Compulsory License for Making and Distributing Phonorecords, Including Digital Phonorecord Deliveries, 66173-66182 [E8-26666]
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Federal Register / Vol. 73, No. 217 / Friday, November 7, 2008 / Rules and Regulations
(202) 707–8380. Telefax: (202) 707–
8366.
SUPPLEMENTARY INFORMATION:
LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201 and 255
[Docket No. RM 2000–7]
Compulsory License for Making and
Distributing Phonorecords, Including
Digital Phonorecord Deliveries
Copyright Office, Library of
Congress.
ACTION: Interim rule and request for
comments.
AGENCY:
SUMMARY: The Copyright Office is
announcing an interim regulation to
clarify the scope and application of the
Section 115 compulsory license to make
and distribute phonorecords of a
musical work by means of digital
phonorecord deliveries. The Office
seeks comments on the interim
regulation.
December 8, 2008.
Comments must be received in the
Office of the General Counsel of the
Copyright Office no later than January 6,
2009.
ADDRESSES: If hand delivered by a
private party, an original and five copies
of a comment or reply comment should
be brought to the Library of Congress,
U.S. Copyright Office, Room 401, 101
Independence Avenue, SE.,
Washington, DC 20559, between 8:30
a.m. and 5 p.m. The envelope should be
addressed as follows: Office of the
General Counsel, U.S. Copyright Office.
If delivered by a commercial courier, an
original and five copies of a comment or
reply comment must be delivered to the
Congressional Courier Acceptance Site
(‘‘CCAS’’) located at 2nd and D Streets,
NE., Washington, DC between 8:30 a.m.
and 4 p.m. The envelope should be
addressed as follows: Office of the
General Counsel, U.S. Copyright Office,
LM 403, James Madison Building, 101
Independence Avenue, SE.,
Washington, DC 20559. Please note that
CCAS will not accept delivery by means
of overnight delivery services such as
Federal Express, United Parcel Service
or DHL. If sent by mail (including
overnight delivery using U.S. Postal
Service Express Mail), an original and
five copies of a comment or reply
comment should be addressed to U.S.
Copyright Office, Copyright GC/I&R,
P.O. Box 70400, Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT:
Tanya M. Sandros, General Counsel, or
Stephen Ruwe, Attorney Advisor,
Copyright GC/I&R, P.O. Box 70400,
Washington, DC 20024. Telephone:
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Background
On July 16, the Copyright Office
published a notice of proposed
rulemaking (the ‘‘NPRM’’) to amend its
regulations to clarify the scope and
application of the Section 115
compulsory license to make and
distribute phonorecords of a musical
work by means of digital phonorecord
deliveries (‘‘DPDs’’). 73 FR 40802.
Specifically, the notice proposed to
amend the definition of ‘‘digital
phonorecord delivery’’ to clarify that a
digital phonorecord delivery under the
compulsory license provided under 17
U.S.C. 115 includes the following:
permanent digital downloads of
phonorecords; limited downloads,
which use technology that causes the
downloaded file to be available for
listening only either during a limited
time (e.g., a time certain or a time tied
to ongoing subscription payments) or for
a limited number of performances; and
all buffer copies delivered to a
transmission recipient. The NPRM also
put forward that the Section 115 license
included coverage for all reproductions
made to facilitate the making and
distributing of DPDs.
In the course of its analysis, the Office
categorized a number of different types
of reproductions that can be made for
the purpose of making DPDs: Server–
end Complete Copies, Recipient–end
Complete Copies, Server–end Buffer
Copies, and Recipient–end Buffer
Copies.1 As described in the NPRM, a
Server–end Complete Copy is a copy of
a sound recording of an entire musical
work which resides on the server of a
digital music service and serves as the
source of the transmission that results in
a DPD. A Recipient–end Complete Copy
is a copy of a sound recording of an
entire musical work which is made on
the recipient’s computer or device
during the course of the transmission. A
Server–end Buffer Copy is a copy of a
portion of a sound recording of a
musical work (which, along with a
number of other buffer copies, typically
will cumulatively constitute a recording
of the entire musical work) that is made
1 We call these reproductions ‘‘copies’’ not in the
technical sense as defined in 17 U.S.C. 101, but in
the more general dictionary sense in which the term
‘‘copies’’ is understood. We recognize that these
reproductions are of sounds other than those
accompanying a motion picture or other audio
visual work, which when fixed in material objects
from which sounds may be perceived would
properly be categorized as ‘‘phonorecords.’’
Additionally, we acknowledge that parties disagree
on the copyright implications of the reproductions,
an analysis of which is contained herein.
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on the transmitting entity’s server and
typically exists for a short period of
time, sometimes a few seconds or less.
A Recipient–end Buffer Copy is a copy
of a portion of a sound recording of a
musical work (which, along with a
number of other buffer copies, typically
will cumulatively constitute a recording
of the entire musical work) that is made
on the recipient’s computer or device
and typically exists for a short period of
time, sometimes a few seconds or less.
In the NPRM, the Office proposed that
a DPD would exist whenever a
transmission includes any of the
following: a Recipient–end Complete
Copy and/or a Recipient–end Buffer
Copy. The Office tentatively proposed
that both of these kinds of copies
satisfied the statutory requirements of
being ‘‘phonorecords’’ that are
‘‘specifically identifiable.’’ The Office
indicated that Server–end Copies did
not satisfy the requirements for a DPD
because they are not ‘‘delivered.’’
The Office proposed to interpret the
compulsory license as including a
license to make Server–end copies as
well as all other intermediate copies
used to facilitate a digital transmission
that results in the making and
distribution of a DPD, even though those
copies may not themselves constitute
DPDs. Thus, a Server–end copy that is
the source of a transmission that results
in a DPD, such as a download, will be
included within the scope of the
compulsory license, although it is not
itself a DPD for which payment would
be required. On the other hand, a
Server–end copy that is the source of a
transmission of a performance that does
not result in the making and
distribution of a DPD would not fall
within the scope of the compulsory
license.
With respect to limited downloads,
the Office proposed the following
conclusion: ‘‘While policy reasons
might exist for distinguishing such a
limited download from a permanent
reproduction, we can find no basis in
the statute for considering a limited
download to be something other than a
phonorecord. Moreover, the fact that a
limited download is a phonorecord does
not in any way prevent the Copyright
Royalty Judges from valuing it
differently and setting a lower rate.’’ 73
FR at 40808. Accordingly, the Office
tentatively concluded that limited
downloads, like other Recipient–end
Complete Copies, satisfy the
requirements for DPDs.
In response to requests by some
interested parties and in light of the
intervening decision of the United
States Court of Appeals for the Second
Circuit in The Cartoon Network LP v.
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CSC Holdings, Inc., 536 F.3d 121 (2d
Cir. Aug. 4, 2008), the Office extended
the comment period and, on September
19, 2008, conducted a hearing. Having
considered the comments and the
testimony at the hearing, the Register of
Copyrights now issues this interim
regulation and requests comments.
Summary of Interim Regulation
In the NPRM, the Office proposed to
define a ‘‘digital phonorecord delivery’’
as including all buffer copies made in
the course of streaming, which would
have meant that all music streaming
activity would be included within the
scope of the compulsory license.2
However, in light of the recent
comments and testimony, and the
uncertainty created by the Second
Circuit’s Cartoon Network opinion
concerning the fixation of buffer copies,
the interim regulation announced today
is more modest in scope than the
proposed regulation. The Office is not
currently prepared to issue a regulation
that definitively addresses whether such
copies are within the scope of the
compulsory license, except to the extent
the transmission also results in the
making of copies which more certainly
qualify as DPDs. As such, the interim
regulation takes no position on whether
or when a buffer copy independently
qualifies as a DPD, or whether and when
it is necessary to obtain a license to
cover the reproduction or distribution of
a musical work in order to engage in
activities such as streaming.
The interim regulation clarifies that
(1) whenever there is a transmission that
results in a DPD, all reproductions made
for the purpose of making the DPD are
also included as part of the DPD, and (2)
limited downloads qualify as DPDs. The
interim regulation does not attempt to
define the threshold at which a DPD
occurs. That remains contested, as
discussed below.
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Authority To Issue Regulations
The Office requested comments on
whether the issues raised in the NPRM
could be addressed in an administrative
rulemaking. In response, the Digital
Media Association (‘‘DiMA’’) as well as
the Business Music Industry; Verizon
Communications; CTIA—The Wireless
Association (‘‘CTIA’’); the National
Association of Broadcasters (‘‘NAB’’);
2 The Office noted that the fact that the
compulsory license is available for such activity
should not be construed as meaning that a license
is necessary for all such activity. Rather, the license
would simply be available for online music services
who do not wish to expose themselves to potential
liability in cases where a musical copyright owner
asserts that the making of, e.g., buffer copies
constitutes an infringement of the reproduction
right.
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Google/YouTube; and Electronic
Frontier Foundation, Public Knowledge,
Center for Democracy and Technology,
Consumers Union, Consumer
Federation of America, U.S. PIRG, and
the Computer & Communications
Industry Association (collectively
referred to as ‘‘Public Interest
Commenters’’) raised questions and
concerns regarding the Office’s
authority to issue a rule that would have
a wide–reaching impact on activities
outside the scope of Section 115.
For example, Verizon, CTIA, and NAB
argued that the proposed rule is a
substantive rule of copyright law and
therefore is not a matter relating to
administration of the functions and
duties of the Copyright Office. They
asserted that the proposed rule would
both reinterpret substantive principles
of copyright law and fundamentally
reset the balance between copyright
owners and users. They maintained that
the proposed rule is distinguishable
from any judicially approved exercise of
Office rulemaking authority under
Sections 701 or 702. Further, they noted
that authority under Sections 701 and
702 is distinguishable from the
authority granted to the Register to make
determinations on ‘‘material questions
of substantive law’’ under Chapter 8,
which is accompanied by specific
procedural limitations that indisputably
are not present in association with the
proposed rule. In addition, DiMA
asserted that the Office’s authority to
issue a rule at this time, in the midst of
the Copyright Royalty Board (the
‘‘CRB’’) ratemaking proceeding, is
foreclosed and that to do so would
impermissively interject the Office into
the CRB proceeding. DiMA maintains
that this result would contravene
specific provisions of the Copyright Act
that narrowly circumscribe the Office’s
authority to be involved in a CRB rate–
setting proceeding.
On the other hand, SESAC noted the
Office’s specific and limited scope of
authority under Section 115, and
asserted that the Office should not go
beyond its statutory authority and opine
on the relative values of separate and
independent rights implicated in a
given transmission. Similarly, the
American Society of Composers,
Authors and Publishers and Broadcast
Music, Inc. (‘‘ASCAP/BMI’’)
acknowledged the Office’s statutory
mandate to address administration of
the Section 115 license. However, they
specifically noted that any statements
by the Office affecting the definition or
applicability of the performance right
are beyond the limited authority granted
to the Office to administer Section 115.
Other comments, such as the one filed
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by the Recording Industry Association
of America (‘‘RIAA’’), and a joint filing
by National Music Publishers
Association, including its wholly owned
licensing subsidiary, The Harry Fox
Agency, Inc.; the Songwriters’ Guild of
America; the Nashville Songwriters
Association International; and the
Association of Independent Music
Publishers, (Collectively ‘‘Copyright
Owners’’) expressed the view that the
Register does possess the authority to
issue such rules.3
Section 702 authorizes the Register of
Copyrights ‘‘to establish regulations not
inconsistent with law for the
administration of the functions and
duties made the responsibility of the
Register under this title.’’ Among the
functions and duties of the Register is
the responsibility to issue regulations
prescribing how a licensee shall file a
notice of intention to use the statutory
license, 17 U.S.C. 115(b)(1), and
regulations governing the submission of
monthly and annual statements of
account. 17 U.S.C. 115(c)(4). Pursuant to
this authority, the Register has issued
regulations that, inter alia, govern the
content of the notice and the statements
of account associated with the use of the
Section 115 license. See 37 CFR 201.18
and 201.19. These regulations include
definitions of statutory terms, which
clarify the application of the terms in
the context of the statutory license thus
enabling a licensee to understand how
to accurately report the making and
distribution of a phonorecord under
Section 115.
Courts have recognized the Register’s
authority to promulgate regulations
interpreting the statute under the
authority granted in Section 702 and
specific provisions in the law, such as
the statutory licenses. In Cablevision
Systems Development Co. v. Motion
Picture Association of America, Inc.
(‘‘Cablevision’’) the court acknowledged
Section 702 as the source of general
authority for the Office to conduct
rulemaking proceedings to carry out
specific responsibilities. Cablevision
836 F.2d 599 (D.C. Cir. 1988), cert.
denied, 487 U.S. 1235 (1988). In
Cablevision, the Register issued
3 Most of the commenters who objected to the
Register’s authority appear to have done so out of
fear that the Register would address issues such as
whether buffer copies constitute phonorecords—
issues which, as set forth below, the Register has
declined to resolve in this proceeding. Many of
those commenters expressed concern that in order
to address those issues, the rulemaking would have
consequences for activities that have no
relationship to the section 115 compulsory license.
However, the more modest regulation announced
today is more narrowly focused and would appear
to have little if any applicability outside the scope
of the compulsory license.
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regulations under Section 111(d)(1) that
directed cable systems to deposit royalty
fees with the Copyright Office. Those
regulations included an interpretation of
the statutory term, ‘‘gross receipts,’’
which was central to the calculation of
royalty fees for the public performance
of secondary transmissions of broadcast
signals under the statutory license.
Opponents of the regulation argued that
the authority of the Register was limited
to the ‘‘ministerial task of designing
forms.’’ The court, however, rejected
this narrow approach, noting that
authority to design forms has a
substantial policy component and that
the Copyright Office ‘‘certainly has
greater expertise in such matters than
the federal courts.’’ Thus, under the
court’s reasoning, the issuance of a rule
interpreting a statutory term for the
purpose of administering the license
was not a violation of the rulemaking
authority granted to the Register,
provided that the interpretation was
reasonable.
Other circuits have reached the same
conclusion. In Satellite Broadcasting
and Communications Association of
America v. Oman (‘‘SBCA’’), the court
found that ‘‘the Copyright Office is a
federal agency with authority to
promulgate rules concerning the
meaning and application of § 111.’’
SBCA 17 F.3d 344, 347 (11th Cir. 1994).
