```

[Federal Register Volume 76, Number 147 (Monday, August 1, 2011)]
[Rules and Regulations]
[Pages 45695-45696]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19306]

=======================================================================
-----------------------------------------------------------------------

LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Parts 370 and 382

[Docket No. RM 2011-5]

Notice and Recordkeeping for Use of Sound Recordings Under 
Statutory License

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Copyright Royalty Judges are amending their regulations to 
authorize the use of proxy reports of use to permit distribution of 
royalties collected for the period April 1, 2004, through December 31, 
2009, for the public performance of sound recordings by means of 
digital audio transmissions pursuant to statutory license. Proxy 
reports of use will be used for those services for which no reports of 
use were submitted or for which the reports of use were unusable.

DATES: Effective Date: August 31, 2011.

FOR FURTHER INFORMATION CONTACT: Richard Strasser, Senior Attorney, or 
Gina Giuffreda, Attorney Advisor, by telephone at (202) 707-7658 or e-
mail at crb@loc.gov.

SUPPLEMENTARY INFORMATION:

Background

    Sections 112 and 114 of the Copyright Act, title 17 of the United 
States Code, are the statutory licenses governing the public 
performance of sound recordings by certain types of eligible services 
\1\ by means of a digital audio transmission. 17 U.S.C. 112(e), 114. 
Services operating under these licenses are required to, among other 
things, pay royalty fees and report to copyright owners of sound 
recordings on the use of their works. Id. The Copyright Act directs the 
Copyright Royalty Judges (``Judges'') to determine the royalty rates to 
be paid, 17 U.S.C. 114(f)(1)(A), (f)(2)(A) and 17 U.S.C. 112(e)(3), and 
to establish regulations to give copyright owners reasonable notice of 
the use of their works and create and maintain records of use for 
delivery to copyright owners. 17 U.S.C. 114(f)(4)(A) and 17 U.S.C. 
112(e)(4). The purpose of the notice and recordkeeping requirement is 
to ensure that the royalties collected under the statutory licenses are 
distributed by a central source--a Collective--or other agents 
designated to receive royalties from the Collective to the correct 
recipients. The Judges promulgated final notice and recordkeeping 
regulations on October 13, 2009.\2\ See 74 FR 52418.
---------------------------------------------------------------------------

    \1\ The types of eligible services consist of subscription, 
nonsubscription, satellite digital audio radio services, and 
business establishment services.
    \2\ Until that time, interim regulations were in effect. See 71 
FR 59010 (October 6, 2006).
---------------------------------------------------------------------------

    On March 24, 2011, SoundExchange, Inc., the entity designated by 
the Judges as the Collective, petitioned the Judges to commence a 
rulemaking proceeding to consider adopting regulations to authorize 
SoundExchange ``to use proxy reporting data to distribute to copyright 
owners and performers certain sound recording royalties for periods 
before 2010 that are otherwise undistributable due to licensees' 
failure to provide reports of use'' or their provision of ``reports of 
use that are so deficient as to be unusable.'' Petition of 
SoundExchange, Inc., for a Rulemaking to Authorize Use of a Proxy to 
Distribute Certain Pre-2010 Sound Recordings at 1 and 2 (March 24, 
2011). The proxy proposed by SoundExchange uses ``available data for 
services of the same license type, for the same year.'' Id at 9. 
SoundExchange stated that the proxy would be used to distribute $28 
million in royalties, which represents 4.5% of all the royalties 
collected for the relevant timeframe--April 1, 2004, through December 
31, 2009. Id. at 2. In

[[Page 45696]]

support of its request, SoundExchange noted that a proxy had been 
utilized once before when the lack of reports of use rendered the 
reasonable distribution of royalties difficult if not impossible. Id. 
at 3. In that instance, reporting data did not exist for the period 
from when the statutory licenses first became available for services 
other than preexisting subscription services (October 1998) to the 
promulgation of interim notice and recordkeeping regulations (March 
2004).\3\ See Notice and Recordkeeping for Use of Sound Recordings 
Under Statutory License, Docket No. RM 2002-1G, Final rule, 69 FR 
58241. There the proxy data was used to distribute 100% of the 
royalties collected for that time period. Id.
---------------------------------------------------------------------------

    \3\ Prior to May 31, 2005, the statutory licenses were 
administered by the Copyright Office under the Copyright Arbitration 
Royalty Panel (``CARP'') system. The Copyright Royalty and 
Distribution Reform Act of 2004, Public Law 108-419, 118 Stat. 234, 
replaced the CARP system with the Copyright Royalty Judges.
---------------------------------------------------------------------------

    On April 19, 2011, the Judges published a notice of proposed 
rulemaking (``NPRM'') seeking comment on SoundExchange's proposal. 76 
FR 21833. In addition to soliciting comments on the proposal, the 
Judges invited comment on, among other things, the reasonableness, 
fairness and appropriateness of the use of the proposed proxy and 
sought comment on possible alternatives to the proposed proxy. Id. at 
21834-35 (April 19, 2011). Comments were due May 19, 2011.
