80_FR_58487 80 FR 58300 - Scope of the Copyright Royalty Judges' Continuing Jurisdiction

80 FR 58300 - Scope of the Copyright Royalty Judges' Continuing Jurisdiction

LIBRARY OF CONGRESS
Copyright Office

Federal Register Volume 80, Issue 187 (September 28, 2015)

Page Range58300-58307
FR Document2015-24591

The Copyright Royalty Judges (``CRJs''), acting pursuant to statute, referred novel material questions of substantive law to the Register of Copyrights for resolution. Those questions concerned the manner and extent to which section 114(f)(5)(C) of the Copyright Act bars the CRJs from admitting into evidence or otherwise considering the provisions contained in settlement agreements reached pursuant to the Webcaster Settlement Act of 2009. The Register resolved those questions in a written decision that was transmitted to the CRJs. That decision is reproduced below.

Federal Register, Volume 80 Issue 187 (Monday, September 28, 2015) 
[Federal Register Volume 80, Number 187 (Monday, September 28, 2015)]
[Notices]
[Pages 58300-58307]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-24591]


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LIBRARY OF CONGRESS

 Copyright Office

[Docket No. 2015-4]


Scope of the Copyright Royalty Judges' Continuing Jurisdiction

AGENCY: Copyright Office, Library of Congress.

ACTION: Final order.

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SUMMARY: The Copyright Royalty Judges (``CRJs''), acting pursuant to 
statute, referred novel material questions of substantive law to the 
Register of Copyrights for resolution. Those questions concerned the 
manner and extent to which section 114(f)(5)(C) of the Copyright Act 
bars the CRJs from admitting into evidence or otherwise considering the 
provisions contained in settlement agreements reached pursuant to the 
Webcaster Settlement Act of 2009. The Register resolved those questions 
in a written decision that was transmitted to the CRJs. That decision 
is reproduced below.

DATES: Effective Date: September 22, 2015.

FOR FURTHER INFORMATION CONTACT: Stephen Ruwe, Assistant General 
Counsel, U.S. Copyright Office, P.O. Box 70400, Washington, DC 20024. 
Telephone: (202) 707-8350.

SUPPLEMENTARY INFORMATION: The Copyright Royalty Judges are tasked with 
determining and adjusting rates and terms of royalty payments for 
statutory licenses under the Copyright Act. See 17 U.S.C. 801. If, in 
the course of proceedings before the CRJs, novel material questions of 
substantive law concerning the interpretation of provisions of title 17 
arise, the CRJs are required by statute to refer those

[[Page 58301]]

questions to the Register of Copyrights for resolution. 17 U.S.C. 
802(f)(1)(B).
    On August 19, 2015, the CRJs, acting pursuant to 17 U.S.C. 
802(f)(1)(B), referred novel material questions of substantive law to 
the Register concerning the manner and extent to which section 
114(f)(5)(C) of the Copyright Act bars the CRJs from admitting into 
evidence or otherwise considering the provisions contained in 
settlement agreements reached pursuant to the Webcaster Settlement Act 
of 2009. On September 18, 2015, the Register resolved those questions 
in a Memorandum Opinion that she transmitted to the CRJs. To provide 
the public with notice of the decision rendered by the Register, the 
Memorandum Opinion is reproduced in its entirety below.

    Dated: September 22, 2015.
Maria A. Pallante,
Register of Copyrights.

Before the U.S. Copyright Office, Library of Congress, Washington, DC 
20559

    In the Matter of: DETERMINATION OF ROYALTY RATES AND TERMS FOR 
EPHEMERAL RECORDING AND WEBCASTING DIGITAL PERFORMANCE OF SOUND 
RECORDINGS (Web IV)

Docket No. 14-CRB-0001-WR(2016-2020) (Web IV)

MEMORANDUM OPINION ON NOVEL MATERIAL QUESTIONS OF LAW

    Section 114(f)(5)(C) of the Copyright Act bars the Copyright 
Royalty Judges (``CRJs'' or ``Judges'') from taking into consideration 
in ratesetting proceedings the provisions of agreements entered into 
under the Webcaster Settlement Act of 2009, which allowed the parties 
to negotiate alternative rates and terms from those established by the 
CRJs. Questions have arisen in the pending proceeding to set royalty 
rates and terms for webcasters' digital performance of sound recordings 
and associated ephemeral reproductions about the proper interpretation 
of this provision. The CRJs determined that these were novel material 
questions of substantive law and, as required under section 
802(f)(1)(B) of the Copyright Act, referred them to the Register of 
Copyrights for resolution. The Register's determination follows.

I. Background

    The instant proceeding will establish royalty rates and terms for 
webcasters' digital performance of sound recordings and the making of 
ephemeral recordings under the statutory licenses set forth in sections 
112(e) and 114(f)(2) of the Copyright Act for the period beginning 
January 1, 2016 and ending on December 31, 2020. Such rates and terms 
are to be set under the ``willing buyer/willing seller standard,'' 
meaning that the rates and terms should be those ``that most clearly 
represent the rates and terms that would have been negotiated in the 
marketplace between a willing buyer and a willing seller.'' \1\ 
Royalties for the use of sound recordings under these statutory 
licenses are collected from webcasters by the receiving agent 
SoundExchange, Inc. (``SoundExchange''), which then distributes them to 
sound recording copyright owners.\2\
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    \1\ 17 U.S.C. Sec.  114(f)(2)(B).
    \2\ 17 U.S.C. Sec.  114(f)(2)(A), (g)(1); 37 CFR Sec.  380.2.
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    The rates and terms established in the current proceeding will 
replace existing royalty rates and terms applicable to webcasters that 
were agreed to and implemented under the Webcaster Settlement Act of 
2009 (``2009 WSA'').\3\ The 2009 WSA is the third webcaster settlement 
act (``WSA'') passed by Congress, following the Webcaster Settlement 
Act of 2008 \4\ (``2008 WSA'') and the Small Webcaster Settlement Act 
of 2002 \5\ (``2002 SWSA'').
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    \3\ Pub. L. 111-36, 123 Stat. 1926.
    \4\ Pub. L. 110-435, 122 Stat. 4974.
    \5\ Pub. L. 107-321, 116 Stat. 2780.
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    The 2002 SWSA was enacted to address a group of small webcasters' 
professed inability to pay the fees established by the Librarian of 
Congress (``Librarian'') under the Copyright Arbitration Royalty Panel 
system, the predecessor to the current CRJ process.\6\ The 2002 SWSA 
provided authority, during a limited window of time, for SoundExchange 
and small webcasters to negotiate and enter into alternative agreements 
to replace the rates set by the Librarian.\7\ The 2008 WSA provided the 
same authority as under the 2002 SWSA, but with regard to webcasters of 
all sizes, and in relation to a 2007 rate determination by the CRJs 
under the revised ratesetting system adopted by Congress in 2004.\8\ 
The 2007 determination was also perceived by webcasters as establishing 
unduly high rates.\9\ The 2009 WSA extended the window of time during 
which the parties were authorized to reach settlements under the 2008 
WSA.\10\
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    \6\ Pub. L. 107-321, Sec.  2, 116 Stat. 2780, 2780-81 (2002).
    \7\ Id. Sec.  4, 116 Stat. at 2781-83.
    \8\ See H.R. Rep. No. 111-139, at 2-3 (2009).
    \9\ See 111 Cong. Rec. H10279 (daily ed. Sept. 27, 2008) 
(statement of Rep. Berman); H.R. Rep. No. 111-139, at 2 (2009).
    \10\ H.R. Rep. No. 111-139, at 3 (2009).
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    The 2002 and subsequent WSAs have been codified in section 114 of 
the Copyright Act.\11\ In their current form, the statutory provisions 
allow the parties to agree to alternative rates in lieu of those set by 
the CRJs for uses through December 31, 2015, but also foreclose 
consideration of the provisions of those agreements by the CRJs in 
ratesetting proceedings. More specifically, section 114(f)(5)(C) 
provides in pertinent part as follows:
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    \11\ 17 U.S.C. Sec.  114(f)(5).
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    (C) Neither subparagraph (A) [allowing the parties to enter into 
alternative agreements] nor any provisions of any agreement entered 
into pursuant to subparagraph (A), including any rate structure, fees, 
terms, conditions, or notice and recordkeeping requirements set forth 
therein, shall be admissible as evidence or otherwise taken into 
account in any administrative, judicial, or other government proceeding 
involving the setting or adjustment of the royalties payable for the 
public performance or reproduction in ephemeral phonorecords or copies 
of sound recordings, the determination of terms or conditions related 
thereto, or the establishment of notice or recordkeeping requirements 
by the Copyright Royalty Judges under paragraph (4) or section 
112(e)(4). It is the intent of Congress that any royalty rates, rate 
structure, definitions, terms, conditions, or notice and recordkeeping 
requirements, included in such agreements shall be considered as a 
compromise motivated by the unique business, economic and political 
circumstances of webcasters, copyright owners, and performers rather 
than as matters that would have been negotiated in the marketplace 
between a willing buyer and a willing seller, or otherwise meet the 
objectives set forth in section 801(b).\12\
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    \12\ 17 U.S.C. Sec.  114(f)(5)(C).
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    As permitted under the 2009 WSA, SoundExchange entered into 
settlement agreements (each, a ``WSA agreement'') with various 
webcasters to replace the rates set by the CRJs.\13\ Under the enabling 
legislation, the rates and terms in each of these WSA agreements are to 
be made available ``to any webcasters meeting the respective 
eligibility conditions of the agreements as an alternative to the rates 
and terms of any

[[Page 58302]]

determination by the [CRJs].''\14\ One such WSA agreement with 
SoundExchange is known as the ``Pureplay Agreement,'' on which Pandora 
Media, Inc. (``Pandora'') and other webcasters currently rely for 
certain uses of sound recordings. Certain individual webcasters, 
including Pandora and iHeartMedia, Inc. (``iHeartMedia''), have also 
entered into directly negotiated license agreements with individual 
record labels (``direct agreements''), rather than with 
SoundExchange.\15\
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    \13\ See Notification of Agreements Under the Webcaster 
Settlement Act of 2009, 74 FR 34,796, 34,797 (July 17, 2009) 
(publishing agreement concerning commercial webcasters including 
small pureplay webcasters); Notification of Agreements Under the 
Webcaster Settlement Act of 2009, 74 FR 40,614, 40,614 (Aug. 12, 
2009) (publishing agreements with Sirius XM Radio Inc., College 
Broadcasters, Inc., Corporation for Public Broadcasting, and 
Northwestern College).
    \14\ Notification of Agreements Under the Webcaster Settlement 
Act of 2009, 74 FR 34,796, 34,797 (July 17, 2009); Notification of 
Agreements Under the Webcaster Settlement Act of 2009, 74 FR 40,614, 
40,614 (Aug. 12, 2009); 17 U.S.C. 114(f)(5)(B) (``[T]he terms of 
such [a WSA] agreement shall be available, as an option, to any 
commercial webcaster or noncommercial webcaster meeting the 
eligibility conditions of such agreement.'').
    \15\ See iHeartMedia Initial Br. at 6; Pandora Initial Br. at 1-
2.
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    According to SoundExchange, direct agreements sought to be 
introduced by the webcasting parties in the instant ratesetting 
proceeding incorporate substantive provisions and/or are otherwise 
influenced by the Pureplay Agreement entered into under the 2009 
WSA.\16\ In a pretrial submission, SoundExchange argued that section 
114(f)(5)(C) prevents the CRJs from considering the direct license 
agreements submitted by the licensee services, and that they should be 
excluded from the current proceeding.\17\
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    \16\ Order Referring Novel Question of Law and Setting Briefing 
Schedule, Docket No. 14-CRB-0001-WR (2016-2020) (July 29, 2015) 
(``Referral Order'') at 1-2.
    \17\ Referral Order at 2 (citing SoundExchange Proposed 
Conclusions of Law ] 48).
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    In response to these concerns, the CRJs issued an order inviting 
briefing from the participants regarding five novel material questions 
of substantive law and, on July 29, 2015, referred the following 
questions to the Register pursuant to 17 U.S.C. 802(f)(1)(B):\18\
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    \18\ See Referral Order at 1. Section 802(f)(1)(B) provides that 
``[i]n any case in which a novel material question of substantive 
law concerning an interpretation of those provisions of this title 
that are the subject of the proceeding is presented, the Copyright 
Royalty Judges shall request a decision of the Register of 
Copyrights, in writing, to resolve such novel question.'' 17 U.S.C. 
802(f)(1)(B).
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    1. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges 
from considering in its entirety a license agreement between a 
webcaster and a record company if that agreement includes any terms 
that are copied verbatim from a [2009] WSA settlement agreement?
    2. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges 
from considering in its entirety a license agreement between a 
webcaster and a record company if that agreement includes any terms 
that are substantively identical to terms of a [2009] WSA settlement 
agreement?
    3. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges 
from considering in its entirety a license agreement between a 
webcaster and a record company if that agreement includes terms that 
the [Copyright Royalty] Judges conclude have been influenced by terms 
of a [2009] WSA settlement agreement?
    4. Does section 114(f)(5)(C) of the [Copyright] Act bar the Judges 
from considering in its entirety a license agreement between a 
webcaster and a record company if that agreement refers to a [2009] WSA 
settlement agreement in provisions unrelated to the rate structure, 
fees, terms, conditions, or notice and recordkeeping requirements set 
forth therein?
    5. If the answer to any of the previous questions is ``no,'' does 
section 114(f)(5)(C) of the [Copyright] Act bar the Judges from 
considering specific provisions of a license agreement between a 
webcaster and a record company that are the same as, are copied from, 
influenced by or refer to provisions of a [2009] WSA settlement 
agreement?

