Advanced Copyright Issues on the Internet - Fenwick & West LLP

On Jan. 9, 2006, the CRB announced commencement of a proceeding to determine ratesand terms of royalty payments under Sections 114 and 112 for preexisting subscription servicesand preexisting satellite digital audio radio services (“SDARS”). 2196 SoundExchange, MusicChoice, Muzak, XM, Sirius, Royalty Logic Inc. and THP Capstar Acquisition dba DMX Music,all filed petitions in response. DMX and Sirius asserted that they qualified as preexistingsubscription services and were thus eligible for the earlier, below-market rates established by theCARP in May 1998 and revised in July 2003. SoundExchange challenged this assertion, arguingthat they did not qualify under as a preexisting service under Section 114(j)(11) because neitherhad provided digital audio transmissions on or before July 31, 1998. On Aug. 21, 2006, the CRBreferred this question to the Register of <strong>Copyright</strong>s for a ruling. 2197In November of 2006, in response to the CRB’s request, the <strong>Copyright</strong> Office publishedin the Federal Register a memorandum opinion concluding that “eligibility for a preexistingsubscription service license is limited to subscription services that satisfy the definition of 17U.S.C. § 114(j)(11), which includes being in operation on July 31, 1998 and continuouslyoperating since that time. In 1998, Congress identified those entities which satisfied thedefinition and were eligible at that time as being DMX, Music Choice and the DiSH Network.Therefore, today, those same services are the only ones that may qualify as being preexistingsubscription services, since they are the only ones which can satisfy the requirement of being inoperation as of July 31, 1998. Moreover, for purposes of participating in a rate settingproceeding, the term ‘preexisting subscription service’ is best interpreted as meaning thebusiness entity which operates under the statutory license. A determination of whether DMX isthe same service that was identified by the legislative history in 1998 and has operatedcontinuously since that time requires a factual analysis that is beyond the scope of the Register’sauthority for questions presented under 17 U.S.C. § 802(f)(1)(B).” 2198Over the next year, various parties either entered into independent settlementarrangements with SoundExchange, were dismissed by the CRB, or withdrew from theproceedings, leaving only Sirius and XM to proceed as SDARS. 2199 On Jan. 10, 2008, the CRBissued its decision setting the statutory royalty rate that XM and Sirius must pay to artists andrecord labels through 2012 as follows: 6.0% for 2007 and 2008; 6.5% for 2009; 7.0% for 2010;7.5% for 2011; and 8.0% for 2012. The CRB ruled that these rates were inclusive of the Section112 ephemeral license, but declined to ascribe any particular percentage of the Section 114royalty as representative of the value of the Section 112 license. 22002196 71 Fed. Reg. 1455 (Jan. 9, 2006).2197 “<strong>Copyright</strong> Royalty Board Sets New Rates for Satellite Radio Providers XM and Sirius,” BNA’s Patent,Trademark & <strong>Copyright</strong> Journal (Dec. 14, 2007) at 160.2198 71 Fed. Reg. 64639, 64640 (Nov. 3, 2006).2199 “<strong>Copyright</strong> Royalty Board Sets New Rates for Satellite Radio Providers XM and Sirius,” BNA’s Patent,Trademark & <strong>Copyright</strong> Journal (Dec. 14, 2007) at 160-61.2200 73 Fed. Reg. 4080, 4102 (Jan. 24, 2008).- 478 -