[Federal Register Volume 68, Number 112 (Wednesday, June 11, 2003)]
[Notices]
[Pages 35008-35012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14791]


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LIBRARY OF CONGRESS

Copyright Office


Notification of Agreement Under the Small Webcaster Settlement 
Act of 2002

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of agreement.

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SUMMARY: The Copyright Office is publishing an agreement which sets 
rates and terms for the reproduction and performance of sound 
recordings made by a noncommercial webcaster under the section 112 and 
114 statutory licenses. Noncommercial webcasters who meet the 
eligibility requirements may choose to operate under the statutory 
licenses in accordance with the rates and terms set forth in the 
agreement published herein rather than the rates and terms adopted by 
the Librarian of Congress in an earlier proceeding.

FOR FURTHER INFORMATION CONTACT: Tanya Sandros, Senior Attorney, 
Copyright Arbitration Royalty Panel, P.O. Box 70977, Southwest Station, 
Washington, DC 20024. Telephone: (202) 707-8380. Telefax: (202) 252-
3423. See the final paragraph of the SUPPLEMENTARY INFORMATION for 
information on where to direct questions regarding the rates and terms 
set forth in the agreement.

SUPPLEMENTARY INFORMATION:

Background

    In 1998, Congress amended the Copyright Act, title 17 of the United 
States Code, to make clear that an eligible nonsubscription service may 
publicly perform copyrighted sound recordings by means of digital audio 
transmissions under a statutory license, 17 U.S.C. 114, provided that 
the service pays the appropriate royalty fee and complies with the 
terms of the license. At the same time, Congress created a second 
statutory license, 17 U.S.C. 112(e), to allow for the making of 
ephemeral reproductions for the purpose of facilitating the digital 
audio transmissions made by the nonsubscription services under the 
section 114 license. Rates and terms for both licenses were set after a 
hearing before a copyright arbitration royalty panel (``CARP''). See 67 
FR 45239 (July 8, 2002). However, some small webcasters, including some 
noncommercial webcasters, did not participate in that proceeding and 
expressed reservations about the fee structure adopted through that 
process.
    In response to those concerns, Congress passed the Small Webcaster 
Settlement Act of 2002 (``SWSA''), Pub. L.107-321, 116 Stat. 2780, 
amending the section 112 and section 114 statutory licenses as they 
relate to small commercial webcasters and noncommercial webcasters. 
Specifically, the SWSA authorizes SoundExchange, an unincorporated 
division of the Recording Industry Association of America, Inc. and the 
Receiving Agent designated by the Librarian of Congress in the initial 
rate setting proceeding, to enter into agreements on behalf of all 
copyright owners and performers for the purpose of establishing an 
alternative payment structure for small commercial webcasters \1\ and 
noncommercial webcasters \2\ operating under the section 112 and 
section 114 statutory licenses.
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    \1\ SoundExchange and small commercial webcasters negotiated 
such an agreement and submitted it to the Copyright Office for 
publication in December, 2002. See 67 FR 78510 (December 24, 2002).
    \2\ For purposes of the SWSA, a ``noncommercial webcaster'' is 
defined as a webcaster that: (1) Is exempt from taxation under 
section 501 of the Internal Revenue Code of 1986, 26 U.S.C. 501; (2) 
has applied in good faith to the Internal Revenue Service for 
exemption from taxation under section 501 of the Internal Revenue 
Code and has a commercially reasonable expectation that such 
exemption shall be granted; or (3) is operated by a State or 
possession or any govenmental entity or subordinate thereof, or by 
the United States or District of Columbia, for exclusively public 
purposes. 17 U.S.C. 114(f)(5)(E).
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    The rates and terms set forth in such agreements apply only to the 
time periods specified in the agreement and have no precedential value 
in any proceeding concerned with the setting of rates and terms for the 
public performance or reproduction in ephemeral phonorecords or copies 
of sound recordings. To make this point clear, Congress included 
language expressly addressing the precedential value of such 
agreements. Specifically, section 114(f)(5)(C), as added by the SWSA, 
states that:

    Neither subparagraph (A) nor any provisions of any agreement 
entered into pursuant to subparagraph (A), including any rate 
structure, fees, terms, conditions, or notice and recordkeeping 
requirements set forth therein, shall be admissible as evidence or 
otherwise taken into account in any administrative, judicial, or 
other government proceeding involving the setting or adjustment of 
the royalties payable for the

[[Page 35009]]

public performance or reproduction in ephemeral recordings or copies 
of sound recordings, the determination of terms or conditions 
related thereto, or the establishment of notice and recordkeeping 
requirements by the Librarian of Congress under paragraph (4) or 
section 112(e)(4). It is the intent of Congress that any royalty 
rates, rate structure, definitions, terms, conditions, or notice and 
recordkeeping requirements, included in such agreements shall be 
considered as a compromise motivated by the unique business, 
economic and political circumstances of small webcasters, copyright 
owners, and performers rather than as matters that would have been 
negotiated in the marketplace between a willing buyer and a willing 
seller, or otherwise meet the objectives set forth in section 
801(b).
17 U.S.C. 114(f)(5)(C) (2002).

Request for Publication of Negotiated Rates and Terms Available to 
Certain Noncommercial Webcasters

    On June 2, 2003, SoundExchange, and a group of membership 
organizations, including American Council on Education, Collegiate 
Broadcasters, Inc., the Intercollegiate Broadcasting System, Inc., 
Harvard Radio Broadcasting Co., Inc., and the National Religious 
Broadcasters Music License Committee, on behalf of their members and/or 
stations that operate or plan to operate noncommercial webcasting 
services, notified the Copyright Office that they had negotiated such 
an agreement for the reproduction and performance of sound recordings 
by noncommercial webcasters under the section 112 and section 114 
statutory licenses, and requested that the Copyright Office publish the 
Rates and Terms in the Federal Register, as required under section 
114(f)(5)(B) of the Copyright Act, as amended by the SWSA.
    Thus, in accordance with the requirement set forth in amended 
section 114(f)(5)(B), the Copyright Office is publishing the submitted 
agreement, as Appendix A, thereby making the rates and terms in the 
agreement available to any noncommercial webcaster meeting the 
eligibility conditions of the agreement as an alternative to the rates 
and terms announced by the Librarian in his July 8, 2002 order. 
Moreover, publication of the agreement in the Federal Register makes 
the agreement binding on all copyright owners of sound recordings and 
other persons entitled to payment under section 114 in lieu of any 
determination by a copyright arbitration royalty panel or decision by 
the Librarian of Congress and fulfills the Copyright Office's 
responsibility with respect to this agreement.
    Beyond publication of this document, the Copyright Office has no 
responsibility for administering the rates and terms of the agreement. 
For this reason, questions regarding the rates and terms set forth in 
this agreement should be directed to SoundExchange (for contact 
information, see http://www.soundexchange.com). Similarly, questions 
regarding the previously published agreement between SoundExchange and 
small commercial webcasters should also be directed to SoundExchange.

    Dated: June 6, 2003.
Marybeth Peters,
Register of Copyrights.

    Note: This appendix will not be codified in Title 37, part 261, 
of the Code of Federal Regulations.