II. Summary of the Parties' Arguments

    All parties agree that section 114(f)(5)(C) bars the CRJs from 
admitting into evidence or otherwise considering provisions of the 
actual settlement agreements reached pursuant to the 2009 WSA.\19\ The 
issue at hand instead concerns directly negotiated licensing agreements 
that allegedly incorporate portions of, or the terms of which were 
influenced by, the WSA agreements.
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    \19\ SoundExchange Initial Br. at 1; Pandora Initial Br. at 1; 
iHeartMedia Initial Br. at 2-3; Broadcasters Initial Br. at 1.
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    SoundExchange argues that each of the referred questions should be 
answered in the affirmative, and that the direct license agreements 
should be excluded from consideration. On the other side of the issue, 
the webcasting parties, namely Pandora, iHeartMedia, and the National 
Association of Broadcasters and National Religious Broadcasters 
Noncommercial Music License Committee (together, the ``Broadcasters,'' 
and all of the licensee parties collectively, the ``Webcasters''), 
assert that the questions should be answered in the negative, and that 
the CRJs should be able to take these agreements into consideration as 
benchmarks or corroborative evidence in the current proceeding.\20\
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    \20\ Initial Brief for SoundExchange at 8, 12, 13, 15, 17, No. 
14-CRB-0001-WR (2016-2020) (Web IV) (Aug. 7, 2015) (``SoundExchange 
Initial Br.''); Initial Brief for Pandora at 25, No. 14-CRB-0001-WR 
(2016-2020) (Web IV) (Aug. 7, 2015) (``Pandora Initial Br.); Initial 
Brief for iHeartMedia at 17, No. 14-CRB-0001-WR (2016-2020) (Web IV) 
(Aug. 7, 2015) (``iHeartMedia Initial Br.''); Initial Brief for the 
Broadcasters at 17-18, No. 14-CRB-0001-WR (2016-2020) (Web IV) (Aug. 
7, 2015) (``Broadcasters Initial Br.'').
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A. SoundExchange's Position

    SoundExchange reads the statutory bar broadly, arguing that if a 
direct license agreement incorporates any terms of, is based upon, or 
is influenced by, the provisions of a WSA agreement, then the CRJs 
should refrain from considering that agreement pursuant to section 
114(f)(5)(C).\21\ SoundExchange offers three primary arguments in 
support of this contention.
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    \21\ SoundExchange Initial Br. at 1.
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    First, SoundExchange claims that section 114(f)(5)(C)'s inclusion 
of the phrase ``otherwise taken into account'' demonstrates that the 
statute's scope is broader than a mere bar against the admission of 
evidence.\22\ SoundExchange maintains that the Webcasters' 
interpretation is faulty because it ``reads entirely out of the statute 
Congress's bar on the [CRJs] from `tak[ing] into account' the WSA 
agreements.''\23\ SoundExchange urges that if Congress intended only to 
preclude the admissibility of the WSA agreements, this language would 
be unnecessary, and that interpreting a statute so as to render 
language inoperative or superfluous is improper.\24\
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    \22\ Id. at 3. SoundExchange argues that this phrase means to 
``take into consideration; allow for.'' Id. at 4.
    \23\ Responsive Brief for SoundExchange at 1, No. 14-CRB-0001-WR 
(2016-2020) (Web IV) (Aug. 14, 2015) (``SoundExchange Responsive 
Br.'') (emphasis and alteration in original).
    \24\ Id. at 3.
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    Second, SoundExchange argues that Congress enacted a ``very broad 
rule of exclusion'' to prevent the terms of a WSA agreement from being 
used against a settling party in subsequent proceedings, including in 
cases where these terms appear in subsequently negotiated 
agreements.\25\ SoundExchange contends that Congress was not solely 
interested in the admissibility of the WSA agreements themselves, but 
more broadly wanted to allow the parties ``to enter into `compromise' 
agreements, `motivated by the unique business, economic and political 
circumstances' then facing the settling parties, without fear that the

[[Page 58303]]

agreement or any of its terms and conditions would later be used in any 
way to be indicative of terms to which willing buyers and willing 
sellers would agree.''\26\ SoundExchange also notes that the 
legislative history of the 2002 SWSA, which first introduced the 
language in section 114(f)(5)(C), expressly states that to facilitate 
settlement, the parties needed assurances that their agreements could 
not later be used against them in future rate proceedings.\27\
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    \25\ SoundExchange Initial Br. at 4, 8.
    \26\ Id. at 5 (quoting 17 U.S.C. 114(f)(5)(C)); see also 
SoundExchange Responsive Br at 6.
    \27\ SoundExchange Initial Br. at 6-7 (citing 2002 SWSA, Sec.  
2(7), 116 Stat. at 2781).
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    Third, SoundExchange argues that any contrary interpretation of the 
statute would be fundamentally unfair because it would permit a party 
to introduce a licensing agreement that was directly influenced by a 
WSA agreement, while preventing an opposing party from introducing the 
WSA agreement itself to show the extent of its influence and to 
demonstrate why the license agreement should not be given weight as 
evidence of a market rate.\28\ SoundExchange argues that such use of 
WSA agreements as both ``a sword and a shield'' is impermissible.\29\
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    \28\ Id. at 2, 6; see also SoundExchange Responsive Br. at 6 
(For the CRJs to ``take account of the direct influence of the 
shadow of the WSA agreement on the negotiation of the direct 
license, the [CRJs] would be forced to consider the WSA agreement 
and its terms[, y]et this necessary step of evaluating the probative 
value of the direct license would run headlong into Sec.  
114(f)(5)(C)'s bar.'').
    \29\ SoundExchange Initial Br. at 6.
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    Regarding each of the referred questions specifically, 
SoundExchange asserts that section 114(f)(5)(C) bars the CRJs from 
considering terms copied verbatim from a direct license agreement 
because ``[w]here a license agreement is simply a verbatim copy of a 
WSA settlement agreement, considering the terms of the license 
agreement is effectively considering all the terms of the WSA agreement 
from which these terms were copied.''\30\ SoundExchange further asserts 
that where only some terms of a direct agreement were copied verbatim 
from a WSA agreement, the entire direct license agreement nonetheless 
cannot be considered because as a ``fundamental rule of contract 
interpretation . . . the terms of any agreement are presumed to be 
dependent and interrelated,'' meaning the CRJs should not consider the 
non-copied terms without also taking into account the copied terms.\31\ 
SoundExchange additionally argues that in every case where a webcaster 
was eligible for the WSA agreement, it should be presumed that the 
entire license agreement was directly affected by the WSA agreement 
because ``the overarching shadow of the WSA agreement rates would have 
affected the entire negotiation'' and, therefore, the statute should 
``bar[] consideration of the agreement as a whole.''\32\
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    \30\ Id. at 8.
    \31\ Id. at 8-12.
    \32\ Id. at 8-12.
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    SoundExchange next argues that if a direct agreement's terms are 
substantively identical to the terms of a WSA agreement, the entire 
agreement should be barred for the same reasons as direct agreements 
with terms copied verbatim from a WSA agreement; ``[o]therwise the 
party seeking to submit the license agreement could simply slightly re-
word the relevant terms.''\33\ Recognizing that substantively identical 
terms could have been arrived at independently of a WSA agreement, 
SoundExchange proposes a test for the CRJs to employ: (i) if the 
proffering party was eligible for and could opt into the WSA agreement, 
that fact should be conclusive proof that the substantively identical 
terms were derived directly from the WSA agreement; and (ii) if the 
proffering party was not eligible to opt into the WSA agreement, that 
party could attempt to show the independent derivation of its agreement 
through evidence of the parties' negotiating history.\34\
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    \33\ Id. at 12; see also SoundExchange Responsive Br. at 4.
    \34\ SoundExchange Initial Br. at 13.
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    Sound Exchange contends that if the terms of a license agreement 
have been directly influenced by the terms of a WSA agreement, then the 
entire license agreement should be barred because its consideration 
``would take `into account' the terms of the WSA agreement, in 
violation of'' the statute.\35\ Recognizing that ``the shadow of a WSA 
settlement agreement [does not] influence[] all negotiations to an 
equal extent,'' SoundExchange proposes that only agreements evidencing 
``direct influence'' should be barred, and that there should be a 
``very strong presumption'' of such influence where a webcaster was 
eligible for and could opt into the WSA agreement and could fall back 
on that option in the absence of the direct agreement.\36\ 
SoundExchange maintains that its interpretation would not bar the 
consideration of all marketplace agreements that are in any way 
influenced by WSA agreements.\37\ Rather, SoundExchange contends that 
its interpretation is limited to those agreements that have been 
``directly influenced'' by a WSA agreement.\38\ SoundExchange argues 
that its test is ``straightforward'' and ``does not involve `arbitrary 
line-drawing' or `second-guessing regarding parties' intent.'''\39\
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    \35\ Id.; see also SoundExchange Responsive Br at 2-3, 9-11.
    \36\ SoundExchange Initial Br. at 14.
    \37\ Id. at 2.
    \38\ Id. at 2-3, 9-11.
    \39\ Id. at 11.
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    SoundExchange next argues that a direct agreement should be barred 
in its entirety if it refers to a WSA agreement, including to 
provisions unrelated to rate structure, fees, terms, conditions, or 
notice and recordkeeping requirements, because ``a reference to a WSA 
agreement in any provision of a license is a reference to a WSA 
agreement's `terms' and `conditions' [because] [t]here are no 
provisions of a license that are `unrelated' to its `terms' and 
`conditions.'''\40\ SoundExchange points to the ``broad language'' of 
section 114(f)(5)(C) to claim that it should ``apply expansively, 
effectively encompassing all provisions in a WSA agreement.''\41\ As 
SoundExchange puts it, ``[i]t is difficult to imagine that a license 
could make a reference to a term or condition of a WSA agreement 
without incorporating that term or condition or otherwise being 
directly influenced by that term or condition.''\42\
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    \40\ Id. at 15.
    \41\ Id. at 16.
    \42\ Id. at 17.
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    SoundExchange vigorously disputes the Webcasters' interpretation of 
section 114(f)(5)(C), suggesting that under their view, a party could 
skirt the statutory prohibition by using its option to join a WSA 
agreement ``as leverage'' to negotiate and enter into a slightly 
modified agreement, thereafter presenting this modified agreement to 
the CRJs as ``competent marketplace evidence.'' \43\ Additionally, 
addressing the Webcasters' argument that SoundExchange's interpretation 
of section 114(f)(5)(C) conflicts with section 114(f)(2)(B)-- which 
provides that the CRJs may consider certain voluntary license 
agreements in establishing rates and terms under the willing buyer/
willing seller standard\44\--SoundExchange contends that the terms of 
the WSA agreements are the result of compromise and, as such, are not 
marketplace evidence, and do not become marketplace evidence by

[[Page 58304]]

being incorporated into new contracts.\45\ SoundExchange maintains that 
even if there is tension between the statutory provisions as the 
Webcasters claim, this still does not permit section 114(f)(5)(C)'s 
plain text to be ignored.\46\
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    \43\ SoundExchange Responsive Br. at 4.
    \44\ 17 U.S.C. 114(f)(2)(B) states, in relevant part: 
``Copyright Royalty Judges shall establish rates and terms that most 
clearly represent the rates and terms that would have been 
negotiated in the marketplace between a willing buyer and a willing 
seller. . . . In establishing such rates and terms, the Copyright 
Royalty Judges may consider the rates and terms for comparable types 
of digital audio transmission services and comparable circumstances 
under voluntary license agreements. . . .''
    \45\ SoundExchange Responsive Br. at 8-9.
    \46\ Id.
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B. The Webcasters' Position

