02-2242. Digital Performance Right in Sound Recordings and Ephemeral Recordings

AGENCY:

Copyright Office, Library of Congress.

ACTION:

Initiation of voluntary negotiation period.

SUMMARY:

The Copyright Office is announcing the initiation of the voluntary negotiation period for determining reasonable rates and terms for two compulsory licenses, which in one case, allows public performances of sound recordings by means of eligible nonsubscription transmissions, and in the second instance, allows the making of an ephemeral phonorecord of a sound recording in furtherance of making a permitted public performance of the sound recording.

EFFECTIVE DATE:

The voluntary negotiation period begins on January 30, 2002.

ADDRESSES:

Copies of voluntary license agreements and petitions, if sent by mail, should be addressed to: Copyright Arbitration Royalty Panel (CARP), P.O. Box 70977, Southwest Station, Washington, DC 20024. If hand delivered, they should be brought to: Office of the General Counsel, James Madison Memorial Building, Room LM-403, First and Independence Avenue, SE, Washington, DC 20559-6000.

FOR FURTHER INFORMATION CONTACT:

David O. Carson, General Counsel, or Tanya M. Sandros, Senior Attorney, Copyright Arbitration Royalty Panel, P.O. Box 70977, Southwest Station, Washington, DC 20024. Telephone: [phone]. Telefax: [phone].

SUPPLEMENTARY INFORMATION:

In 1995, Congress enacted the Digital Performance Right in Sound Recordings Act of 1995 (“DPRA”), Pub. L. 104-39, which created an exclusive right for copyright owners of sound recordings, subject to certain limitations, to perform publicly the sound recordings by means of certain digital audio transmissions. Among the limitations on the performance right was the creation of a new compulsory license for nonexempt, noninteractive, digital subscription transmissions. 17 U.S.C. 114(f).

The scope of this license was expanded in 1998 upon passage of the Digital Millennium Copyright Act of 1998 (“DMCA” or “Act”), Pub. L. 105-304, in order to allow a nonexempt eligible nonsubscription transmission and a nonexempt transmission by a preexisting satellite digital audio radio service to perform publicly a sound recording in accordance with the terms and rates of the statutory license. 17 U.S.C. 114(a).

An “eligible nonsubscription transmission” is a noninteractive, digital audio transmission which, as the name implies, does not require a subscription for receiving the transmission. The transmission must also be made as part of a service that provides audio programming consisting in whole or in part of performances of sound recordings the purpose of which is to provide audio or entertainment programming, but not to sell, advertise, or promote particular goods or services. A “preexisting satellite digital audio radio service” is a subscription digital audio radio service that received a satellite digital audio radio service license issued by the Federal Communications Commission on or before July 31, 1998. See 17 U.S.C. 114(j)(6) and (10).

In addition to expanding the current § 114 license, the DMCA also created a new statutory license for the making of an “ephemeral recording” of a sound recording by certain transmitting organizations. 17 U.S.C. 112(e). The new statutory license allows entities that transmit performances of sound recordings to business establishments, pursuant to the limitations set forth in Section 114(d)(1)(C)(iv), to make an ephemeral recording of a sound recording for purposes of a later transmission. The new license also provides a means by which a transmitting entity with a statutory license under Section 114(f) can make more than the one phonorecord permitted by the exemption specified in Section 112(a). 17 U.S.C. 112(e).

Determination of Reasonable Terms and Rates

The statutory scheme for establishing reasonable terms and rates is the same for both licenses. The terms and rates for the two new statutory licenses may be determined by voluntary agreement among the affected parties, or if necessary, through compulsory arbitration conducted pursuant to Chapter 8 of the Copyright Act.

If the affected parties are able to negotiate voluntary agreements, then it may not be necessary for these parties to participate in an arbitration proceeding. See 17 U.S.C. 112(e)(5) and 114(f)(3). Similarly, if the parties negotiate an industry-wide agreement, an arbitration may not be needed. In the latter case, the Librarian of Congress will follow current rate regulation procedures and notify the public of the proposed agreement in a notice and comment proceeding. If no party with a substantial interest and an intent to participate in an arbitration proceeding files a comment opposing the negotiated rates and terms, the Librarian will adopt the proposed terms and rates without convening a copyright arbitration royalty panel. 37 CFR 251.63(b). If, however, no industry-wide agreement is reached, or only certain parties negotiate license agreements, then those copyright owners and users relying upon one or both of the statutory licenses shall be bound by the terms and rates established through the arbitration process.

Arbitration proceedings cannot be initiated unless a party files a petition for ratemaking with the Librarian of Congress during the 60-day period, beginning July 1, 2002. 17 U.S.C. 112(e)(6) and 114(f)(2)(C)(ii)(II).

On November 27, 1998, the Copyright Office initiated a six-month voluntary negotiation period in accordance with Section 112(e)(3) and 114(f)(2)(A) for the purpose of establishing rates and terms for these licenses for the period beginning on the effective date of the DMCA and ending on December 31, 2000. 63 FR 65555 (November 27, 1998). Parties to these negotiations however, were unable to reach agreement on the rates and terms and, in accordance with Sections 112(e)(4) and 114(f)(1)(B), the Copyright Office initiated arbitration proceedings to determine the rates and terms for use of these licenses through December 31, 2000. 64 FR 52107 (September 27, 1999).

Subsequently, the Copyright Office initiated another voluntary negotiation period in January 2000 for the purpose of setting rates and terms for use of these licenses by services for the period between January 1, 2001, and December 31, 2002. 66 FR 2194 (January 13, 2000). Because the panel in both proceedings was to set rates and terms for the same licenses, albeit for different time periods, the Office consolidated the 1998-2000 proceeding with the 2001-2002 proceeding. See Order, Docket Nos.99-6 CARP DTRA and 2000-3 CARP DTRA2 (December 4, 2000). This consolidated proceeding is still ongoing and the CARP is scheduled to submit its report on February 20, 2002. See Order, Docket No. 2000-9 CARP DTRA1&2 (November 9, 2001).

Initiation of the Next Round of Voluntary Negotiations

Unless the schedule has been readjusted by the parties in a previous rate adjustment proceeding, Sections 112(e)(7) and 114(f)(2)(C)(i)(II) of the Copyright Act require the publication of a notice in January 2002, and at 2-year intervals thereafter, initiating the voluntary negotiation periods for determining reasonable rates and terms for the statutory licenses permitting the public performance of a sound recording by means of certain digital transmissions and the making of an ephemeral recording in accordance with Section 112(e). Parties who negotiate a voluntary license agreement during this period are encouraged to submit two copies of the agreement to the Copyright Office at the above-listed address within 30 days of its execution.

The publication of this notice fulfills the requirement. The negotiation period shall begin on January 30, 2002, and end on June 30, 2002.

Petitions

In the absence of a license agreement negotiated under 17 U.S.C. 112(e)(4) or 114(f)(2)(A), those copyright owners of sound recordings and entities availing themselves of the statutory licenses are subject to arbitration upon the filing of a petition by a party with a significant interest in establishing reasonable terms and rates for the statutory licenses. Petitions must be filed in accordance with 17 U.S.C. 112(e)(7), 114(f)(2)(C)(ii)(II), and 803(a)(1) and may be filed any time during the sixty-day period beginning on July 1, 2002. See also, 37 CFR 251.61. Parties should submit petitions to the Copyright Office at the address listed in this notice. The petitioner must deliver an original and five copies to the Office.

Dated: January 24, 2002.

David O. Carson,

General Counsel.