Determination of Rates and Terms for Digital Performance of Sound Recordings by New Subscription Services and Making of Ephemeral Copies To Facilitate Those Performances (NSS V), 810-812 [2023-28515]
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810
Federal Register / Vol. 89, No. 4 / Friday, January 5, 2024 / Notices
request permission to participate by
submitting a short statement.
Please note the Secretary’s Office will
accept only electronic filings during this
time. Filings must be made through the
Commission’s Electronic Document
Information System (EDIS, https://
edis.usitc.gov). No in-person paperbased filings or paper copies of any
electronic filings will be accepted until
further notice.
Written submissions.—As provided in
§§ 201.8 and 207.15 of the
Commission’s rules, any person may
submit to the Commission on or before
5:15 p.m. on January 24, 2024, a written
brief containing information and
arguments pertinent to the subject
matter of the investigations. Parties shall
file written testimony and
supplementary material in connection
with their presentation at the conference
no later than noon on January 18, 2024.
All written submissions must conform
with the provisions of § 201.8 of the
Commission’s rules; any submissions
that contain BPI must also conform with
the requirements of §§ 201.6, 207.3, and
207.7 of the Commission’s rules. The
Commission’s Handbook on Filing
Procedures, available on the
Commission’s website at https://
www.usitc.gov/documents/handbook_
on_filing_procedures.pdf, elaborates
upon the Commission’s procedures with
respect to filings.
In accordance with §§ 201.16(c) and
207.3 of the rules, each document filed
by a party to the investigations must be
served on all other parties to the
investigations (as identified by either
the public or BPI service list), and a
certificate of service must be timely
filed. The Secretary will not accept a
document for filing without a certificate
of service.
Certification.—Pursuant to § 207.3 of
the Commission’s rules, any person
submitting information to the
Commission in connection with these
investigations must certify that the
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making the certification, the submitter
will acknowledge that any information
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during these investigations may be
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and contract personnel (a) for
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reviews, or (b) in internal investigations,
audits, reviews, and evaluations relating
to the programs, personnel, and
operations of the Commission including
under 5 U.S.C. Appendix 3; or (ii) by
U.S. government employees and
contract personnel, solely for
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cybersecurity purposes. All contract
personnel will sign appropriate
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Authority: These investigations are
being conducted under authority of title
VII of the Tariff Act of 1930; this notice
is published pursuant to § 207.12 of the
Commission’s rules.
By order of the Commission.
Issued: December 29, 2023.
Susan Orndoff,
Acting Attorney Advisor.
[FR Doc. 2024–00034 Filed 1–4–24; 8:45 am]
BILLING CODE 7020–02–P
LIBRARY OF CONGRESS
Copyright Royalty Board
[Docket No. 23–CRB–0013–NSR (2026–
2030)]
Determination of Rates and Terms for
Digital Performance of Sound
Recordings by New Subscription
Services and Making of Ephemeral
Copies To Facilitate Those
Performances (NSS V)
Copyright Royalty Board (CRB),
Library of Congress.
ACTION: Notice announcing
commencement of proceeding with
request for petitions to participate.
AGENCY:
The Copyright Royalty Judges
(Judges) announce commencement of a
proceeding to determine reasonable
rates and terms for digital performance
of sound recordings by new
subscription services and the making of
ephemeral recordings to facilitate those
performances for the period beginning
January 1, 2026, and ending December
31, 2030. The Judges also announce the
date by which a party wishing to
participate in the rate determination
proceeding must file its Petition to
Participate and the accompanying $150
filing fee.
DATES: Petitions to Participate and the
filing fee are due no later than February
5, 2024.
ADDRESSES: The petition to participate
form is available online in eCRB, the
Copyright Royalty Board’s online
electronic filing application, at https://
app.crb.gov/.
Instructions: The petition to
participate process has been simplified.
Interested parties file a petition to
participate by completing and filing the
petition to participate form in eCRB and
paying the fee in eCRB. Do not upload
a petition to participate document.
Docket: For access to the docket, go to
eCRB, the Copyright Royalty Board’s
electronic filing and case management
SUMMARY:
PO 00000
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system, at https://app.crb.gov/ and
search for docket number 23–CRB–
00013–NSR (2026–2030).
