[Federal Register Volume 63, Number 121 (Wednesday, June 24, 1998)]
[Rules and Regulations]
[Pages 34289-34297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16779]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 96-3B]


Notice and Recordkeeping for Digital Subscription Transmissions

AGENCY: Copyright Office, Library of Congress.

ACTION: Interim regulations.

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SUMMARY: The Copyright Office of the Library of Congress is issuing 
interim regulations on the requirements by which copyright owners shall 
receive reasonable notice of the use of their works from digital 
subscription transmission services, and how records of such use shall 
be kept and made available to copyright owners. The Digital Performance 
Right in Sound Recordings Act of 1995 requires the Office to adopt the 
regulations.

EFFECTIVE DATE: The interim regulations are effective July 20, 1998.

FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or 
Jennifer L. Hall, Senior Attorney, Copyright GC/I&R, P.O. Box 70400, 
Southwest Station, Washington, D.C. 20024. Telephone: (202) 707-8380.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Interim Rule in 
Docket No. RM 96-3B, adopted June 15, 1998. The full text of the 
Interim Rule is available for inspection and copying during normal 
business hours in the Public Information Office of the Copyright 
Office, Room LM-401, and in the Public Records Office of the

[[Page 34290]]

Licensing Division of the Copyright Office, Room LM-458, James Madison 
Memorial Building, First and Independence Avenue, S.E., Washington, 
D.C. 20559-6000. The full Interim Rule is also available via the 
Copyright Office homepage at http://www.loc.gov/copyright.
    The regulations are issued on an interim basis due to the 
developing nature of the digital transmission service industry and of 
the technology which will be employed in accommodating the reporting 
requirements. In two years, the Office will provide another opportunity 
for comment before issuing final regulations.

Background

    On November 1, 1995, Congress enacted the Digital Performance Right 
in Sound Recordings Act of 1995 (``the Act''). Public Law No. 104-39, 
109 Stat. 336 (1995). The Act gave to sound recording copyright owners 
an exclusive right to perform their works publicly by means of a 
digital audio transmission. 17 U.S.C. 106(6). Certain digital 
transmissions were exempted from the scope of the right, 17 U.S.C. 
114(d)(1), while nonexempt digital subscription services were given the 
opportunity to qualify for a statutory license. 17 U.S.C. 114(d)(2). 
Congress directed the Librarian of Congress to establish regulations 
under which copyright owners may receive reasonable notice of the use 
of their sound recordings under the statutory license, and under which 
entities performing the sound recordings shall keep and make available 
records of such use. 17 U.S.C. 114(f)(2).

The Sec. 114 License for Nonexempt Subscription Transmissions

    A nonexempt digital subscription service transmission is subject to 
statutory licensing in accordance with 17 U.S.C. 114(f) if the 
transmission is not part of an interactive service, does not exceed the 
``sound recording performance complement,'' does not give an advance 
program schedule or prior announcement of titles to be performed, does 
not automatically cause the receiving device to switch from one program 
channel to another, and includes information encoded by authority of 
the copyright owner identifying the title, the featured artist, and 
related information. 17 U.S.C. 114(d)(2). The ``sound recording 
performance complement'' is a limit on the number of selections that 
can be played from one phonorecord, boxed set, or featured artist 
within a three-hour period. See 17 U.S.C. 114(j)(7).
    Digital subscription transmission services that qualify for the 
statutory license may reach a voluntary agreement as to rates and terms 
with sound recording copyright owners, or may petition the Librarian of 
Congress to convene a copyright arbitration royalty panel (CARP) to set 
rates and terms for those entities that have not reached voluntary 
agreement. 17 U.S.C. 114(f)(1)-(2), and (4). On June 4, 1996, no 
voluntary agreement having been reached, the parties petitioned the 
Librarian to convene such a CARP.<SUP>1</SUP> Rates and terms set by 
the CARP will apply to all copyright owners and subscription services 
not subject to voluntary agreement. 17 U.S.C. 114(f)(2)-(3). However, 
Congress also directed the Librarian of Congress to establish 
regulations by which copyright owners may receive reasonable notice of 
the use of their sound recordings under statutory license, and under 
which records of such use shall be kept and made available by the 
entities performing the sound recordings. 17 U.S.C. 114(f)(2). Anyone 
performing a sound recording publicly by means of a nonexempt 
subscription transmission under section 114(f) may do so without 
infringing the exclusive right of the sound recording copyright owner 
by complying with the notice requirements that the Librarian prescribes 
by regulation and by paying royalty fees in accordance with the law. 17 
U.S.C. 114(f)(5).
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    \1\ On November 28, 1997, the CARP convened by the Librarian 
issued its report determining rates and terms for the license for 
the period from the effective date of the Act. Report of the 
Copyright Arbitration Royalty Panel, In re: Determination of 
Statutory License Terms and Rates for Certain Digital Subscription 
Transmission of Sound Recordings, No. 96-5 (Nov. 28, 1997). The 
Librarian issued an order accepting in part the CARP Report, and 
establishing additional terms. See discussion infra, The 1997 CARP 
Proceeding Under Section 114.
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Rulemaking on Notice and Recordkeeping

    On May 13, 1996, the Copyright Office published a Notice of 
Proposed Rulemaking in the Federal Register requesting comments on the 
requirements by which copyright owners should receive reasonable notice 
of the use of their works from subscription digital transmission 
services and how records of such use should be kept and made available 
to copyright owners. The Office asked commentators to consider both the 
adequacy of notice to sound recording copyright owners and the 
administrative burdens placed on digital transmission services in 
providing notice and maintaining records of use. 61 FR 22004 (May 13, 
1996).

