63506 Federal Register / Vol. 62, No. 230 / Monday, December 1, 1997 / Proposed Rules

(A) For a featured display of a work.

1998–2002 ..............................................$64.78

(B) For background and montage

display.

1998–2002 ..............................................$31.59

(C) For use of a work for program

identification or for thematic use.

1998–2002 ............................................$127.71

(D) For the display of an art

reproduction copyrighted separately

from the work of fine art from which the

work was reproduced, irrespective of

whether the reproduced work of fine art

is copyrighted so as to be subject also

to payment of a display fee under the

terms of the schedule.

1998–2002 ..............................................$41.95

(ii) For such uses in other than PBSdistributed programs:

(A) For featured display of a work.

1998–2002 ..............................................$41.95

(B) For background and montage

display.

1998–2002 ..............................................$21.51

(C) For use of a work for program

identification or for thematic use.

1998–2002 ..............................................$85.76

(D) For the display of an art

reproduction copyrighted separately

from the work of fine art from which the

work was reproduced, irrespective of

whether the reproduced work of fine art

is copyrighted so as to be subject also

to payment of a display fee under the

terms of this schedule.

1998–2002 ..............................................$21.51

* * * * *

(f) Terms of use. (1) The rates of this

schedule are for unlimited broadcast use

for a period of three years from the date

of the first broadcast use of the work

under this schedule. Succeeding

broadcast use periods will require the

following additional payment: Second

three-year period—50 percent; each

three-year period thereafter—25 percent;

provided that a 100 percent additional

payment prior to the expiration of the

first three-year period will cover

broadcast use during all subsequent

broadcast use periods without

limitation. Such succeeding uses which

are subsequent to December 31, 2002,

shall be subject to the rates established

in this schedule.

* * * * *

9. In § 253.10, paragraph (a) is revised

to read as follows:

§ 253.10 Cost of living adjustment.

(a) On December 1, 1998, the

Librarian of Congress shall publish in

the Federal Register a notice of the

change in the cost of living as

determined by the Consumer Price

Index (all consumers, all items) during

the period from the most recent Index

published prior to December 1, 1997, to

the most recent Index published prior to

December 1, 1998. On each December 1,

thereafter the Librarian of Congress shall

publish a notice of change in the cost of

living during the period from the most

recent Index published prior to the

previous notice, to the most recent

Index published prior to December 1 of

that year.

* * * * *

Dated: November 18, 1997.

Marybeth Peters,

Register of Copyrights.

James H. Billington,

The Librarian of Congress.

[FR Doc. 97–31295 Filed 11–26–97; 9:39 am]

BILLING CODE 1410–33–P

LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 255

[Docket No. 96–4 CARP DPRA]

Mechanical and Digital Phonorecord

Delivery Rate Adjustment Proceeding

AGENCY: Copyright Office, Library of

Congress.

ACTION: Notice of proposed rulemaking.

SUMMARY: The Copyright Office of the

Library of Congress is submitting for

public comment a joint petition

concerning the adjustment of the

physical phonorecord and digital

phonorecord delivery royalty rates and

proposed regulations implementing

these rates.

DATES: Comments and notices of intent

to participate are due by December 29,

1997. If comments and Notices of Intent

to Participate are not received by this

date, the proposed terms and rates shall

become effective on January 1, 1998.

ADDRESSES: If sent by mail, an original

and five copies of comments, and

Notices of Intent to Participate, should

be addressed to: Copyright Arbitration

Royalty Panel (CARP), P.O. Box 70977,

Southwest Station, Washington, DC

20024. If hand delivered, an original

and five copies of comments, and

Notices of Intent to Participate, should

be brought to: Office of the Copyright

General Counsel, James Madison

Memorial Building, Room LM–407, First

and Independence Avenue, SE.,

Washington, DC 20540.

FOR FURTHER INFORMATION CONTACT:

David O. Carson, General Counsel;

William J. Roberts, Senior Attorney, or

Tanya Sandros, Attorney Advisor,

Copyright Arbitration Royalty Panel

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

Station, Washington, DC 20024.

Telephone (202) 707–8380. Telefax:

(202) 707–8366.

SUPPLEMENTARY INFORMATION:

How Were the Current Royalty Rates

and Terms Established for the Making

and Distribution of a Physical

Phonorecord and a Digital Phonorecord

Delivery?

