[Federal Register Volume 90, Number 231 (Thursday, December 4, 2025)]
[Proposed Rules]
[Pages 55821-55826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-21935]
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LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Part 380
[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: Proposed rule related to certain noncommercial webcasting.
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SUMMARY: The Copyright Royalty Judges are publishing for comment
proposed regulations governing the rates and terms for the digital
performance of sound recordings by Educational Media Foundation and for
the making of ephemeral recordings necessary for the facilitation of
such transmissions for the
[[Page 55822]]
period from January 1, 2026, through December 31, 2030.
DATES: Comments and objections, if any, are due January 5, 2026.
ADDRESSES: You may submit comments using eCRB, the Copyright Royalty
Board's online electronic filing application, 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 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 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
Section 114 of the Copyright Act, title 17 of the United States
Code, provides a statutory license that allows for the public
performance of sound recordings by means of a digital audio
transmission by, among others, eligible nonsubscription transmission
services. 17 U.S.C. 114(f). For purposes of the section 114 license, an
``eligible nonsubscription transmission'' is a noninteractive digital
audio transmission that does not require a subscription for receiving
the transmission. The transmission must also be made as part of a
service that provides audio programming consisting in whole or in part
of performances of sound recordings the purpose of which is to provide
audio or other entertainment programming, but not to sell, advertise,
or promote particular goods or services. See 17 U.S.C. 114(j)(6).
Services using the section 114 license may need to make one or more
temporary or ``ephemeral'' copies of a sound recording to facilitate
the transmission of that recording. The section 112 statutory license
allows for the making of these ephemeral reproductions. 17 U.S.C.
112(e).
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 sections 114 and 112 statutory
licenses. 17 U.S.C. 801(b)(1), 804(b)(3)(A). The current proceeding
commenced in January 2024 for rates and terms that will become
effective from January 1, 2026 through December 31, 2030. Pursuant to
section 804(b)(3)(A), the Judges published in the Federal Register a
notice commencing the proceeding and requesting that interested parties
submit their petitions to participate. 89 FR 812 (Jan. 5, 2024).
SoundExchange, Inc. (``SoundExchange''), National Religious
Broadcasters Music License Committee,\1\ and the Educational Media
Foundation (``EMF'') \2\ each filed Petitions to Participate, as did
others.
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\1\ The National Religious Broadcasters Music License Committee
subsequently filed a Notice that it has changed its name to the NRB
Music Licensing Committee, Inc. (``NRBMLC''). Notice of Participant
Name Change (Nov. 14, 2025).
\2\ EMF subsequently filed a Notice that it withdraws from this
proceeding. EMF Notice of Withdrawal (Jan. 31, 2025).
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On November 21, 2025, the Judges received a joint motion stating
that participants in the indicated proceeding, SoundExchange and NRBMLC
(``Settling Parties''), together with EMF, had reached a partial
settlement regarding rates and terms for certain internet transmissions
and related ephemeral recordings made by EMF for 2026-2030 and seeking
approval of that partial settlement. Joint Motion to Adopt Settlement,
Docket No. 23-CRB-0012-WR (2026-2030) (Joint Motion to Adopt
Settlement) (eCRB no. 77856). The Settling Parties attached the
proposed regulations concerning the settlement, as Exhibit A. Id. The
Settling Parties attached a copy of the writing embodying their
agreement concerning the settlement, as Exhibit B, and represented that
there are no other agreements beyond the Exhibit B that represent
consideration for, or are contractually related to, the Settlement. Id.
Based upon the Judges' review of the Joint Motion to Adopt
Settlement and relevant attachments--including the Judges' observation
that the Settling Parties include sufficient representations that
Exhibit B to the Joint Motion to Adopt Settlement constitutes ``their
agreement concerning the Settlement'', and that there are no other
agreements beyond Exhibit B that represent consideration for, or are
contractually related to, the Settlement--the Judges find no reason to
doubt that Joint Motion to Adopt Settlement, including the Exhibits A
and B, constitutes ``the agreement'' for purposes of Section
801(b)(7)(A), and that the Joint Motion to Adopt Settlement satisfies
Section 801(b)(7)(A). Therefore, the Judges hereby publish the Proposed
Regulations and request comment from the public.
