[Federal Register Volume 89, Number 4 (Friday, January 5, 2024)]
[Notices]
[Pages 812-814]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28516]
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LIBRARY OF CONGRESS
Copyright Royalty Board
[Docket No 23-CRB-0012-WR (2026-2030)]
Determination of Rates and Terms for Digital Performance of Sound
Recordings and Making of Ephemeral Copies To Facilitate Those
Performances (Web VI)
AGENCY: Copyright Royalty Board (CRB), Library of Congress.
ACTION: Notice announcing commencement of proceeding with request for
petitions to participate.
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SUMMARY: The Copyright Royalty Judges (Judges) announce commencement of
a proceeding to determine reasonable rates and terms for two statutory
licenses permitting the digital performance of sound recordings over
the internet and the making of ephemeral recordings to facilitate those
performances for the period beginning January 1, 2026, and ending
December 31, 2030. The Judges also announce the date by which a party
wishing to participate in the rate determination proceeding must file
its Petition to Participate and pay the accompanying $150 filing fee.
DATES: Petitions to Participate and the filing fee are due no later
than February 6, 2023.
ADDRESSES: The petition to participate form is available online in
eCRB, the Copyright Royalty Board's online electronic filing
application, at https://app.crb.gov/.
Instructions: The petition to participate process has been
simplified. Interested parties file a petition to participate by
completing and filing the petition to participate form in eCRB and
paying the fee in eCRB. Do not upload a petition to participate
document.
Docket: For access to the docket, go to eCRB, the Copyright Royalty
Board's electronic filing and case management system, at https://app.crb.gov/ and search for docket number 23-CRB-0012-WR (2026-2030).
FOR FURTHER INFORMATION CONTACT: Anita Brown, CRB Program Specialist,
at (202) 707-7658 or [email protected].
SUPPLEMENTARY INFORMATION:
Background
Under the Copyright Act, the Copyright Royalty Judges (Judges) must
commence a proceeding every five years to determine reasonable rates
and terms to license the digital transmission over the internet of
sound recordings and the making of ephemeral recordings to facilitate
those transmissions. See 17 U.S.C. 112 (e), 114(d)(2),
803(b)(1)(A)(i)(III), 804(b)(3)(A), 37 CFR 380. This notice commences
the rate determination proceeding for the license period 2026-2030.
Scope of Proceeding
In addition to all other submissions and arguments required by the
Act and the applicable regulations, and in addition to any other
submissions or arguments that the Participants choose to make, there is
an interest among certain Judges in receiving evidence, testimony, and
argument relating to the allocation of the royalty payments required by
the Judges' determination in this proceeding between the section 112
ephemeral recordings royalties and the section 114 sound recording
royalties.\1\
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\1\ Nothing set forth in this section of the Notice of
Commencement should be construed as a statement by the Judges as to
how they will ultimately rule as to any evidence or testimony
proffered with regard to, inter alia, admissibility, competency,
relevancy, probative value or weight or dispositive effect, as to
any issue, or whether they will or will not ultimately consider,
accept, or adopt any argument made in response to this section.
Additionally, nothing in this section should be construed as an
indication that the Judges will or will not ultimately consider any
of the issues set forth herein or addressed by the Participants in
response to this invitation in any determination rendered by them.
Further, by soliciting information regarding these issues, the
Judges are not indicating that they have reached any preliminary
decisions as to any of these issues.
Further, to avoid doubt, the interest among the Judges as
expressed herein does not necessarily relate to any other statutory
licenses.
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Accordingly, the Judges invite Participants, within their written
direct statements, written rebuttal statements, proposed findings of
fact, conclusions of law and briefing, through their witnesses and
attorneys, as appropriate, to consider addressing the following
questions.
Question #1
Does the ephemeral license created by section 112 have economic
value independent of any economic value in the digital public
performance of sound recording license (``sound recording license'')
created by section 114 and, reciprocally, does the sound recording
license created by section 114 have economic value independent of any
economic value in the ephemeral license created by section 112?
