[Federal Register Volume 86, Number 120 (Friday, June 25, 2021)]
[Proposed Rules]
[Pages 33601-33603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12950]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 385

[Docket No. 21-CRB-0001-PR (2023-2027)]


Determination of Rates and Terms for Making and Distributing 
Phonorecords (Phonorecords IV)

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

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SUMMARY: The Copyright Royalty Judges publish for comment proposed 
regulations that set rates and terms applicable during the period 
beginning January 1, 2023, and ending December 31, 2027, for the 
section 115 statutory license for making and distributing phonorecords 
of nondramatic musical works.

DATES: Comments and objections, if any, are due no later than July 26, 
2021.

ADDRESSES: You may send comments, identified by docket number 21-CRB-
0001-PR (2023-2027), online through eCRB at https://app.crb.gov.
    Instructions: To send your comment through eCRB, if you don't have 
a user account, you will first need to register for an account and wait 
for your registration to be approved. Approval of user accounts is only 
available during business hours. Once you have an approved account, you 
can only sign in and file your comment after setting up multi-factor 
authentication, which can be done at any time of day. All comments must 
include the Copyright Royalty Board name and the docket number for this 
proposed rule. All properly filed comments will appear without change 
in eCRB at https://app.crb.gov, including any personal information 
provided.
    Docket: For access to the docket to read background documents or 
comments received, go to eCRB at https://app.crb.gov and perform a case 
search for docket 21-CRB-0001-PR (2023-2027).

FOR FURTHER INFORMATION CONTACT: Anita Blaine, CRB Program Specialist, 
at 202-707-7658 or <a href="/cdn-cgi/l/email-protection#9dfeefffddf1f2feb3faf2eb"><span class="__cf_email__" data-cfemail="83e0f1e1c3efece0ade4ecf5">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Background

    Section 115 of the Copyright Act, title 17 of the United States 
Code, requires a copyright owner of a nondramatic musical work to grant 
a license (also known as the ``mechanical'' compulsory license) to any 
person who wants to make and distribute phonorecords of that work, 
provided that the copyright owner has allowed phonorecords of the work 
to be produced and distributed, and that the licensee complies with the 
statute and regulations. In addition to the production or distribution 
of physical phonorecords (compact discs, vinyl, cassette tapes, and the 
like), section 115 applies to digital transmissions of phonorecords, 
including permanent digital downloads and ringtones.
    Chapter 8 of the Copyright Act requires the Copyright Royalty 
Judges (Judges) to conduct proceedings every five years to determine 
the rates and terms for the section 115 license. 17 U.S.C. 801(b)(1), 
804(b)(4). Accordingly, the Judges commenced the current proceeding in 
January 2021, by publishing notice of the commencement and a request 
that interested parties submit petitions to participate. See 86 FR 25 
(Jan. 5, 2021).
    The Judges received petitions to participate in the current 
proceeding from Amazon.com Services LLC, Apple Inc., Copyright Owners 
(joint petitioners Nashville Songwriters Association International 
(NSAI) and National Music Publishers Association (NMPA)), Google LLC, 
George Johnson, Joint Record Company Participants (filed by Recording 
Industry Association of America, Inc. for joint petitioners Sony Music 
Entertainment, UMG Recordings,

[[Page 33602]]

