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[Federal Register Volume 80, Number 85 (Monday, May 4, 2015)]
[Notices]
[Pages 25333-25335]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10305]

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LIBRARY OF CONGRESS

 Copyright Office

[Docket No. 2015-02]

Scope of the Copyright Royalty Judges' Continuing Jurisdiction

AGENCY: U.S. Copyright Office, Library of Congress.

ACTION: Final order.

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SUMMARY: The Copyright Royalty Judges (``CRJs''), acting pursuant to 
statute, referred novel material questions of substantive law to the 
Register of Copyrights for resolution. Those questions concerned the 
scope of the CRJs' authority, under the statutory grant of continuing 
jurisdiction over ratemaking determinations, to issue a clarifying 
interpretation of regulations adopted pursuant to such a determination. 
The Register resolved those questions in a written decision that was 
transmitted to the CRJs. That decision is reproduced below.

DATES: Effective Date: April 8, 2015.

FOR FURTHER INFORMATION CONTACT: Stephen Ruwe, Assistant General 
Counsel, U.S. Copyright Office, P.O. Box 70400, Washington, DC 20024. 
Telephone: (202) 707-8350.

SUPPLEMENTARY INFORMATION: The Copyright Royalty Judges are tasked with 
determining and adjusting terms and rates of royalty payments of 
statutory licenses under the Copyright Act. See 17 U.S.C. 801. If, in 
the course of proceedings before the CRJs, novel material questions of 
substantive law concerning the interpretation of provisions of title 17 
arise, the CRJs are required by statute to refer those questions to the 
Register of Copyrights for resolution. 17 U.S.C. 802(f)(1)(B).
    On March 9, 2015, the CRJs, acting pursuant to 17 U.S.C. 
802(f)(1)(B), referred novel material questions of substantive law to 
the Register, concerning the CRJs' authority to issue a clarifying 
interpretation of regulations adopted in a prior ratesetting 
determination. On April 8, 2015, the Register resolved those questions 
in a Memorandum Opinion that she transmitted to the CRJs. To provide 
the public with notice of the decision rendered by the Register, the 
Memorandum Opinion is reproduced in its entirety below.

    Dated: April 28, 2015.
Maria A. Pallante,
Register of Copyrights and Director of the U.S. Copyright Office.

Before the U.S. Copyright Office Library of Congress Washington, DC 
20559

    In the Matter of Determination of Rates and Terms for Preexisting 
Subscription Services and Satellite Digital Audio Radio Services
 Docket No. 2006-1 CRB DSTRA (SDARS I)

MEMORANDUM OPINION ON A NOVEL QUESTION OF LAW

    In relation to the above-captioned proceeding before the Copyright 
Royalty Judges (``CRJs'' or ``Judges''), questions have arisen about 
the proper interpretation of 17 U.S.C. 803(c)(4), which provides the 
CRJs with ``continuing jurisdiction'' in certain circumstances to amend 
a written determination after it has issued. The CRJs determined that 
these were novel material questions of substantive law and, as required 
by section 802(f)(1)(B), referred them to the Register of Copyrights 
for resolution. The Register hereby resolves those referred questions.

I. Procedural Background

    On January 24, 2008, the CRJs published final royalty rates and 
terms under the section 112(e) and 114 statutory licenses for the 
period 2007 through 2012 for preexisting satellite digital audio radio 
services (``SDARS I''). 73 FR 4080 (Jan. 24, 2008).\1\ In that 
proceeding, the CRJs set a royalty rate as a percentage of the ``Gross 
Revenues'' of the satellite services. 73 FR at 4084. The definition of 
``Gross Revenues'' adopted by the CRJs excluded several categories of 
revenues received by satellite services, such as revenues from channels 
and programming that are ``exempt from any license requirement or [are] 
separately licensed,'' and revenues attributable to channels and 
programming that are ``offered for a separate charge'' and ``use only 
incidental performances of sound recordings.'' 73 FR at 4102; 37 CFR 
382.11 (2008) (paragraph (3)(vi)(B) & (D) of Gross Revenues 
definition).
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    \1\ The CRJs' determination in SDARS I was appealed to the U.S. 
Court of Appeals for the District of Columbia Circuit. The court 
affirmed the determination in all but one respect, remanding to the 
CRJs the single matter of specifying a royalty for the use of the 
section 112 statutory license. SoundExchange, Inc. v. Librarian of 
Congress, 571 F.3d 1220 (D.C. Cir. 2009). That last issue was 
resolved by the CRJs in further proceedings. 75 FR 5513 (Feb. 3, 
2010).
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    On April 17, 2013, the CRJs adjusted the royalty rates and terms 
for satellite radio for the period 2013 through 2017 (``SDARS II''). 78 
FR 23054 (Apr. 17, 2013) as modified, 78 FR 31842 (May, 28, 2013). In 
the course of that proceeding, SoundExchange criticized the manner in 
which Sirius XM had been excluding revenues in reliance on the SDARS I 
regulations, including its practice of excluding revenues attributable 
to sound recordings made before February 15, 1972, which are generally 
not subject to federal copyright protection, and thus do not fall 
within the section 112(e) and 114

