Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012 / Proposed Rules 29259 

exclusive rights comprised in a copyright, refers to 

the owner of that particular right’’). However, the 

concept of a copyright ‘‘owner’’ need not be 

congruent with the concept of a copyright 

registration ‘‘claimant.’’ As explained supra, if an 

owner of an exclusive right could register a work, 

there would either be multiple registrations for 

particular works, thus violating the general rule of 

only one registration per work, or one registration 

by the first owner to register, thus leading to a 

misleading and inaccurate public record. 

5That provision may also be interpreted to 

distinguish an owner of an exclusive right from a 

‘‘copyright owner’’ in the broader sense of the 

owner of all rights. 

6Righthaven LLC v. Mostofi, 2011 U.S. Dist. 

LEXIS 75810 (D. Nev. July 13, 2011). See also, 

Silvers v. Sony Pictures Entertainment, Inc., 402 

F.3d 881 (9th Cir. 2005), cert. den’d 546 U.S. 827 

(2005) (The right to sue for an accrued claim for 

infringement is not an exclusive right under 17 

U.S.C.S. 106. Moreover, the bare assignment of an 

accrued cause of action is impermissible under 17 

U.S.C.S. 501(b).) 

7Righthaven LLC v. Mostofi, 2011 U.S. Dist. 

LEXIS 75810 (D. Nev. July 13, 2011), quoting, 

Silvers v. Sony Pictures Entertainment, Inc., 402 

F.3d 881 (9th Cir. 2005), quoting, 4 Business and 

Commercial Litigation in Federal Courts, at 1062 

§ 65.3(a)(4) (Robert Haig ed.). Accord, Righthaven 

LLC v. Inform Techs., Inc., 2011 U.S. Dist. LEXIS 

119379 (D. Nev. Oct. 14, 2011). 

foundation in the statutory language for 

allowing a person or organization with 

less than a copyright ownership interest 

in an exclusive right to be considered a 

owner of copyright or a valid claimant 

of a claim to copyright. The bald right 

to register a work is not one of the 

section 106 exclusive rights. Only the 

owner of an exclusive right (or 

subdivision thereof) is entitled, to the 

extent of that right, to all of the 

protection and remedies accorded to the 

copyright owner by title 17. See, 17 

U.S.C. 201(d)(2).5

The above discussion poses more than 

a theoretical problem. While the Office 

recognizes that transfers may be limited 

in time and duration, see, Bean v. Littell, 

669 F. Supp.2d 1031 (D. Ariz. 2008), 

recent court decisions have questioned 

what it means to claim legal title to 

copyright when in fact the ‘‘claimant’’ 

does not in fact own any section 106 

rights or may technically own those 

rights, but does not have the ability to 

exercise any of the exclusive rights.6 At 

least one court has held that the 

standing to sue for copyright 

infringement is absent when underlying 

agreements distort or misrepresent such 

claimants’ interests in and to the 

ownership of exclusive rights. ‘‘If the 

plaintiff is not a proper owner of the 

copyright rights, then it cannot invoke 

copyright protection stemming from the 

exclusive rights belonging to the owner, 

including infringement of the 

copyright.’’ 7 While the Copyright Office 

does not believe that all transfers relying 

on the footnote necessarily misrepresent 

who is a valid copyright claimant, there 

exists the real possibility that the 

footnote fosters questionable claims of 

ownership due to its ambiguous 

language. 

The elimination of the footnote would 

leave numerous options for registering 

works to authors and copyright owners, 

including the owners of a single 

exclusive right. As noted above, the 

owner of an exclusive right may always 

register a claim in the work by listing 

the author as the claimant. Any 

authorized agent of the author, the 

owner of all rights, or the owner of an 

exclusive may similarly file an 

application for registration on behalf of 

a valid claimant by filling out the 

application and certifying their 

relationship to the claimant. 

In the case of collective works, the 

author of articles contributed to a 

number of periodicals may avail himself 

or herself to the group registration 

option for contributions to periodicals 

established pursuant to section 408(d) of 

the Copyright Act. See, 37 CFR 

202.3(b)(8). A number of other group 

registration options exist for other types 

of works, such as for unpublished 

collections and for published 

photographs. See, 37 CFR 202.3(a)(4) 

and 202.3(b)(10). 

In light of the concerns raised about 

the footnote and the alternative 

registration options available to 

claimants, the owners of one or more 

exclusive rights, and agents of such 

persons or entities, the Office believes 

that elimination of the footnote is 

warranted. The Office believes that the 

elimination of the footnote would have 

no discernable adverse effect on the 

ability to register works, would foster a 

more accurate and meaningful record of 

authorship and ownership, and would 

reduce the possibility of fraudulent or 

misleading claims. Removal of the 

footnote would also reduce the 

occurrence of litigation over the validity 

of misleading transfers by creating a 

bright line rule, consistent with the 

rationale expressed for the original 

Interim Regulation, for determining who 

may assert a claim of copyright. The 

Copyright Office seeks public comment 

on this intended amendment to the 

definition of a ‘‘claimant.’’ 

List of Subjects in 37 CFR Part 202 

Copyright, Registration. 

Proposed Regulation 

In consideration of the foregoing, the 

Copyright Office proposes to amend part 

202.3(a)(3) as follows: 

PART 202—PREREGISTRATION AND 

REGISTRATION OF CLAIMS TO 

COPYRIGHT 

1. The authority citation for part 202 

is revised to read as follows: 

Authority: 17 U.S.C. 408, 409, 702. 

2. Amend sec. 202.3 paragraph 

(a)(3)(ii) as follows: 

a. In paragraph (ii), remove footnote 1. 

Dated: May 10, 2012. 

Maria A. Pallante, 

Register of Copyrights. 

[FR Doc. 2012–11879 Filed 5–16–12; 8:45 am] 

BILLING CODE 1410–30–P 

LIBRARY OF CONGRESS 

Copyright Royalty Board 

37 CFR Part 385 

[Docket No. 2011–3 CRB Phonorecords II] 

Adjustment of Determination of 

Compulsory License Rates for 

Mechanical and Digital Phonorecords 

AGENCY: Copyright Royalty Board, 

Library of Congress. 

ACTION: Proposed rule. 

SUMMARY: The Copyright Royalty Judges 

are publishing for comment proposed 

regulations that set the rates and terms 

for the section 115 statutory license for 

the use of musical works in physical 

phonorecord deliveries, permanent 

digital downloads, ringtones, interactive 

streaming, limited downloads, limited 

offerings, mixed service bundles, music 

bundles, paid locker services and 

purchased content locker services. 

DATES: Comments and objections, if any, 

are due no later than June 18, 2012. 

ADDRESSES: Comments and objections 

may be sent electronically to 

crb@loc.gov. In the alternative, send an 

original, five copies, and an electronic 

copy on a CD either by mail or hand 

delivery. Please do not use multiple 

means for transmission. Comments and 

objections may not be delivered by an 

overnight delivery service other than the 

U.S. Postal Service Express Mail. If by 

mail (including overnight delivery), 

comments and objections must be 

addressed to: Copyright Royalty Board, 

P.O. Box 70977, Washington, DC 20024– 

0977. If hand delivered by a private 

party, comments and objections must be 

brought between 8:30 a.m. and 5 p.m. to 

the Copyright Office Public Information 

Office, Library of Congress, James 

Madison Memorial Building, Room LM– 

401, 101 Independence Avenue SE., 

Washington, DC 20559–6000. If 

delivered by a commercial courier, 


srobinson on DSK4SPTVN1PROD with PROPOSALS
29260 Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012 / Proposed Rules 

1The Copyright Royalty Judges, which were 

established by the Copyright Royalty and 

Distribution Reform Act of 2004, are the third entity 

to set the rates and terms for the section 115 license. 

Until its abolishment in 1993, the Copyright 

Royalty Tribunal (‘‘CRT’’) had the authority to 

adjust the statutory rates for the section 115 license. 

After 1993, Congress granted authority to Copyright 

Arbitration Royalty Panels (‘‘CARP’’), under the 

supervision of the Librarian of Congress, to set rates 

and, unlike the CRT, to also adopt terms for the 

mechanical license. See Copyright Royalty Tribunal 

Reform Act of 1993, Public Law 103–198, 107 Stat. 

2304. 

2Thumbplay withdrew from the proceeding on 

April 5, 2012. 

3BMI’s filing was styled as ‘‘Comments in 

Response to Request for Petitions to Participate,’’ 

and BMI withdrew its comments on December 1, 

2011. 

4Music Reports’ signature was inadvertently 

omitted from the motion; its signature was provided 

on April 18, 2012. Since neither Beyond Oblivion 

nor Napster were signatories to the motion, the 

Judges presume that they each reviewed the 

settlement and do not object to its adoption, per the 

signatories’ representation. 

comments and objections must be 

delivered between 8:30 a.m. and 4 p.m. 

to the Congressional Courier Acceptance 

Site located at 2nd and D Street NE., 

Washington, DC, and the envelope must 

be addressed to: Copyright Royalty 

Board, Library of Congress, James 

Madison Memorial Building, LM–403, 

101 Independence Avenue SE., 

Washington, DC 20559–6000. 

FOR FURTHER INFORMATION CONTACT: 

LaKeshia Keys, Program Specialist, by 

telephone at (202) 707–7658 or email at 

crb@loc.gov. 

SUPPLEMENTARY INFORMATION: Section 

115 of the Copyright Act, title 17 of the 

United States Code, also known as the 

mechanical compulsory license, 

requires a copyright owner of a 

nondramatic musical work to grant a 

license to any person who wants to 

make and distribute phonorecords of 

that work, provided that the copyright 

owner has allowed phonorecords of the 

work to be produced and distributed, 

and that the licensee complies with the 

statute and regulations. 

On November 1, 1995, Congress 

passed the Digital Performance Right in 

Sound Recordings Act of 1995 

(‘‘DPRSRA’’), Public Law 104–39, 109 

Stat. 336, which extended the 

mechanical license to digital 

phonorecord deliveries. 17 U.S.C. 

115(c)(3). Consequently, the license now 

covers digital transmissions of 

phonorecords in addition to the 

physical copies such as compact discs, 

vinyl and cassette tapes. Chapter 8 of 

the Copyright Act requires the 

Copyright Royalty Judges (‘‘Judges’’) to 

conduct proceedings every five years to 

determine the rates and terms for the 

section 115 license.1 17 U.S.C. 801(b)(1), 

804(b)(4). In accordance with section 

804(b)(4), the Judges commenced a 

proceeding to set rates and terms for the 

section 115 license on January 9, 2006, 

71 FR 1454, and their final 

determination of said rates and terms 

was published in the Federal Register 

on January 26, 2009. 74 FR 4510. 