In reconsidering its earlier
determination that a satellite carrier
could be considered a cable system
making it eligible to utilize the Section
111 statutory license, the court revised
its determination in light of a final rule
issued by the Copyright Office which
concluded that a satellite carrier was not
a cable system under Section 111. The
court acknowledged that the
interpretation of the agency was due
deference unless arbitrary, capricious,
or manifestly contrary to the provisions
of the Copyright Act. Id.
The current rulemaking is consistent
with the Office’s practice of
promulgating regulations to construe
statutory terms that are critical to the
administration of a statutory license
administered by the Office. The Office
is relying on both its general rulemaking
authority under Section 702 and the
specific grant of authority found in
Section 115(b)(1) and (c)(4) to issue
rules governing notices of intention and
statements of account, in a manner
parallel to what happened when it
adopted a definition of ‘‘gross receipts’’
and construed the term ‘‘cable system,’’
with the only difference being that the
Office considered these terms under its
power to promulgate rules under a
different statutory license. See 17 U.S.C
115(b)(1); (c)(4) and § 111.
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Opponents of the proposed regulation
argue that notwithstanding these earlier
cases, the authority of the Register to
issue the proposed rule is foreclosed
under Gonzales v. Oregon, 546 U.S. 243
(2006). They maintain that Title 17
provides the Register no general
rulemaking authority, and consequently,
the Office cannot issue the proposed
rule. The parties, however, focus only
on Section 702 and fail to recognize the
express authority provided to the
Register in Section 115. Moreover,
Gonzales does not undermine the earlier
rulings in Cablevision or SBCA.
Gonzales recognizes, as do Cablevision
and SBCA, that an agency’s
interpretation of a statute is due
deference when the statute is ambiguous
and when Congress has delegated the
authority to the agency to promulgate
rules carrying the force of law.
Gonzales, 564 U.S. at 255 (citing
Chevron U.S.S., Inc. v. Natural Res. Def.
Council, Inc., 467 U.S. 837 (1984) and
United States v. Mead Corp., 533 U.S.
218, 226–227 (2001)). The facts in
Gonzales, however, led to a finding that
the Attorney General lacked the
authority to issue a regulation about the
scope of ‘‘legitimate medical purpose’’
under his authority to adopt rules
governing the registration of physicians.
Specifically, the court found that the
Attorney General had no authority to
issue a rule that extended beyond
registration practices to ‘‘an
interpretation of the substantive federal
law requirements (under 21 CAR
§ 1306.04 (2005)) for a valid
prescription.’’ Id. at 261. The court also
rejected the position of the Attorney
General that his authority to deregister
physicians provided the necessary
authority for the rule. The court rejected
that approach because it would vest
power in the Attorney General to
criminalize actions of registered
physicians–an activity not contemplated
by the statute. Id. at 261, 262. Similarly,
the court found that the regulatory
authority claimed by the Attorney
General was ‘‘inconsistent with the
design of the statute’’ because the
statute does not delegate rulemaking
authority solely to the Attorney General.
In some instances, he must share that
authority with or defer to the Secretary
of Health and Human Services. Id. at
265.
Unlike the disputed rule in Gonzales,
the interim rule which is the subject of
today’s notice has meaning only for the
Section 115 license. The interim rule is
a clarification of the statutory definition
of a DPD to incorporate the Office’s
determination that the Section 115
license covers server copies and
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intermediate copies made to facilitate
the making and distribution of a DPD
and that a limited download is a DPD.
The rule extends the traditional
understanding of the scope of the
Section 115 license, that phonorecords
made for the purpose of making
additional reproductions of the sound
recording and the musical works
embodied therein are covered under the
license, to the digital realm. As the court
in Cablevision noted, and as discussed
previously, the authority to issue
regulations for the filing of statements of
account includes a ‘‘substantial policy
component.’’ Thus, the Office issues
this rule under its authority to interpret
statutory terms that are central to its role
in promulgating regulations to account
for the royalties owed for the making
and distribution of phonorecords under
the statutory license. Without this
clarification, no guidance would exist
regarding whether liability attached to
these reproductions relative to the
statutory license. In addition, the rule
makes clear that DPDs includes digital
phonorecords that may be limited either
by time or number of uses, an issue that
was raised in the original petition for a
rulemaking but a conclusion that does
not now appear to be in dispute.
The Office also finds no basis for
DiMA’s assertion that the Office is
foreclosed from issuing a rule at this
time, in the midst of the CRB
ratemaking proceeding. The statute does
not constrain the Office from issuing
regulations for the purpose of
administering a statutory license when
the Copyright Royalty Judges are also
conducting a concurrent rate setting
proceeding for the same statutory
license. Nor is there any reason for the
Office to delay the issuance of its
interim rule when, as here, the interim
rule amends Copyright Office
regulations to incorporate concepts that
seemingly are not in dispute by the
parties participating in this rulemaking
proceeding. Moreover, to the extent that
the interim rule adds clarity to an issue
upon which the Register is competent to
rule and may offer guidance to the
Copyright Royalty Judges, there is
nothing improper about the exercise of
the Register’s authority at this time. In
any event, parties have an opportunity
to comment specifically on the interim
rule within the comment period, since
this is an interim rule.
In its NPRM, the Office proposed a
much broader regulation. Consequently,
the Office discusses herein the original
proposal and the reasons for adopting a
more limited regulation.
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Discussion
A. Digital Phonorecord Deliveries in
General
As the Office stated in its NPRM, in
considering whether the reproductions
made by a transmission service are
digital phonorecord deliveries and fit
within the scope of the Section 115
license, the starting point is the
statutory definition of a DPD. 17 U.S.C.
115(d). It defines a DPD, in relevant
part, as:
each individual delivery of a
phonorecord by digital transmission of a
sound recording which results in a
specifically identifiable reproduction by
or for any transmission recipient of a
phonorecord of that sound recording,
regardless of whether the digital
transmission is also a public
performance of the sound recording or
any nondramatic musical work
embodied therein. A digital phonorecord
delivery does not result from a real–time,
non–interactive subscription
transmission of a sound recording where
no reproduction of the sound recording
or the musical work embodied therein is
made from the inception of the
transmission through to its receipt by the
transmission recipient in order to make
the sound recording audible.
17 U.S.C. 115(d). In order for a reproduction
of a sound recording to qualify as a DPD
under the statutory criteria, the reproduction
must meet all the criteria specified in the
definition: (1) it must be delivered, (2) it
must be a phonorecord, and (3) it must be
specifically identifiable.
(1) Delivery. While several parties
disputed the second and third criteria
specified in the definition of a DPD, no
parties put forward arguments against
the proposed finding that reproductions
identified in the NPRM as Recipient–
end copies are ‘‘delivered’’ and
therefore satisfy the first requirement for
being a DPD.4
(2) Phonorecord (Fixation). In
considering whether the reproductions
made by a transmission service are
phonorecords, the Office’s NPRM
turned to the definition found in 17
U.S.C. 101. The statute defines
phonorecords as:
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material objects in which sounds, other
than those accompanying a motion
picture or other audiovisual work, are
fixed by any method now known or later
developed, and from which the sounds
can be perceived, reproduced, or
otherwise communicated, either directly
or with the aid of a machine or device.
The term ‘‘phonorecords’’ includes the
material object in which the sounds are
first fixed.
4 Several
parties disputed the proposed finding
that every ‘‘delivery’’ constitutes a ‘‘distribution’’
These arguments are addressed in a later section
regarding the threshold requirements for use of the
Section 115 license.
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17 U.S.C. 101. The question is whether each
reproduction made during the course of a
digital transmission meets this definition and
thus satisfies the second prong of the
statutory definition for a DPD. The Office
proposed that a buffer copy made in the
course of a service’s transmission on either
the Server–end or the Recipient–end is
sufficiently fixed to meet the definition of a
phonorecord. This proposal was strongly
opposed by parties representing users of the
works.
Parties such as DiMA, Verizon, CTIA,
NAB, Google/YouTube, Public Interest
Commenters, New Media Rights, and
Cablevision disputed the Office’s
conclusion that all buffer copies
qualified as ‘‘fixed’’ phonorecords or
copies. They uniformly cited to the
Second Circuit’s decision in Cartoon
Network, which reversed Twentieth
Century Fox Film Corp. v. Cablevision
Sys. Corp., 478 F. Supp. 2d 607
(S.D.N.Y. 2007), a decision cited in the
NPRM. 73 FR at 40809. They argued
that the Cartoon Network decision
undermines the legal analysis contained
in the NPRM.
On the other hand, RIAA disagreed
with the Cartoon Network decision, but
found it unnecessary to debate the
fixation issue. It argued that some
copies created by transmission services
are persistent enough that they would
meet any definition of the term ‘‘fixed,’’
and services that wish to obtain a
Section 115 license as a ‘‘safe harbor’’
should have that option. Copyright
Owners also argued that the Cartoon
Network decision is inapplicable to the
transmission services in question
because the buffer copies made by
streaming music services are
distinguishable from the ones
considered in the Cartoon Network case.
Under the view of the Copyright
Owners, buffer copies made by
streaming music services are more
analogous to the RAM copies
considered in cases cited in the
Copyright Office’s DMCA Section 104
Report.
The Copyright Owners also concluded
that the Cartoon Network decision’s
analysis of the ‘‘duration’’ requirement
is unsupported by the Copyright Act or
prior judicial interpretation. They
argued that the Cartoon Network court
took a ‘‘stopwatch’’ approach by
measuring the duration of the subject
buffer copies and then opined that they
did not last for a sufficient number of
seconds. In response, the Copyright
Owners asserted that Section 101 does
not require that a copy last for any
specified period of time. 17 U.S.C. 101.
They argued that the Cartoon Network
approach suffers from a lack of
standards–statutory or otherwise–to
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guide this judge–made ‘‘duration’’
requirement. The Copyright Owners
instead endorsed the approach proposed
in the NPRM, which examines whether
the copies in question exist for a
sufficient period of time to be capable
of being ‘‘perceived, reproduced or
otherwise communicated.’’ 73 FR at
40808. They stated that such an
approach does not depend upon an
arbitrary assessment. Moreover, it
adheres to the overarching consensus of
other courts that have considered this
issue.
In the NPRM, the Office’s tentative
conclusions relating to the status of
buffer copies as phonorecords relied in
part on the District Court’s decision in
Twentieth Century Fox, which had
concluded that buffer copies made in a
somewhat different context than the
streaming of music were infringing
‘‘copies’’ under the copyright law. 478
F. Supp. 2d at 621–22. The court
rejected arguments by the defendant
that the buffer copies did not qualify as
‘‘copies’’ because they were ‘‘not fixed’’
and were ‘‘otherwise de minimis.’’ Id. at
621. In finding the buffer copies were
‘‘fixed’’ the court reasoned,
The Copyright Act, however, provides
that a work is ‘‘fixed’’ if it ‘‘is sufficiently
permanent or stable to permit it to be
perceived, reproduced, or otherwise
communicated for a period of more than
transitory duration.’’ Here, as discussed,
the portions of programming residing in
buffer memory are used to make
permanent copies of entire programs on
the Arroyo servers. Clearly, the buffer
copies are capable of being reproduced.
Furthermore, the buffer copies, in the
aggregate, comprise the whole of
plaintiffs’ programming.
Id. (citations omitted) (quoting 17
U.S.C. 101). The court relied in part on
the Copyright Office’s DMCA Section
104 Report, noting,
Indeed, the United States Copyright
Office, in its August 2001 report on the
Digital Millennium Copyright Act
(‘‘DMCA Report’’), has indicated that
buffer copies are ‘‘copies’’ within the
meaning of the Copyright Act.
Specifically, the Copyright Office
concluded that temporary copies of a
work in RAM are generally ‘‘fixed’’ and
thus constitute ‘‘copies’’ within the
scope of the copyright owner’s right of
reproduction, so long as they exist for a
sufficient amount of time to be capable
of being copied, perceived or
communicated. (DMCA Report at xxii,
110–11).
Id. at 621–22.
The issue addressed in Twentieth
Century Fox and in the DMCA Section
104 Report was whether temporary
buffer copies meet the ‘‘fixation’’
requirement of the copyright law.
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Phonorecords (a necessary element of a
DPD; see 17 U.S.C. 115(d)) are defined
as ‘‘material objects in which sounds,
other than those accompanying a
motion picture or other audiovisual
work, are fixed by any method now
known or later developed, and from
which the sounds can be perceived,
reproduced, or otherwise
communicated, either directly or with
the aid of a machine or device.’’ 17
U.S.C. 101 (emphasis added). The
statute defines ‘‘fixed’’ as follows:
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A work is ‘fixed’ in a tangible medium
of expression when its embodiment in a
copy or phonorecord, by or under the
authority of the author, is sufficiently
permanent or stable to permit it to be
perceived, reproduced, or otherwise
communicated for a period of more than
transitory duration. A work consisting of
sounds, images, or both, that are being
transmitted, is ‘fixed’ for purposes of this
title if a fixation of the work is being
made simultaneously with its
transmission.
17 U.S.C. 101.
In the DMCA Section 104 Report, the
Office interpreted the ‘‘more than a
transitory duration’’ element of fixation
as follows: ‘‘The dividing line, then, can
be drawn between reproductions that
exist for a sufficient period of time to be
capable of being ‘perceived, reproduced,
or otherwise communicated’ and those
that do not.’’ DMCA Section 104 Report
at 111. As noted above, the Southern
District of New York had agreed with
this analysis in Twentieth Century Fox.
478 F. Supp. 2d at 621–22.
In the NPRM, the Office reviewed that
analysis and observed, ‘‘The Office has
no reason to believe that developments
in either technology or the law require
us to revisit the above–stated
conclusions. As such, Server–end Buffer
Copies and Recipient–end Buffer Copies
appear to be phonorecords and therefore
satisfy the second requirement for being
a DPD.’’ 73 FR at 40809. Nineteen days
later, the United States Court of Appeals
for the Second Circuit reversed the
district court’s Twentieth Century Fox
decision. Cartoon Network, 536 F.3d at
130. Among other things, the court took
issue with the DMCA Section 104
Report’s analysis of buffer copies and
fixation, stating, ‘‘[a]ccording to the
Copyright Office, if the work is capable
of being copied from that medium for
any amount of time, the answer to both
questions is ‘yes.’ The problem with this
interpretation is that it reads the
‘transitory duration’ language out of the
statute.’’ Id. at 129. The court concluded
that the buffer copies made by a cable
television service in the course of
creating server copies ‘‘are not
‘embodied’ in the buffers for a period of
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more than transitory duration, and are
therefore not ‘fixed’ in the buffers.’’ Id.
at 130.
