[Federal Register Volume 60, Number 231 (Friday, December 1, 1995)]
[Rules and Regulations]
[Pages 61655-61657]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29146]



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LIBRARY OF CONGRESS
37 CFR Part 255

[Docket No. RM 95-4 CARP]


Digital Performance Right in Sound Recordings

AGENCY: Copyright Office, Library of Congress.

ACTION: Initiation of voluntary negotiation period and final rule.

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SUMMARY: The Copyright Office is initiating the six month voluntary 
negotiation period for negotiating terms and rates for a compulsory 
license for digital subscription transmissions, and adopting the rate 
for a compulsory license for digital phonorecord delivery as required 
by the Digital Performance Right in Sound Recordings Act of 1995.

DATES: The effective date of this document is December 1, 1995. The 
initiation of the six month voluntary negotiation period is December 1, 
1995. The effective date of the rate for digital phonorecord deliveries 
is February 1, 1996.

ADDRESSES: Copies of voluntary license agreements and petitions, if 
sent by mail, should be addressed to: Copyright Arbitration Royalty 
Panel (CARP), P.O. Box 70977, Southwest Station, Washington, D.C. 
20024. If hand delivered, they should be brought to: Office of the 
Copyright General Counsel, James Madison Memorial Building, Room LM-
407, First and Independence Avenue, S.E. Washington, D.C. 20540.

FOR FURTHER INFORMATION CONTACT: Marilyn Kretsinger, Acting General 
Counsel, or William Roberts, Senior Attorney, Copyright Arbitration 
Royalty Panel, P.O. Box 70977, Southwest Station, Washington, D.C. 
20024, (202) 707-8380.

SUPPLEMENTARY INFORMATION: On November 1, 1995, the President signed 
into law the ``Digital Performance Right in Sound Recordings Act of 
1995'' (``Digital Performance Act''), Pub. L. 104-39. The Digital 
Performance Act creates an exclusive right for copyright owners of 
sound recordings, subject to certain limitations, to perform publicly 
the sound recordings by means of certain digital audio transmissions. 
See 17 U.S.C. 106(6).
    Among the limitations on the performance of a sound recording 
publicly by means of a digital audio transmission is the creation of a 
new compulsory license for nonexempt subscription transmissions. The 
Digital Performance Act defines a ``subscription transmission'' as one 
that ``is a transmission that is controlled and limited to particular 
recipients, and for which consideration is required to be paid or 
otherwise given by or on behalf of the recipient to receive the 
transmission or a package of transmissions including the 
transmission.'' 17 U.S.C. 114(j)(8). All nonexempt subscription 
transmissions are eligible for section 114 compulsory licensing 
provided they are not made by an ``interactive service,'' which is 
defined in part as ``one that enables a member of the public to 
receive, on request, a transmission of a particular sound recording 
chosen by or on behalf of the recipient.'' See 17 U.S.C. 114(j)(4). 

[[Page 61656]]

    The terms and rates of the section 114 statutory license are 
determined by voluntary negotiation among the affected parties and, 
where necessary, compulsory arbitration conducted under chapter 8 of 
the Copyright Act. The voluntary negotiation period was triggered on 
enactment of the Digital Performance Act, which directs the Librarian 
of Congress, within 30 days of enactment, to publish in the Federal 
Register a notice initiating ``voluntary negotiation proceedings for 
the purpose of determining reasonable terms and rates of royalty 
payments * * *'' 17 U.S.C. 114(f)(1). The voluntary negotiation period 
is to last for six months, and any terms and rates negotiated during 
the period are to be effective from February 1, 1996, the effective 
date of the Digital Performance Act,1 through December 31, 2000. 
The Digital Performance Act requires that the terms and rates should be 
established separately for each different type of digital audio 
transmission service then in operation, but does not require or suggest 
that the terms and rates established must be different. The 
negotiations between copyright owners of sound recordings and the 
entities performing such recordings under the Sec. 114 license are to 
be governed by the provisions of section 114(e) (which grants the 
negotiating parties an antitrust exemption), and each party is 
responsible for bearing its own costs.

    \1\ The effective date of the Digital Performance Act is 
February 1, 1996, with the exception of sections 114 (e) and (f) of 
the law, which became effective upon date of enactment.
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    In the legislative history to the Digital Performance Act, the 
Committee expressed hope that the voluntary negotiation period will 
lead to an industry-wide agreement concerning royalty terms and rates. 
S. Rep. No. 128, 104th Cong., 1st Sess. 29 (1995). If an agreement as 
to rates and terms is reached and there is no further controversy, then 
it is not necessary for the parties to submit to arbitration. In such 
cases, the Librarian of Congress will follow current rate regulation 
procedures and notify the public of the proposed agreement in a notice 
and comment proceeding and, if no opposing comment is received from a 
party with a substantial interest and intent to participate in an 
arbitration proceeding, the Librarian will adopt the terms and rates 
embodied in the agreement without convening a copyright arbitration 
royalty panel. 37 CFR 251.63(b). If, however, no industry-wide 
agreement is reached, or only certain parties negotiate license 
agreements, then those copyright owners and entities performing sound 
recordings not subject to a voluntary agreement shall be bound by the 
terms and rates set by a CARP. Arbitration proceedings are initiated 
upon the filing of a petition for ratemaking with the Librarian of 
Congress during the 60 days immediately following the six month 
voluntary negotiation period. Arbitration cannot take place without the 
filing of a petition even if no voluntary license agreements are 
negotiated.