Therefore, the next proceeding to 

determine rates and terms for the 

section 115 license was to be 

commenced in January 2011. 17 U.S.C. 

804(b)(4). 

Accordingly, the Judges published a 

notice commencing the current 

proceeding and requesting interested 

parties to submit their petitions to 

participate. 76 FR 590 (January 5, 2011). 

Petitions to Participate were received 

from: Microsoft Corporation 

(‘‘Microsoft’’); Omnifone Group Limited 

(‘‘Omnifone’’); CTIA—The Wireless 

Association (‘‘CTIA’’); Cricket 

Communications, Inc. (‘‘Cricket’’); 

PacketVideo, Inc. (‘‘PacketVideo’’); 

Slacker, Inc. (‘‘Slacker’’); Google, Inc. 

(‘‘Google’’); Amazon Digital Services, 

Inc. (‘‘Amazon’’); Beyond Oblivion, Inc. 

(‘‘Beyond Oblivion’’); AT&T Mobility 

LLC (‘‘AT&T Mobility’’); Rdio, Inc. 

(‘‘Rdio’’); Apple, Inc. (‘‘Apple’’); the 

Recording Industry Association of 

America, Inc. (‘‘RIAA’’); Rhapsody 

International, Inc. (‘‘Rhapsody’’); 

RealNetworks, Inc. (‘‘RealNetworks’’); 

Thumbplay, Inc. (‘‘Thumbplay’’); 2

Pandora Media, Inc. (‘‘Pandora’’); The 

American Association of Independent 

Music (‘‘A2IM’’); Music Reports, Inc. 

(‘‘Music Reports’’); the National Music 

Publishers’ Association, Inc., 

Songwriters Guild of America, Nashville 

Songwriters Association International 

and Church Music Publishers 

Association, jointly (collectively, 

‘‘Copyright Owners’’); EMI Music 

Publishing (‘‘EMI’’); the Songwriters 

Guild of America (‘‘SGA’’); Napster, LLC 

(‘‘Napster’’); the Digital Media 

Association (‘‘DiMA’’); and Broadcast 

Music, Inc. (‘‘BMI’’).3 The Judges set the 

timetable for the three-month 

negotiation period, see 17 U.S.C. 

803(b)(3), and directed the participants 

to submit their written direct statements 

no later than April 30, 2012. On April 

11, 2012, the Judges received a Motion 

to Adopt Settlement stating that ‘‘[a]ll 

participants in the Proceeding are 

parties to the Settlement or have 

reviewed the Settlement and do not 

object to its being adopted as the basis 

for setting statutory rates and terms.’’ 4

Motion to Adopt Settlement at 2 (April 

11, 2012). 

Section 801(b)(7)(A) of the Copyright 

Act authorizes the Judges to adopt rates 

and terms negotiated by ‘‘some or all of 

the participants in a proceeding at any 

time during the proceeding’’ provided 

they are submitted to the Judges for 

approval. This section provides that in 

such event: 

(i) The Copyright Royalty Judges shall 

provide to those that would be bound by the 

terms, rates, or other determination set by 

any agreement in a proceeding to determine 

royalty rates an opportunity to comment on 

the agreement and shall provide to 

participants in the proceeding under section 

803(b)(2) that would be bound by the terms, 

rates, or other determination set by the 

agreement an opportunity to comment on the 

agreement and object to its adoption as a 

basis for statutory terms and rates; and 

(ii) The Copyright Royalty Judges may 

decline to adopt the agreement as a basis for 

statutory terms and rates for participants that 

are not parties to the agreement, if any 

participant described in clause (i) objects to 

the agreement and the Copyright Royalty 

Judges conclude, based on the record before 

them if one exists, that the agreement does 

not provide a reasonable basis for setting 

statutory terms or rates. 

17 U.S.C. 801(b)(7)(A). Rates and terms 

adopted pursuant to this provision are 

binding on all copyright owners of 

musical works and those using such 

musical works in the activities set forth 

in the proposed regulations. 

In publishing the parties’ proposed 

rates and terms, the Judges are removing 

two provisions and seeking comment on 

two others. The parties have included 

language in proposed §§ 385.10(c) and 

385.20(c) that states that ‘‘[n]either this 

subpart nor the act of obtaining a license 

under 17 U.S.C. 115 * * * and shall not 

constitute evidence, as to the 

circumstances in which any of the 

exclusive rights of a copyright owner are 

implicated or a license, including a 

compulsory license pursuant to 17 

U.S.C. 115, must be obtained.’’ Our task, 

as set forth in section 115 and chapter 

8 of the Copyright Act, is to adopt rates 

and terms for the compulsory license for 

the making and distributing of physical 

and digital phonorecords. It is not our 

task to offer evaluations, limitations or 

characterizations of the rates and terms. 

Therefore, the Judges decline to include 

the language ‘‘and shall not constitute 

evidence’’ in our regulations. See 

Mechanical and Digital Phonorecord 

Delivery Rate Determination Proceeding, 

Notice of proposed rulemaking, Docket 

No. 2006–3 CRB DPRA, 73 FR 57033, 

57034 (October 1, 2008); 

Noncommercial Educational 

Broadcasting Statutory License, Notice 

of proposed rulemaking, Docket No. 

2006–2 CRB NCBRA, 72 FR 19138, 

19139 (April 17, 2007). 

The parties have proposed two 

provisions, § 385.12(e) and § 385.22(d), 

relating to statements of account for the 


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Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012 / Proposed Rules 29261 

5 In the prior section 115 proceeding, the Register 

found the Judges’ adoption of language that 

excluded inclusion of certain activities from the 

statements of account to be erroneous. See 74 FR 

at 4543. Consequently, the Judges exercised their 

continuing jurisdiction and deleted the offending 

language. See Mechanical and Digital Phonorecord 

Delivery Rate Determination Proceeding, Final rule, 

Docket No. 2006–3 CRB DPRA, 74 FR 6832 

(February 11, 2009). 

section 115 license. Both of these 

sections, which are virtually identical, 

appear to propose in their second 

sentences requirements beyond those 

set forth by the Register of Copyrights in 

37 CFR 201.19. The authority to 

prescribe regulations relating to 

statements of account is ‘‘the exclusive 

domain of the Register,’’ see Division of 

Authority Between the Copyright 

Royalty Judges and the Register of 

Copyrights under the Section 115 

Statutory License, Final order, Docket 

No. RF 2008–1, 73 FR 48396, 48398 

(August 19, 2008), and the Judges 

‘‘cannot alter requirements issued by the 

Register regarding statements of 

account.’’ Review of Copyright Royalty 

Judges Determination, Notice; 

correction, Docket No. 2009–1, 74 FR 

4537, 4543 (January 26, 2009).5

Consequently, we particularly invite 

comments of the parties, and the 

Register of Copyrights, regarding these 

provisions. 

As noted above, 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 June 18, 

2012. 

List of Subjects in 37 CFR Part 385 

Copyright, Phonorecords, Recordings. 

Proposed Regulations 

For the reasons set forth in the 

preamble, the Copyright Royalty Judges 

propose to amend Part 385 of Chapter III 

of title 37 of the Code of Federal 

Regulations to read as follows: 

PART 385—RATES AND TERMS FOR 

USE OF MUSICAL WORKS UNDER 

COMPULSORY LICENSE FOR MAKING 

AND DISTRIBUTING OF PHYSICAL 

AND DIGITAL PHONORECORDS 

1. The authority citation for part 385 

continues to read as follows: 

Authority: 17 U.S.C. 115, 801(b)(1), 

804(b)(4). 

§ 385.4 [Amended] 

2. Section 385.4 is amended by 

removing ‘‘(‘‘ and adding ‘‘§ ’’ in its 

place. 

3. Revise heading of Subpart B to read 

as follows: 

Subpart B—Interactive Streaming and 

Limited Downloads 

4. Section 385.10 is amended as 

follows: 

a. By revising paragraph (b); and 

b. By adding a new paragraph (c). 

The revisions and additions read as 

follows: 

§ 385.10 General. 

* * * * * 

(b) Legal compliance. A licensee that, 

pursuant to 17 U.S.C. 115, makes or 

authorizes interactive streams or limited 

downloads of musical works through 

subscription or nonsubscription digital 

music services shall comply with the 

requirements of that section, the rates 

and terms of this subpart, and any other 

applicable regulations, with respect to 

such musical works and uses licensed 

pursuant to 17 U.S.C. 115. 

(c) Interpretation. This subpart is 

intended only to set rates and terms for 

situations in which the exclusive rights 

of a copyright owner are implicated and 

a compulsory license pursuant to 17 

U.S.C. 115 is obtained. Neither this 

subpart nor the act of obtaining a license 

under 17 U.S.C. 115 is intended to 

express or imply any conclusion as to 

the circumstances in which any of the 

exclusive rights of a copyright owner are 

implicated or a license, including a 

compulsory license pursuant to 17 

U.S.C. 115, must be obtained. 

5. Section 385.11 is amended as 

follows: 

a. By adding in alphabetical order 

definitions for ‘‘Affiliate’’, ‘‘Applicable 

consideration’’, and ‘‘GAAP’’; 

b. In paragraph (2) of ‘‘Limited 

download’’, by adding ‘‘provider’’ after 

‘‘service’’; 

c. In paragraph for definition of 

‘‘Offering’’, by removing ‘‘service’s’’ and 

adding ‘‘service provider’s’’ in its place, 

and by adding ‘‘provider’’ after 

‘‘service’’; 

d. By removing paragraph for 

definition of ‘‘Publication date’’; 

e. In paragraph for definition of 

‘‘Relevant page’’, by removing ‘‘users for 

limited downloads or interactive 

streams’’ and adding ‘‘users for licensed 

activity’’ in its place; 

f. In paragraph for definition of 

‘‘Service’’, by adding ‘‘provider’’ after 

‘‘Service’’ in paragraph heading; 

g. In paragraph (1) of ‘‘Service 

revenue’’, by removing ‘‘U.S. Generally 

Accepted Accounting Principles’’ and 

adding ‘‘GAAP’’ in its place; 

h. In paragraphs (1)(i)–(ii) of ‘‘Service 

revenue’’, by adding ‘‘provider’’ after 

‘‘service’’; 

i. In paragraph (1)(iii) of ‘‘Service 

revenue’’, by adding ‘‘provider’’ after 

‘‘by the service’’; 

j. In paragraph (2)(i) of ‘‘Service 

revenue’’, by removing ‘‘service’’ and 

adding ‘‘service provider’’ in its place 

each place it appears; and 

k. In paragraph (5) of ‘‘Service 

revenue’’, by removing ‘‘In connection 

with such a bundle, if a record company 

providing sound recording rights to the 

service’’ and by removing paragraphs 

(5)(i) and (ii). 