FOR FURTHER INFORMATION CONTACT:
Anita Brown, CRB Program Specialist,
(202) 707–7658, crb@loc.gov.
SUPPLEMENTARY INFORMATION:
Background
Under the Copyright Act, the
Copyright Royalty Judges (Judges) must
commence a proceeding every five years
to determine reasonable rates and terms
to license the digital transmission of
sound recordings by new subscription
services and the making of ephemeral
recordings to facilitate those
transmissions. See 17 U.S.C. 112(e),
114(d)(2), 803(b)(1)(A)(i)(III),
804(b)(3)(A), 37 CFR 383. This notice
commences the rate determination
proceeding for the license period 2026–
2030.
Scope of Proceeding
In addition to all other submissions
and arguments required by the Act and
the applicable regulations, and in
addition to any other submissions or
arguments that the Participants choose
to make, there is an interest among
certain Judges in receiving evidence,
testimony, and argument relating to the
allocation of the royalty payments
required by the Judges’ determination in
this proceeding between the section 112
ephemeral recordings royalties and the
section 114 sound recording royalties.1
Accordingly, the Judges invite
Participants, within their written direct
statements, written rebuttal statements,
proposed findings of fact, conclusions of
law and briefing, through their
witnesses and attorneys, as appropriate,
to consider addressing the following
questions.
Question #1
Does the ephemeral license created by
section 112 have economic value
independent of any economic value in
1 Nothing set forth in this section of the Notice
of Commencement should be construed as a
statement by the Judges as to how they will
ultimately rule as to any evidence or testimony
proffered with regard to, inter alia, admissibility,
competency, relevancy, probative value or weight
or dispositive effect, as to any issue, or whether
they will or will not ultimately consider, accept, or
adopt any argument made in response to this
section. Additionally, nothing in this section
should be construed as an indication that the Judges
will or will not ultimately consider any of the
issues set forth herein or addressed by the
Participants in response to this invitation in any
determination rendered by them. Further, by
soliciting information regarding these issues, the
Judges are not indicating that they have reached any
preliminary decisions as to any of these issues.
Further, to avoid doubt, the interest among the
Judges as expressed herein does not necessarily
relate to any other statutory licenses.
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Federal Register / Vol. 89, No. 4 / Friday, January 5, 2024 / Notices
the digital public performance of sound
recording license (‘‘sound recording
license’’) created by section 114 and,
reciprocally, does the sound recording
license created by section 114 have
economic value independent of any
economic value in the ephemeral
license created by section 112?
Regarding this Question #1, the
Judges note the following language in
the Web V Determination:
SoundExchange and the Services are
generally on the same page regarding
ephemeral recordings, except as to the
question whether the right to make
ephemeral recordings has independent
economic value. Compare SX PFFCL ¶ 1570
(and sources cited therein) (‘‘ephemeral
copies have economic value to services that
publicly perform sound recordings because
these services cannot, as a practical matter,
properly function without those copies’’)
with Services RPFFCL ¶ 1570 (and sources
cited therein) (‘‘While the Services do not
dispute that ephemeral recording right is
frequently needed, it does not have
independent economic value.’’).
Web V Final Determination, 86 FR
59542, 59584 n. 351 (Oct. 27, 2021),
aff’d. National Religious Broadcasters
Noncommercial License Committee v.
Copyright Royalty Bd., 77 F.4th 949
(D.C. Cir. 2023) (emphasis added).
Among the Judges, there is an interest
in obtaining the Participants’ positions
on this Question #1 in the context of the
economic characterization of the
relationship between the section 112
ephemeral license and the section 114
sound recording license. In particular,
the Judges inquire whether the parties
identify these two licenses as perfect
complements.2
The Web V Determination indicates
that participants in that proceeding
were cognizant of the irrelevancy of the
‘‘relative price’’ (i.e., the royalty) for
these two licenses, and thus their
perfect complementarity:
lotter on DSK11XQN23PROD with NOTICES1
As to the specific allocation of royalties
between the performance and ephemeral
recording rights, SoundExchange notes that
this allocation has no effect on the Services.