The Office does not consider the
Second Circuit’s opinion to be definitive
on the issue involved in this
rulemaking. The court’s reasoning
leaves at least something to be desired
and offers no guidance as to when a
copy might be considered to be
‘‘embodied’’ for ‘‘a period of more than
transitory duration.’’ Based on the
Cartoon Network opinion, it appears
that the duration requirement
necessitates an embodiment for more
than 1.2 seconds (the duration of the
buffer copies at issue in that case) but
does not require a duration of more than
‘‘several minutes.’’ Id. at 128, 131
(discussing MAI Sys. Corp. v. Peak
Computer Inc., 991 F.2d 511 (9th Cir.
1993)). Indeed, it leaves open the
possibility that a buffer copy that exists
for several seconds might have
sufficient duration to satisfy the fixation
requirement. We can glean no principle
from the Second Circuit’s opinion
which offers any guidance as to where
the line is to be drawn.5
While the Second Circuit’s opinion
criticizes the analysis in the Office’s
DMCA Section 104 Report, the latter did
attempt to provide a guiding principle
for determining when the duration
requirement has been met:
In establishing the dividing line between
those reproductions that are subject to
the reproduction right and those that are
not, we believe that Congress intended
the copyright owner’s exclusive right to
extend to all reproductions from which
economic value can be derived. The
economic value derived from a
reproduction lies in the ability to copy,
perceive or communicate it. Unless a
reproduction manifests itself so
fleetingly that it cannot be copied,
perceived or communicated, the making
of that copy should fall within the scope
of the copyright owner’s exclusive rights.
The dividing line, then, can be drawn
between reproductions that exist for a
sufficient period of time to be capable of
being ‘perceived, reproduced, or
otherwise communicated’’ and those that
do not.
DMCA Section 104 Report at 111.
For present purposes, we need not
resolve whether the Second Circuit’s
critique of the Office’s analysis is
compelling. It is sufficient to note that
the record in this rulemaking and the
Cartoon Network opinion create
5 Although the factual record in this proceeding
is insufficient, it is quite possible that the buffer
copies typically made in streaming exist for a longer
period of time—and perhaps a considerably longer
period of time—than the 1.2–second buffer copies
at issue in Cartoon Network. If so, that case might
be distinguishable on its facts.
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sufficient uncertainty to make it
inadvisable to engage in rulemaking
activity based on the Office’s analysis in
the DMCA Section 104 Report.
Consequently, the interim rule does not
address whether streaming of music that
involves the making of buffer copies,
but which makes no further copies, falls
within the Section 115 compulsory
license, or whether such buffer copies
qualify as DPDs. It seems likely that in
at least some, and perhaps many cases,
buffer copies may constitute DPDs, but
we do not reach any broad conclusions
on that point in light of the current state
of the law and the factual record before
us.
As a practical matter, the marketplace
may decide that issue. Most licenses
that purport to be made pursuant to
Section 115 are not, in fact, compulsory
licenses. They are voluntary licenses
between music publishers and licensees
who agree to payment of the royalties at
the rates that have been established for
the actual compulsory license. To the
extent that music publishers and
licensees are willing to use the Section
115 model to license reproductions,
including buffer copies, that are made in
the course of streaming, then as a
practical matter the marketplace may
decide to treat buffer copies as DPDs,
although not necessarily as DPDs
entitled to the same royalty as more
permanent copies.
While we leave open the question
whether buffer copies may be DPDs that
fall within the Section 115 compulsory
license, we note that certain streaming
services involve the making of cache
copies. To the extent that cache copies
are placed on the recipient’s hard drive
and may exist for some indefinite period
of time beyond the entire performance
of the phonorecord, the Office
understands that such copies would
appear to satisfy the fixation/
reproduction requirement.
(3) Specifically identifiable. Section
115 defines ‘‘digital phonorecord
delivery,’’ in relevant part, as ‘‘each
individual delivery of a phonorecord by
digital transmission of a sound
recording which results in a specifically
identifiable reproduction by or for any
transmission recipient of a phonorecord
of that sound recording.’’ 17 U.S.C.
115(d). With regard to interpretation of
the phrase ‘‘specifically identifiable
reproduction by or for any transmission
recipient of a phonorecord of that sound
recording,’’ the Copyright Owners
concurred with the tentative proposal in
the Copyright Office’s NPRM, which
offered that the plain meaning of the
statute indicates that a reproduction
may be either ‘‘specifically identifiable’’
by any transmission recipient or
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‘‘specifically identifiable’’ for any
transmission recipient. In endorsing the
view in the NPRM’s tentative proposal,
they noted that contrary to arguments
based upon a comment appearing in
legislative history, Congress could easily
have included a requirement that the
reproduction be specifically identifiable
to the transmitting service, but it did
not.
However, several parties including,
RIAA, Verizon, CTIA, and NAB raised
questions regarding the Office’s
proposed interpretation of the phrase.
These parties agreed with the Office’s
observation that the phrase ‘‘specifically
identifiable’’ is ‘‘unique in copyright
law,’’ but they went on to cast doubt on
the grammatical construction used by
the Office in arriving upon the
tentatively proposed plain meaning.
Verizon and NAB maintained that the
phrasing could not mean that the
phonorecord was ‘‘specifically
identifiable’’ by the recipient, offering
phrases with analogous grammatical
structure to illustrate their point. For
example, they pointed out that the
phrase ‘‘an instantly recognizable
painting by Picasso’’ does not indicate
that the painting is ‘‘instantly
recognizable’’ by Picasso. Similarly,
they noted that in the statutory phrase
‘‘specifically identifiable reproduction
by or for any transmission recipient,’’
the adjectival clause ‘‘specifically
identifiable’’ is not linked to the
transmission recipient. They therefore
asserted that it is equally plausible to
construe the ‘‘specifically identifiable’’
phrase as referring to the transmitting
service.
RIAA also argued that the proposed
interpretation is contrary to the statute’s
legislative history. Verizon, CTIA, and
NAB took a similar position arguing that
the tentatively proposed rule would be
inconsistent with the overall statute and
that the phrase is ambiguous. They
pointed to Muniz v. Hofman, 422 U.S.
454, 468 (1975) and Adams Fruit Co.,
Inc. v. Barrett, 494 U.S. 638, 642 (1990)
for the principle that where statutory
language is susceptible to multiple
constructions, it should be construed by
reference to the legislative intent and
the overall structure of the statutory
provision. They went on to urge that the
Office should follow its own previous
reasoning that, where two
interpretations of statutory language are
both plausible: ‘‘Turning to the
legislative history is appropriate where,
as here, the precise meaning is not
apparent and a clear understanding of
what Congress meant is crucial to an
accurate determination of how Congress
intended the digital performance right
and the statutory scheme to operate.’’
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Final Rule, Public Performance of
Sound Recordings: Definition of a
Service, 65 FR 77292, 77296.
Commenters’ attempts to indicate that
there is ambiguity in the statute cited to
the Senate and House Committee
Reports on the Digital Performance
Right in Sound Recordings Act (the
‘‘1995 House and Senate Reports’’) as
evidence of the proposed ambiguity.
Reliance on such evidence is misplaced.
As the Supreme Court has directed,
extraneous material such as legislative
history ‘‘are only admissible to solve
doubt and not to create it.’’ Railroad
Com. of Wisconsin v. Chicago, B. & Q.
R. Co., 257 U.S. 563, 589 (1922). As
Verizon and NAB’s comments reveal,
the phrase has precisely the same
generally applicable meaning as the
phrase ‘‘instantly recognizable’’ as used
in the phrase ‘‘an instantly recognizable
painting by Picasso.’’
Furthermore, even assuming we were
persuaded by the arguments that the
phrase ‘‘specifically identifiable’’ is
ambiguous and should be read with
reference to the legislative history, as is
urged by Verizon, CTIA and NAB, the
legislative history does not serve to
clarify any supposed ambiguity in the
meaning of the words ‘‘specifically
identifiable’’ but rather suggests a limit
on whom the adjectival clause
‘‘specifically identifiable’’ is to be
applied. Construing the phrase in the
manner suggested would require the
insertion of additional language
indicating that the adjectival clause
‘‘specifically identifiable’’ may only be
applied ‘‘to the transmission service.’’
The Office declines commenters’
invitation to make such an insertion.
Instead, the Office’s interim rule follows
the principle of statutory construction
that one ‘‘should not read words into a
statute that are not there.’’ U.S. v.
Watkins, 278 F.3d 961, 965 (9th Cir.
2002).
After considering the arguments
raised by the parties, the Copyright
Office accepts the structure of the
phrase ‘‘specifically identifiable
reproduction by or for any transmission
recipient of a phonorecord of that sound
recording’’ as it is explained and
advanced by Verizon, CTIA, and NAB.
Throughout the course of this
proceeding leading up to the Office’s
tentatively proposed rule, the parties
and the Office focused on two
competing, yet flawed, interpretations.
Under the previously proposed
interpretations, a reproduction could be
on the one hand ‘‘specifically
identifiable’’ to the transmission service
or on the other hand ‘‘specifically
identifiable’’ by any transmission
recipient or ‘‘specifically identifiable’’
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for any transmission recipient.
However, in light of the comments
submitted by Verizon, CTIA, and NAB,
the Office agrees that the sentence does
not link the adjectival clause
‘‘specifically identifiable’’ to the
transmission recipient. It also
recognizes that nothing in the sentence
links the adjectival clause ‘‘specifically
identifiable’’ to the transmission service.
In keeping with the insightful examples
of similarly constructed language
provided by Verizon, CTIA, and NAB,
the Office concludes that ‘‘specifically
identifiable’’ plainly, unambiguously
and without limitations means
‘‘specifically identifiable’’ to anyone or
anything, including the transmission
service, the transmission service’s
computer, the transmission recipient, or
the transmission recipient’s computer.
While the Office takes no position as
to whether each individual delivery of
a phonorecord by digital transmission
results in a specifically identifiable
reproduction, there can be little
question that certain streaming services
involve the making of legally
recognizable copies. To the extent that
such copies may be identifiable by any
person or computer, including any
identification as an essential step in
actually making the phonorecord
perceptible to the recipient, the Office
understands that such copies would
satisfy the requirement of being
‘‘specifically identifiable.’’
B. Incidental DPDs
The Office recognizes the parties’
views that certain reproductions created
by transmission services may be
categorized as so–called incidental
DPDs. Section 115 requires that rates
and terms shall distinguish between
general DPDs and incidental DPDs.
However, the statute does not offer a
definition of incidental DPDs. Indeed,
the statute does not specifically refer to
incidental DPDs; it simply directs the
Copyright Royalty Judges to set rates
that ‘‘distinguish between (i) digital
phonorecord deliveries where the
reproduction or distribution of a
phonorecord is incidental to the
transmission which constitutes the
digital phonorecord delivery, and (ii)
digital phonorecord deliveries in
general.’’ The lack of a specific
definition of incidental DPDs has
created a great deal of confusion among
those parties with an interest in the
Section 115 license. The Office notes
that the parties have seemed less
interested in defining what constitutes
an incidental DPD and more concerned
about receiving clarification as to
whether specific types of digital
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transmissions services fall within the
scope of the statutory license.
The parties urging the Office to
interpret the meaning of incidental DPD
have not offered specific suggestions as
to how the Office should define the
term. Rather they offered conclusions as
to which specific types of digital
transmission services should be deemed
to create reproductions that fall inside
or outside the definition of incidental
DPD. Support for these conclusions was
made largely on policy or economic
grounds.
As indicated previously, the Office
understands that an incidental DPD is
nothing more than a subset of DPDs.
However, we can find little reason to
delineate the contours of that subset.
Whether a DPD is ‘‘incidental’’ or
‘‘general,’’ it is included under the
Section 115 license. The Office
questions whether the concept of
incidental DPDs as set forth in the
statute lends itself to further
clarification in a regulation of general
application. The Office observes that the
legislative history of the Digital
Performance in Sound Recordings Act
of 1995 indicates that Congress
recognized the likelihood of several
different types of digital transmission
systems. The Office also recognizes
Congress’ indication that certain DPDs
may be incidental to the purpose of the
transmission. S. Rep. No. 104–128 at
39.6 However, the Office notes that,
except for one discrete example of a
type of service that would result in an
incidental DPD, neither the statute nor
the legislative history attempts to offer
criteria for determining the purpose of
a transmission.
The Office understands that neither
the statute, the legislative history, nor
the proposals submitted by commenters
clearly propose any conclusive methods
or criteria for determining the purpose
of a transmission. Moreover, the only
consequence of a determination that a
digital phonorecord delivery is
‘‘incidental’’ is that a separate rate must
be set for an incidental phonorecord
delivery (although, in any event, it is
inherent in the ratemaking provisions of
Section 115 that several different rates
may be set for various kinds of digital
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6 ‘‘For
example, if a transmission system was
designed to allow transmission recipients to hear
sound recordings substantially at the time of
transmission, but the sound recording was
transmitted in a highspeed burst of data and stored
in a computer memory for prompt playback (such
storage being technically the making of a
phonorecord), and the transmission recipient could
not retain the phonorecord for playback on
subsequent occasions (or for any other purpose),
delivering the phonorecord to the transmission
recipient would be incidental to the transmission.’’
S. Rep. No. 104–128 at 39.
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phonorecord deliveries). In setting rates
for the activities specified in Section
115, the Copyright Royalty Judges are to
distinguish between general and
incidental DPDs, and they have the
authority to set different rates for
different types of DPDs, depending on
their analysis of the economics of the
service and the other circumstances set
forth in section 801(b)(1). The Office
therefore proposes that any
determination regarding the purpose of
a transmission, upon which the
determination of when a DPD is an
incidental DPD appears to turn, should
be made in the context of a factual
inquiry before the CRJs, if such a
determination proves to be relevant.7
C. Limited Downloads
In the petition for a rulemaking that
initiated this proceeding, RIAA
characterized a limited download as an
‘‘on–demand transmission of a time–
limited or other use–limited (i.e. non–
permanent) download to a local storage
device (e.g. the hard drive of the user’s
computer), using technology that causes
the downloaded file to be available for
listening only either during a limited
time (e.g. a time certain or a time tied
to ongoing subscription payments) or for
a limited number of times’’ and asked
the office to determine whether and to
what extent limited downloads come
within the scope of the Section 115
license. RIAA Petition at 1. As the Office
has previously indicated, and explains
again in this Notice below, whether a
service is interactive or non–interactive
does not appear to be relevant in the
context of the Section 115 license.
