Federal Register, Volume 73 Issue 217 (Friday, November 7, 2008)

[Federal Register Volume 73, Number 217 (Friday, November 7, 2008)]
[Rules and Regulations]
[Pages 66173-66182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26666]

[[Page 66173]]

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LIBRARY OF CONGRESS

37 CFR Part 201 and 255

[Docket No. RM 2000-7]

Compulsory License for Making and Distributing Phonorecords,
Including Digital Phonorecord Deliveries

AGENCY: Copyright Office, Library of Congress.

ACTION: Interim rule and request for comments.

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SUMMARY: The Copyright Office is announcing an interim regulation to
clarify the scope and application of the Section 115 compulsory license
to make and distribute phonorecords of a musical work by means of
digital phonorecord deliveries. The Office seeks comments on the
interim regulation.

EFFECTIVE DATE: December 8, 2008. Comments must be received in the
Office of the General Counsel of the Copyright Office no later than
January 6, 2009.

ADDRESSES: If hand delivered by a private party, an original and five
copies of a comment or reply comment should be brought to the Library
of Congress, U.S. Copyright Office, Room 401, 101 Independence Avenue,
SE., Washington, DC 20559, between 8:30 a.m. and 5 p.m. The envelope
should be addressed as follows: Office of the General Counsel, U.S.
Copyright Office. If delivered by a commercial courier, an original and
five copies of a comment or reply comment must be delivered to the
Congressional Courier Acceptance Site (``CCAS'') located at 2nd and D
Streets, NE., Washington, DC between 8:30 a.m. and 4 p.m. The envelope
should be addressed as follows: Office of the General Counsel, U.S.
Copyright Office, LM 403, James Madison Building, 101 Independence
Avenue, SE., Washington, DC 20559. Please note that CCAS will not
accept delivery by means of overnight delivery services such as Federal
Express, United Parcel Service or DHL. If sent by mail (including
overnight delivery using U.S. Postal Service Express Mail), an original
and five copies of a comment or reply comment should be addressed to
U.S. Copyright Office, Copyright GC/I&R, P.O. Box 70400, Washington, DC
20024.

FOR FURTHER INFORMATION CONTACT: Tanya M. Sandros, General Counsel, or
Stephen Ruwe, Attorney Advisor, Copyright GC/I&R, P.O. Box 70400,
Washington, DC 20024. Telephone: (202) 707-8380. Telefax: (202) 707-
8366.

SUPPLEMENTARY INFORMATION:

Background

On July 16, the Copyright Office published a notice of proposed
rulemaking (the ``NPRM'') to amend its regulations to clarify the scope
and application of the Section 115 compulsory license to make and
distribute phonorecords of a musical work by means of digital
phonorecord deliveries (``DPDs''). 73 FR 40802. Specifically, the
notice proposed to amend the definition of ``digital phonorecord
delivery'' to clarify that a digital phonorecord delivery under the
compulsory license provided under 17 U.S.C. 115 includes the following:
permanent digital downloads of phonorecords; limited downloads, which
use technology that causes the downloaded file to be available for
listening only either during a limited time (e.g., a time certain or a
time tied to ongoing subscription payments) or for a limited number of
performances; and all buffer copies delivered to a transmission
recipient. The NPRM also put forward that the Section 115 license
included coverage for all reproductions made to facilitate the making
and distributing of DPDs.
In the course of its analysis, the Office categorized a number of
different types of reproductions that can be made for the purpose of
making DPDs: Server-end Complete Copies, Recipient-end Complete Copies,
Server-end Buffer Copies, and Recipient-end Buffer Copies.\1\ As
described in the NPRM, a Server-end Complete Copy is a copy of a sound
recording of an entire musical work which resides on the server of a
digital music service and serves as the source of the transmission that
results in a DPD. A Recipient-end Complete Copy is a copy of a sound
recording of an entire musical work which is made on the recipient's
computer or device during the course of the transmission. A Server-end
Buffer Copy is a copy of a portion of a sound recording of a musical
work (which, along with a number of other buffer copies, typically will
cumulatively constitute a recording of the entire musical work) that is
made on the transmitting entity's server and typically exists for a
short period of time, sometimes a few seconds or less. A Recipient-end
Buffer Copy is a copy of a portion of a sound recording of a musical
work (which, along with a number of other buffer copies, typically will
cumulatively constitute a recording of the entire musical work) that is
made on the recipient's computer or device and typically exists for a
short period of time, sometimes a few seconds or less.
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\1\ We call these reproductions ``copies'' not in the technical
sense as defined in 17 U.S.C. 101, but in the more general
dictionary sense in which the term ``copies'' is understood. We
recognize that these reproductions are of sounds other than those
accompanying a motion picture or other audio visual work, which when
fixed in material objects from which sounds may be perceived would
properly be categorized as ``phonorecords.'' Additionally, we
acknowledge that parties disagree on the copyright implications of
the reproductions, an analysis of which is contained herein.
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In the NPRM, the Office proposed that a DPD would exist whenever a
transmission includes any of the following: a Recipient-end Complete
Copy and/or a Recipient-end Buffer Copy. The Office tentatively
proposed that both of these kinds of copies satisfied the statutory
requirements of being ``phonorecords'' that are ``specifically
identifiable.'' The Office indicated that Server-end Copies did not
satisfy the requirements for a DPD because they are not ``delivered.''
The Office proposed to interpret the compulsory license as
including a license to make Server-end copies as well as all other
intermediate copies used to facilitate a digital transmission that
results in the making and distribution of a DPD, even though those
copies may not themselves constitute DPDs. Thus, a Server-end copy that
is the source of a transmission that results in a DPD, such as a
download, will be included within the scope of the compulsory license,
although it is not itself a DPD for which payment would be required. On
the other hand, a Server-end copy that is the source of a transmission
of a performance that does not result in the making and distribution of
a DPD would not fall within the scope of the compulsory license.
With respect to limited downloads, the Office proposed the
following conclusion: ``While policy reasons might exist for
distinguishing such a limited download from a permanent reproduction,
we can find no basis in the statute for considering a limited download
to be something other than a phonorecord. Moreover, the fact that a
limited download is a phonorecord does not in any way prevent the
Copyright Royalty Judges from valuing it differently and setting a
lower rate.'' 73 FR at 40808. Accordingly, the Office tentatively
concluded that limited downloads, like other Recipient-end Complete
Copies, satisfy the requirements for DPDs.
In response to requests by some interested parties and in light of
the intervening decision of the United States Court of Appeals for the
Second Circuit in The Cartoon Network LP v.

[[Page 66174]]

CSC Holdings, Inc., 536 F.3d 121 (2d Cir. Aug. 4, 2008), the Office
extended the comment period and, on September 19, 2008, conducted a
hearing. Having considered the comments and the testimony at the
hearing, the Register of Copyrights now issues this interim regulation
and requests comments.

