[Federal Register Volume 73, Number 20 (Wednesday, January 30, 2008)]
[Proposed Rules]
[Pages 5466-5470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-1680]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 384

[Docket No. 2007-1 CRB DTRA-BE]


Determination of Rates and Terms for Business Establishment 
Services

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Copyright Royalty Judges are publishing for comment 
proposed regulations that set the rates and terms for the making of an 
ephemeral recording of a sound recording by a business establishment 
service for the period 2009-2013.

DATES: Comments and objections, if any, are due no later than February 
29, 2008.

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 in Sound 
Recordings Act, Public Law No. 104-39, which created an exclusive right 
for copyright owners

[[Page 5467]]

of sound recordings, subject to certain limitations, to perform 
publicly sound recordings by means of certain digital audio 
transmissions. Among the limitations on the performance right was the 
creation of a statutory license for nonexempt, noninteractive digital 
subscription transmissions. 17 U.S.C. 114(d).
    The scope of the section 114 statutory license was expanded in 1998 
upon passage of the Digital Millennium Copyright Act of 1998 
(``DMCA''), Pub. L. No. 105-304, in order to allow for the public 
performance of a sound recording when made in accordance with the terms 
and rates of the statutory license, 17 U.S.C. 114(d), by a preexisting 
satellite digital audio radio service or as part of an eligible 
nonsubscription transmission. In addition to expanding the section 114 
license, the DMCA also created a statutory license for the making of an 
``ephemeral recording'' of a sound recording by certain transmitting 
organizations. 17 U.S.C. 112(e). This license allows entities that 
transmit performances of sound recordings to business establishments, 
pursuant to the limitations set forth in section 114(d)(1)(C)(iv), to 
make an ephemeral recording of a sound recording for a later 
transmission. Id. The license also provides a means by which a 
transmitting entity with a statutory license under section 114(f) can 
make more than the one phonorecord permitted under the exemption set 
forth in section 112(a). 17 U.S.C. 112(e).
    The rates and terms for the making of ephemeral recordings of sound 
recordings by a business establishment service have been adjusted 
periodically by the Librarian of Congress and appear in 37 CFR Parts 
261 and 262. However, the Copyright Royalty and Distribution Reform Act 
of 2004 (``CRDRA''), Public Law No. 108-419, transferred jurisdiction 
over these rates and terms to the Copyright Royalty Judges 
(``Judges''). 17 U.S.C. 801(b)(1). The current rates for this license 
set forth in 37 CFR Part 262 will remain in effect until December 31, 
2008. See Section 6(b)(3) of the CRDRA (rates and terms for section 
112(e) in effect on December 31, 2004, ``shall remain in effect until 
the later of the first applicable effective date for successor terms 
and rates specified in [17 U.S.C.] section 804(b)(2)''); 17 U.S.C. 
804(b)(2)(successor rates to become effective on January 1, 2009).
    On January 5, 2007, pursuant to 17 U.S.C. 803(b)(1)(A)(i)(II), the 
Copyright Royalty Judges published a notice in the Federal Register 
announcing commencement of the proceeding to determine rates and terms 
of royalty payments for the making of ephemeral recordings by business 
establishment services under section 112(e) and requesting interested 
parties to submit their petitions to participate. 72 FR 584 (January 5, 
2007). Petitions to participate in this proceeding were received from 
Music Choice, Royalty Logic, Inc. (``RLI''), Muzak, LLC, SoundExchange, 
Inc., Sirius Satellite Radio, Inc. (``Sirius''), and XM Satellite Radio 
(``XM''). The Judges set the timetable for the three-month negotiation 
period, see 17 U.S.C. 803(b)(3), and directed the participants to 
submit their written direct statements no later than October 31, 2007.
    On October 31, 2007, the Judges received a notice of settlement 
entered into by all parties to the proceeding, with the exception of 
Muzak, which had withdrawn from the proceeding on October 5, 2007, and 
RLI. Accompanying the notice of settlement was a motion by 
SoundExchange requesting that the Judges adopt the proposed rates and 
terms. SoundExchange also filed its written direct statement, given 
that RLI had not agreed to the proposed settlement. RLI did not file a 
written direct statement or an opposition to SoundExchange's motion.
    Prior to a ruling on the motion to publish the proposed rates and 
terms for notice and comment, SoundExchange filed a motion to dismiss 
RLI from this proceeding for failure to file a written direct statement 
and renewed its request that the Judges issue a notice of proposed 
rulemaking seeking comment on the proposed rates and terms. See Motion 
filed November 28, 2007. The Judges received no opposition to this 
motion from RLI. Consequently, on December 6, 2007, the Judges granted 
SoundExchange's motion and dismissed RLI from this proceeding. See, 
Order Granting SoundExchange's Motion to Dismiss Royalty Logic, Inc., 
in Docket No. 2007-1 CRB DTRA-BE (December 6, 2007).
    Since all remaining parties to this proceeding have agreed to the 
settlement, the Judges are publishing the proposed rates and terms for 
notice and comment pursuant to their authority under 17 U.S.C. 
801(b)(7)(A).
    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 
business establishment services making an ephemeral recording of a 
sound recording for the period 2009-2013.
    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 set rates and 
terms for the making of ephemeral recordings by business establishment 
services.

