[Federal Register Volume 64, Number 26 (Tuesday, February 9, 1999)]
[Rules and Regulations]
[Pages 6221-6223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3119]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 255

[Docket No. 96-4 CARP DPRA]


Mechanical and Digital Phonorecord Delivery Rate Adjustment 
Proceeding

AGENCY: Copyright Office, Library of Congress.

ACTION: Final regulations.

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SUMMARY: The Copyright Office of the Library of Congress is announcing 
final regulations setting the rate for the delivery of digital 
phonorecords in general and deferring until the next scheduled rate 
adjustment proceeding further consideration of the royalty rate for the 
delivery of a digital phonorecord where the reproduction or 
distribution

[[Page 6222]]

is incidental to the transmission which constitutes a digital 
phonorecord delivery.

EFFECTIVE DATE: January 1, 1998.

FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or 
Tanya M. Sandros, Attorney Advisor, Copyright Arbitration Royalty Panel 
(``CARP''), P.O. Box 70977, Southwest Station, Washington, DC 20024. 
Telephone (202) 707-8380. Telefax: (202) 252-3423.

SUPPLEMENTARY INFORMATION: On November 1, 1995, Congress passed the 
Digital Performance Right in Sound Recordings Act of 1995 (``Digital 
Performance Act''). Pub. L. 104-39, 109 Stat. 336. Among other things, 
the Act confirms and clarifies that the scope of the statutory license 
to make and distribute phonorecords of nondramatic musical 
compositions, 17 U.S.C. 115, includes the right to distribute or 
authorize distribution by means of a digital transmission which 
constitutes a ``digital phonorecord delivery.'' 17 U.S.C. 115(c)(3)(A).
    A ``digital phonorecord delivery'' is defined as ``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 * * 
*.'' 17 U.S.C. 115(d).
    The Digital Performance Act established that the rate for all 
digital phonorecord deliveries (``DPDs'') made or authorized under a 
compulsory license on or before December 31, 1997, was the same as the 
rate in effect for the making and distribution of physical phonorecords 
for that period. 17 U.S.C. 115(c)(3)(A)(i). For digital phonorecord 
deliveries made or authorized after December 31, 1997, the Digital 
Performance Act established a two-step process for determining the 
terms and rates; either the copyright owners of nondramatic musical 
works and those persons entitled to obtain a license may negotiate the 
rates and terms for the statutory license, or they may participate in a 
Copyright Arbitration Royalty Panel (``CARP'') proceeding. 17 U.S.C. 
115(c)(3)(A)-(D). In a CARP proceeding, the parties present evidence to 
a panel of three arbitrators who, based upon the written record, write 
a report for the Librarian of Congress in which the CARP sets out its 
determination concerning the appropriate rates and terms. 17 U.S.C. 
802(c) and (e).
    The Librarian initiated the voluntary negotiation period for this 
rate setting proceeding on July 17, 1996, and directed it to end on 
December 31, 1996. 61 FR 37213 (July 17, 1996). At the same time, the 
Librarian announced a schedule for a CARP proceeding in case the 
interested parties were unable to reach an industry-wide agreement 
through the negotiation process. The Librarian vacated this schedule 
and a second schedule for a CARP proceeding at the request of the 
negotiating parties, Recording Industry Association of America 
(``RIAA''), the National Music Publishers' Association, Inc. 
(``NMPA''), and The Harry Fox Agency, Inc. (``Harry Fox''). 61 FR 65243 
(December 11, 1996); 62 FR 5057 (February 3, 1997).
    Ultimately, these parties reached a voluntary agreement which they 
submitted to the Librarian of Congress on November 5, 1997, pursuant to 
37 CFR 251.63(b). Section 251.63(b) allows the Librarian to adopt rates 
and terms embodied in a proposed settlement without convening an 
arbitration panel, if after conducting a notice-and-comment proceeding, 
no party with an intent to participate in a CARP proceeding files a 
substantive comment opposing the proposed regulations. See e.g., 62 FR 
63502 (December 1, 1997) (proposing regulations setting rates and terms 
for the section 118 license). Accordingly, the Librarian published the 
proposed rates and terms for digital phonorecord deliveries for public 
comment. 62 FR 63506 (December 1, 1997).
    Three parties filed comments in response to the proposed terms and 
