[Federal Register: February 13, 1998 (Volume 63, Number 30)]
[Rules and Regulations]
[Page 7288-7289]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 255
[Docket No. 96-4 CARP DPRA]
Mechanical and Digital Phonorecord Delivery Rate Adjustment
Proceeding
AGENCY: Copyright Office, Library of Congress.
ACTION: Final regulations.
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SUMMARY: The Copyright Office of the Library of Congress is announcing
final regulations that became effective on January 1, 1998, adjusting
royalty rates to be paid under the mechanical compulsory license,
section 115 of the 1976 Copyright Act, as amended, for use of physical,
or non-digital, phonorecords. The Office addresses rates for physical
phonorecord delivery today, and will address rates for digital
phonorecord delivery in the future.
EFFECTIVE DATE: January 1, 1998.
FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or
Tanya Sandros, Attorney Advisor, Copyright Arbitration Royalty Panel
(CARP), P.O. Box 70977, Southwest Station, Washington, D.C. 20024.
Telephone: (202) 707-8380. Fax: (202) 707-8366.
SUPPLEMENTARY INFORMATION:
Background
The mechanical compulsory license, 17 U.S.C.115, provides a
mechanism outside the realm of contract for persons who want to make
and distribute phonorecords of nondramatic musical works that have been
distributed in the United States by the copyright owner to obtain a
compulsory license to perform that activity. A person is eligible for
this compulsory license if: (1) He or she has not been able to serve a
notice of intention to obtain the license on the copyright owner, and
(2) a notice of intention has been filed with the Copyright Office. 17
U.S.C. 115(b)(1).
Until its demise in 1993, the Copyright Royalty Tribunal had
authority to adjust the statutory rates for the making and distribution
of physical phonorecords, and did so in 1987, setting the rates and
terms for the mechanical compulsory license for at least the next ten
years. See 52 FR 22637 (June 15, 1987). The Copyright Office currently
administers the mechanical license, and responsibility for adjusting
royalty rates rests with Copyright Arbitration Royalty Panels, known as
CARPs. 17 U.S.C. 801(b)(1), 803. The Copyright Act provides that during
the tenth calendar year following a ratesetting, any copyright owner or
user whose royalty rates are specified by the statutory license may
file a petition requesting an adjustment to the rates and terms. 17
U.S.C. 803(a)(1), (3).
On November 1, 1995, Congress passed the Digital Performance Right
in Sound Recordings Act of 1995 (Digital Performance Act), Pub. L. 104-
39, 109 Stat. 336 (1995), which amended sections 114 and 115 of the
Copyright Act, and extended the mechanical license to digital
phonorecord deliveries. The mechanical rate for physical, or non-
digital, phonorecords can be the same as, or different from, the rate
that applies to digital phonorecord deliveries.
The legislative history for the Digital Performance Act states
that: ``Through 1997, the royalty rate payable for digital phonorecord
delivery shall be the same as for physical phonorecords. After 1997,
the rates for digital phonorecord delivery will be determined as
provided by the amended provisions section 115(c)(3) [sic], and need
not be the same as for the making and distribution of physical
phonorecords.'' H.R. Rep. No. 274, 104th Cong., 1st Sess. 28 (1995).
The House Report further recognizes as separate digital and physical
phonorecord rates, stating: ``The terms and rates shall be established
[for digital use] according to the same criteria that apply to the
license for making and distributing physical phonorecords * * *'' Id.
at 29.
The most recent royalty rate applicable under 17 U.S.C.115 was
described in Copyright Office regulations at 37 CFR 255.3(h), as
follows: ``For every phonorecord made and distributed on or after
January 1, 1996, the royalty rate payable with respect to each work
embodied in the phonorecord shall be either 6.95 cents, or 1.3 cents
per minute of playing time or fraction thereof, whichever amount is
larger.'' Id.
The year 1997 was a window year for commencing a proceeding to
further adjust the mechanical phonorecord compulsory license royalty
rates. The Office initiated proceedings to adjust all section 115 rates
in 1997; however, modifications were made due to requests by the
interested parties for extra time to negotiate terms for a new rate.
