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[Federal Register Volume 80, Number 58 (Thursday, March 26, 2015)]
[Proposed Rules]
[Pages 15958-15963]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06896]

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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 380

[Docket No. 2014-CRB-0001-WR (2016-2020) (Web IV)]

Digital Performance Right in Sound Recordings and Ephemeral 
Recordings

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

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SUMMARY: The Copyright Royalty Judges are publishing for comment 
proposed regulations governing the rates and terms for the digital 
performances of sound recordings by certain public radio stations and 
for the making of ephemeral recordings necessary to facilitate those 
transmissions for the period commencing January 1, 2016, and ending on 
December 31, 2020.

DATES: Comments and objections, if any, are due no later than April 16, 
2015.

ADDRESSES: The proposed rule is posted on the agency's Web site 
(www.loc.gov/crb). Submit electronic comments online at http://www.regulations.gov or via email to crb@loc.gov. Those who choose not 
to submit comments electronically should see How to Submit Comments in 
the Supplementary Information section below for physical addresses and 
further instructions.

FOR FURTHER INFORMATION CONTACT: Kimberly Whittle, Attorney Advisor, by 
telephone at (202) 707-7658, or by email at crb@loc.gov.

SUPPLEMENTARY INFORMATION: 

Background

    On February 24, 2015, the Copyright Royalty Judges (Judges) 
received a joint

[[Page 15959]]

motion from SoundExchange, Inc., National Public Radio, Inc., and the 
Corporation for Public Broadcasting to adopt a partial settlement of 
their interests and those of American Public Media, Public Radio 
International, Public Radio Exchange, and other unnamed public radio 
stations (together, the Settling Parties) regarding Web IV rates and 
terms for 2016-2020.\1\ Joint Motion to Adopt Partial Settlement, 
Docket No. 2014-CRB-0001-WR (2016-2020). Their interests concern the 
rule setting minimum copyright royalty fees and terms that the Judges 
will establish for compulsory copyright licenses for certain internet 
transmissions of sound recordings by public radio stations for the 
period from January 1, 2016, through December 31, 2020. SoundExchange, 
Inc. represents sound recording copyright owners and performers. The 
Settling Parties are users of the copyrighted material including public 
radio stations. The Judges hereby publish the proposed settlement and 
request comments from the public.
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    \1\ Web IV is short for Webcasting IV. This proceeding is the 
fourth since Congress enacted the compulsory sound recording 
performance license for webcasting.
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    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 in order to 
facilitate the transmission of that recording. The section 112 
statutory license allows for the making of the necessary ephemeral 
reproductions. 17 U.S.C. 112(e).
    Chapter 8 of the Copyright Act requires the 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 2014 for 
rates and terms that will become effective on January 1, 2016, and end 
on December 31, 2020. 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. 79 FR 412 (January 3, 2014). The following parties 
submitted Petitions to Participate: 8tracks, Inc.; AccuRadio, LLC; 
Amazon.com, Inc.; Apple Inc; Beats Music, LLC; Clear Channel; CMN, 
Inc.; College Broadcasters, Inc. (CBI); CustomChannels.net, LLC; 
Digital Media Association (DiMA); Digitally Imported, Inc.; Educational 
Media Foundation; Feed Media, Inc.; Geo Music Group; Harvard Radio 
Broadcasting Inc. (WHRB); idobi Network; Intercollegiate Broadcasting 
System, Inc. (IBS); Music Reports, Inc.; National Association of 
Broadcasters (NAB); National Music Publishers Association (NMPA); 
National Public Radio (NPR); National Religious Broadcasters 
Noncommercial Music License Committee (NRBNMLC); Pandora Media Inc.; 
Rhapsody International, Inc.; Sirius XM Radio Inc.; SomaFM.com LLC; 
SoundExchange, Inc. (SX); Spotify USA Inc.; and Triton.\2\
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    \2\ The following ten parties have withdrawn their Petitions to 
Participate: 8tracks, Inc.; Amazon.com, Inc.; CMN, Inc.; 
CustomChannels.net, LLC; Digitally Imported, Inc.; Feed Media, Inc.; 
idobi Network; Rhapsody International, Inc.; SomaFM.com LLC; and 
Spotify USA Inc. Three parties, Music Reports, Inc., NMPA, and 
Triton Digital, Inc., have been dismissed from the proceeding.
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    The Judges set the timetable for the three-month negotiation period 
for February 21, 2014, through May 22, 2014. See 17 U.S.C. 803(b)(3). 
The Judges set December 22, 2014, as the deadline by which participants 
were to submit amended written direct statements. On February 24, 2015, 
SoundExchange and the Settling Parties submitted to the Judges a joint 
motion to adopt a partial settlement of their interests in the 
proceeding. The parties requested that the Judges make their decision 
on the motion expeditiously, as the hearings in this rate proceeding 
are scheduled to commence on April 27, 2015.

