Source: http://www.thefederalregister.com/d.p/2003-05-20-03-12349
Timestamp: 2013-05-22 00:43:02
Document Index: 658549597

Matched Legal Cases: ['art 7114', 'art 3944', 'art 6726', 'art 140', 'art 5250', 'art 1739', 'art 30206', 'art 514', 'art 9740', 'art 180', 'art 262', 'ART 262', 'art 262']

Sound recordings and ephemeral recordings; digital performance right, Daily Rules, Proposed Rules, and Notices of the Federal Government
14 CFR Part 7114 CFR Part 3944 CFR Part 6726 CFR Part 140 CFR Part 5250 CFR Part 1739 CFR Part 30206 CFR Part 514 CFR Part 9740 CFR Part 180	Federal Register: May 20, 2003 (Volume 68, Number 97)
DOCID: FR Doc 03-12349
CFR Citation: 37 CFR Part 262
Docket ID: [Docket Nos. 2002-1 CARP DTRA3 and 2001-2 CARP DTNSRA]
SUBJECT CATEGORY: Digital Performance Right in Sound Recordings and Ephemeral Recordings DATES: Comments are due no later than June 19, 2003.
DOCUMENT SUMMARY: The Copyright Office of the Library of Congress is requesting comment on proposed regulations that set rates and terms for the use of sound recordings in eligible nonsubscription transmissions and new subscription services, other than transmissions made by certain noncommercial entities, together with related ephemeral recordings. The rates and terms are for the 2003 and 2004 statutory licensing period, except in the case of new subscription services in which case the license period runs from 1998 through 2004. The agreement published herein supersedes the agreement published in the Federal Register on May 1, 2003, and parties should only comment on the proposed rates and terms set forth in this notice.
SUMMARY: Sound recordings and ephemeral recordings; digital performance right, SUPPLEMENTAL INFORMATION
However, the April 14 proposal has been superseded by a second proposal which was submitted to the Copyright Office on May 8, 2003. The new agreement amends the proposal in the April 14 submission with the approval of the parties to the first agreement, who did not participate in the new round of negotiations, and includes for the first time rates and terms for simulcasts of AM and FM radio broadcast programming.\1\ These new rates are the result of an agreement between Copyright Owners and Performers and Broadcasters.\2\ The May 8 agreement also includes proposed rates and terms for the use of sound recordings in the reproduction of ephemeral recordings by business establishment services. These rates and terms were agreed to by the Copyright Owners and Performers and Music Choice, the only business establishment service participating in this proceeding, and cover the 2003 and 2004 statutory license period. As before, the Petitioners request that the Office publish the amended proposed rates and terms for public comment pursuant to 37 CFR 251.63(b).
\1\ Petitioners note that a dispute over the scope of certain exemptions to Section 106(6) pertaining to the broadcasters is pending in the U.S. Court of Appeals for the Third Circuit, Bonneville Int'l Corp. v. Peters, No. 01CV408 (E.D. Pa. Aug. 1, 2001), appeal docketed, No. 013720 (3rd Cir. Oct. 1, 2001) and that ``[n]othing in this Joint Petition is intended to resolve that dispute, prejudice the position of any of the parties thereto, or imply that any activities determined to be exempt are `covered' by the rates and terms set forth herein.'' Petition at 3 n.3 (May 8, 2003).
