[Federal Register: February 9, 1999 (Volume 64, Number 26)]

[Rules and Regulations]               

[Page 6221-6223]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr09fe99-9]



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LIBRARY OF CONGRESS



Copyright Office



37 CFR Part 255



[Docket No. 96-4 CARP DPRA]



 

Mechanical and Digital Phonorecord Delivery Rate Adjustment 

Proceeding



AGENCY: Copyright Office, Library of Congress.



ACTION: Final regulations.



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SUMMARY: The Copyright Office of the Library of Congress is announcing 

final regulations setting the rate for the delivery of digital 

phonorecords in general and deferring until the next scheduled rate 

adjustment proceeding further consideration of the royalty rate for the 

delivery of a digital phonorecord where the reproduction or 

distribution



[[Page 6222]]



is incidental to the transmission which constitutes a digital 

phonorecord delivery.



EFFECTIVE DATE: January 1, 1998.



FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or 

Tanya M. Sandros, Attorney Advisor, Copyright Arbitration Royalty Panel 

(``CARP''), P.O. Box 70977, Southwest Station, Washington, DC 20024. 

Telephone (202) 707-8380. Telefax: (202) 252-3423.



SUPPLEMENTARY INFORMATION: On November 1, 1995, Congress passed the 

Digital Performance Right in Sound Recordings Act of 1995 (``Digital 

Performance Act''). Pub. L. 104-39, 109 Stat. 336. Among other things, 

the Act confirms and clarifies that the scope of the statutory license 

to make and distribute phonorecords of nondramatic musical 

compositions, 17 U.S.C. 115, includes the right to distribute or 

authorize distribution by means of a digital transmission which 

constitutes a ``digital phonorecord delivery.'' 17 U.S.C. 115(c)(3)(A).

    A ``digital phonorecord delivery'' is defined as ``each individual 

delivery of a phonorecord by digital transmission of a sound recording 

which results in a specifically identifiable reproduction by or for any 

transmission recipient of a phonorecord of that sound recording * * 

*.'' 17 U.S.C. 115(d).

    The Digital Performance Act established that the rate for all 

digital phonorecord deliveries (``DPDs'') made or authorized under a 

compulsory license on or before December 31, 1997, was the same as the 

rate in effect for the making and distribution of physical phonorecords 

for that period. 17 U.S.C. 115(c)(3)(A)(i). For digital phonorecord 

deliveries made or authorized after December 31, 1997, the Digital 

Performance Act established a two-step process for determining the 

terms and rates; either the copyright owners of nondramatic musical 

works and those persons entitled to obtain a license may negotiate the 

rates and terms for the statutory license, or they may participate in a 

Copyright Arbitration Royalty Panel (``CARP'') proceeding. 17 U.S.C. 

115(c)(3)(A)-(D). In a CARP proceeding, the parties present evidence to 

a panel of three arbitrators who, based upon the written record, write 

a report for the Librarian of Congress in which the CARP sets out its 

determination concerning the appropriate rates and terms. 17 U.S.C. 

802(c) and (e).

    The Librarian initiated the voluntary negotiation period for this 

rate setting proceeding on July 17, 1996, and directed it to end on 

December 31, 1996. 61 FR 37213 (July 17, 1996). At the same time, the 

Librarian announced a schedule for a CARP proceeding in case the 

interested parties were unable to reach an industry-wide agreement 

through the negotiation process. The Librarian vacated this schedule 

and a second schedule for a CARP proceeding at the request of the 

negotiating parties, Recording Industry Association of America 

(``RIAA''), the National Music Publishers' Association, Inc. 

(``NMPA''), and The Harry Fox Agency, Inc. (``Harry Fox''). 61 FR 65243 

(December 11, 1996); 62 FR 5057 (February 3, 1997).

    Ultimately, these parties reached a voluntary agreement which they 

submitted to the Librarian of Congress on November 5, 1997, pursuant to 

37 CFR 251.63(b). Section 251.63(b) allows the Librarian to adopt rates 

and terms embodied in a proposed settlement without convening an 

arbitration panel, if after conducting a notice-and-comment proceeding, 

no party with an intent to participate in a CARP proceeding files a 

substantive comment opposing the proposed regulations. See e.g., 62 FR 

63502 (December 1, 1997) (proposing regulations setting rates and terms 

for the section 118 license). Accordingly, the Librarian published the 

proposed rates and terms for digital phonorecord deliveries for public 

comment. 62 FR 63506 (December 1, 1997).

