On September 12, 2013, the Commission published in the Federal Register (78 FR 56542) the Concept Release on Risk Controls and System Safeguards for Automated Trading Environments. The Concept Release provides an overview of the transition from human-centered to automated trading environments, reviews the Commission's regulatory response to date and existing industry practices, and describes a series of pre- trade risk controls, post-trade measures, system safeguards and other protections applicable to trading platforms and other categories of market participants. The Commission requests comment on a broad range of topics including, among other things, the extent to which certain risk controls have been adopted by industry, whether there is a need for regulatory action on such risk controls in order to provide more uniform risk mitigation across Commission-regulated derivatives markets, and the appropriate stage in the lifecycle of an order at which risk controls should be placed.

The Commission is reopening the comment period for the Concept Release beginning on January 21, 2014, and ending on February 14, 2014. Parties who previously submitted comments on the Concept Release, but did so after the original December 11, 2013, comment deadline, are invited to resubmit their comments so that they may be properly considered. Parties presenting relevant materials during the January 21, 2014, meeting of the Commission's Technology Advisory Committee are invited to submit such materials for inclusion in the comment file. Parties may also submit new comments regarding any matter raised in the Concept Release. All comments must be received on or before February 14, 2014.

A notice of proposed rulemaking and a notice of public hearing that appeared in the Federal Register on Monday, September 16, 2013 (78 FR 56841) announced that a public hearing was scheduled for February 5, 2014, at 2 p.m. in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue NW., Washington, DC. The subject of the public hearing is under section 148 of the Internal Revenue Code.

The public comment period for these regulations expired on December 16, 2013. The notice of proposed rulemaking and notice of public hearing instructed those interested in testifying at the public hearing to submit a request to speak and an outline of the topics to be addressed. As of January 17, 2014, no one has requested to speak. Therefore, the public hearing scheduled for February 5, 2014 at 2 p.m. is cancelled.

Executive Summary: Purpose: On June 4, 2013, the White House issued five executive actions designed to increase transparency of the patent system, ensure the highest-quality patents, reduce abusive patent litigation and level the playing field for innovators. The first of these executive actions is titled “Making `Real Party in Interest' the New Default,” and calls for the Office to begin a rulemaking process to require patent applicants and patent owners to regularly update ownership information when the applicant or patent owner is involved in a proceeding before the Office, including designation of the “ultimate parent entity(ies)” of those owners. To help achieve the above goals as well as to improve the incentives for future innovation, to enhance competition by providing the public with more complete information about the competitive landscape and technology marketplace by making patent ownership information more readily available, and to help the Office carry out its task of patent examination, the Office is proposing changes to the rules of practice concerning the attributable owner of pending patent applications and patents. This document and the proposed rules have adopted the term “attributable owner” rather than “real party in interest” to avoid confusion given that the term “real party in interest” is used elsewhere in title 35, United States Code ( e.g., 35 U.S.C. 118, 315, 317, 325, 327).

The proposed changes will facilitate patent examination and other parts of the Office's internal processes by helping to: (1) Ensure that a “power of attorney” is current in each application or proceeding before the Office; (2) avoid potential conflicts of interest for Office personnel; (3) determine the scope of prior art under the common ownership exception under 35 U.S.C. 102(b)(2)(C) and uncover instances of double patenting; (4) verify that the party making a request for a post-issuance proceeding is a proper party for the proceeding; and (5) ensure that the information the Office provides to the public concerning published applications and issued patents is accurate and not misleading. Beyond providing these benefits to the Office, collecting attributable owner information and making it publicly available is expected to: (1) Enhance competition and increase incentives to innovate by providing innovators with information that will allow them to better understand the competitive environment in which they operate; (2) enhance technology transfer and reduce the costs of transactions for patent rights since patent ownership information will be more readily and easily accessible; (3) reduce risk of abusive patent litigation by helping the public defend itself against such abusive assertions by providing more information about all the parties that have an interest in patents or patent applications; and (4) level the playing field for innovators.

The Office is also seeking comments on whether the Office should enable patent applicants and owners to voluntarily report licensing offers and related information to the Office, which the Office will then make available to the public in an accessible online format. Such licensing information could include willingness to license, as well as licensing contacts, license offer terms, or commitments to license the patent, e.g., on royalty-free or reasonable and non-discriminatory terms. Further background and details about this request for comments are below.

In order to engage the public and provide as much opportunity for feedback and input as possible, the Office intends to hold two stakeholder input meetings at which members of the public can provide comment to the Office on this proposal. These meetings will be held during the public comment period for this proposal, at times and locations to be determined. The Office will publicize the times and locations of these meetings through the Office's Internet Web site ( http://www.uspto.gov ).

Summary of Major Provisions: The Office proposes collecting two basic types of attributable owner information: (1) Titleholders and (2) enforcement entities. If applicable, the attributable owner would also include the ultimate parent entity as defined in 16 CFR 801.1(a)(3) of either of these two reporting categories. The Office proposes adopting this “ultimate parent entity” definition rather than creating a new one to minimize the need for additional investigation and analysis of ownership structures. The Office also proposes that “attributable owner” include any entity that creates or uses any type of arrangement or device with the purpose or effect of temporarily divesting such entity of attributable ownership or preventing the vesting of such attributable ownership.

The Office proposes that patent applicants identify the attributable owner or owners when an application is filed (or shortly thereafter), when attributable owner changes during the pendency of an application (within three months of such change), when the issue fee is due for an application that has been allowed, when a maintenance fee is due, and when a patent becomes involved in certain post-issuance proceedings at the Office, including in supplemental examination, ex parte reexamination, or a trial proceeding before the PTAB.

The Office plans to work with its user community to implement this reporting system in a user-friendly manner and welcomes input on how this can best be accomplished. Subject to financial and resource constraints, the Office anticipates, in particular, developing a system for the electronic uploading and updating of attributable owner information, including bulk uploading and updating of attributable owner information when any ownership transfers occur. This type of reporting system will also allow applicants and patentees to indicate that the information the Office has on file is accurate at future checkpoints, such as at the time of maintenance fee payments.

As with other procedural requirements of the Office, this proposal provides an applicant or patent owner with a means to correct omissions and errors in the attributable owner information that has been reported. The notice also proposes to excuse good faith failures to notify the Office of the attributable owner or to provide correct or complete attributable owner information.

The Office proposes to make the proposed rules applicable to all applications filed on or after the effective date of the final rule. For already-filed, pending applications, the Office proposes to require the reporting of attributable owner or owners when the issue fee is due (if and when such application has been allowed) provided that the notice of allowance is mailed on or after the effective date of the final rule. For already-issued patents, the Office proposes to require the reporting of attributable owner or owners when the next maintenance fee is paid, if the payment occurs on or after the effective date of the final rule. For any trial proceeding in which the petition was filed on or after the effective date of the final rule and any supplemental examination or ex parte reexamination in which the request was filed on or after the effective date of the final rule, the Office proposes to require the reporting of attributable owner or owners. The effective date of the final rule would be at least thirty days after publication of the final rule.

While the Office would use attributable owner information for examination purposes in both published and unpublished applications, attributable owner information would be made available to the public for an application that has been published or issued as a patent.

Costs and Benefits: This rulemaking is not economically significant under Executive Order 12866 (Sept. 30, 1993).

Background: On June 4, 2013, the White House Task Force on High-Tech Patent Issues published a paper detailing five executive actions and seven legislative recommendations “to protect innovators from frivolous litigation and ensure the highest-quality patents in our system.” Fact Sheet: White House Task Force on High-Tech Patent Issues, Legislative Priorities & Executive Actions. The first of the five executive actions calls for the Office to “begin a rulemaking process to require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the [Office], specifically designating the `ultimate parent entity' in control of the patent or application.” Id.

With this notice of proposed rulemaking, the Office is proposing changes designed to increase transparency by collecting ownership information of not just the titleholder ( e.g., assignee), but also entities that are real-parties-in-interest because of their right to enforce an issued patent, as well as information about the entities who ultimately control these entities ( i.e., the “ultimate parent entities”). The proposed rule is designed to collect information both during the application process and at certain times after a patent issues, and thus will affect both patent applicants and holders of issued patents.

Before the White House initiatives were announced on June 4, 2013, the Office had begun the process of considering whether and how to collect assignment or real-party-in-interest information (referred to herein as the “attributable owner”) with a request for comments in 2011 and a roundtable held at the Office in January 2013. Request for Comments on Eliciting More Complete Patent Assignment Information, 76 FR 72372 (Nov. 23, 2011) (2011 Request for Comments); Notice of Roundtable on Proposed Requirements for Recordation of Real Party-in-Interest Information Throughout Application Pendency and Patent Term, 77 FR 70385 (Nov. 26, 2012) (2012 Roundtable Notice). The 2012 Roundtable Notice reiterated that the Office was considering promulgating regulations that would require reporting of real-party-in-interest information during the application process and at certain times post-issuance and invited further public input. The Roundtable, which was open to any member of the public, was held on Friday, January 11, 2013. Details on the comments received from organizations and individuals can be found at http://www.uspto.gov/ip/officechiefecon/roundtable_01-11-2013.jsp .

As set forth in the Roundtable Notice, having accurate and up-to-date attributable owner information will facilitate patent examination and other parts of the Office's internal processes. As courts have previously recognized, the Office has the authority to promulgate regulations that “shall govern the conduct of proceedings in the Office.” Star Fruits S.N.C. v. U.S., 393 F.3d 1277, 1282 (Fed. Cir. 2005) (quoting 35 U.S.C. 2(b)(2)); see also Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1335 (Fed. Cir. 2008) (“To comply with section 2(b)(2)(A), a Patent Office rule must be `procedural'— i.e., it must `govern the conduct of proceedings in the Office.' ”). Pursuant to this authority, the Office may require the submission of information that is reasonably necessary to proper examination or treatment of the matter at hand, provided that such requests are not arbitrary or capricious. See Star Fruits, 393 F.3d at 1283-84.

To this end, the Office seeks attributable owner information to ensure that a “power of attorney” is current in each application or each patent involved in a proceeding before the Office. The Office has a clear interest in ensuring that current representatives in any proceeding before the Office are authorized by the current owner of the application or patent. See Lacavera v. Dudas, 441 F.3d 1380, 1383 (Fed. Cir. 2006) (“[T]he PTO has broad authority to govern the conduct of proceedings before it and to govern the recognition and conduct of attorneys.” Moreover, the Leahy-Smith America Invents Act, Public Law 112-29 (2011) (“AIA”) amended 35 U.S.C. 118 to provide that an application for patent may be filed by the assignee or person to whom the inventor is under an obligation to assign the invention. See Public Law 112-29, 125 Stat. 283, 296 (2011).

In addition, it is important for the Office to know the attributable owner of each application or each patent involved in a proceeding before the Office in order to avoid potential conflicts of interest for Office personnel. This problem has been identified during the adoption of regulations for the PTAB. For example, “in the case of the Board, a conflict would typically arise when an official has an investment in a company with a direct interest in a Board proceeding. Such conflicts can only be avoided if the parties promptly provide information necessary to identify potential conflicts.” Rules of Practice for Trials Before the Patent Trial and Appeal Board and Judicial Review of Patent Trial and Appeal Board Decisions, 77 FR 48612, 48617 (Aug. 14, 2012). Like administrative patent judges at the PTAB, “[p]atent examiners are quasi-judicial officials.” Western Elec. Co., Inc. v. Piezo Tech., Inc., 860 F.2d 428, 431 (Fed. Cir. 1988) (citing Butterworth v. United States ex rel. Hoe, 112 U.S. 50, 67 (1884)). Office employees are also subject to executive branch regulations that govern conflicts of interest in certain cases where employees have threshold financial interests in matters before them. See 5 CFR 2640.202(a); see also 18 U.S.C. 208. Accordingly, a clear identification of the attributable owner is important to ensure that officials are able to recuse themselves.

There are recent trends towards greater liquidity in the markets for patent-related intellectual property. See, e.g., U.S. Dept. of Justice & Fed. Trade Comm'n, The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition, at 37-39 (2011) (“ FTC Report” ) (discussing the increasing importance of technology transfer from small, specialized firms to manufacturing firms and from large companies to spin-offs). Thus, the Office has a corresponding need for more regular ownership reporting and updating requirements for the Office's internal function. In particular, having such accurate and up-to-date attributable owner information will help the Office determine whether current representatives in any proceeding before the Office are authorized by the current applicant or owner. Likewise, having such attributable owner information will facilitate the Office's efforts to ensure that applicable conflict-of-interest provisions for Office personnel are followed.

Facilitating greater transparency of patent application and patent ownership is also an important part of the Office's ongoing efforts to modernize patent examination and to improve patent quality. Recent changes in title 35 under the AIA have expanded the role of ownership as part of determining what constitutes prior art. See 35 U.S.C. 102(b). In particular, 35 U.S.C. 102(b)(2)(C) (2011) exempts as prior art those patent applications or issued patents that name different inventors where “the subject matter disclosed and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person.” Because ownership of an earlier-filed patent application or issued patent may prevent its use as prior art against a later-filed patent application, patentability may depend not just on the content of the prior art patent application or issued patent, but also on who owns it.

35 U.S.C. 102(b)(2)(C) (2011) differs from the previous statutory provision on which it was based (pre-AIA 35 U.S.C. 103(c)(1)). While pre-AIA 35 U.S.C. 103(c)(1) concerned an exception to obviousness rather than an exception to what constitutes prior art, it otherwise recited virtually identical language to that of the 35 U.S.C. 102(b)(2)(C) (2011), except that pre-AIA 35 U.S.C. 103(c)(1) stated that patentability was not precluded where “the subject matter and the claimed invention were, at the time the claimed invention was made, owned by the same person or subject to an obligation of assignment to the same person.” Under pre-AIA 35 U.S.C. 103(c)(1), whether earlier subject matter was prior art was established at the time when the claimed invention in the later-filed application was “made,” by considering whether the earlier subject matter was owned by the same entity that owned (or had a right to own) the claimed invention that was just made. In contrast, under 35 U.S.C. 102(b)(2)(C) (2011), there may be an opportunity—in the period before the filing of the second application—for ownership to change in a way that affects whether the earlier patent or patent application is prior art for purposes of 35 U.S.C. 102(a)(2) (2011).

In the prosecution context, 35 U.S.C. 102(b)(2)(C) (2011) presents the possibility that a greater amount of prior art might be subject to this exemption than under pre-AIA 35 U.S.C. 103(c)(1), which, in turn, could render the current method of handling the possibility of common ownership under MPEP 706.02(l)(2) (the examiner presenting an initial rejection, and the applicant rebutting the rejection with proof of ownership) inefficient in a manner contrary to the principles of compact prosecution as explained in MPEP 706 (“The goal of examination is to clearly articulate any rejection early in the prosecution process so that the applicant has the opportunity to provide evidence of patentability and otherwise reply completely at the earliest opportunity.”). Accordingly, tracking attributable owner information for patent applications and issued patents is directly relevant to questions of whether a claimed invention is patentable over the prior art during prosecution.

Moreover, the availability of new types of third-party proceedings that may be filed with the Office, including inter partes review under 35 U.S.C. 311 et seq. and post-grant review under 35 U.S.C. 321 et seq., has created a need for the Office to collect and publish timely ownership information. Because of certain statutory deadlines imposing short time frames for action ( e.g., nine months after patent grant (35 U.S.C. 321(c)), it may often be impractical or impossible for third parties to discover ownership information through other means, such as through litigation between patent owners and third parties that would provide for discovery of such information. As discussed previously, ownership information may be relevant in determining the scope of prior art. Accordingly, providing accurate and up-to-date ownership information to the public is important to facilitate these post-issuance proceedings. In addition, requiring updated ownership information during post-issuance proceedings will facilitate examination for the same reasons discussed previously for examination of applications.

Accordingly, having updated ownership information would allow the Office to: (1) Verify that a bona fide third party is making the request for inter partes review or post-grant review, as required by 35 U.S.C. 311(a) and 321(a), respectively; (2) verify that the petitioner applying for review of a covered business method patent is a real-party-in-interest or privy to an entity that has been sued or charged with infringement of that patent, as required by 37 CFR 42.302(a); and (3) verify that a bona fide patent owner is making the request for supplemental examination, as required by 35 U.S.C. 257(a).

Finally, because the Office publishes information it possesses related to an application or patent (subject to 35 U.S.C. 122), the Office has an interest in ensuring that such information is not misleading. The Office currently receives (and publishes) only assignment information that is voluntarily submitted by the applicant or patent owner. There is no requirement that changes in assignment information be updated, though current law protects against certain types of fraud if such updating occurs. See 35 U.S.C. 261. Consequently the information the Office has on file may be outdated, which may be misleading to the public. Ensuring that the Office can provide information to the public that is not misleading is consistent with several statutory provisions directing the Office to disseminate information to the public as well as those directing the Office to provide access to information through electronic means. See 35 U.S.C. 2(a)(2) (creating a duty of “disseminating to the public information with respect to patents”); 10(a)(4) (providing for publication of information, including “annual indexes of . . . patentees”); 10(b) (allowing the Director to publish the specified information set forth in [item (4)] of subsection 35 U.S.C. 10(a) of this section in a publication format “desirable for the use of the Office”) and 41(i) (creating a duty to provide access to information electronically).

Beyond providing these benefits to the Office, collecting attributable owner information and making it publicly available may have other potential benefits. In particular, collecting attributable owner information and making it publicly available may: (1) Enhance competition and increase incentives to innovate by providing innovators with information that will allow them to better understand the competitive environment in which they operate; (2) enhance technology transfer and reduce the costs of transactions for patent rights since patent ownership information will be more readily and easily accessible; (3) reduce risk of abusive patent litigation by helping the public defend itself against such abusive assertions by providing more information about all the parties that have an interest in patent or patent applications; and (4) level the playing field for innovators.

Regarding enhanced competition and increased incentives to innovate, easier access to accurate and up-to-date attributable owner information will provide innovators with information to better understand the competitive environment in which they operate. This will enable them to better assess, for example, the risks and benefits of developing a new business in a different area of technology, thereby allowing them to allocate their limited research and development resources more judiciously. Chapters 1 and 2 of the FTC Report discuss at length the advantages of ex-ante versus ex-post licensing. By providing the public with more and better information about ownership of patent rights earlier (particularly in advance of product launch and filling of distribution channels), innovators will be better positioned to seek rights ex-ante rather than ex-post, should they so desire.

Regarding enhancing technology transfer and reducing the costs of transactions for patent rights, providing easy access to accurate and up-to-date attributable owner information to the public is expected to reduce information and search costs associated with identifying and then licensing or buying patent assets.

With regard to reducing abusive patent litigation, developing a record of attributable owners will help accused patent infringers identify: (i) The parties who control and/or influence the ability to enter into a settlement agreement or licensing arrangement; and (ii) the full range of patent rights held by the attributable owners so that a license to all desired rights may be taken at once. This point is also reflected in the White House's Fact Sheet: White House Task Force on High-Tech Patent Issues, Legislative Priorities & Executive Actions (June 4, 2013), which notes that certain patent enforcement entities “set up shell companies to hide their activities” and this “tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold.” Accord, United States Government Accountability Office, Intellectual Property: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality, available at http://www.gao.gov/products/GAO-13-465 (2013) (reporting that patent holders sometimes “intentionally hide the existence of their patents until a sector or company are using the patented invention without authorization and can be sued for infringement,” and in some lawsuits, “the identity of interested operating companies is intentionally hidden.” (pp. 20, 31)). Furthermore, providing the public with access to updated attributable owner information may help accused infringers determine whether a patent or application may be subject to fair, reasonable, and non-discriminatory (FRAND) licensing commitments.

