Notice and Recordkeeping for Use of Sound Recordings Under Statutory License, 25038-25049 [2014-09798]

Agencies

• Copyright Royalty Board, Library of Congress
• Library of Congress

[Federal Register Volume 79, Number 85 (Friday, May 2, 2014)]
[Proposed Rules]
[Pages 25038-25049]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09798]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 370

[Docket No. 14-CRB-0005 (RM)]


Notice and Recordkeeping for Use of Sound Recordings Under 
Statutory License

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Copyright Royalty Judges seek written comments on two 
petitions for rulemaking seeking amendments to the regulations for 
filing notice of use and the delivery of records of use of sound 
recordings under two statutory licenses of the Copyright Act.

DATES: Comments are due no later than June 2, 2014. Reply comments are 
due no later than June 16, 2014.

ADDRESSES: The Copyright Royalty Board (CRB) prefers that comments and 
reply comments be submitted electronically to crb@loc.gov. In the 
alternative, commenters shall send a hard-copy original, five paper 
copies, and an electronic copy on a CD either by U.S. mail or hand 
delivery. The CRB will not accept multiple submissions from any 
commenter. Electronic documents must be in either PDF format containing 
accessible text (not an image); Microsoft Word; WordPerfect; Rich Text 
Format (RTF); or ASCII text file format (not a scanned document). 
Commenters MAY NOT submit comments and reply comments by an overnight 
delivery service other than the U.S. Postal Service Express Mail. If 
commenters choose to use the U.S. Postal Service (including overnight 
delivery), they must address their comments and reply comments to: 
Copyright Royalty Board, P.O. Box 70977, Washington, DC 20024-0977. If 
commenters choose hand delivery by a private party, they must direct 
their comments and reply comments to the Copyright Office Public 
Information Office, Library of Congress, James Madison Memorial 
Building, Room LM-401, 101 Independence Avenue SE., Washington, DC 
20559-6000. If commenters choose delivery by commercial courier, they 
must direct

[[Page 25039]]

their comments and reply comments to the Congressional Courier 
Acceptance Site located at 2nd and D Street NW., Washington, DC, on a 
normal business day between 8:30 a.m. and 4 p.m. The envelope must be 
addressed to: Copyright Royalty Board, Library of Congress, James 
Madison Memorial Building, LM-401, 101 Independence Avenue SE., 
Washington, DC 20559-6000.

FOR FURTHER INFORMATION CONTACT: Richard Strasser, Senior Attorney, or 
Gina Giuffreda, Attorney Advisor, by telephone at (202) 707-7658 or 
email at crb@loc.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    On October 6, 2006, the Copyright Royalty Judges (Judges) issued 
interim regulations published in the Federal Register for the delivery 
and format of reports of use of sound recordings for the statutory 
licenses set forth in sections 112 and 114 of the Copyright Act. 71 FR 
59010.\1\ The goal of those interim regulations was to establish format 
and delivery requirements for reports of use so that royalty payments 
to copyright owners pursuant to the section 112 and 114 licenses could 
be made from April 1, 2004, forward based upon actual data on the sound 
recordings transmitted by digital audio services.
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    \1\ Prior to the enactment of the Copyright Royalty and 
Distribution Reform Act of 2004 (Reform Act), Public Law 108-409, 
118 Stat. 2341, responsibility for establishing the notice and 
recordkeeping requirements under sections 112 and 114 of the 
Copyright Act resided with the Librarian of Congress and the 
Copyright Office. The Reform Act transferred this responsibility to 
the Judges. As of May 31, 2005, the effective date of the Reform 
Act, the Copyright Office had promulgated regulations governing the 
filing of notices of intention to use the section 112 and/or 114 
statutory licenses,--as required by 17 U.S.C. 112(e)(7)(A) and 
114(f)(4)(B), respectively--the required data elements to be 
provided in a report of use, and the frequency of reporting. See 69 
FR 11515 (Mar. 11, 2004) and 69 FR 58261 (Sept. 30, 2004). The 
Judges carried forward those regulations. See 71 FR 59010-11 (Oct. 
6, 2006) (full background of Copyright Office notice and 
recordkeeping rulemaking).
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    On December 30, 2008, the Judges published a notice of proposed 
rulemaking (NPRM) setting forth proposed revisions to the interim 
regulations adopted in October 2006. 73 FR 79727. The most significant 
revision proposed by the Judges was to expand the reporting period to 
implement year-round census reporting. Further, on April 8, 2009, the 
Judges published a notice of inquiry (NOI) to obtain additional 
information concerning the likely costs and benefits stemming from the 
adoption of the proposed census reporting provision as well as 
information on any alternatives to the proposal that might accomplish 
the same goals as the proposal in a less burdensome way, particularly 
with respect to small entities. 74 FR 15901.
    Following a notice and comment process, the Judges published a 
final rule on October 13, 2009, amending the interim regulations and 
establishing requirements for census reporting for all but those 
broadcasters who pay no more than the minimum fee for their use of the 
license. 74 FR 52418. The final regulations established requirements by 
which copyright owners may receive reasonable notice of the use of 
their sound recordings and under which records of use were to be kept 
and made available by entities of all sizes performing sound 
recordings. See, e.g., 17 U.S.C. 114(f)(4)(A). As with the interim 
regulations adopted in 2006, the final regulations adopted in 2009 
represented baseline requirements. In other words, digital audio 
services remained free to negotiate other formats and technical 
standards for data maintenance and delivery and to use those in lieu of 
regulations adopted by the Judges, upon agreement with the Collective. 
The Judges indicated that they had no intention of codifying these 
negotiated variances in the future unless and until they come into such 
standardized use as to effectively supersede the existing 
regulations.\2\
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    \2\ In 2011, SoundExchange filed with the Judges a petition for 
rulemaking to consider adopting regulations to authorize 
SoundExchange `` `to use proxy reporting data to distribute to 
copyright owners and performers certain sound recording royalties 
for periods before 2010 that are otherwise undistributable due to 
licensees' failure to provide reports of use' or their provision of 
`reports of use that are so deficient as to be unusable.' '' Notice 
and Recordkeeping for Use of Sound Recordings Under Statutory 
License, Final rule, Docket No. RM 2011-5, 76 FR 45695 (Aug. 1, 
2011). After soliciting comment on SoundExchange's proposal, the 
Judges adopted final regulations relating to distributions based on 
proxy data. Id.
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II. Petition for Clarification and Petition for Rulemaking

    On October 28, 2009, College Broadcasters, Inc. (CBI), American 
Council on Education and Intercollegiate Broadcasting Systems, Inc. 
(collectively, Petitioners) made a motion with the Judges for 
clarification with respect to one issue raised by the final regulation. 
Petitioners noted that the final regulation exempted minimum-fee 
webcasters that are FCC-licensed broadcasters from the census reporting 
requirement, but did not appear to exempt minimum-fee educational 
stations that are not FCC-licensed broadcasters from the same 
requirement. See Joint Petition for Clarification at 2-3 (Oct. 28, 
2009) (Joint Petition). Petitioners asked the Judges to ``clarify'' 
that the exemption extended to minimum fee unlicensed educational 
stations.\3\ Id. at 4.
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    \3\ On November 12, 2009, before the Judges ruled on this 
motion, CBI filed a Petition for Review of the final regulation with 
the United States Court of Appeals for the District of Columbia 
Circuit ( D.C. Circuit) (Appeal No. 09-1276). This appeal was held 
in abeyance pending the outcome of an appeal of the Judges' final 
determination in Docket No. 2009-1 CRB Webcasting III. The D.C. 
Circuit concluded that appeal on July 6, 2012, holding that the 
manner by which the Judges were appointed was unconstitutional, 
dictating a statutory remedy, and remanding to the Judges. 
Intercollegiate Broad. Sys. v. Copyright Royalty Bd., 684 F.3d 1332, 
1340-41 (D.C. Cir. 2012), cert. denied, 133 S. Ct. 2735 (2013). The 
Judges issued their initial determination on remand on January 9, 
2014, and the D.C. Circuit transferred CBI's appeal of the final 
regulation to the United States District Court for the District of 
Columbia. See Order, in Appeal No. 09-1276 (D.C. Cir. Oct. 28, 
2013). By a separate document today in the Federal Register, the 
Judges have affirmed adoption of the final regulation.
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    The Judges have reviewed Petitioners' motion for clarification and 
determined that it is not properly before the Judges. In their motion, 
Petitioners are not seeking a clarification of the final regulation; 
they are seeking a substantive change. The Judges thus determined that 
Petitioners' motion should be treated as a petition for rulemaking and 
made subject to notice and public comment.
    The Judges received a second petition for rulemaking from 
SoundExchange, Inc. (SoundExchange), the sole Collective designated by 
the Judges to collect and distribute sound recording royalties under 
the section 112(e) and 114 licenses. See Petition of SoundExchange, 
Inc. for a Rulemaking to Consider Modifications to Notice and 
Recordkeeping Requirements for Use of Sound Recordings Under Statutory 
License (Oct. 21, 2013) (SX Petition). SoundExchange proposes major 
modifications to 37 CFR part 370.

