Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Rules and Regulations 1755 

10. Protection of Children 

We have analyzed this rule under 

Executive Order 13045, Protection of 

Children from Environmental Health 

Risks and Safety Risks. This rule is not 

an economically significant rule and 

does not create an environmental risk to 

health or risk to safety that may 

disproportionately affect children. 

11. Indian Tribal Governments 

This rule does not have tribal 

implications under Executive Order 

13175, Consultation and Coordination 

with Indian Tribal Governments, 

because it does not have a substantial 

direct effect on one or more Indian 

tribes, on the relationship between the 

Federal Government and Indian tribes, 

or on the distribution of power and 

responsibilities between the Federal 

Government and Indian tribes. 

12. Energy Effects 

This action is not a ‘‘significant 

energy action’’ under Executive Order 

13211, Actions Concerning Regulations 

That Significantly Affect Energy Supply, 

Distribution, or Use. 

13. Technical Standards 

This rule does not use technical 

standards. Therefore, we did not 

consider the use of voluntary consensus 

standards. 

14. Environment 

We have analyzed this rule under 

Department of Homeland Security 

Management Directive 023–01 and 

Commandant Instruction M16475.lD, 

which guide the Coast Guard in 

complying with the National 

Environmental Policy Act of 1969 

(NEPA)(42 U.S.C. 4321–4370f), and 

have determined that this action is one 

of a category of actions that do not 

individually or cumulatively have a 

significant effect on the human 

environment. This rule involves 

establishing a temporary security zone. 

This rule is categorically excluded from 

further review under paragraph 34(g) of 

Figure 2–1 of the Commandant 

Instruction. This rule involves 

establishing a temporary security zone. 

An environmental analysis checklist 

and a categorical exclusion 

determination are available in the 

docket where indicated under 

ADDRESSES. We seek any comments or 

information that may lead to the 

discovery of a significant environmental 

impact from this rule. 

List of Subjects in 33 CFR Part 165 

Harbors, Marine safety, Navigation 

(water), Reporting and recordkeeping 

requirements, Security measures, 

Waterways. 

For the reasons discussed in the 

preamble, the Coast Guard amends 33 

CFR part 165 as follows: 

PART 165—REGULATED NAVIGATION 

AREAS AND LIMITED ACCESS AREAS 

■ 1. The authority citation for part 165 

continues to read as follows: 

Authority: 33 U.S.C. 1231; 46 U.S.C. 

Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 

33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; 

Pub. L. 107–295, 116 Stat. 2064; Department 

of Homeland Security Delegation No. 0170.1. 

■ 2. Add § 165.T05–1067 to read as 

follows: 

§ 165.T05–1067 Security Zone, Potomac 

and Anacostia Rivers; Washington, DC. 

(a) Location. The following area is a 

security zone: 

(1) All waters of the Potomac River, 

from shoreline to shoreline, bounded on 

the north by the Francis Scott Key (U.S. 

Route 29) Bridge at mile 113.0, 

downstream to and bounded on the 

south between the Virginia shoreline 

and the District of Columbia shoreline 

along latitude 38°50′00′′;N, including 

the waters of the Georgetown Channel 

Tidal Basin; and 

(2) All waters of the Anacostia River, 

from shoreline to shoreline, bounded on 

the north by the 11th Street (I–295) 

Bridge at mile 2.1, downstream to and 

bounded on the south by its confluence 

with the Potomac River. All coordinates 

refer to datum NAD 1983. 

(b) Regulations. The general security 

zone regulations found in 33 CFR 

165.33 apply to the security zone 

created by this temporary section, 

§ 165.T05–1067. 

(1) All persons are required to comply 

with the general regulations governing 

security zones found in 33 CFR 165.33. 

(2) Entry into or remaining in this 

zone is prohibited unless authorized by 

the Coast Guard Captain of the Port 

Baltimore. Vessels already at berth, 

mooring, or anchor at the time the 

security zone is implemented do not 

have to depart the security zone. All 

vessels underway within this security 

zone at the time it is implemented are 

to depart the zone. 

