[Federal Register Volume 69, Number 189 (Thursday, September 30, 2004)]
[Rules and Regulations]
[Pages 58261-58262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-22002]



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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 270

[Docket No. RM 2002-1G]


Notice and Recordkeeping for Use of Sound Recordings Under 
Statutory License

AGENCY: Copyright Office, Library of Congress.

ACTION: Final rule.

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SUMMARY: The Copyright Office of the Library of Congress is announcing 
a final regulation specifying notice and recordkeeping requirements 
governing the reporting of certain uses of sound recordings performed 
by means of digital audio transmissions pursuant to statutory license 
for the period October 28, 1998, through March 31, 2004.

EFFECTTIVE DATE: November 1, 2004.

FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or 
Gina Giuffreda, Attorney-Advisor, P.O. Box 70977, Southwest Station, 
Washington, DC 20024. Telephone: (202) 707-8380; Telefax: (202) 252-
3423.

SUPPLEMENTARY INFORMATION:

Background

    The Copyright Act grants copyright owners of sound recordings the 
exclusive right to perform their works publicly by means of digital 
audio transmissions subject to certain limitations and exceptions. 
Among the limitations placed on the performance right for sound 
recordings are certain exemptions and a statutory license that permits 
certain eligible subscription, nonsubscription, and satellite digital 
audio radio to perform those sound recordings publicly by means of 
digital audio transmissions. 17 U.S.C. 114.
    Similarly, copyright owners of sound recordings are granted the 
exclusive right to make copies of their works subject to certain 
limitations and exceptions. Among the limitations placed on the 
reproduction right for sound recordings is a statutory license that 
permits certain eligible subscription, nonsubscription, satellite 
digital audio, and business establishment services to make ephemeral 
copies of those sound recordings to facilitate their digital 
transmission. 17 U.S.C. 112(e).
    Both the section 114 and 112 licenses require services to, among 
other things, report to copyright owners of sound recordings on the use 
of their works. Both licenses direct the Librarian of Congress to 
establish regulations to give copyright owners reasonable notice of the 
use of their works and create and maintain records of use for delivery 
to copyright owners. 17 U.S.C. 114(f)(4)(A) and 17 U.S.C. 112(e)(4). 
The purpose of this notice and recordkeeping requirement is to ensure 
that the royalties collected under the statutory licenses are 
distributed to the correct recipients.
    The Copyright Office announced interim regulations on March 11, 
2004, specifying notice and recordkeeping requirements for use of sound 
recordings under the section 112 and 114 licenses. \1\ See 69 FR 11515 
(March 11, 2004). However, those interim regulations are prospective 
and do not address the notice and recordkeeping requirements for the 
period from October 28, 1998 (the date the statutory licenses other 
than the license for preexisting subscription services first became 
available) through March 31, 2004 (the ``historic period'').
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    \1\ Those regulations did not apply to preexisting subscription 
services, which are defined in section 114 as services that perform 
sound recordings by means of noninteractive audio-only subscription 
digital audio transmissions which were in existence and were making 
such transmissions to the public for a fee on or before July 31, 
1998. 17 U.S.C. 114(j)(11). Requirements for preexisting 
subscription services were announced in 1998, see 64 FR 34289 (June 
24, 1998), and will not be affected by the rules adopted today.
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Proposed Rulemaking

    Previously, the Office had published a notice of inquiry seeking 
comment on what records of use are to be prescribed for uses of sound 
recordings during the historic period, a period during which many 
services had maintained few or, in many instances, no records of such 
use. 68 FR 58054 (October 8, 2003). The Office received a number of 
comments and, on July 13, 2004, the Office published a notice of 
proposed rulemaking proposing rules to address the historic period that 
were based upon the comments it had received in response to the notice 
of inquiry. 69 FR 42007 (July13, 2004). Because few, if any, records of 
prior use had been maintained to date and those that do exist would be 
of little or no use in forming the basis for distribution of royalties 
for the historic period, the Office concluded that there was little 
likelihood of obtaining any useful and meaningful data by requiring 
services to report information from the historic period. Instead of 
requiring such retroactive reports, the Office followed the suggestion 
of several commenters and proposed to adopt rules providing that a 
proxy be used in lieu of reporting requirements for the historic 
period. The proxy that emerged as the one most favored by the 
commenters was the data already provided by the preexisting 
subscription services to SoundExchange, Inc.\2\ under the regulations 
announced in 1998 and now codified at 37 CFR 270.2 for transmissions 
made under section 114(f).
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    \2\ SoundExchange has been designated as the agent to receive 
royalty payments and statements of account from the preexisting 
subscription services. 37 CFR 260.3(f). SoundExchange was also 
designated as the ``Receiving Agent'' to receive royalty payments 
from eligible nonsubscription transmission services for the period 
from October 28, 1998, through December 31, 2002. SoundExchange and 
Royalty Logic, Inc. (``RLI'') were designated for the same period as 
``designated agents'' to distribute those royalty payments to 
copyright owners and performers. However, the regulations governing 
that time period provided that with respect to any royalty payment, 
RLI could act as designated agent only for copyright owners and 
performers who notified SoundExchange that they had elected to use 
RLI at least 30 days prior to SoundExchange's receipt of the royalty 
payment. 37 CFR 261.4(b), (c). Our July 13 notice of proposed 
rulemaking stated that it was the Office's understanding that no 
copyright owners or performers had elected RLI as their designated 
agent in accordance with Sec. 261.4(c), and that if that was the 
case, the proposed regulation would not need to require 
SoundExchange to provide to RLI any data from the preexisting 
subscription services.
    For the period after December 31, 2002, SoundExchange has been 
the sole designated agent. 37 CFR 262.4(b).
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    The Office proposed to adopt regulations specifying that the 
records of use submitted by the preexisting subscription services 
during the period between October 28, 1998, and March 31, 2004, shall 
be considered the records of use for all services operating under the 
section 112(e) and section 114 licenses and that no additional records 
need be filed by the nonsubscription services, the satellite digital 
radio audio services, business establishment services or new types of 
subscription services.

