[Federal Register Volume 65, Number 238 (Monday, December 11, 2000)]
[Proposed Rules]
[Pages 77330-77333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31458]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 2000-4B]


Public Performance of Sound Recordings: Definition of a Service

AGENCY: Copyright Office, Library of Congress.

ACTION: Petition for rulemaking, denial.

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SUMMARY: On April 17, 2000, the Digital Media Association (``DiMA'') 
filed a petition with the Copyright Office, requesting that the Office 
initiate a rulemaking proceeding to amend the rule that defines the 
term ``Service'' for purposes of the statutory license governing the 
public performance of sound recordings by means of digital audio 
transmissions. DiMA sought an amendment that, if adopted, would expand 
the current definition of the term ``Service'' to state that a service 
is not interactive simply because it offers the consumer some degree of 
influence over the programming offered by the webcaster. For the 
reasons set forth in this notice, the Copyright Office is denying the 
DiMA petition.

DATE: December 11, 2000.

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

SUPPLEMENTARY INFORMATION:

Background

    Since the enactment of the Digital Performance Right in Sound 
Recordings Act of 1995 (``DPRA''), Public Law 104-39, copyright owners 
of sound recordings have enjoyed an exclusive right to perform their 
copyrighted works publicly by means of a digital audio transmission, 
subject to certain limitations and exemptions. Among the limitations on 
the newly created digital performance right was the creation of a 
statutory license for nonexempt, noninteractive, digital subscription 
transmissions. 17 U.S.C. 114(d)(2), (3) and (f) (1995).

[[Page 77331]]

    This license was amended in 1998 in response to the rapid growth of 
digital communications networks, e.g., the Internet, and the confusion 
surrounding the question of how the DPRA applied to certain 
nonsubscription digital audio services. These changes, included in the 
Digital Millennium Copyright Act of 1998 (``DMCA''), Public Law 105-
304, expanded the section 114 statutory license to expressly cover 
nonexempt eligible nonsubscription transmissions and nonexempt 
transmissions made by preexisting satellite digital audio radio 
services. 17 U.S.C. 114(f) (1998).
    For purposes of the DMCA, an ``eligible nonsubscription 
transmission'' is defined as:

a non-interactive nonsubscription digital audio transmission not 
exempt under subsection (d)(1) that is made as part of a service 
that provides audio programming consisting, in whole or in part, of 
performances of sound recordings, including retransmissions of 
broadcast transmissions, if the primary purpose of the service is to 
provide to the public such audio or other entertainment programming, 
and the primary purpose of the service is not to sell, advertise, or 
promote particular products or services other than sound recordings, 
live concerts, or other music-related events.

17 U.S.C. 114(j)(6) (1998). A key element of the definition is the 
requirement that the transmission must be ``non-interactive.'' Unless a 
service meets this criterion, it is ineligible for the statutory 
license and, instead, must negotiate a voluntary agreement with the 
copyright owner(s) of the sound recordings before performing the works 
by means of digital audio transmissions. 17 U.S.C. 114(d)(3) (1998).

    The distinction between interactive and non-interactive 
transmissions is central to determining whether a service that 
transmits performances of sound recordings is eligible to operate under 
the section 114 licensing scheme. Non-interactive services may make use 
of the statutory license, but interactive services incur full copyright 
liability under the digital performance right and, therefore, must 
conduct arms-length negotiations with the copyright owners of the sound 
recordings for a license before making a digital transmission of a 
sound recording. Congress imposed full copyright liability on 
interactive services because it believed ``interactive services [were] 
most likely to have a significant impact on traditional record sales, 
and therefore pose[d] the greatest threat to the livelihoods of those 
whose income depends upon revenues derived from traditional record 
sales.'' S. Rep. No. 104-128, at 16 (1995).
    Congress first defined an ``interactive service'' in the DPRA as a 
service 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. The ability of individuals to request that 
particular sound recordings be performed for reception by the public 
at large does not make a service interactive. If an entity offers 
both interactive and non-interactive services (either concurrently 
or at different times), the non-interactive component shall not be 
treated as part of an interactive service.