    Three parties filed comments in response to the proposed terms and 

rates: the United States Telephone Association (``USTA''), the 

Coalition of Internet Webcasters (``Webcasters''), and Broadcast Music, 

Inc. (``BMI''). These comments served to identify heretofore unknown 

parties who have a significant interest in the setting of the rates and 

terms for the delivery of digital phonorecord deliveries. Consequently, 

the parties entered a new round of negotiations in an attempt to 

resolve the commenters' concerns and reach a mutually acceptable 

industry-wide agreement.

    During the second phase of negotiations, the NMPA, SGA, and RIAA 

submitted a memorandum to the Copyright Office requesting that it adopt 

the unopposed rate for the delivery of digital phonorecords in general 

and the schedule for future rate adjustment proceedings set forth in 

its November 5, 1997, agreement, and that it either adopt the proposed 

rates and terms for incidental digital phonorecord deliveries set forth 

in the proposed regulations or sever and defer further consideration of 

these rates and terms until the next rate adjustment proceeding. The 

Copyright Office then offered the parties who had filed a Notice of 

Intent to Participate an opportunity to comment on the memorandum. See 

Order, Docket No. 96-4 CARP DPRA (October 16, 1998).

    USTA responded that its concerns were fully addressed by the 

memorandum; and the three performing rights organizations, ASCAP, BMI, 

and SESAC, filed a joint comment which generally supported the 

recommendations outlined in the NMPA/SGA/RIAA memorandum, provided that 

the final regulations included a provision recognizing that the section 

115 license does not affect in any way the public performance rights 

granted under 17 U.S.C. 106(4). Similarly, the Webcasters filed 

comments which supported the adoption of the rate and terms for digital 

phonorecord deliveries in general and the suggestion to sever and defer 

further consideration of rates and terms for incidental DPDs until the 

next rate adjustment proceeding with two modifications. First, the 

Webcasters sought an amendment to the proposed rules that would allow a 

party to petition the Copyright Office for a proceeding to set a rate 

for the transmission of an incidental digital phonorecord delivery 

prior to the next scheduled date. Second, the Webcasters requested that 

no rate be set for the incidental DPDs prior to the completion of a 

study required by Congress under section 104 of the Digital Millennium 

Copyright Act of 1998 (``DMCA''), subject to the right to petition for 

an interim rate adjustment proceeding.

    In reply comments, NMPA/SGA/RIAA agreed to the ASCAP/BMI/SESAC 

suggestion for a clarification and the Webcasters' suggestion for a 

right to petition for a rate adjustment proceeding for incidental DPDs 

during the interim period. However, they did not support the 

Webcasters' request to postpone the rate adjustment proceeding for 

incidental DPDs until the Office completes its study on the operation 

of sections 109 and 117 of the Copyright Act, 17 U.S.C., as effected by 

Title I of the DMCA.

    On December 4, 1998, the NMPA/SGA/RIAA submitted a second joint 

petition for adjustment of digital phonorecord delivery royalty rates, 

incorporating the proposed modifications except for the suggestion to 

postpone the rate adjustment proceeding until the completion of the 

study. The petition was filed pursuant to 17 U.S.C. 115(c) and 803(a) 

and 37 CFR 251.63(b). Section 251.63(b) allows the Librarian to adopt 

the proposed rates and terms at the conclusion of an unopposed notice-

and-comment rulemaking proceeding. This being so,



[[Page 6223]]



the Copyright Office requested public comment on the proposed rates and 

terms in a notice published in the Federal Register. 63 FR 71249 

(December 24, 1998).

    The Copyright Office received no comments opposing the rates and 

terms for the delivery of digital phonorecords set forth in the 

December 24, 1998, Federal Register notice. Therefore, by this notice, 

the Librarian is adopting and the Copyright Office is announcing final 

regulations which set the rate for the delivery of digital phonorecords 

in general and defer until the next scheduled rate adjustment 

proceeding further consideration of the royalty rate for the delivery 

of a digital phonorecord where the reproduction or distribution is 

incidental to the transmission which constitutes a digital phonorecord 

delivery.



List of Subjects in 37 CFR Part 255



    Copyright, Recordings.



