[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Proposed Rules]
[Pages 63532-63535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-22044]


=======================================================================
-----------------------------------------------------------------------

LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 383

[Docket No. 2005-5 CRB DTNSRA]


Digital Performance Right in Sound Recordings and Ephemeral 
Recordings for a New Subscription Service

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Copyright Royalty Judges are publishing for comment 
proposed regulations that set the rates and terms for the use of sound 
recordings in transmissions made by new subscription services and for 
the making of ephemeral recordings necessary for the facilitation of 
such transmissions for the period commencing from the inception of the 
new subscription service through December 31, 2010.

DATES: Comments and objections, if any, are due no later than December 
10, 2007.

[[Page 63533]]


ADDRESSES: Comments and objections may be sent electronically to 
[email protected]. In the alternative, send an original, five copies and an 
electronic copy on a CD either by mail or hand delivery. Please do not 
use multiple means of transmission. Comments and objections may not be 
delivered by an overnight delivery service other than the U.S. Postal 
Service Express Mail. If by mail (including overnight delivery), 
comments and objections must be addressed to: Copyright Royalty Board, 
P.O. Box 70977, Washington, DC 20024-0977. If hand delivered by a 
private party, comments and objections must be brought to the Copyright 
Office Public Information Office, Library of Congress, James Madison 
Memorial Building, Room LM-401, 101 Independence Avenue, SE., 
Washington, DC 20559-6000. If delivered by a commercial courier, 
comments and objections must be delivered between 8:30 a.m. and 4 p.m. 
to the Congressional Courier Acceptance Site located at 2nd and D 
Street, NE., Washington, DC, and the envelope must be addressed to: 
Copyright Royalty Board, Library of Congress, James Madison Memorial 
Building, LM-403, 101 Independence Avenue, SE., Washington, DC 20559-
6000.

FOR FURTHER INFORMATION CONTACT: Richard Strasser, Senior Attorney, or 
Gina Giuffreda, Attorney-Advisor, by telephone at (202) 707-7658 or e-
mail at [email protected].

SUPPLEMENTARY INFORMATION: 

Background

    In 1995, Congress enacted the Digital Performance Right in Sound 
Recordings Act of 1995 (``DPRA''), Public Law 104-39, which created an 
exclusive right for copyright owners of sound recordings, subject to 
certain limitations, to perform publicly the sound recordings by means 
of certain digital audio transmissions. 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(f).
    Section 114 was later amended with the passage of the Digital 
Millennium Copyright Act of 1998 (``DMCA'' or ``the Act''), Public Law 
105-304, to cover additional digital audio transmissions. These include 
transmissions made by ``new subscription services.'' For purposes of 
the section 114 license, a ``new subscription service'' is ``a service 
that performs sound recordings by means of noninteractive subscription 
digital audio transmissions and that is not a preexisting subscription 
service or a preexisting satellite digital audio radio service.'' 17 
U.S.C. 114(j)(8).
    In addition to expanding the current section 114 license, the DMCA 
also created a new statutory license to allow for the making of 
ephemeral reproductions for the purpose of facilitating certain digital 
audio transmissions, including those made by new subscription services. 
17 U.S.C. 112(e).
    To initiate a proceeding to establish rates and terms for those 
transmissions made by a new subscription service, either a copyright 
owner of sound recordings or a new subscription service must file a 
petition with the Copyright Royalty Judges (``Judges''). The petition 
must indicate that a new subscription service on which sound recordings 
are performed is or is about to become operational, for the purpose of 
determining reasonable terms and rates of royalty payments for the new 
subscription service for the period commencing with the inception of 
such new subscription service and ending on the date on which the most 
recent royalty rates and terms for preexisting subscription digital 
audio transmission services or preexisting satellite digital audio 
radio services expire or such other period as the parties may agree. 17 
U.S.C. 114(f)(2)(C).
    On October 31, 2005, pursuant to section 114(f)(2)(C), XM Satellite 
Radio, Inc. (``XM'') filed with the Judges a Petition to Initiate and 
Schedule Proceeding for a New Type of Subscription Service for a ``new 
type of subscription service [which] performs sound recordings on 
digital audio channels programmed by the licensee for transmission by a 
satellite television distribution service to its residential customers, 
where the audio channels are bundled with television channels as part 
of a `basic' package of service and not for a separate fee.'' XM 
Petition at 1. The petition noted that this new subscription service 
was to commence on or about November 15, 2005. Id.
    On December 5, 2005, pursuant to 17 U.S.C. 804(b)(3)(C)(ii), the 
Copyright Royalty Judges published a notice in the Federal Register 
announcing commencement of the proceeding to set rates and terms for 
royalty payments under sections 114 and 112 for the activities of the 
new subscription service described in the XM Petition and requesting 
interested parties to submit their petitions to participate. 70 FR 
72471 (December 5, 2005). Petitions to participate in this proceeding 
were received from Sirius Satellite Radio, Inc. (``Sirius''), XM, MTV 
Networks (``MTV''), and SoundExchange, Inc.
    The Judges set the schedule for the proceeding for both the direct 
and rebuttal phases of the proceeding, including the dates for the 
filing of the written statements and the dates for oral testimony for 
each phase. Subsequent to the presentation of the direct phase of their 
case and the filing of their written rebuttal statements, but prior to 
the oral presentation of their rebuttal witnesses, the parties informed 
the Judges that they had ``reached full agreement on all issues in this 
litigation'' and that ``there are no more issues to try.'' Transcript 
of September 10, 2007, at p. 5. They also stated that the settlement 
agreement would be submitted to the Judges for approval and adoption 
pursuant to 17 U.S.C. 801(b)(7)(A). Id. at 6. The proposed rates and 
terms codifying the settlement agreement were filed on October 30, 
2007.
    Section 801(b)(7)(A) allows for the adoption of rates and terms 
negotiated by ``some or all of the participants in a proceeding at any 
time during the proceeding'' provided they are submitted to the 
Copyright Royalty Judges for approval. This section provides that in 
such event:

    (i) the Copyright Royalty Judges shall provide to those that 
would be bound by the terms, rates, or other determination set by 
any agreement in a proceeding to determine royalty rates an 
opportunity to comment on the agreement and shall provide to 
participants in the proceeding under section 803(b)(2) that would be 
bound by the terms, rates, or other determination set by the 
agreement an opportunity to comment on the agreement and object to 
its adoption as a basis for statutory terms and rates; and
    (ii) the Copyright Royalty Judges may decline to adopt the 
agreement as a basis for statutory terms and rates for participants 
that are not parties to the agreement, if any participant described 
in clause (i) objects to the agreement and the Copyright Royalty 
Judges conclude, based on the record before them if one exists, that 
the agreement does not provide a reasonable basis for setting 
statutory terms or rates.

17 U.S.C. 801(b)(7)(A). Rates and terms adopted pursuant to this 
provision are binding on all copyright owners of sound recordings and 
new subscription services performing the sound recordings on digital 
audio channels programmed by the licensee for transmission by a 
satellite television distribution service to its residential customers 
where the audio channels are bundled with television channels as part 
of a ``basic'' package of service and not for a separate fee.
    The parties have agreed and proposed that the terms governing the 
activities of a new subscription service under sections 114 and 112 as 
described herein shall be the same, unless

[[Page 63534]]

otherwise specified, as those to be determined by the Judges in the 
current proceeding to set rates and terms for the subscription 
transmissions and the reproduction of ephemeral recordings by 
preexisting satellite digital audio radio services, Docket No. 2006-1 
CRB DSTRA. The Judges will render their determination in that 
proceeding by mid-December.
    The parties proposing the fee structure and fees set forth herein 
have agreed that the fee structure and fees shall not be offered into 
evidence, relied upon, considered as precedent, or otherwise taken into 
account in (i) the proceeding in Docket No. 2006-1 CRB DSTRA to set 
rates and fees for the public performance of sound recordings or the 
reproduction of ephemeral phonorecords via preexisting satellite 
digital audio radio services, or (ii) in the immediately following 
proceeding to adopt successor rates and terms for preexisting satellite 
digital audio radio services.
    As discussed above, the public may comment and object to any or all 
of the proposed regulations contained in this notice of proposed 
rulemaking. Those who do comment and object, however, must be prepared 
to participate in further proceedings in this docket to establish rates 
and terms for the activities of the new subscription services described 
herein under the section 112 and 114 licenses.

List of Subject in 37 CFR Part 383

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

Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges propose to add part 383 to Chapter III of title 37 of the Code 
of Federal Regulations to read as follows:

PART 383--RATES AND TERMS FOR SUBSCRIPTION TRANSMISSIONS AND THE 
REPRODUCTION OF EPHEMERAL RECORDINGS BY NEW SUBSCRIPTION SERVICES

Sec.
383.1 General.
383.2 Definitions.
383.3 Royalty fees for public performance of sound recordings and 
the making of ephemeral recordings.
383.4 Terms for making payment of royalty fees.

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


Sec.  383.1  General.