III. Joint Petition

    Petitioners' proposal concerns the applicability of requirements in 
the final regulation that parties availing themselves of the statutory 
licenses under 17 U.S.C. 112 and 114 report on all performances of 
sound recordings that are subject to the licenses. One of the stated 
goals of the final regulation was to move most users of sound 
recordings toward full census actual total performance (ATP) reporting 
and away from reporting of sampled data. Notice and Recordkeeping for 
Use of Sound Recordings under Statutory License, Final rule, Docket No. 
RM 2008-7, 74 FR 52418, 52420 (Oct. 13, 2009). The final regulation 
contained an exception, however, for ``the lowest intensity users of 
sound recordings in a

[[Page 25040]]

single category of users--broadcasters typically engaged in 
simulcasting their over-the-air broadcasts on the Web.'' Id. These 
broadcasters, who pay no more than the minimum fee for their use of 
sound recordings under the statutory license (i.e., ``minimum fee 
broadcasters''), are permitted to continue reporting sampled Aggregate 
Tuning Hour (ATH) data on a quarterly basis. 37 CFR 370.4(d)(3)(i). All 
other services must report census ATP data on a monthly basis. 37 CFR 
370.4(d)(3)(i).
    Petitioners point out that, unlike minimum fee broadcasters, 
Educational Stations \4\ that only pay the minimum fee are subject to 
monthly reporting of census data if they do not qualify as 
broadcasters--i.e., ``a type of Commercial Webcaster or Noncommercial 
Webcaster that owns and operates a terrestrial AM or FM radio station 
that is licensed by the Federal Communications Commission [``FCC''].'' 
37 CFR 380.2(b).
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    \4\ Petitioners use the term ``Educational Stations'' to refer 
to any webcaster (not just FCC-licensed webcasters) that:
    (A) Is directly operated by, or affiliated with and officially 
sanctioned by a domestically accredited primary or secondary school, 
college, university or other post-secondary degree-granting 
educational institution; and
    (B) The digital audio transmission operations of which are, 
during the course of the year, staffed substantially by students 
enrolled in such institution; and
    (C) Is not a ``public broadcasting entity'' (as defined in 17 
U.S.C. 118(g)) qualified to receive funding from the Corporation of 
Public Broadcasting pursuant to the criteria set forth in 47 U.S.C. 
396; and
    (D) Is exempt from taxation under section 501 of the Internal 
Revenue Code, has applied for such exemption, or is operated by a 
State or possession or any governmental entity or subordinate 
thereof, or by the United States or District of Columbia, for 
exclusively public purposes.
    Joint Petition at 2 n.1 (emphasis and citations omitted). While 
the Judges' proposed amendment to the definition of ``minimum fee 
broadcaster'' does not incorporate CBI's singular reference to 
``Educational Stations,'' the proposed amendment retains the 
substance of CBI's proposal. See proposed Sec.  370.4(b)(2).
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    Petitioners assert that the full census ATP reporting requirement 
presents a serious problem for unlicensed minimum fee Educational 
Stations. They argue that, for the same reasons that the Judges found 
it was not reasonable for minimum fee FCC-licensed broadcasters to move 
toward full census ATP reporting, it is also not reasonable for minimum 
fee unlicensed Educational Stations to move toward full census ATP 
reporting.
    Therefore, Petitioners propose that the definition of a ``minimum 
fee broadcaster'' in 37 CFR 370.4(b)(3) be amended to read: ``(3) A 
minimum fee broadcaster is a nonsubscription service whose payments for 
eligible transmissions do not exceed the annual minimum fee set forth 
in 17 U.S.C. 112 and 114; and either (i) meets the definition of a 
broadcaster pursuant to Sec.  380.2(b) of this chapter; or (ii) is an 
Educational Station, that is, any webcaster that (A) is directly 
operated by, or affiliated with and officially sanctioned by a 
domestically accredited primary or secondary school, college, 
university or other post-secondary degree-granting educational 
institution; and (B) the digital audio transmission operations of which 
are, during the course of the year, staffed substantially by students 
enrolled in such institution; and (C) is not a ``public broadcasting 
entity'' (as defined in 17 U.S.C. 118(g)) qualified to receive funding 
from the Corporation for Public Broadcasting pursuant to the criteria 
set forth in 47 U.S.C. 396; and (D) is exempt from taxation under 
section 501 of the Internal Revenue Code, has applied for such 
exemption, or is operated by a State or possession or any governmental 
entity or subordinate thereof, or by the United States or District of 
Columbia, for exclusively public purposes.'' Joint Petition at 4.
    Petitioners also provide for the Judges' consideration alternative 
language so that the amendment addresses entities other than 
Educational Stations: ``(3) A minimum fee broadcaster is a 
nonsubscription service whose payments for eligible transmissions do 
not exceed the annual minimum fee set forth in 17 U.S.C. 112 and 114; 
and either (i) meets the definition of a broadcaster pursuant to Sec.  
380.2(b) of this chapter; or (ii) is a `noncommercial webcaster' as 
defined in 17 U.S.C. 114(f)(5)(E)(i).'' Id. at 4 n.5.
    The new definition of ``minimum fee broadcaster'' would be 
incorporated by reference in 37 CFR 370.4(d)(3)(ii), which provides 
that such entities may proceed with quarterly sample ATH data reports.
    Finally, Petitioners assert that failure to make the proposed 
change could cause hundreds of minimum fee paying FCC-unlicensed 
Educational Stations to cease operations or to become infringers simply 
because they lack an FCC license. Petitioners assert further that 
copyright owners and performers would see a decline in royalties paid 
and distributed.
    The Judges seek comment on Petitioners' proposal. The Judges 
especially seek comment on how such unlicensed minimum fee Educational 
Stations, as defined by Petitioners, have been reporting under the 
current regulations. Have any ceased operations, as predicted by 
Petitioners? If so, how many? If not, does the need still exist for 
Petitioners' proposed amendment? Have Petitioners, in the first 
instance, persuasively made their case that such a change is warranted? 
If so, should the Judges adopt Petitioners' preferred definition, which 
applies only to Educational Stations, or the broader, alternate 
definition?

IV. SoundExchange Petition

    SoundExchange proposes several amendments in eight areas of the 
current regulations, which, it asserts, will better reflect and 
accommodate the large and growing number of services paying royalties 
under the section 112 and 114 licenses.\5\ The proposed amendments seek 
``to address important operational problems affecting the accuracy of 
royalty distributions and to ensure that the regulations will remain 
workable as the digital music market continues to mature and the scale 
of reporting increases.'' See SX Petition at 2. In SoundExchange's 
view, the suggested amendments described herein reflect the elements 
frequently reported incorrectly by licensees and strike the requisite 
balance between not being too burdensome on services and meeting the 
statutory purpose of ensuring that the proper copyright owners and 
performers are compensated for the use of their work. Id.
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    \5\ As of the date its petition for rulemaking was filed, 
SoundExchange stated it received reporting and payments from more 
than 2,200 different services. SX Petition at 2.
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A. Report of Use and Statement of Account Consolidation, Matching, and 
Identification

    In its petition, SoundExchange describes the difficulties it 
currently faces in matching (1) the royalty payments made by licensees 
to (2) the statement of account (SOA) ``allocating the payment to a 
specific service and time period and reflecting the calculation of the 
payment'' and (3) the report of use (ROU) ``detailing the usage 
corresponding to the payment.'' Id. at 5. Such difficulty, according to 
SoundExchange, results, in part, from licensees that offer multiple 
services consolidating their reporting and identifying their services 
in ways that hinder SoundExchange's ability to credit payments to the 
appropriate licensee and to make accurate distributions based on actual 
usage. Id.
    SoundExchange asserts the proposed amendments in this area will 
allow SoundExchange easily to discern the relationship between payment 
and usage from the documents provided by the licensee. To that end, 
SoundExchange proposes a number of amendments.