Appendix A

Rates and Terms Available to Certain Noncommercial Webcasters

1. General

    (a) Availability of Rates and Terms. The rates and terms set 
forth herein (the ``Rates and Terms'') cover the making of public 
performances of sound recordings by means of digital audio 
transmissions under the statutory license of 17 U.S.C. 114 by 
``Noncommercial Webcasters'' (as defined in Section 9(e) hereof), 
and the reproduction of ephemeral recordings used solely to 
facilitate such transmissions under the statutory license of 17 
U.S.C. 112(e), during the period beginning on October 28, 1998, and 
ending on December 31, 2004. A Noncommercial Webcaster may elect to 
be subject to these Rates and Terms, in their entirety, by complying 
with the procedure set forth in Section 2 hereof.
    (b) Relationship to Other Provisions. Subject to Section 7, any 
Noncommercial Webcaster relying upon the statutory licenses set 
forth in 17 U.S.C. 112 and 114 under these Rates and Terms shall 
comply with the requirements of 17 U.S.C. 112 and 114, these Rates 
and Terms and other governing provisions established by the 
Copyright Office. Any terms determined in accordance with 17 U.S.C. 
112 and 114 and applicable to the collection and distribution by 
SoundExchange of payments under 17 U.S.C. 112 and 114 from 
commercial eligible nonsubscription transmission services (e.g. 
terms relating to distribution of royalties by SoundExchange, 
deductions from distributions, unclaimed funds, possible designation 
of successors to SoundExchange in the event of its dissolution, 
retention of records, verification, and confidentiality of payment 
information) shall apply to payments under these Rates and Terms 
except to the extent inconsistent with these Rates and Terms.
    (c) Relationship to Other Agreements. These Rates and Terms are 
without prejudice to, and subject to, any voluntary agreements that 
a Noncommercial Webcaster may have entered into with any sound 
recording copyright owner. Should there be any voluntarily 
negotiated rates and terms arrived at between copyright owners and 
webcasters that are adopted by the Librarian of Congress during 2003 
as rates and terms for eligible nonsubscription transmission 
services following publication of such rates and terms in the 
Federal Register pursuant to 37 CFR 251.63(b), any Noncommercial 
Webcaster that qualifies for such rates may, by written notice to 
SoundExchange, elect, for 2004, to pay royalties under the rates and 
terms adopted by the Librarian in lieu of the rates and terms 
applicable hereunder; provided that if a Noncommercial Webcaster 
does so, it shall at the time its first 2004 payment is due under 
the terms adopted by the Librarian, pay any additional amount that 
would have been due under the rates and terms adopted by the 
Librarian for the period beginning on October 28, 1998, and ending 
on December 31, 2003, in excess of the royalties previously paid by 
the Noncommercial Webcaster for that period under these Rates and 
Terms.
    (d) CARP Proceedings. A Noncommercial Webcaster that elects to 
be subject to these Rates and Terms agrees that it has elected these 
terms in lieu of participating in a copyright arbitration royalty 
panel (``CARP'') proceeding to set rates for the 2003-2004 period 
and in lieu of any different rates and terms that may be determined 
through such a CARP proceeding. Thus, once a Noncommercial Webcaster 
has elected these Rates and Terms, it shall refrain from 
participating in any such CARP proceeding and can opt out of these 
Rates and Terms only as provided in Section 1(c).

2. Election for Treatment as a Noncommercial Webcaster

    (a) Election Process. A Noncommercial Webcaster that wishes to 
elect to be subject to these Rates and Terms in lieu of any other 
royalty rates and terms that otherwise might apply under 17 U.S.C. 
112 and 114 for the period beginning on October 28, 1998, and ending 
on December 31, 2004, shall submit to SoundExchange a completed and 
signed election form (available on the SoundExchange Web site at 
http://www.soundexchange.com) by no later than the date 30 days 
after publication of these Rates and Terms in the Federal Register. 
Notwithstanding the preceding sentence--
    (1) if a Noncommercial Webcaster has not previously made digital 
audio transmissions of sound recordings under the section 114 
statutory license, the Noncommercial Webcaster may make its election 
by no later than the first date on which it would be obligated under 
these Rates and Terms to make a royalty payment for the use of sound 
recordings under the section 112 or 114 statutory license; and
    (2) an ``NEE'' (as defined in Section 9(d)) may make its 
election by no later than October 15, 2003.
    (b) Effect of Election or Nonelection. A Noncommercial Webcaster 
that fails to make a timely election shall pay royalties as 
otherwise provided under 17 U.S.C. 112 and 114 (the ``Statutory 
Rate''). Subject to Section 1(c), if a Noncommercial Webcaster 
timely elects to be covered by these Rates and Terms, the 
Noncommercial Webcaster shall thereafter be obligated to pay 
royalties under