List of Subjects in 37 CFR Part 384

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

Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges propose to add part 384 to Chapter III of title 37 of the Code 
of Federal Regulations to read as follows:

PART 384--RATES AND TERMS FOR THE MAKING OF EPHEMERAL RECORDINGS BY 
BUSINESS ESTABLISHMENT SERVICES

Sec.
384.1 General.
384.2 Definitions.
384.3 Royalty fees for Ephemeral Recordings.
384.4 Terms for making payment of royalty fees and statements of 
account.
384.5 Confidential information.
384.6 Verification of royalty payments.
384.7 Verification of royalty distributions.
384.8 Unclaimed funds.

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


Sec.  384.1  General.

    (a) Scope. This part 384 establishes rates and terms of royalty 
payments for

[[Page 5468]]

the making of Ephemeral Recordings by a Business Establishment Service, 
as defined in Sec.  384.2(a), in accordance with the provisions of 17 
U.S.C. 112(e), during the period 2009-2013 (the ``License Period'').
    (b) Legal compliance. Licensees relying upon the statutory licenses 
set forth in 17 U.S.C. 112 shall comply with the requirements of that 
section, the rates and terms of this part and any other applicable 
regulations.
    (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 services 
shall apply in lieu of the rates and terms of this part to the making 
of Ephemeral Recordings within the scope of such agreements.


Sec.  384.2  Definitions.

    For purposes of this part, the following definitions shall apply:
    Business Establishment Service means a service making transmissions 
of sound recordings under the limitation on exclusive rights specified 
by 17 U.S.C. 114(d)(1)(C)(iv).
    Collective is the collection and distribution organization that is 
designated by the Copyright Royalty Judges. For the License Period, the 
Collective is SoundExchange, Inc.
    Copyright Owner is a sound recording copyright owner who is 
entitled to receive royalty payments made under this part pursuant to 
the statutory license under 17 U.S.C. 112(e).
    Ephemeral Recording is a phonorecord created for the purpose of 
facilitating a transmission of a public performance of a sound 
recording under the limitations on exclusive rights specified by 17 
U.S.C. 114(d)(1)(C)(iv), and subject to the limitations specified in 17 
U.S.C. 112(e).
    Licensee is a Business Establishment Service that has obtained a 
compulsory license under 17 U.S.C. 112(e) and the implementing 
regulations therefor to make Ephemeral Recordings.
    Performers means the independent administrators identified in 17 
U.S.C. 114(g)(2)(B) and (C) and the parties identified in 17 U.S.C. 
114(g)(2)(D).
    Qualified Auditor is a certified public accountant.


Sec.  384.3  Royalty fees for Ephemeral Recordings.

