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Code · REGISTER · 2006-11-01 · DEPARTMENT OF JUSTICE · Notices

Notices. Final Order

36,087 words·~164 min read·/register/2006/11/01/06-8995·

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 4830-01-P DEPARTMENT OF JUSTICE Drug Enforcement Administration Importer of Controlled Substances; Notice of Application Prior to issuing a registration under 21 U.S.C. 952(a)(2)(B), and in accordance with 21 CFR 1301.34(a), this is notice that on July 25, 2006, Alcan Packaging-Bethlehem, 2400 Baglyos Circle, Bethlehem, Pennsylvania, 18020, has made application to the Drug Enforcement Administration
(DEA)to be registered as an importer of Nabilone (7379), a basic class of controlled substance listed in schedule II. The company plans to import the listed controlled substance for packaging and for distribution. Any manufacturer who is presently, or is applying to be, registered with DEA to manufacture such basic class of controlled substance may file comments or objections to the issuance of the proposed registration and may, at the same time, file a written request for a hearing on such application pursuant to 21 CFR 1301.43 and in such form as prescribed by 21 CFR 1316.47. Any such written comments or objections being sent via regular mail should be addressed, in quintuplicate, to the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, Washington, DC 20537, Attention: DEA Federal Register Representative/ODL; or any being sent via express mail should be sent to DEA Headquarters, Attention: DEA Federal Register Representative/ODL, 2401 Jefferson-Davis Highway, Alexandria, Virginia 22301; and must be filed no later than December 1, 2006. This procedure is to be conducted simultaneously with and independent of the procedures described in 21 CFR 1301.34(b), (c), (d), (e), and (f). As noted in a previous notice published in the **Federal Register** on September 23, 1975, (40 FR 43745-46), all applicants for registration to import a basic class of any controlled substance listed in schedule I or II are, and will continue to be, required to demonstrate to the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, that the requirements for such registration pursuant to 21 U.S.C. 958(a), 21 U.S.C. 823(a), and 21 CFR 1301.34(b), (c), (d), (e), and
(f)are satisfied. Dated: October 25, 2006. Joseph T. Rannazzisi, Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration. [FR Doc. E6-18431 Filed 10-31-06; 8:45 am] BILLING CODE 4410-09-P DEPARTMENT OF JUSTICE Drug Enforcement Administration Importer of Controlled Substances; Notice of Registration By notice dated July 25, 2006, and published in the **Federal Register** on July 31, 2006, (71 FR 43210), Aptuit, 10245 Hickman Mills Drive, Kansas City, Missouri 64137, made application by letter to the Drug Enforcement Administration
(DEA)to be registered as an importer of Marihuana (7360), a basic class of controlled substance listed in schedule I. The company plans to import a finished pharmaceutical product containing cannabis extracts in dosage form for packaging for a clinical trial study. No comments or objections have been received. DEA has considered the factors in 21 U.S.C. 823(a) and 952(a) and determined that the registration of Aptuit to import the basic class of controlled substance is consistent with the public interest and with United States obligations under international treaties, conventions, or protocols in effect on May 1, 1971, at this time. DEA has investigated Aptuit to ensure that the company's registration is consistent with the public interest. The investigation has included inspection and testing of the company's physical security systems, verification of the company's compliance with state and local laws, and a review of the company's background and history. Therefore, pursuant to 21 U.S.C. 952(a) and 958(a), and in accordance with 21 CFR 1301.34, the above named company is granted registration as an importer of the basic class of controlled substance listed Dated: October 25, 2006. Joseph T. Rannazzisi, Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration. [FR Doc. E6-18376 Filed 10-31-06; 8:45 am] BILLING CODE 4410-09-P DEPARTMENT OF JUSTICE Drug Enforcement Administration Manufacturer of Controlled Substances; Notice of Application Pursuant to § 1301.33(a) of Title 21 of the Code of Federal Regulations (CFR), this is notice that on August 28, 2006, Cambrex Charles City, Inc., 1205 11th Street, Charles City, Iowa 50616, made application by letter to the Drug Enforcement Administration
(DEA)to be registered as a bulk manufacturer of Sufentanil (9740), a basic class of controlled substance listed in schedule II. The company plans to manufacture the listed controlled substance in bulk for distribution to its customers. Any other such applicant and any person who is presently registered with DEA to manufacture such a substance may file comments or objections to the issuance of the proposed registration pursuant to 21 CFR 1301.33(a). Any such written comments or objections being sent via regular mail should be addressed, in quintuplicate, to the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, Washington, DC 20537, Attention: DEA Federal Register Representative/ODL; or any being sent via express mail should be sent to DEA Headquarters, Attention: DEA Federal Register Representative/ODL, 2401 Jefferson-Davis Highway, Alexandria, Virginia 22301; and must be filed no later than January 2, 2007. Dated: October 25, 2006. Joseph T. Rannazzisi, Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration. [FR Doc. E6-18375 Filed 10-31-06; 8:45 am] BILLING CODE 4410-09-P DEPARTMENT OF JUSTICE Drug Enforcement Administration Importer of Controlled Substances; Notice of Registration By notice dated July 26, 2006, and published in the **Federal Register** on August 1, 2006, (71 FR 43526), Kenco VPI, Division of Kenco Group Inc., 350 Corporate Place, Chattanooga, Tennessee 37419, made application by letter to the Drug Enforcement Administration
(DEA)to be registered as an importer of Nabilone (7379), a basic class of controlled substance listed in schedule II. The company plans to import the listed controlled substance for distribution to its customers. No comments or objections have been received. DEA has considered the factors in 21 U.S.C. 823(a) and 952(a) and determined that the registration of Kenco VPI to import the basic class of controlled substance is consistent with the public interest and with United States obligations under international treaties, conventions, or protocols in effect on May 1, 1971, at this time. DEA has investigated Kenco VPI to ensure that the company's registration is consistent with the public interest. The investigation has included inspection and testing of the company's physical security systems, verification of the company's compliance with state and local laws, and a review of the company's background and history. Therefore, pursuant to 21 U.S.C. 952(a) and 958(a), and in accordance with 21 CFR 1301.34, the above named company is granted registration as an importer of the basic class of controlled substance listed. Dated: October 25, 2006. Joseph T. Rannazzisi, Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration. [FR Doc. E6-18430 Filed 10-31-06; 8:45 am] BILLING CODE 4410-09-P DEPARTMENT OF JUSTICE Drug Enforcement Administration Importer of Controlled Substances; Notice of Registration By notice dated July 20, 2006, and published in the **Federal Register** on July 28, 2006, (71 FR 42878), Tocris Cookson, Inc., 16144 Westwoods Business Park, Ellisville, Missouri 63021-4500, made application by renewal to the Drug Enforcement Administration
(DEA)to be registered as an importer of Tetrahydrocannabinols (7370), a basic class of controlled substance listed in schedule I. The company plans to import small quantities of the listed controlled substance for sale to research facilities. No comments or objections have been received. DEA has considered the factors in 21 U.S.C. 823(a) and 952(a) and determined that the registration of Tocris Cookson, Inc. to import the basic class of controlled substance is consistent with the public interest and with United States obligations under international treaties, conventions, or protocols in effect on May 1, 1971, at this time. DEA has investigated Tocris Cookson, Inc. to ensure that the company's registration is consistent with the public interest. The investigation has included inspection and testing of the company's physical security systems, verification of the company's compliance with state and local laws, and a review of the company's background and history. Therefore, pursuant to 21 U.S.C. 952(a) and 958(a), and in accordance with 21 CFR 1301.34, the above named company is granted registration as an importer of the basic class of controlled substance listed. Dated: October 25, 2006. Joseph T. Rannazzisi, Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration. [FR Doc. E6-18428 Filed 10-31-06; 8:45 am] BILLING CODE 4410-09-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-59,966] ABB, Inc., Lewisburg, WV; Notice of Revised Determination of Alternative Trade Adjustment Assistance on Reconsideration By letter dated October 10, 2006, a representative of the Maintenance Workers Local Union, No. 1182, Laborers International Union of North America (Union), requested administrative reconsideration regarding Alternative Trade Adjustment Assistance (ATAA). The certification for Trade Adjustment Assistance was signed on September 28, 2006. The Notice of determination was published in the **Federal Register** on October 16, 2006 (71 FR 60762). The determination stated that a significant number of workers in the workers' firm are not 50 years of age or older. The Union asserts that a significant number of workers in the workers' firm are 50 years of age or older and provided a list of workers and their birthdates as support documentation. A careful review of the Union's submissions and previously submitted documents reveal that at least five percent of the workforce at the subject from is at least fifty years of age. The workers in the workers' firm possess skills that are not easily transferable. Competitive conditions within the industry are adverse. Conclusion After careful review of the additional facts obtained on reconsideration, I conclude that the requirements of Section 246 of the Trade Act of 1974, as