Initial Comments and Reply Comments

    The Office received a total of four comments and three reply 
comments, as well as one surreply and one comment to the surreply. 
Comments were submitted by the Recording Industry Association of 
America (RIAA) (representing member companies who manufacture or 
distribute more than 90 percent of legitimate sound recordings sold in 
the United States), and three digital music subscription services 
operating in the United States: DMX, Inc. (DMX); Muzak, Inc. (Muzak); 
and Digital Cable Radio Associates/Music Choice (DCR) (``commenting 
parties''). The Initial and Reply Comments are fully summarized in the 
text of this Interim Rule and Order, and were also discussed in a 
second Notice of Proposed Rulemaking (NPRM), published on June 24, 
1997. See 62 FR 34035 (June 24, 1997). The comments addressed a wide 
range of proposals for notice and records of use, including: an initial 
notice filed with the Copyright Office to indicate commencement of 
transmission under statutory license; quarterly reports of use 
including data to indicate which sound recordings were performed and 
the number of times (summary frequency data); whether reports should be 
served on a single collective rights organization (``Collective'') such 
as RIAA's, rather than on individual copyright owners; data fields to 
identify sound recordings; and maintenance of records. The comments 
also addressed matters not prescribed in the Act, such as 
confidentiality, auditing, and statements of account.

Meetings To Facilitate Agreement on Notice and Recordkeeping 
Requirements; and Issues Identified in Discussions Among the 
Parties

    On November 14, 1996, the Copyright Office met with the parties to 
facilitate agreement on notice and recordkeeping requirements under 
section 114, and to discuss the proper regulatory and recordkeeping 
role for the Office. In attendance were 15 individuals representing 
RIAA, DMX, Muzak, DCR, and the Copyright Office. The Office distributed 
at the meeting a list of principles it accepted: for example, Services 
would file with the Office an initial notice indicating transmission of 
sound recordings under statutory license. Following the meeting, the 
Office circulated a draft meeting summary, and received additional 
written comments in response. A

[[Page 34291]]

second meeting with the parties took place on January 23, 
1997.<SUP>2</SUP>
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    \2\ The comments, meeting summaries, and meeting handouts are 
available in the Public Information Office of the Copyright Office, 
Room LM-401, James Madison Memorial Building, Washington, D.C.
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    In the comments and meeting discussions, the parties considered how 
reports of use would be kept or made available for sound recording 
copyright owners who were not members of a Collective, who could not be 
located, or who refused delivery. While Services believed the Office 
should designate a Collective and not permit individual copyright 
owners not to join, RIAA expressed concern about its Collective 
administering rights for non-member copyright owners, due to 
contractual and fiduciary duties to its members. The commenting parties 
addressed whether Services should provide playlist samples or error 
logs to verify compliance with the sound recording performance 
complement, and whether the Act requires Services to affirmatively 
report compliance with the complement. Following the meetings, however, 
a Service proposal to produce each quarter the entire intended 
playlist, instead of summary frequency data or error logs, was deemed 
generally acceptable, provided an agreeable definition for ``intended 
playlist'' were reached. The commenting parties also continued to 
discuss data fields to identify sound recordings performed.

The Second NPRM and Request for Further Comments

    On June 24, 1997, the Copyright Office published a second Notice of 
Proposed Rulemaking (NPRM), presenting certain preliminary decisions 
and asking the parties for further comments. See Notice of Proposed 
Rulemaking, 62 FR 34035 (June 24, 1997). For example, the Office 
announced that it would accept an optional initial notice from 
Services; concluded that Services should keep and make available 
records to permit monitoring of the performance complement; asked how 
Services would make records of use available to unaffiliated sound 
recording copyright owners; concluded that copyright owners whose 
identity and location is known should be served directly with reports 
of use; inquired whether Services planned to serve quarterly intended 
playlists on small and individual copyright owners, or if there were an 
alternative reporting mechanism; inquired whether copyright owners 
should be permitted to waive complement information in favor of summary 
frequency data for their recording only; sought comment on estimated 
costs for providing intended playlists to different parties; stated a 
requirement that Services maintain records of use for three years; and 
announced that it would issue no regulation on audits. The Office 
provided a 60-day comment period.

The Further Comments

    In response to the request for Further Comments in the June 24, 
1997, NPRM, the Office received comments from: RIAA; DMX; DCR; the 
National Music Publishers' Association, Inc. (NMPA); and Creative 
Engineering Concepts, Inc. (CECI). CECI is the developer of an 
automated signal recognition technology employed nationwide and 
internationally by Broadcast Data Systems, LP, to identify sound 
recordings and advertisements using features and characteristics of the 
audio patterns.

1. Initial Notice

    RIAA argued that the single-page initial notice filed by Services 
with the Copyright Office should be mandatory, not optional, so that 
copyright owners can identify prospectively entities that will transmit 
under statutory license.

2. Reports of Use

    The commenting parties agreed that Services should provide 
quarterly reports of use consisting of their ``intended playlists'' for 
the quarter.
    a. Definition of intended playlist. All commenting parties agreed 
that the intended playlist should report every sound recording 
``scheduled'' to be transmitted; in addition, RIAA recommended that the 
intended playlist report every sound recording ``actually'' 
transmitted. RIAA also recommended that the intended playlist be 
defined to include a detailed report of any Service system failures 
resulting in transmission of unscheduled sound recordings. DMX 
suggested that the definition prescribe data fields and sound recording 
identifiers to be included in the playlist.
    b. Reporting system failures resulting in deviations from the 
intended playlist. RIAA said Services should report system failures, 
including time and duration, and titles of substitute sound recordings 
transmitted in place of those scheduled. DMX said it does not 
automatically generate error logs in event of system failure, and that 
errors causing deviations from intended playlists are rare. DMX noted 
that logs were proposed to evaluate summary frequency data and playlist 
samples; providing complete intended playlists vitiates their 
necessity.
    c. Certification of reports. RIAA said reports of use should 
contain a certification signed by a Service representative attesting 
under notary or penalty of perjury to accuracy. DMX said at most the 
regulation should require a statement that the report reflects 
information believed to be accurate and maintained in ordinary course 
of business.
    d. Reporting compliance with the performance complement. DCR 
reasserted that the Act does not impose an obligation on Services 
affirmatively to report compliance with the performance complement.
    e. Data fields and sound recording identifiers. RIAA, DCR and DMX 
generally agreed that the intended playlist reports should include the 
following eight data fields: channel, sound recording title, featured 
artist, album title, record label, catalog number, transmission date, 
and transmission time. In addition, RIAA sought four other identifiers: 
the CD track number, the Service name, the International Sound 
Recording Code (ISRC), and the ``sound recording identifier'' used by 
Selector (the software program Services employ to generate their 
intended playlists). However, CECI also described its technology to 
automatically identify sound recordings ``using features and 
characteristics of the audio patterns,'' and to monitor sound recording 
usage. CECI already administers a network of remote monitoring systems 
collecting channel number and other data; the technology is used by 
record companies, broadcasters and others, to verify airplay, generate 
statistics, control distribution and determine royalty payments. This 
could be adapted within about six months to automatically document use 
of sound recordings and other copyrighted works by Services, verify 
compliance with the performance complement, and generate reports of 
use.
    f. Compilation albums and non-music and foreign programming. RIAA 
said the standard reporting requirements would clearly apply to retail 
compilation albums, such as movie soundtracks, and should also apply to 
non-retail but commercial compilation albums, such as disc jockey 
compilation albums, because in such cases Services possess and make 
available to their subscribers information regarding the retail album. 
RIAA said the regulations should not distinguish between foreign and 
domestic programming. In earlier comments, Services sought to limit 
regulation of non-stereo, retransmitted foreign-originated programming, 
or retransmitted programming consisting