[[Page 25334]]

statutory licenses.\2\ 78 FR at 23071. In SDARS II, the CRJs maintained 
the exclusions from gross revenues it had adopted in SDARS I, but added 
a new provision specifically addressing the proper treatment of pre-
1972 sound recordings. 78 FR at 23079-81.
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    \2\ See generally U.S. Copyright Office, Copyright and the Music 
Marketplace 53-54 (Feb. 2014).
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    After the CRJs' determination in SDARS II, SoundExchange brought 
suit against Sirius XM on August 25, 2013 in the U.S. District Court 
for the District of Columbia, alleging that for the time period covered 
by SDARS I (2007 through 2012), Sirius XM had underpaid royalties by 
improperly excluding certain revenues from its gross revenue 
calculations, including revenues attributable to pre-1972 sound 
recordings. SoundExchange, Inc. v. Sirius XM Radio, Inc.,--F. Supp. 3d 
--, 2014 WL 4219591, *3-*5 (D.D.C. Aug. 26, 2014).
    Rather than seeking to have the district court to resolve the 
dispute itself, Sirius XM asked the court to refer the issues to the 
CRJs under the administrative law doctrine of ``primary jurisdiction'' 
because they ``involve interpreting and applying the [CRJs'] 
regulations on gross revenues.'' Id. at *3. As explained by the DC 
Circuit, under that doctrine, when a court is ``adjudicating a claim 
[that] would `require[] the resolution of issues which, under a 
regulatory scheme, have been placed within the special competence of an 
administrative body,''' the court can ``suspend the judicial process 
`pending referral of such issues to the administrative body for its 
view.''' United States v. Philip Morris USA Inc., 686 F.3d 832, 837 
(D.C. Cir. 2012) (quoting United States v. W. Pac. R.R. Co., 352 U.S. 
59, 64 (1956)). SoundExchange disagreed that the doctrine applied, 
responding that the relevant regulatory definitions were unambiguous, 
and that the district court should therefore decide the case. 
SoundExchange, 2014 WL 4219591 at *4.
    The district court agreed with Sirius XM, concluding that ``the 
gross revenue exclusions are ambiguous and do not, on their face, make 
clear whether Sirius XM's approaches were permissible under the 
regulations,'' and that referral to the CRJs under the primary 
jurisdiction doctrine was therefore appropriate. Id. In response to 
SoundExchange's related concern that the CRJs lacked authority to 
resolve the issues, the district court pointed to 17 U.S.C. 803(c)(4). 
Id. at *5. Section 803(c)(4) provides as follows:

    Continuing jurisdiction.-- The Copyright Royalty Judges may 
issue an amendment to a written determination to correct any 
technical or clerical errors in the determination or to modify the 
terms, but not the rates, of royalty payments in response to 
unforeseen circumstances that would frustrate the proper 
implementation of such determination. Such amendment shall be set 
forth in a written addendum to the determination that shall be 
distributed to the participants of the proceeding and shall be 
published in the Federal Register.

17 U.S.C. 803(c)(4). The district court concluded that ``[n]either 
party is asking for a change to rates; only a clarification of the 
terms,'' and that such a clarification ``is within the [CRJs'] 
continuing jurisdiction.'' SoundExchange, 2014 WL 4219591 at *5. 
Accordingly, the court stayed its proceedings pending a decision by the 
CRJs clarifying the meaning of the regulations defining Gross Revenues.
    On November 24, 2014, SoundExchange petitioned the CRJs to clarify 
the definition of Gross Revenues adopted in SDARS I. On December 9, 
2014, the CRJs reopened the SDARS I proceedings, observing that 
SoundExchange's petition raised a threshold jurisdictional question 
that potentially constituted a novel material question of substantive 
law that, by statute, must be referred to the Register. In the order 
reopening proceedings, the CRJs asked the parties to file briefs 
addressing the CRJs' authority to issue a clarifying interpretation of 
its regulations. Sirius XM took the position that the Copyright Act or, 
in the alternative, the Administrative Procedure Act (``APA''), gave 
the CRJs such authority. SoundExchange disagreed, arguing that no 
statute gave the CRJs authority to clarify the regulations, and that 
the case should therefore be returned to the district court for 
resolution.
    After considering the parties' responses, on March 9, 2015, the 
CRJs, acting pursuant to 17 U.S.C. 802(f)(1)(B), referred the following 
novel material questions of substantive law to the Register, enclosing 
the briefs the parties had filed:
    (1) Do the Judges have jurisdiction under title 17, or authority 
otherwise, to interpret the regulations adopted in the captioned 
proceeding?
    (2) If the Judges have authority to interpret regulations adopted 
in the course of a rate determination proceeding, is that authority 
time-limited?
    (3) Would the answer regarding the Judges' jurisdiction or 
authority be different if the terms at issue regulated a current, as 
opposed to a lapsed, rate period?

