Proposed Rule2025-08805
Determination of Rates and Terms for Digital Performance of Sound Recordings and Making of Ephemeral Copies To Facilitate Those Performances (Web VI)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 16, 2025
Issuing agencies
Library of CongressCopyright Royalty Board
Abstract
The Copyright Royalty Judges are publishing for comment proposed regulations governing the rates and terms for the nonsubscription digital performance of sound recordings by commercial broadcasters and for the making of ephemeral recordings necessary for the facilitation of such transmissions for the period commencing January 1, 2026, and ending on December 31, 2030.
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<title>Federal Register, Volume 90 Issue 94 (Friday, May 16, 2025)</title>
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[Federal Register Volume 90, Number 94 (Friday, May 16, 2025)]
[Proposed Rules]
[Pages 20977-20982]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-08805]
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LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Part 380
[Docket No 23-CRB-0012-WR (2026-2030)]
Determination of Rates and Terms for Digital Performance of Sound
Recordings and Making of Ephemeral Copies To Facilitate Those
Performances (Web VI)
AGENCY: Copyright Royalty Board (CRB), Library of Congress.
ACTION: Proposed rule related to commercial webcasters.
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SUMMARY: The Copyright Royalty Judges are publishing for comment
proposed regulations governing the rates and terms for the
nonsubscription digital performance of sound recordings by commercial
broadcasters and for the making of ephemeral recordings necessary for
the facilitation of such transmissions for the period commencing
January 1, 2026, and ending on December 31, 2030.
DATES: Comments and objections, if any, are due June 16, 2025.
ADDRESSES: You may submit comments using eCRB, the Copyright Royalty
Board's online electronic filing application, 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 submitted background
documents or comments, go to eCRB, the Copyright Royalty Board's
electronic filing and case management system, at <a href="https://app.crb.gov/">https://app.crb.gov/</a>,
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 <a href="/cdn-cgi/l/email-protection#32514050725e5d511c555d44"><span class="__cf_email__" data-cfemail="d5b6a7b795b9bab6fbb2baa3">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Background
Section 114 of the Copyright Act, title 17 of the United States
Code, provides a statutory license that allows for the public
performance of sound recordings by means of a digital audio
transmission by, among others, eligible nonsubscription transmission
services. 17 U.S.C. 114(f). For purposes of the section 114 license, an
``eligible nonsubscription transmission'' is a noninteractive digital
audio transmission that 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 other entertainment programming, but not to sell, advertise,
or promote particular goods or services. See 17 U.S.C. 114(j)(6).
Services using the section 114 license may need to make one or more
temporary or ``ephemeral'' copies of a sound recording to facilitate
the transmission of that recording. The section 112 statutory license
allows for the making of these ephemeral reproductions. 17 U.S.C.
112(e).
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 sections 114 and 112 statutory licenses. 17
U.S.C. 801(b)(1), 804(b)(3)(A). The current proceeding commenced in
January 2024 for rates and terms that will become effective on January
1, 2026, and end on December 31, 2030. Pursuant to section
804(b)(3)(A), the Judges published in the Federal Register a notice
commencing the proceeding and requesting that
[[Page 20978]]
interested parties submit their petitions to participate. 89 FR 812
(Jan. 5, 2024). SoundExchange, Inc. (``SoundExchange''), and National
Association of Broadcasters (``NAB'') each filed Petitions to
Participate, as did others.
On April 9, 2025, the Judges received a joint motion from
SoundExchange and NAB to adopt a partial settlement of their interests
regarding Web VI rates and terms for 2026-2030 and seeking approval of
that partial settlement. Joint Motion to Adopt Partial Settlement,
Docket No. 23-CRB-0012-WR (2026-2030).
On April 14, 2025, the Judges issued ``Order 36 To File
Certification or Provide Settlement Agreement,'' Docket No. 23-CRB-
0012-WR (2026-2030) which instructed the Settling Parties to certify
that the Motion and the Proposed Regulations annexed to the Motion
represent the full agreement of the Settling Parties, i.e., that there
are no other related agreements and no other clauses. Order 36 further
ordered that if such other agreements or clauses exist, the Settling
Parties shall file them.