17 U.S.C. 114(j)(4) (1995). The second sentence was added to make clear 
that ``the term ``interactive service'' is not intended to cover 
traditional practices engaged in by, for example, radio broadcast 
stations, through which individuals can ask the station to play a 
particular sound recording as part of the service's general programming 
available for reception by members of the public at large.'' S. Rep. 
No. 104-128, at 33-34 (1995).

    In the DMCA, Congress expanded this definition to include further 
explanation of the type of activity that does not, in and of itself, 
make a service interactive. Specifically, the DMCA refined the 
definition of an ``interactive service'' as follows:

    (7) An ``interactive service'' is one that enables a member of 
the public to receive a transmission of a program specially created 
for the recipient, or on request, a transmission of a particular 
sound recording, whether or not as part of a program, which is 
selected by or on behalf of the recipient. The ability of 
individuals to request that particular sound recordings be performed 
for reception by the public at large, or in the case of a 
subscription service, by all subscribers of the service, does not 
make a service interactive, if the programming on each channel of 
the service does not substantially consist of sound recordings that 
are performed within 1 hour of the request or at a time designated 
by either the transmitting entity or the individual making such 
request. If an entity offers both interactive and noninteractive 
services (either concurrently or at different times), the 
noninteractive component shall not be treated as part of an 
interactive service.

17 U.S.C. 114(j)(7) (1998). In both cases, Congress sought to identify 
a service as interactive according to the amount of influence a member 
of the public would have on the selection and performance of a 
particular sound recording. Neither definition, however, draws a bright 
line delineating just how much input a member of the public may have 
upon the basic programming of the service.

    On April 17, 2000, the Digital Media Association (``DiMA'') filed a 
petition with the Office, seeking clarification on this point and an 
amendment to the regulation defining the term ``service.'' DiMA's 
proposed rule would amend 37 C.F.R. 201.35(b)(2) as follows:

    A Service making transmissions that otherwise meet the 
requirements for the section 114(f) statutory license is not 
rendered ``interactive,'' and thus ineligible for the statutory 
license, simply because the consumer may express preferences to such 
Service as to the musical genres, artists and sound recordings that 
may be incorporated into the Service's music programming to the 
public. Such a Service is not ``interactive'' under section 
114(j)(7), as long as: (i) Its transmissions are made available to 
the public generally; (ii) the features offered by the Service do 
not enable the consumer to determine or learn in advance what sound 
recordings will be transmitted over the Service at any particular 
time; and (iii) its transmissions do not substantially consist of 
sound recordings performed within one hour of a request or at a time 
designated by the transmitting entity or the individual making the 
request.

The effect of the amendment would be that a service would not be 
considered interactive merely because it offers a consumer some degree 
of influence over the streamed programming.

    Shortly thereafter, the Copyright Office published a notice in the 
Federal Register, seeking comment from interested parties on two 
issues. First, the Office asked whether the petition articulated a 
proper subject for a rulemaking proceeding; and second, assuming the 
requested rule could be promulgated through a notice and comment 
proceeding, whether sufficient information existed ``to promulgate a 
regulation that could accurately distinguish between activities that 
are interactive and those that are not.'' 65 FR 33266, 33267 (May 23, 
2000).
    For the reasons set forth herein, the Copyright Office denies 
DiMA's petition.

Comments

    Comments and reply comments were filed by the Recording Industry 
Association of America, Inc. (``RIAA'') and the Digital Media 
Association (``DiMA'').

Is a Rulemaking Proceeding Necessary or Appropriate?