(3) Persons desiring to transit the area 

of the security zone must first obtain 

authorization from the Captain of the 

Port Baltimore or his designated 

representative. To seek permission to 

transit the area, the Captain of the Port 

Baltimore and his designated 

representatives can be contacted at 

telephone number 410–576–2693 or on 

Marine Band Radio, VHF–FM channel 

16 (156.8 MHz). The Coast Guard 

vessels enforcing this section can be 

contacted on Marine Band Radio, VHF– 

FM channel 16 (156.8 MHz). Upon 

being hailed by a U.S. Coast Guard 

vessel, or other Federal, State, or local 

agency vessel, by siren, radio, flashing 

light, or other means, the operator of a 

vessel shall proceed as directed. If 

permission is granted, all persons and 

vessels must comply with the 

instructions of the Captain of the Port 

Baltimore or his designated 

representative and proceed at the 

minimum speed necessary to maintain a 

safe course while within the zone. 

(4) Enforcement. The U.S. Coast 

Guard may be assisted in the patrol and 

enforcement of the zone by Federal, 

State, and local agencies. 

(c) Definitions. As used in this 

section: 

Captain of the Port Baltimore means 

the Commander, U.S. Coast Guard 

Sector Baltimore, Maryland or any Coast 

Guard commissioned, warrant or petty 

officer who has been authorized by the 

Captain of the Port to act on his behalf. 

Designated representative means any 

Coast Guard commissioned, warrant, or 

petty officer who has been authorized 

by the Captain of the Port Baltimore to 

assist in enforcing the security zone 

described in paragraph (a) of this 

section. 

(d) Effective Period. This rule is 

effective from 4 p.m. on January 29, 

2013 until 2 a.m. on January 30, 2013. 

(e) Enforcement period. This section 

will be enforced from 4 p.m. on January 

29, 2013 until 2 a.m. on January 30, 

2013. 

Dated: December 16, 2012. 

Kevin C. Kiefer, 

Captain, U.S. Coast Guard, Captain of the 

Port Baltimore. 

[FR Doc. 2013–00217 Filed 1–8–13; 8:45 am] 

BILLING CODE 9110–04–P 

LIBRARY OF CONGRESS 

Copyright Office 

37 CFR Part 201 

[Docket No. 2010–3] 

Refunds Under the Cable Statutory 

License 

AGENCY: Copyright Office, Library of 

Congress. 

ACTION: Final rule. 

SUMMARY: The Copyright Office is 

amending its regulations to clarify its 

practices for providing refunds of cable 

royalties under the provisions of the 

Satellite Television Extension and 


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1756 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Rules and Regulations 

1Although the President signed STELA into law 

on May 27, 2010, the statute states that the date of 

enactment shall be deemed to be February 27, 2010. 

See Public Law 111–175, § 307(a), 124 Stat. 1257 

(May 27, 2010). 2The Office is aware of at least two situations 

where a cable operator initially calculated its 

royalty obligation using the subscriber group 

method, and then in response to an inquiry from 

the Licensing Division, changed its Statement of 

Account to calculate its royalties using the systemwide method. The operator then requested a refund 

for an overpayment that was unrelated to the issue 

of phantom signals. The Office issued a refund in 

both cases, because the amount paid on the initial 

Statement of Account exceeded the amount due for 

the phantom signals. 

3Refund requests may also originate with the 

cable system. The Office is aware of at least one 

situation where a cable operator initiated and 

submitted a timely formal amendment to its initial 

2009/2 Statement of Account requesting a refund 

before the Statement was examined by the 

Licensing Division. However, in this case, the 

Licensing Division is unable to ascertain whether a 

refund is due because the operator used the 

subscriber group methodology in its initial and its 

amended filing and, as a result, the extent of the 

royalty fees that the cable operator owed for the 

system-wide carriage of all signals is unclear. 

Localism Act of 2010 (‘‘STELA’’). A 

cable operator must pay royalties to and 

file Statements of Account with the 

Office every six months in order to use 

the statutory license that allows for the 

retransmission of over-the-air broadcast 

signals under 17 U.S.C. 111. STELA 

allows a cable operator to calculate its 

royalty obligation for the carriage of 

distant signals on a community-bycommunity basis for accounting periods 

beginning on or after January 1, 2010, 

instead of calculating its royalty 

obligation based on the system as a 

whole. STELA also states that a cable 

operator shall not be subject to an 

infringement action if it used the 

subscriber group methodology to 

calculate its royalty obligation in a 

Statement filed prior to the effective 

date of STELA. Although a cable 

operator cannot be held liable for using 

the subscriber group methodology, the 

regulation clarifies that a cable 

operator’s obligation to pay for the 

carriage of distant signals prior to the 

effective date of STELA was determined 

on a system-wide basis. Therefore, 

refunds for an overpayment of royalty 

fees on a Statement filed prior to the 

effective date of STELA will be made 

only when a cable operator has satisfied 

its outstanding royalty obligations (if 

any), including the obligation to pay for 

the carriage of each distant signal on a 

system-wide basis. 

