[Federal Register Volume 78, Number 139 (Friday, July 19, 2013)]
[Proposed Rules]
[Pages 43094-43096]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-17243]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 384

[Docket No. 2012-1 CRB Business Establishments II]


Determination of Rates and Terms for Business Establishment 
Services

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

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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 January 1, 2014, through December 31, 2018.

DATES: Comments and objections are due no later than August 19, 2013.

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 for 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 between 8:30 
a.m. and 5 p.m. 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: LaKeshia Keys, Program Specialist, by 
telephone at (202) 707-7658 or email at [email protected].

SUPPLEMENTARY INFORMATION: In 1995, Congress enacted the Digital 
Performance in Sound Recordings Act, Public Law 104-39, which created 
an exclusive right for copyright owners 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 the passage of the Digital Millennium Copyright Act of 1998 
(DMCA), Public Law 105-34, 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 
performance 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 one 
phonorecord permitted under the exemption set forth in section 112(a). 
17 U.S.C. 112(e).
    Chapter 8 of the Copyright Act requires the Copyright Royalty 
Judges (Judges) to conduct proceedings every five years to determine 
the rates and terms for ``the activities described in section 112(e)(1) 
relating to the limitation on exclusive rights specified by section 
114(d)(1)(C)(iv).'' \1\ 17 U.S.C. 801(b)(1), 804(b)(2). In accordance 
with section 804(b)(2), the Judges commenced a proceeding to set rates 
and terms for the making of ephemeral sound recordings by a business 
establishment service on January 5, 2007, 72 FR 584, and published in 
the Federal Register on March 27, 2008, final regulations setting those 
rates and terms. 73 FR 16199. Therefore, the next proceeding was to be 
commenced in January 2012. 17 U.S.C. 804(b)(2).
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    \1\ Prior to the enactment of the Copyright Royalty and 
Distribution Reform Act of 2004, which established the Copyright 
Royalty Judges, rates and terms for the statutory license under 
section 112(e) were set under the Copyright Arbitration Royalty 
Panel system, which was administered by the Librarian of Congress.
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    Accordingly, the Judges published a notice commencing the current 
proceeding and requesting interested parties to submit their petitions 
to participate. 77 FR 133 (Jan. 3, 2012). Petitions to Participate were 
received from: Pandora Media, Inc.; Music Choice; DMX, Inc.; Muzak LLC; 
Music Reports, Inc.; Clear Channel Broadcasting, Inc.; SoundExchange, 
Inc.; and Sirius XM Radio, Inc. 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 November 16, 2012. Subsequently, the Judges granted the 
participants' request to extend the deadline to November 29, 2012, in 
order to allow the participants to finalize a settlement agreement. See 
Order Granting Joint Motion for Extension of Time for Filing Written 
Direct Statements, Docket No. 2012-1 CRB Business Establishments II 
(Nov. 14, 2012). On November 29, 2012, the Judges received a Motion to 
Adopt Settlement stating that all participants had reached a settlement 
obviating the need for a hearing.
    Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to 
adopt 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 Judges for approval. This section provides in part 
that the Judges must provide to both non-participants and participants 
to the rate proceeding who ``would be bound

[[Page 43095]]

by the terms, rates, or other determination set by any agreement . . . 
an opportunity to comment on the agreement.'' 17 U.S.C. 
801(b)(7)(A)(i). Participants to the proceeding may also ``object to 
[the agreement's] adoption as a basis for statutory terms and rates.'' 
Id. The Judges ``may decline to adopt the agreement as a basis for 
statutory terms and rates for participants that are not parties to the 
agreement,'' only ``if any participant [to the proceeding] objects to 
the agreement and the [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)(ii).
    Rates and terms adopted pursuant to section 801(b)(7)(A) are 
binding on all copyright owners of sound recordings and business 
establishment services making an ephemeral recording of a sound 
recording for the period January 1, 2014, through December 31, 2018.
    As noted above, the public may comment and object to any or all of 
the proposed regulations contained in this notice. Such comments and 
objections must be submitted no later than August 19, 2013.

