Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 5693

railroad worker’s survivors (see

§ 404.1407). Under certain 

circumstances (see § 404.1413), 

certification of benefits payable under 

the provisions of the Social Security Act 

will be made to the Railroad Retirement 

Board. The Railroad Retirement Board 

will certify such benefits to the 

Secretary of the Treasury. 

(b) Who is a vested railroad worker?

You are a vested railroad worker if you 

have: 

(1) Ten years or more of service in the 

railroad industry, or 

(2) Effective January 1, 2002, you have 

at least 5 years of service in the railroad 

industry, all of which accrue after 

December 31, 1995. 

(c) Definition of years of service. As 

used in paragraph (b) of this section, the 

term years of service has the same 

meaning as assigned to it by section 1(f) 

of the Railroad Retirement Act of 1974, 

as amended, (45 U.S.C. 231(f)).

3. § 404.1402 is revised to read as 

follows:

§ 404.1402 When are railroad industry 

services by a non-vested worker covered 

under Social Security? 

If you are a non-vested worker, we 

(the Social Security Administration) 

will consider your services in the 

railroad industry to be ‘‘employment’’ as 

defined in section 210 of the Social 

Security Act for the following purposes: 

(a) To determine entitlement to, or the 

amount of, any monthly benefits or 

lump-sum death payment on the basis 

of your wages and self-employment 

income; 

(b) To determine entitlement to, or the 

amount of, any survivor monthly benefit 

or any lump-sum death payment on the 

basis of your wages and selfemployment income provided you did 

not have a ‘‘current connection’’ with the 

railroad industry, as defined in section 

1(o) of the Railroad Retirement Act of 

1974, as amended, (45 U.S.C. 231(o)), at 

the time of your death; (in such cases, 

survivor benefits are not payable under 

the Railroad Retirement Act); 

(c) To determine entitlement to a 

period of disability (see subpart B of this 

part) on the basis of your wages and 

self-employment income; or 

(d) To apply the provisions of section 

203 of the Social Security Act 

concerning deductions from benefits 

under the annual earnings test (see

subpart E of this part).

4. § 404.1403 is removed.

5. § 404.1405 is amended by revising 

the section heading and paragraph (b) to 

read as follows:

§ 404.1405 If you have been considered a 

non-vested worker, what are the situations 

when your railroad industry work will not be 

covered under Social Security?

* * * * *

(b) You continue to work in the 

railroad industry after establishing 

entitlement to old-age insurance 

benefits under section 202(a) of the 

Social Security Act. If your service in 

the railroad industry is used to establish 

your entitlement to, or to determine the 

amount of, your old-age insurance 

benefits under section 202(a) of the 

Social Security Act, but you become 

vested after the effective date of your 

benefits, your railroad service will no 

longer be deemed to be in 

‘‘employment’’ as defined in section 210 

of the Act. Your benefits and any 

benefits payable to your spouse or child 

under section 202(b), (c), or (d) of the 

Act will be terminated with the month 

preceding the month in which you 

become a vested worker. However, if 

you remain insured (see subpart B of 

this part) without the use of your 

railroad compensation, your benefits 

will instead be recalculated without 

using your railroad compensation. The 

recalculated benefits will be payable 

beginning with the month in which you 

become a vested worker. Any monthly 

benefits paid prior to the month you 

become a vested worker are deemed to 

be correct payments.

6. § 404.1413 is revised to read as 

follows:

§ 404.1413 When will we certify payment to 

the Railroad Retirement Board (RRB)? 

(a) When we will certify payment to 

RRB. If we find that you are entitled to 

any payment under title II of the Social 

Security Act, we will certify payment to 

the Railroad Retirement Board if you 

meet any of the following requirements: 

(1) You are a vested worker; or 

(2) You are the wife or husband of a 

vested worker; or 

(3) You are the survivor of a vested 

worker and you are entitled, or could 

upon application be entitled to, an 

annuity under section 2 of the Railroad 

Retirement Act of 1974, as amended, (45 

U.S.C. 231(a)); or 

(4) You are entitled to benefits under 

section 202 of the Social Security Act on 

the basis of the wages and selfemployment income of a vested worker 

(unless you are the survivor of a vested 

worker who did not have a current 

connection, as defined in section 1(o) of 

the Railroad Retirement Act of 1974, as 

amended, (45 U.S.C. 231(o)) with the 

railroad industry at the time of his or 

her death). 

(b) What information does 

certification include? The certification 

we make to the Railroad Retirement 

Board for individuals entitled to any 

payment(s) under title II will include 

your name, address, payment amount(s), 

and the date the payment(s) should 

begin. 

(c) Applicability limitations. The 

applicability limitations in paragraphs 

(a)(1) through (4) of this section affect 

claimants who first become entitled to 

benefits under title II of the Social 

Security Act after 1974. (See also 

§ 404.1810.)

[FR Doc. 04–2410 Filed 2–5–04; 8:45 am] 

BILLING CODE 4191–02–P

LIBRARY OF CONGRESS

Copyright Office 

37 CFR Parts 262 and 263

[Docket Nos. 2002–1 CARP DTRA3 and 

2001–2 CARP DTNSRA] 

Digital Performance Right in Sound 

Recordings and Ephemeral 

Recordings

AGENCY: Copyright Office, Library of 

Congress.

ACTION: Final rule.

SUMMARY: The Copyright Office of the 

Library of Congress is announcing final 

regulations that set rates and terms for 

the public performance of a sound 

recording made pursuant to a statutory 

license by means of certain eligible 

nonsubscription transmissions and 

digital transmissions made by a new 

type of subscription service. The final 

rule also announces rates and terms for 

the making of related ephemeral 

recordings. The rates and terms are for 

the 2003 and 2004 statutory licensing 

period, except in the case of a new 

subscription service, in which case the 

license period runs from 1998 through 

2004.

DATES: Effective Date: March 8, 2004. 

Applicability Dates: The regulations 

govern the license period which 

commenced on January 1, 2003, and 

ends on December 31, 2004, except in 

the case of a new subscription service, 

in which case the regulations govern the 

license period which commenced on 

October 28, 1998, and ends on 

December 31, 2004.

FOR FURTHER INFORMATION CONTACT:

David O. Carson, General Counsel, or 

Tanya M. Sandros, Senior Attorney, 

Copyright Arbitration Royalty Panel 

(CARP), P.O. Box 70977, Southwest 

Station, Washington, DC 20024. 

Telephone: (202) 707–8380; Telefax: 

(202) 252–3423.

5694 Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 

1For purposes of the section 114 license, an 

‘‘eligible nonsubscription transmission’’ is a 

noninteractive digital audio transmission which, as 

the name implies, 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 entertainment 

programming, but not to sell, advertise, or promote 

particular goods or services. See 17 U.S.C. 114(j)(6). 

A ‘‘new subscription service’’ is ‘‘a service that 

performs sound recordings by means of 

noninteractive subscription digital audio 

transmissions and that is not a preexisting 

subscription or a preexisting satellite digital audio 

radio service.’’ 17 U.S.C. 114(j)(8).

SUPPLEMENTARY INFORMATION: With the 

passage of the Digital Performance Right 

in Sound Recordings Act of 1995, as 

amended by the Digital Millennium 

Copyright Act of 1998, copyright owners 

of sound recordings have enjoyed an 

exclusive right to perform their works 

publicly by means of certain digital 

audio transmissions, subject to certain 

limitations. 17 U.S.C. 114. Among these 

limitations are certain exemptions and a 

statutory license which allows for the 

public performance of sound recordings 

as part of ‘‘eligible nonsubscription 

transmissions’’ and digital transmissions 

made by ‘‘new subscription services.’’ 1

The section 114 statutory license, 

however, does not necessarily cover all 

the rights needed to effectuate a digital 

transmission. It is often necessary for 

the licensee to first make a number of 

digital copies of the sound recording in 

order to bring about the transmission. 

For this reason, Congress created a new 

statutory license in 1998 with the 

passage of the Digital Millennium 

Copyright Act of 1998, Public Law 105–

304, to allow for the making of 

ephemeral reproductions for the 

purpose of facilitating certain digital 

audio transmissions pursuant to the 

section 114 statutory license, including 

those transmissions made by eligible 

nonsubscription services and new 

subscription services. See 17 U.S.C. 

112(e). 

