[Federal Register: May 3, 2007 (Volume 72, Number 85)]
[Page 24623-24624]

Copyright Office

[Docket No. 2007-4]

Notice of Intent to Audit

AGENCY: Copyright Office, Library of Congress

ACTION: Public notice


The Copyright Office of the Library of Congress is announcing receipt of a notice of intent to audit 2005 statements of account concerning the eligible nonsubscription transmissions of sound recordings made by Microsoft Corporation (‘‘Microsoft’’) under statutory licenses.


Tanya M. Sandros, Acting General Counsel, P.O. Box 70977, Southwest Station, Washington, DC 20024–0977. Telephone: (202) 707–8380. Telefax: (202) 252–3423.


Section 106(6) of the Copyright Act, title 17 of the United States Code, gives the copyright owner of a sound recording the right to perform a sound recording publicly by means of a digital audio transmission, subject to certain limitations. 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.’’1 17 U.S.C. 114. A music service that operates under the section 114 statutory license may also make any necessary ephemeral reproductions to facilitate the digital transmission of the sound recording under a second license set forth in section 112(e) of the Copyright Act. Use of these licenses requires that services make payments of royalty fees to and file reports of sound recording performances with SoundExchange. SoundExchange is a collecting rights entity that was designated by the Librarian of Congress to collect statements of account and royalty fee payments from services and distribute the royalty fees to copyright owners and performers entitled to receive such royalties under sections 112(e) and 114(g) following a proceeding before a Copyright Arbitration Royalty Panel (‘‘CARP’’)—Arbitration Royalty Panel (‘‘CARP’’)— the entity responsible for setting rates and terms for use of the section 112 and section 114 licenses prior to the passage of the Copyright Royalty and Distribution Reform Act of 2004 (‘‘CRDRA’’’), Pub. L. No. 108–419, 118 Stat. 2341 (2004). See 69 FR 5695 (February 6, 2004).

This Act, which the President signed into law on November 30, 2004, and which became effective on May 31, 2005, amends the Copyright Act, title 17 of the United States Code, by phasing out the CARP system and replacing it with three permanent Copyright Royalty Judges (‘‘CRJs’’). Consequently, the CRJs carry out the functions heretofore performed by the CARPs, including the adjustment of rates and terms for certain statutory licenses such as the section 114 and 112 licenses. However, section 6(b)(3) of the Act states in pertinent part:

[t]he rates and terms in effect under section 114(f)(2) or 112(e) . . . on December 30, 2004, for new subscription services [and] eligible nonsubscription services . . . shall remain in effect until the later of the first applicable effective date for successor terms and rates . . . or such later date as the parties may agree or the Copyright Royalty Judges may establish.

Successor rates and terms for the licenses are scheduled to be published in the Federal Register on Tuesday, May 1, 2007. However, these successor rates and terms carry an effective date beginning on January 1, 2006. Accordingly, the terms of the section 114 and 112 licenses as previously constituted are still in effect for any request to audit 2005 statements of account.

One of the previously constituted terms, set forth in § 262.6 of title 37 of the Code of Federal Regulations, states that SoundExchange, as the Designated Agent, may conduct a single audit of a Licensee for the purpose of verifying their royalty payments. As a preliminary matter, the Designated Agent is required to submit a notice of its intent to audit a Licensee with the Copyright Office and serve this notice on the service to be audited. 37 CFR 262.6(c).

On December 23, 2005, SoundExchange filed with the Copyright Office a notice of intent to audit Microsoft for the years 2002, 2003, and 2004. See 72 FR 624 (January 5, 2006). Subsequently, on March 29, 2007, SoundExchange filed a second notice of intent to audit Microsoft,2 pursuant to § 262.6(c), notifying the Copyright Office of its intent to expand its current audit to cover 2005. This notice of intent to audit was received by the Copyright Office on April 2, 2007. Section 262.6(c) requires the Copyright Office to publish a notice in the Federal Register within thirty days of receipt of the filing announcing the Designated Agent’s intent to conduct an audit.

In accordance with this regulation, the Office is publishing today’s notice to fulfill this requirement with respect to the notice of intent to audit filed by SoundExchange on March 29, 2007.

1 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 a part of a service that provides audio programming consisting in whole or in part of performances of sound recordings the primary 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).

2 A copy of the new Notice of Intent to Audit Microsoft is posted on the Copyright Office Web site at http://www.copyright.gov/carp/microsoft-notice2.pdf


Dated: April 30, 2007.
Tanya M. Sandros,
Acting General Counsel.