Federal Register / Vol. 78, No. 74 / Wednesday, April 17, 2013 / Notices 22913 

including the validity of the 

methodology and assumptions used; 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submissions 

of responses. 

III. Current Actions: The Department 

of Labor seeks an approval for the 

extension of this information collection 

that requires employers to make, 

maintain, and preserve records in 

accordance with statutory and 

regulatory requirements. 

Type of Review: Extension. 

Agency: Wage and Hour Division. 

Title: Employment Information Form. 

OMB Number: 1235–0021. 

Affected Public: Business or other forprofit, not-for-profit institutions, farms. 

Agency Numbers: Form WH–3. 

Total Respondents: 35,000. 

Total Annual Responses: 35,000. 

Estimated Total Burden Hours: 

11,667. 

Estimated Time per Response: 20 

minutes. 

Frequency: On occasion. 

Total Burden Cost (capital/startup): 

$0. 

Total Burden Costs (operation/ 

maintenance): $0. 

Dated: April 11, 2013. 

Mary Ziegler, 

Director, Division of Regulations, Legislation, 

and Interpretation. 

[FR Doc. 2013–09040 Filed 4–16–13; 8:45 am] 

BILLING CODE 4510–27–P 

LIBRARY OF CONGRESS 

Copyright Office 

[Docket No. 2013–4] 

Review of Copyright Royalty Judges 

Determination 

AGENCY: U.S. Copyright Office, Library 

of Congress. 

ACTION: Notice. 

SUMMARY: The Register of Copyrights 

issues the following decision identifying 

and correcting an erroneous resolution 

of a material question of substantive law 

under title 17 that underlies or is 

contained in the Copyright Royalty 

Judges’ final determination of rates and 

terms of royalty payments for the use of 

sound recordings in transmissions made 

by Preexisting Subscription Services. 

FOR FURTHER INFORMATION CONTACT: 

Jacqueline C. Charlesworth, Senior 

Counsel to the Register, or Stephen 

Ruwe, Attorney Advisor Copyright GC/ 

I&R, P.O. Box 70400, Washington, DC 

20024. Telephone: (202) 707–8380. 

Telefax: (202) 707–8366. 

SUPPLEMENTARY INFORMATION: 

Background 

The Copyright Royalty Judges 

(‘‘CRJs’’), who constitute the Copyright 

Royalty Board (‘‘CRB’’), are required by 

17 U.S.C. 803(b) to issue determinations 

of rates and terms for royalty payments 

due for the public performance of sound 

recordings in certain digital 

transmissions by licensees, including 

Preexisting Subscription Services 

(‘‘PSS’’) and Satellite Digital Audio 

Radio Services (‘‘SDARS’’), in 

accordance with the provisions of 17 

U.S.C. 114 and 112(e). Pursuant to 17 

U.S.C. 801(b)(1), the rates applicable to 

PSS and SDARS are to be reasonable 

and shall be calculated by the CRJs to 

achieve the following objectives: 

(A) To maximize the availability of creative 

works to the public. 

(B) To afford the copyright owner a fair 

return for his or her creative work and the 

copyright user a fair income under existing 

economic conditions. 

(C) To reflect the relative roles of the 

copyright owner and the copyright user in 

the product made available to the public with 

respect to relative creative contribution, 

technological contribution, capital 

investment, cost, risk, and contribution to the 

opening of new markets for creative 

expression and media for their 

communication. 

(D) To minimize any disruptive impact on 

the structure of the industries involved and 

on generally prevailing industry practices. 

17 U.S.C. 801(b)(1); see also 17 U.S.C. 

114(f)(1)(B) (specifying that CRJs shall 

consider factors set forth in section 

801(b)(1) in establishing rates for PSS 

and SDARS). 

On February 14, 2013, the CRJs issued 

a final determination of rates and terms 

of royalty payments for the use of sound 

recordings in transmissions made by 

PSS and SDARS (‘‘Final 

Determination’’). For PSS, for the period 

2013 through the end of 2017, the CRJs 

established a phased-in royalty rate 

commencing at 8.0% of gross revenues 

and rising to 8.5% in 2014. For SDARS, 

the CRJs established a phased-in rate 

commencing at 9.0% gross revenues and 

escalating to 11.0% by 2017. 

