[Federal Register Volume 85, Number 104 (Friday, May 29, 2020)]
[Proposed Rules]
[Pages 32323-32324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11131]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 370

[Docket No. 20-CRB-0007-RM]


Regulation Concerning Proxy Distributions for Unmatched Royalties 
Deposited During 2010-2018

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

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SUMMARY: The Copyright Royalty Judges are proposing to amend their 
regulations concerning proxy distributions for unmatched royalties 
deposited pursuant to statutory license for the period 2010 through 
2018.

DATES: Comments are due no later than June 29, 2020.

ADDRESSES: You may submit comments and proposals, identified by docket 
number 20-CRB-0007-RM, online via eCRB, the Copyright Royalty Board's 
online electronic filing application, at https://app.crb.gov/.
    Instructions: All submissions must include a reference to the CRB 
and this docket number. All submissions will be posted without change 
to eCRB at https://app.crb.gov/ including any personal information 
provided.
    Docket: For access to the docket to read submitted background 
documents or comments, go to eCRB, the Copyright Royalty Board's 
electronic filing and case management system, at https://app.crb.gov/, 
and search for docket number 20-CRB-0007-RM.

FOR FURTHER INFORMATION CONTACT: Anita Blaine, CRB Program Specialist, 
by telephone at (202) 707-7658 or email at [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Copyright Act grants copyright owners of sound recordings the 
exclusive right to perform their works publicly by means of digital 
audio transmissions subject to certain limitations and exceptions. 
Among the limitations placed on the performance right for sound 
recordings is a statutory license that permits certain eligible 
subscription, nonsubscription, satellite digital audio radio services, 
and business establishment services to perform those sound recordings 
publicly by means of digital audio transmissions. 17 U.S.C. 114.
    Similarly, copyright owners of sound recordings are granted the 
exclusive right to make copies of their works subject to certain 
limitations and exceptions. Among the limitations placed on the 
reproduction right for sound recordings is a statutory license that 
permits certain eligible subscription, nonsubscription, satellite 
digital audio radio services, and business establishment services to 
make ephemeral copies of those sound recordings to facilitate their 
digital transmission. 17 U.S.C. 112(e).
    Both the section 114 and 112 licenses require services to, among 
other things, pay royalty fees and to report to copyright owners of 
sound recordings on the use of their works. Both licenses direct the 
Copyright Royalty Judges (``Judges'') to determine the royalty rates to 
be paid, 17 U.S.C. 114(f)(1)(A), (f)(2)(A) and 17 U.S.C. 112(e)(3), and 
to establish regulations to give copyright owners reasonable notice of 
the use of their works and create and maintain records of use for 
delivery to copyright owners. 17 U.S.C. 114(f)(4)(A) and 17 U.S.C. 
112(e)(4). The royalty fees collected under the section 114 and 112 
licenses, as determined by the Judges, are paid to a central source 
known as a Collective.\1\ 37 CFR 380.2(a). The purpose of the notice 
and recordkeeping requirement is to ensure that the royalties collected 
under the statutory licenses are distributed to the correct recipients.
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    \1\ SoundExchange, Inc., has been the Collective since the 
inception of the two licenses.
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    On March 24, 2011, SoundExchange petitioned the Judges to commence 
a rulemaking proceeding to consider adopting regulations to authorize 
SoundExchange, when a licensee fails to provide usable reports of use, 
to use reporting data from certain other licensees (proxy reporting 
data) as a basis for distributing sound recording royalties deposited 
by that licensee during the period prior to 2010 to copyright owners 
and performers. Petition of SoundExchange, Inc. for a Rulemaking to 
Authorize Use of a Proxy to Distribute Certain Pre-2010 Sound Recording 
Royalties at 1-2 and n.1, Docket No. RM 2011-5 (March 24, 2011). After 
notice and comment, the Judges adopted SoundExchange's proposal to use 
proxy reporting data to permit distribution of royalties collected for 
the period April 1, 2004, through December 31, 2009, for the public 
performance of sound recordings by means of digital audio transmissions 
pursuant to statutory license for those services for which no reports 
of use were submitted or for which the reports of use were unusable. 76 
FR 45695 (Aug. 1, 2011).\2\
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    \2\ The Copyright Office approved a similar proposal in 2004 
covering the 1998 to 2004 period. 69 FR 58261 (Sept. 30, 2004).
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    On November 20, 2018, SoundExchange requested that the Judges amend 
the Judges' regulations to authorize SoundExchange to continue to use 
proxy reporting data to distribute to copyright owners and performers 
certain sound recording royalties collected by SoundExchange for 
periods before January 1, 2019, that are otherwise undistributable due 
to licensees' failure to provide reports of use or their provision of 
reports of use that are so deficient as to be unusable. Letter from 
Steven R. Englund, Counsel for SoundExchange, Inc., Docket No. 14-CRB-
0005 (RM) (SoundExchange Letter I).\3\ SoundExchange stated that it was 
holding $24 million in royalties for the period 2010 through 2016 and 
additional royalties for 2017 that are undistributable due to missing 
or unusable reports of use. SoundExchange Letter I at 1 & n.1.
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    \3\ SoundExchange submitted its letter further to Docket No. 14-
CRB-0005 RM, Notice and Recordkeeping for Use of Sound Recordings 
Under Statutory License, which is still pending with the Judges. The 
2014 petition included, among other proposals, a provision that 
would authorize SoundExchange to distribute royalties that did not 
have a useable, matching report of use by a proxy methodology that 
SoundExchange would develop in its discretion, on an ongoing basis. 
Letter from Steven R. Englund, Counsel for SoundExchange, Inc. 
(SoundExchange Letter II) at 2.
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    SoundExchange renewed its request on April 23, 2020. SoundExchange 
Letter II. In that letter, SoundExchange stated it was holding 
approximately $32 million in statutory royalties for the period 2010 
through 2018 and requested that the Judges authorize SoundExchange to 
distribute these royalties using the same ``annual/license type 
methodology'' that the Judges approved in 2011. SoundExchange Letter II 
at 2, citing 37 CFR 370.3(i), 370.4(f). SoundExchange requested that 
the Judges change the dates in the current applicable regulations from 
2010 to 2019, which would authorize SoundExchange to distribute 
royalties from the period 2010 through 2018 by using proxy reports of 
use. SoundExchange Letter II at 2-3.

[[Page 32324]]

    In light of SoundExchange's requests, the Judges propose to 
authorize SoundExchange to continue to use the proxy distribution 
methodologies in 37 CFR 370.3(i), and 370.4(f) to distribute royalties 
for the period 2010 through 2018. Although the current regulations use 
the mandatory ``shall,'' the Judges propose to use the permissive 
``may'' to authorize such distributions.

Solicitation of Comments on the Proposed Regulations

    The Judges seek comment from interested parties on the Judges' 
proposal to permit SoundExchange to use a proxy for the distribution of 
royalties collected under the section 114 and 112 licenses for the 
period 2010 through 2018. In addition to general comments regarding the 
proposal, the Judges seek comments on the following areas:
    1. SoundExchange has requested that the Judges extend the current 
regulations that require rather than permit SoundExchange to use a 
proxy distribution methodology for allocating royalties that 
SoundExchange cannot match with a report of use. The regulations that 
the Judges propose would permit but not require SoundExchange to use 
such a proxy methodology. The Judges seek comment on the propriety of 
the proposed change regarding SoundExchange's ability to distribute 
unmatched royalties.
    2. Has SoundExchange exhausted all reasonable means to ensure that 
all undistributed royalties for the period from 2010 through 2018, have 
been distributed to the party that earned those royalties? If not, what 
other means could SoundExchange use to facilitate further distributions 
without resorting to proxy reports of use?
    3. Assuming that SoundExchange has exhausted all reasonable means 
of distributing royalties to the parties who earned them, is the 
proposed use of proxy reports a fair and appropriate means of 
distributing remaining royalties for this period? If not, what would be 
a better alternative?

List of Subjects in 37 CFR Part 370

    Copyright, Sound recordings.

Proposed Regulations

    For the reasons set forth in the preamble, and under the authority 
of chapter 8, title 17, United States Code, the Copyright Royalty 
Judges propose to amend part 370 of Title 37 of the Code of Federal 
Regulations as follows:

PART 370--NOTICE AND RECORDKEEPING REQUIREMENTS FOR STATUTORY 
LICENSES

0
1. The authority citation for part 370 is revised to read as follows:

    Authority: 17 U.S.C. 112(e), 114(f), 803(b)(6)(A).

0
2. Amend Sec.  370.3 by revising paragraph (i) to read as follows:


Sec.  370.3  Reports of use of sound recordings under statutory license 
for preexisting subscription services.

* * * * *
    (i) In any case in which a preexisting subscription service has not 
provided a report of use required under this section for use of sound 
recordings under section 112(e) or section 114 of title 17 of the 
United States Code, or both, prior to January 1, 2019, reports of use 
for the corresponding calendar year filed by other preexisting 
subscription services may serve as the reports of use for the non-
reporting service, solely for purposes of distribution of any 
corresponding royalties by the Collective.
0
3. Amend Sec.  370.4 by revising paragraph (f) to read as follows:


Sec.  370.4  Reports of use of sound recordings under statutory license 
for nonsubscription transmission services, preexisting satellite 
digital audio radio services, new subscription services and business 
establishment services.

* * * * *
    (f) In any case in which a nonsubscription transmission service, 
preexisting satellite digital audio radio service, new subscription 
service, or business establishment service has not provided a report of 
use required under this section for use of sound recordings under 
section 112(e) or section 114 of title 17 of the United States Code, or 
both, prior to January 1, 2019, reports of use for the corresponding 
calendar year filed by other services of the same type may serve as the 
reports of use for the non-reporting service, solely for purposes of 
distribution of any corresponding royalties by the Collective.

    Dated: May 18, 2020.
Jesse M. Feder,
Chief U.S. Copyright Royalty Judge.
[FR Doc. 2020-11131 Filed 5-28-20; 8:45 am]
BILLING CODE 1410-72-P