The additions read as follows: 

§ 385.11 Definitions. 

Affiliate means an entity controlling, 

controlled by, or under common control 

with another entity, except that an 

affiliate of a record company shall not 

include a copyright owner of musical 

works to the extent it is engaging in 

business as to musical works. 

Applicable consideration means 

anything of value given for the 

identified rights to undertake the 

licensed activity, including, without 

limitation, ownership equity, monetary 

advances, barter or any other monetary 

and/or nonmonetary consideration, 

whether such consideration is conveyed 

via a single agreement, multiple 

agreements and/or agreements that do 

not themselves authorize the licensed 

activity but nevertheless provide 

consideration for the identified rights to 

undertake the licensed activity, and 

including any such value given to an 

affiliate of a record company for such 

rights to undertake the licensed activity. 

For the avoidance of doubt, value given 

to a copyright owner of musical works 

that is controlling, controlled by, or 

under common control with a record 

company for rights to undertake the 

licensed activity shall not be considered 

value given to the record company. 

Notwithstanding the foregoing, 

applicable consideration shall not 

include in-kind promotional 

consideration given to a record 

company (or affiliate thereof) that is 

used to promote the sale or paid use of 

sound recordings embodying musical 

works or the paid use of music services 

through which sound recordings 

embodying musical works are available 

where such in-kind promotional 

consideration is given in connection 

with a use that qualifies for licensing 

under 17 U.S.C. 115. 

GAAP means U.S. Generally Accepted 

Accounting Principles, except that if the 

U.S. Securities and Exchange 

Commission permits or requires entities 

with securities that are publicly traded 

in the U.S. to employ International 

Financial Reporting Standards, as 

issued by the International Accounting 

Standards Board, or as accepted by the 

Securities and Exchange Commission if 

different from that issued by the 


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29262 Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012 / Proposed Rules 

International Accounting Standards 

Board, in lieu of Generally Accepted 

Accounting Principles, then an entity 

may employ International Financial 

Reporting Standards as ‘‘GAAP’’ for 

purposes of this subpart. 

* * * * * 

6. Section 385.12 is amended as 

follows: 

a. In paragraph (b), by removing 

‘‘offering.’’ and adding ‘‘offering taking 

into consideration service revenue and 

expenses associated with such offering.’’ 

in its place; 

b. In paragraph (b)(1), by removing 

‘‘Service.’’ and adding ‘‘Offering.’’ in its 

place and by adding ‘‘provider’’ after 

‘‘service’’; 

c. In paragraph (b)(1)(i), by removing 

‘‘revenue as’’ and adding ‘‘revenue 

associated with the relevant offering as’’ 

in its place; 

d. In paragraph (b)(2), by removing 

‘‘service, subtract’’ and adding ‘‘service 

provider, subtract’’ in its place, by 

removing ‘‘by the service’’, by removing 

‘‘While’’ and adding ‘‘Although’’ in its 

place, by removing ‘‘under its 

agreements with performing rights 

societies as defined in 17 U.S.C. 101’’, 

and by removing ‘‘In the latter case,’’ 

and adding ‘‘In the case where the 

service is also engaging in the public 

performance of musical works that does 

not constitute licensed activity,’’ in its 

place; 

e. In paragraph (b)(3), by adding 

‘‘provider’’ after ‘‘service’’; 

f. In paragraph (b)(4), by removing 

‘‘used by the service’’ and adding ‘‘used 

by the service provider’’ in its place 

each place it appears, by removing ‘‘on 

or after October 1, 2010’’, by removing 

‘‘if the service is’’ and adding ‘‘if the 

service provider is’’; 

g. By revising paragraph (c); 

h. In paragraph (d), by removing ‘‘For 

licensed activity on or after October 1, 

2010,’’; and 

i. By adding a new paragraph (f). 

The revisions and additions read as 

follows: 

§ 385.12 Calculation of royalty payments 

in general. 

* * * * * 

(c) Percentage of service revenue. The 

percentage of service revenue applicable 

under paragraph (b) of this section is 

10.5%. 

* * * * * 

(f) Confidentiality. A licensee’s 

statement of account, including any and 

all information provided by a licensee 

with respect to the computation of a 

subminimum, shall be maintained in 

confidence by any copyright owner, 

authorized representative or agent that 

receives it, and shall solely be used by 

the copyright owner, authorized 

representative or agent for purposes of 

reviewing the amounts paid by the 

licensee and verifying the accuracy of 

any such payments, and only those 

employees of the copyright owner, 

authorized representative or agent who 

need to have access to such information 

for such purposes will be given access 

to such information; provided that in no 

event shall access be granted to any 

individual who, on behalf of a record 

company, is directly involved in 

negotiating or approving royalty rates in 

transactions authorizing third party 

services to undertake licensed activity 

with respect to sound recordings. A 

licensee’s statements of account, 

including any and all information 

provided by a licensee with respect to 

the computation of a subminimum, 

shall not be used for any other purpose, 

and shall not be disclosed to or used by 

or for any record company affiliate or 

any third party, including any thirdparty record company. 

7. Section 385.13 is amended as 

follows: 

a. In paragraphs (a)(1)–(a)(5), by 

removing ‘‘§ 385.12(b)(1)’’ and adding 

‘‘§ 385.12(b)(1)(ii)’’ in its place each 

place it appears, and by removing 

‘‘§ 385.12(b)(3)’’ and adding 

‘‘§ 385.12(b)(3)(ii)’’ in its place each 

place it appears; 

b. In paragraph (a)(4), by adding 

‘‘providing licensed activity that is’’ 

before ‘‘made available to end users’’ 

and by adding ‘‘(including products or 

services subject to other subparts)’’ 

before ‘‘as part of a single transaction’’; 

c. By revising paragraphs (b) and (c); 

d. By redesignating paragraph (d) as 

paragraph (e); 

e. By adding a new paragraph (d); and 

f. In newly redesignated paragraph (e), 

by removing ‘‘the service shall for the 

relevant offering calculate its’’ and 

adding ‘‘the’’ in its place, and by adding 

‘‘shall be calculated,’’ before ‘‘taking 

into account’’. 

The revisions and additions read as 

follows: 

§ 385.13 Minimum royalty rates and 

subscriber-based royalty floors for specific 

types of services. 

* * * * * 

(b) Computation of subminimum I. 

For purposes of paragraphs (a)(2), (3), 

and (4) of this section, subminimum I 

for an accounting period means the 

aggregate of the following with respect 

to all sound recordings of musical works 

used in the relevant offering of the 

service provider during the accounting 

period— 

(1) In cases in which the record 

company is the licensee under 17 U.S.C. 

115 and the record company has granted 

the rights to make interactive streams or 

limited downloads of a sound recording 

through the third-party service together 

with the right to reproduce and 

distribute the musical work embodied 

therein, 17.36% of the total amount 

expensed by the service provider or any 

of its affiliates in accordance with 

GAAP for such rights for the accounting 

period, which amount shall equal the 

applicable consideration for such rights 

at the time such applicable 

consideration is properly recognized as 

an expense under GAAP. 

(2) In cases in which the record 

company is not the licensee under 17 

U.S.C. 115 and the record company has 

granted the rights to make interactive 

streams or limited downloads of a 

sound recording through the third-party 

service without the right to reproduce 

and distribute the musical work 

embodied therein, 21% of the total 

amount expensed by the service 

provider or any of its affiliates in 

accordance with GAAP for such rights 

for the accounting period, which 

amount shall equal the applicable 

consideration for such rights at the time 

such applicable consideration is 

properly recognized as an expense 

under GAAP. 

(c) Computation of subminimum II. 

For purposes of paragraphs (a)(1) and (5) 

of this section, subminimum II for an 

accounting period means the aggregate 

of the following with respect to all 

sound recordings of musical works used 

in the relevant offering of the service 

provider during the accounting period— 

(1) In cases in which the record 

company is the licensee under 17 U.S.C. 

115 and the record company has granted 

the rights to make interactive streams 

and limited downloads of a sound 

recording through the third-party 

service together with the right to 

reproduce and distribute the musical 

work embodied therein, 18% of the total 

amount expensed by the service 

provider or any of its affiliates in 

accordance with GAAP for such rights 

for the accounting period, which 

amount shall equal the applicable 

consideration for such rights at the time 

such applicable consideration is 

properly recognized as an expense 

under GAAP. 

(2) In cases in which the record 

company is not the licensee under 17 

U.S.C. 115 and the record company has 

granted the rights to make interactive 

streams or limited downloads of a 

sound recording through the third-party 

service without the right to reproduce 

and distribute the musical work 

embodied therein, 22% of the total 

amount expensed by the service 


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provider or any of its affiliates in 

accordance with GAAP for such rights 

for the accounting period, which 

amount shall equal the applicable 

consideration for such rights at the time 

such applicable consideration is 

properly recognized as an expense 

under GAAP. 

(d) Payments by third parties. If a 

record company providing sound 

recording rights to the service provider 

for a licensed activity— 

(1) Recognizes revenue (in accordance 

with GAAP, and including for the 

avoidance of doubt all applicable 

consideration with respect to such 

rights for the accounting period, 

regardless of the form or timing of 

payment) from a person or entity other 

than the service provider providing the 

licensed activity and its affiliates, and 

(2) Such revenue is received, in the 

context of the transactions involved, as 

applicable consideration for such rights, 

(3) Then such revenue shall be added 

to the amounts expensed by the service 

provider solely for purposes of 

paragraphs (b)(1), (b)(2), (c)(1), or (c)(2) 

of this section, as applicable, if not 

already included in such expensed 

amounts. Where the service provider is 

the licensee, if the service provider 

provides the record company all 

information necessary for the record 

company to determine whether 

additional royalties are payable by the 

service provider hereunder as a result of 

revenue recognized from a person or 

entity other than the service provider as 

described in the immediately preceding 

sentence, then the record company shall 

provide such further information as 

necessary for the service provider to 

calculate the additional royalties and 

indemnify the service provider for such 

additional royalties. The sole obligation 

of the record company shall be to pay 

the licensee such additional royalties if 

actually payable as royalties hereunder; 

provided, however, that this shall not 

affect any otherwise existing right or 

remedy of the copyright owner nor 

diminish the licensee’s obligations to 

the copyright owner. 