[[Page 25041]]

1. Consolidation and Matching
    First, SoundExchange seeks a requirement that payments, SOAs, and 
ROUs for affiliated entities be provided at the enterprise level, if 
feasible. Id. at 7. If not, then SoundExchange seeks a requirement that 
``any consolidation of ROUs and SOAs for affiliated licensees be the 
same; that is, that there be a one-to-one relationship between usage 
reported in an ROU and SOA unless SoundExchange and the licensee agree 
otherwise.'' Id. at 7 (footnote omitted). In support of its proposal, 
SoundExchange points out that the one-to-one correspondence between 
ROUs and SOAs already exists for broadcasters under 37 CFR 
380.13(g)(1)(viii). Id. at 8. SoundExchange argues that requiring a 
service to identify itself by the same name on its SOAs and ROUs also 
would go a long way in establishing the desired one-to-one 
relationship. Currently, SoundExchange explains, ``a single service 
frequently may be identified by different names on its SOAs and ROUs.'' 
Id. at 8. To rectify this problem, SoundExchange proposes amendments to 
Sec.  370.4(e)(7)(i)(A) and (e)(5), requiring identification of the 
service on both the SOA and ROU by the ``most specific service name 
appropriate to the level of consolidation . . . at the enterprise 
level, if feasible,'' and using that same name on the ROU file name, 
respectively. Id. at 9.
    SoundExchange points out that it recognizes that services may need 
a certain amount of flexibility in the consolidation of their 
reporting, as well as the ability to periodically change that 
consolidation. Such flexibility, however, according to SoundExchange, 
hinders its ability to ``relate the name used on a particular 
associated SOA and ROU to the specific service offerings and relevant 
parent enterprise and payment history.'' Id. at 9. To accommodate such 
flexibility for the licensee and maintain its ability to properly match 
payments to the proper account, SoundExchange proposes amendments to 
Sec. Sec.  370.3(d) and 370.4(e)(7)(i)(B), requiring services to 
provide on its SOA, ROU, and payment an account number/identification 
number assigned by SoundExchange.\6\ Id. at 10.
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    \6\ SoundExchange notes that it currently uses numerical 
identifiers on an internal basis to better identify accounts 
``easily and unambiguously.'' Id. at 10. The proposed language would 
apply only to those services for which SoundExchange has assigned 
such identifier. Id.
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    Next, SoundExchange contends that provision of separate ROUs should 
be required for each different type of service, in light of the current 
requirement that separate SOAs must be provided for services subject to 
different rates since payment calculations differ. Id. To make this 
requirement clear, SoundExchange proposes language be added to Sec.  
370.4(d)(1).
2. ROU Headers and Category Codes
    SoundExchange requests that the Judges require the use of ROU file 
headers because such headers ``identify the columns in the ROU to allow 
SoundExchange to (1) recognize readily when a licensee has submitted an 
ROU with the columns out of order . . . , and (2) be able to ingest 
such ROUs without manual intervention.'' Id. at 10. Mandatory use of 
ROU file headers would, in SoundExchange's opinion, ``significantly 
improve [its] ability to load ROUs without manual intervention and/or 
follow-up with the service.'' Id. SoundExchange specifically proposes 
to eliminate the report generation date and delimiters from the header 
format, as such requirements, in its opinion, are unimportant, and to 
add several new lines to the header (and the reasons therefor):

    Station call letters, if multiple broadcast stations are 
included in the log, in order to allow SoundExchange to identify the 
scope of usage covered by the ROU before ingesting it.
    Audience measurement type (ATH (aggregate tuning hours) or ATP 
(actual total performances)), so it will be clear which type of 
usage is reported in the ROU.
    Checksum (total audience measurement reported on the ROU) in 
order to allow SoundExchange to confirm whether it received and 
ingested all of the data the licensee intended to provide, and 
thereby minimize effort and reduce the risk of inaccurate 
distribution if an ROU is corrupted.
    Character encoding format used in the file, in order to allow 
SoundExchange to read contents of the file as the licensee intended 
them.
    Digital signature certifying the ROU, if the licensee chooses to 
include the signature in the ROU itself, in order to provide a 
permissible location for the signature currently required under 37 
CFR 370.4(d)(4).

SX Petition at 11.
    SoundExchange acknowledges that licensees initially opposed 
providing name and contact information in an ROU header as 
``unnecessarily burdensome'' since that information appears elsewhere 
in the ROU as well as in the Notice of Use. Id. at 12, citing 71 FR 
59010, 59012 (Oct. 6, 2006). SoundExchange attempts to refute this 
contention, arguing: (1) That information in the notices of use can be 
out of date, (2) licensees frequently fail to provide contact 
information in a cover letter or email, as currently required by 37 CFR 
370.4(e)(3)(ii) and (iii), and (3) the possible separation of the ROU 
and such external documents. Id. at 12. Adoption of this proposal, 
SoundExchange points out, would render the current provisions in Sec.  
370.4(e)(3)(ii) and (iii) superfluous and suggests their deletion.
    SoundExchange also asserts that adoption of its proposed amendments 
regarding consolidation, matching, and account numbers/identifiers, see 
supra, would enable the deletion of the current category codes required 
in 37 CFR 370.4(d)(2)(ii). SoundExchange explains category codes can be 
useful ``for distinguishing different types of transmissions with 
different royalty rates when they are combined in a single ROU, and for 
matching ROUs to SOAs when the matching is not otherwise apparent.'' 
Id. at 14. This purpose, according to SoundExchange, would be fulfilled 
by the above proposed amendments. Should the Judges decide not to adopt 
the proposed amendments concerning consolidation and matching, 
SoundExchange requests retention of the category codes requirement, 
provided that such codes are updated to reflect current rate 
structures. SoundExchange asserts that such updates can be done either 
by the Judges through their notice and recordkeeping authority under 17 
U.S.C. 803(c)(3), or their authorization of SoundExchange to publish an 
updated list of codes. Id.
3. Direct Delivery of Notices of Use
    Services intending to operate under the section 112 and 114 
licenses of the Copyright Act must file a Notice of Use (NOU) with the 
Licensing Division of the Copyright Office. 37 CFR 370.2. SoundExchange 
describes the NOU's importance to its distribution process, namely, 
information in the NOU is used to set up the database records of 
licensees and services from whom payment is expected. Id. at 13. The 
current regulations, SoundExchange laments, do not contain a mechanism 
to provide it with timely receipt of the NOU. To satisfy its 
operational need for access to NOUs, SoundExchange proposes changes to 
Sec.  370.2(d) to require licensees to send copies of their NOUs to 
SoundExchange, either by mail or email, at the same time they file them 
with the Copyright Office. Id. at 14.

B. Flexibility in Reporting Format

    SoundExchange seeks to have codified in the recordkeeping 
regulations the already-recognized ability of it and licensees to vary 
reporting requirements by agreement. Id. at 15, citing 71 FR at 59012 
(Oct. 6,

[[Page 25042]]

2006)(``[C]opyright owners and services are always free to negotiate 
different format and delivery requirements that suit their particular 
needs and situations . . .''). Moreover, the proposed amendments, 
argues SoundExchange, will entice licensees to ``do business with 
SoundExchange electronically,'' which in turn will result in more 
efficiency for both SoundExchange and licensees.
1. Certification/Signature Requirements
    The current regulations require that ROUs ``include a signed 
statement'' by the appropriate officer or representative attesting to 
the accuracy of the information provided in the ROU. 37 CFR 
370.4(d)(4). SoundExchange points out that the regulation does not 
require a handwritten signature and notes that in practice an 
electronic signature has been embedded in the ROU or provided in a 
cover email or ``other ancillary document.'' SX Petition at 16. To 
better reflect current practices and allow for future possibilities, 
SoundExchange proposes adding language to Sec.  370.4(d)(4) to read 
``Reports of Use shall include or be accompanied by a signed statement 
. . .''.\7\
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    \7\ SoundExchange uses its proposal regarding ROU signatures to 
urge the Judges to exercise their authority under 17 U.S.C. 
803(c)(4) to eliminate the requirement of a handwritten signature on 
statements of account provided pursuant to 37 CFR 380.4(f)(3), 
380.13(f)(3), 380.23(f)(4), and 384.4(f)(3). The Judges decline 
SoundExchange's invitation as moot. The Judges addressed Sec. Sec.  
380.4, 380.13 and 380.23 in their Initial Determination on Remand in 
the Webcasting III proceeding, see Determination After Remand of 
Rates and Terms for Royalty Years 2011-2015, Docket No. 2009-1 CRB 
Webcasting III (Jan. 9, 2014), and the Judges' adoption of the 
parties' settlement agreement in the Business Establishments II 
proceeding removed the handwritten signature requirement in Sec.  
384.4(f)(3). See, 78 FR 66276 (Nov. 5, 2013).
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2. Character Encoding
    SoundExchange asserts that the current requirement that ROUs be 
provided in the form of ASCII text files hampers its ability to make 
accurate distributions of royalties. SX Petition at 17. In 
SoundExchange's opinion, the ASCII character encoding format is 
outdated and suffers from myriad limitations, e.g., allowance of 
encoding for only 128 characters and the inability to support non-Latin 
alphabets, including certain marks used in such alphabets, used in 
several other languages. Consequently, SoundExchange concludes, ``many 
or most computer systems have migrated to more modern character 
encoding formats,'' of which there are ``many alternatives.'' Id. 
SoundExchange reports that ROUs apparently are provided in 5 to 10 
different non-ASCII character encoding formats, although licensees do 
not identify what formats they use. This lack of information, 
SoundExchange states, leaves it ``trying to guess what character 
encoding was used, and risks loss of data if the wrong format is used 
to read the ROU when it is loaded.'' Id. at 18.
    SoundExchange's proposed solution to this problem is to 
``modernize'' the regulations by:

    Recognizing the reality that services use encoding formats other 
than ASCII by providing flexibility for them to choose an 
appropriate encoding format.
    Requiring licensees to identify the character encoding format 
they use and include it in the ROU header, so that SoundExchange can 
read ROUs as they were intended, convert them properly, and not lose 
data.
    Requiring use of the UTF-8 encoding format if feasible. . . .