The contents of Exhibit A are represented in the Proposed
Regulations in this Notice. Exhibit B may be found on pages 15-20 of
the Joint Motion to Adopt Settlement.\3\
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\3\ The docket for this proceeding, including documents
referenced in this document, may be accessed via the Electronic
filing system eCRB at https://app.crb.gov and perform a case search
for docket 23-CRB-0012-WR (2026-2030). Exhibit B is included in the
document that has been assigned eCRB document number 77856. https://app.crb.gov/document/download/77856.
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Statutory Timing of Adoption of Rates and Terms
Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to
adopt royalty 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. The Judges must
provide ``an opportunity to comment on the agreement'' to participants
and non-participants in the rate proceeding who ``would be bound by the
terms, rates, or other determination set by any agreement. . . .'' 17
U.S.C. 801(b)(7)(A)(i). Participants in the proceeding may also
``object to [the agreement's] adoption as a basis for statutory terms
and rates.'' Id.
The Judges ``may decline to adopt the agreement as a basis for
statutory terms and rates for participants that are not parties to the
agreement,'' only ``if any participant [in the proceeding] objects to
the agreement and the [Judges] conclude, based on the record before
them if one exists, that the agreement does not provide a reasonable
basis for setting statutory terms or rates.'' 17 U.S.C.
801(b)(7)(A)(ii), or where the negotiated agreement includes provisions
that are contrary to the provisions of the applicable license(s) or
otherwise contrary to statutory law. See Scope of the Copyright Royalty
Judges Authority to Adopt Confidentiality Requirements upon Copyright
Owners within a Voluntarily Negotiated License Agreement, 78 FR 47421,
47422 (Aug. 5, 2013), citing 74 FR 4537, 4540 (Jan. 26, 2009).
[[Page 55823]]
Any rates and terms adopted pursuant to this provision would be
applicable to all copyright owners of sound recordings and EMF for the
license period 2026-2030.
Proposed Adjustments to Rates and Terms
According to the Joint Motion to Adopt Settlement, EMF will make
monthly lump sum payments commencing with $593,750 per month
($7,125,000 per year) in 2026 to allow it to make an unlimited number
of public performances and related ephemeral recordings under the
Sections 112(e) and 114 statutory licenses on non-customized channels.
Its payments for 2026 are represented as an increase over what it has
been paying in 2025, and after 2026, its payments increase by 4% per
year for each year of the rate period. Joint Motion to Adopt Settlement
at 2.
The Settlement continues EMF's established prior reporting
arrangements, which provide for submission of a single, monthly report
of use covering all transmissions made by EMF and its affiliates
covered by the Settlement, providing what the parties state are
administrative efficiencies to SoundExchange and EMF. The agreement
also provides EMF, a nonprofit entity largely reliant on listener
donations for its funding, an established, fixed royalty obligation
which the parties assert serves to simplify EMF's planning, budgeting
and targeted fundraising. Id. at 3.
The rates set forth in the Settlement are specific to EMF, which is
stated to be the largest noncommercial webcaster relying on the
statutory licenses and which pays a large majority of the noncommercial
webcaster statutory royalties. Because the Settlement applies to only a
single payor, it was submitted to the Judges for adoption as a
statutory rate and terms so that it will be binding on all artists and
copyright owners, including those that are not members of
SoundExchange. Id. citing 17 U.S.C. 114(f)(1)(B). The parties have
styled their proposed regulations as subpart F to appear in the Judges'
regulations at 37 CFR part 380. Joint Motion to Adopt Settlement at 6,
Exhibit A.
Those who would be bound by the terms, rates, or other
determination set by the agreement may comment on, and any participants
in the Web VI proceeding that would be bound by the terms, rates, or
other determination set by the agreement may object to, any or all of
the proposed regulations contained in this document. Such comments and
objections must be submitted no later than January 5, 2026.
List of Subjects in 37 CFR Part 380
Copyright, Sound recordings, Webcasters.
Proposed Regulations
For the reasons set forth in the preamble, the Copyright Royalty
Judges propose to amend 37 CFR part 380 as follows:
PART 380--RATES AND TERMS FOR TRANSMISSIONS BY ELIGIBLE
NONSUBSCRIPTION SERVICES AND NEW SUBSCRIPTION SERVICES AND FOR THE
MAKING OF EPHEMERAL REPRODUCTIONS TO FACILITATE THOSE TRANSMISSIONS
0
1. The authority citation for part 380 continues to read as follows:
Authority: 17 U.S.C. 112(e), 114(f), 804(b)(3).
0
2. Add subpart F to read as follows:
Subpart F--Educational Media Foundation
Sec.