The mechanical compulsory license,

17 U.S.C. 115, 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 pays the statutory

rate. Until its demise in 1993, the

Copyright Royalty Tribunal had

authority to adjust the statutory rates for

the making and distribution of physical

phonorecords, and did so in 1987, see

52 FR 22637 (June 15, 1987), setting the

rates and terms for the mechanical

compulsory license for at least the next

ten years.

The Copyright Act provides that,

during the tenth calendar year, any

copyright owner or user whose royalty

rates are specified by the statutory

license may file a petition requesting an

adjustment to the rates and terms. 17

U.S.C. 803(a) (1) and (3). This ten-year

cycle makes 1997 a window year for

commencing a proceeding to further

adjust the mechanical phonorecord

compulsory license royalty rates.

On November 1, 1995, Congress

passed the Digital Performance Right in

Sound Recording Act of 1995 (Digital

Performance Act), Pub. L. 104–39, 109

Stat. 336, which extended the

mechanical license to digital

phonorecord deliveries. Congress

passed this Act to maintain and reaffirm

the mechanical rights of songwriters and

music publishers in an era of emerging

technology which makes delivery of

digital phonorecords possible. Among

other things, the Digital Performance

Act confirms and clarifies that the scope

of the compulsory license to make and

distribute phonorecords of nondramatic

musical compositions includes digital

transmissions which constitute ‘‘digital

phonorecord deliveries.’’ 17 U.S.C.

115(c)(3).

The Digitial Performance Act sets the

royalty rate for all digital phonorecord

deliveries made or authorized under the

section 115 compulsory license on or

before December 31, 1997, at the current
Federal Register / Vol. 62, No. 230 / Monday, December 1, 1997 / Proposed Rules 63507

1The interested parties are the Recording

Industry Association of America, the National

Music Publishers’ Association, Inc., and The Harry

Fox Agency, Inc. (collectively, ‘‘the Parties’’).

rate for the making and distribution of

physical phonorecords: 6.95 cents for

each work embodied in a phonorecord,

or 1.3 cents per minute of playing time,

or fraction thereof, whichever amount is

larger. 37 CFR 255.5.

When Does the Current Digital

Phonorecord Delivery Royalty Rate

Expire and How is a New Rate Set?

The rate for the digital phonorecord

deliveries expires on December 31,

1997. Accordingly, in the Digital

Performance Act, Congress established a

two-step process for adjusting the

royalty rate, a negotiation period

wherein the owners and the users

attempt to reach their own voluntary

licenses, and then if necessary, and

upon the filing of a petition in 1997, the

convening of a copyright arbitration

royalty panel (CARP) to establish rates

and terms for those persons who are not

covered by voluntary licenses. 17 U.S.C.

115(c)(3)(C) and (D).

If interested parties reach a negotiated

settlement, they may submit their

proposals for adjusting the rates and

terms for digital phonorecord deliveries

directly to the Librarian of Congress. 37

CFR 251.63. This rule further provides

that:

The Librarian may, upon the request of the

parties, submit the agreed upon rate to the

public in a notice-and-comment proceeding.

The Librarian may adopt the rate embodied

in the proposed settlement without

convening an arbitration panel, provided that

no opposing comment is received by the

Librarian from a party with an intent to

participate in a CARP proceeding.

37 CFR 251.63. This procedure

applies to the adjustment of the

compulsory license rates concerning

both digital phonorecord and physical

phonorecord deliveries.

Chronology—Current Rate Adjustment

Proceeding

On July 17, 1996, the Copyright Office

published a notice designating July 17,

1996, to December 31, 1996, as the

period for the copyright owners and

users to negotiate reasonable terms and

rates for the delivery of a digital

phonorecord. 61 FR 37312 (July 17,

1996). The notice also established a

schedule for convening a CARP which

would have established new rates for

digital phonorecord deliveries before

the current rate expired. In addition, the

Office noted that 1997 was a window

year for adjusting the royalty rates

concerning the making and distribution

of physical phonorecords, and requested

comment from interested parties on the

possibility of conducting a single CARP

proceeding to adjust both the physical

phonorecord and the digital

phonorecord delivery rates, even though

the physical phonorecord rates would

not expire on December 31, 1997. 61 FR

37215.

According to the interested parties,1

however, the proposed schedule did not

allot sufficient time for negotiating a

comprehensive joint proposal.