Id. SoundExchange recommends use of the UTF-8 format because, in its 
opinion, ``it can support every system of writing . . . [so its] use 
should generally be feasible''; ``it is probably the dominant character 
encoding format today, and its use has become a best practice''; and 
``[i]t is the default character encoding format in major Linux/Unix 
operating system implementations, which tend to be used by larger 
licensees.'' Id. Regardless of the preference for the UTF-8 format, 
SoundExchange makes assurances that it can accept other encoding 
formats as long as licensees identify the format used. Id.
3. XML File Format
    Another proposal made by SoundExchange with regard to the 
requirement that ROUs be provided in text file format is to allow XML 
(Extensible Markup Language) as an alternative, but not mandatory, 
format for delivery of ROUs. Id. at 19. SoundExchange describes XML as 
``a common and flexible means of encoding documents'' offering ``many 
advantages over text files,'' such as allowing ``more flexible 
inclusion in ROU data files of information that now must be included in 
the file name or header, enabl[ing] variable fields . . . , 
facilitat[ing] automatic validation of ROUs, allow[ing] real-time 
streaming of ROU data, and otherwise simplify[ing] SoundExchange's 
processing of ROUs.'' Id.

C. Facilitating Unambiguous Identification of Recordings

    SoundExchange recounts that throughout the history of these notice 
and recordkeeping regulations, ``the most contentious issues have 
generally concerned the data items required to be reported on the 
individual lines of an ROU to identify the specific recordings used by 
a service.'' SX Petition at 19. SoundExchange alleges that the current 
set of data elements do not allow for the unambiguous identification of 
recordings; as a result, SoundExchange states that a ``significant 
number'' of such recordings cannot be identified. Id. at 20. 
SoundExchange identifies three areas of reporting as illustrative of 
this problem: Compilations, re-records,\8\ and classical music.
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    \8\ SoundExchange defines ``re-records'' as those instances 
where an artist has recorded his/her most popular songs multiple 
times, e.g., with a different band, a different label, ``live'' 
versus original album. Id. at 20.
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    In relation to compilations and re-records, SoundExchange 
characterizes the failure of licensees to provide the International 
Standard Recording Code (ISRC) \9\ as the primary impediment to its 
ability to identify the sound recording. Id. Although licensees 
currently can report the album and label name as an alternative to the 
ISRC, see Sec.  370.4(d)(2)(v), SoundExchange contends that this 
alternative can be problematic with respect to compilations because (1) 
the album title differs from the original album on which the recording 
appeared, (2) the album title is ambiguous, e.g., ``Greatest Hits,'' 
and (3) the label distributing the compilation differs from the label 
distributing the original album. Id.\10\ Similar problems exist with 
respect to re-records, according to SoundExchange, because oftentimes 
``the payees are different for each of the recordings due to different 
copyright owners, different `featured artists' . . . changing 
membership of a featured band over time, different producers, and 
different nonfeatured artists.'' Id. at 20-21.
---------------------------------------------------------------------------

    \9\ SoundExchange notes that ISRCs ``are widely used by record 
companies and most digital distribution companies for purposes of 
rights administration, and are used for reporting purposes in direct 
license arrangements between record companies and webcasting and on-
demand services.'' Id. at 22.
    \10\ SoundExchange states that licensees frequently report as 
``various'' the artists on a compilation with multiple artists. Id. 
at 20. The Judges note that the Copyright Office specifically deemed 
such identification as unacceptable. See 69 FR 11524 (Mar. 11, 2004) 
(``[W]here the sound recording performed is taken from an album that 
contains various featured artists, i.e., a compilation, it is not 
acceptable to report the featured artist as `Various.' The featured 
artist of the particular sound recording track performed must be 
reported.'').
---------------------------------------------------------------------------

    To rectify these issues, SoundExchange proposes requiring licensees 
to provide the ISRC (where available), as well as the album title and 
marketing label, as preexisting subscription services (PSS) currently 
are

[[Page 25043]]

required to do under 37 CFR 370. 3(d)(5), (6), (8). The benefits for 
this change, in SoundExchange's opinion, are twofold: (1) It represents 
the ``easiest'' solution for services to implement because ISRCs are 
typically available to the services, and (2) it provides the ``greatest 
positive effect'' to SoundExchange's match rate. Id. at 22.
    With respect to classical music, SoundExchange charges that 
services' incorrect identification of classical tracks--namely, 
reporting the composers as artists, in direct contravention of the 
Copyright Office's ``clear instructions'' to the contrary--severely 
hamper its ability to unambiguously identify the sound recording. Id. 
at 21 citing 69 FR 11523-24 (Mar. 11, 2004). SoundExchange recommends 
the following amendments to Sec.  370.4(d)(2):

    Rather than completing the current featured artist field, a 
service would identify the featured artist by reporting (1) ensemble 
(i.e., name of orchestra or other group), (2) conductor, and (3) 
soloist(s), where applicable, to the extent that any of the 
foregoing is identified on the commercial product packaging.
    Rather than completing the current sound recording title field, 
a service would identify the sound recording title by reporting (1) 
composer, (2) title of overall work, and (3) title of movement or 
other constituent part of the work, if applicable.

Id. at 24. These proposed amendments, in SoundExchange's estimation, 
``specify clearly the level of precision necessary to identify the 
featured artist and sound recording title of classical tracks'' with 
minimal impact on text and XML format reports. Id.

D. Reporting Non-Payable Tracks

    The rate structure adopted by the Judges in their recent decision 
setting the rates and terms under sections 112 and 114 for satellite 
digital audio radio services (SDARs) allows services to exclude use of 
certain categories of sound recordings from royalty payments.\11\ See 
Determination of Rates and Terms for Preexisting Subscription Services 
and Preexisting Satellite Digital Audio Radio Services, Final rule and 
order, Docket No. 2011-1 CRB PSS/Satellite II, 78 FR 23054, 23072-73 
(Apr. 17, 2013) (deductions allowed for directly licensed recordings 
and pre-1972 recordings). The regulations governing SDARs require the 
service to identify the tracks for which it claims an exclusion from 
royalties. See 37 CFR 382.13(h). SoundExchange requests the Judges to 
include in these notices and recordkeeping regulations a similar 
provision ``requiring that ROUs for [any] service relying on the 
statutory licenses include reporting of all recordings used by the 
service, with a new field flagging any usage excluded from the 
service's royalty payment.'' Id. at 26 (footnote omitted). 
SoundExchange argues that requiring all services to identify any 
excluded sound recordings better enables SoundExchange to ensure the 
accuracy of a service's royalty payments. Id. The proposed provision, 
SoundExchange points out, only affects those services that exclude 
sound recordings from their royalty payments.
---------------------------------------------------------------------------

    \11\ The regulations governing webcasting, where royalties are 
paid on a per-performance basis, exclude from the definition of 
``performance'' those sound recordings not requiring a license and 
those that are licensed separately. See 37 CFR 380.2, 380.11, and 
380.21.
---------------------------------------------------------------------------

E. Late or Never-Delivered ROUs

    SoundExchange proposes amendments to address those instances where 
a licensee submits its ROU late, never submits an ROU, or submits an 
unusable ROU.\12\
---------------------------------------------------------------------------

    \12\ For 2012, SoundExchange states that 41% of the ROUs 
received were submitted more than five days late, 31% of licensees 
never submitted any ROU, and 585 licensees submitted ROUs with an 
average match rate under 50%. Moreover, according to SoundExchange, 
in 2012, 69% of licensees have failed at least once to submit a 
required ROU. Id. at 26.
---------------------------------------------------------------------------

1. Proxy Distribution
    First, SoundExchange seeks from the Judges standing authorization 
to use proxy data \13\ for distribution of royalties in those instances 
where a licensee either fails to submit an ROU or submits an ROU that 
is unusable and the likelihood of SoundExchange obtaining meaningful 
information in order to effectuate a distribution is small. Id. at 28. 
SoundExchange notes that proxy distributions have been authorized in 
two prior instances: (1) In 2004, the ROUs submitted by PSS constituted 
the proxy data for distributions to all other types of services for the 
period 1998-2004, see 69 FR 58261 (Sept. 30, 2004); and (2) in 2011, 
for the period 2004-2009, ROUs of other services of the same type for a 
particular calendar year served as proxy data for those services not 
submitting an ROU during that calendar year. See 37 CFR 370.3(i), 
370.4(f).
---------------------------------------------------------------------------

    \13\ ``Proxy data,'' as defined by SoundExchange, is ``data 
about usage, other than the actual usage for which the relevant 
royalties were paid, which is used in place of (i.e., as a `proxy' 
for) data concerning the actual relevant usage in making a royalty 
distribution.'' Id. at 27 n13.
---------------------------------------------------------------------------