Statutory Timing of Adoption of Rates and Terms

    Section 801(b)(7)(A) allows for the adoption of rates and terms 
negotiated by ``some or all of the participants in a proceeding at any 
time during the proceeding'' provided the parties submit the negotiated 
rates and terms to the Judges for approval. That provision directs the 
Judges to provide those who would be bound by the negotiated rates and 
terms an opportunity to comment on the agreement. Unless a participant 
in a proceeding objects and the Judges conclude that the agreement does 
not provide a reasonable basis for setting statutory rates or terms, 
the Judges adopt the negotiated rates and terms. 17 U.S.C. 
801(b)(7)(A).
    If the Judges adopt the proposed rates and terms pursuant to this 
provision for the 2016-2020 rate period, the adopted rates and terms 
shall be binding on all copyright owners of sound recordings, NPR, 
American Public Media, Public Radio International, and Public Radio 
Exchange, and up to 530 public radio stations to be named by CPB that 
perform sound recordings during the license period 2016-2020.

Proposed Adjustments to Rates and Terms

    In the proposed settlement, SoundExchange and the Settling Parties 
request that the Judges adopt the rates and terms for public radio as a 
new ``Subpart D'' to part 380, 37 CFR. Under the proposal, the parties 
would continue the rate structure in place for public radio, while 
increasing the fee amount. Joint Motion to Adopt Partial Settlement at 
3. The proposal also contemplates retention of largely unchanged 
recordkeeping and reporting terms, by which affected entities take 
advantage of a consolidated report of usage prepared by and submitted 
through the Corporation for Public Broadcasting. Id.
    The public may comment and object to any or all of the proposed 
regulations contained in this notice. Such comments and objections must 
be submitted no later than April 16, 2015.

How To Submit Comments

    Interested members of the public must submit comments to only one 
of the following addresses. If not commenting by email or online, 
commenters must submit an original of their comments, five paper 
copies, and an electronic version on a CD.
    Email: crb@loc.gov; or
    Online: http://www.regulations.gov; or
    U.S. mail: Copyright Royalty Board, P.O. Box 70977, Washington, DC 
20024-0977; or
    Overnight service (only USPS Express Mail is acceptable): Copyright 
Royalty Board, P.O. Box 70977, Washington, DC 20024-0977; or
    Commercial courier: Address package to: Copyright Royalty Board, 
Library of Congress, James Madison Memorial Building, LM-403, 101 
Independence Avenue SE., Washington, DC 20559-

[[Page 15960]]

6000. Deliver to: Congressional Courier Acceptance Site, 2nd Street NE. 
and D Street NE., Washington, DC; or
    Hand delivery: Library of Congress, James Madison Memorial 
Building, LM-401, 101 Independence Avenue SE., Washington, DC 20559-
6000.