DATES: Effective Date: February 8, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Tanya Sandros, Deputy General 

Counsel, or Erik Bertin, Attorney 

Advisor, Copyright GC/I&R, P.O. Box 

70400, Washington, DC 20024. 

Telephone: (202) 707–8380. Telefax: 

(202) 707–8366. All prior Federal 

Register notices and comments in this 

docket are available at http:// 

www.copyright.gov/docs/stela/ 

comments/index.html. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Section 111 of the Copyright Act 

(‘‘Act’’), Title 17 of the United States 

Code (‘‘Section 111’’), allows cable 

operators to retransmit the performance 

or display of a work embodied in a 

primary transmission made by a 

television or radio station licensed by 

the Federal Communications 

Commission (‘‘FCC’’). In order to use 

this statutory license, cable operators 

are required to pay royalty fees to the 

Copyright Office on a semi-annual basis. 

The Office invests these royalties in 

United States Treasury securities 

pending distribution of the funds to 

those copyright owners who are entitled 

to receive a share of the fees. In 2010, 

Congress enacted the Satellite 

Television Extension and Localism Act 

of 2010 (‘‘STELA’’), Public Law 111– 

175, which inter alia changed the 

methodology for calculating royalty 

obligations under Section 111. 

Generally speaking, the royalty fee for 

retransmitting a distant broadcast signal 

is based on a percentage of the gross 

receipts generated by a cable system. 

Under the licensing framework 

established by Congress in 1976, cable 

operators were required to pay for every 

distant broadcast signal that they carried 

on their system without regard to 

whether a particular signal was received 

by or made available to all of the 

subscribers within a particular 

community. Cable operators often 

referred to the signals that subscribers 

could not receive as ‘‘phantom signals,’’ 

because the operator’s royalty obligation 

was calculated based solely on the 

number and type of signals (e.g., local 

vs. distant or permitted vs. nonpermitted) carried by a cable system, 

even if the operator did not provide a 

particular signal to all of its subscribers. 

The Office and the cable industry have 

been aware of this issue for more than 

25 years, but it did not receive 

legislative attention until 2010. 

Section 104 of STELA changed the 

methodology for calculating the royalty 

fees that a cable operator must pay in 

order to use the statutory license. The 

royalty fee is based on the communities 

where a cable system actually offers 

distant broadcast signals, instead of 

calculating royalties based on carriage of 

the signals throughout the system as a 

whole. As a result, the controversy 

surrounding phantom signals has been 

eliminated. Specifically, STELA 

amended Section 111(d)(1) of the 

Copyright Act to state that if a cable 

system provides distant broadcast 

signals to some, but not all, of the 

subscribers served by that system, the 

gross receipts and distant signal 

equivalent values for each signal may be 

based on the subscribers in those 

communities where the signal is 

actually provided. See 17 U.S.C. 

111(d)(1)(C)(iii). 

STELA also amended Section 

111(d)(1)(D) to state that: 

A cable system that, on a statement 

submitted before the date of the enactment of 

the Satellite Television Extension and 

Localism Act of 2010, computed its royalty 

fee consistent with the methodology under 

subparagraph (C)(iii), or that amends a 

statement filed before such date of enactment 

to compute the royalty fee due using such 

methodology, shall not be subject to an 

action for infringement, or eligible for any 

royalty refund or offset, arising out of its use 

of such methodology on such statement. 

In other words, a cable operator cannot 

be held liable for using the subscriber 

group methodology to calculate its 

royalty obligation on any Statement of 

Account filed prior to the enactment of 

STELA (including any amended 

Statement).1 However, the legislation 

makes clear that a cable operator shall 

not be entitled to any refund or offset 

based on the fact that it used the 

subscriber group methodology on a 

Statement or amended Statement filed 

prior to the date of enactment. 

