[Federal Register Volume 61, Number 138 (Wednesday, July 17, 1996)]
[Rules and Regulations]
[Pages 37213-37216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18105]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 251

[Docket No. 96-4 CARP DPRA]


Digital Phonorecord Delivery Rate Adjustment Proceeding

AGENCY: Copyright Office, Library of Congress.

ACTION: Final regulations, notice of initiation of negotiation period.

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SUMMARY: The Copyright Office is announcing the initiation of the 
negotiation period for determining reasonable rates and terms for 
digital transmissions that constitute a digital phonorecord delivery. 
This negotiation period is mandated by the Digital

[[Page 37214]]

Performance Right in Sound Recordings Act of 1995 and is intended to 
promote the private settlement of the rates and terms for digital 
phonorecord delivery. In addition, the Office is adopting procedural 
regulations implementing the Digital Performance Right in Sound Records 
Act of 1995. The Office also solicits comments on the advisability of 
consolidating the digital phonorecord delivery rate adjustment 
proceeding with the physical phonorecord rate adjustment proceeding.

EFFECTIVE DATES: The regulations are effective August 16, 1996. The 
negotiation period begins July 17, 1996 and ends December 31, 1996. 
Comments on consolidation are due November 8, 1996. Petitions for rate 
adjustment are due January 10, 1997.

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

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

SUPPLEMENTARY INFORMATION:

Background

    On November 1, 1995, Congress passed the Digital Performance Right 
in Sound Recordings Act of 1995 (``Digital Performance Act''). Public 
Law 104-39, 109 Stat. 336. Among other things, it confirms and 
clarifies that the scope of the compulsory license to make and 
distribute phonorecords of nondramatic musical compositions includes 
digital transmissions which constitute ``digital phonorecord 
deliveries.'' 17 U.S.C. 115(c)(3). 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. 17 U.S.C. 115(d), 37 
CFR 255.4.
    The Digital Performance Act also provides 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 physical phonorecords. 
Accordingly, the Copyright Office and the Library of Congress amended 
part 255 of the Copyright Office's rules to set the rate for digital 
phonorecord deliveries at 6.95 cents for each work embodied in a 
phonorecord, or 1.3 cents per minute of playing time or fraction 
thereof, whichever amount is larger. 60 FR 61655 (December 1, 1995); 37 
CFR 255.5. This is the same rate that applies to the manufacture and 
distribution of physical phonorecords.

This Rate Adjustment Proceeding

    The current rate for digital phonorecord deliveries expires 
December 31, 1997. Accordingly, in the Digital Performance Act, 
Congress established a two-step process for adjusting the royalty rate: 
a negotiation period during the second half of 1996 wherein the owners 
and the users attempt to reach their own voluntary licenses, and the, 
if necessary, and upon petition in 1997, the convening of a copyright 
arbitration panel (CARP) to establish rates and terms for those persons 
who are not covered by such voluntary licenses. 17 U.S.C. 115(c)(3)(C) 
and (D).
    For the first step in the process, the negotiation period, the 
Digital Performance Act provides that during the period of June 30, 
1996, through December 31, 1996, the Librarian of Congress shall cause 
notice to be published in the Federal Register of the initiation of 
voluntary negotiation proceedings for the purpose of determining 
reasonable terms and rates for digital phonorecord deliveries. 17 
U.S.C. 115(c)(3)(C).
    The Digital Performance Act does not require the negotiation period 
to begin on June 30, 1996, nor does it require that the negotiation 
period be six months long. It is the Office's understanding that the 
Act leaves the commencement and the length of the negotiation period to 
the discretion of the Librarian.
    Upon consideration, the Office believes that the negotiation period 
should begin in July, 1996, and should conclude by December 31, 1996, 
and that petitions to convene a CARP should be filed by January 10, 
1997, for the following reason. The current rate for digital 
phonorecord deliveries, by operation of law, is set to expire December 
31, 1997. Should negotiations fail and the Librarian be petitioned to 
convene a CARP, written direct cases would have to be filed by January 
31, 1997, if the precontroversy period (three months), the arbitration 
proceeding (six months) and the Librarian's review of the CARP's 
decision (two moths) is to conclude by December 31, 1997. Otherwise, 
there will be a lapse in time when no rates apply to digital 
phonorecord deliveries.
    Therefore, the following procedural dates shall apply:
     From today's publication in the Federal Register to 
December 31, 1996, there is established the voluntary negotiation 
proceeding for determining reasonable terms and rates of royalty 
payments for digital phonorecord deliveries. Such terms and rates shall 
distinguish between (a) digital phonorecord deliveries where the 
reproduction or distribution of a phonorecord is incidental to the 
transmission which constitutes the digital phonorecord delivery, and 
(b) digital phonorecord deliveries in general.
     If negotiations are successful, any copyright owners of 
nondramatic musical works and any persons entitled to obtain a 
compulsory license for digital phonorecord deliveries may submit to the 
Librarian of Congress licenses covering such activities. 17 U.S.C. 
115(c)(3)(C).
     In addition, if negotiations are successful, the Librarian 
may, upon the request of the parties to the negotiation proceeding, 
submit the agreed upon rates and terms to the public in a notice-and-
comment proceeding. The Librarian may adopt the rates and terms 
embodied in the proposed settlement without convening a CARP, provided 
that no opposing comment is received by the Librarian from a party with 
an intent to participate in a CARP proceeding. 37 CFR 251.63(a). Such 
petitions are to be filed by January 10, 1997.
     If negotiations are not successful, petitions to convene a 
CARP are to be filed by January 10, 1997.\1\ The petition shall detail 
petitioner's interest in the royalty rate sufficiently to permit the 
Librarian of Congress to determine whether the petitioner has a 
``significant interest'' in the rate. The petition must also identify 
the extent to which the petitioner's interest is shared by other owners 
or users; owners or users with similar interests may file a joint 
petition. 37 CFR 251.62.
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    \1\ Because the law requires petitions to be filed in 1997, and 
because written direct cases must be filed by January 31, 1997, if 
the proceeding is to conclude by December 31, 1997, the petitions 
must be received by the Copyright Office by January 10, 1997. 
Therefore, it is advisable for petitioners to deliver their 
petitions to the Copyright Office. If petitions are mailed to the 
CARP post office box, it is advisable that they be sent well in 
advance.
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     Notices of Intent to Participate in a CARP proceeding to 
adjust the rates and establish the terms of the digital

