Review of Copyright Royalty Judges Determination, 9143-9146 [E8-3149]
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Federal Register / Vol. 73, No. 33 / Tuesday, February 19, 2008 / Notices
5. This amendment is to answer a
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[FR Doc. E8–3007 Filed 2–15–08; 8:45 am]
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Background
The Copyright Royalty Judges are
required by 17 U.S.C. 803(b) and 37 CFR
351 to issue determinations of rates and
terms for royalty payments due for the
public performance of sound recordings
in certain digital transmissions by
licensees in accordance with the
provisions of 17 U.S.C. 114, and the
making of certain ephemeral recordings
by licensees in accordance with the
provisions of 17 U.S.C. 112(e).
The Copyright Royalty Judges recently
issued three final determinations setting
rates and terms for the public
performance of a sound recording by
means of a digital transmission and for
the making of ephemeral recordings
necessary to facilitate those
transmissions pursuant to 17 U.S.C. 114
and 17 U.S.C. 112(e). On December 19,
2007 the Copyright Royalty Judges
announced the rates and terms
applicable to Preexisting Satellite
Services, 72 FR 71795; on December 20,
2007, they announced the rates and
terms applicable to New Subscription
Services, 72 FR 72253; and, on January
24, 2008, they announced the rate and
terms applicable to Satellite Digital
Audio Radio Services. 73 FR 4080.1
Under 17 U.S.C. 802(f)(1)(D), the
Register of Copyrights may review for
legal error the resolution by the
Copyright Royalty Judges of a material
question of substantive law under title
17 that underlies or is contained in a
final determination of the Copyright
Royalty Judges. If the Register of
Copyrights concludes, after taking into
consideration the views of the
participants in the proceeding, that any
resolution reached by the Copyright
Royalty Judges was in material error, the
Register of Copyrights shall publish
such a decision in the Federal Register,
together with a specific identification of
the legal conclusion of the Copyright
Royalty Judges that is determined to be
erroneous. The decision of the Register
of Copyrights shall be binding as
precedent upon the Copyright Royalty
Judges in subsequent proceedings.
The Register of Copyrights has
deemed that the Copyright Royalty
Judges’ publication of Final Rulings
regarding New Subscription Services
(‘‘NSS’’), Preexisting Subscription
February 13, 2008.
Victor M. Fortuno,
Vice President, General Counsel and
Corporate Secretary.
[FR Doc. 08–758 Filed 2–13–08; 4:55 pm]
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TIME AND DATE:
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9143
Review of Copyright Royalty Judges
Determination
Copyright Office, Library of
Congress.
ACTION: Notice.
AGENCY:
SUMMARY: The Register of Copyrights
issues the following determination
concerning the Copyright Royalty
Judges’ decisions to include the rate for
use of the section 112 license for
ephemeral recordings within the rates
and terms of royalty payments under
section 114 for the use of sound
recordings in transmissions made by
New Subscription Services, Preexisting
Subscription Services and Satellite
Digital Audio Radio Services, and to not
set a minimum fee within the section
112 license rates for the Satellite Digital
Audio Radio Services.
FOR FURTHER INFORMATION CONTACT:
Tanya M. Sandros, General Counsel,
Copyright GC/I&R, P.O. Box 70400,
Washington, DC 20024. Telephone:
(202) 707–8380. Telefax: (202) 707–
8366.
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1 On May 1, 2007, the Copyright Royalty Judges
announced rates and terms applicable to an Eligible
Nonsubscription Transmission or a Transmission
made by a New Subscription Service, herein
referred to as Webcaster II, 72 FR 24084. [Docket
No. CRB 2005–1] While the 60 day time period
allotted under 17 U.S.C. 802(f)(1)(D) for issuing a
written review for legal error has expired with
regard to Webcaster II, the same legal error which
is addressed herein was made in Webcaster II.
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Federal Register / Vol. 73, No. 33 / Tuesday, February 19, 2008 / Notices
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Services (‘‘PSS’’) and Preexisting
Satellite Digital Audio Radio Services
(‘‘SDARS’’) constitute issuance of final
determinations as per 802(f)(1)(D). The
Register of Copyrights has reviewed
these final determinations of rates and
terms of royalty payments under
sections 114 and 112. The Register
concludes that the Copyright Royalty
Judges’ resolution to include the rate for
the section 112 license within the rates
and terms for the section 114 license
constitutes a failure to establish a
discernable rate for the section 112
license and is therefore a legal error.
Moreover, this legal error has serious
ramifications in that the beneficiaries of
the section 114 license fees are not
identical to the beneficiaries of the
section 112 license fees. The Register
also concludes that the Copyright
Royalty Judges’ failure to set a minimum
fee within the section 112 license rates
for SDARS is a legal error.
Copyright Royalty Judges’
Determination Setting Rates and Terms
for New Subscription Services
On October 31, 2005, pursuant to
section 114(f)(2)(C), XM Satellite Radio,
Inc. (‘‘XM’’) filed a Petition to Initiate
and Schedule Proceeding for a NSS with
the Copyright Royalty Judges. Pursuant
to 17 U.S.C. 804(b)(3)(C)(ii), the
Copyright Royalty Judges published a
notice in the Federal Register on
December 5, 2005, announcing
commencement of the proceeding to set
rates and terms for royalty payments
under sections 114 and 112 for the
activities of the new subscription
service described in the XM Petition
and requesting interested parties to
submit their Petitions to Participate. 70
FR 72471. Petitions to participate were
received from Sirius Satellite Radio, Inc.