Regarding this Question #1, the Judges note the following language
in the Web V Determination:
SoundExchange and the Services are generally on the same page
regarding ephemeral recordings, except as to the question whether
the right to make ephemeral recordings has independent economic
value. Compare SX PFFCL ] 1570 (and sources cited therein)
(``ephemeral
[[Page 813]]
copies have economic value to services that publicly perform sound
recordings because these services cannot, as a practical matter,
properly function without those copies'') with Services RPFFCL ]
1570 (and sources cited therein) (``While the Services do not
dispute that ephemeral recording right is frequently needed, it does
not have independent economic value.'').
Web V Final Determination, 86 FR 59542, 59584 n. 351 (Oct. 27, 2021),
aff'd. National Religious Broadcasters Noncommercial License Committee
v. Copyright Royalty Bd., 77 F.4th 949 (D.C. Cir. 2023) (emphasis
added).
Among the Judges, there is an interest in obtaining the
Participants' positions on this Question #1 in the context of the
economic characterization of the relationship between the section 112
ephemeral license and the section 114 sound recording license. In
particular, the Judges inquire whether the parties identify these two
licenses as perfect complements.\2\
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\2\ ``Perfect complements'' are goods that are always consumed
together in fixed proportions. H. Varian, Intermediate
Microeconomics at 40 (8th ed. 2010). Thus, a purchaser of perfectly
complementary goods ``wants to consume the goods in the same ratio
regardless of their relative price.'' P. Krugman & R. Wells,
Microeconomics at 306 (3d ed. 2013) (emphasis added). (Each
noninteractive service or New Subscription Service (``NSS'')
requires both the section 112 ephemeral license and the section 112
sound recording license in order to transmit any sound recording,
thus making the fixed proportion (ratio) equal to 1:1 for these
licenses.) The irrelevancy of ``relative price'' between these
perfect complements referenced by Krugman & Wells underscores the
indeterminacy of the royalties attributable to each license which
underlies the Judges' present inquiries.
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The Web V Determination indicates that participants in that
proceeding were cognizant of the irrelevancy of the ``relative price''
(i.e., the royalty) for these two licenses, and thus their perfect
complementarity:
As to the specific allocation of royalties between the
performance and ephemeral recording rights, SoundExchange notes that
this allocation has no effect on the Services. See SX PFFCL ] 1574.
. . . ``[T]he willing buyer'' (i.e., the music service) ``is
disinterested with respect to that allocation . . . .''
Web V Determination, 86 FR 59584 (emphasis added).
Accordingly, the Judges invite the Participants to address this
Question #1 in their proffered evidence, testimony, and/or arguments.
Question #2
Are agreements in the interactive marketplace or other unregulated
markets informative (and, if so, to what extent) as to the allocation
of royalties between the section 112 ephemeral license and the section
114 sound recording license?
Regarding this Question #2, the Judges are mindful of the absence
of any statutory requirement in unregulated markets that specifies
percentages of the sound recording royalties to be distributed to sound
recording artists, non-featured vocalists and musicians, and (if
Letters of Direction are issued) to producers, mixers and sound
engineers.
In prior proceedings, evidence was proffered regarding such
agreements. The Judges take note of the following portion of the Web V
Determination:
``Most of these agreements do not set a distinct rate for those
ephemeral copies, incorporating them instead into the overall rate
that the [music services] pay[ ] for the combined ephemeral copy
rights and performance rights.'' Id. at 11-12. Dr. Ford also
testified that to the extent marketplace agreements do set a royalty
rate for ephemeral recordings they generally express that rate as a
percentage of an overall bundled rate for both performances and
ephemerals. See Ford Des. WDT at 12-14.
SoundExchange also offers several direct licenses in the record
of this proceeding as evidence that marketplace agreements do not
set distinct rates (as distinguished from bundled rates) for
ephemeral recordings. See, e.g., Trial Ex. 4035 at 11-12, 16-19
(2015 Agreement . . .); Trial Ex. 5037 at 3-4, 5-9 (2017 Agreement .
. .)
Web V Determination, 86 FR 59584.
Accordingly, the Judges invite the Participants to address this
Question #2 in their proffered evidence, testimony, and/or arguments.
Question #3
Can and should the Judges rely on agreements containing provisions
regarding splits of royalties between the section 112 ephemeral license
and the section 114 sound recording license if the agreements described
by witnesses or referenced in other documents are not proffered as
evidence in this proceeding?