On April 18, 2025, the Settling Parties filed a Joint Response
stating that ``[t]he Proposed Regulations constituted the Settling
Parties' complete agreement concerning statutory rates and terms. See
17 U.S.C. 801(b)(7)(A). However, as is customary in any litigation
settlement, the Settling Parties also agreed on procedures for filing
and announcing their settlement, which were set forth in a Commercial
Broadcaster Settlement Agreement entered into between SoundExchange and
NAB as of April 4, 2025 (``Settlement Agreement'').'' Joint Response of
SoundExchange Joint Petitioners and the National Association of
Broadcasters to Order 36. Docket No. 23-CRB-0012-WR (2026-2030)
(``Joint Response''). The Settling Parties certified that ``the only
other agreement between the Parties related to the Settlement is the
Settlement Agreement.'' Joint Response at 2. The Settlement Agreement
is attached to the Joint Response as Exhibit C and ``includes, at
Paragraph 10, a merger clause, reflecting that the entirety of the
Settling Parties' agreement is encompassed in the Settlement
Agreement.'' Joint Response at 2.
Based upon the Judges' review of the Joint Response, its
attachments, and the related submissions referenced therein, the Judges
find no reason to doubt that Exhibit C to the Joint Response
constitutes ``the agreement'' for purposes of Section 801(b)(7)(A).
Exhibit C may be found on pages 11-31 of the Joint Response (eCRB no.
57276). The Judges hereby publish the Proposed Regulations and request
comments from the public.\1\
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\1\ The docket for this proceeding, including documents
referenced in this document, may be accessed via the Electronic
filing system eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a> and perform a case search
for docket 23-CRB-0012-WR (2026-2030).
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Statutory Timing of Adoption of Rates and Terms
Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to
adopt royalty 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. The Judges must
provide ``an opportunity to comment on the agreement'' to participants
and non-participants in the rate proceeding who ``would be bound by the
terms, rates, or other determination set by any agreement. . . .'' 17
U.S.C. 801(b)(7)(A)(i). Participants in the proceeding may also
``object to [the agreement's] adoption as a basis for statutory terms
and rates.'' Id.
The Judges ``may decline to adopt the agreement as a basis for
statutory terms and rates for participants that are not parties to the
agreement,'' only ``if any participant [in the proceeding] objects to
the agreement and the [Judges] conclude, based on the record before
them if one exists, that the agreement does not provide a reasonable
basis for setting statutory terms or rates.'' 17 U.S.C.
801(b)(7)(A)(ii), or where the negotiated agreement includes provisions
that are contrary to the provisions of the applicable license(s) or
otherwise contrary to statutory law. See Scope of the Copyright Royalty
Judges Authority to Adopt Confidentiality Requirements upon Copyright
Owners within a Voluntarily Negotiated License Agreement, 78 FR 47421,
47422 (Aug. 5, 2013), citing 74 FR 4537, 4540 (Jan. 26, 2009).
Any rates and terms adopted pursuant to this provision would be
binding on all copyright owners of sound recordings, and commercial
broadcasters performing the sound recordings for the license period
2026-2030.
Proposed Adjustments to Rates and Terms
According to SoundExchange and NAB, the settlement includes agreed-
upon per-performance royalties for nonsubscription digital audio
transmissions by Commercial Broadcasters (and ephemeral recordings to
facilitate such transmissions), as well as agreed-upon increases in the
annual minimum fee over the rate period. The proposed regulations also
include certain agreed-upon changes to existing statutory license
terms, including shortening the monthly payment cycle from 45 days to
30 days, reducing the late fee applicable to late payments discovered
in an audit during the period from which a notice of intent is filed
through the date that the auditor provides its written report from 1.5%
per month to 1% per month, capping late fees on underpayments
discovered during an audit at 75% of the total amount the auditor
determines is owed pursuant to the audit, providing SoundExchange
permission to distribute royalties based on proxy data when it cannot
obtain a report of use from a Commercial Broadcaster, and effective
January 1, 2027, requiring Commercial Broadcasters using third-party
vendors for transmissions or reporting to either obtain data necessary
for verifying their royalty payments from their vendors on an ongoing
basis or contractually require delivery of necessary data in the event
of an audit (in each instance of the foregoing, as set forth in more
detail in the attached Settlement). Other terms of the applicable
Section 112(e) and 114 statutory licenses are agreed to continue in all
material respects in accordance with the same terms as are in effect on
the date of the Motion (April 9, 2025). Joint Motion at 2-3.
Those who would be bound by the terms, rates, or other
determination set by the agreement may comment on, and proceeding
participants may object to, any or all of the proposed regulations
contained in this document. Such comments and objections must be
submitted no later than June 16, 2025.
