[Federal Register Volume 75, Number 191 (Monday, October 4, 2010)]
[Proposed Rules]
[Pages 61116-61118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24779]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201
[Docket No. RM 2010-3]
Refunds Under the Cable Statutory License
AGENCY: Copyright Office, Library of Congress.
ACTION: Notice of Proposed Rulemaking.
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SUMMARY: The Office seeks comment on whether a cable operator may
receive refunds in situations where it has failed to pay for the
carriage of distant signals on a system-wide basis under the Copyright
Act, before it was amended to allow a cable system to calculate its
royalty fees on a community-by-community basis.
DATES: Written comments must be received in the Office of the General
Counsel of the Copyright Office no later than November 3, 2010. Reply
comments must be received in the Office of the General Counsel of the
Copyright Office no later than November 3, 2010.
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. E.D.T. 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: Ben Golant, Assistant General Counsel,
and Tanya M. Sandros, Deputy General Counsel, Copyright GC/I&R, P.O.
Box 70400, Washington, DC 20024. Telephone: (202) 707-8380. Telefax:
(202) 707-8366.
SUPPLEMENTARY INFORMATION: Section 111 of the Copyright Act (``Act''),
title 17 of the United States Code (``Section 111''), provides cable
operators with a statutory license to retransmit to the public a
performance or display of a work embodied in a primary transmission
made by a television station licensed by the Federal Communications
Commission (``FCC''). Cable systems that retransmit broadcast signals
in accordance with the provisions governing the statutory license set
forth in Section 111 are required to pay royalty fees to the Copyright
Office (``Office''). Payments made under the cable statutory license
are remitted semi-annually to the Office which invests the royalties in
United States Treasury securities pending distribution of these funds
to those copyright owners who are entitled to receive a share of the
fees. Section 111 was recently amended by the Satellite Television
Extension and Localism Act of 2010 (``STELA''), Pub. L. No. 111-175,
[[Page 61117]]
which made some changes to the design of the royalty payment structure,
as noted below.
Cable operators have long paid royalties for the retransmission of
non-network programming carried by distant broadcast television signals
under the Section 111 statutory license. The royalties are based on a
percentage of gross receipts generated by a cable system. Under the
licensing framework established by Congress in 1976, cable operators
had to pay for the number of distant signals carried, even though some
such signals were not received or made available to every subscriber of
a particular cable system. Distant broadcast signals that were not made
available on a system-wide basis, but on which operators were required
to pay royalties, have been called ``phantom signals.'' The Copyright
Office has been aware of the phantom signal situation since at least
1983, see NCTA Petition for Issuance of Notice of Proposed Rulemaking
(filed August 22, 1983), but the matter has only recently received
legislative attention.
Section 104 of STELA, entitled ``Modifications to Cable System
Secondary Transmission Rights Under Section 111,'' directly addresses
phantom signals. Specifically, it amends Section 111(d)(1) of the
Copyright Act which sets forth the methodology for a cable operator to
calculate royalty fees. Cable operators now pay royalty fees based on
the communities where the distant broadcast signal is actually offered
rather than on a broader cable system basis as had been the case since
1978.
Specifically, STELA amends subparagraph (C) of Section 111(d)(1) to
state that if a cable system provides secondary transmissions of
primary transmitters to some, but not all, communities served by the
cable system, the gross receipts and distant signal equivalent values
for each secondary transmission may be derived on the basis of the
subscribers in those communities where the cable system actually
provides such secondary transmission. Where a cable system calculates
its royalties on a community-specific (``subscriber group'') basis, the
operator applies the methodology in Section 111(d)(1)(B)(ii)-(iv) to
calculate a separate royalty for each subscriber group.
The legislation also amends subparagraph (D) of Section 111(d)(1)
to state that:
A cable system that, on a statement submitted before the date
of the enactment of the Satellite Television Extension and Localism
Act of 2010, computed its royalty fee consistent with the
methodology under subparagraph (C)(iii), or that amends a statement
filed before such date of enactment to compute the royalty fee due
using such methodology, shall not be subject to an action for
infringement, or eligible for any royalty refund or offset, arising
out of its use of such methodology on such statement.