Request for Comments on the Voluntary Submission of Licensing Information: The Office is also seeking public comment on enabling patent applicants and owners to voluntarily report licensing offers and related information for the Office to make available to the public. The Office currently permits patent owners to request that their patents be listed in the Official Gazette as available for license or sale, upon payment of the fee set forth in 37 CFR 1.21(i). See MPEP 1703. For examples of such listings, see ( http://www.uspto.gov/web/offices/com/sol/og/2012/week02/TOC.htm#ref18 ) (Jan. 10, 2012) and ( http://www.uspto.gov/web/offices/com/sol/og/patlics.htm ) (Dec. 11, 2007). The Office seeks public comment on whether the Office should also, or alternatively, permit patent applicants and owners to voluntarily provide information about licensing for the Office to make available to the public in, for example, a searchable online database or Public PAIR. Such licensing information could include willingness to license, as well as licensing contacts, license offer terms, or commitments to license the patent, e.g., on royalty-free or reasonable and non-discriminatory terms. In accordance with best practices in technology transfer, this information could also include permitting a patent applicant or owner to include keywords, technical fields, and/or descriptive information about the underlying technology, related technical papers and publications, and desired attributes in a technology partner (see, e.g. http://www.federallabs.org/ ).

The Office believes that the implementation of such a voluntary program would further enhance the transparency and efficiency of the marketplace for patent rights by providing a clearinghouse for patent holders to post licensing terms. Such a system would be expected to further enhance technology transfer and reduce the costs of transactions for patent rights. The World Intellectual Property Organization (WIPO) has offered a similar option to report licensing terms and information to PCT applicants since January 2012, in order to promote voluntary licensing. In November 2013, it introduced the WIPO GREEN online marketplace, to promote innovation and diffusion of green technologies. ( https://webaccess.wipo.int/green/ ).

Attributable Owner Information To Be Collected: The Office is proposing that the attributable owner be identified on filing (or shortly thereafter), when there is a change of attributable owner during the pendency of an application, at the time of issue fee and maintenance fee payments, and when a patent is involved in supplemental examination, ex parte reexamination, or a trial proceeding before the Patent Trial and Appeal Board (PTAB). The Office proposes to collect two basic types of attributable owner information: (1) Titleholders and (2) enforcement entities. The attributable owner would also include the ultimate parent entity as defined in 16 CFR 801.1(a)(3) of either of these two types of attributable owner. In addition, any entity that creates or uses any type of arrangement or device with the purpose or effect of temporarily divesting such entity of attributable ownership or preventing the vesting of such attributable ownership would also be considered an attributable owner. Each of the attributable owner types and corresponding “ultimate parent entity” are discussed in greater detail as follows.

In many cases, these types of ownership interests may be coextensive. Specifically, the titleholder (or assignee) is often the same entity that has the right to enforce the patent, and is not controlled by any other entity (and so would not have to separately report an ultimate parent entity). Most additional reporting will need to be done by companies that have complicated corporate structures and licenses, which often include the complex structures used by certain patent assertion entities (“PAEs”) to hide their true identities from the public. Some of this additional reporting may include exclusive licensees. Although exclusive licensees are sometimes confidential now, they would only need to be disclosed where their rights are so substantial that they have enforcement rights in the patent. In such circumstances, the public has a strong interest in knowing their identities in order to have an accurate picture of the competitive patent landscape, to allocate their research and development efforts appropriately, and to take licenses or purchase patents proactively and efficiently from the correct entities, as dictated by business needs.

The Office proposes to collect this attributable owner information from applicants and patent owners, and invites public comments as to whether and when additional attributable owner information should be collected as well as whether changes could be made to the scope of the information proposed to be collected while still achieving the objectives of the Office set forth in this document.

The Office is proposing to require disclosure of the following ownership interests:

1. Titleholders: The first type of attributable owner information the Office proposes to collect is comprised of the titleholder(s) of the patent application or issued patent. Titleholders are defined as an entity that has been assigned title to the patent or application. This proposed requirement overlaps with the information that applicant and patent owners currently may voluntarily submit for assignment recordation at the Office. Reporting of exclusive licensees might be required in the limited circumstances where the exclusive license transfers so many rights that it is effectively an assignment, but the Office expects that exclusive licensee information would more routinely be reported under the second type of ownership information the Office proposes to collect (entities that have standing to enforce). See, e.g., Alfred C. Mann Found. v. Cochlear Corp., 604 F.3d 1354, 1360-61 (Fed. Cir. 2010).

2. Enforcement Entities: The second type of attributable owner information the Office proposes to collect is comprised of those entities not already identified as titleholders, but who are necessary to be joined in a lawsuit in order to have standing to enforce the patent or any patent resulting from the application. The entities having the legal right to enforce the patent refers to those parties that would be necessary and sufficient to bring a legal infringement action. See Vaupel Textilmaschinen KG v. Meccanica EuroItalia SPA, 944 F.2d 870, 875-76 (Fed. Cir. 1991). This proposed reporting requirement would require disclosure of exclusive licensees in certain cases.

Ultimate Parent Entities: Information required to be reported for each type of attributable owner would also include identification of the ultimate parent entity, i.e., the entity that ultimately controls the actions of any entities discussed previously, if they are not their own ultimate parents. The term “ultimate parent entity” is defined by reference to the definition (an entity which is not controlled by any other entity) along with the accompanying examples set forth in 16 CFR 801.1(a)(3). The Office is proposing incorporation by reference of the definition of ultimate parent entity in 16 CFR 801.1(a)(3) but would welcome comments on how this definition might be modified for use at the Office. The Office recognizes that corporations sometimes transfers patents and patent applications within the corporation for legitimate reasons, such as tax savings purposes, and also welcomes comments on the impact of the proposed changes on this practice.

Hidden Beneficial Owners: Information required to be reported would also include identification of entities that are trying to avoid the need for their disclosure by temporarily divesting themselves of ownership rights through contractual or other arrangements. The Office deems the beneficiaries of these temporarily divested rights to be attributable owners. The Office seeks to have a complete picture of the attributable owners for the numerous reasons detailed in this document, and this provision is designed to discourage intentional shielding of such ownership interests.

As discussed previously, the Office expects that this information will facilitate the Office's core function of examining patents. All of the ownership interests outlined previously will help the Office to avoid potential conflicts of interest, as required by regulation and statute, and the quasi-judicial roles of patent examiners. For example, the attributable owner information would allow Office employees to evaluate whether they own stock in companies that are appearing before them in patent examination or other Office proceedings. The related ultimate parent entity information would serve as an additional check to the extent that Office employees might not be aware of subsidiaries owned by companies in which they might own stock.

Information about the titleholder and its ultimate parent entity will also help the Office to determine the scope of prior art under the common ownership exception under 35 U.S.C. 102(b)(2)(C), to uncover instances of double patenting, and ensure that the power of attorney is current in applications under examination. The ultimate parent entity information in particular would facilitate searching by providing a common identifier for companies that have many subsidiaries that nominally hold title to the application or patent.

The Office plans to publish information about attributable owners in accordance with its duty to provide information to the public, 35 U.S.C. 2(a)(2), although such information will be made available only in accordance with 35 U.S.C. 122. The Office expects that the public provision of attributable owner information will increase transparency of the patent system, as outlined in the background section of this document.

The Office is proposing the following timing and handling of disclosures:

Timing of Attributable Owner Information Collection: For the purposes discussed previously, the Office proposes to collect information at the following points during prosecution and post-issuance so that the Office will have access to accurate and up-to-date information and will be able to provide such information to the public.

During Patent Prosecution: The Office proposes the following attributable owner reporting requirements for pending applications: (1) Application Filing Requirement: The applicant would be required to identify the attributable owner at the time a patent application is initially filed (or shortly thereafter); (2) Update Requirement: The applicant would be required to identify a new attributable owner during prosecution within three months of any change in attributable owner; and (3) Issue Fee Payment Requirement: The applicant would be required to identify the attributable owner (or verify that the attributable owner information currently on record at the Office is correct) at the time of issue fee payment. The requirement to identify the attributable owner would not apply to provisional applications, and would not apply to international applications prior to the commencement of the national stage in the United States. The Office welcomes comments on whether there are other times during prosecution ( e.g., with each reply to an Office action) where updating or verification of attributable owner information should be required, and on whether within three months of any change in attributable owner is the appropriate time frame ( i.e., should the time frame be more or less than three months?).

After Patent Issuance: The Office proposes the following attributable owner reporting requirements for issued patents: (1) Maintenance Fee Requirement: The patent owner would be required to identify the attributable owner (or verify that the attributable owner information currently on record at the Office is correct) at the time each maintenance fee is paid; and (2) Post-Issuance Proceeding Requirement: The patent owner would be required to identify the attributable owner (or verify that the attributable owner information currently on record at the Office is correct) at the time the patent becomes involved in certain post-issuance proceedings before the Office, including (1) any trial proceeding before the PTAB, such as any post grant review under 35 U.S.C. 321, inter partes review under 35 U.S.C. 311, covered business method patent review under section 18 of the AIA, or derivation proceeding under 35 U.S.C 135; (2) any request for supplemental examination under 35 U.S.C. 257(a); and (3) any ex parte reexamination proceeding under 35 U.S.C. 302.

Provision of Attributable Owner Information to the Public: While the Office would use attributable owner information for examination purposes in both published and unpublished applications, attributable owner information would be made available to the public in an application that has been published under 35 U.S.C. 122(b) or issued as a patent under 35 U.S.C. 151. The Office anticipates providing information about the current attributable owner, as well as a history of any attributable owner changes, in an accessible electronic format, such as via the public side of the Patent Application Information Retrieval (PAIR) system.

The following is a discussion of proposed amendments to title 37 of the Code of Federal Regulations, Part 1:

Section 1.17: Section 1.17(g) is proposed to be amended to include a reference to proposed §§ 1.279 and 1.387. Sections 1.279 and 1.387 as proposed provide for a petition and the petition fee set forth in § 1.17(g) if the applicant or patent owner has failed to notify the Office of a change to the attributable owner, or has indicated an incorrect or an incomplete attributable owner, despite a good faith effort to comply with these requirements.

Section 1.271: Section 1.271 as proposed defines the entity or entities that are covered by the term “attributable owner” as that term is used in the rules of practice. Section 1.271(a) as proposed specifically provides that the attributable owner includes each of the following entities: (1) An entity that, exclusively or jointly, has been assigned title to the patent or application (proposed § 1.271(a)(1)); and (2) an entity necessary to be joined in a lawsuit in order to have standing to enforce the patent or any patent resulting from the application (proposed § 1.271(a)(2)).

Section 1.271(b) as proposed provides that the attributable owner of a patent or application includes the ultimate parent entity as defined in 16 CFR 801.1(a)(3) of an entity described in § 1.271(a). The ultimate parent entity is an entity which is not controlled by any other entity. 16 CFR 801.1(a) provides the following illustrative examples for identifying the ultimate parent entity: “(1) If corporation A holds one hundred percent of the stock of subsidiary B, and B holds seventy-five percent of the stock of its subsidiary C, corporation A is the ultimate parent entity, since it controls subsidiary B directly and subsidiary C indirectly, and since it is the entity within the person which is not controlled by any other entity; (2) if corporation A is controlled by natural person D, natural person D is the ultimate parent entity; and (3) if P and Q are the ultimate parent entities within persons `P' and `Q,' and P and Q each own fifty percent of the voting securities of R, then P and Q are both ultimate parents of R, and R is part of both persons `P' and `Q.' ”

With regard to the definition of “ultimate parent entity” as “an entity which is not controlled by any other entity,” 16 CFR 801.1(b) defines “control” as follows: The term control (as used in the terms control(s), controlling, controlled by and under common control with) means: (1) Either (i) holding fifty percent or more of the outstanding voting securities of an issuer, or (ii) in the case of an unincorporated entity, having the right to fifty percent or more of the profits of the entity, or having the right in the event of dissolution to fifty percent or more of the assets of the entity; or (2) having the contractual power presently to designate fifty percent or more of the directors of a for-profit or not-for-profit corporation, or in the case of trusts that are irrevocable and/or in which the settlor does not retain a reversionary interest, the trustees of such a trust. 16 CFR 801.1(b) further provides a number of illustrative examples for identifying the ultimate parent entity based upon its definition of “control.”

Section 1.271(c) as proposed provides that any entity that, directly or indirectly, creates or uses a trust, proxy, power of attorney, pooling arrangement, or any other contract, arrangement, or device with the purpose or effect of temporarily divesting such entity of attributable ownership of a patent or application, or preventing the vesting of such attributable ownership of a patent or application, shall also be deemed for the purpose of § 1.271 to be an attributable owner of such patent or application.

Section 1.271(d) as proposed defines the term “entity” used in § 1.271. Section 1.271(d) as proposed specifically provides that the term “entity” used in § 1.271 includes: (1) Any natural person, corporation, company, partnership, joint venture, association, joint-stock company, trust, estate of a deceased natural person, foundation, fund, or institution, whether incorporated or not, wherever located and of whatever citizenship (proposed § 1.271(d)(1)); (2) any receiver, trustee in bankruptcy or similar official or any liquidating agent for any of the entities described in § 1.271(d)(1), in his or her capacity as such (proposed § 1.271(d)(2)); (3) a joint venture or other corporation which has not been formed but the acquisition of the voting securities or other interest in which, if already formed, would be an attributable owner as described in this section (proposed § 1.271(d)(3)); or (4) any other organization or corporate form not specifically listed in § 1.271(d)(1), (d)(2), or (d)(3) that holds an interest in an application or patent (proposed § 1.271(d)(4)). Section 1.271(d) as proposed (in combination with the exception in proposed § 1.271(e)) tracks the definition of entity in 16 CFR 801.1(a)(2).

Section 1.271(e) as proposed provides an “exception” to the term “entity” as used in § 1.271. Section 1.271(e) as proposed specifically provides that, notwithstanding the provisions of § 1.271(c), the term “entity” does not include any foreign state, foreign government, or agency thereof (other than a corporation or unincorporated entity engaged in commerce), and also does not include the United States, any of the States thereof, or any political subdivision or agency of either (other than a corporation or unincorporated entity engaged in commerce).

Section 1.271(f) as proposed sets out the information concerning an entity that must be provided when that entity is being identified as an attributable owner. Section 1.271(f) as proposed specifically provides that when there is a requirement to identify the attributable owner, each entity constituting the attributable owner must be identified as follows: (1) The identification of a public company must include the name of the company, stock symbol, and stock exchange where the company is listed (proposed § 1.271(f)(1)); (2) the identification of a non-public company must include the name of the company, place of incorporation, and address of the principal place of business (proposed § 1.271(f)(2)); (3) the identification of a partnership must include the name of the partnership and address of the principal place of business (proposed § 1.271(f)(3)); (4) the identification of a natural person must include the full legal name, residence, and a correspondence address (proposed § 1.271(f)(4)); and (5) the identification of any other type of entity must include its name, if organized under the laws of a state, the name of that state and legal form of organization, and address of the principal place of business (proposed § 1.271(f)(5)).

Section 1.271(g) is proposed to clarify that a shareholder or partner in a corporate form, partnership, or other association (except for shareholders of a public company) must also be identified as an attributable owner if the shareholder or partner meets one of the definitions set forth in § 1.271(a), (b), or (c), even if the a corporate form, partnership, or other association is separately identified as an attributable owner.

Section 1.273: Section 1.273 as proposed requires the applicant to identify the attributable owner (the “initial” attributable owner) on filing or within the time period provided in § 1.53(f) (provides for the completion of an application under 35 U.S.C. 111(a) for examination) or § 1.495(c) (provides for the submission of missing requirements in an international application that commenced the national stage under 35 U.S.C. 371). Section 1.273 as proposed specifically provides that the attributable owner must be identified in each application under 35 U.S.C. 111(a), including a reissue application, and in each international application that commenced the national stage under 35 U.S.C. 371(b) or (f). The requirements of proposed § 1.273 would not apply to provisional applications under 35 U.S.C. 111(b), and would not apply to international applications prior to the commencement of the national stage under 35 U.S.C. 371(b) or (f). Section 1.273 as proposed also provides that if an application under 35 U.S.C. 111(a) which has been accorded a filing date pursuant to § 1.53(b) or (d) does not identify the attributable owner, or if an international application which complies with § 1.495(b) does not identify the attributable owner, the applicant will be notified and given a period of time within which to file a notice identifying the attributable owner to avoid abandonment. Section 1.273 as proposed also provides that the notice by the Office under § 1.273 may be combined with a notice under § 1.53(f) (providing for the completion of an application under 35 U.S.C. 111(a) for examination) or § 1.495(c) (providing for the filing of missing requirements in an international application that commenced the national stage under 35 U.S.C. 371). Thus, the applicant must identify the attributable owner on filing or in reply to a notice setting a time period within which the attributable owner must be identified. The Office generally issues a notice under § 1.53(f) (if necessary) within one to two months of the filing date of an application and sets a two-month time period for an applicant to comply with the requirements in the notice under § 1.53(f). The two-month time period for an applicant to comply with the requirements in the notice under § 1.53(f) may be extended under § 1.136(a) by up to five months. Thus, this process would permit an applicant up to eight months from the filing date of an application to provide the attributable ownership information. The failure to identify the attributable owner within the time period set under § 1.273 would result in abandonment of the application. An applicant would be able to revive an application abandoned for failure to identify the attributable owner within the time period set under § 1.273 under the provisions of § 1.137, provided that the failure to identify the attributable owner was unintentional.

The Office is proposing making this requirement applicable to applications under 35 U.S.C. 111(a) filed on or after the effective date of the final rule and to international applications that commenced the national stage under 35 U.S.C. 371(b) or (f) on or after the effective date of the final rule.

Section 1.275: Section 1.275 as proposed addresses the procedure to be followed if there is a change in attributable owner during the pendency of an application under 35 U.S.C. 111(a) or the pendency of an international application which complies with § 1.495(b). The requirements of proposed § 1.275 would not apply to provisional applications under 35 U.S.C. 111(b), and would not apply to international applications prior to the commencement of the national stage under 35 U.S.C. 371(b) or (f). Section 1.275 as proposed specifically provides that if there is such a change during the pendency of an application, the applicant has three months (non-extendable) from the date of the change to the attributable owner within which to file a notice identifying the current attributable owner.

The Office is proposing making this requirement applicable to applications under 35 U.S.C. 111(a) filed on or after the effective date of the final rule and to international applications that commenced the national stage under 35 U.S.C. 371(b) or (f) on or after the effective date of the final rule.

Section 1.277: Section 1.277 as proposed requires applicants to confirm that attributable owner information on record at the Office is accurate, or to provide updated information. Section 1.277 as proposed specifically provides if a notice of allowance under § 1.311 has been sent to the applicant, and if the attributable owner information on record at the Office is no longer correct, that the applicant must file a notice identifying the current attributable owner within three months (non-extendable) from the date of the mailing of the notice of allowance. If the attributable owner information on record at the Office is still correct, applicants can simply confirm that there have been no changes. To this end, the Office plans to provide a checkbox on the notice of allowance (PTOL-85b) (or checkbox via the electronic filing system) so that if the information on record at the Office remains correct, an applicant may simply check a box to so indicate. The failure to either update or confirm within three months (non-extendable) from the date of mailing of the notice of allowance would result in abandonment of the application. An applicant would be able to revive an application abandoned for failure to complete this action under the provisions of § 1.137, provided that the failure was unintentional.

The Office is proposing making this requirement applicable to applications in which a notice of allowance under 35 U.S.C. 151 and 1.311 is mailed on or after the effective date of the final rule.