List of Subjects in 37 CFR Part 380
Copyright, Sound recordings, Webcasters.
Proposed Regulations
For the reasons set forth in the preamble, the Copyright Royalty
Board proposes to amend 37 CFR part 380 as follows:
PART 380--RATES AND TERMS FOR TRANSMISSIONS BY ELIGIBLE
NONSUBSCRIPTION SERVICES AND NEW SUBSCRIPTION SERVICES AND FOR THE
MAKING OF EPHEMERAL REPRODUCTIONS TO FACILITATE THOSE TRANSMISSIONS
0
1. The authority citation for part 380 continues to read as follows:
Authority: 17 U.S.C. 112(e), 114(f), 804(b)(3).
0
2. Add subpart E to read as follows:
[[Page 20979]]
Subpart E--Nonsubscription Transmissions by Commercial Broadcasters
Sec.
380.40 Definitions.
380.41 Royalty fees for the public performance of sound recordings
by Commercial Broadcasters making Nonsubscription Transmissions and
for Ephemeral Recordings.
380.42 Making payment of royalty fees.
380.43 Delivering statements of account.
380.44 Distributing royalty fees.
380.45 Handling Confidential Information.
380.46 Auditing payments and distributions.
Sec. 380.40 Definitions.
In addition to the definitions in Sec. 380.7, the following
definitions apply for purposes of this subpart:
Collective means the collection and distribution organization that
is designated by the Copyright Royalty Judges, which, for the current
rate period, is SoundExchange, Inc.
Commercial Broadcaster is a Commercial Webcaster, a material part
of the business of which consists of owning and operating one or more
terrestrial AM or FM broadcast radio stations licensed as such by the
Federal Communications Commission.
Commercial Webcaster means a Licensee, other than a Noncommercial
Webcaster, Noncommercial Educational Webcaster, or Public Broadcaster,
that makes Ephemeral Recordings and eligible Digital Audio
Transmissions of sound recordings pursuant to the statutory licenses
under 17 U.S.C. 112(e) and 114(d)(2).
Copyright Owners means sound recording copyright owners, and rights
owners under 17 U.S.C. 1401(l)(2), who are entitled to royalty payments
made under this part pursuant to the statutory licenses under 17 U.S.C.
112(e) and 114.
Digital Audio Transmission has the same meaning as in 17 U.S.C.
114(j)(5).
Eligible Transmission means a Nonsubscription Transmission made by
a Licensee that is subject to licensing under 17 U.S.C. 114(d)(2) and
the payment of royalties under this part.
Ephemeral Recording has the same meaning as in 17 U.S.C. 112.
Licensee means a Commercial Webcaster, a Noncommercial Webcaster, a
Noncommercial Educational Webcaster, a Public Broadcaster, or any
entity operating a noninteractive internet streaming service that has
obtained a license under 17 U.S.C. 114 to make Eligible Transmissions
and a license under 17 U.S.C. 112(e) to make Ephemeral Recordings to
facilitate those Eligible Transmissions.
Noncommercial Educational Webcaster means a Noncommercial
Educational Webcaster under subpart C of this part.
Noncommercial Webcaster has the same meaning as in 17 U.S.C.
114(f)(4)(E), but excludes a Noncommercial Educational Webcaster or
Public Broadcaster.
Nonsubscription has the same meaning as in 17 U.S.C. 114(j)(9).
Payor means the entity required to make royalty payments to the
Collective or the entity required to distribute royalty fees collected,
depending on context. The Payor is:
(1) A Licensee, in relation to the Collective; and
(2) The Collective in relation to a Copyright Owner or Performer.
Performance means each instance in which any portion of a sound
recording is publicly performed to a listener by means of a Digital
Audio Transmission (e.g., the delivery of any portion of a single track
from a compact disc or server copy to one listener), but excludes the
following:
(1) A performance of a sound recording that does not require a
license (e.g., a sound recording that is not subject to protection
under title 17, United States Code);
(2) A performance of a sound recording for which the service has
previously obtained a license from the Copyright Owner of such sound
recording; and
(3) An incidental performance that both:
(i) 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
(ii) Does not contain an entire sound recording, other than ambient
music that is background at a public event, 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).
Performers means the independent administrators identified in 17
U.S.C. 114(g)(2)(B) and (C) and the parties identified in 17 U.S.C.
114(g)(2)(D).
