Proposed Rule2022-11521
Determination of Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)
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Published
June 1, 2022
Issuing agencies
Library of CongressCopyright Royalty Board
Abstract
The Copyright Royalty Judges publish for comment proposed regulations that set rates and terms applicable during the period beginning January 1, 2023, and ending December 31, 2027, for the section 115 statutory license for making and distributing certain configurations of phonorecords of nondramatic musical works.
Full Text
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<title>Federal Register, Volume 87 Issue 105 (Wednesday, June 1, 2022)</title>
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[Federal Register Volume 87, Number 105 (Wednesday, June 1, 2022)]
[Proposed Rules]
[Pages 33093-33095]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-11521]
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LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Part 385
[Docket No. 21-CRB-0001-PR (2023-2027)]
Determination of Rates and Terms for Making and Distributing
Phonorecords (Phonorecords IV)
AGENCY: Copyright Royalty Board, Library of Congress.
ACTION: Proposed rule.
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SUMMARY: The Copyright Royalty Judges publish for comment proposed
regulations that set rates and terms applicable during the period
beginning January 1, 2023, and ending December 31, 2027, for the
section 115 statutory license for making and distributing certain
configurations of phonorecords of nondramatic musical works.
DATES: Comments and objections, if any, are due no later than July 1,
2022.
ADDRESSES: You may send comments, identified by docket number 21-CRB-
0001-PR (2023-2027), by filing online through eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a>.
Instructions: To send your comment through eCRB, if you don't have
a user account, you will first need to register for an account and wait
for your registration to be approved. Approval of user accounts is only
available during business hours. Once you have an approved account, you
can only sign in and file your comment after setting up multi-factor
authentication, which can be done at any time of day. All comments must
include the Copyright Royalty Board name and the docket number for this
proposed rule. All properly filed comments will appear without change
in eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a>, including any personal information
provided.
Docket: For access to the docket to read background documents or
comments received, go to eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a> and perform a case
search for docket 21-CRB-0001-PR (2023-2027).
FOR FURTHER INFORMATION CONTACT: Anita Brown, CRB Program Specialist,
at 202-707-7658 or <a href="/cdn-cgi/l/email-protection#31524353715d5e521f565e47"><span class="__cf_email__" data-cfemail="4427362604282b276a232b32">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Background
Section 115 of the Copyright Act, title 17 of the United States
Code, requires a copyright owner of a nondramatic musical work to grant
a license (also known as the ``mechanical'' compulsory license) to any
person who wants to make and distribute phonorecords of that work,
provided that the copyright owner has allowed phonorecords of the work
to be produced and distributed, and that the licensee complies with the
statute and regulations. In addition to the production or distribution
of physical phonorecords (compact discs, vinyl, cassette tapes, and the
like), section 115 applies to digital transmissions of phonorecords,
including permanent digital downloads and ringtones.
Chapter 8 of the Copyright Act requires the Copyright Royalty
Judges (Judges) to conduct proceedings every five years to determine
the rates and terms for the section 115 license. 17 U.S.C. 801(b)(1),
804(b)(4). Accordingly, the Judges commenced the current proceeding in
January 2021, by publishing notice of the commencement and soliciting
petitions to participate from interested parties. See 86 FR 25 (Jan. 5,
2021).
The Judges received petitions to participate in the current
proceeding from <a href="http://Amazon.com">Amazon.com</a> Services LLC, Apple Inc., Copyright Owners
(joint petitioners Nashville Songwriters Association International
(NSAI) and National Music Publishers' Association (NMPA)), Google LLC,
George Johnson, Joint Record Company Participants (filed by Recording
Industry Association of America, Inc. for joint petitioners Sony Music
Entertainment, UMG Recordings, Inc., and Warner Music Group Corp.),
Pandora Media, LLC, David Powell, SoundCloud Operations Inc.,\1\
Spotify USA Inc., and Brian Zisk.\2\
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\1\ SoundCloud Operations Inc. withdrew from the proceeding on
May 21, 2021.
\2\ David Powell and Brian Zisk filed petitions to participate
in this proceeding; neither filed a Written Direct Statement.
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The Judges gave notice to all participants of the three-month
negotiation period required by 17 U.S.C. 803(b)(3) and directed that,
if the participants were unable to negotiate a settlement, they should
submit Written Direct Statements no later than September 10, 2021. On
May 25, 2021, the Judges received a motion stating that several
participants \3\ had reached a partial settlement regarding the rates
and terms for the period commencing in January 2023 under Section 115
of the Copyright Act, namely, the applicable rates for use of musical
works in physical phonorecords, permanent downloads, ringtones, and
music bundles (Subpart B Configurations) \4\
[[Page 33094]]
and seeking approval of that partial settlement. See Motion to Adopt
Settlement of Statutory Royalty Rates and Terms for Subpart B
Configurations, Docket No. 21-CRB-0001-PR (2023-2027) at 1 (May 25,
2021). The Judges published for comment a proposed rule and received
comments in opposition to the settlement from twelve interested
parties, including joint comments from organizations, trade
associations, and self-assembled groups of parties.\5\ See 86 FR 33601
(June 25, 2021), 86 FR 40793 (Jul. 29, 2021) (reopening comment
period), 86 FR 58626 (Oct. 22, 2021) (reopening comment period a second
time).
