Webcasting Proceeding Does Not ‘Present' Rate Issue

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By Anandashankar Mazumdar
Nov. 25 — There didn't seem to be sufficient evidence for the Copyright Royalty Board to set up a royalty system for online music streaming that set different rates based on who holds the copyrights in a particular song, according to a memorandum opinion issued Nov. 24 by Register of Copyrights Maria A. Pallante.

Large music labels had argued that the board had broad authority to set up a royalty rate system based on who owns rights in particular recordings. Webcasters, such as Pandora and SiriusXM, opposed such a structure.

On Sept. 11, the board referred a question to the register, asking whether a provision creating a statutory license under 17 U.S.C. §114 prohibited the board “from setting rates and terms that distinguish among different types or categories of licensors.”

However, the memorandum responding to the referral said the proceeding before the CRB had not “presented” the question of whether the board may create a royalty system differentiating among different kinds copyright holders.

The board must make royalty rulings based on evidence in the record—and, in this proceeding, there was no evidence on the question of creating rates depending on whether the copyright holder is a major label or an independent, the register of copyrights said. There was no basis under the Copyright Act to issue a written opinion in the matter, she said.

SoundExchange Inc., a collective royalty organization representing copyright holders and recording artists, argued that, should the Copyright Office permit segmentation, the parties should be given more time to address issues that they had not yet been able to address.

However, webcasters took the position that the law did not allow the board to institute different rates for different categories of music licensors. Major music labels took the opposite position, stating that there was precedent to support the board's “broad discretion” to establish rates.

The register of copyrights determined that she was not authorized to offer an opinion on the matter by Section 802 of the Copyright Act, because it provided for a written opinion in a “case in which a novel material question of substantive law concerning interpretation” of certain provisions of the Copyright Act “is presented” or “arise in the course of the proceeding.” In this case, the register said the question referred by the board was “merely a theoretical one in the context of the proceeding.”

Significantly, no party in the proceeding had actually proposed any structure setting forth different rates and terms based on different types of licensors, the register said. The board is required to render its decisions based on the evidence in the record, the register's letter said, and, in this case, there was no evidence that could form the basis for such a fee structure on the part of the CRB.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com
To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com