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 CERTAIN ELIGIBLE NONSUBSCRIPTION 
TRANSMISSIONS, NEW SUBSCRIPTION SERVICES AND THE MAKING OF 
EPHEMERAL REPRODUCTIONS

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 D to part 380 to read as follows:
0
3.
Subpart D--Certain Transmissions by Public Broadcasting Entities
Sec.
380.30 General.
380.31 Definitions.
380.32 Royalty fees for the public performance of sound recordings 
and for ephemeral recordings.
380.33 Terms for making payment of royalty fees and statements of 
account.
380.34 Confidential Information.
380.35 Verification of royalty payments.
380.36 Verification of royalty distributions.
380.37 Unclaimed funds.

Subpart D--Certain Transmissions by Public Broadcasting Entities

Sec.  380.30  General.

    (a) Scope. This subpart establishes rates and terms of royalty 
payments for the public performance of sound recordings in certain 
digital transmissions, through Authorized Web sites, by means of Web 
site Performances, by certain Covered Entities as set forth in this 
subpart in accordance with the provisions of 17 U.S.C. 114, and the 
making of ephemeral recordings by Covered Entities in accordance with 
the provisions of 17 U.S.C. 112(e) solely as necessary to encode Sound 
Recordings in different formats and at different bit rates as necessary 
to facilitate Web site Performances, during the period January 1, 2016, 
through December 31, 2020. The provisions of this subpart shall apply 
to the Covered Entities in lieu of other rates and terms applicable 
under 17 U.S.C. 112(e) and 114.
    (b) Legal compliance. Licensees relying upon the statutory licenses 
set forth in 17 U.S.C. 112(e) and 114 shall comply with the 
requirements of those sections, the rates and terms of this subpart, 
and any other applicable regulations.
    (c) Relationship to voluntary agreements. Notwithstanding the 
royalty rates and terms established in this subpart, the rates and 
terms of any license agreements entered into by Copyright Owners and 
Licensees shall apply in lieu of the rates and terms of this subpart to 
transmission within the scope of such agreements.

Sec.  380.31  Definitions.

    For purposes of this subpart, the following definitions shall 
apply:
    Aggregate Tuning Hours (ATH) means the total hours of programming 
that Covered Entities have transmitted during the relevant period to 
all listeners within the United States from all Covered Entities that 
provide audio programming consisting, in whole or in part, of Web site 
Performances, less the actual running time of any sound recordings for 
which the Covered Entity has obtained direct licenses apart from this 
Agreement. By way of example, if a Covered Entity transmitted one hour 
of programming to ten (10) simultaneous listeners, the Covered Entity's 
Aggregate Tuning Hours would equal ten (10). If three (3) minutes of 
that hour consisted of transmission of a directly licensed recording, 
the Covered Entity's Aggregate Tuning Hours would equal nine (9) hours 
and thirty (30) minutes. As an additional example, if one listener 
listened to a Covered Entity for ten (10) hours (and none of the 
recordings transmitted during that time was directly licensed), the 
Covered Entity's Aggregate Tuning Hours would equal 10.
    Authorized Web site is any Web site operated by or on behalf of any 
Covered Entity that is accessed by Web site Users through a Uniform 
Resource Locator (``URL'') owned by such Covered Entity and through 
which Web site Performances are made by such Covered Entity.
    CPB is the Corporation for Public Broadcasting.
    Collective is the collection and distribution organization that is 
designated by the Copyright Royalty Judges. For the 2016-2020 license 
period, the Collective is SoundExchange, Inc.
    Copyright Owners are Sound Recording copyright owners who are 
entitled to royalty payments made under this subpart pursuant to the 
statutory licenses under 17 U.S.C. 112(e) and 114(f).
    Covered Entities are NPR, American Public Media, Public Radio 
International, and Public Radio Exchange, and up to 530 Originating 
Public Radio Stations as named by CPB. CPB shall notify SoundExchange 
annually of the eligible Originating Public Radio Stations to be 
considered Covered Entities hereunder (subject to the numerical 
limitations set forth herein). The number of Originating Public Radio 
Stations treated hereunder as Covered Entities shall not exceed 530 for 
a given year without SoundExchange's express written approval, except 
that CPB shall have the option to increase the number of Originating 
Public Radio Stations that may be considered Covered Entities as 
provided in Sec.  380.32(c).
    Ephemeral Phonorecords are Phonorecords of all or any portion of 
any Sound Recordings; provided that:
    (1) Such Phonorecords are limited solely to those necessary to 
encode Sound Recordings in different formats and at different bit rates 
as necessary to facilitate Web site Performances covered by this 
subpart;
    (2) Such Phonorecords are made in strict conformity with the 
provisions set forth in 17 U.S.C. 112(e)(1)(A) through (D), and
    (3) The Covered Entities comply with 17 U.S.C. 112(a) and (e) and 
all of the terms and conditions of this Agreement.
    Music ATH is ATH of Web site Performances of Sound Recordings of 
musical works.
    NPR is National Public Radio, Inc.
    Originating Public Radio Station is a noncommercial terrestrial 
radio broadcast station that:
    (1) Is licensed as such by the Federal Communications Commission;
    (2) Originates programming and is not solely a repeater station;
    (3) Is a member or affiliate of NPR, American Public Media, Public 
Radio International, or Public Radio Exchange, a member of the National 
Federation of Community Broadcasters, or another public radio station 
that is qualified to receive funding from CPB pursuant to its criteria;
    (4) Qualifies as a ``noncommercial webcaster'' under 17 U.S.C. 
114(f)(5)(E)(i); and
    (5) Either:
    (i) Offers Web site Performances only as part of the mission that 
entitles it to be exempt from taxation under section 501 of the 
Internal Revenue Code of 1986 (26 U.S.C. 501); or

