[Federal Register Volume 80, Number 236 (Wednesday, December 9, 2015)]
[Notices]
[Pages 76577-76581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30910]


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LIBRARY OF CONGRESS

Copyright Office

[Docket No. 2015-5]


Copyright Royalty Judges' Ability To Set Rates and Terms That 
Distinguish Among Different Types or Categories of Licensors

AGENCY: U.S. Copyright Office, Library of Congress.

ACTION: Final order.

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SUMMARY: The Copyright Royalty Judges (``CRJs'') referred a question of 
substantive law to the Register of Copyrights for resolution. The 
question asked whether section 114 of the Copyright Act or any other 
applicable provision of the Act prohibits the CRJs from setting rates 
and terms that distinguish among different types or categories of 
licensors. In a written opinion that was transmitted to the CRJs, the 
Register determined that the question was not properly presented in the 
proceeding and therefore the Register did not opine on its merits. That 
opinion is reproduced below.

DATES: Effective Date: November 24, 2015.

FOR FURTHER INFORMATION CONTACT: Stephen Ruwe, Assistant General 
Counsel, U.S. Copyright Office, P.O. Box 70400, Washington, DC 20024. 
Telephone: (202) 707-8350.

SUPPLEMENTARY INFORMATION: The Copyright Royalty Judges are tasked with 
determining and adjusting rates and terms of royalty payments for 
statutory licenses under the Copyright Act. See 17 U.S.C. 801. If, in 
the course of proceedings before the CRJs, novel material questions of 
substantive law concerning the interpretation of provisions of title 17 
arise, the CRJs are required by statute to refer those questions to the 
Register of Copyrights for resolution. 17 U.S.C. 802(f)(1)(B).
    On October 14, 2015, the CRJs, invoking 17 U.S.C. 802(f)(1)(B), 
referred to the Register the question of whether section 114 of the 
Copyright Act or any other applicable provision of the Act prohibits 
the CRJs from setting rates and terms that distinguish among different 
types or categories of licensors. The same day, the Register issued an 
order inviting the participants in the proceeding and other interested 
parties to file supplemental briefs on certain specified issues. On 
November 24, 2015, the Register issued a memorandum opinion in which 
she determined that the question was not presented within the meaning 
of 17 U.S.C. 802(f)(1)(B), and therefore the Register did not opine on 
the question's merits. To provide the public with notice of the 
Register's response, the Memorandum Opinion is reproduced in its 
entirety below.

    Dated: December 2, 2015.
Maria A. Pallante,
Register of Copyrights.

Before the U.S. Copyright Office

Library of Congress

Washington, DC 20559

    In the Matter of DETERMINATION OF ROYALTY RATES AND TERMS FOR 
EPHEMERAL RECORDING AND WEBCASTING DIGITAL PERFORMANCE OF SOUND 
RECORDINGS (Web IV), Docket No. 14-CRB-0001-WR (2016-2020) (Web IV)

MEMORANDUM OPINION ON NOVEL MATERIAL QUESTION OF LAW

    In the above-captioned proceeding (``Web IV''), currently pending 
before the Copyright Royalty Judges (``CRJs'' or ``Judges''), the 
Judges will establish royalty rates and terms for webcasters' digital 
performance of sound recordings and making of ephemeral recordings 
under the statutory licenses embodied in sections 112(e) and 114(f)(2) 
of the Copyright Act (``Act''), such rates and terms to apply for the 
five-year period beginning January 1, 2016. The Act requires the CRJs 
to establish rates and terms that ``distinguish among the different 
types of eligible nonsubscription transmission services and new 
subscription services''--that is, among different types of webcasting 
services--but does not include the same instruction vis-a-vis the 
licensors of sound recordings under the relevant licenses.\1\
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    \1\ 17 U.S.C. 114(f)(2).
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    On September 11, 2015, relying upon section 802(f)(1)(B), the CRJs 
referred to the Register of Copyrights the following question:
    Does Section 114 of the Act (or any other applicable provision of 
the Act) prohibit the Judges from setting rates and terms that 
distinguish among different types or categories of licensors, assuming 
a factual basis in the evidentiary record before the Judges 
demonstrates such a distinction in the marketplace? \2\
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    \2\ Order Referring Novel Material Question of Law and Setting 
Briefing Schedule, Docket No. 14-CRB-0001-WR (2016-2020) (Sept. 11, 
2015) (``Referral Order'').

Section 802(f)(1)(B) requires the CRJs to request a decision of the 
Register ``[i]n any case in which a novel material question of 
substantive law concerning an interpretation of those provisions of 
[title 17] that are the subject of the proceeding is presented.'' \3\ 
The Register's decision is to be issued within thirty days after the 
Register receives all of the briefs or comments of the participants and 
her determination becomes part of the record of the proceeding.\4\
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    \3\ 17 U.S.C. 802(f)(1)(B)(i).
    \4\ Id.
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    For the reasons explained below, the Register of Copyrights 
concludes that the question posed by the CRJs is not in fact 
``presented'' in this proceeding, and was therefore not properly 
referred to the Register for decision.