II. Summary of Parties' Arguments

    The parties' dispute is focused on around the first referred 
question. The Register understands this question to ask, in essence, 
whether the CRJs have the power to issue a clarifying interpretation of 
their regulations.
    SoundExchange asserts that the provision cited by the district 
court, 17 U.S.C. 803(c)(4), does not give the CRJs authority to clarify 
the regulations at issue here. First, SoundExchange argues that 
resolution of legal ambiguity cannot properly be characterized as a 
correction of a ``technical or clerical'' error. Second, SoundExchange 
urges that the separate authority in section 803(c)(4) to ``modify the 
terms, but not the rates, of royalty payments in response to unforeseen 
circumstances that would frustrate the proper implementation of such 
determination'' does not apply to this case. In particular, it argues 
that any modification of the definition of ``Gross Revenues'' would 
affect the rates of royalty payments, not the terms under which those 
payments are made, and that the definition of ``Gross Revenues'' is 
accordingly not a ``term.'' In addition, SoundExchange asserts that 
Sirius XM's decision to exclude certain revenues from its gross revenue 
calculation was not an ``unforeseen circumstance[ ]'' that would 
``frustrate the proper implementation of [the] determination.''
    Sirius XM, in contrast, asserts that section 803(c)(4) empowers the 
CRJs to interpret the SDARS I regulations, and amend them to prevent an 
interpretation that is at odds with copyright law or the intent of its 
earlier determination. According to Sirius XM, such an amendment can 
either be considered a ``technical amendment'' that prevents a mistaken 
interpretation of their determination, or a ``modification'' of the 
terms of the royalty payment in response to unforeseen circumstances. 
In response to SoundExchange's point that a modification of the Gross 
Revenues definition would constitute an impermissible change in rates, 
Sirius XM urges that ``rates'' refers only to the percentage-of-revenue 
rate in the CRJs' determination, and ``terms'' refers broadly to 
``other aspects of the determination required to implement the rates.''
    In the alternative, Sirius XM argues that if section 803(c)(4) did 
not give the CRJs sufficient authority to clarify the meaning of the 
regulations, the APA independently authorizes the CRJs to do so. Sirius 
XM notes that section 803(a)(1) instructs the CRJs to act in accordance 
with the APA, and that the APA includes a provision authorizing 
agencies to ``issue a declaratory order to

[[Page 25335]]

terminate a controversy or remove uncertainty'' as part of formal 
adjudications. 5 U.S.C. 554(e). SoundExchange disputes that contention 
on the ground that, within the meaning of the APA, the CRJs engage in 
rulemakings, not adjudications, and therefore 5 U.S.C. 554(e) does not 
apply.
    With respect to the remaining two questions, the parties agree that 
if the CRJs have authority to interpret regulations adopted in the 
course of a rate determination proceeding, that authority would not be 
time limited. In addition, they agree that the CRJs' continuing 
jurisdiction does not depend on whether a rate period is current or 
lapsed.

III. Register's Determination

    Having considered the relevant statutory language and the input 
from the parties, the Register determines that the CRJs have 
jurisdiction under section 803(c)(4) of Title 17 to clarify the meaning 
of the regulations adopted in SDARS I. The Register also determines 
that this authority is not time-limited, and that the CRJs' authority 
is the same whether the regulations at issue apply to a current or 
lapsed rate period.

A. The CRJs' Continuing Jurisdiction Encompasses the Authority to Issue 
Clarifying Amendments to Written Determinations.