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 amend part 384 of 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

0
1. The authority citation for part 384 continues to read as follows:

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


Sec.  384.1  [Amended]

0
2. Section 384.1 is amended as follows:
0
a. In paragraph (a), by removing ``Sec.  384.2(a)'' and adding ``Sec.  
384.2'' in its place, and by removing ``2009-1013'' and adding 
``January 1, 2014, through December 31, 2018'' in its place;
0
b. In paragraph (b), by removing ``licenses set forth in 17 U.S.C. 
112'' and adding ``license set forth in 17 U.S.C. 112(e)'' in its 
place; and
0
c. In paragraph (c), by removing ``services'' and adding ``Licensees'' 
in its place.
0
3. Section 384.2 is amended by revising the definition for ``Copyright 
Owner'' to read as follows:


Sec.  384.2   Definitions.

* * * * *
    Copyright Owners are sound recording copyright owners who are 
entitled to royalty payments made under this part pursuant to the 
statutory license under 17 U.S.C. 112(e).
* * * * *


Sec.  384.3  [Amended]

0
4. Section 384.3 is amended as follows:
0
a. In paragraph (a), by removing ``service pursuant to the limitation 
on exclusive rights specified by 17 U.S.C. 114(d)(1)(C)(iv)'' and 
adding ``Business Establishment Service'' in its place and removing 
``10%'' and adding ``12.5%'' in its place; and
0
b. In paragraph (b), by removing ``$10,000 for each calendar year'' and 
adding ``$10,000 for each calendar year of the License Period'' in its 
place.
0
5. Section 384.4 is amended as follows:
0
a. By revising the paragraph heading for paragraph (a);
0
b. In paragraph (b)(2)(i), by removing ``condition precedent in 
paragraph (b)(2) of this section'' and adding ``condition precedent in 
this paragraph (b)(2)'' in its place, and by removing ``authorized such 
Collective'' and adding ``authorized the Collective'' in its place;
0
c. By revising paragraphs (c) through (e);
0
d. By revising introductory text of paragraph (f);
0
e. In paragraph (f)(2), by removing ``facsimile number'' and adding 
``facsimile number (if any)'' in its place, and by removing 
``individual or individuals'' and adding ``person'' in its place;
0
f. In paragraph (f)(3), by removing ``handwritten'';
0
g. In paragraph (f)(3)(i), by removing ``a corporation'' and adding 
``corporation'' in its place;
0
h. In paragraph (f)(6), by removing ``a corporation'' and adding 
``corporation'' in its place;
0
i. In paragraph (f)(8), by removing ``if the Licensee is a corporation 
or partnership,'';
0
j. By revising paragraphs (g) and (h); and
0
k. By removing paragraph (i).
    The revisions read as follows:


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

    (a) Payment to the Collective. * * *
* * * * *
    (c) Monthly payments. A Licensee shall make any payments due under 
Sec.  384.3(a) on a monthly basis on or before the 45th day after the 
end of each month for that month. All monthly payments shall be rounded 
to the nearest cent.
    (d) Minimum payments. A Licensee shall make any minimum payment due 
under Sec.  384.3(b) by January 31 of the applicable calendar year, 
except that payment by 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.
    (e) Late payments. A Licensee shall pay a late fee of 1.0% per 
month, or the highest lawful rate, whichever is lower, if either or 
both a required payment or statement of account for a required payment 
is received by the Collective after the due date. Late fees shall 
accrue from the due date until both the payment and statement of 
account are received by the Collective.
    (f) Statements of account. For any part of the License Period 
during which a Licensee operates a Business Establishment Service, at 
the time when a minimum payment is due under paragraph (d) of this 
section, and 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. In the 
case of a minimum payment, or 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:
* * * * *
    (g) Distribution of royalties. (1) The Collective shall promptly 
distribute royalties received from Licensees directly to Copyright 
Owners, or their designated agents, that are entitled to such 
royalties. The Collective shall only be responsible for making 
distributions to those Copyright Owners or their designated agents who 
provide the Collective with such information as is necessary to 
identify the correct recipient. The Collective shall distribute 
royalties on a basis that values all Ephemeral Recordings by a Licensee 
equally based upon the information provided under the reports of use 
requirements for Licensees contained in Sec.  370.4 of this chapter.
    (2) If the Collective is unable to locate a Copyright Owner 
entitled to a distribution of royalties under paragraph (g)(1) of this 
section within 3 years from the date of payment by a Licensee, such 
royalties shall be handled in accordance with Sec.  384.8.