    Unlike in the prior instances of proxy distributions, where the 
distribution methodology was specified in the regulations, the language 
proposed by SoundExchange here is more general in that it does not 
specify a particular methodology. SoundExchange charges that ``a 
standing regulation (as opposed to one targeted at a one-time 
distribution and based on an analysis of the situation at that time) 
should provide flexibility for SoundExchange to reassess the details of 
the distribution methodology from time to time to achieve fair results 
based on circumstances at that time and its most recent data and 
experience.'' Id. at 29. Given the composition of its board of 
directors--representatives of the recording industry (both major and 
independent labels), recording artists, artist representatives and 
music organizations--SoundExchange argues that it is ``well-situated to 
make a determination of when a proxy distribution is justified and of 
what precise methodology should be employed.'' Id.
    The Judges recognize that the distribution methodology may not 
necessarily have to be specified in a regulation; however, the Judges 
believe that SoundExchange should have to disclose the methodology 
serving as the basis for a proxy distribution and afford copyright 
owners and performers an opportunity to object to the proffered 
methodology. Thus, the Judges seek comment on how to accomplish these 
goals without codification in a regulation. Should the amended 
regulation include language requiring SoundExchange to post the 
proffered methodology for a particular proxy distribution on its Web 
site and provide a timeframe in which affected copyright owners and 
performers may object? What is an adequate and reasonable timeframe for 
objections to be lodged? If there is an objection, what process should 
be adopted in order to resolve the objection? Is there some other 
process?
2. Late Fees
    Next, SoundExchange urges the Judges to impose a late fee for ROUs 
that are untimely and/or noncompliant. Id. at 29. The proposed language 
offered by SoundExchange states, in pertinent part, that the late fee 
``shall accrue from the due date of the [ROU] until a fully compliant 
[ROU] is received by the Collective or the relevant royalties are 
distributed pursuant to [a proxy distribution], provided that, in the 
case of a timely provided but noncompliant [ROU], the Collective'' 
notifies the Service within 90 days of ``any noncompliance that is 
reasonably

[[Page 25044]]

evident to the Collective.'' \14\ See SX Petition at Exhibit B at 
proposed Sec.  370.6(a).
---------------------------------------------------------------------------

    \14\ The proposed language mirrors that adopted by the Judges in 
Sec. Sec.  380.13(e) and 380.23(e), which, SoundExchange 
acknowledges, resulted from settlement agreements between 
SoundExchange and certain webcasters. Id. at 30.
---------------------------------------------------------------------------

    In support of its proposal, SoundExchange stresses that the ROU's 
importance to the distribution process equals that of the royalty 
payment and the SOA, namely, without it, no distribution can be made. 
Id. at 30. SoundExchange notes that the Judges have imposed late fees 
for late payments and late SOAs, see, e.g., 37 CFR 382.13(d), and 
argues that the same reasoning supports adoption of a late fee for 
ROUs, especially in light of the frequency with which ROUs are 
submitted in an untimely and/or noncompliant manner. Id. Finally, 
SoundExchange claims that in its experience the late fees imposed for 
SOAs promote compliance. Id.
    The Judges specifically seek comment on SoundExchange's proposal to 
have the late fee accrue from the original due date until receipt by 
SoundExchange of a fully compliant ROU, in light of the Judges' 
previously stated concern that a late fee provide ``an effective 
incentive'' to comply in a timely manner without being ``punitive.'' 
See 73 FR 4080, 4099 (Jan. 24, 2008). Does the proposed language 
assuage that concern? If not, should the Judges impose a cap on the 
amount of late fees SoundExchange can collect? If so, what should the 
cap be?
3. Accelerated Delivery of ROUs
    Finally, SoundExchange asks the Judges to change the due date for 
ROUs submitted by all non-PSS services from the current 45 days after 
the close of the relevant reporting period to 30 days.\15\ SX Petition 
at 30. The proposed change, in SoundExchange's view, better reflects 
the ``30-day [reporting] cycle for digital music services common under 
commercial music license agreements.'' Id. SoundExchange contends the 
requirement of services to report on a monthly, rather than the 
previous quarterly, basis obviates the need for the 45-day due 
date.\16\ Id. Adoption of this proposed amendment, according to 
SoundExchange, will allow ``more time for data quality assurance 
without affecting the timing of distributions,'' thereby expediting the 
distribution of royalties. Id. at 31.
---------------------------------------------------------------------------

    \15\ ROUs for PSS would remain 45 days after the close of the 
relevant reporting period. See 37 CFR 370.3(b).
    \16\ ``Minimum fee broadcasters'' still report on a quarterly 
basis. See 37 CFR 370.4(d)(3).
---------------------------------------------------------------------------

F. Correction of ROUs and SOAs

    Another impediment to its ability to smoothly execute the royalty 
distribution process alleged by SoundExchange is the ``occasional'' 
receipt of corrected ROUs and SOAs submitted by Services upon their own 
initiative. Id. at 31. By way of example, SoundExchange notes that 
Services paying on a percentage-of-revenue basis submit corrected SOAs 
to reflect an adjustment of their revenue for a certain period. Id. 
Submissions of corrected ROUs and SOAs, according to SoundExchange, 
cause major disruptions to the ``flow of royalties through 
SoundExchange,'' especially when such corrections are submitted after 
completion of the initial processing of a ROU/SOA. Id. To combat such 
disruptions, SoundExchange proposes the addition of a new Sec.  370.6 
which would bar licensees ``from claiming credit for a downward 
adjustment in royalty allocations'' when the corrected ROU/SOA is 
submitted 90 days after the submission of the initial ROU/SOA and would 
allow SoundExchange to ``allocate any adjustment to the usage reported 
on the service's next ROU, rather than the ROU for the period being 
adjusted.'' Id. The proposed amendment, in SoundExchange's view, 
affords licensees ``a fair opportunity to correct their own errors 
without unreasonably burdening the royalty distribution process.'' Id. 
at 32.

G. Recordkeeping

    SoundExchange also proposes amendments to the recordkeeping 
requirements. It contends that the current provisions in 37 CFR 
370.3(h) and 370.4(d)(6) are useful but incomplete. SoundExchange 
contends that currently no clear mechanism exists to allow it to 
substantiate royalty payments that depend on the usage asserted on a 
service's ROUs and SOAs. SoundExchange asserts that some services have 
adopted business rules systematically to exclude from their reported 
usage performances of less than a certain length, an exemption that 
SoundExchange represents is inconsistent with the CRB's regulations. SX 
Petition at 33. SoundExchange contends that such instances of 
underreporting can be determined by comparing the usage reported on the 
ROUs to the original records from which the ROUs were generated. Id. To 
permit such comparison, SoundExchange proposes a change to Sec.  
370.4(d)(5) to require services to retain and provide access to 
unsummarized source records of usage in electronic form, such as server 
logs or other native data. Id. Where a licensee relies upon a third-
party contractor for its transmissions, SoundExchange proposes that the 
licensee be required to retain either server logs or native records of 
usage, if practicable, or, otherwise, retain the native data that the 
contractor provided to the licensee. Id.

H. Proposals SoundExchange Characterizes as Housekeeping

    SoundExchange also proposes a number of changes that it 
characterizes as ``housekeeping'' changes. Although the Judges take no 
position at this time on whether any of the proposed changes in this 
section should be adopted, as a preliminary matter the Judges question 
whether certain of these proposals are properly characterized as 
``housekeeping.''
1. Quattro Pro Template
    SoundExchange proposes that the Judges delete the requirement in 37 
CFR 370.4(e)(2) that SoundExchange provide template ROUs in Quattro Pro 
format, which SoundExchange contends is no longer necessary. SX 
Petition at 34.
2. Inspection of ROUs
    SoundExchange also proposes that the Judges amend the requirement 
in 37 CFR 370.5(d) regarding the right to inspect ROUs. Id. 
SoundExchange proposes two changes to Sec.  370.5(d). First, 
SoundExchange proposes to amend the rule to give featured artists the 
same right to inspect ROUs as copyright owners currently have. Id. at 
36. Second, SoundExchange proposes to remove the last sentence of Sec.  
370.5(d), which requires the Collective to use its best efforts, 
including searching Copyright Office public records and published 
directories of sound recording copyright owners, to locate copyright 
owners to make available reports of use. Id. SoundExchange contends 
that this provision reflects an outdated view of the way in which the 
section 114 license is administered and is no longer practicable. Id.
3. Redundant Confidentiality Provisions
    SoundExchange proposes eliminating confidentiality provisions in 
Sec. Sec.  370.3(g) and 370.4(d)(5), which, SoundExchange contends, are 
redundant, given the presence of a confidentiality provision in Sec.  
370.5(e) that applies to ROUs generally. Id.
4. Clarification of New Subscription Services and Definition of 
Aggregate Tuning Hours
    SoundExchange also proposes amendments to clarify which new 
subscription services are subject to