amended, have been met for workers at the subject firm. In accordance with the provisions of the Act, I make the following certification: All workers of ABB, Inc., Lewisburg, West Virginia, who became totally or partially separated from employment on or after August 28, 2005 through September 28, 2008, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974. Signed in Washington, DC, this 25th day of October 2006. Elliott S. Kushner, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E6-18357 Filed 10-31-06; 8:45 am] BILLING CODE 4510-30-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-60,167] Andrew Corporation AFMA; Andrew Facility Massachusetts Division Including On-Site Leased Workers of Andover Personnel, John Galt Services, MMD Temps, Footbridge Engineering, Sperion, TEK Systems and National Engineering Service Corp, Amesbury, MA; Amended Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification of Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on October 6, 2006, applicable to workers of Andrew Corporation AFMA, Andrew Facility Massachusetts Division, including on-site leased workers of Andover Personnel, John Galt Services, MMD Temps, Footbridge Engineering, Amesbury, Massachusetts. The notice will be published soon in the **Federal Register** . At the request of the State agency and the company, the Department reviewed the certification for workers of the subject firm. New information shows that leased workers of Tek Systems and National Engineering Service Corp. were employed on-site at the Amesbury, Massachusetts location of Andrew Corporation FMA, Andrew Facility Massachusetts Division. Based on these findings, the Department is amending this certification to include leased workers of Tek Systems and National Engineering Service Corp. working on-site at Andrew Corporation AFMA, Andrew Facility Massachusetts Division, Amesbury, Massachusetts. The intent of the Department's certification is to include all workers employed at Andrew Corporation AFMA, Andrew Facility Massachusetts Division, who were adversely affected by a shift in production to Mexico and China. The amended notice applicable to TA-W-60,167 is hereby issued as follows: All workers of Andrew Corporation, AFMA, Andrew Facility Massachusetts Division, including on-site leased workers of Andover Personnel, John Galt Services, MMD Temps, Footbridge Engineering, Spherion, Tek Systems and National Engineering Service Corp. who became totally or partially separated from employment on or after September 26, 2005, through October 6, 2008, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974. Signed at Washington, DC, this 25th day of October 2006. Richard Church, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E6-18359 Filed 10-31-06; 8:45 am] BILLING CODE 4510-30-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-60,150] Celestica Corporation, Including On-Site Workers of Securitas Security, Including On-Site Leased Workers of Adecco Westminster, Colorado; Amended Certification Regarding Eligibility To Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance In accordance with Section 223 of the Trade Act of 1974 (19 U.S.C. 2273), and Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor issued a Certification of Eligibility to Apply for Worker Adjustment Assistance and Alternative Trade Adjustment Assistance on October 13, 2006, applicable to workers of Celestica, Westminster, Colorado. The notice was published in the **Federal Register** on October 25, 2006 (71 FR 62489). At the request of a company official, the Department reviewed the certification for workers of the subject firm. The workers were engaged in warehousing and distribution operations. New information shows that workers of Securitas Security were employed on-site at the Westminster, Colorado location of Celestica. Based on these findings, the Department is amending this certification to include workers of Securitas Security working on-site at Celestica, Westminster, Colorado. The intent of the Department's certification is to include all workers employed at Celestica, Westminster, Colorado who were adversely affected by a shift in production to Mexico, Canada and Israel. The amended notice applicable to TA-W-60,150 is hereby issued as follows: All workers of Celestica Corporation, including on-site workers of Securitas Security and on-site leased workers of Adecco, Westminster, Colorado, who became totally or partially separated from employment on or after September 25, 2005, through October 13, 2008, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are also eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974. Signed at Washington, DC, this 25th day of October 2006. Richard Church, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E6-18358 Filed 10-31-06; 8:45 am] BILLING CODE 4510-30-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-59,500] Connecticut General Life Insurance Company (CGLIC), Cigna Healthcare Service Operations, Philadelphia, PA; Notice of Negative Determination Regarding Application for Reconsideration By application dated August 17, 2006 a petitioner requested administrative reconsideration of the Department's negative determination regarding eligibility for workers and former workers of the subject firm to apply for Trade Adjustment Assistance (TAA). The denial notice applicable to workers of Connecticut General Life Insurance Company (CGLIC), Cigna Healthcare Service Operations, Philadelphia, Pennsylvania was signed on July 24, 2006 and published in the **Federal Register** on August 14, 2006 (71 FR 46519). Pursuant to 29 CFR 90.18(c) reconsideration may be granted under the following circumstances:
(1)If it appears on the basis of facts not previously considered that the determination complained of was erroneous;
(2)if it appears that the determination complained of was based on a mistake in the determination of facts not previously considered; or
(3)if in the opinion of the Certifying Officer, a mis-interpretation of facts or of the law justified reconsideration of the decision. The TAA petition filed on behalf of workers at Connecticut General Life Insurance Company (CGLIC), Cigna Healthcare Service Operations, Philadelphia, Pennsylvania engaged in computer support for CIGNA's Disability Management IT (support, basic Application development support, coding and systems testing, and customer help desk support) was denied because the ST petitioning workers did not produce an article within the meaning of Section 222 of the Act. The petitioner contends that the Department erred in its interpretation of work performed at the subject facility as providing a service and further conveys that workers of the subject firm created various software for sale or lease to customers. The petitioner included the name of a customer who purchased/leased Disability Management software from the subject firm, thus concluding that workers of the subject firm were supporting this customer. A company official was contacted for clarification in regard to the nature of the work performed at the subject facility. The official stated that workers of the subject firm were employed by Connecticut General Life Insurance Company (CGLIC) that supports CIGNA's Disability Management Business at Intracorp, CIGNA disability management company. The official clarified that Intracorp is not in the business of manufacturing Disability Management software for sale to third parties. Workers of the subject firm provided system support for Intracorp, which sells case management services to workers' compensation insurers, employers who self fund workers' compensation and disability benefits, and third party administrator. All software developed by workers of the subject firm is used to support this service business. In addition to case management, Intracorp developed its own automated medical bill review service and this software program is also used externally by the subject firm for its business. The official further clarified that there is only one instance when a customer temporarily leases software developed by Intracorp to perform its own bill review services. This customer did not purchase this software. When the software was leased to this customer, some modifications were done to existing Audit Plus software, however these enhancements are not a new “product” but rather are enhancements to an existing system. The sophistication of the work involved is not an issue in ascertaining whether the petitioning workers are eligible for trade adjustment assistance, but whether they produce an article within the meaning of section 222 of the Trade Act of 1974. Research, development and technical support of the existing software is not considered production of an article within the meaning of Section 222 of the Trade Act. Further, while the provision of services may result in creation of software, as outlined by the petitioner, it is incidental to the provision of services. The Department has consistently determined that those items which are created incidental to the provision of services are not considered articles for purposes of the Trade Act. The investigation on reconsideration supported the findings of the primary investigation that the petitioning group of workers does not produce an article. Service workers can be certified only if worker separations are caused by a reduced demand for their services from a parent or controlling firm or subdivision whose workers produce an article domestically who meet the eligibility requirements, or if the group of workers are leased workers who perform their duties at a facility that meet the eligibility requirements. The petitioner's alleges that the work performed by the workers of the subject firm has been shifted to India. The company official stated that developments for the Audit Plus bill review system enhancements or fixes are currently performed on-site and have not been moved abroad. The official also stated that there are currently no firm target dates to move this work offshore. Conclusion After review of the application and investigative findings, I conclude that there has been no error or misinterpretation of the law or of the facts which would justify reconsideration of the Department of Labor's prior decision. Accordingly, the application is denied. Signed at Washington, DC, this 25th day of October, 2006. Elliott S. Kushner, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E6-18353 