Under 17 U.S.C. 802(f)(1)(D), the 

Register of Copyrights may review for 

legal error the resolution by the CRJs of 

a material question of substantive law 

under title 17 that underlies or is 

contained in a final determination of the 

CRJs. If the Register of Copyrights 

concludes, after taking into 

consideration the views of the 

participants in the proceeding, that any 

resolution reached by the CRJs was in 

material error, the Register of Copyrights 

shall issue a written decision correcting 

such legal error. 17 U.S.C. 802(f)(1)(D). 

The Register’s correction, which must 

specifically identify the legal conclusion 

of the CRJs determined to be erroneous, 

is to be published in the Federal 

Register along with the CRJs’ final 

determination. Id. ‘‘As to conclusions of 

substantive law involving an 

interpretation of the statutory provisions 

of [title 17], the decision of the Register 

of Copyrights shall be binding as 

precedent upon the Copyright Royalty 

Judges in subsequent proceedings 

* * *.’’ Id. 

The Register concludes that the CRJs’ 

determination of rates for royalty 

payments to be paid by PSS pursuant to 

17 U.S.C. 114 for the use of sound 

recordings did not properly consider the 

four statutory factors as required under 

17 U.S.C. 801(b)(1). The CRJs’ 

misinterpretation of the applicable 

statutory standard constitutes an 

erroneous resolution of a material 

question of substantive law under title 

17 that underlies or is contained in the 

final determination. 

Copyright Royalty Judges’ 

Determination Setting Rates and Terms 

for Preexisting Subscription Services 

On January 5, 2011, the CRJs 

announced the commencement of 

proceeding 2011–1 CRB PSS/Satellite II 

(‘‘PSS SDARS II’’) to determine the 

reasonable rates and terms applicable to 

PSS and SDARS for the period January 

1, 2013 through December 31, 2017. 76 

FR 591, Jan. 5, 2011. Pursuant to 17 

U.S.C. 804(b)(3)(B), the CRJs gave notice 

of a request for petitions to participate. 

Id. By the time of the commencement of 

the PSS SDARS hearing, of the original 

participants, only Music Choice, Sound 

Exchange, and Sirius XM remained as 

non-settling participants in the 

proceeding. Final Determination at 2. 

On May 25, 2012, these participants 

submitted a stipulation to the CRJs in 

which they agreed to § 112 license rates 

and terms, and the proceeding 

continued with respect to the § 114 rates 

and terms. Id. at 2. On December 14, 

2012, the CRJs issued their Initial 

Determination in the proceeding. Id. at 

3. SoundExchange and Sirius XM filed 

motions for a rehearing asserting various 

errors of fact and law, both of which 

were denied on January 30, 2013. Order 

Denying Motions for Rehearing, Docket 

No. 2011–1 CRB PSS/Satellite II (Jan. 

30, 2013). On February 14, 2013, the 


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22914 Federal Register / Vol. 78, No. 74 / Wednesday, April 17, 2013 / Notices 

1The Final Determination reflected the views of 

two of the three CRJs. The third CRJ, Judge Roberts, 

filed a separate opinion concurring in part and 

dissenting in part. In referencing the ‘‘CRJs’’ in the 

course of discussing the majority opinion, the 

Register is referring to the two majority judges. 

2Sirius XM participated in proceeding only with 

respect to rates for SDARS. 

3At a different point in the opinion, the CRJs 

observed that the benchmark evidence submitted by 

the PSS parties in support of their proposals, which 

included licensing agreements with various third 

parties and expert analysis thereof, ‘‘failed to 

provide the means for determining a reasonable rate 

for the PSS, other than, perhaps to indicate the 

extreme ends of the range of reasonable rates.’’ 

Final Determination at 20. This statement appears 

to contradict somewhat the CRJs’ earlier conclusion, 

described above, that the parties had failed to 

establish any zone of reasonableness whatsoever. 