See SX PFFCL ¶ 1574. . . . ‘‘[T]he willing
2 ‘‘Perfect complements’’ are goods that are
always consumed together in fixed proportions. H.
Varian, Intermediate Microeconomics at 40 (8th ed.
2010). Thus, a purchaser of perfectly
complementary goods ‘‘wants to consume the goods
in the same ratio regardless of their relative price.’’
P. Krugman & R. Wells, Microeconomics at 306 (3d
ed. 2013) (emphasis added). (Each noninteractive
service or New Subscription Service (‘‘NSS’’)
requires both the section 112 ephemeral license and
the section 112 sound recording license in order to
transmit any sound recording, thus making the
fixed proportion (ratio) equal to 1:1 for these
licenses.) The irrelevancy of ‘‘relative price’’
between these perfect complements referenced by
Krugman & Wells underscores the indeterminacy of
the royalties attributable to each license which
underlies the Judges’ present inquiries.
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buyer’’ (i.e., the music service) ‘‘is
disinterested with respect to that allocation
. . . .’’
Web V Determination, 86 FR 59584
(emphasis added).
Accordingly, the Judges invite the
Participants to address this Question #1
in their proffered evidence, testimony,
and/or arguments.
Question #2
Are agreements in the interactive
marketplace or other unregulated
markets informative (and, if so, to what
extent) as to the allocation of royalties
between the section 112 ephemeral
license and the section 114 sound
recording license?
Regarding this Question #2, the
Judges are mindful of the absence of any
statutory requirement in unregulated
markets that specifies percentages of the
sound recording royalties to be
distributed to sound recording artists,
non-featured vocalists and musicians,
and (if Letters of Direction are issued) to
producers, mixers and sound engineers.
In prior proceedings, evidence was
proffered regarding such agreements.
The Judges take note of the following
portion of the Web V Determination:
‘‘Most of these agreements do not set a
distinct rate for those ephemeral copies,
incorporating them instead into the overall
rate that the [music services] pay[ ] for the
combined ephemeral copy rights and
performance rights.’’ Id. at 11–12. Dr. Ford
also testified that to the extent marketplace
agreements do set a royalty rate for
ephemeral recordings they generally express
that rate as a percentage of an overall
bundled rate for both performances and
ephemerals. See Ford Des. WDT at 12–14.
SoundExchange also offers several direct
licenses in the record of this proceeding as
evidence that marketplace agreements do not
set distinct rates (as distinguished from
bundled rates) for ephemeral recordings. See,
e.g., Trial Ex. 4035 at 11–12, 16–19 (2015
Agreement . . .); Trial Ex. 5037 at 3–4, 5–9
(2017 Agreement . . .)
Web V Determination, 86 FR 59584.
Accordingly, the Judges invite the
Participants to address this Question #2
in their proffered evidence, testimony,
and/or arguments.
Question #3
Can and should the Judges rely on
agreements containing provisions
regarding splits of royalties between the
section 112 ephemeral license and the
section 114 sound recording license if
the agreements described by witnesses
or referenced in other documents are
not proffered as evidence in this
proceeding?
This question is of interest because, in
Web V, the Judges received evidence
and testimony that such an agreement
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existed as between the sound recording
companies and the performing artists’
representatives, but that agreement was
not proffered and thus not record
evidence. Specifically on this issue, the
Web V Determination describes the
testimony of a SoundExchange witness:
[T]he SoundExchange board of directors,
which is comprised of record company and
performing artist representatives ‘‘adopted a
resolution reflecting agreement that 5% of
the royalties for the bundle of rights should
be attributable to the Section 112(e)
ephemeral royalties, with the rest being
allocated to the Section 114 performance
royalties.’’ Bender WDT ¶ 56.
SoundExchange avers that ‘‘[a]s a result, a
95%–5% split ‘credibly represents the result
that would in fact obtain in a hypothetical
marketplace negotiation between a willing
buyer and the interested willing sellers under
the relevant constraints.’ ’’
Web V Determination, 86 FR 59584.