Inc., and Warner Music Group Corp.), Pandora Media, LLC, David Powell, 
SoundCloud Operations Inc.,\1\ Spotify USA Inc., and Brian Zisk.
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    \1\ SoundCloud Operations Inc. withdrew from the proceeding on 
May 21, 2021.
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    The Judges gave notice to all participants of the three-month 
negotiation period required by 17 U.S.C. 803(b)(3) and directed that, 
if the participants were unable to negotiate a settlement, they should 
submit Written Direct Statements no later than September 10, 2021. On 
May 25, 2021, the Judges received a motion stating that several 
participants \2\ had reached a partial settlement regarding the rates 
and terms under Section 115 of the Copyright Act, namely, for physical 
phonorecords, permanent downloads, ringtones, and music bundles for the 
2023-2027 rate period and seeking approval of that partial settlement. 
See Motion to Adopt Settlement of Statutory Royalty Rates and Terms for 
Subpart B Configurations, Docket No. 21-CRB-0001-PR (2023-2027) at 1 
(May 25, 2021) (Motion). The movants state that ``the settlement 
represents the consensus of buyers and sellers representing the vast 
majority of the market for `mechanical' rights for [the 37 CFR 385] 
Subpart B Configurations.'' \3\ Motion at 4.
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    \2\ The participants who filed the motion are the ``Publisher/
Songwriter Participants'' (NMPA and NSAI) and the ``Record Company 
Participants'' (Sony Music Entertainment, UMG Recordings, Inc. and 
Warner Music Group Corp.). Motion at 1.
    \3\ Participants Amazon.com Services LLC, Google LLC, Pandora 
Media, LLC, and Spotify USA Inc. do not object to the settlement, 
Motion at 4 n.2, however, the movants state that they understand 
that participant George Johnson intends to object to it. Motion at 
4.
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    The settlement proposes that ``Subpart B Configuration Rates and 
Terms presently set forth in 37 CFR part 385 subpart B . . . continue 
to be applicable to the Record Company Participants and all other 
licensees of `mechanical' rights in musical works for the Subpart B 
Configurations, for the rate period covered by the Proceeding, with 
only a few minor editorial changes to the applicable regulations.'' 
Motion at 3.
    The proposed editorial changes apply to Sec. Sec.  385.10 and 
385.11 of Subpart B and to two definitions in Subpart A and would 
clarify the regulations. For example, the definition of Licensed 
Activity needs to be changed to remove the reference to Subpart B 
because the term Licensed Activity does not appear in Subpart B. See 37 
CFR 385.2, 385.10-11; Motion at 6-7 (redline of regulations with 
rationale for changes).
    Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to 
adopt rates and terms negotiated by ``some or all of the participants 
in a proceeding at any time during the proceeding'' provided they are 
submitted to the Judges for approval. This section provides that the 
Judges shall provide notice and an opportunity to comment on the 
agreement to (1) those that would be bound by the terms, rates, or 
other determination set by the agreement and (2) participants in the 
proceeding that would be bound by the terms, rates, or other 
determination set by the agreement. See section 801(b)(7)(A). The 
Judges may decline to adopt the agreement as a basis for statutory 
terms and rates for participants not party to the agreement if any 
participant objects and the Judges conclude that the agreement does not 
provide a reasonable basis for setting statutory terms or rates. Id.
    If the Judges adopt rates and terms reached pursuant to a 
negotiated settlement, those rates and terms are binding on all 
copyright owners of musical works and those using the musical works in 
the activities described in the proposed regulations.
    The Judges propose an additional minor revision to change an 
outdated cross reference. They propose to shorten the cross reference 
17 U.S.C. 115(c)(3)(C) and (D) to 17 U.S.C. 115 because the section no 
longer has a subsection (c)(3). See 17 U.S.C. 115; Orrin G. Hatch-Bob 
Goodlatte Music Modernization Act, Public Law 115-264, 132 Stat. 3676, 
3679-3684 (Oct. 11, 2018).
    The Judges solicit comments on whether they should adopt the 
proposed regulations as statutory rates and terms relating to the 
making and distribution of physical or digital phonorecords of 
nondramatic musical works.
    Comments and objections regarding the rates and terms and the minor 
revisions must be submitted no later than July 26, 2021.

List of Subjects in 37 CFR Part 385

    Copyright, Phonorecords, Recordings.

Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges propose to amend 37 CFR part 385 as follows:

PART 385--RATES AND TERMS FOR USE OF NONDRAMATIC MUSICAL WORKS IN 
THE MAKING AND DISTRIBUTING OF PHYSICAL AND DIGITAL PHONORECORDS

0
1. The authority citation for part 385 continues to read as follows:

    Authority:  17 U.S.C. 115, 801(b)(1), 804(b)(4).

Subpart A--Regulations of General Application

0
2. In Sec.  385.2 revise the introductory text of the definition for 
``Eligible Limited Download'', the definition for ``Licensed 
Activity'', and the fourth sentence for definition ``Sound Recording 
Company'' to read as follows:


Sec.  385.2  Definitions.

* * * * *
    Eligible Limited Download means a transmission of a sound recording 
embodying a musical work to an End User of a digital phonorecord under 
17 U.S.C. 115 that results in a Digital Phonorecord Delivery of that 
sound recording that is only accessible for listening for-- * * *
* * * * *
    Licensed Activity, as the term is used in subparts C and D of this 
part, means delivery of musical works, under voluntary or statutory 
license, via Digital Phonorecord Deliveries in connection with 
Interactive Eligible Streams, Eligible Limited Downloads, Limited 
Offerings, mixed Bundles, and Locker Services.
* * * * *
    Sound Recording Company means a person or entity that:
* * * * *
    (4) Performs the functions of marketing and authorizing the 
distribution of a sound recording of a musical work under its own 
label, under the authority of a person identified in paragraphs (1) 
through (3) of this section.
* * * * *

Subpart B--Physical Phonorecord Deliveries, Permanent Downloads, 
Ringtones, and Music Bundles

0
3. Revise Sec.  385.10 to read as follows:


Sec.  385.10  Scope.

    This subpart establishes rates and terms of royalty payments for 
making and distributing physical phonorecords, Permanent Downloads, 
Ringtones, and Music Bundles, in accordance with the provisions of 17 
U.S.C. 115.
0
4. Revise Sec.  385.11 paragraph (a) to read as follows:


Sec.  385.11  Royalty rates.

    (a) Physical phonorecords and Permanent Downloads. For every 
physical phonorecord and Permanent Download the Licensee makes and 
distributes or authorizes to be made and distributed, the royalty rate 
payable for each work embodied in the phonorecord

[[Page 33603]]

or Permanent Download shall be either 9.1 cents or 1.75 cents per 
minute of playing time or fraction thereof, whichever amount is larger.
* * * * *

Jesse M. Feder,
Chief Copyright Royalty Judge.
[FR Doc. 2021-12950 Filed 6-24-21; 8:45 am]
BILLING CODE 1410-72-P


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