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LIBRARY OF CONGRESS

UNITED STATES COPYRIGHT OFFICE

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Interim Regulations on Notice and Recordkeeping for Digital  Subscription Transmissions          Docket No. RM 96-3B

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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.

NOTE: This is a longer version of the document published in the Federal Register on June 24, 1998.

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

SUPPLEMENTARY INFORMATION

A synopsis of this Interim Rule will be published in the FEDERAL REGISTER. This is the full text of the Interim Rule. It 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 Licensing Division of the Copyright Office, Room LM-458, James Madison Memorial Building, First and Independence Avenue, SE., Washington, D.C. 20559-6000. The full Interim Rule is also available via the Copyright Office website 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.

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.

Background

On November 1, 1995, Congress enacted the Digital Performance Right in Sound Recordings Act of 1995 ("the Act"). Public Law 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," a limit on the number of selections that can be played from one phonorecord, boxed set, or featured artist within a three-hour period, is defined as:

the transmission during any 3-hour period, on a particular channel used by a transmitting entity, of no more than --

(A) 3 different selections of sound recordings from any one phonorecord lawfully distributed for public performance or sale in the United States, if no more than 2 such selections are transmitted consecutively; or

(B) 4 different selections of sound recordings --

(i) by the same featured recording artist; or

(ii) from any set or compilation of phonorecords lawfully distributed together as a unit for public performance or sale in the United States, if no more than three such selections are transmitted consecutively: Provided, That the transmission of selections in excess of the numerical limits provided for in clauses (A) and (B) from multiple phonorecords shall nonetheless qualify as a sound recording performance complement if the programming of the multiple phonorecords was not willfully intended to avoid the numerical limitations prescribed in such clauses.

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.(1) 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).

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), 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"). RIAA represents member companies who manufacture or distribute more than 90 percent of legitimate sound recordings sold in the United States. RIAA Reply at 17. DCR is distributed to residential subscribers under the brand name "Music Choice" via cable systems, MMDS, and direct broadcast satellite (DBS) to more than a million subscribers. DCR Comment at 1.(2) DMX, which began operating the subscription service "Digital Music Express" in 1991 to some 23,000 monthly subscribers and now also serves more than a million residences in the United States and abroad, is distributed as a premium channel service by cable television and DBS. DMX offers 30 channels for residential cable subscribers and up to 92 channels to DBS subscribers, with each channel representing a particular era or genre without commercials or announcers. DMX Comment at 3-4.(3) Muzak has been a supplier of subscription music to businesses for 60 years and has begun to provide digitally broadcast subscription music to customers. Muzak Comment at 1.

The comments provided a wide range of proposals for notice and records of use, with varying form and content requirements, and also addressed matters not prescribed in the Act, such as confidentiality, auditing and statements of account.

1. Initial Notice.

A bedrock proposal was that digital subscription transmission services ("Services") file an initial notice with the Copyright Office indicating commencement of transmission under statutory license. RIAA and DMX agreed Services should file such a notice, but differed on when it should be filed, what it should contain, and whether to require amendments to reflect changes in reported information; for example, RIAA sought information on Services' business status, partners, officers, shareholders, and securities registrations. See RIAA Comment at 3, 5 and Reply at 3-4; DMX Comment at 9 and Reply at 4-5. DCR saw no basis for an initial notice requirement, and said information RIAA sought was either proprietary, already available, or beyond the Act's scope. DCR Reply at 4. There were differences relating to whether to characterize the notice as an "intent to obtain" a statutory license, and whether to require a statement of intention to comply with terms of the statutory license. RIAA Reply at 4-5; DMX Comment at 9 and Reply at 6-8.

2. Records of Use.

In addition to an initial notice, the commenting parties proposed generally that Services file reports of use including data to indicate which sound recordings were performed and the number of times (summary frequency data). DCR favored a monthly playlist report downloaded electronically to RIAA, and filed with the Copyright Office for inspection by sound recording copyright owners. DMX, Muzak, and RIAA believed reports should be quarterly. DCR Comment at 2; DMX Comment at 2, 9-10 and Reply at 10; Muzak Comment at 2; RIAA Comment at 6 and Reply at 1-2.

All three Services said the reports should be served on a single collective rights organization ("Collective") or on the Copyright Office, rather than on various individual copyright owners. DMX Comment at 2, 8 and Reply at 3, 14-15; Muzak Comment at 2; DCR Reply at 5-6. Because its members manufacture and distribute more than 90 percent of the legitimate sound recordings sold in the United States, RIAA said it is uniquely suited to represent sound recording copyright owners for performance royalties, and had already created a "Collective" with nearly 100 member companies, to collect and distribute royalties to sound recording copyright owners regardless of their membership in the RIAA trade association. RIAA Reply at 17.

3. Data Fields to Identify Sound Recordings.

All commenting parties agreed that reports of use should include the following data fields to identify sound recordings performed: selection (track) title, featured artist, album title, and record label. Also suggested by DMX, Muzak and RIAA was the album catalog number. DMX Comment at 2, 9-10 and Reply at 10, 14-16; Muzak Comment at 3; RIAA Comment at 6-7, 10-12 and Reply Appendix; DCR Comment at 2 and Reply at 3 n.4, 4. In addition, RIAA sought the track number, media type, release date, volume number of a multi-volume set, universal product code (UPC), International Standard Recording Code (ISRC)(4), and a "sound recording identifier" used by the particular software program ("Selector") developed by the company ("Radio Computing Services," or RCS) that presently generates electronic playlists for the Services in accord with each Service's play rules. RIAA said it plans to use the Selector program to automate the reports of use. RIAA Comment at 6-7, 10-12 and Reply at 11-12, Appendix. Services responded that requiring such detailed information was neither necessary nor feasible, and would burden the nascent industry. DCR Reply at 2-3; DMX Reply at 11-13.