(‘‘Sirius’’), XM, MTV Networks
(‘‘MTV’’), and SoundExchange, Inc.
Subsequent to the presentation of the
direct phase of their cases and the filing
of their written rebuttal statements, but
prior to the oral presentation of their
rebuttal witnesses, the parties informed
the Copyright Royalty Judges that they
had ‘‘reached full agreement on all
issues in this litigation’’ and that ‘‘there
are no more issues to try.’’ Docket No.
CRB 2005–5, Transcript of September
10, 2007, at p. 5. They stated that the
settlement agreement would be
submitted to the Copyright Royalty
Judges for approval and adoption
pursuant to 17 U.S.C. 801(b)(7)(A). Id. at
6. The proposed rates and terms
codifying the settlement agreement were
filed on October 30, 2007.
Section 801(b)(7)(A) allows for the
adoption of rates and terms negotiated
by ‘‘some or all of the participants in a
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proceeding at any time during the
proceeding’’ provided they are
submitted to the Copyright Royalty
Judges for approval. 17 U.S.C.
801(b)(7)(A). Accordingly, on November
9, 2007, the Copyright Royalty Judges
published a Notice of Proposed
Rulemaking (‘‘NPRM’’) requesting
comment on the proposed rates and
terms submitted to the Judges. 72 FR
63532. Comments were due by
December 10, 2007. In response to the
NPRM, the Copyright Royalty Judges
received only one comment, which was
submitted by SoundExchange,
supporting the adoption of the proposed
regulations.
The Copyright Royalty Judges
received no objections from a party that
would be bound by the proposed rates
and terms and that would be willing to
participate in further proceedings.
Therefore, on December 20, 2007, they
adopted final regulations which set the
rates and terms for the use of sound
recordings in transmissions made by
NSS and for the making of ephemeral
recordings necessary for the facilitation
of such transmissions for the period
commencing from the inception of the
NSS through December 31, 2010.
The Copyright Royalty Judges’ rates,
which included a non-refundable
annual minimum fee, allocated a single
calculation and payment for both the
public performance of sound recordings
by eligible digital transmissions made
by a Service pursuant to 17 U.S.C. 114,
and for ephemeral recordings of sound
recordings made pursuant to 17 U.S.C.
112 to facilitate such transmissions.
They did not set a separate discernible
rate for the section 112 license.
Copyright Royalty Judges’
Determination Setting Rates and Terms
for Preexisting Subscription Services
and Satellite Digital Audio Radio
Services
On January 9, 2006, the Copyright
Royalty Judges commenced a
proceeding to set rates and terms for
PSS and SDARS with a request for
petitions to participate. 73 FR 1455.
Seven parties filed petitions to
participate in this proceeding:
SoundExchange, Music Choice, Muzak
LLC, XM, Sirius, Royalty Logic, Inc.,
and THP Capstar Acquisition d/b/a
DMX Music. Prior to the beginning of
formal hearings, the Copyright Royalty
Judges referred a novel material
question of substantive law regarding
the universe of preexisting subscription
services to the Register of Copyrights.
On October 20, 2006, the Register of
Copyrights transmitted her
determination on this issue to the
Copyright Royalty Judges. Subsequently,
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DMX withdrew from the proceeding on
October 20, 2006, and Sirius
participated in the proceeding solely as
a SDARS rather than as both a PSS and
a SDARS. Royalty Logic, Inc. also
withdrew from the proceeding on
November 21, 2006, and the Copyright
Royalty Judges dismissed Muzak from
the proceedings on January 7, 2007.
Music Choice, as a PSS, reached a
settlement with SoundExchange. Their
settlement was submitted to the
Copyright Royalty Judges and published
for comment on October 31, 2006. 72 FR
61585. No objections were received
from a party that would be bound by the
proposed rates and terms and that
would be willing to participate in
further proceedings. On December 19,
2007, the Copyright Royalty Judges
adopted final regulations which set the
rates and terms for PSS under sections
114 and 112 for the license period
2008–2012. The rates, which included a
non-refundable annual advance
payment (i.e. a minimum fee), allocated
a single calculation and payment
method for both the public performance
of sound recordings by eligible digital
transmissions made pursuant to 17
U.S.C. 114, and for ephemeral
recordings of sound recordings made
pursuant to 17 U.S.C. 112 to facilitate
such transmissions. The adopted
settlement did not set a separate
discernible rate for the section 112
license. 73 FR 71795.
In light of Music Choice’s settlement,
the only potential licensees remaining
in the proceeding were the SDARS: XM
and Sirius. Hereafter the proceeding was
referred to as the SDARS proceeding.
The remaining parties entered into
negotiations to set rates and terms for
use of the section 114 and section 112
statutory licenses but they were unable
to reach an agreement. Consequently,
the Copyright Royalty Judges proceeded
with hearings to determine the rates and
terms that would apply to SDARS.
The standards the Copyright Royalty
Judges are to apply in setting the rates
and terms for SDARS (as well as for
PSS) differ between the 114 and 112
licenses. Section 114(f)(1) requires the
Copyright Royalty Judges to establish
rates and terms for the transmission of
the sound recordings that are reasonable
and that are calculated to achieve four
specific policy objectives set forth in
section 801(b)(1) of the copyright law.
17 U.S.C. 114(f)(1), 17 U.S.C. 801(b)(1).
On the other hand, section 112(e),
governing the reproductions made to
facilitate the transmissions licensed
under section 114, requires the
Copyright Royalty Judges to set rates
and terms that most clearly represent
those ‘‘that would have been negotiated
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in the marketplace between a willing
buyer and a willing seller,’’ and to take
into account certain factors when
making this determination. 17 U.S.C.