[[Page 34292]]

of less than one-half music, such as sports or talk radio, but in their 
Further Comments professed no plans for such programming.

3. Central Collective

    The Further Comments urged the Office to designate a central 
Collective and not impose a requirement of direct service to small, 
independent copyright owners. Services argued severe costs and 
administrative burdens associated with the reporting scheme in the NPRM 
would cripple them, and that direct service would force them to 
mainstream programming. DMX said use of collectives is common practice 
internationally with respect to collection and distribution of 
royalties for performance of sound recordings.
    a. Alternative reporting mechanism. Services did not wish to 
identify individual copyright owners and provide separate reports that 
would also permit complement monitoring. DCR said no alternative to the 
intended playlist would provide comparable information, and the only 
alternative was to designate an independent second Collective for 
copyright owners not wishing to join RIAA. CECI volunteered to be an 
alternative Collective for small independent copyright owners. DMX 
urged the Office to mandate a single Collective, but, recognizing 
burden and expense of providing independent copyright owners with 
either intended playlists or individually tailored summary reports, DMX 
suggested three alternative reporting methods, and five ``safeguards'' 
it sought if direct service were required. DMX said Services should be 
able to choose among the methods and vary them by agreement or 
according to recipient, and that unserved copyright owners should make 
their identity and location known to Services by registered letter.
    b. RIAA Collective as central repository. In Further Comments, RIAA 
said it now agreed to become the central repository for all copyright 
owners, including non-RIAA members. RIAA said it would now agree to 
receive all reports of use and royalties from Services. Because it now 
sought to be the central Collective, it said many questions in the 
second NPRM were moot; for example, there is no need for an alternative 
to the intended playlist, and no need for separation of reports. 
Because the Collective now planned to identify and locate copyright 
owners of all sound recordings performed under the license and to 
distribute to all entitled copyright owners, there was no need to 
define copyright owners ``whose identity and location is known'' to 
trigger a direct service requirement. RIAA said it required complete 
and uniform data to operate a royalty distribution system. It rejected 
summary frequency data because it lacks complement information and said 
all copyright owners are entitled to the same notice of use. RIAA said 
it would deduct costs from royalties to cover administrative expenses. 
Royalties that could not be distributed for unlocated copyright owners 
would, after three years of escrow, be used to offset costs of locating 
non-members.

4. Details Relating to Records of Use

    The Further Comments addressed a number of details relating to 
records of use, including formats of reports, access and 
confidentiality, audits, maintenance of records, costs of maintaining 
and providing records, and retroactivity of recordkeeping requirements.
    a. Reporting and maintaining records of use; format. RIAA and DCR 
agreed that reports of use should be provided within 30 days of the 
close of each quarter; DMX preferred no later than 45 days following 
the end of the quarter. The commenting parties agreed that Services 
should be required to retain reports of use for three years, and that 
reports should be provided on a common machine-readable medium. DMX 
generally accepted the file format suggested by RIAA.
    b. Confidentiality. The commenting Services agreed that provision 
of intended playlists may raise confidentiality concerns. One said 
Services should be able to elect to provide intended playlists, summary 
frequency data, or Internet-posted past playlists (in either a 
password-protected or publicly available area). RIAA said playlists are 
available to anyone willing to monitor programming, but suggested that 
instead of requiring a confidentiality agreement, the regulation should 
limit the information's dissemination and utilization.
    c. Access and audits. While announcing that it would not promulgate 
audit regulations, the Office in the June 24, 1997, NPRM inquired 
whether some regulation on access were needed and how Services would 
make records available to copyright owners who had not been served. DMX 
suggested that audits of Services be limited to once a year, and that 
copyright owners be able to view information held by a Collective, 
subject to fees. NMPA urged the Office to expressly establish audit 
requirements in its forthcoming regulations on notice and recordkeeping 
under section 115.
    d. Costs. RIAA said it would deduct costs from royalties to cover 
administrative expenses, while royalties that could not be distributed 
to unlocated copyright owners would be escrowed for three years before 
reverting to the general royalty account for distribution, or being 
used to offset costs to Collective members of trying to locate non-
members. RIAA said costs of serving the Collective or copyright owners, 
and of retaining reports for three years, should be borne by Services. 
DMX said Services should bear costs of maintaining intended playlists, 
but the cost of preparing and delivering reports of use to a Collective 
or record company, including reasonable labor and computer time, should 
be deducted from royalty payments.
    e. Effective date and transition period. DCR and DMX said reports 
of use should not be required from the license's creation on February 
1, 1996, through adoption of regulations. DCR said retroactive 
recordkeeping would require millions of records. DCR and DMX said the 
Office should recognize a transition period of two years before full 
compliance with notice and recordkeeping rules is required. RIAA sought 
use data for periods preceding issuance of regulations, and said the 
regulation should not recognize a formal transition period.