I. Background

    Rates and terms under the statutory licenses set forth in sections 
112(e) and 114(f)(2) are to be to be set under the ``willing buyer/
willing seller standard,'' meaning that the rates and terms should be 
those ``that most clearly represent the rates and terms that would have 
been negotiated in the marketplace between a willing buyer and a 
willing seller.'' \5\ In establishing those rates and terms, the CRJs 
``may consider the rates and terms for comparable types of digital 
audio transmission services and comparable circumstances under 
voluntary license agreements.'' \6\ The Act also specifies that 
``[s]uch rates and terms shall distinguish among the different types of 
[services] then in operation . . . such differences to be based on 
criteria including, but not limited to, the quantity and nature of the 
use of sound recordings and the degree to which use of the service may 
substitute for or may promote the purchase of phonorecords by 
consumers.'' \7\
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    \5\ 17 U.S.C. 114(f)(2)(B); see also id. Sec.  112(e)(4).
    \6\ 17 U.S.C. 114(f)(2)(B); see also id. Sec.  112(e)(4).
    \7\ 17 U.S.C. 114(f)(2)(B).
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    Neither section 114 nor any other provision of the Act includes any 
express language addressing whether or not webcasting rates and terms 
can distinguish among licensors of sound recordings. Since the 
inception of the statutory license for the digital performance of sound 
recordings in 1995, the CRJs--as well as their predecessor, the 
Copyright Arbitration Royalty Panels--have established uniform rates 
and terms for all licensors

[[Page 76578]]

of sound recordings under the section 114 and 112 licenses.\8\
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    \8\ See generally, e.g., Determination of Royalty Rates for 
Digital Performance Right in Sound Recordings and Ephemeral 
Recordings, 79 FR 23,102 (Apr. 25, 2014); Determination of Rates and 
Terms for Preexisting Subscription Services and Satellite Digital 
Audio Radio Services, 78 FR 23,054 (April 17, 2013); Digital 
Performance Right in Sound Recordings and Ephemeral Recordings, 76 
FR 13,026 (Mar. 9, 2011); Digital Performance Right in Sound 
Recordings and Ephemeral Recordings, 72 FR 24,084 (May 1, 2007); 
Determination of Reasonable Rates and Terms for the Digital 
Performance of Sound Recordings by Preexisting Subscription 
Services, 68 FR 39,837 (July 3, 2003); Determination of Reasonable 
Rates and Terms for the Digital Performance of Sound Recordings and 
Ephemeral Recordings, 67 FR 45,240 (July 8, 2002); Determination of 
Reasonable Rates and Terms for the Digital Performance of Sound 
Recordings, 63 FR 25,394 (May 8, 1998).
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    On September 11, 2015, after the close of the record in this 
proceeding, the CRJs issued an order referring the above-cited novel 
material question of substantive law to the Register and requesting 
briefing on the question from the parties.\9\ As noted, the CRJs 
invoked 17 U.S.C. 802(f)(1)(B) as the basis for their referral. That 
provision states that ``[i]n any case in which a novel material 
question of substantive law concerning an interpretation of those 
provisions of this title that are the subject of the proceeding is 
presented, the Copyright Royalty Judges shall request a decision of the 
Register of Copyrights, in writing, to resolve such novel question.'' 
\10\ The CRJs must ``apply the legal determinations embodied in [a 
timely delivered] decision of the Register of Copyrights in resolving 
material questions of substantive law'' and must include the decision 
``in the record that accompanies their final determination.'' \11\
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    \9\ See Referral Order at 2.
    \10\ 17 U.S.C. 802(f)(1)(B)(i).
    \11\ Id.
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    The CRJs delivered the participants' initial and responsive briefs 
to the Copyright Office on October 14, 2015. That same day, the 
Register invited participants in the Web IV proceeding and other 
interested parties to file supplemental briefs on three specific issues 
relating to the novel material question of substantive law:
    1. Is there any evidence in the legislative history of the 1909 
Copyright Act, the 1976 Copyright Act, the Digital Performance Rights 
in Sound Recordings Act of 1995, the 1998 Digital Millennium Copyright 
Act, the Copyright Royalty and Distribution Reform Act of 2004, or any 
other legislation, of an intent by Congress to allow or disallow the 
establishment of rates and/or terms that distinguish among different 
types or categories of licensors?
    2. How might the Register's decision affect other statutory 
licenses, e.g., the statutory license in section 115 for the making and 
distribution of phonorecords of nondramatic musical works? How, if at 
all, should any such broader implications factor into the Register's 
analysis?
    3. Are there administrative law or constitutional considerations 
(including rational basis or due process concerns) that would affect or 
should guide the Judges' ability to adopt rates and/or terms for the 
compensation of copyright owners, featured recording artists, and 
others for the use of sound recordings based on the identity of the 
licensor?