rates: the United States Telephone Association (``USTA''), the 
Coalition of Internet Webcasters (``Webcasters''), and Broadcast Music, 
Inc. (``BMI''). These comments served to identify heretofore unknown 
parties who have a significant interest in the setting of the rates and 
terms for the delivery of digital phonorecord deliveries. Consequently, 
the parties entered a new round of negotiations in an attempt to 
resolve the commenters' concerns and reach a mutually acceptable 
industry-wide agreement.
    During the second phase of negotiations, the NMPA, SGA, and RIAA 
submitted a memorandum to the Copyright Office requesting that it adopt 
the unopposed rate for the delivery of digital phonorecords in general 
and the schedule for future rate adjustment proceedings set forth in 
its November 5, 1997, agreement, and that it either adopt the proposed 
rates and terms for incidental digital phonorecord deliveries set forth 
in the proposed regulations or sever and defer further consideration of 
these rates and terms until the next rate adjustment proceeding. The 
Copyright Office then offered the parties who had filed a Notice of 
Intent to Participate an opportunity to comment on the memorandum. See 
Order, Docket No. 96-4 CARP DPRA (October 16, 1998).
    USTA responded that its concerns were fully addressed by the 
memorandum; and the three performing rights organizations, ASCAP, BMI, 
and SESAC, filed a joint comment which generally supported the 
recommendations outlined in the NMPA/SGA/RIAA memorandum, provided that 
the final regulations included a provision recognizing that the section 
115 license does not affect in any way the public performance rights 
granted under 17 U.S.C. 106(4). Similarly, the Webcasters filed 
comments which supported the adoption of the rate and terms for digital 
phonorecord deliveries in general and the suggestion to sever and defer 
further consideration of rates and terms for incidental DPDs until the 
next rate adjustment proceeding with two modifications. First, the 
Webcasters sought an amendment to the proposed rules that would allow a 
party to petition the Copyright Office for a proceeding to set a rate 
for the transmission of an incidental digital phonorecord delivery 
prior to the next scheduled date. Second, the Webcasters requested that 
no rate be set for the incidental DPDs prior to the completion of a 
study required by Congress under section 104 of the Digital Millennium 
Copyright Act of 1998 (``DMCA''), subject to the right to petition for 
an interim rate adjustment proceeding.
    In reply comments, NMPA/SGA/RIAA agreed to the ASCAP/BMI/SESAC 
suggestion for a clarification and the Webcasters' suggestion for a 
right to petition for a rate adjustment proceeding for incidental DPDs 
during the interim period. However, they did not support the 
Webcasters' request to postpone the rate adjustment proceeding for 
incidental DPDs until the Office completes its study on the operation 
of sections 109 and 117 of the Copyright Act, 17 U.S.C., as effected by 
Title I of the DMCA.
    On December 4, 1998, the NMPA/SGA/RIAA submitted a second joint 
petition for adjustment of digital phonorecord delivery royalty rates, 
incorporating the proposed modifications except for the suggestion to 
postpone the rate adjustment proceeding until the completion of the 
study. The petition was filed pursuant to 17 U.S.C. 115(c) and 803(a) 
and 37 CFR 251.63(b). Section 251.63(b) allows the Librarian to adopt 
the proposed rates and terms at the conclusion of an unopposed notice-
and-comment rulemaking proceeding. This being so,

[[Page 6223]]

the Copyright Office requested public comment on the proposed rates and 
terms in a notice published in the Federal Register. 63 FR 71249 
(December 24, 1998).
    The Copyright Office received no comments opposing the rates and 
terms for the delivery of digital phonorecords set forth in the 
December 24, 1998, Federal Register notice. Therefore, by this notice, 
the Librarian is adopting and the Copyright Office is announcing final 
regulations which set the rate for the delivery of digital phonorecords 
in general and defer until the next scheduled rate adjustment 
proceeding further consideration of the royalty rate for the delivery 
of a digital phonorecord where the reproduction or distribution is 
incidental to the transmission which constitutes a digital phonorecord 
delivery.