The procedure for setting the rates 

and terms for these two statutory 

licenses is a two-step process. 17 U.S.C. 

112(e)(3), (4), and (6) and 17 U.S.C. 

114(f)(2). The first step requires the 

Librarian of Congress to initiate a 

voluntary negotiation period in order to 

give interested parties an opportunity to 

reach consensus with respect to the 

applicable rates and terms through an 

informal process. However, in the event 

the parties are unable to reach an 

agreement during this period, sections 

112(e)(4) and 114(f)(2)(B) direct the 

Librarian of Congress to convene a 

three-person Copyright Arbitration 

Royalty Panel (‘‘CARP’’) for the purpose 

of determining the rates and terms for 

the compulsory license, provided that 

an interested party files a petition in 

accordance with 17 U.S.C. 803(a)(1), 

requesting the formal proceeding. 

The initial schedule of rates and terms 

for the sections 112 and 114 licenses 

applicable to eligible nonsubscription 

services for the period from October 28, 

1998, to December 31, 2002, was 

published on July 8, 2002, after a formal 

hearing before a CARP. See 67 FR 45239 

(July 8, 2002). Yet, this announcement 

did not settle the matter for long. It only 

established rates and terms for the 

license period ending December 31st of 

that year. 

For this reason, the Library initiated 

a new proceeding to adjust the rates and 

terms applicable to eligible 

nonsubscription transmissions for the 

2003–2004 license period by publishing 

a notice in the Federal Register in 

January 2002 announcing the six-month 

voluntary negotiation period that 

commences a rate adjustment 

proceeding. See 67 FR 4472 (January 30, 

2002). The Librarian took this step even 

though the rates for 1998–2002 had not 

been announced, in order to comply 

with the timetable set forth in sections 

112(e)(7) and 114(f)(2)(C)(i)(II). 

Specifically, these sections require the 

Librarian to publish a notice 

commencing the negotiation process in 

the first week of January 2000 and at 

two year intervals thereafter, unless the 

parties have agreed to an alternative 

schedule during the settlement phase of 

the process. In any event, the parties did 

not negotiate a proposed settlement 

during the specified period to cover the 

next license period and opted instead to 

file petitions with the Office, requesting 

that the Librarian of Congress convene 

a CARP to adjust the rates and terms for 

the license period 2003–2004. Two such 

petitions were filed with the Copyright 

Office. The Recording Industry 

Association of America, Inc. (‘‘RIAA’’) 

filed one of the two petitions, and 

IOMedia Partners, Inc., 3WK, Digitally 

Imported Radio, IM Networks, Inc., 

Beethoven.com, LLC, All Bass Radio, 

Discombobulated, LLC, Wolf FM and 

Integrity Media Group, Inc. d/b/a 

Boomer Radio, filed jointly a second 

petition on behalf of certain licensees. 

Likewise, in accordance with the time 

frame set forth in the law for the 

purpose of setting rates and terms for 

use of the section 114 license by new 

subscription services, the Library 

initiated a six-month voluntary 

negotiation period to adjust the rates 

and terms for new subscription services. 

See 66 FR 9881 (February 12, 2001). 

Again, no settlement was reached by the 

end of the six-month period. 

Consequently, Music Choice and the 

RIAA filed separate petitions with the 

Copyright Office requesting that a CARP 

be convened in order to set the rates and 

terms for the public performance of 

sound recordings by new subscription 

services. 

Proposed Settlement Agreements 

The parties in both proceedings 

continued to negotiate in good faith 

beyond the statutorily mandated sixmonth negotiation periods in hopes of 

reaching an industry wide settlement. 

Ultimately, they succeeded, as 

evidenced by the adoption of the 

proposed rates and terms as final rules. 

The process, however, required the 

consideration of three separate 

agreements, explained herein. 

On May 1, 2003, the Copyright Office 

published a notice in the Federal 

Register, requesting comment on 

proposed regulations that set rates and 

terms for the use of sound recordings in 

certain eligible nonsubscription 

transmissions made pursuant to section 

114 during the 2003 and 2004 statutory 

licensing period, as well as for the 

making of ephemeral recordings 

necessary for the facilitation of such 

transmissions in accordance with the 

section 112(e) license. The proposal also 

included rates and terms for the use of 

sound recordings in transmissions made 

by new subscription services from 1998 

through December 31, 2004, and the 

making of the related ephemeral 

recordings under these same statutory 

licenses. 68 FR 23241 (May 1, 2003). 

These proposed rates and terms were 

part of a settlement agreement 

negotiated by SoundExchange, a 

division of the RIAA, the American 

Federation of Television and Radio 

Artists (‘‘AFTRA’’), the American 

Federation of Musicians of the United 

States and Canada (‘‘AFM’’), and the 

Digital Media Association (‘‘DiMA’’) and 

were submitted to the Copyright Office 

on April 14, 2003, along with a petition 

requesting that the Office publish the 

proposed rates and terms pursuant to 

§ 251.63(b) of title 37 of the Code of 

Federal Regulations, which the Office 

did. Id. See 68 FR 23241 (May 1, 2003). 

The April 14 proposal was later 

superseded by a second proposal which 

was submitted to the Copyright Office 

on May 8, 2003. The new agreement 

amended the proposal in the April 14 

submission with the approval of the 

parties to the first agreement and 

included, for the first time, rates and 

terms for simulcasts of AM and FM 

radio broadcast programming. These 

new rates were the result of an 

agreement between SoundExchange,

Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 5695

2Those entities who negotiated on behalf of the 

broadcasters include Bonneville International 

Corporation, Clear Channel Communications, Inc., 

the National Religious Broadcasters Music License 

Committee, Salem Communications Corporation, 

and Susquehanna Radio Corporation.

AFM, and AFTRA (collectively, 

‘‘Copyright Owners and Performers’’), on 

the one hand, and Broadcasters,2 on the 

other hand. The May 8 agreement also 

included proposed rates and terms 

applicable to business establishment 

services that make ephemeral 

phonorecords pursuant to section 112(e) 

for the purpose of transmitting a public 

performance of a sound recording under 

the limitation on exclusive rights 

specified by section 114(d)(1)(C)(iv). 

These rates and terms were agreed to by 

the Copyright Owners and Performers 

and Music Choice, the only business 

establishment service participating in 

this proceeding, and cover the 2003 and 

2004 statutory license period. As before, 

the Petitioners requested that the Office 

publish the amended proposed rates 

and terms for public comment pursuant 

to 37 CFR 251.63(b). See 68 FR 27506 

(May 20, 2003).

On July 3, 2003, SoundExchange, the 

American Council on Education, and 

the Intercollegiate Broadcasting System, 

Inc., jointly with Harvard Radio 

Broadcasting Co., Inc. submitted the 

third and final proposal to the Copyright 

Office. It proposed rates and terms for 

use of the section 112 and section 114 

statutory licenses by noncommercial 

licensees during the 2003–2004 license 

period that are identical to the statutory 

rates and terms adopted by the Librarian 

for the period ending December 31, 

2002. See 67 FR 45239 (July 8, 2002). It 

should be noted, however, that many 

noncommercial webcasters will not be 

using these rates and terms for this time 

period. Instead, certain noncommercial 

licensees will operate under the rate 

structure adopted in a separate license, 

negotiated with RIAA in accordance 

with the Small Webcaster Settlement 

Act of 2002. See 68 FR 35008 (June 11, 

2003).

Objections to the Proposed Rates and 

Terms 

The Copyright Office received 

objections to the proposals announced 

in the May 20 and the August 21 notices 

from four entities: Live365.com, Lester 

Chambers (‘‘Chambers’’), Royalty Logic, 

Inc. (‘‘RLI’’) and SRN Broadcasting & 

Marketing, Inc. (‘‘SRN’’). Specifically, 

Live365.com objected to the rates and 

terms applicable to commercial 

webcasters, but withdrew its objections 

early in the process, obviating the need 

to consider its concerns further. 

Similarly, SRN objected to these same 

rates. However, SRN was eventually 

dismissed from the proceedings for its 

failure to comply with the Orders issued 

in this proceeding and the rules 

governing this process. See Order in 

Docket No. 2002–1 CARP DTRA3, dated 

August 15, 2003. That left the objections 

of RLI and RLI’s client, Lester 

Chambers, which, in both cases, 

concerned the appointment and 

responsibilities of those agents 

designated to collect and distribute the 

royalty fees. 

