Refunds Under the Cable Statutory License

The Copyright Office has amended its regulations to clarify its practices for providing refunds of cable royalties under the provisions of the Satellite Television Extension and Localist Act of 2010, Pub. L. No 111-175 ("STELA").

A cable operator must pay royalties to and file Statements of Account with the Office every six months in order to use the statutory license that allows for the retransmission of over-the-air broadcast signals under Section 111 of the Copyright Act. STELA amended Section 111 to allow a cable system to calculate its royalty payments on a community-by-community basis, rather than on a system-wide basis, for accounting periods beginning on or after January 1, 2010. STELA eliminated the possibility of an infringement action against those cable systems that historically did not pay for carriage of “phantom signals,” and it clarified that a system that used the community-by-community methodology is not eligible for any royalty refund or offset. However, the legislation did not indicate whether a cable system should be entitled to a refund for non-phantom related reporting errors if there is an outstanding balance owed for the carriage of phantom signals for an accounting period prior to 2010.

Although a cable operator can no longer be held liable for calculating its royalties on a community-by-community basis, a cable operator's obligation to pay for the carriage of distant signals prior to the effective date of STELA was determined on a system-wide basis. Therefore, the Copyright Office has amended its rules to clarify that refunds for an overpayment of royalty fees on a Statement of Account filed prior to the effective date of STELA will be made only when a cable operator has satisfied its outstanding royalty obligations (if any), including the obligation to pay for the carriage of each distant signal on a system-wide basis.