On October 4, 2010, the Office 

published a notice of proposed 

rulemaking and request for comment on 

a regulation that would implement 

Section 111(d)(1)(D) of the Copyright 

Act. See 75 FR 61116. The Office 

explained that the proposed regulation 

would confirm that a cable operator’s 

obligation to pay for the carriage of 

distant signals prior to the effective date 

of STELA was determined on a systemwide basis. It would also confirm that 

the Office will not issue refunds for a 

Statement filed before the 2010/1 

accounting period, unless the cable 

operator has satisfied its outstanding 

royalty obligations (if any), including 

the obligation to pay for the carriage of 

distant signals on a system-wide basis.2

The Office explained that a number of 

cable operators have requested refunds 

for overpayments that they allegedly 

made on Statements filed prior to the 

enactment of STELA. In most cases, the 

refund request was made in response to 

an inquiry from the Licensing Division 

concerning a questionable or missing 

entry in the operator’s filing, such as 

identifying a local signal as a distant 

signal for the 2009/2 accounting period 

or an earlier accounting period.3 In 


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4This group includes the Joint Sports Claimants 

(professional and college sports programming); 

Commercial Television Claimants (local 

commercial television programming); Devotional 

Claimants (religious television programming); 

Canadian Claimants (Canadian television 

programming); and Music Claimants (musical 

works included in television programming). 

5As discussed above, the Office is aware of at 

least one situation where a cable operator requested 

a refund on its 2009/2 Statement of Account before 

the Statement was examined by the Licensing 

Division. This request was timely under 

§ 201.17(m)(3)(i), because it was received within 60 

days after the last day of the accounting period. 

those cases where the operators used the 

subscriber group methodology to 

calculate their royalty obligations, 

instead of calculating royalties on a 

system-wide basis, the Licensing 

Division has declined to issue a refund 

because there appears to be a balance 

due—rather than an overpayment—on 

their Statements. 

II. The Timeliness of the Refund 

Requests 

A. Comments 

The Office received comments and 

reply comments from the National Cable 

& Telecommunications Association 

(‘‘NCTA’’) and the Motion Picture 

Association of America, Inc., on behalf 

of its member companies, and other 

producers and/or syndicators of movies, 

programs, and specials broadcast by 

television stations (collectively, the 

‘‘Program Suppliers’’). The Office also 

received reply comments from a group 

of Copyright Owners who, like Program 

Suppliers, are the beneficiaries of the 

royalties collected under the statutory 

license.4

In their initial comments, the Program 

Suppliers asserted that most of the 

refund requests should be denied 

because they appear to be untimely. The 

Copyright Owners expressed the same 

view. See Program Suppliers Comment 

at 3–4; Copyright Owners Reply at 1–2. 

The Office’s current regulations state 

that a cable operator may request a 

refund ‘‘before the expiration of 60 days 

from the last day of the applicable 

Statement of Account filing period, or 

before the expiration of 60 days from the 

date of receipt at the Copyright Office of 

the royalty payment that is the subject 

of the request, whichever time period is 

longer.’’ 37 CFR 201.17(m)(3)(i). The 

Program Suppliers stated that this 

regulation bars many of the refund 

requests at issue in this proceeding, 

because the cable operators made their 

requests more than 60 days after they 

filed their Statements and their royalty 

payments with the Office. Program 

Suppliers Comment at 3–4. However, 

the Program Suppliers took a different 

position in their reply comments. 

Although they urged the Office ‘‘to 

continue to enforce [the 60 day] rule,’’ 

the Program Suppliers stated that refund 

requests should be permitted where—as 

here—a cable operator requests a refund 

in response to a communication from 

the Licensing Division, even if that 

request is made more than 60 days after 

the deadline. Program Suppliers Reply 

at 1, 2. 

The NCTA expressed the same view. 

Both the Program Suppliers and the 

NCTA contended that the current 

regulations do not allow cable operators 

to request a refund when they discover 

an overpayment in response to a 

communication from the Licensing 

Division, and they asked the Office to 

adopt a new regulation which would 

allow the Office to issue a refund in this 

situation. Program Suppliers Reply at 2– 

4; NCTA Reply at 4. 

B. Discussion 

The Program Suppliers are correct 

that a cable operator may request a 

refund under § 201.17(m)(3)(i) of the 

regulations, provided that the request is 

made within 60 days after the operator 

filed its Statement of Account and/or 

royalty payments with the Office. 

However, most of the refunds at issue in 

this proceeding are not governed by this 

section.5 Instead, they are governed by 

§ 201.17(m)(3)(vi) of the regulations, 

which states that ‘‘[a] request for a 

refund is not necessary where the 

Licensing Division, during its 

examination of a Statement of Account 

or related document, discovers an error 

that has resulted in a royalty 

overpayment.’’ 

