[Federal Register Volume 68, Number 162 (Thursday, August 21, 2003)]
[Proposed Rules]
[Pages 50493-50495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-21467]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 263

[Docket No. 2002-1 CARP DTRA3]


Digital Performance Right in Sound Recordings and Ephemeral 
Recordings

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Copyright Office of the Library of Congress is requesting 
comment on proposed regulations that set rates and terms for the use of 
sound recordings in eligible nonsubscription transmissions made by 
noncommercial licensees, and for the making of related ephemeral 
recordings. The rates and terms are for the 2003 and 2004 statutory 
licensing period.

DATES: Comments are due no later than September 22, 2003.

ADDRESSES: An original and five copies of any comment shall be 
delivered by hand to: Office of the General Counsel, James Madison 
Memorial Building, Room LM-403, First and Independence Avenue, SE., 
Washington, DC 20559-6000; or mailed to: Copyright Arbitration Royalty 
Panel (CARP), P.O. Box 70977, Southwest Station, Washington, DC 20024-
0977.

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

SUPPLEMENTARY INFORMATION: Since 1995, copyright owners of sound 
recordings have had the exclusive right to perform their works publicly 
by means of a digital audio transmission, subject to certain 
limitations. 17 U.S.C. 106(6). Among the limitations on the performance 
right was the creation of a new compulsory license for nonexempt, 
noninteractive digital subscription transmissions. 17 U.S.C. 114. 
Section 114 was later amended with the passage of the Digital 
Millennium Copyright Act of 1998 (``DMCA''), Public Law 105-304, to 
cover additional digital audio transmissions, including services making 
eligible nonsubscription transmissions. The DMCA also created a new 
statutory license to provide for the making of certain ephemeral 
phonerecords that facilitate the making of digital audio transmissions 
pursuant to the section 114 license. See 17 U.S.C. 112(e).
    Rates and terms for use of sound recordings pursuant to these 
licenses by eligible nonsubscription services and by business-to-
business establishment services were published in the Federal Register 
on July 8, 2002, after a full hearing before a Copyright Arbitration 
Royalty Panel (``CARP''), but these rates only applied to those 
transmissions made through December 31, 2002. See 67 FR 45239 (July 8, 
2002).
    In accordance with section 114(f)(2)(C)(i)(II), the Copyright 
Office initiated a new rate proceeding in January 2002 to set rates and 
terms for the current license period, January 1, 2003 through December 
31, 2004. The first step in the rate adjustment process is the 
announcement of a voluntary six-month negotiation period See 67 FR 4472 
(January 30, 2002). Although no agreements were reached during the 
early stages of this proceeding, copyright owners and performers did 
ultimately reach an agreement with certain licensees and the proposed 
settlement was published in the Federal Register on May 20, 2003. 68 FR 
27506 (May 20, 2003). This agreement, however, did not make any special 
provisions for noncommercial entities who operate under the same 
statutory licenses, because noncommercial webcasters were involved in 
separate rate negotiations to establish an alternative rate structure 
to the one that would be set in accordance with the procedures set 
forth in 17 U.S.C. 112(e) and 114(f). These negotiations were conducted 
in accordance with the Small Webcaster Settlement Act of 2002 
(``SWSA''), Public Law 107-321, 116 Stat. 2780.
    The SWSA was passed in 2002 to address certain concerns of small 
webcasters with respect to the rates announced on July 8, 2002, and the 
CARP process which established those rates. Basically, it gave small 
commercial webcasters and noncommercial webcasters another opportunity 
to negotiate a different and separate rate schedule applicable to their 
use of sound recordings in digital transmissions for the period through 
2004. The negotiations for these alternative agreements were conducted 
sequentially. SoundExchange, an unincorporated division of the