    (a) Basic royalty rate. For the making of any number of Ephemeral 
Recordings in the operation of a service pursuant to the limitation on 
exclusive rights specified by 17 U.S.C. 114(d)(1)(C)(iv), a Licensee 
shall pay 10% of such Licensee's ``Gross Proceeds'' derived from the 
use in such service of musical programs that are attributable to 
copyrighted recordings. ``Gross Proceeds'' as used in this section 
means all fees and payments, including those made in kind, received 
from any source before, during or after the License Period that are 
derived from the use of copyrighted sound recordings during the License 
Period pursuant to 17 U.S.C. 112(e) for the sole purpose of 
facilitating a transmission to the public of a performance of a sound 
recording under the limitation on exclusive rights specified in 17 
U.S.C. 114(d)(1)(C)(iv). The attribution of Gross Proceeds to 
copyrighted recordings may be made on the basis of:
    (1) For classical programs, the proportion that the playing time of 
copyrighted classical recordings bears to the total playing time of all 
classical recordings in the program, and
    (2) For all other programs, the proportion that the number of 
copyrighted recordings bears to the total number of all recordings in 
the program.
    (b) Minimum fee. Each Licensee shall pay a minimum fee of $10,000 
for each calendar year in which it makes Ephemeral Recordings for use 
to facilitate transmissions under the limitation on exclusive rights 
specified by 17 U.S.C. 114(d)(1)(C)(iv), whether or not it does so for 
all or any part of the year. These minimum fees shall be nonrefundable, 
but shall be fully creditable to royalty payments due under paragraph 
(a) of this section for the same calendar year (but not any subsequent 
calendar year).
    (c) Other royalty rates and terms. This part 384 does not apply to 
persons or entities other than Licensees, or to Licensees to the extent 
that they make other types of ephemeral recordings beyond those set 
forth in paragraph (a) of this section. For ephemeral recordings other 
than those governed by paragraph (a) of this section, persons making 
such ephemeral recordings must pay royalties, to the extent (if at all) 
applicable, under 17 U.S.C. 112(e) or as prescribed by other law, 
regulation or agreement.


Sec.  384.4  Terms for making payment of royalty fees and statements of 
account.

    (a) Payment to Collective. A Licensee shall make the royalty 
payments due under Sec.  384.3 to the Collective.
    (b) Designation of the Collective. (1) Until such time as a new 
designation is made, SoundExchange, Inc., is designated as the 
Collective to receive statements of account and royalty payments from 
Licensees due under Sec.  384.3 and to distribute such royalty payments 
to each Copyright Owner, or their designated agents, entitled to 
receive royalties under 17 U.S.C. 112(e).
    (2) If SoundExchange, Inc. should dissolve or cease to be governed 
by a board consisting of equal numbers of representatives of Copyright 
Owners and Performers, then it shall be replaced by a successor 
Collective upon the fulfillment of the requirements set forth in 
paragraph (b)(2)(i) of this section.
    (i) By a majority vote of the nine Copyright Owner representatives 
and the nine Performer representatives on the SoundExchange board as of 
the last day preceding the condition precedent in paragraph (b)(2) of 
this section, such representatives shall file a petition with the 
Copyright Royalty Judges designating a successor to collect and 
distribute royalty payments to Copyright Owners entitled to receive 
royalties under 17 U.S.C. 112(e) that have themselves authorized such 
Collective.
    (ii) The Copyright Royalty Judges shall publish in the Federal 
Register within 30 days of receipt of a petition filed under paragraph 
(b)(2)(i) of this section an order designating the Collective named in 
such petition.
    (c) Monthly payments. A Licensee shall make any payments due under 
Sec.  384.3(a) by the 45th day after the end of each month for that 
month, except that if the Copyright Royalty Judges issue their final 
determination adopting these rates and terms after the commencement of 
the License Period, then payments due under Sec.  384.3(a) for the 
period from the beginning of the License Period through the last day of 
the month in which the Copyright Royalty Judges issue their final 
determination adopting these rates and terms shall be due 45 days after 
the end of such period. All monthly payments shall be rounded to the 
nearest cent.
    (d) Minimum payments. A Licensee shall make any payment due under 
Sec.  384.3(b) by January 31 of the applicable calendar year, except 
that:
    (1) If the Copyright Royalty Judges issue their final determination 
adopting these rates and terms after the commencement of the License 
Period, then payment due under Sec.  384.3(b) for 2009 shall be due 45 
days after the last day of the month in which these rates and terms are 
adopted by the Copyright Royalty Judges and published in the Federal 
Register; and
    (2) Payment for a Licensee that has not previously made Ephemeral 
Recordings pursuant to the license under 17 U.S.C. 112(e) shall be due 
by the 45th day after the end of the month in which the Licensee 
commences to do so.