An objection, however, can only be 

considered if the party filing the 

objection has a significant interest in the 

outcome of the proceeding. In the case 

of RLI, the Office determined that RLI 

had no independent standing to pursue 

its own objections but held that RLI 

could represent the interests of its 

client, Lester Chambers, provided that 

Chambers expressly authorized RLI to 

represent its interest in these 

proceedings. See Order in Docket Nos. 

2002–1 CARP DTRA3 and 2001–2 CARP 

DTNSRA, dated August 18, 2003. 

Consequently, at the beginning of the 

hearing phase of this proceeding, 

Chambers, as represented by RLI, was 

the only remaining party that had filed 

an objection to the proposed rates and 

terms. This objection, however, became 

moot on January 8, 2003, when RLI filed 

a notice with the Copyright Office 

withdrawing its Notice of Intent to 

Participate in these proceedings and its 

Direct Case. 

Because there are no longer any 

parties objecting to the proposed rates 

and terms, the Librarian is adopting as 

final regulations the rates and terms for 

the section 112(e) and section 114 

licenses proposed in the May 20 and 

August 21 notices. The rates and terms 

apply to the public performance of a 

sound recording by means of certain 

eligible nonsubscription transmissions 

and digital transmissions made by a 

new type of subscription service. The 

final rules also announce rates and 

terms for the making of related 

ephemeral recordings. The rates and 

terms are for the 2003 and 2004 license 

period, except in the case of new 

subscription services, in which case the 

license period runs from 1998 through 

2004. 

Adoption of the rules presented 

herein as final regulations concludes the 

above-captioned proceedings.

List of Subjects in 37 CFR Parts 262 and 

263

Copyright, Digital audio 

transmissions, Performance right, Sound 

recordings.

Final Regulation 

In consideration of the foregoing, the 

Copyright Office adds parts 262 and 263 

to 37 CFR to read as follows:

PART 262—RATES AND TERMS FOR 

CERTAIN ELIGIBLE 

NONSUBSCRIPTION TRANSMISSIONS, 

NEW SUBSCRIPTION SERVICES AND 

THE MAKING OF EPHEMERAL 

REPRODUCTIONS

Sec. 

262.1 General. 

262.2 Definitions. 

262.3 Royalty fees for public performance 

of sound recordings and for ephemeral 

recordings. 

262.4 Terms for making payment of royalty 

fees and statements of account. 

262.5 Confidential information. 

262.6 Verification of statements of account. 

262.7 Verification of royalty payments. 

262.8 Unclaimed funds.

Authority: 17 U.S.C. 112(e), 114, 801(b)(1).

§ 262.1 General. 

(a) Scope. This part 262 establishes 

rates and terms of royalty payments for 

the public performance of sound 

recordings in certain digital 

transmissions by certain Licensees in 

accordance with the provisions of 17 

U.S.C. 114, and the making of 

Ephemeral Recordings by certain 

Licensees in accordance with the 

provisions of 17 U.S.C. 112(e), during 

the period 2003–2004 and in the case of 

Subscription Services 1998–2004 (the 

‘‘License Period’’). 

(b) Legal compliance. Licensees 

relying upon the statutory licenses set 

forth in 17 U.S.C. 112 and 114 shall 

comply with the requirements of those 

sections, the rates and terms of this part 

and any other applicable regulations. 

(c) Relationship to voluntary 

agreements. Notwithstanding the 

royalty rates and terms established in 

this part, the rates and terms of any 

license agreements entered into by 

Copyright Owners and services shall 

apply in lieu of the rates and terms of 

this part to transmissions within the 

scope of such agreements.

§ 262.2 Definitions. 

For purposes of this part, the 

following definitions shall apply: 

(a) Aggregate Tuning Hours means the 

total hours of programming that the 

Licensee has transmitted during the 

relevant period to all Listeners within 

the United States from all channels and 

stations that provide audio 

programming consisting, in whole or in 

part, of eligible nonsubscription 

transmissions or noninteractive digital 

audio transmissions as part of a new 

subscription service, less the actual

5696 Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 

running time of any sound recordings 

for which the Licensee has obtained 

direct licenses apart from 17 U.S.C. 

114(d)(2) or which do not require a 

license under United States copyright 

law. By way of example, if a service 

transmitted one hour of programming to 

10 simultaneous Listeners, the service’s 

Aggregate Tuning Hours would equal 

10. If 30 minutes of that hour consisted 

of transmission of a directly licensed 

recording, the service’s Aggregate 

Tuning Hours would equal 9 hours and 

30 minutes. As an additional example, 

if one Listener listened to a service for 

10 hours (and none of the recordings 

transmitted during that time was 

directly licensed), the service’s 

Aggregate Tuning Hours would equal 

10. 

(b) Broadcast Simulcast means 

(1) A simultaneous Internet 

transmission or retransmission of an 

over-the-air terrestrial AM or FM radio 

broadcast, including one with 

previously broadcast programming 

substituted for programming for which 

requisite licenses or clearances to 

transmit over the Internet have not been 

obtained and one with substitute 

advertisements, and 

(2) An Internet transmission in 

accordance with 17 U.S.C. 

114(d)(2)(C)(iii) of an archived program, 

which program was previously 

broadcast over-the-air by a terrestrial 

AM or FM broadcast radio station, in 

either case whether such Internet 

transmission or retransmission is made 

by the owner and operator of the AM or 

FM radio station that makes the 

broadcast or by a third party. 

(c) Business Establishment Service

means a service making transmissions of 

sound recordings under the limitation 

on exclusive rights specified by 17 

U.S.C. 114(d)(1)(C)(iv). 

(d) Copyright Owner is a sound 

recording copyright owner who is 

entitled to receive royalty payments 

made under this part pursuant to the 

statutory licenses under 17 U.S.C. 112(e) 

or 114. 

(e) Designated Agent is the agent 

designated by the Librarian of Congress 

as provided in § 262.4(b). 

(f) Ephemeral Recording is a 

phonorecord created for the purpose of 

facilitating a transmission of a public 

performance of a sound recording under 

the limitations on exclusive rights 

specified by 17 U.S.C. 114(d)(1)(C)(iv) or 

for the purpose of facilitating a 

transmission of a public performance of 

a sound recording under a statutory 

license in accordance with 17 U.S.C. 

114(f), and subject to the limitations 

specified in 17 U.S.C. 112(e). 

(g) Licensee is a person or entity that

(1) Has obtained a compulsory license 

under 17 U.S.C. 114 and the 

implementing regulations therefor to 

make eligible nonsubscription 

transmissions, or noninteractive digital 

audio transmissions as part of a new 

subscription service (as defined in 17 

U.S.C. 114(j)(8)), or that has obtained a 

compulsory license under 17 U.S.C. 

112(e) and the implementing regulations 

therefor to make Ephemeral Recordings 

for use in facilitating such 

transmissions, or 

(2) Is a Business Establishment 

Service that has obtained a compulsory 

license under 17 U.S.C. 112(e) and the 

implementing regulations therefor to 

make Ephemeral Recordings, but not a 

person or entity that: 

(i) Is exempt from taxation under 

section 501 of the Internal Revenue 

Code of 1986 (26 U.S.C. 501); 

(ii) Has applied in good faith to the 

Internal Revenue Service for exemption 

from taxation under section 501 of the 

Internal Revenue Code and has a 

commercially reasonable expectation 

that such exemption shall be granted; or 

(iii) Is a State or possession or any 

governmental entity or subordinate 

thereof, or the United States or District 

of Columbia, making transmissions for 

exclusively public purposes. 

(h) Listener is a player, receiving 

device or other point receiving and 

rendering a transmission of a public 

performance of a sound recording made 

by a Licensee, irrespective of the 

number of individuals present to hear 

the transmission. 

(i) Nonsubscription Service means a 

service making eligible nonsubscription 

transmissions. 

(j) Performance is each instance in 

which any portion of a sound recording 

is publicly performed to a Listener by 

means of a digital audio transmission or 

retransmission (e.g., the delivery of any 

portion of a single track from a compact 

disc to one Listener) but excluding the 

following: 

(1) A performance of a sound 

recording that does not require a license 

(e.g., the sound recording is not 

copyrighted); 

(2) A performance of a sound 

recording for which the service 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) Other than ambient music that is 

background at a public event, does not 

contain an entire sound recording 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). 