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Recording Industry Association of America, Inc. that is authorized to 
negotiate on behalf of copyright owners and performers, reached an 
agreement with small commercial webcasters in December 2002. See 67 FR 
78510 (December 24, 2002). Negotiations between SoundExchange and the 
noncommercial webcasters followed and were completed in May 2003. The 
SWSA agreement applicable to the noncommercial entities was published 
in the Federal Register on June 11, 2003. 68 FR 35008 (June 11, 2003). 
Noncommercial webcasters who wished to take advantage of the rates and 
terms set forth in this agreement and had already made digital audio 
transmissions were required to submit a completed and signed election 
form to SoundExchange no later than 30 days after publication of the 
rates and terms in the Federal Register. Noncommercial webcasters who 
have not yet made a digital audio transmission may still elect to 
operate under the SWSA provided that they file the election form no 
later than the first date on which it would be obligated to make a 
royalty payment. See 68 FR at 35009.
    Shortly thereafter, SoundExchange, the American Council on 
Education, and the Intercollegiate Broadcasting System, Inc., jointly 
with Harvard Radio Broadcasting Co., Inc. filed a petition with the 
Copyright Office for adjustment of the section 112 and 114 statutory 
rates and terms applicable to noncommercial licensees, requesting that 
the Office publish the proposed rates and terms for public comment 
pursuant to 37 CFR 251.63(b). The proposed rates and terms are 
identical to the applicable rates and terms for the period ending 
December 31, 2002, as established in the Order of the Librarian of 
Congress published July 8, 2002. See 67 FR 45239 (July 8, 2002).
    The purpose for proposing these rates and terms is to ensure that a 
statutory rate is set for noncommercial licensees, so that there is no 
gap in the statutory rate scheme. Thus, a noncommercial licensee who 
does not opt to operate under the rates and terms negotiated in the 
SWSA agreement would operate according to the rates and terms announced 
today, should they be adopted as final rules. However, noncommercial 
webcasters who have elected to operate under the rates and terms 
negotiated pursuant to the SWSA and published on June 11, 2003, will 
not be affected by the proposed rates and terms announced today.
    Section 251.63(b) of title 37 of the Code of Federal Regulations 
allows the Librarian to adopt proposed rates and terms without 
convening a CARP, provided that the proposed rates and terms are 
published in the Federal Register and no interested party with an 
intent to participate in the proceeding files a comment objecting to 
the proposed terms. In other words, unless there is an objection from a 
person with a significant interest in setting rates and terms 
applicable to noncommercial licensees and who is prepared and eligible 
to participate in a CARP proceeding, the Librarian can adopt the rates 
and terms in the proposed settlement in final regulations without 
convening a CARP. This procedure to adopt negotiated rates and terms in 
the case where an agreement has been reached has been specifically 
endorsed by Congress.

    If an agreement as to rates and terms is reached and there is no 
controversy as to these matters, it would make no sense to subject 
the interested parties to the needless expense of an arbitration 
proceeding conducted under [section 114(f)(2) (1995)]. Thus, it is 
the Committee's intention that in such a case, as under the 
Copyright Office's current regulations concerning rate adjustment 
proceedings, the Librarian of Congress should notify the public of 
the proposed agreement in a notice-and-comment proceeding and, if no 
opposing comment is received from a party with a substantial 
interest and an intent to participate in an arbitration proceeding, 
the Librarian of Congress should adopt the rates embodied in the 
agreement without convening an arbitration panel.

S. Rep. No. 104-128, at 29 (1995) (citations omitted).
    Accordingly, the Copyright Office is granting the joint petition 
filed on July 3, 2003, and is publishing for public comment the 
proposed rates and terms embodied in the agreement. Any party who 
objects to the proposed rates and terms set forth herein must file a 
written objection with the Copyright Office and an accompanying Notice 
of Intent to Participate, if the party has not already done so, in 
accordance with the requirements set forth in the Copyright Office's 
November 20, 2001, Notice. See 66 FR 58180, 58181 (November 20, 2001). 
The content of the written challenge should describe the party's 
interest in the proceeding, the proposed rule the party finds 
objectionable, and the reasons for the challenge.
    Only a party with a significant interest in these rates and terms 
and who is prepared to participate in a CARP proceeding has standing to 
object. A noncommercial webcaster that has elected to operate under the 
rates and terms negotiated under the SWSA and published on June 11 
would have no standing to object to the rates and terms announced 
today.
    If no comments are received, the regulations shall become final 
upon publication of a final rule and shall cover the period from 
January 1, 2003, to December 31, 2004.