Therefore, the Office’s regulatory text
adopts a slightly altered characterization
of limited downloads, as a subset of
DPDs that ‘‘may be made available to
the transmission recipient for a limited
period of time or for a specified number
of performances.’’ Applying the above–
stated understandings regarding DPDs
in general, the Office concludes that
limited downloads fall within the
definition for DPDs in that they are
delivered; they satisfy the requirements
for being a phonorecord; and they are
specifically identifiable.8 This
7 The Office observes that nothing in the law
prevents the CRJs from setting different rates for
various kinds of incidental DPDs.
8 The Office understands that there may be many
types of limited downloads made available to
transmission recipients for varying periods of time
or number of performances. Nothing in the law
prevents the CRJs from setting different rates for
various kinds of limited downloads. The Office
observes that the agreement submitted to the CRJs
on September 22, 2008 assigns rates for specific
types of limited downloads. See Mechanical and
Digital Phonorecord Delivery Rate Determination
Proceeding, 73 FR 57033, 57034 (Oct. 1,
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conclusion regarding limited downloads
is reflected in the interim rule.
D. Threshold Requirements for Use of
the Section 115 License
Several parties expressed concern
with the NPRM’s proposed
interpretation of 17 U.S.C. 115(a)(l),
which states that ‘‘A person may obtain
a compulsory license only if his or her
primary purpose in making
phonorecords is to distribute them to
the public for private use, including by
means of a digital phonorecord
delivery.’’ Public Interest Commenters
questioned the Office’s proposed
understanding that DPDs are, by the fact
of their having been delivered,
distributed within the meaning of the
copyright law. They urged the Office to
avoid preempting any judicial
resolution regarding whether Internet
transmissions may result in distribution
of ‘‘material objects.’’ Google/YouTube
asserted that the Office’s proposal
overlooks a legal distinction between
copying that facilitates the delivery or
‘‘distribution’’ of a reproduction of a
sound recording, on the one hand, and
copying that merely enables the public
performance of a sound recording, on
the other. It also maintained that a
‘‘performance’’ to consumers, with or
without the benefit of an intervening
distribution entity, does not constitute
the ‘‘distribution’’ of a copy of the
content at issue. DiMA also argued that
various types of streaming, other than
interactive streaming, may or may not
make reproductions at the recipient end
of a transmission, and such
reproductions may not always be for the
‘‘primary purpose’’ of making
phonorecords.
Verizon, CTIA, and NAB claimed that
the NPRM contained a near tautology
when it asserted that by virtue of having
been delivered, phonorecords are
distributed within the meaning of
copyright law. They also argued that the
approach advanced by the Office all but
reads the ‘‘primary purpose’’
requirement out of Section 115. They
acknowledged that a primary purpose in
making the DPD may be to distribute it.
But they argued that the NPRM ignores
the fact that, even if a buffer copy is a
DPD, the primary purpose of making
such a DPD is not to ‘‘distribute’’
anything. It is rather an essential step in
2008)(proposed 37 CFR § 385.11 (definition of
‘‘Limited download’’)). The Office notes that to the
extent DPDs fall within the characterization of
limited downloads as set forth in the Office’s
interim rule (which is broader than the category
identified in the submitted agreement) they are
licensable under Section 115 regardless of the rates
assigned to them, or indeed regardless of whether
any rate has been assigned to them.
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the effectuation of a performance. They
then cited to statements made by the
Register that a ‘‘stream’’ does not
constitute a distribution and that buffer
and other intermediate copies are for all
practical purposes useless. Finally, they
offered the argument that characterizing
all buffers as distributed would
undermine many established principles,
provisions and practices of copyright
law including fair use, the concept of
publication, and registration practices.
As indicated above, the Office’s
interim rule, unlike the NPRM, takes no
position as to whether a buffer copy
constitutes a phonorecord. However, it
is apparent that when a transmission to
an individual consumer does result in a
DPD, the phonorecord is made for the
purpose of allowing the recipient to
make a private use of that phonorecord,
even if that use is simply to hear the
performance of the phonorecord
contemporaneously with the
transmission. Similarly, it appears that
enabling a recipient to make such a
private use is a service’s primary
purpose in making phonorecords on a
recipient’s device. The Office notes that
Congress intended the Section 115
license to cover DPDs ‘‘regardless of
whether the digital transmission is also
a public performance of the sound
recording or any nondramatic musical
work embodied therein.’’ 17 U.S.C.
115(d).
The Office’s interim rule also does not
determine whether all phonorecords
which satisfy the previously addressed
requirements for being DPDs are
necessarily ‘‘distributed.’’ This position
is consistent with the Office’s prior legal
conclusions as well as the Register’s
statements and policy arguments to
Congress that a stream in and of itself
does not constitute a distribution.
However, under the Office’s above–
stated analysis, there is no dispute that
limited download services as well as
certain streaming services involve the
making of legally recognizable copies
that fit within the definition of a DPD.
To the extent that such phonorecords
exist on the recipient’s computer for
some period of time beyond their
performance, it is reasonable to consider
the phonorecord as having been
‘‘distributed.’’ At the very least, where
services involve the making of DPDs
that exist on the recipient’s computer
for some period of time beyond their
performance and which can be used to
replay the phonorecord, it would appear
that such phonorecords have been
‘‘distributed.’’9 Whether the delivery of
9 NMPA referred the Office to evidence indicating
that three leading streaming music services create
such copies. See Statement of Jacqueline
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a phonorecord that lasts no longer than
the streamed performance constitutes a
distribution is an issue that need not be
resolved for purposes of this
rulemaking.
E. Non–DPD Copies Under the Section
115 License
Among the commenters, Verizon,
CTIA, and NAB were alone in disputing
the tentative proposal in the NPRM
stating that server copies, and all other
intermediate copies, used to make DPDs
under the Section 115 license fall
within the scope of the license. They
argued that the primary purpose in
making server ‘‘phonorecords’’ is not
‘‘to distribute them to the public for
private use’’ and that therefore they are
not eligible for the 115 license.
However, this argument misunderstands
the Office’s interpretation in the NPRM
of the coverage provided by the Section
115 license.
The Office understands that the
Section 115 license has traditionally
provided coverage beyond those
phonorecords made and distributed to
the public for private use, so long as
such phonorecords were used to achieve
the primary purpose of making and
distributing phonorecords under the
Section 115 license. Indeed, when it
enacted Section 115 in 1976, Congress
stated that it intended the license to
cover ‘‘every possible manufacturing or
other process capable of reproducing a
sound recording in phonorecords.’’10 As
stated in the NPRM, the right to make
master recordings, which are used to
make the phonorecords that are actually
distributed has long been understood to
be included in the Section 115 license.
Similarly, server copies, as well as all
other intermediate copies used to make
and distribute DPDs under the Section
115 license, perform a function in the
world of DPDs that is parallel to master
recordings and manufacturing
equipment in the physical world.
Consequently, the interim rule confirms
that server copies and intermediate
reproductions may come within the
scope of the license. The Office notes
that a person seeking to operate under
the Section 115 license must still satisfy
the threshold requirements of the
license. But, having done so, that
licensee’s coverage may extend to
phonorecords other than those that are
Charlesworth https://www.copyright.gov/docs/
section115/2008/rml2000–
7lNMPAlhearinglstatement.pdf.
10 H. Rep. No. 94–1476, at 110. See also, The
Copyright Act of 1976, Transitional and
Supplementary Provisions, Sec. 106 (‘‘...parts of
instruments serving to reproduce phonorecords
mechanically ... such parts made on or after January
1, 1978, constitute phonorecords.’’
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actually distributed provided that they
are made for the purpose of making and
distributing a DPD. On the other hand,
server and intermediate copies that are
the source of a transmission that does
not result in the making and
distribution of a DPD would not fall
within the scope of the compulsory
license. Finally, the Office notes that
server and intermediate copies covered
under the Section 115 license that are
not distributed do not entitle the owner
to separate royalty payments. 17 U.S.C.
115(c)(1).
F. Issues Outside the Scope of This
Proceeding
1. Interactive vs. Non–interactive
The Office recognizes that nearly all
of the commenters have expressed some
preference to distinguish between
phonorecords that are, or may be, made
by Interactive Streaming Services versus
those made by Non–interactive
Streaming Services. As the Office stated
in its NPRM, distinctions relating to
interactivity are appropriate in the
context of the Section 114 license,
which is available only for
nonintereactive transmissions, and such
distinctions may be appropriate to raise
as a matter of economic value or policy
before the CRJs–for example, in setting
rates–or Congress. However, whether a
service is interactive or non–interactive
does not appear to be relevant in
determining whether particular
reproductions of phonorecords may be
covered under the current Section 115
license, except perhaps under the last
sentence of Section 115(d), which does
address the potential for non–
interactivity to be relevant. However,
this sentence must be read in its
entirety, which provides:
A digital phonorecord delivery does not
result from a real–time, non–interactive
subscription transmission of a sound
recording where no reproduction of the
sound recording or the musical work
embodied therein is made from the
inception of the transmission through to
its receipt by the transmission recipient
in order to make the sound recording
audible.
15 U.S.C. 115(d) (emphasis added).
The Office acknowledges that it may
be more common for interactive streams
to result in DPDs and that it may be
relatively uncommon for non–
interactive streams to do so. However, if
phonorecords are delivered by a
transmission service, then under the last
sentence of 115(d) it is irrelevant
whether the transmission that created
the phonorecords is interactive or non–
interactive. To the extent that each
stream creates a DPD, it appears that the
only proffered justification for
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distinguishing between the interactive
and non–interactive transmissions is the
business justification that interactive
DPDs have a greater economic impact.
The Office would not dispute a finding
that non–interactive and interactive
streams have different economic value,
or even that a rate of zero might be
appropriate for DPDs made in the course
of non–interactive streams. Nor does it
question the motivation for the
industry’s adoption of an agreement that
distinguishes between the two.
However, the Office maintains that any
such distinctions can and should be
addressed by different rates rather than
being based on an unfounded assertion
that non–interactive streaming cannot
involve the making and distribution of
phonorecords which are licensable
under Section 115.
2. Policy Arguments
As has happened throughout this
proceeding, a number of commenters
proposed revisions that they would like
Congress to adopt, including provisions
that would expressly exempt transient
copies made during the course of an
authorized digital performance of a
sound recording and declare that server
copies made to facilitate an authorized
public performance have no
independent economic value. The
Office notes, as it did in the NPRM, that
such matters are beyond the scope of the
current proceeding, not to mention the
Office’s regulatory power. Commenters
also asserted that the proposed rule
would have created problems regarding
commenters’ current understanding of
other sections of the Copyright Act,
such as the Section 114 and 112 licenses
and Chapter 10’s treatment of audio
home recording. The interim rule,
however, is limited to clarifying that
reproductions created in the process of
making a DPD are covered under the
license and to acknowledge that a DPD
may be limited either by time or to a
specific number of plays. Consequently,
there is no need to address the concerns
raised by the parties about the effect of
the proposed rule on other provisions in
the copyright law.
pwalker on PROD1PC71 with RULES
G. Regulatory Text
The text of the interim regulation
adopted today is based upon the text
proposed in the NPRM, but with some
fairly significant modifications. The text
defines a digital phonorecord delivery
as follows:
‘‘digital phonorecord delivery’’ is each
individual delivery of a phonorecord by
digital transmission of a sound recording
which results in a specifically identifiable
reproduction by or for any transmission
recipient of a phonorecord of that sound
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recording, regardless of whether the digital
transmission is also a public performance of
the sound recording or any nondramatic
musical work embodied therein. The
reproduction of the phonorecord must be
sufficiently permanent or stable to permit it
to be perceived, reproduced, or otherwise
communicated for a period of more than
transitory duration. Such a phonorecord may
be permanent or it may be made available to
the transmission recipient for a limited
period of time or for a specified number of
performances. A digital phonorecord delivery
includes all phonorecords that are made for
the purpose of making the digital
phonorecord delivery.
The second sentence of the definition
did not appear in the original proposed
regulatory text. It is included in the
interim regulation to clarify that any
DPD requires that the phonorecord that
is delivered must meet the requirements
of fixation, including the durational
requirement. However, the regulatory
text takes no position on the threshold
for satisfying that durational
requirement, and therefore is not
inconsistent with the approach taken in
either the DMCA Section 104 Report or
the Cartoon Network case.
The definition also makes clear that a
DPD may be made available on a limited
basis and that DPDs include any
phonorecords made for the purpose of
making the DPD. Thus, phonorecords
such as server copies that are not
sufficient to constitute a DPD (because
they are not ‘‘delivered’’) but are
nevertheless made for the purpose of
delivering a DPD (such as a full or
limited download or a cache copy at the
end of the stream if that copy meets the
fixation requirement) are nevertheless
part of the DPD if a phonorecord is in
fact delivered. And buffer copies, if they
meet the fixation requirement, may also
be DPDs or be included as parts of
DPDs. If a buffer copy does not meet the
fixation requirement, it is irrelevant
whether it is part of a DPD because it
cannot be an infringing ‘‘copy.’’
List of Subjects
37 CFR Part 201
Copyright, General provisions.
37 CFR Part 255
Compulsory license fees,
Phonorecords.
Proposed Regulations
In consideration of the foregoing, the
Copyright Office proposes to amend
parts 201 and 255 of 37 CFR, as follows:
■
PART 201—GENERAL PROVISIONS
1. The authority citation for part 201
continues to read as follows:
■
Authority: 17 U.S.C. 702.
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66181
2. Amend § 201.18 as follows:
a. By redesignating paragraphs (a)(2)
through (a)(6) as (a)(4) through (a)(8);
and
■ b. By adding new paragraphs (a)(2)
and (a)(3).
The revisions and additions to
§ 201.18 read as follows:
■
■
201.18 Notice of intention to obtain a
compulsory license for making and
distributing phonorecords of nondramatic
musical works.
(a) * * *
(2) A person is entitled to serve or file
a Notice of Intention and thereby obtain
a compulsory license pursuant to 17
U.S.C. 115 only if his primary purpose
in making phonorecords is to distribute
them to the public for private use,
including by means of a digital
phonorecord delivery.
(3) For the purposes of this section, a
‘‘digital phonorecord delivery’’ is each
individual delivery of a phonorecord by
digital transmission of a sound
recording which results in a specifically
identifiable reproduction by or for any
transmission recipient of a phonorecord
of that sound recording, regardless of
whether the digital transmission is also
a public performance of the sound
recording or any nondramatic musical
work embodied therein. The
reproduction of the phonorecord must
be sufficiently permanent or stable to
permit it to be perceived, reproduced, or
otherwise communicated for a period of
more than transitory duration. Such a
phonorecord may be permanent or it
may be made available to the
transmission recipient for a limited
period of time or for a specified number
of performances. A digital phonorecord
delivery includes all phonorecords that
are made for the purpose of making the
digital phonorecord delivery.