Public Broadcaster means a Public Broadcaster under subpart D of
this part.
Qualified Auditor means an independent Certified Public Accountant.
Transmission has the same meaning as in 17 U.S.C. 114(j)(15).
Sec. 380.41 Royalty fees for the public performance of sound
recordings by Commercial Broadcasters making Nonsubscription
Transmissions and for Ephemeral Recordings.
(a) Royalty fees. During the period 2026-2030, royalty rates for
Commercial Broadcasters making Nonsubscription Digital Audio
Transmissions of sound recordings pursuant to 17 U.S.C. 114, and for
Ephemeral Recordings of sound recordings made pursuant to 17 U.S.C.
112(e) to facilitate such transmissions, are as follows:
(1) 2026: $0.0028 per Performance;
(2) 2027: $0.0029 per Performance;
(3) 2028: $0.0030 per Performance;
(4) 2029: $0.0031 per Performance; and
(5) 2030: $0.0032 per Performance.
(b) Minimum fee. (1) Subject to paragraph (b)(2) of this section,
Commercial Broadcasters making Nonsubscription Digital Audio
Transmissions of sound recordings pursuant to 17 U.S.C. 114 must pay
the Collective a minimum fee as follows each year for each channel or
station:
(i) 2026: $1,100;
(ii) 2027: $1,150;
(iii) 2028: $1,200;
(iv) 2029: $1,250; and
(v) (2030: $1,250.
(2) The Collective must apply the fee to the Commercial
Broadcaster's account as credit towards any additional royalty fees
that the Commercial Broadcaster may incur under this subpart in the
same year. The fee is payable for each individual channel and each
individual station maintained or operated by the Commercial Broadcaster
and making Nonsubscription Digital Audio Transmissions of sound
recordings pursuant to 17 U.S.C. 114 during each calendar year or part
of a calendar year during which it is a Licensee. The maximum aggregate
minimum fee that a Commercial Broadcaster making Nonsubscription
Digital Audio Transmissions of sound recordings pursuant to 17
U.S.C.114 must pay under this subpart in any calendar year is 100
multiplied by the applicable amount specified in paragraph (b)(1) of
this section. The minimum fee is nonrefundable.
(c) Ephemeral Recordings royalty fees; allocation between Ephemeral
Recordings and performance royalty fees. The Collective must credit 5%
of all royalty payments under this subpart as payment for Ephemeral
Recordings and credit the remaining 95% to section 114 royalties. All
Ephemeral Recordings that a Commercial Broadcaster makes which are
necessary and commercially reasonable for making noninteractive
Nonsubscription Digital Audio Transmissions are included in the 5%.
[[Page 20980]]
Sec. 380.42 Making payment of royalty fees.
(a) Payment to the Collective. A Commercial Broadcaster must make
the royalty payments due under this subpart to SoundExchange, Inc.,
which is the Collective designated by the Copyright Royalty Board to
collect and distribute royalties under this subpart.
(b) Monthly payments. A Commercial Broadcaster must make royalty
payments on a monthly basis. Payments, Statements of Account and
Reports of Use are due on or before the 30th day after the end of the
month in which the Commercial Broadcaster made Nonsubscription Digital
Audio Transmissions of sound recordings pursuant to 17 U.S.C. 114.
(c) Minimum payments. A Commercial Broadcaster must make any
minimum annual payments due under this subpart by January 31 of the
applicable license year. A Commercial Broadcaster that as of January 31
of any year has not made any Nonsubscription Digital Audio
Transmissions or Ephemeral Recordings pursuant to the licenses in 17
U.S.C. 114 and/or 17 U.S.C. 112(e), but that begins making such
transmissions after that date must make any payment due by the 30th day
after the end of the month in which the Commercial Broadcaster
commences making such transmissions.
(d) Late fees. (1) A Commercial Broadcaster must pay a late fee for
each payment and each Statement of Account that the Collective receives
after the due date. The late fee is 1.5% (or the highest lawful rate,
whichever is lower) of the late payment amount per month, except as
specified in paragraph (d)(2) of this section. The late fee for a late
Statement of Account is 1.5% of the payment amount associated with the
Statement of Account. Late fees accrue from the due date until the date
that the Collective receives the late payment or late Statement of
Account.