What is clear, however, is that in applying the 

§ 801(b)(1) factors, the CRJs did not consider a range 

of 2.6% to 15%, or any other range of possible rates, 

but instead assessed only the singular rate of 7.5% 

under each of the four statutory factors. See Id. at 

20–29. 

4 In its motion for rehearing, SoundExchange took 

issue with the way in which the CRJs defined the 

zone of reasonable rates for SDARS, as the Final 

Determination appears to suggest two possible 

ranges. Compare Final Determination at 48–49 

(suggesting zone was 7% to 22.32%), with Final 

Determination at 61 (suggesting 12%–13% as the 

top of the zone of reasonableness). In rejecting 

SoundExchange’s motion, the CRJs stated that ‘‘the 

Judges determined that the zone of reasonableness 

had a floor of 7% * * * and an upper bound ‘that 

can be no more than 22.32%.’’’ Order Denying 

Motions for Rehearing at 3. The rates established by 

the CRJs for SDARS after considering the statutory 

factors fell within both possible zones. Final 

Determination at 68. 

5The Register does not mean to suggest that there 

is only one conceivable approach to satisfy the 

statutory criteria, but merely to point out an 

established methodology for testing potential rates 

against the section 801(b)(1) factors. Cf. Mechanical 

and Digital Phonorecord Rate Determination 

Proceeding, 74 FR 4510, 4522–26, Jan. 26, 2009 

(considering specific penny rates for the 

reproduction and distribution of musical works 

under section 801(b)(1) and finding that such rates 

satisfied all four factors without any need for 

adjustment). 

6The phase-in was designed to ‘‘moderate any 

potential negative impact the rate increase might 

have on the PSS.’’ Final Determination at 29. 

7The Register’s Notice posed additional questions 

to the participants. With regard to those additional 

questions, the Register has closed her review for 

legal error without reaching any conclusions. No 

inferences or precedential value shall be drawn 

from the Register’s decision to not to express any 

conclusions on those questions. 

8Sirius XM responded to the Notice but did not 

weigh in on the PSS issue. 

CRJs issued their Final Determination of 

rates and terms for PSS and SDARS.1

This review concerns the CRJs’ 

interpretation and application of the 

statutory criteria of § 801(b)(1) in 

establishing rates for PSS, which 

involved the participants Music Choice 

and SoundExchange.2 As set forth 

above, under 17 U.S.C. 801(b)(1), the 

rates established for PSS under section 

114(f)(1)(B) are to be reasonable and 

calculated to achieve each of four 

statutory objectives. 17 U.S.C. 801(b)(1); 

see also 17 U.S.C. 114(f)(1)(B) 

(specifying that CRJs shall consider 

factors set forth in § 801(b)(1) in 

establishing rates for PSS and SDARS); 

accord SoundExchange, Inc. v. 

Librarian of Congress, 571 F.3d 1220, 

1222 (D.C. Cir. 2009) (setting forth 

statutory standard). 

In the proceeding, Music Choice 

proposed a PSS royalty rate of 2.6% of 

gross revenues. Final Determination at 

9. SoundExchange, for its part, proposed 

a rate of 15% of gross revenues for the 

first year of the licensing period, 

increasing to 45% by 2017. Id. The CRJs 

concluded that these proposals ‘‘were so 

far apart, and so far from the current 

rate, that they cannot even be said to 

describe a ‘zone of reasonableness.’ ’’ Id. 

at 16. In light of this assessment, the 

CRJs determined that ‘‘[t]he only 

remaining guidance the Judges have 

upon which to base the new rates is the 

current royalty rate of 7.5% of PSS 

Gross Revenues. This rate approximates 

the middle of the wide spectrum 

proposed by the parties. It is the rate 

against which the Judges will test the 

section 801(b) policy factors.’’ Id. at 16– 

17.3

This approach stands in contrast to 

the CRJs’ methodology in the previous 

PSS SDARS proceeding (‘‘PSS SDARS 

I’’), as well as in the SDARS portion of 

the instant proceeding, pursuant to 

which the CRJs applied the statutory 

factors to a range of potentially 

applicable rates determined to lie 

within the ‘‘zone of reasonableness’’ in 

order to ascertain which rates among 

those considered should be adopted. 