(k) 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). 

(l) Subscription Service means a new 

subscription service (as defined in 17 

U.S.C. 114(j)(8)) making noninteractive 

digital audio transmissions. 

(m) Subscription Service Revenues

shall mean all monies and other 

consideration paid or payable, including 

the fair market value of non-cash or inkind consideration paid or payable by 

third parties, from the operation of a 

Subscription Service, as comprised of 

the following: 

(1) Subscription fees and other 

monies and consideration paid for 

access to the Subscription Service by or 

on behalf of subscribers receiving 

within the United States transmissions 

made as part of the Subscription 

Service; 

(2) Monies and other consideration 

(including without limitation customer 

acquisition fees) from audio or visual 

advertising, promotions, sponsorships, 

time or space exclusively or 

predominantly targeted to subscribers of 

the Subscription Service, whether 

(i) On or through the Subscription 

Service media player, or on pages 

accessible only by subscribers or that 

are predominantly targeted to 

subscribers, or 

(ii) In e-mails addressed exclusively 

or predominantly to subscribers of the 

Subscription Service, or 

(iii) Delivered exclusively or 

predominantly to subscribers of the 

Subscription Service in some other 

manner, in each case less advertising 

agency commissions (not to exceed 15% 

of those monies and other 

consideration) actually paid to a 

recognized advertising agency not 

owned or controlled by Licensee; 

(3) Monies and other consideration 

(including without limitation the 

proceeds of any revenue-sharing or 

commission arrangements with any 

fulfillment company or other third 

party, and any charge for shipping or 

handling) from the sale of any product 

or service directly through the 

Subscription Service media player or 

through pages or advertisements

Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 5697

accessible only by subscribers or that 

are predominantly targeted to 

subscribers (but not pages or 

advertisements that are not 

predominantly targeted to subscribers), 

less 

(i) Monies and other consideration 

from the sale of phonorecords and 

digital phonorecord deliveries of sound 

recordings, 

(ii) The Licensee’s actual, out-ofpocket cost to purchase for resale the 

products or services (except 

phonorecords and digital phonorecord 

deliveries of sound recordings) from 

third parties, or in the case of products 

produced or services provided by the 

Licensee, the Licensee’s actual cost to 

produce the product or provide the 

service (but not more than the fair 

market wholesale value of the product 

or service), and 

(iii) Sales and use taxes, shipping, and 

credit card and fulfillment service fees 

actually paid to unrelated third parties; 

provided that: 

(A) The fact that a transaction is 

consummated on a different page than 

the page/location where a potential 

customer responds to a ‘‘buy button’’ or 

other purchase opportunity for a 

product or service advertised directly 

through such player, pages or 

advertisements shall not render such 

purchase outside the scope of 

Subscription Service Revenues 

hereunder, and 

(B) Monies and other consideration 

paid by or on behalf of subscribers for 

software or any other access device 

owned by Licensee (or any subsidiary or 

other affiliate of the Licensee, but 

excluding, for the avoidance of doubt, 

any entity that sells a third-party 

product, whether or not bearing the 

Licensee’s brand) to access the 

Licensee’s Subscription Service shall 

not be deemed part of Subscription 

Service Revenues, unless such software 

or access device is required as a 

condition to access the Subscription 

Service and either is purchased by a 

subscriber contemporaneously with or 

after subscribing or has no independent 

function other than to access the 

Subscription Service; 

(4) Monies and other consideration for 

the use or exploitation of data 

specifically and separately concerning 

subscribers or the Subscription Service, 

but not monies and other consideration 

for the use or exploitation of data 

wherein information concerning 

subscribers or the Subscription Service 

is commingled with and not separated 

or distinguished from data that 

predominantly concern nonsubscribers 

or other services; and 

(5) Bad debts recovered with respect 

to paragraphs (m)(1) through (4) of this 

section; provided that the Subscription 

Service shall be permitted to deduct bad 

debts actually written off during a 

reporting period.

§ 262.3 Royalty fees for public 

performances of sound recordings and for 

ephemeral recordings. 

(a) Basic royalty rate. Royalty rates 

and fees for eligible nonsubscription 

transmissions made by Licensees 

pursuant to 17 U.S.C. 114(d)(2) during 

the period January 1, 2003, through 

December 31, 2004, and the making of 

Ephemeral Recordings pursuant to 17 

U.S.C. 112(e) to facilitate such 

transmissions; noninteractive digital 

audio transmissions made by Licensees 

pursuant to 17 U.S.C. 114(d)(2) as part 

of a new subscription service during the 

period October 28, 1998, through 

December 31, 2004, and the making of 

Ephemeral Recordings pursuant to 17 

U.S.C. 112(e) to facilitate such 

transmissions; and the making of 

Ephemeral Recordings by Business 

Establishment Services pursuant to 17 

U.S.C. 112(e) during the period January 

1, 2003, through December 31, 2004, 

shall be as follows: 

(1) Nonsubscription Services. For 

their operation of Nonsubscription 

Services, Licensees other than Business 

Establishment Services shall, at their 

election as provided in paragraph (b) of 

this section, pay at one of the following 

rates: 

(i) Per Performance Option. $0.000762 

(0.0762¢) per Performance for all digital 

audio transmissions, except that 4% of 

Performances shall bear no royalty to 

approximate the number of partial 

Performances of nominal duration made 

by a Licensee due to, for example, 

technical interruptions, the closing 

down of a media player or channel 

switching; Provided that this provision 

is not intended to imply that permitting 

users of a service to ‘‘skip’’ a recording 

is or is not permitted under 17 U.S.C. 

114(d)(2). For the avoidance of doubt, 

this 4% exclusion shall apply to all 

Licensees electing this payment option 

irrespective of the Licensee’s actual 

experience in respect of partial 

Performances. 

(ii) Aggregate Tuning Hour Option.

(A) Non-Music Programming. $0.000762 

(0.0762¢) per Aggregate Tuning Hour for 

programming reasonably classified as 

news, talk, sports or business 

programming. 

(B) Broadcast Simulcasts. $0.0088 

(0.88¢) per Aggregate Tuning Hour for 

Broadcast Simulcast programming not 

reasonably classified as news, talk, 

sports or business programming. 

(C) Other Programming. $0.0117 

(1.17¢) per Aggregate Tuning Hour for 

programming other than Broadcast 

Simulcast programming and 

programming reasonably classified as 

news, talk, sports or business 

programming. 

(2) Subscription Services. For their 

operation of Subscription Services, 

Licensees other than Business 

Establishment Services shall, at their 

election as provided in paragraph (b) of 

this section, pay at one of the following 

rates:

(i) Per Performance Option. $0.000762 

(0.0762¢) per Performance for all digital 

audio transmissions, except that 4% of 

Performances shall bear no royalty to 

approximate the number of partial 

Performances of nominal duration made 

by a Licensee due to, for example, 

technical interruptions, the closing 

down of a media player or channel 

switching; Provided that this provision 

is not intended to imply that permitting 

users of a service to ‘‘skip’’ a recording 

is or is not permitted under 17 U.S.C. 

114(d)(2). For the avoidance of doubt, 

this 4% exclusion shall apply to all 

Licensees electing this payment option 

irrespective of the Licensee’s actual 

experience in respect of partial 

performances. 

(ii) Aggregate Tuning Hour Option.—

(A) Non-Music Programming.

$0.000762 (0.0762¢) per Aggregate 

Tuning Hour for programming 

reasonably classified as news, talk, 

sports or business programming. 

(B) Broadcast Simulcasts. $0.0088 

(0.88¢) per Aggregate Tuning Hour for 

Broadcast Simulcast programming not 

reasonably classified as news, talk, 

sports or business programming. 

(C) Other Programming. $0.0117 

(1.17¢) per Aggregate Tuning Hour for 

programming other than Broadcast 

Simulcast programming and 

programming reasonably classified as 

news, talk, sports or business 

programming. 

