PART 384—RATES AND TERMS FOR THE MAKING OF EPHEMERAL RECORDINGS BY BUSINESS ESTABLISHMENT SERVICES Authority: 17 U.S.C. 112(e), 801(b)(1). Source: 73 FR 16199, Mar. 27, 2008, unless otherwise noted. § 384.1 General. (a) Scope. (b) Legal compliance. (c) Relationship to voluntary agreements. [73 FR 16199, Mar. 27, 2008, as amended at 78 FR 66277, Nov. 5, 2013; 83 FR 60363, Nov. 26, 2018; 89 FR 267, Jan. 3, 2024] § 384.2 Definitions. For purposes of this part, the following definitions shall apply: Business Establishment Service Collective Copyright Owners Ephemeral Recording Licensee Performers Qualified Auditor [73 FR 16199, Mar. 27, 2008, as amended at 78 FR 66277, Nov. 5, 2013; 84 FR 32313, July 8, 2019] § 384.3 Royalty fees for ephemeral recordings. (a) Basic royalty rate. Table 1 to Paragraph ( a Year Rate 2024 14.0 2025 14.5 2026 14.75 2027 15.0 2028 15.0 (2) Gross Proceeds as used in this section means all fees and payments, including those made in kind, received from any source before, during or after the License Period that are derived from the use of sound recordings subject to protection under title 17, United States Code, during the License Period pursuant to 17 U.S.C. 112(e) for the sole purpose of facilitating a transmission to the public of a performance of a sound recording under the limitation on exclusive rights specified in 17 U.S.C. 114(d)(1)(C)(iv). (3) Subject to paragraph (a)(4) of this section, the royalty specified in paragraph (a)(1) of this section for a particular Business Establishment Service offering may be reduced by a percentage corresponding to the “Direct License Share” for such Business Establishment Service offering, as follows: (i) If the transmissions of the Business Establishment Service offering are entirely made over the internet or the Licensee otherwise is able to count all of its Performances to business subscribers, the Direct License Share for such Business Establishment Service offering is its Performances of directly licensed sound recordings and sound recordings for which no license is required ( e.g., (ii) If the transmissions of the Business Establishment Service offering are made to 10% or more of the bona fide subscriber locations of the Business Establishment Service offering over the internet, or the Licensee otherwise is able to count its Performances to 10% or more of bona fide subscriber locations of the Business Establishment Service offering, and the Business Establishment Service offering provides transmissions of a substantially similar set of channels (fairly represented by the countable channels) to other subscriber locations by means that do not allow the Licensee to count Performances ( e.g., (iii) If paragraphs (a)(3)(i) and (ii) of this section do not apply, but the Licensee transmits a set of webcast channels substantially similar to and representative of the Business Establishment Service offering to consumers over the internet or by other means that allow the Licensee to count Performances on those channels (“Reference Channels”), the Direct License Share for such Business Establishment Service offering is its Performances of Excluded Recordings on the Reference Channels divided by its total Performances on the Reference Channels. (iv) Otherwise, the Direct License Share for such Business Establishment Service offering is a fraction calculated on a subscriber location-by-subscriber location basis, or if that is impracticable, on a uniform basis for all subscriber locations, where: (A) The numerator is the play frequency (as defined in § 370.4(b) of this chapter) of Excluded Recordings for the Business Establishment Service offering during a period of time each day as follows: ( 1 ( 2 (B) The denominator is the total play frequency (as defined in § 370.4(b) of this chapter) for the Business Establishment Service offering between the same hours as used in the numerator. (4) The Direct License Share reduction in paragraph (a)(3) of this section is available to a Licensee only if the Licensee provides the Collective, by no later than the due date for the relevant payment under § 384.4(c), a list of each Copyright Owner from which the Licensee claims to have a direct license of rights to Excluded Recordings that is in effect for the month for which the payment is made and of each sound recording for which the Licensee takes the reduction, identified by featured artist name, sound recording title, and International Standard Recording Code (ISRC) number or, if the ISRC is not available and feasible, album title and copyright owner name. Notwithstanding § 384.5, the Collective may disclose such information as reasonably necessary for it to confirm whether a claimed direct license exists and claimed sound recordings are properly excludable. (5) For purposes of paragraph (a)(3) of this section, Performance (i) Except as discussed in paragraph (a)(5)(ii) of this section, a Performance is an instance in which any portion of a sound recording is publicly performed to a Business Establishment Service subscriber location within the United States ( e.g., (ii) An instance in which a portion of a sound recording is publicly performed to a Business Establishment Service subscriber location within the United States is not a Performance if it both: (A) Makes no more than incidental use of sound recordings including, but not limited to, brief musical transitions in and out of commercials or program segments, brief use during news, talk and sports programming, brief background use during disk jockey announcements, brief use during commercials of sixty seconds or less in duration, or brief use during sporting or other public events; and (B) Does not contain an entire sound recording and does not feature a particular sound recording of more than thirty seconds (as in the case of a sound recording used as a theme song), except for ambient music that is background at a public event. (b) Minimum fee. (c) Other royalty rates and terms. [73 FR 16199, Mar. 27, 2008, as amended at 78 FR 66277, Nov. 5, 2013; ; 83 FR 60363, Nov. 26, 2018; 84 FR 32313, July 8, 2019; 89 FR 267, Jan. 3, 2024] § 384.4 Terms for making payment of royalty fees and statements of account. (a) Payment to the Collective. (b) Designation of the Collective. (2) If SoundExchange, Inc. should dissolve or cease to be governed by a board consisting of equal numbers of representatives of Copyright Owners and Performers, then it shall be replaced by a successor Collective upon the fulfillment of the requirements set forth in paragraph (b)(2)(i) of this section. (i) By a majority vote of the nine Copyright Owner representatives and the nine