\2\ Those entities who negotiated on behalf of the broadcasters include, Bonneville International Corporation, Clear Channel Communications, Inc., the National Religious Broadcasters Music License Committee, Salem Communications Corporation and Susquehanna Radio Corporation. Section 251.63(b) of title 37 of the Code of Federal Regulations allows the Librarian to adopt the parties' proposed rates and terms without convening a Copyright Arbitration Royalty Panel (``CARP'') for this purpose, provided that the proposed rates and terms are published in the Federal Register and no interested party with an intent to participate in the proceeding files a comment objecting to the proposed terms. In other words, unless there is an objection from a person with a significant interest in the proceeding who is prepared and eligible to participate in a CARP proceeding, the purpose of which is to adjust the rates and terms for use of sound recordings in eligible nonsubscription transmissions and new subscription services pursuant to the section 112 and section 114 statutory licenses, the Librarian can adopt the rates and terms in the proposed settlement in final regulations without convening a CARP. This procedure to adopt negotiated rates and terms in the case where an agreement has been reached has been specifically endorsed by Congress. If an agreement as to rates and terms is reached and there is no controversy as to these matters, it would make no sense to subject the interested parties to the needless expense of an arbitration proceeding conducted under [section 114(f)(2)(1995)]. Thus, it is the Committee's intention that in such a case, as under the Copyright Office's current regulations concerning rate adjustment proceedings, the Librarian of Congress should notify the public of the proposed agreement in a noticeandcomment proceeding and, if no opposing comment is received from a party with a substantial interest and an intent to participate in an arbitration proceeding, the Librarian of Congress should adopt the rates embodied in the agreement without convening an arbitration panel.
Accordingly, the Copyright Office is granting the joint petition filed on May 8 and is publishing for public comment the proposed rates and terms embodied in the amended agreement as submitted to the Office on May 8. Because this notice includes amendments to the proposal published in the May 1 notice, interested parties should comment only on the rates and terms published herein and should not comment on those published in the May 1 notice. Any party who objects to the amended proposed rates and terms set forth herein must file a written objection with the Copyright Office and an accompanying Notice of Intent to [[Page 27507]]
PART 262RATES AND TERMS FOR CERTAIN ELIGIBLE NONSUBSCRIPTION TRANSMISSIONS, NEW SUBSCRIPTION SERVICES AND THE MAKING OF EPHEMERAL REPRODUCTIONS Sec. 262.1 General. 262.2 Definitions.
262.4 Terms for making payment of royalty fees and statements of account. 262.5 Confidential information. 262.6 Verification of statements of account. 262.7 Verification of royalty payments. 262.8 Unclaimed funds. Authority: 17 U.S.C. 112(e), 114, 801(b)(1). Sec. 262.1 General.
(a) Scope. This part 262 establishes rates and terms of royalty payments for the public performance of sound recordings in certain digital transmissions by certain Licensees in accordance with the provisions of 17 U.S.C. 114, and the making of Ephemeral Recordings by certain Licensees in accordance with the provisions of 17 U.S.C. 112(e), during the period 20032004 and in the case of Subscription Services 19982004 (the ``License Period'').
(a) Aggregate Tuning Hours means the total hours of programming that the Licensee has transmitted during the relevant period to all Listeners within the United States from all channels and stations that provide audio programming consisting, in whole or in part, of eligible nonsubscription transmissions or noninteractive digital audio transmissions as part of a new subscription service, less the actual running time of any sound recordings for which the Licensee has obtained direct licenses apart from 17 U.S.C. 114(d)(2) or which do not require a license under United States copyright law. By way of example, if a service transmitted one hour of programming to 10 simultaneous Listeners, the service's Aggregate Tuning Hours would equal 10. If 30 minutes of that hour consisted of transmission of a directly licensed recording, the service's Aggregate Tuning Hours would equal 9 hours and 30 minutes. As an additional example, if one Listener listened to a service for 10 hours (and none of the recordings transmitted during that time was directly licensed), the service's Aggregate Tuning Hours would equal 10. (b) Broadcast Simulcast means
(1) A simultaneous Internet transmission or retransmission of an overtheair terrestrial AM or FM radio broadcast, including one with previously broadcast programming substituted for programming for which requisite licenses or clearances to transmit over the Internet have not been obtained and one with substitute advertisements, and
(2) An Internet transmission in accordance with 17 U.S.C. 114(d)(2)(C)(iii) of an archived program, which program was previously broadcast overtheair by a terrestrial AM or FM broadcast radio station, in either case whether such Internet transmission or retransmission is made by the owner and operator of the AM or FM radio station that makes the broadcast or by a third party.
