a Licensee equally based
upon the information provided by the Licensee pursuant to the
regulations governing records of use of sound recordings by Licensees;
Provided, however, Performers and Copyright Owners that authorize the
Designated Agent may agree with the Designated Agent to allocate their
shares of the royalty payments made by any Licensee among themselves on
an alternative basis. Parties entitled to receive payments under 17
U.S.C. 114(g)(2) may agree with the Designated Agent upon payment
protocols to be used by the Designated Agent that provide for
alternative arrangements for the payment of royalties consistent with
the percentages in 17 U.S.C. 114(g)(2).
(2) The Designated Agent shall inform the Register of Copyrights
of:
(i) Its methodology for distributing royalty payments to Copyright
Owners and Performers who have not themselves authorized the Designated
Agent (hereinafter ``nonmembers''), and any amendments thereto, within
60 days of adoption and no later than 30 days prior to the first
distribution to Copyright Owners and Performers of any royalties
distributed pursuant to that methodology;
(ii) Any written complaint that the Designated Agent receives from
a nonmember concerning the distribution of royalty payments, within 60
days of receiving such written complaint; and
(iii) The final disposition by the Designated Agent of any
complaint specified by paragraph (g)(2)(ii) of this section, within 60
days of such disposition.
(3) A Designated Agent may request that the Register of Copyrights
provide a written opinion stating whether the Designated Agent's
methodology for distributing royalty payments to nonmembers meets the
requirements of this section.
(h) Permitted deductions. The Designated Agent may deduct from the
payments made by Licensees under Sec. 262.3, prior to the distribution
of such payments to any person or entity entitled thereto, all incurred
costs permitted to be deducted under 17 U.S.C. 114(g)(3); Provided,
however, that any party entitled to receive royalty payments under 17
U.S.C. 112(e) or 114(g) may agree to permit the Designated Agent to
make any other deductions.
(i) Retention of records. Books and records of a Licensee and of
the Designated Agent relating to the payment, collection, and
distribution of royalty payments shall be kept for a period of not less
than 3 years.
Sec. 262.5 Confidential information.
(a) Definition. For purposes of this part, ``Confidential
Information'' shall include the statements of account, any information
contained therein, including the amount of royalty payments, and any
information pertaining to the statements of account reasonably
designated as confidential by the Licensee submitting the statement.
(b) Exclusion. Confidential Information shall not include documents
or information that at the time of delivery to the Receiving Agent or a
Designated Agent are public knowledge. The Designated Agent that claims
the benefit of this provision shall have the burden of proving that the
disclosed information was public knowledge.
(c) Use of Confidential Information. In no event shall the
Designated Agent use any Confidential Information for any purpose other
than royalty collection and distribution and activities directly
related thereto; Provided, however, that the Designated Agent may
disclose to Copyright Owners and Performers Confidential Information
provided on statements of account under this part in aggregated form,
so long as Confidential Information pertaining to any individual
Licensee cannot readily be identified, and the Designated Agent may
disclose the identities of services that have obtained licenses under
17 U.S.C. 112(e) or 114 and whether or not such services are current in
their obligations to pay minimum fees and submit statements of account
(so long as the Designated Agent does not disclose the amounts paid by
the Licensee).
(d) Disclosure of Confidential Information. Except as provided in
paragraph (c) of this section and as required by law, access to
Confidential Information shall be limited to:
(1) Those employees, agents, attorneys, consultants and independent
contractors of the Designated Agent, subject to an appropriate
confidentiality agreement, who are engaged in the
[[Page 5701]]
collection and distribution of royalty payments hereunder and
activities related thereto, who are not also employees or officers of a
Copyright Owner or Performer, and who, for the purpose of performing
such duties during the ordinary course of their work, require access to
the records;
(2) An independent and qualified auditor, subject to an appropriate
confidentiality agreement, who is authorized to act on behalf of the
Designated Agent with respect to the verification of a Licensee's
statement of account pursuant to Sec. 262.6 or on behalf of a
Copyright Owner or Performer with respect to the verification of
royalty payments pursuant to Sec. 262.7;
(3) The Copyright Office, in response to inquiries concerning the
operation of the Designated Agent;
(4) In connection with future Copyright Arbitration Royalty Panel
proceedings under 17 U.S.C. 114(f)(2) and 112(e), and under an
appropriate protective order, attorneys, consultants and other
authorized agents of the parties to the proceedings, Copyright
Arbitration Royalty Panels, the Copyright Office or the courts; and
(5) In connection with bona fide royalty disputes or claims that
are the subject of the procedures under Sec. 262.6 or Sec. 262.7, and
under an appropriate confidentiality agreement or protective order, the
specific parties to such disputes or claims, their attorneys,
consultants or other authorized agents, and/or arbitration panels or
the courts to which disputes or claims may be submitted.