Section 1.279: Section 1.279 as proposed provides for the situation in which the applicant has failed to notify the Office of a change to the attributable owner, or has indicated an incorrect or an incomplete attributable owner, despite a good faith effort to comply with these requirements. Section 1.279 as proposed specifically provides that if, despite a good faith effort by the applicant to notify the Office of the initial attributable owner, and of any changes to the attributable owner, in the manner required by §§ 1.273, 1.275, and 1.277, the failure or error may be excused in a pending application on petition accompanied by a showing of reason for the delay, error, or incompleteness and the petition fee set forth in § 1.17(g).

Section 1.279 as proposed is limited to excusing failure or errors in a pending application. Where there has been a failure to identify the attributable owner within the time period set under § 1.273, or after mailing the notice of allowance, a failure either to confirm that the information on file at the Office is correct, or to identify the current attributable owner within three months (non-extendable) from the date of mailing under § 1.277, that has resulted in abandonment of an application, the applicant's remedy (if the failure was unintentional) is by way of a petition to revive the abandoned application under the provisions of § 1.137.

Section 1.381: Section 1.381 as proposed provides for a patent holder to either: (1) Identify the current attributable owner prior to each maintenance fee payment; or (2) confirm prior to each maintenance fee payment that there has been no change to the attributable owner information most recently provided to the Office. Section 1.381 as proposed specifically provides that a notice identifying the current attributable owner must be filed within the period specified in § 1.362(d) or (e), but prior to the date the maintenance fee is paid, for each maintenance fee. Section 1.381 as proposed does not require that the notice be provided concurrently with the maintenance fee payment as the Office appreciates that maintenance fee payments are often provided as bulk payments in an automated fashion by a third party. Rather, § 1.381 as proposed provides a considerable “window” (within the six-month payment window in § 1.362(d) or the six-month surcharge window in § 1.362(e), but prior to the date the maintenance fee is paid) within which a notice identifying the current attributable owner must be provided. The Office welcomes comments on how to collect attributable owner information at the time of each maintenance fee, particularly in light of this practice of maintenance fee submission in bulk by third parties.

Section 1.381 as proposed also provides that if there has been no change to the attributable owner information most recently provided to the Office, the notice may simply indicate that there has been no change. The Office plans to provide a means (automated or a pre-printed form) such that if the current attributable owner has been previously provided to the Office, the patent owner may simply check the box or submit a pre-printed form to indicate that there has been no change to the attributable owner. Thus, a patent owner who provides updated attributable owner information whenever there is a change to the attributable owner during the life of the patent may simply check the box or submit a pre-printed form to indicate that that there has been no change to the attributable owner.

The Office is proposing making this requirement applicable to patents in which a maintenance fee is paid on or after the effective date of the final rule.

Section 1.383: Section 1.383 as proposed requires the patent holder to identify the current attributable owner for any patents involved in a PTAB trial proceeding. Section 1.383 as proposed specifically provides that the mandatory notice filed by a patent owner as required by § 42.8(a)(2) must also be accompanied by a notice identifying the current attributable owner. Section 42.8 requires that the petitioner and the patent owner each file a notice identifying ( inter alia ) each real party in interest owner for the party. See § 42.8(b)(1). Proposed § 1.383 differs from the current requirement in § 42.8 to identify each real party in interest in that proposed § 1.383: (1) Requires identification of each attributable owner (defined in § 1.271), rather than real party in interest; and (2) applies only to a patent owner. Section 1.383 as proposed further provides that if there is a change to the attributable owner during the pendency of the trial, the patent owner has twenty-one days (non-extendable) from the date of the change within which to file a notice identifying the current attributable owner. Section 1.383 provides a twenty-one-day period, rather than a three-month period, for updating any changes in attributable owners for a patent involved in a PTAB proceeding because § 42.8 requires that a notice must be filed with the Board within twenty-one days of a change in the information that is required to be in the mandatory notice. See 42.8(a)(3).

The Office is proposing making this requirement applicable to any trial proceeding in which the petition was filed on or after the effective date of the final rule.

Section 1.385: Section 1.385 as proposed requires a patent holder to identify the current attributable owner in a request for supplemental examination and during ex parte reexamination proceedings.

Section 1.385(a) as proposed pertains to supplemental examination. Section 1.385(a) as proposed provides that a request for supplemental examination under § 1.610 must also be accompanied by a notice identifying the current attributable owner. Thus, a request for supplemental examination would not be accorded a filing date unless it is accompanied by a notice identifying the current attributable owner. A request for supplemental examination may be filed only by the patent owner and a supplemental examination proceeding will not last longer than three months (35 U.S.C. 257(a)). Therefore, there are no provisions for a request for supplemental examination by a party other than the patent owner or for a change to the attributable owner during a supplemental examination.

Section 1.385(b) as proposed pertains to a request for ex parte reexamination by the patent holder. Section 1.385(b) as proposed specifically provides that a request for ex parte reexamination under § 1.510 by the patent holder must also be accompanied by a notice identifying the current attributable owner. Thus, a request for ex parte reexamination by the patent owner would not be accorded a filing date unless it is accompanied by a notice identifying the current attributable owner.

Section 1.385(c) as proposed pertains to a request for ex parte reexamination in which the patent owner has not identified the current attributable owner because the request was filed by a third party rather than the patent holder. Section 1.385(c) as proposed specifically provides that a reply or any other paper filed by the patent holder in an ex parte reexamination proceeding must be accompanied by a notice identifying the current attributable owner, unless such a notice has previously been filed by the patent holder. Thus, a reply by the patent holder in an ex parte reexamination would be considered incomplete unless it is accompanied by a notice identifying the current attributable owner, or unless such a notice has previously been filed. The phrase “unless such a notice has previously been filed by the patent owner” covers the situations in which: (1) The request for ex parte reexamination was by the patent holder and the patent holder identified the current attributable owner in the request for ex parte reexamination; or (2) the current attributable owner was identified in a previous reply by the patent holder. Section 1.385(c) as proposed further provides that if there is a change to the attributable owner during the pendency of the reexamination proceeding, the patent holder has three months (non-extendable) from the date of the change to the attributable owner within which to file a notice identifying the current attributable owner.

The Office is proposing making this requirement applicable to any supplemental examination or ex parte reexamination in which the request was filed on or after the effective date of the final rule.

Section 1.387: Section 1.387 as proposed addresses the situation in which the patent holder has failed to notify the Office of a change to the attributable owner, or has indicated an incorrect or an incomplete attributable owner, despite a good faith effort to comply with these requirements. Section 1.387 as proposed specifically provides that if, despite a good faith effort by the patent holder to notify the Office of the initial attributable owner, and of any changes to the attributable owner, in the manner required by §§ 1.273, 1.275, 1.277, 1.381, 1.383, and 1.385, the failure or error may be excused on petition accompanied by a showing of reason for the delay, error, or incompleteness and the petition fee set forth in § 1.17(g). Thus, proposed § 1.387 would be the applicable provision for corrections in an issued patent, regardless of whether the failure or error occurred during the application process ( i.e., there was a failure to comply with §§ 1.273, 1.275, or 1.277) or after the patent issued ( i.e., there was a failure to comply with §§ 1.381, 1.383, and 1.385).

This document proposes to require that the attributable owner, including the ultimate parent entity, be identified during the pendency of a patent application and at specified times during the life of a patent. The changes in this rulemaking do not change the substantive criteria of patentability and also do not place any limits or conditions on the patent owner's ability to transfer ownership of, or any other interest in, a patent or patent application. Therefore, the changes proposed in this rulemaking involve rules of agency practice and procedure, and/or interpretive rules. See Bachow Commc'ns Inc. v. F.C.C., 237 F.3d 683, 690 (D.C. Cir. 2001) (rules governing an application process are procedural under the Administrative Procedure Act); Inova Alexandria Hosp. v. Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (rules for handling appeals were procedural where they did not change the substantive standard for reviewing claims).

Accordingly, prior notice and opportunity for public comment are not required pursuant to 5 U.S.C. 553(b) or (c) (or any other law). See Cooper Techs, 536 F.3d at 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 U.S.C. 2(b)(2)(B), does not require notice and comment rulemaking for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice”) (quoting 5 U.S.C. 553(b)(A)). The Office, however, is publishing all of these proposed changes as it seeks the benefit of the public's views on the Office's proposed implementation.

The Office is proposing to amend the rules of patent practice to provide greater transparency concerning the ownership of pending patent applications and patents. The purpose of this rulemaking is to ensure the highest-quality patents, to facilitate patent examination at the Office, to enhance competition and increase incentives to innovate by providing innovators with information that will allow them to better understand the competitive environment in which they operate, enhance technology transfer and reduce the costs of transactions for patent rights by making patent ownership information more readily and easily available, to reduce risk of abusive patent litigation by helping the public defend itself against risk of abusive assertions by providing more information about the parties that have an interest in patents or patent applications, and to level the playing field for innovators.

The objective of the proposed rules is to provide greater transparency concerning the ownership of pending patent applications and patents to facilitate patent examination at the Office by requiring that the attributable owner, including the ultimate parent entity, be identified during the pendency of a patent application and at specified times during the life of a patent, and to further ensure that the ownership information the Office provides to the public is accurate and not misleading.

The proposed changes to require patent applicants and patent owners to regularly update ownership information when the applicant or patent owner is involved in a proceeding before the Office will facilitate patent examination and other parts of the Office's internal processes by helping to: (1) Ensure that a “power of attorney” is current in each application or proceeding before the Office; (2) avoid potential conflicts of interest for Office personnel; (3) determine the scope of prior art under the common ownership exception under 35 U.S.C. 102(b)(2)(C) and uncover instances of double patenting; (4) verify that the party making a request for a post-issuance proceeding is a proper party for the proceeding; and (5) ensure that the information the Office provides to the public concerning published applications and issued patents is accurate and not misleading.

Beyond providing these benefits to the Office, collecting attributable owner information and making it available may: (1) Enhance competition and increase incentives to innovate by providing innovators with information to allow them to better understand the competitive environment in which they operate; (2) enhance technology transfer and reduce the costs of transactions for patent rights since patent ownership information will be more readily and easily accessible; (3) help the public defend itself against abusive patent assertion or litigation by providing more information about all the parties that have an interest in the patent or patent application; and (4) level the playing field for innovators.

The legal basis for the proposed rules is 35 U.S.C. 2(b)(2), which authorizes the Office to establish regulations, not inconsistent with law, which “govern the conduct of proceedings in the Office.” 35 U.S.C. 2(a)(2)(A); see also Star Fruits S.N.C., 393 F.3d at 1282 (quoting 35 U.S.C. 2(b)(2)), and Cooper Techs., 536 F.3d at 1335 (“To comply with section 2(b)(2)(A), a Patent Office rule must be `procedural'— i.e., it must `govern the conduct of proceedings in the Office.’ ”). Pursuant to this authority, the Office may require the submission of attributable owner information that is reasonably necessary to proper examination or treatment of the matter at hand, provided that such requests are not arbitrary or capricious. See Star Fruits, 393 F.3d at 1283-84.

Further legal basis for the proposed rule comes from 35 U.S.C. 2(a). Because the Office publishes information it possesses related to an application or patent (subject to 35 U.S.C. 122), the Office has an interest in ensuring that such information is not misleading. The Office currently receives (and publishes) only assignment information that is voluntarily submitted by the applicant or patent owner. There is currently no requirement that changes in assignment information be updated, though current law protects against certain types of fraud if such updating occurs. See 35 U.S.C. 261. Consequently, the information the Office has on file may be outdated, which may be misleading to the public. Ensuring that the Office can provide information to the public that is not misleading is consistent with several statutory provisions directing the Office to disseminate information to the public as well as those directing the Office to provide access to information through electronic means. See 35 U.S.C. 2(a)(2) (creating a duty of “disseminating to the public information with respect to patents”); 10(a)(4) (providing for publication of information, including “annual indexes of . . . patentees”); 10(b) (allowing the Director to publish the specified information set forth in item (4) of subsection 35 U.S.C. 10(a) of this section in a publication format “desirable for the use of the Office”) and 41(i) (creating a duty to provide access to information electronically).

A. Size Standard and Description of Entities Affected. The Small Business Administration (SBA) small business size standards applicable to most analyses conducted to comply with the Regulatory Flexibility Act are set forth in 13 CFR 121.201. These regulations generally define small businesses as those with fewer than a specified maximum number of employees or less than a specified level of annual receipts for the entity's industrial sector or North American Industry Classification System (NAICS) code. As provided by the Regulatory Flexibility Act, and after consultation with the Small Business Administration, the Office formally adopted an alternate size standard as the size standard for the purpose of conducting an analysis or making a certification under the Regulatory Flexibility Act for patent-related regulations. See Business Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR 67109 (Nov. 20, 2006), 1313 Off. Gaz. Pat. Office 60 (Dec. 12, 2006). This alternate small business size standard is SBA's previously established size standard that identifies the criteria entities must meet to be entitled to pay reduced patent fees. See 13 CFR 121.802. If patent applicants identify themselves on a patent application as qualifying for reduced patent fees, the Office captures this data in the Patent Application Location and Monitoring (PALM) database system, which tracks information on each patent application submitted to the Office.

Unlike the SBA small business size standards set forth in 13 CFR 121.201, the size standard for the Office is not industry-specific. Specifically, the Office's definition of small business concern for Regulatory Flexibility Act purposes is a business or other concern that: (1) Meets the SBA's definition of a “business concern or concern” set forth in 13 CFR 121.105; and (2) meets the size standards set forth in 13 CFR 121.802 for the purpose of paying reduced patent fees, namely, an entity: (a) Whose number of employees, including affiliates, does not exceed 500 persons; and (b) which has not assigned, granted, conveyed, or licensed (and is under no obligation to do so) any rights in the invention to any person who made it and could not be classified as an independent inventor, or to any concern which would not qualify as a non-profit organization or a small business concern under this definition. See Business Size Standard for Purposes of United States Patent and Trademark Office Regulatory Flexibility Analysis for Patent-Related Regulations, 71 FR at 67112, 1313 Off. Gaz. Pat. Office at 63.

B. Estimate of Number of Entities Affected. The proposed rules will apply to all entities, including small or micro entity patent applicants or patent owners, that: (1) File a patent application; (2) change attributable owners during the pendency of a patent application; (3) pay an issue fee in an allowed application; (4) pay a maintenance fee for a patent; (5) file a request for supplemental examination under 35 U.S.C. 257(a); (6) file a request for ex parte reexamination under 35 U.S.C. 302; or (7) have a patent involved in a third-party requested ex parte reexamination under 35 U.S.C. 302, or a trial proceeding before the PTAB, such as any post grant review under 35 U.S.C. 321, inter partes review under 35 U.S.C. 311, covered business method patent review under section 18 of the AIA, or derivation proceeding under 35 U.S.C 135.

Based upon the information in the Office's PALM system, the Office received approximately 437,000 new applications (including continuing applications but not requests for continued examination) in fiscal year 2013, of which approximately 131,000 were by small or micro entity applicants. Thus, the Office estimates that 437,000 patent applicants, of which 131,000 are small or micro entities, will need to provide attributable owner information each year due to the requirement to identify the attributable owner at the time a patent application is initially filed (or shortly thereafter).

Based upon the information in the Office's PALM system, there are approximately 1,249,000 patent applications currently (in October of 2013) pending before the Office, of which 337,000 are by small or micro entity applicants. Since the Office does not currently require applicants and patent holders to disclose changes in the attributable owner of an application or patent, the Office does not have information on how often there is a change in attributable owner of an application during the pendency of a patent application. The Office's assignment records, however, indicate that about ninety-two percent of applications have recorded assignment documents at the time of patent grant, but fewer than four percent of applications have a second recorded assignment document each year reflecting some type of ownership transfer during the pendency of a patent application. The high percentage of patent applicants who currently submit an assignment document for recordation and the relatively low percentage of patent applicants who submit a second assignment document for recordation leads to the inference that changes in ownership during the pendency of a patent application are relatively infrequent ( e.g., changes in ownership will occur in fewer than four percent of applications each year). Thus, the Office estimates that 50,000 (four percent of 1,249,000, rounded up to the nearest thousand) patent applicants, of which 14,000 (four percent of 337,000, rounded up to the nearest thousand) are small or micro entities, will need to update attributable owner information each year due to the requirement to update attributable owner information when there is a change in ownership during the pendency of a patent application.

Based upon the information in the Office's Revenue Accounting Management (RAM) system, the Office received the following fee payments in fiscal year 2013: (1) 296,481 issue fee payments (68,574 by small or micro entity applicants); (2) 153,875 first stage maintenance fee payments (27,076 by small or micro entity patent owners); (3) 99,249 second stage maintenance fee payments (16,692 by small or micro entity patent owners); and (4) 75,470 third stage maintenance fee payments (11,273 by small or micro entity patent owners). Thus, the Office estimates that 297,000 (266,481 rounded up to the nearest thousand) patent applicants, of which 69,000 (68,574 rounded up to the nearest thousand) are small or micro entities, will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the current attributable owner has been previously identified) at the time of issue fee payment, and the Office estimates that 329,000 (153,875 plus 99,249 plus 75,470, rounded up to the nearest thousand), of which 55,000 (27,076 plus 16,692 plus 11,273, rounded up to the nearest thousand) are small or micro entities, will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the attributable owner information currently on record at the Office is correct) at the time each maintenance fee is paid.

Based upon the information from the Office's Central Reexamination Unit, there are fewer than 800 requests for ex parte reexamination filed each year. In addition, the Office's assignment records show that fewer than three percent of the patents in force have a recorded assignment document reflecting some type of ownership transfer during the life of the patent, which leads to the inference that changes in ownership during the life of a patent are relatively infrequent ( e.g., changes in ownership will occur in fewer than three percent of patents). Thus, the Office estimates that approximately 1,000 (800 plus three percent of 800 (800 plus 24) rounded up to the nearest thousand) patent owners will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the real party in interest information currently on record at the Office is correct) in an ex parte reexamination proceeding or when there is a change in ownership during an ex parte reexamination proceeding.

The supplemental examination provisions have been enacted as part of the AIA. The Office has received thirty-one requests for supplemental examination since September 16, 2012, the effective date of the supplemental examination provisions of the AIA. Thus, the Office estimates that approximately 100 (31 rounded up to the nearest hundred) patent owners will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the real party in interest information currently on record at the Office is correct) at the time the patent owner files a request for supplemental examination.

The PTAB trial provisions (post grant review under 35 U.S.C. 321, inter partes review under 35 U.S.C. 311, covered business method patent review under section 18 of the AIA, or derivation proceedings under 35 U.S.C 135) have been enacted as part of the AIA. The Office received 563 petitions for a PTAB trial proceeding during fiscal year 2013, but received between eighty and one hundred petitions for a PTAB trial proceeding during each of August, September, and October of 2013. Thus, the Office estimates that approximately 2,000 (100 per month multiplied by 12 months (1,200) plus three percent of 1200 (1,200 plus 360), rounded up to the nearest thousand) patent owners will need to update attributable owner information each year based upon the filing of a petition for a PTAB trial proceeding.

Summary of Number of Entities Affected: Based upon the foregoing, the Office estimates that: (1) 437,000 (131,000 small or micro entity) patent applicants will need to provide attributable owner information each year due to the requirement to identify the attributable owner at the time a patent application is initially filed (or shortly thereafter); (2) 50,000 (14,000 small or micro entity) patent applicants will need to update attributable owner information each year due to the requirement to update attributable owner information when there is a change in ownership during the pendency of a patent application; (3) 297,000 (69,000 small or micro entity) patent applicants will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the current attributable owner information on record at the Office is correct) at the time of issue fee payment; (4) 329,000 (55,000 small or micro entity) patent owners will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the attributable owner information currently on record at the Office is correct) at the time each maintenance fee is paid; (5) 1,000 patent owners will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the real party in interest information currently on record at the Office is correct) in an ex parte reexamination proceeding, or the requirement to identify the attributable owner when there is a change in ownership during an ex parte reexamination proceeding; (6) 100 patent owners will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the attributable owner information currently on record at the Office is correct) at the time the patent owner files a request for supplemental examination; and (7) 2,000 patent owners will need to update attributable owner information each year due to the requirement to identify the attributable owner (or verify that the attributable owner information currently on record at the Office is correct) at the time the patent becomes involved a PTAB post grant review, inter partes review, covered business method patent review, derivation proceeding, or the requirement to identify the attributable owner when there is a change in ownership during a PTAB post grant review, inter partes review, covered business method patent review, or derivation proceeding.