Summary of Interim Regulation

In the NPRM, the Office proposed to define a ``digital phonorecord
delivery'' as including all buffer copies made in the course of
streaming, which would have meant that all music streaming activity
would be included within the scope of the compulsory license.\2\
However, in light of the recent comments and testimony, and the
uncertainty created by the Second Circuit's Cartoon Network opinion
concerning the fixation of buffer copies, the interim regulation
announced today is more modest in scope than the proposed regulation.
The Office is not currently prepared to issue a regulation that
definitively addresses whether such copies are within the scope of the
compulsory license, except to the extent the transmission also results
in the making of copies which more certainly qualify as DPDs. As such,
the interim regulation takes no position on whether or when a buffer
copy independently qualifies as a DPD, or whether and when it is
necessary to obtain a license to cover the reproduction or distribution
of a musical work in order to engage in activities such as streaming.
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\2\ The Office noted that the fact that the compulsory license
is available for such activity should not be construed as meaning
that a license is necessary for all such activity. Rather, the
license would simply be available for online music services who do
not wish to expose themselves to potential liability in cases where
a musical copyright owner asserts that the making of, e.g., buffer
copies constitutes an infringement of the reproduction right.
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The interim regulation clarifies that (1) whenever there is a
transmission that results in a DPD, all reproductions made for the
purpose of making the DPD are also included as part of the DPD, and (2)
limited downloads qualify as DPDs. The interim regulation does not
attempt to define the threshold at which a DPD occurs. That remains
contested, as discussed below.

Authority To Issue Regulations

The Office requested comments on whether the issues raised in the
NPRM could be addressed in an administrative rulemaking. In response,
the Digital Media Association (``DiMA'') as well as the Business Music
Industry; Verizon Communications; CTIA--The Wireless Association
(``CTIA''); the National Association of Broadcasters (``NAB''); Google/
YouTube; and Electronic Frontier Foundation, Public Knowledge, Center
for Democracy and Technology, Consumers Union, Consumer Federation of
America, U.S. PIRG, and the Computer & Communications Industry
Association (collectively referred to as ``Public Interest
Commenters'') raised questions and concerns regarding the Office's
authority to issue a rule that would have a wide-reaching impact on
activities outside the scope of Section 115.
For example, Verizon, CTIA, and NAB argued that the proposed rule
is a substantive rule of copyright law and therefore is not a matter
relating to administration of the functions and duties of the Copyright
Office. They asserted that the proposed rule would both reinterpret
substantive principles of copyright law and fundamentally reset the
balance between copyright owners and users. They maintained that the
proposed rule is distinguishable from any judicially approved exercise
of Office rulemaking authority under Sections 701 or 702. Further, they
noted that authority under Sections 701 and 702 is distinguishable from
the authority granted to the Register to make determinations on
``material questions of substantive law'' under Chapter 8, which is
accompanied by specific procedural limitations that indisputably are
not present in association with the proposed rule. In addition, DiMA
asserted that the Office's authority to issue a rule at this time, in
the midst of the Copyright Royalty Board (the ``CRB'') ratemaking
proceeding, is foreclosed and that to do so would impermissively
interject the Office into the CRB proceeding. DiMA maintains that this
result would contravene specific provisions of the Copyright Act that
narrowly circumscribe the Office's authority to be involved in a CRB
rate-setting proceeding.
On the other hand, SESAC noted the Office's specific and limited
scope of authority under Section 115, and asserted that the Office
should not go beyond its statutory authority and opine on the relative
values of separate and independent rights implicated in a given
transmission. Similarly, the American Society of Composers, Authors and
Publishers and Broadcast Music, Inc. (``ASCAP/BMI'') acknowledged the
Office's statutory mandate to address administration of the Section 115
license. However, they specifically noted that any statements by the
Office affecting the definition or applicability of the performance
right are beyond the limited authority granted to the Office to
administer Section 115. Other comments, such as the one filed by the
Recording Industry Association of America (``RIAA''), and a joint
filing by National Music Publishers Association, including its wholly
owned licensing subsidiary, The Harry Fox Agency, Inc.; the
Songwriters' Guild of America; the Nashville Songwriters Association
International; and the Association of Independent Music Publishers,
(Collectively ``Copyright Owners'') expressed the view that the
Register does possess the authority to issue such rules.\3\
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\3\ Most of the commenters who objected to the Register's
authority appear to have done so out of fear that the Register would
address issues such as whether buffer copies constitute
phonorecords--issues which, as set forth below, the Register has
declined to resolve in this proceeding. Many of those commenters
expressed concern that in order to address those issues, the
rulemaking would have consequences for activities that have no
relationship to the section 115 compulsory license. However, the
more modest regulation announced today is more narrowly focused and
would appear to have little if any applicability outside the scope
of the compulsory license.
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Section 702 authorizes the Register of Copyrights ``to establish
regulations not inconsistent with law for the administration of the
functions and duties made the responsibility of the Register under this
title.'' Among the functions and duties of the Register is the
responsibility to issue regulations prescribing how a licensee shall
file a notice of intention to use the statutory license, 17 U.S.C.
115(b)(1), and regulations governing the submission of monthly and
annual statements of account. 17 U.S.C. 115(c)(4). Pursuant to this
authority, the Register has issued regulations that, inter alia, govern
the content of the notice and the statements of account associated with
the use of the Section 115 license. See 37 CFR 201.18 and 201.19. These
regulations include definitions of statutory terms, which clarify the
application of the terms in the context of the statutory license thus
enabling a licensee to understand how to accurately report the making
and distribution of a phonorecord under Section 115.
Courts have recognized the Register's authority to promulgate
regulations interpreting the statute under the authority granted in
Section 702 and specific provisions in the law, such as the statutory
licenses. In Cablevision Systems Development Co. v. Motion Picture
Association of America, Inc. (``Cablevision'') the court acknowledged
Section 702 as the source of general authority for the Office to
conduct rulemaking proceedings to carry out specific responsibilities.
Cablevision 836 F.2d 599 (D.C. Cir. 1988), cert. denied, 487 U.S. 1235
(1988). In Cablevision, the Register issued

[[Page 66175]]