[[Page 15961]]

    (ii) In the case of a governmental entity (including a Native 
American Tribal governmental entity), is operated exclusively for 
public purposes.
    Performers means the independent administrators identified in 17 
U.S.C. 114(g)(2)(B) and (C) and the individuals and entities identified 
in 17 U.S.C. 114(g)(2)(D).
    Person is a natural person, a corporation, a limited liability 
company, a partnership, a trust, a joint venture, any governmental 
authority or any other entity or organization.
    Phonorecords have the meaning set forth in 17 U.S.C. 101.
    Qualified Auditor is a Certified Public Accountant, or a person, 
who by virtue of education or experience, is appropriately qualified to 
perform an audit to verify royalty payments related to performances of 
sound recordings.
    Side Channel is any Internet-only program available on an 
Authorized Web site or an archived program on such Authorized Web site 
that, in either case, conforms to all applicable requirements under 17 
U.S.C. 114.
    Sound Recording has the meaning set forth in 17 U.S.C. 101.
    Term is the period January 1, 2016, through December 31, 2020.
    Web site is a site located on the World Wide Web that can be 
located by a Web site User through a principal URL.
    Web site Performances (1) Are all public performances by means of 
digital audio transmissions of Sound Recordings, including the 
transmission of any portion of any Sound Recording, made through an 
Authorized Web site in accordance with all requirements of 17 U.S.C. 
114, from servers used by a Covered Entity (provided that the Covered 
Entity controls the content of all materials transmitted by the 
server), or by a contractor authorized pursuant to Section 380.32(f), 
that consist of either:
    (i) The retransmission of a Covered Entity's over-the-air 
terrestrial radio programming; or
    (ii) The digital transmission of nonsubscription Side Channels that 
are programmed and controlled by the Covered Entity.
    (2) This term does not include digital audio transmissions made by 
any other means.
    Web site Users are all those who access or receive Web site 
Performances or who access any Authorized Web site.

Sec.  380.32  Royalty fees for the public performance of sound 
recordings and for ephemeral recordings.