(f) Ephemeral Recording is a phonorecord created for the purpose of facilitating a transmission of a public performance of a sound recording under the limitations on exclusive rights specified by 17 U.S.C. 114(d)(1)(C)(iv) or for the purpose of facilitating a transmission of a public performance of a sound recording under a statutory license in accordance with 17 U.S.C. 114(f), and subject to the limitations specified in 17 U.S.C. 112(e). (g) Licensee is a person or entity that
(j) Performance is each instance in which any portion of a sound recording is publicly performed to a Listener by means of a digital audio transmission or [[Page 27508]]
(2) A performance of a sound recording for which the service has previously obtained a license from the Copyright Owner of such sound recording; and (3) An incidental performance that both:
(m) Subscription Service Revenues shall mean all monies and other consideration paid or payable, including the fair market value of non
cash or inkind consideration paid or payable by third parties, from the operation of a Subscription Service, as comprised of the following:
(ii) In emails addressed exclusively or predominantly to subscribers of the Subscription Service, or
(3) Monies and other consideration (including without limitation the proceeds of any revenuesharing or commission arrangements with any fulfillment company or other third party, and any charge for shipping or handling) from the sale of any product or service directly through the Subscription Service media player or through pages or advertisements accessible only by subscribers or that are predominantly targeted to subscribers (but not pages or advertisements that are not predominantly targeted to subscribers), less
(ii) The Licensee's actual, outofpocket cost to purchase for resale the products or services (except phonorecords and digital phonorecord deliveries of sound recordings) from third parties, or in the case of products produced or services provided by the Licensee, the Licensee's actual cost to produce the product or provide the service (but not more than the fair market wholesale value of the product or service), and
(B) Monies and other consideration paid by or on behalf of subscribers for software or any other access device owned by Licensee (or any subsidiary or other affiliate of the Licensee, but excluding, for the avoidance of doubt, any entity that sells a thirdparty product, whether or not bearing the Licensee's brand) to access the Licensee's Subscription Service shall not be deemed part of Subscription Service Revenues, unless such software or access device is required as a condition to access the Subscription Service and either is purchased by a subscriber contemporaneously with or after subscribing or has no independent function other than to access the Subscription Service;
(a) Basic royalty rate. Royalty rates and fees for eligible nonsubscription transmissions made by Licensees pursuant to 17 U.S.C. 114(d)(2) during the period January 1, 2003, through December 31, 2004, and the making of Ephemeral Recordings pursuant to 17 U.S.C. 112(e) to facilitate such transmissions; noninteractive digital audio transmissions made by Licensees pursuant to 17 U.S.C. 114(d)(2) as part of a new subscription service during the period October 28, 1998, through December 31, 2004, and the making of Ephemeral Recordings pursuant to 17 U.S.C. 112(e) to facilitate such transmissions; and the making of Ephemeral Recordings by Business Establishment Services pursuant to 17 U.S.C. 112(e) during the period January 1, 2003, through December 31, 2004, shall be as follows: (1) Nonsubscription Services. For their operation of Nonsubscription Services, Licensees other than Business Establishment Services shall, at their election as provided in paragraph (b) of this section, pay at one of the following rates:
(i) Per Performance Option. $0.000762 (0.0762[cent]) per Performance for all digital audio transmissions, except that 4% of Performances shall bear no royalty to approximate the number of partial Performances of nominal duration made by a Licensee due to, for example, technical interruptions, the closing down of a media player or channel [[Page 27509]]
(ii) Aggregate Tuning Hour Option.(A) NonMusic Programming. $0.000762 (0.0762[cent]) per Aggregate Tuning Hour for programming reasonably classified as news, talk, sports or business programming.