regulations under Section 111(d)(1) that directed cable systems to
deposit royalty fees with the Copyright Office. Those regulations
included an interpretation of the statutory term, ``gross receipts,''
which was central to the calculation of royalty fees for the public
performance of secondary transmissions of broadcast signals under the
statutory license. Opponents of the regulation argued that the
authority of the Register was limited to the ``ministerial task of
designing forms.'' The court, however, rejected this narrow approach,
noting that authority to design forms has a substantial policy
component and that the Copyright Office ``certainly has greater
expertise in such matters than the federal courts.'' Thus, under the
court's reasoning, the issuance of a rule interpreting a statutory term
for the purpose of administering the license was not a violation of the
rulemaking authority granted to the Register, provided that the
interpretation was reasonable.
Other circuits have reached the same conclusion. In Satellite
Broadcasting and Communications Association of America v. Oman
(``SBCA''), the court found that ``the Copyright Office is a federal
agency with authority to promulgate rules concerning the meaning and
application of Sec. 111.'' SBCA 17 F.3d 344, 347 (11th Cir. 1994). In
reconsidering its earlier determination that a satellite carrier could
be considered a cable system making it eligible to utilize the Section
111 statutory license, the court revised its determination in light of
a final rule issued by the Copyright Office which concluded that a
satellite carrier was not a cable system under Section 111. The court
acknowledged that the interpretation of the agency was due deference
unless arbitrary, capricious, or manifestly contrary to the provisions
of the Copyright Act. Id.
The current rulemaking is consistent with the Office's practice of
promulgating regulations to construe statutory terms that are critical
to the administration of a statutory license administered by the
Office. The Office is relying on both its general rulemaking authority
under Section 702 and the specific grant of authority found in Section
115(b)(1) and (c)(4) to issue rules governing notices of intention and
statements of account, in a manner parallel to what happened when it
adopted a definition of ``gross receipts'' and construed the term
``cable system,'' with the only difference being that the Office
considered these terms under its power to promulgate rules under a
different statutory license. See 17 U.S.C 115(b)(1); (c)(4) and Sec.
111.
Opponents of the proposed regulation argue that notwithstanding
these earlier cases, the authority of the Register to issue the
proposed rule is foreclosed under Gonzales v. Oregon, 546 U.S. 243
(2006). They maintain that Title 17 provides the Register no general
rulemaking authority, and consequently, the Office cannot issue the
proposed rule. The parties, however, focus only on Section 702 and fail
to recognize the express authority provided to the Register in Section
115. Moreover, Gonzales does not undermine the earlier rulings in
Cablevision or SBCA. Gonzales recognizes, as do Cablevision and SBCA,
that an agency's interpretation of a statute is due deference when the
statute is ambiguous and when Congress has delegated the authority to
the agency to promulgate rules carrying the force of law. Gonzales, 564
U.S. at 255 (citing Chevron U.S.S., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837 (1984) and United States v. Mead Corp., 533 U.S.
218, 226-227 (2001)). The facts in Gonzales, however, led to a finding
that the Attorney General lacked the authority to issue a regulation
about the scope of ``legitimate medical purpose'' under his authority
to adopt rules governing the registration of physicians. Specifically,
the court found that the Attorney General had no authority to issue a
rule that extended beyond registration practices to ``an interpretation
of the substantive federal law requirements (under 21 CAR Sec. 1306.04
(2005)) for a valid prescription.'' Id. at 261. The court also rejected
the position of the Attorney General that his authority to deregister
physicians provided the necessary authority for the rule. The court
rejected that approach because it would vest power in the Attorney
General to criminalize actions of registered physicians-an activity not
contemplated by the statute. Id. at 261, 262. Similarly, the court
found that the regulatory authority claimed by the Attorney General was
``inconsistent with the design of the statute'' because the statute
does not delegate rulemaking authority solely to the Attorney General.
In some instances, he must share that authority with or defer to the
Secretary of Health and Human Services. Id. at 265.
Unlike the disputed rule in Gonzales, the interim rule which is the
subject of today's notice has meaning only for the Section 115 license.
The interim rule is a clarification of the statutory definition of a
DPD to incorporate the Office's determination that the Section 115
license covers server copies and intermediate copies made to facilitate
the making and distribution of a DPD and that a limited download is a
DPD. The rule extends the traditional understanding of the scope of the
Section 115 license, that phonorecords made for the purpose of making
additional reproductions of the sound recording and the musical works
embodied therein are covered under the license, to the digital realm.
As the court in Cablevision noted, and as discussed previously, the
authority to issue regulations for the filing of statements of account
includes a ``substantial policy component.'' Thus, the Office issues
this rule under its authority to interpret statutory terms that are
central to its role in promulgating regulations to account for the
royalties owed for the making and distribution of phonorecords under
the statutory license. Without this clarification, no guidance would
exist regarding whether liability attached to these reproductions
relative to the statutory license. In addition, the rule makes clear
that DPDs includes digital phonorecords that may be limited either by
time or number of uses, an issue that was raised in the original
petition for a rulemaking but a conclusion that does not now appear to
be in dispute.
The Office also finds no basis for DiMA's assertion that the Office
is foreclosed from issuing a rule at this time, in the midst of the CRB
ratemaking proceeding. The statute does not constrain the Office from
issuing regulations for the purpose of administering a statutory
license when the Copyright Royalty Judges are also conducting a
concurrent rate setting proceeding for the same statutory license. Nor
is there any reason for the Office to delay the issuance of its interim
rule when, as here, the interim rule amends Copyright Office
regulations to incorporate concepts that seemingly are not in dispute
by the parties participating in this rulemaking proceeding. Moreover,
to the extent that the interim rule adds clarity to an issue upon which
the Register is competent to rule and may offer guidance to the
Copyright Royalty Judges, there is nothing improper about the exercise
of the Register's authority at this time. In any event, parties have an
opportunity to comment specifically on the interim rule within the
comment period, since this is an interim rule.
In its NPRM, the Office proposed a much broader regulation.
Consequently, the Office discusses herein the original proposal and the
reasons for adopting a more limited regulation.

[[Page 66176]]

Discussion

A. Digital Phonorecord Deliveries in General

As the Office stated in its NPRM, in considering whether the
reproductions made by a transmission service are digital phonorecord
deliveries and fit within the scope of the Section 115 license, the
starting point is the statutory definition of a DPD. 17 U.S.C. 115(d).
It defines a DPD, in relevant part, as:

each individual delivery of a phonorecord by digital
transmission of a sound recording which results in a specifically
identifiable reproduction by or for any transmission recipient of a
phonorecord of that sound recording, regardless of whether the
digital transmission is also a public performance of the sound
recording or any nondramatic musical work embodied therein. A
digital phonorecord delivery does not result from a real-time, non-
interactive subscription transmission of a sound recording where no
reproduction of the sound recording or the musical work embodied
therein is made from the inception of the transmission through to
its receipt by the transmission recipient in order to make the sound
recording audible.
17 U.S.C. 115(d). In order for a reproduction of a sound recording
to qualify as a DPD under the statutory criteria, the reproduction
must meet all the criteria specified in the definition: (1) it must
be delivered, (2) it must be a phonorecord, and (3) it must be
specifically identifiable.

(1) Delivery. While several parties disputed the second and third
criteria specified in the definition of a DPD, no parties put forward
arguments against the proposed finding that reproductions identified in
the NPRM as Recipient-end copies are ``delivered'' and therefore
satisfy the first requirement for being a DPD.\4\
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\4\ Several parties disputed the proposed finding that every
``delivery'' constitutes a ``distribution'' These arguments are
addressed in a later section regarding the threshold requirements
for use of the Section 115 license.
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(2) Phonorecord (Fixation). In considering whether the
reproductions made by a transmission service are phonorecords, the
Office's NPRM turned to the definition found in 17 U.S.C. 101. The
statute defines phonorecords as:

material objects in which sounds, other than those accompanying
a motion picture or other audiovisual work, are fixed by any method
now known or later developed, and from which the sounds can be
perceived, reproduced, or otherwise communicated, either directly or
with the aid of a machine or device. The term ``phonorecords''
includes the material object in which the sounds are first fixed.
17 U.S.C. 101. The question is whether each reproduction made during
the course of a digital transmission meets this definition and thus
satisfies the second prong of the statutory definition for a DPD.
The Office proposed that a buffer copy made in the course of a
service's transmission on either the Server-end or the Recipient-end
is sufficiently fixed to meet the definition of a phonorecord. This
proposal was strongly opposed by parties representing users of the
works.

