Among other things, my analysis has so far caused me to question which rates apply to limited downloads prior to 2008. Interestingly, I have not heard this topic reported in the media or discussed by my colleagues in the music industry.
Section 385.11 of the Copyright Royalty Judges' Final Determination of Rates and Terms (page 77) states that:
"A limited download is a general digital phonorecord delivery under 17 U.S.C. 115(c)(3)(C) and (D)."
As published in the February 9, 1999 Federal Register, 37 CFR part 255.5 was revised in 1999 to set rates for digital phonorecord deliveries in general. As a result, US Register of Copyrights Marybeth Peters wrote in the January 26, 2009 Federal Register:
"With respect to limited downloads, the previous rate-setting proceeding established royalty fees that clearly applied to limited downloads, whether such downloads were promotional or not."
The Copyright Royalty Judges must have mostly concurred because they responded by amending their Final Determination of Rates and Terms to strike provisions including one that allowed licensees to report no royalties for certain limited downloads deemed to be promotional, including limited downloads that occurred prior to 2008.
Setting aside the issue of promotional units, according to the logic of the Register of Copyrights, it seems that the statutory mechanical royalty rates for all limited downloads through December 31, 2007 are equal to unit rates applicable to permanent downloads and physical records:
Playing time 0:00 - 5:00 minutes:
1996-1997 = $0.0695
1998-1999 = $0.071
2000-2001 = $0.0755
2002-2003 = $0.08
2004-2005 = $0.085
2006-2007 = $0.091
However, the participants' agreement and the Copyright Royalty Judges Final Determination of Rates and Terms (as amended) set forth contrary rates for limited downloads prior to 2008.
Is the Register of Copyrights correct that "the previous rate-setting proceeding established royalty fees that clearly applied to limited downloads"? Which rates do you think apply and for which time periods?
Based on the summary of reportable rates that the Harry Fox Agency published, it represents that the rates for limited downloads prior to 2008 are set forth in the participants' agreement, not the rates applicable to all digital phonorecord deliveries in general.
While I think this may have been the intent of the participants (and the 1999 rate setting panel), perhaps the Register of Copyrights is technically correct that this would be impermissible retroactive rulemaking because when the participants and the CRJs deemed limited downloads to be general digital phonorecord deliveries, they subjected licensees to the same statutory royalty rates that were applicable to other general digital phonorecord deliveries (i.e., permanent downloads) through 2007. Attention attorneys: Please feel free to post comments or email me at email@example.com to tell me what you think.
Regardless of what the answer is, that the Copyright Royalty Judges did not clarify rates applicable to limited downloads during the period from inception to December 31, 2007 is troubling to those of us who must compute and audit royalties therefor.
Regrettably, this point is but one example of the confusion arising from the labyrinthine rates that the US music industry took over a decade to issue. The challenge of complying with such royalty rate calculations is great for my business, which reports, certifies and audits such royalties, but bad news for the music business as a whole. I think the Copyright Royalty Judges and the participants cost the music industry much needed profit in choosing to adopt such complex rates.
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