(iii) Percentage of Subscription Service Revenues Option. 10.9% of Subscription Service Revenues, but in no event less than 27[cent] per month for each person who subscribes to the Subscription Service for all or any part of the month or to whom the Subscription Service otherwise is delivered by Licensee without a fee (e.g., during a free trial period), subject to the following reduction associated with the transmission of directly licensed sound recordings (if applicable). For any given payment period, the fee due from Licensee shall be the amount calculated under the formula described in the immediately preceding sentence multiplied by the following fraction: the total number of Performances (as defined under Sec. 262.2(j), which excludes directly licensed sound recordings) made by the Subscription Service during the period in question, divided by the total number of digital audio transmissions of sound recordings made by the Subscription Service during the period in question (inclusive of Performances and equivalent transmissions of directly licensed sound recordings). Any Licensee paying on such basis shall report to the Designated Agent on its statements of account the pertinent music use information upon which such reduction has been calculated. This option shall not be available to a Subscription Service where
(B) The consideration paid or given to receive the Subscription Service also entitles the subscriber to receive or have access to material, products or services other than the Subscription Service (for example, as in the case of a ``bundled service'' consisting of access to the Subscription Service and also access to the Internet in general). In all events, in order to be eligible for this payment option, a Licensee may not engage in pricing practices whereby the Subscription Service is offered to subscribers on a ``loss leader'' basis or whereby the price of the Subscription Service is materially subsidized by payments made by the subscribers for other products or services.
(3) Business Establishment Services. For the making of any number of Ephemeral Recordings in the operation of a service pursuant to the limitation on exclusive rights specified by 17 U.S.C. 114(d)(1)(C)(iv), a Licensee that is a Business Establishment Service shall pay 10% of such Licensee's ``Gross Proceeds'' derived from the use in such service of musical programs that are attributable to copyrighted recordings. ``Gross Proceeds'' as used in paragraph (a)(3) of this section means all fees and payments, including those made in kind, received from any source before, during or after the License Period that are derived from the use of copyrighted sound recordings pursuant to 17 U.S.C. 112(e) for the sole purpose of facilitating a transmission to the public of a performance of a sound recording under the limitation on exclusive rights specified in 17 U.S.C. 114(d)(1)(C)(iv). The attribution of Gross Proceeds to copyrighted recordings may be made on the basis of:
(b) Election process. A Licensee other than a Business Establishment Service shall elect the particular Nonsubscription Service and/or Subscription Service royalty rate categories it chooses (that is, among paragraph (a)(1)(i) or (ii) of this section and/or paragraph (a)(2)(i), (ii) or (iii) of this section) for the License Period by no later than [the date 30 days after these rates and terms are adopted by the Librarian of Congress and published in the Federal Register.] Notwithstanding the preceding sentence, where a Licensee has not previously provided a Nonsubscription Service or Subscription Service, as the case may be, the Licensee may make its election by no later than thirty (30) days after the new service first makes a digital audio transmission of a sound recording under the 17 U.S.C. 114 statutory license. Each such election shall be made by notifying the Designated Agent in writing of such election, using an election form provided by the Designated Agent. A Licensee that fails to make a timely election shall pay royalties as provided in paragraphs (a)(1)(i) and (a)(2)(i) of this section, as applicable. Notwithstanding the foregoing, a Licensee eligible to make royalty payments under an agreement entered into pursuant to the Small Webcaster [[Page 27510]]
(d) Minimum fee.(1) Business Establishment Services. Each Licensee that is a Business Establishment Service shall pay a minimum fee of $10,000 for each calendar year in which it makes Ephemeral Recordings for use to facilitate transmissions under the limitation on exclusive rights specified by 17 U.S.C. 114(d)(1)(C)(iv), whether or not it does so for all or any part of the year.
(b) Designation of agent and potential successor designated agents.(1) Until such time as a new designation is made, SoundExchange, presently an unincorporated division of the Recording Industry Association of America, Inc. (``RIAA''), is designated as the Designated Agent to receive statements of account and royalty payments from Licensees due under Sec. 262.3 and to distribute such royalty payments to each Copyright Owner and Performer entitled to receive royalties under 17 U.S.C. 112(e) or 114(g). SoundExchange shall continue to be designated after its separate incorporation.
(ii) Licensees shall make their royalty payments to the successor entity named by the copyright owner representatives under paragraph (b)(2)(i) of this section (the ``Receiving Agent'') and shall provide statements of account on a form prepared by the Receiving Agent. Licensees shall submit a copy of each statement of account to the collective named by the performer representatives under paragraph (b)(2)(ii) of this section at the same time such statement of account is delivered to the Receiving Agent.