380.50 Definitions.
380.51 Royalty fees for Eligible Transmissions of sound recordings
and the making of Ephemeral Recordings.
380.52 Making payment of royalty fees.
380.53 Delivering statements of account.
380.54 Distributing royalty fees.
380.55 Handling Confidential Information.
380.56 Auditing payments and distributions.
Sec. 380.50 Definitions.
For purposes of this subpart, the following definitions apply:
Collective means the collection and distribution organization that
is designated by the Copyright Royalty Judges, which, for the current
rate period, is SoundExchange, Inc.
Copyright Owners means sound recording copyright owners, and rights
owners under 17 U.S.C. 1401(l)(2), who are entitled to royalty payments
made under this subpart pursuant to the statutory licenses under 17
U.S.C. 112(e) and 114.
Digital Audio Transmission has the same meaning as in 17 U.S.C.
114(j)(5).
Eligible Transmission means an ``eligible nonsubscription
transmission'' as defined in 17 U.S.C. 114(j)(6) that is:
(1) made by the Licensee;
(2) subject to licensing under 17 U.S.C. 114(d)(2);
(3) transmitted over the internet on a channel or station offered
for streaming to any member of the public who chooses to listen and
that provides only linear programming that is not personalized to any
particular listener.
Ephemeral Recording has the same meaning as in 17 U.S.C. 112.
Licensee means Educational Media Foundation and its affiliated
organizations under common control, including K-LOVE, Inc. and The
Association for Community Education, Inc., so long as each of these
organizations is a Noncommercial Webcaster.
Noncommercial Webcaster has the same meaning as in 17 U.S.C.
114(f)(4)(E)(i).
Nonsubscription has the same meaning as in 17 U.S.C. 114(j)(9).
Payor means the entity required to make royalty payments to the
Collective or the entity required to distribute royalty fees collected,
depending on context. The Payor is:
(1) The Licensee, in relation to the Collective; and
(2) The Collective in relation to a Copyright Owner or Performer.
Performance means each instance in which any portion of a sound
recording is publicly performed to a listener by means of a Digital
Audio Transmission (e.g., the delivery of any portion of a single track
from a compact disc to one listener), but excludes the following:
(1) A performance of a sound recording that does not require a
license (e.g., a sound recording that is not subject to protection
under title 17, United States Code);
(2) A performance of a sound recording for which the Licensee has
previously obtained a license from the Copyright Owner of such sound
recording; and
(3) An incidental performance that both:
(i) Makes no more than incidental use of sound recordings
including, but not limited to, brief musical transitions in and out of
commercials or program segments, brief performances during news, talk
and sports programming, brief background performances during disk
jockey announcements, brief performances during commercials of sixty
seconds or less in duration, or brief performances during sporting or
other public events; and
(ii) Does not contain an entire sound recording, other than ambient
music that is background at a public event, and does not feature a
particular sound recording of more than thirty seconds (as in the case
of a sound recording used as a theme song).
Performers means the independent administrators identified in 17
U.S.C. 114(g)(2)(B) and (C) and the parties identified in 17 U.S.C.
114(g)(2)(D).
Qualified Auditor means an independent Certified Public Accountant.
[[Page 55824]]
Sec. 380.51 Royalty fees for Eligible Transmissions of sound
recordings and the making of Ephemeral Recordings.
(a) Royalty fees. During the period 2026-2030, the Licensee's
royalty payment for all Eligible Transmissions made by the Licensee
during each year, and for Ephemeral Recordings of sound recordings made
pursuant to 17 U.S.C. 112(e) to facilitate such Eligible Transmissions,
shall be as follows:
(1) 2026: $7,125,000.00 ($593,750.00 per month);
(2) 2027: $7,410,000.00 ($617,500.00 per month);
(3) 2028: $7,706,400.00 ($642,200.00 per month);
(4) 2029: $8,014,656.00 ($667,888.00 per month); and
(5) 2030: $8,335,242.24 ($694,603.52 per month).
(b) Allocation between Ephemeral Recordings and performance royalty
fees. The Collective must credit 5% of all royalty payments as payment
for Ephemeral Recordings and credit the remaining 95% to section 114
royalties. All Ephemeral Recordings that the Licensee makes which are
necessary and commercially reasonable for making Eligible Transmissions
are included in the 5%.
(c) Other Digital Audio Transmissions. During the period 2026-2030,
if the Licensee makes any Digital Audio Transmissions of sound
recordings subject to licensing under 17 U.S.C. 114(d)(2) other than
Eligible Transmissions, the provisions of subparts A and B of this part
shall apply.