[[Page 5469]]

    (e) Late payments. A Licensee shall pay a late fee of 0.75% per 
month, or the highest lawful rate, whichever is lower, for any payment 
received by the Collective after the due date. Late fees shall accrue 
from the due date until payment is received by the Collective.
    (f) Statements of account. For any part of the period beginning on 
the date the Copyright Royalty Judges issue their final determination 
adopting these rates and terms and ending on December 31, 2013, during 
which a Licensee operates a Business Establishment Service, by 45 days 
after the end of each month during the period, the Licensee shall 
deliver to the Collective a statement of account containing the 
information set forth in this paragraph (f) on a form prepared, and 
made available to Licensees, by the Collective. If a payment is owed 
for such month, the statement of account shall accompany the payment. A 
statement of account shall contain only the following information:
    (1) Such information as is necessary to calculate the accompanying 
royalty payment, or if no payment is owed for the month, to calculate 
any portion of the minimum fee recouped during the month;
    (2) The name, address, business title, telephone number, facsimile 
number, electronic mail address and other contact information of the 
individual or individuals to be contacted for information or questions 
concerning the content of the statement of account;
    (3) The handwritten signature of:
    (i) The owner of the Licensee or a duly authorized agent of the 
owner, if the Licensee is not a partnership or a corporation;
    (ii) A partner or delegee, if the Licensee is a partnership; or
    (iii) An officer of the corporation, if the Licensee is a 
corporation;
    (4) The printed or typewritten name of the person signing the 
statement of account;
    (5) The date of signature;
    (6) If the Licensee is a partnership or a corporation, the title or 
official position held in the partnership or corporation by the person 
signing the statement of account;
    (7) A certification of the capacity of the person signing; and
    (8) A statement to the following effect:

    I, the undersigned owner or agent of the Licensee, or officer or 
partner, if the Licensee is a corporation or partnership, have 
examined this statement of account and hereby state that it is true, 
accurate and complete to my knowledge after reasonable due 
diligence.

    (g) Distribution of payments. The Collective shall distribute 
royalty payments directly to Copyright Owners; Provided that the 
Collective shall only be responsible for making distributions to those 
Copyright Owners who provide the Collective with such information as is 
necessary to identify and pay the correct recipient of such payments. 
The Collective shall distribute royalty payments on a basis that values 
all Ephemeral Recordings by a Licensee equally based upon the 
information provided by the Licensee pursuant to the regulations 
governing reports of use of sound recordings by Licensees; Provided, 
however, that Copyright Owners that authorize the Collective may agree 
with the Collective to allocate their shares of the royalty payments 
made by any Licensee among themselves on an alternative basis. 
Copyright Owners entitled to receive payments may agree with the 
Collective upon payment protocols to be used by the Collective that 
provide for alternative arrangements for the payment of royalties.
    (h) Permitted deductions. The Collective may deduct from the 
payments made by Licensees under Sec.  384.3, prior to the distribution 
of such payments to any person or entity entitled thereto, all incurred 
costs permitted to be deducted under 17 U.S.C. 114(g)(3); Provided, 
however, that any party entitled to receive royalty payments under 17 
U.S.C. 112(e) may agree to permit the Collective to make any other 
deductions.
    (i) Retention of records. Books and records of a Licensee and of 
the Collective relating to the payment, collection, and distribution of 
royalty payments shall be kept for a period of not less than 3 years.


Sec.  384.5  Confidential Information.