[[Page 35010]]

and comply with the provisions of these Rates and Terms through 
December 31, 2004, provided that such Noncommercial Webcaster 
continues to meet the conditions for eligibility as a Noncommercial 
Webcaster, as set forth in 17 U.S.C. 114(f)(5)(E)(i) (as added by 
the Small Webcaster Settlement Act of 2002).
    (c) Proof of Eligibility. A Noncommercial Webcaster that makes 
an election pursuant to Section 2(a) shall make available to 
SoundExchange, within 30 days after SoundExchange's written request 
at any time during the 3 years following such election, sufficient 
evidence to support its eligibility as a Noncommercial Webcaster 
and, if applicable, as an NEE. Any proof of eligibility provided 
hereunder shall be provided with a certification signed by the chief 
executive officer of the Noncommercial Webcaster, or other person 
with similar management authority over the Noncommercial Webcaster, 
certifying that the information provided is accurate and the person 
signing is authorized to act on behalf of the Noncommercial 
Webcaster.

3. Minimum Annual Fees

    (a) NEEs Transmitting a Single Channel. Except as provided in 
Section 3(c) and subject to Section 4, each NEE shall pay 
nonrefundable minimum annual fees as set forth below for all or any 
portion of a year in which it made or makes any digital audio 
transmissions of sound recordings under the section 114 statutory 
license (whether a ``Broadcaster Simulcast'' (as defined in Section 
9(b)), an Internet-only transmission or otherwise):
    (1) $200 for the period beginning on October 28, 1998, and 
ending on December 31, 1999 (which shall be treated as one year for 
purposes of these Rates and Terms);
    (2) $250 for each of the years 2000 through 2003; and
    (3) $500 for 2004, except in the case of an NEE that is, or is 
affiliated with, an educational institution with fewer than 10,000 
enrolled students, in which case the minimum fee shall be $250.
    (b) Other Noncommercial Webcasters Transmitting a Single 
Channel. Except as provided in Section 3(c) and subject to Section 
4, each Noncommercial Webcaster that is not an NEE shall pay 
nonrefundable minimum annual fees as set forth below for all or any 
portion of a year in which it made or makes any digital audio 
transmissions of sound recordings under the section 114 statutory 
license (whether a Broadcaster Simulcast, an Internet-only 
transmission or otherwise):
    (1) $200 for the period beginning on October 28, 1998, and 
ending on December 31, 1999 (which shall be treated as one year for 
purposes of these Rates and Terms);
    (2) $250 for 2000;
    (3) $300 for 2001, except in the case of a Noncommercial 
Webcaster substantially all of the programming of which is 
reasonably classified as news, talk, sports or business programming, 
in which case the minimum fee shall be $250;
    (4) $350 for 2002, except in the case of a Noncommercial 
Webcaster substantially all of the programming of which is 
reasonably classified as news, talk, sports or business programming, 
in which case the minimum fee shall be $250;
    (5) $400 for 2003, except in the case of a Noncommercial 
Webcaster substantially all of the programming of which is 
reasonably classified as news, talk, sports or business programming, 
in which case the minimum fee shall be $250; and
    (6) $500 for 2004, except in the case of a Noncommercial 
Webcaster substantially all of the programming of which is 
reasonably classified as news, talk, sports or business programming, 
in which case the minimum fee shall be $250.
    (c) Noncommercial Webcasters Transmitting Multiple Channels. 
Notwithstanding Section 3(a) or (b) as applicable, the nonrefundable 
minimum annual fee shall be $500 for each year (as identified in 
Section 3(a)(1) through (3) or 3(b)(1) through (6)) for any 
Noncommercial Webcaster that made or makes digital audio 
transmissions of sound recordings on more than one channel or 
station of programming; provided that--
    (1) if the digital audio transmissions of sound recordings over 
any channels or stations in excess of one consist only of 
``Incidental Performances'' (as defined in Section 9(f)), the 
nonrefundable minimum annual fee shall be as provided in Section 
3(a) or (b) as applicable;
    (2) if substantially all of the programming of all of a 
Noncommercial Webcaster's channels and stations is reasonably 
classified as news, talk, sports or business programming, the 
minimum fee shall be $250;
    (3) if a Noncommercial Webcaster that owns or operates multiple 
over-the-air terrestrial AM or FM radio stations offers more than 
one Internet channel or station on which substantially all of the 
programming consists of Broadcaster Simulcasts, then--
    (A) a nonrefundable minimum annual fee otherwise determined in 
accordance with this Section 3(c) shall extend to only three such 
Internet channels or stations offering Broadcaster Simulcasts, as 
well as associated Internet-only channels (subject to Section 5);
    (B) additional nonrefundable minimum annual fees shall be 
payable under this Section 3(c) for additional groups of up to three 
Internet channels or stations offering Broadcaster Simulcasts, as 
well as associated Internet-only channels (subject to Section 5);
    (C) each such group of up to three such Internet channels or 
stations, as well as associated Internet-only channels (subject to 
Section 5), shall be treated as a separate Noncommercial Webcaster 
for purposes of Sections 3(c)(2), 4 and 5;
    (D) all such channels or stations offering Broadcaster 
Simulcasts in a group shall be treated as a single channel or 
station for purposes of Section 5;
    (E) any additional channels or stations considered with the 
group for purposes of Section 5 shall also be considered with the 
group for purposes of Section 4; and
    (F) accordingly, the Noncommercial Webcaster may offer two 
additional Internet-only channels or stations with each group of up 
to three channels or stations offering Broadcaster Simulcasts 
without triggering payments under Section 5(b), but all of such 
channels or stations (up to a total of five) shall be considered 
together for purposes of determining whether the Noncommercial 
Webcaster exceeds the 146,000 Aggregate Tuning Hour threshold in 
Section 4; and
    (4) for purposes of determining the number of channels or 
stations of programming offered by a Noncommercial Webcaster, an 
``archived program'' (as defined in 17 U.S.C. 114(j)(2)) that 
complies with the conditions in 17 U.S.C. 114(d)(2)(C)(iii)(I) and 
(II) shall not be considered a separate channel or station of 
programming except in the case of a Noncommercial Webcaster that 
exclusively makes digital audio transmissions of archived 
programming.
    (d) Payment in Lieu of Providing Reports of Use. All 
Noncommercial Webcasters' payments of nonrefundable minimum annual 
fees for each of 2003 and 2004 shall be accompanied by an additional 
payment of $50 in 2003 and $25 in 2004 in lieu of the provision of 
reports of use of sound recordings, as described in Section 7.