*
*
*
*
*
■ 3. Amend § 201.19 as follows:
■ a. By amending paragraph (a)(1) to
add ‘‘, including by means of a digital
phonorecord delivery.’’ after ‘‘of
nondramatic musical works’’.
■ b. By redesignating paragraphs (a)(3)
through (a)(12) as paragraphs (a)(4)
through (a)(13); and
■ c. By adding a new paragraph (a)(3).
The revisions to § 201.19 read as
follows:
201.19 Royalties and statements of
account under compulsory license for
making and distributing phonorecords of
nondramatic works.
(a) * * *
(3) For the purposes of this section, a
‘‘digital phonorecord delivery’’ is each
individual delivery of a phonorecord by
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Federal Register / Vol. 73, No. 217 / Friday, November 7, 2008 / Rules and Regulations
digital transmission of a sound
recording which results in a specifically
identifiable reproduction by or for any
transmission recipient of a phonorecord
of that sound recording, regardless of
whether the digital transmission is also
a public performance of the sound
recording or any nondramatic musical
work embodied therein. The
reproduction of the phonorecord must
be sufficiently permanent or stable to
permit it to be perceived, reproduced, or
otherwise communicated for a period of
more than transitory duration. Such a
phonorecord may be permanent or it
may be made available to the
transmission recipient for a limited
period of time or for a specified number
of performances. A digital phonorecord
delivery includes all phonorecords that
are made for the purpose of making the
digital phonorecord delivery.
*
*
*
*
*
Dated: October 22, 2008.
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. E8–26666 Filed 11–6–08; 8:45 am]
PART 255—ADJUSTMENT OF
ROYALTY PAYMENTS UNDER
COMPULSORY LICENSE FOR MAKING
AND DISTRIBUTING PHONORECORDS
SUMMARY: Under the Clean Air Act, EPA
is taking direct final action to approve
a revision to the Clark County portion
of the Nevada State Implementation
Plan (SIP). This revision consists of
transportation conformity criteria and
procedures related to interagency
consultation and enforceability of
certain transportation-related control
measures and mitigation measures. The
intended effect is to include the
transportation conformity criteria and
procedures in the applicable SIP.
DATES: This rule is effective on January
6, 2009, without further notice, unless
EPA receives adverse comments by
December 8, 2008. If we receive such
comments, we will publish a timely
withdrawal in the Federal Register to
notify the public that this direct final
rule will not take effect.
ADDRESSES: Submit comments,
identified by docket number EPA–R09–
OAR–2008–0728, by one of the
following methods:
1. Federal eRulemaking Portal:
https://www.regulations.gov. Follow the
on-line instructions.
2. E-mail: vagenas.ginger@epa.gov.
3. Mail or deliver: Ginger Vagenas
(AIR–2), U.S. Environmental Protection
Agency Region IX, 75 Hawthorne Street,
San Francisco, CA 94105–3901.
Instructions: All comments will be
included in the public docket without
change and may be made available
online at https://www.regulations.gov,
including any personal information
provided, unless the comment includes
Confidential Business Information (CBI)
or other information whose disclosure is
restricted by statute. Information that
you consider CBI or otherwise protected
4. The authority citation for part 255
continues to read as follows:
■
Authority: 17 U.S.C. 702.
5. Section 255.4 is revised to read as
follows:
■
pwalker on PROD1PC71 with RULES
§ 255.4 Definition of digital phonorecord
delivery.
A ‘‘digital phonorecord delivery’’ is
each individual delivery of a
phonorecord by digital transmission of
a sound recording which results in a
specifically identifiable reproduction by
or for any transmission recipient of a
phonorecord of that sound recording,
regardless of whether the digital
transmission is also a public
performance of the sound recording or
any nondramatic musical work
embodied therein. The reproduction of
the phonorecord must be sufficiently
permanent or stable to permit it to be
perceived, reproduced, or otherwise
communicated for a period of more than
transitory duration. Such a phonorecord
may be permanent or it may be made
available to the transmission recipient
for a limited period of time or for a
specified number of performances. A
digital phonorecord delivery includes
all phonorecords that are made for the
purpose of making the digital
phonorecord delivery.
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BILLING CODE 1410–30–S
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–R09–OAR–2008–0728; FRL–8729–1]
Approval and Promulgation of
Implementation Plans; Revisions to the
Nevada State Implementation Plan;
Clark County
Environmental Protection
Agency (EPA).
ACTION: Direct final rule.
AGENCY:
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should be clearly identified as such and
should not be submitted through
https://www.regulations.gov or e-mail.
The https://www.regulations.gov portal is
an ‘‘anonymous access’’ system, and
EPA will not know your identity or
contact information unless you provide
it in the body of your comment. If you
send e-mail directly to EPA, your e-mail
address will be automatically captured
and included as part of the public
comment. If EPA cannot read your
comment due to technical difficulties
and cannot contact you for clarification,
EPA may not be able to consider your
comment.
Docket: The index to the docket for
this action is available electronically at
https://www.regulations.gov and in hard
copy at EPA Region IX, 75 Hawthorne
Street, San Francisco, California. While
all documents in the docket are listed in
the index, some information may be
publicly available only at the hard copy
location (e.g., copyrighted material), and
some may not be publicly available in
either location (e.g., CBI). To inspect the
hard copy materials, please schedule an
appointment during normal business
hours with the contact listed in the FOR
FURTHER INFORMATION CONTACT section.
FOR FURTHER INFORMATION CONTACT:
Ginger Vagenas, EPA Region IX, (415)
972–3964, vagenas.ginger@epa.gov.
SUPPLEMENTARY INFORMATION:
Throughout this document, ‘‘we,’’ ‘‘us’’
and ‘‘our’’ refer to EPA.
Table of Contents
I. Transportation Conformity
II. Background for This Action
III. State Submittal and EPA Evaluation
IV. Public Comment and Final Action
V. Statutory and Executive Order Reviews
I. Transportation Conformity
Transportation conformity is required
under section 176(c) of the Clean Air
Act (CAA or Act) to ensure that
federally supported highway, transit
projects, and other activities are
consistent with (‘‘conform to’’) the
purpose of the SIP. Conformity applies
to areas that are currently designated
nonattainment, and to areas that have
been redesignated to attainment after
1990 (maintenance areas) with plans
developed under section 175A of the
Act, for the following transportation
related criteria pollutants: Ozone,
particulate matter (PM2.5 and PM10),
carbon monoxide (CO), and nitrogen
dioxide (NO2).
Conformity to the purpose of the SIP
means that transportation activities will
not cause new air quality violations,
worsen existing violations, or delay
timely attainment of the relevant
national ambient air quality standards
E:\FR\FM\07NOR1.SGM
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Agencies
[Federal Register Volume 73, Number 217 (Friday, November 7, 2008)]
[Rules and Regulations]
[Pages 66173-66182]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-26666]
[[Page 66173]]
=======================================================================
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201 and 255
[Docket No. RM 2000-7]
Compulsory License for Making and Distributing Phonorecords,
Including Digital Phonorecord Deliveries
AGENCY: Copyright Office, Library of Congress.
ACTION: Interim rule and request for comments.
-----------------------------------------------------------------------
SUMMARY: The Copyright Office is announcing an interim regulation to
clarify the scope and application of the Section 115 compulsory license
to make and distribute phonorecords of a musical work by means of
digital phonorecord deliveries. The Office seeks comments on the
interim regulation.
EFFECTIVE DATE: December 8, 2008. Comments must be received in the
Office of the General Counsel of the Copyright Office no later than
January 6, 2009.
ADDRESSES: If hand delivered by a private party, an original and five
copies of a comment or reply comment should be brought to the Library
of Congress, U.S. Copyright Office, Room 401, 101 Independence Avenue,
SE., Washington, DC 20559, between 8:30 a.m. and 5 p.m. The envelope
should be addressed as follows: Office of the General Counsel, U.S.
Copyright Office. If delivered by a commercial courier, an original and
five copies of a comment or reply comment must be delivered to the
Congressional Courier Acceptance Site (``CCAS'') located at 2nd and D
Streets, NE., Washington, DC between 8:30 a.m. and 4 p.m. The envelope
should be addressed as follows: Office of the General Counsel, U.S.
Copyright Office, LM 403, James Madison Building, 101 Independence
Avenue, SE., Washington, DC 20559. Please note that CCAS will not
accept delivery by means of overnight delivery services such as Federal
Express, United Parcel Service or DHL. If sent by mail (including
overnight delivery using U.S. Postal Service Express Mail), an original
and five copies of a comment or reply comment should be addressed to
U.S. Copyright Office, Copyright GC/I&R, P.O. Box 70400, Washington, DC
20024.
FOR FURTHER INFORMATION CONTACT: Tanya M. Sandros, General Counsel, or
Stephen Ruwe, Attorney Advisor, Copyright GC/I&R, P.O. Box 70400,
Washington, DC 20024. Telephone: (202) 707-8380. Telefax: (202) 707-
8366.
SUPPLEMENTARY INFORMATION:
Background
On July 16, the Copyright Office published a notice of proposed
rulemaking (the ``NPRM'') to amend its regulations to clarify the scope
and application of the Section 115 compulsory license to make and
distribute phonorecords of a musical work by means of digital
phonorecord deliveries (``DPDs''). 73 FR 40802. Specifically, the
notice proposed to amend the definition of ``digital phonorecord
delivery'' to clarify that a digital phonorecord delivery under the
compulsory license provided under 17 U.S.C. 115 includes the following:
permanent digital downloads of phonorecords; limited downloads, which
use technology that causes the downloaded file to be available for
listening only either during a limited time (e.g., a time certain or a
time tied to ongoing subscription payments) or for a limited number of
performances; and all buffer copies delivered to a transmission
recipient. The NPRM also put forward that the Section 115 license
included coverage for all reproductions made to facilitate the making
and distributing of DPDs.
In the course of its analysis, the Office categorized a number of
different types of reproductions that can be made for the purpose of
making DPDs: Server-end Complete Copies, Recipient-end Complete Copies,
Server-end Buffer Copies, and Recipient-end Buffer Copies.\1\ As
described in the NPRM, a Server-end Complete Copy is a copy of a sound
recording of an entire musical work which resides on the server of a
digital music service and serves as the source of the transmission that
results in a DPD. A Recipient-end Complete Copy is a copy of a sound
recording of an entire musical work which is made on the recipient's
computer or device during the course of the transmission. A Server-end
Buffer Copy is a copy of a portion of a sound recording of a musical
work (which, along with a number of other buffer copies, typically will
cumulatively constitute a recording of the entire musical work) that is
made on the transmitting entity's server and typically exists for a
short period of time, sometimes a few seconds or less. A Recipient-end
Buffer Copy is a copy of a portion of a sound recording of a musical
work (which, along with a number of other buffer copies, typically will
cumulatively constitute a recording of the entire musical work) that is
made on the recipient's computer or device and typically exists for a
short period of time, sometimes a few seconds or less.
---------------------------------------------------------------------------
\1\ We call these reproductions ``copies'' not in the technical
sense as defined in 17 U.S.C. 101, but in the more general
dictionary sense in which the term ``copies'' is understood. We
recognize that these reproductions are of sounds other than those
accompanying a motion picture or other audio visual work, which when
fixed in material objects from which sounds may be perceived would
properly be categorized as ``phonorecords.'' Additionally, we
acknowledge that parties disagree on the copyright implications of
the reproductions, an analysis of which is contained herein.
---------------------------------------------------------------------------
In the NPRM, the Office proposed that a DPD would exist whenever a
transmission includes any of the following: a Recipient-end Complete
Copy and/or a Recipient-end Buffer Copy. The Office tentatively
proposed that both of these kinds of copies satisfied the statutory
requirements of being ``phonorecords'' that are ``specifically
identifiable.'' The Office indicated that Server-end Copies did not
satisfy the requirements for a DPD because they are not ``delivered.''
The Office proposed to interpret the compulsory license as
including a license to make Server-end copies as well as all other
intermediate copies used to facilitate a digital transmission that
results in the making and distribution of a DPD, even though those
copies may not themselves constitute DPDs. Thus, a Server-end copy that
is the source of a transmission that results in a DPD, such as a
download, will be included within the scope of the compulsory license,
although it is not itself a DPD for which payment would be required. On
the other hand, a Server-end copy that is the source of a transmission
of a performance that does not result in the making and distribution of
a DPD would not fall within the scope of the compulsory license.
With respect to limited downloads, the Office proposed the
following conclusion: ``While policy reasons might exist for
distinguishing such a limited download from a permanent reproduction,
we can find no basis in the statute for considering a limited download
to be something other than a phonorecord. Moreover, the fact that a
limited download is a phonorecord does not in any way prevent the
Copyright Royalty Judges from valuing it differently and setting a
lower rate.'' 73 FR at 40808. Accordingly, the Office tentatively
concluded that limited downloads, like other Recipient-end Complete
Copies, satisfy the requirements for DPDs.
In response to requests by some interested parties and in light of
the intervening decision of the United States Court of Appeals for the
Second Circuit in The Cartoon Network LP v.
[[Page 66174]]
CSC Holdings, Inc., 536 F.3d 121 (2d Cir. Aug. 4, 2008), the Office
extended the comment period and, on September 19, 2008, conducted a
hearing. Having considered the comments and the testimony at the
hearing, the Register of Copyrights now issues this interim regulation
and requests comments.
Summary of Interim Regulation
In the NPRM, the Office proposed to define a ``digital phonorecord
delivery'' as including all buffer copies made in the course of
streaming, which would have meant that all music streaming activity
would be included within the scope of the compulsory license.\2\
However, in light of the recent comments and testimony, and the
uncertainty created by the Second Circuit's Cartoon Network opinion
concerning the fixation of buffer copies, the interim regulation
announced today is more modest in scope than the proposed regulation.
The Office is not currently prepared to issue a regulation that
definitively addresses whether such copies are within the scope of the
compulsory license, except to the extent the transmission also results
in the making of copies which more certainly qualify as DPDs. As such,
the interim regulation takes no position on whether or when a buffer
copy independently qualifies as a DPD, or whether and when it is
necessary to obtain a license to cover the reproduction or distribution
of a musical work in order to engage in activities such as streaming.