At this time the Office is announcing final regulations that adjust
royalty rates for reproduction and distribution of physical
phonorecords. Rate adjustment for use of digital phonorecords under
section 115 will be announced in the future. The Office bifurcates this
procedure in order to finalize the rate adjustment for physical
phonorecords, and then to consider important legal and policy issues
brought forward by interested parties that relate to application of
section 115 rates for digital phonorecord delivery.
History of the Current Proceeding
On July 17, 1996, the Copyright Office published a notice which,
among other things, established a schedule for convening a CARP which
would have set new rates for digital phonorecord deliveries before the
existing rate expired. See 61 FR 37312 (July 17, 1996). As noted supra,
1997 also was a window year for adjusting royalty rates for the making
and distribution of physical phonorecords. The Office requested comment
from interested parties on the possibility of consolidating the two
proceedings, and conducting a single CARP to adjust both the physical
phonorecord and the digital phonorecord delivery rates. See 61 FR 37215
(July 17, 1996).
According to the interested parties, consisting of the Recording
Industry Association of America (RIAA), the National Music Publishers'
Association, Inc. (NMPA), and the Harry Fox Agency, Inc. (referred to
together as the Parties), the proposed schedule did not allot
sufficient time for negotiating a comprehensive joint proposal.
Therefore, they filed a motion with the Office on November 8, 1996,
asking the Office to vacate the proposed schedule to allow them time to
continue their negotiations. The Office granted the Parties' motion and
rescheduled the proceeding. See 61 FR 65243 (December 11, 1996).
[[Page 7289]]
Although the new schedule extended the negotiation period by three
months, the Parties thought the time still insufficient for conducting
the necessary negotiations, and requested a meeting with the Office to
discuss difficulties associated with negotiating rates and terms for
use of digital technology in an evolving marketplace. The Office
granted the request and met with the Parties on January 9, 1997. At
that meeting, the Parties again requested more time to conduct
negotiations on rates and terms for the section 115 license, having
acknowledged the need to establish the mechanical rate before they
attempted to negotiate the rates for the digital delivery of
phonorecords. The Office agreed to vacate the schedule. See 62 FR 5057
(February 3, 1997).
On November 7, 1997, NMPA, RIAA, and the Songwriters' Guild of
America (SGA) filed a joint petition with the Copyright Office
outlining a proposal to adjust the physical phonorecord and digital
phonorecord delivery royalty rates. The Parties to the joint petition,
having duly filed a proposal concerning the 1997 physical phonorecord
and digital phonorecord delivery royalty rate adjustments, asked the
Copyright Office to submit their proposal to a notice-and-comment
proceeding to promulgate regulations to adjust the proposed rates and
terms. Accordingly, pursuant to 17 U.S.C. 803(c) and 37 CFR 251.63(b),
the Copyright Office invited public comment on the proposed rates and
terms for adjusting the physical phonorecord and digital phonorecord
delivery royalty rates, and on the regulatory language implementing the
proposal.<SUP>1</SUP> Comments and Notices of Intent to Participate in
a CARP proceeding, should it be necessary, were to be submitted to the
Office by December 29, 1997.
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\1\ According to 37 CFR 251.63: The Librarian may, upon the
request of the parties, submit the agreed upon rate to the public in
a notice-and-comment proceeding. The Librarian may adopt the rate
embodied in the proposed settlement without convening an arbitration
panel, provided that no opposing comment is received by the
Librarian from a party with an intent to participate in a CARP
proceeding. Id.
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The Office received four comments in response to its Notice of
Proposed Rulemaking, including three Notices of Intent to Participate
in any CARP proceeding which may be instituted in this matter. None of
these filings contained comments or objections to rates proposed for
the reproduction and distribution of physical phonorecords under the
mechanical compulsory license. Because no comments opposing the rates
for reproduction and distribution of physical phonorecords under 17
U.S.C.115 were received, the Librarian adopted those rates, effective
January 1, 1998, but not the rates concerning reproduction and
distribution of digital phonorecords, as they were previously published
in the Federal Register. See 62 FR 63506 (December 1, 1997).