See 73 FR 4080, 4094–98, Jan. 24, 2008 

(identifying 2.35% to 13% as the zone 

of reasonableness and applying the 

statutory factors to adopt rates within 

that zone); Final Determination at 49–62 

(analyzing SDARS rates within a ‘‘zone 

of reasonableness’’).4 As this process 

has been explained by the Court of 

Appeals for the D.C. Circuit, ‘‘ ‘To the 

extent that the statutory objectives 

determine a range of reasonable royalty 

rates that would serve all [the] 

objectives adequately but to differing 

degrees, the [Board] is free to choose 

among those rates, and courts are 

without authority to set aside the 

particular rate chosen by the [Board] if 

it lies within a zone of reasonableness.’’ 

Recording Indus. Ass’n v. Librarian of 

Congress, 608 F.3d 861, 865 (D.C. Cir. 

2010) (alterations in original).5

Here, instead of analyzing a range of 

potentially acceptable rates for PSS 

under the section 801(b)(1) factors, the 

CRJs instead chose to apply the four 

statutory objectives to only the existing 

statutory rate of 7.5%. In the case of the 

first section 801(b) factor—maximizing 

the availability of creative works—the 

CRJs determined that ‘‘the policy goal of 

maximizing creative works to the public 

is reasonably reflected in the current 

rate and, therefore, no adjustment is 

necessary.’’ Final Determination at 22. 

With respect to the second factor, 

however—affording fair return/fair 

income to copyright owners and users— 

the CRJs concluded, in light of a 

prospective increase in Music Choice’s 

usage of sound recordings, that ‘‘a 1% 

upward adjustment of the benchmark 

(from 7.5% to 8.5% of Gross Revenues), 

phased in during the early part of the 

licensing period, is appropriate to serve 

the policy of fair return/fair income.’’ Id. 

at 25. Turning to the third factor—the 

relative roles of copyright owners and 

users—the CRJs reverted to the 7.5% 

rate, opining that ‘‘[u]pon careful 

weighing of the evidence * * * no 

adjustment [to the current 7.5% rate] is 

warranted.’’ Id. at 27. With respect to 

the fourth factor—minimizing 

disruptive impact—‘‘the Judges [were] 

not persuaded by the record testimony 

or the arguments of the parties that the 

current PSS rate [of 7.5%] is disruptive 

to a degree that would warrant an 

adjustment, either up or down.’’ Id. at 

29. 

In sum, the CRJs’ analysis yielded 

conflicting results. An upward 

adjustment to the current 7.5% rate was 

found to be warranted under factor two, 

while factors one, three and four 

indicated that the rate should remain 

the same. Following this mixed review 

of the 7.5% rate under the statutory 

factors, the CRJs—without any 

explanation of how these disparate 

results might be reconciled—chose to 

adopt a ‘‘phased-in’’ rate structure 

starting at 8.0% in 2013, and increasing 

to 8.5% for the years 2014 through 2017. 

Id.6

On March 15, 2013, the Copyright 

Office issued a Notice of Review for 

Legal Error in Docket No. 2011–1 CRB 

(‘‘Notice’’). In the Notice, the Office 

sought comments, inter alia, on whether 

the PSS rates in the final determination 

‘‘were properly evaluated under each of 

the four statutory objectives as required 

by 17 U.S.C. 801(b)(1).’’ Notice at 2; 17 

U.S.C. 802(f)(l)(D) (in conducting review 

for legal error, Register is to take into 

account the views of the participants).7

The Office received responses to this 

question from the two interested parties, 

Music Choice and SoundExchange.8 In 

its comments, Music Choice asserted 

that because the CRJs had erroneously 

selected 7.5% from the PSS SDARS I 

determination as the benchmark rate for 

their consideration, the evaluation of 

the four policy objectives based on this 


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Federal Register / Vol. 78, No. 74 / Wednesday, April 17, 2013 / Notices 22915 

9Although in their comments the responding 

parties expressed significant concern about the 

CRJs’ selection of the PSS statutory rate generated 

by PSS SDARS I as the relevant benchmark for PSS 

SDARS II, the Register does not mean to suggest any 

view on this aspect of the proceeding, or on the 

merits of the rates ultimately selected by the CRJs. 