[[Page 25045]]

reporting on an aggregate tuning hour basis and which are required to 
report performances. Id. at 37. SoundExchange contends that there are 
two principal types of new subscription services, one of which provides 
a ``PSS-like service through cable and satellite television 
distributors and pays royalties pursuant to 37 CFR Part 383 on a 
percentage of revenue basis'' and one of which provides subscription 
webcasting and pays royalties pursuant to 37 CFR Part 380 Subpart A on 
a per-performance basis. Id. SoundExchange contends that the former 
type of service was intended to be permitted to use the aggregate 
tuning hour reporting method but the latter was not. As a result, 
SoundExchange proposes that the Judges amend 37 CFR 370.4(d)(2)(vii) 
and the definition of aggregate tuning hours in 37 CFR 370.4(b)(1) to 
narrow the types of new subscription services that may use the 
aggregate tuning hour reporting method. Id. at 37-38. SoundExchange 
also proposes updating the list of services in the aggregate tuning 
hours definition in 37 CFR 370.4(b)(1) entitled to report on an 
aggregate tuning hour basis purportedly to conform to changes to that 
list that the Judges adopted in 2009. Id. at 38.
5. Miscellaneous
    SoundExchange proposes to change references to SoundExchange's 
office location in 37 CFR 370.4(e)(4). A generic reference would 
replace the address listed in the current rule, which, SoundExchange 
states, is no longer accurate. Id.
    Next, SoundExchange proposes changes to 37 CFR 370.5(c) to state 
that SoundExchange must file an annual report by September 30 of the 
year following the reporting year. SoundExchange contends that the 
September 30 deadline would allow SoundExchange to have sufficient time 
after the end of the reporting year, to prepare a ``typical corporate 
annual report incorporating the audited numbers.'' Id. at 39. According 
to SoundExchange, the proposed September 30 deadline would supersede an 
earlier deadline set forth in a 2007 order from the Judges in which 
they expressed a preference for SoundExchange to post its annual report 
no later than the end of the first quarter of the year following the 
year that is the subject of the report. See Order Granting in Part and 
Denying in Part Services' Motion to Compel SoundExchange to Provide 
Discovery Relating to the Testimony of Barrie Kessler, Docket No. 2005-
5 CRB DTNSRA, at 3 (June 6, 2007).
    Finally, SoundExchange's remaining proposed amendments seek to: (1) 
Institute a consistent convention for capitalization of defined terms, 
which, SoundExchange states, the current rules lack, id.; (2) eliminate 
the term ``AM/FM Webcast'' in 37 CFR 370.4(b)(2) because, according to 
SoundExchange, the term does not appear in the current regulations, id. 
at 40; and (3) refer to the statutory licenses consistently as section 
114 and section 112(e), unless the circumstance indicates a more 
specific reference, id.

V. Conclusion

    The Judges seek comment on each of the proposed amendments herein 
and request that commenters give special attention to those issues 
specifically identified by the Judges in relation to a particular 
proposed amendment.
    The Judges stress that, by setting forth the proposed amendments in 
this NPRM, the Judges are neither adopting them nor endorsing their 
adoption. The Judges will decide whether to adopt, modify, or reject 
any of the proposed amendments after reviewing any comments they 
receive in response to this NPRM.

List of Subjects in 37 CFR Part 370

    Copyright, Sound recordings.

Proposed Regulations

    In consideration of the foregoing, the Copyright Royalty Judges 
propose to amend 37 CFR part 370 as follows.

PART 370--NOTICE AND RECORDKEEPING REQUIREMENTS FOR STATUTORY 
LICENSES

0
1. The authority citation for part 370 continues to read as follows:

    Authority:  17 U.S.C. 112(e)(4), 114(f)(4)(A).
0
2. Amend Sec.  370.1 as follows:
0
a. By revising paragraph (a);
0
b. In paragraph (b), by removing ``114(d)(2)'' and adding ``114'' in 
its place each place it appears and by removing ``preexisting 
subscription service, preexisting satellite digital audio radio 
service, nonsubscription transmission service, new subscription 
service, business establishment service'' and adding ``Preexisting 
Subscription Service, Preexisting Satellite Digital Audio Radio 
Service, Nonsubscription Transmission Service, New Subscription 
Service, Business Establishment Service'' in its place;
0
c. In paragraphs (e) through (g), by removing ``service'' and adding 
``Service'' in its place each place it appears; and
0
d. In paragraph (i), by removing ``114(d)(2)'' and adding ``114'' in 
its place.
    The revision reads as follows:


Sec.  370.1  General definitions.

* * * * *
    (a) A Notice of Use of Sound Recordings Under Statutory License is 
a written notice to sound recording copyright owners of the use of 
their works under section 112(e) or 114 of title 17, United States 
Code, or both, and is required under this part to be filed by a Service 
in the Copyright Office.
* * * * *
0
3. Amend Sec.  370.2 as follows:
0
a. In paragraph (a), by removing ``114(d)(2)'' and adding ``114'' in 
its place;
0
b. In paragraph (b)(5), by removing ``subscription service, preexisting 
satellite digital audio radio service, nonsubscription transmission 
service, new subscription service or business establishment service'' 
and adding ``Subscription Service, Preexisting Satellite Digital Audio 
Radio Service, Nonsubscription Transmission Service, New Subscription 
Service or Business Establishment Service'' in its place;
0
c. By revising paragraph (d); and
0
d. In paragraph (e), by removing ``Recordings under'' and adding 
``Recordings Under'' in its place.
    The revision reads as follows:


Sec.  370.2  Notice of use of sound recordings under statutory license.

* * * * *
0
(d) Filing notices; fees. The original and three copies shall be filed 
with the Licensing Division of the Copyright Office and shall be 
accompanied by the filing fee set forth in Sec.  201.3(e) of this 
title. Notices shall be placed in the public records of the Licensing 
Division. The Notice and filing fee shall be sent to the Licensing 
Division at either the address listed on the form obtained from the 
Copyright Office or to: Library of Congress, Copyright Office, 
Licensing Division, 101 Independence Avenue SE., Washington, DC 20557-
6400. A copy of each Notice also shall be sent to each Collective 
designated by determination of the Copyright Royalty Judges, at the 
physical address or electronic mail address posted on the Collective's 
Web site or identified in its Notice of Designation as Collective under 
statutory license pursuant to Sec.  370.5(b). A Service that, on or 
after July 1, 2004, shall make digital transmissions and/or ephemeral 
phonorecords of sound recordings under statutory license shall file a 
Notice of Use of Sound Recordings Under Statutory License with the

[[Page 25046]]

Licensing Division of the Copyright Office and send a copy of the 
Notice to each Collective prior to the making of the first ephemeral 
phonorecord of the sound recording and prior to the first digital 
transmission of the sound recording.
* * * * *
0
4. Amend Sec.  370.3 as follows:
0
a. In paragraph (a), by removing ``reports of use'' and adding 
``Reports of Use'' in its place, by removing ``114(d)(2)'' and adding 
``114'' in its place, and by removing ``preexisting subscription 
services'' and adding ``Preexisting Subscription Services'' in its 
place.
0
b. In paragraph (c) introductory text, by removing ``preexisting 
subscription service'' and adding ``Preexisting Subscription Service'' 
in its place in the first sentence and by removing ``subscription 
services'' and adding ``Subscription Services'' in its place each place 
it appears;
0
c. In paragraph (c)(2), by removing ``preexisting subscription 
service'' and adding ``Preexisting Subscription Service'' in its place;
0
d. Amend paragraph (d):
0
i. By revising the introductory text;
0
ii. In paragraph (1), by removing ``preexisting subscription service or 
entity'' and adding ``Preexisting Subscription Service'' in its place; 
and
0
iii. In paragraph (5), by removing ``preexisting subscription service'' 
and adding ``Preexisting Subscription Service'' in its place.
0
e. By revising paragraph (e);
0
f. In paragraph (f), by revising the introductory text;
0
g. By revising paragraph (f)(1);
0
h. By removing paragraph (g);
0
i. By redesignating paragraph (h) as paragraph (g); and
0
j. By removing paragraph (i).
    The revisions read as follows:


Sec.  370.3  Reports of use for sound recordings under statutory 
license for preexisting subscription services.

* * * * *
    (d) Content. A ``Report of Use of Sound Recordings Under Statutory 
License'' shall be identified as such by prominent caption or heading, 
and shall include the account number assigned to the Preexisting 
Subscription Service by the Collective (if the Preexisting Subscription 
Service has been notified of such account number by the Collective), 
the character encoding format used to generate the Report of Use (e.g., 
UTF-8), and the Preexisting Subscription Service's ``Intended 
Playlists'' for each channel and each day of the reported month. The 
``Intended Playlists'' shall include a consecutive listing of every 
recording scheduled to be transmitted, and shall contain the following 
information in the following order:
* * * * *
    (e) Signature. Reports of Use shall include or be accompanied by a 
signed statement by the appropriate officer or representative of the 
Preexisting Subscription Service attesting, under penalty of perjury, 
that the information contained in the Report is believed to be accurate 
and is maintained by the Preexisting Subscription Service in its 
ordinary course of business. The signature shall be accompanied by the 
printed or typewritten name and title of the person signing the Report, 
and by the date of signature.
    (f) Format. Reports of Use should be provided on a standard 
machine-readable medium, such as diskette, optical disc, or magneto-
optical disc, and should conform as closely as possible to the 
following specifications, unless the Preexisting Subscription Service 
and the Collective have agreed otherwise:
    (1) Delimited text format, using pipe characters as delimiter, with 
no headers or footers, or XML (Extensible Markup Language) format, in 
either case with character encoding in the UTF-8 format if feasible;
* * * * *
0
5. Revise Sec.  370.4 to read as follows:


Sec.  370.4  Reports of use of sound recordings under statutory license 
for nonsubscription transmission services, preexisting satellite 
digital audio radio services, new subscription services and business 
establishment services.