4. Reporting Specific Usage and Complement Compliance.

While Muzak was of the opinion that playlist samples and extracts would be preferable to "100% accurate detail which is rarely achievable," Muzak Comment at 2, RIAA asserted that Congress intended copyright owners to be compensated for every sound recording digitally transmitted, and that the sound recording performance complement requires Services to maintain detailed information on a channel-by-channel basis. RIAA Comment at 5, 8 and Reply at 2. RIAA said reports of use should include both the Song Library ("used to create the intended playlist") and the actual playlist (or "Performance Log"), which it sought to cross-reference to identify specific recordings transmitted. Id. at 7. DMX said it could not create a log of recordings actually transmitted, and that the playlist typically includes an extra song per hour that may not be performed "to assure a continuous program of music despite technical or programming glitches, incorrect time markings on the sound recordings, etc." DMX Reply at 9. DMX said it lacked staff to compare scheduled against actual programming for more than 90 channels for "service 24 hours a day seven days a week," and noted confidentiality and trade secret concerns associated with the programming information sought. Id. at 2, 7-8 and Reply at 9-10.

5. Maintenance of Records.

Because the statute of limitations for infringement actions is three years, RIAA said records of use and data used to compile statements of account should be kept for three years from the date of service on the copyright owner, or deposited with the Copyright Office for verification purposes. DMX, however, said data supporting summary reports of use should be maintained no more than two years, time to permit a single audit with a reasonable burden. DCR believed copyright owners should have the right to request retransmission or clarification of files electronically downloaded only within 30 days, "after which time the digital audio services would have no obligation to maintain archived files of" the playlists. DCR also argued against retroactive recordkeeping requirements, which could require Services to produce 15 million records for just the first five months. RIAA Comment at 6, 13, 16 and Reply at 2, 13 (citing 17 U.S.C. 507); DMX Comment at 11 and Reply at 20; DCR Comment at 2-3 and Reply at 7.

6. Statements of Account, Access and Confidentiality, and Auditing.

In addition to the notice and recordkeeping proposals, the comments addressed certain matters not prescribed in the Act.

a. Statements of account. RIAA proposed that Services file semi-annual Statements of Account with the Copyright Office, to include Service name, address, gross receipts, royalties paid, and subscriber information; copyright owners or their representatives would have access at the Office to statements of account upon request. DCR saw nothing in the Act requiring Statements of Account. Muzak said the purpose of reports of use is to allocate funds, so payments should be concurrent with and accompany the reports. DMX believed that requirements governing statements of account were necessary, but should await arbitration of rates and terms under section 114(f)(2). RIAA Comment at 13-16 (citing 17 U.S.C. 1003, 111, and 119); DCR Reply at 5; Muzak Comment at 2; DMX Reply at 17.

b. Access and confidentiality. To provide access, DCR suggested that playlists be electronically downloaded to RIAA each month, with a copy available at the Copyright Office solely for inspection by sound recording copyright owners. DCR Reply at 5 (comparing 17 U.S.C. 1003(c)). The other Services stressed that programming details may reveal competitive information, and that a reporting system must provide security and confidentiality. Muzak said that a Collective, when reporting to members and copyright owners, should combine data to protect confidentiality of individual transmitters. Muzak Comment at 2-3. DMX agreed that copyright owners and agents should not be permitted to disclose to third parties or other Services "information pertaining to the performance of or license fees paid with respect to the sound recordings of others." DMX Comment at 12.

c. Auditing. To protect confidentiality, DMX said a Service's full playlist information should be made available only in independent audit proceedings, and information on royalties paid to particular owners should be restricted to that copyright owner and an independent auditor; limited access is particularly important because DCR/Music Choice is owned by three large record companies. DMX Comment at 7. To protect against multiple audits, DMX proposed that the regulation permit only a single audit per year on behalf of all interested parties, by a certified independent auditor, and initiated by timely filing with the Copyright Office of a notice of intent to audit; the notice would be published in the Federal Register to give interested persons an opportunity to agree in advance to share audit expenses and results. DMX Comment at 12-13. Originally, RIAA proposed that copyright owners have reasonable access to records supporting Statements of Account within 14 days of written request to a Service. In its Reply, RIAA accepted DMX's proposal with the added suggestion that interested parties have the opportunity to agree on the choice of an auditor. While questioning the confidentiality of playlist time and sequence, RIAA agreed not to disseminate this information in aggregate form to individual members. RIAA Reply at 14, 17.

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.(5) See Memorandum from Marilyn J. Kretsinger, Acting General Counsel, U.S. Copyright Office, to Commenting Parties (Oct. 9, 1996). In attendance were 15 individuals representing RIAA, DMX, Muzak, DCR, and the Copyright Office. The Office distributed at the meeting a list of proposals from the Comments that it accepted in principle: (1) Services would file with the Office a brief initial notice indicating transmission of sound recordings under statutory license; (2) reports of use and royalties would be best collected and distributed by a single Collective, provided that access to records were given to non-Collective member copyright owners; (3) reports of use should be quarterly, and maintained for three years; and (4) the regulation should not require Statements of Account. Following the meeting, the Office circulated a draft meeting summary, and received additional written comments in response. A second meeting with the parties took place on January 23, 1997. See Memorandum from Marilyn J. Kretsinger, Acting General Counsel, U.S. Copyright Office, to Commenting Parties (Jan. 14, 1997).(6)

The comments and meeting discussions produced the following issues.

1. Reporting Compliance With the Sound Recording Performance Complement.

In addition to summary frequency data, RIAA proposed that the quarterly report include a "sample" of the Service's playlist, to permit copyright owners: (1) to verify accuracy of the summary frequency data; and (2) to monitor compliance with the sound recording performance complement defined in 17 U.S.C. 114(j)(7). Under one proposal, the sample would have consisted of a 30-day report each quarter of either: (1) the Service's actual playlist; or (2) its intended playlist with an error log and an accompanying certification of the information's accuracy by a Service official. See RIAA Additional Reply (Dec. 19, 1996) at 7.