However, the Judges noted in the Web
V Determination that ‘‘[t]he
SoundExchange Board resolution
reflecting the agreement between artists
and copyright owners is not in the
record [and] testimony concerning the
agreement, therefore, is hearsay, but the
Judges exercise their discretion under
37 CFR 351.10(a) to admit and consider
this hearsay testimony.’’ Web V
Determination, 86 FR 59584 n.352.
This Question #3 raises the following
subsidiary questions:
Is an internal resolution by
SoundExchange an ‘‘agreement’’?
If the resolution references an agreement,
should both the resolution and the
agreement, if memorialized in writing, be
proffered as evidence?
Is an agreement made by members of the
SoundExchange Board of Directors a
marketplace agreement between willing
parties?
Is such an agreement reflective of a process
in which the parties to the agreement have
bargaining power sufficient to generate an
agreement reflective of effective competition?
Do the Board members voting on the
agreement and resolution on behalf of the
sound recording companies have a sufficient
number of votes to approve or defeat the
agreement and resolution if they all voted
identically?
Do the Board members voting on the
agreement and resolution on behalf of the
artists and others entitled to a share of the
section 114 royalties have a sufficient
number of votes to approve or defeat the
resolution if they all voted identically?
Should the Judges exercise their discretion
to admit hearsay testimony regarding such
agreements and resolutions, or should the
Judges require production of the agreements
and resolutions?
Does the Best Evidence Rule require
production of the actual agreements and
resolutions described above?
Accordingly, the Judges invite the
Participants to address this Question #3
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Federal Register / Vol. 89, No. 4 / Friday, January 5, 2024 / Notices
in their proffered evidence, testimony,
and/or arguments.
Question #4
Petitions To Participate
Parties with a significant interest in
the outcome of the rate proceeding and
wish to participate in the proceeding
must provide the information required
by § 351.1(b) of the Judges’ regulations
by completing and filing the Petition to
Participate form in eCRB. Parties must
pay the $150 filing fee when filing each
Petition to Participate form. Parties must
use the form in eCRB instead of
uploading a document and must comply
with the requirements of § 351.1(b)(1) of
the Copyright Royalty Board’s
regulations. 37 CFR 351.1(b)(1).
Only attorneys admitted to the bar in
one or more states or the District of
Columbia and members in good
standing will be allowed to represent
parties before the Judges. Only
individuals may represent themselves
and appear without legal counsel. 37
CFR 303.2.
The Judges will address scheduling
and further procedural matters after
receiving petitions to participate.
lotter on DSK11XQN23PROD with NOTICES1
Copyright Royalty Board
[Docket No 23–CRB–0012–WR (2026–2030)]
Does the marketplace evidence
indicate how the Judges should consider
allocation of royalties as between the
section 112 ephemeral license and the
section 114 sound recording license,
including allocations to sound recording
artists, non-featured vocalists and
musicians, or to producers, mixers and
sound engineers, pursuant to section
114? Among the Judges, there is a
concern whether—with section 114,
unlike section 112, providing for an
allocation of 50% of the section 114
royalties to artists (and others, in certain
circumstances), as described above—
evidence and the law may lead the
Judges to apportion royalties as between
the section 112 and 114 licenses in a
manner that effectuates the section 114mandated split of royalties in a manner
that is legally and economically
appropriate.
Accordingly, the Judges invite the
Participants to address this Question #4
in their proffered evidence, testimony,
and/or arguments.
Dated: December 20, 2023.
David P. Shaw,
Chief Copyright Royalty Judge.
[FR Doc. 2023–28515 Filed 1–4–24; 8:45 am]
BILLING CODE 1410–72–P
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17:32 Jan 04, 2024
Jkt 262001
Determination of Rates and Terms for
Digital Performance of Sound
Recordings and Making of Ephemeral
Copies To Facilitate Those
Performances (Web VI)
Copyright Royalty Board (CRB),
Library of Congress.
ACTION: Notice announcing
commencement of proceeding with
request for petitions to participate.