(iii) Percentage of Subscription 

Service Revenues Option. 10.9% of 

Subscription Service Revenues, but in 

no event less than 27¢ per month for 

each person who subscribes to the 

Subscription Service for all or any part 

of the month or to whom the 

Subscription Service otherwise is 

delivered by Licensee without a fee 

(e.g., during a free trial period), subject 

to the following reduction associated 

with the transmission of directly 

licensed sound recordings (if 

applicable). For any given payment 

period, the fee due from Licensee shall 

be the amount calculated under the 

formula described in the immediately 

preceding sentence multiplied by the

5698 Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 

following fraction: the total number of 

Performances (as defined under 

§ 262.2(j), which excludes directly 

licensed sound recordings) made by the 

Subscription Service during the period 

in question, divided by the total number 

of digital audio transmissions of sound 

recordings made by the Subscription 

Service during the period in question 

(inclusive of Performances and 

equivalent transmissions of directly 

licensed sound recordings). Any 

Licensee paying on such basis shall 

report to the Designated Agent on its 

statements of account the pertinent 

music use information upon which such 

reduction has been calculated. This 

option shall not be available to a 

Subscription Service where—

(A) A particular computer software 

product or other access device must be 

purchased for a separate fee from the 

Licensee as a condition of receiving 

transmissions of sound recordings 

through the Subscription Service, and 

the Licensee chooses not to include 

sales of such software product or other 

device to subscribers as part of 

Subscription Service Revenues in 

accordance with § 262.2(m)(3), or 

(B) The consideration paid or given to 

receive the Subscription Service also 

entitles the subscriber to receive or have 

access to material, products or services 

other than the Subscription Service (for 

example, as in the case of a ‘‘bundled 

service’’ consisting of access to the 

Subscription Service and also access to 

the Internet in general). In all events, in 

order to be eligible for this payment 

option, a Licensee may not engage in 

pricing practices whereby the 

Subscription Service is offered to 

subscribers on a ‘‘loss leader’’ basis or 

whereby the price of the Subscription 

Service is materially subsidized by 

payments made by the subscribers for 

other products or services. 

(3) Business Establishment Services.

For the making of any number of 

Ephemeral Recordings in the operation 

of a service pursuant to the limitation 

on exclusive rights specified by 17 

U.S.C. 114(d)(1)(C)(iv), a Licensee that is 

a Business Establishment Service shall 

pay 10% of such Licensee’s ‘‘Gross 

Proceeds’’ derived from the use in such 

service of musical programs that are 

attributable to copyrighted recordings. 

‘‘Gross Proceeds’’ as used in paragraph 

(a)(3) of this section means all fees and 

payments, including those made in 

kind, received from any source before, 

during or after the License Period that 

are derived from the use of copyrighted 

sound recordings pursuant to 17 U.S.C. 

112(e) for the sole purpose of facilitating 

a transmission to the public of a 

performance of a sound recording under 

the limitation on exclusive rights 

specified in 17 U.S.C. 114(d)(1)(C)(iv). 

The attribution of Gross Proceeds to 

copyrighted recordings may be made on 

the basis of: 

(i) For classical programs, the 

proportion that the playing time of 

copyrighted classical recordings bears to 

the total playing time of all classical 

recordings in the program, and 

(ii) For all other programs, the 

proportion that the number of 

copyrighted recordings bears to the total 

number of all recordings in the program. 

(b) Election process. A Licensee other 

than a Business Establishment Service 

shall elect the particular 

Nonsubscription Service and/or 

Subscription Service royalty rate 

categories it chooses (that is, among 

paragraph (a)(1)(i) or (ii) of this section 

and/or paragraph (a)(2)(i), (ii) or (iii) of 

this section) for the License Period by 

no later than March 8, 2004. 

Notwithstanding the preceding 

sentence, where a Licensee has not 

previously provided a Nonsubscription 

Service or Subscription Service, as the 

case may be, the Licensee may make its 

election by no later than thirty (30) days 

after the new service first makes a 

digital audio transmission of a sound 

recording under the 17 U.S.C. 114 

statutory license. Each such election 

shall be made by notifying the 

Designated Agent in writing of such 

election, using an election form 

provided by the Designated Agent. A 

Licensee that fails to make a timely 

election shall pay royalties as provided 

in paragraphs (a)(1)(i) and (a)(2)(i) of 

this section, as applicable. 

Notwithstanding the foregoing, a 

Licensee eligible to make royalty 

payments under an agreement entered 

into pursuant to the Small Webcaster 

Settlement Act of 2002 may elect to 

make payments under such agreement 

as specified in such agreement. 

(c) Ephemeral Recordings. The royalty 

payable under 17 U.S.C. 112(e) for any 

reproduction of a phonorecord made by 

a Licensee other than a Business 

Establishment Service during the 

License Period, and used solely by the 

Licensee to facilitate transmissions for 

which it pays royalties as and when 

provided in this section and § 262.4 

shall be deemed to be included within, 

and to comprise 8.8% of, such royalty 

payments. The royalty payable under 17 

U.S.C. 112(e) for the reproduction of 

phonorecords by a Business 

Establishment Service shall be as set 

forth in paragraph (a)(3) of this section. 

(d) Minimum fee. (1) Business 

Establishment Services. Each Licensee 

that is a Business Establishment Service 

shall pay a minimum fee of $10,000 for 

each calendar year in which it makes 

Ephemeral Recordings for use to 

facilitate transmissions under the 

limitation on exclusive rights specified 

by 17 U.S.C. 114(d)(1)(C)(iv), whether or 

not it does so for all or any part of the 

year. 

(2) Other Services. Each Licensee 

other than a Business Establishment 

Service shall pay a minimum fee of 

$2,500, or $500 per channel or station 

(excluding archived programs, but in no 

event less than $500 per Licensee), 

whichever is less, for each calendar year 

in which it makes eligible 

nonsubscription transmissions, 

noninteractive digital audio 

transmissions as part of a new 

subscription service or Ephemeral 

Recordings for use to facilitate such 

transmissions, whether or not it does 

the foregoing for all or any part of the 

year; except that the minimum annual 

fee for a Licensee electing to pay under 

paragraph (a)(2)(iii) of this section shall 

be $5,000. 

(3) In General. These minimum fees 

shall be nonrefundable, but shall be 

fully creditable to royalty payments due 

under paragraph (a) of this section for 

the same calendar year (but not any 

subsequent calendar year). 

(e) Continuing Obligation. For the 

limited purpose of the period 

immediately following the License 

Period, and on an entirely without 

prejudice and nonprecedential basis 

relative to other time periods and 

proceedings, if successor statutory 

royalty rates for Licensees for the period 

beginning January 1, 2005, have not 

been established by January 1, 2005, 

then Licensees shall pay to the 

Designated Agent, effective January 1, 

2005, and continuing for the period 

through April 30, 2005, or until 

successor rates and terms are 

established, whichever is earlier, an 

interim royalty pursuant to the same 

rates and terms as are provided for the 

License Period. Such interim royalties 

shall be subject to retroactive 

adjustment based on the final successor 

rates. Any overpayment shall be fully 

creditable to future payments, and any 

underpayment shall be paid within 30 

days after establishment of the successor 

rates and terms, except as may 

otherwise be provided in the successor 

terms. If there is a period of such 

interim payments, Licensees shall elect 

the particular royalty rate categories it 

chooses for the interim period as 

described in paragraph (b) of this 

section, except that the election for a 

service that is in operation shall be 

made by no later than January 15, 2005. 

(f) Other royalty rates and terms. This 

part 262 does not apply to persons or

Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 5699

entities other than Licensees, or to 

Licensees to the extent that they make 

other types of transmissions beyond 

those set forth in paragraph (a) of this 

section. For transmissions other than 

those governed by paragraph (a) of this 

section, or the use of Ephemeral 

Recordings to facilitate such 

transmissions, persons making such 

transmissions must pay royalties, to the 

extent (if at all) applicable, under 17 

U.S.C. 112(e) and 114 or as prescribed 

by other law, regulation or agreement.

§ 262.4 Terms for making payment of 

royalty fees and statements of account. 

(a) Payment to designated agent. A 

Licensee shall make the royalty 

payments due under § 262.3 to the 

Designated Agent. 

(b) Designation of agent and potential 

successor designated agents. (1) Until 

such time as a new designation is made, 

SoundExchange, presently an 

unincorporated division of the 

Recording Industry Association of 

America, Inc. (‘‘RIAA’’), is designated as 

the Designated Agent to receive 

statements of account and royalty 

payments from Licensees due under 

§ 262.3 and to distribute such royalty 

payments to each Copyright Owner and 

Performer entitled to receive royalties 

under 17 U.S.C. 112(e) or 114(g). 

SoundExchange shall continue to be 

designated after its separate 

incorporation. 