Schedule for Filing a Written Direct Case

    On August 18, 2004, the Copyright Office issued an order in this 
proceeding in which it: (1) Announced the consolidation of this 
proceeding with the proceeding to establish rates and terms for new 
subscription services, Docket No. 2001-2-DTNSRA; (2) set forth a new 
precontroversy discovery schedule and set a date for a meeting to 
discuss administrative issues; (3) directed parties in this proceeding 
to file a Notice of Intention to Submit a Written Direct Case; and (4) 
set a new briefing schedule for filing oppositions and replies to the 
pending motion to adopt the interim protective order.
    Any new participants who may enter this proceeding by filing an 
objection to the proposed rates and terms as they apply to 
noncommercial entities must comply with the dates and requirements set 
forth in the August 18 order. See http://www.copyright.gov/carp/order81803.pdf. Accordingly, all parties to this proceeding, including 
any new participants, must be prepared to file a written direct case 
with the Copyright Office and serve a copy of the written direct case 
on all parties to this proceeding on October 6, 2003.

List of Subjects in 37 CFR Part 263

    Copyright, Digital audio transmissions, Performance right, Sound 
recordings.

Proposed Regulation

    In consideration of the foregoing, the Copyright Office proposes 
adding part 263 to 37 CFR to read as follows:

PART 263--RATES AND TERMS FOR CERTAIN TRANSMISSIONS AND THE MAKING 
OF EPHEMERAL REPRODUCTIONS BY NONCOMMERCIAL LICENSEES

Sec.
263.1 General.
263.2 Definitions.
263.3 Royalty Rates and Terms.

    Authority: 17 U.S.C. 112(e), 114, 801(b)(1).


Sec.  263.1  General.

    This part 263 establishes rates and terms of royalty payments for 
the public performance of sound recordings in certain digital 
transmissions by certain Noncommercial Licensees in accordance with the 
provisions of 17 U.S.C. 114, and the making of ephemeral recordings by 
certain

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Noncommercial Licensees in accordance with the provisions of 17 U.S.C. 
112(e), during the period 2003-2004.


Sec.  263.2  Definitions.

    For purposes of this part, the following definition shall apply:
    A Noncommercial Licensee is a person or entity that has obtained a 
compulsory license under 17 U.S.C. 114 and the implementing regulations 
therefor, or that has obtained a compulsory license under 17 U.S.C. 
112(e) and the implementing regulations therefor to make ephemeral 
recordings for use in facilitating such transmissions, and--
    (a) Is exempt from taxation under section 501 of the Internal 
Revenue Code of 1986 (26 U.S.C. 501);
    (b) 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
    (c) Is a State of possession or any governmental entity or 
subordinate thereof, or the United States or District of Columbia, 
making transmissions for exclusively public purposes.


Sec.  263.3  Royalty Rates and Terms.

    A Noncommercial Licensee shall in every respect be treated as a 
``Licensee'' under part 262 of this chapter, and all terms applicable 
to Licensees and their payments under part 262 of this chapter shall 
apply to Noncommercial Licensees and their payment, except that a 
Noncommercial Licensee shall pay royalties at the rates applicable to 
such a ``Licensee,'' as currently provided in Sec.  261.3(a), (c), (d) 
and (e) of this chapter, rather than at the rates set forth in Sec.  
262.3(a) through (d) of this chapter.

    Dated: August 18, 2003.
David O. Carson,
General Counsel.
[FR Doc. 03-21467 Filed 8-20-03; 8:45 am]
BILLING CODE 1410-33-P