    As noted above, under section 803(c)(4), the CRJs ``may issue an 
amendment to a written determination to correct any technical or 
clerical errors in the determination or to modify the terms, but not 
the rates, of royalty payments in response to unforeseen circumstances 
that would frustrate the proper implementation of such determination.'' 
17 U.S.C. 803(c)(4). As an initial matter, the Register accepts the 
district court's conclusion that the meaning of the relevant regulatory 
provisions, and the application of those provisions to the particular 
fact pattern presented here, is uncertain. See SoundExchange, 2014 WL 
4219591, at *4 (``[T]he gross revenue exclusions are ambiguous and do 
not, on their face, make clear whether Sirius XM's approaches were 
permissible under the regulations.'').
    The Register concludes that the CRJs' power to ``correct any 
technical . . . errors'' in determinations encompasses the power to 
resolve ambiguity in the meaning of regulations adopted pursuant to 
those determinations.\3\ Such a correction is ``technical'' in the 
sense that it merely clarifies existing regulations to ensure they are 
applied in the manner intended by the CRJs. As the district court 
appreciated, the CRJs are in the best position to provide this type of 
interpretive guidance, given their familiarity with the extensive 
record on which the regulations are based and their general ``technical 
and policy expertise.'' SoundExchange, 2014 WL 4219591 at *4. This 
approach is also consistent with general principles of administrative 
law, under which courts regularly defer to agencies' reasonable 
interpretations of ambiguous regulations. See Auer v. Robbins, 519 U.S. 
452, 461 (1997). Section 803(c)(4) provides the administrative 
mechanism by which the CRJs can issue such interpretations.
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    \3\ As explained above, Sirius XM argues that the CRJs' power to 
``modify the terms, but not the rates, of royalty payments in 
response to unforeseen circumstances that would frustrate the proper 
implementation of such determination'' provides an alternate source 
of authority to clarify the SDARS I regulations. 17 U.S.C. 
803(c)(4). SoundExchange contends, however, that the definition of 
``Gross Revenues'' is not a ``term.'' For its part, the district 
court concluded that the definition was a term. SoundExchange, 2014 
WL 4219591 at *5 (``Neither party is asking for a change to rates; 
only a clarification of terms.''). The Register need not resolve 
this issue, because the CRJs' separate power to ``correct any 
technical . . . errors'' provides a sufficient basis for the CRJs to 
act in this case. For the same reason, the Register need not address 
whether the APA separately authorizes the CRJs to clarify the SDARS 
I regulations.
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    This understanding of section 803(c)(4) also comports with the 
Register's prior reading of that provision. Specifically, the Register 
has construed section 803(c)(4) as providing the CRJs the authority to 
amend their regulations to conform with the Register's interpretation 
of the Copyright Act. In 2009, after the CRJs issued a determination 
setting the rates and terms of royalty payments for making and 
distribution of phonorecords of musical works under 17 U.S.C. 115, the 
Register exercised her statutory authority to correct certain legal 
errors in that determination. 74 FR 4537 (Jan. 6, 2009). In particular, 
the Register concluded that a number of regulatory terms that the CRJs 
had adopted were inconsistent with the Copyright Act, including certain 
terms related to digital phonorecord deliveries and the retroactivity 
of promotional royalty rates. See 73 FR at 4541-42. Although the 
Register lacked the authority actually to amend the regulations adopted 
by the CRJs, she concluded that the CRJs could ``codify the corrections 
identified and made herein by the Register'' by exercising their 
authority under section 803(c)(4). Id. at 4543. The CRJs subsequently 
relied on that authority to amend the regulations and excise the 
erroneous regulatory provisions. 74 FR 6832, 6833 (Feb. 11, 2009). The 
CRJs explained that doing so would ``clarify potential confusion facing 
users of the license at issue'' and ``promote an efficient 
administration of the applicable license.'' Id. These same rationales 
apply with equal force here.

B. The CRJs' Continuing Jurisdiction Is Not Subject to Time Limits, and 
Extends to Both Current and Lapsed Rate Periods.

    The Register agrees with the parties that the CRJs' continuing 
jurisdiction authority is not subject to a time limit. Nothing in the 
text of section 803(c)(4) indicates a time limit. And, no other 
provision in Title 17 would otherwise impose a time limit on the CRJs' 
exercise of that authority. Furthermore, the scope of the CRJs' 
continuing jurisdiction authority is the same whether the terms at 
issue concern a current or lapsed rate period. Nothing in the text of 
section 803(c)(4), or any other provision in Title 17, differentiates 
between current and lapsed rate periods for purposes of the CRJs' 
exercise of continuing jurisdiction.
    April 8, 2015

Maria A. Pallante,
Register of Copyrights and Director of the United States Copyright 
Office

[FR Doc. 2015-10305 Filed 5-1-15; 8:45 am]
 BILLING CODE P
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