4. Usage Fees for 2004

    (a) In General. Subject to Section 5, the nonrefundable minimum 
annual fee payable under Section 3 for 2004 shall constitute full 
payment for digital audio transmissions totaling not more than 
146,000 ``Aggregate Tuning Hours'' (as defined in Section 9(a)) per 
month. If, in any month during 2004, a Noncommercial Webcaster makes 
digital audio transmissions of sound recordings under the section 
114 statutory license in excess of 146,000 Aggregate Tuning Hours, 
the Noncommercial Webcaster shall pay additional royalties for those 
digital audio transmissions in excess of 146,000 Aggregate Tuning 
Hours at the following rates, subject to an election as provided in 
Section 4(b):
    (1) $0.0002176 (.02176[cent]) per ``Performance'' (as defined in 
Section 9(f)); or
    (2) $.00251 (.251[cent]) per ``Aggregate Tuning Hour,'' except 
in the case of channels or stations where substantially all of the 
programming is reasonably classified as news, talk, sports or 
business programming, in which case the royalty rate shall be $.0002 
(.02[cent]) per Aggregate Tuning Hour.
    For the avoidance of doubt, a Noncommercial Webcaster shall 
calculate its Aggregate Tuning Hours of digital audio transmissions 
each month and shall pay any additional royalties owed for such 
month as provided above in this Section 4(a), but the Noncommercial 
Webcaster shall not owe any additional royalties for any subsequent 
months until such time as the Noncommercial Webcaster again exceeds 
the 146,000 Aggregate Tuning Hour threshold during a given month.
    (b) Election of Per Performance or Aggregate Tuning Hour Rate. 
The first time a Noncommercial Webcaster is required to pay 
additional royalties under Section 4(a), the Noncommercial Webcaster 
shall elect to pay based on the per performance royalty set forth in 
Section 4(a)(1) or the aggregate tuning hour royalty set forth in 
Section 4(a)(2) for all additional royalties under Section 4(a) 
incurred during the remainder of 2004, if any. Thus, for example, a 
Noncommercial Webcaster may not in one