    (a) Definition. For purposes of this part, ``Confidential 
Information'' shall include the statements of account, any information 
contained therein, including the amount of royalty payments, and any 
information pertaining to the statements of account reasonably 
designated as confidential by the Licensee submitting the statement.
    (b) Exclusion. Confidential Information shall not include documents 
or information that at the time of delivery to the Collective are 
public knowledge. The Collective shall have the burden of proving that 
the disclosed information was public knowledge.
    (c) Use of Confidential Information. In no event shall the 
Collective or any other person or entity authorized to have access to 
Confidential Information pursuant to paragraph (d) of this section use 
any Confidential Information for any purpose other than royalty 
collection and distribution and activities directly related thereto.
    (d) Disclosure of Confidential Information. Access to Confidential 
Information shall be limited to:
    (1) Those employees, agents, attorneys, consultants and independent 
contractors of the Collective, subject to an appropriate 
confidentiality agreement, who are engaged in the collection and 
distribution of royalty payments hereunder and activities related 
thereto, who are not also employees or officers of a Copyright Owner or 
Performer, and who, for the purpose of performing such duties during 
the ordinary course of their work, require access to the records;
    (2) Board members of the Collective, and members of Collective 
committees whose primary functions are directly related to royalty 
collection and distribution, subject to an appropriate confidentiality 
agreement and for the sole purpose of performing their duties as board 
or committee members of the Collective, as applicable, provided that 
the sole confidential information that may be shared pursuant to this 
paragraph (d)(2) is confidential information contained in monthly 
statements of accounts provided pursuant to Sec.  384.4(f) that 
accompany royalty payments;
    (3) An independent and Qualified Auditor, subject to an appropriate 
confidentiality agreement, who is authorized to act on behalf of the 
Collective with respect to the verification of a Licensee's royalty 
payments pursuant to Sec.  384.6 or on behalf of a Copyright Owner with 
respect to the verification of royalty distributions pursuant to Sec.  
384.7;
    (4) Copyright owners whose works have been used under the statutory 
license set forth in 17 U.S.C. 112(e) by the Licensee whose 
Confidential Information is being supplied, or agents thereof, subject 
to an appropriate confidentiality agreement, provided that the sole 
confidential information that may be shared pursuant to paragraph 
(d)(4) of this section are monthly statements of account provided 
pursuant to Sec.  384.4(f) that accompany royalty payments;
    (5) In connection with future proceedings under 17 U.S.C. 112(e) 
before the Copyright Royalty Judges, and under an appropriate 
protective order, attorneys, consultants and other authorized agents of 
the parties to the proceedings or the courts; and
    (6) In connection with bona fide royalty disputes or claims that 
are the subject of the procedures under Sec.  384.6 or Sec.  384.7, and 
under an appropriate confidentiality agreement or protective

[[Page 5470]]

order, the specific parties to such disputes or claims, their 
attorneys, consultants or other authorized agents, and/or arbitration 
panels or the courts to which disputes or claims may be submitted.
    (e) Safeguarding of Confidential Information. The Collective and 
any person or entity identified in paragraph (d) of this section shall 
implement procedures to safeguard all Confidential Information using a 
reasonable standard of care, but no less than the same degree of 
security used to protect Confidential Information or similarly 
sensitive information belonging to such Collective, person, or entity.


Sec.  384.6  Verification of royalty payments.

    (a) General. This section prescribes procedures by which the 
Collective may verify the royalty payments made by a Licensee.
    (b) Frequency of verification. The Collective may conduct a single 
audit of a Licensee, upon reasonable notice and during reasonable 
business hours, during any given calendar year, for any or all of the 
prior 3 calendar years, but no calendar year shall be subject to audit 
more than once.
    (c) Notice of intent to audit. The Collective must file with the 
Copyright Royalty Judges a notice of intent to audit a particular 
Licensee, which shall, within 30 days of the filing of the notice, 
publish in the Federal Register a notice announcing such filing. The 
notification of intent to audit shall be served at the same time on the 
Licensee to be audited. Any such audit shall be conducted by an 
independent and Qualified Auditor identified in the notice, and shall 
be binding on all parties.
    (d) Acquisition and retention of records. The Licensee shall use 
commercially reasonable efforts to obtain or to provide access to any 
relevant books and records maintained by third parties for the purpose 
of the audit and retain such records for a period of not less than 3 
years. The Collective shall retain the report of the verification for a 
period of not less than 3 years.
    (e) Acceptable verification procedure. An audit, including 
underlying paperwork, which was performed in the ordinary course of 
business according to generally accepted auditing standards by an 
independent and Qualified Auditor, shall serve as an acceptable 
verification procedure for all parties with respect to the information 
that is within the scope of the audit.
    (f) Consultation. Before rendering a written report to the 
Collective, except where the auditor has a reasonable basis to suspect 
fraud and disclosure would, in the reasonable opinion of the auditor, 
prejudice the investigation of such suspected fraud, the auditor shall 
review the tentative written findings of the audit with the appropriate 
agent or employee of the Licensee being audited in order to remedy any 
factual errors and clarify any issues relating to the audit; Provided 
that the appropriate agent or employee of the Licensee reasonably 
cooperates with the auditor to remedy promptly any factual errors or 
clarify any issues raised by the audit.
    (g) Costs of the verification procedure. The Collective shall pay 
the cost of the verification procedure, unless it is finally determined 
that there was an underpayment of 10% or more, in which case the 
Licensee shall, in addition to paying the amount of any underpayment, 
bear the reasonable costs of the verification procedure.


