Copyright Office Announces Notice of Inquiry Regarding Cable Statutory License

September 20, 2006. The Copyright Office (CO) published a notice in the Federal Register that announces, describes, and sets comment deadlines for a notice of inquiry (NOI) regarding copyright issues associated with the secondary transmission of digital television broadcast signals by cable operators.

The Copyright Act, at 17 U.S.C. § 106, provides that "the owner of copyright under this title has the exclusive rights to do and to authorize" certain things. However, the Copyright Act also includes numerous limitations on these exclusive rights. 17 U.S.C. § 111 provides that certain secondary transmissions are not an infringement of copyright. It creates for cable systems a statutory license to retransmit a performance or display of a work embodied in a primary transmission made by a television station licensed by the Federal Communications Commission (FCC). The CO has promulgated rules implementing this statutory license.

Copyright Owners' Petition for Rulemaking. The Motion Picture Association of America (MPAA), National Basketball Association (NBA), National Football League (NFL), and other copyright owners, submitted a petition for rulemaking [20 pages in PDF] to the CO on May 23, 2005, regarding applicability of the CO's rules to the retransmission of digital broadcast signals under the Section 111 statutory license.

The petitioners wrote that the Congress created the cable statutory license "nearly thirty years ago, at a time when all broadcast stations were analog and transmitted a single stream of programming on either a VHF or an UHF channel. It was not until 1997 that the FCC adopted rules governing transition of the broadcast television industry from analog to digital signals, and thereby authorized each individual broadcaster to transmit multiple streams of programming over various channels ... Congress has never specifically addressed in Section 111 the issues arising from cable carriage of digital broadcast signals."

The Congress has more recently dealt with the satellite statutory license in 17 U.S.C. § 119.

The petitioners continued that "Cable operators are increasingly retransmitting digital signals of broadcast stations. ... If cable operators do carry digital broadcast signals relying upon the Section 111 compulsory license ... it is important that they properly report such carriage and pay the royalties that Section 111 requires. Based upon a review of statements of account filed with the Copyright Office by cable operators as well as other material, Copyright Owners are concerned that cable operators are not reporting and calculating their Section 111 royalties properly."

The petitioners requested that the CO "address the recordkeeping and royalty calculation issues that necessarily arise in connection with the carriage of digital broadcast signals by cable operators -- assuming that the Office is of the view that Section 111 covers retransmissions of digital broadcast signals."

The petition also included proposed language for changes to the CO's regulations.

Copyright Office Comments. The CO wrote in its notice that when the Congress passed the statute creating the cable statutory license it "made a distinction between primary and secondary transmissions and local versus distant ones in order to identify which transmissions are subject to the statutory license and at what rate. It did not define a broadcast transmission or identify whether a transmission was subject to the statutory license on the basis of the signal's technical characteristics (i.e., an analog signal vs. a digital signal) nor was there a need to make such distinctions because all transmissions at that time were broadcast in an analog format." (Parentheses in original.)

The CO added that "there is nothing in the Act, its legislative history, or the Copyright Office's implementing rules, which limits the cable statutory license to analog broadcast signals. Instead, the cited provisions broadly state that the statutory license applies to any broadcast stations licensed by the FCC or any of the signals transmitted by such stations. Thus, use of the statutory license for the retransmission of a digital signal would not be precluded merely because the technological characteristics of a digital signal differ from the traditional analog signal format."

But, the CO added, "questions remain with regard to the application and operation of the cable statutory license structure in the digital television context."

Hence, the CO's notice seeks comments on issued raised by the petition, and a plethora of additional issues raised by the CO.

Summary of Questions Posed by Notice of Inquiry. The CO first seeks comments on a number of digital broadcast signal retransmission issues.

One subcategory of issues concerns retransmission of a digital television broadcast signal. The CO asks:

"First, in the case where the digital signal has or has had an analog counterpart, would the digital broadcast station's television market for Section 111 purposes be the same as the broadcast station's television market for the analog signal? And if the analog signal is considered distant, can the digital counterpart ever be considered local, or vice versa?"

"Second, how should the Copyright Office determine whether a distant digital broadcast signal is permitted or non-permitted for Distant Signal Equivalent (``DSE´´) purposes?"

"Third, how does the Copyright Office determine the basis of carriage for a distant digital signal (i.e. market quotas, grandfathered status, etc.)?" (Parentheses in original.)