    The various Webcasters' arguments largely parallel one another. 
Each of the Webcasters asserts that section 114(f)(5)(C) applies only 
to the specific settlement agreements entered into with SoundExchange 
pursuant to the 2009 WSA, and not to any subsequent direct license 
agreements between a webcasting service and a sound recording 
owner.\47\
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    \47\ Pandora Initial Br. at 1; iHeartMedia Initial Br. at 2-3; 
Broadcasters Initial Br. at 1.
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    Looking to the text of the statute, the Webcasters urge that, in 
contrast to the WSA agreements, the direct agreements were not entered 
into with SoundExchange as contemplated by the statute.\48\ They point 
out that they were not entered into during the time period for 
settlements authorized by the statute, do not bind all copyright owners 
as provided in the statute, were not published in the Federal Register 
as required by the statute, and do not provide any immunities from 
liability to the record companies as provided in the statute.\49\ The 
Broadcasters and iHeartMedia add that, unlike the WSA agreements, the 
direct agreements were not motivated by the encouragement of Congress 
to reach an accommodation, and do not represent compromises motivated 
by the unique business, economic, and political circumstances of 
webcasters, copyright owners, or performers, as Congress specifically 
intended in passing the WSAs.\50\
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    \48\ Broadcasters Initial Br. at 7; Pandora Initial Br. at 7; 
iHeartMedia Initial Br. at 8.
    \49\ Broadcasters Initial Br. at 7; Pandora Initial Br. at 7-9; 
iHeartMedia Initial Br. at 8.
    \50\ Broadcasters Initial Br. at 11; iHeartMedia Initial Br. at 
10-11.
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    The Webcasters reject SoundExchange's interpretation of the phrase 
``taken into account'' as precluding the consideration of direct 
license agreements that may contain terms identical to or influenced by 
a WSA agreement. They argue that SoundExchange's interpretation would 
require disregarding every benchmark agreement proposed by the parties, 
as all license agreements are to some degree impacted by the prevailing 
rates and terms set under the statute.\51\ Pandora contends that its 
reading does not render the phrase meaningless as SoundExchange claims, 
but rather offers a ``far more natural and plausible reading'' that 
``simply prevents a party from end-running, or the [CRJs] from 
indirectly circumventing, the statutory admissibility proscription by 
invoking or relying upon the terms of a WSA agreement without that 
agreement having actually been moved into evidence.'' \52\ iHeartMedia 
suggests that the phrase merely means that the CRJs ``may not take 
administrative or judicial notice'' of the WSA agreements.\53\
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    \51\ Pandora Initial Br. at 4, 10; iHeartMedia Responsive Br. at 
8; see also Pandora Responsive Br. at 1.
    \52\ Pandora Responsive Br. at 5.
    \53\ iHeartMedia Responsive Br. at 2, 5-7.
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    The Broadcasters add that if the preclusion in subparagraph (C) is 
applied to direct agreements, ``it would force the [CRJs] to engage in 
arbitrary line-drawing and second-guessing regarding parties' intent in 
entering into license agreements in a manner nowhere contemplated or 
discussed in the statutory prohibition.'' \54\ Additionally, 
iHeartMedia asserts that a recent opinion from a federal district court 
in the Southern District of New York considering section 114(i)--an 
allegedly ``parallel provision'' which contains the same ``taken into 
account'' language as section 114(f)(5)(C)--interpreted section 114(i) 
as precluding ``only consideration of the [other] rates themselves'' 
and not ``consideration of how these rates influenced the market for 
musical works.'' \55\
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    \54\ Broadcasters Initial Br. at 9.
    \55\ iHeartMedia Initial Br. at 16 (citing In re Pandora Media, 
Inc., 6 F. Supp. 3d 317, 366-67 (S.D.N.Y. 2014)).
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    Concerning the statute's legislative history, Pandora argues that 
Congress passed the WSA in order to encourage SoundExchange to 
negotiate ``less onerous rates'' than those announced by the CRJs, and 
that the bar on subsequent CRJ consideration of the WSA agreements was 
imposed specifically so that SoundExchange ``would not be construed as 
a `willing seller''' in relation to those rates in future CRB 
proceedings.\56\ Pandora claims that Congress did not intend to limit 
the CRJs' ability to consider subsequent marketplace agreements that 
may be somehow derived from or influenced by a WSA agreement.\57\ 
iHeartMedia similarly asserts that in enacting the 2002 SWSA, Congress 
indicated that ``it would be `in the public interest' to be `clear that 
the agreement will not be admissible as evidence or otherwise taken 
into account' in future rate-setting proceedings.'' \58\ iHeartMedia 
argues that this legislative history demonstrates that Congress was 
only concerned with consideration of the WSA settlement agreements 
themselves, and not subsequent direct license agreements.\59\
---------------------------------------------------------------------------

    \56\ Pandora Initial Br. at 3-4, 14-15.
    \57\ Id. at 4, 9, 15-16; see also iHeartMedia Initial Br. at 9 
(``Congress in Sec.  114(f)(5)(C) did not preclude consideration of 
provisions found outside of a Webcaster Settlement Agreement, even 
where a provisions is, for example, copied from or influenced by a 
provision in an agreement made pursuant to Sec.  114(f)(5)(A).'') .
    \58\ iHeartMedia Initial Br. at 10 (quoting 2002 SWSA, Sec.  
2(1)-(7), 116 Stat. at 2780-81).
    \59\ Id.
---------------------------------------------------------------------------

    The Webcasters also argue that SoundExchange's interpretation 
conflicts with section 114(f)(2)(B), which provides that the CRJs may 
consider voluntary license agreements to further the objective of 
establishing rates and terms that most clearly represent those that 
would have been negotiated in the marketplace between a willing buyer 
and a willing seller.\60\ As Pandora puts it, that provision 
``explicitly encourages the [CRJs] to consider marketplace agreements 
between statutory services and rightsholders.'' \61\ Pandora argues 
that section 114(f)(2)(B) ``does not qualify that invitation with 
language excepting agreements that were `influenced by' the statutory 
rates set forth in . . . WSA agreements, and any such gloss would 
contravene the settled canon of statutory construction that requires 
courts to give effect to all provisions of a statute as a `harmonious 
whole.' '' \62\ In iHeartMedia's view, ``[a]greements involving the 
same sellers, the same buyers, and the same statutory services not only 
are the very agreements Congress authorized the [CRJs] to consider, but 
also are critical to determining rates and terms that `most clearly' 
represent what a willing buyer and willing seller in this market would 
negotiate in the absence of the statutory license.'' \63\ iHeartMedia 
further asserts that an interpretation that would preclude the CRJs 
from considering the direct licenses would put section 114(f)(5)(C) 
into ``irreconcilable conflict'' with section 114(f)(2)(B), ``because 
every direct license agreement is necessarily negotiated against the 
background--or in the `shadow'--of the statutory regime, which includes 
the Webcaster Settlement Agreements.'' \64\
---------------------------------------------------------------------------

    \60\ 17 U.S.C. Sec.  114(f)(2)(B) states, in relevant part: 
``Copyright Royalty Judges shall establish rates and terms that most 
clearly represent the rates and terms that would have been 
negotiated in the marketplace between a willing buyer and a willing 
seller. . . . In establishing such rates and terms, the Copyright 
Royalty Judges may consider the rates and terms for comparable types 
of digital audio transmission services and comparable circumstances 
under voluntary license agreements . . . .''
    \61\ Pandora Initial Br. at 12.
    \62\ Id.
    \63\ Id.
    \64\ Id. at 13.

---------------------------------------------------------------------------

[[Page 58305]]

    Pandora additionally asserts that SoundExchange's position that the 
statutory licenses and the WSA agreements cast a ``shadow'' upon the 
direct license agreements ``conflates admissibility under Section 
114(f)(5)(C) with the weight that should be given to the parties' 
competing benchmark agreements.'' \65\ iHeartMedia agrees, stating 
``[t]he need to remove the effect of the shadow [cast by the WSA 
agreements on direct licenses] is part of the analysis under Sec.  
114(f)(2)(B), and provides no basis to discard from the evidentiary 
record--in whole or in part--any voluntarily negotiated direct license 
between a statutory service and an individual record label.'' \66\ 
Pandora further adds that if, as SoundExchange posits, a party ever 
attempted to evade section 114(f)(5)(C) by entering into a direct 
license that copies a WSA agreement for the purpose of admitting it as 
a benchmark, the CRJs ``would be more than capable of issuing rulings 
assuring a lack of prejudice . . . and assigning such an agreement the 
evidentiary weight it deserved.'' \67\
---------------------------------------------------------------------------

    \65\ Pandora Responsive Br. at 10 (emphasis in original).
    \66\ iHeartMedia Responsive Br. at 12.
    \67\ Pandora Responsive Br. at 11.
---------------------------------------------------------------------------

    Finally, the Broadcasters assert that the Register is not 
authorized to render an opinion on the referred questions, because 
section 802(f)(1)(B) only allows for the referral of ``a novel material 
question of substantive law,'' and the admissibility of evidence is, in 
the Broadcasters' view, a purely procedural question.\68\
---------------------------------------------------------------------------

    \68\ Broadcasters Initial Br. at 17; Broadcasters Responsive Br. 
at 6.
---------------------------------------------------------------------------

III. Register's Determination

    Having considered the relevant statutory language and the input 
from the parties, the Register determines that it is appropriate to 
opine on the referred questions, and that the answer to each of the 
referred questions is ``no.'' The Register finds that section 
114(f)(5)(C) prohibits consideration of the provisions of the WSA 
agreements by the CRJs but does not bar the CRJs from considering 
directly negotiated license agreements that incorporate or otherwise 
reflect provisions in a WSA agreement. The Register further concludes, 
however, that the statutory bar does not preclude SoundExchange from 
introducing evidence or argument concerning the existence of the WSA 
agreements themselves, including their general influence or impact on 
the negotiation of the direct agreements, provided that individual 
provisions of the WSA are not introduced in the proceeding.

A. The Questions Were Properly Referred

    Under 17 U.S.C. Sec.  802(f)(1)(B), the CRJs are required to refer 
to the Register ``novel material question[s] of substantive law.'' \69\ 
The Broadcasters raise a threshold concern that the referred questions 
were improperly referred by the CRJs because they ``relat[e] primarily 
to the admissibility of evidence,'' and are therefore procedural in 
nature.\70\
---------------------------------------------------------------------------

    \69\ 17 U.S.C. Sec.  802(f)(1)(B).
    \70\ Id.; see also Broadcasters Responsive Br. at 6 (comparing 
section 802(f)(1)(B) with section 801(c), which states that ``[t]he 
Copyright Royalty Judges may make any necessary procedural or 
evidentiary rulings'').
---------------------------------------------------------------------------

    The Register finds the questions to be substantive rather than 
procedural, and that they were therefore properly referred by the CRJs. 
The referred questions require the Register to interpret the scope of 
section 114(f)(5)(C)'s prohibition, including what it means to take 
various types of agreements and their provisions ``into account'' for 
purposes of the ratesetting proceeding.\71\ This goes well beyond a 
mere matter of procedure, as the interpretation of this statutory 
provision speaks to the benchmark evidence that the CRJs may 
appropriately consider, a core concern of the ratesetting process. The 
referred questions are thus readily distinguishable from simple issues 
of admissibility arising under the CRJs' evidence-related rules, such 
as whether proffered evidence is properly authenticated or whether an 
application of the hearsay rule is appropriate.\72\ The questions were 
thus properly referred by the CRJs.
---------------------------------------------------------------------------

    \71\ Referral Order at 1-3.
    \72\ See 37 CFR 351.10(a).
---------------------------------------------------------------------------

B. Analysis of the Referred Questions

    As noted above, the Register concludes that section 114(f)(5)(C) 
prohibits consideration of provisions of settlement agreements entered 
into pursuant to the 2009 WSA and does not bar the CRJs from 
considering direct license agreements containing provisions that are 
copied from, are substantively identical to, have been influenced by, 
or refer to, the provisions of a WSA agreement. This result is 
compelled not only by the language of section 114(f)(5)(C), but by the 
legislative intent behind that statute as well.
1. Section 114(f)(5)(C) Does Not Bar Consideration of Direct License 
Agreements
    A reading of the entirety of section 114(f)(5) makes clear that the 
material excluded under subparagraph (C) is limited to the provisions 
of actual settlement agreements entered into pursuant to the WSA. 
Subparagraph (C) bars consideration of ``subparagraph (A)'' and ``any 
provisions of any agreement entered into pursuant to subparagraph 
(A).'' \73\ Subparagraph (A), in turn, permits SoundExchange and 
webcasters to enter into the WSA agreements.\74\ Subparagraph (B) 
requires that any such agreement will ``be published in the Federal 
Register'' and that ``the terms of such agreement shall be available, 
as an option, to any commercial webcaster or noncommercial webcaster 
meeting the eligibility conditions of such agreement.''\75\ 
Subparagraph (F) adds that ``[t]he authority to make settlements 
pursuant to subparagraph (A) shall expire at 11:59 p.m. Eastern time on 
the 30th day after the date of the enactment of the Webcaster 
Settlement Act of 2009.'' \76\
---------------------------------------------------------------------------

    \73\ Id. (emphasis added)
    \74\ 17 U.S.C. 114(f)(5)(A). Note, subparagraph (A) refers to 
the ``receiving agent,'' which is identified as SoundExchange by 37 
CFR 261.2 and 261.4(b).
    \75\ 17 U.S.C. 114(f)(5)(B).
    \76\ 17 U.S.C. 114(f)(5)(F).
---------------------------------------------------------------------------

    Accordingly, the ``provisions of . . . agreement[s]'' barred under 
section 114(f)(5)(C) must be contained within agreements: (i) between 
SoundExchange and webcasters; (ii) that are binding on all copyright 
owners; (iii) that are published in the Federal Register; (iv) that are 
available as an option to any eligible webcasters; and (v) that were 
entered into on or before July 30, 2009.\77\ Based only on the 
requirement to publish in the Federal Register, the only agreements 
meeting these criteria are the WSA agreements themselves. A direct 
license agreement's provisions cannot be the subject of the statute's 
prohibition because the direct agreement containing them cannot satisfy 
these criteria--such a direct agreement was not ``entered into pursuant 
to subparagraph (A).'' This is true regardless of whether the direct 
license's provisions are copied from or influenced by a WSA agreement's 
provisions.
---------------------------------------------------------------------------

    \77\ See 17 U.S.C. 114(f)(5). The 2009 WSA was enacted on June 
30, 2009. Webcaster Settlement Act of 2009, Pub. L. 111-36, 123 
Stat. 1926 (2009). Thirty days thereafter was July 30, 2009.
---------------------------------------------------------------------------

    Additionally, section 114(f)(5)(C) includes an explicit statement 
of Congress's intent concerning the evidentiary bar:

    It is the intent of Congress that any royalty rates, rate 
structure, definitions, terms, conditions, or notice and recordkeeping 
requirements, included in such agreements shall be considered as a 
compromise motivated by the

[[Page 58306]]

unique business, economic and political circumstances of webcasters, 
copyright owners, and performers rather than as matters that would have 
been negotiated in the marketplace between a willing buyer and a 
willing seller, or otherwise meet the objectives set forth in section 
801(b).\78\
---------------------------------------------------------------------------

    \78\ 17 U.S.C. 114(f)(5)(C) (emphasis added).
---------------------------------------------------------------------------