Therefore, they filed a motion with the

Office on November 8, 1996, requesting

that the Office vacate the proposed

schedule to allow them more time to

continue their negotiations. The Office

granted the moving Parties’ motion and

rescheduled the proceeding. 61 FR

65243 (December 11, 1996).

Although the new schedule extended

the negotiation period by three months,

the Parties thought the time still

insufficient for conducting the

necessary negotiations, and so,

requested a meeting with the Office to

discuss the difficulties associated with

negotiating rates and terms for use of a

new technology in a marketplace with

little definition or clear direction. The

Office granted their request and met

with the Parties on January 9, 1997. At

that meeting, the Parties again requested

more time for conducting the

negotiations on setting the rates and

terms for the section 115 license, having

acknowledged the need to establish the

mechanical rate before they attempted

to negotiate the rates for the digital

delivery of phonorecords. After

considering the difficulties confronting

the Parties, the Office agreed to vacate

the schedule. 62 FR 5057 (February 3,

1997).

The additional time for further

negotiations proved to be beneficial, and

on November 7, 1997, the National

Music Publishers’ Association, Inc.

(NMPA), The Songwriters Guild of

America (SGA), and the Recording

Industry Association of America (RIAA)

filed a joint petition with the Copyright

Office outlining a proposal to adjust the

physical phonorecord and digital

phonorecord delivery royalty rates.

NMPA, SGA, and RIAA, the

organizations that represent the interests

of copyright owners and copyright users

in the current proceeding, were also the

principal participants representing these

interests in the 1980 and the 1987

mechanical rate adjustment

proceedings. 46 FR 55276 (November 9,

1981) and 52 FR 22637 (June 15, 1987).

The Parties to the joint petition,

having duly filed a proposal concerning

the 1997 physical phonorecord and

digital phonorecord delivery royalty rate

adjustments, asked the Copyright Office

to submit their proposal to a notice and

comment proceeding to promulgate

regulations to adjust the proposed rates

and terms. Accordingly, pursuant to 17

U.S.C. 803(c) and 37 CFR 251.63(b), the

Copyright Office invites public

comment on the proposed rates and

terms for adjusting the physical

phonorecord and digital phonorecord

delivery royalty rates, and on the

regulatory language implementing the

proposal.

Comments and Notices of Intent to

Participate

Any party who wishes to challenge

the proposed rates and terms must

submit his or her written comments to

the Librarian of Congress no later than

close of business on December 31, 1997.

The content of the written challenge

should describe the party’s interest in

this proceeding, the proposed rule that

the party finds objectionable, and the

reasons for the challenge.

In addition, any party submitting

written challenges must also submit an

accompanying Notice of Intent to

Participate. Failure to submit a Notice of

Intent to Participate will preclude the

interested party from participating in a

CARP proceeding to adjust the rates and

terms, and will preclude consideration

of his or her challenge. If no comments

or Notices of Intent to Participate are

received by close of business on the date

for filing such comments, the proposed

terms and rates shall become effective

on January 1, 1998.

List of Subjects in 37 CFR Part 255

Copyright, Recordings.

For the reasons set forth in the

preamble, the Library proposes to

amend 37 CFR part 255 as follows:

PART 255—ADJUSTMENT OF

ROYALTY PAYABLE UNDER

COMPULSORY LICENSE FOR MAKING

AND DISTRIBUTING PHONORECORDS

1. The authority citation for part 255

continues to read as follows:

Authority: 17 U.S.C. 801(b)(1) and 803.

2. In § 255.3(a), the phrase ‘‘(b), (c),

(d), (e), (f), (g), and (h)’’ is removed and

the phrase ‘‘(b) through (m)’’ is added

after the word ‘‘paragraphs’’.

3. In § 255.3(b), the phrase ‘‘(c), (d),

(e), (f), (g), and (h)’’ is removed and the

phrase ‘‘(c) through (m)’’ is added after

the word ‘‘paragraphs’’.

4. In § 255.3(c), the phrase ‘‘(d), (e),

(f), (g), and (h)’’ is removed and the

phrase ‘‘(d) through (m)’’ is added after

the word ‘‘paragraphs’’.

5. In § 255.3(d), the phrase ‘‘(e), (f),

(g), and (h)’’ is removed and the phrase
63508 Federal Register / Vol. 62, No. 230 / Monday, December 1, 1997 / Proposed Rules

‘‘(e) through (m)’’ is added after the

word ‘‘paragraphs’’.