    The Judges received a single comment from SoundExchange in response 
to the NPRM. SoundExchange noted that since the filing of its petition, 
additional reports of use had been provided allowing a further 
distribution of royalties, thereby reducing the amount of 
undistributable royalties to $19.4 million, or about 3% of the total 
royalties collected for the April 1, 2004, to December 31, 2009, 
period. Comments of SoundExchange, Inc. at 1. In response to the 
questions posed in the NPRM, SoundExchange reiterated that the proposed 
proxy would be applied to a much smaller percentage of royalties than 
the one the Copyright Office approved for the October 1998 to March 
2004 period. See e.g., id. at 4, 5. SoundExchange also recounted its 
efforts in arriving at the proposed proxy and noted that it ``has not 
devised any alternative that would be demonstrably more fair.'' Id. at 
5.
    Given that the proxy will be applied to a small percentage of 
royalties for the relevant time period and that no viable alternatives 
have been provided, the Judges are adopting as final the proposed 
regulations as set forth in the NPRM allowing for the use of the proxy 
proposed by SoundExchange for the distribution of royalties for the 
period of April1, 2004, through December 31, 2009. Adoption of the 
proposed regulations, especially in the absence of opposition to the 
proposed proxy, will promote the expeditious distribution of the 
affected royalties.
    The Judges also are adopting as final the technical corrections to 
part 382 proposed by SoundExchange as set forth in the NPRM reflecting 
the renumbering of certain sections in part 370 resulting from the 
Judges' adoption of final notice and recordkeeping regulations in 
October 2009.

List of Subjects

37 CFR Part 370

    Copyright, Sound recordings.

37 CFR Part 382

    Copyright, Digital audio transmissions, Performance right, Sound 
recordings.

Final Regulations

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges amend 37 CFR parts 370 and 382 as follows:

PART 370--NOTICE AND RECORDKEEPING REQUIREMENTS FOR STATUTORY 
LICENSES

0
1. The authority citation for part 370 continues to read as follows:

    Authority:  17 U.S.C. 112(e)(4), 114(f)(4)(A).

0
2. Section 370.3 is amended by adding new paragraph (i) to read as 
follows:

Sec.  370.3  Reports of use of sound recordings under statutory license 
for preexisting subscription services.

* * * * *
    (i) In any case in which a preexisting subscription service has not 
provided a report of use required under this section for use of sound 
recordings under section 112(e) or section 114 of title 17 of the 
United States Code, or both, prior to January 1, 2010, reports of use 
for the corresponding calendar year filed by other preexisting 
subscription services shall serve as the reports of use for the non-
reporting service, solely for purposes of distribution of any 
corresponding royalties by the Collective.

0
3. Section 370.4 is amended by adding new paragraph (f) to read as 
follows:

Sec.  370.4  Reports of use of sound recordings under statutory license 
for nonsubscription transmission services, preexisting satellite 
digital audio radio services, new subscription services and business 
establishment services.

* * * * *
    (f) In any case in which a nonsubscription transmission service, 
preexisting satellite digital audio radio service, new subscription 
service, or business establishment service has not provided a report of 
use required under this section for use of sound recordings under 
section 112(e) or section 114 of title 17 of the United States Code, or 
both, prior to January 1, 2010, reports of use for the corresponding 
calendar year filed by other services of the same type shall serve as 
the reports of use for the non-reporting service, solely for purposes 
of distribution of any corresponding royalties by the Collective.

PART 382--RATES AND TERMS FOR DIGITAL TRANSMISSIONS OF SOUND 
RECORDINGS AND THE REPRODUCTION OF EPHEMERAL RECORDINGS BY 
PREEXISTING SUBSCRIPTION SERVICES AND PREEXISTING SATELLITE DIGITAL 
AUDIO RADIO SERVICES

0
4. The authority citation of part 382 continues to read as follows:

    Authority:  17 U.S.C. 112(e), 114, and 801(b)(1).

Sec.  382.3  [Amended]

0
5. Section 382.3(c)(1) is amended by removing ``Sec.  370.2'' and 
adding ``Sec.  370.3'' in its place.

Sec.  382.13  [Amended]

0
6. Section 382.13(f)(1) is amended by removing ``Sec.  370.3'' and 
adding ``Sec.  370.4'' in its place.

    Dated: July 14, 2011.
James Scott Sledge,
Chief U.S. Copyright Royalty Judge.
    Approved by:

James H. Billington,
Librarian of Congress.
[FR Doc. 2011-19306 Filed 7-29-11; 8:45 am]
BILLING CODE 1410-72-P
```