---------------------------------------------------------------------------
\2\ The Office noted that the fact that the compulsory license
is available for such activity should not be construed as meaning
that a license is necessary for all such activity. Rather, the
license would simply be available for online music services who do
not wish to expose themselves to potential liability in cases where
a musical copyright owner asserts that the making of, e.g., buffer
copies constitutes an infringement of the reproduction right.
---------------------------------------------------------------------------
The interim regulation clarifies that (1) whenever there is a
transmission that results in a DPD, all reproductions made for the
purpose of making the DPD are also included as part of the DPD, and (2)
limited downloads qualify as DPDs. The interim regulation does not
attempt to define the threshold at which a DPD occurs. That remains
contested, as discussed below.
Authority To Issue Regulations
The Office requested comments on whether the issues raised in the
NPRM could be addressed in an administrative rulemaking. In response,
the Digital Media Association (``DiMA'') as well as the Business Music
Industry; Verizon Communications; CTIA--The Wireless Association
(``CTIA''); the National Association of Broadcasters (``NAB''); Google/
YouTube; and Electronic Frontier Foundation, Public Knowledge, Center
for Democracy and Technology, Consumers Union, Consumer Federation of
America, U.S. PIRG, and the Computer & Communications Industry
Association (collectively referred to as ``Public Interest
Commenters'') raised questions and concerns regarding the Office's
authority to issue a rule that would have a wide-reaching impact on
activities outside the scope of Section 115.
For example, Verizon, CTIA, and NAB argued that the proposed rule
is a substantive rule of copyright law and therefore is not a matter
relating to administration of the functions and duties of the Copyright
Office. They asserted that the proposed rule would both reinterpret
substantive principles of copyright law and fundamentally reset the
balance between copyright owners and users. They maintained that the
proposed rule is distinguishable from any judicially approved exercise
of Office rulemaking authority under Sections 701 or 702. Further, they
noted that authority under Sections 701 and 702 is distinguishable from
the authority granted to the Register to make determinations on
``material questions of substantive law'' under Chapter 8, which is
accompanied by specific procedural limitations that indisputably are
not present in association with the proposed rule. In addition, DiMA
asserted that the Office's authority to issue a rule at this time, in
the midst of the Copyright Royalty Board (the ``CRB'') ratemaking
proceeding, is foreclosed and that to do so would impermissively
interject the Office into the CRB proceeding. DiMA maintains that this
result would contravene specific provisions of the Copyright Act that
narrowly circumscribe the Office's authority to be involved in a CRB
rate-setting proceeding.
On the other hand, SESAC noted the Office's specific and limited
scope of authority under Section 115, and asserted that the Office
should not go beyond its statutory authority and opine on the relative
values of separate and independent rights implicated in a given
transmission. Similarly, the American Society of Composers, Authors and
Publishers and Broadcast Music, Inc. (``ASCAP/BMI'') acknowledged the
Office's statutory mandate to address administration of the Section 115
license. However, they specifically noted that any statements by the
Office affecting the definition or applicability of the performance
right are beyond the limited authority granted to the Office to
administer Section 115. Other comments, such as the one filed by the
Recording Industry Association of America (``RIAA''), and a joint
filing by National Music Publishers Association, including its wholly
owned licensing subsidiary, The Harry Fox Agency, Inc.; the
Songwriters' Guild of America; the Nashville Songwriters Association
International; and the Association of Independent Music Publishers,
(Collectively ``Copyright Owners'') expressed the view that the
Register does possess the authority to issue such rules.\3\
---------------------------------------------------------------------------
\3\ Most of the commenters who objected to the Register's
authority appear to have done so out of fear that the Register would
address issues such as whether buffer copies constitute
phonorecords--issues which, as set forth below, the Register has
declined to resolve in this proceeding. Many of those commenters
expressed concern that in order to address those issues, the
rulemaking would have consequences for activities that have no
relationship to the section 115 compulsory license. However, the
more modest regulation announced today is more narrowly focused and
would appear to have little if any applicability outside the scope
of the compulsory license.
---------------------------------------------------------------------------
Section 702 authorizes the Register of Copyrights ``to establish
regulations not inconsistent with law for the administration of the
functions and duties made the responsibility of the Register under this
title.'' Among the functions and duties of the Register is the
responsibility to issue regulations prescribing how a licensee shall
file a notice of intention to use the statutory license, 17 U.S.C.
115(b)(1), and regulations governing the submission of monthly and
annual statements of account. 17 U.S.C. 115(c)(4). Pursuant to this
authority, the Register has issued regulations that, inter alia, govern
the content of the notice and the statements of account associated with
the use of the Section 115 license. See 37 CFR 201.18 and 201.19. These
regulations include definitions of statutory terms, which clarify the
application of the terms in the context of the statutory license thus
enabling a licensee to understand how to accurately report the making
and distribution of a phonorecord under Section 115.
Courts have recognized the Register's authority to promulgate
regulations interpreting the statute under the authority granted in
Section 702 and specific provisions in the law, such as the statutory
licenses. In Cablevision Systems Development Co. v. Motion Picture
Association of America, Inc. (``Cablevision'') the court acknowledged
Section 702 as the source of general authority for the Office to
conduct rulemaking proceedings to carry out specific responsibilities.
Cablevision 836 F.2d 599 (D.C. Cir. 1988), cert. denied, 487 U.S. 1235
(1988). In Cablevision, the Register issued
[[Page 66175]]
regulations under Section 111(d)(1) that directed cable systems to
deposit royalty fees with the Copyright Office. Those regulations
included an interpretation of the statutory term, ``gross receipts,''
which was central to the calculation of royalty fees for the public
performance of secondary transmissions of broadcast signals under the
statutory license. Opponents of the regulation argued that the
authority of the Register was limited to the ``ministerial task of
designing forms.'' The court, however, rejected this narrow approach,
noting that authority to design forms has a substantial policy
component and that the Copyright Office ``certainly has greater
expertise in such matters than the federal courts.'' Thus, under the
court's reasoning, the issuance of a rule interpreting a statutory term
for the purpose of administering the license was not a violation of the
rulemaking authority granted to the Register, provided that the
interpretation was reasonable.
Other circuits have reached the same conclusion. In Satellite
Broadcasting and Communications Association of America v. Oman
(``SBCA''), the court found that ``the Copyright Office is a federal
agency with authority to promulgate rules concerning the meaning and
application of Sec. 111.'' SBCA 17 F.3d 344, 347 (11th Cir. 1994). In
reconsidering its earlier determination that a satellite carrier could
be considered a cable system making it eligible to utilize the Section
111 statutory license, the court revised its determination in light of
a final rule issued by the Copyright Office which concluded that a
satellite carrier was not a cable system under Section 111. The court
acknowledged that the interpretation of the agency was due deference
unless arbitrary, capricious, or manifestly contrary to the provisions
of the Copyright Act. Id.
The current rulemaking is consistent with the Office's practice of
promulgating regulations to construe statutory terms that are critical
to the administration of a statutory license administered by the
Office. The Office is relying on both its general rulemaking authority
under Section 702 and the specific grant of authority found in Section
115(b)(1) and (c)(4) to issue rules governing notices of intention and
statements of account, in a manner parallel to what happened when it
adopted a definition of ``gross receipts'' and construed the term
``cable system,'' with the only difference being that the Office
considered these terms under its power to promulgate rules under a
different statutory license. See 17 U.S.C 115(b)(1); (c)(4) and Sec.
111.
Opponents of the proposed regulation argue that notwithstanding
these earlier cases, the authority of the Register to issue the
proposed rule is foreclosed under Gonzales v. Oregon, 546 U.S. 243
(2006). They maintain that Title 17 provides the Register no general
rulemaking authority, and consequently, the Office cannot issue the
proposed rule. The parties, however, focus only on Section 702 and fail
to recognize the express authority provided to the Register in Section
115. Moreover, Gonzales does not undermine the earlier rulings in
Cablevision or SBCA. Gonzales recognizes, as do Cablevision and SBCA,
that an agency's interpretation of a statute is due deference when the
statute is ambiguous and when Congress has delegated the authority to
the agency to promulgate rules carrying the force of law. Gonzales, 564
U.S. at 255 (citing Chevron U.S.S., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837 (1984) and United States v. Mead Corp., 533 U.S.
218, 226-227 (2001)). The facts in Gonzales, however, led to a finding
that the Attorney General lacked the authority to issue a regulation
about the scope of ``legitimate medical purpose'' under his authority
to adopt rules governing the registration of physicians. Specifically,
the court found that the Attorney General had no authority to issue a
rule that extended beyond registration practices to ``an interpretation
of the substantive federal law requirements (under 21 CAR Sec. 1306.04
(2005)) for a valid prescription.'' Id. at 261. The court also rejected
the position of the Attorney General that his authority to deregister
physicians provided the necessary authority for the rule. The court
rejected that approach because it would vest power in the Attorney
General to criminalize actions of registered physicians-an activity not
contemplated by the statute. Id. at 261, 262. Similarly, the court
found that the regulatory authority claimed by the Attorney General was
``inconsistent with the design of the statute'' because the statute
does not delegate rulemaking authority solely to the Attorney General.
In some instances, he must share that authority with or defer to the
Secretary of Health and Human Services. Id. at 265.
Unlike the disputed rule in Gonzales, the interim rule which is the
subject of today's notice has meaning only for the Section 115 license.
The interim rule is a clarification of the statutory definition of a
DPD to incorporate the Office's determination that the Section 115
license covers server copies and intermediate copies made to facilitate
the making and distribution of a DPD and that a limited download is a
DPD. The rule extends the traditional understanding of the scope of the
Section 115 license, that phonorecords made for the purpose of making
additional reproductions of the sound recording and the musical works
embodied therein are covered under the license, to the digital realm.
As the court in Cablevision noted, and as discussed previously, the
authority to issue regulations for the filing of statements of account
includes a ``substantial policy component.'' Thus, the Office issues
this rule under its authority to interpret statutory terms that are
central to its role in promulgating regulations to account for the
royalties owed for the making and distribution of phonorecords under
the statutory license. Without this clarification, no guidance would
exist regarding whether liability attached to these reproductions
relative to the statutory license. In addition, the rule makes clear
that DPDs includes digital phonorecords that may be limited either by
time or number of uses, an issue that was raised in the original
petition for a rulemaking but a conclusion that does not now appear to
be in dispute.
The Office also finds no basis for DiMA's assertion that the Office
is foreclosed from issuing a rule at this time, in the midst of the CRB
ratemaking proceeding. The statute does not constrain the Office from
issuing regulations for the purpose of administering a statutory
license when the Copyright Royalty Judges are also conducting a
concurrent rate setting proceeding for the same statutory license. Nor
is there any reason for the Office to delay the issuance of its interim
rule when, as here, the interim rule amends Copyright Office
regulations to incorporate concepts that seemingly are not in dispute
by the parties participating in this rulemaking proceeding. Moreover,
to the extent that the interim rule adds clarity to an issue upon which
the Register is competent to rule and may offer guidance to the
Copyright Royalty Judges, there is nothing improper about the exercise
of the Register's authority at this time. In any event, parties have an
opportunity to comment specifically on the interim rule within the
comment period, since this is an interim rule.
In its NPRM, the Office proposed a much broader regulation.
Consequently, the Office discusses herein the original proposal and the
reasons for adopting a more limited regulation.
[[Page 66176]]
Discussion
A. Digital Phonorecord Deliveries in General
As the Office stated in its NPRM, in considering whether the
reproductions made by a transmission service are digital phonorecord
deliveries and fit within the scope of the Section 115 license, the
starting point is the statutory definition of a DPD. 17 U.S.C. 115(d).
It defines a DPD, in relevant part, as:
each individual delivery of a phonorecord by digital
transmission of a sound recording which results in a specifically
identifiable reproduction by or for any transmission recipient of a
phonorecord of that sound recording, regardless of whether the
digital transmission is also a public performance of the sound
recording or any nondramatic musical work embodied therein. A
digital phonorecord delivery does not result from a real-time, non-
interactive subscription transmission of a sound recording where no
reproduction of the sound recording or the musical work embodied
therein is made from the inception of the transmission through to
its receipt by the transmission recipient in order to make the sound
recording audible.
17 U.S.C. 115(d). In order for a reproduction of a sound recording
to qualify as a DPD under the statutory criteria, the reproduction
must meet all the criteria specified in the definition: (1) it must
be delivered, (2) it must be a phonorecord, and (3) it must be
specifically identifiable.
(1) Delivery. While several parties disputed the second and third
criteria specified in the definition of a DPD, no parties put forward
arguments against the proposed finding that reproductions identified in
the NPRM as Recipient-end copies are ``delivered'' and therefore
satisfy the first requirement for being a DPD.\4\
---------------------------------------------------------------------------
\4\ Several parties disputed the proposed finding that every
``delivery'' constitutes a ``distribution'' These arguments are
addressed in a later section regarding the threshold requirements
for use of the Section 115 license.
---------------------------------------------------------------------------
(2) Phonorecord (Fixation). In considering whether the
reproductions made by a transmission service are phonorecords, the
Office's NPRM turned to the definition found in 17 U.S.C. 101. The
statute defines phonorecords as:
material objects in which sounds, other than those accompanying
a motion picture or other audiovisual work, are fixed by any method
now known or later developed, and from which the sounds can be
perceived, reproduced, or otherwise communicated, either directly or
with the aid of a machine or device. The term ``phonorecords''
includes the material object in which the sounds are first fixed.
17 U.S.C. 101. The question is whether each reproduction made during
the course of a digital transmission meets this definition and thus
satisfies the second prong of the statutory definition for a DPD.
The Office proposed that a buffer copy made in the course of a
service's transmission on either the Server-end or the Recipient-end
is sufficiently fixed to meet the definition of a phonorecord. This
proposal was strongly opposed by parties representing users of the
works.
Parties such as DiMA, Verizon, CTIA, NAB, Google/YouTube, Public
Interest Commenters, New Media Rights, and Cablevision disputed the
Office's conclusion that all buffer copies qualified as ``fixed''
phonorecords or copies. They uniformly cited to the Second Circuit's
decision in Cartoon Network, which reversed Twentieth Century Fox Film
Corp. v. Cablevision Sys. Corp., 478 F. Supp. 2d 607 (S.D.N.Y. 2007), a
decision cited in the NPRM. 73 FR at 40809. They argued that the
Cartoon Network decision undermines the legal analysis contained in the
NPRM.