    (a) Royalty rates. The total license fee for all Web site 
Performances by Covered Entities during the Term, up to a total Music 
ATH of 285,132,065 per calendar year, and Ephemeral Phonorecords made 
by Covered Entities solely to facilitate such Web site Performances, 
during the Term shall be $2,800,000 (the ``License Fee''), unless 
additional payments are required as described in paragraph (c) of this 
section.
    (b) Calculation of License Fee. It is understood that the License 
Fee includes:
    (1) An annual minimum fee of $500 for each Covered Entity for each 
year during the Term;
    (2) Additional usage fees for certain Covered Entities; and
    (3) A discount that reflects the administrative convenience to the 
Collective of receiving annual lump sum payments that cover a large 
number of separate entities, as well as the protection from bad debt 
that arises from being paid in advance.
    (c) Increase in Covered Entities. If the total number of 
Originating Public Radio Stations that wish to make Web site 
Performances in any calendar year exceeds the number of such 
Originating Public Radio Stations considered Covered Entities in the 
relevant year, and the excess Originating Public Radio Stations do not 
wish to pay royalties for such Web site Performances apart from this 
subpart, CPB may elect by written notice to the Collective to increase 
the number of Originating Public Radio Stations considered Covered 
Entities in the relevant year effective as of the date of the notice. 
To the extent of any such elections, CPB shall make an additional 
payment to the Collective for each calendar year or part thereof it 
elects to have an additional Originating Public Radio Station 
considered a Covered Entity, in the amount of $500 per Originating 
Public Radio Station per year. Such payment shall accompany the notice 
electing to have an additional Originating Public Radio Station 
considered a Covered Entity.
    (d) Ephemeral recordings. The royalty payable under 17 U.S.C. 
112(e) for the making of all ephemeral recordings used by Covered 
Entities solely to facilitate Web site Performances for which royalties 
are paid pursuant to this subpart shall be included within, and 
constitute 5% of, the total royalties payable under 17 U.S.C. 112(e) 
and 114.
    (e) Effect of non-performance by any Covered Entity. In the event 
that any Covered Entity violates any of the material provisions of 17 
U.S.C. 112(e) or 114 or this subpart that it is required to perform, 
the remedies of the Collective shall be specific to that Covered Entity 
only, and shall include, without limitation, termination of that 
Covered Entity's right to be treated as a Covered Entity hereunder upon 
written notice to CPB. The Collective and Copyright Owners also shall 
have whatever rights may be available to them against that Covered 
Entity under applicable law. The Collective's remedies for such a 
breach or failure by an individual Covered Entity shall not include 
termination of the rights of other Covered Entities to be treated as 
Covered Entities hereunder, except that if CPB fails to pay the License 
Fee or otherwise fails to perform any of the material provisions of 
this subpart, or such a breach or failure by a Covered Entity results 
from CPB's inducement, and CPB does not cure such breach or failure 
within 30 days after receiving notice thereof from the Collective, then 
the Collective may terminate the right of all Covered Entities to be 
treated as Covered Entities hereunder upon written notice to CPB. In 
such a case, a prorated portion of the License Fee for the remainder 
Term (to the extent paid by CPB) shall, after deduction of any damages 
payable to the Collective by virtue of the breach or failure, be 
credited to statutory royalty obligations of Covered Entities to the 
Collective for the Term as specified by CPB.
    (f) Use of contractors. The right to rely on this subpart is 
limited to Covered Entities, except that a Covered Entity may employ 
the services of a third person to provide the technical services and 
equipment necessary to deliver Web site Performances on behalf of such 
Covered Entity, but only through an Authorized Web site. Any agreement 
between a Covered Entity and any third person for such services shall:
    (1) Obligate such third person to provide all such services in 
accordance with all applicable provisions of the statutory licenses and 
this subpart,
    (2) Specify that such third person shall have no right to make Web 
site Performances or any other performances or Phonorecords on its own 
behalf or on behalf of any person or entity other than a Covered Entity 
through the Covered Entity's Authorized Web site by virtue of its 
services for the Covered Entity, including in the case of Phonorecords, 
pre-encoding or otherwise establishing a library of Sound Recordings 
that it offers to a Covered Entity or others for purposes of making 
performances, but instead must obtain all necessary licenses from the 
Collective, the copyright owner or another duly authorized person, as 
the case may be;
    (3) Specify that such third person shall have no right to grant any 
sublicenses under the statutory licenses; and

[[Page 15962]]

    (4) Provide that the Collective is an intended third-party 
beneficiary of all such obligations with the right to enforce a breach 
thereof against such third person.