(2) In a case in which, pursuant to Sec. 380.46(g), an auditor
determines that a Commercial Broadcaster underpaid royalties pursuant
to this subpart:
(i) The late fee applicable to the underpayment so discovered shall
accrue at the rate of 1% (or the highest lawful rate, whichever is
lower) of the underpayment amount per month during the period starting
on the date that the relevant notice of intent to audit is filed with
the Copyright Royalty Judges pursuant to Sec. 380.46(c), and ending on
the date that the auditor provides its written report pursuant to Sec.
380.46(f);
(ii) The late fee applicable to the underpayment so discovered
shall accrue at the rate provided in paragraph (d)(1) of this section
at all other times between the due date and the date that the
Collective receives the underpayment so discovered; and
(iii) The total amount of late fees applicable to the underpayment
so discovered shall in no event exceed 75% of the principal amount of
the underpayment so discovered.
(e) Waiver of late fees. The Collective may waive or lower late
fees for immaterial or inadvertent failures of a Commercial Broadcaster
to make a timely payment or submit a timely Statement of Account.
(f) Notice regarding noncompliant Statements of Account. If it is
reasonably evident to the Collective that a timely-provided Statement
of Account is materially noncompliant, the Collective must notify the
Commercial Broadcaster within 90 days of discovery of the
noncompliance.
(g) Use of account numbers. If the Collective notifies a Commercial
Broadcaster of an account number to be used to identify its royalty
payments for a particular service offering, the Commercial Broadcaster
must include that account number on its check or check stub for any
payment for that service offering made by check, in the identifying
information for any payment for that service offering made by
electronic transfer, in its statements of account for that service
offering under Sec. 380.43, and in the transmittal of its Reports of
Use for that service offering under Sec. 370.4 of this chapter.
Sec. 380.43 Delivering statements of account.
(a) Statements of Account. Any payment due under this part must be
accompanied by a corresponding Statement of Account that must contain
the following information:
(1) Such information as is necessary to calculate the accompanying
royalty payment;
(2) The name, address, business title, telephone number, facsimile
number (if any), electronic mail address (if any) and other contact
information of the person to be contacted for information or questions
concerning the content of the Statement of Account;
(3) The account number assigned to the Licensee by the Collective
for the relevant service offering (if the Licensee has been notified of
such account number by the Collective);
(4) The signature of:
(i) The Licensee or a duly authorized agent of the Licensee;
(ii) A partner or delegate if the Licensee is a partnership; or
(iii) An officer of the corporation if the Licensee is a
corporation.
(5) The printed or typewritten name of the person signing the
Statement of Account;
(6) If the Licensee is a partnership or corporation, the title or
official position held in the partnership or corporation by the person
signing the Statement of Account;
(7) A certification of the capacity of the person signing;
(8) The date of signature; and
(9) An attestation to the following effect: I, the undersigned
owner/officer/partner/agent of the Licensee have examined this
Statement of Account and hereby state that it is true, accurate, and
complete to my knowledge after reasonable due diligence and that it
fairly presents, in all material respects, the liabilities of the
Licensee pursuant to 17 U.S.C. 112(e) and 114 and applicable
regulations adopted under those sections.
(b) Certification. Licensee's Chief Financial Officer or, if
Licensee does not have a Chief Financial Officer, a person authorized
to sign Statements of Account for the Licensee, must submit a signed
certification on an annual basis attesting that the Licensee's royalty
statements for the prior year represent a true and accurate
determination of the royalties due and that any method of allocation
employed by Licensee was applied in good faith and in accordance with
U.S. GAAP.
Sec. 380.44 Distributing royalty fees.
(a) Distribution of royalties. (1) The Collective must promptly
distribute royalties received from Commercial Broadcasters to Copyright
Owners and Performers that are entitled thereto, or to their designated
agents. The Collective shall only be responsible for making
distributions to those who provide the Collective with information as
is necessary to identify and pay the correct recipient. The Collective
must distribute royalties on a basis that values all Performances by a
Commercial Broadcaster equally based upon the information provided
under the Reports of Use requirements for Commercial Broadcasters
pursuant to Sec. 370.4 of this chapter and this subpart. In any case
in which a Commercial Broadcaster has not provided a compliant Report
of Use, whether for the current license period or otherwise, and the
board of directors of the Collective determines that further efforts to
seek the missing Report of Use from the Commercial Broadcaster would
not be warranted, the Collective may distribute the royalties
associated with the Commercial Broadcaster's missing Report of Use on
the basis of Reports of Use for the corresponding calendar year filed
by other Licensees.