(2) If SoundExchange should fail to 

incorporate by July 1, 2003, 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 

by successor entities upon the 

fulfillment of the requirements set forth 

in paragraphs (b)(2)(i) and (ii) of this 

section.

(i) By a majority vote of the nine 

copyright owner representatives on the 

SoundExchange Board as of the last day 

preceding the condition precedent in 

paragraph (b)(2) of this section, such 

representatives shall file a petition with 

the Copyright Office designating a 

successor Designated Agent to distribute 

royalty payments to Copyright Owners 

and Performers entitled to receive 

royalties under 17 U.S.C. 112(e) or 

114(g) that have themselves authorized 

such Designated Agent. 

(ii) By a majority vote of the nine 

performer representatives on the 

SoundExchange Board as of the last day 

preceding the condition precedent in 

paragraph (b)(2) of this section, such 

representatives shall file a petition with 

the Copyright Office designating a 

successor Designated Agent to distribute 

royalty payments to Copyright Owners 

and Performers entitled to receive 

royalties under 17 U.S.C. 112(e) or 

114(g) that have themselves authorized 

such Designated Agent. 

(iii) The Copyright Office shall 

publish in the Federal Register within 

30 days of receipt of a petition filed 

under paragraph (b)(2)(i) or (ii) of this 

section an order designating the 

Designated Agents named in such 

petitions. Nothing contained in this 

section shall prohibit the petitions filed 

under paragraphs (b)(2)(i) and (ii) of this 

section from naming the same successor 

Designated Agent. 

(3) If petitions are filed under 

paragraphs (b)(2)(i) and (ii) of this 

section, then, following the actions of 

the Copyright Office in accordance with 

paragraph (b)(2)(iii) of this section: 

(i) Each of the successor entities shall 

have all the rights and responsibilities 

of a Designated Agent under this part 

262, except as specifically set forth in 

this paragraph (b)(3). 

(ii) Licensees shall make their royalty 

payments to the successor entity named 

by the copyright owner representatives 

under paragraph (b)(2)(i) of this section 

(the ‘‘Receiving Agent’’) and shall 

provide statements of account on a form 

prepared by the Receiving Agent. 

Licensees shall submit a copy of each 

statement of account to the collective 

named by the performer representatives 

under paragraph (b)(2)(ii) of this section 

at the same time such statement of 

account is delivered to the Receiving 

Agent. 

(iii) The Designated Agents shall agree 

between themselves concerning 

responsibility for distributing royalty 

payments to Copyright Owners and 

Performers that have not themselves 

authorized either Designated Agent. The 

Designated Agents also shall agree to a 

corresponding methodology for 

allocating royalty payments between 

them using the information provided by 

the Licensee pursuant to the regulations 

governing records of use of 

performances for the period for which 

the royalty payment was made. Such 

methodology shall value all 

performances equally. Within 30 days 

after their agreement concerning such 

responsibility and methodology, the 

Designated Agents shall inform the 

Register of Copyrights thereof. 

(iv) With respect to any royalty 

payment received by the Receiving 

Agent from a Licensee, a designation by 

a Copyright Owner or Performer of a 

Designated Agent must be made no later 

than 30 days prior to the receipt by the 

Receiving Agent of that royalty 

payment. 

(v) The Receiving Agent shall 

promptly allocate the royalty payments 

it receives between the two Designated 

Agents in accordance with the agreed 

methodology. A final adjustment, if 

necessary, shall be agreed and paid or 

refunded, as the case may be, between 

the Receiving Agent and the collectives 

named under paragraph (b)(2) of this 

section for each calendar year no later 

than 180 days following the end of each 

calendar year. The Designated Agents 

shall agree on a reasonable basis for the 

sharing on a pro-rata basis of any costs 

associated with the allocations set forth 

in paragraph (b)(3)(iii) of this section. 

(vi) If a Designated Agent is unable to 

locate a Copyright Owner or Performer 

that the Designated Agent otherwise 

would be required to pay under this 

paragraph (b) within 3 years from the 

date of payment by Licensee, such 

Copyright Owner’s or Performer’s share 

of the payments made by Licensees may 

first be applied to the costs directly 

attributable to the administration of the 

royalty payments due such Copyright 

Owners and Performers by that 

Designated Agent and shall thereafter be 

allocated between the Designated 

Agents on a pro rata basis (based on 

distributions to entitled parties) to offset 

any costs permitted to be deducted by 

a designated agent under 17 U.S.C. 

114(g)(3). The foregoing shall apply 

notwithstanding the common law or 

statutes of any State. 

(c) Monthly payments. A Licensee 

shall make any payments due under 

§ 262.3(a) by the 45th day after the end 

of each month for that month, except 

that payments due under § 262.3(a) for 

the period from the beginning of the 

License Period through the last day of 

the month in which these rates and 

terms are adopted by the Librarian of 

Congress and published in the Federal 

Register shall be due 45 days after the 

end of such period. All monthly 

payments shall be rounded to the 

nearest cent. 

(d) Minimum payments. A Licensee 

shall make any payment due under 

§ 262.3(d) by January 31 of the 

applicable calendar year, except that: 

(1) Payment due under § 262.3(d) for 

2003, and in the case of a Subscription 

Service any earlier year, shall be due 45 

days after the last day of the month in 

which these rates and terms are adopted 

by the Librarian of Congress and 

published in the Federal Register; and 

(2) Payment for a Licensee that has 

not previously made eligible 

nonsubscription transmissions, 

noninteractive digital audio 

transmissions as part of a new 

subscription service or Ephemeral 

Recordings pursuant to licenses under 

17 U.S.C. 114(f) and/or 17 U.S.C. 112(e) 

shall be due by the 45th day after the

5700 Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 

end of the month in which the Licensee 

commences to do so. 

(e) Late payments. A Licensee shall 

pay a late fee of 0.75% per month, or the 

highest lawful rate, whichever is lower, 

for any payment received by the 

Designated Agent after the due date. 

Late fees shall accrue from the due date 

until payment is received by the 

Designated Agent. 

(f) Statements of account. For any part 

of the period beginning on the date 

these rates and terms are adopted by the 

Librarian of Congress and published in 

the Federal Register and ending on 

December 31, 2004, during which a 

Licensee operates a service, by 45 days 

after the end of each month during the 

period, the Licensee shall deliver to the 

Designated Agent a statement of account 

containing the information set forth in 

this paragraph (f) on a form prepared, 

and made available to Licensees, by the 

Designated Agent. If a payment is owed 

for such month, the statement of 

account shall accompany the payment. 

A statement of account shall include 

only the following information: 

(1) Such information as is necessary 

to calculate the accompanying royalty 

payment, or if no payment is owed for 

the month, to calculate any portion of 

the minimum fee recouped during the 

month, including, as applicable, the 

Performances, Aggregate Tuning Hours 

(to the nearest minute) or Subscription 

Service Revenues for the month; 

(2) The name, address, business title, 

telephone number, facsimile number, 

electronic mail address and other 

contact information of the individual or 

individuals to be contacted for 

information or questions concerning the 

content of the statement of account; 

(3) The handwritten signature of: 

(i) The owner of the Licensee or a 

duly authorized agent of the owner, if 

the Licensee is not a partnership or a 

corporation; 

(ii) A partner or delegee, if the 

Licensee is a partnership; or 

(iii) An officer of the corporation, if 

the Licensee is a corporation; 

(4) The printed or typewritten name 

of the person signing the statement of 

account; 

(5) The date of signature; 

(6) If the Licensee is a partnership or 

a 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; and 

(8) A statement to the following effect:

I, the undersigned owner or agent of the 

Licensee, or officer or partner, if the Licensee 

is a corporation or partnership, have 

examined this statement of account and 

hereby state that it is true, accurate and 

complete to my knowledge after reasonable 

due diligence.

(g) Distribution of payments.—(1) The 

Designated Agent shall distribute 

royalty payments directly to Copyright 

Owners and Performers, according to 17 

U.S.C. 114(g)(2); Provided that the 

Designated Agent shall only be 

responsible for making distributions to 

those Copyright Owners and Performers 

who provide the Designated Agent with 

such information as is necessary to 

identify and pay the correct recipient of 

such payments. The agent shall 

distribute royalty payments on a basis 

that values all performances by a 

Licensee equally based upon the 

information provided by the Licensee 

pursuant to the regulations governing 

records of use of sound recordings by 

Licensees; Provided, however, 

Performers and Copyright Owners that 

authorize the Designated Agent may 

agree with the Designated Agent to 

allocate their shares of the royalty 

payments made by any Licensee among 

themselves on an alternative basis. 

