[Federal Register: July 17, 1996 (Volume 61, Number 138)]
[Rules and Regulations]
[Page 37213-37216]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 251
[Docket No. 96-4 CARP DPRA]
Digital Phonorecord Delivery Rate Adjustment Proceeding
AGENCY: Copyright Office, Library of Congress.
ACTION: Final regulations, notice of initiation of negotiation period.
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SUMMARY: The Copyright Office is announcing the initiation of the
negotiation period for determining reasonable rates and terms for
digital transmissions that constitute a digital phonorecord delivery.
This negotiation period is mandated by the Digital
[[Page 37214]]
Performance Right in Sound Recordings Act of 1995 and is intended to
promote the private settlement of the rates and terms for digital
phonorecord delivery. In addition, the Office is adopting procedural
regulations implementing the Digital Performance Right in Sound Records
Act of 1995. The Office also solicits comments on the advisability of
consolidating the digital phonorecord delivery rate adjustment
proceeding with the physical phonorecord rate adjustment proceeding.
EFFECTIVE DATES: The regulations are effective August 16, 1996. The
negotiation period begins July 17, 1996 and ends December 31, 1996.
Comments on consolidation are due November 8, 1996. Petitions for rate
adjustment are due January 10, 1997.
ADDRESSES: Comments, copies of voluntary license agreements, and
petitions, when sent by mail should be addressed to: Copyright
Arbitration Royalty Panel (CARP), P.O. Box 70977, Southwest Station,
Washington, D.C. 20024. Comments, copies of voluntary license
agreements, and petitions, when hand delivered, should be brought to:
Office of the General Counsel, Copyright Office, James Madison Memorial
Building, Room LM-407, First and Independence Avenue, SE., Washington,
DC.
FOR FURTHER INFORMATION CONTACT:
Marilyn J. Kretsinger, Acting General Counsel, or William Roberts,
Senior Attorney, Copyright Arbitration Royalty Panel, P.O. Box 70977,
Southwest Station, Washington, DC 20024, (202) 707-8380.
SUPPLEMENTARY INFORMATION:
Background
On November 1, 1995, Congress passed the Digital Performance Right
in Sound Recordings Act of 1995 (``Digital Performance Act''). Public
Law 104-39, 109 Stat. 336. Among other things, it confirms and
clarifies that the scope of the compulsory license to make and
distribute phonorecords of nondramatic musical compositions includes
digital transmissions which constitute ``digital phonorecord
deliveries.'' 17 U.S.C. 115(c)(3). A ``digital phonorecord delivery''
is 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. 17 U.S.C. 115(d), 37
CFR 255.4.
The Digital Performance Act also provides that the rate for all
digital phonorecord deliveries made or authorized under a compulsory
license on or before December 31, 1997, shall be the same as the rate
in effect for the making and distribution of physical phonorecords.
Accordingly, the Copyright Office and the Library of Congress amended
part 255 of the Copyright Office's rules to set the rate for digital
phonorecord deliveries at 6.95 cents for each work embodied in a
phonorecord, or 1.3 cents per minute of playing time or fraction
thereof, whichever amount is larger. 60 FR 61655 (December 1, 1995); 37
CFR 255.5. This is the same rate that applies to the manufacture and
distribution of physical phonorecords.
This Rate Adjustment Proceeding
The current rate for digital phonorecord deliveries expires
December 31, 1997. Accordingly, in the Digital Performance Act,
Congress established a two-step process for adjusting the royalty rate:
a negotiation period during the second half of 1996 wherein the owners
and the users attempt to reach their own voluntary licenses, and the,
if necessary, and upon petition in 1997, the convening of a copyright
arbitration panel (CARP) to establish rates and terms for those persons
who are not covered by such voluntary licenses. 17 U.S.C. 115(c)(3)(C)
and (D).
For the first step in the process, the negotiation period, the
Digital Performance Act provides that during the period of June 30,
1996, through December 31, 1996, the Librarian of Congress shall cause
notice to be published in the Federal Register of the initiation of
voluntary negotiation proceedings for the purpose of determining
reasonable terms and rates for digital phonorecord deliveries. 17
U.S.C. 115(c)(3)(C).
The Digital Performance Act does not require the negotiation period
to begin on June 30, 1996, nor does it require that the negotiation
period be six months long. It is the Office's understanding that the
Act leaves the commencement and the length of the negotiation period to
the discretion of the Librarian.
Upon consideration, the Office believes that the negotiation period
should begin in July, 1996, and should conclude by December 31, 1996,
and that petitions to convene a CARP should be filed by January 10,
1997, for the following reason. The current rate for digital
phonorecord deliveries, by operation of law, is set to expire December
31, 1997. Should negotiations fail and the Librarian be petitioned to
convene a CARP, written direct cases would have to be filed by January
31, 1997, if the precontroversy period (three months), the arbitration
proceeding (six months) and the Librarian's review of the CARP's
decision (two moths) is to conclude by December 31, 1997. Otherwise,
there will be a lapse in time when no rates apply to digital
phonorecord deliveries.