The 1997 CARP Proceeding Under Section 114

    As noted, following a period of voluntary negotiation concerning 
rates and terms for the section 114 statutory license, the parties 
petitioned the Librarian of Congress on June 4, 1996, to convene a 
copyright arbitration royalty panel (CARP). See 17 U.S.C. 114(f)(1)-
(2); Initiation of Voluntary Negotiation Period, 60 FR 61655 (Dec, 1, 
1995); Initiation of Arbitration, 62 FR 29742 (June 2, 1997). On 
November 28, 1997, the CARP convened by the Librarian issued its report 
determining rates and terms for the license for the period from the 
effective date of the Act. Report of the Copyright Arbitration Royalty 
Panel, In re: Determination of Statutory License Terms and Rates for 
Certain Digital Subscription Transmission of Sound Recordings, No. 96-5 
(Nov. 28, 1997) (Report). The Report established, inter alia, the 
following terms:
    (1) Collective: The CARP determined that ``any notices and payments 
required by the CARP `should be submitted to a single private entity or 
government agency that will distribute the funds to sound recording 
copyright owners.' '' Because RIAA requested that it be designated as 
the single entity and because Services did not object, the

[[Page 34293]]

Panel determined ``that the RIAA Collective shall serve as that single 
private entity.'' Report para. 184. See also para. 205.
    (2) Maintenance of certain records: The CARP said Services shall 
maintain accurate records on matters directly related to the payment of 
license fees for a period of three years. Report Paras. 192, 209.
    (3) Audits: Interested parties may conduct a single audit of a 
Service during any given year. Report Paras. 193, 210.
    (4) Confidentiality: RIAA must establish safeguards to avoid 
disclosure of confidential financial and business information. 
Paras. 191, 208.
    On January 27, 1998, the Librarian concluded on the recommendation 
of the Register that he could not adopt the Report to the extent that 
certain of the findings and conclusions were arbitrary and contrary to 
law. Notice and Order, Docket No. 96-5 CARP DSTRA (Jan. 27, 1998). See 
17 U.S.C. 802(f). Setting aside the Panel's final determination in 
part, to reject the Panel's rate and certain of the terms, the 
Librarian issued an Order published in the Federal Register, accepting 
each of the terms set forth above. See Determination of Reasonable 
Rates and Terms for the Digital Performance of Sound Recordings, 63 FR 
25394 (May 8, 1998). The Librarian's Order also established the 
following additional terms.
    (5) Audits: Interested parties may conduct one audit of the RIAA 
Collective during any given year. 37 CFR 260.6.
    (6) Costs: The RIAA Collective may deduct, from royalties it 
distributes, reasonable costs incurred in administration of the 
distribution of royalties, so long as the reasonable costs do not 
exceed actual costs incurred by the collecting entity. 37 CFR 260.3(d). 
The Collective also may use unclaimed funds to offset the cost of 
administering collection and distribution of royalties. 37 CFR 260.7.
    The CARP proceeding and Librarian's final determination upon review 
of the CARP Report therefore resolved until at least the year 2001 some 
of the issues that were the subject of comment in the present 
rulemaking, including the establishment of a single Collective, 
auditing, confidentiality, and deduction of costs.

Discussion and Conclusions

    The Act directs the Librarian to establish regulations under which 
copyright owners may receive reasonable notice of use of their sound 
recordings under the license, and under which entities performing sound 
recordings shall keep and make available records of use. 17 U.S.C. 
114(d)(2). Congress meant to inhibit neither the arrival of new 
technologies nor the operation of existing digital audio services. S. 
Rep. No. 128, 104th Cong., 1st Sess. 15 (1995); Cong. Rec. S950 (daily 
ed. Jan. 13, 1995) (statement of Sen. Feinstein). The Office has 
considered both adequacy of notice to copyright owners and 
administrative burden for Services providing notice and records. See 61 
FR 22004 (May 13, 1996).

1. Initial Notice

    Digital subscription services transmitting sound recordings under 
the statutory license will file an initial notice with the Copyright 
Office consisting of Service name, address, telephone number, and 
information on how to gain access to the online website or home page of 
the Service or entity, where information may be posted under these 
regulations concerning the use of sound recordings under statutory 
license. The notice will be placed in Copyright Office records where 
copyright owners may access the information concerning use of sound 
recordings under the license. The filing will be required to assist 
copyright owners and Collectives locate entities transmitting under the 
license. Services will file the initial notice any time prior to 
commencement of transmission under the license or within 45 days of the 
regulation's effective date, and update the filing within 45 days of a 
change in the information reported. The notices shall be accompanied by 
a filing fee.

2. Designation of a Single Collective

    Digital subscription services will also be required to provide 
detailed reports of their use of sound recordings under the license, 
but will not be required to serve copyright owners individually. 
Although the Office suggested in its second NPRM that it did not have 
authority to designate a single Collective to serve as a central 
repository and might have to require Services to serve reports of use 
directly on copyright owners or their agents, the Services urged the 
Office to designate a single Collective. Services argued that the costs 
of direct service upon owners of the 10 million songs performed by each 
Service annually would cripple them and cause them to eliminate all but 
``mainstream'' programming in order to limit the number of copyright 
owners served. One Service observed that use of collective 
administration for performance of sound recordings is common practice 
internationally.
    The Office recognizes that collective administration may be 
preferable where a large number of works are used, no single use is of 
great value, and owners cannot be easily located. In such cases, a 
central clearinghouse creates efficiencies of scale. The Office 
continues to question whether it would be appropriate, as part of an 
isolated rulemaking on notice and recordkeeping pursuant to 17 U.S.C. 
114(f)(2), to require that notice of use of sound recordings be served 
on a single Collective rather than on all sound recording copyright 
owners. However, a single Collective (the RIAA Collective) has now been 
designated by a CARP and confirmed by an Order of the Librarian for 
purposes of receiving royalty payments and statements of account. In 
this notice and recordkeeping proceeding, RIAA said that its Collective 
would serve as central repository for reports for all sound recording 
copyright owners, regardless of membership in RIAA; commenting Services 
accepted the RIAA Collective as suitable for this role. The purpose of 
the CARP proceeding was to determine reasonable terms and rates under 
the statutory license. See 17 U.S.C. 114(f). The CARP's designation of 
a single Collective to receive royalty payments and statements of 
account as a term of the license simplifies the Office's task in this 
notice and recordkeeping proceeding. Rates and terms determined in the 
CARP proceeding are binding on all Services and sound recording 
copyright owners. 17 U.S.C. 114(f)(2). Because Services will send 
royalty payments and statements of account to a single Collective 
rather than to individual copyright owners, records of use should be 
sent to the Collective, which will distribute royalties to copyright 
owners based on the information in the records of use.<SUP>3</SUP> As 
one Service noted, reports of use determine royalty payments and should 
logically accompany them.
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    \3\ While most copyright owners are likely to utilize the 
designated Collective, a copyright owner and Service may reach 
separate arrangements in place of requirements imposed by the CARP 
or Copyright Office for royalties and records of use. Section 
114(f)(3) provides:
    License agreements voluntarily negotiated at any time between 
one or more copyright owners of sound recordings and one or more 
entities performing sound recordings shall be given effect in lieu 
of any determination by a copyright arbitration royalty panel or 
decision by the Librarian of Congress. 17 U.S.C 114(f)(3).
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    The Librarian's Order of May 8, 1998, establishes rates and terms 
for the statutory license through December 31, 2000. See 17 U.S.C. 
114(f)(1). The RIAA Collective will serve as the collective 
administration organization through