Parties entitled to receive payments 

under 17 U.S.C. 114(g)(2) may agree 

with the Designated Agent upon 

payment protocols to be used by the 

Designated Agent that provide for 

alternative arrangements for the 

payment of royalties consistent with the 

percentages in 17 U.S.C. 114(g)(2). 

(2) The Designated Agent shall inform 

the Register of Copyrights of: 

(i) Its methodology for distributing 

royalty payments to Copyright Owners 

and Performers who have not 

themselves authorized the Designated 

Agent (hereinafter ‘‘nonmembers’’), and 

any amendments thereto, within 60 

days of adoption and no later than 30 

days prior to the first distribution to 

Copyright Owners and Performers of 

any royalties distributed pursuant to 

that methodology; 

(ii) Any written complaint that the 

Designated Agent receives from a 

nonmember concerning the distribution 

of royalty payments, within 60 days of 

receiving such written complaint; and 

(iii) The final disposition by the 

Designated Agent of any complaint 

specified by paragraph (g)(2)(ii) of this 

section, within 60 days of such 

disposition. 

(3) A Designated Agent may request 

that the Register of Copyrights provide 

a written opinion stating whether the 

Designated Agent’s methodology for 

distributing royalty payments to 

nonmembers meets the requirements of 

this section. 

(h) Permitted deductions. The 

Designated Agent may deduct from the 

payments made by Licensees under 

§ 262.3, prior to the distribution of such 

payments to any person or entity 

entitled thereto, all incurred costs 

permitted to be deducted under 17 

U.S.C. 114(g)(3); Provided, however, 

that any party entitled to receive royalty 

payments under 17 U.S.C. 112(e) or 

114(g) may agree to permit the 

Designated Agent to make any other 

deductions. 

(i) Retention of records. Books and 

records of a Licensee and of the 

Designated Agent relating to the 

payment, collection, and distribution of 

royalty payments shall be kept for a 

period of not less than 3 years.

§ 262.5 Confidential information. 

(a) Definition. For purposes of this 

part, ‘‘Confidential Information’’ shall 

include the statements of account, any 

information contained therein, 

including the amount of royalty 

payments, and any information 

pertaining to the statements of account 

reasonably designated as confidential by 

the Licensee submitting the statement. 

(b) Exclusion. Confidential 

Information shall not include 

documents or information that at the 

time of delivery to the Receiving Agent 

or a Designated Agent are public 

knowledge. The Designated Agent that 

claims the benefit of this provision shall 

have the burden of proving that the 

disclosed information was public 

knowledge. 

(c) Use of Confidential Information. In 

no event shall the Designated Agent use 

any Confidential Information for any 

purpose other than royalty collection 

and distribution and activities directly 

related thereto; Provided, however, that 

the Designated Agent may disclose to 

Copyright Owners and Performers 

Confidential Information provided on 

statements of account under this part in 

aggregated form, so long as Confidential 

Information pertaining to any individual 

Licensee cannot readily be identified, 

and the Designated Agent may disclose 

the identities of services that have 

obtained licenses under 17 U.S.C. 112(e) 

or 114 and whether or not such services 

are current in their obligations to pay 

minimum fees and submit statements of 

account (so long as the Designated 

Agent does not disclose the amounts 

paid by the Licensee). 

(d) Disclosure of Confidential 

Information. Except as provided in 

paragraph (c) of this section and as 

required by law, access to Confidential 

Information shall be limited to: 

(1) Those employees, agents, 

attorneys, consultants and independent 

contractors of the Designated Agent, 

subject to an appropriate confidentiality 

agreement, who are engaged in the

Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 5701

collection and distribution of royalty 

payments hereunder and activities 

related thereto, who are not also 

employees or officers of a Copyright 

Owner or Performer, and who, for the 

purpose of performing such duties 

during the ordinary course of their 

work, require access to the records; 

(2) An independent and qualified 

auditor, subject to an appropriate 

confidentiality agreement, who is 

authorized to act on behalf of the 

Designated Agent with respect to the 

verification of a Licensee’s statement of 

account pursuant to § 262.6 or on behalf 

of a Copyright Owner or Performer with 

respect to the verification of royalty 

payments pursuant to § 262.7; 

(3) The Copyright Office, in response 

to inquiries concerning the operation of 

the Designated Agent; 

(4) In connection with future 

Copyright Arbitration Royalty Panel 

proceedings under 17 U.S.C. 114(f)(2) 

and 112(e), and under an appropriate 

protective order, attorneys, consultants 

and other authorized agents of the 

parties to the proceedings, Copyright 

Arbitration Royalty Panels, the 

Copyright Office or the courts; and 

(5) In connection with bona fide 

royalty disputes or claims that are the 

subject of the procedures under § 262.6 

or § 262.7, and under an appropriate 

confidentiality agreement or protective 

order, the specific parties to such 

disputes or claims, their attorneys, 

consultants or other authorized agents, 

and/or arbitration panels or the courts to 

which disputes or claims may be 

submitted.

(e) Safeguarding of Confidential 

Information. The Designated Agent and 

any person identified in paragraph (d) of 

this section shall implement procedures 

to safeguard all Confidential 

Information using a reasonable standard 

of care, but no less than the same degree 

of security used to protect Confidential 

Information or similarly sensitive 

information belonging to such 

Designated Agent or person.

§ 262.6 Verification of statements of 

account. 

(a) General. This section prescribes 

procedures by which the Designated 

Agent may verify the royalty payments 

made by a Licensee. 

(b) Frequency of verification. The 

Designated Agent may conduct a single 

audit of a Licensee, upon reasonable 

notice and during reasonable business 

hours, during any given calendar year, 

for any or all of the prior 3 calendar 

years, but no calendar year shall be 

subject to audit more than once. 

(c) Notice of intent to audit. The 

Designated Agent must file with the 

Copyright Office a notice of intent to 

audit a particular Licensee, which shall, 

within 30 days of the filing of the 

notice, publish in the Federal Register

a notice announcing such filing. The 

notification of intent to audit shall be 

served at the same time on the Licensee 

to be audited. Any such audit shall be 

conducted by an independent and 

qualified auditor identified in the 

notice, and shall be binding on all 

parties. 

(d) Acquisition and retention of 

records. The Licensee shall 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 and retain such records for a 

period of not less than 3 years. The 

Designated Agent shall retain the report 

of the verification for a period of not 

less than 3 years. 

(e) Acceptable verification procedure.

An audit, including underlying 

paperwork, which was performed in the 

ordinary course of business according to 

generally accepted auditing standards 

by an independent and 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. 

(f) Consultation. Before rendering a 

written report to the Designated Agent, 

except where the auditor has a 

reasonable basis to suspect fraud and 

disclosure would, in the reasonable 

opinion of the auditor, prejudice the 

investigation of such suspected fraud, 

the auditor shall review the tentative 

written findings of the audit with the 

appropriate agent or employee of the 

Licensee being audited in order to 

remedy any factual errors and clarify 

any issues relating to the audit; 

Provided that the appropriate agent or 

employee of the Licensee reasonably 

cooperates with the auditor to remedy 

promptly any factual errors or clarify 

any issues raised by the audit. 

(g) Costs of the verification procedure.

The Designated Agent shall pay the cost 

of the verification procedure, unless it is 

finally determined that there was an 

underpayment of 10% or more, in 

which case the Licensee shall, in 

addition to paying the amount of any 

underpayment, bear the reasonable costs 

of the verification procedure.

§ 262.7 Verification of royalty payments. 

(a) General. This section prescribes 

procedures by which any Copyright 

Owner or Performer may verify the 

royalty payments made by the 

Designated Agent; Provided, however, 

that nothing contained in this section 

shall apply to situations where a 

Copyright Owner or a Performer and the 

Designated Agent have agreed as to 

proper verification methods. 

(b) Frequency of verification. A 

Copyright Owner or a Performer may 

conduct a single audit of the Designated 

Agent upon reasonable notice and 

during reasonable business hours, 

during any given calendar year, for any 

or all of the prior 3 calendar years, but 

no calendar year shall be subject to 

audit more than once. 

