In a highly anticipated decision, Librarian of Congress James H. Billington issued a final decision on June 20 that set the rates and terms for the performance of sound recordings by means of digital audio transmissions, better known as "webcasting."
The decision also recommended rates for the statutory license to make "ephemeral" recordings used to facilitate the transmission of performances of sound recordings.
The decision adopted the recommendation of Register of Copyrights Marybeth Peters and rejected the rates and terms recommended by a Copyright Arbitration Royalty Panel (CARP) on Feb. 20.
The most significant difference between the panel's determination and the Librarian's decision is that the Librarian abandoned the panel's two-tiered rate structure of 14 cents (i.e., $1.40 per 1,000 listeners) for each performance of "Internet-only" transmissions and 7 cents, (i.e., 70 cents per 1,000 listeners) for each retransmission of a performance in an AM/FM radio broadcast, and decided that the rate of 7 cents will apply to both types of transmissions.
Some of the rates for noncommercial broadcasters have also been decreased, and the fee webcasters and broadcasters must pay for the making of ephemeral recordings has been reduced from 9 percent of the performance fees to 8.8 percent. Another important change was that the minimum payment for business establishment services (background music services that transmit music to be performed on business premises) was increased from $500 to $10,000.
The decision generated unprecedented media interest, including prominent coverage in all of the major newspapers, and illuminated the Librarian's and the Register of Copyright's roles in a highly contentious area. A media advisory was issued the previous week by the Library's Public Affairs Office indicating that a summary of the decision would be available on the Copyright Office Web site at 5 p.m. on June 20. According to George Thuronyi, a Copyright Office Web administrator, the site received an unprecedented 30,000-plus hits within 18 hours of the decision.
The Copyright Office and the Librarian of Congress were also the recipients of more than 9,000 e-mail messages since the first recommendations were issued on Feb. 20. Because of a regulation (37 CFR 251.33) that states no person outside the Library of Congress shall engage in ex parte communication with the Librarian of Congress or the Register of Copyrights on the merit or status of any matter, procedural or substantive, relating to the distribution of royalty fees, these e-mails were handled by the Copyright Information Section, which provided general background information about the highly misunderstood legal process.
Background
The Librarian and the Copyright Office became involved in the controversy because of a provision in the Digital Millennium Copyright Act (DMCA), passed by Congress in October 1998, which granted record companies and performers the right to collect royalties when their copyrighted works were played via digital media, including Internet radio. That legislation guaranteed that webcasters could receive a statutory license to use those copyrighted works at a rate to be determined later by the U.S. Copyright Office and to be retroactive to October 1998.
On Nov. 27, 1998, the Library published a notice initiating a voluntary negotiation period for the purpose of establishing rates and terms for the digital public performance of a sound recording license (as it pertains to webcasters) under Section 114 and for the making of ephemeral copies in furtherance of a digital public performance under Section 112 for the period beginning on Oct. 28, 1998, and ending on Dec. 31, 2000.
No voluntary agreements were reached between the Recording Industry of America Inc. (RIAA), the performers, broadcasters and webcasters. As a result, on July 23, 1999, RIAA filed a petition in accordance with 17 U.S.C. 112(e)(5) and 114(f)(2)(B) to convene a CARP for the purpose of setting rates and terms for these licenses, asserting that it had a significant interest in such a proceeding because it had established a collective that comprises more than 200 different recording labels and artists, including all of the major record companies in the United States.
Before this proceeding could be concluded, however, negotiations began to set rates for the second license period beginning on Jan. 1, 2001, and ending on Dec. 31, 2002. Again, the parties could not reach a voluntary agreement. Consequently, the Copyright Office consolidated the two proceedings into a single proceeding in which one panel would set rates and terms for the two license periods for both the Section 114 license and the Section 112 license.
In February, the panel made its decision and reported its determination to the Librarian after a six-month hearing in which webcasters, broadcasters and copyright owners offered evidence for what the appropriate rate and terms should be for the public performance of a sound recording over the Internet. By far the largest for a CARP proceeding, the hearing record included a written transcript approaching 15,000 pages, many thousands of pages of exhibits, and more than 1,000 pages of post-hearing submissions.
One of the provisions of the law that drew controversy was that CARP shall establish rates that most clearly represent the fees that would have been negotiated in the marketplace between a willing buyer and a willing seller. The panel concluded that the best evidence of the marketplace rate for webcasting, including both retransmissions of radio broadcast signals and transmissions of original programming produced for Internet-only transmission, could be found in an agreement reached by RIAA, representing record companies that own the copyrights in the vast majority of sound recordings subject to the statutory license, and Yahoo! Inc., a major webcaster and Internet retransmitter of broadcast radio signals. The panel based its decision on the rates established in that agreement.
In accordance with Section 802(f) of the copyright law (Title 17 U.S.C.), the Librarian had 90 days from date of delivery of the CARP report to review the determination and either accept or reject the proposed rates and terms of payment. He is required to accept the determination of CARP, unless the determination is arbitrary or contrary to law. On May 21, the Librarian, following the recommendation of the Register of Copyrights, rejected the panel's determination. Thirty days later, on June 20, he issued a final determination, setting the rates and terms of payment for these statutory licenses. In making this decision, he adopted the panel's reasoning and recommendations so long as they were not arbitrary or contrary to law.
Based on this standard, the Librarian accepted the panel's determination that an agreement negotiated in the marketplace between RIAA and Yahoo! represented the best evidence of marketplace rates for the digital performance of a sound recording over the Internet. The Librarian, however, did not accept all of the panel's conclusions concerning its rationale for setting a rate twice as high for Internet-only transmissions as compared to retransmissions of over-the-air radio programming. Consequently, the Librarian adopted a unitary rate for each digital transmission of a public performance of a sound recording made over the Internet. Further adjustments to the rates for the ephemeral recording license were also made, based upon the evidence and the applicable standard.
The rates and terms under this determination cover the period from Oct. 28, 1998, through Dec. 31, 2002. Under Section 802(g) of Title 17 U.S.C., any decision of the Librarian of Congress with respect to a determination of an arbitration panel may be appealed by any aggrieved party that would be bound by the determination, to the U.S. Court of Appeals for the District of Columbia Circuit, within 30 days from publication of the decision in the Federal Register.
More information on this matter may be found on: www.copyright.gov/carp/webcasting_rates.html