In response, representatives of Services raised two issues: (1) whether the Act requires them to affirmatively report compliance with the performance complement at all; and (2) if so, whether a sample size could be developed with a true mathematical or statistical basis. See DCR Additional Comment (Dec. 12, 1996) at 4-6; Letter from Jon L. Praed to Jean R. Milbauer (Jan. 16, 1997). DCR said it was not required to provide a playlist sample or error log, because the Act's "reasonable" notice requirement does not oblige Services to "provide notice of" or "affirmatively report" compliance with the performance complement; and it would exceed the Copyright Office's statutory authority to impose recordkeeping requirements implicating the complement. DCR Additional Comment (Dec. 12, 1996) at 4-6. DCR noted that transmissions from multiple phonorecords exceeding the complement's numerical limitations will nonetheless conform to the complement if the programming of multiple phonorecords was not "willfully intended" to avoid the numerical limitations. Id. at 6, 6 n. 11 (citing 17 U.S.C. 114(j)(7) and S. Rep. No. 128, 104th Cong., 1st Sess. 35 (1995)). RIAA replied that if a Service were to violate the complement regularly, such pattern could provide evidence of intent. A performance is permitted under the license only if it conforms to the complement; unless notice of use includes data to test compliance, it will be impossible to determine if a performance is a permitted use. RIAA Additional Reply (Dec. 19, 1996) at 8, 8 n.5, 9. The Copyright Office has authority under the Act to promulgate comprehensive notice and recordkeeping regulations. Id. at 4-5. With respect to the sample size, at the January 23 meeting RIAA responded that it would attempt to determine an appropriate one if Services would provide necessary data. On February 11, the Office encouraged the Services to address RIAA's request for such data. Memorandum from Nanette Petruzzelli, Acting General Counsel, U.S. Copyright Office, to Commenting Parties (Feb. 11, 1997). On March 11, 1997, however, after consulting with the other commenting Services, a representative for DMX proposed that Services simply produce their entire intended playlist for each quarter, instead of providing summary frequency data or error logs, to enable copyright owners to determine allocation of royalties and compliance with the performance complement. Letter from Seth D. Greenstein, Esq., to Jean R. Milbauer, Esq. (Mar. 11, 1997). This proposal was deemed generally acceptable to the commenting parties provided that an agreeable definition for "intended playlist" were reached. See Letter from Jean R. Milbauer to DMX, DCR, and Muzak (Mar. 13, 1997); Letter from Seth D. Greenstein to Jean Milbauer, Esq. (Mar. 18, 1997); Letter from Fernando R. Laguarda, Esq., to Jean R. Milbauer, Esq. (Mar. 18, 1997) ("without waiving any legal objections previously set forth").

2. Data Fields.

The commenting parties continued to discuss data fields to be provided in the reports of use that would permit identification of sound recordings performed and distribution of royalties to individual copyright owners, without placing unreasonable burden on Services. See, e.g., DCR Additional Comment (Dec. 12, 1996) at 4 n.7; RIAA Additional Reply (Dec. 19, 1996) at 2 n.1; Letter from Seth D. Greenstein, Esq., to Jean Milbauer, Esq. (Mar. 18, 1997).

3. Non-Collective Member Copyright Owners.

The discussions raised issues concerning 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. As stated above, RIAA created a Collective to collect and distribute its members' sound recording performance royalties. Owners of copyright in an estimated 90 percent of legitimate sound recordings sold in the United States are members of the RIAA trade association, and would likely designate its Collective as agent or representative. In those cases, Services would file reports of use (and royalties and accounting information) with the RIAA Collective. In its Reply Comments, RIAA said its Collective would collect and distribute royalties for entitled copyright owners "regardless of their membership in the RIAA" and noted that the Collective had nearly 100 members, "including non-RIAA members." RIAA Reply at 17. At the facilitated meetings, however, RIAA said it might not permit copyright owners that were not members of the RIAA trade association to designate its Collective as their agent to receive reports and royalties. RIAA said it was concerned about its Collective using RIAA member funds to administer the performance right for non-RIAA members. See Summary of Nov. 14 Meeting 1 (Jan. 2, 1997). In written comments submitted following the November meeting, RIAA emphasized that, due to contractual and fiduciary responsibilities toward its members, it could not use RIAA "member funds to administer nonmember royalties without their members' approval." RIAA Additional Reply (Dec. 19, 1996) at 9-10. This meant that Services might not be able to report to the RIAA Collective for an estimated ten percent of all legitimate sound recordings sold in the United States. It was also recognized at the meetings that some copyright owners may prefer not to designate the RIAA Collective, see 17 U.S.C. 114(e)(1) (permitting designation of common agents on nonexclusive basis), and that the location or identity of still other sound recording copyright owners may be unknown. DCR, however, argued that benefits to copyright owners of a single repository far outweighed "costs of administering such a system for the few non-members." DCR believed the Office should designate a single Collective and not permit individual copyright owners to elect not to join. DCR Additional Comment (Dec. 12, 1996) at 7.

The Second NPRM and Request for Further Comments

On June 24, 1997, the Copyright Office published a second Notice of Proposed Rulemaking (NPRM), requesting further written comment. Much of this second inquiry concerned the reports of use proposed by the parties. For example, the Office inquired what the definition of "intended playlist" should be; how long after the close of each period reports should be due; whether reports should be supplemented by error logs in the event of a system malfunction; whether reports should bear a certification by a Service representative; what data fields and sound recording identifiers should be included in the reports; whether the regulation should address compilation albums or non-music and foreign programming; and whether the Office should expressly recognize a transition period before Services must provide reports conforming completely to the regulations. Based on the written comments and facilitated discussions, the Office also presented "certain preliminary decisions" in the second NPRM, and asked the parties to address certain additional policy questions.

1. Initial Notice.

For example, the Office announced a preliminary decision in the second NPRM that it would accept an optional initial notice filed by Services indicating transmission of sound recordings under statutory license; the notice would consist simply of Service name, address, and contact person, and be placed in Copyright Office records where copyright owners could access this information concerning the use of sound recordings under the license. In making the initial notice optional rather than mandatory, the Office's reasoning was that section 114(f)(2) requires that copyright owners receive notice of use of their sound recordings, and a notice indicating commencement of transmission under statutory license would not accomplish that objective; and that copyright owners would most appropriately and reasonably receive notice of use of their sound recordings by direct service. As discussed below, however, the Office has reconsidered this preliminary conclusion.

2. Reporting Compliance With the Performance Complement.

The Office concluded in the second NPRM that the Digital Performance Right in Sound Recordings Act contemplates that digital subscription services keep and make available, not simply summary frequency data, but records of use to enable sound recording copyright owners to generally monitor Services' compliance with the sound recording performance complement. See 17 U.S.C. 114(d)(2); 114(f)(5); 114(j)(7). The Office determined that establishing such a reporting requirement is within its rulemaking authority under 17 U.S.C. 114(f)(2).