"Fourth, what DSE values (for network, educational, independent) should be assigned to digital signals?" (Parentheses in original.)

"Fifth, how would the Copyright Office determine the coverage area of a broadcast licensee's digital television transmission for cable copyright purposes, especially in the context of significantly viewed signals?"

It also asks, "Would the resolution of these questions be the same in the case where the signal never had an analog counterpart?"

Another digital broadcast signal retransmission issue raised by the notice of inquiry is simultaneous retransmission of analog and digital broadcast signals.

The CO asks, "Must a cable operator pay separately for carriage of a digital signal and an analog signal where the signals carry identical programming to the subscriber, or does the statutory license allow for a single payment for the delivery of the same programming albeit in two different formats? Would the programming be considered ``different´´ if the digital signal included only a subset of the programming from the analog signal or if the digital signal was broadcast in a high definition format? Are cable systems offering such combinations to subscribers and is the Copyright Owners' method of valuation appropriate?" (Footnote omitted.)

The CO also asks commenters "to provide examples of where cable operators are retransmitting the analog and digital signals of the same licensee, but the programming on the primary (or main) digital signal is different than that of the analog signal. We also seek comment on how a cable operator should report the carriage of a digital signal that has been downconverted to an analog signal (at the cable operator's headend) so that subscribers without a digital set top box are able to view such signals." (Parentheses in original.)

Another digital broadcast signal retransmission issue raised by the notice of inquiry is retransmission of digital multicast streams. The CO seeks comment on the petitioners' argument that "a cable operator carrying multicast signals must identify those signals separately in Space G on its SOA form", and that the CO should require " separate calculation of DSE values and royalty payments for carriage of multiple streams of distant digital signals."

Another digital broadcast signal retransmission issue raised by the notice of inquiry is retransmission of datacast streams. The CO seeks comment on whether "time and technology eroded the precedential value" of WGN Continental Broadcasting Co. v. United Video, Inc., 693 F.2d 622 (7th Cir. 1982).

The final digital broadcast signal retransmission issue raised by the notice of inquiry is retransmission of digital audio broadcast signals. The CO seeks comment "on what changes in our rules and the SOAs are necessary to accommodate the secondary transmission of digital audio signals by cable systems. How should cable systems report the retransmission of digital audio multicast streams? Will cable subscribers need specialized equipment or set top boxes to receive these digital radio signals? If so, how would this affect a cable operator's gross receipts calculations?"

Next, the CO seeks comments on the marketing of digital broadcast signals and the cable statutory license.

Finally, the CO seeks comments on digital equipment and reception issues under Section 111. For example, the CO seeks comment on the petitioners' argument that "a cable operator must include in its gross receipts any fees charged subscribers for digital set top boxes used to receive HDTV or other digital broadcast signals, notwithstanding that the operator may market its offering of such signals as ``free.´´"

The CO also seeks comment "on whether cable subscribers have been required to purchase CableCards in order to access digital broadcast television signals. If so, we ask whether the Copyright Office's definition of gross receipts should be amended to include subscriber revenue generated through the lease of CableCards. How are cable operators currently treating the lease of CableCards on their SOAs? What space and block on the SOAs should be changed, or possibly added, to list CableCard revenue?"

The CO also seeks comment on the petitioners' argument that "fees for service to additional digital television sets or ``HDTV Terminals´´ must be included in a cable system's gross receipts".

Miscellaneous Information. Initial comments are due by November 6, 2006. Reply comments are due by December 4, 2006.

The notice identifies two attorneys at the Copyright Office assigned to this proceeding, Ben Golant and Tanya Sandros, at 202-707-8380. The attorneys for the sports league petitioners are Robert Garrett and Christopher Winters of the Washington DC office of the law firm of Arnold & Porter. The attorney for the MPAA is Gregory Olaniran of the Washington DC office of the law firm of Stinson Morrison & Hecker.

TLJ spoke with a representative of the National Cable and Telecommunications Association (NCTA) who stated that the NCTA's attorneys are studying the NOI, and that the NCTA will submit a comment to the CO, but that the NCTA has no reaction to the NOI at this time.

The CO notice is published at Federal Register, September 20, 2006, Vol. 71, No. 182, at Pages 54948-54953.

See also, the prepared testimony of Marybeth Peters, Registrar of Copyrights, before the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property on February 24, 2004.