Filed 10-31-06; 8:45 am] BILLING CODE 4510-30-P DEPARTMENT OF LABOR Employment and Training Administration [TA-W-59,520] LeeMAH Electronics, Inc., San Francisco, CA; Notice of Revised Determination on Reconsideration By letter dated August 23, 2006, a petitioner requested administrative reconsideration regarding the Department's Negative Determination Regarding Eligibility to Apply for Worker Adjustment Assistance, applicable to the workers of the subject firm. The initial investigation resulted in a negative determination signed on July 20, 2006 was based on the finding that there were no increased imports of printed circuit boards and cable assemblies and there was no shift of production to a foreign source during the relevant period. The workers were separately identifiable by product. The denial notice was published in the **Federal Register** on August 4, 2006 (71 FR 44320). To support the request for reconsideration, the petitioner supplied additional information regarding company imports of like or directly competitive products with those produced at the subject firm. The review of the case revealed that workers of the subject firm produce printed circuit boards at a plant on Folsom Street and cable assemblies at a plant on Pacific Avenue and that workers are separately identifiable by product line and location. Upon further contact with the subject firm's company official, it was revealed that the subject firm decreased domestic production of printed circuit boards, while increasing its reliance on imports of printed circuit boards from 2004 to 2005 and from January through May of 2006 when compared with the same period in 2005. The investigation also revealed that workers of LeeMAH Electronics, Inc., San Francisco, California, may be eligible for TAA on the basis of a secondary upstream supplier impact. The Department conducted an investigation of subject firm workers on the basis of secondary impact. It was revealed that LeeMAH Electronics, Inc., San Francisco, California supplied cable assemblies for production of test, measurement and radio equipment, and at least 20 percent of its production or sales is supplied to a manufacturer whose workers were certified eligible to apply for adjustment assistance. In accordance with Section 246 of the Trade Act of 1974 (26 U.S.C. 2813), as amended, the Department of Labor herein presents the results of its investigation regarding certification of eligibility to apply for alternative trade adjustment assistance
(ATAA)for older workers. In order for the Department to issue a certification of eligibility to apply for ATAA, the group eligibility requirements of Section 246 of the Trade Act must be met. The Department has determined in this case that the requirements of Section 246 have been met. A significant number of workers at the firm are age 50 or over and possess skills that are not easily transferable. Competitive conditions within the industry are adverse. Conclusion After careful review of the additional facts obtained on reconsideration, I conclude that increased imports of articles like or directly competitive with circuit boards produced at LeeMAH Electronics, Inc., San Francisco, California, contributed importantly to the declines in sales or production and to the total or partial separation of workers at the subject firm. Also, after careful review of the facts obtained in the investigation, I determine that workers of Electronics, Inc., San Francisco, California engaged the production of cable assemblies qualify as adversely affected secondary workers under Section 222 of the Trade Act of 1974, as amended. In accordance with the provisions of the Act, I make the following certification: All workers of LeeMAH Electronics, Inc., San Francisco, California, who became totally or partially separated from employment on or after June 2, 2005 through two years from the date of this certification, are eligible to apply for adjustment assistance under Section 223 of the Trade Act of 1974, and are eligible to apply for alternative trade adjustment assistance under Section 246 of the Trade Act of 1974. Signed in Washington, DC, this 25th day of October 2006. Elliott S. Kushner, Certifying Officer, Division of Trade Adjustment Assistance. [FR Doc. E6-18354 Filed 10-31-06; 8:45 am] BILLING CODE 4510-30-P DEPARTMENT OF LABOR Employment and Training Administration Investigations Regarding Certifications of Eligibility To Apply For Worker Adjustment Assistance And Alternative Trade Adjustment Assistance Petitions have been filed with the Secretary of Labor under Section 221(a) of the Trade Act of 1974 (“the Act”) and are identified in the Appendix to this notice. Upon receipt of these petitions, the Director of the Division of Trade Adjustment Assistance, Employment and Training Administration, has instituted investigations pursuant to Section 221(a) of the Act. The purpose of each of the investigations is to determine whether the workers are eligible to apply for adjustment assistance under Title II, Chapter 2, of the Act. The investigations will further relate, as appropriate, to the determination of the date on which total or partial separations began or threatened to begin and the subdivision of the firm involved. The petitioners or any other persons showing a substantial interest in the subject matter of the investigations may request a public hearing, provided such request is filed in writing with the Director, Division of Trade Adjustment Assistance, at the address shown below, not later than November 13, 2006. Interested persons are invited to submit written comments regarding the subject matter of the investigations to the Director, Division of Trade Adjustment Assistance, at the address shown below, not later than November 13, 2006. The petitions filed in this case are available for inspection at the Office of the Director, Division of Trade Adjustment Assistance, Employment and Training Administration, U.S. Department of Labor, Room C-5311, 200 Constitution Avenue, NW., Washington, DC 20210. Signed at Washington, DC, this 26th day of October 2006. Richard Church, Certifying Officer, Division of Trade Adjustment Assistance. Appendix—30 TAA [Petitions Instituted Between 10/16/06 and 10/20/06] TA-W Subject firm (petitioners) Location Date of institution Date of petition 60245 R.L. Stowe Mills, Inc. (Comp). Belmont, NC 10/16/06 10/12/06 60246 Weyerhaeuser Cosmopolis Pulp Mill (Union). Cosmopolis, WA 10/16/06 10/12/06 60247 Advanced Technology Services (Wkrs). Vinita, OK 10/16/06 10/13/06 60248 Werner Co. (Comp). Franklin Park, IL 10/16/06 10/13/06 60249 ADVO (Comp). Pittsburgh, PA 10/16/06 10/16/06 60250 Senco Products (Wkrs). Cincinnati, OH 10/17/06 09/21/06 60251 Canvas Products (Union). Detroit, MI 10/17/06 10/16/06 60252 Shogren Hosiery Mfg. Co., Inc. (Comp). Concord, NC 10/17/06 10/17/06 60253 Metaldyne (Comp). St. Marys, PA 10/18/06 10/12/06 60254 Consolidated Metco, Inc. (IAM). Clackamas, OR 10/18/06 10/17/06 60255 Textron Fastening Systems (Wkrs). Wytheville, VA 10/18/06 10/16/06 60256 Eaton Corporation (Wkrs). Auburn, IN 10/18/06 10/16/06 60257 Benchmark Electronics (Wkrs). Hudson, NH 10/18/06 10/16/06 60258 Woodbridge Corporation (Wkrs). Lithonia, GA 10/18/06 10/18/06 60259 Burris Manufacturing, Inc. (Comp). Albemarle, NC 10/18/06 10/18/06 60260 Georgia Pacific Corp. (State). Crossett, AR 10/18/06 10/17/06 60261 Clout Financial Services, Inc. (Wkrs). Bloomington, IN 10/18/06 10/18/06 60262 Paramount Cards, Inc. (State). Pawtucket, RI 10/19/06 10/18/06 60263 Freedom Industries (Comp). Liberty, MS 10/19/06 10/18/06 60264 Ibase (Comp). Austin, TX 10/19/06 10/10/06 60265 Physical Rehab Works (State). Herrin, IL 10/19/06 10/18/06 60266 Hanesbrands, Inc. (Comp). Winston-Salem, NC 10/19/06 10/13/06 60267 Guide Corp. (State). Monroe, LA 10/20/06 10/19/06 60268 Harte Hanks Marketing Intelligence (Wkrs). Troy, MI 10/20/06 09/22/06 60269 AAR Cargo Systems (Comp). Livonia, MI 10/20/06 10/17/06 60270 Beard Hosiery Co., Inc. (Comp). Lenoir, NC 10/20/06 10/19/06 60271 Town of Hartland (Comp). Hartland, ME 10/20/06 10/18/06 60272 Elder Manufacturing, Inc. (Wkrs). St. Louis, MO 10/20/06 10/19/06 60273 Micro Motion, Inc. (State). Boulder, CO 10/20/06 10/19/06 60274 Southern Glove Manufacturing Co., Inc. (Comp). Conover, NC 10/20/06 10/20/06 [FR Doc. E6-18352 Filed 10-31-06; 8:45 am] BILLING CODE 4510-30-P LIBRARY OF CONGRESS Copyright Office [Docket No. RF 2006-1] Mechanical and Digital Phonorecord Delivery Rate Adjustment Proceeding AGENCY: Copyright Office, Library of Congress. ACTION: Final Order. SUMMARY: The Copyright Royalty Board, acting pursuant to statute, referred two novel questions of law to the Register of Copyrights. Specifically, the Copyright Royalty Board requested a decision by the Register of Copyrights regarding whether ringtones are subject to the statutory license for making and distributing phonorecords under the Copyright Act, and if so, what legal conditions and/or limitations would apply. The Register of Copyrights, in a timely fashion, transmitted a Memorandum Opinion to the Copyright Royalty Board stating, with certain caveats, that the statutory license applies to ringtones. DATES: **Effective Date:** October 16, 2006. FOR FURTHER INFORMATION CONTACT: Ben Golant, Senior Attorney, and Tanya M. Sandros, Associate General Counsel, Copyright GC/I&R, P.O. Box 70400, Southwest Station, Washington, DC 20024. Telephone:
(202)707-8380. Telefax:
(202)707-8366. SUPPLEMENTARY INFORMATION: In the *Copyright Royalty and Distribution Reform Act of 2004* , Congress amended Title 17 to replace the copyright arbitration royalty panel with the Copyright Royalty Board (“Board”). One of the functions of the new Board is to make determinations and adjustments of reasonable terms and rates of royalty payments as provided in sections 112(e), 114, 115, 116, 118, 119 and 1004 of the Copyright Act. In any case in which a novel question of law concerning an interpretation of a provision of the Copyright Act is presented in a ratesetting proceeding, the Board has the authority to request a decision of the Register of Copyrights (“Register”), in writing, to resolve such questions. *See* 17 U.S.C. 802(f)(1)(B)(i). For this purpose, a “novel question of law” is a question of law that has not been determined in prior decisions, determinations, and rulings described in Section 803(a) of the Copyright Act. On August 1, 2006, the Recording Industry Association of America (“RIAA”) requested that the Board refer a question to the Register of Copyrights regarding the eligibility of ringtones ( *i.e* ., short digital sound recording file distributed for use in a cellular telephone or similar device) for statutory licensing under Section115 of the Copyright Act. An opposition to the RIAA‘s referral motion was submitted, collectively, by the National Music Publishers Association, Inc., the Songwriters Guild of America, and the Nashville Songwriters Association International (“Copyright Owners”). After considering the arguments of the parties, the Board agreed that the matters raised by the RIAA motion did present novel questions of law and agreed to submit the questions to the Register. Accordingly, on September 14, 2006, the Board transmitted to the Register:
(1)an Order, dated August 18, 2006, referring two novel questions of law; and
(2)the Initial and Reply Briefs filed with the Board by RIAA and the Copyright Owners. The Board‘s transmittal triggered the 30-day decision period prescribed in Section 802 of the Copyright Act. This statutory provision states that the Register “shall transmit his or her decision to the Copyright Royalty Judges within 30 days after the Register of Copyrights receives all of the briefs or comments of the participants.” *See* 17 U.S.C. 802(f)(1)(B)(i). On October 16, 2006, the Register transmitted a Memorandum Opinion to the Board that answered the novel questions of law. To provide the public with notice of the decision rendered by the Register, the Memorandum Opinion is reproduced in its entirety, below. Dated: October 26, 2006 Marybeth Peters, Register of Copyrights. **Before the** **U.S. Copyright Office** **Library of Congress** **Washington, D.C. 20559** **Docket No. RF 2006-1** **In the Matter of** **Mechanical and Digital Phonorecord** **Delivery Rate Adjustment Proceeding** MEMORANDUM OPINION I. Introduction On September 14, 2006, the Copyright Royalty Board (“Board”), acting on a request by the Recording Industry Association of America, Inc. (“RIAA”), and pursuant to 17 U.S.C. § 802(f)(1)(B), referred two novel questions of law 1 to the Register of Copyrights (“Register”). Specifically, the Board requested a decision by the Register as to the following: 1 A “novel question of law” is a question of law that has not been determined in prior decisions, determinations, and rulings described in Section 803(a) of the Copyright Act. *See* 17 U.S.C. § 802(f)(1)(B)(ii). 1. Does a ringtone, made available for use on a cellular telephone or similar device, constitute delivery of a digital phonorecord that is subject to statutory licensing under 17 U.S.C. § 115, irrespective of whether the ringtone is monophonic (having only a single melodic line), polyphonic (having both melody and harmony), or a mastertone (a digital sound recording or excerpt thereof)? 2. If so, what are the legal conditions and/or limitations on such statutory licensing? 2 2 *See Mechanical and Digital Phonorecord Delivery Rate Adjustment Proceeding,* Order Granting in Part the Request for Referral of a Novel Question of Law, Docket No. 2006-3 CRB DPRA (Aug. 18, 2006) (“Order”). In sum, and as stated more fully below, we believe that ringtones (including monophonic and polyphonic ringtones, as well as mastertones) qualify as digital phonorecord deliveries (“DPDs”) as defined in 17 U.S.C. § 15. Apart from meeting the formal requirements of Section 115 ( *e.g* ., service of a notice of intention to obtain a compulsory license under Section 115(b)(1), submission of statements of account and royalty payments, etc.), whether a particular ringtone falls within the scope of the statutory license will depend primarily upon whether what is performed is simply the original musical work (or a portion thereof), or a derivative work (i.e., a musical work based on the original musical work but which is recast, transformed, or adapted in such a way that it becomes an original work of authorship and would be entitled to copyright protection as a derivative work). *Procedural Background* . On August 1, 2006, the RIAA requested that the Copyright Royalty Board refer a question to the Register of Copyrights regarding the eligibility of a mastertone, a short digital sound recording file distributed for use in a cellular telephone or similar device, for statutory licensing under 17 U.S.C. § 115. 3 An opposition to the RIAA‘s referral motion was submitted, collectively, by the National Music Publishers Association, Inc., the Songwriters Guild of America, and the Nashville Songwriters Association International (“Copyright Owners”). After considering the arguments of the parties, the Board agreed that the matters raised by the RIAA motion did present novel questions of law and agreed to submit the questions to the Register. 3 The Copyright Royalty Board is currently conducting a proceeding to determine the reasonable rates and terms for the making and distribution of phonorecords under the Section 115 license. *See Adjustments or Determination of Compulsory License Rates for Making and Distributing Phonorecords* , 71 Fed Reg 1454 (Jan. 9, 2006). The answers to the two questions referred to the Register will help determine the scope of the ratesetting proceeding before the Board. Accordingly, on September 14, 2006, the Board transmitted to the Register of Copyrights the following:
(1)the Order, dated August 18, 2006, referring two novel questions of law; and
(2)the Initial and Reply Briefs filed with the Board by RIAA and the Copyright Owners. The Board‘s transmittal triggered the 30-day decision period prescribed in Section 802(f)(1)(B) of the Copyright Act. This statutory provision states that the Register of Copyrights “shall transmit his or her decision to the Copyright Royalty Judges within 30 days after the Register of Copyrights receives all of the briefs or comments of the participants.” 4 4 17 U.S.C. § 802(f)(1)(B). In addition to reviewing the Initial Briefs and Reply Briefs filed in this proceeding, the Office concluded that it would be helpful to conduct oral argument relating to the novel questions of law. 5 On October 4, 2006, the Copyright Office convened a hearing and questioned counsel on matters raised in the briefs filed by RIAA and Copyright Owners. 6 5 *See In the Matter of Mechanical and Digital Phonorecord Delivery Rate Adjustment Proceeding,* Notice of Oral Argument, Docket No. RF 2006-1 (Sept. 28, 2006). 6 We note that for demonstration purposes at the oral argument, RIAA and Copyright Owners have created CDs containing many examples of ringtones as well as full length versions of some of the musical works from which the ringtones were based. Copyright Owners‘ CD also contains ringtones downloaded from specific mobile phone operators. These CDs are now part of the record in this proceeding as is the oral testimony of the parties. *Summary of Arguments.* RIAA argues that ringtones are digital phonorecord deliveries as that term is defined in the Copyright Act and are subject to statutory licensing under the plain language of Section 115, without limitation. It argues that ringtones in general and mastertones, 7 in particular, contain no new original material, are not protectable as derivative works, and therefore cannot infringe on the derivative work rights of the Copyright Owners. Moreover, even if they were derivative works, RIAA argues that Section 115(a)(2), the arrangement privilege, expressly authorizes their creation. In any event, RIAA argues that once the copyright owner of a musical work distributes a new ringtone to the public, anyone can obtain a statutory license to use the musical work in that ringtone. RIAA concludes that the Register should find that ringtones are subject to statutory licensing under Section 115 of the Copyright Act, and all of the conditions under the provision should apply. 7 These types of ringtones are described in more detail below. Copyright Owners assert that all ringtones are excluded from the Section 115 statutory license. They argue that the statutory license for making and distributing phonorecords of musical works is narrow in scope and does not encompass ringtones. They argue that ringtones are not covered by Section 115 because they involve only a portion of the underlying composition, not the entire musical work. Copyright Owners argue that ringtones are derivative works and thus fall outside the express language of the statute. As for Section 115(a)(2), they argue that ringtones cannot be considered “arrangements” as that term is understood in the music industry, and in any event, ringtones change the basic melody and fundamental character of the musical work. Copyright Owners also argue that ringtones fail to satisfy Section 115's requirement that the phonorecords be distributed for private use. Copyright Owners conclude that although variations exist among ringtones, none of them fit within the Section 115 licensing scheme. *Summary of Decision.* We find that ringtones (including monophonic and polyphonic ringtones, as well as mastertones) are phonorecords and the delivery of such by wire or wireless technology meets the definition of DPD set forth in the Copyright Act. However, there are a variety of different types of ringtones ranging from those that are simple excerpts taken from a larger musical work to ones that include additional material and may be considered original musical works in and of themselves. Ringtones that are merely excerpts of a preexisting sound recording fall squarely within the scope of the statutory license, whereas those that contain additional material may actually be considered original derivative works and therefore outside the scope of the Section 115 license. 8 Moreover, we decide that a ringtone is made and distributed for private use even though some consumers may purchase them for the purpose of identifying themselves in public. We also conclude that if a newly created ringtone is considered a derivative work, and the work has been first distributed with the authorization of the copyright owner, then any person may use the statutory license to make and distribute the musical work in the ringtone. For those ringtones that are covered by Section 115 of the Copyright Act, all of the rights, conditions, and requirements in the Act would apply. For those ringtones that fall outside the scope of Section 115, the rights at issue must be acquired through voluntary licenses. While the Copyright Royalty Judges need not know which specific ringtones fall within/outside the scope of the license for the purpose of setting rates, and the parties have not asked the Register to undertake such a granular analysis here, we nevertheless offer some guidance on the legal matters raised in this proceeding. 