Therefore, the following procedural dates shall apply:
<bullet> From today's publication in the Federal Register to
December 31, 1996, there is established the voluntary negotiation
proceeding for determining reasonable terms and rates of royalty
payments for digital phonorecord deliveries. Such terms and rates shall
distinguish between (a) digital phonorecord deliveries where the
reproduction or distribution of a phonorecord is incidental to the
transmission which constitutes the digital phonorecord delivery, and
(b) digital phonorecord deliveries in general.
<bullet> If negotiations are successful, any copyright owners of
nondramatic musical works and any persons entitled to obtain a
compulsory license for digital phonorecord deliveries may submit to the
Librarian of Congress licenses covering such activities. 17 U.S.C.
115(c)(3)(C).
<bullet> In addition, if negotiations are successful, the Librarian
may, upon the request of the parties to the negotiation proceeding,
submit the agreed upon rates and terms to the public in a notice-and-
comment proceeding. The Librarian may adopt the rates and terms
embodied in the proposed settlement without convening a CARP, provided
that no opposing comment is received by the Librarian from a party with
an intent to participate in a CARP proceeding. 37 CFR 251.63(a). Such
petitions are to be filed by January 10, 1997.
<bullet> If negotiations are not successful, petitions to convene a
CARP are to be filed by January 10, 1997.\1\ The petition shall detail
petitioner's interest in the royalty rate sufficiently to permit the
Librarian of Congress to determine whether the petitioner has a
``significant interest'' in the rate. The petition must also identify
the extent to which the petitioner's interest is shared by other owners
or users; owners or users with similar interests may file a joint
petition. 37 CFR 251.62.
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\1\ Because the law requires petitions to be filed in 1997, and
because written direct cases must be filed by January 31, 1997, if
the proceeding is to conclude by December 31, 1997, the petitions
must be received by the Copyright Office by January 10, 1997.
Therefore, it is advisable for petitioners to deliver their
petitions to the Copyright Office. If petitions are mailed to the
CARP post office box, it is advisable that they be sent well in
advance.
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<bullet> Notices of Intent to Participate in a CARP proceeding to
adjust the rates and establish the terms of the digital
[[Page 37215]]
phonorecord delivery compulsory license are to be filed by January 17,
1997.
<bullet> Written direct cases in the CARP proceeding shall be filed
by January 31, 1997.
<bullet> After the precontroversy discovery period, the Librarian
will initiate the CARP proceeding on May 1, 1997.
Relationship to Rate Adjustment Proceeding for Physical
Phonorecords
The year 1997 is also when the mechanical royalty rate for physical
phonorecords may be adjusted. This rate can be the same as, or
different from, the rate that applies to digital phonorecord
deliveries. While the rate for digital phonorecord deliveries expires,
by law, on December 31, 1997, and needs to be replaced, there is no
similar urgency to adjust the mechanical royalty rate for physical
phonorecords. If no rate adjustment proceeding for physical
phonorecords is concluded by December 31, 1997, the rate in existence
now will simply continue until such time as it is adjusted.
The question is still raised whether it wouldn't be more efficient
and less costly to have the same CARP panel, if one is to be convened,
consider the mechanical royalty rates for both physical phonorecords
and digital phonorecord deliveries. To consolidate such proceedings, it
would be necessary to have a petition to adjust the physical
phonorecord rate filed at the same time as the petition to adjust the
digital phonorecord deliveries rate, January 10, 1997.
However, to require petitions to be filed by January 10, 1997,
might deprive the interested copyright owners and users of time in 1997
to negotiate the rate. Therefore, the Office solicits comments on the
advisability of consolidating the two rate adjustment proceedings.
Comments are due by November 8, 1996. If the comments favor
consolidation, the Office will issue an order indicating that the two
proceedings will be consolidated. The order will also call for physical
phonorecord petitions to be filed by January 10, 1997, Notices of
Intent to Participate to be filed by January 17, 1997, written direct
cases to be filed by January 31, 1997, and list all other procedural
dates. The order will also cancel, because of time constraints, the 30-
day negotiation period that follows the filing of a physical
phonorecord petition set out in 37 CFR 251.63(a). The Librarian will
initiate the consolidated proceeding on May 1, 1997.
Amendment of CARP Rules to Reflect Passage of Digital Performance Act
In addition to expanding the scope of the mechanical compulsory
license to include digital phonorecord deliveries, the Digital
Performance Act also added a new compulsory license: the license for
qualifying subscription digital audio transmission services to perform
sound recordings. The rates and terms for both these licenses are to be
set by the CARP, if negotiations prove successful. Therefore, the
current CARP rules need to be amended to reflect these additional
responsibilities.
Section 553(b)(3)(A) of the Administrative Procedure Act states
that general notice of proposed rulemaking is not required for rules of
agency organization, procedure, or practice. Since the Office finds
that the following final regulations are rules of agency organization,
procedure, or practice, no notice of proposed rulemaking is required.