3. Service of Reports of Use on Non-Collective Members.

In the NPRM, the Office asked the parties to address how Services should make records of use available to sound recording copyright owners who were not members of a major Collective such as RIAA's. To determine appropriate section 114 reporting requirements, the Office examined statutory and regulatory precedent involving collective and compulsory licensing of performance and reproduction rights in musical works under sections 106 and 115. See Notice of Proposed Rulemaking, 62 FR 34035 (June 24, 1997). The Office concluded that sound recording copyright owners whose identity and location were known would best be served directly, or directly via their designated agent, with the quarterly reports of use of their copyrighted works under the statutory license; the Office would not accept the reports of use, and could not designate a particular entity as a central Collective or records repository. The majority of copyright owners would likely designate the RIAA Collective. The Office recognized the potential burden for Services of identifying and serving individual copyright owners who were not members of such a Collective, and the possible disincentive that individual reporting could create for performances of recordings owned by small or independent record labels. Id. (citing DMX Comment at 2, 8 and Reply at 3; Muzak Comment at 2; DCR Reply at 5-6). However, the Office said that in the context of this rulemaking on notice and recordkeeping, it was unable to designate a particular Collective, and thus saw no alternative at that time to requiring Services that perform sound recordings under the statutory license to serve the sound recording copyright owner whose identity and location is known (or its designated agent) directly with reports of use; only copyright owners whose location or identity were unknown, or who refused delivery, would not be directly served. The Office therefore requested comment on how digital services would identify and locate sound recording copyright owners, and how the regulation should define a sound recording copyright owner "whose identity and location is known" so as to trigger the requirement of direct service. Id.

4. Maintenance of Records for Unknown Copyright Owners.

The Office announced in the second NPRM that Services would be required to maintain their records of use (i.e., either the reports of use, or the information underlying the reports of use) for a period of three years, the statutory limitation for copyright infringement actions. In the event that an address for a copyright owner were not known, or a copyright owner refused delivery, the Office said no additional filing would be required at the Copyright Office; Services were urged as a matter of business practice to retain any evidence of mailing and a brief statement as to why reports of use were not served on the copyright owner, and to consider designating a collective agent to maintain reports of use for the three year period.

The Office envisioned that owners of copyright in sound recordings performed under the license who had not been directly served, but who made their identity and location known, should have access to records of use for the preceding three years, and thereafter be served directly with reports relating to subsequent performances. The Office thus inquired how Services proposed to make these records of use reasonably available and accessible, and how copyright owners whose works were performed but who had not been directly served should make their identity and location known to Services. The Office also inquired how such copyright owners might identify their sound recordings, and how a regulation might delineate boundaries within which such copyright owners could demand access to records of use.

5. Audits of Records of Use.

The Office announced in the second NPRM that it would issue no regulation on audits of information underlying the reports of use. The commenting parties agreed in the facilitated meetings that rules governing audits of accounting records were best handled as a matter of rates and terms, to be addressed and resolved through a CARP or negotiation. However, to ensure access to records and limit the potential for multiple audits, some parties had proposed a regulation limiting copyright owners to a single audit per year of information underlying the reports of use; the procedure would be initiated by a notice of intent to audit, filed with the Copyright Office and published in the Federal Register, with a comment period for all interested parties to agree on choice of auditor. See DMX Comment at 12-13; RIAA Reply at 14-16, 18. The Office said in the NPRM it assumed that the decision to provide intended playlists in the reports of use would obviate the need for an audit regulation, and that it generally sees the practice of auditing as a business and legal decision. See Notice of Proposed Rulemaking, 62 FR 34,035 (June 24, 1997).

6. Confidentiality of Records and Data Separation.

Finally, the Office acknowledged confidentiality concerns Services had expressed in relation to serving playlist information and programming details upon copyright owners, and noted that precautions a large Collective might take to protect confidentiality might be difficult to duplicate by dozens of smaller recipients. See id. (citing Muzak Comment at 2-3). Yet the Office also recognized that the Services' desire to avoid burdensome data separation and production of different data in different formats for different copyright owner entities was a primary motivation for the proposal "simply to produce the entire intended playlist for each quarter," subject to appropriate confidentiality provisions. See id. (quoting Letter from Seth D. Greenstein, Esq., to Jean Milbauer, Esq. (Mar. 11, 1997)).

The Office therefore asked whether provision of the intended playlist did in fact raise confidentiality concerns and, if so, what measures a Service or copyright owner could take to protect its confidentiality. The Office inquired whether Services planned to provide their intended playlists for each quarter to small and individual sound recording copyright owners (as well as to a major Collective such as RIAA's) and, if not, whether they could propose an alternative reporting mechanism to indicate which sound recordings were performed and the number of times (summary frequency data), and permit sound recording copyright owners to monitor compliance with the performance complement (perhaps through date and time information). The Office inquired whether Services would extract names of individual copyright owners, or members of various Collectives, in order to provide such individuals or entities with separate royalties or reports, and whether this could provide a means for an alternative reporting mechanism. The Office asked whether copyright owners should be required to sign and return a confidentiality agreement before receiving playlist reports and whether the regulation should permit copyright owners to waive performance complement information in order to receive simply summary frequency data pertaining to use of only their sound recordings. We also sought comment on estimated costs for providing intended playlists to different parties, and on who should bear costs of serving, maintaining, and accessing such records of use. The Office provided a 60-day comment period.