112(e)(4). Additionally, the section 112
license requires that ‘‘such rates shall
include a minimum fee for each type of
service offered.’’ 17 U.S.C. 112(e)(4).
After considering the evidence in this
proceeding and the applicable law, the
Copyright Royalty Judges announced
their final determination setting rates
and terms for SDARS on January 24,
2008, stating that the ‘‘appropriate
section 114 performance license rate is
6.0% of gross revenues for 2007 and
2008, 6.5% for 2009, 7.0% for 2010,
7.5% for 2011 and 8.0% for 2012 and,
further, that the appropriate section 112
reproduction license rate is deemed to
be embodied in the section 114 license
rate.’’ 73 FR at 4084. However, the
Copyright Royalty Judges did not
determine a separate rate for the section
112 license or determine what portion
of the Section 114 license fee, if any,
should be deemed to be attributable to
the section 112 license. In other words,
they did not set a discernible rate for
section 112. Additionally, the Copyright
Royalty Judges did not set a minimum
fee for the SDARS section 112 license.
Review of Copyright Royalty Judges’
Determinations
In accordance with the authority
granted to the Register of Copyrights
under 17 U.S.C. 802(f)(1)(D), the
Register of Copyrights has reviewed for
legal error the determinations of the
Copyright Royalty Judges setting rates
and terms for use of the sections 112
and 114 statutory licenses by NSS, PSS,
and SDARS. The Register concludes that
the Copyright Royalty Judges did not
determine rates for the section 114 and
112 licenses and that this resolution
constitutes an error on a material
question of substantive law under title
17 in each of the above-referenced
determinations. Further, the Register
concludes that the Copyright Royalty
Judges’ determination of rates for
SDARS did not include a minimum fee
for the section 112 license and that this
resolution was also in material error.
It is not that the Copyright Royalty
Judges failed to recognize the need to set
a rate for the section 112 license or
include a minimum fee. The January 24,
2007 Order acknowledges the Copyright
Royalty Judges’ responsibility to set
these rates for the section 112 license.
73 FR at 4084 and 4098. Even so, the
Copyright Royalty Judges chose not to
set a specific rate for the section 112
license, citing the paucity of evidence in
the record for the SDARS proceeding
that could be used to determine the
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value of the license. In that case, the
Copyright Royalty Judges were
presented with two proposals.
According to the final order,
SoundExchange suggested ‘‘combining
the Section 112 and 114 rates over the
license period by allocating 8.8% of the
combined fee owed by the SDARS
towards the 112 charge.’’ 73 FR at 4098.
The SDARS agreed in principle but they
suggested that the section 112 license
has no separate value. However, the
Copyright Royalty Judges rejected both
proposals, finding that neither proposal
was supported by record evidence. Id
The Copyright Royalty Judges
declined to accept that 8.8% of the rate
for the performance of the sound
recording represents the valuation of the
right to make reproductions of the
sound recordings under the section 112
license. Instead, they concluded that
‘‘SoundExchange’s valuation of 8.8% is
nothing more than an effort to preserve
a belief that the section 112 license has
some value by perpetuating the number
adopted in the first webcasting
proceeding.’’ Id The Copyright Royalty
Judges then characterized the section
112 license as ‘‘an add-on to the
securing of the performance rights
granted by the Section 114 license,’’ and
determined that the rate for the section
112 license rate is embodied in the rate
for the section 114 license, just as they
did in Webcaster II.2 Id. However, the
Copyright Royalty Judges did not
identify any particular percentage of the
section 114 license fee as representing
the value of the section 112 license.
There is also sparse evidence or
analysis regarding the decision to
include rates for the section 112 license
within the rates and terms for the
section 114 license in either the
December 19, 2007 Final Rule for PSS
or the December 20, 2007 Final Rule for
NSS, since both determinations were
the result of negotiated settlements.
Settlements, however, are not accepted
in a vacuum. Section 801(b)(7)(A)
allows for the adoption of rates and
terms negotiated by ‘‘some or all the
participants in a proceeding at any time
during the proceeding’’ provided they
are submitted to the Copyright Royalty
Judges for approval. 17 U.S.C.
801(b)(7)(A). The Copyright Royalty
Judges have the authority to accept or
reject the settlement and it is the
resulting Final Order which is then
subject to review by the Register. 17
U.S.C. 802(f)(1)(D). In fact, in their
October 31, 2007 NPRM announcing
2 In Webcaster II the Copyright Royalty Judges, for
the first time, announced rates and terms of royalty
payments under sections 114 and 112 for the use
of sound recordings in transmissions. 72 FR 24084.
[Docket No. CRB 2005–1]
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9145
negotiated rates and terms for PSS, the
Copyright Royalty Judges exercised their
authority to accept or reject the
proposed settlement by including two
modifications to the negotiated proposal
before publishing it for comment. 73 FR
61586.
The negotiated settlements
establishing rates and terms for both
PSS and NSS, and their approval by the
Copyright Royalty Judges, followed the
previous conclusion in Webcaster II
regarding inclusion of the section 112
license within the section 114 license as
a single rate. Thus, the Webcaster II
conclusion on this matter likely
underlies the parties’ settlement just as
it did the January 24, 2007 Order for the
SDARS. Therefore, the Register reviews
the analysis and resolution on this
matter as contained in Webcaster II.