* * * * * 

8. Section 385.14 is amended as 

follows: 

a. In paragraphs (a)(1)(iii)(A)–(C), by 

removing ‘‘service’’ and adding ‘‘service 

provider’’ in its place each place it 

appears; 

b. In paragraph (a)(1)(iii)(A), by 

removing ‘‘commencing on or after 

October 1, 2010, except’’ and adding 

‘‘other than’’ in its place; 

c. In paragraph (a)(3), by removing 

‘‘the service shall provide’’ and adding 

‘‘the service provider shall provide’’ in 

its place, by removing ‘‘the service shall 

have’’ and adding ‘‘the service provider 

shall have’’ in its place, and by 

removing ‘‘the service (but’’ and adding 

‘‘the service provider (but’’ in its place; 

d. By revising paragraph (b)(1); 

e. In paragraph (b)(4), by removing 

‘‘the service, and not’’ and adding ‘‘the 

service provider, and not’’ in its place; 

and 

f. By revising paragraph (d). 

The revisions read as follows: 

§ 385.14 Promotional royalty rate. 

* * * * * 

(b) * * * 

(1) No applicable consideration for 

making or authorizing the relevant 

interactive streams or limited 

downloads is received by the record 

company, any of its affiliates, or any 

other person or entity acting on behalf 

of or in lieu of the record company, 

except for in-kind promotional 

consideration given to a record 

company (or affiliate thereof) that is 

used to promote the sale or paid use of 

sound recordings or the paid use of 

music services through which sound 

recordings are available; 

* * * * * 

(d) Interactive streaming of clips. In 

addition to those in paragraph (a) of this 

section, the provisions of this paragraph 

(d) apply to interactive streaming 

conducted or authorized by record 

companies under the promotional 

royalty rate of segments of sound 

recordings of musical works with a 

playing time that does not exceed 90 

seconds. Such interactive streams may 

be made or authorized by a record 

company under the promotional royalty 

rate without any of the temporal 

limitations set forth in paragraphs (b) 

and (c) of this section (but subject to the 

other conditions of paragraphs (b) and 

(c) of this section, as applicable). For 

clarity, this paragraph (d) is strictly 

limited to the uses described herein and 

shall not be construed as permitting the 

creation or use of an excerpt of a 

musical work in violation of 17 U.S.C. 

106(2) or 115(a)(2) or any other right of 

a musical work owner. 

9. Add Subpart C to read as follows: 

Subpart C—Limited Offerings, Mixed 

Service Bundles, Music Bundles, Paid 

Locker Services and Purchased Content 

Locker Services 

Sec. 

385.20 General. 

385.21 Definitions. 

385.22 Calculation of royalty payments in 

general. 

385.23 Royalty rates and subscriber-based 

royalty floors for specific types of 

services. 

385.24 Free trial periods. 

385.25 Reproduction and distribution 

rights covered. 

325.26 Effect of rates. 

Subpart C—Limited Offerings, Mixed 

Service Bundles, Music Bundles, Paid 

Locker Services and Purchased 

Content Locker Services 

§ 385.20 General. 

(a) Scope. This subpart establishes 

rates and terms of royalty payments for 

certain reproductions or distributions of 

musical works through limited 

offerings, mixed service bundles, music 

bundles, paid locker services and 

purchased content locker services 

provided in accordance with the 

provisions of 17 U.S.C. 115. For the 

avoidance of doubt, to the extent that 

product configurations for which rates 

are specified in subpart A of this part 

are included within licensed subpart C 

of this part activity, the rates specified 

in subpart A of this part shall not apply, 

except that in the case of a music 

bundle the compulsory licensee may 

elect to pay royalties for the music 

bundle pursuant to subpart C of this 

part or for the components of the bundle 

pursuant to subpart A of this part. 

(b) Legal compliance. A licensee that, 

pursuant to 17 U.S.C. 115, makes or 

authorizes reproduction or distribution 

of musical works in limited offerings, 

mixed service bundles, music bundles, 

paid locker services or purchased 

content locker services shall comply 

with the requirements of that sections, 

the rates and terms of this subpart, and 

any other applicable regulations, with 

respect to such musical works and uses 

licensed pursuant to 17 U.S.C. 115. 

(c) Interpretation. This subpart is 

intended only to set rates and terms for 

situations in which the exclusive rights 

of a copyright owner are implicated and 

a compulsory license pursuant to 17 

U.S.C. 115 is obtained. Neither this 

subpart nor the act of obtaining a license 

under 17 U.S.C. 115 is intended to 

express or imply any conclusion as to 

the circumstances in which any of the 

exclusive rights of a copyright owner are 

implicated or a license, including a 

compulsory license pursuant to 17 

U.S.C. 115, must be obtained. 

§ 385.21 Definitions. 

For purposes of this subpart, the 

following definitions shall apply: 

Affiliate shall have the meaning given 

in § 385.11. 

Applicable consideration shall have 

the meaning given in § 385.11, except 

that for purposes of this subpart 

references in the definition of 

‘‘Applicable consideration’’ in § 385.11 

to licensed activity shall mean licensed 

subpart C of this part activity. 


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Free trial royalty rate means the 

statutory royalty rate of zero in the case 

of certain free trial periods, as provided 

in § 385.24. 

GAAP shall have the meaning given 

in § 385.11. 

Interactive stream shall have the 

meaning given in § 385.11. 

Licensee shall have the meaning given 

in § 385.11. 

Licensed subpart C of this part 

activity means— 

(1) In the case of a limited offering, 

the applicable interactive streams or 

limited downloads; 

(2) In the case of a locker service, the 

applicable interactive streams, 

permanent digital downloads, restricted 

downloads or ringtones; 

(3) In the case of a music bundle, the 

applicable reproduction or distribution 

of a physical phonorecord, permanent 

digital download or ringtone; and 

(4) In the case of a mixed service 

bundle, the applicable— 

(i) Permanent digital downloads; 

(ii) Ringtones; 

(iii) To the extent a limited offering is 

included in a mixed service bundle, 

interactive streams or limited 

downloads; or 

(iv) To the extent a locker service is 

included in a mixed service bundle, 

interactive streams, permanent digital 

downloads, restricted downloads or 

ringtones. 

Limited download shall have the 

meaning given in § 385.11. 

Limited offering means a subscription 

service providing interactive streams or 

limited downloads where— 

(1) An end user is not provided the 

opportunity to listen to a particular 

sound recording chosen by the end user 

at a time chosen by the end user (i.e., 

the service does not provide interactive 

streams of individual recordings that are 

on-demand, and any limited downloads 

are rendered only as part of programs 

rather than as individual recordings that 

are on-demand); or 

(2) The particular sound recordings 

available to the end user over a period 

of time are substantially limited relative 

to services in the marketplace providing 

access to a comprehensive catalog of 

recordings (e.g., a service limited to a 

particular genre, or permitting 

interactive streaming only from a 

monthly playlist consisting of a limited 

set of recordings). 

Locker service means a service 

providing access to sound recordings of 

musical works in the form of interactive 

streams, permanent digital downloads, 

restricted downloads or ringtones, 

where the service has reasonably 

determined that phonorecords of the 

applicable sound recordings have been 

purchased by the end user or are 

otherwise in the possession of the end 

use prior to the end user’s first request 

to access such sound recordings by 

means of the service. The term service 

locker does not extend to any part of a 

service otherwise meeting this 

definition as to which a license is not 

obtained for the applicable 

reproductions and distributions of 

musical works. 

Mixed service bundle means an 

offering of one or more of permanent 

digital downloads, ringtones, locker 

services or limited offerings, together 

with one or more of non-music services 

(e.g., Internet access service, mobile 

phone service) or non-music products 

(e.g., a device such as a phone) of more 

than token value, that is provided to 

users as part of one transaction without 

pricing for the music services or music 

products separate from the whole 

offering. 

Music bundle means an offering of 

two or more of physical phonorecords, 

permanent digital downloads or 

ringtones provided to users as part of 

one transaction (e.g., download plus 

ringtone, CD plus downloads). A music 

bundle must contain at least two 

different product configurations and 

cannot be combined with any other 

offering containing licensed activity 

under subpart B of this part or subpart 

C of this part. 

(1) In the case of music bundles 

containing one or more physical 

phonorecords, the physical phonorecord 

component of the music bundle must be 

sold under a single catalog number, and 

the musical works embodied in the 

digital phonorecord delivery 

configurations in the music bundle must 

be the same as, or a subset of, the 

musical works embodied in the physical 

phonorecords; provided that when the 

music bundle contains a set of digital 

phonorecord deliveries sold by the same 

record company under substantially the 

same title as the physical phonorecord 

(e.g., a corresponding digital album), up 

to 5 sound recordings of musical works 

that are included in the stand-alone 

version of such set of digital 

phonorecord deliveries but are not 

included on the physical phonorecord 

may be included among the digital 

phonorecord deliveries in the music 

bundle. In addition, the seller must 

permanently part with possession of the 

physical phonorecord or phonorecords 

sold as part of the music bundle. 

(2) In the case of music bundles 

composed solely of digital phonorecords 

deliveries, the number of digital 

phonorecord deliveries in either 

configuration cannot exceed 20, and the 

musical works embodied in each 

configuration in the music bundle must 

be the same as, or a subset of, the 

musical works embodied in the 

configuration containing the most 

musical works. 

Paid locker service means a locker 

service that is a subscription service. 

Permanent digital download shall 

have the meaning given in § 385.2. 