The Further Comments

In response to the request for Further Comments in the Notice of Proposed Rulemaking of June 24, 1997, the Office received five comments. Further Comments were received from: RIAA; DMX; DCR; the National Music Publishers' Association, Inc. (NMPA); and Creative Engineering Concepts, Inc. (CECI). NMPA is a trade association representing more than 600 music publishers that own and administer copyrights in musical compositions, and whose subsidiary, the Harry Fox Agency, Inc., licenses mechanical and synchronization reproduction rights in musical compositions for more than 17,000 music publishers. NMPA Further Comment at 1-2. 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. CECI Further Comment at 1.(7)

1. Initial Notice.

RIAA argued that the 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. Unless the filing is mandatory, a Collective will have to expend time and resources searching for entities transmitting under the license, because new entities are not likely to voluntarily prepare a government filing; the Collective should be able to coordinate reports of use before a new Service begins using product. A single-page initial notice prior to commencement of transmission under the statutory license is not burdensome. RIAA Further Comment at 7-8.(8)

2. Reports of Use.

In correspondence among themselves (copied in duplicate to the Copyright Office) after the facilitated meetings, the commenting parties had agreed that Services should provide quarterly reports of use consisting of their "intended playlists" for the preceding quarter, and exchanged proposed definitions of "intended playlist." See Letter from Seth D. Greenstein to Jean Milbauer, Esq. (March 11, 1997); Letter from Jean R. Milbauer to Commenting Services (Mar. 12, 1997); Letter from Seth D. Greenstein to Jean Milbauer, Esq. (Mar. 18, 1997); Letter from Fernando R. Laguarda to Jean R. Milbauer, Esq. (Mar. 18, 1997); Letter from Linda R. Bocchi to Fernando R. Laguarda, Esq. (Mar. 21, 1997).

a. Definition of intended playlist. Seeking further consensus, the Office asked the parties in the June 24 NPRM for a final formulation of the definition of intended playlist. RIAA recommended a definition that would require reports of every sound recording transmitted or scheduled to be transmitted, and detailed reports of Service system failures resulting in transmission of unscheduled sound recordings.(9) In contrast, DMX suggested a definition that would require reports of every sound recording scheduled to be played (absent notice "to the contrary"), and that would prescribe the data fields and sound recording identifiers to be included in the playlist.(10) DCR also recommended an intended playlist that would report dates and times each title is scheduled to play. DCR Further Comment at 5 (emphasis added).

b. Reporting system failures resulting in deviations from the intended playlist. As noted, RIAA said Services should provide detailed reports of system failures, including time and duration of any "system crash" and the titles of sound recordings transmitted in place of those scheduled on the intended playlist. RIAA noted that it abandoned its earlier request for an "error log" of system failures and resulting playlist substitutions, because not all Services said they could provide one. RIAA said its agreement to accept the intended playlists in the reports of use was contingent on the definition of "intended playlist" including titles of all sound recordings performed and all "over-scheduled" sound recordings not performed, such that the playlist would report all sound recordings actually transmitted and scheduled to be transmitted. Because no sound recording not on the intended playlist would be transmitted absent a "total system crash," RIAA reasoned that such system failures must therefore be reported to ensure accuracy of the playlist report. RIAA Further Comment at 10, 12.

In contrast, DMX said errors causing deviations from intended playlists are rare events that occur on a single channel for limited periods, and result in an "infinitesimal" and "economically insignificant" effect on royalties. DMX said the regulation should not require error logs, which it said it does not automatically generate in the rare event of a system failure. DMX noted that such logs were originally proposed to evaluate summary frequency data and playlist samples; the pact to provide complete intended playlists vitiates the need for error logs. DMX Further Comment at 4; see also DCR Further Comment at 5 (no error log should be provided).

c. Certification of reports. In RIAA's view, reports of use should contain a certification signed by a Service officer or representative attesting under notary or penalty of perjury to the accuracy of the information in the report, so that an individual is personally accountable for the report and to encourage verification of the data. RIAA Further Comment at 13. DMX and DCR countered that the Act does not contain a certification requirement and the regulation should not impose one. DMX said at most the regulation should require a statement that the intended playlist report reflects information believed to be accurate and maintained by the Service in ordinary course of business. DMX Further Comment at 4-5; DCR Further Comment at 5.

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 sound recording performance complement, because transmissions exceeding the complement qualify for the statutory license if the programming was not "willfully intended to avoid" numerical limitations in the statute, and because the burden of proof in copyright infringement actions is typically on plaintiffs. DCR Further Comment at 4 (citing 17 U.S.C. 114(j)(7); Warner Bros v. Dae Rim Trading, 677 F. Supp. 740, 764 (S.D.N.Y. 1988)). DCR said Congress must be presumed to have intended the judicially recognized meaning of "willful," id. (citing Pierce v. Underwood, 487 U.S. 552 567-68 (1988)), so requiring Services to report compliance would exceed the Copyright Office's authority under the Act. Id. (citing Chevron, U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 842 (1984) (agencies must give effect to Congressional intent)). See also DMX Further Comment at 2 (Act does not give rise to obligation to report compliance with complement).

e. Data fields and sound recording identifiers. RIAA, DCR and DMX 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. DMX Further Comment at 3-4; RIAA Further Comment at 19-20; DCR Further Comment at 5 (date and time not required but "will not be stripped from the playlist").

In addition, RIAA sought four other identifiers: the CD track number, the Service name, the International Sound Recording Code (ISRC),(11) and the "sound recording identifier" used by the Selector software program that Services employ to generate their intended playlists. RIAA Further Comment at 19-21. RIAA said the track number is available, but did not explain its necessity. Id. at 20. The trade association asserted that the Service name should be required because files will be transmitted from different locations, and identification of the source Service should be clear independent of mailing labels, illegible postmarks, or informal labeling of computer files. Id. As for the ISRC, RIAA said this "fingerprint" identifier already embedded in sound recordings by some record companies, will eventually enable automatic identification of all sound recordings, and has been called "the key to royalty administration in the future" by the International Federation of the Phonographic Industry (IFPI). Finally, RIAA also sought the "sound recording identifier" data field used by Selector, the software program RIAA proposes to use in creating a reporting and royalty distribution system. Id. at 20-21, 21 n. 5.

CECI, however, also described technology it has developed which automatically identifies sound recordings "with high accuracy using features and characteristics of the audio patterns." CECI explained that individual recordings can be identified:

using passive pattern recognition or active technology once suitable encoding standards for "watermarking" are established. Digital data that may be encoded in the compact disc recording format (catalog number and ISRC) could also be recorded into dynamically inserted identifiers. Any or all of these methods can be used to identify a specific work.

