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Copyright Office Clarifies STELA Obligations

Friday, January 11, 2013

The Copyright Office will no longer refund overpayments of cable royalty fees for statements dated prior to Jan. 1, 2010, unless the cable operator owed the refund is current on all its outstanding dues, according to a final rule published Jan. 9. 78 Fed. Reg. 1,755 (Jan. 9, 2013).

When the Satellite Television Extension and Localism Act went into effect in 2010 it allowed cable operators to calculate its royalty obligation for the carriage of distant signals on a community-by-community basis, instead of calculating its obligation based on the entire system. This change, the Copyright Office said, eliminated the “phantom signals” problem that had previously required cable operators to pay royalties on signals that subscribers could not receive.

The notice said that STELA amended the Copyright Act so that now, “[I]f a cable system provides distant broadcast signals to some, but not all, of the subscribers served by that system, the gross receipts and distant signal equivalent values for each signal may be based on the subscribers in those communities where the signal is actually provided.” 17 U.S.C. §111(d)(1)(C)(iii).

STELA also states that an operator “shall not be subject to an action for infringement, or eligible for any royalty refund or offset, arising out of its use of such methodology on such statement,” for statements filed before the act went into effect. 17 U.S.C. §111(d)(1)(D). A dispute still existed, however, with regards to whether the Copyright Office should use the old method or the new method to calculate whether a cable operator overpaid or was instead due a refund for payments made before STELA went into effect. The final rule set forth the following clarification:

[R]efunds for an overpayment of royalty fees on a Statement filed prior to the effective date of STELA will be made only when a cable operator has satisfied its outstanding royalty obligations (if any), including the obligation to pay for the carriage of each distant signal on a system-wide basis.  

Text is available here.

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