[[Page 34294]]

that date. Negotiations on rates and terms for years 2001 through 2005 
will commence in January 2000. 17 U.S.C. 114(f)(4)(B).<SUP>4</SUP>
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    \4\ Because future negotiations or CARP proceedings may result 
in designation of more than one Collective, the regulations 
anticipate the possibility that there may be multiple Collectives. 
Of course, it is also possible that future negotiations or CARP 
proceedings result in some payment mechanism other than a 
Collective.
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    In summary, the regulation directs Services to serve records of use 
upon the Collective or Collectives identified in Copyright Office 
records as having been designated through the CARP process or by 
settlement agreement. Because Services will serve records of use for 
all sound recording copyright owners upon the designated Collective[s], 
there is no need for a definition of sound recording copyright owners 
whose identity and location is known, or other regulations concerning a 
direct service requirement. As discussed below, in the event that no 
Collective is designated, or if all designated Collectives terminate 
collection and distribution operations, Services will be required to 
post records of use online, with appropriate safeguards to protect 
confidentiality. Interested parties will have an opportunity to comment 
on these issues before final regulations are issued in late 2000.
    In order to effectuate the statutory mandate that ``copyright 
owners'' may receive reasonable notice of the use of their sound 
recordings under this section, 17 U.S.C. 114(f)(2), the Collective 
should make certain information publicly available. In order to receive 
records of use, designated collectives will file with the Copyright 
Office and post and make available online a notice containing the 
following information: the Collective name, address, and telephone 
number; a statement that the Collective has been designated for 
collection and distribution of performance royalties under statutory 
license for digital transmission of sound recordings; and information 
on how to gain access to the Collective's online website or home page, 
where information may be posted under these regulations concerning the 
use of sound recordings under statutory license. The address of the 
Collective website will be made available on the Copyright Office 
website. In addition, the Collective will post and make available 
online, for the duration of one year, an annual report on how the 
Collective operates, how royalties are collected and distributed, and 
what the Collective spent that fiscal year on administrative expenses.

3. Reports of Use

    Reports of use will be monthly, and shall consist primarily of the 
Service's Intended Playlists for each channel and each day of the 
month. Reports of use shall be due on the twentieth day after the end 
of each month, commencing with the month succeeding the month in which 
these regulations become effective. The commenting parties agreed that 
reports of use should consist of the Intended Playlists. Not all 
Services can produce an actual playlist or error log, and the proposal 
to provide samples to test playlist reports was not found acceptable. 
The Intended Playlists accomplish all of copyright owners' reporting 
objectives, including provision of information with which copyright 
owners can generally monitor compliance with the sound recording 
performance complement in section 114(j)(7).
    The Office considered arguments of DCR and other Services that the 
Act imposes no obligation to affirmatively report compliance with the 
complement, but reaffirms its earlier judgment. The Office notes that 
conforming to the performance complement is a condition of the 
statutory license, and a Service that complies with the regulatory 
notice requirements and pays the statutory royalties thereby avoids 
infringing the copyright owners' exclusive rights. 17 U.S.C. 114(d)(2), 
(f)(5). The Office determines, therefore, that it is within its 
rulemaking authority under section 114(f)(2) to require reporting of 
complement information. See Cablevision Sys. Dev. v. Motion Picture 
Ass'n, 836 F.2d 599 (D.C. Cir. 1988)(Copyright Office had authority to 
issue regulations interpreting statute). The Office believes that the 
presence and specificity of the performance complement indicates 
Congress' intent that records of use include data to test compliance. 
While section 114(j)(7) provides that transmissions from multiple 
phonorecords exceeding the performance complement's numerical 
limitations will nonetheless conform to the complement if the 
programming of multiple phonorecords was not ``wilfully intended'' to 
avoid the numerical limitations, a pattern of regular conduct might 
provide evidence of the requisite intent.
    The Intended Playlists shall consist of a consecutive listing of 
every sound recording scheduled to be performed, for each of the 
Service's channels and each day during the reported month. This 
definition reflects the true nature of the Intended Playlist, as a 
listing of sound recordings scheduled to be played. The regulation 
requires that the Intended Playlist include every recording scheduled 
to be transmitted, rather than those scheduled and actually 
transmitted, because the comments and facilitated discussions 
established that Services are not able to provide an actual playlist, 
and that Intended Playlists already include overscheduled recordings 
(about an extra song per hour) to assure continuity, and are therefore 
highly reflective of recordings actually transmitted. Services shall 
report system failures causing deviations from the Intended Playlists, 
including the date, time and duration of any such system failure, but 
during the interim regulatory period, will not be required to also 
report the titles of sound recordings transmitted in place of those 
scheduled on the intended playlist. The facilitated discussions 
indicated that not all Services can provide an error log, and that 
system failures causing deviations from the playlist are rare events 
occurring on a single channel for limited periods. Efforts during such 
events are likely focused more on repairing the malfunction than on 
recordkeeping of titles. However, if system failures appear to increase 
in frequency or duration, or become opportunities for wholesale 
complement violations, then the Office will reconsider its position.
    The Reports of Use shall include the following data fields and 
sound recording identifiers that all commenting parties agreed to: 
channel, sound recording title, featured artist, album title, record 
label catalog number, transmission date, and transmission time. 
Although one Service argued that the Act creates no duty to report date 
and time, the Office believes that Congress intended Services to report 
complement information; moreover, given that Service's argument that 
only ``willfully intended'' transgressions will violate the complement, 
the Intended Playlists' scheduled dates and times would presumably help 
establish Service's intentions in this regard. In addition to the eight 
data fields, the Reports of Use will also include: Service name, 
because the source of the report should be clear independent of mailing 
labels or informal labeling of computer files; and, where feasible, the 
International Sound Recording Code (ISRC), because this identifier, 
when embedded in sound recordings, facilitates automatic identification 
and royalty administration worldwide. The required data fields will not 
include the Selector sound recording identifier, or any other 
identifiers relating to