This question is of interest because, in Web V, the Judges received
evidence and testimony that such an agreement existed as between the
sound recording companies and the performing artists' representatives,
but that agreement was not proffered and thus not record evidence.
Specifically on this issue, the Web V Determination describes the
testimony of a SoundExchange witness:
[T]he SoundExchange board of directors, which is comprised of
record company and performing artist representatives ``adopted a
resolution reflecting agreement that 5% of the royalties for the
bundle of rights should be attributable to the Section 112(e)
ephemeral royalties, with the rest being allocated to the Section
114 performance royalties.'' Bender WDT ] 56. SoundExchange avers
that ``[a]s a result, a 95%-5% split `credibly represents the result
that would in fact obtain in a hypothetical marketplace negotiation
between a willing buyer and the interested willing sellers under the
relevant constraints.' ''
Web V Determination, 86 FR 59584.
However, the Judges noted in the Web V Determination that ``[t]he
SoundExchange Board resolution reflecting the agreement between artists
and copyright owners is not in the record [and] testimony concerning
the agreement, therefore, is hearsay, but the Judges exercise their
discretion under 37 CFR 351.10(a) to admit and consider this hearsay
testimony.'' Web V Determination, 86 FR 59584 n.352.
This Question #3 raises the following subsidiary questions:
Is an internal resolution by SoundExchange an ``agreement''?
If the resolution references an agreement, should both the
resolution and the agreement, if memorialized in writing, be
proffered as evidence?
Is an agreement made by members of the SoundExchange Board of
Directors a marketplace agreement between willing parties?
Is such an agreement reflective of a process in which the
parties to the agreement have bargaining power sufficient to
generate an agreement reflective of effective competition?
Do the Board members voting on the agreement and resolution on
behalf of the sound recording companies have a sufficient number of
votes to approve or defeat the agreement and resolution if they all
voted identically?
Do the Board members voting on the agreement and resolution on
behalf of the artists and others entitled to a share of the section
114 royalties have a sufficient number of votes to approve or defeat
the resolution if they all voted identically?
Should the Judges exercise their discretion to admit hearsay
testimony regarding such agreements and resolutions, or should the
Judges require production of the agreements and resolutions?
Does the Best Evidence Rule require production of the actual
agreements and resolutions described above?
Accordingly, the Judges invite the Participants to address this
Question #3 in their proffered evidence, testimony, and/or arguments.
Question #4
Does the marketplace evidence indicate how the Judges should
consider allocation of royalties as between the section 112 ephemeral
license and the section 114 sound recording license, including
allocations to sound recording artists, non-featured vocalists and
musicians, or to producers, mixers and sound engineers, pursuant to
section 114? Among the Judges, there is a concern whether--with section
114, unlike section 112, providing for an allocation of 50% of the
section 114 royalties to artists (and others, in certain
[[Page 814]]
circumstances), as described above--evidence and the law may lead the
Judges to apportion royalties as between the section 112 and 114
licenses in a manner that effectuates the section 114-mandated split of
royalties in a manner that is legally and economically appropriate.
Accordingly, the Judges invite the Participants to address this
Question #4 in their proffered evidence, testimony, and/or arguments.
Petitions To Participate
Parties with a significant interest in the outcome of the rate
proceeding must provide the information required by Sec. 351.1(b) of
the Judges' regulations by completing and filing the Petition to
Participate form in eCRB. Parties must pay the $150 filing fee when
filing each Petition to Participate form. Parties must use the form in
eCRB instead of uploading a document and must comply with the
requirements of Sec. 351.1(b)(1) of the Copyright Royalty Board's
regulations. 37 CFR 351.1(b)(1).
Only attorneys admitted to the bar in one or more states or the
District of Columbia who are members in good standing will be allowed
to represent parties before the Judges. Only individuals may represent
themselves and appear without legal counsel. 37 CFR 303.2.
The Judges will address scheduling and further procedural matters
after receiving petitions to participate.
Dated December 20, 2023.
David P. Shaw,
Chief Copyright Royalty Judge.
[FR Doc. 2023-28516 Filed 1-4-24; 8:45 am]
BILLING CODE 1410-72-P