When the Office discovers a 

legitimate overpayment in its 

examination of a Statement or amended 

Statement it is required to issue a 

refund, regardless of whether the Office 

discovers the error on its own or in the 

course of its communication with the 

cable operator. When the Office issues 

an inquiry concerning a particular 

Statement of Account, the NCTA noted 

that the operator typically reviews that 

Statement for errors and, if the operator 

determines that the royalties paid on 

that Statement exceeded the amount 

due, the operator may request a refund 

by filing a corrected Statement of 

Account. The NCTA correctly noted that 

‘‘the Office’s longstanding practice has 

been to issue the appropriate refund’’ in 

this situation, ‘‘even though the request 

for such refund falls outside the 60-day 

window that governs operator-initiated 

refund requests.’’ NCTA Reply at 4. 

The NCTA contended that this 

practice ‘‘is not expressly codified in the 

Office’s rules,’’ NCTA Reply at 4, but in 

fact, the regulations specifically state 

that ‘‘the Licensing Division will 

forward the royalty refund to the cable 

system owner named in the Statement 

of Account without regard to the time 

limitations provided for [in 

§ 201.17(m)(3)(i) of the regulations].’’ 37 

CFR 201.17(m)(3)(vi). Simply put, the 

Program Suppliers and the NCTA have 

asked the Office to adopt a rule that is 

already reflected in the regulations. 

To be clear, there must be a direct 

relationship between the issues 

identified in the Office’s inquiry and the 

basis for the operator’s refund request. 

An inquiry from the Office is not an 

open invitation to revisit every entry in 

every Statement of Account that has 

been filed with the Office, and refunds 

will not be made if the operator 

discovers errors that are unrelated to the 

issues that prompted the Office’s 

inquiry. For example, if the Office 

notified a cable operator that it 

apparently reported three local signals 

as distant signals on its 2010/1 

Statement of Account, the operator may 

be entitled to a refund for those three 

signals under § 201.17(m)(3)(vi) of the 

regulations. However, if the operator 

determined that it failed to identify 

another distant station as a significantly 

viewed station on its 2010/1 Statement 

of Account (hence, considered to be a 

local station), or mistakenly paid 

royalties for another signal that was not 

carried anywhere on the system, the 

operator would not be entitled to a 

refund for those overpayments unless it 

filed an amended Statement of Account 

within the time allowed under 

§ 201.17(m)(3)(i) of the regulations. 

III. Final Rule 

A. Comments 

The Program Suppliers and the 

Copyright Owners did not take a 

position on the proposed regulation in 

their initial comments. They simply 

noted that the refund requests appear to 

be untimely and should be denied on 

that basis. However, the Program 

Suppliers took an entirely different 

position in their reply comments, 

stating that the ‘‘proposed Amendment 

to Section 201.17(m) is unnecessary,’’ 

and that there is ‘‘no reason for [a] new 

regulation regarding phantom signals.’’ 

Program Suppliers Reply at 2. 

While the Program Suppliers did not 

explain the reason for the change in 

their views, the NCTA consistently 

maintained the same position in its 

initial comments and reply comments. 

The NCTA contended that the proposed 

rule ignores the ‘‘letter and spirit’’ of the 

statutory language set forth in Section 

111(d)(1)(D), as well as the legislative 


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history for that provision. The NCTA 

also contended that the regulation 

would undermine the negotiated 

settlement between copyright owners 

and cable operators that resolved the 

longstanding dispute over phantom 

signals. NCTA Comment at 2; NCTA 

Reply at 1, 2. 

Specifically, the NCTA asserted that 

the proposed regulation ‘‘runs counter 

to Congress’ clear intent to hold cable 

operators harmless for their past use of 

the subscriber group methodology,’’ and 

that adopting this rule ‘‘would 

effectively penalize a cable operator for 

something Congress has expressly 

approved.’’ NCTA Comment at 2; NCTA 

Reply at 3. The NCTA commented that 

the regulation would prevent cable 

operators from obtaining a refund for an 

overpayment on a Statement of Account 

or an amended Statement of Account 

filed prior to the effective date of 

STELA, even if the overpayment ‘‘does 

not arise from the operator’s use of 

subscriber group or system-wide 

reporting.’’ NCTA Reply at 3. For 

example, the NCTA contended that the 

regulation would prevent a cable 

operator who used the subscriber group 

methodology from claiming a refund 

where the operator incorrectly reported 

a local signal as distant or mistakenly 

paid royalties for a signal that was not 

carried anywhere on the system. NCTA 

Reply at 3. 

