[Federal Register Volume 83, Number 133 (Wednesday, July 11, 2018)]
[Proposed Rules]
[Pages 32068-32069]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14543]

Proposed Rules
                                                Federal Register

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.


Federal Register / Vol. 83, No. 133 / Wednesday, July 11, 2018 / 
Proposed Rules

[[Page 32068]]


Copyright Office

37 CFR Part 201

[Docket No. 2018-6]

Streamlining the Administration of DART Royalty Accounts and 
Electronic Royalty Payment Processes

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

ACTION: Notice of proposed rulemaking.


SUMMARY: The Copyright Office is proposing to establish a regulation 
regarding its procedures for closing out royalty payments accounts 
under section 1005, and updating its regulations governing online 
payment procedures for cable, satellite, and digital audio recording 
technology (``DART'') statements of account to no longer require that 
payments be made in a single lump sum. These amendments are intended to 
improve the efficiency of the Copyright Office's Licensing Division 

DATES: Written comments must be received no later than 11:59 p.m. 
Eastern Time on August 10, 2018.

ADDRESSES: For reasons of government efficiency, the Copyright Office 
is using the regulations.gov system for the submission and posting of 
public comments in this proceeding. All comments are therefore to be 
submitted electronically through regulations.gov. Specific instructions 
for submitting comments are available on the Copyright Office website 
at https://www.copyright.gov/rulemaking/dartfunds. If electronic 
submission of comments is not feasible due to lack of access to a 
computer and/or the internet, please contact the Office using the 
contact information below for special instructions.

FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and 
Associate Register of Copyrights, by email at [email protected], or 
Jalyce Mangum, Attorney-Advisor, by email at [email protected]. Each 
can be contacted by telephone by calling (202) 707-8350.


I. Background

A. The Audio Home Recording Act of 1992 and DART Royalty Funds

    The Audio Home Recording Act of 1992 (AHRA) \1\ amended title 17 to 
``provide a legal and administrative framework within which digital 
audio recording technology may be made available to consumers,'' \2\ 
including to implement a royalty payment system regarding the 
importation, manufacture, and distribution of digital audio recording 
devices or media. Digital audio recording devices are defined as ``any 
machine or device of a type commonly distributed to individuals for use 
by individuals . . . that is capable of[] making a digital audio copied 
recording for private use.'' \3\ Congress intended ``importers and 
manufacturers'' to ``bear the cost of royalty fees,'' which would then 
be distributed to owners of the rights to musical works and sound 
recordings.\4\ The AHRA also requires digital audio recording devices 
to incorporate copying controls to prevent piracy of digital audio 
recordings.\5\ Manufacturers, importers, and distributors of devices 
with proper copying controls and who pay royalties are not liable for 
copyright infringement to the extent their products are used to make 
copies of sound recordings.\6\

    \1\ See Public Law 102-563, 106 Stat. 4237 (1992).
    \2\ H.R. Rep. No. 102-873(I), at 9 (1992).
    \3\ 17 U.S.C. 1001(3).
    \4\ S. Rep. No. 102-294, at 39 (1992); see also 17 U.S.C. 
    \5\ 17 U.S.C. 1002(a).
    \6\ See Alliance of Artists and Recording Cos. v. Gen. Motors 
Co., 162 F. Supp. 3d 8, 10 (D.D.C. 2016).

    Congress delegated to the Copyright Office and the Copyright 
Royalty Tribunal (``CRT'')--a predecessor to the system administered by 
the Copyright Royalty Judges (``CRJs'')--authority to administer the 
royalty system under chapter 10.\7\ Under section 1003, the importer or 
manufacturer of a digital audio recording device or media must file a 
notice with the Register of Copyrights, as well as quarterly and annual 
statements of account with respect to distribution, accompanied by 
royalty payments.\8\ The Register receives all royalty payments and, 
after deducting the reasonable costs incurred for administering this 
license, deposits the balance with the Treasury of the United 
States.\9\ These royalty payments are divided between a sound recording 
fund and a musical works fund, which are in turn subdivided into 
various subfunds, referred to collectively as the DART subfunds.\10\ 
The royalty payments attributed to these subfunds are allocated to 
copyright owners pursuant to distribution orders issued in proceedings 
before the CRJs, as described in section 1007 and in various provisions 
of chapter 8 of title 17. The Licensing Division of the Copyright 
Office administers the DART subfunds and distributes them pursuant to 
the CRJs' distribution orders.\11\

    \7\ See 17 U.S.C. 1003; see also S. Rep. No. 102-294, at 39 
(``Administration of the royalty system is the dual responsibility 
of the Copyright Office and the CRT'').
    \8\ 17 U.S.C. 1003(b), (c)(1), (c)(3).
    \9\ Id. at 1005.
    \10\ Id. at 1006(b).
    \11\ See, e.g., Order Granting Claimants' Request for Partial 
Distribution of 2005 Through 2008 DART Music Funds Royalties, Docket 
No. 2010-8 CRB DD 2005-2008 (MW), available at https://www.crb.gov/orders/2011/04411-order-granting-claimants-partial-distribution.pdf 
(last visited May 16, 2018).

    After the CRJs have issued a final distribution order with respect 
to a DART subfund, and the Licensing Division has distributed the 
royalty funds pursuant to that order, small royalty balances can still 
be attributed to these subfunds unless they have been formally closed 
out by the Copyright Office. These attributions can occur as a result 
of subsequent deposits made by payees, or, more often, in the course of 
routine review and adjustments made in the years following each 
appropriation, for example, when anticipated contract expenditures or 
other overhead expenses come in slightly under budget.
    Maintaining these small amounts in separate funds creates 
administrative expenses for the Licensing Division, and the transaction 
costs associated with distributing such small amounts of money can 
exceed the amount of money remaining in these accounts. Under section 
1005, the Copyright Office may, ``in the Register's discretion,'' close 
out the royalty payments account for a calendar year four years after 
the close of that year, and attribute ``any funds remaining in [the] 
account and any subsequent deposits that would otherwise be 
attributable to that

[[Page 32069]]

calendar year as attributable to the succeeding calendar year.'' \12\ 
In practice, the Register has not previously established a procedure to 
exercise this discretion. The Copyright Office now proposes to close 
out funds or subfunds at any time four years after the close of the 
calendar year for a given fund, if that fund is subject to a final 
distribution order. In accordance with section 1005, the Register will 
treat any funds remaining in such account or subsequent deposits as 
attributable to the closest succeeding calendar year. The Office 
proposes to codify this practice in its proposed rule, and seeks 
comment on this proposal.

    \12\ 17 U.S.C. 1005.

B. Payment of Royalty Fees by Electronic Funds Transfer

    The Licensing Division administers various statutory licensing 
schemes, including those requiring the submission of statements of 
account by cable systems, satellite carriers, and manufacturers or 
importers of digital audio recording devices and media.\13\ Pursuant to 
its statutory authority, the Copyright Office has set out the 
requirements for payment of royalty fees under each of these statutory 
licenses by regulation.\14\ One such requirement for all of these 
statutory licenses is that ``[a]ll royalty fees shall be paid by a 
single electronic funds transfer.'' \15\ This language became effective 
in 2006, as part of the final rule requiring remitters to pay royalty 
payments by electronic funds transfer (``EFT'').\16\

    \13\ See 17 U.S.C. 111(d)(1), 119(b)(1), 122(a)(5), 1003(c).
    \14\ 37 CFR 201.11(f)(1), 201.17(k)(1), 201.28(h)(1).
    \15\ Id.
    \16\ Electronic Payment of Royalties, 71 FR 45739 (Aug. 10, 

    In practice, however, the Office has found that the requirement 
that remitters make royalty payments for multiple statements of account 
in a single, lump sum payment is unnecessarily restrictive and has 
hampered ongoing modernization efforts. Accordingly, the Office 
proposes to remove the requirement that filers submit multiple SOAs in 
a single EFT payment for the relevant statutory licenses, specifically, 
by amending 37 CFR 201.11(f)(1), 201.17(k)(1), and 201.28(h)(1) to 
remove the requirement that royalty fees must be paid in ``a single'' 
payment. The current regulatory requirement that funds be submitted 
through EFT will remain in place.
    Because the Office seeks to implement this reform expeditiously for 
reasons of administrative efficiency, it is separating this minor 
proposed change from a larger ongoing rulemaking, noticed in December 
2017, that proposes to address a wider and more complex set of issues 
related to statement of account reporting practices, particularly the 
section 111 license for cable systems.\17\ The Office has extended the 
public comment period for that December 2017 NPRM to October 4, 
2018.\18\ Meanwhile, while the change removing the requirement that 
royalty fees must be paid in ``a single'' payment is intended to be 
technical, the Office solicits public comment on this discrete issue as 
part of this current rulemaking.

    \17\ Statutory Cable, Satellite, and DART License Reporting 
Practices, 82 FR 56926, 56935-36 (Dec. 1, 2017).
    \18\ Statutory Cable, Satellite, and DART License Reporting 
Practices, 83 FR 26229 (Jun. 6, 2018).

List of Subjects in 37 CFR Part 201

    Copyright, General provisions.

Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Office 
proposes amending 37 CFR part 201 as follows:


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

    Authority:  17 U.S.C. 702.

Sec.  201.11   [Amended]

2. Amend Sec.  201.11 by removing ``a single'' from paragraph (f)(1).

Sec.  201.17   [Amended]

3. Amend Sec.  201.17 by removing ``a single'' from paragraph (k)(1) 
introductory text.

Sec.  201.28   [Amended]

4. Amend Sec.  201.28 by removing ``a single'' from paragraph (h)(1) 
introductory text.
5. Add Sec.  201.31 to read as follows:

Sec.  201.31  Procedures for closing out royalty payments accounts in 
accordance with the Audio Home Recording Act.

    (a) General. This section prescribes rules pertaining to the close 
out of royalty payments accounts in accordance with 17 U.S.C. 1005.
    (b) In the Register's discretion, four years after the close of any 
calendar year, the Register of Copyrights may close out the royalty 
payments account for that calendar year, including any sub-accounts, 
that are subject to a final distribution order under which royalty 
payments have been disbursed. Following closure of an account, the 
Register will treat any funds remaining in that account, or subsequent 
deposits that would otherwise be attributable to that calendar year, as 
attributable to the succeeding calendar year.

    Dated: July 2, 2018.
Regan A. Smith,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2018-14543 Filed 7-10-18; 8:45 am]