4. Description of the projected reporting, recordkeeping and other compliance requirements of the proposed rules, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record: The proposed rules will apply to all entities, including any small or micro entity patent applicant or patent holder, that: (1) File a patent application; (2) change attributable owners during the pendency of a patent application; (3) pay an issue fee in an allowed application; (4) pay a maintenance fee for a patent; (5) file a request for supplemental examination under 35 U.S.C. 257(a); (6) file a request for ex parte reexamination under 35 U.S.C. 302; or (7) have a patent involved in a third-party requested ex parte reexamination under 35 U.S.C. 302, or a trial proceeding before the PTAB, such as any post grant review under 35 U.S.C. 321, inter partes review under 35 U.S.C. 311, covered business method patent review under section 18 of the AIA, or derivation proceeding under 35 U.S.C 135.

A patent attorney or general practice attorney would have the type of professional skills necessary for providing the attributable owner information required by the proposed rules. As discussed previously, the Office issued a request for comments in November of 2011 ( Request for Comments on Eliciting More Complete Patent Assignment Information, 76 FR at 72372 et seq. ) and issued a notice of a roundtable and request for comments in November of 2012 ( Notice of Roundtable on Proposed Requirements for Recordation of Real Party-in-Interest Information Throughout Application Pendency and Patent Term, 77 FR at 70385 et seq. ). The Office received input at this roundtable, including the suggestion that providing the attributable owner information might have a transaction cost of $100, depending upon the inclusiveness of the definition of attributable owner (which was discussed under the rubric of “real party in interest” at the roundtable). It was also suggested that the transaction could be less costly, and less frequently incurred, because reporting would occur at times applicants were already working with the application and would require ownership information that was readily known and could be easily reported. As described further below, given the Office's records concerning assignment recordation and feedback at the roundtable, the Office estimates that in many instances, reporting ownership information in compliance with this proposed rule will have negligible costs. Applicants or patentees will often be reporting information readily known ( e.g., that the patent is owned by the inventor, or that the patent is owned by the employer of the inventor to whom it has been assigned) and in many instances will be providing this information at a time they are otherwise interacting with the Office ( e.g., upon application, upon issue, during a post-grant proceeding). This seems likely to have a minimal cost, and to require minimal time to report. Given the Office's records suggesting that many applications do not have more than one recorded assignment, in many instances applicants or patentees will likely be merely confirming the ownership information is unchanged, which should have a negligible cost.

As noted previously, the Office's assignment records indicate that approximately ninety-two percent of patent applications have a recorded assignment at the time of grant, and four percent of patent applications have a second recorded assignment each year reflecting some kind of ownership change. Approximately eight percent of applications have no assignment transaction, and presumably are filed by the original owners. This suggests that for most applications, there would be a single reporting of attributable owner, with no changes needed to be reported at later times. At subsequent instances when reporting was required ( e.g., upon issue), the owner would merely be confirming that no change had occurred, which would have negligible cost. The Office presumes that reporting costs for these applications would be negligible, because the applicants would be indicating that they are the attributable owners, providing the same information they are providing elsewhere in the application. In summary, the Office estimates that in many instances, when reporting is required under the proposed rule, applicants or patentees will be providing information that is readily known and available to them, and that can be provided easily and at negligible cost during the application process, at grant, or after grant. The Office estimates that in instances where the owner of a large number of patents reports information in compliance with this proposal, economies of scale would likely work to reduce the cost of reporting ( e.g., reporting ownership information at the same time). The Office estimates that only a minority of instances would present multiple transfers that would potentially require greater costs to meet these reporting requirements. In a majority of instances, the Office estimates that the costs to report would be minimal.

The Office welcomes comments from the public specifically on the issue of estimating costs of compliance with the proposed rule, including comments on possible transaction costs, frequencies of reporting changes in information, and possible economies of scale in reporting.

5. Description of any significant alternatives to the rules which accomplish the stated objectives of applicable statutes and which minimize any significant economic impact of the rules on small entities: This analysis considered significant alternatives such as: (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities. See 5 U.S.C. 603.

With respect to the proposed requirement for updating any changes in attributable owners during the application process, the Office considered requiring updated attributable owner information with each reply to an Office action. The Office has instead proposed requiring updating only if there is a change to the attributable owner during the pendency of an application, with a single confirmation at the time of issuance, to reduce the need for a periodic review of attributable owner information.

With respect to the proposed requirement for updating any changes in attributable owners after the patent is granted, the Office considered requiring updating attributable owner information whenever there was a post patent proceeding ( e.g., with requests for a certificate of correction under 35 U.S.C. 254 or 255, or requests to correct inventorship under 35 U.S.C. 256).

With respect to differing compliance or reporting requirements or timetables that take into account the resources available to small entities, the Office considered requiring updating attributable owner information at fewer instances during the pendency of an application ( e.g., only on filing and at allowance), but such a proposal would not achieve the objection of having accurate and up-to-date ownership information and providing greater public transparency concerning the ownership of pending patent applications and patents. The proposed rules minimize the “periodic” reporting requirement by permitting an applicant or patent owner who updates attributable owner information whenever there is a change in the attributable owner to simply confirm that there has been no change to the attributable owner.

With respect to the clarification, consolidation, or simplification of compliance and reporting requirements under the rule for such small entities, the proposed rules track existing regulations overseen by the Federal Trade Commission ( e.g., the definition of ultimate parent entity in 16 CFR 801.1(a)(3), and the definition of entity in 16 CFR 801.1(a)(2)) rather than creating new definitions, to minimize the need for additional investigation and analysis of ownership structures. The simplicity or complexity of the proposed definition of attributable owner with respect to any particular application or patent is driven by the simplicity or complexity of the ownership arrangement of the particular application or patent, which is ultimately within the control of the applicant or patent owner. Finally, as discussed previously, the proposed rules minimize the reporting requirement by permitting an applicant or patent owner who is facing a requirement to identify attributable owner information to simply confirm that there has been no change to the attributable owner.

With respect to an exemption from coverage of the rule, or any part thereof, for such small entities, such an exemption would defeat the objective of having accurate and up-to-date ownership information and providing greater public transparency concerning the ownership of pending patent applications and patents.

Finally, the proposed rules do not involve design standards.

6. Identification, to the extent practicable, of all relevant Federal rules which may duplicate, overlap or conflict with the proposed rules: The Office is the sole agency of the United States Government responsible for administering the provisions of title 35, United States Code, pertaining to examination and granting patents. Therefore, no other Federal, state, or local entity shares jurisdiction over the examination and granting of patents.

Other countries, however, have their own patent laws, and an entity desiring a patent in a particular country must make an application for patent in that country, in accordance with the applicable law. Although the potential for overlap exists internationally, this cannot be avoided except by treaty (such as the Paris Convention for the Protection of Industrial Property, the Patent Law Treaty (PLT), or the Patent Cooperation Treaty (PCT)). Nevertheless, the Office believes that there are no other duplicative or overlapping rules.

C. Executive Order 12866 (Regulatory Planning and Review): This rulemaking has been determined to be significant for purposes of Executive Order 12866 (Sept. 30, 1993).

D. Executive Order 13563 (Improving Regulation and Regulatory Review): The Office has complied with Executive Order 13563. Specifically, the Office has, to the extent feasible and applicable: (1) Made a reasoned determination that the benefits justify the costs of the rule; (2) tailored the rule to impose the least burden on society consistent with obtaining the regulatory objectives; (3) selected a regulatory approach that maximizes net benefits; (4) specified performance objectives; (5) identified and assessed available alternatives; (6) involved the public in an open exchange of information and perspectives among experts in relevant disciplines, affected stakeholders in the private sector and the public as a whole, and provided on-line access to the rulemaking docket; (7) attempted to promote coordination, simplification, and harmonization across Government agencies and identified goals designed to promote innovation; (8) considered approaches that reduce burdens and maintain flexibility and freedom of choice for the public; and (9) ensured the objectivity of scientific and technological information and processes.

E. Executive Order 13132 (Federalism): This rulemaking does not contain policies with federalism implications sufficient to warrant preparation of a Federalism Assessment under Executive Order 13132 (Aug. 4, 1999).

F. Executive Order 13175 (Tribal Consultation): This rulemaking will not: (1) Have substantial direct effects on one or more Indian tribes; (2) impose substantial direct compliance costs on Indian tribal governments; or (3) preempt tribal law. Therefore, a tribal summary impact statement is not required under Executive Order 13175 (Nov. 6, 2000).

G. Executive Order 13211 (Energy Effects): This rulemaking is not a significant energy action under Executive Order 13211 because this rulemaking is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Therefore, a Statement of Energy Effects is not required under Executive Order 13211 (May 18, 2001).

H. Executive Order 12988 (Civil Justice Reform): This rulemaking meets applicable standards to minimize litigation, eliminate ambiguity, and reduce burden as set forth in sections 3(a) and 3(b)(2) of Executive Order 12988 (Feb. 5, 1996).

I. Executive Order 13045 (Protection of Children): This rulemaking does not concern an environmental risk to health or safety that may disproportionately affect children under Executive Order 13045 (Apr. 21, 1997).

J. Executive Order 12630 (Taking of Private Property): This rulemaking will not effect a taking of private property or otherwise have taking implications under Executive Order 12630 (Mar. 15, 1988).

K. Congressional Review Act: Under the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801-808), the United States Patent and Trademark Office will submit a report containing any final rule resulting from this rulemaking and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the Government Accountability Office.

L. Unfunded Mandates Reform Act of 1995: The changes set forth in this document do not involve a Federal intergovernmental mandate that will result in the expenditure by State, local, and tribal governments, in the aggregate, of 100 million dollars (as adjusted) or more in any one year, or a Federal private sector mandate that will result in the expenditure by the private sector of 100 million dollars (as adjusted) or more in any one year, and will not significantly or uniquely affect small governments. Therefore, no actions are necessary under the provisions of the Unfunded Mandates Reform Act of 1995. See 2 U.S.C. 1501 et seq.

M. National Environmental Policy Act: This rulemaking will not have any effect on the quality of the environment and is thus categorically excluded from review under the National Environmental Policy Act of 1969. See 42 U.S.C. 4321 et seq.

N. National Technology Transfer and Advancement Act: The requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) are not applicable because this rulemaking does not contain provisions which involve the use of technical standards.

O. Paperwork Reduction Act: The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ) requires that the Office consider the impact of paperwork and other information collection burdens imposed on the public. This rulemaking involves information collection requirements which are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3549).

This rulemaking proposes to require that patent applicants identify the attributable owner or owners on filing of an application (or shortly thereafter), within three months of any change in attributable owner during the pendency of the application, and when the issue fee is due for an application that has been allowed. This rulemaking also proposes to require that patent holders identify the attributable owner when a maintenance fee is due, and when a patent becomes involved in certain post-issuance proceedings at the Office, including in supplemental examination, ex parte reexamination, or a trial proceeding before the PTAB. This rulemaking further proposes to provide that an applicant or patent owner may correct a good faith failure to notify the Office of a change to the attributable owner, or correct an indication of an incorrect or an incomplete attributable owner, by filing a petition accompanied by a showing of reason for the delay, error, or incompleteness.

The collection of information that would be triggered by these proposed requirements has been submitted to OMB under OMB control number 0651-00xx. The proposed collection, containing the basis for the following summary of the estimated annual reporting burdens, will be available at OMB's Information Collection Review Web site: www.reginfo.gov/public/do/PRAMain. The title, description and respondent description of this information collection, with an estimate of the annual reporting burdens, follows:

Title of Collection: Identification of Attributable Owner.

OMB Control Number: 0651-00xx.

Needs and Uses: This information collection is necessary in order to provide the Office and the public with up-to-date information concerning the attributable owner of a patent or patent application. The Office will use the information collected to facilitate patent examination and other parts of the Office's internal processes by helping to: (1) Ensure that a “power of attorney” is current in each application or proceeding before the Office; (2) avoid potential conflicts of interest for Office personnel; (3) determine the scope of prior art under the common ownership exception under 35 U.S.C. 102(b)(2)(C) and uncover instances of double patenting; (4) verify that the party making a request for a post-issuance proceeding is a proper party for the proceeding; and (5) ensure that the information the Office provides to the public concerning published applications and issued patents is accurate and not misleading.

Method of Collection: By mail, facsimile, hand delivery, or electronically to the Office.

Affected Public: Individuals or households; businesses or other for-profits; and not-for-profit institutions.

Estimated Number of Respondents: 1,116,300 responses per year.

Estimated Time per Response: The Office estimates that it will take the public, on average, approximately 6 minutes (0.1 hour) to identify the attributable owner in an application or patent and approximately 1 hour to correct a good faith failure to notify the Office of a change to the attributable owner (or to correct a good faith but incorrect or incomplete indication of attributable owner).

Estimated Total Annual Respondent Burden Hours: 111,810 hours per year (1,116,100 responses times 0.1 hours plus 200 responses times 1 hour).

Estimated Total Annual (Hour) Respondent Cost Burden: $43,494,090 per year (111,810 hours times the $389/hour attorney rate suggested by the AIPLA 2013 Economic Survey).

The Office is soliciting comments to: (1) Evaluate whether the proposed information requirement is necessary for the proper performance of the functions of the Office, including whether the information will have practical utility; (2) evaluate the accuracy of the Office's estimate of the burden; (3) enhance the quality, utility, and clarity of the information to be collected; and (4) minimize the burden of collecting the information on those who are to respond, including by using appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.

Please send comments related to this proposed collection of information under the Paperwork Reduction Act on or before March 25, 2014 to Mail Stop Comments—Patents, Commissioner for Patents, P.O. Box 1450, Alexandria, VA, 22313-1450, marked to the attention of Raul Tamayo, Senior Legal Advisor, Office of Patent Legal Administration, Office of the Deputy Commissioner for Patent Examination Policy. Comments should also be submitted to the Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10202, 725 17th Street NW., Washington, DC 20503, Attention: Desk Officer for the United States Patent and Trademark Office.

Notwithstanding any other provision of law, no person is required to respond to, nor shall a person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the Paperwork Reduction Act, unless that collection of information displays a currently valid OMB control number.

For the reasons set forth in the preamble, 37 CFR part 1 is proposed to be amended as follows:

The first air quality standards for PM 2.5 were established on July 18, 1997 (62 FR 38652). EPA promulgated an annual standard at a level of 15 micrograms per cubic meter (μg/m 3 ), based on a three-year average of annual mean PM 2.5 concentrations (the 1997 annual PM 2.5 standard). In the same rulemaking, EPA promulgated a 24-hour standard of 65 μg/m 3 based on a three-year average of the 98th percentile of 24-hour concentrations.

On January 5, 2005 (70 FR 944, 1014), EPA published air quality area designations for the 1997 PM 2.5 NAAQS. In that rulemaking action, EPA designated the Charleston Area as nonattainment for the 1997 annual PM 2.5 NAAQS. The Charleston Area is comprised of Kanawha and Putnam Counties. See 40 CFR 81.349.

On October 17, 2006 (71 FR 61144), EPA retained the annual average standard at 15 μg/m 3 but revised the 24-hour standard to 35 μg/m 3 , based again on the three-year average of the 98th percentile of the 24-hour concentrations (the 2006 annual PM 2.5 standard) . On November 13, 2009 (74 FR 58688), EPA published designations for the 2006 24-hour PM 2.5 standard, which became effective on December 14, 2009. In that rulemaking action, EPA designated the Charleston Area as nonattainment for the 2006 24-hour PM 2.5 NAAQS. See 74 FR 58775 and 40 CFR 81.349.

In response to legal challenges of the annual standard promulgated in 2006, the DC Circuit Court remanded the 2006 annual standard to EPA for further consideration. See American Farm Bureau Federation and National Pork Producers Council, et. al. v. EPA, 559 F.3d 512 (D.C. Cir. 2009). However, given that the 1997 annual and the 2006 annual PM 2.5 standards are essentially identical, attainment of the 1997 annual PM 2.5 standard would also indicate attainment of the remanded 2006 annual PM 2.5 standard. Since the Charleston Area is designated nonattainment for the1997 annual and the 2006 24-hour PM 2.5 NAAQS, today's proposed rulemaking action addresses the redesignation to attainment of the Charleston Area for these standards.

On October 11, 2011 (76 FR 62640) and November 18, 2011 (76 FR 71450), EPA determined that the Charleston Area has attained the 1997 annual and 2006 24-hour PM 2.5 NAAQS, respectively. Pursuant to 40 CFR 51.1004(c) and based on these determinations, the requirements for the Charleston Area to submit an attainment demonstration and associated reasonably available control measures (RACM), a reasonable further progress (RFP) plan, contingency measures, and other planning SIP revisions related to the attainment of either the 1997 annual and 2006 24-hour PM 2.5 NAAQS are suspended until such time as: the Area is redesignated to attainment for each standard, at which time the requirements no longer apply; or EPA determines that the Area has again violated any of the standards, at which time such plans are required to be submitted.

On December 12, 2012 (77 FR 73923), EPA approved a 2002 emissions inventory for the 1997 annual PM 2.5 NAAQS for the Charleston Area. The emissions inventory was submitted with West Virginia's attainment plan for the 1997 annual PM 2.5 NAAQS on November 4, 2009, to meet the requirements of section 172(c)(3) of the CAA, one of the criteria for redesignation. The emissions inventory included emissions for 2002 that cover the general source categories of point, area, nonroad mobile, onroad mobile and biogenic sources which addressed not only direct emissions of PM 2.5 , but also emissions of all precursors with the potential to participate in PM 2.5 formation, i.e., SO 2 , NO x , VOC, and NH 3 .

On December 6, 2012, the State of West Virginia through the West Virginia Department of Environmental Protection (WVDEP) formally submitted a request to redesignate the Charleston Area from nonattainment to attainment for the 1997 annual and the 2006 24-hour PM 2.5 NAAQS. Concurrently, WVDEP submitted maintenance plans for the Area as SIP revisions to ensure continued attainment throughout the Area over the next 10 years for the 1997 annual and the 2006 24-hour PM 2.5 NAAQS. The maintenance plans submitted for each of the standards are essentially the same, thus EPA is proposing to approve as a SIP revision a maintenance plan for both the 1997 annual and the 2006 24-hour PM 2.5 NAAQS. The December 6, 2012 submittal also includes a 2008 emissions inventory for PM 2.5 , SO 2 , and NO x for the 2006 24-hour PM 2.5 NAAQS, which WVDEP supplemented on June 24, 2013 to include emissions of VOC and NH 3 . EPA is proposing to approve the 2008 emissions inventory for the 2006 24-hour PM 2.5 NAAQS for PM 2.5 , SO 2 , NO x , VOC, and NH 3 in order to meet the emissions inventory requirement of section 172(c)(3) of the CAA.