    The reference to ``such agreements'' subparagraph (C) clearly 
refers to the WSA agreements Congress was authorizing under 
subparagraph (A). The provisions that are barred from consideration are 
thus those ``included'' in WSA agreements--not other agreements.
    This interpretation is confirmed by relevant legislative history as 
well. When Congress enacted the 2002 SWSA, which first contained this 
statutory language, it explained that it intended to make ``clear that 
the agreement will not be admissible as evidence or otherwise taken 
into account.'' \79\ In referencing ``the agreement,'' Congress was 
clearly referring to a specific agreement--namely, the alternative 
agreement with SoundExchange it was authorizing under that 
legislation.\80\ There was no suggestion that Congress was referencing 
other agreements as well.
---------------------------------------------------------------------------

    \79\ Small Webcaster Settlement Act of 2002, Pub. L. 107-321, 
Sec.  2(7), 116 Stat. at 2781 (2002) (emphasis added).
    \80\ See id.
---------------------------------------------------------------------------

    The Register further observes that section 114(f)(5)(C) is 
addressed to individual provisions contained in the WSA agreements, 
rather than the agreements as a whole. Section 114(f)(5)(C) provides 
that no ``provisions of any agreement entered into pursuant to 
subparagraph (A), including any rate structure, fees, terms, 
conditions, or notice and recordkeeping requirements set forth 
therein,'' shall be taken into consideration.\81\ It is apparent from 
both this language enumerating specific examples of rates and terms, 
and the language setting forth Congress' intent quoted above, that 
Congress meant to exclude from consideration in future proceedings the 
particular rates and terms ``included'' in a WSA agreement--rather than 
the existence or fact of the agreement itself. Had Congress intended to 
bar any consideration of the WSA agreements whatsoever, it could have 
easily have said so. But it did not. Instead, Congress made clear it 
was referring to the individual ``provisions of''--i.e., the rates and 
terms contained in--the WSA agreements.
---------------------------------------------------------------------------

    \81\ 17 U.S.C. 114(f)(5)(C).
---------------------------------------------------------------------------

    Section 114(f)(5)(C) also provides that ``subparagraph (A)'' itself 
shall not be admissible as evidence or otherwise taken into 
account.\82\ Based on a plain reading of the statute, the Register 
determines that this simply means that the language of subparagraph (A) 
cannot--either in whole or in part--be introduced into evidence or 
otherwise considered in a CRJ proceeding. Accordingly, the reference to 
subparagraph (A) in section 114(f)(5)(C) does not preclude 
consideration of the existence or effects of the WSAs entered into as a 
result of subparagraph (A) so long as the language of subparagraph (A) 
is not introduced. Again, had Congress wished to articulate a broader 
proscription, it could have done so. The Register will not read section 
114(f)(5)(C) more broadly than it is written.
---------------------------------------------------------------------------

    \82\ Id.
---------------------------------------------------------------------------

    Contrary to SoundExchange's assertions, the phrase ``taken into 
account'' in section 114(f)(5)(C) does not alter the Register's reading 
of the statutory language. SoundExchange's interpretation--that 
consideration of the terms of a direct license agreement that have been 
copied from or directly influenced by the terms of a WSA agreement 
would impermissibly ``take into account'' the terms of the WSA 
agreement--is overreaching. The Register agrees with the Webcasters 
that such a reading could effectively exclude all potentially probative 
benchmark agreements from consideration because virtually every 
voluntary agreement could be said to be is influenced to some extent by 
the background statutory scheme--which includes the WSA agreements.\83\ 
Indeed, this is the nature of a compulsory licensing regime in general; 
the existence of a statutory ``fallback'' can influence the direct 
agreements that are entered into in its shadow. While the Register is 
sympathetic to SoundExchange's argument that the direct agreements have 
been shaped by the availability of the Pureplay Agreement as an 
alternative option for licensees, the same would be true of direct 
agreements entered into with CRJ-determined rates as a fallback.
---------------------------------------------------------------------------

    \83\ See, e.g., Determination of Rates and Terms for Preexisting 
Subscription Services and Satellite Digital Audio Radio Services, 78 
FR 23054, 23065 n.32 (Apr. 17, 2013) (noting that although the CRJs 
``question whether any agreements regarding sound recording rights 
could be purely market-based given the current statutory 
framework,'' they ``do not have the luxury of ignoring record 
evidence of the contemporaneous results of arm's length negotiations 
between the same buyers and sellers and rights involved in the 
market for which the Judges are charged to determine a reasonable 
rate.'').
---------------------------------------------------------------------------

    The far more plausible reading of the ``otherwise take into 
account'' language, which the Register determines is what Congress 
intended, is simply that the CRJs are not only barred from admitting 
WSA agreement terms into evidence, but that they also cannot consider 
the provisions of WSA agreements even if not offered as evidence. For 
example, the broader ``taken into account'' language would prohibit the 
CRJs from taking notice of provisions of the WSA agreements that have 
been published in the Federal Register, even if not introduced into 
evidence.\84\ Thus the phrase is not superfluous, as SoundExchange 
suggests.
---------------------------------------------------------------------------

    \84\ See 5 U.S.C. 556(e) (acknowledging that ``an agency 
decision [can] rest[] on official notice of a material fact not 
appearing in the evidence in the record''); 17 U.S.C. 
803(b)(6)(C)(xi) (noting that ``[n]o evidence, including exhibits, 
may be submitted in the written direct statement or written rebuttal 
statement of a participant without a sponsoring witness, except 
where the Copyright Royalty Judges have taken official notice'') 
(emphasis added).
---------------------------------------------------------------------------

    To interpret section 114(f)(5)(C) as preventing the CRJs from 
taking direct license agreements into consideration would seemingly 
undermine Congress' directive in section 114(f)(2)(B), which encourages 
the CRJs to ``consider the rates and terms for comparable types of 
digital audio transmission services and comparable circumstances under 
voluntary license agreements.'' \85\ Direct agreements between sound 
recording owners and webcasters for uses covered by the section 112 and 
114 licenses would appear to be very the type of evidence that section 
114(f)(2)(B) Congress had in mind. Had Congress intended the 
exclusionary rule to extend to directly negotiated agreements as 
SoundExchange suggests, it presumably would also have acted to 
reconcile section 114(f)(5)(C) with section 114(f)(2)(B).
---------------------------------------------------------------------------

    \85\ See 17 U.S.C. 114(f)(2)(B). The Register notes that this 
section does not restrict this consideration to only those 
agreements that do not contain terms that are copied verbatim from, 
are substantively identical to, have been influenced by, or refer to 
terms of a WSA settlement agreement.
---------------------------------------------------------------------------

    Finally, the Register agrees with the Webcasters that as a 
practical matter, it could be very difficult to draw lines between 
negotiated agreements that were ``directly influenced'' by WSA 
agreements and those that were not. SoundExchange's suggested rule 
would require the CRJs to sort admissible from inadmissible agreements 
based on amorphous criteria, which would be a challenging task to say 
the least.
2. Section 114(f)(5)(C) Does Not Preclude Consideration of the General 
Effect of WSA Agreements on Direct License Agreements
    Although the Register finds that the CRJs may take into 
consideration direct

[[Page 58307]]

licenses that incorporate or otherwise reflect WSA agreement terms, it 
is also the case that they are entitled to weigh the value of any such 
evidence in light of the overall circumstances of the marketplace, 
including any general impact of the WSA agreements.
    As discussed above, in rate determinations, the CRJs are tasked 
with replicating a ``hypothetical market'' where ``the webcasting 
statutory license [does] not exist.'' \86\ Among the tools at the CRJs' 
disposal to accomplish this task are ``the rates and terms for 
comparable types of digital audio transmission services and comparable 
circumstances under voluntary license agreements.'' \87\ As Webcasters 
seem to acknowledge, when considering a voluntary agreement, the CRJs 
may consider whether an agreement was made in the ``shadow'' of a 
statutory rate or WSA agreement in evaluating its worth as a 
benchmark.\88\ As the U.S. Court of Appeals for the D.C. Circuit has 
stressed, ``[i]t is generally within the discretion of the Judges to 
assess evidence of an agreement's comparability and to decide whether 
to look to its rates and terms for guidance.'' \89\ This ``broad 
discretion'' includes the ability to ``discount . . . benchmarks'' 
offered by the parties.\90\ Although section 114(f)(5)(C) may preclude 
the consideration or comparison of individual rates and terms contained 
in the WSA agreements, it does not prevent the CRJs from considering 
the agreements at all.
---------------------------------------------------------------------------

    \86\ Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 
796 F.3d 111, 131 (D.C. Cir. 2015) (internal alterations omitted).
    \87\ 17 U.S.C. 114(f)(2)(B).
    \88\ See Pandora Responsive Br. at 10-11; iHeartMedia Responsive 
Br. at 12.
    \89\ Intercollegiate Broad. Sys. v. Copyright Royalty Bd., 574 
F.3d 748, 759 (D.C. Cir. 2009).
    \90\ Music Choice v. Copyright Royalty Bd., 774 F.3d 1000, 1009 
(D.C. Cir. 2014).
---------------------------------------------------------------------------

    Section 114(f)(5)(C) bars the CRJs from considering the terms of 
agreements negotiated under the 2009 WSA. Nowhere does the statute 
suggest that the mere existence of such agreements, or their general 
effect on the marketplace or particular negotiations, may not be 
considered. As noted above, the statutory language is specific in 
limiting the scope of the prohibition to the ``provisions of any [WSA] 
agreement.'' \91\ Section 114(f)(5)(C) provides examples of the types 
of provisions Congress had in mind: ``rate structure, fees, terms, 
conditions, or notice and recordkeeping requirements.'' \92\ This list, 
which appears twice in subparagraph (C),\93\ makes clear that the ban 
applies only to a WSA agreement's specific terms, as embodied in 
particular provisions.
---------------------------------------------------------------------------

    \91\ See 17 U.S.C. 114(f)(5)(C) (emphasis added).
    \92\ See id.
    \93\ 17 U.S.C. 114(f)(5)(C).
---------------------------------------------------------------------------

    A recent case from federal district court in the Southern District 
of New York speaks to this issue.\94\ As part of a rate determination 
for the performance of musical compositions by Pandora in a ratesetting 
proceeding conducted under a federal consent decree, the court 
discussed section 114(i) of the Copyright Act, which contains the same 
``taken into account'' language as section 114(f)(5)(C).\95\ Section 
114(i) provides relevant part:

    \94\ See In re Pandora Media, Inc., 6 F. Supp. 3d 317 (S.D.N.Y. 
2014).
    \95\ See id. at 366-67.
---------------------------------------------------------------------------

    License fees payable for the public performance of sound recordings 
under section 106(6) shall not be taken into account in any 
administrative, judicial, or other governmental proceeding to set or 
adjust the royalties payable to copyright owners of musical works for 
the public performance of their works.\96\
---------------------------------------------------------------------------

    \96\ 17 U.S.C. 114(i).

    During the course of the federal court proceeding, the licensing 
organization, ASCAP, the licensor, proposed a variety of benchmarks for 
the court to consider, including a series of licensing agreements 
negotiated directly between copyright owners and licensees outside of 
the consent decree process.\97\ At trial, the parties disputed the 
extent to which the court could consider evidence relating to the rate 
for the public performance of sound recordings (as opposed to musical 
works).\98\ While the presiding judge noted that she could ``not take 
the [sound recording rate] into account in determining the fair market 
rate for a public performance license [for musical compositions],'' she 
went on to state that ``one observation may be safely made'': \99\
---------------------------------------------------------------------------

    \97\ In re Pandora Media, Inc., 6 F. Supp. 3d at 320.
    \98\ Transcript of Trial at 729:18-733:1, In re Pandora Media, 
Inc., 6 F. Supp. 3d 317 (S.D.N.Y. 2014) (Nos. 12 Civ. 8035, 41 Civ. 
1395).
    \99\ In re Pandora Media, Inc., 6 F. Supp. 3d at 366-67.

    I don't understand that that testimony about motive in negotiations 
and turmoil within ASCAP over these different rates [for sound 
recordings] would be inadmissible pursuant to Section 114. Indeed, I 
think it would be difficult to deal with the facts on the ground as 
they exist and to set a rate that is reasonable in the context of the 
facts . . . without knowing about that.\100\
---------------------------------------------------------------------------

    \100\ Transcript of Trial at 731:1-7, In re Pandora Media, Inc., 
6 F. Supp. 3d 317 (S.D.N.Y. 2014) (Nos. 12 Civ. 8035, 41 Civ. 1395).
---------------------------------------------------------------------------

This commentary in the consent decree case further supports the 
Register's determination that evidence concerning the general impact 
and influence of the WSA agreements--and the statutory licensing regime 
that gave rise to them--may appropriately be considered by the CRJs in 
evaluating the probative value of the direct agreements.