Purchased content locker service 

means a locker service made available to 

end-user purchasers of permanent 

digital downloads, ringtones or physical 

phonorecords at no incremental charge 

above the otherwise applicable purchase 

price of the permanent digital 

downloads, ringtones or physical 

phonorecords, with respect to the sound 

recordings embodied in permanent 

digital downloads or ringtones or 

physical phonorecords purchased from 

a qualifying seller as described in 

paragraph (1) of the definition of 

‘‘Purchased content locker service,’’ 

whereby the locker service enables the 

purchaser to engage in one or both of 

the qualifying activities identified in 

paragraph (2) of the definition of 

‘‘Purchased content locker service.’’ In 

addition, in the case of a locker service 

made available to end-user purchasers 

of physical phonorecords, the seller 

must permanently part with possession 

of the physical phonorecords. 

(1) A qualifying seller for purposes of 

this definition of ‘‘purchased content 

locker service’’ is the same entity 

operating such locker service, one of its 

affiliates or predecessors, or— 

(i) In the case of permanent digital 

downloads or ringtones, a seller having 

another legitimate connection to the 

locker service provider set forth in one 

or more written agreements (including 

that the locker service and permanent 

digital downloads or ringtones are 

offered through the same third party); or 

(ii) In the case of physical 

phonorecords, a seller having an 

agreement with— 

(A) The locker service provider 

whereby such parties establish an 

integrated offer that creates a consumer 

experience commensurate with having 

the same service both sell the physical 

phonorecord and offer the locker 

service; or 

(B) A service provider that also has an 

agreement with the entity offering the 

locker service, where pursuant to those 

agreements the service provider has 

established an integrated offer that 

creates a consumer experience 

commensurate with having the same 

service both sell the physical 

phonorecord and offer the locker 

service. 

(2) Qualifying activity for purposes of 

this definition of ‘‘purchased content 


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locker service’’ is enabling the 

purchaser to— 

(i) Receive one or more additional 

phonorecords of such purchased sound 

recordings of musical works in the form 

of permanent digital downloads or 

ringtones at the time of purchase, or 

(ii) Subsequently access such 

purchased sound recordings of musical 

works in the form of interactive streams, 

additional permanent digital 

downloads, restricted downloads or 

ringtones. 

Record company shall have the 

meaning given in § 385.11. 

Restricted download means a digital 

phonorecord delivery distributed in the 

form of a download that may not be 

retained and played on a permanent 

basis. The term restricted download 

includes a limited download. 

Ringtone shall have the meaning 

given in § 385.2. 

Service provider shall have the 

meaning given in § 385.11, except that 

for purposes of this subpart references 

in the definition of ‘‘Service provider’’ 

in § 385.11 to licensed activity and 

service revenue shall mean licensed 

subpart C of this part activity and 

subpart C of this part service revenue, 

respectively. 

Subpart C of this part offering means 

a service provider’s offering of licensed 

subpart C of this part activity that is 

subject to a particular rate set forth in 

§ 385.23(a) (e.g., a particular 

subscription plan available through the 

service provider). 

Subpart C of this part relevant page 

means a page (including a Web page, 

screen or display) from which licensed 

subpart C of this part activity offered by 

a service provider is directly available to 

end users, but only where the offering 

of licensed subpart C of this part activity 

and content that directly relates to the 

offering of licensed subpart C of this 

part activity (e.g., an image of the artist 

or artwork closely associated with such 

offering, artist or album information, 

reviews of such offering, credits and 

music player controls) comprises 75% 

or more of the space on that page, 

excluding any space occupied by 

advertising. A licensed subpart C of this 

part activity is directly available to end 

users from a page if sound recordings of 

musical works can be accessed by end 

users for licensed subpart C of this part 

activity from such page (in most cases 

this will be the page where the 

transmission takes place). 

Subpart C of this part service revenue. 

(1) Subject to paragraphs (2) through (6) 

of the definition of ‘‘Subpart C of this 

part service revenue,’’ and subject to 

GAAP, subpart C of this part service 

revenue shall mean the following: 

(i) All revenue recognized by the 

service provider from end users from 

the provision of licensed subpart C of 

this part activity; 

(ii) All revenue recognized by the 

service provider by way of sponsorship 

and commissions as a result of the 

inclusion of third-party ‘‘in-stream’’ or 

‘‘in-download’’ advertising as part of 

licensed subpart C of this part activity 

(i.e., advertising placed immediately at 

the start, end or during the actual 

delivery, by way of transmissions of a 

musical work that constitute licensed 

subpart C of this part activity); and 

(iii) All revenue recognized by the 

service provider, including by way of 

sponsorship and commissions, as a 

result of the placement of third-party 

advertising on a subpart C of this part 

relevant page of the service or on any 

page that directly follows such subpart 

C of this part relevant page leading up 

to and including the transmission of a 

musical work that constitutes licensed 

subpart C of this part activity; provided 

that, in the case where more than one 

service is actually available to end users 

from a subpart C of this part relevant 

page, any advertising revenue shall be 

allocated between such services on the 

basis of the relative amounts of the page 

they occupy. 

(2) In each of the cases identified in 

paragraph (1) of the definition of 

‘‘Subpart C of this part service revenue,’’ 

such revenue shall, for the avoidance of 

doubt, 

(i) Include any such revenue 

recognized by the service provider, or if 

not recognized by the service provider, 

by any associate, affiliate, agent or 

representative of such service provider 

in lieu of its being recognized by the 

service provider; 

(ii) Include the value of any barter or 

other nonmonetary consideration; 

(iii) Not be reduced by credit card 

commissions or similar payment 

process charges; and 

(iv) Except as expressly set forth in 

this subpart, not be subject to any other 

deduction or set-off other than refunds 

to end users for licensed subpart C of 

this part activity that they were unable 

to use due to technical faults in the 

licensed subpart C of this part activity 

or other bona fide refunds or credits 

issued to end users in the ordinary 

course of business. 

(3) In each of the cases identified in 

paragraph (1) of the definition of 

‘‘Subpart C of this part service revenue,’’ 

such revenue shall, for the avoidance of 

doubt, exclude revenue derived solely 

in connection with services and 

activities other than licensed subpart C 

of this part activity, provided that 

advertising or sponsorship revenue shall 

be treated as provided in paragraphs (2) 

and (4) of the definition of ‘‘Subpart C 

of this part service revenue.’’ By way of 

example, the following kinds of revenue 

shall be excluded: 

(i) Revenue derived from non-music 

voice, content and text services; 

(ii) Revenue derived from other nonmusic products and services (including 

search services, sponsored searches and 

click-through commissions); 

(iii) Revenue generated from the sale 

of actual locker service storage space to 

the extent that such storage space is sold 

at a separate retail price; 

(iv) In the case of a locker service, 

revenue derived from the sale of 

permanent digital downloads or 

ringtones; and 

(v) Revenue derived from other music 

or music-related products and services 

that are not or do not include licensed 

subpart C of this part activity. 

(4) For purposes of paragraph (1) of 

the definition of ‘‘Subpart C of this part 

service revenue,’’ advertising or 

sponsorship revenue shall be reduced 

by the actual cost of obtaining such 

revenue, not to exceed 15%. 

(5) In the case of a mixed service 

bundle, the revenue deemed to be 

recognized from end users for the 

service for the purpose of the definition 

in paragraph (1) of the definition of 

‘‘Subpart C of this part service revenue’’ 

shall be the greater of— 

(i) The revenue recognized from end 

users for the mixed service bundle less 

the standalone published price for end 

users for each of the non-music product 

or non-music service components of the 

bundle; provided that, if there is no 

such standalone published price for a 

non-music component of the bundle, 

then the average standalone published 

price for end users for the most closely 

comparable non-music product or nonmusic service in the U.S. shall be used 

or, if more than one such comparable 

exists, the average of such standalone 

prices for such comparables shall be 

used; and 

(ii) Either— 

(A) In the case of a mixed service 

bundle that either has 750,000 

subscribers or other registered users, or 

is reasonably expected to have 750,000 

subscribers or other registered users 

within 1 year after commencement of 

the mixed service bundle, 40% of the 

standalone published price of the 

licensed music component of the 

bundle (i.e., the permanent digital 

downloads, ringtones, locker service or 

limited offering); provided that, if there 

is no such standalone published price 

for the licensed music component of the 

bundle, then the average standalone 

published price for end users for the 


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29266 Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012 / Proposed Rules 

most closely comparable licensed music 

component in the U.S. shall be used or, 

if more than one such comparable 

exists, the average of such standalone 

prices for such comparables shall be 

used; and further provided that in any 

case in which royalties were paid based 

on this paragraph due to a reasonable 

expectation of reaching 750,000 

subscribers or other registered users 

within 1 year after commencement of 

the mixed service bundle and that does 

not actually happen, applicable 

payments shall, in the accounting 

period next following the end of such 1- 

year period, retroactively be adjusted as 

if paragraph (5)(ii)(B) of the definition of 

‘‘Subpart C of this part service revenue’’ 

applied; or 

(B) Otherwise, 50% of the standalone 

published price of the licensed music 

component of the bundle (i.e., the 

permanent digital downloads, ringtones, 

locker service or limited offering); 

provided that, if there is no such 

standalone published price for the 

licensed music component of the 

bundle, then the average standalone 

published price for end users for the 

most closely comparable licensed music 

component in the U.S. shall be used or, 

if more than one such comparable 

exists, the average of such standalone 

prices for such comparables shall be 

used. 

(6) In the case of a music bundle 

containing a physical phonorecord, 

where the music bundle is distributed 

by a record company for resale and the 

record company is the compulsory 

licensee— 

(i) Service revenue shall be 150% of 

the record company’s wholesale 

revenue from the music bundle; and 

(ii) The times at which distribution 

and revenue recognition are deemed to 

occur shall be in accordance with 

§ 201.19 of this title. 

Subscription service means a digital 

music service for which end users are 

required to pay a fee to access the 

service for defined subscription periods 

of 3 years or less (in contrast to, for 

example, a service where the basic 

charge to users is a payment per 

download or per play), whether such 

payment is made for access to the 

service on a standalone basis or as part 

of a bundle with one or more other 

products or services, and including any 

use of such a service on a trial basis 

without charge as described in § 385.24. 

§ 385.22 Calculation of royalty payments 

in general. 

(a) Applicable royalty. Licensees that 

make or authorize licensed subpart C of 

this part activity pursuant to 17 U.S.C. 

115 shall pay royalties therefor that are 

calculated as provided in this section, 

subject to the royalty rates and 

subscriber-based royalty floors for 

specific types of services provided in 

§ 385.23, except as provided for certain 

free trial periods in § 385.24. 

(b) Rate calculation methodology. 