    (a) Scope. This part 383 establishes rates and terms of royalty 
payments for the public performance of sound recordings in certain 
digital transmissions by Licensees in accordance with the provisions of 
17 U.S.C. 114, and the making of certain ephemeral recordings by 
Licensees in accordance with the provisions of 17 U.S.C. 112(e), during 
the period commencing from the inception of the Licensees' Services and 
continuing through December 31, 2010.
    (b) Legal compliance. Licensees relying upon the statutory licenses 
set forth in 17 U.S.C. 112 and 114 shall comply with the requirements 
of those sections and the rates and terms of this part.
    (c) Relationship to voluntary agreements. Notwithstanding the 
royalty rates and terms established in this part, the rates and terms 
of any license agreements entered into by Copyright Owners and 
Licensees shall apply in lieu of the rates and terms of this part to 
transmissions within the scope of such agreements.


Sec.  383.2  Definitions.

    For purposes of this part, the following definitions shall apply:
    (a) Applicable Period is the period for which a particular payment 
to the designated collection and distribution organization is due.
    (b) Bundled Contracts means contracts between the Licensee and a 
Provider in which the Service is not the only content licensed by the 
Licensee to the Provider.
    (c) Copyright Owner is a sound recording copyright owner who is 
entitled to receive royalty payments under 17 U.S.C. 112(e) or 114(g).
    (d) License Period means the period commencing from the inception 
of the Licensees' Services and continuing through December 31, 2010.
    (e) Licensee is a person that has obtained statutory licenses under 
17 U.S.C. 112 and 114, and the implementing regulations, to make 
digital audio transmissions as part of a Service (as defined in 
paragraph (h) of this section), and ephemeral recordings for use in 
facilitating such transmissions.
    (f) Provider means a ``multichannel video programming distributor'' 
as that term is defined in 47 CFR 76.1000(e); notwithstanding such 
definition, for purposes of this part, a Provider shall include only a 
distributor of programming to televisions, such as a cable or satellite 
television provider.
    (g) Revenue. (1) ``Revenue'' means all monies and other 
considerations, paid or payable, recognizable during the Applicable 
Period as revenue by the Licensee consistent with Generally Accepted 
Accounting Principles (``GAAP'') and the Licensee's past practices, 
which is derived by the Licensee from the operation of the Service and 
shall be comprised of the following:
    (i) Revenues recognizable by Licensee from Licensee's Providers and 
directly from residential U.S. subscribers for Licensee's Service;
    (ii) Licensee's advertising revenues recognizable from the Service 
(as billed), or other monies received from sponsors of the Service if 
any, less advertising agency commissions not to exceed 15% of those 
fees incurred to a recognized advertising agency not owned or 
controlled by Licensee;
    (iii) Revenues recognizable for the provision of time on the 
Service to any third party;
    (iv) Revenues recognizable from the sale of time to Providers of 
paid programming, such as infomercials, on the Service;
    (v) Where merchandise, service, or anything of value is receivable 
by Licensee in lieu of cash consideration for the use of Licensee's 
Service, the fair market value thereof or Licensee's prevailing 
published rate, whichever is less;
    (vi) Monies or other consideration recognizable as revenue by 
Licensee from Licensee's Providers, but not including revenues 
recognizable by Licensee's Providers from others and not accounted for 
by Licensee's Providers to Licensee, for the provision of hardware for 
the Service by anyone and used in connection with the Service;
    (vii) Monies or other consideration recognizable as revenue for any 
references to or inclusion of any product or service on the Service; 
and
    (viii) Bad debts recovered regarding paragraphs (g)(1)(i) through 
(vii) of this section.
    (2) ``Revenue'' shall include such payments as set forth in 
paragraphs (g)(1)(i) through (viii) of this section to which Licensee 
is entitled but which are paid or payable to a parent, subsidiary, 
division, or affiliate of Licensee, in lieu of payment to Licensee but 
not including payments to Licensee's Providers for the Service. 
Licensee shall be allowed a deduction from ``Revenue'' as defined in 
paragraph (g)(1) of this section for bad debts actually written off 
during the reporting period.
    (h) A Service is a non-interactive (consistent with the definition 
of ``interactive service'' in 17 U.S.C. 114(j)(7)) audio-only 
subscription service (including accompanying information and graphics 
related to the audio) that is transmitted to residential