[[Page 43096]]

    (h) Retention of records. Books and records of a Licensee and of 
the Collective relating to payments of and distributions of royalties 
shall be kept for a period of not less than the prior 3 calendar years.


Sec.  384.5  [Amended]

0
6. Section 384.5 is amended as follows:
0
a. In paragraph (a), by removing ``part'' and adding ``section'' in its 
place, and by removing ``account, any information'' and adding 
``account and any information'' in its place;
0
b. In paragraph (b), by removing ``The Collective shall have'' and 
adding ``The party claiming the benefit of this provision shall have'' 
in its place;
0
c. In paragraph (c), by removing ``activities directly related 
thereto'' and adding ``activities related directly thereto'' in its 
place;
0
d. In paragraph (d)(1), by removing ``work, require access to the 
records'' and adding ``work require access to Confidential 
Information'' in its place;
0
e. In paragraph (d)(2), by removing ``Collective committees'' and 
adding ``the Collective committees'' in its place, and by removing 
``confidential information'' and adding ``Confidential Information'' in 
its place each place it appears;
0
f. In paragraph (d)(3), by removing ``respect to the verification of a 
Licensee's royalty payments'' and adding ``respect to verification of a 
Licensee's statement of account'' in its place;
0
g. In paragraph (d)(4), by removing ``Copyright owners whose works'' 
and adding ``Copyright Owners, including their designated agents, whose 
works'' in its place, by removing ``, or agents thereof'', and by 
removing ``confidential information'' and adding ``Confidential 
Information'' in its place; and
0
h. In paragraph (e), by removing ``to safeguard all Confidential 
Information'' and adding ``to safeguard against unauthorized access to 
or dissemination of any Confidential Information'' in its place, and by 
removing ``belonging to such Collective'' and adding ``belonging to the 
Collective'' in its place.
0
7. Section 384.6 is amended by revising paragraph (d) to read as 
follows:


Sec.  384.6  Verification of royalty payments.

* * * * *
    (d) Acquisition and retention of report. 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. The Collective shall retain the report of the 
verification for a period of not less than 3 years.
* * * * *
0
8. Section 384.7 is amended as follows:
0
a. In paragraph (a), by removing ``Provided'' and adding ``provided'' 
in its place; and
0
b. By revising paragraph (d).
    The revision reads as follows:


Sec.  384.7  Verification of royalty distributions.

* * * * *
    (d) Acquisition and retention of record. 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. The Copyright Owner requesting the verification procedure 
shall retain the report of the verification for a period of not less 
than 3 years.
* * * * *
0
9. Section 384.8 is revised to read as follows:


Sec.  384.8  Unclaimed funds.

    If the Collective is unable to identify or locate a Copyright Owner 
who is entitled to receive a royalty distribution 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 distribution. No claim 
to such distribution shall be valid after the expiration of the 3-year 
period. After 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: July 12, 2013.
Suzanne M. Barnett,
Chief Copyright Royalty Judge.
[FR Doc. 2013-17243 Filed 7-18-13; 8:45 am]
BILLING CODE 1410-72-P