In this proposed rulemaking action, EPA is taking into account two decisions of the DC Circuit Court. In the first of the two DC Circuit Court decisions, the DC Circuit Court, on August 21, 2012, issued EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 (D.C. Cir. 2012), which vacated and remanded CSAPR and ordered EPA to continue administering the Clean Air Interstate Rule (CAIR) “pending . . . development of a valid replacement.” EME Homer City at 38. The DC Circuit Court denied all petitions for rehearing on January 24, 2013. EPA and other parties filed for certiorari to the Supreme Court, and on June 24, 2013, the Supreme Court granted certiorari on EPA's petition for appeal of EME Homer City Generation. See EME Homer City Generation, L.P. v. EPA, 696 F.3d 7 (D.C. Cir. 2012), cert. granted, 570 U.S. — (2013). Nonetheless, EPA intends to continue to act in accordance with the EME Homer City opinion. In the second decision, on January 4, 2013, in Natural Resources Defense Council (NRDC) v. EPA, the DC Circuit Court remanded to EPA the “Final Clean Air Fine Particle Implementation Rule” (72 FR 20586, April 25, 2007) and the “Implementation of the New Source Review (NSR) Program for Particulate Matter Less than 2.5 Micrometers (PM 2.5 )” final rule (73 FR 28321, May 16, 2008). 706 F.3d 428 (D.C. Cir. 2013).

The CAA provides the requirements for redesignating a nonattainment area to attainment. Specifically, section 107(d)(3)(E) of the CAA allows for redesignation providing that: (1) EPA determines that the area has attained the applicable NAAQS; (2) EPA has fully approved the applicable implementation plan for the area under section 110(k) of the CAA; (3) EPA determines that the improvement in air quality is due to permanent and enforceable reductions in emissions resulting from implementation of the applicable SIP and applicable Federal air pollutant control regulations and other permanent and enforceable reductions; (4) EPA has fully approved a maintenance plan for the area as meeting the requirements of section 175A of the CAA; and (5) the state containing such area has met all requirements applicable to the area under section 110 and part D of the CAA.

EPA has provided guidance on redesignation in the “State Implementation Plans; General Preamble for the Implementation of Title I of the CAA Amendments of 1990,” (57 FR 13498, April 16, 1992) (the “General Preamble”) and has provided further guidance on processing redesignation requests in the following documents: (1) “Procedures for Processing Requests to Redesignate Areas to Attainment,” Memorandum from John Calcagni, Director, Air Quality Management Division, September 4, 1992 (hereafter referred to as the “1992 Calcagni Memorandum”); (2) “State Implementation Plan (SIP) Actions Submitted in Response to Clean Air Act (CAA) Deadlines,” Memorandum from John Calcagni, Director, Air Quality Management Division, October 28, 1992; and (3) “Part D New Source Review (Part D NSR) Requirements for Areas Requesting Redesignation to Attainment,” Memorandum from Mary D. Nichols, Assistant Administrator for Air and Radiation, October 14, 1994.

Section 175A of the CAA sets forth the elements of a maintenance plan for areas seeking redesignation from nonattainment to attainment. Under section 175A of the CAA, the plan must demonstrate continued attainment of the applicable NAAQS for at least 10 years after approval of a redesignation of an area to attainment. Eight years after the redesignation, the state must submit a revised maintenance plan demonstrating that attainment will continue to be maintained for the 10 years following the initial 10-year period. To address the possibility of future NAAQS violations, the maintenance plan must contain such contingency measures, with a schedule for implementation, as EPA deems necessary to assure prompt correction of any future PM 2.5 violations.

The 1992 Calcagni Memorandum provides additional guidance on the content of a maintenance plan. The memorandum states that a PM 2.5 maintenance plan should address the following provisions: (1) An attainment emissions inventory; (2) a maintenance demonstration showing maintenance for 10 years; (3) a commitment to maintain the existing monitoring network; (4) verification of continued attainment; and (5) a contingency plan to prevent or correct future violations of the NAAQS.

EPA is proposing to take several rulemaking actions related to the redesignation of the Charleston Area to attainment for both the 1997 annual and the 2006 24-hour PM 2.5 NAAQS. EPA is proposing to find that the Charleston Area meets the requirements for redesignation for the 1997 annual and the 2006 24-hour PM 2.5 NAAQS under section 107(d)(3)(E) of the CAA. EPA is thus proposing to approve West Virginia's request to change the legal designation for the Charleston Area from nonattainment to attainment for the 1997 annual and the 2006 24-hour PM 2.5 NAAQS.

EPA is also proposing to approve the associated maintenance plans for the Charleston Area as a revision to the West Virginia SIP for the 1997 annual and the 2006 24-hour PM 2.5 NAAQS, including the insignificance determinations for PM 2.5 and NO X for the onroad motor source contribution of the Charleston Area for both the 1997 annual and the 2006 24-hour PM 2.5 NAAQS. The approval of the maintenance plans is one of the CAA criteria for redesignation of the Charleston Area to attainment for both standards. West Virginia's maintenance plans are designed to ensure continued attainment in the Charleston Area for 10 years after redesignation for both the 1997 annual and the 2006 24-hour PM 2.5 NAAQS.

EPA previously determined that the Charleston Area has attained both the 1997 annual and the 2006 24-hour PM 2.5 NAAQS, therefore, EPA is proposing to find that the Area continues to attain both standards. See 76 FR 62640, October 11, 2011 and 76 FR 71450, November 18, 2011. EPA is also proposing to approve the 2008 comprehensive emissions inventory that includes PM 2.5, SO 2 NO X , VOC, and NH 3 for the Charleston Area as part of the West Virginia SIP for the 2006 24-hour PM 2.5 NAAQS in order to meet the requirements of section 172(c)(3) of the CAA.

EPA recently promulgated CSAPR (76 FR 48208, August 8, 2011), to replace CAIR, which has been in place since 2005. See 76 FR 59517. CAIR requires significant reductions in emissions of SO 2 and NO X from electric generating units to limit the interstate transport of these pollutants and the ozone and fine particulate matter they form in the atmosphere. See 76 FR 70093. The DC Circuit Court initially vacated CAIR, North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), but ultimately remanded the rule to EPA without vacatur to preserve the environmental benefits provided by CAIR, North Carolina v. EPA, 550 F.3d 1176, 1178 (D.C. Cir. 2008).

On December 30, 2011, the DC Circuit Court issued an order addressing the status of CSAPR and CAIR in response to motions filed by numerous parties seeking a stay of CSAPR pending judicial review. In that order, the DC Circuit Court stayed CSAPR pending resolution of the petitions for review of that rule in EME Homer City Generation, L.P. v. EPA (No. 11-1302 and consolidated cases). The DC Circuit Court also indicated that EPA was expected to continue to administer CAIR in the interim until judicial review of CSAPR was completed.

On August 21, 2012, the DC Circuit Court issued a decision to vacate CSAPR. In that decision, it also ordered EPA to continue administering CAIR “pending the promulgation of a valid replacement.” EME Homer City, 696 F.3d at 38 (DC Circ. 2012). The DC Circuit Court denied all petitions for rehearing on January 24, 2013. EPA and other parties have filed petitions for certiorari to the U.S. Supreme Court. On June 24, 2013 the Supreme Court granted EPA's petition for certiorari. Nonetheless, EPA intends to continue to act in accordance with the EME Homer City opinion.

In light of these unique circumstances and for the reasons explained subsequently, to the extent that attainment is due to emission reductions associated with CAIR, EPA is here proposing to determine that those reductions are sufficiently permanent and enforceable for purposes of sections 107(d)(3)(E)(iii) and 175A of the CAA. EPA, therefore, proposes to approve the redesignation requests and the related SIP revisions for Kanawha and Putnam Counties in West Virginia, including West Virginia's plan for maintaining attainment of the 1997 annual and 2006 24-hour PM 2.5 NAAQS in the Charleston Area.

As directed by the DC Circuit Court, CAIR remains in place and enforceable until substituted by a valid replacement rule. West Virginia's SIP revision lists CAIR as a control measure that was approved by EPA on August 6, 2009 (74 FR 38536) and became state-effective on May 1, 2008 for the purpose of reducing SO 2 and NO x emissions. CAIR was thus in place and getting emission reductions when the Charleston Area monitored attainment of the 1997 annual and 2006 24-hour PM 2.5 NAAQS. The quality-assured, quality-controlled, certified monitoring data used to demonstrate the Area's attainment of both the 1997 annual and 2006 24-hour PM 2.5 NAAQS was also impacted by CAIR.

To the extent that West Virginia is relying on CAIR in its maintenance plan, the recent directive from the DC Circuit Court in EME Homer City ensures that the reductions associated with CAIR will be permanent and enforceable for the necessary time period. EPA has been ordered by the DC Circuit Court to develop a new rule to address interstate transport to replace CSAPR, and the opinion makes clear that after promulgating that new rule, EPA must provide states an opportunity to draft and submit SIPs to implement that rule. Thus, CAIR will remain in place until: (1) EPA has promulgated a final rule through a notice-and-comment rulemaking process; (2) states have had an opportunity to draft and submit SIPs; (3) EPA has reviewed the SIPs to determine if they can be approved; and (4) EPA has taken action on the SIPs, including promulgating a Federal Implementation Plan (FIP) if appropriate. The DC Circuit Court's clear instruction to EPA that it must continue to administer CAIR until a valid replacement exists provides an additional backstop. By definition, any rule that replaces CAIR and meets the DC Circuit Court's direction would require upwind states to have SIPs that eliminate significant contributions to downwind nonattainment and prevent interference with maintenance in downwind areas.

Further, in vacating CSAPR and requiring EPA to continue administering CAIR, the DC Circuit Court emphasized that the consequences of vacating CAIR “might be more severe now in light of the reliance interests accumulated over the intervening four years.” EME Homer City, 696 F.3d at 38. The accumulated reliance interests include the interests of states who reasonably assumed they could rely on reductions associated with CAIR which brought certain nonattainment areas into attainment with the NAAQS. If EPA were prevented from relying on reductions associated with CAIR in redesignation actions, states would be forced to impose additional, redundant reductions on top of those achieved by CAIR. EPA believes this is precisely the type of irrational result the DC Circuit Court sought to avoid by ordering EPA to continue administering CAIR. For these reasons also, EPA believes it is appropriate to allow states to rely on CAIR, and the existing emissions reductions achieved by CAIR, as sufficiently permanent and enforceable for purposes such as redesignation. Following promulgation of the replacement rule, EPA will review SIP revisions as appropriate to identify whether there are any issues that need to be addressed.

On January 4, 2013, in NRDC v. EPA, the DC Circuit Court remanded to EPA the “Final Clean Air Fine Particle Implementation Rule” (72 FR 20586, April 25, 2007) and the “Implementation of the New Source Review (NSR) Program for Particulate Matter Less than 2.5 Micrometers (PM 2.5 )” final rule (73 FR 28321, May 16, 2008) (collectively, “1997 PM 2.5 Implementation Rule”). 706 F.3d 428 (D.C. Cir. 2013). The DC Circuit Court found that EPA erred in implementing the 1997 annual PM 2.5 NAAQS pursuant to the general implementation provisions of subpart 1 of Part D of Title I of the CAA (subpart 1), rather than the particulate-matter-specific provisions of subpart 4 of Part D of Title I (subpart 4). Although the DC Circuit Court did not directly address the 2006 24-hour PM 2.5 NAAQS, EPA is taking into account the DC Circuit Court's position on subpart 4 and the 1997 annual PM 2.5 NAAQS in evaluating redesignations for the 2006 24-hour PM 2.5 NAAQS.

EPA is proposing to determine that the DC Circuit Court's January 4, 2013 decision does not prevent EPA from redesignating the Charleston Area to attainment for either the 1997 annual or the 2006 24-hour PM 2.5 NAAQS. Even in light of the DC Circuit Court's decision, redesignation for this Area is appropriate under the CAA and EPA's longstanding interpretations of the CAA's provisions regarding redesignation. EPA first explains its longstanding interpretation that requirements that are imposed, or that become due, after a complete redesignation request is submitted for an area that is attaining the standard, are not applicable for purposes of evaluating a redesignation request. Second, EPA then shows that, even if EPA applies the subpart 4 requirements to the West Virginia redesignation requests and disregards the provisions of its 1997 PM 2.5 Implementation Rule recently remanded by the DC Circuit Court, the State's request for redesignation of the Area still qualifies for approval. EPA's discussion takes into account the effect of the DC Circuit Court's ruling on the Area's maintenance plan, which EPA views as approvable when subpart 4 requirements are considered.

With respect to the 1997 PM 2.5 Implementation Rule, the DC Circuit Court's January 4, 2013 ruling rejected EPA's reasons for implementing the PM 2.5 NAAQS solely in accordance with the provisions of subpart 1, and remanded that matter to EPA, so that it could address implementation of the 1997 annual PM 2.5 NAAQS under subpart 4 of Part D of the CAA, in addition to subpart 1. For the purposes of evaluating the West Virginia's redesignation request for the Charleston Area, to the extent that implementation under subpart 4 would impose additional requirements for areas designated nonattainment, EPA believes that those requirements are not “applicable” for the purposes of section 107(d)(3)(E) of the CAA, and thus EPA is not required to consider subpart 4 requirements with respect to the redesignation of the Charleston Area. Under its longstanding interpretation of the CAA, EPA has interpreted section 107(d)(3)(E) to mean, as a threshold matter, that the part D provisions which are “applicable” and which must be approved in order for EPA to redesignate an area include only those which came due prior to a state's submittal of a complete redesignation request. See 1992 Calcagni Memorandum. See also “State Implementation Plan (SIP) Requirements for Areas Submitting Requests for Redesignation to Attainment of the Ozone and Carbon Monoxide (CO) National Ambient Air Quality Standards (NAAQS) on or after November 15, 1992,” Memorandum from Michael Shapiro, Acting Assistant Administrator, Air and Radiation, September 17, 1993 (Shapiro memorandum); Final Redesignation of Detroit-Ann Arbor, (60 FR 12459, 12465-66, March 7, 1995); Final Redesignation of St. Louis, Missouri, (68 FR 25418, 25424-27, May 12, 2003); Sierra Club v. EPA, 375 F.3d 537, 541 (7th Cir. 2004) (upholding EPA's redesignation rulemaking applying this interpretation and expressly rejecting Sierra Club's view that the meaning of “applicable” under the statute is “whatever should have been in the plan at the time of attainment rather than whatever actually was in the plan and already implemented or due at the time of attainment”). 1 In this case, at the time that West Virginia submitted its redesignation requests for both standards, the requirements under subpart 4 were not due, and indeed, were not yet known to apply.

EPA's view that, for purposes of evaluating the redesignation of the Charleston Area, the subpart 4 requirements were not due at the time West Virginia submitted the redesignation requests is in keeping with the EPA's interpretation of subpart 2 requirements for subpart 1 ozone areas redesignated subsequent to the DC Circuit Court's decision in South Coast Air Quality Mgmt. Dist. v. EPA, 472 F.3d 882 (D.C. Cir. 2006). In South Coast, the DC Circuit Court found that EPA was not permitted to implement the 1997 8-hour ozone standard solely under subpart 1, and held that EPA was required under the statute to implement the standard under the ozone-specific requirements of subpart 2 as well. Subsequent to the South Coast decision, in evaluating and acting upon redesignation requests for the 1997 8-hour ozone standard that were submitted to EPA for areas under subpart 1, EPA applied its longstanding interpretation of the CAA that “applicable requirements,” for purposes of evaluating a redesignation, are those that had been due at the time the redesignation request was submitted. See, e.g., Proposed Redesignation of Manitowoc County and Door County Nonattainment Areas (75 FR 22047, 22050, April 27, 2010). In those rulemaking actions, EPA therefore did not consider subpart 2 requirements to be “applicable” for the purposes of evaluating whether the area should be redesignated under section 107(d)(3)(E) of the CAA.

EPA's interpretation derives from the provisions of section 107(d)(3) of the CAA. Section 107(d)(3)(E)(v) states that, for an area to be redesignated, a state must meet “all requirements `applicable' to the area under section 110 and part D.” Section 107(d)(3)(E)(ii) provides that EPA must have fully approved the “applicable” SIP for the area seeking redesignation. These two sections read together support EPA's interpretation of “applicable” as only those requirements that came due prior to submission of a complete redesignation request. First, holding states to an ongoing obligation to adopt new CAA requirements that arose after the state submitted its redesignation request, in order to be redesignated, would make it problematic or impossible for EPA to act on redesignation requests in accordance with the 18-month deadline Congress set for EPA action in section 107(d)(3)(D). If “applicable requirements” were interpreted to be a continuing flow of requirements with no reasonable limitation, states, after submitting a redesignation request, would be forced continuously to make additional SIP submissions that in turn would require EPA to undertake further notice-and-comment rulemaking actions to act on those submissions. This would create a regime of unceasing rulemaking that would delay action on the redesignation request beyond the 18-month timeframe provided by the CAA for this purpose.

Second, a fundamental premise for redesignating a nonattainment area to attainment is that the area has attained the relevant NAAQS due to emission reductions from existing controls. Thus, an area for which a redesignation request has been submitted would have already attained the NAAQS as a result of satisfying statutory requirements that came due prior to the submission of the request. Absent a showing that unadopted and unimplemented requirements are necessary for future maintenance, it is reasonable to view the requirements applicable for purposes of evaluating the redesignation request as including only those SIP requirements that have already come due. These are the requirements that led to attainment of the NAAQS. To require, for redesignation approval, that a state also satisfy additional SIP requirements coming due after the state submits its complete redesignation request, and while EPA is reviewing it, would compel the state to do more than is necessary to attain the NAAQS, without a showing that the additional requirements are necessary for maintenance.

In the context of this redesignation, the timing and nature of the D.C. Circuit Court's January 4, 2013 decision in NRDC v. EPA compound the consequences of imposing requirements that come due after the redesignation request is submitted. West Virginia submitted its redesignation requests for the 1997 annual and the 2006 24-hour PM 2.5 NAAQS on December 6, 2012 for Charleston Area, but the D.C. Circuit Court did not issue its decision remanding EPA's 1997 PM 2.5 Implementation Rule concerning the applicability of the provisions of subpart 4 until January 2013.

To require West Virginia's fully-completed and pending redesignation requests for both the 1997 annual and the 2006 24-hour PM 2.5 NAAQS to comply now with requirements of subpart 4 that the D.C. Circuit Court announced only in its January, 2013 decision on the 1997 PM 2.5 Implementation Rule, would be to give retroactive effect to such requirements when the State had no notice that it was required to meet them. The D.C. Circuit Court recognized the inequity of this type of retroactive impact in Sierra Club v. Whitman, 285 F.3d 63 (D.C. Cir. 2002), 2 where it upheld the D.C. Circuit Court's ruling refusing to make retroactive EPA's determination that the Area did not meet its attainment deadline. In that case, petitioners urged the D.C. Circuit Court to make EPA's nonattainment determination effective as of the date that the statute required, rather than the later date on which EPA actually made the determination. The D.C. Circuit Court rejected this view, stating that applying it “would likely impose large costs on States, which would face fines and suits for not implementing air pollution prevention plans . . . even though they were not on notice at the time.” Id. at 68. Similarly, it would be unreasonable to penalize the State of West Virginia by rejecting its redesignation request for an area that is already attaining both the 1997 annual and 2006 24-hour PM 2.5 standards and that met all applicable requirements known to be in effect at the time of the requests. For EPA now to reject the redesignation requests solely because the State did not expressly address subpart 4 requirements of which it had no notice, would inflict the same unfairness condemned by the D.C. Circuit Court in Sierra Club v. Whitman.

Even if EPA were to take the view that the D.C. Circuit Court's January 4, 2013 decision requires that, in the context of pending redesignations for either the 1997 annual or 2006 24-hour PM 2.5 standards, subpart 4 requirements were due and in effect at the time West Virginia submitted its redesignation requests, EPA proposes to determine that the Charleston Area still qualifies for redesignation to attainment for both the 1997 annual and 2006 24-hour PM 2.5 standards. As explained subsequently, EPA believes that the two redesignation requests for the Charleston Area, though not expressed in terms of subpart 4 requirements, substantively meet the requirements of that subpart for purposes of redesignating the Area to attainment for both standards.