8 We note that Section 115 permits the creation of derivative works, but this privilege under the statutory license is limited to making musical arrangements necessary to conform it to the style or manner of interpretation of the performance involved. 17 U.S.C. § 115(a)(2). For purposes of our discussion in this proceeding, when we refer to derivative works not covered by Section 115, we mean those types of works that exhibit a degree of “originality” as that term is defined in court precedent. The addition of original material would not only take a ringtone outside the scope of the privilege of making arrangements, it would also take the ringtone outside the Section 115 license altogether. II. Section 115 of the Copyright Act Almost a century ago, Congress added to the Copyright Act the right for copyright owners to make and distribute, or authorize others to make and distribute, mechanical reproductions (known today as phonorecords) of their musical compositions. Due to its concern about potential monopolistic behavior, Congress also created a statutory license, Section 115 of the Act, to allow anyone to make and distribute a mechanical reproduction of a musical composition without the consent of the copyright owner provided that the person adhered to the provisions of the license, most notably paying a statutorily established royalty to the copyright owner. Although originally enacted to address the reproduction of musical compositions on perforated player piano rolls, the statutory license has for most of the past century been used primarily for the making and distribution of phonorecords and, more recently, for the digital delivery of music online. 9 9 Statement of Marybeth Peters, Register of Copyrights, Before the Subcommittee on Intellectual Property: Music Licensing Reform, U.S. House of Representatives, 109th Cong., 1st Sess. at 20 (June 21, 2005). In 1995, Congress recognized that “digital transmission of sound recordings [was] likely to become a very important outlet for the performance of recorded music.” 10 Moreover, it realized that “[t]hese new technologies also may lead to new systems for the electronic distribution of phonorecords with the authorization of the affected copyright owners.” 11 For these reasons, Congress made changes to Section 115 to meet the challenges of providing music in a digital format when it enacted the Digital Performance Right in Sound Recordings Act of 1995 (“DPRA”) 12 which also granted copyright owners of sound recordings an exclusive right to perform their works publicly by means of a digital audio transmission subject to certain limitations. 13 Specifically, Congress wanted to reaffirm the mechanical rights of songwriters and music publishers in the new world of digital technology. The changes to Section 115 were also designed to minimize the burden on transmission services by placing record companies in the position to license not only their own rights, but also, if they chose to do so, the rights of writers and music publishers to authorize digital phonorecord delivery. 14 It is the DPRA amendments to Section 115 that are of particular interest here. 10 S. Rep. No. 104-128, 104th Cong., 1st Sess. at 14 (1995). 11 *Id.* 12 Pub. L. No. 104-39, 109 Stat. 336 (1995). 13 *See* 17 U.S.C. § 114. 14 S. Rep. No. 104-128, at 37 (1995). III. Ringtone Types Before addressing the questions raised by the Copyright Royalty Judges, we must first determine the scope of the subject matter in this proceeding. According to RIAA, a ringtone is a digital file, generally no more that 30 seconds in length, played by a cellular phone or other mobile device to alert the user of an incoming call or message. 15 RIAA states that, initially, mobile carriers and other ringtone vendors distributed synthesized ringtones that embodied versions of musical works, but not recorded performances by featured recording artists. It states that these earlier forms of ringtones are commonly known as “monophonic” ringtones (having only a single melodic line) and “polyphonic” ringtones (having both melody and harmony). RIAA explains that typical commercial monophonic and polyphonic ringtones consist of a segment of the musical work representing its “hook,” or most memorable portion of the melody, with little or no revision. 16 15 Cellular phones typically have the ability to accept downloads of ringtones, usually directly over the cellular telephone network. Over the last decade, a new consumer market has developed for musical ringtones. According to RIAA, the vast majority of ringtones (99 percent) now in the marketplace consist of excerpts from sound recordings. Oral Argument Transcript at 7, 10. 16 RIAA Initial Brief at 3-4; *see also* Neil J. Rosini and Michael I. Rudell, *Ring Tone Revenues Foster Copyright Detente,* 234 N.Y.L.J. 3, col. 1
(2005)(“Originally, musical ring tones were only available in ‘monophonic’ form: a simple series of tones-each a single note-that might remind one of several bars from a favorite CD as performed by a very simple computer. Technology then advanced to the ‘polyphonic’ level, which are like monophonic ring tones with multiple notes played at the same time, creating harmonies. They sound closer to that favorite CD, but without original instrumentation or vocals.”)(Hereinafter “Rosini and Rudell”). RIAA states that advances in technology now allow mobile devices to play digital copies of commercial sound recordings. As a result, mobile phone manufacturers are incorporating the functionality of stand-alone portable digital music players, thus permitting consumers to download sound recordings via the Internet or a computer connected to the Internet. RIAA states that, in addition to full song downloads of commercial recordings to such phones, there is consumer demand for downloads of shorter (partial-copy) excerpts of sound recordings for use as ringtones. These ringtones are commonly referred to as “mastertones.” 17 RIAA asserts that mastertones are displacing monophonic and polyphonic ringtones as the ringtone of choice amongst consumers. 18 RIAA acknowledges that record companies and ringtone vendors must obtain licenses to reproduce and distribute the relevant musical works in ringtones and that Section 115 exists to enable use of musical works when licenses are not otherwise available. 19 17 RIAA explains that record companies hire contractors to select hooks from popular sound recordings and then create ringtones including these hooks. Oral Argument Transcript at 10. 18 *See* Rosini and Rudell (Mastertones “not only sound like a favorite CD but are that favorite CD.”). 19 RIAA Initial Brief at 4-5. Copyright Owners describe ringtones as ten-to-thirty-second “snippets” of full-length musical works that are created to serve as ringers on cell phones and other mobile devices. 20 Copyright Owners alternatively describe a ringtone as a ten-to-thirty-second derivation of a musical work, sometimes repeated in a “looping” sequence and sometimes not. 21 Copyright Owners assert that the creation of ringtones, including mastertones, involves “substantial” creativity and “significant” changes to the underlying work. They state, for example, that making a ringtone requires creative determinations as to which portions of the work should be selected to best capture the “hook” of the full length recording and also to be most appealing as ringtones. They further state that many mastertones are designed to be looped, repeating the selected portions of the song multiple times until the phone or mobile device is answered. 22 Some songs have multiple hooks, each of which can be made into a separate ringtone. Other ringtones, they assert, include new content not present in the underlying work. 23 20 Copyright Owners Initial Brief at 1-2. 21 *Id* . at 9. We note that looping involves a portion of a musical performance that is then sequenced in a repetitive manner. 22 RIAA states that ringtone producers do not intentionally create looping sequences; instead, looping is the product of cellphones that do not have adequate storage capacity (memory). Oral Argument Transcript at 13-14. 23 Copyright Owners Reply Brief at 5, 7. *Analysis.* While RIAA and the Copyright Owners may disagree as to the amount of creativity it takes to create a ringtone, they do agree that, in general, ringtones are a unique category of sound recordings that are used to announce an incoming call. The most rudimentary ringtone, in musical terms, is the monophonic ringtone that only contains a musical work‘s melody (or a portion of the melody). One level up the musical hierarchy is the polyphonic ringtone that contains a work‘s melody and harmony (or a portion thereof). The most musically complex ringtones are mastertones. A mastertone is a portion of a pre-existing full length musical work that may play sequentially or is looped in a sequence. A mastertone could also contain a portion of a musical work combined with a message from the recording artist designed specifically for the ringtone user. It is important to note that there are also non-musical ringtones that are becoming increasingly popular with consumers. 24 As discussed below, different types of ringtones may be treated differently for Section 115 purposes. 24 *See* Rosini and Rudell (“[C]onsumers aren‘t settling merely for musical ringtones and ringbacks. Audio clips from films and television programs; comic routines from Comedy Central; pithy observations by Donald Trump; and announcement of baseball plays are also available as ring tones.”); *see also* http://cyberextazy.wordpress.com/2006/09/01/ringtones-in-mtvs-video-music-awards/, *Ringtones in MTV‘s Video Music Awards* (Sept. 1, 2006) (stating that ringtones are evolving into watchtones, which are ringtones combined with video clips). IV. The Applicability of Section 115 to Ringtones *Statutory Language* . Section 115 of the Copyright Act provides a “compulsory license to make and distribute phonorecords” of any musical work previously recorded once a phonorecord of a nondramatic musical work has been “distributed to the public in the United States under authority of the copyright owner.” 25 Such a license “includes the right of the compulsory licensee to distribute or authorize the distribution of a phonorecord of a nondramatic musical work by means of a digital transmission which constitutes a digital phonorecord delivery.” 26 The term “digital phonorecord delivery” or “DPD” is defined, in part, as “each individual delivery of a phonorecord by digital transmission of a sound recording which results in a specifically identifiable reproduction by or for any transmission recipient of a phonorecord of that sound recording.” 27 25 17 U.S.C. § 115(a)(1). 26 17 U.S.C. § 115(c)(3)(A). 27 17 U.S.C. § 115(d). The legislative history accompanying this provision states, *inter alia* , that:
(1)the phrase “specifically identifiable reproduction” should be understood to mean a reproduction specifically identifiable to the transmission service; and
(2)a transmission by a noninteractive subscription transmission service that transmits in real time a continuous program of music selections chosen by the transmitting entity, for which the consumer pays a monthly fee would generally not be considered a DPD. Congress created the statutory mechanical license, as part of the Copyright Act of 1909, to prevent monopolistic control over musical works while ensuring that music publishers and songwriters receive an appropriate royalty. 28 Congress revisited the issue of statutory licensing in 1976 and 1995 and has reaffirmed these same purposes. 29 Congress added the DPD provisions to Section 115, as part of the DPRA of 1995, with support of the music publishers, noting: “The intention in extending the mechanical compulsory license to digital phonorecord deliveries is to maintain and reaffirm the mechanical rights of songwriters and music publishers as new technologies permit phonorecords to be delivered by wire or over the airwaves rather than by the traditional making and distribution of records, cassettes, and CDs.” 30 The question presented here is whether ringtones qualify as digital phonorecord deliveries within the scope of Section 115. 31 28 *See* H. R. Rep. No. 60-2222, at 7
(1909)(“The main object to be desired in expanding copyright protection accorded to music has been to give to the composer an adequate return for the value of his composition, and it has been a serious and difficult task to combine the protection of the composer with the protection of the public, and to so frame an act that it would accomplish the double purpose of securing to the composer an adequate return for all use made of his composition and at the same time prevent the formation of oppressive monopolies, which might be founded upon the very rights granted to the composer for the purpose of protecting his interests.)” 29 *See* H. R. Rep. No. 94-1476, at 107
(1976)(“[A] compulsory licensing system is still warranted as a condition for the rights of reproducing and distributing phonorecords of copyrighted music.”). 30 *See* S. Rep. No. 104-128, at 37 (1995). 31 We note that the Harry Fox Agency, Inc., a subsidiary of the National Music Publishers Association and the leading musical work licensing agency, released a notice in 2004 informing all licensees of its stated position that Section 115 does not cover ringtones or mastertones. *See* Mario F. Gonzales, *Are Musical Compositions Subject to Compulsory Licensing for Ringtones?* , 12 UCLA Ent. L. Rev. 11, 11-12 (2004). RIAA asserts that its dispute with the Harry Fox Agency over the interpretation of Section 115 remains unresolved and “has cast a pall of legal uncertainty over the ringtone market.” RIAA Initial Brief at 6. RIAA argues that, under the plain language of the Copyright Act, a distribution of a ringtone is a DPD subject to statutory licensing under the Copyright Act. RIAA asserts that a ringtone results from the fixation of a series of musical, spoken, or other sounds and therefore meets the definition of a “sound recording” in Section 101 of the Copyright Act; its fixation in a material object is a “phonorecord.” According to RIAA, it is a phonorecord of the relevant musical work as well. In the case of a mastertone, the sound recording is a clip of the commercially distributed recording. In the case of monophonic and polyphonic ringtones, the fixed sounds are rendered by a synthesizer in the telephone and so do not represent ambient sound in a recording studio. 32 32 *Id* . at 6-7. RIAA asserts that downloads of ringtones are DPDs because, when a ringtone is downloaded, there is a digital transmission of the sound recording that results in a specifically identifiable reproduction for the transmission recipient. RIAA argues that the statutory license under Section 115 includes the right of the licensee to distribute ringtones just as it includes the right of the licensee to make and authorize other kinds of downloads. 33 RIAA asserts that statutory licensing of ringtones is consistent with Congressional intent, as they are just the type of new technology contemplated by Congress to be included within the scope of the DPRA. 34 33 *Id.* at 8. 34 *Id.* at 21, 23. Copyright Owners do not argue that ringtones are not DPDs, stating instead that since ringtones are not covered by Section 115, there is no need to address the question. 35 Rather, Copyright Owners argue that the statutory license for making and distributing phonorecords or musical works is narrow in scope and does not encompass uses such as ringtones. They assert that the inclusion of ringtones within the statutory license would contravene Congress‘ intent that Section 115 be a narrowly construed exception to certain exclusive rights of the musical work copyright owner. Copyright Owners state that, as a “limited exception” to certain exclusive rights granted to copyright owners, courts consistently have held that the statutory license “be construed narrowly, lest the exception destroy, rather than prove, the rule.” 36 35 Oral Argument Transcript at 55. 36 Copyright Owners Initial Brief at 5, citing *Fame Publishing Co. v. Alabama Custom Tape, Inc.* , 507 F. 2d 667, 670 (5th Cir. 1975)(noting that the compulsory license provision of the 1909 Copyright Act is a limited exception to the copyright holder‘s exclusive right to decide who shall make use of his composition). With regard to the DPRA of 1995, Copyright Owners assert that Congress‘ clarification that Section 115 covered not only “brick and mortar” sales did not extend the license to cover any and all digital uses. They state that the existing limitations on the scope of the license did not change and that use of a work prior to publication, the creation of derivative works, and the synchronization of a musical work, are uses that remain outside of the license, whether in digital or physical form. 37 37 Copyright Owners Initial Brief at 7-8. Copyright Owners assert that RIAA‘s interpretation of Section 115 would “potentially open the door” to licensing of snippets of musical works used to enhance all sorts of other consumer products and devices, such as musical car alarms or doorbells. They state that the licensing of musical works for functional uses in consumer products is not what Congress intended when it enacted Section 115. 38 38 Copyright Owners Reply Brief at 14-15. RIAA, in its Reply, asserts that the statutory mechanical license has been a fixture of U.S. copyright law for nearly a century and argues that it should be construed in accordance with its terms. RIAA contests Copyright Owners‘ view that Section 115 should be construed narrowly, noting that the legislative history accompanying the 1976 Copyright Act states: “The fundamental question of whether to retain the compulsory license or do away with it altogether was a major issue during earlier stages of the program for general revision of the copyright law. At the hearings it was apparent that the argument on this point had shifted, and the real issue was not whether to retain the compulsory license but how much the royalty rate under it should be . .≥.≥. The Committee‘s conclusion on this point remains the same as in 1967: ‘that a compulsory license system is still warranted as a condition for the rights of reproducing and distributing phonorecords of copyrighted music.‘” 39 RIAA adds that Congress did not narrow the license through adoption of the DPRA in 1995, but rather stated that it was “extending the mechanical compulsory license to digital phonorecord deliveries” and that its purpose was to “maintain and reaffirm” that the Section 115 license would apply to “new technologies.” 40 RIAA concludes that although some details of the Section 115 license have changed over the years, nothing in these enactments or the legislative history thereof suggests that Congress intended a narrow reading of the statute. 39 RIAA Reply Brief at 3, citing H.R. Rep. No. 94-1476, at 107 (1976). 40 *Id* . at 4, citing S.Rep. No. 104-128, at 37 (1995). *Analysis.* We find that ringtones meet the definition of DPDs. The issue presented is one of pure statutory construction and there is no actual dispute on this point. 41 Based on the language of the statute, ringtones easily meet the requisite definitions under the Copyright Act to be included in the Section 115 licensing scheme. First, we hold that a ringtone meets the definition of “sound recording” under Section 101 of the Act as a work that results from “the fixation of a series of musical, spoken, or other sounds,” 42 and that the sound recording is fixed in the form of a “phonorecord,” defined in the statute as a “material object in which sounds are fixed by any method now known or later developed.” 43 The phonorecord here is the actual sound recording file stored as a “download” on either the cell phone‘s hard drive or on a cell phone‘s removable memory storage disk. 44 When downloaded through the Internet or by wireless transmission, a ringtone is part of a “digital phonorecord delivery” and a digital transmission of a sound recording which results in a “specifically identifiable reproduction” by or for any transmission recipient of a phonorecord of that sound recording. 45 We also believe that our statutory analysis comports with Congressional intent. Ringtones are delivered by means of the type of “new technologies” Congress intended to be included when it enacted the DPRA in 1995. 46 41 *Id* . at 2, citing *Doyle v. Huntress, Inc.* , 419 F.3d 3, 7-8 (1st Cir. 2005) (“A question of statutory construction presents a purely legal question.”); *Blackman v. District of Columbia* , 2006 WL 2034355, *6 (DC Cir. 2006) (statutory construction begins with “the language itself, the specific context in which that language is used, and the broader context of the statute as a whole[.]”). 42 17 U.S.C. § 101 (“‘Sound recordings’ are works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied.”). 43 17 U.S.C. § 101 (“‘Phonorecords‘ are material objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term ‘phonorecords‘ includes the material object in which the sounds are first fixed.”). 44 *See* S. Rep. No. 104-128, at 39