List of Subjects in 37 CFR Part 255

    Copyright, Recordings.

    For the reasons set forth in the preamble, the Library 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:

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

    2. Revise Sec. 255.5 to read as follows:


Sec. 255.5  Royalty rate for digital phonorecord deliveries in general.

    (a) 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.
    (b) For every digital phonorecord delivery made on or after January 
1, 1998, except for digital phonorecord deliveries where the 
reproduction or distribution of a phonorecord is incidental to the 
transmission which constitutes the digital phonorecord delivery, as 
specified in 17 U.S.C. 115(c)(3)(C) and (D), the royalty rate payable 
with respect to each work embodied in the phonorecord shall be the 
royalty rate prescribed in Sec. 255.3 for the making and distribution 
of a phonorecord made and distributed on the date of the digital 
phonorecord delivery (the ``Physical Rate''). In any future proceeding 
under 17 U.S.C. 115(c)(3)(C) or (D), the royalty rates payable for a 
compulsory license for digital phonorecord deliveries in general shall 
be established de novo, and no precedential effect shall be given to 
the royalty rate payable under this paragraph for any period prior to 
the period as to which the royalty rates are to be established in such 
future proceeding.
    3. Add Secs. 255.6 through 255.8 to read as follows:


Sec. 255.6  Royalty rate for incidental digital phonorecord deliveries.

    The royalty rate for digital phonorecord deliveries where the 
reproduction or distribution of a phonorecord is incidental to the 
transmission which constitutes a digital phonorecord delivery, as 
specified in 17 U.S.C. 115(c)(3)(C) and (D), is deferred for 
consideration until the next digital phonorecord delivery rate 
adjustment proceeding pursuant to the schedule set forth in Sec. 255.7; 
provided, however, that any owner or user of a copyrighted work with a 
significant interest in such royalty rate, as provided in 17 U.S.C. 
803(a)(1), may petition the Librarian of Congress to establish a rate 
prior to the commencement of the next digital phonorecord delivery rate 
adjustment proceeding. In the event such a petition is filed, the 
Librarian of Congress shall proceed in accordance with 17 U.S.C. 
115(c)(3)(D), and all applicable regulations, as though the petition 
had been filed in accordance with 17 U.S.C. 803(a)(1).


Sec. 255.7  Future proceedings.

    The procedures specified in 17 U.S.C. 115(c)(3)(C) shall be 
repeated in 1999, 2001, 2003, and 2006 so as to determine the 
applicable rates and terms for the making of digital phonorecord 
deliveries during the periods beginning January 1, 2001, 2003, 2005, 
and 2008. The procedures specified in 17 U.S.C. 115(c)(3)(D) shall be 
repeated, in the absence of license agreements negotiated under 17 
U.S.C. 115(c)(3)(B) and (C), upon the filing of a petition in 
accordance with 17 U.S.C. 803(a)(1), in 2000, 2002, 2004, and 2007 so 
as to determine new rates and terms for the making of digital 
phonorecord deliveries during the periods beginning January 1, 2001, 
2003, 2005, and 2008. Thereafter, the procedures specified in 17 U.S.C. 
115(c)(3)(C) and (D) shall be repeated in each fifth calendar year. 
Notwithstanding the foregoing, different years for the repeating of 
such proceedings may be determined in accordance with 17 U.S.C. 
115(c)(3)(C) and (D).


Sec. 255.8  Public performances of sound recordings and musical works.

    Nothing in this part annuls or limits the exclusive right to 
publicly perform a sound recording or the musical work embodied 
therein, including by means of a digital transmission, under 17 U.S.C. 
106(4) and 106(6).

    Dated: January 29, 1999.
Marybeth Peters,
Register of Copyrights.

James H. Billington,
The Librarian of Congress.
[FR Doc. 99-3119 Filed 2-8-99; 8:45 am]
BILLING CODE 1410-33-P