In Webcaster II, the Copyright Royalty
Judges rejected the proposal put forward
by SoundExchange and agreed to by the
Digital Media Association, which sought
to carry forward the combination of
sections 112 and 114 rates from the
prior license period. This proposal
included the ‘‘deeming’’ of 8.8% of the
total fee owed by Services as
constituting the section 112 charge. 72
FR 24101. The Copyright Royalty Judges
declined to ascribe any particular
percentage of the section 114 royalty as
representative of the value of the section
112 license.
The Copyright Royalty Judges made
this decision based on the view that
‘‘SoundExchange’s evaluation of 8.8% is
not a rate.’’ Id Additionally, they noted
that ‘‘the paucity of the record prevents
us from determining that 8.8% of the
section 114 royalties is either the value
of or the rate for the section 112 license’’
and that ‘‘the record demonstrates that
* * * copyright owners and performers
are unable to secure separate fees for the
section 112 license.’’ 72 FR 24101–
24102.
The Register observes that the parties’
failure to provide sufficient evidence to
set a rate does not dispatch the
Copyright Royalty Judges’ statutory
obligations. The Register notes that
Congress allows the Copyright Royalty
Judges to consider a broad array of
information in determining the separate
rates for the section 112 license that
most clearly represent the fees that
would have been negotiated in the
marketplace between a willing buyer
and a willing seller. In making these
determinations, the Copyright Royalty
Judges are to consider economic,
competitive, and programming
information presented by the parties,
and they may consider voluntary license
agreements negotiated under section
112. 17 U.S.C. 112(e)(4). Furthermore,
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Federal Register / Vol. 73, No. 33 / Tuesday, February 19, 2008 / Notices
the Copyright Royalty Judges have been
granted subpoena powers to compel
participants or witnesses to appear and
give testimony. See 17 U.S.C.
803(b)(6)(C)(ix).
Moreover, there is a practical reason
for making this determination. The
requirement in section 112(e)(4) to
determine rates is logical in that the two
licenses involve different rights. The
section 112 statutory license applies to
reproductions, while the section 114
statutory license applies to public
performances. Moreover, the
beneficiaries of the section 114 license
are not identical to the beneficiaries of
the section 112 license. Royalties
collected under section 114 are paid to
the performers and the copyright
owners of the sound recordings, i.e.,
usually the record companies; whereas,
the royalties collected pursuant to the
section 112 license are not paid to
performers. Without separate rates for
both the section 114 and 112 licenses,
SoundExchange is unable to allocate
properly the funds it collects as the
Designated Agent and fulfill both its
responsibility to distribute receipts to
stakeholders of the public performance
right under section 114(g) as well as its
responsibility to distribute receipts to
separate stakeholders of the
reproduction right under section 112.
Consequently, the Register finds that
the Copyright Royalty Judges’ resolution
to include rates for the section 112
license within rates and terms for the
section 114, without specifying what
percentage, if any, is attributable to the
section 112 license, does not fulfill the
Copyright Royalty Judges’ responsibility
to determine the value of the section
112 license for ephemeral copies. Both
the text and the legislative history of
section 112 indicate Congress’ view that
the rate setting body must determine the
value of the section 112 license. See 17
U.S.C. 112(e)(3) (requiring reasonable
rates and terms of royalty payments for
the activities specified by paragraph (1)
which shall include a minimum fee for
each type of service offered by
transmitting organizations); DMCA
Conf. Rpt., 105–796, at 89–91; DMCA
Section-by-Section Analysis at 52–53,
61–62.
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Conclusion
Having reviewed the resolution by the
Copyright Royalty Judges for legal error,
the Register of Copyrights hereby
concludes that in setting rates for the
section 112 and 114 statutory licenses,
the Copryight Royalty Judges must
establish separate values for each of the
two licenses and that rates for the
section 112 license shall include a
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minimum fee.3 Pursuant to the
requirements established in 802(f)(1)(D),
the Register issues this written decision
not later than 60 days after the dates on
which the final determinations by the
Copyright Judges were issued. This
decision shall be binding as precedent
upon the Copyright Royalty Judges in
subsequent proceedings.
Dated: February 14, 2008.
Marybeth Peters,
Register of Copyrights.
[FR Doc. E8–3149 Filed 2–15–08; 8:45 am]
BILLING CODE 1410–30–P
NATIONAL CREDIT UNION
ADMINISTRATION
Sunshine Act; Notice of Agency
Meeting
10: a.m., Thursday,
February 21, 2008.
PLACE: Board Room, 7th Floor, Room
7047, 1775 Duke Street, Alexandria, VA
22314–3428.
STATUS: Open.
MATTERS TO BE CONSIDERED: 1. Quarterly
Insurance Fund Report.
2. Final Rule: Part 797 of NCUA’s
Rules and Regulations, Procedures for
Debt Collection.
FOR FURTHER INFORMATION CONTACT:
Mary Rupp, Secretary of the Board,
Telephone: 703–518–6304.
TIME AND DATE:
Mary Rupp,
Secretary of the Board.
[FR Doc. 08–770 Filed 2–14–08; 2:39 pm]
BILLING CODE 7535–01–M
THE NATIONAL FOUNDATION ON THE
ARTS AND THE HUMANITIES
Meetings of Humanities Panel
The National Endowment for
the Humanities.
ACTION: Notice of meetings.
AGENCY:
SUMMARY: Pursuant to the provisions of
the Federal Advisory Committee Act
(Pub. L. 92–463, as amended), notice is
hereby given that the following
meetings of Humanities Panels will be
held at the Old Post Office, 1100
Pennsylvania Avenue, NW.,
Washington, DC 20506.