(1995)(stating that storage of data in a “computer memory” is “technically the making of a phonorecord.”). 45 17 U.S.C. § 115(d). 46 *See* S. Rep. No. 104-128, at 37
(1995)We disagree with Copyright Owners that Congress did not intend for ringtones to be the kind of use of musical works contemplated for inclusion under the Section 115 license. 47 While we adhere to the general proposition that statutory licenses are to be construed narrowly, 48 we find that Section 115, as amended by the DPRA, purposefully broadened the scope of the statutory license to cover DPDs, and ringtones appear to fit comfortably within the definition of DPDs. On this note, we recognize that Copyright Owners have cited *Fame Publishing Co. v. Alabama Custom Tape, Inc.* , 507 F. 2d at 670, to support their narrow construction argument. However, we find this citation is inapt because the case arose out of a dispute concerning statutory language found in the 1909 Act that is not present in the current version of Section 115. In any event, the legislative history of the Copyright Act of 1909 states that from its inception, this compulsory license was intended to include all “mechanical reproductions” and that one of its purposes was “to secure to the composer an adequate return for *all use* made of his composition[.]” 49 (emphasis added). While the concept of the cellular phone ringtone undoubtedly would have astonished the members of the 1909 Congress, the license they devised was broad enough to include ringtones. Whether our interpretation “opens the door” to licensing of snippets of musical works to be used in car alarms or doorbells is a question that is outside the scope of this proceeding. 47 We are not saying that Congress specifically contemplated ringtones and their inclusion in the Section 115 license. Rather, ringtones generally fall into the class of “new technologies” that Congress concluded should be included within the expanded statutory license. 48 *See Public Performance of Sound Recordings: Definition of a Service,* Docket No. RM 2000-B, 65 FR 77,292, 77,297 (Dec. 11, 2000) (noting that the Copyright Office has historically construed limitations on copyright narrowly, especially those constrained by a compulsory license.). 49 *See* H. R. Rep. No. 60-2222, at 7 (1909). *Works or Portions of Works.* According to Copyright Owners, Section 115 is expressly limited to the making and distributing of phonorecords of “works,” not portions of works such as ringtones. Copyright Owners argue that because a ringtone is not a reproduction of the entire musical work, it is not subject to the statutory license. They argue that Section 115 throughout its provisions makes clear that a “work,” and not a “portion” of a work, is its subject. Copyright Owners state that this result was not an accident of drafting nor is it an unintended source of statutory ambiguity. They state that Congress had no difficulty using the term “portions” where in fact that concept was intended, such as in Sections 108(h)(1) and 110(2) of the Copyright Act. 50 Copyright Owners assert that this interpretation is confirmed by Section 115's legislative history which mentions “cover records” as well as cassettes and CDs. 51 50 Section 108(h)(1) states in part “a library or archives. . .may reproduce, distribute, display, or perform in facsimile or digital form a copy or phonorecord of such work, or portions thereof, for purposes of preservation, scholarship, or research.” Section 110(2) refers to “the performance of a nondramatic literary or musical work or reasonable and limited portions of any other work, or display of a work in an amount comparable to that which is typically displayed in the course of a live classroom session, by or in the course of a transmission.” 51 Copyright Owners Initial Brief at 9-11, citing *Supplementary Register‘s Report on the General Revision of the U.S. Copyright Law:* *1965 Revision Bill* , House Comm. on the Judiciary, 89th Cong., Copyright Law Revision Part 6, at 54 (Comm. Print 1965) (discussing “cover” records); H.R. Rep. No. 90-83, at 67
(1967)(referring to “disks and audio tapes”); S. Rep. No. 104-128, at 37
(1995)(“extending the mechanical compulsory licenses. . .as new technologies permit phonorecord to be delivered by wire or over airwaves rather than by traditional making and distributing of record, cassettes and CDs”). Copyright Owners remark that it is obvious that the Section 115 license applies only to physical or digital phonorecords of complete works since industry practices have developed on the basis of this interpretation of Section 115. They state, for example, that partial uses of compositions, such as medleys and samples, are licensed in market transactions. They further state that legal commentators have recognized that the Section 115 license does not apply to digital sampling and that it would have to be modified in order to include sampling within its scope. 52 52 *Id* . at 11, citing Jennifer R.R. Mueller, *Note: All Mixed Up: Bridgeport Music v. Dimension Films and De Minimis Digital Sampling* , 81 IND. L.J. 435, 461 (Winter 2006). RIAA asserts that Section 115 applies to whole musical works as well as portions of musical works, and that any other reading would be inconsistent with other provisions of the Copyright Act. 53 RIAA states that if the Copyright Owners are correct that the Copyright Act distinguishes between “works” and “portions of works,” then reproduction and distribution of ringtones would be permissible without a license as the provisions under Section 106 granting the exclusive rights to reproduction and distribution only refer to “works,” not “portions of works.” RIAA remarks that the Copyright Owners do not intend that interpretation nor is it a correct one. RIAA adds that Copyright Owners‘ approach to what constitutes a “work” would make other phrases in the statute superfluous. It notes, for example, that one of the factors used in determining whether a use of a work is a fair use under Section 107(3) is the “amount and substantiality of the portion used in relation to the copyrighted work as a whole.” The phrase “as a whole” would be superfluous if a “work” in the Act must always be the whole work and not a portion thereof. 54 RIAA asserts that although unstated, Copyright Owners apparently are relying on the canon of statutory construction *expressio unius est exclusio alterius* , which provides a general inference that omissions in statutory text are intentional. 55 RIAA notes, however, that this maxim “requires great caution in its application” and should be disregarded where “its application would thwart the legislative intent made apparent by the entire act.” 56 It states that such caution should be exercised here because, unlike most of the relevant language in Section 115, the references to “portions” of works that Copyright Owners cite did not appear in the 1976 Act and were only added years later. RIAA asserts that there is no indication that either amendment was intended to affect the interpretation of the provisions of the Copyright Act enacted more that twenty years before. RIAA concludes that two isolated references in the Copyright Act to “portions of works” cannot imply that the hundreds of unadorned references to “works” apply only to works in their entirety. 57 53 RIAA Reply Brief at 7. 54 *Id* . at 9, citing 17 U.S.C. § 107(3) 55 *Id* . at 8, citing 2A *Sutherland, Statutes and Statutory Construction* , § 47:25 (Norman Singer ed., 6th ed. 2005). 56 *Id.* 57 *Id* . at 7, 9. RIAA notes that Copyright Owners‘ argument that ringtones are analogous to sampling is equally misplaced. It states that ringtones are excerpts that are taken from musical works and distributed as such; samples, however, are short excerpts that are blended into what are clearly new creative works. RIAA asserts that the fact that the latter are licensed apart from Section 115 does not imply that the former should be. 58 *Analysis* . The Section 115 license is not limited to the reproduction and distribution of phonorecords of the entire musical work, and an excerpt may qualify for the statutory license if all other requirements are met. We believe that the Copyright Act‘s language and purpose are broad and that “portions of works” should be treated the same as any other type of work under Section 115. This provision of the Act does not expressly exclude “portions of works” from its scope and we cannot assume that such treatment was intended in the absence of clear statutory language to that effect. 59 Contrary to Copyright Owners‘ assertion, we cannot find support for such a limited and narrow reading of the Act in the legislative history they cite. 60 58 *Id.* at n.8. 59 We agree with RIAA that Section 115 makes no distinction between downloads of song excerpts and full songs delivered by online music services such as Apple‘s iTunes Music Store and Verizon Wireless‘ V Cast Music Store. *See* RIAA Initial Brief at 1. 60 *See* n. 51, *supra* Moreover, we believe that Copyright Owners‘ citations to Sections 108 and 110 are inapt as these provisions were not enacted contemporaneously with Section 115 and cannot be read to provide any guidance as to Congressional intent or the purpose of the statutory license. We note, in particular, that their interpretation of Section 110(2) defies legislative intent as well as common sense. 61 Under Copyright Owners‘ interpretation, educators using the distance education exemption could transmit limited portions of works other than nondramatic literary or musical works, but if they transmit a performance of a nondramatic literary or musical work, they would have to transmit the entire work as a transmission of a portion of the work would not be permitted. Congress certainly did not intend this result. 