[[Page 35011]]

month when its digital audio transmissions exceed 146,000 Aggregate 
Tuning Hours calculate its additional royalties based on the per 
performance royalty and in another month when its digital audio 
transmissions exceed 146,000 Aggregate Tuning Hours calculate its 
additional royalties based on the aggregate tuning hour royalty.
    (c) Reporting. For 2004, each Noncommercial Webcaster making 
digital audio transmissions in excess of 146,000 Aggregate Tuning 
Hours in any month shall report its Aggregate Tuning Hours of 
digital audio transmissions to SoundExchange in its monthly 
statement of account under Section 6(d). Each Noncommercial 
Webcaster having a statutory license in 2004 and not making digital 
audio transmissions in excess of 146,000 Aggregate Tuning Hours in 
any month shall so certify in the statement of account accompanying 
its first payment in 2005, if any.

5. Fees for More Than Three Channels of Programming

    Subject to Section 3(c)(3), if in any year (as identified in 
Section 3(a)(1) through (3) or 3(b)(1) through (6)), a Noncommercial 
Webcaster made or makes digital audio transmissions of sound 
recordings on more than three channels or stations of programming, 
then--
    (a) the Noncommercial Webcaster shall by written notice to 
SoundExchange at the time of its first payment for the year or its 
inception of its first channel or station in excess of three, 
whichever is later, designate three channels or stations for which 
the nonrefundable minimum annual fee payable under Section 3, and in 
2004, any additional royalty payment under Section 4, shall 
constitute full payment; and
    (b) the Noncommercial Webcaster shall pay royalties for all its 
digital audio transmissions of sound recordings under the section 
114 statutory license over its other channels and stations at the 
Statutory Rate for digital audio transmissions made by commercial 
eligible nonsubscription transmission services at such time, 
provided that--
    (1) the Noncommercial Webcaster shall not be required to make 
any minimum payment that otherwise applies to commercial eligible 
nonsubscription transmission services;
    (2) the nonrefundable minimum annual fee payable under Section 3 
shall not be creditable toward such payments for its other channels 
and stations;
    (3) such payments for its other channels and stations shall be 
due at the times provided in Section 6 (rather than any different 
times otherwise applicable to commercial eligible nonsubscription 
transmission services), except that if the Statutory Rate for 
digital audio transmissions made by commercial eligible 
nonsubscription transmission services has not then been determined, 
such payments for its other channels and stations shall be due 45 
days following the month in which the Statutory Rate is determined; 
and
    (4) the Noncommercial Webcaster shall comply with other terms 
relating to royalty payments that otherwise apply to commercial 
eligible nonsubscription transmission services (e.g. terms 
concerning any election among payment options).
    For the avoidance of doubt, by operation of Section 3(c)(3), 
when a Noncommercial Webcaster that owns or operates multiple over-
the-air terrestrial AM or FM radio stations offers more than one 
Internet channel or station on which substantially all of the 
programming consists of Broadcaster Simulcasts: (i) such Broadcaster 
Simulcasts shall in no event be subject to the Statutory Rate for 
digital audio transmissions made by commercial eligible 
nonsubscription transmission services, and (ii) only programming 
offered on Internet-only channels or stations in excess of two that 
may be associated with a group of up to three channels or stations 
offering Broadcaster Simulcasts may be subject to that Statutory 
Rate as provided in this Section.