Royalty payments for licensed subpart C 

of this part activity shall be calculated 

as provided in paragraph (b) of this 

section. If a service provides different 

subpart C of this part offerings, royalties 

must be separately calculated with 

respect to each such subpart C of this 

part offering taking into consideration 

service revenue and expenses associated 

with such offering. Uses subject to the 

free trial royalty rate shall be excluded 

from the calculation of royalties due, as 

further described in this section and the 

following § 385.23. 

(1) Step 1: Calculate the All-In 

Royalty for the Subpart C of this Part 

Offering. For each accounting period, 

the all-in royalty for each subpart C of 

this part offering of the service provider 

is the greater of: 

(i) The applicable percentage of 

subpart C of this part service revenue 

associated with the relevant offering as 

set forth in § 385.23(a) (excluding any 

subpart C of this part service revenue 

derived solely from licensed subpart C 

of this part activity uses subject to the 

free trial royalty rate), and 

(ii) The minimum specified in 

§ 385.23(a) for the subpart C of this part 

offering involved. 

(2) Step 2: Subtract applicable 

performance royalties to determine the 

payable royalty pool, which is the 

amount payable for the reproduction 

and distribution of all musical works 

used by the service provider by virtue 

of its licensed subpart C of this part 

activity for a particular subpart C of this 

part offering during the accounting 

period. From the amount determined in 

step 1 in paragraph (b)(1) of this section, 

for each subpart C of this part offering 

of the service provider, subtract the total 

amount of royalties for public 

performance of musical works that has 

been or will be expensed pursuant to 

public performance licenses in 

connection with uses of musical works 

through such subpart C of this part 

offering during the accounting period 

that constitute licensed subpart C of this 

part activity (other than licensed 

subpart C of this part activity subject to 

the free trial royalty rate), or in 

connection with previewing of such 

subpart C of this part offering during the 

accounting period. Although this 

amount may be the total of the 

payments with respect to the service for 

that subpart C of this part offering for 

the accounting period, it will be less 

than the total of such public 

performance payments if the service is 

also engaging in public performance of 

musical works that does not constitute 

licensed subpart C of this part activity, 

or previewing of such licensed subpart 

C of this part activity. In the case where 

the service is also engaging in the public 

performance of musical works that does 

not constitute licensed subpart C of this 

part activity, the amount to be 

subtracted for public performance 

payments shall be the amount of such 

payments allocable to licensed subpart 

C of this part activity uses (other than 

free trial royalty rate uses), and 

previewing of such uses, in connection 

with the relevant subpart C of this part 

offering, as determined in relation to all 

uses of musical works for which the 

public performance payments are made 

for the accounting period. Such 

allocation shall be made on the basis of 

plays of musical works or, where perplay information is unavailable due to 

bona fide technical limitations as 

described in step 3 in paragraph (b)(3) 

of this section, using the same 

alternative methodology as provided in 

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

(3) Step 3: Calculate the Per-Work 

Royalty Allocation for Each Relevant 

Work. This is the amount payable for 

the reproduction and distribution of 

each musical work used by the service 

provider by virtue of its licensed 

subpart C of this part activity through a 

particular subpart C of this part offering 

during the accounting period. To 

determine this amount, the result 

determined in step 2 in paragraph (b)(2) 

of this section must be allocated to each 

musical work used through the subpart 

C of this part offering. The allocation 

shall be accomplished as follows: 

(i) In the case of limited offerings (but 

not limited offerings that are part of 

mixed service bundles), by dividing the 

payable royalty pool determined in step 

2 in paragraph (b)(2) of this section for 

such offering by the total number of 

plays of all musical works through such 

offering during the accounting period 

(other than free trial royalty rate plays) 

to yield a per-play allocation, and 

multiplying that result by the number of 

plays of each musical work (other than 

free trial royalty rate plays) through the 

offering during the accounting period. 

For purposes of determining the perwork royalty allocation in all 

calculations under this step 3 only (i.e., 

after the payable royalty pool has been 

determined), for sound recordings of 

musical works with a playing time of 

over 5 minutes, each play shall be 

counted as provided in paragraph (c) of 

this section. Notwithstanding the 

foregoing, if the service provider is not 


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capable of tracking play information due 

to bona fide limitations of the available 

technology for services of that nature or 

of devices usable with the service, the 

per-work royalty allocation may instead 

be accomplished in a manner consistent 

with the methodology used by the 

service provider for making royalty 

payment allocations for the use of 

individual sound recordings. 

(ii) In the case of mixed service 

bundles and locker services, by— 

(A) Determining a constructive 

number of plays of all licensed musical 

works that is the sum of the total 

number of interactive streams of all 

licensed musical works made through 

such offering during the accounting 

period (other than free trial royalty rate 

interactive streams), plus the total 

number of plays of restricted downloads 

of all licensed musical works made 

through such offering during the 

accounting period as to which the 

service provider tracks plays (other than 

free trial royalty rate restricted 

downloads), plus 5 times the total 

number of downloads of all licensed 

musical works made through such 

offering during the accounting period as 

to which the service provider does not 

track plays (other than free trial royalty 

rate downloads); 

(B) Determining a constructive perplay allocation that is the payable 

royalty pool determined in step 2 of 

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

offering divided by the constructive 

number of plays of all licensed musical 

works determined in paragraph 

(b)(3)(ii)(A) of this section; 

(C) For each licensed musical work, 

determining a constructive number of 

plays of that musical work that is the 

sum of the total number of interactive 

streams of such licensed musical work 

made through such offering during the 

accounting period (other than free trial 

royalty rate interactive streams), plus 

the total number of plays of restricted 

downloads of such licensed musical 

work made through such offering during 

the accounting period as to which the 

service provider tracks plays (other than 

free trial royalty rate restricted 

downloads), plus 5 times the total 

number of downloads of such licensed 

musical work made through such 

offering during the accounting period as 

to which the service provider does not 

track plays (other than free trial royalty 

rate downloads); and 

(D) For each licensed musical work, 

determining the per-work royalty 

allocation by multiplying the 

constructive per-play allocation 

determined in paragraph (b)(3)(ii)(B) of 

this section by the constructive number 

of plays of that musical work 

determined in paragraph (b)(3)(ii)(C) of 

this section. 

(E) Notwithstanding the foregoing, if a 

service provider offers both a paid 

locker service and a purchased content 

locker service, and with respect to the 

purchased content locker service there 

is no subpart C of this part service 

revenue and the applicable 

subminimum is zero dollars, then the 

service provider shall be permitted to 

include within the calculation of 

constructive plays under paragraphs 

(b)(3)(ii)(A) and (b)(3)(ii)(C) of this 

section for the paid locker service, the 

licensed subpart C of this part activity 

made through the purchased content 

locker service (i.e., the total number of 

interactive streams of all licensed 

musical works made through the 

purchased content locker service during 

the accounting period (other than free 

trial royalty rate interactive streams), 

plus the total number of plays of 

restricted downloads of all licensed 

musical works made through the 

purchased content locker service during 

the accounting period as to which the 

service provider tracks plays (other than 

free trial royalty rate restricted 

downloads), plus 5 times the total 

number of downloads of all licensed 

musical works made through the 

purchased content locker service during 

the accounting period as to which the 

service provider does not track plays 

(other than free trial royalty rate 

downloads)); provided that the relevant 

licensed subpart C of this part activity 

made through the purchased content 

locker service is similarly included 

within the play calculation for the paid 

locker service for the corresponding 

sound recording rights. 

(iii) In the case of music bundles, by— 

(A) Allocating the payable royalty 

pool determined in step 2 of paragraph 

(b)(2) of this section to separate pools 

for each type of product configuration 

included in the music bundle (e.g., CD, 

permanent digital download, ringtone) 

in accordance with the ratios that the 

standalone published prices of the 

products that are included in the music 

bundle bear to each other; provided 

that, if there is no such standalone 

published price for such a product, then 

the average standalone published price 

for end users for the most closely 

comparable product in the U.S. shall be 

used or, if more than one such 

comparable exists, the average of such 

standalone prices for such comparables 

shall be used; and 

(B) Allocating the product 

configuration pools determined in 

paragraph (b)(3)(iii)(A) of this section to 

individual musical works by dividing 

each such pool by the total number of 

sound recordings of musical works 

included in products of that 

configuration in the music bundle. 

(c) Overtime adjustment. For purposes 

of the calculations in step 3 of 

paragraph (b)(3)(i) of this section only, 

for sound recordings of musical works 

with a playing time of over 5 minutes, 

adjust the number of plays as follows: 

(1) 5:01 to 6:00 minutes—Each play = 

1.2 plays 

(2) 6:01 to 7:00 minutes—Each play = 

1.4 plays 

(3) 7:01 to 8:00 minutes—Each play = 

1.6 plays 

(4) 8:01 to 9:00 minutes—Each play = 

1.8 plays 

(5) 9:01 to 10:00 minutes—Each play = 

2.0 plays 

(6) For playing times of greater than 

10 minutes, continue to add .2 plays for 

each additional minute or fraction 

thereof. 

(d) Accounting. The calculations 

required by paragraph (b) of this section 

shall be made in good faith and on the 

basis of the best knowledge, information 

and belief of the licensee at the time 

payment is due, and subject to the 

additional accounting and certification 

requirements of 17 U.S.C. 115(c)(5) and 

§ 201.19 of this title. Without limitation, 

a licensee’s statements of account shall 

set forth each step of its calculations 

with sufficient information to allow the 

copyright owner to assess the accuracy 

and manner in which the licensee 

determined the payable royalty pool and 

per-work allocations (including 

information sufficient to demonstrate 

whether and how a minimum royalty 

payment pursuant to § 385.23 does or 

does not apply) and, for each subpart C 

of this part offering reported, also 

indicate the type of licensed subpart C 

of this part activity involved and the 

number of plays or downloads, as 

applicable, of each musical work 

(including an indication of any overtime 

adjustment applied, if applicable) that is 

the basis of the per-work royalty 

allocation being paid. 