Initiation of Voluntary Negotiations

    Pursuant to 17 U.S.C. 114(f)(1), the Copyright Office of the 
Library of Congress is initiating the six month voluntary negotiation 
period for sound recording copyright owners and entities that perform 
or authorize the performance of sound recordings by means of nonexempt 
digital subscription transmissions. The negotiation period is to run 
from December 1, 1995 to June 1, 1996. Parties which negotiate a 
voluntary license agreement during this period are encouraged to submit 
two copies of the agreement to the Copyright Office at the above listed 
address within 30 days of its execution.

Petitions

    Pursuant to 17 U.S.C. 114(f)(2), those sound recording copyright 
owners and entities that perform or authorize the performance of sound 
recordings by means of nonexempt digital transmissions and who have not 
negotiated license agreements under section 114(f)(1) are subject to 
arbitration upon the filing of a petition. Only those parties with a 
significant interest in the establishment of terms and rates for the 
section 114 license may file a petition. Petitions must be submitted in 
accordance with 17 U.S.C. 803(a)(1), and may be filed at any time 
during the period commencing on June 2, 1996, and ending on August 1, 
1996. Petitions should be submitted to the Copyright Office at the 
address listed in this notice. The petitioner must deliver an original 
and five copies of the petition to the Office.
    If all the affected parties negotiate a single industry-wide 
agreement during the period described in section 114(f)(1), they must 
petition the Librarian of Congress for acceptance of the agreement 
during the same 60 day period. The Librarian will then follow the 
notice and comment procedures of 37 CFR 251.63(b). If a party with a 
significant interest and an intent to participate in an arbitration 
proceeding files an objection to the agreement during the notice and 
comment proceeding, then the Librarian shall initiate an arbitration 
proceeding in accordance with chapter 8 of the Copyright Act and 37 CFR 
251 part.

Digital Phonorecord Delivery

    The Digital Performance Act also provides that the section 115 
compulsory license to make and distribute phonorecord includes the 
right of the compulsory licensee to make or authorize digital 
phonorecord deliveries. The Act identifies that the rate for all 
digital phonorecord deliveries made or authorized under a compulsory 
license on or before December 31, 1997, shall be the same as the rate 
in effect for the making and distribution of a physical phonorecord. 
2 As a result, the Office is amending part 255 of its rules to 
reflect the new royalty rate for digital phonorecord deliveries, and to 
adopt the same definition of digital phonorecord delivery as appears in 
the Digital Performance Act. The effective date of the rule change is 
February 1, 1996, the date on which the Digital Performance Act takes 
effect.

    \2\ After December 31, 1997, the rate for digital phonorecord 
deliveries could be the same or different than the rate for making 
and distributing a physical phonorecord, depending on the outcome of 
negotiations or CARP proceedings scheduled to take place that year.
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Good Cause Finding

    Section 553(b)(3)(B) states that notice of a proposed rulemaking is 
not required ``when the agency for good cause finds * * * that notice 
and public procedure thereon are impracticable, unnecessary, or 
contrary to the public interest.''
    Because the Digital Performance Act requires that the new rate for 
digital phonorecord deliveries is to be the same as for the making and 
distribution of physical phonorecords until December 31, 1997, the 
Office is without any discretion in the matter. Therefore, it would be 
impracticable, unnecessary, and contrary to the public interest to 
solicit comments on a rule that is mandated by law.

List of Subjects in 37 CFR Part 255

    Copyright, Recordings.

    For the reasons set forth in the preamble, the Copyright Office 
amends 37 CFR part 255 as follows:

PART 255--ADJUSTMENT OF ROYALTY PAYABLE UNDER COMPULSORY LICENSE 
FOR MAKING AND DISTRIBUTING PHONORECORDS

    1. The authority citation for part 255 continues to read as 
follows:


[[Page 61657]]

    Authority: 17 U.S.C. 801(b)(1) and 803.

    2. Section 255.1 is revised to read as follows:


Sec. 255.1  General.

    This part 255 adjusts the rates of royalties payable under the 
compulsory license for making and distributing phonorecords, including 
digital phonorecord deliveries, embodying nondramatic musical works, 
under 17 U.S.C. 115.
    3. A new Sec. 255.4 is added to read as follows:


Sec. 255.4  Definition of digital phonorecord delivery.

    A ``digital phonorecord delivery'' is each individual delivery of a 
phonorecord by digital transmission of a sound recording which results 
in a specifically identifiable reproduction by or for any transmission 
recipient of a phonorecord of that sound recording, regardless of 
whether the digital transmission is also a public performance of the 
sound recording or any nondramatic musical work embodied therein. A 
digital phonorecord delivery does not result from a real-time, 
noninteractive subscription transmission of a sound recording where no 
reproduction of the sound recording or the musical work embodied 
therein is made from the inception of the transmission through to its 
receipt by the transmission recipient in order to make the sound 
recording audible.
    4. A new Sec. 255.5 is added to read as follows:


Sec. 255.5  Royalty rate for digital phonorecord deliveries.

    For every digital phonorecord delivery made on or before December 
31, 1997, the royalty rate payable with respect to each work embodied 
in the phonorecord shall be either 6.95 cents, or 1.3 cents per minute 
of playing time or fraction thereof, whichever amount is larger.

    Dated: November 24, 1995.
Marilyn Kretsinger,
Acting General Counsel.
    Approved:
James H. Billington,
The Librarian of Congress.
[FR Doc. 95-29146 Filed 11-30-95; 8:45 am]
BILLING CODE 1410-33-P