[[Page 34295]]

particular private monitoring systems, because the Office does not wish 
to incorporate proprietary standards of a particular company while the 
transmission, reporting, and copyright management technologies are 
rapidly developing. There are no separate requirements for compilation 
albums, except that in the case of compilation albums created for 
commercial purposes, Services should report the name of the retail 
album identified by the Service for the sound recording. During the 
interim period, there are no separate requirements for non-music or 
retransmitted, foreign-originated programming, because the Services 
reported no current plans to transmit such programming. The Reports of 
Use should be provided on a common machine-readable medium, such as 
diskette, optical disc, or magneto-optical disc, in the ASCII delimited 
format set forth in the regulation, with all data for one record on a 
single line. Reports of Use must be accompanied by a statement by a 
Service representative, signed under penalty of perjury, that the 
Intended Playlist report reflects information believed to be accurate 
and maintained by the Service in its ordinary course of business.

4. Availability of Records

    If no Collective is designated, or all designated Collectives have 
terminated collection and distribution operations, Services will be 
required to post their reports of use online on the 20th day after the 
end of each month and make them available to all sound recording 
copyright owners for a period of 90 days. The Office inquired whether 
Services consider their playlists to be confidential or trade secrets, 
and has given the matter considerable thought. The Office cannot state 
conclusively that there is no confidential trade secret interest in the 
programming details incorporated in an Intended Playlist but notes that 
past Intended Playlists are publicly performed and are historical fact. 
Realistically, the Office has had to weigh any confidentiality interest 
against the Services' own competing interests in minimizing 
administrative burdens and costs, as well as copyright owners' interest 
in receiving information concerning use of their works. The regulation 
requires Collectives and copyright owners not to disseminate 
information in the reports to persons not entitled to it, or to utilize 
it for any purpose other than those the Act permits, including royalty 
collection, distribution, and determining compliance with statutory 
license requirements, without express consent of the Service. Services 
may require use of passwords for access to electronically posted 
reports, and may predicate provision of a password upon information 
relating to identity, location and status as a sound recording 
copyright owner, and upon a ``click-wrap'' agreement not to use the 
reported information without the Service's consent for any purpose 
other than those contemplated under the Act; however, Services must 
make passwords available free of charge or of other restrictions. In 
the event that no Collective is designated, and in the absence of 
direct service to notify them of use of their copyrighted works, all 
sound recording copyright owners should be able to gain access online 
to records of use of their sound recordings under the statutory 
license. Services will be required to provide the Copyright Office with 
information on how to gain access to Services' online reports of use. 
That information will be made available on the Copyright Office 
website.
    Because section 114(f)(2) mandates requirements by which 
``copyright owners'' may receive reasonable notice of the use of their 
sound recordings, provision must be made for individual copyright 
owners to have access to the Reports of Use, even where there are 
designated Collectives. Accordingly, Collectives receiving the Reports 
of Use must make copies of the reports available for inspection by any 
sound recording copyright owner, without charge, during normal office 
hours upon reasonable notice. Any copyright owner exercising the right 
to inspect the Reports of Use must agree in writing to certain 
confidentiality restrictions.
    Because rates and terms of payment are to be addressed through 
industry-wide settlement or a CARP, this notice and recordkeeping 
regulation will not address how copyright owners will contact Services 
to demand payment based on records of use in the event that all 
designated Collectives have terminated operations or in the event that, 
in a future settlement or CARP proceeding, no Collective is designated. 
Similarly, the regulation will not include requirements for statements 
of account, which are properly addressed as a license term through 
negotiation or a CARP. Services will be required to maintain their 
reports of use for three years, the statutory period of limitations for 
copyright infringement actions. The regulation will not address the 
proposal for a yearly audit of records underlying the Reports of Use, 
which the Office generally sees as a matter of business and legal 
practice to be addressed through negotiation or a CARP.
    The Office inquired about the costs of providing copyright owners 
with records of use. RIAA said that its Collective would deduct 
reasonable administrative costs as a percentage of royalties. The 
matter of costs is a question for resolution through negotiation or a 
CARP. See Determination of Reasonable Rates and Terms for the Digital 
Performance of Sound Recordings, 63 FR 25394 (May 8, 1998). However, 
collectives typically deduct administrative expenses. See 
Recommendations of the Intergovernmental Committee of the Rome 
Convention, 1979 Copyright 103, 109.<SUP>5</SUP>
---------------------------------------------------------------------------

    \5\ Arguably, the RIAA Collective's expenses would be lower than 
typical collectives' because it will not be negotiating licenses but 
will simply collect and distribute royalties.
---------------------------------------------------------------------------

5. Effective Dates

    These regulations will be adopted on an interim basis for a period 
of two years, and will become effective on July 20, 1998. The 
regulations will recognize a transition period through August 31, 1998, 
before Services are required to comply fully with the recordkeeping 
rules. For the period February 1, 1996, through August 31, 1998, 
Services must make available records of use, but will have the option 
of producing either summary frequency data or full Intended Playlists.

6. Regulatory Flexibility Act

    Although the Copyright Office, as a department of the Library of 
Congress and part of the legislative branch, is not an ``agency'' 
subject to the Regulatory Flexibility Act, 5 U.S.C. 601-612, the 
Register of Copyrights has considered the effect of these interim 
regulations on small businesses. The Register has determined that the 
interim regulations would not have a significant economic impact on a 
substantial number of small entities that would require provision of 
special relief for small entities in the regulations, and that the 
interim regulations are, to the extent consistent with the stated 
objectives of applicable statutes, designed to minimize any significant 
economic impact on small entities.