(iii) The Designated Agents shall agree between themselves concerning responsibility for distributing royalty payments to Copyright Owners and Performers that have not themselves authorized either Designated Agent. The [[Page 27511]]
(v) The Receiving Agent shall promptly allocate the royalty payments it receives between the two Designated Agents in accordance with the agreed methodology. A final adjustment, if necessary, shall be agreed and paid or refunded, as the case may be, between the Receiving Agent and the collectives named under paragraph (b)(2) of this section for each calendar year no later than 180 days following the end of each calendar year. The Designated Agents shall agree on a reasonable basis for the sharing on a prorata basis of any costs associated with the allocations set forth in paragraph (b)(3)(iii) of this section.
(2) The name, address, business title, telephone number, facsimile number, electronic mail address and other contact information of the individual or individuals to be contacted for information or questions concerning the content of the statement of account; (3) The handwritten signature of:
(4) The printed or typewritten name of the person signing the statement of account; (5) The date of signature;
(7) A certification of the capacity of the person signing; and (8) A statement to the following effect: I, the undersigned owner or agent of the Licensee, or officer or partner, if the Licensee is a corporation or partnership, have examined this statement of account and hereby state that it is true, accurate and complete to my knowledge after reasonable due diligence.
(g) Distribution of payments.(1) The Designated Agent shall distribute royalty payments directly to Copyright Owners and Performers, according to 17 U.S.C. 114(g)(2); Provided that the Designated Agent shall only be responsible for making distributions to those Copyright Owners and Performers who provide the Designated Agent with such information as is necessary to identify and pay the correct recipient of such payments. The agent shall distribute royalty payments on a basis that values all performances by a Licensee equally based upon the information provided by the Licensee pursuant to the regulations governing records of use of sound recordings by Licensees; Provided, however, Performers and Copyright Owners that authorize the Designated Agent may agree with the Designated Agent to allocate their shares of the royalty payments made by any Licensee among themselves on an alternative basis. Parties entitled to receive payments under 17 U.S.C. 114(g)(2) may agree with the Designated Agent upon payment protocols to be used by the Designated Agent that provide for alternative arrangements for the payment of royalties consistent with the percentages in 17 U.S.C. 114(g)(2).
(i) Its methodology for distributing royalty payments to Copyright Owners and Performers who have not themselves authorized the Designated Agent (hereinafter ``nonmembers''), and any amendments thereto, within 60 days of adoption and no later than 30 [[Page 27512]]
(i) Retention of records. Books and records of a Licensee and of the Designated Agent relating to the payment, collection, and distribution of royalty payments shall be kept for a period of not less than 3 years. Sec. 262.5 Confidential information.
(e) Safeguarding of Confidential Information. The Designated Agent and any person identified in paragraph (d) of this section shall implement procedures to safeguard all Confidential Information using a reasonable standard of care, but no less than the same degree of security used to protect Confidential Information or similarly sensitive information belonging to such Designated Agent or person. Sec. 262.6 Verification of statements of account.
(f) Consultation. Before rendering a written report to the Designated Agent, except where the auditor has a reasonable basis to suspect fraud and disclosure would, in the reasonable opinion of the auditor, prejudice the investigation of such suspected fraud, the auditor shall review the tentative written findings of the audit with the appropriate agent or employee of the Licensee being audited in order to remedy any factual errors and clarify [[Page 27513]]
(g) Costs of the verification procedure. The Designated Agent shall pay the cost of the verification procedure, unless it is finally determined that there was an underpayment of 10% or more, in which case the Licensee shall, in addition to paying the amount of any underpayment, bear the reasonable costs of the verification procedure. Sec. 262.7 Verification of royalty payments.
If a Designated Agent is unable to identify or locate a Copyright Owner or Performer who is entitled to receive a royalty payment under this part, the Designated Agent shall retain the required payment in a segregated trust account for a period of 3 years from the date of payment. No claim to such payment shall be valid after the expiration of the 3year period. After the expiration of this period, the Designated Agent may apply the unclaimed funds to offset any costs deductible under 17 U.S.C. 114(g)(3). The foregoing shall apply notwithstanding the common law or statutes of any State. Dated: May 12, 2003. David O. Carson, General Counsel. [FR Doc. 0312349 Filed 51903; 8:45 am]