On the other hand, RIAA disagreed with the Cartoon Network
decision, but found it unnecessary to debate the fixation issue. It
argued that some copies created by transmission services are persistent
enough that they would meet any definition of the term ``fixed,'' and
services that wish to obtain a Section 115 license as a ``safe harbor''
should have that option. Copyright Owners also argued that the Cartoon
Network decision is inapplicable to the transmission services in
question because the buffer copies made by streaming music services are
distinguishable from the ones considered in the Cartoon Network case.
Under the view of the Copyright Owners, buffer copies made by streaming
music services are more analogous to the RAM copies considered in cases
cited in the Copyright Office's DMCA Section 104 Report.
The Copyright Owners also concluded that the Cartoon Network
decision's analysis of the ``duration'' requirement is unsupported by
the Copyright Act or prior judicial interpretation. They argued that
the Cartoon Network court took a ``stopwatch'' approach by measuring
the duration of the subject buffer copies and then opined that they did
not last for a sufficient number of seconds. In response, the Copyright
Owners asserted that Section 101 does not require that a copy last for
any specified period of time. 17 U.S.C. 101. They argued that the
Cartoon Network approach suffers from a lack of standards-statutory or
otherwise-to guide this judge-made ``duration'' requirement. The
Copyright Owners instead endorsed the approach proposed in the NPRM,
which examines whether the copies in question exist for a sufficient
period of time to be capable of being ``perceived, reproduced or
otherwise communicated.'' 73 FR at 40808. They stated that such an
approach does not depend upon an arbitrary assessment. Moreover, it
adheres to the overarching consensus of other courts that have
considered this issue.
In the NPRM, the Office's tentative conclusions relating to the
status of buffer copies as phonorecords relied in part on the District
Court's decision in Twentieth Century Fox, which had concluded that
buffer copies made in a somewhat different context than the streaming
of music were infringing ``copies'' under the copyright law. 478 F.
Supp. 2d at 621-22. The court rejected arguments by the defendant that
the buffer copies did not qualify as ``copies'' because they were ``not
fixed'' and were ``otherwise de minimis.'' Id. at 621. In finding the
buffer copies were ``fixed'' the court reasoned,
The Copyright Act, however, provides that a work is ``fixed''
if it ``is sufficiently permanent or stable to permit it to be
perceived, reproduced, or otherwise communicated for a period of
more than transitory duration.'' Here, as discussed, the portions of
programming residing in buffer memory are used to make permanent
copies of entire programs on the Arroyo servers. Clearly, the buffer
copies are capable of being reproduced. Furthermore, the buffer
copies, in the aggregate, comprise the whole of plaintiffs'
programming.
Id. (citations omitted) (quoting 17 U.S.C. 101). The court relied
in part on the Copyright Office's DMCA Section 104 Report, noting,
Indeed, the United States Copyright Office, in its August 2001
report on the Digital Millennium Copyright Act (``DMCA Report''),
has indicated that buffer copies are ``copies'' within the meaning
of the Copyright Act. Specifically, the Copyright Office concluded
that temporary copies of a work in RAM are generally ``fixed'' and
thus constitute ``copies'' within the scope of the copyright owner's
right of reproduction, so long as they exist for a sufficient amount
of time to be capable of being copied, perceived or communicated.
(DMCA Report at xxii, 110-11).
Id. at 621-22.
The issue addressed in Twentieth Century Fox and in the DMCA
Section 104 Report was whether temporary buffer copies meet the
``fixation'' requirement of the copyright law.
[[Page 66177]]
Phonorecords (a necessary element of a DPD; see 17 U.S.C. 115(d)) are
defined as ``material objects in which sounds, other than those
accompanying a motion picture or other audiovisual work, are fixed by
any method now known or later developed, and from which the sounds can
be perceived, reproduced, or otherwise communicated, either directly or
with the aid of a machine or device.'' 17 U.S.C. 101 (emphasis added).
The statute defines ``fixed'' as follows:
A work is `fixed' in a tangible medium of expression when its
embodiment in a copy or phonorecord, by or under the authority of
the author, is sufficiently permanent or stable to permit it to be
perceived, reproduced, or otherwise communicated for a period of
more than transitory duration. A work consisting of sounds, images,
or both, that are being transmitted, is `fixed' for purposes of this
title if a fixation of the work is being made simultaneously with
its transmission.
17 U.S.C. 101.
In the DMCA Section 104 Report, the Office interpreted the ``more
than a transitory duration'' element of fixation as follows: ``The
dividing line, then, can be drawn between reproductions that exist for
a sufficient period of time to be capable of being `perceived,
reproduced, or otherwise communicated' and those that do not.'' DMCA
Section 104 Report at 111. As noted above, the Southern District of New
York had agreed with this analysis in Twentieth Century Fox. 478 F.
Supp. 2d at 621-22.
In the NPRM, the Office reviewed that analysis and observed, ``The
Office has no reason to believe that developments in either technology
or the law require us to revisit the above-stated conclusions. As such,
Server-end Buffer Copies and Recipient-end Buffer Copies appear to be
phonorecords and therefore satisfy the second requirement for being a
DPD.'' 73 FR at 40809. Nineteen days later, the United States Court of
Appeals for the Second Circuit reversed the district court's Twentieth
Century Fox decision. Cartoon Network, 536 F.3d at 130. Among other
things, the court took issue with the DMCA Section 104 Report's
analysis of buffer copies and fixation, stating, ``[a]ccording to the
Copyright Office, if the work is capable of being copied from that
medium for any amount of time, the answer to both questions is `yes.'
The problem with this interpretation is that it reads the `transitory
duration' language out of the statute.'' Id. at 129. The court
concluded that the buffer copies made by a cable television service in
the course of creating server copies ``are not `embodied' in the
buffers for a period of more than transitory duration, and are
therefore not `fixed' in the buffers.'' Id. at 130.
The Office does not consider the Second Circuit's opinion to be
definitive on the issue involved in this rulemaking. The court's
reasoning leaves at least something to be desired and offers no
guidance as to when a copy might be considered to be ``embodied'' for
``a period of more than transitory duration.'' Based on the Cartoon
Network opinion, it appears that the duration requirement necessitates
an embodiment for more than 1.2 seconds (the duration of the buffer
copies at issue in that case) but does not require a duration of more
than ``several minutes.'' Id. at 128, 131 (discussing MAI Sys. Corp. v.
Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993)). Indeed, it leaves
open the possibility that a buffer copy that exists for several seconds
might have sufficient duration to satisfy the fixation requirement. We
can glean no principle from the Second Circuit's opinion which offers
any guidance as to where the line is to be drawn.\5\
---------------------------------------------------------------------------
\5\ Although the factual record in this proceeding is
insufficient, it is quite possible that the buffer copies typically
made in streaming exist for a longer period of time--and perhaps a
considerably longer period of time--than the 1.2-second buffer
copies at issue in Cartoon Network. If so, that case might be
distinguishable on its facts.
---------------------------------------------------------------------------
While the Second Circuit's opinion criticizes the analysis in the
Office's DMCA Section 104 Report, the latter did attempt to provide a
guiding principle for determining when the duration requirement has
been met:
In establishing the dividing line between those reproductions
that are subject to the reproduction right and those that are not,
we believe that Congress intended the copyright owner's exclusive
right to extend to all reproductions from which economic value can
be derived. The economic value derived from a reproduction lies in
the ability to copy, perceive or communicate it. Unless a
reproduction manifests itself so fleetingly that it cannot be
copied, perceived or communicated, the making of that copy should
fall within the scope of the copyright owner's exclusive rights. The
dividing line, then, can be drawn between reproductions that exist
for a sufficient period of time to be capable of being `perceived,
reproduced, or otherwise communicated'' and those that do not.
DMCA Section 104 Report at 111.
For present purposes, we need not resolve whether the Second
Circuit's critique of the Office's analysis is compelling. It is
sufficient to note that the record in this rulemaking and the Cartoon
Network opinion create sufficient uncertainty to make it inadvisable to
engage in rulemaking activity based on the Office's analysis in the
DMCA Section 104 Report. Consequently, the interim rule does not
address whether streaming of music that involves the making of buffer
copies, but which makes no further copies, falls within the Section 115
compulsory license, or whether such buffer copies qualify as DPDs. It
seems likely that in at least some, and perhaps many cases, buffer
copies may constitute DPDs, but we do not reach any broad conclusions
on that point in light of the current state of the law and the factual
record before us.
As a practical matter, the marketplace may decide that issue. Most
licenses that purport to be made pursuant to Section 115 are not, in
fact, compulsory licenses. They are voluntary licenses between music
publishers and licensees who agree to payment of the royalties at the
rates that have been established for the actual compulsory license. To
the extent that music publishers and licensees are willing to use the
Section 115 model to license reproductions, including buffer copies,
that are made in the course of streaming, then as a practical matter
the marketplace may decide to treat buffer copies as DPDs, although not
necessarily as DPDs entitled to the same royalty as more permanent
copies.
While we leave open the question whether buffer copies may be DPDs
that fall within the Section 115 compulsory license, we note that
certain streaming services involve the making of cache copies. To the
extent that cache copies are placed on the recipient's hard drive and
may exist for some indefinite period of time beyond the entire
performance of the phonorecord, the Office understands that such copies
would appear to satisfy the fixation/reproduction requirement.
(3) Specifically identifiable. Section 115 defines ``digital
phonorecord delivery,'' in relevant part, as ``each individual delivery
of a phonorecord by digital transmission of a sound recording which
results in a specifically identifiable reproduction by or for any
transmission recipient of a phonorecord of that sound recording.'' 17
U.S.C. 115(d). With regard to interpretation of the phrase
``specifically identifiable reproduction by or for any transmission
recipient of a phonorecord of that sound recording,'' the Copyright
Owners concurred with the tentative proposal in the Copyright Office's
NPRM, which offered that the plain meaning of the statute indicates
that a reproduction may be either ``specifically identifiable'' by any
transmission recipient or
[[Page 66178]]
``specifically identifiable'' for any transmission recipient. In
endorsing the view in the NPRM's tentative proposal, they noted that
contrary to arguments based upon a comment appearing in legislative
history, Congress could easily have included a requirement that the
reproduction be specifically identifiable to the transmitting service,
but it did not.
However, several parties including, RIAA, Verizon, CTIA, and NAB
raised questions regarding the Office's proposed interpretation of the
phrase. These parties agreed with the Office's observation that the
phrase ``specifically identifiable'' is ``unique in copyright law,''
but they went on to cast doubt on the grammatical construction used by
the Office in arriving upon the tentatively proposed plain meaning.
Verizon and NAB maintained that the phrasing could not mean that the
phonorecord was ``specifically identifiable'' by the recipient,
offering phrases with analogous grammatical structure to illustrate
their point. For example, they pointed out that the phrase ``an
instantly recognizable painting by Picasso'' does not indicate that the
painting is ``instantly recognizable'' by Picasso. Similarly, they
noted that in the statutory phrase ``specifically identifiable
reproduction by or for any transmission recipient,'' the adjectival
clause ``specifically identifiable'' is not linked to the transmission
recipient. They therefore asserted that it is equally plausible to
construe the ``specifically identifiable'' phrase as referring to the
transmitting service.
RIAA also argued that the proposed interpretation is contrary to
the statute's legislative history. Verizon, CTIA, and NAB took a
similar position arguing that the tentatively proposed rule would be
inconsistent with the overall statute and that the phrase is ambiguous.
They pointed to Muniz v. Hofman, 422 U.S. 454, 468 (1975) and Adams
Fruit Co., Inc. v. Barrett, 494 U.S. 638, 642 (1990) for the principle
that where statutory language is susceptible to multiple constructions,
it should be construed by reference to the legislative intent and the
overall structure of the statutory provision. They went on to urge that
the Office should follow its own previous reasoning that, where two
interpretations of statutory language are both plausible: ``Turning to
the legislative history is appropriate where, as here, the precise
meaning is not apparent and a clear understanding of what Congress
meant is crucial to an accurate determination of how Congress intended
the digital performance right and the statutory scheme to operate.''
Final Rule, Public Performance of Sound Recordings: Definition of a
Service, 65 FR 77292, 77296.
Commenters' attempts to indicate that there is ambiguity in the
statute cited to the Senate and House Committee Reports on the Digital
Performance Right in Sound Recordings Act (the ``1995 House and Senate
Reports'') as evidence of the proposed ambiguity. Reliance on such
evidence is misplaced. As the Supreme Court has directed, extraneous
material such as legislative history ``are only admissible to solve
doubt and not to create it.'' Railroad Com. of Wisconsin v. Chicago, B.
& Q. R. Co., 257 U.S. 563, 589 (1922). As Verizon and NAB's comments
reveal, the phrase has precisely the same generally applicable meaning
as the phrase ``instantly recognizable'' as used in the phrase ``an
instantly recognizable painting by Picasso.''
Furthermore, even assuming we were persuaded by the arguments that
the phrase ``specifically identifiable'' is ambiguous and should be
read with reference to the legislative history, as is urged by Verizon,
CTIA and NAB, the legislative history does not serve to clarify any
supposed ambiguity in the meaning of the words ``specifically
identifiable'' but rather suggests a limit on whom the adjectival
clause ``specifically identifiable'' is to be applied. Construing the
phrase in the manner suggested would require the insertion of
additional language indicating that the adjectival clause
``specifically identifiable'' may only be applied ``to the transmission
service.'' The Office declines commenters' invitation to make such an
insertion. Instead, the Office's interim rule follows the principle of
statutory construction that one ``should not read words into a statute
that are not there.'' U.S. v. Watkins, 278 F.3d 961, 965 (9th Cir.
2002).
After considering the arguments raised by the parties, the
Copyright Office accepts the structure of the phrase ``specifically
identifiable reproduction by or for any transmission recipient of a
phonorecord of that sound recording'' as it is explained and advanced
by Verizon, CTIA, and NAB. Throughout the course of this proceeding
leading up to the Office's tentatively proposed rule, the parties and
the Office focused on two competing, yet flawed, interpretations. Under
the previously proposed interpretations, a reproduction could be on the
one hand ``specifically identifiable'' to the transmission service or
on the other hand ``specifically identifiable'' by any transmission
recipient or ``specifically identifiable'' for any transmission
recipient. However, in light of the comments submitted by Verizon,
CTIA, and NAB, the Office agrees that the sentence does not link the
adjectival clause ``specifically identifiable'' to the transmission
recipient. It also recognizes that nothing in the sentence links the
adjectival clause ``specifically identifiable'' to the transmission
service. In keeping with the insightful examples of similarly
constructed language provided by Verizon, CTIA, and NAB, the Office
concludes that ``specifically identifiable'' plainly, unambiguously and
without limitations means ``specifically identifiable'' to anyone or
anything, including the transmission service, the transmission
service's computer, the transmission recipient, or the transmission
recipient's computer.