Sec. 380.52 Making payment of royalty fees.
(a) Payment to the Collective. The Licensee must make the royalty
payments due under this part to SoundExchange, Inc., which is the
Collective designated by the Copyright Royalty Board to collect and
distribute royalties under this part.
(b) Monthly payments. The Licensee must make royalty payments on a
monthly basis. Each month during the period 2026-2030, the Licensee
shall pay one-twelfth of the annual royalty for the relevant year, as
set forth in Sec. 380.51(a). Each such payment shall be made on or
before the fifteenth day of the month and shall be accompanied by a
Statements of Account in accordance with Sec. 380.53. Payments shall
be made in U.S. dollars in accordance with wiring instructions that
will be separately provided by the Collective from time to time.
(c) Reports of Use. The Licensee shall submit a single, monthly
Report of Use, as described in 37 CFR 370.4, reflecting actual total
Performances made by the Licensee and all of its affiliates, for all
Eligible Transmissions and any other Digital Audio Transmissions it may
make as a Noncommercial Webcaster pursuant to the statutory licenses
under 17 U.S.C. 112(e) and 114. Reports of Use are due on or before the
30th day after the end of the month in which the Licensee made Eligible
Transmissions.
(d) Late fees. The Licensee must pay a late fee for each payment
and each Statement of Account that the Collective receives after the
due date. The late fee is 1.5% (or the highest lawful rate, whichever
is lower) of the late payment amount per month. The late fee for a late
Statement of Account is 1.5% of the payment amount associated with the
Statement of Account. Late fees accrue from the due date until the date
that the Collective receives the late payment or late Statement of
Account.
(1) Waiver of late fees. The Collective may waive or lower late
fees for immaterial or inadvertent failures of the Licensee to make a
timely payment or submit a timely Statement of Account.
(2) Notice regarding noncompliant Statements of Account. If it is
reasonably evident to the Collective that a timely-provided Statement
of Account is materially noncompliant, the Collective must notify the
Licensee within 90 days of discovery of the noncompliance.
(e) Use of account numbers. If the Collective notifies the Licensee
of an account number to be used to identify its royalty payments for a
particular service offering, the Licensee must include that account
number in the identifying information for any payment for that service
offering made by electronic transfer, in its Statements of Account for
that service offering under Sec. 380.53, and in the transmittal of its
Reports of Use for that service offering under Sec. 370.4 of this
chapter.
Sec. 380.53 Delivering statements of account.
(a) Statements of Account. Any payment due under this part must be
accompanied by a corresponding Statement of Account that must contain
the following information:
(1) The amount of the royalty payment and the month for which it is
submitted;
(2) The name, address, business title, telephone number, facsimile
number (if any), electronic mail address (if any) and other contact
information of the person to be contacted for information or questions
concerning the content of the Statement of Account;
(3) The account number assigned to the Licensee by the Collective
for the relevant service offering (if the Licensee has been notified of
such account number by the Collective);
(4) The signature of:
(i) The Licensee or a duly authorized agent of the Licensee;
(ii) A partner or delegate if the Licensee is a partnership; or
(iii) An officer of the corporation if the Licensee is a
corporation.
(5) The printed or typewritten name of the person signing the
Statement of Account;
(6) If the Licensee is a partnership or corporation, the title or
official position held in the partnership or corporation by the person
signing the Statement of Account;
(7) A certification of the capacity of the person signing;
(8) The date of signature; and
(9) An attestation to the following effect: I, the undersigned
owner/officer/partner/agent of the Licensee have examined this
Statement of Account and hereby state that it is true, accurate, and
complete to my knowledge after reasonable due diligence and that it
fairly presents, in all material respects, the liabilities of the
Licensee pursuant to 17 U.S.C. 112(e) and 114 and applicable
regulations adopted under those sections.
(b) Certification. Licensee's Chief Financial Officer or, if
Licensee does not have a Chief Financial Officer, a person authorized
to sign Statements of Account for the Licensee, must submit a signed
certification on an annual basis attesting that the Licensee's royalty
statements for the prior year represent a true and accurate
determination of the royalties due.
Sec. 380.54 Distributing royalty fees.
(a) Distribution of royalties.