6. Payment of Royalties in General

    (a) Timing of Minimum Payments. Payments of nonrefundable 
minimum annual fees under Section 3 for the period beginning on 
October 28, 1998, and ending on December 31, 2003, shall be due by 
October 15, 2003. Nonrefundable minimum annual fees for 2004 shall 
be due by January 31, 2004. Notwithstanding the foregoing provisions 
of this Section 6(a), when a Noncommercial Webcaster has not 
previously made digital audio transmissions of sound recordings 
under the section 114 statutory license, the Noncommercial Webcaster 
may make its first payment of nonrefundable minimum annual fees 
within 45 days following the month in which the Noncommercial 
Webcaster commences digital audio transmissions of sound recordings 
under the section 114 statutory license.
    (b) Timing of Other Payments. Any payments due under Section 4 
or 5 shall be due 45 days following the month in which the liability 
accrues.
    (c) Credit. Any payments of section 112 or 114 statutory license 
royalties made by a Noncommercial Webcaster to SoundExchange prior 
to its election under Section 2 shall be creditable to the payments 
due under Sections 3 through 5 of these Rates and Terms.
    (d) Remittance. Payments of all amounts due under these Rates 
and Terms shall be made to SoundExchange and shall under no 
circumstances be refundable. Payments shall be accompanied by a 
statement of account in the form made available on the SoundExchange 
Web site located at http://www.soundexchange.com.
    (e) Ephemeral Recordings. The royalty payable under 17 U.S.C. 
112(e) for any reproduction of a phonorecord made during the period 
beginning on October 28, 1998, and ending on December 31, 2004, and 
used solely by a Noncommercial Webcaster to facilitate transmissions 
for which it pays royalties as and when provided in these Rates and 
Terms shall be deemed to be included within, and to comprise 8.8% 
percent of, the Noncommercial Webcaster's royalty payments under 
these Rates and Terms.
    (f) Continuing Obligation to Pay. If Statutory Rates and terms 
for Noncommercial Webcasters for the period beginning January 1, 
2005, have not been established by December 31, 2004, then 
Noncommercial Webcasters shall continue to make payments at the 2004 
rates under these Rates and Terms until such successor rates and 
terms are established. Such interim royalties shall be subject to 
retroactive adjustment based on the final successor rates. Any 
overpayment shall be fully creditable to future payments, and any 
underpayment shall be paid within 30 days after establishment of the 
successor rates and terms, except as may otherwise be provided in 
the successor terms.
    (g) Late Payments. A Noncommercial Webcaster shall pay a late 
fee of 0.75% per month, or the highest lawful rate, whichever is 
lower, for any payment received by SoundExchange after the due date. 
Late fees shall accrue from the due date until payment is received 
by SoundExchange.

7. Notice and Recordkeeping

    (a) Data for Distributions. Noncommercial Webcasters electing 
these Rates and Terms shall not be required to provide reports of 
use of sound recordings for 2003 and 2004, even if the Librarian of 
Congress issues regulations otherwise requiring such reports by 
Noncommercial Webcasters. The payments required by Section 3(d) are 
intended to facilitate SoundExchange's ability to collect or 
otherwise acquire substitute data on which to base distributions to 
copyright owners and performers of payments made by Noncommercial 
Webcasters, although SoundExchange shall be under no obligation to 
spend such payments in any particular way or to collect or otherwise 
acquire any particular data by any particular means. SoundExchange 
may base its distributions to copyright owners and performers of 
payments made by Noncommercial Webcasters on any data or methodology 
determined by its board.
    (b) Future Reporting. The Noncommercial Webcasters shall 
designate a task force of not less than five members that shall be 
obligated to use reasonable efforts to work with SoundExchange to 
determine data fields and report formats and recommend policies, 
procedures and systems for the delivery of electronic reports of use 
of sound recordings to SoundExchange sufficient to permit 
SoundExchange, beginning in 2005, to distribute the royalties paid 
by Noncommercial Webcasters to those copyright owners and performers 
whose sound recordings are used by Noncommercial Webcasters based on 
data reported by or on behalf of Noncommercial Webcasters. In the 
absence of agreement among the Noncommercial Webcasters concerning 
the membership of such task force, each Noncommercial Webcaster 
shall be obligated to use reasonable efforts to do the foregoing.