    DiMA seeks its proposed amendment to the definition of the term 
``service'' based on its understanding that a consumer-influenced 
webcast would not be prohibited from using the section 114 statutory 
license. According to DiMA, this clarification is necessary in large 
part because copyright holders of the sound recordings have taken the 
untenable position that ``consumer-influenced webcasting of any nature 
is not eligible for the DMCA statutory license.'' DiMA comment at 4; 
DiMA reply at 9-11.
    At the same time, DiMA states that it is impossible to discern all 
possible

[[Page 77332]]

permutations of features and functionalities that may be offered by a 
service which allows consumer input on programming selections. DiMA 
comment at 5. Nevertheless, DiMA asserts that its proposed rule 
establishes guidelines to be used to determine whether a specific 
service is interactive after a fact-intensive analysis of its 
activities. DiMA acknowledges, however, that the Office may determine 
that application of the rule, especially the guidelines set forth in 
the second half of the proposal, may involve evidentiary issues that 
bar adoption of the entire proposal. If this is the case, DiMA asks the 
Office to adopt, at a minimum, the first sentence of the proposed rule, 
which reads as follows:

    A Service making transmissions that otherwise meet the 
requirements for the section 114(f) statutory license is not 
rendered ``interactive,'' and thus ineligible for the statutory 
license, simply because the consumer may express preferences to such 
Service as to the musical genres, artists and sound recordings that 
may be incorporated into the Service's music programming to the 
public.

DiMA reply at 7. DiMA is expressly not asking the Copyright Office to 
determine whether any particular service is non-interactive. Id.

    DiMA also argues that the rulemaking is necessary in order to 
``define the appropriate bounds'' of the Copyright Arbitration Royalty 
Panel (``CARP'') ``proceeding which will determine the statutory rates 
for sound recording performances (and certain reproductions) associated 
with webcasting.'' DiMA Petition at 2; DiMA comment at 4; see also 64 
FR 52107 (September 27, 1999).
    RIAA opposes the DiMA petition. It asserts that DiMA's proposed 
change will not clarify current law, but actually change it. RIAA 
argues that clear standards for determining what constitutes an 
``interactive service'' have already been set forth in section 
114(j)(7). Specifically, section 114(j)(7) requires an ``interactive 
service'' to either ``enable[] a member of the public to receive a 
transmission of a program specially created for the recipient, or on 
request, a transmission of a particular sound recording, whether or not 
as part of a program, which is selected by or on behalf of the 
recipient.'' 17 U.S.C. 114(j)(7).
    RIAA also argues that the determination as to whether a particular 
service is interactive requires a fact-intensive inquiry to determine 
whether the service offers the type of prohibited activity 
characterized in section 114(j)(7). Moreover, RIAA contends that the 
DiMA proposal fails to define a class of service that embodies these 
principles, offering instead, a rule meant to cover ``a myriad of 
services with different personalization features,'' which defy 
characterization into general categories. RIAA comment at 12. RIAA then 
cites potential problems with the proffered regulatory language due to 
the lack of precise definitions for concepts and terms such as 
``preferences'' or ``incorporated into the Service's programming.'' Id. 
at 6.
    RIAA also takes exception to DiMA's assertions that RIAA believes 
any amount of consumer influence automatically makes a service 
interactive. In fact, RIAA acknowledges that all music programming 
services are likely to be influenced by their consumers' tastes. RIAA 
comment at 3. For this reason, RIAA purports to examine each service on 
a case-by-case basis, asking the question ``whether the service offers 
`programs specially created for the recipient' or whether it allows 
listeners to request particular sound recordings.'' RIAA reply at 2-3. 
Because it evaluates each service in this manner, RIAA maintains that 
DiMA's argument in support of this rulemaking proceeding is groundless.
    The Copyright Office has considered DiMA's request to initiate a 
rulemaking to clarify that a service does not become interactive merely 
because consumers may have some influence on the music programming 
offered by the service and finds that this concept is not in dispute. 
RIAA readily acknowledges that consumers may express preferences for 
certain music genres, artists, or even sound recordings without the 
service necessarily becoming interactive. RIAA comment at 8. The Office 
agrees, and concurs with DiMA that certain passages from the DMCA 
Conference Report quoted in its comments support this interpretation. 
For example, the following passage in the DMCA Conference Report 
distinguishes between certain activities that make a service 
interactive and those that do not:

    [A] service would be interactive if it allowed a small number of 
individuals to request that sound recordings be performed in a 
program specially created for that group and not available to any 
individuals outside of that group. In contrast, a service would not 
be interactive if it merely transmitted to a large number of 
recipients of the service's transmissions a program consisting of 
sound recordings requested by a small number of those listeners.