(1) The Collective must promptly distribute royalties received from
the Licensee to Copyright Owners and Performers that are entitled
thereto, or to their designated agents. The Collective shall only be
responsible for making distributions to those who provide the
Collective with information as is necessary to identify and pay the
correct recipient. The Collective must distribute royalties on a basis
that values all Performances by the Licensee equally based upon the
information provided under the Reports of Use requirements for the
Licensee pursuant to Sec. 370.4 of this chapter and this subpart. In
any case in which the Licensee has not provided a compliant Report of
Use within three years after the due date specified in Section
370.4(c), whether for the current license period or otherwise, and the
board of directors of the Collective determines that further efforts to
seek the missing
[[Page 55825]]
Report of Use from the Licensee would not be warranted, the Collective
may distribute the royalties associated with the Licensee's missing
Report of Use on the basis of Reports of Use for the corresponding
calendar year filed by other licensees.
(2) The Collective must use its best efforts to identify and locate
Copyright Owners and featured artists in order to distribute royalties
payable to them under 17 U.S.C. 112(e) and 114. Such efforts must
include, but not be limited to, searches in Copyright Office public
records and published directories of Copyright Owners.
(b) Unclaimed funds. If the Collective is unable to identify or
locate a Copyright Owner or Performer who is entitled to receive a
royalty distribution under this subpart, the Collective must retain the
required payment in a segregated trust account for a period of three
years from the date of the first distribution of royalties from the
relevant payment by the Licensee. No claim to distribution shall be
valid after the expiration of the three-year period. After expiration
of this period, the Collective may apply the unclaimed funds to offset
any costs deductible under 17 U.S.C. 114(g)(3).
(c) Retention of records. The Licensee shall keep and securely
store complete and accurate books and records relating to payments of
royalties for a period of not less than the prior three calendar years,
including all supporting documentation necessary to permit verification
of the accuracy of its payments pursuant to Sec. 380.51. The
Collective shall keep books and records relating to distributions of
royalties for a period of not less than the prior three calendar years.
(d) Designation of the Collective.
(1) The Judges designate SoundExchange, Inc., as the Collective to
receive Statements of Account and royalty payments from the Licensee
and to distribute royalty payments to each Copyright Owner and
Performer (or their respective designated agents) entitled to receive
royalties under 17 U.S.C. 112(e) or 114(g).
(2) If SoundExchange, Inc. should dissolve or cease to be governed
by a board consisting of equal numbers of representatives of Copyright
Owners and Performers, then it shall be replaced for the applicable
royalty period by a successor Collective according to the following
procedure:
(i) The nine Copyright Owner representatives and the nine Performer
representatives on the SoundExchange board as of the last day preceding
SoundExchange's cessation or dissolution shall vote by a majority to
recommend that the Copyright Royalty Judges designate a successor and
must file a petition with the Copyright Royalty Judges requesting that
the Judges designate the named successor and setting forth the reasons
therefore.
(ii) Within 30 days of receiving the petition, the Copyright
Royalty Judges must issue an order designating the recommended
Collective, unless the Judges find good cause not to make and publish
the designation in the Federal Register.
Sec. 380.55 Handling Confidential Information.
(a) Definition. For purposes of this part, ``Confidential
Information'' means the Statements of Account, any information
contained therein, and any information pertaining to the Statements of
Account reasonably designated as confidential by the party submitting
the statement. Confidential Information does not include documents or
information that at the time of delivery to the Collective is public
knowledge. The party seeking information from the Collective based on a
claim that the information sought is a matter of public knowledge shall
have the burden of proving to the Collective that the requested
information is in the public domain.
(b) Use of Confidential Information. The Collective may not use any
Confidential Information for any purpose other than royalty collection
and distribution and activities related directly thereto.
(c) Disclosure of Confidential Information. The Collective shall
limit access to Confidential Information to:
(1) Those employees, agents, consultants, and independent
contractors of the Collective, subject to an appropriate written
confidentiality agreement, who are engaged in the collection and
distribution of royalty payments hereunder and activities related
directly thereto who require access to the Confidential Information for
the purpose of performing their duties during the ordinary course of
their work;
(2) A Qualified Auditor or outside counsel who is authorized to act
on behalf of:
(i) The Collective with respect to verification of the Licensee's
statement of account pursuant to this part; or
(ii) A Copyright Owner or Performer with respect to the
verification of royalty distributions pursuant to this part;
(3) Copyright Owners and Performers, including their designated
agents, whose works the Licensee used under the statutory licenses set
forth in 17 U.S.C. 112(e) and 114 by the Licensee whose Confidential
Information is being supplied, subject to an appropriate written
confidentiality agreement, and including those employees, agents,
consultants, and independent contractors of such Copyright Owners and
Performers and their designated agents, subject to an appropriate
written confidentiality agreement, who require access to the
Confidential Information to perform their duties during the ordinary
course of their work;
(4) Attorneys and other authorized agents of parties to proceedings
under 17 U.S.C. 112 and 114, acting under an appropriate protective
order.