Comments

    Three comments were submitted to the Office in response to the 
notice of proposed rulemaking. SoundExchange, Inc., a nonprofit 
organization jointly controlled by representatives of copyright owners 
and performers on whose behalf it receives and disburses section 114 
statutory royalties, expressed its support for the proposed rule as 
``the best solution for a bad situation''-i.e., a situation in which 
services using the statutory license had not been required to retain 
data on use of sound recordings. The National Association of 
Broadcasters, many of whose members operate under the statutory 
license, also expressed its support for the proposed rule.
    RLI submitted a comment in which it took no position on the use of 
data from

[[Page 58262]]

the preexisting subscription services as a proxy. However, RLI asserted 
that contrary to the Office's understanding, a number of copyright 
owners and performers had designated RLI as their designated agent to 
distribute statutory royalties. RLI therefore urged that the records of 
use submitted by the preexisting subscription services to SoundExchange 
be provided to RLI as well so that RLI could use those records in its 
distribution of royalties to copyright owners and performers who have 
designated it as their designated agent. RLI further requested that the 
regulations provide that RLI receive such records directly from the 
preexisting subscription services rather than from SoundExchange.

The Final Rule

    In light of the support in the comments for adoption of the reports 
already submitted by the preexisting subscription services as a proxy 
for reports from nonsubscription services, the satellite digital radio 
audio services, business establishment services or new types of 
subscription services, the Office has decided to adopt the proposed 
rule as a final rule.
    However, RLI's assertion that it is entitled to receive the 
preexisting subscription services' reports requires a modification of 
the proposed rule. Whether RLI has or has not properly been designated 
by any copyright owners or performers is not an issue that can be 
resolved in this rulemaking proceeding; nor is there any need to 
resolve that issue. It will suffice to provide in the regulation that 
if RLI has been properly designated by any copyright owners or 
performers,\3\ SoundExchange must provide copies of the preexisting 
subscription services' reports to that designated agent. The Office 
rejects as impractical RLI's request that the preexisting subscription 
services be required to send those reports directly to RLI. The reports 
in question, which cover the period from October 28, 1998, through 
March 31, 2004, have already been submitted to SoundExchange (or its 
predecessor, the Recording Industry Association of America) over a 
period of several years under the existing notice and recordkeeping 
regulations for preexisting subscription services. It would be an 
unfair burden on the preexisting subscription services to require them 
now to serve additional copies of those reports (copies of which they 
have not necessarily retained) on RLI, especially when all the reports 
are now in the possession of SoundExchange, which necessarily will have 
retained those reports to assist in distribution of royalties.
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    \3\ And RLI is the only other entity eligible to be so 
designated.
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List of Subjects in 37 CFR Part 270

    Copyright, Sound recordings.

Final Regulation

0
In consideration of the foregoing, the Copyright Office amends part 270 
of 37 CFR to read as follows:
0
1. The authority citation for part 270 continues to read as follows:

    Authority: 17 U.S.C. 702.

PART 270--NOTICE AND RECORDKEEPING REQUIREMENTS FOR STATUTORY 
LICENSES

0
2. Part 270 is amended as follows:
0
a. By redesignating Sec.  270.4 as Sec.  270.5; and
0
b. By adding a new Sec.  270.4 to read as follows:


Sec.  270.4  Reports of use of sound recordings under statutory license 
prior to April 1, 2004.

    (a) General. This section prescribes the rules which govern reports 
of use of sound recordings by nonsubscription transmission services, 
preexisting satellite digital audio radio services, new subscription 
services, and business establishment services under section 112(e) or 
section 114(d)(2) of title 17 of the United States Code, or both, for 
the period from October 28, 1998, through March 31, 2004.
    (b) Reports of use. Reports of use filed by preexisting 
subscription services for transmissions made under 17 U.S.C. 114(f) 
pursuant to Sec. 270.2 for use of sound recordings under section 112(e) 
or section 114(d)(2) of title 17 of the United States Code, or both, 
for the period October 28, 1998, through March 31, 2004, shall serve as 
the reports of use for nonsubscription transmission services, 
preexisting satellite digital audio radio services, new subscription 
services, and business establishment services for their use of sound 
recordings under section 112(e) or section 114(d)(2) of title 17 of the 
United States Code, or both, for the period from October 28, 1998, 
through March 31, 2004.
    (c) Royalty Logic Inc. If, in accordance with Sec. 261.4(c), any 
Copyright Owners or Performers have provided timely notice to 
SoundExchange of an election to receive royalties from Royalty Logic, 
Inc. as a Designated Agent for the period October 28, 1998, through 
December 31, 2002, or any portion thereof, SoundExchange shall provide 
to RLI copies of the Reports of Use described in paragraph (b) of this 
section for that period or the applicable portion thereof.

    Dated: September 21, 2004
Marybeth Peters,
Register of Copyrights.
    Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 04-22002 Filed 9-29-04; 8:45 am]
BILLING CODE 1410-33-S