AGENCY:
The Copyright Royalty Judges
(Judges) announce commencement of a
proceeding to determine reasonable
rates and terms for two statutory
licenses permitting the digital
performance of sound recordings over
the internet and the making of
ephemeral recordings to facilitate those
performances for the period beginning
January 1, 2026, and ending December
31, 2030. The Judges also announce the
date by which a party wishing to
participate in the rate determination
proceeding must file its Petition to
Participate and pay the accompanying
$150 filing fee.
DATES: Petitions to Participate and the
filing fee are due no later than February
6, 2023.
ADDRESSES: The petition to participate
form is available online in eCRB, the
Copyright Royalty Board’s online
electronic filing application, at https://
app.crb.gov/.
Instructions: The petition to
participate process has been simplified.
Interested parties file a petition to
participate by completing and filing the
petition to participate form in eCRB and
paying the fee in eCRB. Do not upload
a petition to participate document.
Docket: For access to the docket, go to
eCRB, the Copyright Royalty Board’s
electronic filing and case management
system, at https://app.crb.gov/ and
search for docket number 23–CRB–
0012–WR (2026–2030).
FOR FURTHER INFORMATION CONTACT:
Anita Brown, CRB Program Specialist,
at (202) 707–7658 or crb@loc.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
Under the Copyright Act, the
Copyright Royalty Judges (Judges) must
commence a proceeding every five years
to determine reasonable rates and terms
to license the digital transmission over
the internet of sound recordings and the
making of ephemeral recordings to
facilitate those transmissions. See 17
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
U.S.C. 112 (e), 114(d)(2),
803(b)(1)(A)(i)(III), 804(b)(3)(A), 37 CFR
380. This notice commences the rate
determination proceeding for the license
period 2026–2030.
Scope of Proceeding
In addition to all other submissions
and arguments required by the Act and
the applicable regulations, and in
addition to any other submissions or
arguments that the Participants choose
to make, there is an interest among
certain Judges in receiving evidence,
testimony, and argument relating to the
allocation of the royalty payments
required by the Judges’ determination in
this proceeding between the section 112
ephemeral recordings royalties and the
section 114 sound recording royalties.1
Accordingly, the Judges invite
Participants, within their written direct
statements, written rebuttal statements,
proposed findings of fact, conclusions of
law and briefing, through their
witnesses and attorneys, as appropriate,
to consider addressing the following
questions.
Question #1
Does the ephemeral license created by
section 112 have economic value
independent of any economic value in
the digital public performance of sound
recording license (‘‘sound recording
license’’) created by section 114 and,
reciprocally, does the sound recording
license created by section 114 have
economic value independent of any
economic value in the ephemeral
license created by section 112?
Regarding this Question #1, the
Judges note the following language in
the Web V Determination:
SoundExchange and the Services are
generally on the same page regarding
ephemeral recordings, except as to the
question whether the right to make
ephemeral recordings has independent
economic value. Compare SX PFFCL ¶ 1570
(and sources cited therein) (‘‘ephemeral
1 Nothing set forth in this section of the Notice
of Commencement should be construed as a
statement by the Judges as to how they will
ultimately rule as to any evidence or testimony
proffered with regard to, inter alia, admissibility,
competency, relevancy, probative value or weight
or dispositive effect, as to any issue, or whether
they will or will not ultimately consider, accept, or
adopt any argument made in response to this
section. Additionally, nothing in this section
should be construed as an indication that the Judges
will or will not ultimately consider any of the
issues set forth herein or addressed by the
Participants in response to this invitation in any
determination rendered by them. Further, by
soliciting information regarding these issues, the
Judges are not indicating that they have reached any
preliminary decisions as to any of these issues.
Further, to avoid doubt, the interest among the
Judges as expressed herein does not necessarily
relate to any other statutory licenses.
E:\FR\FM\05JAN1.SGM
05JAN1
]]>Agencies
[Federal Register Volume 89, Number 4 (Friday, January 5, 2024)]
[Notices]
[Pages 810-812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28515]
=======================================================================
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LIBRARY OF CONGRESS
Copyright Royalty Board
[Docket No. 23-CRB-0013-NSR (2026-2030)]
Determination of Rates and Terms for Digital Performance of Sound
Recordings by New Subscription Services and Making of Ephemeral Copies
To Facilitate Those Performances (NSS V)
AGENCY: Copyright Royalty Board (CRB), Library of Congress.