Parties such as DiMA, Verizon, CTIA, NAB, Google/YouTube, Public
Interest Commenters, New Media Rights, and Cablevision disputed the
Office's conclusion that all buffer copies qualified as ``fixed''
phonorecords or copies. They uniformly cited to the Second Circuit's
decision in Cartoon Network, which reversed Twentieth Century Fox Film
Corp. v. Cablevision Sys. Corp., 478 F. Supp. 2d 607 (S.D.N.Y. 2007), a
decision cited in the NPRM. 73 FR at 40809. They argued that the
Cartoon Network decision undermines the legal analysis contained in the
NPRM.
On the other hand, RIAA disagreed with the Cartoon Network
decision, but found it unnecessary to debate the fixation issue. It
argued that some copies created by transmission services are persistent
enough that they would meet any definition of the term ``fixed,'' and
services that wish to obtain a Section 115 license as a ``safe harbor''
should have that option. Copyright Owners also argued that the Cartoon
Network decision is inapplicable to the transmission services in
question because the buffer copies made by streaming music services are
distinguishable from the ones considered in the Cartoon Network case.
Under the view of the Copyright Owners, buffer copies made by streaming
music services are more analogous to the RAM copies considered in cases
cited in the Copyright Office's DMCA Section 104 Report.
The Copyright Owners also concluded that the Cartoon Network
decision's analysis of the ``duration'' requirement is unsupported by
the Copyright Act or prior judicial interpretation. They argued that
the Cartoon Network court took a ``stopwatch'' approach by measuring
the duration of the subject buffer copies and then opined that they did
not last for a sufficient number of seconds. In response, the Copyright
Owners asserted that Section 101 does not require that a copy last for
any specified period of time. 17 U.S.C. 101. They argued that the
Cartoon Network approach suffers from a lack of standards-statutory or
otherwise-to guide this judge-made ``duration'' requirement. The
Copyright Owners instead endorsed the approach proposed in the NPRM,
which examines whether the copies in question exist for a sufficient
period of time to be capable of being ``perceived, reproduced or
otherwise communicated.'' 73 FR at 40808. They stated that such an
approach does not depend upon an arbitrary assessment. Moreover, it
adheres to the overarching consensus of other courts that have
considered this issue.
In the NPRM, the Office's tentative conclusions relating to the
status of buffer copies as phonorecords relied in part on the District
Court's decision in Twentieth Century Fox, which had concluded that
buffer copies made in a somewhat different context than the streaming
of music were infringing ``copies'' under the copyright law. 478 F.
Supp. 2d at 621-22. The court rejected arguments by the defendant that
the buffer copies did not qualify as ``copies'' because they were ``not
fixed'' and were ``otherwise de minimis.'' Id. at 621. In finding the
buffer copies were ``fixed'' the court reasoned,

The Copyright Act, however, provides that a work is ``fixed''
if it ``is sufficiently permanent or stable to permit it to be
perceived, reproduced, or otherwise communicated for a period of
more than transitory duration.'' Here, as discussed, the portions of
programming residing in buffer memory are used to make permanent
copies of entire programs on the Arroyo servers. Clearly, the buffer
copies are capable of being reproduced. Furthermore, the buffer
copies, in the aggregate, comprise the whole of plaintiffs'
programming.

Id. (citations omitted) (quoting 17 U.S.C. 101). The court relied
in part on the Copyright Office's DMCA Section 104 Report, noting,

Indeed, the United States Copyright Office, in its August 2001
report on the Digital Millennium Copyright Act (``DMCA Report''),
has indicated that buffer copies are ``copies'' within the meaning
of the Copyright Act. Specifically, the Copyright Office concluded
that temporary copies of a work in RAM are generally ``fixed'' and
thus constitute ``copies'' within the scope of the copyright owner's
right of reproduction, so long as they exist for a sufficient amount
of time to be capable of being copied, perceived or communicated.
(DMCA Report at xxii, 110-11).
Id. at 621-22.

The issue addressed in Twentieth Century Fox and in the DMCA
Section 104 Report was whether temporary buffer copies meet the
``fixation'' requirement of the copyright law.

[[Page 66177]]

Phonorecords (a necessary element of a DPD; see 17 U.S.C. 115(d)) are
defined as ``material objects in which sounds, other than those
accompanying a motion picture or other audiovisual work, are fixed by
any method now known or later developed, and from which the sounds can
be perceived, reproduced, or otherwise communicated, either directly or
with the aid of a machine or device.'' 17 U.S.C. 101 (emphasis added).
The statute defines ``fixed'' as follows:

A work is `fixed' in a tangible medium of expression when its
embodiment in a copy or phonorecord, by or under the authority of
the author, is sufficiently permanent or stable to permit it to be
perceived, reproduced, or otherwise communicated for a period of
more than transitory duration. A work consisting of sounds, images,
or both, that are being transmitted, is `fixed' for purposes of this
title if a fixation of the work is being made simultaneously with
its transmission.
17 U.S.C. 101.

In the DMCA Section 104 Report, the Office interpreted the ``more
than a transitory duration'' element of fixation as follows: ``The
dividing line, then, can be drawn between reproductions that exist for
a sufficient period of time to be capable of being `perceived,
reproduced, or otherwise communicated' and those that do not.'' DMCA
Section 104 Report at 111. As noted above, the Southern District of New
York had agreed with this analysis in Twentieth Century Fox. 478 F.
Supp. 2d at 621-22.
In the NPRM, the Office reviewed that analysis and observed, ``The
Office has no reason to believe that developments in either technology
or the law require us to revisit the above-stated conclusions. As such,
Server-end Buffer Copies and Recipient-end Buffer Copies appear to be
phonorecords and therefore satisfy the second requirement for being a
DPD.'' 73 FR at 40809. Nineteen days later, the United States Court of
Appeals for the Second Circuit reversed the district court's Twentieth
Century Fox decision. Cartoon Network, 536 F.3d at 130. Among other
things, the court took issue with the DMCA Section 104 Report's
analysis of buffer copies and fixation, stating, ``[a]ccording to the
Copyright Office, if the work is capable of being copied from that
medium for any amount of time, the answer to both questions is `yes.'
The problem with this interpretation is that it reads the `transitory
duration' language out of the statute.'' Id. at 129. The court
concluded that the buffer copies made by a cable television service in
the course of creating server copies ``are not `embodied' in the
buffers for a period of more than transitory duration, and are
therefore not `fixed' in the buffers.'' Id. at 130.
The Office does not consider the Second Circuit's opinion to be
definitive on the issue involved in this rulemaking. The court's
reasoning leaves at least something to be desired and offers no
guidance as to when a copy might be considered to be ``embodied'' for
``a period of more than transitory duration.'' Based on the Cartoon
Network opinion, it appears that the duration requirement necessitates
an embodiment for more than 1.2 seconds (the duration of the buffer
copies at issue in that case) but does not require a duration of more
than ``several minutes.'' Id. at 128, 131 (discussing MAI Sys. Corp. v.
Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993)). Indeed, it leaves
open the possibility that a buffer copy that exists for several seconds
might have sufficient duration to satisfy the fixation requirement. We
can glean no principle from the Second Circuit's opinion which offers
any guidance as to where the line is to be drawn.\5\
---------------------------------------------------------------------------

\5\ Although the factual record in this proceeding is
insufficient, it is quite possible that the buffer copies typically
made in streaming exist for a longer period of time--and perhaps a
considerably longer period of time--than the 1.2-second buffer
copies at issue in Cartoon Network. If so, that case might be
distinguishable on its facts.
---------------------------------------------------------------------------

While the Second Circuit's opinion criticizes the analysis in the
Office's DMCA Section 104 Report, the latter did attempt to provide a
guiding principle for determining when the duration requirement has
been met:

In establishing the dividing line between those reproductions
that are subject to the reproduction right and those that are not,
we believe that Congress intended the copyright owner's exclusive
right to extend to all reproductions from which economic value can
be derived. The economic value derived from a reproduction lies in
the ability to copy, perceive or communicate it. Unless a
reproduction manifests itself so fleetingly that it cannot be
copied, perceived or communicated, the making of that copy should
fall within the scope of the copyright owner's exclusive rights. The
dividing line, then, can be drawn between reproductions that exist
for a sufficient period of time to be capable of being `perceived,
reproduced, or otherwise communicated'' and those that do not.
DMCA Section 104 Report at 111.

