[Federal Register Volume 81, Number 142 (Monday, July 25, 2016)]
[Proposed Rules]
[Pages 48371-48372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17437]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 385

[Docket No. 16-CRB-0003-PR (2018-2022)]


Determination of Rates and Terms for Making and Distributing 
Phonorecords (Phonorecords III)

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

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SUMMARY: The Copyright Royalty Judges publish for comment proposed 
regulations that set rates and terms applicable during the period 
beginning January 1, 2018, and ending December 31, 2022, for the 
section 115 statutory license for making and distributing phonorecords 
of nondramatic musical works.

DATES: Comments and objections, if any, are due no later than August 
24, 2016.

ADDRESSES: The proposed rule is posted on the agency's Web site 
(www.loc.gov/crb) and on the web at Regulations.gov 
(www.regulations.gov). Interested parties should submit electronic 
comments via email to [email protected]. Those who chose not to submit 
comments electronically should see How to Submit Comments in the 
SUPPLEMENTARY INFORMATION section below for physical addresses and 
further instructions.

FOR FURTHER INFORMATION CONTACT: Kimberly Whittle, Attorney Advisor, by 
telephone at (202) 707-7658, or by email at [email protected].

SUPPLEMENTARY INFORMATION: 

Background

    Section 115 of the Copyright Act, title 17 of the United States 
Code, requires a copyright owner of a nondramatic musical work to grant 
a license (also known as the ``mechanical'' compulsory license) to any 
person who wants to make and distribute phonorecords of that work, 
provided that the copyright owner has allowed phonorecords of the work 
to be produced and distributed, and that the licensee complies with the 
statute and regulations. In addition to the production or distribution 
of physical phonorecords (compact discs, vinyl, cassette tapes, and the 
like), section 115 applies to digital transmissions of phonorecords, 
including permanent digital downloads and ringtones.
    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 section 115 license. 17 U.S.C. 801(b)(1), 
804(b)(4). Accordingly, the Judges commenced the current proceeding in 
January 2016, by publishing notice of the commencement and a request 
that interested parties submit petitions to participate. See 81 FR 255 
(Jan. 5, 2016).
    The Judges received petitions to participate in the current 
proceeding from Amazon Digital Services, Inc.; Apple, Inc.; American 
Society of Composers, Authors and Publishers (ASCAP); Broadcast Music, 
Inc. (BMI); Church Music Publishers Association; David Powell; Deezer 
S.A.; Digital Media Association (DiMA); Gear Publishing Co; GEO Music 
Group; Google, Inc.; Music Reports, Inc.; Nashville Songwriters 
Association International; National Music Publishers Association; Harry 
Fox Agency; Omnifone Group Limited; Pandora Media, Inc.; Recording 
Industry Association of America, Inc. (RIAA); Rhapsody International, 
Inc.; Songwriters of North America; Sony Music Entertainment; 
SoundCloud Limited; Spotify USA Inc.; Universal Music Group (UMG); and 
Warner Music Group (WMG).
    The Judges gave notice to all participants of the three-month 
negotiation period required by 17 U.S.C. 803(b)(3) and directed that, 
if the participants were unable to negotiate a settlement, they should 
submit Written Direct Statements no later than October 3, 2016. On June 
15, 2016, the Judges received a motion stating that several 
participants \1\ had reached a partial settlement ``among a significant 
portion of the sound recording and music publishing industries'' 
regarding the rates and terms under Section 115 of the Copyright Act 
for physical phonorecords, permanent digital downloads, and ringtones 
for 2018-2022 rate period and seeking approval of that partial 
settlement. See Joint Motion to Adopt Partial Settlement, Docket No. 
16-CRB-0003-PR (2018-2022) at 1 (June 15, 2016) (Motion).
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    \1\ The participants filing the motion were Church Music 
Publishers Association, Nashville Songwriters Association 
International, National Music Publishers Association, Harry Fox 
Agency, and Songwriters of North America (collectively self-named 
the ``Copyright Owners''), and licensees UMG and WMG.
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    The settlement proposes ``that the royalty rates and terms 
presently set forth in 37 C.F.R. Part 385 Subpart A should be continued 
for the rate period at issue in the Proceeding, with one minor 
conforming update, namely, that an outdated cross reference in section 
385.4 regarding statements of account be updated, and that the 
continued rates

[[Page 48372]]

should apply to ``Subpart A Configurations made and distributed by or 
on behalf of UMG and WMG'' and, in the Judges' discretion, to other 
licensees. Motion at 3.
    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 that Judges 
shall provide notice and an opportunity to comment on the agreement to 
(1) those that would be bound and (2) participants in the proceeding 
that would be bound by the terms, rates, or other determination set by 
the agreement. See section 801(b)(7)(A). The Judges may decline to 
adopt the agreement as a basis for statutory terms and rates for 
participants not party to the agreement if any participant objects and 
the Judges conclude that the agreement does not provide a reasonable 
basis for setting statutory terms or rates. Id.
    If the Judges adopt rates and terms reached pursuant to a 
negotiated settlement, those rates and terms are binding on all 
copyright owners of musical works and those using the musical works in 
the activities described in the proposed regulations.

Proposed Adjustments to Rates and Terms

    In publishing the parties' proposed rates and terms, the Judges are 
making the requested change in the cross reference because it is 
clearly outdated. The text of the section it refers to merely says 
``reserved.'' In addition, the Judges propose adding the dates of the 
five-year period to the ``General'' section in order to specify the 
applicable dates of the rates and terms.
    In the event the Judges determine not to adopt the proposed 
regulations for all copyright owners of musical works licensed under 
section 115 for the making or distributing of physical or digital 
phonorecords, the parties have proposed the following revised 
definition of licensee \2\, which would make the rates in the partial 
settlement applicable only to ``Subpart A Configurations made and 
distributed by or on behalf of [licensees] UMG and WMG'':
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    \2\ The current definition is: ``Licensee is a person or entity 
that has obtained a compulsory license under 17 U.S.C. 115, and the 
implementing regulations, to make and distribute phonorecords of a 
nondramatic musical work, including by means of a digital 
phonorecord delivery.'' 37 CFR 385.2.

    Licensee is Capitol Christian Music Group, Inc., Capitol 
Records, LLC, UMG Recordings, Inc., Warner Music Inc., any of their 
respective successors, and any entity controlling, controlled by, or 
under common control with any such entity, when it has obtained a 
compulsory license under 17 U.S.C. 115, and the implementing 
regulations, to make and distribute phonorecords of a nondramatic 
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musical work, including by means of a digital phonorecord delivery.

    The Judges solicit comments on whether they should adopt the 
proposed regulations, including the change in the cross reference, as 
statutory rates and terms relating to the making and distribution of 
physical or digital phonorecords of nondramatic musical works for the 
participants that submitted the Motion. In addition, the Judges seek 
comment on whether they should apply the rates and terms in the partial 
settlement to all copyright owners and licensees and whether they 
should specify the five-year period in the regulation.
    Comments and objections must be submitted no later than August 24, 
2016.

How To Submit Comments

    Interested members of the public must submit comments to only one 
of the following addresses. If not commenting by email or online, 
commenters must submit an original of their comments, five paper 
copies, and an electronic version in searchable PDF format on a CD.
    Email: [email protected]; or
    Online: http://www.regulations.gov; or
    U.S. mail: Copyright Royalty Board, P.O .Box 70977, Washington, DC 
20024-0977; or
    Overnight service (only USPS Express Mail is acceptable): Copyright 
Royalty Board, P.O. Box 70977, Washington, DC 20024-0977; or
    Commercial courier: Address package to: Copyright Royalty Board, 
Library of Congress, James Madison Memorial Building, LM-403, 101 
Independence Avenue SE., Washington, DC 20559-6000. Deliver to: 
Congressional Courier Acceptance Site, 2nd Street NE., and D Street 
NE., Washington, DC; or
    Hand delivery: Library of Congress, James Madison Memorial 
Building, LM-401, 101 Independence Avenue SE., Washington, DC 20559-
6000.

List of Subjects in 37 CFR Part 385

    Copyright, Phonorecords, Recordings.

Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges propose to amend 37 CFR part 385 as follows:

PART 385--RATES AND TERMS FOR USE OF MUSICAL WORKS UNDER COMPULSORY 
LICENSE FOR MAKING AND DISTRIBUTING OF PHYSICAL AND DIGITAL 
PHONORECORDS

0
1. The authority citation for part 385 continues to read as follows:

    Authority:  17 U.S.C. 115, 801(b)(1), 804(b)(4).


Sec.  385.1  [Amended]

0
2. Section 385.1(a) is amended by adding ``, during the period January 
1, 2018, through December 31, 2022'' after ``17 U.S.C. 115''.


Sec.  385.4  [Amended]

0
3. Section 385.4 is amended by removing ``Sec.  201.19(e)(7)(i)'' and 
adding ``Sec.  210.16(g)(1)'' in its place.

    Dated: July 19, 2016.
Suzanne M. Barnett,
Chief Copyright Royalty Judge.
[FR Doc. 2016-17437 Filed 7-22-16; 8:45 am]
 BILLING CODE 1410-72-P