Copyright Office Releases STELA Section 302 Report

The Copyright Office has issued its report on marketplace alternatives to statutory licenses set forth in Sections 111, 119 and 122 of the Copyright Act, as required by Section 302 of the Satellite Television Extension and Localism Act of 2010 (STELA).

The Report, prepared after a year of review that included a public hearing, provides recommendations for commencing a structured phase-out of the statutory provisions while taking into account the reasonable needs of those who would be affected. In announcing the report, Register of Copyrights Maria A. Pallante welcomed “the opportunity to work with Members of Congress and the copyright community as technology, business models, and the broadcast programming market continue to evolve.”

According to the Copyright Office, he Report considers the repeal of statutory licensing provisions in Sections 111, 119, and 122 of the Copyright Act (Title 17, U.S. Code), which currently govern the retransmission of distant and local television broadcast signals by cable operators and satellite carriers.

The Report provides recommendations for commencing and carrying out such repeal responsibly and on a reasonable schedule, addressing the following specific points:

(1) Possible methods for implementing a phase-out (including allowing stakeholders the opportunity to develop market licenses); and

(2) Possible mechanisms for ensuring a timely and effective phase-out (including adopting a date-certain and a tiered schedule); and

(3) Possible legislative or administrative actions that may be appropriate in achieving a phase-out (including addressing communications issues that are outside the scope of copyright law).

In reaching the recommendations contained in the Report, the Copyright Office engaged with many stakeholders, including copyright owners, members of the broadcast, cable and satellite industries, as well as the Federal Communications Commission, through numerous focused meetings, a public comment period and public hearing.

The Copyright Office summarized the key points of the Report:

• Although statutory licensing has ensured the efficient and cost-effective delivery of television programming in the United States for as long as 35 years in some instances, it is an artificial construct created in an earlier era. Copyright owners should be permitted to develop marketplace licensing options to replace the provisions of Sections 111, 119 and 122, working with broadcasters, cable operators and satellite carriers, and other licensees, taking into account consumer demands.

• Business models based on sublicensing, collective licensing and/or direct licensing are largely undeveloped in the broadcast retransmission context, but they are feasible alternatives to securing the public performance rights necessary to retransmit copyrighted content in many instances.

• The options of sublicensing, collective licensing, and direct licensing do not represent the entire universe of possibilities, are not mutually exclusive, and will not remain static. Business models may emerge that incorporate these concepts in part or in combination, and technology will continuously inform the practices of both licensors and licensees. Over time, marketplace licensing should evolve in a variety of innovative ways, subject to investment and experimentation in the marketplace.

• The Copyright Office recommends that Congress provide a date-specific trigger for the phase-out and eventual repeal of the distant signal licenses, but leave repeal of the local signal licenses to a later time. This approach would provide stakeholders with an opportunity to test new business models with the least likelihood of disruption to consumers, and give Congress the advantage of drawing on that experience when considering when and how to address the local signal licenses.

• Before determining the date-specific trigger and transition period for the phase-out of the distant signal licenses, the Copyright Office recommends that Congress evaluate the concerns of stakeholders who operate with limited resources in the broadcast programming distribution chain and determine whether special consideration is advisable.

• In selecting the sunset date for the distant signal licenses, the Copyright Office recommends that Congress build in a sufficient transition period, during which cable operators and satellite carriers should be instructed to negotiate with broadcast stations for carriage of the programming on the broadcast signal in cases where said broadcast stations have obtained the rights necessary to retransmit all of the content carried on their signals (provided, however, the broadcast stations forgo their mandatory carriage rights under the must-carry and carry-one carry-all provisions of the Communications Act).

• The statutory licenses at issue are codified in copyright law but do not operate in a vacuum. They interact with equally complex provisions of communications law and regulations. The Copyright Office recommends that Congress consider and, as appropriate, address these provisions in tandem with the recommendations described in this Report.

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