On October 26, 2015, the Office received supplemental briefing from 
participants and other interested parties in response to the above 
questions.

II. Summary of the Parties' Arguments

A. Position of SoundExchange

    SoundExchange, Inc. (``SoundExchange'') is the entity currently 
designated for purposes of sections 114 and 112 to collect statutory 
royalties from webcasting (and certain other) services and distribute 
them to copyright owners and recording artists. In the Web IV 
ratesetting proceedings before the CRJs, SoundExchange served as the 
primary representative of copyright owners and artists, including major 
and independent record labels, featured recording artists, and the two 
artist unions designated under the statute to receive and distribute 
royalties to nonfeatured musicians and vocalists--the American 
Federation of Musicians of the United States and Canada (``AFM'') and 
the Screen Actors Guild-American Federation of Television and Radio 
Artists (``SAG-AFTRA'').\12\ It is undisputed that during the 
ratesetting proceedings before the CRJs, SoundExchange--acting on 
behalf of its constituent interests--proposed rates and terms that did 
not distinguish among licensors of sound recordings.\13\
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    \12\ 17 U.S.C. 114(g)(2)(B), (C).
    \13\ SoundExchange Initial Br. at 2; see also SoundExchange 
Supp. Br. at 2 (``In the proceeding, SoundExchange identified, based 
on the best marketplace evidence, a single royalty rate for all 
commercial licensees utilizing the statutory license.'').
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    Although SoundExchange represented the vast majority of copyright 
owner participants during the Web IV ratesetting proceedings,\14\ it 
has declined to take a position on the question referred by the 
CRJs.\15\ Instead, SoundExchange noted that two groups of its 
constituents--UMG Recordings, Inc., Capitol Records, LLC, and Sony 
Music Entertainment (collectively, ``Major Labels''), on the one hand, 
and the American Association of Independent Music, AFM, and SAG-AFTRA 
(collectively, ``Independent Labels and Unions''), on the other--would 
be filing their own briefs.\16\ These groups are represented by 
separate counsel for the present purpose and, as explained below, take 
diametrically opposed positions on the merits.
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    \14\ George Johnson, an individual sound recording owner, 
represented himself during ratesetting proceedings. See George 
Johnson Initial Br. at 1; NAB/NRBNMLC Response Br. at 1 n.1.
    \15\ SoundExchange Initial Br. at 1; SoundExchange Response Br. 
at 1.
    \16\ SoundExchange Initial Br. at 1.
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    Although SoundExchange has declined to take a position on the 
merits of the referred question, it does, however, stress that 
``[b]ecause segmentation by licensor would raise issues that no party 
has addressed'' in the proceeding, if the Register were to determine 
that segmentation were legally permissible, the parties would need to 
be given an opportunity to further address those issues.\17\
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    \17\ Id. at 2.
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B. Position of Independent Labels and Unions, Music Managers, and 
Webcasters

    The Independent Labels and Unions and Music Managers Forum, along 
with webcasting parties iHeartMedia, Inc., Pandora Media, Inc., 
SiriusXM Radio, Inc., and the National Association of Broadcasters and 
National Religious Broadcasters Noncommercial Music License Committee 
(``NAB/NRBNMLC'') (the webcasting parties collectively, 
``Webcasters''), contend that the CRJs lack the authority to adopt 
different rates and terms for different categories of licensors.\18\ 
These parties argue that the overall structure of section 114 
demonstrates that Congress did not intend for parties to adopt 
differential rates for licensors.
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    \18\ See, e.g., Independent Labels and Unions Initial Br. at 24; 
iHeartMedia Initial Br. at 3; SiriusXM Initial Br. at 1; Pandora 
Initial Br. at 1; NAB/NRBNMLC Response Br.at 2; Music Managers Forum 
Supp. Br. at 1.
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    For instance, these parties note that section 114 expressly allows 
the CRJs to set different rates and terms based on the type of 
webcasting service being licensed, but is silent as to whether the CRJs 
can differentiate among types of licensors. Relying on the canon of 
statutory construction known as expressio unius est exclusio alterius--
that is, the express mention of one subject impliedly excludes other 
subjects--this group urges that this silence was purposeful, and shows 
Congress's intent to withhold from the CRJs the power to adopt 
different rates and terms for different licensors. They