FOR FURTHER INFORMATION CONTACT:
Heather C. Gottry, Acting Advisory
Committee Management Officer,
National Endowment for the
3 The Register, however, takes no position on
what the value of the minimum fee should be, or
whether it could be a fee of zero.
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Humanities, Washington, DC 20506;
telephone (202) 606–8322. Hearingimpaired individuals are advised that
information on this matter may be
obtained by contacting the
Endowment’s TDD terminal on (202)
606–8282.
SUPPLEMENTARY INFORMATION: The
proposed meetings are for the purpose
of panel review, discussion, evaluation
and recommendation on applications
for financial assistance under the
National Foundation on the Arts and the
Humanities Act of 1965, as amended,
including discussion of information
given in confidence to the agency by the
grant applicants. Because the proposed
meetings will consider information that
is likely to disclose trade secrets and
commercial or financial information
obtained from a person and privileged
or confidential and/or information of a
personal nature the disclosure of which
would constitute a clearly unwarranted
invasion of personal privacy, pursuant
to authority granted me by the
Chairman’s Delegation of Authority to
Close Advisory Committee meetings,
dated July 19, 1993, I have determined
that these meetings will be closed to the
public pursuant to subsections (c) (4),
and (6) of section 552b of Title 5, United
States Code.
1. Date: March 4, 2008.
Time: 9 a.m. to 5 p.m.
Room: 415.
Program: This meeting will review
applications for Stabilization 3 in
Preservation and Access Grants for
Stabilizing Humanities Collections,
submitted to the Division of
Preservation and Access, at the October
1, 2007 deadline.
2. Date: March 6, 2008.
Time: 9 a.m. to 5 p.m.
Room: 415.
Program: This meeting will review
applications for Stabilization 4 in
Preservation and Access Grants for
Stabilizing Humanities Collections,
submitted to the Division of
Preservation and Access, at the October
1, 2007 deadline.
3. Date: March 13, 2008.
Time: 9 a.m. to 5 p.m.
Room: 415.
Program: This meeting will review
applications for National Digital
Newspaper Program (NDNP) in National
Digital Newspaper Program, submitted
to the Division of Preservation and
Access, at the November 1, 2007
deadline.
4. Date: March 13, 2008.
Time: 9 a.m. to 5 p.m.
Room: 315.
Program: This meeting will review
applications for Digital Humanities
E:\FR\FM\19FEN1.SGM
19FEN1
]]>Agencies
[Federal Register Volume 73, Number 33 (Tuesday, February 19, 2008)]
[Notices]
[Pages 9143-9146]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-3149]
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LIBRARY OF CONGRESS
Copyright Office
[Docket No. 2008-2]
Review of Copyright Royalty Judges Determination
AGENCY: Copyright Office, Library of Congress.
ACTION: Notice.
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SUMMARY: The Register of Copyrights issues the following determination
concerning the Copyright Royalty Judges' decisions to include the rate
for use of the section 112 license for ephemeral recordings within the
rates and terms of royalty payments under section 114 for the use of
sound recordings in transmissions made by New Subscription Services,
Preexisting Subscription Services and Satellite Digital Audio Radio
Services, and to not set a minimum fee within the section 112 license
rates for the Satellite Digital Audio Radio Services.
FOR FURTHER INFORMATION CONTACT: Tanya M. Sandros, General Counsel,
Copyright GC/I&R, P.O. Box 70400, Washington, DC 20024. Telephone:
(202) 707-8380. Telefax: (202) 707-8366.
SUPPLEMENTARY INFORMATION:
Background
The Copyright Royalty Judges are required by 17 U.S.C. 803(b) and
37 CFR 351 to issue determinations of rates and terms for royalty
payments due for the public performance of sound recordings in certain
digital transmissions by licensees in accordance with the provisions of
17 U.S.C. 114, and the making of certain ephemeral recordings by
licensees in accordance with the provisions of 17 U.S.C. 112(e).
The Copyright Royalty Judges recently issued three final
determinations setting rates and terms for the public performance of a
sound recording by means of a digital transmission and for the making
of ephemeral recordings necessary to facilitate those transmissions
pursuant to 17 U.S.C. 114 and 17 U.S.C. 112(e). On December 19, 2007
the Copyright Royalty Judges announced the rates and terms applicable
to Preexisting Satellite Services, 72 FR 71795; on December 20, 2007,
they announced the rates and terms applicable to New Subscription
Services, 72 FR 72253; and, on January 24, 2008, they announced the
rate and terms applicable to Satellite Digital Audio Radio Services. 73
FR 4080.\1\
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\1\ On May 1, 2007, the Copyright Royalty Judges announced rates
and terms applicable to an Eligible Nonsubscription Transmission or
a Transmission made by a New Subscription Service, herein referred
to as Webcaster II, 72 FR 24084. [Docket No. CRB 2005-1] While the
60 day time period allotted under 17 U.S.C. 802(f)(1)(D) for issuing
a written review for legal error has expired with regard to
Webcaster II, the same legal error which is addressed herein was
made in Webcaster II.
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Under 17 U.S.C. 802(f)(1)(D), the Register of Copyrights may review
for legal error the resolution by the Copyright Royalty Judges of a
material question of substantive law under title 17 that underlies or
is contained in a final determination of the Copyright Royalty Judges.
If the Register of Copyrights concludes, after taking into
consideration the views of the participants in the proceeding, that any
resolution reached by the Copyright Royalty Judges was in material
error, the Register of Copyrights shall publish such a decision in the
Federal Register, together with a specific identification of the legal
conclusion of the Copyright Royalty Judges that is determined to be
erroneous. The decision of the Register of Copyrights shall be binding
as precedent upon the Copyright Royalty Judges in subsequent
proceedings.
