[Federal Register Volume 63, Number 228 (Friday, November 27, 1998)]
[Rules and Regulations]
[Pages 65555-65557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31657]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 251

[Docket No. RM 98-4 CARP]


Digital Performance Right in Sound Recordings and Ephemeral 
Recordings

AGENCY: Copyright Office, Library of Congress.

ACTION: Final rule and initiation of voluntary negotiation period.

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SUMMARY: The Copyright Office is initiating the six-month voluntary 
negotiation periods, as required by the Digital Millennium Copyright 
Act of 1998, for negotiating terms and rates for two compulsory 
licenses, which in one case, allows public performances of sound 
recordings by means of eligible nonsubscription transmissions and by 
new subscription services, and in the second instance, allows the 
making of an ephemeral phonorecord of a sound recording in furtherance 
of making a permitted public performance of the sound recording. In 
addition, the Office is adopting procedural regulations to implement 
the Digital Millennium Copyright Act of 1998.

EFFECTIVE DATES: The effective date of the regulation is December 28, 
1998. The effective date of the initiation of the six-month voluntary 
negotiation periods is November 27, 1998.

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, DC 20024. 
If hand delivered, they should be brought to: Office of the General 
Counsel, James Madison Memorial Building, Room LM-403, First and 
Independence Avenue, SE, Washington, DC 20559-6000.

FOR FURTHER INFORMATION: David O. Carson, General Counsel, or Tanya M. 
Sandros, Attorney Advisor, Copyright Arbitration Royalty Panel, P.O. 
Box 70977, Southwest Station, Washington, D.C. 20024. Telephone (202) 
707-8380 or Telefax (202) 707-8366.

SUPPLEMENTARY INFORMATION: On October 28, 1998, the President signed 
into law the ``Digital Millennium Copyright Act of 1998'' (``DMCA'' or 
``Act''). Public Law 105-304. Among other things, the DMCA amends 
sections 112 and 114 of the Copyright Act, title 17 of the United 
States Code, to create a new license, governing the making of an 
ephemeral recording of a sound recording, and to expand another to 
facilitate the public performance of sound recordings by means of 
certain audio transmissions. See 17 U.S.C. 112(e)(1) and 114(d)(2). In 
amending these sections, Congress sought to ``first, further a stated 
objective of Congress when it passed the Digital Performance Right in 
Sound Recordings Act of 1995 (DPRA) to ensure that recording artists 
and record companies will be protected as new technologies affect the 
ways in which their creative works are used; and second, to create fair 
and efficient licensing mechanisms that address the complex issues 
facing copyright owners and copyright users as a result of the rapid 
growth of digital audio services.'' H.R. Conf. Rep. No. 105-796, at 79-
80 (1998).
    In enacting the Digital Performance Right in Sound Recordings Act 
of 1995 (DPRA), Pub. L. 104-39, Congress created 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. Among the limitations on the performance was the 
creation of a new compulsory license for nonexempt, noninteractive, 
digital subscription transmissions. The DMCA expands this license to 
allow a nonexempt eligible nonsubscription transmission and a nonexempt 
transmission by a preexisting satellite digital audio radio service to 
perform publicly a sound recording in accordance with the terms and 
rates of the statutory license. 17 U.S.C. 114(a).
    An ``eligible nonsubscription transmission'' is a noninteractive, 
digital audio transmission which, as the name implies, does not require 
a subscription for receiving the transmission. The transmission must 
also be made as part of a service that provides audio programming 
consisting in whole or in part of performances of sound recordings 
which purpose is to provide audio or entertainment programming, but not 
to sell, advertise, or promote particular goods or services. A 
``preexisting satellite digital audio radio service'' is a subscription 
digital audio radio service that received a satellite digital audio 
radio service license issued by the Federal Communications Commission 
on or before July 31, 1998. See 17 U.S.C. 114(j)(6) and (10). Only two 
known entities, CD Radio and American Mobile Radio Corporation, qualify 
under the statutory definition as preexisting satellite digital audio 
radio services.
    In addition to expanding the current 114 license, the DMCA creates 
a new statutory license for the making of an ``ephemeral recording'' of 
a sound recording by certain transmitting organizations. The new 
statutory license allows entities that transmit performances of sound 
recordings to business establishments, pursuant to the limitations set 
forth in section 114(d)(1)(C)(iv), to make an ephemeral recording of a 
sound recording for purposes of a later transmission. The new license 
also provides a means by which a transmitting entity with a statutory 
license under section 114(f) can make more than the one phonorecord 
specified in section 112(a). 17 U.S.C. 112(e).

Determination of Reasonable Terms and Rates

    The statutory scheme for establishing reasonable terms and rates is 
the same for both licenses. The terms and rates for the two new 
statutory licenses may be determined by voluntary agreement among the 
affected parties, or if necessary, through compulsory arbitration 
conducted pursuant to Chapter 8 of the Copyright Act. Because the DMCA 
does not establish reasonable rates and terms for either the new 
section 112 or the expanded section 114 license, the statute requires 
the Librarian of Congress to initiate a

[[Page 65556]]

voluntary negotiation period, the first phase in the rate setting 
process, within 30 days of enactment for the purpose of determining 
reasonable terms and rates for each license. See 17 U.S.C. 112(e)(4) 
and 114(f)(2)(A).
    If the affected parties are able to negotiate an industry-wide 
agreement, then it will not be necessary for the parties to participate 
in an arbitration proceeding. 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. If no party 
with a substantial interest and an intent to participate in an 
arbitration proceeding files a comment opposing the negotiated rates 
and terms, the Librarian will adopt the proposed terms and rates 
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 users relying upon one or both of the statutory licenses 
shall be bound by the terms and rates established through the 
arbitration process.
    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 negotiation period. Arbitration 
cannot take place, however, unless a party files a petition even if the 
parties fail to negotiate a voluntary license agreement. 17 U.S.C. 
112(e)(5) and 114(f)(1)(B).
    The rates and terms established shall be effective during the 
period beginning on the effective date of the enactment of the DMCA and 
ending on December 31, 2000, or upon agreement by the affected parties, 
another mutually acceptable date. 17 U.S.C. 112(e)(5) and 114(f)(2)(A).