ACTION: Notice announcing commencement of proceeding with request for
petitions to participate.
-----------------------------------------------------------------------
SUMMARY: The Copyright Royalty Judges (Judges) announce commencement of
a proceeding to determine reasonable rates and terms for digital
performance of sound recordings by new subscription services and the
making of ephemeral recordings to facilitate those performances for the
period beginning January 1, 2026, and ending December 31, 2030. The
Judges also announce the date by which a party wishing to participate
in the rate determination proceeding must file its Petition to
Participate and the accompanying $150 filing fee.
DATES: Petitions to Participate and the filing fee are due no later
than February 5, 2024.
ADDRESSES: The petition to participate form is available online in
eCRB, the Copyright Royalty Board's online electronic filing
application, at https://app.crb.gov/.
Instructions: The petition to participate process has been
simplified. Interested parties file a petition to participate by
completing and filing the petition to participate form in eCRB and
paying the fee in eCRB. Do not upload a petition to participate
document.
Docket: For access to the docket, go to eCRB, the Copyright Royalty
Board's electronic filing and case management system, at https://app.crb.gov/ and search for docket number 23-CRB-00013-NSR (2026-2030).
FOR FURTHER INFORMATION CONTACT: Anita Brown, CRB Program Specialist,
(202) 707-7658, [email protected].
SUPPLEMENTARY INFORMATION:
Background
Under the Copyright Act, the Copyright Royalty Judges (Judges) must
commence a proceeding every five years to determine reasonable rates
and terms to license the digital transmission of sound recordings by
new subscription services and the making of ephemeral recordings to
facilitate those transmissions. See 17 U.S.C. 112(e), 114(d)(2),
803(b)(1)(A)(i)(III), 804(b)(3)(A), 37 CFR 383. This notice commences
the rate determination proceeding for the license period 2026-2030.
Scope of Proceeding
In addition to all other submissions and arguments required by the
Act and the applicable regulations, and in addition to any other
submissions or arguments that the Participants choose to make, there is
an interest among certain Judges in receiving evidence, testimony, and
argument relating to the allocation of the royalty payments required by
the Judges' determination in this proceeding between the section 112
ephemeral recordings royalties and the section 114 sound recording
royalties.\1\
---------------------------------------------------------------------------
\1\ Nothing set forth in this section of the Notice of
Commencement should be construed as a statement by the Judges as to
how they will ultimately rule as to any evidence or testimony
proffered with regard to, inter alia, admissibility, competency,
relevancy, probative value or weight or dispositive effect, as to
any issue, or whether they will or will not ultimately consider,
accept, or adopt any argument made in response to this section.
Additionally, nothing in this section should be construed as an
indication that the Judges will or will not ultimately consider any
of the issues set forth herein or addressed by the Participants in
response to this invitation in any determination rendered by them.
Further, by soliciting information regarding these issues, the
Judges are not indicating that they have reached any preliminary
decisions as to any of these issues.
Further, to avoid doubt, the interest among the Judges as
expressed herein does not necessarily relate to any other statutory
licenses.
---------------------------------------------------------------------------
Accordingly, the Judges invite Participants, within their written
direct statements, written rebuttal statements, proposed findings of
fact, conclusions of law and briefing, through their witnesses and
attorneys, as appropriate, to consider addressing the following
questions.
Question #1
Does the ephemeral license created by section 112 have economic
value independent of any economic value in
[[Page 811]]
the digital public performance of sound recording license (``sound
recording license'') created by section 114 and, reciprocally, does the
sound recording license created by section 114 have economic value
independent of any economic value in the ephemeral license created by
section 112?
Regarding this Question #1, the Judges note the following language
in the Web V Determination:
SoundExchange and the Services are generally on the same page
regarding ephemeral recordings, except as to the question whether
the right to make ephemeral recordings has independent economic
value. Compare SX PFFCL ] 1570 (and sources cited therein)
(``ephemeral copies have economic value to services that publicly
perform sound recordings because these services cannot, as a
practical matter, properly function without those copies'') with
Services RPFFCL ] 1570 (and sources cited therein) (``While the
Services do not dispute that ephemeral recording right is frequently
needed, it does not have independent economic value.'').