List of Subjects in 37 CFR Part 255
Copyright, Recordings.
For the reasons set forth above, the Copyright Office amends 37 CFR
part 255 as follows:
PART 255--ADJUSTMENT OF ROYALTY PAYABLE UNDER COMPULSORY LICENSE
FOR MAKING AND DISTRIBUTING PHONORECORDS
1. The authority citation for part 255 continues to read as
follows:
Authority: 17 U.S.C. 801(b)(1) and 803.
Sec. 255.3 [Amended]
2. In Sec. 255.3(a), the phrase ``(b), (c), (d), (e), (f), (g), and
(h)'' is removed and the phrase ``(b) through (m)'' is added after the
word ``paragraphs''.
3. In Sec. 255.3(b), the phrase ``(c), (d), (e), (f), (g), and
(h)'' is removed and the phrase ``(c) through (m)'' is added after the
word ``paragraphs''.
4. In Sec. 255.3(c), the phrase ``(d), (e), (f), (g), and (h)'' is
removed and the phrase ``(d) through (m)'' is added after the word
``paragraphs''.
5. In Sec. 255.3(d), the phrase ``(e), (f), (g), and (h)'' is
removed and the phrase ``(e) through (m)'' is added after the word
``paragraphs''.
6. In Sec. 255.3(e), the phrase ``(f), (g), and (h)'' is removed
and the phrase ``(f) through (m)'' is added after the word
``paragraphs''.
7. In Sec. 255.3(f), the phrase ``(g), and (h)'' is removed and the
phrase ``(g) through (m)'' is added after the word ``paragraphs''.
8. In Sec. 255.3(g), the phrase ``paragraph (h)'' is removed and
the phrase ``paragraphs (h) through (m)'' is added after the phrase
``pursuant to''.
9. In Sec. 255.3(h), the phrase ``, subject to further adjustment
pursuant to paragraphs (i) through (m) of this section'' is added after
the word ``larger''.
10. Add new paragraphs (i), (j), (k), (l), and (m) to Sec. 255.3 to
read as follows:
Sec. 255.3 Adjustment of royalty rate.
* * * * *
(i) For every phonorecord made and distributed on or after January
1, 1998, the royalty rate payable with respect to each work embodied in
the phonorecord shall be either 7.1 cents, or 1.35 cents per minute of
playing time or fraction thereof, whichever amount is larger, subject
to further adjustment pursuant to paragraphs (j) through (m) of this
section.
(j) For every phonorecord made and distributed on or after January
1, 2000, the royalty rate payable with respect to each work embodied in
the phonorecord shall be either 7.55 cents, or 1.45 cents per minute of
playing time or fraction thereof, whichever amount is larger, subject
to further adjustment pursuant to paragraphs (k) through (m) of this
section.
(k) For every phonorecord made and distributed on or after January
1, 2002, the royalty rate payable with respect to each work embodied in
the phonorecord shall be either 8.0 cents, or 1.55 cents per minute of
playing time or fraction thereof, whichever amount is larger, subject
to further adjustment pursuant to paragraphs (l) through (m) of this
section.
(l) For every phonorecord made and distributed on or after January
1, 2004, the royalty rate payable with respect to each work embodied in
the phonorecord shall be either 8.5 cents, or 1.65 cents per minute of
playing time or fraction thereof, whichever amount is larger, subject
to further adjustment pursuant to paragraph (m) of this section.
(m) For every phonorecord made and distributed on or after January
1, 2006, the royalty rate payable with respect to each work embodied in
the phonorecord shall be either 9.1 cents, or 1.75 cents per minute of
playing time or fraction thereof, whichever amount is larger.
Dated: January 30, 1998.
Marybeth Peters,
Register of Copyrights.
James H. Billington,
Librarian of Congress.
***2/27/98***