In other words, operators who have heretofore based royalty payments
on subscriber group calculations will not face liability for having
done so. The amendments also make clear that cable operators who
have paid for phantom signals in the past are not entitled to now
seek refunds or offsets for those payments in any Statement of
Account period from 2010/1 onward. With regard to offsets, cable
operators cannot deduct the amount they paid for a phantom signal
prior to STELA (e.g., 2009/1) from the royalties they must pay in
future Statement of Account periods.
While STELA eliminates the possibility of an action for
infringement against those cable systems that did not pay for the
carriage of phantom signals historically, it did not alter how a cable
system was to calculate its royalty fee obligation for carriage of
these signals under Section 111 prior to the passage of this
legislation. Nevertheless, certain cable systems have concluded that
the language which prevents a copyright owner from bringing an
infringement suit against a cable system which had computed its past
royalty fee obligation in a manner consistent with the methodology in
new Section 111(d)(1)(D) also nullifies their obligation to have paid
for carriage of all signals on a system-wide basis for the accounting
periods ending prior to January 1, 2010. This approach represents one
interpretation of the effect of the new provision, but it is not the
only one. A more literal reading of the new statutory language is that
it only shields a cable system from an infringement action and that it
does not erase a cable system's obligation to have paid for the
carriage of each distant signal on a system-wide basis prior to the
2010/1 accounting period. Under the latter interpretation, any
underpayment for carriage of a phantom signal still remains even though
the operator cannot be sued for infringement under Section 111.
We raise this issue because some cable systems which, prior to the
2010/1 accounting period, did not pay for carriage of phantom signals
are now requesting refunds in cases where there are other non-related
issues. In these cases, the cable system is just now replying to a
pending Licensing Division initiated letter and is requesting a refund
for a reporting mistake, e.g., identifying a local signal as a distant
signal for the 2009/2 accounting period (or an earlier accounting
period), even though, according to the Copyright Office's examination
of the statement of account, the cable system still has an outstanding
royalty fee obligation for the retransmission of a phantom signal
during the same period.
At this time, the Office is not inclined to refund any fees for a
non-phantom reporting error in the case where the operator has an
outstanding balance owed for the carriage of a phantom signal without
accounting for that obligation too because, prior to STELA, section 111
required that royalty fees be calculated on a system-wide basis.
Moreover, the language in STELA protecting a cable system from an
infringement suit for failure to make these payments prior to the 2010/
1 accounting period does not address a cable system's past obligation
to have paid the royalty fees owed by the cable system at the time it
filed the statement of accounts. Historically, cable operators have
been expected to pay for each distant signal on a system-wide basis and
when that did not occur, the Office would write to the cable system
noting the underpayment and record it as an outstanding obligation.
Moreover, the Office would not provide a refund for an overpayment for
misreporting a local signal as a distant signal or similar reporting
error until the outstanding obligation for carriage of the phantom
signal had been satisfied. Nothing in the legislation appears to have
altered this approach. Nevertheless, in light of the requests from
certain cable operators, we seek comment on whether to offset the
outstanding balance owed for carriage of phantom signals before
providing a refund for an error unrelated to phantom signals that
occurred in an accounting period prior to 2010/1.
List of Subjects in 37 CFR 201
Copyright
Proposed Regulation
For the reasons set forth in the preamble, the Copyright Office
proposes to amend part 201 of title 37 of the Code of Federal
Regulations as follows:
PART 201 - GENERAL PROVISIONS
1. The authority citation for part 201 continues to read as
follows:
Authority: 17 U.S.C. 702
2. Amend section 201.17 by redesignating paragraphs (m)(1) through
(4) as paragraphs (m)(2) through (5) and adding a new paragraph (m)(1)
to read as follows:
[[Page 61118]]
Sec. 201.17 Statements of Account covering compulsory licenses for
secondary transmissions by cable systems.
* * * * *
(m) Corrections, supplemental payments and refunds.
(1) Royalty fee obligations under 17 U.S.C. 111 prior to the
effective date of the Satellite Television Extension and Localism Act
of 2010, Pub.L. No. 111-175 are determined based on carriage of each
distant signal on a system-wide basis. Refunds for an overpayment of
royalty fees for an accounting period prior to January 1, 2010, shall
be made only when all outstanding royalty fee obligations have been
met, including those for carriage of each distant signal on a system-
wide basis.
* * * * *
Dated: September 28, 2010
Tanya Sandros,
Deputy General Counsel,
U.S. Copyright Office.
[FR Doc. 2010-24779 Filed 10-1-10; 8:45 am]
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