Sec.  384.7  Verification of royalty distributions.

    (a) General. This section prescribes procedures by which any 
Copyright Owner may verify the royalty distributions made by the 
Collective; Provided, however, that nothing contained in this section 
shall apply to situations where a Copyright Owner and the Collective 
have agreed as to proper verification methods.
    (b) Frequency of verification. A Copyright Owner may conduct a 
single audit of the Collective upon reasonable notice and during 
reasonable business hours, during any given calendar year, for any or 
all of the prior 3 calendar years, but no calendar year shall be 
subject to audit more than once.
    (c) Notice of intent to audit. A Copyright Owner must file with the 
Copyright Royalty Judges a notice of intent to audit the Collective, 
which shall, within 30 days of the filing of the notice, publish in the 
Federal Register a notice announcing such filing. The notification of 
intent to audit shall be served at the same time on the Collective. Any 
such audit shall be conducted by an independent and Qualified Auditor 
identified in the notice, and shall be binding on all Copyright Owners.
    (d) Acquisition and retention of records. The Collective shall use 
commercially reasonable efforts to obtain or to provide access to any 
relevant books and records maintained by third parties for the purpose 
of the audit and retain such records for a period of not less than 3 
years. The Copyright Owner requesting the verification procedure shall 
retain the report of the verification for a period of not less than 3 
years.
    (e) Acceptable verification procedure. An audit, including 
underlying paperwork, which was performed in the ordinary course of 
business according to generally accepted auditing standards by an 
independent and Qualified Auditor, shall serve as an acceptable 
verification procedure for all parties with respect to the information 
that is within the scope of the audit.
    (f) Consultation. Before rendering a written report to a Copyright 
Owner, except where the auditor has a reasonable basis to suspect fraud 
and disclosure would, in the reasonable opinion of the auditor, 
prejudice the investigation of such suspected fraud, the auditor shall 
review the tentative written findings of the audit with the appropriate 
agent or employee of the Collective in order to remedy any factual 
errors and clarify any issues relating to the audit; Provided that the 
appropriate agent or employee of the Collective reasonably cooperates 
with the auditor to remedy promptly any factual errors or clarify any 
issues raised by the audit.
    (g) Costs of the verification procedure. The Copyright Owner 
requesting the verification procedure shall pay the cost of the 
procedure, unless it is finally determined that there was an 
underpayment of 10% or more, in which case the Collective shall, in 
addition to paying the amount of any underpayment, bear the reasonable 
costs of the verification procedure.


Sec.  384.8  Unclaimed funds.

    If a Collective is unable to identify or locate a Copyright Owner 
who is entitled to receive a royalty payment under this part, the 
Collective shall retain the required payment in a segregated trust 
account for a period of 3 years from the date of payment. No claim to 
such payment shall be valid after the expiration of the 3-year period. 
After the expiration of this period, the Collective may apply the 
unclaimed funds to offset any costs deductible under 17 U.S.C. 
114(g)(3). The foregoing shall apply notwithstanding the common law or 
statutes of any State.

    Dated: January 24, 2008.
James Scott Sledge,
Chief Copyright Royalty Judge.
[FR Doc. E8-1680 Filed 1-29-08; 8:45 am]
BILLING CODE 1410-72-P