Finally, the NCTA predicted that the 

proposed rule will cause ‘‘confusion’’ 

regarding the treatment of phantom 

signals and it will ‘‘reignite the 

uncertainty and controversy’’ that the 

legislation was intended to resolve. 

NCTA Comment at 2; NCTA Reply at 2. 

The NCTA explained that the 

amendments to Section 111 were 

intended ‘‘to provide a permanent 

resolution of the phantom signal 

controversy’’ and that the proposed rule 

‘‘is antithetical to the goals of closure 

and certainty that are at the heart of the 

phantom signal settlement.’’ NCTA 

Comment at 4 (emphasis in original). 

B. Discussion 

As a general rule, the Office will issue 

a refund to a cable operator when the 

royalty fees paid on a particular 

Statement of Account exceed the 

amount due. The NCTA contended that 

‘‘Section 111(d)(1)(D), as amended by 

STELA, speaks for itself and provides 

all of the guidance needed for copyright 

owners, copyright users, and the Office 

to determine a cable operator’s royalty 

fees and to make refunds where 

appropriate.’’ NCTA Reply at 2. The 

Office agrees with that assessment. 

STELA amended Section 111(d)(1)(D) 

to state that: 

A cable system that, on a statement 

submitted before the date of the enactment of 

the Satellite Television Extension and 

Localism Act of 2010, computed its royalty 

fee consistent with the methodology under 

subparagraph (C)(iii), or that amends a 

statement filed before such date of enactment 

to compute the royalty fee due using such 

methodology, shall not be subject to an 

action for infringement, or eligible for any 

royalty refund or offset, arising out of its use 

of such methodology on such statement. 

As the NCTA observed, cable operators 

cannot be held liable in an infringement 

action for using the subscriber group 

methodology to calculate their royalty 

obligations on a Statement of Account 

or amended Statement of Account filed 

prior to the enactment of STELA. Nor 

are they required to recalculate their 

royalty obligations using the systemwide methodology in order to avoid 

liability for infringement. See NCTA 

Reply at 2. However, Section 

111(d)(1)(D) makes it clear that cable 

operators are not entitled to any refunds 

or offsets arising out of their use of the 

subscriber group methodology before 

the enactment of STELA. The NCTA 

correctly noted that cable operators who 

paid for phantom signals on a preSTELA Statement of Account are 

‘‘expressly precluded from obtaining 

any benefit (through refunds or offsets 

to other payment obligations) by going 

back and revising their calculations to 

use the subscriber group methodology 

after-the-fact.’’ NCTA Comment at 3–4. 

Likewise, cable operators cannot deduct 

the amount that they paid for a phantom 

signal prior to the 2010/1 accounting 

period in order to reduce the amount 

that they owe on a future Statement of 

Account. See id. 

The question presented in this 

proceeding is whether the Office should 

allow use of the subscriber group 

methodology in place of the systemwide methodology to determine 

whether there is an overpayment or a 

balance due on Statements filed prior to 

the effective date of STELA. The NCTA 

contended that Section 111(d)(1)(D) 

prevents copyright owners from 

bringing an infringement action against 

a cable operator that computed its 

royalty obligations using the subscriber 

group methodology, and that this same 

provision extinguishes ‘‘all direct or 

indirect claims that operators have 

outstanding ‘balances’ of underpaid 

royalties as a result of their using that 

methodology.’’ NCTA Comment at 5. 

While this is one interpretation of 

Section 111(d)(1)(D), it is not the only 

one. As the Office explained in the 

notice of proposed rulemaking, a literal 

reading indicates that this provision 

shields cable operators from liability for 

an infringement action, but it does not 

eliminate the obligation to pay for the 

carriage of phantom signals prior to the 

enactment of STELA. Under the 

licensing framework that predated 

STELA, cable operators were expected 

to calculate their royalty obligations on 

a system-wide basis. If an operator 

failed to pay for a distant signal on a 

system-wide basis, the Office would 

notify the operator and record the 

balance due as an outstanding 

obligation. Until the operator satisfied 

this royalty obligation, the Office would 

not issue a refund for overpayments 

caused by misreporting a local signal as 

a distant signal or other reporting errors. 