6. In § 255.3(e), the phrase ‘‘(f), (g),

and (h)’’ is removed and the phrase ‘‘(f)

through (m)’’ is added after the word

‘‘paragraphs’’.

7. In § 255.3(f), the phrase ‘‘(g), and

(h)’’ is removed and the phrase ‘‘(g)

through (m)’’ is added after the word

‘‘paragraphs’’.

8. In § 255.3(g), the phrase ‘‘paragraph

(h)’’ is removed and the phrase

‘‘paragraphs (h) through (m)’’ is added

after the phrase ‘‘pursuant to’’.

9. In § 255.3(h), the phrase ‘‘, subject

to further adjustment pursuant to

paragraphs (i) through (m) of this

section’’ is added after the word

‘‘larger’’.

10. Add new paragraphs (i), (j), (k), (l),

and (m) to § 255.3 to read as follows:

§ 255.3 Adjustment of royalty rate.

* * * * *

(i) For every phonorecord made and

distributed on or after January 1, 1998,

the royalty rate payable with respect to

each work embodied in the phonorecord

shall be either 7.1 cents, or 1.35 cents

per minute of playing time or fraction

thereof, whichever amount is larger,

subject to further adjustment pursuant

to paragraphs (j) through (m) of this

section.

(j) For every phonorecord made and

distributed on or after January 1, 2000,

the royalty rate payable with respect to

each work embodied in the phonorecord

shall be either 7.55 cents, or 1.45 cents

per minute of playing time or fraction

thereof, whichever amount is larger,

subject to further adjustment pursuant

to paragraphs (k) through (m) of this

section.

(k) For every phonorecord made and

distributed on or after January 1, 2002,

the royalty rate payable with respect to

each work embodied in the phonorecord

shall be either 8.0 cents, or 1.55 cents

per minute of playing time or fraction

thereof, whichever amount is larger,

subject to further adjustment pursuant

to paragraphs (l) through (m) of this

section.

(l) For every phonorecord made and

distributed on or after January 1, 2004,

the royalty rate payable with respect to

each work embodied in the phonorecord

shall be either 8.5 cents, or 1.65 cents

per minute of playing time or fraction

thereof, whichever amount is larger,

subject to further adjustment pursuant

to paragraph (m) of this section.

(m) For every phonorecord made and

distributed on or after January 1, 2006,

the royalty rate payable with respect to

each work embodied in the phonorecord

shall be either 9.1 cents, or 1.75 cents

per minute of playing time or fraction

thereof, whichever amount is larger.

11. Revise § 255.5 to read as follows:

§ 255.5 Royalty rate for digital

phonorecord deliveries in general.

(a) For every digital phonorecord

delivery made on or before December

31, 1997, the royalty rate payable with

respect to each work embodied in the

phonorecord shall be either 6.95 cents,

or 1.3 cents per minute of playing time

or fraction thereof, whichever amount is

larger.

(b) Except as provided in § 255.6, for

every digital phonorecord delivery

made on or after January 1, 1998, the

royalty rate payable with respect to each

work embodied in the phonorecord

shall be the royalty rate prescribed in

§ 255.3 for the making and distribution

of a phonorecord made and distributed

on the date of the digital phonorecord

delivery (the ‘‘Physical Rate’’). In any

future proceeding under 17 U.S.C.

115(c)(3)(C) or (D), the royalty rates

payable for a compulsory license for

digital phonorecord deliveries in

general shall be established de novo,

and no precedential effect shall be given

to the royalty rate payable under this

paragraph for any period prior to the

period as to which the royalty rates are

to be established in such future

proceeding.

12. Add § 255.6 to read as follows:

§ 255.6 Royalty rate for incidental digital

phonorecord deliveries.

(a) Except as provided in paragraphs

(b) and (c) of this section, for every

digital phonorecord delivery made on or

after January 1, 1998, where the

reproduction or distribution of the

phonorecord is incidental to the

transmission which constitutes the

digital phonorecord delivery (an

‘‘Incidental DPD’’), the royalty rate

payable with respect to each work

embodied in the phonorecord shall be

the Physical Rate. In any future

proceeding under 17 U.S.C. 115(c)(3)(C)

or (D), the characterization of a digital

phonorecord delivery as ‘‘incidental’’

and the royalty rates payable for a

compulsory license for Incidental DPDs

shall be established de novo, and no

precedential effect shall be given to the

characterization of a digital

phonorecord delivery as ‘‘incidental’’

under this section or to the royalty rate

payable under this section for any

period prior to the period as to which

the characterization of a digital

phonorecord delivery as ‘‘incidental’’ or

the royalty rates are to be established in

such future proceeding.