For present purposes, we need not resolve whether the Second
Circuit's critique of the Office's analysis is compelling. It is
sufficient to note that the record in this rulemaking and the Cartoon
Network opinion create sufficient uncertainty to make it inadvisable to
engage in rulemaking activity based on the Office's analysis in the
DMCA Section 104 Report. Consequently, the interim rule does not
address whether streaming of music that involves the making of buffer
copies, but which makes no further copies, falls within the Section 115
compulsory license, or whether such buffer copies qualify as DPDs. It
seems likely that in at least some, and perhaps many cases, buffer
copies may constitute DPDs, but we do not reach any broad conclusions
on that point in light of the current state of the law and the factual
record before us.
As a practical matter, the marketplace may decide that issue. Most
licenses that purport to be made pursuant to Section 115 are not, in
fact, compulsory licenses. They are voluntary licenses between music
publishers and licensees who agree to payment of the royalties at the
rates that have been established for the actual compulsory license. To
the extent that music publishers and licensees are willing to use the
Section 115 model to license reproductions, including buffer copies,
that are made in the course of streaming, then as a practical matter
the marketplace may decide to treat buffer copies as DPDs, although not
necessarily as DPDs entitled to the same royalty as more permanent
copies.
While we leave open the question whether buffer copies may be DPDs
that fall within the Section 115 compulsory license, we note that
certain streaming services involve the making of cache copies. To the
extent that cache copies are placed on the recipient's hard drive and
may exist for some indefinite period of time beyond the entire
performance of the phonorecord, the Office understands that such copies
would appear to satisfy the fixation/reproduction requirement.
(3) Specifically identifiable. Section 115 defines ``digital
phonorecord delivery,'' in relevant part, as ``each individual delivery
of a phonorecord by digital transmission of a sound recording which
results in a specifically identifiable reproduction by or for any
transmission recipient of a phonorecord of that sound recording.'' 17
U.S.C. 115(d). With regard to interpretation of the phrase
``specifically identifiable reproduction by or for any transmission
recipient of a phonorecord of that sound recording,'' the Copyright
Owners concurred with the tentative proposal in the Copyright Office's
NPRM, which offered that the plain meaning of the statute indicates
that a reproduction may be either ``specifically identifiable'' by any
transmission recipient or

[[Page 66178]]

``specifically identifiable'' for any transmission recipient. In
endorsing the view in the NPRM's tentative proposal, they noted that
contrary to arguments based upon a comment appearing in legislative
history, Congress could easily have included a requirement that the
reproduction be specifically identifiable to the transmitting service,
but it did not.
However, several parties including, RIAA, Verizon, CTIA, and NAB
raised questions regarding the Office's proposed interpretation of the
phrase. These parties agreed with the Office's observation that the
phrase ``specifically identifiable'' is ``unique in copyright law,''
but they went on to cast doubt on the grammatical construction used by
the Office in arriving upon the tentatively proposed plain meaning.
Verizon and NAB maintained that the phrasing could not mean that the
phonorecord was ``specifically identifiable'' by the recipient,
offering phrases with analogous grammatical structure to illustrate
their point. For example, they pointed out that the phrase ``an
instantly recognizable painting by Picasso'' does not indicate that the
painting is ``instantly recognizable'' by Picasso. Similarly, they
noted that in the statutory phrase ``specifically identifiable
reproduction by or for any transmission recipient,'' the adjectival
clause ``specifically identifiable'' is not linked to the transmission
recipient. They therefore asserted that it is equally plausible to
construe the ``specifically identifiable'' phrase as referring to the
transmitting service.
RIAA also argued that the proposed interpretation is contrary to
the statute's legislative history. Verizon, CTIA, and NAB took a
similar position arguing that the tentatively proposed rule would be
inconsistent with the overall statute and that the phrase is ambiguous.
They pointed to Muniz v. Hofman, 422 U.S. 454, 468 (1975) and Adams
Fruit Co., Inc. v. Barrett, 494 U.S. 638, 642 (1990) for the principle
that where statutory language is susceptible to multiple constructions,
it should be construed by reference to the legislative intent and the
overall structure of the statutory provision. They went on to urge that
the Office should follow its own previous reasoning that, where two
interpretations of statutory language are both plausible: ``Turning to
the legislative history is appropriate where, as here, the precise
meaning is not apparent and a clear understanding of what Congress
meant is crucial to an accurate determination of how Congress intended
the digital performance right and the statutory scheme to operate.''
Final Rule, Public Performance of Sound Recordings: Definition of a
Service, 65 FR 77292, 77296.
Commenters' attempts to indicate that there is ambiguity in the
statute cited to the Senate and House Committee Reports on the Digital
Performance Right in Sound Recordings Act (the ``1995 House and Senate
Reports'') as evidence of the proposed ambiguity. Reliance on such
evidence is misplaced. As the Supreme Court has directed, extraneous
material such as legislative history ``are only admissible to solve
doubt and not to create it.'' Railroad Com. of Wisconsin v. Chicago, B.
& Q. R. Co., 257 U.S. 563, 589 (1922). As Verizon and NAB's comments
reveal, the phrase has precisely the same generally applicable meaning
as the phrase ``instantly recognizable'' as used in the phrase ``an
instantly recognizable painting by Picasso.''
Furthermore, even assuming we were persuaded by the arguments that
the phrase ``specifically identifiable'' is ambiguous and should be
read with reference to the legislative history, as is urged by Verizon,
CTIA and NAB, the legislative history does not serve to clarify any
supposed ambiguity in the meaning of the words ``specifically
identifiable'' but rather suggests a limit on whom the adjectival
clause ``specifically identifiable'' is to be applied. Construing the
phrase in the manner suggested would require the insertion of
additional language indicating that the adjectival clause
``specifically identifiable'' may only be applied ``to the transmission
service.'' The Office declines commenters' invitation to make such an
insertion. Instead, the Office's interim rule follows the principle of
statutory construction that one ``should not read words into a statute
that are not there.'' U.S. v. Watkins, 278 F.3d 961, 965 (9th Cir.
2002).
After considering the arguments raised by the parties, the
Copyright Office accepts the structure of the phrase ``specifically
identifiable reproduction by or for any transmission recipient of a
phonorecord of that sound recording'' as it is explained and advanced
by Verizon, CTIA, and NAB. Throughout the course of this proceeding
leading up to the Office's tentatively proposed rule, the parties and
the Office focused on two competing, yet flawed, interpretations. Under
the previously proposed interpretations, a reproduction could be on the
one hand ``specifically identifiable'' to the transmission service or
on the other hand ``specifically identifiable'' by any transmission
recipient or ``specifically identifiable'' for any transmission
recipient. However, in light of the comments submitted by Verizon,
CTIA, and NAB, the Office agrees that the sentence does not link the
adjectival clause ``specifically identifiable'' to the transmission
recipient. It also recognizes that nothing in the sentence links the
adjectival clause ``specifically identifiable'' to the transmission
service. In keeping with the insightful examples of similarly
constructed language provided by Verizon, CTIA, and NAB, the Office
concludes that ``specifically identifiable'' plainly, unambiguously and
without limitations means ``specifically identifiable'' to anyone or
anything, including the transmission service, the transmission
service's computer, the transmission recipient, or the transmission
recipient's computer.
While the Office takes no position as to whether each individual
delivery of a phonorecord by digital transmission results in a
specifically identifiable reproduction, there can be little question
that certain streaming services involve the making of legally
recognizable copies. To the extent that such copies may be identifiable
by any person or computer, including any identification as an essential
step in actually making the phonorecord perceptible to the recipient,
the Office understands that such copies would satisfy the requirement
of being ``specifically identifiable.''