[[Page 76579]]

also point to the provision stating that ``[t]he schedule of reasonable 
rates and terms'' adopted by the CRJs ``shall . . . be binding on all 
copyright owners,'' \19\ and argue that by referring to a single 
``schedule'' that binds ``all'' copyright owners, Congress anticipated 
that the CRJs would maintain a single set of rates and terms for all 
licensors.\20\
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    \19\ 17 U.S.C. 114(f)(2)(B); 17 U.S.C. 112(e)(4).
    \20\ iHeartMedia Response Br. at 2-3, iHeartMedia Supp. Br. at 
9-10; see also Independent Labels and Unions Initial Br. at 5-8.
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    These parties also urge that adopting rates and terms that 
differentiate among categories of licensors would undermine Congress's 
desire for an administrable statutory license. For example, they note 
that the ownership or distribution rights for any given sound recording 
can change hands repeatedly, and that it thus may be difficult to know 
the current owner of any particular recording at a given point in 
time.\21\ According to these parties, it is unlikely that Congress 
would have established a scheme that made it difficult for a licensee 
to know what rates and terms apply to individual sound recordings.\22\
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    \21\ See, e.g., Independent Labels and Unions Initial Br. at 9 
(``[T]he entity or person who owns or control rights of any 
particular recording can be quite fluid and historically quite hard 
to keep track of, as ownership and distribution rights change over 
time.''); Pandora Initial Br. at 5 (explaining that ``ownership of 
sound recordings is hardly static'' and providing examples of the 
different ways a given recording could cross back and forth between 
various categories of owners); Music Managers Forum Supp. Br. at 1 
(``A recording could be made by an artist, licensed to an 
independent label, sold to a major label and then revert back to the 
artist.'').
    \22\ See, e.g., Independent Labels and Unions Initial Br. at 9-
11; iHeartMedia Initial Br. at 3; Pandora Initial Br. at 5-6 
(``[M]ost if not all services would be unable to compute the license 
fees owed to SoundExchange under a differential-pricing regime, as 
they neither possess, nor have ready access to, all of the 
information necessary to determine which sound recordings are owned 
by which licensors, let alone at any given time, and into which 
licensor-category any given record label may fall.'').
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    In addition to arguments about the merits of the referred question, 
the Independent Labels and Unions and Webcasters raise procedural 
concerns of due process under the Constitution and the Administrative 
Procedure Act.\23\ Specifically, they urge that, even if the Register 
were to conclude that the CRJs could adopt rates that distinguish among 
categories of licensors, the CRJs could not actually adopt such rates 
in this ratesetting proceeding.\24\ The Independent Labels and Unions 
and Webcasters argue that they had inadequate notice that the CRJs 
might adopt differential rates.\25\ They point to the CRJs' uniform 
historical practice of adopting rates and terms for webcasting that do 
not distinguish among different categories of licensors,\26\ and the 
fact that no party to the ratesetting proceeding proposed rates that 
distinguish among licensors.\27\ As NAB/NRBNMLC puts it, ``no 
participant had the opportunity, or any reason, to introduce evidence 
or to respond to any such proposal, or to demonstrate the potential 
administrative difficulties or consequences of such rates and terms.'' 
\28\
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    \23\ See, e.g., Independent Labels and Unions Initial Br. at 14-
22; NAB/NRBNMLC Response Br. at 1-2; SiriusXM Initial Br. at 3-4, 
17-18; iHeartMedia Supp. Br. at 3-7.
    \24\ See, e.g., Independent Labels and Unions Initial Br. at 22; 
iHeartMedia Response Br. at 10.
    \25\ See, e.g., NAB/NRBNMLC Response Br. at 1; Independent 
Labels and Unions Initial Br. at 16; iHeartMedia Supp. Br. at 2, 4-
6.
    \26\ See, e.g., Independent Labels and Unions Initial Br. at 11-
13; iHeartMedia Supp. Br. at 3.
    \27\ See, e.g., Independent Labels and Unions Initial Br. at 13-
14; Pandora Initial Br. at 4; iHeartMedia Response Br. at 9; 
SiriusXM Initial Br. at 6, 17; NAB/NRBNMLC Response Br. at 1.
    \28\ NAB/NRBNMLC Response Br. at 1; see also Independent Labels 
and Unions Initial Br. at 13-14.
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    Indeed, the Independent Labels and Unions urge that they agreed to 
be represented by SoundExchange in the ratesetting proceedings on the 
assumption that SoundExchange would seek, and the CRJs would adopt, a 
single set of rates for all licensors.\29\ The Independent Labels and 
Unions suggest that, had the possibility of rates and terms that 
differentiate among licensors in fact been before the CRJs, 
SoundExchange could not have fairly represented all of its 
constituents--who disagree about the desirability of differential 
rates--and the Independent Labels and Unions would have participated in 
the proceedings in their own right.\30\
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    \29\ Independent Labels and Unions Initial Br. at 14.
    \30\ Id. at 14, 23.
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C. Position of the Major Labels and George Johnson