(2) The Collective must use its best efforts to identify and locate
Copyright
[[Page 20981]]
Owners and featured artists in order to distribute royalties payable to
them under 17 U.S.C. 112(e) and 114. Such efforts must include, but not
be limited to, searches in Copyright Office public records and
published directories of sound recording Copyright Owners.
(b) Unclaimed funds. If the Collective is unable to identify or
locate a Copyright Owner or Performer who is entitled to receive a
royalty distribution under this part, the Collective must retain the
required payment in a segregated trust account for a period of three
years from the date of the first distribution of royalties from the
relevant payment by a Commercial Broadcaster. No claim to distribution
shall be valid after the expiration of the three-year period. After
expiration of this period, the Collective may apply the unclaimed funds
to offset any costs deductible under 17 U.S.C. 114(g)(3).
(c) Retention of records. Commercial Broadcasters shall keep and
securely store complete and accurate books and records relating to
payments of royalties under this subpart for a period of not less than
the prior three calendar years, including all supporting documentation
necessary to permit verification of the accuracy of their payments
pursuant to Sec. 380.46. On and after January 1, 2027, a Commercial
Broadcaster using a third-party vendor for transmission of Performances
licensed as Nonsubscription Digital Audio Transmissions pursuant to 17
U.S.C. 114 or reporting due pursuant to this subpart must comply with
this requirement by either obtaining necessary data from its vendor on
an ongoing basis or contractually requiring delivery of necessary data
by its vendor in the event of verification pursuant to Sec. 380.46.
The Collective shall keep books and records relating to distributions
of royalties for a period of not less than the prior three calendar
years.
(d) Designation of the Collective. (1) The Judges designate
SoundExchange, Inc., as the Collective to receive Statements of Account
and royalty payments from Commercial Broadcasters and to distribute
royalty payments to each Copyright Owner and Performer (or their
respective designated agents) entitled to receive royalties under 17
U.S.C. 112(e) or 114(g).
(2) If SoundExchange, Inc. should dissolve or cease to be governed
by a board consisting of equal numbers of representatives of Copyright
Owners and Performers, then it shall be replaced for the applicable
royalty period by a successor Collective according to the following
procedure:
(i) The nine Copyright Owner representatives and the nine Performer
representatives on the SoundExchange board as of the last day preceding
SoundExchange's cessation or dissolution shall vote by a majority to
recommend that the Copyright Royalty Judges designate a successor and
must file a petition with the Copyright Royalty Judges requesting that
the Judges designate the named successor and setting forth the reasons
therefor.
(ii) Within 30 days of receiving the petition, the Copyright
Royalty Judges must issue an order designating the recommended
Collective, unless the Judges find good cause not to make and publish
the designation in the Federal Register.
Sec. 380.45 Handling Confidential Information.
(a) Definition. For purposes of this part, ``Confidential
Information'' means the Statements of Account and any information
contained therein, including the amount of royalty payments and the
number of Performances, and any information pertaining to the
Statements of Account reasonably designated as confidential by the
party submitting the statement. Confidential Information does not
include documents or information that at the time of delivery to the
Collective is public knowledge. The party seeking information from the
Collective based on a claim that the information sought is a matter of
public knowledge shall have the burden of proving to the Collective
that the requested information is in the public domain.
(b) Use of Confidential Information. The Collective may not use any
Confidential Information for any purpose other than royalty collection
and distribution and activities related directly thereto.
(c) Disclosure of Confidential Information. The Collective shall
limit access to Confidential Information to:
(1) Those employees, agents, consultants, and independent
contractors of the Collective, subject to an appropriate written
confidentiality agreement, who are engaged in the collection and
distribution of royalty payments hereunder and activities related
directly thereto who require access to the Confidential Information for
the purpose of performing their duties during the ordinary course of
their work;
(2) A Qualified Auditor or outside counsel who is authorized to act
on behalf of:
(i) The Collective with respect to verification of a Licensee's
statement of account pursuant to this part; or
(ii) A Copyright Owner or Performer with respect to the
verification of royalty distributions pursuant to this part;
(3) Copyright Owners and Performers, including their designated
agents, whose works a Licensee used under the statutory licenses set
forth in 17 U.S.C. 112(e) and 114 by the Licensee whose Confidential
Information is being supplied, subject to an appropriate written
confidentiality agreement, and including those employees, agents,
consultants, and independent contractors of such Copyright Owners and
Performers and their designated agents, subject to an appropriate
written confidentiality agreement, who require access to the
Confidential Information to perform their duties during the ordinary
course of their work;
(4) Attorneys and other authorized agents of parties to proceedings
under 17 U.S.C. 112 and 114, acting under an appropriate protective
order.