Initiation of Voluntary Negotiations

    Pursuant to sections 112(e)(4) and 114(f)(2)(A), the Copyright 
Office of the Library of Congress is initiating the six-month voluntary 
negotiation periods for determining reasonable rates and terms for the 
statutory licenses permitting the public performance of a sound 
recording by means of certain digital transmissions and the making of a 
phonorecord in furtherance of these public performances. The 
negotiation period shall run from November 27, 1998, to May 27, 1999. 
Parties who 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

    In the absence of a license agreement negotiated under 17 U.S.C. 
112(e)(4) or 114(f)(2)(A), those copyright owners of sound recordings 
and entities availing themselves of the statutory licenses are subject 
to arbitration upon the filing of a petition by a party with a 
significant interest in establishing reasonable terms and rates for the 
statutory licenses. Petitions must be filed in accordance with 17 
U.S.C. 803(a)(1) and may be filed anytime during the sixty-day period 
beginning six months after the publication of this document in the 
Federal Register. See also 37 CFR 251.61. Parties should submit 
petitions to the Copyright Office at the address listed in this notice. 
The petitioner must deliver an original and five copies to the Office.

Amendment of CARP Rules To Reflect Passage of the Digital 
Millennium Copyright Act of 1998

    The DMCA creates two new compulsory licenses governing the public 
performance of certain audio transmissions and the making of ephemeral 
recordings to facilitate the transmission of certain public 
performances. In both instances, the reasonable rates and terms for the 
statutory license may be determined by a CARP, when voluntary 
negotiations prove unsuccessful. Therefore, the Copyright Office is 
amending its regulations to reflect the additional rate setting 
responsibilities of the Office and the CARP.
    Section 553(b)(3)(A) of the Administrative Procedure Act, 5 U.S.C., 
states that general notice of proposed rulemaking is not required for 
rules of agency organization 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 procedures, Hearing and appeal 
procedures.

    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. In Sec. 251.2, redesignate paragraphs (b) through (g) as (c) 
through (h), respectively, and add new paragraph (b) and revise newly 
redesignated paragraph (c) to read as follows:


Sec. 251.2  Purpose of Copyright Arbitration Royalty Panels

* * * * *
    (b) To make determinations concerning royalty rates and terms for 
making ephemeral recordings, 17 U.S.C. 112(e);
    (c) To make determinations concerning royalty rates and terms for 
the public performance of sound recordings by certain digital audio 
transmissions, 17 U.S.C. 114;
* * * * *


Sec. 251.58  [Amended]

    3. In Sec. 251.58, paragraph (c) is amended by adding the number 
``112,'' after the number ``111,''.


Sec. 251.60  [Amended]

    4. Section 251.60 is amended by removing the word ``subscription'' 
and adding in its place the phrase ``the making of ephemeral recordings 
(17 U.S.C. 112), certain'' after the term ``(17 U.S.C. 111),''.
    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, ephemeral recordings, certain 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.
    (2) Ephemeral Recordings: During a 60-day period prescribed by the 
Librarian in 1999, 2000, and at 2-year intervals thereafter, or as 
otherwise agreed to by the parties.
    (3) Digital Audio Transmissions: For preexisting digital 
subscription transmission services and preexisting satellite digital 
audio radio services:
    (i) During a 60-day period commencing on July 1, 2001 and at 5-year 
intervals thereafter, or
    (ii) During a 60-day period prescribed by the Librarian in a 
proceeding to set reasonable terms and rates for a new type of 
subscription digital audio transmission service; and for an eligible 
nonsubscription service or a new subscription service:
    (A) During a 60-day period prescribed by the Librarian in 1999,
    (B) During a 60-day period commencing on July 1, 2000, and at 2-
year intervals thereafter,

[[Page 65557]]

    (C) During a 60-day period prescribed by the Librarian in a 
proceeding to set reasonable terms and rates for a new type of eligible 
nonsubscription service or new subscription service, or
    (D) As otherwise agreed to by the parties.
    (4) Phonorecords: During 1997 and each subsequent tenth calendar 
year.
    (5) Digital Phonorecord Deliveries: During 1997 and each subsequent 
fifth calendar year, or as otherwise agreed to by the parties.
    (6) Coin-operated phonorecord players (jukeboxes): Within one year 
of the expiration or termination of a negotiated license authorized by 
17 U.S.C. 116.
* * * * *


Sec. 251.62  [Amended]

    6. In Sec. 251.62, paragraph (a) is amended by removing the word 
``subscription'' and adding in its place the phrase ``ephemeral 
recordings, certain'' after the word ``cable,''.

    Dated: November 18, 1998.
Marybeth Peters,
Register of Copyrights.
    Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 98-31657 Filed 11-25-98; 8:45 am]
BILLING CODE 1410-33-U