Performer representatives on the SoundExchange board as of the last day preceding the condition precedent in this paragraph (b)(2), such representatives shall file a petition with the Copyright Royalty Judges designating a successor to collect and distribute royalty payments to Copyright Owners entitled to receive royalties under 17 U.S.C. 112(e) that have themselves authorized the Collective. (ii) The Copyright Royalty Judges shall publish in the Federal Register (c) Monthly payments. (d) Minimum payments. (e) Late payments. (f) Use of account numbers. (g) Statements of account. (1) Such information as is necessary to calculate the accompanying royalty payment, or if no payment is owed for the month, to calculate any portion of the minimum fee recouped during the month; (2) The name, address, business title, telephone number, facsimile number (if any), electronic mail address and other contact information of the person to be contacted for information or questions concerning the content of the statement of account; (3) The account number assigned to the Licensee by the Collective for the relevant Business Establishment Service offering (if the Licensee has been notified of such account number by the Collective); (4) The signature of: (i) The owner of the Licensee or a duly authorized agent of the owner, if the Licensee is not a partnership or corporation; (ii) A partner or delegee, if the Licensee is a partnership; or (iii) An officer of the corporation, if the Licensee is a corporation; (5) The printed or typewritten name of the person signing the statement of account; (6) The date of signature; (7) If the Licensee is a partnership or corporation, the title or official position held in the partnership or corporation by the person signing the statement of account; (8) A certification of the capacity of the person signing; and (9) A statement to the following effect: I, the undersigned owner or agent of the Licensee, or officer or partner, have examined this statement of account and hereby state that it is true, accurate and complete to my knowledge after reasonable due diligence. (h) International Standard Recording Codes. (i) Distribution of royalties. (2) If the Collective is unable to locate a Copyright Owner entitled to a distribution of royalties under paragraph (i)(1) of this section within 3 years from the date of payment by a Licensee, such royalties shall be handled in accordance with § 384.8. (j) Retention of records. [73 FR 16199, Mar. 27, 2008, as amended at 78 FR 66277, Nov. 5, 2013; 89 FR 268, Jan. 3, 2024] § 384.5 Confidential information. (a) Definition. (b) Exclusion. (c) Use of Confidential Information. (d) Disclosure of Confidential Information. (1) Those employees, agents, attorneys, consultants and independent contractors of the Collective, subject to an appropriate confidentiality agreement, who are engaged in the collection and distribution of royalty payments hereunder and activities related thereto, who are not also employees or officers of a Copyright Owner or Performer, and who, for the purpose of performing such duties during the ordinary course of their work require access to Confidential Information; (2) Board members of the Collective, and members of the Collective committees whose primary functions are directly related to royalty collection and distribution, subject to an appropriate confidentiality agreement and for the sole purpose of performing their duties as board or committee members of the Collective, as applicable, provided that the sole Confidential Information that may be shared pursuant to this paragraph (d)(2) is Confidential Information contained in monthly statements of accounts provided pursuant to § 384.4(f) that accompany royalty payments; (3) An independent and Qualified Auditor, subject to an appropriate confidentiality agreement, who is authorized to act on behalf of the Collective with respect to verification of a Licensee's statement of account pursuant to § 384.6 or on behalf of a Copyright Owner with respect to the verification of royalty distributions pursuant to § 384.7; (4) Copyright Owners, including their designated agents, whose works have been used under the statutory license set forth in 17 U.S.C. 112(e) by the Licensee whose Confidential Information is being supplied, subject to an appropriate confidentiality agreement, provided that the sole Confidential Information that may be shared pursuant to paragraph (d)(4) of this section are monthly statements of account provided pursuant to § 384.4(f) that accompany royalty payments; (5) In connection with future proceedings under 17 U.S.C. 112(e) before the Copyright Royalty Judges, and under an appropriate protective order, attorneys, consultants and other authorized agents of the parties to the proceedings or the courts; and (6) In connection with bona fide royalty disputes or claims that are the subject of the procedures under § 384.6 or § 384.7, and under an appropriate confidentiality agreement or protective order, the specific parties to such disputes or claims, their attorneys, consultants or other authorized agents, and/or arbitration panels or the courts to which disputes or claims may be submitted. (e) Safeguarding of Confidential Information. [73 FR 16199, Mar. 27, 2008, as amended at 78 FR 66278, Nov. 5, 2013; 83 FR 60363, Nov. 26, 2018] § 384.6 Verification of royalty payments. (a) General. (b) Frequency of verification. (c) Notice of intent to audit. Federal Register (d) Acquisition and retention of report. (e) Acceptable verification procedure. (f) Consultation. (g) Costs of the verification procedure. [73 FR 16199, Mar. 27, 2008, as amended at 78 FR 66278, Nov. 5, 2013] § 384.7 Verification of royalty distributions. (a) General. (b) Frequency of verification. (c) Notice of intent to audit. Federal Register (d) Acquisition and retention of record. (e) Acceptable verification procedure. (f) Consultation. (g) Costs of the verification procedure. [73 FR 16199, Mar. 27, 2008, as amended at 78 FR 66278, Nov. 5, 2013] § 384.8 Unclaimed funds. If the Collective is unable to identify or locate a Copyright Owner who is entitled to receive a royalty distribution under this part, the Collective shall retain the required payment in a segregated trust account for a period of 3 years from the date of distribution. No claim to such distribution shall be valid after the expiration of the 3-year period. After expiration of this period, the Collective may apply the unclaimed funds to offset any costs deductible under 17 U.S.C. 114(g)(3). The foregoing shall apply notwithstanding the common law or statutes of any State. [78 FR 66278, Nov. 5, 2013]