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\3\ The participants who filed the motion are the ``Copyright
Owners'' (NMPA and NSAI) and the ``Record Company Participants''
(Sony Music Entertainment, UMG Recordings, Inc. and Warner Music
Group Corp.). Motion at 1.
\4\ Subpart B refers to subpart B, part 385, subchapter E,
chapter III, 37 CFR, the regulations detailing royalty rates and
terms for licensing musical works under the provisions of 17 U.S.C.
115 (Copyright Act).
\5\ One participant in the proceeding, George Johnson d/b/a GEO
Music, objected to the settlement. Other parties opposing adoption
of the settlement as a basis for statutory rates and terms included
songwriters, publishers, music industry attorneys, and trade
associations.
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After considering the comments in opposition to the settlement, the
Judges withdrew the proposed rule that would have adopted that
settlement as statutory royalty rates. See Proposed rule; withdrawal;
Determination of Royalty Rates and Terms for Making and Distributing
Phonorecords (Phonorecords IV), 87 FR 18342 (Mar. 30, 2022).
On May 5, 2022, the Judges received a Joint Motion to Adopt New
Settlement of Statutory Royalty Rates and Terms for Subpart B
Configurations (Motion). The moving parties are self-identified
Copyright Owners and self-identified Record Company Participants.\6\
The full text of the Motion is available on eCRB (<a href="https://app.crb.gov">https://app.crb.gov</a>).\7\
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\6\ The composition of the moving parties is the same as in the
original motion filed in May 2021.
\7\ The Motion stated that the Moving Parties had previously
separately entered into a memorandum of understanding (MOU)
addressing certain negotiated licensing processes and late fee
waivers but that the MOU was ``not consideration'' for any of the
terms of the current settlement. See Motion at 4 n. 2; 6. (<a href="https://app.crb.gov/document/download/26619">https://app.crb.gov/document/download/26619</a>). The Moving Parties contend
that predecessor agreements to the MOU, some or all of which may be
incorporated by reference in the current MOU, are publicly available
online at <a href="http://nmpalatefeesettlement.com/">http://nmpalatefeesettlement.com/</a>.
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On May 19, 2022, George Johnson d/b/a/ GEO, filed a response in
opposition to the Motion.\8\
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\8\ In general, the Judges do not receive pleadings in
opposition to a motion that triggers publication of notice, such as
the Motion at issue here. Nonetheless, the Judges received and
considered GEO's timely opposition. The Judges will not consider
that opposition as a formal comment as required by publication in
the Federal Register. The Moving Parties communicated to the Judges
that no reply is forthcoming.
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The settlement proposes that the section 115 royalty rate for
subpart B configurations for the rate period commencing January 1,
2023, be set at $0.12 per track, with annual inflation-based
adjustments for subsequent years of the rate period. Motion at 3. The
Moving Parties proposed editorial and substantive changes to applicable
regulations found in both subparts A and B of part 385 to accomplish
the rate increase.
The proposed editorial changes apply to two definitions in subpart
A and would clarify the reach and application of the terms ``Licensed
Activity,'' and ``Sound Recording Company.'' The substantive changes
occur in secs. 385.10 and 385.11, which state the proposed rate for
2023 and describe the proposed annual inflation-based rate adjustment
for subsequent years. The Moving Parties provided a redlined version of
the regulations and the proposed changes thereto, along with the stated
rationale for each change. Motion at 6-7.
As part of this proposed rule, the Judges propose an additional
minor revision to the definition of ``Eligible Digital Download'' in
section 385.2. The cross-reference to 17 U.S.C. 115(c)(3)(C) and (D) in
that definition is shortened to 17 U.S.C. 115 because, following
enactment of the Music Modernization Act, the section no longer has a
subsection (c)(3). See Orrin G. Hatch-Bob Goodlatte Music Modernization
Act, Public Law 115-264, 132 Stat. 3678, 3679-3684 (October 11, 2018).
Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to
adopt rates and terms negotiated by ``some or all of the participants
in a proceeding at any time during the proceeding'' provided they are
submitted to the Judges for approval. This section provides that the
Judges shall provide notice and an opportunity to comment on the
agreement to (1) those that would be bound by the terms, rates, or
other determination set by the agreement and (2) participants in the
proceeding that would be bound by the terms, rates, or other
determination set by the agreement. See sec. 801(b)(7)(A). The Judges
may decline to adopt the agreement as a basis for statutory terms and
rates for participants not party to the agreement if any participant
objects and the Judges conclude that the agreement does not provide a
reasonable basis for setting statutory terms or rates. Id.
If the Judges adopt rates and terms reached pursuant to a
negotiated settlement, those rates and terms are binding on all
copyright owners of musical works and those using the musical works in
the activities described in the proposed regulations.
The Judges solicit comments on whether they should adopt the
proposed regulations as statutory rates and terms relating to the
making and distribution of physical or digital phonorecords of
nondramatic musical works encompassed in subpart B, part 385 of the
applicable regulations.
Comments and objections regarding the rates and terms and the
revisions to the regulations proposed by the Moving Parties and the
Judges must be submitted no later than July 1, 2022.
List of Subjects in 37 CFR Part 385
Copyright, Phonorecords, Recordings.
Proposed Regulations
For the reasons set forth in the preamble, the Copyright Royalty
Judges propose to amend 37 CFR part 385 as follows:
PART 385--RATES AND TERMS FOR USE OF NONDRAMATIC MUSICAL WORKS IN
THE MAKING AND DISTRIBUTING OF PHYSICAL AND DIGITAL PHONORECORDS
0
1. The authority citation for part 385 continues to read as follows:
Authority: 17 U.S.C. 115, 801(b)(1), 804(b)(4).
0
2. In Sec. 385.2 revise the introductory text of the definition for
``Eligible Limited Download'', the definition for ``Licensed
Activity'', and the fourth sentence in the definition for Sound
Recording Company to read as follows:
Sec. 385.2 Definitions.
* * * * *
Eligible Limited Download means a transmission of a sound recording
embodying a musical work to an End User of a digital phonorecord under
17 U.S.C. 115 that results in a Digital Phonorecord Delivery of that
sound recording that is only accessible for listening for--
* * * * *
Licensed Activity, as the term is used in subparts C and D of this
part, means delivery of musical works, under voluntary or statutory
license, via Digital Phonorecord Deliveries in connection with
Interactive Eligible Streams, Eligible Limited Downloads, Limited
Offerings, mixed Bundles, and Locker Services.
* * * * *
Sound Recording Company means a person or entity that:
* * * * *
(4) Performs the functions of marketing and authorizing the
distribution of a sound recording of a musical work under its own
label, under
[[Page 33095]]
the authority of a person identified in paragraphs (1) through (3) of
this section.
* * * * *
0
3. Revise Sec. 385.10 to read as follows:
Sec. 385.10 Scope.
This subpart establishes rates and terms of royalty payments for
making and distributing physical phonorecords, Permanent Downloads,
Ringtones, and Music Bundles, in accordance with the provisions of 17
U.S.C. 115.
0
4. Revise Sec. 385.11 paragraph (a) to read as follows:
Sec. 385.11 Royalty rates.
(a) Physical phonorecords and Permanent Downloads.
(1) 2023 Rate. For the year 2023, for every physical phonorecord
and Permanent Download the Licensee makes and distributes or authorizes
to be made and distributed, the royalty rate payable for each work
embodied in the phonorecord or Permanent Download shall be either 12.0
cents or 2.31 cents per minute of playing time or fraction thereof,
whichever amount is larger.
(2) Annual rate adjustment. The Copyright Royalty Judges shall
adjust the royalty rates in paragraph (a)(1) of this section each year
to reflect any changes occurring in the cost of living as determined by
the most recent Consumer Price Index for All Urban Consumers (U.S. City
Average, all items) (CPI-U) published by the Secretary of Labor before
December 1 of the preceding year. The calculation of the rate for each
year shall be cumulative based on a calculation of the percentage
increase in the CPI-U from the CPI-U published in November, 2022 (the
Base Rate) and shall be made according to the following formulas: for
the per-work rate, (1 + (Cy-Base Rate)/Base Rate) x 12[cent], rounded
to the nearest tenth of a cent; for the per-minute rate, (1 + (Cy-Base
Rate)/Base Rate) x 2.31[cent], rounded to the nearest hundredth of a
cent; where Cy is the CPI-U published by the Secretary of Labor before
December 1 of the preceding year. The Judges shall publish notice of
the adjusted fees in the Federal Register at least 25 days before
January 1. The adjusted fees shall be effective on January 1.
* * * * *
Dated: May 24, 2022.
Suzanne M. Barnett,
Chief Copyright Royalty Judge.
[FR Doc. 2022-11521 Filed 5-31-22; 8:45 am]
BILLING CODE 1410-72-P
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