B. Incidental DPDs

The Office recognizes the parties' views that certain reproductions
created by transmission services may be categorized as so-called
incidental DPDs. Section 115 requires that rates and terms shall
distinguish between general DPDs and incidental DPDs. However, the
statute does not offer a definition of incidental DPDs. Indeed, the
statute does not specifically refer to incidental DPDs; it simply
directs the Copyright Royalty Judges to set rates that ``distinguish
between (i) digital phonorecord deliveries where the reproduction or
distribution of a phonorecord is incidental to the transmission which
constitutes the digital phonorecord delivery, and (ii) digital
phonorecord deliveries in general.'' The lack of a specific definition
of incidental DPDs has created a great deal of confusion among those
parties with an interest in the Section 115 license. The Office notes
that the parties have seemed less interested in defining what
constitutes an incidental DPD and more concerned about receiving
clarification as to whether specific types of digital

[[Page 66179]]

transmissions services fall within the scope of the statutory license.
The parties urging the Office to interpret the meaning of
incidental DPD have not offered specific suggestions as to how the
Office should define the term. Rather they offered conclusions as to
which specific types of digital transmission services should be deemed
to create reproductions that fall inside or outside the definition of
incidental DPD. Support for these conclusions was made largely on
policy or economic grounds.
As indicated previously, the Office understands that an incidental
DPD is nothing more than a subset of DPDs. However, we can find little
reason to delineate the contours of that subset. Whether a DPD is
``incidental'' or ``general,'' it is included under the Section 115
license. The Office questions whether the concept of incidental DPDs as
set forth in the statute lends itself to further clarification in a
regulation of general application. The Office observes that the
legislative history of the Digital Performance in Sound Recordings Act
of 1995 indicates that Congress recognized the likelihood of several
different types of digital transmission systems. The Office also
recognizes Congress' indication that certain DPDs may be incidental to
the purpose of the transmission. S. Rep. No. 104-128 at 39.\6\ However,
the Office notes that, except for one discrete example of a type of
service that would result in an incidental DPD, neither the statute nor
the legislative history attempts to offer criteria for determining the
purpose of a transmission.
---------------------------------------------------------------------------

\6\ ``For example, if a transmission system was designed to
allow transmission recipients to hear sound recordings substantially
at the time of transmission, but the sound recording was transmitted
in a highspeed burst of data and stored in a computer memory for
prompt playback (such storage being technically the making of a
phonorecord), and the transmission recipient could not retain the
phonorecord for playback on subsequent occasions (or for any other
purpose), delivering the phonorecord to the transmission recipient
would be incidental to the transmission.'' S. Rep. No. 104-128 at
39.
---------------------------------------------------------------------------

The Office understands that neither the statute, the legislative
history, nor the proposals submitted by commenters clearly propose any
conclusive methods or criteria for determining the purpose of a
transmission. Moreover, the only consequence of a determination that a
digital phonorecord delivery is ``incidental'' is that a separate rate
must be set for an incidental phonorecord delivery (although, in any
event, it is inherent in the ratemaking provisions of Section 115 that
several different rates may be set for various kinds of digital
phonorecord deliveries). In setting rates for the activities specified
in Section 115, the Copyright Royalty Judges are to distinguish between
general and incidental DPDs, and they have the authority to set
different rates for different types of DPDs, depending on their
analysis of the economics of the service and the other circumstances
set forth in section 801(b)(1). The Office therefore proposes that any
determination regarding the purpose of a transmission, upon which the
determination of when a DPD is an incidental DPD appears to turn,
should be made in the context of a factual inquiry before the CRJs, if
such a determination proves to be relevant.\7\
---------------------------------------------------------------------------

\7\ The Office observes that nothing in the law prevents the
CRJs from setting different rates for various kinds of incidental
DPDs.
---------------------------------------------------------------------------

C. Limited Downloads

In the petition for a rulemaking that initiated this proceeding,
RIAA characterized a limited download as an ``on-demand transmission of
a time-limited or other use-limited (i.e. non-permanent) download to a
local storage device (e.g. the hard drive of the user's computer),
using technology that causes the downloaded file to be available for
listening only either during a limited time (e.g. a time certain or a
time tied to ongoing subscription payments) or for a limited number of
times'' and asked the office to determine whether and to what extent
limited downloads come within the scope of the Section 115 license.
RIAA Petition at 1. As the Office has previously indicated, and
explains again in this Notice below, whether a service is interactive
or non-interactive does not appear to be relevant in the context of the
Section 115 license. Therefore, the Office's regulatory text adopts a
slightly altered characterization of limited downloads, as a subset of
DPDs that ``may be made available to the transmission recipient for a
limited period of time or for a specified number of performances.''
Applying the above-stated understandings regarding DPDs in general, the
Office concludes that limited downloads fall within the definition for
DPDs in that they are delivered; they satisfy the requirements for
being a phonorecord; and they are specifically identifiable.\8\ This
conclusion regarding limited downloads is reflected in the interim
rule.
---------------------------------------------------------------------------

\8\ The Office understands that there may be many types of
limited downloads made available to transmission recipients for
varying periods of time or number of performances. Nothing in the
law prevents the CRJs from setting different rates for various kinds
of limited downloads. The Office observes that the agreement
submitted to the CRJs on September 22, 2008 assigns rates for
specific types of limited downloads. See Mechanical and Digital
Phonorecord Delivery Rate Determination Proceeding, 73 FR 57033,
57034 (Oct. 1, 2008)(proposed 37 CFR Sec. 385.11 (definition of
``Limited download'')). The Office notes that to the extent DPDs
fall within the characterization of limited downloads as set forth
in the Office's interim rule (which is broader than the category
identified in the submitted agreement) they are licensable under
Section 115 regardless of the rates assigned to them, or indeed
regardless of whether any rate has been assigned to them.
---------------------------------------------------------------------------

D. Threshold Requirements for Use of the Section 115 License

Several parties expressed concern with the NPRM's proposed
interpretation of 17 U.S.C. 115(a)(l), which states that ``A person may
obtain a compulsory license only if his or her primary purpose in
making phonorecords is to distribute them to the public for private
use, including by means of a digital phonorecord delivery.'' Public
Interest Commenters questioned the Office's proposed understanding that
DPDs are, by the fact of their having been delivered, distributed
within the meaning of the copyright law. They urged the Office to avoid
preempting any judicial resolution regarding whether Internet
transmissions may result in distribution of ``material objects.''
Google/YouTube asserted that the Office's proposal overlooks a legal
distinction between copying that facilitates the delivery or
``distribution'' of a reproduction of a sound recording, on the one
hand, and copying that merely enables the public performance of a sound
recording, on the other. It also maintained that a ``performance'' to
consumers, with or without the benefit of an intervening distribution
entity, does not constitute the ``distribution'' of a copy of the
content at issue. DiMA also argued that various types of streaming,
other than interactive streaming, may or may not make reproductions at
the recipient end of a transmission, and such reproductions may not
always be for the ``primary purpose'' of making phonorecords.
Verizon, CTIA, and NAB claimed that the NPRM contained a near
tautology when it asserted that by virtue of having been delivered,
phonorecords are distributed within the meaning of copyright law. They
also argued that the approach advanced by the Office all but reads the
``primary purpose'' requirement out of Section 115. They acknowledged
that a primary purpose in making the DPD may be to distribute it. But
they argued that the NPRM ignores the fact that, even if a buffer copy
is a DPD, the primary purpose of making such a DPD is not to
``distribute'' anything. It is rather an essential step in