(d) Safeguarding Confidential Information. The Collective and any
person authorized to receive Confidential Information from the
Collective must implement procedures to safeguard against unauthorized
access to or dissemination of Confidential Information using a
reasonable standard of care, but no less than the same degree of
security that the recipient uses to protect its own Confidential
Information or similarly sensitive information.
Sec. 380.46 Auditing payments and distributions.
(a) General. This section prescribes procedures by which any entity
entitled to receive payment or distribution of royalties may verify
payments or distributions by auditing the Payor. The Collective may
audit a Commercial Broadcaster's payments of royalties to the
Collective, and a Copyright Owner or Performer may audit the
Collective's distributions of royalties to the Copyright Owner or
Performer. Nothing in this section shall preclude a verifying entity
and the Payor from agreeing to verification methods in addition to or
different from those set forth in this section.
(b) Frequency of auditing. The verifying entity may conduct an
audit of each Payor only once a year for any or all of the prior three
calendar years. A verifying entity may not audit records for any
calendar year more than once.
(c) Notice of intent to audit. The verifying entity must file with
the Copyright Royalty Judges a notice of intent to audit the Payor,
which notice the Judges must publish in the Federal Register within 30
days of the filing of the notice. Simultaneously with the
[[Page 20982]]
filing of the notice, the verifying entity must deliver a copy to the
Payor.
(d) The audit. The audit must be conducted during regular business
hours by a Qualified Auditor who is not retained on a contingency fee
basis and is identified in the notice. The auditor shall determine the
accuracy of royalty payments or distributions, including whether an
underpayment or overpayment of royalties was made. An audit of books
and records, including underlying paperwork, performed in the ordinary
course of business according to generally accepted auditing standards
by a Qualified Auditor, shall serve as an acceptable verification
procedure for all parties with respect to the information that is
within the scope of the audit.
(e) Access to third-party records for audit purposes. The Payor
must use commercially reasonable efforts to obtain or to provide access
to any relevant books and records maintained by third parties for the
purpose of the audit.
(f) Duty of auditor to consult. The auditor must produce a written
report to the verifying entity. Before rendering the report, unless the
auditor has a reasonable basis to suspect fraud on the part of the
Payor, the disclosure of which would, in the reasonable opinion of the
auditor, prejudice any investigation of the suspected fraud, the
auditor must review tentative written findings of the audit with the
appropriate agent or employee of the Payor in order to remedy any
factual errors and clarify any issues relating to the audit; Provided
that an appropriate agent or employee of the Payor reasonably
cooperates with the auditor to remedy promptly any factual errors or
clarify any issues raised by the audit. The auditor must include in the
written report information concerning the cooperation or the lack
thereof of the employee or agent.
(g) Audit results; underpayment or overpayment of royalties. If the
auditor determines the Payor underpaid royalties, the Payor shall remit
the amount of any underpayment determined by the auditor to the
verifying entity, together with interest as specified in Sec.
380.42(d). In the absence of mutually-agreed payment terms, which may,
but need not, include installment payments, the Payor shall remit
promptly to the verifying entity the entire amount of the underpayment
determined by the auditor and the applicable late fees. If the auditor
determines the Payor overpaid royalties, however, the verifying entity
shall not be required to remit the amount of any overpayment to the
Payor, and the Payor shall not seek by any means to recoup, offset, or
take a credit for the overpayment, unless the Payor and the verifying
entity have agreed otherwise.
(h) Paying the costs of the audit. The verifying entity must pay
the cost of the verification procedure, unless the auditor determines
that there was a net underpayment (i.e., underpayments less any
overpayments) of 10% or more, in which case the Payor must bear the
reasonable, documented costs of the verification procedure, in addition
to paying or distributing the amount of any underpayment.
(i) Retention of audit report. The verifying entity must retain the
report of the audit for a period of not less than three years from the
date of issuance.
Dated: May 13, 2025.
Christina L. Shifton,
Interim Chief Copyright Royalty Judge.
[FR Doc. 2025-08805 Filed 5-15-25; 8:45 am]
BILLING CODE 1410-72-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.