With respect to evaluating the relevant substantive requirements of subpart 4 for purposes of redesignating the Charleston Area, EPA notes that subpart 4 incorporates components of subpart 1 of part D, which contains general air quality planning requirements for areas designated as nonattainment. See Section 172(c). Subpart 4 itself contains specific planning and scheduling requirements for coarse particulate matter (PM 10 )  3 nonattainment areas, and under the D.C. Circuit Court's January 4, 2013 decision in NRDC v. EPA, these same statutory requirements also apply for PM 2.5 nonattainment areas. EPA has longstanding general guidance that interprets the 1990 amendments to the CAA, making recommendations to states for meeting the statutory requirements for SIPs for nonattainment areas. See, the General Preamble. In the General Preamble, EPA discussed the relationship of subpart 1 and subpart 4 SIP requirements, and pointed out that subpart 1 requirements were to an extent “subsumed by, or integrally related to, the more specific PM 10 requirements” (57 FR 13538, April 16, 1992). The subpart 1 requirements include, among other things, provisions for attainment demonstrations, RACM, RFP, emissions inventories, and contingency measures.

For the purposes of these redesignation requests, in order to identify any additional requirements which would apply under subpart 4, we are considering the Charleston Area to be a “moderate” PM 2.5 nonattainment area. Under section 188 of the CAA, all areas designated nonattainment areas under subpart 4 would initially be classified by operation of law as “moderate” nonattainment areas, and would remain moderate nonattainment areas unless and until EPA reclassifies the area as a “serious” nonattainment area. Accordingly, EPA believes that it is appropriate to limit the evaluation of the potential impact of subpart 4 requirements to those that would be applicable to moderate nonattainment areas. Sections 189(a) and (c) of subpart 4 apply to moderate nonattainment areas and include the following: (1) An approved permit program for construction of new and modified major stationary sources (section 189(a)(1)(A)); (2) an attainment demonstration (section 189(a)(1)(B)); (3) provisions for RACM (section 189(a)(1)(C)); and (4) quantitative milestones demonstrating RFP toward attainment by the applicable attainment date (section 189(c)).

The permit requirements of subpart 4, as contained in section 189(a)(1)(A), refer to and apply the subpart 1 permit provisions requirements of sections 172 and 173 to PM 10 , without adding to them. Consequently, EPA believes that section 189(a)(1)(A) does not itself impose for redesignation purposes any additional requirements for moderate areas beyond those contained in subpart 1. 4 In any event, in the context of redesignation, EPA has long relied on the interpretation that a fully approved nonattainment new source review program is not considered an applicable requirement for redesignation, provided the area can maintain the standard with a prevention of significant deterioration (PSD) program after redesignation. A detailed rationale for this view is described in a memorandum from Mary Nichols, Assistant Administrator for Air and Radiation, dated October 14, 1994, entitled, “Part D New Source Review Requirements for Areas Requesting Redesignation to Attainment.” See also rulemakings for Detroit, Michigan (60 FR 12467-12468, March 7, 1995); Cleveland-Akron-Lorain, Ohio (61 FR 20458, 20469-20470, May 7, 1996); Louisville, Kentucky (66 FR 53665, October 23, 2001); and Grand Rapids, Michigan (61 FR 31834-31837, June 21, 1996).

With respect to the specific attainment planning requirements under subpart 4, 5 when EPA evaluates a redesignation request under either subpart 1 and/or 4, any area that is attaining the PM 2.5 NAAQS is viewed as having satisfied the attainment planning requirements for these subparts. For redesignations, EPA has for many years interpreted attainment-linked requirements as not applicable for areas attaining the standard. In the General Preamble, EPA stated that: “The requirements for RFP will not apply in evaluating a request for redesignation to attainment since, at a minimum, the air quality data for the area must show that the area has already attained. Showing that the State will make RFP towards attainment will, therefore, have no meaning at that point.”

The General Preamble also explained that: “[t]he section 172(c)(9) requirements are directed at ensuring RFP and attainment by the applicable date. These requirements no longer apply when an area has attained the standard and is eligible for redesignation. Furthermore, section 175A for maintenance plans . . . provides specific requirements for contingency measures that effectively supersede the requirements of section 172(c)(9) for these areas.” Id. EPA similarly stated in its 1992 Calcagni Memorandum that, “The requirements for reasonable further progress and other measures needed for attainment will not apply for redesignations because they only have meaning for areas not attaining the standard.”

It is evident that even if we were to consider the D.C. Circuit Circuit Court's January 4, 2013 decision in NRDC v. EPA to mean that attainment-related requirements specific to subpart 4 should be imposed retroactively  6 and thus are now past due, those requirements do not apply to an area that is attaining the 1997 annual and/or the 2006 24-hour PM 2.5 NAAQS, for the purpose of evaluating a pending request to redesignate the area to attainment. EPA has consistently enunciated this interpretation of applicable requirements under section 107(d)(3)(E) since the General Preamble was published more than twenty years ago. Courts have recognized the scope of EPA's authority to interpret “applicable requirements” in the redesignation context. See Sierra Club v. EPA, 375 F.3d 537 (7th Cir. 2004).

This is a summary of the Commission's Notice of Proposed Rulemaking, FCC 13-162, adopted on December 17, 2013 and released on December 18, 2013. The full text is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street SW., CY-A257, Washington, DC 20554. This document will also be available via ECFS ( http://www.fcc.gov/cgb/ecfs/ ). Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat. The complete text may be purchased from the Commission's copy contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording, and Braille), send an email to fcc504@fcc.gov or call the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

This document contains no proposed information collection requirements.

1. In this Notice of Proposed Rulemaking, we propose to eliminate the Commission's sports blackout rules, which prohibit certain multichannel video programming distributors (MVPDs) from retransmitting, within a protected local blackout zone, the signal of a distant broadcast station carrying a live sporting event if the event is not available live on a local television broadcast station. 1 The sports blackout rules were originally adopted nearly 40 years ago when game ticket sales were the main source of revenue for sports leagues. These rules were intended to address concerns that MVPDs' importation of a distant signal carrying a blacked-out sports event could result in lost revenue from ticket sales, which might cause sports leagues to expand the reach of blackouts by refusing to sell their rights to sports events to all distant stations. The rationale underpinning the rules was to ensure to the greatest extent possible the continued availability of sports telecasts to the public. Changes in the sports industry in the last four decades have called into question whether the sports blackout rules remain necessary to ensure the overall availability of sports programming to the general public. In this proceeding, we will determine whether the sports blackout rules have become outdated due to marketplace changes since their adoption, and whether modification or elimination of those rules is appropriate. We recognize that elimination of our sports blackout rules alone might not end sports blackouts, but it would leave sports carriage issues to private solutions negotiated by the interested parties in light of current market conditions and eliminate unnecessary regulation.

2. Prior to 1953, National Football League (NFL) bylaws prohibited member teams from, among other things, (i) telecasting their games into the home territory of another team that was playing at home, and (ii) telecasting their games into the home territory of another team that was playing away from home and was telecasting its game into its home territory. In 1953, a federal court held that the NFL's prohibition on the telecast of outside games into the home territory of a team that was playing at home was a reasonable method of protecting the home team's gate receipts and was not illegal under the antitrust laws. The court found, however, that restricting the telecast of outside games into the home territory of a team not playing at home was an unreasonable restraint on trade because, when the home team was playing away, there was no gate to protect.

3. In 1961, the NFL entered into an agreement with the CBS television network under which the NFL's member teams pooled the television rights to their games and authorized the league to sell the rights to the network as a package, with the revenue from the league sales to be distributed equally among the member teams. Under this agreement, CBS was permitted to determine which games would be televised and where the games would be televised. The NFL then petitioned the court for a ruling on whether the terms of its contract with CBS violated the court's 1953 final judgment. The court concluded that the provision giving CBS the power to determine which games would be televised and where was contrary to the final judgment and that execution and performance of the contract was therefore prohibited. This ruling did not, however, apply to a similar contract between the newly formed American Football League (AFL) and the ABC television network, because the AFL was not a party to the court's 1953 final judgment. Concerned that the court's ruling placed it at a disadvantage to the AFL, the NFL petitioned Congress for relief, arguing that packaged network contracts were desirable because they allowed the member teams to negotiate for the sale of television rights with a single voice and equalized revenue among the member teams.

4. Congress responded to the NFL's plea for relief with its passage of the Sports Broadcasting Act of 1961. The Sports Broadcasting Act exempts from the antitrust laws joint agreements among individual teams engaged in professional football, baseball, basketball, or hockey that permit the leagues to pool the individual teams' television rights and sell those rights as a package. This statute also expressly permits these four professional sports leagues to black out television broadcasts of home games within the home territory of a member team. At the time the Sports Broadcasting Act was enacted, television blackouts were believed to be necessary to protect gate receipts, and the packaging of individual teams' television rights was thought to be necessary to enhance the financial stability of the leagues by assuring equal distribution of revenues among all teams. The NFL subsequently instituted a practice of blacking out the television broadcast of all home games of its member teams in their home territory, irrespective of whether the games were sold out.

5. In August 1971, the Commission sent a letter to Congress seeking guidance on the Commission's proposed regulatory scheme for the then-nascent cable television industry, which included several proposals relating to sports programming. The Commission noted the exemptions from the anti-trust laws granted to professional sports leagues under the Sports Broadcasting Act and stated that “cable systems should not be permitted to circumvent the purpose of th[is] law by importing the signal of a station carrying the home game of a professional team if that team has elected to black out the game in its home territory.” The Commission indicated that it would follow the “spirit and letter” of the Sports Broadcasting Act “since it represents Congressional policy in this important area” and stated that it intended to initiate a rulemaking proceeding on this issue in the near future. The Commission commenced a rulemaking proceeding proposing a sports blackout rule for cable television systems in February 1972.

6. In 1973, during the pendency of the Commission's rulemaking proceeding, Congress enacted Public Law 93-107 in response to complaints from dissatisfied football fans who were unable to view the sold out home games of their local teams on the public airwaves due to the NFL's blackout policy. Public Law 93-107 added new section 331 to the Communications Act of 1934, as amended (Communications Act), which prohibited professional sports leagues from blacking out the television broadcast of a home game in a team's home territory if the game was televised elsewhere pursuant to a league television contract and the game sold out 72 hours in advance of game time. Public Law 93-107 was intended as a limited experiment to allow all affected parties to assess the impact of the statute and expired by its own terms effective December 31, 1975. Although the statute was not renewed, the NFL subsequently continued to follow the practice of blacking out the television broadcast of home games in a team's home territory only if the game was not sold out 72 hours in advance of game time.

7. In the meantime, the Commission adopted the cable sports blackout rule in 1975 to address concerns that cable systems could frustrate sports leagues' blackout policies by importing the distant signal of a television station carrying the home game of a sports team that has elected to black out the game in its home territory. Specifically, the Commission found that

The Commission emphasized that its concern was not in ensuring the profitability of organized sports, but rather in ensuring the overall availability of sports telecasts to the general public, which it found was “of vital importance to the larger and more effective use of the airwaves.” The cable sports blackout rule adopted by the Commission, which was originally codified in § 76.67 and later renamed, slightly revised, and renumbered as § 76.111, is designed to allow the holder of the exclusive distribution rights to the sports event ( i.e., a sports team, league, promoter, or other agent, rather than a broadcaster) to control, through contractual agreements, the display of that event on local cable systems. Under this rule, the rights holder may demand that a cable system located within the specified zone of protection of a television broadcast station licensed to a community in which a sports event is taking place black out the distant importation of the sports event if the event is not being carried live by a television broadcast station in that community. The zone of protection afforded by the cable sports blackout rule is generally 35 miles surrounding the reference point of the broadcast station's community of license in which the live sporting event is taking place. The cable sports blackout rule applies to all sports telecasts in which the event is not exhibited on a local television station, including telecasts of high school, college, and professional sports, and individual as well as team sports.

8. The Telecommunications Act of 1996 (1996 Act) added a new section 653 to the Communications Act, which established a new framework for entry into the video programming distribution market, the open video system. Congress's intent in establishing the open video system framework was “to encourage telephone companies to enter the video programming distribution market and to deploy open video systems in order to `introduce vigorous competition in entertainment and information markets' by providing a competitive alternative to the incumbent cable operator.” As an incentive for telephone company entry into the video programming distribution market, section 653 provides for reduced regulatory burdens for open video systems subject to the systems' compliance with certain non-discrimination and other requirements set forth in Section 653(b)(1). Section 653(b)(1)(D) directed the Commission to extend to the distribution of video programming over open video systems the Commission's rules on sports blackouts, network nonduplication, and syndicated exclusivity. The Commission amended its rules in 1996 to directly apply the existing cable sports blackout rule to open video systems. 2

9. In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999 (SHVIA), which provides statutory copyright licenses for satellite carriers to provide additional local and national broadcast programming to subscribers. In enacting SHVIA, Congress sought to place satellite carriers on an equal footing with cable operators with respect to the availability of broadcast programming. Section 1008 of SHVIA added a new Section 339 to the Communications Act. Section 339(b) directed the Commission to apply the cable network nonduplication, syndicated exclusivity, and sports blackout rules to satellite carriers' retransmission of nationally distributed superstations and, to the extent technically feasible and not economically prohibitive, to extend the cable sports blackout rule to satellite carriers' retransmission of network stations to subscribers.

10. The Commission adopted a sports blackout rule for satellite carriers in November 2000. This rule provides that, on the request of the holder of the rights to a sports event, a satellite carrier may not retransmit a nationally distributed superstation or a network station carrying the live television broadcast of the sports event to subscribers if the event is not being carried live by a local television broadcast station. This rule applies within the same 35-mile zone of protection that applies to cable systems applies to satellite carriers; that is, 35 miles surrounding the reference point of the broadcast station's community of license in which the live sporting event is taking place.

11. The Commission last examined the sports blackout rules more than seven years ago, in a 2005 report to Congress required by the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA). SHVERA directed the Commission to complete an inquiry and submit a report to Congress “regarding the impact on competition in the multichannel video programming distribution market of the current retransmission consent, network non-duplication, syndicated exclusivity, and sports blackout rules, including the impact of those rules on the ability of rural cable operators to compete with direct broadcast satellite (`DBS') industry in the provision of digital broadcast television signals to consumers.” SHVERA also directed the Commission to “include such recommendations for changes in any statutory provisions relating to such rules as the Commission deems appropriate.” The Commission concluded in its report that the sports blackout rules do not affect competition among MVPDs, that commenters failed to advance any link between the blackout rules and competition among MVPDs, and that no commenter pressed the case for repeal or modification of the sports blackout rules. The Commission therefore declined to recommend any regulatory or statutory revisions to modify the protections afforded to the holders of sports programming rights.

12. Today, sports leagues' blackout policies determine which games are blacked out locally. These policies are given effect primarily through contractual arrangements negotiated between the leagues or individual teams that hold the rights to the games and the entities to which they grant distribution rights, including television networks, local television broadcast stations, Regional Sports Networks (RSNs), and MVPDs. The Commission's rules, described above, supplement these contractual relationships by requiring MVPDs to black out games that are required by the sports leagues or individual teams to be blacked out on local television stations.

13. In November 2011, the Sports Fan Coalition, Inc., National Consumers League, Public Knowledge, League of Fans, and Media Access Project (collectively, Petitioners or SFC) filed a joint Petition for Rulemaking urging the Commission to eliminate the sports blackout rules. The Petitioners assert that, at a time when ticket prices for sports events are at historic highs and high unemployment rates persist, making it difficult for many consumers to afford attending local sports events, the Commission should not support the “anti-consumer” blackout policies of professional sports leagues. The Petitioners also argue that the sports leagues' blackout policies are no longer needed to protect gate receipts and therefore should not be facilitated by the Commission's sports blackout rules. The Petitioners maintain that, “without a regulatory subsidy from the federal government in the form of the [sports blackout rules], sports leagues would be forced to confront the obsolescence of their blackout policies and could voluntarily curtail blackouts.” On January 12, 2012, the Media Bureau issued a Public Notice seeking comment on the Petition. Comments in support of the petition were filed by SFC, a group of nine sports economists, several members of Congress, and thousands of individual consumers. The NFL, the Office of the Commissioner of Baseball (Baseball Commissioner), the National Association of Broadcasters, and a group of network television affiliates filed comments opposing the Petition.

14. We propose to eliminate the sports blackout rules. The sports blackout rules were first adopted nearly four decades ago to ensure that the potential loss of gate receipts resulting from cable system importation of distant stations did not lead sports clubs to refuse to sell their rights to sports events to distant stations, which would reduce the overall availability of sports programming to the public. The rules were extended to open video systems and then to satellite carriers to provide parity between cable and newer video distributors. The sports industry has changed dramatically in the last 40 years, however, and the Petitioners argue that the economic rationale underlying the sports blackout rules may no longer be valid. Below we seek comment on whether we have authority to repeal the sports blackout rules. Next, we examine whether the economic considerations that led to adoption of the sports blackout rules continue to justify our intervention in this area. Finally, we propose to eliminate the sports blackout rules and seek comment on the potential benefits and harms of that proposed action on interested parties, including sports leagues, broadcasters, and consumers.

15. We seek comment on whether we have the authority to repeal the sports blackout rules. As discussed above, Congress did not explicitly mandate that the Commission adopt the cable sports blackout rule. Rather, the Commission adopted the cable sports blackout rule as a regulatory measure premised on the policy established by Congress in the Sports Broadcasting Act, which exempts from the antitrust laws joint agreements among individual teams engaged in professional football, baseball, basketball, or hockey that permit the leagues to pool the individual teams' television rights and sell those rights as a package and expressly permits these four professional sports leagues to black out television broadcasts of home games within the home territory of a member team. Section 653(b)(1)(D) of the Act, as added by the 1996 Act, directed the Commission to extend to open video systems “the Commission's regulations concerning sports exclusivity (47 CFR 76.67).” Similarly, Section 339(b) of the Communications Act, as added by SHVIA in 1999, directed the Commission to “apply . . . sports blackout protection (47 CFR 76.67) to the retransmission of the signals of nationally distributed superstations by satellite carriers” and, “to the extent technically feasible and not economically prohibitive, apply sports blackout protection (47 CFR 76.67) to the retransmission of the signals of network stations by satellite carriers.” Reflecting the language used in these statutory provisions, the legislative history of Section 339(b) states that Congress's intent was to place satellite carriers on an equal footing with cable operators with respect to the availability of television programming. Petitioners argue that the Commission has the authority to repeal the sports blackout rules for both cable and DBS because Congress never directed the Commission to issue the sports blackout rules in the first instance and only directed the Commission to establish parity between the cable and DBS regimes. Senators Blumenthal and McCain likewise assert that “[i]t is important to note that Congress never instructed the Commission to promulgate the Sports Blackout Rule in the first place. The Commission therefore possesses ample authority to amend the Sports Blackout Rule sua sponte, without any action by Congress.” Several commenters opposing elimination of the sports blackout rules assert that Congress mandated the sports blackout rule for DBS. These commenters do not, however, expressly argue that the Commission does not have authority to eliminate the sports blackout rules, either for cable or for DBS and OVS. We tentatively conclude that repeal of the cable sports blackout rule is authorized by the Communications Act, which grants the Commission general rulemaking power, including the authority to revisit its rules and modify or repeal them where it concludes such action is appropriate. We seek comment on this tentative conclusion. We also seek comment on whether we have the authority to repeal the sports blackout rules for DBS and OVS. We observe that when Congress enacted the sports blackout provisions in Sections 339(b) and 653(b)(1)(D) of the Act, Congress directed the Commission to apply to DBS and OVS the sports blackout protection applied to cable, set forth in 47 CFR 76.67, rather than simply directing the adoption of sports blackout rules for those services. The statute does not withdraw the Commission's authority to modify its cable rule at some point in the future, nor is there any indication in the legislative history that Congress intended to withdraw this authority. Given that the DBS and OVS provisions are expressly tied to the cable sports blackout rule, does this evince an intent on the part of Congress that the Commission should accord the same regulatory treatment to DBS and OVS as cable, i.e., if the Commission modifies or repeals the cable rule it should also modify or repeal the DBS and OVS rules? Would Congress's intent to subject open video systems to reduced regulatory burdens as an incentive for their entry into the video market support an assertion of authority to eliminate the sports blackout rule for OVS if we determine that the cable sports blackout rule is no longer needed? Alternatively, are Congress's directives to the Commission regarding application of sports blackout protection to open video systems and to satellite carriers more appropriately interpreted to mean that the Commission does not have the authority to repeal the sports blackout rules for these types of entities, even if it does so for cable? If we determine that we do not have the authority to repeal the satellite sports blackout rule and/or the OVS sports blackout rule, would it nevertheless be appropriate to repeal the cable sports blackout rule? Would eliminating the sports blackout rule for cable but not for DBS and/or OVS create undue disparities or unintended consequences for any of these entities?