[[Page 66180]]

the effectuation of a performance. They then cited to statements made
by the Register that a ``stream'' does not constitute a distribution
and that buffer and other intermediate copies are for all practical
purposes useless. Finally, they offered the argument that
characterizing all buffers as distributed would undermine many
established principles, provisions and practices of copyright law
including fair use, the concept of publication, and registration
practices.
As indicated above, the Office's interim rule, unlike the NPRM,
takes no position as to whether a buffer copy constitutes a
phonorecord. However, it is apparent that when a transmission to an
individual consumer does result in a DPD, the phonorecord is made for
the purpose of allowing the recipient to make a private use of that
phonorecord, even if that use is simply to hear the performance of the
phonorecord contemporaneously with the transmission. Similarly, it
appears that enabling a recipient to make such a private use is a
service's primary purpose in making phonorecords on a recipient's
device. The Office notes that Congress intended the Section 115 license
to cover DPDs ``regardless of whether the digital transmission is also
a public performance of the sound recording or any nondramatic musical
work embodied therein.'' 17 U.S.C. 115(d).
The Office's interim rule also does not determine whether all
phonorecords which satisfy the previously addressed requirements for
being DPDs are necessarily ``distributed.'' This position is consistent
with the Office's prior legal conclusions as well as the Register's
statements and policy arguments to Congress that a stream in and of
itself does not constitute a distribution. However, under the Office's
above-stated analysis, there is no dispute that limited download
services as well as certain streaming services involve the making of
legally recognizable copies that fit within the definition of a DPD. To
the extent that such phonorecords exist on the recipient's computer for
some period of time beyond their performance, it is reasonable to
consider the phonorecord as having been ``distributed.'' At the very
least, where services involve the making of DPDs that exist on the
recipient's computer for some period of time beyond their performance
and which can be used to replay the phonorecord, it would appear that
such phonorecords have been ``distributed.''\9\ Whether the delivery of
a phonorecord that lasts no longer than the streamed performance
constitutes a distribution is an issue that need not be resolved for
purposes of this rulemaking.
---------------------------------------------------------------------------

\9\ NMPA referred the Office to evidence indicating that three
leading streaming music services create such copies. See Statement
of Jacqueline Charlesworth http://www.copyright.gov/docs/section115/2008/rm_2000-7_NMPA_hearing_statement.pdf.
---------------------------------------------------------------------------

E. Non-DPD Copies Under the Section 115 License

Among the commenters, Verizon, CTIA, and NAB were alone in
disputing the tentative proposal in the NPRM stating that server
copies, and all other intermediate copies, used to make DPDs under the
Section 115 license fall within the scope of the license. They argued
that the primary purpose in making server ``phonorecords'' is not ``to
distribute them to the public for private use'' and that therefore they
are not eligible for the 115 license. However, this argument
misunderstands the Office's interpretation in the NPRM of the coverage
provided by the Section 115 license.
The Office understands that the Section 115 license has
traditionally provided coverage beyond those phonorecords made and
distributed to the public for private use, so long as such phonorecords
were used to achieve the primary purpose of making and distributing
phonorecords under the Section 115 license. Indeed, when it enacted
Section 115 in 1976, Congress stated that it intended the license to
cover ``every possible manufacturing or other process capable of
reproducing a sound recording in phonorecords.''\10\ As stated in the
NPRM, the right to make master recordings, which are used to make the
phonorecords that are actually distributed has long been understood to
be included in the Section 115 license. Similarly, server copies, as
well as all other intermediate copies used to make and distribute DPDs
under the Section 115 license, perform a function in the world of DPDs
that is parallel to master recordings and manufacturing equipment in
the physical world. Consequently, the interim rule confirms that server
copies and intermediate reproductions may come within the scope of the
license. The Office notes that a person seeking to operate under the
Section 115 license must still satisfy the threshold requirements of
the license. But, having done so, that licensee's coverage may extend
to phonorecords other than those that are actually distributed provided
that they are made for the purpose of making and distributing a DPD. On
the other hand, server and intermediate copies that are the source of a
transmission that does not result in the making and distribution of a
DPD would not fall within the scope of the compulsory license. Finally,
the Office notes that server and intermediate copies covered under the
Section 115 license that are not distributed do not entitle the owner
to separate royalty payments. 17 U.S.C. 115(c)(1).
---------------------------------------------------------------------------

\10\ H. Rep. No. 94-1476, at 110. See also, The Copyright Act
of 1976, Transitional and Supplementary Provisions, Sec. 106
(``...parts of instruments serving to reproduce phonorecords
mechanically ... such parts made on or after January 1, 1978,
constitute phonorecords.''
---------------------------------------------------------------------------

F. Issues Outside the Scope of This Proceeding

1. Interactive vs. Non-interactive

The Office recognizes that nearly all of the commenters have
expressed some preference to distinguish between phonorecords that are,
or may be, made by Interactive Streaming Services versus those made by
Non-interactive Streaming Services. As the Office stated in its NPRM,
distinctions relating to interactivity are appropriate in the context
of the Section 114 license, which is available only for nonintereactive
transmissions, and such distinctions may be appropriate to raise as a
matter of economic value or policy before the CRJs-for example, in
setting rates-or Congress. However, whether a service is interactive or
non-interactive does not appear to be relevant in determining whether
particular reproductions of phonorecords may be covered under the
current Section 115 license, except perhaps under the last sentence of
Section 115(d), which does address the potential for non-interactivity
to be relevant. However, this sentence must be read in its entirety,
which provides:

A digital phonorecord delivery does not result from a real-
time, non-interactive subscription transmission of a sound recording
where no reproduction of the sound recording or the musical work
embodied therein is made from the inception of the transmission
through to its receipt by the transmission recipient in order to
make the sound recording audible.
15 U.S.C. 115(d) (emphasis added).

The Office acknowledges that it may be more common for interactive
streams to result in DPDs and that it may be relatively uncommon for
non-interactive streams to do so. However, if phonorecords are
delivered by a transmission service, then under the last sentence of
115(d) it is irrelevant whether the transmission that created the
phonorecords is interactive or non-interactive. To the extent that each
stream creates a DPD, it appears that the only proffered justification
for

[[Page 66181]]

distinguishing between the interactive and non-interactive
transmissions is the business justification that interactive DPDs have
a greater economic impact. The Office would not dispute a finding that
non-interactive and interactive streams have different economic value,
or even that a rate of zero might be appropriate for DPDs made in the
course of non-interactive streams. Nor does it question the motivation
for the industry's adoption of an agreement that distinguishes between
the two. However, the Office maintains that any such distinctions can
and should be addressed by different rates rather than being based on
an unfounded assertion that non-interactive streaming cannot involve
the making and distribution of phonorecords which are licensable under
Section 115.