    September 18, 2015
Maria A. Pallante
Register of Copyrights and Director, United States Copyright Office.
[FR Doc. 2015-24591 Filed 9-25-15; 8:45 am]
BILLING CODE 1410-30-P

58300 Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices We will summarize and/or include in 889–5627 (TTY/TDD). Email: Estimated Total Annual Responses: the request for OMB approval of the wood.diane@dol.gov. To obtain a copy 424. ICR, the comments received in response of the proposed information collection Average Time per Response: 0.25 to this comment request; they will also request (ICR), please contact the person Hours. become a matter of public record. listed above. Estimated Total Annual Burden Portia Wu, SUPPLEMENTARY INFORMATION: Hours: 106 Hours. Total Estimated Annual Other Cost Assistant Secretary for Employment and I. Background Training, Labor. Burden: There is no cost for The Worker Profiling and respondents. [FR Doc. 2015–24573 Filed 9–25–15; 8:45 am] Reemployment Services (WPRS) We will summarize and/or include in BILLING CODE 4510–FN–P program allows for the targeting of the request for OMB approval of the reemployment services to those most in ICR, the comments received in response DEPARTMENT OF LABOR need of services. The ETA 9048 and to this comment request; they will also ETA 9049 are the only means of tracking become a matter of public record. Employment and Training the activities in the WPRS program. The Portia Wu, Administration ETA 9048 report describes flows of claimants at various points in the WPRS Assistant Secretary for Employment and Training, Labor. Comment Request for Information system from initial profiling through the Collection on the ETA 9048, Worker [FR Doc. 2015–24572 Filed 9–25–15; 8:45 am] completion of specific reemployment Profiling and Reemployment Services services. The ETA 9049 describes the BILLING CODE 4510–FW–P Activity, and the ETA 9049, Worker reemployment experience of profiled Profiling and Reemployment Services claimants who were referred to services Outcomes, Extension Without by examining the state’s existing wage LIBRARY OF CONGRESS Revisions record files to see in which quarter the individuals who received reemployment Copyright Office AGENCY: Employment and Training Administration (ETA), Labor. services became employed, what wages [Docket No. 2015–4] they earned, and whether they changed ACTION: Notice. Scope of the Copyright Royalty industries. SUMMARY: The Department of Labor Judges’ Continuing Jurisdiction II. Review Focus (Department), as part of its continuing AGENCY: Copyright Office, Library of effort to reduce paperwork and The Department is particularly interested in comments which: Congress. respondent burden, conducts a preclearance consultation program to • Evaluate whether the proposed ACTION: Final order. provide the public and Federal agencies collection of information is necessary for the proper performance of the SUMMARY: The Copyright Royalty Judges with an opportunity to comment on (‘‘CRJs’’), acting pursuant to statute, proposed and/or continuing collections functions of the agency, including whether the information will have referred novel material questions of of information in accordance with the substantive law to the Register of Paperwork Reduction Act of 1995 [44 practical utility; • evaluate the accuracy of the Copyrights for resolution. Those U.S.C. 3506(c)(2)(A)]. This program questions concerned the manner and helps ensure that requested data can be agency’s estimate of the burden of the proposed collection of information, extent to which section 114(f)(5)(C) of provided in the desired format, the Copyright Act bars the CRJs from reporting burden (time and financial including the validity of the methodology and assumptions used; admitting into evidence or otherwise resources) is minimized, collection considering the provisions contained in instruments are clearly understood, and • enhance the quality, utility, and clarity of the information to be settlement agreements reached pursuant the impact of collection requirements on to the Webcaster Settlement Act of 2009. respondents can be properly assessed. collected; and • minimize the burden of the The Register resolved those questions in Currently, ETA is soliciting comments a written decision that was transmitted concerning the collection of data on the collection of information on those who are to respond, including through the to the CRJs. That decision is reproduced ETA 9048, Worker Profiling and below. Reemployment Services Activity, and use of appropriate automated, the ETA 9049, Worker Profiling and electronic, mechanical, or other DATES: Effective Date: September 22, Reemployment Services Outcomes, technological collection techniques or 2015. which expires May 31, 2016. other forms of information technology, FOR FURTHER INFORMATION CONTACT: DATES: Submit written comments to the e.g., permitting electronic submissions Stephen Ruwe, Assistant General office listed in the addresses section of responses. Counsel, U.S. Copyright Office, P.O. Box below on or before November 27, 2015. III. Current Actions 70400, Washington, DC 20024. ADDRESSES: Send written comments to Telephone: (202) 707–8350. Type of Review: Extension without Diane Wood, Office of Unemployment changes. SUPPLEMENTARY INFORMATION: The Insurance, Room S–4524, Employment Title: Worker Profiling and Copyright Royalty Judges are tasked and Training Administration, U.S. Reemployment Services Activity and with determining and adjusting rates Department of Labor, 200 Constitution Outcomes. and terms of royalty payments for tkelley on DSK3SPTVN1PROD with NOTICES Avenue NW., Washington, DC 20210. OMB Number: 1205–0353. statutory licenses under the Copyright Telephone number: 202–693–3212 (this Affected Public: State Workforce Act. See 17 U.S.C. 801. If, in the course is not a toll-free number). Individuals Agencies. of proceedings before the CRJs, novel with hearing or speech impairments Form(s): ETA 9048, ETA 9049. material questions of substantive law may access the telephone number above Estimated Total Annual Respondents: concerning the interpretation of via TTY by calling the toll-free Federal 53. provisions of title 17 arise, the CRJs are Information Relay Service at 1–877– Annual Frequency: Quarterly. required by statute to refer those VerDate Sep<11>2014 17:19 Sep 25, 2015 Jkt 235001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1

Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices 58301 questions to the Register of Copyrights Copyright Act for the period beginning Copyright Act.11 In their current form, for resolution. 17 U.S.C. 802(f)(1)(B). January 1, 2016 and ending on the statutory provisions allow the On August 19, 2015, the CRJs, acting December 31, 2020. Such rates and parties to agree to alternative rates in pursuant to 17 U.S.C. 802(f)(1)(B), terms are to be set under the ‘‘willing lieu of those set by the CRJs for uses referred novel material questions of buyer/willing seller standard,’’ meaning through December 31, 2015, but also substantive law to the Register that the rates and terms should be those foreclose consideration of the provisions concerning the manner and extent to ‘‘that most clearly represent the rates of those agreements by the CRJs in which section 114(f)(5)(C) of the and terms that would have been ratesetting proceedings. More Copyright Act bars the CRJs from negotiated in the marketplace between a specifically, section 114(f)(5)(C) admitting into evidence or otherwise willing buyer and a willing seller.’’ 1 provides in pertinent part as follows: considering the provisions contained in Royalties for the use of sound (C) Neither subparagraph (A) settlement agreements reached pursuant recordings under these statutory [allowing the parties to enter into to the Webcaster Settlement Act of 2009. licenses are collected from webcasters alternative agreements] nor any On September 18, 2015, the Register by the receiving agent SoundExchange, provisions of any agreement entered resolved those questions in a Inc. (‘‘SoundExchange’’), which then into pursuant to subparagraph (A), Memorandum Opinion that she distributes them to sound recording including any rate structure, fees, terms, transmitted to the CRJs. To provide the copyright owners.2 conditions, or notice and recordkeeping public with notice of the decision The rates and terms established in the requirements set forth therein, shall be rendered by the Register, the current proceeding will replace existing admissible as evidence or otherwise Memorandum Opinion is reproduced in royalty rates and terms applicable to taken into account in any its entirety below. webcasters that were agreed to and administrative, judicial, or other Dated: September 22, 2015. implemented under the Webcaster government proceeding involving the Settlement Act of 2009 (‘‘2009 WSA’’).3 setting or adjustment of the royalties Maria A. Pallante, The 2009 WSA is the third webcaster payable for the public performance or Register of Copyrights. settlement act (‘‘WSA’’) passed by reproduction in ephemeral Before the U.S. Copyright Office, Congress, following the Webcaster phonorecords or copies of sound Library of Congress, Washington, DC Settlement Act of 2008 4 (‘‘2008 WSA’’) recordings, the determination of terms 20559 and the Small Webcaster Settlement Act or conditions related thereto, or the of 2002 5 (‘‘2002 SWSA’’). establishment of notice or In the Matter of: DETERMINATION OF The 2002 SWSA was enacted to recordkeeping requirements by the ROYALTY RATES AND TERMS FOR address a group of small webcasters’ Copyright Royalty Judges under EPHEMERAL RECORDING AND professed inability to pay the fees WEBCASTING DIGITAL PERFORMANCE OF paragraph (4) or section 112(e)(4). It is established by the Librarian of Congress the intent of Congress that any royalty SOUND RECORDINGS (Web IV) (‘‘Librarian’’) under the Copyright rates, rate structure, definitions, terms, Docket No. 14–CRB–0001–WR(2016–2020) Arbitration Royalty Panel system, the (Web IV) conditions, or notice and recordkeeping predecessor to the current CRJ process.6 requirements, included in such MEMORANDUM OPINION ON NOVEL The 2002 SWSA provided authority, agreements shall be considered as a MATERIAL QUESTIONS OF LAW during a limited window of time, for compromise motivated by the unique SoundExchange and small webcasters to business, economic and political Section 114(f)(5)(C) of the Copyright negotiate and enter into alternative circumstances of webcasters, copyright Act bars the Copyright Royalty Judges agreements to replace the rates set by owners, and performers rather than as (‘‘CRJs’’ or ‘‘Judges’’) from taking into the Librarian.7 The 2008 WSA provided matters that would have been negotiated consideration in ratesetting proceedings the same authority as under the 2002 in the marketplace between a willing the provisions of agreements entered SWSA, but with regard to webcasters of buyer and a willing seller, or otherwise into under the Webcaster Settlement Act all sizes, and in relation to a 2007 rate meet the objectives set forth in section of 2009, which allowed the parties to determination by the CRJs under the 801(b).12 negotiate alternative rates and terms revised ratesetting system adopted by As permitted under the 2009 WSA, from those established by the CRJs. Congress in 2004.8 The 2007 SoundExchange entered into settlement Questions have arisen in the pending determination was also perceived by agreements (each, a ‘‘WSA agreement’’) proceeding to set royalty rates and terms webcasters as establishing unduly high with various webcasters to replace the for webcasters’ digital performance of rates.9 The 2009 WSA extended the rates set by the CRJs.13 Under the sound recordings and associated window of time during which the enabling legislation, the rates and terms ephemeral reproductions about the parties were authorized to reach in each of these WSA agreements are to proper interpretation of this provision. settlements under the 2008 WSA.10 be made available ‘‘to any webcasters The CRJs determined that these were The 2002 and subsequent WSAs have novel material questions of substantive meeting the respective eligibility been codified in section 114 of the conditions of the agreements as an law and, as required under section 802(f)(1)(B) of the Copyright Act, 1 17 alternative to the rates and terms of any U.S.C. § 114(f)(2)(B). referred them to the Register of 2 17 U.S.C. § 114(f)(2)(A), (g)(1); 37 CFR § 380.2. Copyrights for resolution. The Register’s 3 Pub. L. 111–36, 123 Stat. 1926. 11 17 U.S.C. § 114(f)(5). 12 17 U.S.C. § 114(f)(5)(C). determination follows. 4 Pub. L. 110–435, 122 Stat. 4974. 13 See Notification of Agreements Under the 5 Pub. L. 107–321, 116 Stat. 2780. I. Background Webcaster Settlement Act of 2009, 74 FR 34,796, tkelley on DSK3SPTVN1PROD with NOTICES 6 Pub. L. 107–321, § 2, 116 Stat. 2780, 2780–81 34,797 (July 17, 2009) (publishing agreement The instant proceeding will establish (2002). 7 Id. § 4, 116 Stat. at 2781–83. concerning commercial webcasters including small royalty rates and terms for webcasters’ 8 See H.R. Rep. No. 111–139, at 2–3 (2009). pureplay webcasters); Notification of Agreements digital performance of sound recordings Under the Webcaster Settlement Act of 2009, 74 FR 9 See 111 Cong. Rec. H10279 (daily ed. Sept. 27, 40,614, 40,614 (Aug. 12, 2009) (publishing and the making of ephemeral recordings 2008) (statement of Rep. Berman); H.R. Rep. No. agreements with Sirius XM Radio Inc., College under the statutory licenses set forth in 111–139, at 2 (2009). Broadcasters, Inc., Corporation for Public sections 112(e) and 114(f)(2) of the 10 H.R. Rep. No. 111–139, at 3 (2009). Broadcasting, and Northwestern College). VerDate Sep<11>2014 17:19 Sep 25, 2015 Jkt 235001 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1