Sec.  380.33  Terms for making payment of royalty fees and statements 
of account.

    (a) Payment to the Collective. CPB shall pay the License Fee to the 
Collective in five equal installments of $560,000 each, which shall be 
due December 31, 2015 and annually thereafter through December 31, 
2019.
    (b) Designation of the Collective. (1) Until such time as a new 
designation is made, SoundExchange, Inc., is designated as the 
Collective to receive statements of account and royalty payments for 
Covered Entities under this subpart and to distribute such royalty 
payments to each Copyright Owner and Performer, or their 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 by a successor 
Collective upon the fulfillment of the requirements set forth in 
paragraph (b)(2)(i) of this section.
    (i) By a majority vote of the nine Copyright Owner representatives 
and the nine Performer representatives on the SoundExchange board as of 
the last day preceding the condition precedent in this paragraph (b)(2) 
of this section, such representatives shall file a petition with the 
Copyright Royalty Judges designating a successor to collect and 
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 the Collective.
    (ii) The Copyright Royalty Judges shall publish in the Federal 
Register within 30 days of receipt of a petition filed under paragraph 
(b)(2)(i) of this section an order designating the Collective named in 
such petition.
    (c) Reporting. CPB and Covered Entities shall submit reports of use 
and other information concerning Web site Performances as agreed upon 
with the Collective.
    (d) Late payments and statements of account. A Licensee shall pay a 
late fee of 1.5% per month, or the highest lawful rate, whichever is 
lower, for any payment and/or statement of account received by the 
Collective after the due date. Late fees shall accrue from the due date 
until payment and the related statement of account are received by the 
Collective.
    (e) Distribution of royalties. (1) The Collective shall promptly 
distribute royalties received from CPB to Copyright Owners and 
Performers, or their designated agents, who are entitled to such 
royalties. The Collective shall only be responsible for making 
distributions to those Copyright Owners, Performers, or their 
designated agents who provide the Collective with such information as 
is necessary to identify the correct recipient. The Collective shall 
distribute royalties on a basis that values all Web site Performances 
by Covered Entities equally based upon the reporting information 
provided by CPB/NPR.
    (2) If the Collective is unable to locate a Copyright Owner or 
Performer entitled to a distribution of royalties under paragraph 
(e)(1) of the section within 3 years from the date of payment by a 
Licensee, such royalties shall be handled in accordance with Sec.  
380.37.
    (f) Retention of records. Books and records of CPB and Covered 
Entities and of the Collective relating to payments of and 
distributions of royalties shall be kept for a period of not less than 
the prior 3 calendar years.

Sec.  380.34  Confidential Information.

