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Copyright Office Adopts Final Rule on Section 115 Compulsory License Payments
Practical Law Legal Update 3-581-9065 (Approx. 3 pages)
Copyright Office Adopts Final Rule on Section 115 Compulsory License Payments
by Practical Law Intellectual Property & Technology
| Published on 19 Sep 2014 • USA (National/Federal) |
The US Copyright Office has issued a final rule implementing payment and statement of account regulations for Section 115 compulsory licenses for the making and distribution of phonorecords of nondramatic musical works.
On September 18, 2014, the US Copyright Office issued a final rule implementing Section 115 of the Copyright Act with payment and statement of account regulations for compulsory licenses for the making and distribution of phonorecords of nondramatic musical works (79 Fed. Reg. 56190 (Sept. 18, 2014)). This final rule takes into account comments received from the Copyright Office's first proposal of the rule in July 2012 and an additional request for comments in December 2013. The Copyright Office notes that it purposely designed the rule to be flexible to limit the need to amend the regulations when the Copyright Royalty Board (CRB) makes future amendments to Section 115 rates and terms.
Section 115(c)(5) of the Copyright Act allows the Register of Copyrights to issue regulations governing monthly payments and monthly and annual statements of account for the compulsory mechanical license for nondramatic musical works (17 U.S.C. 115(c)(5)). This final rule updates the existing payment and statement of account regulations due to legal and marketplace developments, including both:
- The CRB's recent adoption of newer percentage-of-revenue royalty rate structures for certain digital music services. For more information on these rates, see Legal Update, Copyright Royalty Board Finalizes Rule Adjusting Compulsory License Rates for Mechanical and Digital Phonorecords.
- Changes in accounting and industry practice in the years since the rule's last substantial revision.
Specifically, the final rule:
- Amends part 201 and adds part 210 to title 37 of the CFR.
- Adopts the new percentage-of-revenue royalty rate structure ("percentage-rate usages") for limited downloads, interactive streaming and incidental digital phonorecord deliveries.
- Adopts regulations for services subject to cents-per-phonorecord rates. For example, services include physical phonorecord deliveries, permanent downloads and ringtones.
- Makes certain technical and organizational changes including:
- Treating the term GAAP (Generally Accepted Accounting Principles) in a manner to maintain consistency with the CRB's terms.
- Consolidating the provisions describing when phonorecords are considered "distributed" within the meaning of Section 115.
- Requiring statements of account to make clear when money is withheld from royalty payments to copyright owners for remittance to the IRS.
- Excluding incomplete transmissions from the rule's definition of "digital phonorecord deliveries."
- Reconciling overpayments in the annual statement to be made available to the compulsory licensee as a credit.
The rule will take effect on November 17, 2014.
Update: On October 8, 2014, the Copyright Office issued a correction to the final rule that corrects:
- Section 210.16, paragraph (c)(1)(vi) to remove the incorrect reference to paragraph "(a)(3)" and replace it with a reference to paragraph "(c)(3)".
- Section 210.17, paragraph (h) to clarify that copyright owners may request annual statements of account that they had not received for fiscal years ending after March 1, 2009 and before November 17, 2014 at any time within six months after November 17, 2014, the effective date of the rules.