H.R. Conf. Rep. No. 105-797, at 87-88 (1998) (``DMCA Conference 
Report'').

    However, the fact that some degree of consumer influence on a 
service's programming is permissible does not mean that a regulation to 
clarify that fact is necessary or even desirable. In fact, because the 
law and the accompanying legislative history make it clear that 
consumers can have some influence on the offerings made by a service 
without making the service interactive, there is no need to amend the 
regulations to make this point.
    What is not clear, however, is how much influence a consumer can 
have on the programming offered by a transmitting entity before that 
activity must be characterized as interactive. The examples cited in 
the comments and gleaned from the legislative history are merely 
illustrative and do not identify with specificity those characteristics 
of a service that make it interactive.\1\ Such a determination must be 
made on a case-by-case basis after the development of a full 
evidentiary record in accordance with the standards and precepts 
already set forth in the statute. DiMA appears to agree with this 
approach in theory and, in fact, expressly states that it does not seek 
a ruling on whether any particular service should be characterized as 
an interactive service. DiMA reply at 7.
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    \1\ RIAA and DiMA discussed the services offered by Launch 
Media, Inc., through its LAUNCHcast service, and MTV, through its 
Radio SonicNet service, to illustrate the type of offerings that are 
in dispute. See RIAA comment at 6-7; DiMA reply at 18-21. From these 
descriptions, there is considerable doubt whether either offering 
would qualify as an ``interactive service.''
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    Moreover, courts recognize that some principles must evolve over a 
period of time before an agency will have gathered sufficient 
information to formulate a general rule. See Securities and Exchange 
Commission v. Chenery Corp., 332 U.S. 194, 202-203 (1947) 
(acknowledging that ``the agency may not have sufficient experience 
with a particular problem to warrant rigidifying its tentative judgment 
into a hard and fast rule. Or the problem may be so specialized and 
varying in nature as to be impossible to capture within the boundaries 
of a general rule.''). See also, WWHT, Inc. v. Federal Communications 
Commission, 656 F.2d 807, 817 (D.C. Cir. 1981) (supporting agency's 
denial of rulemaking petition in case where rapid technological 
development in area makes it difficult to formulate effective 
regulations, or the state of development ``may be such that sufficient 
data are not yet available on which to premise adequate 
regulations.'').
    In light of the rapidly changing business models emerging in 
today's digital marketplace, no rule can accurately draw the line 
demarcating the limits between an interactive service and a 
noninteractive service. Nor can one readily classify an entity which

[[Page 77333]]

makes transmissions as exclusively interactive or noninteractive. The 
statutory definition of an ``interactive service'' and the DMCA 
Conference Report make it clear that a transmitting entity may offer 
both types of service, either concurrently or at different times, and 
that ``the noninteractive components are not to be treated as part of 
an interactive service, and thus are eligible for statutory 
licensing.'' See, DMCA Conference Report at 88 (1998). The proposed 
amendment makes no mention of this nuance of the law.
    Moreover, the Copyright Office is not persuaded that any new rules 
are necessary to discern which parties should participate in the 
current copyright arbitration royalty panel proceeding, the purpose of 
which is only to set rates and terms for the public performance of 
sound recordings made in accordance with the section 114 statutory 
license. 17 U.S.C. 114(f)(2)(A). The panel's responsibility is to 
establish the value of the performances and set appropriate rates, not 
to discern whether a particular service meets the eligibility 
requirements for using the license.
    In short, the Office does not believe that DiMA has presented a 
persuasive case that a rulemaking on this issue is necessary, 
desirable, or feasible.
    For these reasons, the Office denies DiMA's petition.

    Dated: November 21, 2000.
Marybeth Peters,
Register of Copyrights.
[FR Doc. 00-31458 Filed 12-8-00; 8:45 am]
BILLING CODE 1410-31-P