8. Default

    A Noncommercial Webcaster shall comply with all the requirements 
of these Rates and Terms. If it fails to do so, SoundExchange may 
give written notice to the Noncommercial Webcaster that, unless the 
breach is remedied within 30 days from the date of notice and not 
repeated, the

[[Page 35012]]

Noncommercial Webcaster's authorization to make public performances 
and ephemeral reproductions under these Rates and Terms will be 
automatically terminated. Such termination renders any public 
performances and ephemeral reproductions as to which the breach 
relates actionable as acts of infringement under 17 U.S.C. 501 and 
fully subject to the remedies provided by 17 U.S.C. 502-506 and 509.

9. Definitions

    As used in these Rates and Terms, the following terms shall have 
the following meanings:
    (a) The term ``Aggregate Tuning Hours'' means the total hours of 
programming that a Noncommercial Webcaster has transmitted during 
the relevant period to all listeners within the United States over 
the relevant channels or stations, and from any archived programs, 
that provide audio programming consisting, in whole or in part, of 
eligible nonsubscription transmissions, less the actual running time 
of any sound recordings for which the Noncommercial Webcaster has 
obtained direct licenses apart from 17 U.S.C. 114(d)(2) or which do 
not require a license under United States copyright law. By way of 
example, if a Noncommercial Webcaster transmitted 1 hour of 
programming to 10 simultaneous listeners, the Noncommercial 
Webcaster's Aggregate Tuning Hours would equal 10. If three minutes 
of that hour consisted of transmission of a directly licensed 
recording, the Noncommercial Webcaster's Aggregate Tuning Hours 
would equal 9 hours and 30 minutes. As an additional example, if one 
listener listened to a Noncommercial Webcaster for 10 hours (and 
none of the recordings transmitted during that time was directly 
licensed), the Noncommercial Webcaster's Aggregate Tuning Hours 
would equal 10.
    (b) A ``Broadcaster Simulcast'' is a simultaneous Internet 
transmission or retransmission of an over-the-air terrestrial AM or 
FM radio broadcast, including one with previously broadcast 
programming substituted for programming for which requisite licenses 
or clearances to transmit over the Internet have not been obtained 
and one with substitute advertisements, where such Internet 
transmission or retransmission is made by a Noncommercial Webcaster 
that owns or operates the over-the-air radio station making the AM 
or FM broadcast.
    (c) An ``Incidental Performance'' is a Performance that both:
    (1) makes no more than incidental use of sound recordings 
including, but not limited to, brief musical transitions in and out 
of commercials or program segments, brief performances during news, 
talk, sports and business programming, brief background performances 
during disk jockey announcements, brief performances during 
commercials of 60 seconds or less in duration, or brief performances 
during sporting or other public events; and
    (2) other than ambient music that is background at a public 
event, does not contain an entire sound recording and does not 
feature a particular sound recording of more than 30 seconds (as a 
sound recording used as a theme song is featured).
    (d) An ``NEE'' or ``Noncommercial Educational Entity'' is a 
Noncommercial Webcaster that is directly operated by, or is 
affiliated with and officially sanctioned by, and the digital audio 
transmission operations of which are, during the course of the year, 
staffed substantially by students enrolled at, a domestically 
accredited primary or secondary school, college, university or other 
post-secondary degree-granting educational institution, but that is 
not a ``public broadcasting entity'' (as defined in 17 U.S.C. 
118(g)) qualified to receive funding from the Corporation for Public 
Broadcasting pursuant to the criteria set forth in 47 U.S.C. 396.
    (e) The term ``Noncommercial Webcaster'' shall have the meaning 
given in 17 U.S.C. 114(f)(5)(E)(i) (as added by the Small Webcaster 
Settlement Act of 2002).
    (f) A ``Performance'' is each instance in which any portion of a 
sound recording is publicly performed to a listener by means of a 
digital audio transmission or retransmission (e.g., the delivery of 
any portion of a single track from a compact disc to one listener) 
but excluding the following:
    (1) a performance of a sound recording that does not require a 
license (e.g., the sound recording is not copyrighted);
    (2) a performance of a sound recording for which the 
Noncommercial Webcaster has previously obtained a license from the 
copyright owner of such sound recording; and
    (3) an Incidental Performance.

[FR Doc. 03-14791 Filed 6-10-03; 8:45 am]
BILLING CODE 1410-33-P