The Office has followed this practice for 

more than 30 years. 

The NCTA contended that the 

proposed regulation ‘‘would effectively 

penalize cable operators who used the 

subscriber group methodology on 

statements of account for accounting 

periods occurring prior to 2010’’ and 

that this is contrary to ‘‘Congress’ clear 

intent to hold cable operator’s [sic] 

harmless for their past use of the 

subscriber group methodology.’’ NCTA 

Comment at 2; NCTA Reply at 3. 

However, the NCTA has not cited any 

language in the statute or the legislative 

history that expressly overruled the 

Office’s longstanding practice 

concerning refunds or offsets involving 

payments for phantom signals in the 

pre-STELA period. Section 111(d)(1)(D) 

simply states that a cable operator 

cannot be sued for infringement for 

failing to calculate its royalty obligation 

using the system-wide methodology on 

a Statement filed prior to the enactment 

of STELA. The fact that Congress 

eliminated a cause of action that could 

have been asserted before STELA does 

not mean that the obligation to use the 

system-wide methodology did not exist 

or that Congress retroactively eliminated 

that obligation prior to the 2010/1 

accounting period. Nor does it mean 

that a cable operator should be able to 

pocket the difference if using the 

subscriber group method, rather than 

the system-wide method, resulted in an 

overpayment for accounting periods 

prior to 2010/1. Indeed, the statute 

specifically states that refunds or offsets 

arising out of the cable operators’ use of 

the subscriber group methodology prior 

to the effective date of STELA are not 

permitted. 

The NCTA contended that the 

proposed rule would prevent a cable 

operator from obtaining a refund or 

offset, even if the overpayment ‘‘does 

not arise from the operator’s use of 

subscriber group or system-wide 

reporting.’’ NCTA Reply at 3. In other 

words, if the cable operator would 


srobinson on DSK4SPTVN1PROD with 
Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Rules and Regulations 1759 

6As the NCTA observed, an operator might be 

entitled to a refund if it incorrectly reported a local 

signal as distant or mistakenly paid royalties for a 

signal that was not carried anywhere on the system. 

See NCTA Reply at 3. 

7As discussed above, STELA is effective as of 

February 27, 2010. The 2010/2 accounting period 

ended on December 31, 2010, and Statements of 

Account for that period were due on March 1, 2011. 

otherwise be entitled to a refund or 

offset 6—but for the fact that it 

calculated its royalty obligation using 

the subscriber group method rather than 

the system-wide method, and as a 

result, underpaid the royalties due 

under the system-wide method—then 

the operator is not entitled to a refund 

or offset under Section 111(d)(1)(D). 

That is indeed the effect of the 

regulation. 

Cable operators presumably use the 

subscriber group method, because it 

lowers the amount of royalties owed 

under the statutory license. Indeed, in 

most of the refund requests at issue in 

this proceeding, the amount owed on 

the Statement of Account would be 

higher if the cable operator used the 

system-wide method instead of the 

subscriber group method to calculate its 

royalty obligation. In such cases, the 

operators are not entitled to a refund or 

offset, because the overpayments 

purportedly shown on their Statements 

of Account would not have occurred but 

for the fact that they calculated their 

royalty obligation using the subscriber 

group method rather than the systemwide method, which was the 

methodology in effect when the 

Statements were filed. 

The NCTA contended that the 

proposed rule is inconsistent with the 

legislative history for the amendment to 

Section 111(d)(1)(D), but the quotes that 

the NCTA cited from the congressional 

debate do not support this view. At best, 

these quotes merely indicate that 

stakeholders disagreed over whether a 

cable operator should be required to pay 

for phantom signals and that the 

legislation was intended to resolve that 

longstanding dispute. The NCTA offered 

no language from the congressional 

debate indicating that Congress 

intended to change the method that 

should be used to calculate royalty 

obligations on Statements filed before 

the date of enactment. Nor is there any 

indication that Congress intended to 

overrule the Office’s longstanding 

practice of declining to issue refunds or 

offsets to cable operators who failed to 

pay for phantom signals. 

Finally, the NCTA contended that the 

proposed rule will cause ‘‘confusion 

and uncertainty’’ regarding the 

treatment of phantom signals. NCTA 

Reply at 2. However, the NCTA 

acknowledged that the instances where 

a cable operator used the subscriber 

group methodology and subsequently 

requested a refund ‘‘are relatively rare,’’ 

NCTA Comment at 1 n.3, and in fact, it 

provided only one example of alleged 

‘‘confusion and delay’’ in its comments. 