(d) Safeguarding Confidential Information. The Collective and any
person authorized to receive Confidential Information from the
Collective must implement procedures to safeguard against unauthorized
access to or dissemination of Confidential Information using a
reasonable standard of care, but no less than the same degree of
security that the recipient uses to protect its own Confidential
Information or similarly sensitive information.
Sec. 380.56 Auditing payments and distributions.
(a) General. This section prescribes procedures by which any entity
entitled to receive payment or distribution of royalties may verify
payments or distributions by auditing the Payor. The Collective may
audit the Licensee's payments of royalties to the Collective, and a
Copyright Owner or Performer may audit the Collective's distributions
of royalties to the Copyright Owner or Performer. Nothing in this
section shall preclude a verifying entity and the Payor from agreeing
to verification methods in addition to or different from those set
forth in this section.
(b) Frequency of auditing. The verifying entity may conduct an
audit of each licensee only once a year for any or all of the prior
three calendar years. A verifying entity may not audit records for any
calendar year more than once.
(c) Notice of intent to audit. The verifying entity must file with
the Copyright Royalty Judges a notice of intent to audit the Payor,
which notice the Judges must publish in the Federal Register within 30
days of the filing of the notice. Simultaneously with the filing of the
notice, the verifying entity must deliver a copy to the Payor.
(d) The audit. The audit must be conducted during regular business
hours by a Qualified Auditor who is not retained on a contingency fee
basis and is identified in the notice. The auditor shall determine the
accuracy of royalty payments or distributions, including
[[Page 55826]]
whether an underpayment or overpayment of royalties was made. An audit
of books and records, including underlying paperwork, performed in the
ordinary course of business according to generally accepted auditing
standards by a Qualified Auditor, shall serve as an acceptable
verification procedure for all parties with respect to the information
that is within the scope of the audit.
(e) Access to third-party records for audit purposes. The Payor
must use commercially reasonable efforts to obtain or to provide access
to any relevant books and records maintained by third parties for the
purpose of the audit.
(f) Duty of auditor to consult. The auditor must produce a written
report to the verifying entity. Before rendering the report, unless the
auditor has a reasonable basis to suspect fraud on the part of the
Payor, the disclosure of which would, in the reasonable opinion of the
auditor, prejudice any investigation of the suspected fraud, the
auditor must review tentative written findings of the audit with the
appropriate agent or employee of the Payor in order to remedy any
factual errors and clarify any issues relating to the audit; Provided
that an appropriate agent or employee of the Payor reasonably
cooperates with the auditor to remedy promptly any factual errors or
clarify any issues raised by the audit. The auditor must include in the
written report information concerning the cooperation or the lack
thereof of the employee or agent.
(g) Audit results; underpayment or overpayment of royalties. If the
auditor determines the Payor underpaid royalties, the Payor shall remit
the amount of any underpayment determined by the auditor to the
verifying entity, together with interest at the rate specified in Sec.
380.2(d). In the absence of mutually-agreed payment terms, which may,
but need not, include installment payments, the Payor shall remit
promptly to the verifying entity the entire amount of the underpayment
determined by the auditor. If the auditor determines the Payor overpaid
royalties, however, the verifying entity shall not be required to remit
the amount of any overpayment to the Payor, and the Payor shall not
seek by any means to recoup, offset, or take a credit for the
overpayment, unless the Payor and the verifying entity have agreed
otherwise.
(h) Paying the costs of the audit. The verifying entity must pay
the cost of the verification procedure, unless the auditor determines
that there was a net underpayment (i.e., underpayments less any
overpayments) of 10% or more, in which case the Payor must bear the
reasonable costs of the verification procedure, in addition to paying
or distributing the amount of any underpayment.
(i) Retention of audit report. The verifying party must retain the
report of the audit for a period of not less than three years from the
date of issuance.
Dated: December 2, 2025.
Christina L. Shifton,
Interim Chief Copyright Royalty Judge.
[FR Doc. 2025-21935 Filed 12-3-25; 8:45 am]
BILLING CODE 1410-72-P