[[Page 37215]]

phonorecord delivery compulsory license are to be filed by January 17, 
1997.
     Written direct cases in the CARP proceeding shall be filed 
by January 31, 1997.
     After the precontroversy discovery period, the Librarian 
will initiate the CARP proceeding on May 1, 1997.

Relationship to Rate Adjustment Proceeding for Physical 
Phonorecords

    The year 1997 is also when the mechanical royalty rate for physical 
phonorecords may be adjusted. This rate can be the same as, or 
different from, the rate that applies to digital phonorecord 
deliveries. While the rate for digital phonorecord deliveries expires, 
by law, on December 31, 1997, and needs to be replaced, there is no 
similar urgency to adjust the mechanical royalty rate for physical 
phonorecords. If no rate adjustment proceeding for physical 
phonorecords is concluded by December 31, 1997, the rate in existence 
now will simply continue until such time as it is adjusted.
    The question is still raised whether it wouldn't be more efficient 
and less costly to have the same CARP panel, if one is to be convened, 
consider the mechanical royalty rates for both physical phonorecords 
and digital phonorecord deliveries. To consolidate such proceedings, it 
would be necessary to have a petition to adjust the physical 
phonorecord rate filed at the same time as the petition to adjust the 
digital phonorecord deliveries rate, January 10, 1997.
    However, to require petitions to be filed by January 10, 1997, 
might deprive the interested copyright owners and users of time in 1997 
to negotiate the rate. Therefore, the Office solicits comments on the 
advisability of consolidating the two rate adjustment proceedings. 
Comments are due by November 8, 1996. If the comments favor 
consolidation, the Office will issue an order indicating that the two 
proceedings will be consolidated. The order will also call for physical 
phonorecord petitions to be filed by January 10, 1997, Notices of 
Intent to Participate to be filed by January 17, 1997, written direct 
cases to be filed by January 31, 1997, and list all other procedural 
dates. The order will also cancel, because of time constraints, the 30-
day negotiation period that follows the filing of a physical 
phonorecord petition set out in 37 CFR 251.63(a). The Librarian will 
initiate the consolidated proceeding on May 1, 1997.

Amendment of CARP Rules to Reflect Passage of Digital Performance Act

    In addition to expanding the scope of the mechanical compulsory 
license to include digital phonorecord deliveries, the Digital 
Performance Act also added a new compulsory license: the license for 
qualifying subscription digital audio transmission services to perform 
sound recordings. The rates and terms for both these licenses are to be 
set by the CARP, if negotiations prove successful. Therefore, the 
current CARP rules need to be amended to reflect these additional 
responsibilities.
    Section 553(b)(3)(A) of the Administrative Procedure Act states 
that general notice of proposed rulemaking is not required for rules of 
agency organization, procedure, or practice. Since the Office finds 
that the following final regulations are rules of agency organization, 
procedure, or practice, no notice of proposed rulemaking is required.

List of Subjects in 37 CFR Part 251

    Administrative practice and procedure, Cable television, Copyright, 
Jukeboxes, Organization and functions (government agencies), 
Recordings, Satellites.

    For the reasons set forth in the preamble, the Copyright Office and 
the Library of Congress amend 37 CFR part 251 as follows:

PART 251--COPYRIGHT ARBITRATION ROYALTY PANEL RULES OF PROCEDURE

    1. The authority citation for part 251 continues to read as 
follows:

    Authority: 17 U.S.C. 801-803.