CECI Further Comment at 1-2. CECI reported that with Broadcast Data Systems, LP, it already administers a "continuous comprehensive" international network of remote monitoring systems in which a centrally located computer system collects and logs channel number and other data. CECI's technology is currently used by record companies, broadcasters, advertisers and others, to verify airplay, generate statistics, estimate popularity, control distribution and determine royalty payments. CECI said its current software and data processing methods could be adapted within about six months to automatically document use of sound recordings and other copyrighted works by Services, to verify compliance with the sound recording performance complement, and to generate reports of use. Locations of remote monitors could be selected "to provide the best access to the audio feeds of the transmission services," with detection logs "forwarded electronically to a central location for analysis and report generation." Id. at 2-3.

f. Compilation albums and non-music and foreign programming. RIAA said the regulation should not establish separate data field requirements for compilation albums. The standard reporting requirements would clearly apply to retail compilation albums, such as movie soundtracks, and are also appropriate for non-retail but commercial compilation albums, such as disc jockey compilation albums, because Services possess and sometimes make available to their subscribers information regarding the retail album as the recording is being transmitted. RIAA Further Comment at 21-22.(12)

Earlier, DCR argued that non-stereo, retransmitted foreign-originated programming should be exempt from notice and recordkeeping requirements, because there are no means to audit content of such transmissions "other than requiring retransmitted foreign broadcasters to comply themselves with the Act." DCR also suggested that the regulations exempt retransmitted programming consisting of less than one-half music, such as sports, news or talk radio. See DCR Reply at 6-7. In the Further Comments, DCR reported that it has no plans to retransmit foreign-originated music programming and that the Act simply does not apply to non-music programming. DCR Further Comment at 9. DMX said it transmits only music programming at present. DMX Further Comment at 10. RIAA said in its earlier comments that Services transmitting non-music programming should submit information to permit a Collective to differentiate between music and non-music programming; specifically, Services should submit a cover sheet stating the names of files, the total number of "records" in each file, the date range of the submission, and the total number of hours of non-music programming. RIAA Reply at 19-20. RIAA said the regulations should not distinguish between foreign and domestic programming. RIAA Further Comment at 23.

3. Designation of A Single Collective.

As a matter of primary concern, the Further Comments urged the Office to designate a central Collective and not impose on Services a requirement of direct service for small, independent copyright owners. Services argued the "severe" costs and administrative burdens associated with the reporting scheme set forth in the NPRM would cripple them. DCR estimated costs of up to $10 million annually to identify and locate copyright owners; calculate royalties where no Collective is designated; provide each owner or agent with reports and royalties; and maintain records for three years. DMX Further Comment at 1, 5; DCR Further Comment at 2, 3 n.6, 7.(13) The Services reiterated that requiring direct service to independent copyright owners would force them to mainstream their diverse formats and genre-specific programming. DMX Further Comment at 1; DCR Further Comment at 3. DCR said the Office was "wrong" to look to section 115 and its regulations requiring direct service, because under several other licenses a central Collective is designated. "The Copyright Office does not lack authority under the Act to designate a collective agent for notice and recordkeeping," DCR asserted, adding that nothing in the Act precludes such a designation. DCR Further Comment at 6-7 (citing cable, satellite and blanket music performance licenses). DMX agreed that the Office should "require by regulation that a single agency or collective should receive payments and reports" and noted that the "use of collective administration agents is common practice internationally with respect to the collection and distribution of royalties for the performance of sound recordings." DMX Further Comment at 5.

a. Alternative reporting mechanism. The Services were not enthusiastic about the prospect of identifying individual copyright owners and providing separate royalties and reports that would also permit monitoring of the performance complement. There simply is no alternative to the intended playlist "that provides comparable information sought by the RIAA," DCR said, other than to "designate an independent second collective agent for those copyright owners who do not wish to join the RIAA." DCR Further Comment at 4, 7 n.8. Notably, CECI volunteered to be that second, alternative collective:

A large percentage of all copyright owners are members of the RIAA and would probably designate RIAA as their agent. A suitable agency or collective must be found or created to collect and distribute royalty payments to the remaining copyright owners. Some of these owners or their locations are unknown. We propose to serve as agent and clearinghouse for these small independent copyright owners.

CECI Further Comment at 2. A separate organization to serve the needs of independent copyright owners "would maintain royalty accounts for independent owners based on use records. If copyright owners cannot be identified or located, royalties will be held in escrow until claimed." Id. at 3.

DMX urged the Office to require by regulation that a single Collective receive payments and reports under the license, but, recognizing the burden and expense of providing individual copyright owners with either intended playlist reports for multiple 24-hour channels or individually tailored summary data reports, DMX suggested three alternative reporting mechanisms, and five "safeguards" to be implemented if Services are required to serve copyright owners directly. DMX suggested that the regulation permit a Service "to choose among these alternative methods" according to its administrative capabilities and fiscal constraints, and to vary its reporting methods by agreement or according to the recipient, providing, for example, "complete intended playlist data to a collective but summary data to owners or non-collective members [with] limited numbers of copyrighted sound recordings." DMX Further Comment at 2-3. First, DMX suggested that a Service could provide a record company with a summary list of titles performed from that label's sound recordings and the number of performances (summary frequency data) each quarter, with more complete intended playlist information made available (for complement purposes) to an independent representative of a copyright owner subject to appropriate safeguards as to confidentiality and burden. Second, DMX proposed that Services have the option of providing the intended playlist, in either complete or abbreviated form, such as a complete intended playlist for a Collective, or an intended playlist containing only songs owned by a particular smaller recipient copyright owner. Third, DMX suggested that the intended playlist for the previous quarter could be published "in a public forum, such as on the Internet...in a password-protected area; or, if a service believed that confidentiality was less important than administrative convenience, could be made publicly available." DMX Further Comment at 2-3.(14) DMX also advocated implementation of five "safeguards" if direct service is required: 1) Services could presume that the record company named on the sound recording (including promotional copies sent to Services) is the copyright owner, absent actual written notice to the contrary; 2) a Collective representing copyright owners would provide notice to Services of the record companies and sound recordings it represents, to be updated no later than 30 days before the quarter's close; 3) Services would be able to elect the reporting method to employ with individual copyright owners, or to agree with a Collective or copyright owner on a particular reporting method; 4) service of reports of use would be sufficient if sent by registered mail to the last known address of the record company known or last address listed on the sound recording; 5) costs of preparing and sending the report of use, including reasonable labor and computer time expenses, could be deducted from any royalty payments. DMX Further Comment at 5-6, 8. DMX also addressed how copyright owners who are not served should make their identity and location known to Services, suggesting that any sound recording copyright owner that thinks its works have been performed by a Service should be required to send a registered letter to the Service's chief financial officer. Id. at 8.