16. We request comment on whether the economic rationale underlying the sports blackout rules remains valid in today's marketplace. Specifically, we invite commenters to submit information, and to comment on information currently in the record, regarding (i) the extent to which sports events continue to be blacked out locally as a result of the failure of the events to sell out, (ii) the relative importance of gate receipts vis-à-vis other revenues in organized sports today, and (iii) whether local blackouts of sports events significantly affect gate receipts. We invite commenters also to submit any other information that may be relevant in assessing whether the sports blackout rules are still needed to ensure the overall availability of sports telecasts to the public. We ask commenters to assess whether this information, as updated and supplemented, supports retaining or eliminating the sports blackout rules.

17. We seek comment on the extent to which sports events are blacked out locally today due to the failure of the events to sell out. The record indicates that professional football continues to be the sport most affected by blackouts. Under the NFL's longstanding blackout policy, the television broadcast of home games in a team's home territory has been blacked out if the game was not sold out 72 hours in advance of game time. In 1974, just prior to the Commission's adoption of the cable sports blackout rule, 59 percent of regular season NFL games were blacked out due to failure of the games to sell out. During the 2011 NFL season, only 16 out of 256 regular season games, or six percent of games, were blacked out. These 16 blackouts occurred in just four cities: Buffalo, Cincinnati, San Diego, and Tampa Bay. Thus, the percentage of NFL games that are blacked out today has dropped substantially since the sports blackout rules were adopted, and blackouts of NFL games are relatively rare. Does this substantial reduction in the number of blacked out NFL games suggest that the sports blackout rules are no longer needed? Conversely, does the relatively small number of blackouts of NFL games argue against the need to eliminate the sports blackout rules? To what extent are blackouts of NFL games averted when teams and local businesses work together to “sell” outstanding tickets, thereby allowing local coverage of games? Has the cable sports blackout rule had any impact on the number of NFL blackouts? How should this affect our analysis?

18. We note that in 2012, after the petition for rulemaking in this proceeding was put out for comment, the NFL modified its blackout policy to allow its member teams the option of avoiding a blackout in their local television market if the team sold at least 85 percent of game tickets at least 72 hours prior to the game. Specifically, under this new policy, individual teams are required to determine their own blackout threshold—anywhere from 85 percent to 100 percent—at the beginning of the season and adhere to that number throughout that season. If ticket sales exceed the threshold set by the team, the team must share a higher percentage of the revenue from those ticket sales than usual with the visiting team. We seek comment on the extent to which this new policy has impacted blackouts of NFL games. According to SFC, there were 15 NFL games blacked out affecting five NFL franchises during the 2012 season. Which teams opted to take advantage of the NFL's new blackout policy and what effect, if any, did the NFL's relaxation of its blackout policy have on ticket sales for the home games of these teams? Does the NFL's recent relaxation of its sports blackout policy weigh in favor of or against elimination of the Commission's sports blackout rules?

19. We note that the record is largely silent on the prevalence of blackouts affecting sports other than the NFL; thus we invite comment on the extent to which these sports events are blacked out locally today. As noted above, the sports blackout rules apply to all sports telecasts in which the event is not available live on a local television station, including telecasts of high school, college, and professional sports, and individual as well as team sports. The Sports Economists assert, however, that “major professional sports leagues in the U.S. [other than the NFL] generally do not use blackout rules to prevent a game from being televised in the locality in which it is being played” because they “sell television rights to only some games through national broadcast agreements.” The Sports Economists explain that

To what extent are the sports blackout rules still relevant for sports other than professional football, where individual teams, rather than the league, hold and sell the distribution rights for all or most of the games? In this regard, we seek comment on the importance of retaining the sports blackout rules to protect the viability of any nascent sports leagues that may emerge in the future.

20. Professional baseball is the only other sport for which commenters provided any information on blackouts. Commenters indicate that the number of MLB games blacked out is relatively small because individual MLB teams, rather than the league, negotiate with local broadcast television flagship stations or RSNs for exclusive rights to televise most of the teams' games, both home and away games, in the teams' home territories. According to the Baseball Commissioner, in 2011, 151 of 162 regular season games of each MLB team, on average, were televised on the team's local broadcast television station or RSN. Therefore, the Baseball Commissioner asserts, at most eleven of 162 regular season games of each MLB team were affected by the sports blackout rules. To the extent that more specific data are available regarding the number of home games of MLB teams blacked out pursuant to the Commission's sports blackout rules, as opposed to MLB's blackout policies, we request that commenters provide those data. Specifically, for each MLB team, we seek current data on whether exclusive rights to televise most of the teams' games have been granted to local broadcast flagship stations or RSNs and the number of home games that are blacked out pursuant to the Commission's rules. Does the number of games blacked out argue in favor of or weigh against repeal of the sports blackout rules? In addition, for home games that are blacked out under our rules, we seek information as to why they are blacked out. In this regard, the Baseball Commissioner states that “[t]he vast majority of MLB games are not sold out. While there are specific instances in which MLB clubs do take account of gate attendance in making decisions about telecasting patterns (and invoking the [Commission's sports blackout rules]), MLB clubs do not routinely black out games that are not sold out.” Accordingly, what factors other than attendance are taken into account in determining which MLB games are blacked out locally? How many MLB games were blacked out due to failure to sell out and how many were blacked out for other reasons? If, as reported, few MLB games are blacked out due to failure to sell out, does this support the conclusion that the sports blackout rules are not needed to promote attendance at sports events?

21. We likewise request specific data detailing the extent to which any other sports events, including games of other major professional sports leagues ( e.g., the NBA and NHL), and any other professional, collegiate, or high school sports events, are blacked out locally. To the extent that these other sports events are blacked out, are they blacked out due to failure of the event to sell out or for some other reason?

22. We seek comment on the relative importance of gate receipts vis-à-vis other revenues in sports today. As discussed above, when the Commission adopted the cable sports blackout rule in 1975, it found that “gate receipts were the primary source of revenue for sports clubs.” The record before us indicates, however, that the importance of gate receipts has diminished dramatically for NFL clubs in the past four decades, particularly in relation to television revenues. The Sports Economists state that in 1970 the estimated average revenue of an NFL team was approximately $5 million and the estimated average operating income was less than $1 million, whereas in 2009 the estimated average revenue of an NFL team was about $250 million and the estimated average operating income was $33 million. The Sports Economists further state that ticket sales today account for around 20 percent of NFL revenues, while television revenues account for around 60 percent. According to SFC, television revenues, which are shared equally among teams, are 80 times what they were in 1970 and now account for 50 percent of the NFL's total revenues. SFC asserts that gate receipts, which are split 60/40 between the home team and visiting team, account for only 21.6 percent of the NFL's total revenues. These figures indicate that television revenues have replaced gate receipts as the most significant source of revenue for NFL clubs. Does this shift in the source of revenue for NFL clubs undermine the economic rationale for the sports blackout rules? We invite commenters to supplement the record with more current data on NFL revenues, including total revenues, gate receipts, and television revenues, to the extent that such data are available. If gate receipts are no longer the primary or most significant source of revenue for NFL clubs, are the sports blackout rules still necessary to promote attendance at games and to ensure the overall availability of telecasts of these sports to the public? If so, why?

23. There is scant information in the record regarding the significance of gate receipts in relation to other sources of revenue for sports other than professional football. The Baseball Commissioner states only that, “in any given year, ticket sales and television revenues account for roughly the same portion of [MLB's] revenues and both are critically important to an MLB club's economic health.” To the extent that commenters assert that the sports blackout rules remain necessary to ensure the overall availability of telecasts of particular sports to the public, we request that they provide current revenue data for such sports, including total revenues, television revenues, and gate receipts. We note that, during recent years, MLB has entered into other revenue-generating ventures, such as the MLB Channel, a baseball-related programming channel available to MVPD subscribers, and Extra Innings, which offers regular season game premium (pay) packages through MVPDs to their subscribers. MLB also offers regular season game packages directly to customers through MLB.tv. Such programming is streamed over the Internet and can be viewed on computers and mobile devices, as well as on televisions using devices such as Apple TV. Moreover, many teams either own the RSNs that carry their game telecasts or have obtained ownership interests in RSNs. Does the emergence of these additional revenue sources impact the relative importance of gate receipts and, accordingly, the continued need for the sports blackout rules? If gate receipts are not the primary or most significant source of revenue for these sports, why are the sports blackout rules necessary to ensure the overall availability of telecasts of these sports to the public?

24. We seek comment on the extent to which local blackouts of sports events affect attendance and gate receipts at those events and the extent to which the cable sports blackout rule itself affects attendance and gate receipts at sports events. As discussed above, the sports blackout rules are intended to address concerns that MVPDs' importation of a distant signal carrying a blacked-out sports event could lead to lost revenue from ticket sales, which might cause sports leagues to expand the reach of blackouts by refusing to sell their rights to sports events to all distant stations. The objective of the sports blackout rules is not to ensure the profitability or financial viability of sports leagues, but rather to ensure the overall availability of sports programming to the general public. Thus, we are interested in gate receipts and other revenues of sports leagues only to the extent that such revenues are relevant to this objective. Based on their review of several econometric studies of attendance at NFL games as well as other team sports in the U.S. and Europe, the Sports Economists conclude that there is no evidence that local blackouts of NFL games significantly affect either ticket sales or no-shows at those games. We seek comment on the Sports Economists' conclusion and the underlying studies on which it relies. Do these studies support the conclusion that our sports blackout rules are no longer needed? For example, if local blackouts of NFL games do not significantly affect either ticket sales or no-shows at those games, does it follow that the cable sports blackout rule has no significant effect on attendance? Additionally, we invite commenters to submit any additional studies or evidence showing the extent to which local blackouts of NFL games impact gate receipts at those games and the extent to which the cable sports blackout rule itself impacts gate receipts. In particular, we note that the NFL asserts that its blackout policy, as supported by the Commission's sports blackout rules, is designed to promote high attendance at games. We invite the NFL and other interested commenters to submit any available data or evidence indicating that the NFL's blackout policy in fact has the intended effect of promoting attendance at games. As noted above, only four cities were affected by local blackouts of NFL games in 2011: Buffalo, Cincinnati, San Diego, and Tampa Bay; in 2012, local blackouts of NFL games were limited to Buffalo, Cincinnati, Oakland, San Diego, and Tampa Bay. We seek comment on whether certain teams or cities are routinely disproportionately affected by local blackouts of NFL games and, if so, why. For example, some commenters suggest that certain cities are more severely impacted by blackouts because of conditions in the local economy ( e.g., locally high unemployment) or a large stadium capacity in a city with a relatively small population. If these are the factors that lead to failure to sell out games, does blacking out a game promote attendance at future games in those cities? Are any cities affected by these factors able to sellout games on a regular basis? If so, why? To what extent does a team's performance lead to poor attendance and blackouts? For example, are blackouts more common when a team is not in playoff contention? Should this affect our analysis? If so, how?

25. Are the sports blackout rules necessary to sustain gate receipts and other revenues for NFL clubs? Commenters who assert that eliminating the sports blackout rules would result in a significant reduction in gate receipts or other revenues for NFL clubs should quantify or estimate the anticipated reduction and explain the basis for their estimates. We also seek comment on the connection between any such lost revenues and the willingness of teams to enter into agreements allowing broadcast coverage of their games, maximizing the availability of such broadcasts to the public.

26. There is no specific information in the record regarding the effect of blackouts on gate receipts for any other sports events. We seek comment on whether blackouts have any significant effect on gate receipts for any sports events other than NFL games. Commenters should provide any available data or evidence to support their positions. What impact, if any, would elimination of the sports blackout rules be expected to have on gate receipts and other revenues for these sports? To the extent that commenters argue that eliminating the sports blackout rules would result in a significant reduction in gate receipts or other revenues for these sports, we request that they quantify or estimate the anticipated reduction and explain the basis for their estimates.

27. Some commenters suggest that blacking out games may actually harm, rather than support, ticket sales. We seek comment on whether blacking out sports events may have the unintended effect of alienating sports fans and discouraging their attendance at home games. According to the Petitioners, recent empirical studies suggest that televising professional sports may actually have a positive effect on attendance at home games. Does televising sports events serve to generate interest among sports fans and thereby promote higher attendance at home games in the long run? If this is the case, then why would a professional sports league, such as the NFL, ever seek to black out games? For example, do commenters believe that the NFL is operating pursuant to a mistaken understanding of the relationship between blackouts and attendance? Or do commenters believe that the NFL has reason for maintaining its blackout policy other than attendance? Commenters are invited to submit any studies or evidence supporting the view that televising sports events encourages attendance at home games.

28. We invite commenters to submit any other information or data that they believe is relevant to our assessment of whether the sports blackout rules remain necessary to ensure the overall availability of sports telecasts to the public. For example, are changes in the video distribution market in the 40 years since the sports blackout rules were originally adopted, such as those described above, relevant to our assessment? To what extent do sports leagues distribute games via such premium services today and what impact do such premium services have on the leagues' revenues and blackout policies? Commenters should explain how any such information supports or undercuts the economic basis for the sports blackout rules.

29. We propose to eliminate the sports blackout rules. With respect to professional football, the sport most affected by the sports blackout rules, it appears from the existing record that television revenues have replaced gate receipts as the most significant source of revenue for NFL clubs in the 40 years since the rules were first adopted. Moreover, the record received thus far indicates no direct link between blackouts and increased attendance at NFL games. The record also suggests that the sports blackout rules have little relevance for sports other than professional football, because the distribution rights for most of the games in these sports are sold by individual teams, rather than the leagues. Finally, it appears that the sports blackout rules are unnecessary because sports leagues can pursue local blackout protection through private contractual negotiations. Thus, it appears that the sports blackout rules have become obsolete. Accordingly, if the record in this proceeding, as updated and supplemented by commenters, confirms that the sports blackout rules are no longer necessary to ensure the overall availability to the public of sports telecasts, we propose to repeal these rules. We seek comment on this proposal.

30. We seek comment on how elimination of the sports blackout rules would affect sports leagues and teams and their ability, as holders of the exclusive distribution rights to their games, to control the distribution of home games in the teams' home territories. As discussed above, the sports leagues, not the Commission, are the source of sports blackouts. And the Commission's rules supplement the contractual relationships between the leagues or individual teams that hold the rights to the games and the entities to which they grant distribution rights by requiring MVPDs to black out games that are required by the sports leagues or individual teams to be blacked out on local television stations. To the extent that the Commission's rules are no longer needed to assure the continued availability of sports programming to the public, does the Commission have any continued interest in supplementing these contractual relationships? Should it instead be left to the sports leagues and individual teams to negotiate in the private marketplace whatever local blackout protection they believe they need?

31. Several commenters argue that the compulsory copyright licenses granted to MVPDs under Sections 111 and 119 of the Copyright Act would make it difficult or impossible for sports leagues or teams to negotiate the protection provided by the sports blackout rules through private contracts. The compulsory licenses permit cable systems and, to a more limited extent, satellite carriers to retransmit the signals of distant broadcast stations without obtaining the consent of the sports leagues whose games are carried on those stations, when the carriage of such stations is permitted under FCC rules. Absent the sports blackout rules, these commenters argue, an MVPD would be able to take advantage of the compulsory license to retransmit the signal of a distant station carrying a game that has been blacked out locally by a sports league or team.

32. We seek comment on how the compulsory licenses would affect the ability of sports leagues and sports teams to obtain through market-based negotiations the same protection that is currently provided by the sports blackout rules. The NFL contends that, since it contracts with the CBS, NBC, and FOX networks for broadcast distribution of its games, it lacks privity with the local network affiliates that carry the games and with the MVPDs that retransmit the broadcast signals. Thus, it claims that ensuring that all of the other parties involved in the distribution of its games are contractually bound to honor the NFL's sports blackout policy would require rewriting hundreds of contracts, including contracts between the NFL and the CBS, NBC, and FOX networks, contracts between the networks and their affiliates, and contracts between the network affiliates and the MVPDs. The Petitioners assert that this argument ignores the direct privity of contract the sports leagues have with the MVPDs themselves, noting that virtually all MVPDs carry networks or game packages owned directly by the sports leagues, such as the NFL Network, MLB Network, NBA TV, NHL Network, and NFL Sunday Ticket (DIRECTV). We seek comment on the extent to which the sports leagues contract directly with MVPDs for carriage of networks or game packages owned directly by the sports leagues. Do such contracts already include some form of blackout protection and, if so, what protection do these contracts provide? In this connection, the Commission has previously found that sports leagues routinely negotiate with MVPDs greater blackout protection than that afforded by the sports blackout rules, and the comments in the record support this finding. For example, sports leagues and teams contractually negotiate with MVPDs blackouts of games throughout the teams' home territories, which generally extend well beyond the limited 35-mile zone of protection afforded by our sports blackout rules. In addition, the sports blackout rules afford blackout protection only to the home teams, whereas sports leagues or teams often negotiate blackout protection for both the home and away teams. Accordingly, if sports leagues and teams are able to obtain greater protection than that afforded under the sports blackout rules in arm's length marketplace negotiations, why do they need the sports blackout rules to avoid the impact of the compulsory licenses?

33. Moreover, the Commission has found that “[s]ports leagues control both broadcast carriage and MVPD retransmission of their programming.” It observed that a broadcaster cannot carry a sports event without the permission of the sports leagues or clubs that hold the rights to the event and, under the retransmission consent rules, MVPDs, with limited exceptions, cannot carry a broadcaster's signal without the permission of the broadcaster. Thus, the Commission reasoned that a sports league could prevent unwanted MVPD retransmission through its contracts with broadcasters by requiring, as a term of carriage, the deletion of specific sports events. Because the sports leagues could obtain local blackout protection through their contracts with broadcast stations, the Commission suggested that the sports leagues may not need the sports blackout rules to prevent MVPDs from using the compulsory licenses to carry blacked-out games. Instead, it stated that the sports blackout rules may serve primarily as an enforcement mechanism for existing contracts between broadcasters and sports leagues. We seek comment on this analysis. Could sports leagues or teams prevent MVPDs from retransmitting certain sports events through their contracts with broadcasters? If so, especially given the popularity of certain sports programming, would leagues such as the NFL be well positioned to secure blackout protection through private contractual negotiations? Would leagues need to renegotiate existing contracts with broadcasters to secure such protection? If so, should that affect our analysis? What effect, if any, would the NFL's lack of direct privity with the local network affiliates that carry the games have on its ability to control MVPD retransmission? What are the costs and benefits to sports leagues and teams of our elimination of the sports blackout rules? To the extent possible, we encourage commenters to quantify any costs and benefits and to submit supporting data.