Specifically, the NCTA predicted that 

the proposed rule would create 

uncertainty for Statements of Account 

filed for the second accounting period of 

2010, because ‘‘those statements were 

not due until after the effective date of 

STELA, but in some cases were filed 

before that date.’’ NCTA Reply at 2, n.1. 

In fact, the Office did not receive any 

Statements of Account for the 2010/2 

accounting period before the effective 

date of STELA, so the regulation will 

not cause any delay in connection with 

those Statements.7 Moreover, the 

proposed rule draws a bright line that 

eliminates any confusion. Refunds on 

Statements of Account filed prior to the 

2010/1 accounting period are based 

upon calculations of royalty obligations 

under the methodology that attributed 

carriage of a signal throughout the cable 

system rather than on the revised 

methodology adopted under STELA that 

requires calculations to be made based 

on carriage of signals within discrete 

communities. 

List of Subjects in 37 CFR Part 201 

Copyright, General provisions. 

Final Regulations 

In consideration of the foregoing, the 

Copyright Office amends part 201 of 37 

CFR as follows: 

PART 201—GENERAL PROVISIONS 

■ 1. The authority citation for part 201 

continues to read as follows: 

Authority: 17 U.S.C. 702. 

■ 2. Amend § 201.17 by redesignating 

paragraphs (m)(1) through (4) as 

paragraphs (m)(2) through (5) and 

adding a new paragraph (m)(1) to read 

as follows: 

§ 201.17 Statements of Account covering 

compulsory licenses for secondary 

transmissions by cable systems. 

* * * * * 

(m) * * * 

(1) Royalty fee obligations under 17 

U.S.C. 111 prior to the effective date of 

the Satellite Television Extension and 

Localism Act of 2010, Public Law 111– 

175, are determined based on carriage of 

each distant signal on a system-wide 

basis. Refunds for an overpayment of 

royalty fees for an accounting period 

prior to January 1, 2010, shall be made 

only when all outstanding royalty fee 

obligations have been met, including 

those for carriage of each distant signal 

on a system-wide basis. 

* * * * * 

Dated: September 21, 2012. 

Maria A. Pallante, 

Register of Copyrights. 

Approved by: 

James H. Billington, 

The Librarian of Congress. 

[FR Doc. 2013–00171 Filed 1–8–13; 8:45 am] 

BILLING CODE 1410–30–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR PART 52 

[FRL–9767–5] 

Notice of Approval of Clean Air Act 

Outer Continental Shelf Minor Source/ 

Title V Minor Permit Modification 

Issued to Shell Offshore, Inc. for the 

Kulluk Conical Drilling Unit 

AGENCY: United States Environmental 

Protection Agency (EPA). 

ACTION: Notice of final action. 

SUMMARY: This notice announces that 

EPA Region 10 has issued a final 

decision granting Shell Offshore Inc.’s 

(‘‘Shell’’) request for minor 

modifications of Clean Air Act Outer 

Continental Shelf (‘‘OCS’’) Minor 

Source/Title V Permit No. 

R10OCS03000 (‘‘permits’’). The permits 

authorize air emissions associated with 

Shell’s operation of the Kulluk Conical 

Drilling Unit (‘‘Kulluk’’) in the Beaufort 

Sea to conduct exploratory oil and gas 

drilling. 

DATES: January 9, 2013. 

ADDRESSES: The documents relevant to 

the above-referenced permits are 

available for public inspection during 

normal business hours at the following 

address: U.S. Environmental Protection 

Agency, Region 10, 1200 Sixth Avenue, 

Suite 900, AWT–107, Seattle, WA 

98101. To arrange for viewing of these 

documents, call Natasha Greaves at 

(206) 553–7079. 

FOR FURTHER INFORMATION CONTACT: 

Natasha Greaves, Office of Air Waste 

and Toxics, U.S. Environmental 

Protection Agency, Region 10, 1200 6th 

Avenue, Suite 900, AWT–107, Seattle, 

WA 98101. 

SUPPLEMENTARY INFORMATION: EPA 

Region 10 issued a final decision on the 

minor modifications of the permits on 

September 28, 2012. The modified 

permits also became effective on that 

date, and the 30-day period provided by 

40 CFR 71.11(l) to file with the 

Environmental Appeals Board (‘‘EAB’’) 


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