List of Subjects in 37 CFR Part 251
Administrative practice and procedure, Cable television, Copyright,
Jukeboxes, Organization and functions (government agencies),
Recordings, Satellites.
For the reasons set forth in the preamble, the Copyright Office and
the Library of Congress amend 37 CFR part 251 as follows:
PART 251--COPYRIGHT ARBITRATION ROYALTY PANEL RULES OF PROCEDURE
1. The authority citation for part 251 continues to read as
follows:
Authority: 17 U.S.C. 801-803.
2. Section 251.2 is revised to read as follows:
Sec. 251.2 Purpose of Copyright Arbitration Royalty Panels.
The Librarian of Congress, upon the recommendation of the Register
of Copyrights, may appoint and convene a Copyright Arbitration Royalty
Panel (CARP) for the following purposes:
(a) To make determinations concerning royalty rates for the cable
compulsory license, 17 U.S.C. 111;
(b) To make determinations concerning royalty rates and terms for
the subscription digital audio transmissions compulsory license, 17
U.S.C. 114;
(c) To make determinations concerning royalty rates for making and
distributing phonorecords, and royalty rates and terms for digital
transmissions that constitute digital phonorecord deliveries, 17 U.S.C.
115;
(d) To make determinations concerning royalty rates for coin-
operated phonorecord players (jukeboxes) whenever a negotiated license
expires or is terminated and is not replaced by another such license
agreement, 17 U.S.C. 116;
(e) To make determinations concerning royalty rates and terms for
the use by noncommercial educational broadcast stations for certain
copyrighted works, 17 U.S.C. 118;
(f) To make determinations concerning royalty rates for the
satellite carrier compulsory license, 17 U.S.C. 119; and
(g) To make determinations concerning the distribution of cable and
satellite carrier royalty fees and digital audio recording devices and
media payments deposited with the Register of Copyrights, 17 U.S.C.
111, 119, and chapter 10, respectively.
3. Section 251.58(c) is revised to read as follows:
Sec. 251.58 Judicial review.
* * * * *
(c) The pendency of any appeal shall not relieve persons obligated
to make royalty payments under 17 U.S.C. 111, 114, 115, 116, 118, 119,
or 1003, and who would be affected by the determination on appeal, from
depositing statements of account and royalty fees by those sections.
4. The first sentence of Sec. 251.60 is revised to read as follows:
Sec. 251.60 Scope.
This subpart governs only those proceedings dealing with royalty
rate adjustments affecting cable (17 U.S.C. 111), subscription digital
audio transmission
(17 U.S.C. 114), the manufacture and distribution of
phonorecords, including digital phonorecord deliveries (17 U.S.C. 115),
performances on coin-operated phonorecord players (jukeboxes) (17
U.S.C. 116), noncommercial educational broadcasting (17 U.S.C. 118) and
satellite carriers (17 U.S.C. 119). * * *
5. In Sec. 251.61, paragraph (a) is revised to read as follows:
Sec. 251.61 Commencement of adjustment proceedings.
(a) In the case of cable, subscription digital audio transmissions,
phonorecords, digital phonorecord deliveries, and coin-operated
phonorecord players (jukeboxes), rate adjustment proceedings shall
commence with the filing of a petition by an interested party according
to the following schedule:
(1) Cable: During 1995, and each subsequent fifth calendar year.
[[Page 37216]]
(2) Subscription Digital Audio Transmissions: During a 60-day
period prescribed by the Librarian in 1996, 2000, and each subsequent
fifth calendar year.
(3) Phonorecords: During 1997 and each subsequent tenth calendar
year.
(4) Digital Phonorecord Deliveries: During 1997 and each subsequent
fifth calendar year except to the extent that different years may be
determined by the parties to a negotiated settlement or by the
copyright arbitration royalty panel.
(5) Coin-operated phonorecord players (jukeboxes): Within one year
of the expiration or termination of a negotiated license authorized by
17 U.S.C. 116.
* * * * *
6. In Sec. 251.62, the first sentence of paragraph (a) is revised
to read as follows:
Sec. 251.62 Content of petition.
(a) In the case of a petition for rate adjustment proceedings for
cable, subscription digital audio transmissions, phonorecords, digital
phonorecord deliveries,and coin-operated phonorecord players
(jukeboxes), the petition shall detail the petitioner's interest in the
royalty rate sufficiently to permit the Librarian of Congress to
determine whether the petitioner has a ``significant interest'' in the
matter. * * *
* * * * *
7. In Sec. 251.63, the first sentence of paragraph (a) is revised
to read as follows:
Sec. 251.63 Consideration of petition; settlements.
(a) To allow time for the parties to settle their differences
concerning cable, phonorecord, and jukebox rate adjustments, the
Librarian of Congress shall, after the filing of the petition under
Sec. 251.62 and before the 45-day period specified in
Sec. 251.45(b)(2)(i), designate a 30-day period for consideration of
their settlement. * * *
* * * * *
Dated: July 12, 1996.
Recommended by:
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 96-18105 Filed 7-16-96; 8:45 am]
***7/24/96***