Web V Final Determination, 86 FR 59542, 59584 n. 351 (Oct. 27, 2021),
aff'd. National Religious Broadcasters Noncommercial License Committee
v. Copyright Royalty Bd., 77 F.4th 949 (D.C. Cir. 2023) (emphasis
added).
Among the Judges, there is an interest in obtaining the
Participants' positions on this Question #1 in the context of the
economic characterization of the relationship between the section 112
ephemeral license and the section 114 sound recording license. In
particular, the Judges inquire whether the parties identify these two
licenses as perfect complements.\2\
---------------------------------------------------------------------------
\2\ ``Perfect complements'' are goods that are always consumed
together in fixed proportions. H. Varian, Intermediate
Microeconomics at 40 (8th ed. 2010). Thus, a purchaser of perfectly
complementary goods ``wants to consume the goods in the same ratio
regardless of their relative price.'' P. Krugman & R. Wells,
Microeconomics at 306 (3d ed. 2013) (emphasis added). (Each
noninteractive service or New Subscription Service (``NSS'')
requires both the section 112 ephemeral license and the section 112
sound recording license in order to transmit any sound recording,
thus making the fixed proportion (ratio) equal to 1:1 for these
licenses.) The irrelevancy of ``relative price'' between these
perfect complements referenced by Krugman & Wells underscores the
indeterminacy of the royalties attributable to each license which
underlies the Judges' present inquiries.
---------------------------------------------------------------------------
The Web V Determination indicates that participants in that
proceeding were cognizant of the irrelevancy of the ``relative price''
(i.e., the royalty) for these two licenses, and thus their perfect
complementarity:
As to the specific allocation of royalties between the
performance and ephemeral recording rights, SoundExchange notes that
this allocation has no effect on the Services. See SX PFFCL ] 1574.
. . . ``[T]he willing buyer'' (i.e., the music service) ``is
disinterested with respect to that allocation . . . .''
Web V Determination, 86 FR 59584 (emphasis added).
Accordingly, the Judges invite the Participants to address this
Question #1 in their proffered evidence, testimony, and/or arguments.
Question #2
Are agreements in the interactive marketplace or other unregulated
markets informative (and, if so, to what extent) as to the allocation
of royalties between the section 112 ephemeral license and the section
114 sound recording license?
Regarding this Question #2, the Judges are mindful of the absence
of any statutory requirement in unregulated markets that specifies
percentages of the sound recording royalties to be distributed to sound
recording artists, non-featured vocalists and musicians, and (if
Letters of Direction are issued) to producers, mixers and sound
engineers.
In prior proceedings, evidence was proffered regarding such
agreements. The Judges take note of the following portion of the Web V
Determination:
``Most of these agreements do not set a distinct rate for those
ephemeral copies, incorporating them instead into the overall rate
that the [music services] pay[ ] for the combined ephemeral copy
rights and performance rights.'' Id. at 11-12. Dr. Ford also
testified that to the extent marketplace agreements do set a royalty
rate for ephemeral recordings they generally express that rate as a
percentage of an overall bundled rate for both performances and
ephemerals. See Ford Des. WDT at 12-14.
SoundExchange also offers several direct licenses in the record
of this proceeding as evidence that marketplace agreements do not
set distinct rates (as distinguished from bundled rates) for
ephemeral recordings. See, e.g., Trial Ex. 4035 at 11-12, 16-19
(2015 Agreement . . .); Trial Ex. 5037 at 3-4, 5-9 (2017 Agreement .
. .)
Web V Determination, 86 FR 59584.
Accordingly, the Judges invite the Participants to address this
Question #2 in their proffered evidence, testimony, and/or arguments.
Question #3
Can and should the Judges rely on agreements containing provisions
regarding splits of royalties between the section 112 ephemeral license
and the section 114 sound recording license if the agreements described
by witnesses or referenced in other documents are not proffered as
evidence in this proceeding?