    (a) General. This section prescribes rules for the maintenance and 
delivery of Reports of Use of sound recordings under section 112(e) or 
section 114 of title 17 of the United States Code, or both, by 
Nonsubscription Transmission Services, Preexisting Satellite Digital 
Audio Radio Services, New Subscription Services, and Business 
Establishment Services.
    (b) Definitions. (1) Aggregate Tuning Hours are the total hours of 
programming that a Preexisting Satellite Digital Audio Radio Service, a 
service as defined in Sec.  383.2(h) of this chapter, a Business 
Establishment Service or a Nonsubscription Service qualifying as a 
Minimum Fee Broadcaster has transmitted during the reporting period 
identified in paragraph (d)(3) of this section to all listeners within 
the United States over the relevant channels or stations, and from any 
archived programs, that provide audio programming consisting, in whole 
or in part, of transmissions by means of a Preexisting Satellite 
Digital Audio Radio Service, a service as defined in Sec.  383.2(h) of 
this chapter, a Business Establishment Service or a Nonsubscription 
Service qualifying as a Minimum Fee Broadcaster, less the actual 
running time of any sound recordings for which the Service has obtained 
direct licenses apart from 17 U.S.C. 114 or which do not require a 
license under United States copyright law. For example, if a Minimum 
Fee Broadcaster transmitted one hour of programming to 10 simultaneous 
listeners, the Minimum Fee Broadcaster's Aggregate Tuning Hours would 
equal 10. If 3 minutes of that hour consisted of transmission of a 
directly licensed recording, the Minimum Fee Broadcaster's Aggregate 
Tuning Hours would equal 9 hours and 30 minutes. If one listener 
listened to the transmission of a Minimum Fee Broadcaster for 10 hours 
(and none of the recordings transmitted during that time was directly 
licensed), the Minimum Fee Broadcaster's Aggregate Tuning Hours would 
equal 10.
    (2) A Minimum Fee Broadcaster is a Nonsubscription Transmission 
Service whose payments for eligible transmissions do not exceed the 
annual minimum fee established for licensees relying upon the statutory 
licenses set forth in 17 U.S.C. 112(e) and 114; and either:
    (i) Meets the definition of a broadcaster pursuant to Sec.  380.2 
of this chapter; or
    (ii) Is directly operated by, or affiliated with and officially 
sanctioned by a domestically accredited primary or secondary school, 
college, university or other post-secondary degree-granting educational 
institution; and
    (iii) The digital audio transmission operations of which are, 
during the course of the year, staffed substantially by students 
enrolled in such institution; and
    (iv) Is not a ``public broadcasting entity'' (as defined in 17 
U.S.C. 118(g)) qualified to receive funding from the Corporation for 
Public Broadcasting pursuant to the criteria set forth in 47 U.S.C. 
396; and
    (v) Is exempt from taxation under section 501 of the Internal 
Revenue code, has applied for such exemption, or is operated by a State 
or possession or any governmental entity or subordinate thereof, or by 
the United States or District of Columbia, for exclusively public 
purposes.
    (3) A Performance is each instance in which any portion of a sound 
recording is publicly performed to a listener by means of a digital 
audio transmission or retransmission (e.g., the delivery of any

[[Page 25047]]

portion of a single track from a compact disc to one listener) but 
excluding the following:
    (i) A performance of a sound recording that does not require a 
license (e.g., the sound recording is not copyrighted);
    (ii) A performance of a sound recording for which the Service has 
previously obtained a license from the copyright owner of such sound 
recording; and
    (iii) An incidental performance that both:
    (A) Makes no more than incidental use of sound recordings 
including, but not limited to, brief musical transitions in and out of 
commercials or program segments, brief performances during news, talk 
and sports programming, brief background performances during disk 
jockey announcements, brief performances during commercials of sixty 
seconds or less in duration, or brief performances during sporting or 
other public events; and
    (B) Other than ambient music that is background at a public event, 
does not contain an entire sound recording and does not feature a 
particular sound recording of more than thirty seconds (as in the case 
of a sound recording used as a theme song).
    (4) Play Frequency is the number of times a sound recording is 
publicly performed by a Service during the relevant period, without 
respect to the number of listeners receiving the sound recording. If a 
particular sound recording is transmitted to listeners on a particular 
channel or program only once during the reporting period, then the Play 
Frequency is one. If the sound recording is transmitted 10 times during 
the reporting period, then the Play Frequency is 10.
    (c) Delivery. Reports of Use shall be delivered to Collectives that 
are identified in the records of the Licensing Division of the 
Copyright Office as having been designated by determination of the 
Copyright Royalty Judges. Reports of Use shall be delivered on or 
before the thirtieth day after the close of each reporting period 
identified in paragraph (d)(3) of this section.
    (d) Report of Use. (1) Separate reports. A Nonsubscription 
Transmission Service, Preexisting Satellite Digital Audio Radio Service 
or a New Subscription Service that transmits sound recordings pursuant 
to the statutory license set forth in section 114 of title 17 of the 
United States Code and makes ephemeral phonorecords of sound recordings 
pursuant to the statutory license set forth in section 112(e) of title 
17 of the United States Code need not maintain a separate Report of Use 
for each statutory license during the relevant reporting periods. 
However, a provider of Services subject to different statutory rates 
shall provide a separate Report of Use for each such type of Service. 
When corporate affiliates provide multiple Services of the same type, 
they shall if feasible consolidate their reporting onto a single Report 
of Use for that type of Service. Each Report of Use must cover the same 
scope of activity (e.g., the same Service offering and the same 
channels or stations) as any related statement of account, unless the 
Service and the Collective have agreed otherwise.
    (2) Content. For a Nonsubscription Transmission Service, 
Preexisting Satellite Digital Audio Radio Service, New Subscription 
Service or Business Establishment Service that transmits sound 
recordings pursuant to the statutory license set forth in section 114 
of title 17 of the United States Code, or the statutory license set 
forth in section 112(e) of title 17 of the United States Code, or both, 
each Report of Use shall contain the following information, in the 
following order, for each sound recording transmitted during the 
reporting periods identified in paragraph (d)(3) of this section, 
whether or not the Service is paying statutory royalties for the 
particular sound recording;
    (i) The name of the Nonsubscription Transmission Service, 
Preexisting Satellite Digital Audio Radio Service, New Subscription 
Service or Business Establishment Service making the transmissions;
    (ii) The featured artist, except in the case of a classical 
recording;
    (iii) The sound recording title, except in the case of a classical 
recording;
    (iv) The International Standard Recording Code (ISRC), where 
available and feasible;
    (v) The album title;
    (vi) The marketing label;
    (vii) For a Nonsubscription Transmission Service except those 
qualifying as Minimum Fee Broadcasters and for a New Subscription 
Service other than a service as defined in Sec.  383.2(h) of this 
chapter: The actual total Performances of the sound recording during 
the reporting period;
    (viii) For a Preexisting Satellite Digital Audio Radio Service, a 
service as defined in Sec.  383.2(h) of this chapter, a Business 
Establishment Service or a Nonsubscription Service qualifying as a 
Minimum Fee Broadcaster: The actual total Performances of the sound 
recording during the reporting period or, alternatively, the:
    (A) Aggregate Tuning Hours;
    (B) Channel or program name; and
    (C) Play Frequency;
    (ix) In the case of a classical recording:
    (A) The ensemble (e.g., orchestra or other group) identified on the 
commercial product packaging, if any;
    (B) The conductor identified on the commercial product packaging, 
if any;
    (C) The soloist(s) identified on the commercial product packaging, 
if any;
    (D) The composer of the relevant musical work;
    (E) The overall title of the relevant musical work (e.g., the name 
of a symphony); and
    (F) The title of the relevant movement or other constituent part of 
the musical work, if applicable; and
    (x) The letters ``NLR'' (for ``no license required'') if the 
Service has excluded the sound recording from its calculation of 
statutory royalties in accordance with regulations setting forth the 
applicable royalty rates and terms because transmission of the sound 
recording does not require a license, or the letters ``DL'' (for 
``direct license'') if the Service has excluded the sound recording 
from its calculation of statutory royalties in accordance with 
regulations setting forth the applicable royalty rates and terms 
because the Service has a license directly from the copyright owner of 
such sound recording.
    (3) Reporting period. A Report of Use shall be prepared:
    (i) For each calendar month of the year by all Services other than 
a Nonsubscription Service qualifying as a Minimum Fee Broadcaster; or
    (ii) For a two-week period (two periods of 7 consecutive days) for 
each calendar quarter of the year by a Nonsubscription Service 
qualifying as a Minimum Fee Broadcaster and the two-week period need 
not consist of consecutive weeks, but both weeks must be completely 
within the calendar quarter.
    (4) Signature. Reports of Use shall include or be accompanied by a 
signed statement by the appropriate officer or representative of the 
Service attesting, under penalty of perjury, that the information 
contained in the Report is believed to be accurate and is maintained by 
the Service in its ordinary course of business. The signature shall be 
accompanied by the printed or typewritten name and the title of the 
person signing the Report, and by the date of the signature.
    (5) Documentation. A Service shall, for a period of at least three 
years from the date of service or posting of a Report of Use, keep and 
retain a copy of the Report of Use. During that period, a Service shall 
also keep and retain in