    For the reasons set forth in the preamble, the Library amends 37 

CFR part 255 as follows:



PART 255--ADJUSTMENT OF ROYALTY PAYABLE UNDER COMPULSORY LICENSE 

FOR MAKING AND DISTRIBUTING PHONORECORDS



    1. The authority citation for part 255 continues to read as 

follows:



    Authority: 17 U.S.C. 801(b)(1) and 803.



    2. Revise Sec. 255.5 to read as follows:





Sec. 255.5  Royalty rate for digital phonorecord deliveries in general.



    (a) For every digital phonorecord delivery made on or before 

December 31, 1997, the royalty rate payable with respect to each work 

embodied in the phonorecord shall be either 6.95 cents, or 1.3 cents 

per minute of playing time or fraction thereof, whichever amount is 

larger.

    (b) For every digital phonorecord delivery made on or after January 

1, 1998, except for digital phonorecord deliveries where the 

reproduction or distribution of a phonorecord is incidental to the 

transmission which constitutes the digital phonorecord delivery, as 

specified in 17 U.S.C. 115(c)(3)(C) and (D), the royalty rate payable 

with respect to each work embodied in the phonorecord shall be the 

royalty rate prescribed in Sec. 255.3 for the making and distribution 

of a phonorecord made and distributed on the date of the digital 

phonorecord delivery (the ``Physical Rate''). In any future proceeding 

under 17 U.S.C. 115(c)(3)(C) or (D), the royalty rates payable for a 

compulsory license for digital phonorecord deliveries in general shall 

be established de novo, and no precedential effect shall be given to 

the royalty rate payable under this paragraph for any period prior to 

the period as to which the royalty rates are to be established in such 

future proceeding.

    3. Add Secs. 255.6 through 255.8 to read as follows:





Sec. 255.6  Royalty rate for incidental digital phonorecord deliveries.



    The royalty rate for digital phonorecord deliveries where the 

reproduction or distribution of a phonorecord is incidental to the 

transmission which constitutes a digital phonorecord delivery, as 

specified in 17 U.S.C. 115(c)(3)(C) and (D), is deferred for 

consideration until the next digital phonorecord delivery rate 

adjustment proceeding pursuant to the schedule set forth in Sec. 255.7; 

provided, however, that any owner or user of a copyrighted work with a 

significant interest in such royalty rate, as provided in 17 U.S.C. 

803(a)(1), may petition the Librarian of Congress to establish a rate 

prior to the commencement of the next digital phonorecord delivery rate 

adjustment proceeding. In the event such a petition is filed, the 

Librarian of Congress shall proceed in accordance with 17 U.S.C. 

115(c)(3)(D), and all applicable regulations, as though the petition 

had been filed in accordance with 17 U.S.C. 803(a)(1).





Sec. 255.7  Future proceedings.



    The procedures specified in 17 U.S.C. 115(c)(3)(C) shall be 

repeated in 1999, 2001, 2003, and 2006 so as to determine the 

applicable rates and terms for the making of digital phonorecord 

deliveries during the periods beginning January 1, 2001, 2003, 2005, 

and 2008. The procedures specified in 17 U.S.C. 115(c)(3)(D) shall be 

repeated, in the absence of license agreements negotiated under 17 

U.S.C. 115(c)(3)(B) and (C), upon the filing of a petition in 

accordance with 17 U.S.C. 803(a)(1), in 2000, 2002, 2004, and 2007 so 

as to determine new rates and terms for the making of digital 

phonorecord deliveries during the periods beginning January 1, 2001, 

2003, 2005, and 2008. Thereafter, the procedures specified in 17 U.S.C. 

115(c)(3)(C) and (D) shall be repeated in each fifth calendar year. 

Notwithstanding the foregoing, different years for the repeating of 

such proceedings may be determined in accordance with 17 U.S.C. 

115(c)(3)(C) and (D).





Sec. 255.8  Public performances of sound recordings and musical works.



    Nothing in this part annuls or limits the exclusive right to 

publicly perform a sound recording or the musical work embodied 

therein, including by means of a digital transmission, under 17 U.S.C. 

106(4) and 106(6).



    Dated: January 29, 1999.

Marybeth Peters,

Register of Copyrights.



James H. Billington,

The Librarian of Congress.

[FR Doc. 99-3119 Filed 2-8-99; 8:45 am]

BILLING CODE 1410-33-P