The Register of Copyrights has deemed that the Copyright Royalty
Judges' publication of Final Rulings regarding New Subscription
Services (``NSS''), Preexisting Subscription
[[Page 9144]]
Services (``PSS'') and Preexisting Satellite Digital Audio Radio
Services (``SDARS'') constitute issuance of final determinations as per
802(f)(1)(D). The Register of Copyrights has reviewed these final
determinations of rates and terms of royalty payments under sections
114 and 112. The Register concludes that the Copyright Royalty Judges'
resolution to include the rate for the section 112 license within the
rates and terms for the section 114 license constitutes a failure to
establish a discernable rate for the section 112 license and is
therefore a legal error. Moreover, this legal error has serious
ramifications in that the beneficiaries of the section 114 license fees
are not identical to the beneficiaries of the section 112 license fees.
The Register also concludes that the Copyright Royalty Judges' failure
to set a minimum fee within the section 112 license rates for SDARS is
a legal error.
Copyright Royalty Judges' Determination Setting Rates and Terms for New
Subscription Services
On October 31, 2005, pursuant to section 114(f)(2)(C), XM Satellite
Radio, Inc. (``XM'') filed a Petition to Initiate and Schedule
Proceeding for a NSS with the Copyright Royalty Judges. Pursuant to 17
U.S.C. 804(b)(3)(C)(ii), the Copyright Royalty Judges published a
notice in the Federal Register on December 5, 2005, announcing
commencement of the proceeding to set rates and terms for royalty
payments under sections 114 and 112 for the activities of the new
subscription service described in the XM Petition and requesting
interested parties to submit their Petitions to Participate. 70 FR
72471. Petitions to participate were received from Sirius Satellite
Radio, Inc. (``Sirius''), XM, MTV Networks (``MTV''), and
SoundExchange, Inc.
Subsequent to the presentation of the direct phase of their cases
and the filing of their written rebuttal statements, but prior to the
oral presentation of their rebuttal witnesses, the parties informed the
Copyright Royalty Judges that they had ``reached full agreement on all
issues in this litigation'' and that ``there are no more issues to
try.'' Docket No. CRB 2005-5, Transcript of September 10, 2007, at p.
5. They stated that the settlement agreement would be submitted to the
Copyright Royalty Judges for approval and adoption pursuant to 17
U.S.C. 801(b)(7)(A). Id. at 6. The proposed rates and terms codifying
the settlement agreement were filed on October 30, 2007.
Section 801(b)(7)(A) allows for the adoption of rates and terms
negotiated by ``some or all of the participants in a proceeding at any
time during the proceeding'' provided they are submitted to the
Copyright Royalty Judges for approval. 17 U.S.C. 801(b)(7)(A).
Accordingly, on November 9, 2007, the Copyright Royalty Judges
published a Notice of Proposed Rulemaking (``NPRM'') requesting comment
on the proposed rates and terms submitted to the Judges. 72 FR 63532.
Comments were due by December 10, 2007. In response to the NPRM, the
Copyright Royalty Judges received only one comment, which was submitted
by SoundExchange, supporting the adoption of the proposed regulations.
The Copyright Royalty Judges received no objections from a party
that would be bound by the proposed rates and terms and that would be
willing to participate in further proceedings. Therefore, on December
20, 2007, they adopted final regulations which set the rates and terms
for the use of sound recordings in transmissions made by NSS and for
the making of ephemeral recordings necessary for the facilitation of
such transmissions for the period commencing from the inception of the
NSS through December 31, 2010.
The Copyright Royalty Judges' rates, which included a non-
refundable annual minimum fee, allocated a single calculation and
payment for both the public performance of sound recordings by eligible
digital transmissions made by a Service pursuant to 17 U.S.C. 114, and
for ephemeral recordings of sound recordings made pursuant to 17 U.S.C.
112 to facilitate such transmissions. They did not set a separate
discernible rate for the section 112 license.
Copyright Royalty Judges' Determination Setting Rates and Terms for
Preexisting Subscription Services and Satellite Digital Audio Radio
Services
On January 9, 2006, the Copyright Royalty Judges commenced a
proceeding to set rates and terms for PSS and SDARS with a request for
petitions to participate. 73 FR 1455. Seven parties filed petitions to
participate in this proceeding: SoundExchange, Music Choice, Muzak LLC,
XM, Sirius, Royalty Logic, Inc., and THP Capstar Acquisition d/b/a DMX
Music. Prior to the beginning of formal hearings, the Copyright Royalty
Judges referred a novel material question of substantive law regarding
the universe of preexisting subscription services to the Register of
Copyrights.
On October 20, 2006, the Register of Copyrights transmitted her
determination on this issue to the Copyright Royalty Judges.
Subsequently, DMX withdrew from the proceeding on October 20, 2006, and
Sirius participated in the proceeding solely as a SDARS rather than as
both a PSS and a SDARS. Royalty Logic, Inc. also withdrew from the
proceeding on November 21, 2006, and the Copyright Royalty Judges
dismissed Muzak from the proceedings on January 7, 2007.
Music Choice, as a PSS, reached a settlement with SoundExchange.