10Under the statutory framework, the CRJs are 

required to ‘‘act in accordance with regulations 

issued by the Copyright Royalty Judges and the 

Librarian of Congress, and on the basis of a written 

record, prior determinations and interpretations of 

the Copyright Royalty Tribunal, Librarian of 

Congress, the Register of Copyrights, copyright 

arbitration royalty panels (to the extent those 

determinations are not inconsistent with a decision 

of the Librarian of Congress or the Register of 

Copyrights), and the Copyright Royalty Judges (to 

the extent those determinations are not inconsistent 

with a decision of the Register of Copyrights that 

was timely delivered to the Copyright Royalty 

Judges pursuant to section 802(f)(1)(A) or (B), or 

with a decision of the Register of Copyrights 

pursuant to section 802 (f)(1)(D)) * * * and 

decisions of the court of appeals * * * .’’ 17 U.S.C. 

803(a)(1). 

selection was also necessarily 

erroneous. Letter from Paul M. Fakler to 

Office of the General Counsel at 12 

(Mar. 22, 2013). Music Choice observed 

that ‘‘[i]n taking this approach, the 

Judges departed from longstanding 

precedent, in which a range of 

reasonable rates is established and then 

a rate is selected from within that range 

by balancing the four policy objectives 

* * *.’’ Id. (citing Librarian’s PSS 

Determination, 63 FR 25394, 25405–06, 

May 8, 1998). 

In similar fashion, SoundExchange 

argued that applying the statutory 

factors to the ‘‘incorrect starting point’’ 

of the 7.5% rate established in PSS 

SDARS I was ‘‘utterly meaningless.’’ 

Letter from Michael B. DeSanctis to 

Office of the General Counsel at 5 (Mar. 

25, 2013). As expressed by 

SoundExchange: ‘‘Simply put, it is a 

clearly erroneous application of the 

section 801(b)(1) factors to apply them 

as adjustments to a rate that is not a 

marketplace rate and that is wholly 

unsupported by the record evidence.’’ 

Id.9

Review of Copyright Royalty Judges’ 

Determination 

Section 801(b)(1) provides that the 

rates adopted by the CRJs ‘‘shall be 

calculated to achieve’’ the four statutory 

objectives. Under a plain reading of the 

statutory provision, the rates selected by 

the CRJs must be determined to satisfy 

each of the four criteria in order to 

fulfill the statutory purpose. 

As interpreted by the Court of 

Appeals for the District of Columbia 

Circuit, ‘‘the natural reading of the 

language of section 801(b)(1) is that the 

royalty rate is to be ‘calculated to 

achieve the following objectives’ in the 

sense of being designed or adapted for 

the achievement of those objectives 

* * *.’’ Recording Indus. Ass’n. v. 

Copyright Royalty Tribunal, 662 F.2d 1, 

8 n.19 (D.C. Cir. 1981). That court has 

further explained that ‘‘[t]he statutory 

factors pull in opposing directions, and 

reconciliation of these objectives is 

committed to the Tribunal [now CRB] as 

part of its mandate to determine 

‘reasonable’ royalty rates.’’ Id at 9.; see 

also Recording Indus. Ass’n v. Librarian 

of Congress, 608 F.3d at 864 (‘‘When 

establishing terms and rates * * * the 

Copyright Act requires the Board to 

balance four general and sometimes 

conflicting policy objectives.’’); 

Recording Indus. Ass’n v. Librarian of 

Congress, 176 F.3d 528, 533 (D.C. Cir. 

1999) (‘‘‘[R]easonable rates’ are those 

that are calculated with reference to the 

four statutory criteria.’’). 