    (a) Definition. For purposes of this subpart, ``Confidential 
Information'' shall include the statements of account and 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 
information or documents that at the time of delivery to the Collective 
are public knowledge, or documents or information that become publicly 
known through no fault of the Collective or are known by the Collective 
when disclosed by CPB/NPR. The party claiming 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 
Collective use any Confidential Information for any purpose other than 
royalty collection and distribution and activities related directly 
thereto and enforcement of the terms of the statutory licenses.
    (d) Disclosure of Confidential Information. Access to Confidential 
Information shall be limited to:
    (1) Those employees, agents, attorneys, consultants and independent 
contractors of the Collective, subject to an appropriate 
confidentiality agreement, who are engaged in the collection and 
distribution of royalty payments hereunder and activities related 
thereto, for the purpose of performing such duties during the ordinary 
course of their work and who require access to the Confidential 
Information;
    (2) An independent and Qualified Auditor, subject to an appropriate 
confidentiality agreement, who is authorized to act on behalf of the 
Collective with respect to verification of a Licensee's statement of 
account pursuant to Sec.  380.35 or on behalf of a Copyright Owner or 
Performer with respect to the verification of royalty distributions 
pursuant to Sec.  380.36,
    (3) Copyright Owners and Performers, including their designated 
agents, whose works have been 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 
confidentiality agreement, and including those employees, agents, 
attorneys, consultants and independent contractors of such Copyright 
Owners and Performers and their designated agents, subject to an 
appropriate confidentiality agreement, for the purpose of performing 
their duties during the ordinary course of their work and who require 
access to the Confidential Information; and
    (4) In connection with future proceedings under 17 U.S.C. 112(e) 
and 114 before the Copyright Royalty Judges, and under an appropriate 
protective order, attorneys, consultants and other authorized agents of 
the parties to the proceedings or the courts, subject to the provisions 
of any relevant agreements restricting the activities of CPB, Covered 
Entities or the Collective in such proceedings.
    (e) Safeguarding of Confidential Information. The Collective and 
any person identified in paragraph (d) of this section shall implement 
procedures to safeguard against unauthorized access to or dissemination 
of any 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 the Collective or person.

Sec.  380.35  Verification of royalty payments.

    (a) General. This section prescribes procedures by which the 
Collective may verify the royalty payments made by CPB.
    (b) Frequency of verification. The Collective may conduct a single 
audit of any Covered Entities, upon reasonable notice and during 
reasonable business hours, during any given calendar year,

[[Page 15963]]

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 Collective must file with the 
Copyright Royalty Judges a notice of intent to audit CPB and Covered 
Entities, 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 
CPB. 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 report. CPB and Covered Entities 
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. The Collective shall retain the report of 
the verification for a period of not less than 3 years.
    (e) Consultation. Before rendering a written report to the 
Collective, 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 CPB in order to remedy any factual errors and 
clarify any issues relating to the audit; provided that an appropriate 
agent or employee of CPB reasonably cooperates with the auditor to 
remedy promptly any factual errors or clarify any issues raised by the 
audit.
    (f) Costs of the verification procedure. The Collective 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 CPB shall, 
in addition to paying the amount of any underpayment, bear the 
reasonable costs of the verification procedure.

Sec.  380.36  Verification of royalty distributions.

    (a) General. This section prescribes procedures by which any 
Copyright Owner or Performer may verify the royalty distributions made 
by the Collective; provided, however, that nothing contained in this 
section shall apply to situations where a Copyright Owner or Performer 
and the Collective have agreed as to proper verification methods.
    (b) Frequency of verification. A Copyright Owner or Performer may 
conduct a single audit of the Collective 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 Royalty Judges a notice of intent to audit the 
Collective, 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 
Collective. Any 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 report. The Collective 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. 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) 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 Collective in order to remedy 
any factual errors and clarify any issues relating to the audit; 
Provided that the appropriate agent or employee of the Collective 
reasonably cooperates with the auditor to remedy promptly any factual 
errors or clarify any issues raised by the audit.
    (f) Costs of the verification procedure. The Copyright Owner or 
Performer requesting the verification procedure 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 Collective shall, in 
addition to paying the amount of any underpayment, bear the reasonable 
costs of the verification procedure.

Sec.  380.37  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 shall retain the required payment in a 
segregated trust account for a period of 3 years from the date of 
distribution. No claim to such distribution shall be valid after the 
expiration of the 3-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). The foregoing shall apply notwithstanding 
the common law or statutes of any State.

    Dated: March 20, 2015.
Jesse M. Feder,
Copyright Royalty Judge.
[FR Doc. 2015-06896 Filed 3-25-15; 8:45 am]
 BILLING CODE 1410-72-P
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