(e) Safeguarding of Confidential Information. The Designated Agent
and any person identified in paragraph (d) of this section shall
implement procedures to safeguard all Confidential Information using a
reasonable standard of care, but no less than the same degree of
security used to protect Confidential Information or similarly
sensitive information belonging to such Designated Agent or person.
Sec. 262.6 Verification of statements of account.
(a) General. This section prescribes procedures by which the
Designated Agent may verify the royalty payments made by a Licensee.
(b) Frequency of verification. The Designated Agent may conduct a
single audit of a Licensee, upon reasonable notice and during
reasonable business hours, during any given calendar year, for any or
all of the prior 3 calendar years, but no calendar year shall be
subject to audit more than once.
(c) Notice of intent to audit. The Designated Agent must file with
the Copyright Office a notice of intent to audit a particular Licensee,
which shall, within 30 days of the filing of the notice, publish in the
Federal Register a notice announcing such filing. The notification of
intent to audit shall be served at the same time on the Licensee to be
audited. Any such audit shall be conducted by an independent and
qualified auditor identified in the notice, and shall be binding on all
parties.
(d) Acquisition and retention of records. The Licensee shall use
commercially reasonable efforts to obtain or to provide access to any
relevant books and records maintained by third parties for the purpose
of the audit and retain such records for a period of not less than 3
years. The Designated Agent shall retain the report of the verification
for a period of not less than 3 years.
(e) Acceptable verification procedure. An audit, including
underlying paperwork, which was performed in the ordinary course of
business according to generally accepted auditing standards by an
independent and qualified auditor, shall serve as an acceptable
verification procedure for all parties with respect to the information
that is within the scope of the audit.
(f) Consultation. Before rendering a written report to the
Designated Agent, except where the auditor has a reasonable basis to
suspect fraud and disclosure would, in the reasonable opinion of the
auditor, prejudice the investigation of such suspected fraud, the
auditor shall review the tentative written findings of the audit with
the appropriate agent or employee of the Licensee being audited in
order to remedy any factual errors and clarify any issues relating to
the audit; Provided that the appropriate agent or employee of the
Licensee reasonably cooperates with the auditor to remedy promptly any
factual errors or clarify any issues raised by the audit.
(g) Costs of the verification procedure. The Designated Agent shall
pay the cost of the verification procedure, unless it is finally
determined that there was an underpayment of 10% or more, in which case
the Licensee shall, in addition to paying the amount of any
underpayment, bear the reasonable costs of the verification procedure.
Sec. 262.7 Verification of royalty payments.
(a) General. This section prescribes procedures by which any
Copyright Owner or Performer may verify the royalty payments made by
the Designated Agent; Provided, however, that nothing contained in this
section shall apply to situations where a Copyright Owner or a
Performer and the Designated Agent have agreed as to proper
verification methods.
(b) Frequency of verification. A Copyright Owner or a Performer may
conduct a single audit of the Designated Agent upon reasonable notice
and during reasonable business hours, during any given calendar year,
for any or all of the prior 3 calendar years, but no calendar year
shall be subject to audit more than once.
(c) Notice of intent to audit. A Copyright Owner or Performer must
file with the Copyright Office a notice of intent to audit the
Designated Agent, which shall, within 30 days of the filing of the
notice, publish in the Federal Register a notice announcing such
filing. The notification of intent to audit shall be served at the same
time on the Designated Agent. Any such audit shall be conducted by an
independent and qualified auditor identified in the notice, and shall
be binding on all Copyright Owners and Performers.