[[Page 25048]]

machine-readable form unsummarized source records of usage underlying 
the Report of Use, such as server logs. If the Service uses a third-
party contractor to make transmissions and it is not practicable for 
the Service to obtain and retain unsummarized source records of usage 
underlying the Report of Use, the Service shall keep and retain the 
original data concerning usage that is provided by the contractor to 
the Service.
    (e) Format and delivery. (1) Electronic format only. Reports of Use 
must be maintained and delivered in electronic format only, as 
prescribed in paragraphs (e)(2) through (7) of this section. A hard 
copy Report of Use is not permissible.
    (2) File format: facilitation by provision of spreadsheet 
templates. All Report of Use data files must be delivered in text or 
XML (Extensible Markup Language) format, with character encoding in the 
UTF-8 format if feasible. To facilitate such delivery, SoundExchange 
shall post and maintain on its Internet Web site a template for 
creating a Report of Use using Microsoft's Excel spreadsheet and 
instruction on how to convert such spreadsheets to UTF-8 text files 
that conform to the format specifications set forth below. Further, 
technical support and cost associated with the use of the spreadsheets 
is the responsibility of the Service submitting the Report of Use.
    (3) Delivery mechanism. The data contained in a Report of Use may 
be delivered by any mechanism agreed upon between the Service and 
SoundExchange, or by File Transfer Protocol (FTP), email, or CD-ROM 
according to the following specifications:
    (i) A Service delivering a Report of Use via FTP must obtain a 
username, password and delivery instructions from SoundExchange. 
SoundExchange shall maintain on a publicly available portion of its Web 
site instructions for applying for a username, password and delivery 
instructions. SoundExchange shall have 15 days from date of request to 
respond with a username, password and delivery instructions.
    (ii) A Service delivering a Report of Use via email shall append 
the Report as an attachment to the email.
    (iii) A Service delivering a Report of Use via CD-ROM must compress 
the reporting data to fit onto a single CD-ROM per reporting period.
    (4) Delivery address. Reports of Use shall be delivered to 
SoundExchange at the physical or electronic mail address posted on its 
Web site or identified in its Notice of Designation as Collective under 
statutory license pursuant to Sec.  370.5(b). SoundExchange shall 
forward electronic copies of these Reports of Use to any other 
Collectives defined in this section.
    (5) File naming. Each data file contained in a Report of Use must 
be given a name by the Service, consisting of the most specific service 
name appropriate to the scope of usage reflected in the Report of Use 
and statement of account, followed by the start and end date of the 
reporting period. The start and end date must be separated by a dash 
and in the format of year, month, and day (YYYYMMDD). Each file name 
must end with the file type extension of ``.txt''. (Example: 
AcmeMusicCo20050101-20050331.txt).
    (6) File type and compression. (i) All data files must be in text 
or XML (Extensible Markup Language) format, with character encoding in 
the UTF-8 format if feasible.
    (ii) A Report of Use must be compressed in one of the following 
zipped formats:
    (A) .zip--generated using utilities such as WinZip and/or UNIX zip 
command;
    (B) .Z--generated using UNIX compress command; or
    (C) .gz--generated using UNIX gzip command.
    (iii) Zipped files shall be named in the same fashion as described 
in paragraph (e)(5) of this section, except that such zipped files 
shall use the applicable file extension compression name described in 
this paragraph (e)(6).
    (7) Files with headers. (i) Services shall submit files with 
headers, in which the following elements, in order, must occupy the 
first 17 rows of a Report of Use:
    (A) Name of Service as it appears on the relevant statement of 
account, which shall be the most specific service name appropriate to 
the scope of usage reflected in the Report of Use and statement of 
account;
    (B) The account number assigned to the Service by the Collective 
for the relevant Service offering (if the Service has been notified of 
such account number by the Collective);
    (C) Name of contact person;
    (D) Street address of the Service;
    (E) City, state and zip code of the Service;
    (F) Telephone number of the contact person;
    (G) Email address of the contact person;
    (H) Start of the reporting period (YYYYMMDD);
    (I) End of the reporting period (YYYYMMDD);
    (J) Station call letters, if multiple broadcast stations are 
included in the Report of Use, or otherwise a blank line;
    (K) Number of rows in data file, beginning with 18th row;
    (L) Checksum (the total of the audience measurements reported on 
the Report of Use);
    (M) Audience measurement type (ATP if the Service reports actual 
total Performances, ATH if the Service reports Aggregate Tuning Hours);
    (N) Character encoding format used to generate the Report of Use 
(e.g., UTF-8);
    (O) Digital signature pursuant to paragraph (d)(4) of this section, 
if included in the Report of Use;
    (P) Blank line; and
    (Q) Report headers (Featured Artist, Sound Recording Title, etc.).
    (ii) Each of the rows described in paragraphs (e)(7)(i)(A) through 
(G) of this section must not exceed 255 alphanumeric characters. Each 
of the rows described in paragraphs (e)(7)(i)(H) and (I) of this 
section should not exceed eight alphanumeric characters.
    (iii) Data text fields, as required by paragraph (d)(2) of this 
section, begin on row 18 of a Report of Use. A carriage return must be 
at the end of each row thereafter. Abbreviations within data fields are 
not permitted.
    (iv) The text indicator character must be unique and must never be 
found in the Report's data content.
    (v) The field delimiter character must be unique and must never be 
found in the Report's data content. Delimiters must be used even when 
certain elements are not being reported; in such case, the Service must 
denote the blank data field with a delimiter in the order in which it 
would have appeared.
0
6. Amend Sec.  370.5 as follows:
0
a. By revising paragraph (a);
0
b. In paragraph (c), by adding ``The Collective should post its Annual 
Report by no later than September 30 of the year following the year 
that is the subject of the report.'' after ``administrative 
expenses.'';
0
c. By revising paragraph (d); and
0
d. By adding new paragraph (g).
    The revisions and addition read as follows:


Sec.  370.5  Designated collection and distribution organizations for 
reports of use of sound recordings under statutory license.

    (a) General. This section prescribes rules under which Reports of 
Use shall be collected and made available under section 112(e) and 114 
of title 17 of the United States Code.
* * * * *
    (d) Inspection of Reports of Use by copyright owners and featured 
artists. The Collective shall make copies of the Reports of Use for the 
preceding three

[[Page 25049]]

years available for inspection by any sound recording copyright owner 
or featured artist, without charge, during normal office hours upon 
reasonable notice. The Collective shall predicate inspection of Reports 
of Use upon information relating to identity, location and status as a 
sound recording copyright owner or featured artist, and the copyright 
owner's or featured artist's written agreement not to utilize the 
information for purposes other than royalty collection and 
distribution, and determining compliance with statutory license 
requirements, without express consent of the Service providing the 
Report of Use.
* * * * *
    (g) Authority to agree to special reporting arrangements. A 
Collective is authorized to agree with Services concerning reporting 
requirements to apply in lieu of the requirements set forth in this 
part.
0
7. Add new Sec. Sec.  370.6 and 370.7 to read as follows:


Sec.  370.6  Late reports of use.

    (a) Late fee. A Service shall pay a late fee for each instance in 
which any Report of Use is not received by the Collective in compliance 
with the regulations in this part by the due date. Such late fee shall 
be a monthly percentage of the payment associated with the late Report 
of Use, where such percentage is the percentage rate specified for late 
payments in the applicable regulations setting forth royalty rates and 
terms for Services of that type. The late fee shall accrue from the due 
date of the Report of Use until a fully compliant Report of Use is 
received by the Collective or the relevant royalties are distributed 
pursuant to paragraph (b) of this section, provided that, in the case 
of a timely provided but noncompliant Report of Use, the Collective has 
notified the Service within 90 days regarding any noncompliance that is 
reasonably evident to the Collective.
    (b) Proxy distribution. In any case in which a Service has not 
provided a compliant Report of Use required under this part for use of 
sound recordings under section 112(e) or section 114 of title 17 of the 
United States Code, or both, and the board of directors of the 
Collective determines that further efforts to seek missing Reports of 
Use from the Service would not be warranted, the Collective may 
determine that it will distribute the royalties associated with the 
Service's missing Reports of Use on the basis of a proxy data set 
approved by the board of directors of the Collective.


Sec.  370.7  Correction of reports of use and statements of account.

    If a Service discovers that it has submitted a Report of Use or 
statement of account for a particular reporting period that is in 
error, the Service should promptly deliver to the Collective a 
corrected Report of Use or statement of account, as applicable. 
However, more than 90 days after the Service's first submission of a 
Report of Use or statement of account for a particular reporting 
period, as the case may be, the Service cannot claim credit for a 
reduction in royalties by submitting a corrected Report of Use or 
statement of account for the reporting period. Subject to the 
foregoing, when a Service submits a corrected Report of Use or 
statement of account for a prior reporting period, the Collective may 
allocate any upward or permitted downward adjustment in the Service's 
royalty obligations to the usage reported on the Service's next Report 
of Use provided in the ordinary course.

    Dated: February 20, 2014.
Suzanne M. Barnett,
Chief U.S. Copyright Royalty Judge.
[FR Doc. 2014-09798 Filed 5-1-14; 8:45 am]
BILLING CODE 1410-72-P