b. RIAA Collective as central repository. As noted, after initially seeking the role of central Collective in its comments and reply comments, RIAA announced at the facilitated meetings and in additional written comments filed after the meeting that it might not permit copyright owners that were not members of the RIAA trade association to designate the RIAA Collective as their agent for reports and royalties because, due to contractual and fiduciary responsibilities, it could not use RIAA-"member funds to administer nonmember royalties without their members' approval." See RIAA Additional Reply (Dec. 19, 1996) at 9-10; Summary of Nov. 14 Meeting 1 (Jan. 2, 1997). In its Further Comments, RIAA stated that it now "will agree to become the central repository for collecting and distributing royalties for all copyright owners, including non-RIAA Collective members." RIAA said it will not require RIAA membership to join the Collective, and will agree to receive all reports of use and royalties due from Services. RIAA Further Comment at 4-5.

Because it now sought to be the central Collective, RIAA said many questions in the NPRM had become moot. RIAA's first concern was that the intended playlist be the uniform reporting mechanism and that "there is no alternative reporting mechanism" and "no need to establish separate reporting requirements for non-members of the Collective." The Collective rendered "the separation of reports issue as moot." Id. at 11, 14, 17-18, 24. Because the Collective now planned to identify and locate copyright owners of all sound recordings performed under the license and to act as "central repository distributing to all entitled copyright owners" with "the responsibility of handling non-members," RIAA said that "a definition for a sound recording copyright owner `whose identity and location is known' for the purpose of triggering the requirement of direct service is not necessary. The Collective will be served with notice of use on behalf of all entitled copyright owners and will receive the royalties for these copyright owners." Id. at 17. However, 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, a requirement "not contingent upon the size of the copyright owner, or membership in the Collective." Id. at 14.

RIAA said it would identify and locate copyright owners by searching: (1) the Pollstar and Billboard's International Buyer's Guide publications (updated yearly); (2) Internet e-mail address directories, yellow pages and record sales sources; (3) 800-number directories; and (4) SoundScan file and distributors databases. Id. at 5. RIAA said it would deduct costs from royalties to cover administrative expenses and royalties that could not be distributed (for unlocated copyright owners) would be transferred into a general escrow account for three years.

After this period of time, the royalties will revert back into the general royalty account for distribution. Undistributed royalties for non-members will also revert back to the general royalty account, and will be used to offset administrative costs to the Collective members incurred in trying to locate non-members.

Id. at 4-5. RIAA said this procedure is "comprehensive enough to adequately identify all copyright owners, foreign or domestic." Id. at 16-17.

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, while DMX preferred reports to be filed no later than 45 days following the end of the quarter. RIAA Further Comment at 12; DCR Further Comment at 5; DMX Further Comment at 4. RIAA, DCR and DMX all agreed that Services should be required to retain reports of use for three years, with RIAA urging that Services retain their actual reports and not merely information underlying the reports. RIAA Further Comment at 14; DCR Further Comment at 9; DMX Further Comment at 9. DMX and DCR agreed that intended playlists should be provided on a common machine-readable medium, such as diskette, optical disc, or magneto-optical disc, and should be "required to be produced in only one data format." DMX Further Comment at 4; DCR Further Comment at 5. In earlier comments, Muzak agreed that reports should be delivered in a mutually agreeable computer format, and recommended that RIAA devise a standard computerized reporting format to which all licensees should conform. Muzak Comment at 2-3. RIAA suggested ASCII delimited format, with all data for one record on a single line and all channels in one file. DMX generally accepted the file format suggested by RIAA, but said not all channels should be included in a single file. Both RIAA and DMX proposed regulatory language for file format requirements. See RIAA Comment at 9-12; DMX Reply at 14, 16.

b. Confidentiality. According to DCR, provision of the intended playlist raises confidentiality problems because it would provide sufficient information to disclose the Service's proprietary and trade-secret programming methodology. Thus, DCR said this information should be provided only to the RIAA Collective and any alternative Collective and only for reporting purposes under the statutory license, "not for any other purpose -- including further business use -- without the express consent of the digital audio services." DCR Further Comment at 7-8. DMX said the intended playlist "may" raise confidentiality concerns, so should be provided "only under a strict and enforceable confidentiality agreement providing for substantial liquidated damages in case of material breach" and preferably only to independent collectives or agents for the limited purpose of determining royalty distribution and compliance with statutory license requirements and "not...directly to copyright owners." DMX Further Comment at 7. DMX said Services should have the option of electing whether to provide intended playlists, to report summary frequency data, or to post past playlists on the Internet either in a password-protected area or, "if a service believed that confidentiality was less important than administrative convenience,...publicly available." Id. at 2-3. RIAA did not necessarily accept the intended playlist's confidentiality "since it is available to anyone who is willing to monitor the Services' programming," but suggested that the regulation expressly require that the Collective and copyright owners not disseminate the information to persons not entitled to it, nor utilize it for purposes other than those the Act permits, including to verify sound recording usage, to perform royalty collection and distribution, and to monitor compliance with the complement. RIAA Further Comment at 15. See also RIAA Additional Reply (Aug. 12, 1996) at 6 (Schedule "A"). RIAA said such a requirement in the regulation would accomplish the same goal as requiring copyright owners or agents to sign a confidentiality agreement. Copyright owners should not be permitted to waive complement information in favor of summary frequency data, because RIAA plans to administer the performance right even for individuals who opt not to join the Collective, which should not have to manipulate summary frequency data. Id. at 16.

c. Access and audits. As noted, the Copyright Office announced in the June 24 NPRM that it would not promulgate audit regulations and that the commenting parties had generally agreed that audit requirements were best handled through negotiation or CARP. The Office inquired in the June 24, 1997, NPRM whether some regulation on access were needed and how Services would make records available to copyright owners who had not been served. As summarized above, DMX proposed a regulation to limit Service audits to once a year, and suggested that copyright owners be able to view information held by a Collective, subject to appropriate fees. See DMX Further Comment at 9; RIAA Further Comment at 8-9. Also filing comments was NMPA, urging the Office to expressly establish audit requirements in the forthcoming rulemaking governing notice and recordkeeping for digital phonorecord deliveries under section 115; unlike section 114, "the statutory audit requirement under section 115(c)(3)(D) is not subject to any CARP proceeding or agreement between the parties pursuant to section 114(f)," and "access (through audit and otherwise)" would be "essential" to effectively implement the section 115 recordkeeping requirements. NMPA Further Comment at 1, 4, 6.