This question is of interest because, in Web V, the Judges received
evidence and testimony that such an agreement existed as between the
sound recording companies and the performing artists' representatives,
but that agreement was not proffered and thus not record evidence.
Specifically on this issue, the Web V Determination describes the
testimony of a SoundExchange witness:
[T]he SoundExchange board of directors, which is comprised of
record company and performing artist representatives ``adopted a
resolution reflecting agreement that 5% of the royalties for the
bundle of rights should be attributable to the Section 112(e)
ephemeral royalties, with the rest being allocated to the Section
114 performance royalties.'' Bender WDT ] 56. SoundExchange avers
that ``[a]s a result, a 95%-5% split `credibly represents the result
that would in fact obtain in a hypothetical marketplace negotiation
between a willing buyer and the interested willing sellers under the
relevant constraints.' ''
Web V Determination, 86 FR 59584.
However, the Judges noted in the Web V Determination that ``[t]he
SoundExchange Board resolution reflecting the agreement between artists
and copyright owners is not in the record [and] testimony concerning
the agreement, therefore, is hearsay, but the Judges exercise their
discretion under 37 CFR 351.10(a) to admit and consider this hearsay
testimony.'' Web V Determination, 86 FR 59584 n.352.
This Question #3 raises the following subsidiary questions:
Is an internal resolution by SoundExchange an ``agreement''?
If the resolution references an agreement, should both the
resolution and the agreement, if memorialized in writing, be
proffered as evidence?
Is an agreement made by members of the SoundExchange Board of
Directors a marketplace agreement between willing parties?
Is such an agreement reflective of a process in which the
parties to the agreement have bargaining power sufficient to
generate an agreement reflective of effective competition?
Do the Board members voting on the agreement and resolution on
behalf of the sound recording companies have a sufficient number of
votes to approve or defeat the agreement and resolution if they all
voted identically?
Do the Board members voting on the agreement and resolution on
behalf of the artists and others entitled to a share of the section
114 royalties have a sufficient number of votes to approve or defeat
the resolution if they all voted identically?
Should the Judges exercise their discretion to admit hearsay
testimony regarding such agreements and resolutions, or should the
Judges require production of the agreements and resolutions?
Does the Best Evidence Rule require production of the actual
agreements and resolutions described above?
Accordingly, the Judges invite the Participants to address this
Question #3
[[Page 812]]
in their proffered evidence, testimony, and/or arguments.
Question #4
Does the marketplace evidence indicate how the Judges should
consider allocation of royalties as between the section 112 ephemeral
license and the section 114 sound recording license, including
allocations to sound recording artists, non-featured vocalists and
musicians, or to producers, mixers and sound engineers, pursuant to
section 114? Among the Judges, there is a concern whether--with section
114, unlike section 112, providing for an allocation of 50% of the
section 114 royalties to artists (and others, in certain
circumstances), as described above--evidence and the law may lead the
Judges to apportion royalties as between the section 112 and 114
licenses in a manner that effectuates the section 114-mandated split of
royalties in a manner that is legally and economically appropriate.
Accordingly, the Judges invite the Participants to address this
Question #4 in their proffered evidence, testimony, and/or arguments.
Petitions To Participate
Parties with a significant interest in the outcome of the rate
proceeding and wish to participate in the proceeding must provide the
information required by Sec. 351.1(b) of the Judges' regulations by
completing and filing the Petition to Participate form in eCRB. Parties
must pay the $150 filing fee when filing each Petition to Participate
form. Parties must use the form in eCRB instead of uploading a document
and must comply with the requirements of Sec. 351.1(b)(1) of the
Copyright Royalty Board's regulations. 37 CFR 351.1(b)(1).
Only attorneys admitted to the bar in one or more states or the
District of Columbia and members in good standing will be allowed to
represent parties before the Judges. Only individuals may represent
themselves and appear without legal counsel. 37 CFR 303.2.
The Judges will address scheduling and further procedural matters
after receiving petitions to participate.
Dated: December 20, 2023.
David P. Shaw,
Chief Copyright Royalty Judge.
[FR Doc. 2023-28515 Filed 1-4-24; 8:45 am]
BILLING CODE 1410-72-P