List of Subjects in 37 CFR Part 201

    Copyright.

Interim Regulations

    For the reasons set forth in the preamble, Part 201 of Title 37 of 
the Code of Federal Regulations is amended as follows:

[[Page 34296]]

PART 201--GENERAL PROVISIONS

    1. The authority citation for Part 201 continues to read as 
follows:

    Authority: 17 U.S.C. 702.

    2. Sections 201.35 through 201.37 are added to read as follows:


Sec. 201.35  Initial Notice of Digital Transmission of Sound Recordings 
under Statutory License.

    (a) General. This section prescribes rules under which copyright 
owners shall receive initial notice of use of their sound recordings 
under statutory license under section 114(f) of title 17 of the United 
States Code, as amended by Public Law 104-39, 109, Stat. 336.
    (b) Definitions. (1) An Initial Notice of Digital Transmission of 
Sound Recordings under Statutory License is a notice to sound recording 
copyright owners of the use of their works under section 114(f), and 
required under this regulation to be filed by a Service in the 
Copyright Office.
    (2) A Service is an entity engaged in the digital transmission of 
sound recordings, pursuant to section 114(f) of title 17 of the United 
States Code.
    (c) Forms. The Copyright Office does not provide printed forms for 
the filing of Initial Notices.
    (d) Content. An ``Initial Notice of Digital Transmission of Sound 
Recordings under Statutory License'' shall be identified as such by 
prominent caption or heading, and shall include the following:
    (1) The full legal name of the Service commencing digital 
transmission of sound recordings under statutory license;
    (2) The full address, including a specific number and street name 
or rural route, of the place of business of the Service. A post office 
box or similar designation will not be sufficient except where it is 
the only address that can be used in that geographic location;
    (3) The telephone number and facsimile number of the Service; and
    (4) Information on how to gain access to the online website or home 
page of the Service, or where information may be posted under these 
regulations concerning the use of sound recordings under statutory 
license.
    (e) Signature. The Initial Notice shall include the signature of 
the appropriate officer or representative of the Service transmitting 
sound recordings under statutory license. The signature shall be 
accompanied by the printed or typewritten name and title of the person 
signing the Notice, and by the date of signature.
    (f) Filing. A Service shall file the Initial Notice with the 
Licensing Division of the Copyright Office prior to the first 
transmission of sound recordings under the license, or within 45 days 
of the effective date of this regulation. Each Notice shall be 
accompanied by a filing fee of $20. Initial Notices and amendments will 
be placed in the public records of the Licensing Division of the 
Copyright Office, and posted online where they will be accessible 
through the Copyright Office website. The address of the Licensing 
Division is: Library of Congress, Copyright Office, Licensing Division, 
101 Independence Avenue, S.E., Washington, D.C. 20557-6400.
    (g) Amendments. A Service shall file with the Licensing Division of 
the Copyright Office an amendment reporting a change in the information 
reported in the Initial Notice within 45 days of the change. An 
amendment shall be accompanied by a fee of $20, and shall:
    (1) Be clearly and prominently identified as ``An Amendment to an 
Initial Notice of Digital Transmission of Sound Recordings under 
Statutory License'';
    (2) Identify the specific Initial Notice intended to be amended, by 
Service name and filing date, so that it may be readily located in the 
records of the Copyright Office;
    (3) Clearly specify the nature of the amendment to be made; and
    (4) Be signed and dated in accordance with this section.


Sec. 201.36  Reports of Use of Sound Recordings under Statutory 
License.

    (a) General. This section prescribes rules under which Services 
shall serve copyright owners with notice of use of their sound 
recordings, what the content of that notice should be, and under which 
records of such use shall be kept and made available.
    (b) Definitions. (1) A Collective is a collection and distribution 
organization that is designated under the statutory license, either by 
settlement agreement reached under section 114(f)(1) or section 
114(f)(4)(A) and adopted pursuant to 37 CFR 251.63(b), or by decision 
of a Copyright Arbitration Royalty Panel (CARP) under section 114(f)(2) 
or section 114(f)(4)(B), or by an order of the Librarian pursuant to 17 
U.S.C. 802(f).
    (2) A Report of Use of Sound Recordings under Statutory License is 
a report required under this regulation to be provided by the Service 
transmitting sound recordings under statutory license.
    (3) A Service is an entity engaged in the digital transmission of 
sound recordings pursuant to section 114(f) of title 17 of the United 
States Code.
    (c) Service. Reports of Use shall be served upon Collectives that 
are identified in the records of the Licensing Division of the 
Copyright Office as having been designated under the statutory license, 
either by settlement agreement reached under section 114(f)(1) or 
section 114(f)(4)(A) and adopted pursuant to 37 CFR 251.63(b), or by 
decision of a Copyright Arbitration Royalty Panel (CARP) under section 
114(f)(2) or section 114(f)(4)(B), or by an order of the Librarian 
pursuant to 17 U.S.C. 802(f). Reports of use shall be served, by 
certified or registered mail, or by other means if agreed upon by the 
respective Service and Collective, on or before the twentieth day after 
the close of each month, commencing with the month succeeding the month 
in which these regulations become effective.
    (d) Posting. In the event that no Collective is designated under 
the statutory license, or if all designated Collectives have terminated 
collection and distribution operations, a Service transmitting sound 
recordings under statutory license shall post and make available online 
its Reports of Use. Services shall post their Reports of Use online on 
or before the 20th day after the close of each month, and make them 
available to all sound recording copyright owners for a period of 90 
days. Services may require use of passwords for access to posted 
Reports of Use, but must make passwords available in a timely manner 
and free of charge or other restrictions. Services may predicate 
provision of a password upon:
    (1) Information relating to identity, location and status as a 
sound recording copyright owner; and
    (2) A ``click-wrap'' agreement not to use information in the Report 
of Use for purposes other than royalty collection, royalty 
distribution, and determining compliance with statutory license 
requirements, without the express consent of the Service providing the 
Report of Use.
    (e) Content. A ``Report of Use of Sound Recordings under Statutory 
License'' shall be identified as such by prominent caption or heading, 
and shall include a Service's ``Intended Playlists'' for each channel 
and each day of the reported month.
    (1) The ``Intended Playlists'' shall include a consecutive listing 
of every recording scheduled to be transmitted, and shall contain the 
following information in the following order:
    (i) The name of the service or entity;
    (ii) The channel;