34. We seek comment also on whether and how repeal of the sports blackout rules would affect consumers. We received more than 7,500 comments on the Petition from individual consumers who support elimination of the sports blackout rules. These comments indicate that sports blackouts, while less frequent now than when the sport blackout rules were first adopted, are still a significant source of frustration for consumers. Some of these consumers are disabled or elderly sports fans who are physically unable to attend games in person and rely on television (either broadcast or pay TV) to watch their favorite teams. Others complain that they can no longer afford to attend games due to high ticket prices, the economy, or reduced income following retirement; that they already subsidize professional sports through publicly funded stadiums and should be able to watch the games at home; or that they pay a substantial premium to watch their favorite NFL team on DIRECTV's NFL Sunday Ticket but are sometimes unable to watch due to a blackout, even though they may live 150 miles or more from the team's stadium. We seek comment on what impact, if any, repeal of the Commission's sports blackout rules would have on these and other consumers.

35. The Petitioners acknowledge that eliminating the Commission's sports blackout rules alone likely would not end local sports blackouts as sports fans may wish. We note that the leagues' underlying blackout policies would remain, and, as discussed above, the leagues may be able to obtain the same blackout protection provided under our rules through free market negotiations. The leagues could still require local television stations to black out games; thus, consumers that rely on over-the-air television would still be unable to view blacked-out games. Moreover, repeal of our sports blackout rules alone would not provide relief to consumers that are subject to blackouts resulting from the leagues' use of expansive home territories. Nevertheless, the Petitioners assert that, “unless and until the Commission eliminates the [sports blackout rules], the sports leagues will be under no pressure to contractually negotiate for the protection that they claim is necessary.” The Petitioners suggest that, if the leagues find that such negotiations would be too daunting, eliminating the sports blackout rules may compel the leagues to lower ticket prices until all seats are sold out or perhaps to end blackouts altogether. We seek comment on whether there is any benefit to consumers of repealing the sports blackout rules if the sports leagues' underlying blackout policies remain. Is removing unnecessary or obsolete regulations in itself a sufficient justification for eliminating the sports blackout rules, even if there is no direct or immediate benefit to consumers? If the evidence in this proceeding, including any data or studies submitted by commenters, suggests that there are no tangible benefits to retaining the sports blackout rules but that these rules also do not cause any tangible harms, should the Commission repeal the sports blackout rules? Would removing the Commission's tacit endorsement of the leagues' blackout policies serve the public interest? Are the leagues more likely to relax or reconsider their blackout policies if the Commission's sports blackout rules are repealed? How does our analysis of the issues differ between professional sports leagues which have been granted exemptions from the antitrust laws and sports leagues which have not been granted antitrust protections?

36. Further, we invite comment on any potential harm to consumers of eliminating the sports blackout rules. Some commenters express concern that eliminating the sports blackout rules could accelerate the migration of sports from free over-the-air television to pay TV, which would be harmful to consumers who cannot afford pay TV. As noted above, the compulsory copyright licenses granted to MVPDs apply to the retransmission of broadcast signals, not to pay TV content. According to NAB, if the sports blackout rules are eliminated, “sports leagues wishing to retain control over distribution of their content would have an incentive to move to pay platforms where the compulsory license would not undermine their private agreements.” Similarly, the NFL asserts that eliminating the sports blackout rules “would make broadcast television distribution more difficult, expensive and uncertain and accordingly would make cable network distribution a more appealing prospect.” What percentage of consumers watch the sports programming they view on broadcast television channels rather than pay TV or via the Internet using premium services such as MLB.tv? Would repeal of the sports blackout rules hasten the migration of NFL games from broadcast television channels to pay TV? If so, is it appropriate for the Commission to have the objective of preventing such a migration? We note that the NFL recently extended its contracts with the CBS, FOX, and NBC television networks, ensuring that many NFL games will remain on broadcast television channels at least through the 2022 season. In view of these contract extensions, it appears unlikely that NFL games would migrate further from broadcast television channels to pay TV in the near future. We nevertheless seek comment on whether repeal of the sports blackout rules would likely encourage migration of NFL games to pay TV in the immediate future or in the longer term. What effect, if any, would repeal of the sports blackout rules have on migration to pay TV of sports other than professional football? In this regard, the record suggests that other professional sports teams already distribute a majority of their regular season games via RSNs and other cable networks. Is elimination of the sports blackout rules likely to result in any further migration of these sports from broadcast television channels to pay TV? Are there any other potential harms to consumers from repealing the sports blackout rules? We encourage commenters to quantify, to the extent possible, any benefits and costs to consumers of eliminating the sports blackout rules and to submit supporting data.

37. Some commenters argue that eliminating the sports blackout rules would undermine broadcasters' local program exclusivity and harm localism. These commenters assert that the sports blackout rules, together with the network non-duplication and syndicated exclusivity rules, support local broadcasters' investments in high quality, diverse informational and entertainment programming. By hindering the ability of local broadcast stations to obtain and enforce exclusive local program rights, they assert, elimination of the sports blackout rules would make it more difficult for the stations to attract advertising, which in turn would reduce their ability to invest in local information programming and popular programming. Would elimination of the sports blackout rules have a negative impact on localism? What, if any, costs and benefits would repeal of the sports blackout rules have on broadcasters? To the extent possible, we encourage commenters to quantify any costs and benefits and to submit data supporting their positions.

38. We seek comment also on whether and how elimination of the sports blackout rules would affect any other entities. Some commenters assert that under the Copyright Act any change in the sports blackout rules will trigger a proceeding before the Copyright Royalty Tribunal to adjust the compulsory licensing rates that cable systems pay. Would such a rate adjustment proceeding be mandatory or discretionary on the part of the Copyright Royalty Tribunal? In this regard, we note that the Copyright Act provides that, if the sports blackout rules are changed, the compulsory licensing rates “ may be adjusted to assure that such rates are reasonable in light of the changes.” What burdens and costs would a rate adjustment proceeding impose on the Copyright Royalty Tribunal and any other entities? Are there any other entities that would be impacted by elimination of the sports blackout rules? If so, what are the benefits and costs of elimination for those entities? We request that commenters quantify any benefits and costs to the extent possible and submit supporting data.

39. Finally, we seek comment on whether, as an alternative to outright repeal of the sports blackout rules, we should make modifications to these rules. If so, what modifications should we make, and why would such modifications be preferable to repeal of the sports blackout rules? Commenters that propose any such modifications should quantify the benefits and costs of their proposals and provide supporting data.

40. As required by the Regulatory Flexibility Act, as amended (RFA), the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules considered in the attached Notice of Proposed Rulemaking ( NPRM ). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the NPRM as indicated on the first page of the NPRM. The Commission will send a copy of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). In addition, the NPRM and the IRFA (or summaries thereof) will be published in the Federal Register .

41. The NPRM proposes to eliminate the sports blackout rules, which prohibit certain multichannel video programming distributors (MVPDs) (cable, satellite, and open video systems (OVS)) from retransmitting, within a protected local blackout zone, the signal of a distant broadcast station carrying a live sports event if the event is not available live on a local television broadcast station. The sports blackout rules were originally adopted nearly 40 years ago, when the primary source of revenue for sports leagues was game ticket sales. The sports blackout rules were intended to ensure that the potential loss of ticket sales resulting from MVPD retransmission of distant stations did not cause sports leagues to refuse to sell their rights to sports events to the distant stations, thereby reducing the overall availability of sports telecasts to the public. The sports industry has changed dramatically in the past four decades, however, and it appears that the sports blackout rules may no longer be necessary to assure the overall availability of sports programming.

42. The NPRM tentatively concludes that the Commission has the authority to eliminate the cable sports blackout rule under its general rulemaking power, given that Congress did not explicitly mandate that the Commission adopt the cable sports blackout rule. Because Congress directed the Commission to extend the sports blackout protection applied to cable to satellite and OVS, the NPRM seeks comment on whether the Commission also has the authority to repeal the sports blackout rules for satellite and OVS. In addition, the NPRM seeks comment on whether there is a continued need for the sports blackout rules. In particular, the NPRM seeks comment on whether the economic rationale underlying the sports blackout rules is still valid. Finally, the NPRM proposes to repeal the sports blackout rules and seeks comment on the benefits and costs of such repeal on interested parties, including the sports leagues, broadcasters, and consumers.

43. This NPRM is adopted pursuant to the authority found in Sections 1, 4(i), 4(j), 303(r), 339(b), 653(b) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 303(r), 339(b), and 573(b).

44. The RFA directs agencies to provide a description of, and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.

45. Wired Telecommunications Carriers. The 2007 North American Industry Classification System (“NAICS”) defines “Wired Telecommunications Carriers” as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities that they operate to provide a variety of services, such as wired telephony services, including VoIP services; wired (cable) audio and video programming distribution; and wired broadband Internet services. By exception, establishments providing satellite television distribution services using facilities and infrastructure that they operate are included in this industry.” All establishments listed above are included in the SBA's broad economic census category, Wired Telecommunications Carriers, which was developed for small wireline businesses. Under this category, the SBA deems a wireline business to be small if it has 1,500 or fewer employees. Census data for 2007 shows that there were 31,996 establishments that operated that year. Of this total, 30,178 establishments had fewer than 100 employees, and 1,818 establishments had 100 or more employees. Therefore, under this size standard, the majority of such businesses can be considered small entities.

46. Cable Television Distribution Services. Since 2007, these services have been defined within the broad economic census category of Wired Telecommunications Carriers, which was developed for small wireline businesses. This category is defined as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities that they operate to provide a variety of services, such as wired telephony services, including VoIP services; wired (cable) audio and video programming distribution; and wired broadband Internet services.” The SBA has developed a small business size standard for this category, which is: All such businesses having 1,500 or fewer employees. Census data for 2007 shows that there were 31,996 establishments that operated that year. Of this total, 30,178 establishments had fewer than 100 employees, and 1,818 establishments had 100 or more employees. Therefore, under this size standard, we estimate that the majority of such businesses can be considered small entities.

47. Cable Companies and Systems. The Commission has also developed its own small business size standards, for the purpose of cable rate regulation. Under the Commission's rules, a “small cable company” is one serving 400,000 or fewer subscribers nationwide. Industry data shows that there were 1,141 cable companies at the end of June 2012. Of this total, all but ten cable operators nationwide are small under this size standard. In addition, under the Commission's rate regulation rules, a “small system” is a cable system serving 15,000 or fewer subscribers. Current Commission records show 4,945 cable systems nationwide. Of this total, 4,380 cable systems have less than 20,000 subscribers, and 565 systems have 20,000 or more subscribers, based on the same records. Thus, under this standard, we estimate that most cable systems are small entities.

48. Cable System Operators (Telecom Act Standard). The Communications Act of 1934, as amended, also contains a size standard for small cable system operators, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.” There are approximately 56.4 million incumbent cable video subscribers in the United States today. Accordingly, an operator serving fewer than 564,000 subscribers shall be deemed a small operator if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that all but ten incumbent cable operators are small entities under this size standard. We note that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250,000,000, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act.

49. Television Broadcasting. This Economic Census category “comprises establishments primarily engaged in broadcasting images together with sound. These establishments operate television broadcasting studios and facilities for the programming and transmission of programs to the public.” The SBA has created the following small business size standard for such businesses: Those having $14 million or less in annual receipts. The Commission has estimated the number of licensed commercial television stations to be 1,386. In addition, according to Commission staff review of the BIA Advisory Services, LLC's Media Access Pro Television Database on March 28, 2012, about 950 of an estimated 1,300 commercial television stations (or approximately 73 percent) had revenues of $14 million or less. We therefore estimate that the majority of commercial television broadcasters are small entities.

50. We note, however, that in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations must be included. Our estimate, therefore, likely overstates the number of small entities that might be affected by our action because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. In addition, an element of the definition of “small business” is that the entity not be dominant in its field of operation. We are unable at this time to define or quantify the criteria that would establish whether a specific television station is dominant in its field of operation. Accordingly, the estimate of small businesses to which rules may apply does not exclude any television station from the definition of a small business on this basis and is therefore possibly over-inclusive to that extent.

51. In addition, the Commission has estimated the number of licensed noncommercial educational (NCE) television stations to be 396. These stations are non-profit, and therefore considered to be small entities.

52. Direct Broadcast Satellite (DBS) Service. DBS service is a nationally distributed subscription service that delivers video and audio programming via satellite to a small parabolic “dish” antenna at the subscriber's location. DBS, by exception, is now included in the SBA's broad economic census category, Wired Telecommunications Carriers, which was developed for small wireline businesses. Under this category, the SBA deems a wireline business to be small if it has 1,500 or fewer employees. Census data for 2007 shows that there were 31,996 establishments that operated that year. Of this total, 30,178 establishments had fewer than 100 employees, and 1,818 establishments had 100 or more employees. Therefore, under this size standard, the majority of such businesses can be considered small entities. However, the data we have available as a basis for estimating the number of such small entities were gathered under a superseded SBA small business size standard formerly titled “Cable and Other Program Distribution.” The definition of Cable and Other Program Distribution provided that a small entity is one with $12.5 million or less in annual receipts. Currently, only two entities provide DBS service, which requires a great investment of capital for operation: DIRECTV and DISH Network. Each currently offer subscription services. DIRECTV and DISH Network each report annual revenues that are in excess of the threshold for a small business. Because DBS service requires significant capital, we believe it is unlikely that a small entity as defined under the superseded SBA size standard would have the financial wherewithal to become a DBS service provider.

53. Satellite Master Antenna Television (SMATV) Systems, also known as Private Cable Operators (PCOs). SMATV systems or PCOs are video distribution facilities that use closed transmission paths without using any public right-of-way. They acquire video programming and distribute it via terrestrial wiring in urban and suburban multiple dwelling units such as apartments and condominiums, and commercial multiple tenant units such as hotels and office buildings. SMATV systems or PCOs are now included in the SBA's broad economic census category, Wired Telecommunications Carriers, which was developed for small wireline businesses. Under this category, the SBA deems a wireline business to be small if it has 1,500 or fewer employees. Census data for 2007 show that there were 31,996 establishments that operated that year. Of this total, 30,178 establishments had fewer than 100 employees, and 1,818 establishments had 100 or more employees. Therefore, under this size standard, the majority of such businesses can be considered small entities.

54. Home Satellite Dish (HSD) Service. HSD or the large dish segment of the satellite industry is the original satellite-to-home service offered to consumers, and involves the home reception of signals transmitted by satellites operating generally in the C-band frequency. Unlike DBS, which uses small dishes, HSD antennas are between four and eight feet in diameter and can receive a wide range of unscrambled (free) programming and scrambled programming purchased from program packagers that are licensed to facilitate subscribers' receipt of video programming. Because HSD provides subscription services, HSD falls within the SBA-recognized definition of Wired Telecommunications Carriers. The SBA has developed a small business size standard for this category, which is: All such businesses having 1,500 or fewer employees. Census data for 2007 show that there were 31,996 establishments that operated that year. Of this total, 30,178 establishments had fewer than 100 employees, and 1,818 establishments had 100 or more employees. Therefore, under this size standard, the majority of such businesses can be considered small entities.

55. Open Video Systems. The open video system (OVS) framework was established in 1996, and is one of four statutorily recognized options for the provision of video programming services by local exchange carriers. The OVS framework provides opportunities for the distribution of video programming other than through cable systems. Because OVS operators provide subscription services, OVS falls within the SBA small business size standard covering cable services, which is “Wired Telecommunications Carriers.” The SBA has developed a small business size standard for this category, which is: All such businesses having 1,500 or fewer employees. Census data for 2007 shows that there were 31,996 establishments that operated that year. Of this total, 30,178 establishments had fewer than 100 employees, and 1,818 establishments had 100 or more employees. Therefore, under this size standard, we estimate that the majority of these businesses can be considered small entities. In addition, we note that the Commission has certified some OVS operators, with some now providing service. Broadband service providers (BSPs) are currently the only significant holders of OVS certifications or local OVS franchises. The Commission does not have financial or employment information regarding the other entities authorized to provide OVS, some of which may not yet be operational. Thus, again, at least some of the OVS operators may qualify as small entities.

56. Cable and Other Subscription Programming. The Census Bureau defines this category as follows: “This industry comprises establishments primarily engaged in operating studios and facilities for the broadcasting of programs on a subscription or fee basis. . . . These establishments produce programming in their own facilities or acquire programming from external sources. The programming material is usually delivered to a third party, such as cable systems or direct-to-home satellite systems, for transmission to viewers.” The SBA has developed a small business size standard for this category, which is: all such businesses having $15 million dollars or less in annual revenues. Census data for 2007 show that there were 659 establishments that operated that year. Of that number, 462 operated with annual revenues of $9,999,999 dollars or less. One hundred ninety-seven (197) operated with annual revenues of between $10 million and $100 million or more. Thus, under this size standard, the majority of such businesses can be considered small entities.

57. The proposed rule changes discussed in the NPRM would affect compliance requirements. The proposed rule changes would eliminate the sports blackout rules, which prohibit certain MVPDs from televising the home game of a sports team within a specified geographic area surrounding a television broadcast station licensed to the community in which the game is being played if the game is not available live on a television broadcast station in that community.

58. The RFA requires an agency to describe any significant alternatives that might minimize any significant economic impact on small entities. Such alternatives may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.

59. As discussed in the NPRM, repeal of the sports blackout rules would not eliminate the sports leagues' underlying blackout policies. Rather, it would simply remove Commission support for these policies. Sports leagues would still be able to require local television broadcast stations to black out games. In addition, sports leagues would likely be able to obtain the same protection afforded under the sports blackout rules either through market-based negotiations with MVPDs or through their contracts with broadcasters by requiring, as a term of carriage, the deletion of specific sports events. Accordingly, we believe that repeal of the sports blackout rules would impose only minimal burdens on any affected entities. For this reason, an analysis of alternatives to the proposed rule changes is unnecessary. We invite comment on whether there are any alternatives we should consider that would minimize any adverse impact on small entities, but which maintain the benefits of our proposal.

60. None.

61. This Notice of Proposed Ruemaking proposes no new or modified information collection requirements. In addition, therefore, it does not propose any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002.

62. Permit-But-Disclose. The proceeding this NPRM initiates shall be treated as a “permit-but-disclose” proceeding in accordance with the Commission's ex parte rules. Persons making ex parte presentations must file a copy of any written presentation or a memorandum summarizing any oral presentation within two business days after the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all persons attending or otherwise participating in the meeting at which the ex parte presentation was made, and (2) summarize all data presented and arguments made during the presentation. If the presentation consisted in whole or in part of the presentation of data or arguments already reflected in the presenter's written comments, memoranda or other filings in the proceeding, the presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission staff during ex parte meetings are deemed to be written ex parte presentations and must be filed consistent with rule § 1.1206(b). In proceedings governed by rule § 1.49(f) or for which the Commission has made available a method of electronic filing, written ex parte presentations and memoranda summarizing oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment filing system available for that proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt, searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission's ex parte rules.

63. Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS).

Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/.

Paper Filers: Parties who choose to file by paper must file an original and one copy of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, filers must submit two additional copies for each additional docket or rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.

1. All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building.

2. Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.

3. U.S. Postal Service first-class, Express, and Priority mail should be addressed to 445 12th Street SW., Washington, DC 20554.

64. People With Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an email to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

65. For additional information on this proceeding, contact Kathy Berthot, Kathy.Berthot@fcc.gov, of the Media Bureau, Policy Division, (202) 418-2120.

66. Accordingly, it is ordered that, pursuant to the authority found in sections 1, 4(i), 4(j), 303(r), 339(b), and 653(b) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 303(r), 339(b), and 573(b) this Notice of Proposed Rulemaking is adopted.

67. It is further ordered that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Notice of Proposed Rulemaking in MB Docket No. 12-3, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 part 76 as follows: