[Federal Register Volume 87, Number 105 (Wednesday, June 1, 2022)]
[Proposed Rules]
[Pages 33093-33095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-11521]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 385

[Docket No. 21-CRB-0001-PR (2023-2027)]


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

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, 2023, and ending December 31, 2027, for the 
section 115 statutory license for making and distributing certain 
configurations of phonorecords of nondramatic musical works.

DATES: Comments and objections, if any, are due no later than July 1, 
2022.

ADDRESSES: You may send comments, identified by docket number 21-CRB-
0001-PR (2023-2027), by filing online through eCRB at https://app.crb.gov.
    Instructions: To send your comment through eCRB, if you don't have 
a user account, you will first need to register for an account and wait 
for your registration to be approved. Approval of user accounts is only 
available during business hours. Once you have an approved account, you 
can only sign in and file your comment after setting up multi-factor 
authentication, which can be done at any time of day. All comments must 
include the Copyright Royalty Board name and the docket number for this 
proposed rule. All properly filed comments will appear without change 
in eCRB at https://app.crb.gov, including any personal information 
provided.
    Docket: For access to the docket to read background documents or 
comments received, go to eCRB at https://app.crb.gov and perform a case 
search for docket 21-CRB-0001-PR (2023-2027).

FOR FURTHER INFORMATION CONTACT: Anita Brown, CRB Program Specialist, 
at 202-707-7658 or [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 2021, by publishing notice of the commencement and soliciting 
petitions to participate from interested parties. See 86 FR 25 (Jan. 5, 
2021).
    The Judges received petitions to participate in the current 
proceeding from Amazon.com Services LLC, Apple Inc., Copyright Owners 
(joint petitioners Nashville Songwriters Association International 
(NSAI) and National Music Publishers' Association (NMPA)), Google LLC, 
George Johnson, Joint Record Company Participants (filed by Recording 
Industry Association of America, Inc. for joint petitioners Sony Music 
Entertainment, UMG Recordings, Inc., and Warner Music Group Corp.), 
Pandora Media, LLC, David Powell, SoundCloud Operations Inc.,\1\ 
Spotify USA Inc., and Brian Zisk.\2\
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    \1\ SoundCloud Operations Inc. withdrew from the proceeding on 
May 21, 2021.
    \2\ David Powell and Brian Zisk filed petitions to participate 
in this proceeding; neither filed a Written Direct Statement.
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    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 September 10, 2021. On 
May 25, 2021, the Judges received a motion stating that several 
participants \3\ had reached a partial settlement regarding the rates 
and terms for the period commencing in January 2023 under Section 115 
of the Copyright Act, namely, the applicable rates for use of musical 
works in physical phonorecords, permanent downloads, ringtones, and 
music bundles (Subpart B Configurations) \4\

[[Page 33094]]

and seeking approval of that partial settlement. See Motion to Adopt 
Settlement of Statutory Royalty Rates and Terms for Subpart B 
Configurations, Docket No. 21-CRB-0001-PR (2023-2027) at 1 (May 25, 
2021). The Judges published for comment a proposed rule and received 
comments in opposition to the settlement from twelve interested 
parties, including joint comments from organizations, trade 
associations, and self-assembled groups of parties.\5\ See 86 FR 33601 
(June 25, 2021), 86 FR 40793 (Jul. 29, 2021) (reopening comment 
period), 86 FR 58626 (Oct. 22, 2021) (reopening comment period a second 
time).
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    \3\ The participants who filed the motion are the ``Copyright 
Owners'' (NMPA and NSAI) and the ``Record Company Participants'' 
(Sony Music Entertainment, UMG Recordings, Inc. and Warner Music 
Group Corp.). Motion at 1.
    \4\ Subpart B refers to subpart B, part 385, subchapter E, 
chapter III, 37 CFR, the regulations detailing royalty rates and 
terms for licensing musical works under the provisions of 17 U.S.C. 
115 (Copyright Act).
    \5\ One participant in the proceeding, George Johnson d/b/a GEO 
Music, objected to the settlement. Other parties opposing adoption 
of the settlement as a basis for statutory rates and terms included 
songwriters, publishers, music industry attorneys, and trade 
associations.
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    After considering the comments in opposition to the settlement, the 
Judges withdrew the proposed rule that would have adopted that 
settlement as statutory royalty rates. See Proposed rule; withdrawal; 
Determination of Royalty Rates and Terms for Making and Distributing 
Phonorecords (Phonorecords IV), 87 FR 18342 (Mar. 30, 2022).
    On May 5, 2022, the Judges received a Joint Motion to Adopt New 
Settlement of Statutory Royalty Rates and Terms for Subpart B 
Configurations (Motion). The moving parties are self-identified 
Copyright Owners and self-identified Record Company Participants.\6\ 
The full text of the Motion is available on eCRB (https://app.crb.gov).\7\
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    \6\ The composition of the moving parties is the same as in the 
original motion filed in May 2021.
    \7\ The Motion stated that the Moving Parties had previously 
separately entered into a memorandum of understanding (MOU) 
addressing certain negotiated licensing processes and late fee 
waivers but that the MOU was ``not consideration'' for any of the 
terms of the current settlement. See Motion at 4 n. 2; 6. (https://app.crb.gov/document/download/26619). The Moving Parties contend 
that predecessor agreements to the MOU, some or all of which may be 
incorporated by reference in the current MOU, are publicly available 
online at http://nmpalatefeesettlement.com/.
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    On May 19, 2022, George Johnson d/b/a/ GEO, filed a response in 
opposition to the Motion.\8\
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    \8\ In general, the Judges do not receive pleadings in 
opposition to a motion that triggers publication of notice, such as 
the Motion at issue here. Nonetheless, the Judges received and 
considered GEO's timely opposition. The Judges will not consider 
that opposition as a formal comment as required by publication in 
the Federal Register. The Moving Parties communicated to the Judges 
that no reply is forthcoming.
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    The settlement proposes that the section 115 royalty rate for 
subpart B configurations for the rate period commencing January 1, 
2023, be set at $0.12 per track, with annual inflation-based 
adjustments for subsequent years of the rate period. Motion at 3. The 
Moving Parties proposed editorial and substantive changes to applicable 
regulations found in both subparts A and B of part 385 to accomplish 
the rate increase.
    The proposed editorial changes apply to two definitions in subpart 
A and would clarify the reach and application of the terms ``Licensed 
Activity,'' and ``Sound Recording Company.'' The substantive changes 
occur in secs. 385.10 and 385.11, which state the proposed rate for 
2023 and describe the proposed annual inflation-based rate adjustment 
for subsequent years. The Moving Parties provided a redlined version of 
the regulations and the proposed changes thereto, along with the stated 
rationale for each change. Motion at 6-7.
    As part of this proposed rule, the Judges propose an additional 
minor revision to the definition of ``Eligible Digital Download'' in 
section 385.2. The cross-reference to 17 U.S.C. 115(c)(3)(C) and (D) in 
that definition is shortened to 17 U.S.C. 115 because, following 
enactment of the Music Modernization Act, the section no longer has a 
subsection (c)(3). See Orrin G. Hatch-Bob Goodlatte Music Modernization 
Act, Public Law 115-264, 132 Stat. 3678, 3679-3684 (October 11, 2018).
    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 the 
Judges shall provide notice and an opportunity to comment on the 
agreement to (1) those that would be bound by the terms, rates, or 
other determination set by the agreement and (2) participants in the 
proceeding that would be bound by the terms, rates, or other 
determination set by the agreement. See sec. 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.
    The Judges solicit comments on whether they should adopt the 
proposed regulations as statutory rates and terms relating to the 
making and distribution of physical or digital phonorecords of 
nondramatic musical works encompassed in subpart B, part 385 of the 
applicable regulations.
    Comments and objections regarding the rates and terms and the 
revisions to the regulations proposed by the Moving Parties and the 
Judges must be submitted no later than July 1, 2022.

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 NONDRAMATIC MUSICAL WORKS IN 
THE 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).

0
2. In Sec.  385.2 revise the introductory text of the definition for 
``Eligible Limited Download'', the definition for ``Licensed 
Activity'', and the fourth sentence in the definition for Sound 
Recording Company to read as follows:


Sec.  385.2  Definitions.

* * * * *
    Eligible Limited Download means a transmission of a sound recording 
embodying a musical work to an End User of a digital phonorecord under 
17 U.S.C. 115 that results in a Digital Phonorecord Delivery of that 
sound recording that is only accessible for listening for--
* * * * *
    Licensed Activity, as the term is used in subparts C and D of this 
part, means delivery of musical works, under voluntary or statutory 
license, via Digital Phonorecord Deliveries in connection with 
Interactive Eligible Streams, Eligible Limited Downloads, Limited 
Offerings, mixed Bundles, and Locker Services.
* * * * *
    Sound Recording Company means a person or entity that:
* * * * *
    (4) Performs the functions of marketing and authorizing the 
distribution of a sound recording of a musical work under its own 
label, under

[[Page 33095]]

the authority of a person identified in paragraphs (1) through (3) of 
this section.
* * * * *
0
3. Revise Sec.  385.10 to read as follows:


Sec.  385.10  Scope.

    This subpart establishes rates and terms of royalty payments for 
making and distributing physical phonorecords, Permanent Downloads, 
Ringtones, and Music Bundles, in accordance with the provisions of 17 
U.S.C. 115.
0
4. Revise Sec.  385.11 paragraph (a) to read as follows:


Sec.  385.11  Royalty rates.

    (a) Physical phonorecords and Permanent Downloads.
    (1) 2023 Rate. For the year 2023, for every physical phonorecord 
and Permanent Download the Licensee makes and distributes or authorizes 
to be made and distributed, the royalty rate payable for each work 
embodied in the phonorecord or Permanent Download shall be either 12.0 
cents or 2.31 cents per minute of playing time or fraction thereof, 
whichever amount is larger.
    (2) Annual rate adjustment. The Copyright Royalty Judges shall 
adjust the royalty rates in paragraph (a)(1) of this section each year 
to reflect any changes occurring in the cost of living as determined by 
the most recent Consumer Price Index for All Urban Consumers (U.S. City 
Average, all items) (CPI-U) published by the Secretary of Labor before 
December 1 of the preceding year. The calculation of the rate for each 
year shall be cumulative based on a calculation of the percentage 
increase in the CPI-U from the CPI-U published in November, 2022 (the 
Base Rate) and shall be made according to the following formulas: for 
the per-work rate, (1 + (Cy-Base Rate)/Base Rate) x 12[cent], rounded 
to the nearest tenth of a cent; for the per-minute rate, (1 + (Cy-Base 
Rate)/Base Rate) x 2.31[cent], rounded to the nearest hundredth of a 
cent; where Cy is the CPI-U published by the Secretary of Labor before 
December 1 of the preceding year. The Judges shall publish notice of 
the adjusted fees in the Federal Register at least 25 days before 
January 1. The adjusted fees shall be effective on January 1.
* * * * *

    Dated: May 24, 2022.
Suzanne M. Barnett,
Chief Copyright Royalty Judge.
[FR Doc. 2022-11521 Filed 5-31-22; 8:45 am]
BILLING CODE 1410-72-P