[[Page 34297]]

    (iii) The sound recording title;
    (iv) The featured recording artist, group, or orchestra;
    (v) The retail album title (or, in the case of compilation albums 
created for commercial purposes, the name of the retail album 
identified by the Service for purchase of the sound recording);
    (vi) The recording label;
    (vii) The catalog number;
    (viii) The International Standard Recording Code (ISRC) embedded in 
the sound recording, where available and feasible;
    (ix) The date of transmission; and
    (x) The time of transmission.
    (2) The Report of Use shall include a report of any system failure 
resulting in a deviation from the Intended Playlists of scheduled sound 
recordings. Such report shall include the date, time and duration of 
any such system failure.
    (f) Signature. Reports of use shall include a signed statement by 
the appropriate officer or representative of the Service attesting, 
under penalty of perjury, that the information contained in the Report 
is believed to be accurate and is maintained by the Service in its 
ordinary course of business. The signature shall be accompanied by the 
printed or typewritten name and title of the person signing the Report, 
and by the date of signature.
    (g) Format. Reports of use should be provided on a standard 
machine-readable medium, such as diskette, optical disc, or magneto-
optical disc, and should conform as closely as possible to the 
following specifications:
    (1) ASCII delimited format, using pipe characters as delimiter, 
with no headers or footers;
    (2) Carats should surround strings;
    (3) No carats should surround dates and numbers;
    (4) Dates should be indicated by: MM/DD/YYYY;
    (5) Times should be based on a 24-hour clock: HH:MM:SS;
    (6) A carriage return should be at the end of each line; and
    (7) All data for one record should be on a single line.
    (h) Confidentiality. Copyright owners, their agents and Collectives 
shall not disseminate information in the Reports of Use to any persons 
not entitled to it, nor utilize the information for purposes other than 
royalty collection and distribution, and determining compliance with 
statutory license requirements, without express consent of the Service 
providing the Report of Use.
    (i) Documentation. All compulsory licensees shall, for a period of 
at least three years from the date of service or posting of the Report 
of Use, keep and retain a copy of the Report of Use. For reporting 
periods from February 1, 1996, through August 31, 1998, the Service 
shall serve upon all designated Collectives and retain for a period of 
three years from the date of transmission records of use indicating 
which sound recordings were performed and the number of times each 
recording was performed, but is not required to produce full Reports of 
Use or Intended Playlists for those periods.


Sec. 201.37  Designated Collection and Distribution Organizations for 
Records of Use of Sound Recordings under Statutory License.

    (a) General. This section prescribes rules under which records of 
use shall be collected and distributed under section 114(f) of title 17 
of the United States Code, as amended by Public Law 104-39, 109 Stat. 
336, and under which records of such use shall be kept and made 
available.
    (b) Definition. (1) A Collective is a collection and distribution 
organization that is designated under the statutory license, either by 
settlement agreement reached under section 114(f)(1) or section 
114(f)(4)(A) and adopted pursuant to 37 CFR 251.63(b), or by decision 
of a Copyright Arbitration Royalty Panel (CARP) under section 114(f)(2) 
or section 114(f)(4)(B), or by an order of the Librarian pursuant to 17 
U.S.C. 802(f).
    (2) A Service is an entity engaged in the digital transmission of 
sound recordings pursuant to section 114(f) of title 17 of the United 
States Code.
    (c) Notice of Designation as Collective under Statutory License. A 
Collective shall file with the Licensing Division of the Copyright 
Office and post and make available online a ``Notice of Designation as 
Collective under Statutory License,'' which shall be identified as such 
by prominent caption or heading, and shall contain the following 
information:
    (1) The Collective name, address, telephone number and facsimile 
number;
    (2) A statement that the Collective has been designated for 
collection and distribution of performance royalties under statutory 
license for digital transmission of sound recordings; and
    (3) Information on how to gain access to the online website or home 
page of the Collective, where information may be posted under these 
regulations concerning the use of sound recordings under statutory 
license. The address of the Licensing Division is: Library of Congress, 
Copyright Office, Licensing Division, 101 Independence Avenue, S.E., 
Washington, D.C. 20557-6400.
    (d) Annual Report. The Collective will post and make available 
online, for the duration of one year, an Annual Report on how the 
Collective operates, how royalties are collected and distributed, and 
what the Collective spent that fiscal year on administrative expenses.
    (e) Inspection of Reports of Use by Copyright Owners. The 
Collective shall make copies of the Reports of Use for the preceding 
three years available for inspection by any sound recording copyright 
owner, without charge, during normal office hours upon reasonable 
notice. The Collective shall predicate inspection of Reports of Use 
upon information relating to identity, location and status as a sound 
recording copyright owner, and the copyright owner's written agreement 
not to utilize the information for purposes other than royalty 
collection and distribution, and determining compliance with statutory 
license requirements, without express consent of the Service providing 
the Report of Use. The Collective shall render its best efforts to 
locate copyright owners in order to make available records of use, and 
such efforts shall include searches in Copyright Office public records 
and published directories of sound recording copyright owners.
    (f) Confidentiality. Copyright owners, their agents, and 
Collectives shall not disseminate information in the Reports of Use to 
any persons not entitled to it, nor utilize the information for 
purposes other than royalty collection and distribution, and 
determining compliance with statutory license requirements, without 
express consent of the Service providing the Report of Use.
    (g) Termination and dissolution. If a Collective terminates its 
collection and distribution operations prior to the close of its term 
of designation, the Collective shall notify the Copyright Office, and 
all Services transmitting sound recordings under statutory license, by 
certified or registered mail. The dissolving Collective shall provide 
each such Service with information identifying the copyright owners it 
has served.

    Dated: June 15, 1998.
Marybeth Peters,
Register of Copyrights.

    Approved:
James H. Billington,
The Librarian of Congress.
[FR Doc. 98-16779 Filed 6-22-98; 8:45 am]
BILLING CODE 1410-30-P