2. Policy Arguments

As has happened throughout this proceeding, a number of commenters
proposed revisions that they would like Congress to adopt, including
provisions that would expressly exempt transient copies made during the
course of an authorized digital performance of a sound recording and
declare that server copies made to facilitate an authorized public
performance have no independent economic value. The Office notes, as it
did in the NPRM, that such matters are beyond the scope of the current
proceeding, not to mention the Office's regulatory power. Commenters
also asserted that the proposed rule would have created problems
regarding commenters' current understanding of other sections of the
Copyright Act, such as the Section 114 and 112 licenses and Chapter
10's treatment of audio home recording. The interim rule, however, is
limited to clarifying that reproductions created in the process of
making a DPD are covered under the license and to acknowledge that a
DPD may be limited either by time or to a specific number of plays.
Consequently, there is no need to address the concerns raised by the
parties about the effect of the proposed rule on other provisions in
the copyright law.

G. Regulatory Text

The text of the interim regulation adopted today is based upon the
text proposed in the NPRM, but with some fairly significant
modifications. The text defines a digital phonorecord delivery as
follows:

``digital phonorecord delivery'' is each individual delivery of a
phonorecord by digital transmission of a sound recording which
results in a specifically identifiable reproduction by or for any
transmission recipient of a phonorecord of that sound recording,
regardless of whether the digital transmission is also a public
performance of the sound recording or any nondramatic musical work
embodied therein. The reproduction of the phonorecord must be
sufficiently permanent or stable to permit it to be perceived,
reproduced, or otherwise communicated for a period of more than
transitory duration. Such a phonorecord may be permanent or it may
be made available to the transmission recipient for a limited period
of time or for a specified number of performances. A digital
phonorecord delivery includes all phonorecords that are made for the
purpose of making the digital phonorecord delivery.

The second sentence of the definition did not appear in the
original proposed regulatory text. It is included in the interim
regulation to clarify that any DPD requires that the phonorecord that
is delivered must meet the requirements of fixation, including the
durational requirement. However, the regulatory text takes no position
on the threshold for satisfying that durational requirement, and
therefore is not inconsistent with the approach taken in either the
DMCA Section 104 Report or the Cartoon Network case.
The definition also makes clear that a DPD may be made available on
a limited basis and that DPDs include any phonorecords made for the
purpose of making the DPD. Thus, phonorecords such as server copies
that are not sufficient to constitute a DPD (because they are not
``delivered'') but are nevertheless made for the purpose of delivering
a DPD (such as a full or limited download or a cache copy at the end of
the stream if that copy meets the fixation requirement) are
nevertheless part of the DPD if a phonorecord is in fact delivered. And
buffer copies, if they meet the fixation requirement, may also be DPDs
or be included as parts of DPDs. If a buffer copy does not meet the
fixation requirement, it is irrelevant whether it is part of a DPD
because it cannot be an infringing ``copy.''

List of Subjects

37 CFR Part 201

37 CFR Part 255

Compulsory license fees, Phonorecords.

Proposed Regulations

0
In consideration of the foregoing, the Copyright Office proposes to
amend parts 201 and 255 of 37 CFR, as follows:

PART 201--GENERAL PROVISIONS

0
1. The authority citation for part 201 continues to read as follows:

Authority: 17 U.S.C. 702.

0
2. Amend Sec. 201.18 as follows:
0
a. By redesignating paragraphs (a)(2) through (a)(6) as (a)(4) through
(a)(8); and
0
b. By adding new paragraphs (a)(2) and (a)(3).
The revisions and additions to Sec. 201.18 read as follows:

201.18 Notice of intention to obtain a compulsory license for making
and distributing phonorecords of nondramatic musical works.

(a) * * *
(2) A person is entitled to serve or file a Notice of Intention and
thereby obtain a compulsory license pursuant to 17 U.S.C. 115 only if
his primary purpose in making phonorecords is to distribute them to the
public for private use, including by means of a digital phonorecord
delivery.
(3) For the purposes of this section, a ``digital phonorecord
delivery'' is each individual delivery of a phonorecord by digital
transmission of a sound recording which results in a specifically
identifiable reproduction by or for any transmission recipient of a
phonorecord of that sound recording, regardless of whether the digital
transmission is also a public performance of the sound recording or any
nondramatic musical work embodied therein. The reproduction of the
phonorecord must be sufficiently permanent or stable to permit it to be
perceived, reproduced, or otherwise communicated for a period of more
than transitory duration. Such a phonorecord may be permanent or it may
be made available to the transmission recipient for a limited period of
time or for a specified number of performances. A digital phonorecord
delivery includes all phonorecords that are made for the purpose of
making the digital phonorecord delivery.
* * * * *
0
3. Amend Sec. 201.19 as follows:
0
a. By amending paragraph (a)(1) to add ``, including by means of a
digital phonorecord delivery.'' after ``of nondramatic musical works''.
0
b. By redesignating paragraphs (a)(3) through (a)(12) as paragraphs
(a)(4) through (a)(13); and
0
c. By adding a new paragraph (a)(3).
The revisions to Sec. 201.19 read as follows:

201.19 Royalties and statements of account under compulsory license
for making and distributing phonorecords of nondramatic works.

(a) * * *
(3) For the purposes of this section, a ``digital phonorecord
delivery'' is each individual delivery of a phonorecord by

[[Page 66182]]

digital transmission of a sound recording which results in a
specifically identifiable reproduction by or for any transmission
recipient of a phonorecord of that sound recording, regardless of
whether the digital transmission is also a public performance of the
sound recording or any nondramatic musical work embodied therein. The
reproduction of the phonorecord must be sufficiently permanent or
stable to permit it to be perceived, reproduced, or otherwise
communicated for a period of more than transitory duration. Such a
phonorecord may be permanent or it may be made available to the
transmission recipient for a limited period of time or for a specified
number of performances. A digital phonorecord delivery includes all
phonorecords that are made for the purpose of making the digital
phonorecord delivery.
* * * * *

PART 255--ADJUSTMENT OF ROYALTY PAYMENTS UNDER COMPULSORY LICENSE
FOR MAKING AND DISTRIBUTING PHONORECORDS

0
4. The authority citation for part 255 continues to read as follows:

Authority: 17 U.S.C. 702.
0
5. Section 255.4 is revised to read as follows:

Sec. 255.4 Definition of digital phonorecord delivery.

A ``digital phonorecord delivery'' is each individual delivery of a
phonorecord by digital transmission of a sound recording which results
in a specifically identifiable reproduction by or for any transmission
recipient of a phonorecord of that sound recording, regardless of
whether the digital transmission is also a public performance of the
sound recording or any nondramatic musical work embodied therein. The
reproduction of the phonorecord must be sufficiently permanent or
stable to permit it to be perceived, reproduced, or otherwise
communicated for a period of more than transitory duration. Such a
phonorecord may be permanent or it may be made available to the
transmission recipient for a limited period of time or for a specified
number of performances. A digital phonorecord delivery includes all
phonorecords that are made for the purpose of making the digital
phonorecord delivery.

Dated: October 22, 2008.
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. E8-26666 Filed 11-6-08; 8:45 am]
BILLING CODE 1410-30-S