Accordingly, in prior rate proceedings 

governed by section 801(b)(1), the CRJs 

(and their predecessor ratesetting 

bodies, the Copyright Royalty Tribunal 

and the copyright arbitration royalty 

panels) have assessed potentially 

applicable rates including the ultimately 

selected rates under each of the four 

statutory factors to ensure that the 

chosen rates would achieve the four 

policy objectives. See, e.g., 

Determination of Rates and Terms for 

Preexisting Subscription Services and 

Satellite Digital Audio Radio Services, 

73 FR 4094–4098, Jan. 24, 2008; 

Determination of Reasonable Rates and 

Terms for the Digital Performance of 

Sound Recordings, 63 FR 25405–09, 

May 8, 1998; Adjustment of Royalty 

Payable Under Compulsory License for 

Making and Distributing Phonorecords 

46 FR 10466, 10479–81, Feb. 3, 1981; 

Adjustment of the Royalty Rate for CoinOperated Phonorecord Players, 46 FR 

884, 889, Jan. 5, 1981. 

In this case the CRJs did not do this.10

Rather, in the instant proceeding, the 

existing statutory rate of 7.5% for PSS 

was found by the CRJs to meet the 

factors set forth in § 801(b)(1)(A), (C) 

and (D), with no adjustment warranted. 

But the CRJs also determined that the 

7.5% rate should be adjusted upward 

for the period in question (initially to 

8.0% and later to 8.5%) in light of the 

fair return/fair income factor set forth in 

section 801(b)(1)(B). Thus, the CRJs did 

not consider the ultimately selected 

rates of 8.0% and 8.5% against the 

policy goals of section 801(b)(1)(A), (C) 

or (D), or determine that the chosen 

rates in fact fulfill these three policy 

objectives. 

Proper consideration of the four 

statutory criteria set forth in section 

801(b)(1) lies at the heart of the process 

for establishing reasonable rates 

according to Congress’ design. The 

Register therefore concludes that the 

CRJs’ misinterpretation of section 

801(b)(1), and consequent failure to 

evaluate the actual rates chosen for PSS 

under each of the section 801(b)(1) 

factors, constitutes a material error of 

substantive law. 

CRJs’ Continuing Jurisdiction 

The Register notes that the CRJs enjoy 

continuing jurisdiction to amend their 

final determination. Under section 

803(c)(4), ‘‘The Copyright Royalty 

Judges may issue an amendment to a 

written determination to correct any 

technical or clerical errors in the 

determination or to modify the terms, 

but not the rates, of royalty payments in 

response to unforeseen circumstances 

that would frustrate the proper 

implementation of such determination. 

Such amendment shall be set forth in a 

written addendum to the determination 

that shall be distributed to the 

participants of the proceeding and shall 

be published in the Federal Register.’’ 

The Register encourages the CRJs to 

consider whether the error identified 

herein is amenable to correction 

pursuant to their continuing 

jurisdiction. 

Conclusion 

Having reviewed the resolution by the 

Copyright Royalty Judges for legal error, 

the Register of Copyrights hereby 

concludes that the rates set for royalty 

payments for the use of sound 

recordings in transmissions made by 

PSS must be found to satisfy all of the 

section 801(b)(1) factors. The CRJs’ 

failure to determine that the selected 

rates fulfill each of the four statutory 

objectives constitutes legal error. This 

decision shall be binding as precedent 

upon the CRJs. 

Dated: April 9, 2013. 

Maria A Pallante, 

Register of Copyrights. 

[FR Doc. 2013–09005 Filed 4–16–13; 8:45 am] 

BILLING CODE 1410–30–P 

MARINE MAMMAL COMMISSION 

Sunshine Act Meeting 

TIME AND DATE: The Marine Mammal 

Commission and its Committee of 

Scientific Advisors on Marine Mammals 

will meet on Tuesday, 7 May 2013, from 

10:30 a.m. to 5:45 p.m.; Wednesday, 8 

May 2013, from 8:30 a.m. to 5:30 p.m.; 

Thursday, 9 May 2013, from 8:30 a.m. 

to 5:00 p.m. The Commission and the 

Committee also will meet in executive 


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