    The Major Labels, supported by George Johnson, an individual sound 
recording owner, contend that the CRJs are permitted to adopt rates and 
terms that distinguish among types or categories of licensors.\31\ 
Citing precedent from the U.S. Court of Appeals for the D.C. Circuit, 
the Major Labels argue that the CRJs have ``broad discretion to 
effectuate their mandate under Section 114 to establish rates that most 
clearly represent the rates negotiated by a willing buyer and a willing 
seller in the marketplace.'' \32\ They stress that no provision of the 
Copyright Act limits the CRJs' ability to adopt rates that distinguish 
among licensors.
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    \31\ Major Labels Initial Br. at 2; George Johnson Response Br. 
at 4-5.
    \32\ Major Labels Initial Br. at 3.
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    In addition, the Major Labels point to provisions of the statute 
that they claim indicate Congress's intent to allow the CRJs to 
establish such differential rates. For example, they argue that the 
willing buyer/willing seller standard ``necessarily contemplates the 
possibility of setting different rates for different kinds of 
licensors, because it directs the Judges to set rates and terms that 
reflect those that would be found in a hypothetical marketplace 
characterized by precisely such differentiation.'' \33\ The Major 
Labels urge that the statutory provisions upon which the Independent 
Labels and Artists, the Music Managers Forum, and Webcasters rely do 
not cabin the CRJs' generally broad discretion to set rates and terms 
as they deem appropriate in light of the record evidence.\34\ 
Furthermore, they dismiss the administrability concerns raised by those 
groups as irrelevant to the question asked, arguing that those 
arguments ``are outside the scope of the [referral order] and 
irrelevant to the pure question of law posed by the Judges.'' \35\
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    \33\ Id. at 6.
    \34\ Id. at 2-8, 12-14.
    \35\ Id. at 16.
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    The Major Labels similarly dismiss the due process arguments raised 
by the Independent Labels and Unions and Webcasters as ``irrelevant to 
answering the question posed'' by the CRJs, which they again emphasize 
to be a ``pure question of law.'' \36\ They further argue that, even if 
those issues were relevant, the CRJs are not foreclosed from adopting a 
rate structure that distinguishes among licensors by crediting evidence 
already in the record. They point in particular to the CRJs' notice 
initiating the ratesetting proceeding, in which the CRJs stated that 
they were `` `open to receiving evidence, testimony, and argument 
regarding any reasonable rate structure,' '' requesting participants to 
``address the importance `of the presence of economic variation among 
buyers and sellers.' '' \37\ The Major Labels suggest that these 
statements provided the parties with sufficient notice that the CRJs 
were willing to consider rates that differentiate among different 
licensors. Even so, the Major Labels do not challenge the assertion 
that no party to the ratesetting

[[Page 76580]]

proceeding pressed for rates or terms that distinguish among licensors.
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    \36\ Id. at 15.
    \37\ Major Labels Supp. Br. at 13 (quoting 79 FR 412, 413 (Jan. 
3, 2014)) (emphasis in orginal).
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D. Position of Music Publishers Regarding Impact on Other Statutory 
Licenses

    In response to the Register's invitation to non-participants to 
offer their views, the National Music Publishers Association, Inc. 
(``NMPA'') and a group comprising the Independent Music Publishers 
Forum, the Association of Independent Music Publishers, and a group of 
nine independent music publishers (this group collectively, ``IMPF/
AIMP''), filed supplemental briefs. NMPA did not take a position on the 
merits of the referred question.\38\ IMPF/AIMP, however, adopted the 
arguments of the Independent Labels and Artists, taking the position 
that ``Section 114 does not permit the Copyright Royalty Judges to 
award different rates based on the identity or categorization of the 
licensors.'' \39\
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    \38\ NMPA Supp. Br. at 2.
    \39\ IMPF/AIMP Supp. Br. at 4.
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    NMPA and IMPF/AIMP also addressed the Register's question regarding 
the implications of the decision here for other statutory licenses.\40\ 
They asked the Register to expressly confine her decision to sections 
112 and 114, and state that the decision does not have any impact on 
the statutory license in section 115 for the making and distribution of 
phonorecords of nondramatic musical works.\41\ According to NMPA, 
``Section 115 is a very different license than Section 114,'' as it 
concerns ``an entirely different type of royalty, and an entirely 
different group of stakeholders.'' \42\
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    \40\ See NMPA Supp. Br. at 3-7; IMPF/AIMP Supp. Br. at 4-5. 
Other parties also addressed this question to varying extents. See, 
e.g., Independent Labels and Unions Supp. Br. at 2-3 (arguing that a 
decision here ``would impact all Copyright Office rate 
proceedings''); SiriusXM Supp. Br. at 5-7 (arguing that any ruling 
here ``should be strictly limited'' to the Web IV proceeding, 
discussing differences between the licenses); Major Labels Supp. Br. 
at 5-8 (arguing that the potential ramifications of any decision on 
other statutory licenses are beyond the scope of the referred 
question and irrelevant to its resolution, discussing differences 
between the licenses).
    \41\ NMPA Supp. Br. at 7; IMPF/AIMP Supp. Br. at 4-5.
    \42\ NMPA Supp. Br. at 3.
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III. Register's Determination