(e) Confidentiality. A licensee’s 

statements of account, including any 

and all information provided a licensee 

with respect to the computation of a 

subminimum, shall be maintained in 

confidence of any copyright owner, 

authorized representative or agent that 

receives it, and shall solely be used by 

the copyright owner, authorized 

representative or agent for purposes of 

reviewing the amounts paid by the 

licensee and verifying the accuracy of 

any such payments, and only those 

employees of the copyright owner, 

authorized representative or agent who 

need to have access to such information 


srobinson on DSK4SPTVN1PROD with PROPOSALS
29268 Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012 / Proposed Rules 

for such purposes will be given access 

to such information; provided that in no 

event shall access be granted to any 

individual who, on behalf of a record 

company, is directly involved in 

negotiating or approving royalty rates in 

transactions authorizing third party 

services to undertake licensed activity 

with respect to sound recordings. A 

licensee’s statements of account, 

including any and all information 

provided by a licensee with respect to 

the computation of a subminimum, 

shall not be used for any other purpose, 

and shall not be disclosed to or used by 

or for any record company affiliate or 

any third party, including any thirdparty record company. 

§ 385.23 Royalty rates and subscriberbased royalty floors for specific types of 

services. 

(a) In general. The following royalty 

rates and subscriber-based royalty floors 

shall apply to the following types of 

licensed subpart C of this part activity: 

(1) Mixed service bundle. In the case 

of a mixed service bundle, the 

percentage of subpart C of this part 

service revenue applicable in step 1 of 

§ 385.22(b)(1)(i) is 11.35%. The 

minimum for use in step 1 of 

§ 385.22(b)(1)(ii) is the appropriate 

subminimum as described in paragraph 

(b) of this section for the accounting 

period, where the all-in percentage 

applicable to § 385.23(b)(1) is 17.36%, 

and the sound recording-only 

percentage applicable to § 385.23(b)(2) 

is 21%. 

(2) Music bundle. In the case of a 

music bundle, the percentage of subpart 

C of this part service revenue applicable 

in step 1 of § 385.22(b)(1)(i) is 11.35%. 

The minimum for use in step 1 of 

§ 385.22(b)(1)(ii) is the appropriate 

subminimum as described in paragraph 

(b) of this section for the accounting 

period, where the all-in percentage 

applicable to § 385.23(b)(1) and (3) is 

17.36%, and the sound recording-only 

percentage applicable to § 385.23(b)(2) 

is 21%. 

(3) Limited offering. In the case of a 

limited offering, the percentage of 

subpart C of this part service revenue 

applicable in step 1 of § 385.22(b)(1)(i) 

is 10.5%. The minimum for use in step 

1 of § 385.22(b)(1)(ii) is the greater of— 

(i) The appropriate subminimum as 

described in paragraph (b) of this 

section for the accounting period, where 

the all-in percentage applicable to 

§ 385.23(b)(1) is 17.36%, and the sound 

recording-only percentage applicable to 

§ 385.23(b)(2) is 21%; and 

(ii) The aggregate amount of 18 cents 

per subscriber per month. 

(4) Paid locker service. In the case of 

a paid locker service, the percentage of 

subpart C of this part service revenue 

applicable in step 1 of § 385.22(b)(1)(i) 

is 12%. The minimum for use in step 1 

of § 385.22(b)(1)(ii) is the greater of— 

(i) The appropriate subminimum as 

described in paragraph (b) of this 

section for the accounting period, where 

the all-in percentage applicable to 

§ 385.23(b)(1) is 17.11%, and the sound 

recording-only percentage applicable to 

§ 385.23(b)(2) is 20.65%; and 

(ii) The aggregate amount of 17 cents 

per subscriber per month. 

(5) Purchased content locker service. 

In the case of a purchased content 

locker service, the percentage of subpart 

C of this part service revenue applicable 

in step 1 of § 385.22(b)(1)(i) is 12%. For 

the avoidance of doubt, paragraph (1)(i) 

of the definition of ‘‘Subpart C of this 

part service revenue’’ shall not apply. 

The minimum for use in step 1 in 

§ 385.22(b)(1)(ii) is the appropriate 

subminimum as described in paragraph 

(b) of this section for the accounting 

period, where the all-in percentage 

applicable to § 385.23(b)(1) is 18%, and 

the sound recording-only percentage 

applicable to § 385.23(b)(2) is 22%, 

except that for purposes of paragraph (b) 

of this section the applicable 

consideration expensed by the service 

for the relevant rights shall consist only 

of applicable consideration expensed by 

the service, if any, that is incremental to 

the applicable consideration expensed 

for the rights to make the relevant 

permanent digital downloads and 

ringtones. 

(b) Computation of subminima. For 

purposes of paragraph (a) of this section, 

the subminimum for an accounting 

period is the aggregate of the following 

with respect to all sound recordings of 

musical works used in the relevant 

subpart C of this part offering of the 

service provider during the accounting 

period— 

(1) Except as provided in paragraph 

(b)(3) of this section, in cases in which 

the record company is the licensee 

under 17 U.S.C. 115 and the record 

company has granted the rights to 

engage in licensed subpart C of this part 

activity with respect to a sound 

recording through the third-party 

service together with the right to 

reproduce and distribute the musical 

work embodied therein, the appropriate 

all-in percentage from paragraph (a) of 

this section of the total amount 

expensed by the service provider or any 

of its affiliates in accordance with 

GAAP for such rights for the accounting 

period, which amount shall equal the 

applicable consideration for such rights 

at the time such applicable 

consideration is properly recognized as 

an expense under GAAP. 

(2) In cases in which the record 

company is not the licensee under 17 

U.S.C. 115 and the record company has 

granted the rights to engage in licensed 

subpart C of this part activity with 

respect to a sound recording through the 

third-party service without the right to 

reproduce and distribute the musical 

work embodied therein, the appropriate 

sound recording-only percentage from 

paragraph (a) of this section of the total 

amount expensed by the service 

provider or any of its affiliates in 

accordance with GAAP for such rights 

for the accounting period, which 

amount shall equal the applicable 

consideration for such rights at the time 

such applicable consideration is 

properly recognized as an expense 

under GAAP. 

(3) In the case of a music bundle 

containing a physical phonorecord, 

where the music bundle is distributed 

by a record company for resale and the 

record company is the compulsory 

licensee, the appropriate all-in 

percentage from paragraph (a) of this 

section of the record company’s total 

wholesale revenue from the music 

bundle in accordance with GAAP for 

the accounting period, which amount 

shall equal the applicable consideration 

for such music bundle at the time such 

applicable consideration is properly 

recognized as revenue under GAAP, 

subject to the provisions of § 201.19 of 

this title concerning the times at which 

distribution and revenue recognition are 

deemed to occur. 

(4) If a record company providing 

sound recording rights to the service 

provider for a licensed subpart C of this 

part activity— 

(i) Recognizes revenue (in accordance 

with GAAP, and including for the 

avoidance of doubt all applicable 

consideration with respect to such 

rights for the accounting period, 

regardless of the form or timing of 

payment) from a person or entity other 

than the service provider providing the 

licensed subpart C of this part activity 

and its affiliates, and 

(ii) Such revenue is received, in the 

context of the transactions involved, as 

applicable consideration for such rights, 

(iii) Then such revenue shall be added 

to the amounts expensed by the service 

provider solely for purposes of 

paragraph (b)(1) or (2) of this section, as 

applicable, if not already included in 

such expensed amounts. Where the 

service provider is the licensee, if the 

service provider provides the record 

company all information necessary for 

the record company to determine 

whether additional royalties are payable 


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by the service provider hereunder as a 

result of revenue recognized from a 

person or entity other than the service 

provider as described in the 

immediately preceding sentence, then 

the record company shall provide such 

further information as necessary for the 

service provider to calculate the 

additional royalties and indemnify the 

service provider for such additional 

royalties. The sole obligation of the 

record company shall be to pay the 

licensee such additional royalties if 

actually payable as royalties hereunder; 

provided, however, that this shall not 

affect any otherwise existing right or 

remedy of the copyright owner nor 

diminish the licensee’s obligations to 

the copyright owner. 

(c) Computation of subscriber-based 

royalty rates. For purposes of 

paragraphs (a)(3) and (4) of this section, 

to determine the subscriber-based 

minimum applicable to any particular 

subpart C of this part offering, the total 

number of subscriber-months for the 

accounting period shall be calculated, 

taking into account all end users who 

were subscribers for complete calendar 

months, prorating in the case of end 

users who were subscribers for only part 

of a calendar month, and deducting on 

a prorated basis for end users covered 

by a free trial period subject to the free 

trial royalty rate as described in 

§ 385.24. The product of the total 

number of subscriber-months for the 

accounting period and the specified 

number of cents per subscriber shall be 

used as the subscriber-based component 

of the minimum for the accounting 

period. 

§ 385.24 Free trial periods. 

(a) General provisions. This section 

establishes a royalty rate of zero in the 

case of certain free trial periods for 

mixed service bundles, paid locker 

services and limited offerings under a 

license pursuant to 17 U.S.C. 115. 

Subject to the requirements of 17 U.S.C. 

115 and the additional provisions of 

paragraphs (b) through (e) of this 

section, the free trial royalty rate shall 

apply to a musical work when a record 

company transmits or authorizes the 

transmission, as part of a mixed service 

bundle, paid locker service or limited 

offering, of a sound recording that 

embodies such musical work, only if— 

(1) The primary purpose of the record 

company in providing or authorizing 

the free trial period is to promote the 

applicable subpart C of this part 

offering; 

(2) No applicable consideration for 

making or authorizing the transmissions 

is received by the record company, or 

any other person or entity acting on 

behalf of or in lieu of the record 

company, except for in-kind 

promotional consideration used to 

promote the sale or paid use of sound 

recordings or audiovisual works 

embodying musical works or the paid 

use of music services through which 

sound recordings or audiovisual works 

embodying musical works are available; 

(3) The free trial period does not 

exceed 30 consecutive days per 

subscriber per two-year period; 

(4) In connection with authorizing the 

transmissions, the record company has 

obtained from the service provider it 

authorizes a written representation 

that— 

(i) The service provider agrees to 

maintain for a period of no less than 5 

years from the end of each relevant 

accounting period complete and 

accurate records of the relevant 

authorization, and identifying each 

sound recording of a musical work 

made available through the free trial 

period, the licensed subpart C of this 

part activity involved, and the number 

of plays or downloads, as applicable, of 

such recording; 

(ii) The service is in all material 

respects operating with appropriate 

license authority with respect to the 

musical works it is using; and 

(iii) The representation is signed by a 

person authorized to make the 

representation on behalf of the service 

provider; 

(5) Upon receipt by the record 

company of written notice from the 

copyright owner of a musical work or 

agent of the copyright owner stating in 

good faith that a particular service is in 

a material manner operating without 

appropriate license authority from such 

copyright owner, the record company 

shall within 5 business days withdraw 

by written notice its authorization of 

such uses of such copyright owner’s 

musical works under the free trial 

royalty rate by that service; 

(6) The free trial period is offered free 

of any charge to the end user; and 

(7) End users are periodically offered 

an opportunity to subscribe to the 

service during such free trial period. 