(b) No royalty shall be payable for any

‘‘Transient Phonorecord’’ made in the

course of any digital phonorecord

delivery made on or after January 1,

1998: provided that a royalty shall be

payable with respect to each work

embodied in the phonorecord ultimately

reproduced by or for the ultimate

transmission recipient of such digital

phonorecord delivery at the royalty rate

prescribed under § 255.5 or the other

paragraphs of this section, as applicable.

Nothing in this paragraph shall limit or

impair any rights or remedies of the

copyright owner of a work against any

person who makes reproductions from a

Transient Phonorecord for any purpose

other than to facilitate the transmission

to the ultimate transmission recipient.

For the purpose of this paragraph, a

‘‘Transient Phonorecord’’ is a transient

phonorecord reproduced in temporary

computer memory or digital storage

intermediate to the communications

system through which a digital

phonorecord delivery is made, where

such transient phonorecord is made in

the ordinary operation of such system

solely to facilitate the transmission to

the ultimate transmission recipient. An

example of a Transient Phonorecord is

a phonorecord reproduced temporarily

in a router intermediate to the Internet.

(c)(1) For every digital phonorecord

delivery made on or after January 1,

1998, no royalty shall be payable where:

(i) The reproduction or distribution of

the phonorecord is incidental to the

promotion of a sound recording

embodying a work,

(ii) The phonorecord is of no more

than 30 seconds of playing time of the

sound recording of such work, or in the

case of sound recordings of a work with

a playing time of more than 5 minutes,

the phonorecord is of no more than the

lesser of 10% or 60 seconds of playing

time of the sound recording of such

work, and

(iii) The digital phonorecord delivery

is made or authorized by the copyright

owner of such sound recording.

(2) The copyright owner of any work

embodied in a sound recording may,

without payment of any royalty to the

copyright owner of the sound recording,

make or authorize a digital phonorecord

delivery where:

(i) The reproduction or distribution of

the phonorecord is incidental to the

promotion of the work embodied in the

sound recording,

(ii) The phonorecord is of no more

than 30 seconds of playing time of the

sound recording of such work, or in the

case of sound recordings of a work with

a playing time of more than 5 minutes,

the phonorecord is of no more than the

lesser of 10% or 60 seconds of playing

time of the sound recording of such

work, and
Federal Register / Vol. 62, No. 230 / Monday, December 1, 1997 / Proposed Rules 63509

(iii) The digital phonorecord delivery

is made by the copyright owner of such

work, either individually or collectively

with other copyright owners of such

works, or by an organization of

copyright owners designated by such

copyright owners as their common

agent.

13. Add § 255.7 to read as follows:

§ 255.7 Future proceedings.

The procedures specified in 17 U.S.C.

115(c)(3)(C) shall be repeated in 1998

and every second year thereafter until

2006 so as to determine the applicable

rates and terms for the making of digital

phonorecord deliveries during the

periods beginning January 1, 2000,

2002, 2004, 2006 and 2008. The

procedures specified in 17 U.S.C.

115(c)(3)(D) shall be repeated, in the

absence of license agreements

negotiated under 17 U.S.C. 115(c)(3)(B)

and (C), upon the filing of a petition in

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

1999 and every second year thereafter

until 2007 so as to determine new rates

and terms for the making of digital

phonorecord deliveries during the

periods beginning January 1, 2000,

2002, 2004, 2006 and 2008. Thereafter,

the procedures specified in 17 U.S.C.

115(c)(3)(C) and (D) shall be repeated in

each fifth calendar year.

Notwithstanding the provisions of this

section, different years for the repeating

of such proceedings may be determined

in accordance with 17 U.S.C.

115(c)(3)(C) and (D).

Dated: November 18, 1997.

Marybeth Peters,

Register of Copyrights.

Approved by:

James H. Billington,

The Librarian of Congress.

[FR Doc. 97–31293 Filed 11–26–97; 9:39 am]

BILLING CODE 1410–33–P