Their settlement was submitted to the Copyright Royalty Judges and
published for comment on October 31, 2006. 72 FR 61585. No objections
were received from a party that would be bound by the proposed rates
and terms and that would be willing to participate in further
proceedings. On December 19, 2007, the Copyright Royalty Judges adopted
final regulations which set the rates and terms for PSS under sections
114 and 112 for the license period 2008-2012. The rates, which included
a non-refundable annual advance payment (i.e. a minimum fee), allocated
a single calculation and payment method for both the public performance
of sound recordings by eligible digital transmissions made pursuant to
17 U.S.C. 114, and for ephemeral recordings of sound recordings made
pursuant to 17 U.S.C. 112 to facilitate such transmissions. The adopted
settlement did not set a separate discernible rate for the section 112
license. 73 FR 71795.
In light of Music Choice's settlement, the only potential licensees
remaining in the proceeding were the SDARS: XM and Sirius. Hereafter
the proceeding was referred to as the SDARS proceeding. The remaining
parties entered into negotiations to set rates and terms for use of the
section 114 and section 112 statutory licenses but they were unable to
reach an agreement. Consequently, the Copyright Royalty Judges
proceeded with hearings to determine the rates and terms that would
apply to SDARS.
The standards the Copyright Royalty Judges are to apply in setting
the rates and terms for SDARS (as well as for PSS) differ between the
114 and 112 licenses. Section 114(f)(1) requires the Copyright Royalty
Judges to establish rates and terms for the transmission of the sound
recordings that are reasonable and that are calculated to achieve four
specific policy objectives set forth in section 801(b)(1) of the
copyright law. 17 U.S.C. 114(f)(1), 17 U.S.C. 801(b)(1). On the other
hand, section 112(e), governing the reproductions made to facilitate
the transmissions licensed under section 114, requires the Copyright
Royalty Judges to set rates and terms that most clearly represent those
``that would have been negotiated
[[Page 9145]]
in the marketplace between a willing buyer and a willing seller,'' and
to take into account certain factors when making this determination. 17
U.S.C. 112(e)(4). Additionally, the section 112 license requires that
``such rates shall include a minimum fee for each type of service
offered.'' 17 U.S.C. 112(e)(4).
After considering the evidence in this proceeding and the
applicable law, the Copyright Royalty Judges announced their final
determination setting rates and terms for SDARS on January 24, 2008,
stating that the ``appropriate section 114 performance license rate is
6.0% of gross revenues for 2007 and 2008, 6.5% for 2009, 7.0% for 2010,
7.5% for 2011 and 8.0% for 2012 and, further, that the appropriate
section 112 reproduction license rate is deemed to be embodied in the
section 114 license rate.'' 73 FR at 4084. However, the Copyright
Royalty Judges did not determine a separate rate for the section 112
license or determine what portion of the Section 114 license fee, if
any, should be deemed to be attributable to the section 112 license. In
other words, they did not set a discernible rate for section 112.
Additionally, the Copyright Royalty Judges did not set a minimum fee
for the SDARS section 112 license.
Review of Copyright Royalty Judges' Determinations
In accordance with the authority granted to the Register of
Copyrights under 17 U.S.C. 802(f)(1)(D), the Register of Copyrights has
reviewed for legal error the determinations of the Copyright Royalty
Judges setting rates and terms for use of the sections 112 and 114
statutory licenses by NSS, PSS, and SDARS. The Register concludes that
the Copyright Royalty Judges did not determine rates for the section
114 and 112 licenses and that this resolution constitutes an error on a
material question of substantive law under title 17 in each of the
above-referenced determinations. Further, the Register concludes that
the Copyright Royalty Judges' determination of rates for SDARS did not
include a minimum fee for the section 112 license and that this
resolution was also in material error.
It is not that the Copyright Royalty Judges failed to recognize the
need to set a rate for the section 112 license or include a minimum
fee. The January 24, 2007 Order acknowledges the Copyright Royalty
Judges' responsibility to set these rates for the section 112 license.
73 FR at 4084 and 4098. Even so, the Copyright Royalty Judges chose not
to set a specific rate for the section 112 license, citing the paucity
of evidence in the record for the SDARS proceeding that could be used
to determine the value of the license. In that case, the Copyright
Royalty Judges were presented with two proposals. According to the
final order, SoundExchange suggested ``combining the Section 112 and
114 rates over the license period by allocating 8.8% of the combined
fee owed by the SDARS towards the 112 charge.'' 73 FR at 4098. The
SDARS agreed in principle but they suggested that the section 112
license has no separate value. However, the Copyright Royalty Judges
rejected both proposals, finding that neither proposal was supported by
record evidence. Id
The Copyright Royalty Judges declined to accept that 8.8% of the
rate for the performance of the sound recording represents the
valuation of the right to make reproductions of the sound recordings
under the section 112 license. Instead, they concluded that
``SoundExchange's valuation of 8.8% is nothing more than an effort to
preserve a belief that the section 112 license has some value by
perpetuating the number adopted in the first webcasting proceeding.''
Id The Copyright Royalty Judges then characterized the section 112
license as ``an add-on to the securing of the performance rights
granted by the Section 114 license,'' and determined that the rate for
the section 112 license rate is embodied in the rate for the section
114 license, just as they did in Webcaster II.\2\ Id. However, the
Copyright Royalty Judges did not identify any particular percentage of
the section 114 license fee as representing the value of the section
112 license.