(b) Recordkeeping by record 

companies. To rely upon the free trial 

royalty rate for a free trial period, a 

record company making or authorizing 

the free trial period shall keep complete 

and accurate contemporaneous written 

records of the contractual terms that 

bear upon the free trial period; and 

further provided that, if the record 

company itself is conducting the free 

trial period, it shall also maintain any 

additional records described in 

paragraph (a)(4)(i) of this section. The 

records required by this paragraph (b) 

shall be maintained for no less time 

than the record company maintains 

records of usage of royalty-bearing uses 

involving the same type of licensed 

subpart C of this part activity in the 

ordinary course of business, but in no 

event for less than 5 years from the 

conclusion of the licensed subpart C of 

this part activity to which they pertain. 

If the copyright owner of a musical work 

or its agent requests a copy of the 

information to be maintained under this 

paragraph (b) with respect to a specific 

free trial period, the record company 

shall provide complete and accurate 

documentation within 10 business days, 

except for any information required 

under paragraph (a)(4)(i) of this section, 

which shall be provided within 20 

business days, and provided that if the 

copyright owner or agent requests 

information concerning a large volume 

of free trial periods or sound recordings, 

the record company shall have a 

reasonable time, in view of the amount 

of information requested, to respond to 

any request of such copyright owner or 

agent. If the record company does not 

provide required information within the 

required time, and upon receipt of 

written notice citing such failure does 

not provide such information within a 

further 10 business days, the uses will 

be considered not to be subject to the 

free trial royalty rate and the record 

company (but not any third-party 

service it has authorized) shall be liable 

for any payment due for such uses; 

provided, however, that all rights and 

remedies of the copyright owner with 

respect to unauthorized uses shall be 

preserved. 

(c) Recordkeeping by services. If the 

copyright owner of a musical work or its 

agent requests a copy of the information 

to be maintained under paragraph 

(a)(4)(i) of this section by a service 

authorized by a record company with 

respect to a specific promotion, the 

service provider shall provide complete 

and accurate documentation within 20 

business days, provided that if the 

copyright owner or agent requests 

information concerning a large volume 

of free trial periods or sound recordings, 

the service provider shall have a 

reasonable time, in view of the amount 

of information requested, to respond to 

any request of such copyright owner or 

agent. If the service provider does not 

provide required information within the 

required time, and upon receipt of 

written notice citing such failure does 

not provide such information within a 

further 10 business days, the uses will 

be considered not to be subject to the 

free trial royalty rate and the service 

provider (but not the record company) 


srobinson on DSK4SPTVN1PROD with PROPOSALS
29270 Federal Register / Vol. 77, No. 96 / Thursday, May 17, 2012 / Proposed Rules 

will be liable for any payment due for 

such uses; provided, however, that all 

rights and remedies of the copyright 

owner with respect to unauthorized 

uses shall be preserved. 

(d) Interpretation. The free trial 

royalty rate is exclusively for audio-only 

licensed subpart C of this part activity 

involving musical works subject to 

licensing under 17 U.S.C. 115. The free 

trial royalty rate does not apply to any 

other use under 17 U.S.C. 115; nor does 

it apply to public performances, 

audiovisual works, lyrics or other uses 

outside the scope of 17 U.S.C. 115. 

Without limitation, uses subject to 

licensing under 17 U.S.C. 115 that do 

not qualify for the free trial royalty rate 

(including without limitation licensed 

subpart C of this part activity beyond 

the time limitations applicable to the 

free trial royalty rate) require payment 

of applicable royalties. This section is 

based on an understanding of industry 

practices and market conditions at the 

time of its development, among other 

things. The terms of this section shall be 

subject to de novo review and 

consideration (or elimination altogether) 

in future proceedings before the 

Copyright Royalty Judges. Nothing in 

this section shall be interpreted or 

construed in such a manner as to nullify 

or diminish any limitation, requirement 

or obligation of 17 U.S.C. 115 or other 

protection for musical works afforded 

by the Copyright Act, 17 U.S.C. 101 et 

seq. 

§ 385.25 Reproduction and distribution 

rights covered. 

A compulsory license under 17 U.S.C. 

115 extends to all reproduction and 

distribution rights that may be necessary 

for the provision of the licensed subpart 

C of this part activity, solely for the 

purpose of providing such licensed 

subpart C of this part activity (and no 

other purpose). 

§ 385.26 Effect of rates. 

In any future proceedings under 17 

U.S.C. 115(c)(3)(C) and (D), the royalty 

rates payable for a compulsory license 

shall be established de novo. 

Dated: May 10, 2012. 

Stanley C. Wisniewski, 

Copyright Royalty Judge. 

[FR Doc. 2012–11751 Filed 5–16–12; 8:45 am] 

BILLING CODE 1410–72–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R08–OAR–2011–0851, FRL–9673–6] 

Approval and Promulgation of 

Implementation Plans; State of 

Montana; State Implementation Plan 

and Regional Haze Federal 

Implementation Plan 

AGENCY: Environmental Protection 

Agency. 

ACTION: Proposed rule; corrections. 

SUMMARY: EPA is correcting a proposed 

rule that appeared in the Federal 

Register on April 20, 2012. The 

proposed rule includes the proposed 

Federal Implementation Plan (FIP) to 

address regional haze in the State of 

Montana and the proposed approval of 

revisions to the Montana SIP submitted 

by the State of Montana through the 

Montana Department of Environmental 

Quality on February 17, 2012. We are 

correcting some typographical errors 

and clarifying some information with 

this document. 

FOR FURTHER INFORMATION CONTACT: 

Vanessa Hinkle, EPA, Region 8, (303) 

312–6561. 

SUPPLEMENTARY INFORMATION: 

Throughout this document, wherever 

‘‘we’’ or ‘‘our’’ is used it means the EPA. 

On April 20, 2012, EPA published the 

proposed rule titled ‘‘Approval and 

Promulgation of Implementation Plans; 

State of Montana; State Implementation 

Plan and Regional Haze Federal 

Implementation Plan’’ (77 FR 23988). 

See docket number EPA–R08–OAR– 

2011–0851. The following corrections 

are made to the proposed rule: 

1. On page 23992, Footnote 7 is 

amended to read as follows: ‘‘Guidance 

for Estimating Natural Visibility 

Conditions Under the Regional Haze 

Rule, September 2003, EPA–454/B–03– 

005, available at http://www.epa.gov/

ttncaaa1/t1/memoranda/rh_envcurhr_

gd.pdf, (hereinafter referred to as ‘‘our 

2003 Natural Visibility Guidance’’); and 

Guidance for Tracking Progress Under 

the Regional Haze Rule, (September 

2003, EPA–454/B–03–004, available at 

http://www.epa.gov/ttncaaa1/t1/

memoranda/rh_tpurhr_gd.pdf, 

(hereinafter referred to as our ‘‘2003 

Tracking Progress Guidance’’).’’ 

2. On page 24002, Footnote 27 is 

amended to read as follows: 

‘‘ ‘‘Modeling Protocol: Montana Regional 

Haze Federal Implementation Plan (FIP) 

Support’’, University of North Carolina, 

Contract EP–D–07–102, November 21, 

2011.’’ 

3. On page 24004, Footnote 40 is 

amended to read as follows: ‘‘Ash Grove 

Update March 2012 (Ash Grove’s letter 

indicates a mean of 14.4 lbs./ton clinker 

and a 99th percentile of 18.6 lb NOX/ton 

clinker. This is significantly greater than 

the 2006 emissions shown in Table 10 

for the Midlothian kilns.).’’ 

4. On pages 24013 and 24014, 

Footnote 75 is amended to read as 

follows: ‘‘BART analysis by Holcim for 

Trident Cement Plant, Three Forks, MT 

(‘‘Holcim Initial Response’’) (July 6, 

2007); Responses to EPA comments on 

BART analysis for Trident Cement Plant 

(‘‘Holcim 2008 Responses’’) (Jan. 25, 

2008); BART analysis by Holcim for low 

NOX burners for Trident Cement Plant 

(‘‘Holcim Additional Response, June 

2009’’) (June 9, 2009); Response to EPA 

letter regarding Confidential Business 

Information (CBI) claims on BART 

analysis for Trident Cement Plant 

(‘‘Holcim Additional Response, August 

2009’’) (Aug. 12, 2009); Response to 

EPA request for NOX and SO2 emissions 

data for 2008–2010 (‘‘Holcim 2011 

Response’’) (June 30, 2011); Response to 

EPA request for emissions and clinker 

production for Holcim pursuant to CAA 

section 114(a) (‘‘Holcim 2012 

Response’’) (Mar. 2, 2012).’’ 

5. On page 24014, in the first column, 

the first sentence of the second 

paragraph is amended to read, ‘‘We 

identified that the following previously 

described NOX control technologies are 

available: LNB, MKF, FGR, SNCR, and 

SCR.’’ 

6. On page 24018, in Table 52, the 

annual emissions reduction for fuel 

switching option 2 is amended to 31.1 

tpy, the remaining annual emissions for 

fuel switching option 2 is amended to 

19.1 tpy, the annual emissions 

reduction for fuel switching option 1 is 

amended to 16.1 tpy, and the remaining 

annual emissions for fuel switching 

option 1 is amended to 34.1 tpy. 

7. On page 24020, in Table 60, the 

emissions reductions from fuel 

switching option 1 are amended to 16.1 

tpy, the average cost effectiveness for 

fuel switching option 1 is amended to 

14,938 dollars per ton, the emissions 

reduction from fuel switching option 2 

is amended to 31.1 tpy, and the average 

cost effectiveness for fuel switching 

option 2 is amended to 21,211 dollars 

per ton. 

8. On page 24021, in Table 63, the 

average cost effectiveness for fuel 

switching option 2 is amended to 21,211 

dollars per ton, and the average cost 

effectiveness for fuel switching option 1 

is amended to 14,938 dollars per ton. 

9. On page 24023, Footnote 113 is 

amended to read as follows: ‘‘Baseline 

emissions were determined by averaging 


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