    2. Section 251.2 is revised to read as follows:


Sec. 251.2   Purpose of Copyright Arbitration Royalty Panels.

    The Librarian of Congress, upon the recommendation of the Register 
of Copyrights, may appoint and convene a Copyright Arbitration Royalty 
Panel (CARP) for the following purposes:
    (a) To make determinations concerning royalty rates for the cable 
compulsory license, 17 U.S.C. 111;
    (b) To make determinations concerning royalty rates and terms for 
the subscription digital audio transmissions compulsory license, 17 
U.S.C. 114;
    (c) To make determinations concerning royalty rates for making and 
distributing phonorecords, and royalty rates and terms for digital 
transmissions that constitute digital phonorecord deliveries, 17 U.S.C. 
115;
    (d) To make determinations concerning royalty rates for coin-
operated phonorecord players (jukeboxes) whenever a negotiated license 
expires or is terminated and is not replaced by another such license 
agreement, 17 U.S.C. 116;
    (e) To make determinations concerning royalty rates and terms for 
the use by noncommercial educational broadcast stations for certain 
copyrighted works, 17 U.S.C. 118;
    (f) To make determinations concerning royalty rates for the 
satellite carrier compulsory license, 17 U.S.C. 119; and
    (g) To make determinations concerning the distribution of cable and 
satellite carrier royalty fees and digital audio recording devices and 
media payments deposited with the Register of Copyrights, 17 U.S.C. 
111, 119, and chapter 10, respectively.
    3. Section 251.58(c) is revised to read as follows:


Sec. 251.58   Judicial review.

* * * * *
    (c) The pendency of any appeal shall not relieve persons obligated 
to make royalty payments under 17 U.S.C. 111, 114, 115, 116, 118, 119, 
or 1003, and who would be affected by the determination on appeal, from 
depositing statements of account and royalty fees by those sections.
    4. The first sentence of Sec. 251.60 is revised to read as follows:


Sec. 251.60   Scope.

    This subpart governs only those proceedings dealing with royalty 
rate adjustments affecting cable (17 U.S.C. 111), subscription digital 
audio transmission (17 U.S.C. 114), the manufacture and distribution of 
phonorecords, including digital phonorecord deliveries (17 U.S.C. 115), 
performances on coin-operated phonorecord players (jukeboxes) (17 
U.S.C. 116), noncommercial educational broadcasting (17 U.S.C. 118) and 
satellite carriers (17 U.S.C. 119). * * *
    5. In Sec. 251.61, paragraph (a) is revised to read as follows:


Sec. 251.61   Commencement of adjustment proceedings.

    (a) In the case of cable, subscription digital audio transmissions, 
phonorecords, digital phonorecord deliveries, and coin-operated 
phonorecord players (jukeboxes), rate adjustment proceedings shall 
commence with the filing of a petition by an interested party according 
to the following schedule:
    (1) Cable: During 1995, and each subsequent fifth calendar year.

[[Page 37216]]

    (2) Subscription Digital Audio Transmissions: During a 60-day 
period prescribed by the Librarian in 1996, 2000, and each subsequent 
fifth calendar year.
    (3) Phonorecords: During 1997 and each subsequent tenth calendar 
year.
    (4) Digital Phonorecord Deliveries: During 1997 and each subsequent 
fifth calendar year except to the extent that different years may be 
determined by the parties to a negotiated settlement or by the 
copyright arbitration royalty panel.
    (5) Coin-operated phonorecord players (jukeboxes): Within one year 
of the expiration or termination of a negotiated license authorized by 
17 U.S.C. 116.
* * * * *
    6. In Sec. 251.62, the first sentence of paragraph (a) is revised 
to read as follows:


Sec. 251.62   Content of petition.

    (a) In the case of a petition for rate adjustment proceedings for 
cable, subscription digital audio transmissions, phonorecords, digital 
phonorecord deliveries,and coin-operated phonorecord players 
(jukeboxes), the petition shall detail the petitioner's interest in the 
royalty rate sufficiently to permit the Librarian of Congress to 
determine whether the petitioner has a ``significant interest'' in the 
matter. * * *
* * * * *
    7. In Sec. 251.63, the first sentence of paragraph (a) is revised 
to read as follows:


Sec. 251.63   Consideration of petition; settlements.

    (a) To allow time for the parties to settle their differences 
concerning cable, phonorecord, and jukebox rate adjustments, the 
Librarian of Congress shall, after the filing of the petition under 
Sec. 251.62 and before the 45-day period specified in 
Sec. 251.45(b)(2)(i), designate a 30-day period for consideration of 
their settlement. * * *
* * * * *
    Dated: July 12, 1996.

Recommended by:
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 96-18105 Filed 7-16-96; 8:45 am]
BILLING CODE 1410-33-M