(c) Notice of intent to audit. A 

Copyright Owner or Performer must file 

with the Copyright Office a notice of 

intent to audit the Designated Agent, 

which shall, within 30 days of the filing 

of the notice, publish in the Federal 

Register a notice announcing such 

filing. The notification of intent to audit 

shall be served at the same time on the 

Designated Agent. Any such audit shall 

be conducted by an independent and 

qualified auditor identified in the 

notice, and shall be binding on all 

Copyright Owners and Performers. 

(d) Acquisition and retention of 

records. The Designated Agent shall 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 and retain such records for a 

period of not less than 3 years. The 

Copyright Owner or Performer 

requesting the verification procedure 

shall retain the report of the verification 

for a period of not less than 3 years. 

(e) Acceptable verification procedure.

An audit, including underlying 

paperwork, which was performed in the 

ordinary course of business according to 

generally accepted auditing standards 

by an independent and 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. 

(f) Consultation. Before rendering a 

written report to a Copyright Owner or 

Performer, except where the auditor has 

a reasonable basis to suspect fraud and 

disclosure would, in the reasonable 

opinion of the auditor, prejudice the 

investigation of such suspected fraud, 

the auditor shall review the tentative 

written findings of the audit with the 

appropriate agent or employee of the 

Designated Agent in order to remedy 

any factual errors and clarify any issues 

relating to the audit; Provided that the 

appropriate agent or employee of the 

Designated Agent reasonably cooperates 

with the auditor to remedy promptly 

any factual errors or clarify any issues 

raised by the audit. 

(g) Costs of the verification procedure.

The Copyright Owner or Performer 

requesting the verification procedure

5702 Federal Register / Vol. 69, No. 25 / Friday, February 6, 2004 / Rules and Regulations 

shall pay the cost of the procedure, 

unless it is finally determined that there 

was an underpayment of 10% or more, 

in which case the Designated Agent 

shall, in addition to paying the amount 

of any underpayment, bear the 

reasonable costs of the verification 

procedure.

§ 262.8 Unclaimed funds. 

If a Designated Agent is unable to 

identify or locate a Copyright Owner or 

Performer who is entitled to receive a 

royalty payment under this part, the 

Designated Agent shall retain the 

required payment in a segregated trust 

account for a period of 3 years from the 

date of payment. No claim to such 

payment shall be valid after the 

expiration of the 3-year period. After the 

expiration of this period, the Designated 

Agent may apply the unclaimed funds 

to offset any costs deductible under 17 

U.S.C. 114(g)(3). The foregoing shall 

apply notwithstanding the common law 

or statutes of any State.

PART 263—RATES AND TERMS FOR 

CERTAIN TRANSMISSIONS AND THE 

MAKING OF EPHEMERAL 

REPRODUCTIONS BY 

NONCOMMERCIAL LICENSEES

Sec. 

263.1 General. 

263.2 Definitions. 

263.3 Royalty rates and terms.

Authority: 17 U.S.C. 112(e), 114, 801(b)(1).

§ 263.1 General. 

This part 263 establishes rates and 

terms of royalty payments for the public 

performance of sound recordings in 

certain digital transmissions by certain 

Noncommercial Licensees in 

accordance with the provisions of 17 

U.S.C. 114, and the making of 

ephemeral recordings by certain 

Noncommercial Licensees in 

accordance with the provisions of 17 

U.S.C. 112(e), during the period 2003–

2004.

§ 263.2 Definitions. 

For purposes of this part, the 

following definition shall apply: 

A Noncommercial Licensee is a 

person or entity that has obtained a 

compulsory license under 17 U.S.C. 114 

and the implementing regulations 

therefor, or that has obtained a 

compulsory license under 17 U.S.C. 

112(e) and the implementing regulations 

therefor to make ephemeral recordings 

for use in facilitating such 

transmissions, and—

(a) Is exempt from taxation under 

section 501 of the Internal Revenue 

Code of 1986 (26 U.S.C. 501); 

(b) Has applied in good faith to the 

Internal Revenue Service for exemption 

from taxation under section 501 of the 

Internal Revenue Code and has a 

commercially reasonable expectation 

that such exemption shall be granted; or 

(c) Is a State or possession or any 

governmental entity or subordinate 

thereof, or the United States or District 

of Columbia, making transmissions for 

exclusively public purposes.

§ 263.3 Royalty rates and terms. 

A Noncommercial Licensee shall in 

every respect be treated as a ‘‘Licensee’’

under part 262 of this chapter, and all 

terms applicable to Licensees and their 

payments under part 262 of this chapter 

shall apply to Noncommercial Licensees 

and their payment, except that a 

Noncommercial Licensee shall pay 

royalties at the rates applicable to such 

a ‘‘Licensee,’’ as currently provided in 

§ 261.3(a), (c), (d) and (e) of this chapter, 

rather than at the rates set forth in 

§ 262.3(a) through (d) of this chapter.

Dated: January 22, 2004. 

Marybeth Peters, 

Register of Copyrights. 

Approved by: 

James H. Billington, 

The Librarian of Congress.

[FR Doc. 04–2535 Filed 2–5–04; 8:45 am] 

BILLING CODE 1410–33–P

DEPARTMENT OF THE INTERIOR

Bureau of Land Management 

43 CFR Part 2930 

[WO–250–1220–PA–24 1A] 

RIN 1004–AD45 

Permits for Recreation on Public 

Lands

AGENCY: Bureau of Land Management, 

Interior.

ACTION: Final rule.

SUMMARY: The Bureau of Land 

Management (BLM) is amending its 

regulations on Special Recreation 

Permits by changing the maximum term 

for these permits to 10 years instead of 

5 years. The reason for this change is to 

add a reasonable expectation of 

continuity for outfitters, guides, and 

other small businesses that provide 

services to recreationists on public 

lands. 

BLM is also amending its regulations 

on Recreation Use Permits for fee areas 

by adding a section on prohibited acts 

and penalties. This new provision is 

necessary to give BLM law enforcement 

personnel authority to cite persons who 

do not pay fees or otherwise do not 

follow the regulations on Recreation Use 

Permits.

EFFECTIVE DATE: April 6, 2004.

ADDRESSES: You may submit 

suggestions or inquiries to the following 

addresses: Mail: Director (250), Bureau 

of Land Management, Eastern States 

Office, 7450 Boston Blvd., Springfield, 

VA 22153. Personal or messenger 

delivery: Room 301, 1620 L Street, NW., 

Washington, DC 20036.

FOR FURTHER INFORMATION CONTACT: Lee 

Larson at (202) 452–5168 as to the 

substance of the final rule, or Ted 

Hudson at (202) 452–5042 as to 

procedural matters. Persons who use a 

telecommunications device for the deaf 

(TDD) may contact either individual by 

calling the Federal Information Relay 

Service (FIRS) at (800) 877–8339, 24 

hours a day, 7 days a week.

SUPPLEMENTARY INFORMATION:

I. Background 

II. Discussion of Public Comments 

III. Discussion of Final Rule 

IV. Procedural Matters

I. Background 

BLM published a final rule on Permits 

for Recreation on Public Lands in the 

Federal Register on October 1, 2002 (67 

FR 61732). That final rule included a 

new subpart containing regulations on 

recreation use permits. These permits 

are for use of BLM fee areas. Fee areas 

are sites that provide specialized 

facilities, equipment, or services related 

to outdoor recreation. These include 

areas that are developed by BLM, 

receive regular maintenance, may have 

on-site staffing, and are supported by 

Federal funding. Not all fee areas 

necessarily have all of these attributes. 

Examples of fee areas are campgrounds 

that include improvements such as 

picnic tables, toilet facilities, tent or 

trailer sites, and drinking water; and 

specialized sites such as swimming 

pools, boat launch facilities, places with 

guided tours, hunting blinds, and so 

forth. 

The October 1, 2002, final rule did not 

include a section on prohibited acts for 

such fee areas. We later determined that 

such a provision was necessary to give 

BLM law enforcement personnel 

authority to cite persons who use these 

areas without proper authorization, 

without paying required fees, without 

properly displaying their authorizations, 

or with falsified documentation. The 

proposed rule published on October 1, 

2002 (67 FR 61746), listed these acts as 

those that would be prohibited. 

The October 1, 2002, final rule left 

substantially intact the existing