58302 Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices determination by the [CRJs].’’14 One agreement between a webcaster and a benchmarks or corroborative evidence such WSA agreement with record company if that agreement in the current proceeding.20 SoundExchange is known as the includes any terms that are A. SoundExchange’s Position ‘‘Pureplay Agreement,’’ on which substantively identical to terms of a Pandora Media, Inc. (‘‘Pandora’’) and [2009] WSA settlement agreement? SoundExchange reads the statutory other webcasters currently rely for bar broadly, arguing that if a direct 3. Does section 114(f)(5)(C) of the certain uses of sound recordings. license agreement incorporates any [Copyright] Act bar the Judges from Certain individual webcasters, terms of, is based upon, or is influenced considering in its entirety a license including Pandora and iHeartMedia, by, the provisions of a WSA agreement, agreement between a webcaster and a Inc. (‘‘iHeartMedia’’), have also entered then the CRJs should refrain from record company if that agreement into directly negotiated license considering that agreement pursuant to includes terms that the [Copyright agreements with individual record section 114(f)(5)(C).21 SoundExchange Royalty] Judges conclude have been labels (‘‘direct agreements’’), rather than offers three primary arguments in influenced by terms of a [2009] WSA with SoundExchange.15 support of this contention. settlement agreement? According to SoundExchange, direct First, SoundExchange claims that agreements sought to be introduced by 4. Does section 114(f)(5)(C) of the section 114(f)(5)(C)’s inclusion of the the webcasting parties in the instant [Copyright] Act bar the Judges from phrase ‘‘otherwise taken into account’’ ratesetting proceeding incorporate considering in its entirety a license demonstrates that the statute’s scope is substantive provisions and/or are agreement between a webcaster and a broader than a mere bar against the otherwise influenced by the Pureplay record company if that agreement refers admission of evidence.22 Agreement entered into under the 2009 to a [2009] WSA settlement agreement SoundExchange maintains that the WSA.16 In a pretrial submission, in provisions unrelated to the rate Webcasters’ interpretation is faulty SoundExchange argued that section structure, fees, terms, conditions, or because it ‘‘reads entirely out of the 114(f)(5)(C) prevents the CRJs from notice and recordkeeping requirements statute Congress’s bar on the [CRJs] from considering the direct license set forth therein? ‘tak[ing] into account’ the WSA agreements submitted by the licensee 5. If the answer to any of the previous agreements.’’23 SoundExchange urges services, and that they should be questions is ‘‘no,’’ does section that if Congress intended only to excluded from the current proceeding.17 114(f)(5)(C) of the [Copyright] Act bar preclude the admissibility of the WSA In response to these concerns, the the Judges from considering specific agreements, this language would be CRJs issued an order inviting briefing provisions of a license agreement unnecessary, and that interpreting a from the participants regarding five between a webcaster and a record statute so as to render language novel material questions of substantive company that are the same as, are inoperative or superfluous is law and, on July 29, 2015, referred the copied from, influenced by or refer to improper.24 following questions to the Register provisions of a [2009] WSA settlement Second, SoundExchange argues that pursuant to 17 U.S.C. 802(f)(1)(B):18 agreement? Congress enacted a ‘‘very broad rule of 1. Does section 114(f)(5)(C) of the exclusion’’ to prevent the terms of a [Copyright] Act bar the Judges from II. Summary of the Parties’ Arguments WSA agreement from being used against considering in its entirety a license All parties agree that section a settling party in subsequent agreement between a webcaster and a 114(f)(5)(C) bars the CRJs from admitting proceedings, including in cases where record company if that agreement into evidence or otherwise considering these terms appear in subsequently includes any terms that are copied provisions of the actual settlement negotiated agreements.25 verbatim from a [2009] WSA settlement agreements reached pursuant to the SoundExchange contends that Congress agreement? 2009 WSA.19 The issue at hand instead was not solely interested in the 2. Does section 114(f)(5)(C) of the concerns directly negotiated licensing admissibility of the WSA agreements [Copyright] Act bar the Judges from agreements that allegedly incorporate themselves, but more broadly wanted to considering in its entirety a license portions of, or the terms of which were allow the parties ‘‘to enter into influenced by, the WSA agreements. ‘compromise’ agreements, ‘motivated by 14 Notification of Agreements Under the the unique business, economic and Webcaster Settlement Act of 2009, 74 FR 34,796, SoundExchange argues that each of political circumstances’ then facing the 34,797 (July 17, 2009); Notification of Agreements the referred questions should be settling parties, without fear that the Under the Webcaster Settlement Act of 2009, 74 FR answered in the affirmative, and that the 40,614, 40,614 (Aug. 12, 2009); 17 U.S.C. 114(f)(5)(B) (‘‘[T]he terms of such [a WSA] direct license agreements should be 20 Initial Brief for SoundExchange at 8, 12, 13, 15, agreement shall be available, as an option, to any excluded from consideration. On the 17, No. 14–CRB–0001–WR (2016–2020) (Web IV) commercial webcaster or noncommercial webcaster other side of the issue, the webcasting (Aug. 7, 2015) (‘‘SoundExchange Initial Br.’’); Initial meeting the eligibility conditions of such Brief for Pandora at 25, No. 14–CRB–0001–WR parties, namely Pandora, iHeartMedia, (2016–2020) (Web IV) (Aug. 7, 2015) (‘‘Pandora agreement.’’). 15 See iHeartMedia Initial Br. at 6; Pandora Initial and the National Association of Initial Br.); Initial Brief for iHeartMedia at 17, No. Br. at 1–2. Broadcasters and National Religious 14–CRB–0001–WR (2016–2020) (Web IV) (Aug. 7, 16 Order Referring Novel Question of Law and Broadcasters Noncommercial Music 2015) (‘‘iHeartMedia Initial Br.’’); Initial Brief for the Broadcasters at 17–18, No. 14–CRB–0001–WR Setting Briefing Schedule, Docket No. 14–CRB– License Committee (together, the (2016–2020) (Web IV) (Aug. 7, 2015) (‘‘Broadcasters 0001–WR (2016–2020) (July 29, 2015) (‘‘Referral ‘‘Broadcasters,’’ and all of the licensee Order’’) at 1–2. Initial Br.’’). 17 Referral Order at 2 (citing SoundExchange parties collectively, the ‘‘Webcasters’’), 21 SoundExchange Initial Br. at 1. Proposed Conclusions of Law ¶ 48). assert that the questions should be 22 Id. at 3. SoundExchange argues that this phrase tkelley on DSK3SPTVN1PROD with NOTICES 18 See Referral Order at 1. Section 802(f)(1)(B) answered in the negative, and that the means to ‘‘take into consideration; allow for.’’ Id. at 4. provides that ‘‘[i]n any case in which a novel CRJs should be able to take these 23 Responsive Brief for SoundExchange at 1, No. material question of substantive law concerning an agreements into consideration as interpretation of those provisions of this title that 14–CRB–0001–WR (2016–2020) (Web IV) (Aug. 14, are the subject of the proceeding is presented, the 2015) (‘‘SoundExchange Responsive Br.’’) Copyright Royalty Judges shall request a decision of 19 SoundExchange Initial Br. at 1; Pandora Initial (emphasis and alteration in original). 24 Id. at 3. the Register of Copyrights, in writing, to resolve Br. at 1; iHeartMedia Initial Br. at 2–3; Broadcasters such novel question.’’ 17 U.S.C. 802(f)(1)(B). Initial Br. at 1. 25 SoundExchange Initial Br. at 4, 8. 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Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices 58303 agreement or any of its terms and should be presumed that the entire influenced’’ by a WSA agreement.38 conditions would later be used in any license agreement was directly affected SoundExchange argues that its test is way to be indicative of terms to which by the WSA agreement because ‘‘the ‘‘straightforward’’ and ‘‘does not involve willing buyers and willing sellers would overarching shadow of the WSA ‘arbitrary line-drawing’ or ‘second- agree.’’26 SoundExchange also notes that agreement rates would have affected the guessing regarding parties’ intent.’’’39 the legislative history of the 2002 entire negotiation’’ and, therefore, the SoundExchange next argues that a SWSA, which first introduced the statute should ‘‘bar[] consideration of direct agreement should be barred in its language in section 114(f)(5)(C), the agreement as a whole.’’32 entirety if it refers to a WSA agreement, expressly states that to facilitate SoundExchange next argues that if a including to provisions unrelated to rate settlement, the parties needed direct agreement’s terms are structure, fees, terms, conditions, or assurances that their agreements could substantively identical to the terms of a notice and recordkeeping requirements, not later be used against them in future WSA agreement, the entire agreement because ‘‘a reference to a WSA rate proceedings.27 should be barred for the same reasons as agreement in any provision of a license Third, SoundExchange argues that direct agreements with terms copied is a reference to a WSA agreement’s any contrary interpretation of the statute verbatim from a WSA agreement; ‘terms’ and ‘conditions’ [because] [t]here would be fundamentally unfair because ‘‘[o]therwise the party seeking to submit are no provisions of a license that are it would permit a party to introduce a the license agreement could simply ‘unrelated’ to its ‘terms’ and licensing agreement that was directly slightly re-word the relevant terms.’’33 ‘conditions.’’’40 SoundExchange points influenced by a WSA agreement, while Recognizing that substantively identical to the ‘‘broad language’’ of section preventing an opposing party from terms could have been arrived at 114(f)(5)(C) to claim that it should introducing the WSA agreement itself to independently of a WSA agreement, ‘‘apply expansively, effectively show the extent of its influence and to SoundExchange proposes a test for the encompassing all provisions in a WSA demonstrate why the license agreement CRJs to employ: (i) if the proffering agreement.’’41 As SoundExchange puts should not be given weight as evidence party was eligible for and could opt into it, ‘‘[i]t is difficult to imagine that a of a market rate.28 SoundExchange the WSA agreement, that fact should be license could make a reference to a term argues that such use of WSA agreements conclusive proof that the substantively or condition of a WSA agreement as both ‘‘a sword and a shield’’ is identical terms were derived directly without incorporating that term or impermissible.29 from the WSA agreement; and (ii) if the condition or otherwise being directly Regarding each of the referred proffering party was not eligible to opt influenced by that term or condition.’’42 questions specifically, SoundExchange into the WSA agreement, that party SoundExchange vigorously disputes asserts that section 114(f)(5)(C) bars the could attempt to show the independent the Webcasters’ interpretation of section CRJs from considering terms copied derivation of its agreement through 114(f)(5)(C), suggesting that under their verbatim from a direct license evidence of the parties’ negotiating view, a party could skirt the statutory agreement because ‘‘[w]here a license history.34 prohibition by using its option to join a agreement is simply a verbatim copy of Sound Exchange contends that if the WSA agreement ‘‘as leverage’’ to a WSA settlement agreement, terms of a license agreement have been negotiate and enter into a slightly considering the terms of the license directly influenced by the terms of a modified agreement, thereafter agreement is effectively considering all WSA agreement, then the entire license presenting this modified agreement to the terms of the WSA agreement from agreement should be barred because its the CRJs as ‘‘competent marketplace which these terms were copied.’’30 consideration ‘‘would take ‘into evidence.’’ 43 Additionally, addressing SoundExchange further asserts that account’ the terms of the WSA the Webcasters’ argument that where only some terms of a direct agreement, in violation of’’ the statute.35 SoundExchange’s interpretation of agreement were copied verbatim from a Recognizing that ‘‘the shadow of a WSA section 114(f)(5)(C) conflicts with WSA agreement, the entire direct settlement agreement [does not] section 114(f)(2)(B)— which provides license agreement nonetheless cannot be influence[] all negotiations to an equal that the CRJs may consider certain considered because as a ‘‘fundamental extent,’’ SoundExchange proposes that voluntary license agreements in rule of contract interpretation . . . the only agreements evidencing ‘‘direct establishing rates and terms under the terms of any agreement are presumed to influence’’ should be barred, and that willing buyer/willing seller be dependent and interrelated,’’ there should be a ‘‘very strong standard44—SoundExchange contends meaning the CRJs should not consider presumption’’ of such influence where a that the terms of the WSA agreements the non-copied terms without also webcaster was eligible for and could opt are the result of compromise and, as taking into account the copied terms.31 into the WSA agreement and could fall such, are not marketplace evidence, and SoundExchange additionally argues that back on that option in the absence of the do not become marketplace evidence by in every case where a webcaster was direct agreement.36 SoundExchange eligible for the WSA agreement, it maintains that its interpretation would 38 Id. at 2–3, 9–11. not bar the consideration of all 39 Id. at 11. 26 Id. at 5 (quoting 17 U.S.C. 114(f)(5)(C)); see also marketplace agreements that are in any 40 Id. at 15. SoundExchange Responsive Br at 6. way influenced by WSA agreements.37 41 Id. at 16. 27 SoundExchange Initial Br. at 6–7 (citing 2002 Rather, SoundExchange contends that 42 Id. at 17. SWSA, § 2(7), 116 Stat. at 2781). its interpretation is limited to those 43 SoundExchange Responsive Br. at 4. 28 Id. at 2, 6; see also SoundExchange Responsive Br. at 6 (For the CRJs to ‘‘take account of the direct agreements that have been ‘‘directly 44 17 U.S.C. 114(f)(2)(B) states, in relevant part: ‘‘Copyright Royalty Judges shall establish rates and influence of the shadow of the WSA agreement on terms that most clearly represent the rates and tkelley on DSK3SPTVN1PROD with NOTICES 32 Id. at 8–12. the negotiation of the direct license, the [CRJs] terms that would have been negotiated in the would be forced to consider the WSA agreement 33 Id. at 12; see also SoundExchange Responsive marketplace between a willing buyer and a willing and its terms[, y]et this necessary step of evaluating Br. at 4. seller. . . . In establishing such rates and terms, the the probative value of the direct license would run 34 SoundExchange Initial Br. at 13. Copyright Royalty Judges may consider the rates headlong into § 114(f)(5)(C)’s bar.’’). 35 Id.; see also SoundExchange Responsive Br at and terms for comparable types of digital audio 29 SoundExchange Initial Br. at 6. 2–3, 9–11. transmission services and comparable 30 Id. at 8. 36 SoundExchange Initial Br. at 14. circumstances under voluntary license 31 Id. at 8–12. 37 Id. at 2. agreements. . . .’’ VerDate Sep<11>2014 17:19 Sep 25, 2015 Jkt 235001 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1