(d) Acquisition and retention of records. The Designated Agent
shall use commercially reasonable efforts to obtain or to provide
access to any relevant books and records maintained by third parties
for the purpose of the audit and retain such records for a period of
not less than 3 years. The Copyright Owner or Performer requesting the
verification procedure shall retain the report of the verification for
a period of not less than 3 years.
(e) Acceptable verification procedure. An audit, including
underlying paperwork, which was performed in the ordinary course of
business according to generally accepted auditing standards by an
independent and qualified auditor, shall serve as an acceptable
verification procedure for all parties with respect to the information
that is within the scope of the audit.
(f) Consultation. Before rendering a written report to a Copyright
Owner or Performer, except where the auditor has a reasonable basis to
suspect fraud and disclosure would, in the reasonable opinion of the
auditor, prejudice the investigation of such suspected fraud, the
auditor shall review the tentative written findings of the audit with
the appropriate agent or employee of the Designated Agent in order to
remedy any factual errors and clarify any issues relating to the audit;
Provided that the appropriate agent or employee of the Designated Agent
reasonably cooperates with the auditor to remedy promptly any factual
errors or clarify any issues raised by the audit.
(g) Costs of the verification procedure. The Copyright Owner or
Performer requesting the verification procedure
[[Page 5702]]
shall pay the cost of the procedure, unless it is finally determined
that there was an underpayment of 10% or more, in which case the
Designated Agent shall, in addition to paying the amount of any
underpayment, bear the reasonable costs of the verification procedure.
Sec. 262.8 Unclaimed funds.
If a Designated Agent is unable to identify or locate a Copyright
Owner or Performer who is entitled to receive a royalty payment under
this part, the Designated Agent shall retain the required payment in a
segregated trust account for a period of 3 years from the date of
payment. No claim to such payment shall be valid after the expiration
of the 3-year period. After the expiration of this period, the
Designated Agent may apply the unclaimed funds to offset any costs
deductible under 17 U.S.C. 114(g)(3). The foregoing shall apply
notwithstanding the common law or statutes of any State.
PART 263--RATES AND TERMS FOR CERTAIN TRANSMISSIONS AND THE MAKING
OF EPHEMERAL REPRODUCTIONS BY NONCOMMERCIAL LICENSEES
Sec.
263.1 General.
263.2 Definitions.
263.3 Royalty rates and terms.
Authority: 17 U.S.C. 112(e), 114, 801(b)(1).
Sec. 263.1 General.
This part 263 establishes rates and terms of royalty payments for
the public performance of sound recordings in certain digital
transmissions by certain Noncommercial Licensees in accordance with the
provisions of 17 U.S.C. 114, and the making of ephemeral recordings by
certain Noncommercial Licensees in accordance with the provisions of 17
U.S.C. 112(e), during the period 2003-2004.
Sec. 263.2 Definitions.
For purposes of this part, the following definition shall apply:
A Noncommercial Licensee is a person or entity that has obtained a
compulsory license under 17 U.S.C. 114 and the implementing regulations
therefor, or that has obtained a compulsory license under 17 U.S.C.
112(e) and the implementing regulations therefor to make ephemeral
recordings for use in facilitating such transmissions, and--
(a) Is exempt from taxation under section 501 of the Internal
Revenue Code of 1986 (26 U.S.C. 501);
(b) Has applied in good faith to the Internal Revenue Service for
exemption from taxation under section 501 of the Internal Revenue Code
and has a commercially reasonable expectation that such exemption shall
be granted; or
(c) Is a State or possession or any governmental entity or
subordinate thereof, or the United States or District of Columbia,
making transmissions for exclusively public purposes.
Sec. 263.3 Royalty rates and terms.
A Noncommercial Licensee shall in every respect be treated as a
``Licensee'' under part 262 of this chapter, and all terms applicable
to Licensees and their payments under part 262 of this chapter shall
apply to Noncommercial Licensees and their payment, except that a
Noncommercial Licensee shall pay royalties at the rates applicable to
such a ``Licensee,'' as currently provided in Sec. 261.3(a), (c), (d)
and (e) of this chapter, rather than at the rates set forth in Sec.
262.3(a) through (d) of this chapter.
Dated: January 22, 2004.
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 04-2535 Filed 2-5-04; 8:45 am]
BILLING CODE 1410-33-P