    Having carefully considered the statutory framework and the 
parties' submissions, the Register of Copyrights concludes that there 
is no basis in the context of the current proceeding on which to render 
an opinion on the question posed by the CRJs, as the question does not 
meet the statutory criteria for referral.
    In referring the question to the Register for a written opinion, 
the Judges relied on 17 U.S.C. 802(f)(1)(B). That provision, however, 
requires the CRJs to request a decision from the Register only in a 
``case in which a novel material question of substantive law concerning 
an interpretation of those provisions of [title 17] that are the 
subject of the proceeding is presented.'' \43\ Similarly, section 
802(f)(1)(A)(ii)--which the CRJs did not cite but also could arguably 
apply--gives the CRJs discretion to obtain a formal written opinion 
from the Register of Copyrights concerning ``any material questions of 
substantive law that relate to the construction of provisions of this 
title and arise in the course of the proceeding.'' \44\ Thus, by their 
plain terms, these two statutory mechanisms requiring a written opinion 
from the Register may only be invoked by the CRJs where a referred 
question is actually ``presented'' or ``arise[s]'' in a particular 
proceeding.
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    \43\ 17 U.S.C. 802(f)(1)(B)(i) (emphasis added).
    \44\ Id. Sec.  802(f)(1)(A)(ii) (emphasis added).
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    This reading of the statute is reinforced by its legislative 
history. Originally, when the CRJ system was enacted in 2004, the 
statute allowed the CRJs to refer material questions of substantive law 
to the Register under section 802(f)(1)(A)(ii) when they ``concern[ed] 
an interpretation or construction of those provisions of [title 17] 
that are the subject of the proceeding.'' \45\ On its face, this 
language appeared broadly to permit the referral of questions 
concerning any provision that was generally the ``subject'' of the 
proceeding (e.g., in the current proceeding, sections 112(e) and 
114(f)), regardless of whether the specific question was actually 
implicated by the proceeding. But when Congress made technical 
corrections to the statute in 2006, it qualified section 
802(f)(1)(A)(ii) to clarify that questions may be referred under this 
provision only when they actually ``arise in the course of the 
proceeding.'' \46\ By adding the ``arise'' requirement, the amendment 
brought section 802(f)(1)(A)(ii) more closely into alignment with 
section 802(f)(1)(B)(i), which already contained the ``presented'' 
language. In limiting the referral mechanism in both cases, Congress 
signaled its intent that questions sent to the Register for a written 
opinion--whether novel and/or material--should be confined to matters 
actually at issue in a proceeding.
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    \45\ Copyright Royalty and Distribution Reform Act of 2004, Pub. 
L. 108-419, Sec.  3(a), 118 Stat. 2341, 2346 (2004).
    \46\ Copyright Royalty Judges Program Technical Corrections Act, 
Pub. L. 109-303, Sec.  3, 120 Stat. 1478, 1478-79 (2006).
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    Whether a question of substantive law is actually ``presented'' or 
``arises'' in a particular case will inevitably depend upon the 
circumstances of that proceeding. It will often be readily apparent 
that the question is presented, such as when the question concerns a 
statutory limitation on the CRJs' authority to consider certain types 
of evidence sought to be presented by participants,\47\ whether a 
specific term proposed by a party for adoption in a settlement is 
consistent with the Act,\48\ the extent of the CRJs' continuing 
jurisdiction over a prior determination under the Act,\49\ or whether a 
statutory license extends to a particular activity for which a party 
seeks to have a rate established.\50\ In each of these examples, the 
Register's answer to the question will presumably have an impact on the 
conduct or outcome of the proceeding.
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    \47\ Scope of the Copyright Royalty Judges' Continuing 
Jurisdiction, 80 FR 58,300 (Sept. 28, 2015).
    \48\ See., e.g., Scope of the Copyright Royalty Judges Authority 
to Adopt Confidentiality Requirements upon Copyright Owners within a 
Voluntarily Negotiated License Agreement, 78 FR 47,421 (Aug. 5, 
2013) (in section 115 proceeding, determining that CRJs lacked 
authority to adopt certain provisions imposing a duty of 
confidentiality upon copyright owners).
    \49\ See, e.g., Scope of the Copyright Royalty Judges' 
Continuing Jurisdiction, 80 FR 25,333 (May 4, 2015) (determining 
that CRJs had the authority to issue a clarifying interpretation of 
regulations adopted in a prior ratesetting determination).
    \50\ Mechanical and Digital Phonorecord Delivery Rate Adjustment 
Proceeding, 71 FR 64,303 (Nov. 1, 2006).
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    Here, by contrast, the Register finds that the question whether the 
CRJs may adopt rates and terms for webcasting that distinguish among 
different types or categories of licensors is merely a theoretical one 
in the context of this proceeding. As noted, the CRJs have not 
previously adopted rates and terms for webcasting services that 
distinguish among licensors. Setting aside the question whether the 
CRJs have the authority to do so, it is clear from the submissions in 
response to the referred question that the various participants 
litigated this case on the assumption that the outcome would be an 
undifferentiated rate structure for licensors. To be sure, in 
initiating the proceeding, the CRJs broadly invited parties to provide 
evidence and argument ``regarding any reasonable rate structure'' or 
``the presence of economic variations among buyers and sellers.'' \51\