While the Office takes no position as to whether each individual
delivery of a phonorecord by digital transmission results in a
specifically identifiable reproduction, there can be little question
that certain streaming services involve the making of legally
recognizable copies. To the extent that such copies may be identifiable
by any person or computer, including any identification as an essential
step in actually making the phonorecord perceptible to the recipient,
the Office understands that such copies would satisfy the requirement
of being ``specifically identifiable.''
B. Incidental DPDs
The Office recognizes the parties' views that certain reproductions
created by transmission services may be categorized as so-called
incidental DPDs. Section 115 requires that rates and terms shall
distinguish between general DPDs and incidental DPDs. However, the
statute does not offer a definition of incidental DPDs. Indeed, the
statute does not specifically refer to incidental DPDs; it simply
directs the Copyright Royalty Judges to set rates that ``distinguish
between (i) digital phonorecord deliveries where the reproduction or
distribution of a phonorecord is incidental to the transmission which
constitutes the digital phonorecord delivery, and (ii) digital
phonorecord deliveries in general.'' The lack of a specific definition
of incidental DPDs has created a great deal of confusion among those
parties with an interest in the Section 115 license. The Office notes
that the parties have seemed less interested in defining what
constitutes an incidental DPD and more concerned about receiving
clarification as to whether specific types of digital
[[Page 66179]]
transmissions services fall within the scope of the statutory license.
The parties urging the Office to interpret the meaning of
incidental DPD have not offered specific suggestions as to how the
Office should define the term. Rather they offered conclusions as to
which specific types of digital transmission services should be deemed
to create reproductions that fall inside or outside the definition of
incidental DPD. Support for these conclusions was made largely on
policy or economic grounds.
As indicated previously, the Office understands that an incidental
DPD is nothing more than a subset of DPDs. However, we can find little
reason to delineate the contours of that subset. Whether a DPD is
``incidental'' or ``general,'' it is included under the Section 115
license. The Office questions whether the concept of incidental DPDs as
set forth in the statute lends itself to further clarification in a
regulation of general application. The Office observes that the
legislative history of the Digital Performance in Sound Recordings Act
of 1995 indicates that Congress recognized the likelihood of several
different types of digital transmission systems. The Office also
recognizes Congress' indication that certain DPDs may be incidental to
the purpose of the transmission. S. Rep. No. 104-128 at 39.\6\ However,
the Office notes that, except for one discrete example of a type of
service that would result in an incidental DPD, neither the statute nor
the legislative history attempts to offer criteria for determining the
purpose of a transmission.
---------------------------------------------------------------------------
\6\ ``For example, if a transmission system was designed to
allow transmission recipients to hear sound recordings substantially
at the time of transmission, but the sound recording was transmitted
in a highspeed burst of data and stored in a computer memory for
prompt playback (such storage being technically the making of a
phonorecord), and the transmission recipient could not retain the
phonorecord for playback on subsequent occasions (or for any other
purpose), delivering the phonorecord to the transmission recipient
would be incidental to the transmission.'' S. Rep. No. 104-128 at
39.
---------------------------------------------------------------------------
The Office understands that neither the statute, the legislative
history, nor the proposals submitted by commenters clearly propose any
conclusive methods or criteria for determining the purpose of a
transmission. Moreover, the only consequence of a determination that a
digital phonorecord delivery is ``incidental'' is that a separate rate
must be set for an incidental phonorecord delivery (although, in any
event, it is inherent in the ratemaking provisions of Section 115 that
several different rates may be set for various kinds of digital
phonorecord deliveries). In setting rates for the activities specified
in Section 115, the Copyright Royalty Judges are to distinguish between
general and incidental DPDs, and they have the authority to set
different rates for different types of DPDs, depending on their
analysis of the economics of the service and the other circumstances
set forth in section 801(b)(1). The Office therefore proposes that any
determination regarding the purpose of a transmission, upon which the
determination of when a DPD is an incidental DPD appears to turn,
should be made in the context of a factual inquiry before the CRJs, if
such a determination proves to be relevant.\7\
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\7\ The Office observes that nothing in the law prevents the
CRJs from setting different rates for various kinds of incidental
DPDs.
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C. Limited Downloads
In the petition for a rulemaking that initiated this proceeding,
RIAA characterized a limited download as an ``on-demand transmission of
a time-limited or other use-limited (i.e. non-permanent) download to a
local storage device (e.g. the hard drive of the user's computer),
using technology that causes the downloaded file to be available for
listening only either during a limited time (e.g. a time certain or a
time tied to ongoing subscription payments) or for a limited number of
times'' and asked the office to determine whether and to what extent
limited downloads come within the scope of the Section 115 license.
RIAA Petition at 1. As the Office has previously indicated, and
explains again in this Notice below, whether a service is interactive
or non-interactive does not appear to be relevant in the context of the
Section 115 license. Therefore, the Office's regulatory text adopts a
slightly altered characterization of limited downloads, as a subset of
DPDs that ``may be made available to the transmission recipient for a
limited period of time or for a specified number of performances.''
Applying the above-stated understandings regarding DPDs in general, the
Office concludes that limited downloads fall within the definition for
DPDs in that they are delivered; they satisfy the requirements for
being a phonorecord; and they are specifically identifiable.\8\ This
conclusion regarding limited downloads is reflected in the interim
rule.
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\8\ The Office understands that there may be many types of
limited downloads made available to transmission recipients for
varying periods of time or number of performances. Nothing in the
law prevents the CRJs from setting different rates for various kinds
of limited downloads. The Office observes that the agreement
submitted to the CRJs on September 22, 2008 assigns rates for
specific types of limited downloads. See Mechanical and Digital
Phonorecord Delivery Rate Determination Proceeding, 73 FR 57033,
57034 (Oct. 1, 2008)(proposed 37 CFR Sec. 385.11 (definition of
``Limited download'')). The Office notes that to the extent DPDs
fall within the characterization of limited downloads as set forth
in the Office's interim rule (which is broader than the category
identified in the submitted agreement) they are licensable under
Section 115 regardless of the rates assigned to them, or indeed
regardless of whether any rate has been assigned to them.
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D. Threshold Requirements for Use of the Section 115 License
Several parties expressed concern with the NPRM's proposed
interpretation of 17 U.S.C. 115(a)(l), which states that ``A person may
obtain a compulsory license only if his or her primary purpose in
making phonorecords is to distribute them to the public for private
use, including by means of a digital phonorecord delivery.'' Public
Interest Commenters questioned the Office's proposed understanding that
DPDs are, by the fact of their having been delivered, distributed
within the meaning of the copyright law. They urged the Office to avoid
preempting any judicial resolution regarding whether Internet
transmissions may result in distribution of ``material objects.''
Google/YouTube asserted that the Office's proposal overlooks a legal
distinction between copying that facilitates the delivery or
``distribution'' of a reproduction of a sound recording, on the one
hand, and copying that merely enables the public performance of a sound
recording, on the other. It also maintained that a ``performance'' to
consumers, with or without the benefit of an intervening distribution
entity, does not constitute the ``distribution'' of a copy of the
content at issue. DiMA also argued that various types of streaming,
other than interactive streaming, may or may not make reproductions at
the recipient end of a transmission, and such reproductions may not
always be for the ``primary purpose'' of making phonorecords.
Verizon, CTIA, and NAB claimed that the NPRM contained a near
tautology when it asserted that by virtue of having been delivered,
phonorecords are distributed within the meaning of copyright law. They
also argued that the approach advanced by the Office all but reads the
``primary purpose'' requirement out of Section 115. They acknowledged
that a primary purpose in making the DPD may be to distribute it. But
they argued that the NPRM ignores the fact that, even if a buffer copy
is a DPD, the primary purpose of making such a DPD is not to
``distribute'' anything. It is rather an essential step in
[[Page 66180]]
the effectuation of a performance. They then cited to statements made
by the Register that a ``stream'' does not constitute a distribution
and that buffer and other intermediate copies are for all practical
purposes useless. Finally, they offered the argument that
characterizing all buffers as distributed would undermine many
established principles, provisions and practices of copyright law
including fair use, the concept of publication, and registration
practices.
As indicated above, the Office's interim rule, unlike the NPRM,
takes no position as to whether a buffer copy constitutes a
phonorecord. However, it is apparent that when a transmission to an
individual consumer does result in a DPD, the phonorecord is made for
the purpose of allowing the recipient to make a private use of that
phonorecord, even if that use is simply to hear the performance of the
phonorecord contemporaneously with the transmission. Similarly, it
appears that enabling a recipient to make such a private use is a
service's primary purpose in making phonorecords on a recipient's
device. The Office notes that Congress intended the Section 115 license
to cover DPDs ``regardless of whether the digital transmission is also
a public performance of the sound recording or any nondramatic musical
work embodied therein.'' 17 U.S.C. 115(d).
The Office's interim rule also does not determine whether all
phonorecords which satisfy the previously addressed requirements for
being DPDs are necessarily ``distributed.'' This position is consistent
with the Office's prior legal conclusions as well as the Register's
statements and policy arguments to Congress that a stream in and of
itself does not constitute a distribution. However, under the Office's
above-stated analysis, there is no dispute that limited download
services as well as certain streaming services involve the making of
legally recognizable copies that fit within the definition of a DPD. To
the extent that such phonorecords exist on the recipient's computer for
some period of time beyond their performance, it is reasonable to
consider the phonorecord as having been ``distributed.'' At the very
least, where services involve the making of DPDs that exist on the
recipient's computer for some period of time beyond their performance
and which can be used to replay the phonorecord, it would appear that
such phonorecords have been ``distributed.''\9\ Whether the delivery of
a phonorecord that lasts no longer than the streamed performance
constitutes a distribution is an issue that need not be resolved for
purposes of this rulemaking.
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\9\ NMPA referred the Office to evidence indicating that three
leading streaming music services create such copies. See Statement
of Jacqueline Charlesworth https://www.copyright.gov/docs/section115/
2008/rm_2000-7_NMPA_hearing_statement.pdf.
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E. Non-DPD Copies Under the Section 115 License
Among the commenters, Verizon, CTIA, and NAB were alone in
disputing the tentative proposal in the NPRM stating that server
copies, and all other intermediate copies, used to make DPDs under the
Section 115 license fall within the scope of the license. They argued
that the primary purpose in making server ``phonorecords'' is not ``to
distribute them to the public for private use'' and that therefore they
are not eligible for the 115 license. However, this argument
misunderstands the Office's interpretation in the NPRM of the coverage
provided by the Section 115 license.
The Office understands that the Section 115 license has
traditionally provided coverage beyond those phonorecords made and
distributed to the public for private use, so long as such phonorecords
were used to achieve the primary purpose of making and distributing
phonorecords under the Section 115 license. Indeed, when it enacted
Section 115 in 1976, Congress stated that it intended the license to
cover ``every possible manufacturing or other process capable of
reproducing a sound recording in phonorecords.''\10\ As stated in the
NPRM, the right to make master recordings, which are used to make the
phonorecords that are actually distributed has long been understood to
be included in the Section 115 license. Similarly, server copies, as
well as all other intermediate copies used to make and distribute DPDs
under the Section 115 license, perform a function in the world of DPDs
that is parallel to master recordings and manufacturing equipment in
the physical world. Consequently, the interim rule confirms that server
copies and intermediate reproductions may come within the scope of the
license. The Office notes that a person seeking to operate under the
Section 115 license must still satisfy the threshold requirements of
the license. But, having done so, that licensee's coverage may extend
to phonorecords other than those that are actually distributed provided
that they are made for the purpose of making and distributing a DPD. On
the other hand, server and intermediate copies that are the source of a
transmission that does not result in the making and distribution of a
DPD would not fall within the scope of the compulsory license. Finally,
the Office notes that server and intermediate copies covered under the
Section 115 license that are not distributed do not entitle the owner
to separate royalty payments. 17 U.S.C. 115(c)(1).
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\10\ H. Rep. No. 94-1476, at 110. See also, The Copyright Act
of 1976, Transitional and Supplementary Provisions, Sec. 106
(``...parts of instruments serving to reproduce phonorecords
mechanically ... such parts made on or after January 1, 1978,
constitute phonorecords.''
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F. Issues Outside the Scope of This Proceeding
1. Interactive vs. Non-interactive
The Office recognizes that nearly all of the commenters have
expressed some preference to distinguish between phonorecords that are,
or may be, made by Interactive Streaming Services versus those made by
Non-interactive Streaming Services. As the Office stated in its NPRM,
distinctions relating to interactivity are appropriate in the context
of the Section 114 license, which is available only for nonintereactive
transmissions, and such distinctions may be appropriate to raise as a
matter of economic value or policy before the CRJs-for example, in
setting rates-or Congress. However, whether a service is interactive or
non-interactive does not appear to be relevant in determining whether
particular reproductions of phonorecords may be covered under the
current Section 115 license, except perhaps under the last sentence of
Section 115(d), which does address the potential for non-interactivity
to be relevant. However, this sentence must be read in its entirety,
which provides:
A digital phonorecord delivery does not result from a real-
time, non-interactive subscription transmission of a sound recording
where no reproduction of the sound recording or the musical work
embodied therein is made from the inception of the transmission
through to its receipt by the transmission recipient in order to
make the sound recording audible.
15 U.S.C. 115(d) (emphasis added).
The Office acknowledges that it may be more common for interactive
streams to result in DPDs and that it may be relatively uncommon for
non-interactive streams to do so. However, if phonorecords are
delivered by a transmission service, then under the last sentence of
115(d) it is irrelevant whether the transmission that created the
phonorecords is interactive or non-interactive. To the extent that each
stream creates a DPD, it appears that the only proffered justification
for
[[Page 66181]]
distinguishing between the interactive and non-interactive
transmissions is the business justification that interactive DPDs have
a greater economic impact. The Office would not dispute a finding that
non-interactive and interactive streams have different economic value,
or even that a rate of zero might be appropriate for DPDs made in the
course of non-interactive streams. Nor does it question the motivation
for the industry's adoption of an agreement that distinguishes between
the two. However, the Office maintains that any such distinctions can
and should be addressed by different rates rather than being based on
an unfounded assertion that non-interactive streaming cannot involve
the making and distribution of phonorecords which are licensable under
Section 115.
2. Policy Arguments
As has happened throughout this proceeding, a number of commenters
proposed revisions that they would like Congress to adopt, including
provi