58304 Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices being incorporated into new contracts.45 not render the phrase meaningless as admissible as evidence or otherwise SoundExchange maintains that even if SoundExchange claims, but rather offers taken into account’ in future rate-setting there is tension between the statutory a ‘‘far more natural and plausible proceedings.’’ 58 iHeartMedia argues provisions as the Webcasters claim, this reading’’ that ‘‘simply prevents a party that this legislative history demonstrates still does not permit section from end-running, or the [CRJs] from that Congress was only concerned with 114(f)(5)(C)’s plain text to be ignored.46 indirectly circumventing, the statutory consideration of the WSA settlement admissibility proscription by invoking agreements themselves, and not B. The Webcasters’ Position or relying upon the terms of a WSA subsequent direct license agreements.59 The various Webcasters’ arguments agreement without that agreement The Webcasters also argue that largely parallel one another. Each of the having actually been moved into SoundExchange’s interpretation Webcasters asserts that section evidence.’’ 52 iHeartMedia suggests that conflicts with section 114(f)(2)(B), 114(f)(5)(C) applies only to the specific the phrase merely means that the CRJs which provides that the CRJs may settlement agreements entered into with ‘‘may not take administrative or judicial consider voluntary license agreements SoundExchange pursuant to the 2009 notice’’ of the WSA agreements.53 to further the objective of establishing WSA, and not to any subsequent direct The Broadcasters add that if the rates and terms that most clearly license agreements between a preclusion in subparagraph (C) is represent those that would have been webcasting service and a sound applied to direct agreements, ‘‘it would negotiated in the marketplace between a recording owner.47 force the [CRJs] to engage in arbitrary willing buyer and a willing seller.60 As Looking to the text of the statute, the line-drawing and second-guessing Pandora puts it, that provision Webcasters urge that, in contrast to the regarding parties’ intent in entering into ‘‘explicitly encourages the [CRJs] to WSA agreements, the direct agreements license agreements in a manner consider marketplace agreements were not entered into with nowhere contemplated or discussed in between statutory services and SoundExchange as contemplated by the the statutory prohibition.’’ 54 rightsholders.’’ 61 Pandora argues that statute.48 They point out that they were Additionally, iHeartMedia asserts that a section 114(f)(2)(B) ‘‘does not qualify not entered into during the time period recent opinion from a federal district that invitation with language excepting for settlements authorized by the court in the Southern District of New agreements that were ‘influenced by’ the statute, do not bind all copyright owners York considering section 114(i)—an statutory rates set forth in . . . WSA as provided in the statute, were not allegedly ‘‘parallel provision’’ which agreements, and any such gloss would published in the Federal Register as contains the same ‘‘taken into account’’ contravene the settled canon of statutory required by the statute, and do not language as section 114(f)(5)(C)— construction that requires courts to give provide any immunities from liability to interpreted section 114(i) as precluding effect to all provisions of a statute as a the record companies as provided in the ‘‘only consideration of the [other] rates ‘harmonious whole.’ ’’ 62 In statute.49 The Broadcasters and themselves’’ and not ‘‘consideration of iHeartMedia’s view, ‘‘[a]greements iHeartMedia add that, unlike the WSA how these rates influenced the market involving the same sellers, the same agreements, the direct agreements were for musical works.’’ 55 buyers, and the same statutory services not motivated by the encouragement of Concerning the statute’s legislative not only are the very agreements Congress to reach an accommodation, history, Pandora argues that Congress Congress authorized the [CRJs] to and do not represent compromises passed the WSA in order to encourage consider, but also are critical to motivated by the unique business, SoundExchange to negotiate ‘‘less determining rates and terms that ‘most economic, and political circumstances onerous rates’’ than those announced by clearly’ represent what a willing buyer of webcasters, copyright owners, or the CRJs, and that the bar on subsequent and willing seller in this market would performers, as Congress specifically CRJ consideration of the WSA negotiate in the absence of the statutory intended in passing the WSAs.50 agreements was imposed specifically so license.’’ 63 iHeartMedia further asserts The Webcasters reject that SoundExchange ‘‘would not be that an interpretation that would SoundExchange’s interpretation of the construed as a ‘willing seller’’’ in preclude the CRJs from considering the phrase ‘‘taken into account’’ as relation to those rates in future CRB direct licenses would put section precluding the consideration of direct proceedings.56 Pandora claims that 114(f)(5)(C) into ‘‘irreconcilable license agreements that may contain Congress did not intend to limit the conflict’’ with section 114(f)(2)(B), terms identical to or influenced by a CRJs’ ability to consider subsequent ‘‘because every direct license agreement WSA agreement. They argue that marketplace agreements that may be is necessarily negotiated against the SoundExchange’s interpretation would somehow derived from or influenced by background—or in the ‘shadow’—of the require disregarding every benchmark a WSA agreement.57 iHeartMedia statutory regime, which includes the agreement proposed by the parties, as similarly asserts that in enacting the Webcaster Settlement Agreements.’’ 64 all license agreements are to some 2002 SWSA, Congress indicated that ‘‘it degree impacted by the prevailing rates would be ‘in the public interest’ to be 58 iHeartMedia Initial Br. at 10 (quoting 2002 and terms set under the statute.51 ‘clear that the agreement will not be SWSA, § 2(1)–(7), 116 Stat. at 2780–81). Pandora contends that its reading does 59 Id. 60 17 U.S.C. § 114(f)(2)(B) states, in relevant part: 52 Pandora Responsive Br. at 5. 45 SoundExchange ‘‘Copyright Royalty Judges shall establish rates and Responsive Br. at 8–9. 53 iHeartMedia Responsive Br. at 2, 5–7. 46 Id. terms that most clearly represent the rates and 54 Broadcasters Initial Br. at 9. terms that would have been negotiated in the 47 Pandora Initial Br. at 1; iHeartMedia Initial Br. 55 iHeartMedia Initial Br. at 16 (citing In re marketplace between a willing buyer and a willing at 2–3; Broadcasters Initial Br. at 1. Pandora Media, Inc., 6 F. Supp. 3d 317, 366–67 seller. . . . In establishing such rates and terms, the 48 Broadcasters Initial Br. at 7; Pandora Initial Br. Copyright Royalty Judges may consider the rates (S.D.N.Y. 2014)). tkelley on DSK3SPTVN1PROD with NOTICES at 7; iHeartMedia Initial Br. at 8. 56 Pandora Initial Br. at 3–4, 14–15. and terms for comparable types of digital audio 49 Broadcasters Initial Br. at 7; Pandora Initial Br. 57 Id. at 4, 9, 15–16; see also iHeartMedia Initial transmission services and comparable at 7–9; iHeartMedia Initial Br. at 8. Br. at 9 (‘‘Congress in § 114(f)(5)(C) did not preclude circumstances under voluntary license agreements 50 Broadcasters Initial Br. at 11; iHeartMedia consideration of provisions found outside of a . . . .’’ 61 Pandora Initial Br. at 12. Initial Br. at 10–11. Webcaster Settlement Agreement, even where a 51 Pandora Initial Br. at 4, 10; iHeartMedia 62 Id. provisions is, for example, copied from or 63 Id. Responsive Br. at 8; see also Pandora Responsive influenced by a provision in an agreement made Br. at 1. pursuant to § 114(f)(5)(A).’’) . 64 Id. at 13. 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Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices 58305 Pandora additionally asserts that A. The Questions Were Properly limited to the provisions of actual SoundExchange’s position that the Referred settlement agreements entered into statutory licenses and the WSA Under 17 U.S.C. § 802(f)(1)(B), the pursuant to the WSA. Subparagraph (C) agreements cast a ‘‘shadow’’ upon the CRJs are required to refer to the Register bars consideration of ‘‘subparagraph direct license agreements ‘‘conflates ‘‘novel material question[s] of (A)’’ and ‘‘any provisions of any admissibility under Section 114(f)(5)(C) substantive law.’’ 69 The Broadcasters agreement entered into pursuant to with the weight that should be given to raise a threshold concern that the subparagraph (A).’’ 73 Subparagraph (A), the parties’ competing benchmark referred questions were improperly in turn, permits SoundExchange and agreements.’’ 65 iHeartMedia agrees, referred by the CRJs because they webcasters to enter into the WSA stating ‘‘[t]he need to remove the effect ‘‘relat[e] primarily to the admissibility agreements.74 Subparagraph (B) requires of the shadow [cast by the WSA of evidence,’’ and are therefore that any such agreement will ‘‘be agreements on direct licenses] is part of procedural in nature.70 published in the Federal Register’’ and the analysis under § 114(f)(2)(B), and The Register finds the questions to be that ‘‘the terms of such agreement shall provides no basis to discard from the substantive rather than procedural, and be available, as an option, to any evidentiary record—in whole or in that they were therefore properly commercial webcaster or part—any voluntarily negotiated direct referred by the CRJs. The referred noncommercial webcaster meeting the license between a statutory service and questions require the Register to eligibility conditions of such an individual record label.’’ 66 Pandora interpret the scope of section agreement.’’75 Subparagraph (F) adds further adds that if, as SoundExchange 114(f)(5)(C)’s prohibition, including that ‘‘[t]he authority to make settlements posits, a party ever attempted to evade what it means to take various types of pursuant to subparagraph (A) shall section 114(f)(5)(C) by entering into a agreements and their provisions ‘‘into expire at 11:59 p.m. Eastern time on the direct license that copies a WSA account’’ for purposes of the ratesetting 30th day after the date of the enactment agreement for the purpose of admitting proceeding.71 This goes well beyond a of the Webcaster Settlement Act of it as a benchmark, the CRJs ‘‘would be mere matter of procedure, as the 2009.’’ 76 more than capable of issuing rulings interpretation of this statutory provision Accordingly, the ‘‘provisions of . . . assuring a lack of prejudice . . . and speaks to the benchmark evidence that agreement[s]’’ barred under section assigning such an agreement the the CRJs may appropriately consider, a 114(f)(5)(C) must be contained within evidentiary weight it deserved.’’ 67 core concern of the ratesetting process. agreements: (i) between SoundExchange Finally, the Broadcasters assert that The referred questions are thus readily and webcasters; (ii) that are binding on the Register is not authorized to render distinguishable from simple issues of all copyright owners; (iii) that are an opinion on the referred questions, admissibility arising under the CRJs’ published in the Federal Register; (iv) because section 802(f)(1)(B) only allows evidence-related rules, such as whether that are available as an option to any for the referral of ‘‘a novel material proffered evidence is properly eligible webcasters; and (v) that were question of substantive law,’’ and the authenticated or whether an application entered into on or before July 30, admissibility of evidence is, in the of the hearsay rule is appropriate.72 The 2009.77 Based only on the requirement Broadcasters’ view, a purely procedural questions were thus properly referred by to publish in the Federal Register, the question.68 the CRJs. only agreements meeting these criteria III. Register’s Determination are the WSA agreements themselves. A B. Analysis of the Referred Questions direct license agreement’s provisions Having considered the relevant As noted above, the Register cannot be the subject of the statute’s statutory language and the input from concludes that section 114(f)(5)(C) prohibition because the direct the parties, the Register determines that prohibits consideration of provisions of agreement containing them cannot it is appropriate to opine on the referred settlement agreements entered into satisfy these criteria—such a direct questions, and that the answer to each pursuant to the 2009 WSA and does not agreement was not ‘‘entered into of the referred questions is ‘‘no.’’ The bar the CRJs from considering direct pursuant to subparagraph (A).’’ This is Register finds that section 114(f)(5)(C) license agreements containing true regardless of whether the direct prohibits consideration of the provisions that are copied from, are license’s provisions are copied from or provisions of the WSA agreements by substantively identical to, have been influenced by a WSA agreement’s the CRJs but does not bar the CRJs from influenced by, or refer to, the provisions provisions. considering directly negotiated license of a WSA agreement. This result is Additionally, section 114(f)(5)(C) agreements that incorporate or compelled not only by the language of includes an explicit statement of otherwise reflect provisions in a WSA section 114(f)(5)(C), but by the Congress’s intent concerning the agreement. The Register further legislative intent behind that statute as evidentiary bar: concludes, however, that the statutory well. It is the intent of Congress that any bar does not preclude SoundExchange royalty rates, rate structure, definitions, from introducing evidence or argument 1. Section 114(f)(5)(C) Does Not Bar Consideration of Direct License terms, conditions, or notice and concerning the existence of the WSA recordkeeping requirements, included agreements themselves, including their Agreements in such agreements shall be considered general influence or impact on the A reading of the entirety of section as a compromise motivated by the negotiation of the direct agreements, 114(f)(5) makes clear that the material provided that individual provisions of excluded under subparagraph (C) is 73 Id. (emphasis added) the WSA are not introduced in the 74 17 U.S.C. 114(f)(5)(A). Note, subparagraph (A) tkelley on DSK3SPTVN1PROD with NOTICES proceeding. 69 17 U.S.C. § 802(f)(1)(B). refers to the ‘‘receiving agent,’’ which is identified 70 Id.;see also Broadcasters Responsive Br. at 6 as SoundExchange by 37 CFR 261.2 and 261.4(b). 65 Pandora Responsive Br. at 10 (emphasis in (comparing section 802(f)(1)(B) with section 801(c), 75 17 U.S.C. 114(f)(5)(B). original). which states that ‘‘[t]he Copyright Royalty Judges 76 17 U.S.C. 114(f)(5)(F). 66 iHeartMedia Responsive Br. at 12. may make any necessary procedural or evidentiary 77 See 17 U.S.C. 114(f)(5). The 2009 WSA was 67 Pandora Responsive Br. at 11. rulings’’). enacted on June 30, 2009. Webcaster Settlement Act 71 Referral Order at 1–3. 68 Broadcasters Initial Br. at 17; Broadcasters of 2009, Pub. L. 111–36, 123 Stat. 1926 (2009). Responsive Br. at 6. 72 See 37 CFR 351.10(a). Thirty days thereafter was July 30, 2009. 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58306 Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices unique business, economic and political admissible as evidence or otherwise which the Register determines is what circumstances of webcasters, copyright taken into account.82 Based on a plain Congress intended, is simply that the owners, and performers rather than as reading of the statute, the Register CRJs are not only barred from admitting matters that would have been negotiated determines that this simply means that WSA agreement terms into evidence, in the marketplace between a willing the language of subparagraph (A) but that they also cannot consider the buyer and a willing seller, or otherwise cannot—either in whole or in part—be provisions of WSA agreements even if meet the objectives set forth in section introduced into evidence or otherwise not offered as evidence. For example, 801(b).78 considered in a CRJ proceeding. the broader ‘‘taken into account’’ The reference to ‘‘such agreements’’ Accordingly, the reference to language would prohibit the CRJs from subparagraph (C) clearly refers to the subparagraph (A) in section 114(f)(5)(C) taking notice of provisions of the WSA WSA agreements Congress was does not preclude consideration of the agreements that have been published in authorizing under subparagraph (A). existence or effects of the WSAs entered the Federal Register, even if not The provisions that are barred from into as a result of subparagraph (A) so introduced into evidence.84 Thus the consideration are thus those ‘‘included’’ long as the language of subparagraph (A) phrase is not superfluous, as in WSA agreements—not other is not introduced. Again, had Congress SoundExchange suggests. agreements. wished to articulate a broader To interpret section 114(f)(5)(C) as This interpretation is confirmed by proscription, it could have done so. The preventing the CRJs from taking direct relevant legislative history as well. Register will not read section license agreements into consideration When Congress enacted the 2002 114(f)(5)(C) more broadly than it is would seemingly undermine Congress’ SWSA, which first contained this written. directive in section 114(f)(2)(B), which statutory language, it explained that it Contrary to SoundExchange’s encourages the CRJs to ‘‘consider the intended to make ‘‘clear that the assertions, the phrase ‘‘taken into rates and terms for comparable types of agreement will not be admissible as account’’ in section 114(f)(5)(C) does not digital audio transmission services and evidence or otherwise taken into alter the Register’s reading of the comparable circumstances under account.’’ 79 In referencing ‘‘the statutory language. SoundExchange’s voluntary license agreements.’’ 85 Direct agreement,’’ Congress was clearly interpretation—that consideration of the agreements between sound recording referring to a specific agreement— terms of a direct license agreement that owners and webcasters for uses covered namely, the alternative agreement with have been copied from or directly by the section 112 and 114 licenses SoundExchange it was authorizing influenced by the terms of a WSA would appear to be very the type of under that legislation.80 There was no agreement would impermissibly ‘‘take evidence that section 114(f)(2)(B) suggestion that Congress was into account’’ the terms of the WSA Congress had in mind. Had Congress referencing other agreements as well. agreement—is overreaching. The intended the exclusionary rule to extend The Register further observes that Register agrees with the Webcasters that to directly negotiated agreements as section 114(f)(5)(C) is addressed to such a reading could effectively exclude SoundExchange suggests, it presumably individual provisions contained in the all potentially probative benchmark would also have acted to reconcile WSA agreements, rather than the agreements from consideration because section 114(f)(5)(C) with section agreements as a whole. Section virtually every voluntary agreement 114(f)(2)(B). 114(f)(5)(C) provides that no ‘‘provisions could be said to be is influenced to Finally, the Register agrees with the of any agreement entered into pursuant some extent by the background statutory Webcasters that as a practical matter, it to subparagraph (A), including any rate scheme—which includes the WSA could be very difficult to draw lines structure, fees, terms, conditions, or agreements.83 Indeed, this is the nature between negotiated agreements that notice and recordkeeping requirements were ‘‘directly influenced’’ by WSA of a compulsory licensing regime in set forth therein,’’ shall be taken into agreements and those that were not. general; the existence of a statutory consideration.81 It is apparent from both SoundExchange’s suggested rule would ‘‘fallback’’ can influence the direct this language enumerating specific require the CRJs to sort admissible from agreements that are entered into in its examples of rates and terms, and the inadmissible agreements based on shadow. While the Register is language setting forth Congress’ intent amorphous criteria, which would be a sympathetic to SoundExchange’s quoted above, that Congress meant to challenging task to say the least. argument that the direct agreements exclude from consideration in future have been shaped by the availability of 2. Section 114(f)(5)(C) Does Not proceedings the particular rates and the Pureplay Agreement as an Preclude Consideration of the General terms ‘‘included’’ in a WSA alternative option for licensees, the Effect of WSA Agreements on Direct agreement—rather than the existence or fact of the agreement itself. Had same would be true of direct agreements License Agreements Congress intended to bar any entered into with CRJ-determined rates Although the Register finds that the consideration of the WSA agreements as a fallback. CRJs may take into consideration direct The far more plausible reading of the whatsoever, it could have easily have ‘‘otherwise take into account’’ language, said so. But it did not. Instead, Congress 84 See 5 U.S.C. 556(e) (acknowledging that ‘‘an made clear it was referring to the agency decision [can] rest[] on official notice of a 82 Id. material fact not appearing in the evidence in the individual ‘‘provisions of’’—i.e., the 83 See, e.g., Determination of Rates and Terms for record’’); 17 U.S.C. 803(b)(6)(C)(xi) (noting that rates and terms contained in—the WSA Preexisting Subscription Services and Satellite ‘‘[n]o evidence, including exhibits, may be agreements. Digital Audio Radio Services, 78 FR 23054, 23065 submitted in the written direct statement or written Section 114(f)(5)(C) also provides that n.32 (Apr. 17, 2013) (noting that although the CRJs rebuttal statement of a participant without a ‘‘question whether any agreements regarding sound sponsoring witness, except where the Copyright tkelley on DSK3SPTVN1PROD with NOTICES ‘‘subparagraph (A)’’ itself shall not be Royalty Judges have taken official notice’’) recording rights could be purely market-based given the current statutory framework,’’ they ‘‘do not have (emphasis added). 78 17 U.S.C. 114(f)(5)(C) (emphasis added). the luxury of ignoring record evidence of the 85 See 17 U.S.C. 114(f)(2)(B). The Register notes 79 Small Webcaster Settlement Act of 2002, Pub. contemporaneous results of arm’s length that this section does not restrict this consideration L. 107–321, § 2(7), 116 Stat. at 2781 (2002) negotiations between the same buyers and sellers to only those agreements that do not contain terms (emphasis added). and rights involved in the market for which the that are copied verbatim from, are substantively 80 See id. Judges are charged to determine a reasonable identical to, have been influenced by, or refer to 81 17 U.S.C. 114(f)(5)(C). rate.’’). terms of a WSA settlement agreement. VerDate Sep<11>2014 17:19 Sep 25, 2015 Jkt 235001 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1