[[Page 76581]]

But it is undisputed that no participant in the proceeding in fact 
proposed rates or terms that differentiated among licensors and, 
accordingly, such a structure was not understood to be a subject of 
litigation.\52\ Moreover, based on the parties' briefs in response to 
the referred question and the Copyright Office's review of the Web IV 
docket, there is no indication that the CRJs went beyond their general 
invitation at the outset of the proceeding to require that such 
differentiation be addressed.\53\ As a result, no party addressed the 
question of ``segmentation by licensor,'' \54\ and ``no participant had 
the opportunity, or any reason, to introduce evidence or to respond to 
any such proposal, or to demonstrate the potential administrative 
difficulties or consequences of such rates and terms.'' \55\
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    \51\ Determination of Royalty Rates for Digital Performance in 
Sound Recordings and Ephemeral Recordings (Web IV), 79 FR 412, 413 
(Jan. 3, 2014). In that notice, the CRJs also referred generally to 
the concept of ``price discrimination'' in free market transactions, 
and invited participants to address ``the potential applicability or 
inapplicability of price discrimination within the commercial 
webcaster segment of the market as well.'' Id. at 413-14. But the 
CRJs' discussion focused on price discrimination by sellers--i.e., 
where sellers charge different prices for identical goods with the 
price differences based on the status of the buyers. Id. at 413. 
That, of course, is the type of price discrimination expressly 
contemplated by the statute, which requires the CRJs to adopt 
``rates and terms [that] distinguish among the different types of 
[services] then in operation.'' 17 U.S.C. 114(f)(2).
    \52\ See NAB/NRBNMLC Response Br. at 1; SiriusXM Initial Br. at 
6; Independent Labels and Unions Initial Br. at 11-12; see also 
Direct Testimony of Kurt Hanson Submitted on behalf of AccuRadio, 
LLC, 16-18 (Oct. 6, 2014); Written Direct Statement of College 
Broadcasters, Inc. (Oct. 7, 2014) (attaching proposed regulations); 
Letter from David Oxenford on behalf of Educational Media Foundation 
to Copyright Royalty Board (Oct. 7, 2014) (joining in the rate 
proposal submitted by NRBNMLC); Written Direct Statement of Geo 
Music Group, 4-5 (Oct. 10, 2014); Written Testimony of Michael 
Papish on behalf of Harvard Radio Broadcasting Co., Inc. (WHRB) 
(Oct. 7, 2014); Written Testimony of Frederick J. Kass on behalf of 
Intercollegiate Broadcasting System (Oct. 7, 2014); Proposed Rates 
and Terms of iHeartMedia, Inc. (Oct. 7, 2014); Written Direct 
Statement of the National Association of Broadcasters, Vol. 1B (Oct. 
7, 2014); Written Direct Case of the Corporation for Public 
Broadcasting, on behalf of National Public Radio, Inc., including 
National Public Radio, Inc.'s Member Stations, American Public 
Media, Public Radio International, and Public Radio Exchange 
Broadcasting, 6-8 (Oct. 7, 2014); Written Direct Statement of the 
National Religious Broadcasters Noncommercial Music License 
Committee, Including Educational Media Foundation (Oct. 7, 2014); 
Proposed Rates and Terms of Pandora Media, Inc.; Written Direct 
Statement of Sirius XM Radio Inc., 1-2 (Oct. 7, 2014); Proposed 
Rates and Terms of SoundExchange, Inc. (Oct. 7, 2014).
    \53\ See Notice of Participants, Commencement of Voluntary 
Negotiation Period, and Case Scheduling Order, Docket No. 14-CRB-
0001-WR (2016-2020), 1 (Feb. 19, 2014) (asking parties to ``address 
expressly issues relating to categories of licensees,'' but omitting 
any mention of issues relating to categories of licensors).
    \54\ SoundExchange Initial Br. at 2. In this regard, it is 
notable that SoundExchange finds itself unable to put forth a 
unified view on the question of differentiated rates. Presumably 
SoundExchange could not have acted as the representative of 
virtually all of the rightsholders in the proceeding if the question 
of a differentiated rate structure was actually in contention. See 
Independent Labels and Unions Initial Br. at 14.
    \55\ See NAB/NRBNMLC Response Br. at 1.
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    In this regard, the Register further observes that the CRJs are 
statutorily required to make determinations that are ``supported by the 
written record'' \56\ and based ``on economic, competitive and 
programming information presented by the parties.'' \57\ Significantly, 