d. Costs. RIAA said it would deduct its administrative expenses from royalties, and royalties that could not be distributed to unlocated copyright owners would be placed in escrow for three years before reverting to the general royalty account. RIAA Further Comment at 4-5. RIAA said that Services should bear costs of serving the Collective and retaining reports of use for three years "from the date of service." Id. at 14. In contrast, DMX said the costs of preparing and delivering reports of use to a Collective or record company, including reasonable expenses for labor and computer time, should be deducted from any royalty payments. While costs would vary with reporting method, DMX estimated media and mailing costs of at least $10 per copyright owner served to provide complete intended playlists on diskette, with additional costs for labor, computer time and equipment. While Services should bear costs of maintaining intended playlists in ordinary course of business, in the "unlikely event that extraordinary storage or preservation methods are required, DMX might reconsider this position." DMX Further Comment at 6-7. DCR said to avoid "inordinately high transaction costs" which would "eliminate the benefit of a statutory licensing scheme," the Office should designate a Collective. DCR Further Comment at 6.

e. Effective date and transition period. DCR said retroactive recordkeeping would mandate millions of records and be an "overwhelming" burden. DCR and DMX agreed reports should not be required from the license's creation on February 1, 1996, through adoption of regulations; both Services said the Office should recognize a transition period of two years before full compliance with notice and recordkeeping rules is required, during which time Services would report with "existing data, reasonable commercial efforts and existing equipment and employee resources." DMX Further Comment at 10; DCR Further Comment at 9-10, and Reply at 7. The rules should be adopted on an interim basis, with an opportunity to petition for emergency suspension or review. DCR Further Comment at 9-10. In contrast, RIAA sought use data for periods preceding issuance of regulations, and, while Services might need a year to resolve reporting issues, the regulation should not recognize a formal transition period; rather, reports should conform as closely as possible to the rules and not be permitted to "languish in a transition mode." RIAA Further Comment at 22-24.

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 Panel determined "that the RIAA Collective shall serve as that single private entity." Report  184. See also  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  192, 209.

(3) Audits: Interested parties may conduct a single audit of a Service during any given year. Report  193, 210.

(4) Confidentiality: RIAA must establish safeguards to avoid disclosure of confidential financial and business information.  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.(15) As one Service noted, reports of use determine royalty payments and should logically accompany them.

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 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).(16)

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 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.(17)

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 to read as follows:

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:

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.

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;

(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.

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.

 

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. Determination of Reasonable Rates and Terms for the Digital Performance of Sound Recordings, 63 FR 25394 (May 8, 1998). See discussion infra, The 1997 CARP Proceeding Under Section 114.

2 DCR, one Service noted, is owned "in part by three companies with substantial interests in the production and distribution of sound recordings: Time-Warner, Inc., Sony Music and EMI Music." DMX Comment at 7.

3 DMX now reportedly has 2.2 million residential customers and 40,000 commercial subscribers. Marc Fisher, Cable's Cavalcade of Sound, Wash. Post, Dec. 30, 1997, at C1.

4 The ISRC is an identifier embedded in the recording that acts as a digital fingerprint, enabling automatic identification of sound recordings for royalty administration. Specifically, the ISRC is a 12 character alphanumeric code divided into four elements representing the country, first owner, year of reference, and a designation code. RIAA Further Comment at 20-21, 21 n.5; see also IFPI, ISRC--Essential to Rights Administration in the Digital Age (1996) (available from IFPI Secretariat, London).

5 One of the parties had proposed an industry working group to reach consensus on reporting requirements. DCR Reply at 3 n. 6.

6 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.

7 See also Paul Farhi, Keeping an Eye on Airplay: Fairfax Firm Keys in on Song, Ad Signatures, Wash. Post, June 23, 1997, (Business), at 17.

8 RIAA noted that the initial notice should include the Service's phone and facsimile number. RIAA Further Comment at 8.

9 RIAA recommended the following definition:

The intended playlist is a list that, absent a Service notifying the RIAA Collective that a total system crash has occurred, contains each and every title of each and every sound recording actually transmitted, and each and every sound recording scheduled to be transmitted for each and every channel. Absent a total system crash, no sound recording will be transmitted that is not listed on the intended playlist. Notification of a system crash will include the following:

(i) the date of the crash;

(ii) the time of the crash;

(iii) the duration of the crash; and

(iv) the title of the sound recordings that were transmitted during the system crash.

RIAA Further Comment at 11.

10 DMX suggested the following definition:

Absent a Service notifying the sound recording copyright owner or its designated representative to the contrary, the intended playlist constitutes a consecutive listing of every sound recording scheduled to be played during the relevant time period. Information to be contained in the Intended Playlist should include: an identification of the channel on which the sound recording was to be performed, the sound recording name, the title of the album from which the sound recording was taken, the name of the featured artist, the record catalog number, the name of the record label, and the date and time of the scheduled performance.

DMX Further Comment at 3-4.

11 See supra note 3.

12 Advance announcement of titles would exceed conditions of the statutory license. See 17 U.S.C. 114(d)(2)(C).

13 With RIAA representing some 90 percent of the approximately 2.5 million song titles DCR performs each quarter, individual service to the remaining 10 percent (250,000 titles, "assuming a separate copyright in each title") at about $10 to produce and mail each quarterly report, would mean costs of $2.5 million per quarter, or $10 million annually. DCR Further Comment at 3 n.6. See also DMX Further Comment at 6-7 ("providing full information on disks may impose media and mailing costs of $10 or more per copyright owner served; additional...costs would be incurred in terms of computer time, equipment costs and employee costs.").

14 DMX noted that, while it treats its entire intended playlist as confidential business information, it makes a portion of its "historical playlist information accessible to the public via its World Wide Web site on the Internet." DMX Further Comment at 7-8.

15 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).

16 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.

17 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.



Copyright Office * Library of Congress * Washington, D.C. 20559-6000

 

07/01/98