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\2\ In Webcaster II the Copyright Royalty Judges, for the first
time, announced rates and terms of royalty payments under sections
114 and 112 for the use of sound recordings in transmissions. 72 FR
24084. [Docket No. CRB 2005-1]
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There is also sparse evidence or analysis regarding the decision to
include rates for the section 112 license within the rates and terms
for the section 114 license in either the December 19, 2007 Final Rule
for PSS or the December 20, 2007 Final Rule for NSS, since both
determinations were the result of negotiated settlements. Settlements,
however, are not accepted in a vacuum. Section 801(b)(7)(A) allows for
the adoption of rates and terms negotiated by ``some or all the
participants in a proceeding at any time during the proceeding''
provided they are submitted to the Copyright Royalty Judges for
approval. 17 U.S.C. 801(b)(7)(A). The Copyright Royalty Judges have the
authority to accept or reject the settlement and it is the resulting
Final Order which is then subject to review by the Register. 17 U.S.C.
802(f)(1)(D). In fact, in their October 31, 2007 NPRM announcing
negotiated rates and terms for PSS, the Copyright Royalty Judges
exercised their authority to accept or reject the proposed settlement
by including two modifications to the negotiated proposal before
publishing it for comment. 73 FR 61586.
The negotiated settlements establishing rates and terms for both
PSS and NSS, and their approval by the Copyright Royalty Judges,
followed the previous conclusion in Webcaster II regarding inclusion of
the section 112 license within the section 114 license as a single
rate. Thus, the Webcaster II conclusion on this matter likely underlies
the parties' settlement just as it did the January 24, 2007 Order for
the SDARS. Therefore, the Register reviews the analysis and resolution
on this matter as contained in Webcaster II.
In Webcaster II, the Copyright Royalty Judges rejected the proposal
put forward by SoundExchange and agreed to by the Digital Media
Association, which sought to carry forward the combination of sections
112 and 114 rates from the prior license period. This proposal included
the ``deeming'' of 8.8% of the total fee owed by Services as
constituting the section 112 charge. 72 FR 24101. The Copyright Royalty
Judges declined to ascribe any particular percentage of the section 114
royalty as representative of the value of the section 112 license.
The Copyright Royalty Judges made this decision based on the view
that ``SoundExchange's evaluation of 8.8% is not a rate.'' Id
Additionally, they noted that ``the paucity of the record prevents us
from determining that 8.8% of the section 114 royalties is either the
value of or the rate for the section 112 license'' and that ``the
record demonstrates that * * * copyright owners and performers are
unable to secure separate fees for the section 112 license.'' 72 FR
24101-24102.
The Register observes that the parties' failure to provide
sufficient evidence to set a rate does not dispatch the Copyright
Royalty Judges' statutory obligations. The Register notes that Congress
allows the Copyright Royalty Judges to consider a broad array of
information in determining the separate rates for the section 112
license that most clearly represent the fees that would have been
negotiated in the marketplace between a willing buyer and a willing
seller. In making these determinations, the Copyright Royalty Judges
are to consider economic, competitive, and programming information
presented by the parties, and they may consider voluntary license
agreements negotiated under section 112. 17 U.S.C. 112(e)(4).
Furthermore,
[[Page 9146]]
the Copyright Royalty Judges have been granted subpoena powers to
compel participants or witnesses to appear and give testimony. See 17
U.S.C. 803(b)(6)(C)(ix).
Moreover, there is a practical reason for making this
determination. The requirement in section 112(e)(4) to determine rates
is logical in that the two licenses involve different rights. The
section 112 statutory license applies to reproductions, while the
section 114 statutory license applies to public performances. Moreover,
the beneficiaries of the section 114 license are not identical to the
beneficiaries of the section 112 license. Royalties collected under
section 114 are paid to the performers and the copyright owners of the
sound recordings, i.e., usually the record companies; whereas, the
royalties collected pursuant to the section 112 license are not paid to
performers. Without separate rates for both the section 114 and 112
licenses, SoundExchange is unable to allocate properly the funds it
collects as the Designated Agent and fulfill both its responsibility to
distribute receipts to stakeholders of the public performance right
under section 114(g) as well as its responsibility to distribute
receipts to separate stakeholders of the reproduction right under
section 112.
Consequently, the Register finds that the Copyright Royalty Judges'
resolution to include rates for the section 112 license within rates
and terms for the section 114, without specifying what percentage, if
any, is attributable to the section 112 license, does not fulfill the
Copyright Royalty Judges' responsibility to determine the value of the
section 112 license for ephemeral copies. Both the text and the
legislative history of section 112 indicate Congress' view that the
rate setting body must determine the value of the section 112 license.
See 17 U.S.C. 112(e)(3) (requiring reasonable rates and terms of
royalty payments for the activities specified by paragraph (1) which
shall include a minimum fee for each type of service offered by
transmitting organizations); DMCA Conf. Rpt., 105-796, at 89-91; DMCA
Section-by-Section Analysis at 52-53, 61-62.
Conclusion
Having reviewed the resolution by the Copyright Royalty Judges for
legal error, the Register of Copyrights hereby concludes that in
setting rates for the section 112 and 114 statutory licenses, the
Copryight Royalty Judges must establish separate values for each of the
two licenses and that rates for the section 112 license shall include a
minimum fee.\3\ Pursuant to the requirements established in
802(f)(1)(D), the Register issues this written decision not later than
60 days after the dates on which the final determinations by the
Copyright Judges were issued. This decision shall be binding as
precedent upon the Copyright Royalty Judges in subsequent proceedings.
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\3\ The Register, however, takes no position on what the value
of the minimum fee should be, or whether it could be a fee of zero.
Dated: February 14, 2008.
Marybeth Peters,
Register of Copyrights.
[FR Doc. E8-3149 Filed 2-15-08; 8:45 am]
BILLING CODE 1410-30-P
