The Copyright Royalty Judges have now revealed the proposed Phonorecords V settlement within the Federal Register, formally starting the general public remark course of. Feedback and objections are due August 10, 2026.
The order itself is just two pages lengthy and, standing alone, is considerably opaque. A reader might simply come away with out understanding what the settlement really does. For that purpose, we’re posting each the Federal Register discover and the underlying settlement movement. The movement offers the context obligatory to know what the events have proposed.
At a excessive degree, the settlement proposes to proceed the prevailing Subpart B rules governing bodily phonorecords, everlasting downloads, ringtones, and music bundles via the 2028–2032 fee interval. Reasonably than rewriting the rules, the settling events suggest to depart the rules in place, together with the prevailing inflation adjustment mechanism in 37 C.F.R. § 385.11(a)(2).
That time deserves emphasis as a result of it’s simple to overlook.
The settlement preserves the prevailing COLA mechanism, which can—could—produce modest annual will increase within the statutory minimal fee. However it additionally preserves the method’s mounted 12¢ reference fee and November 2022 CPI-U baseline. Consequently, the COLA is utilized to a reference fee that displays 2022 buying energy, not 2028 buying energy (or extra precisely, November 2027 buying energy). Though the method protects in opposition to future inflation, it doesn’t compensate for the cumulative erosion in the actual worth of the 12¢ benchmark in the course of the 5 years between its adoption in 2023 and the start of the following fee interval. (That fee is at present price roughly 11¢ give or take, which is why the present COLA-adjusted fee is 13.1¢, not 12¢.)
The proposal due to this fact does not freeze the statutory royalty at no matter inflation-adjusted 2023 fee is in impact on the finish of 2027 (which I at present anticipate shall be round 13.5¢). Reasonably, it freezes the method itself. The primary fee for the brand new interval (2028) shall be calculated utilizing the November 2027 CPI-U, revealed in December 2027, and annual charges thereafter will proceed to be decided utilizing the identical methodology.
That doesn’t imply the statutory fee stays mounted. So long as the CPI-U index continues to extend, the annual statutory fee would ordinarily at the very least nominally proceed to extend—even when the annual inflation fee itself declines yr over yr. The necessary distinction is that the method preserves future buying energy relative to the mounted November 2022 benchmark; it does not restore the buying energy that has already been misplaced earlier than the brand new fee interval begins. One technique to restore that buying energy could be for the primary yr of Phonorecords V to begin the place Phonorecords IV left off (which I believe shall be someplace between 13.1¢ and 13.5¢). That will be in line with the way in which the federal government set the obligatory charges apart from the primary freeze (1909-1978) and the second freeze (2006-2023). However don’t let 48 years of historical past get in the way in which.
The Judges’ discover additionally confirms that a number of copyright proprietor individuals—together with the Songwriters Guild of America, Phrase Collections, Eight Mile Music Firms, and George Johnson—declined to hitch the settlement, however nonetheless proceeds on to publication for discover and remark.
The race now shifts from the negotiating desk to the general public report. Whereas the subset of settling individuals succeeded in inserting their settlement earlier than the Judges first, the remaining individuals who declined to settle now have the chance to file objections asking the Judges to not undertake it. Members of the general public might also take part by submitting feedback. Beneath the Copyright Act and the Judges’ discover, individuals file objections; members of the general public file feedback. Each are due August 10, 2026.
What the discover does not do is equally noteworthy.
The Judges don’t query whether or not the current report is enough to help the unbiased dedication Congress assigned to them, nor do they point out any intention to develop the report earlier than deciding whether or not to undertake the settlement. The legislative historical past of the Copyright Royalty and Distribution Reform Act expressly contemplated that subsets of individuals may negotiate settlements at completely different phases of a continuing and acknowledged that the ensuing information might fluctuate significantly in completeness. Congress instructed the Judges that, in these circumstances, they need to consider “the report earlier than them” utilizing “their greatest judgment“ in figuring out whether or not a proposed settlement satisfies the governing statutory normal.
I’m keen to be educated in any other case, however I consider that the current report doesn’t help the kind of unbiased dedication that Congress assigned to the Copyright Royalty Judges. Congress expressly anticipated that settlement agreements could be offered at various phases of a continuing, leading to information of various completeness. It nonetheless directed the Judges to “use their greatest judgment” in figuring out whether or not “the report earlier than them” satisfies the governing statutory normal. If the current report is insufficient, the correct course is to not abandon that unbiased judgment, however to train the procedural authority Congress individually conferred to develop a report enough to help it.
Certainly, the Copyright Act offers that, on the shut of the voluntary negotiation interval, the Judges are to find out “if additional proceedings beneath this chapter are obligatory“ and, if that’s the case, independently decide the extent of these proceedings. The legislative historical past likewise contemplates that the Judges could have to develop the report earlier than deciding whether or not a proposed settlement satisfies the relevant statutory normal.
Whether or not one agrees with the proposed settlement or opposes it, the general public remark interval now offers the principal alternative to handle each the substance of the proposal and whether or not the prevailing report offers an affordable foundation for adopting it because the statutory fee and phrases for all affected events.
Feedback and objections are due August 10, 2026.
We’ll proceed our evaluation after reviewing each the Federal Register discover and the underlying settlement movement, which we encourage readers to learn collectively.