Federal Register / Vol. 80, No. 187 / Monday, September 28, 2015 / Notices 58307 licenses that incorporate or otherwise appears twice in subparagraph (C),93 This commentary in the consent decree reflect WSA agreement terms, it is also makes clear that the ban applies only to case further supports the Register’s the case that they are entitled to weigh a WSA agreement’s specific terms, as determination that evidence concerning the value of any such evidence in light embodied in particular provisions. the general impact and influence of the of the overall circumstances of the A recent case from federal district WSA agreements—and the statutory marketplace, including any general court in the Southern District of New licensing regime that gave rise to them— impact of the WSA agreements. York speaks to this issue.94 As part of may appropriately be considered by the a rate determination for the performance CRJs in evaluating the probative value of As discussed above, in rate of musical compositions by Pandora in the direct agreements. determinations, the CRJs are tasked with a ratesetting proceeding conducted replicating a ‘‘hypothetical market’’ September 18, 2015 under a federal consent decree, the where ‘‘the webcasting statutory license court discussed section 114(i) of the Maria A. Pallante [does] not exist.’’ 86 Among the tools at Copyright Act, which contains the same Register of Copyrights and Director, United the CRJs’ disposal to accomplish this ‘‘taken into account’’ language as States Copyright Office. task are ‘‘the rates and terms for section 114(f)(5)(C).95 Section 114(i) [FR Doc. 2015–24591 Filed 9–25–15; 8:45 am] comparable types of digital audio provides relevant part: BILLING CODE 1410–30–P transmission services and comparable License fees payable for the public circumstances under voluntary license performance of sound recordings under agreements.’’ 87 As Webcasters seem to section 106(6) shall not be taken into acknowledge, when considering a account in any administrative, judicial, MILLENNIUM CHALLENGE voluntary agreement, the CRJs may or other governmental proceeding to set CORPORATION consider whether an agreement was or adjust the royalties payable to made in the ‘‘shadow’’ of a statutory rate copyright owners of musical works for [MCC FR 15–03] or WSA agreement in evaluating its the public performance of their works.96 worth as a benchmark.88 As the U.S. Report on the Criteria and During the course of the federal court Court of Appeals for the D.C. Circuit has proceeding, the licensing organization, Methodology for Determining the stressed, ‘‘[i]t is generally within the ASCAP, the licensor, proposed a variety Eligibility of Candidate Countries for discretion of the Judges to assess of benchmarks for the court to consider, Millennium Challenge Account evidence of an agreement’s including a series of licensing Assistance in Fiscal Year 2016 comparability and to decide whether to agreements negotiated directly between look to its rates and terms for AGENCY: Millennium Challenge copyright owners and licensees outside Corporation. guidance.’’ 89 This ‘‘broad discretion’’ of the consent decree process.97 At trial, includes the ability to ‘‘discount . . . ACTION: Notice. the parties disputed the extent to which benchmarks’’ offered by the parties.90 the court could consider evidence Although section 114(f)(5)(C) may SUMMARY: This report to Congress is relating to the rate for the public preclude the consideration or provided in accordance with Section performance of sound recordings (as comparison of individual rates and 608(b) of the Millennium Challenge Act opposed to musical works).98 While the terms contained in the WSA of 2003, as amended, 22 U.S.C. 7707(b) presiding judge noted that she could agreements, it does not prevent the CRJs (the ‘‘Act’’). ‘‘not take the [sound recording rate] into from considering the agreements at all. Dated: September 22, 2015. account in determining the fair market Section 114(f)(5)(C) bars the CRJs from rate for a public performance license Maame Ewusi-Mensah Frimpong, considering the terms of agreements [for musical compositions],’’ she went VP/General Counsel and Corporate Secretary, negotiated under the 2009 WSA. on to state that ‘‘one observation may be Millennium Challenge Corporation. Nowhere does the statute suggest that safely made’’: 99 Report on the Criteria and Methodology the mere existence of such agreements, I don’t understand that that testimony for Determining the Eligibility of or their general effect on the about motive in negotiations and Candidate Countries for Millennium marketplace or particular negotiations, turmoil within ASCAP over these Challenge Account Assistance in Fiscal may not be considered. As noted above, different rates [for sound recordings] Year 2016 the statutory language is specific in would be inadmissible pursuant to limiting the scope of the prohibition to Section 114. Indeed, I think it would be Summary the ‘‘provisions of any [WSA] difficult to deal with the facts on the In accordance with section 608(b)(2) agreement.’’ 91 Section 114(f)(5)(C) ground as they exist and to set a rate of the Millennium Challenge Act of provides examples of the types of that is reasonable in the context of the 2003 (the ‘‘Act’’, 22 U.S.C. 7707(b)(1)), provisions Congress had in mind: ‘‘rate facts . . . without knowing about the Millennium Challenge Corporation structure, fees, terms, conditions, or that.100 (MCC) is submitting the following notice and recordkeeping report. This report identifies the criteria requirements.’’ 92 This list, which 93 17 U.S.C. 114(f)(5)(C). and methodology that the Millennium 94 See In re Pandora Media, Inc., 6 F. Supp. 3d Challenge Corporation (MCC) intends to 86 Intercollegiate Broad. Sys., Inc. v. Copyright 317 (S.D.N.Y. 2014). use to determine which candidate Royalty Bd., 796 F.3d 111, 131 (D.C. Cir. 2015) 95 See id. at 366–67. (internal alterations omitted). 96 17 U.S.C. 114(i). countries may be eligible to be 87 17 U.S.C. 114(f)(2)(B). 97 In re Pandora Media, Inc., 6 F. Supp. 3d at 320. considered for assistance under the Act tkelley on DSK3SPTVN1PROD with NOTICES 88 See Pandora Responsive Br. at 10–11; 98 Transcript of Trial at 729:18–733:1, In re for FY 2016. iHeartMedia Responsive Br. at 12. Pandora Media, Inc., 6 F. Supp. 3d 317 (S.D.N.Y. Under section 608 (c)(1) of the Act, 89 Intercollegiate Broad. Sys. v. Copyright Royalty 2014) (Nos. 12 Civ. 8035, 41 Civ. 1395). MCC will, for a thirty-day period Bd., 574 F.3d 748, 759 (D.C. Cir. 2009). 99 In re Pandora Media, Inc., 6 F. Supp. 3d at 90 Music Choice v. Copyright Royalty Bd., 774 following publication, accept and 366–67. F.3d 1000, 1009 (D.C. Cir. 2014). 100 Transcript of Trial at 731:1–7, In re Pandora consider public comment for purposes 91 See 17 U.S.C. 114(f)(5)(C) (emphasis added). Media, Inc., 6 F. Supp. 3d 317 (S.D.N.Y. 2014) (Nos. of determining eligible countries under 92 See id. 12 Civ. 8035, 41 Civ. 1395). section 607 of the Act (22 U.S.C. 7706). VerDate Sep<11>2014 17:19 Sep 25, 2015 Jkt 235001 PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 E:\FR\FM\28SEN1.SGM 28SEN1


Document Created: 2018-02-26 10:21:38
Document Modified: 2018-02-26 10:21:38
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
ActionFinal order.
DatesEffective Date: September 22, 2015.
ContactStephen Ruwe, Assistant General Counsel, U.S. Copyright Office, P.O. Box 70400, Washington, DC 20024. Telephone: (202) 707-8350.
FR Citation80 FR 58300 
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