the U.S. Court of Appeals for the D.C. Circuit has twice vacated CRJ 
determinations that relied on theories ``first presented in the Judges' 
determination and not advanced by any participant.''\58\ Here--
consistent with their rate proposals--the participants' respective 
proposed findings of fact and conclusions of law submitted at the 
conclusion of the proceeding uniformly fail to advocate for statutory 
rates and terms that distinguish among licensors.\59\ Moreover, in 
briefing the question now before the Register, no party has identified 
any basis upon which the CRJs could reasonably rely to adopt a 
differentiated rate structure.\60\ Thus, even assuming for the sake of 
argument that they possess the legal authority to establish rates that 
differentiate by licensor,\61\ it seems that under the current 
circumstances, the CRJs could not meet their basic obligation ``to make 
[a] reasoned decision[] supported by the written record before them.'' 
\62\
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    \56\ 17 U.S.C. 803(c)(3).
    \57\ Id. Sec.  114(f)(2)(B).
    \58\ Settling Devotional Claimants v. Copyright Royalty Bd., 797 
F.3d 1106, 1121 (D.C. Cir. 2015) (quoting Intercollegiate Broad. 
Sys. v. Copyright Royalty Bd., 574 F.3d 748, 767 (D.C. Cir. 2009) 
(internal quotation marks omitted)).
    \59\ See Proposed Findings and Conclusions of Intercollegiate 
Broadcasting Systems, 13 (July 19, 2015); Proposed Findings of Fact 
of iHeartMedia, Inc., 207 (June 24, 2015); National Association of 
Broadcasters' Proposed Findings of Fact and Conclusions of Law (July 
19, 2015) (attaching NAB's Proposed Rates and Terms); The National 
Religious Broadcasters Noncommercial Music License Committee's 
Corrected Proposed Findings of Fact and Conclusions of Law (June 24, 
2015) (attaching NRBNMLC's Proposed Noncommercial Webcaster Rates 
and Terms); Pandora Media, Inc.'s Proposed Findings of Fact and 
Conclusions of Law, 1-2 (June 19, 2015); Sirius XM Radio Inc.'s 
Proposed Findings of Fact, 1 (June 19, 2015); Proposed Findings of 
Fact of SoundExchange, Inc., 94-96 (June 19, 2015); Proposed 
Findings and Conclusions on behalf of Harvard Radio Broadcasting 
Co., Inc. (WHRB) (June 19, 2015).
    \60\ Although the Major Labels suggest that the CRJs could 
``credit evidence supporting a different rate structure than they 
have adopted in the past,'' they do not point to any actual argument 
or evidence in the record that would support such an approach. See 
Majors Labels Supp. Br. at 14. In any event, as noted, such an 
approach would appear to run afoul of controlling precedent. See 
Settling Devotional Claimants, 797 F.3d at 1121 (reversing CRJ 
determination where theory was ``first presented in the Judges' 
determination and not advanced by any participant'').
    \61\ In considering these procedural issues, the Register does 
not mean to suggest any conclusion concerning the CRJs' legal 
authority to adopt rates and terms that distinguish among licensors.
    \62\ Settling Devotional Claimants, 797 F.3d at 1121.
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    In sum, given the posture of the case, the question referred by the 
CRJs appears to be only a theoretical one in that the Register is 
unable to discern how a written decision at this juncture could 
substantively impact the conduct or outcome of this proceeding.\63\ 
Indeed, the question itself is presented in hypothetical terms: it asks 
the Register to ``assum[e] a factual basis in the evidentiary record'' 
for a distinction among licensors. As significant as the question of a 
differentiated rate structure for licensors might be under different 
circumstances, the Register does not believe that the statute 
contemplates the issuance of a written opinion when the inquiry is 
wholly theoretical in nature.
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    \63\ Referral Order at 2.
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    The language of the Act makes clear that the referral procedure 
under section 802(f)(1)(B) is limited to novel material questions of 
substantive law that are actually ``presented.'' As the Register has 
concluded that the question set forth in the CRJs' September 11, 2015 
order is not actually presented in this proceeding, she leaves the 
answer for another day.
November 24, 2015

Maria A. Pallante
Register of Copyrights and Director, United States Copyright Office

[FR Doc. 2015-30910 Filed 12-8-15; 8:45 am]
BILLING CODE 1410-30-P