[[Page 63535]]

subscribers of a television service through a Provider which is 
marketed as and is in fact primarily a video service where
    (1) Subscribers do not pay a separate fee for audio channels,
    (2) The audio channels are delivered by digital audio transmissions 
through a technology that is incapable of tracking the individual sound 
recordings received by any particular consumer.
    (3) However, paragraph (h)(2) of this section shall not apply to 
the Licensee's current contracts with Providers that are in effect as 
of the effective date of this part if such Providers become capable in 
the future of tracking the individual sound recordings received by any 
particular consumer, provided that the audio channels continued to be 
delivered to Subscribers by digital audio transmissions and the 
Licensee remains incapable of tracking the individual sound recordings 
received by any particular consumer.
    (i) Subscriber means every residential subscriber to the underlying 
service of the Provider who receives Licensee's Service in the United 
States for all or any part of a month; provided, however, that for any 
Licensee that is not able to track the number of subscribers on a per-
day basis, ``Subscribers'' shall be calculated based on the average of 
the number of subscribers on the last day of the preceding month and 
the last day of the applicable month, unless the Service is paid by the 
Provider based on end-of-month numbers, in which event ``Subscribers'' 
shall be counted based on end-of-month data.
    (j) Stand-Alone Contracts means contracts between the Licensee and 
a Provider in which the only content licensed to the Provider is the 
Service.


Sec.  383.3  Royalty fees for public performances of sound recordings 
and the making of ephemeral recordings.

    (a) Royalty rates. Royalty rates for the public performance of 
sound recordings by eligible digital transmissions made over a Service 
pursuant to 17 U.S.C. 114, and for ephemeral recordings of sound 
recordings made pursuant to 17 U.S.C. 112 to facilitate such 
transmissions, are as follows. Each Licensee will pay, with respect to 
content covered by the License that is provided via the Service of each 
such Licensee:
    (1) For Stand-Alone Contracts, the greater of:
    (i) 15% of Revenue, or
    (ii) The following monthly minimum payment per Subscriber to the 
Service of such Licensee--


(A) From inception through 2006: $0.0075

(B) 2007: $0.0075

(C) 2008: $0.0075

(D) 2009: $0.0125

(E) 2010: $0.0150 and

    (2) For Bundled Contracts, the greater of:
    (i) 15% of Revenue allocated to reflect the objective value of the 
Licensee's Service, or
    (ii) The following monthly minimum payment per Subscriber to the 
Service of such Licensee:


(A) From inception through 2006: $0.0220

(B) 2007: $0.0220

(C) 2008: $0.0220

(D) 2009: $0.0220

(E) 2010: $0.0250

    (b) Minimum fee. Each Licensee will pay an annual, non-refundable 
minimum fee of one hundred thousand dollars ($100,000), payable on 
January 31 of each calendar year in which the Service is provided 
pursuant to the section 112 and 114 statutory licenses, but payable 
pursuant to the applicable regulations for all years 2007 and earlier. 
Such fee shall be recoupable and credited against royalties due in the 
calendar year in which it is paid.


Sec.  383.4  Terms for making payment of royalty fees.

    (a) Subject to the provisions of this section, terms governing 
timing and due dates of royalty payments, late fees, statements of 
account, audit and verification of royalty payments and distributions, 
cost of audit and verification, record retention requirements, 
treatment of Licensees' confidential information, distribution of 
royalties, unclaimed funds, designation and definition of the 
collection and distribution organization, and any definitions for 
applicable terms not defined herein and not otherwise inapplicable 
shall be those adopted by the Copyright Royalty Judges for subscription 
transmissions and the reproduction of ephemeral recordings by 
preexisting satellite digital audio radio services in Docket No. 2006-1 
CRB DSTRA (``the SDARS Proceeding'').
    (b) Without prejudice to any applicable notice and recordkeeping 
provisions, statements of account shall not require reports of 
performances.
    (c) If the Copyright Royalty Judges adopt reports of use 
regulations in the SDARS Proceeding, those regulations, if any, shall 
govern Licensees' obligations to report sound recordings used pursuant 
to this part, except that Licensees also shall report to SoundExchange 
which channels are transmitted by their respective Providers for all 
past, current and future periods. In the event that the Copyright 
Royalty Judges do not adopt reports of use regulations in the SDARS 
Proceeding, then reports of use provided by XM Satellite Radio Inc. 
(``XM'') and Sirius Satellite Radio Inc. (``Sirius'') for their use of 
sound recordings on their preexisting satellite digital audio radio 
services (as defined in 17 U.S.C. 114(j)(10)) shall be deemed to 
satisfy XM's and Sirius' obligations to report sound recordings used 
pursuant to this part, and MTV Networks shall provide census reporting, 
retroactive to the inception of its Service.

    Dated: November 6, 2007.
James Scott Sledge,
Chief Copyright Royalty Judge.
 [FR Doc. E7-22044 Filed 11-8-07; 8:45 am]
BILLING CODE 1410-72-P