61 *See* 17 U.S.C. § 110(2) (discussing works “produced or marketed primarily for performance or display as part of mediated instructional activities transmitted via digital networks . . .”). We also find that Copyright Owners‘ reading of the Copyright Act, if adopted, would render certain provisions of the statute superfluous. For example, well-settled interpretation of and practice under Section 118 of the Act would be undermined if Copyright Owners‘ interpretation were correct. Under this provision, licensing agreements and related fees negotiated between noncommercial broadcasting entities and copyright owners of published nondramatic musical works are subject to ratesetting by the Copyright Royalty Board. 62 While Section 118 expressly refers to “works,” it has been understood to include portions of works as well. For example, under 37 CFR § 253.7(b)(3), which implements the rates set for the Section 118 statutory license, “a ‘Concert Feature‘ shall be deemed to be the nondramatic presentation in a program of all or part of a symphony, concerto, or other serious work originally written for concert performance or the nondramatic presentation in a program of portions of a serious work written for opera performances.” 63 (emphasis added). If we were to accept Copyright Owners‘ argument that the Act covers only full musical works, and not portions of musical works, then the Board could never set such rates pursuant to Section 253.7. This result, we believe, was not intended by Congress. 62 *See* 17 U.S.C. § 118. Section 118(d) gives public broadcasters permission to engage in certain “activities with respect to published nondramatic musical works and published pictorial, graphic, and sculptural works . . .” Under Section 118(d)(1), one of the activities is “the performance or display of a work.” 17 U.S.C. § 118(d)(1). 63 *See* 37 CFR § 253.7(b)(3). We also believe that Copyright Owners analogy to sampling is inapt. Sampling generally refers to the appropriation of sounds from an existing sound recording for transformative use along with other sounds in a new work. A mastertone, in contrast, is taken from a single work, in the form of an excerpt. *Marketplace Developments.* According to Copyright Owners, the statutory license was instituted to ensure a market where none existed, but there is an active market for freely negotiated licenses already in place. They assert that the Register of Copyrights has stated that ringtones are a subject more appropriately left to market forces than government regulation and that “there is no need for Government to legislate what the parties can negotiate themselves.” 64 They state that Copyright Owners and record labels, recognizing that ringtones are not DPDs subject to the statutory license, have entered into voluntary license agreements granting the labels the right to create ringtones at specified mutually-negotiated royalty rates. 65 Copyright Owners assert that these voluntary licenses provide further support that ringtones are outside the narrow scope of Section 115. They conclude that there exists a vibrant and growing market for ringtones, which makes it unnecessary and inappropriate to include ringtones within Section 115. 66 64 Copyright Owners Initial Brief at 8, citing *Copyright Office Views on Music Licensing Reform* . Hearings Before the Subcomm. on Courts, the Internet, and Intellectual Property. House Comm. on the Judiciary, 109th Cong., at 20
(2005)(Statement of Marybeth Peters, Register of Copyrights) 65 For example, Copyright Owners cite the November 1, 2004 Sony BMG/EMI Music Publishing Agreement that granted the former the right to create ringtones embodying EMI compositions 66 Copyright Owners Initial Brief at 4. According to RIAA, Copyright Owners mischaracterize current marketplace conditions and the Register‘s prior testimony, which, in any instance, are both irrelevant. RIAA asserts that the Register‘s testimony was in the context of an express legislative invitation to explore revision of the statute. The reform proposal presented by the Register, if adopted by Congress, would have repealed the statutory license and omitted from a successor licensing system the statutory treatment of “ringtunes” and certain other types of works. RIAA notes that the Register‘s reform proposal is not law, but Section 115 is. 67 67 RIAA Reply Brief at 4, citing *Music Licensing Reform. Subcomm* . on Intellectual Property, Senate Comm. on the Judiciary, 109th Cong. (July 12, 2005) (Statement of Marybeth Peters, Register of Copyrights). RIAA disputes Copyright Owners‘ claims that the purpose of the statutory license was to ensure a market where none existed and that the ringtone market is thriving. As to the former point, RIAA asserts that Section 115 was enacted to protect the market from a “great music monopoly,” not to create a market. 68 With regard to the latter point, RIAA asserts that although the U.S. has the world‘s largest music market, the U.S. ringtone market represents only a fraction of worldwide sales, with the bulk of the market in Europe and Asia. Moreover, aside from the EMI agreement cited by Copyright Owners, there are no other major ringtone licensing agreements of importance. RIAA states that with tens of thousands of music publishers, the need to clear all these rights through negotiation is a burden on the market and it is not surprising that the U.S. offerings lag behind other parts of the world. RIAA concludes that some mastertone agreements are no substitute for the Section 115 license. 69 68 RIAA Reply Brief at 5, citing *Melville B. Nimmer & David Nimmer, Nimmer on Copyright* § 8.04[A] (2004). 69 *Id* . at 6-7. In Reply, Copyright Owners reiterate that the market for ringtones is thriving and no compulsory license is needed to ensure its continued growth. The suggestion by RIAA that, absent compulsory licensing, music publishers will “prevent the commercialization” of ringtones is belied by the years of voluntary licensing of compositions by music publishers for such uses. 70 70 Copyright Owners Reply Brief at 15-16, citing Rudell and Rosini, (noting that U.S. ringtone sales in 2005 was approximately $500 million). *Analysis.* The general success, or lack thereof, of the marketplace for ringtones is not dispositive, or even necessarily relevant, in this analysis. Commercial negotiations involving the use of copyrighted works cannot annul the force and effect of existing law, unless Congress explicitly so states. We in fact note that, despite the existence of the Section 115 license, the vast majority of sound recordings are made pursuant to direct licenses from music publishers or the Harry Fox Agency rather than under the provisions of the statute. These commercial agreements, however, do not negate the existence of the statutory license. Moreover, reliance on the statements made by the Register of Copyrights is both inappropriate and inapt. These statements were proposals for revising the law, not interpretations of the existing regulatory regime. V. Derivative Works *Section 115 and Derivative Works.* Section 101 of the Copyright Act defines a derivative work as a “work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications, which as a whole, represent an original work of authorship, is a derivative work.” 71 Congress used one defined term, “derivative work,” to specify both that derivative works are protectable under Section 103 of the Copyright Act and that the copyright owner has the exclusive right to prepare derivative works under Section 106(2) of the Copyright Act. 72 According to the Act‘s legislative history, Section 115 exists to permit artists and record companies to create sound recordings, which are a type of derivative work. 73 71 17 U.S.C. § 101. 72 Section 103 states that “the copyright in a compilation or derivative work extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material.” 17 U.S.C. § 103(b). Section 106 states that “[s]ubject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following. . .
(2)prepare derivative works based upon the copyrighted work. . .” 17 U.S.C. § 106(2). 73 *See* H. R. Rep. No. 94-1476, at 108-09
(1976)(noting that a Section 115 license permits either the creation of a new sound recording or a duplication of an existing one with the consent of the sound recording copyright owner). Copyright Owners generally assert that ringtones fall outside the ambit of the statutory license because they are derivative works. They argue that ringtones exceed the scope of the Section 115 license by infringing the copyright owners‘ exclusive right to prepare derivative works. They assert that Section 115 subjects only the rights to reproduce and distribute phonorecords of works to the statutory license, leaving derivative works outside its scope. Copyright Owners argue that ringtones fit squarely within the derivative work definition because they are based on pre-existing works, and typically reduce a three-to-five minute work to an abridged ten-to-thirty second work. 74 74 Copyright Owners Initial Brief at 12-13. Copyright Owners note that the Copyright Board of Canada recently observed in a proceeding to set the rates for ringtones that “mastertones are created by taking an actual segment of a sound recording after determining which number of seconds out of a work will be most appropriate for the market.” *Id.* , citing Copyright Board of Canada, Collective Administration of Performing Rights and of Communications Rights, *Statement of Royalties to be Collected by SOCAN for the Communication to the Public by Telecommunication, In Canada, of Musical or Dramatico-Musical Works* , Tariff No. 24-Ringtones (2003-2005) (Aug. 18, 2006) at 13. In response, RIAA notes that this statement by the Copyright Board confirms its supposition that the selection of a mastertone from the underlying musical work is a “trivial omission.” RIAA Reply Brief at n. 10. RIAA asserts that the legal tests for protection of derivative works and infringement of the derivative work right are identical and, in any event, require originality. 75 It states that “[F]or the derivative work right to be infringed, the defendant must have created a derivative work, and for the derivative work to have been created, the Act requires the contribution of expressive content capable of standing on its own as a copyrightable work.” 76 RIAA cites a string of precedent to support its position that derivative works must be original to be afforded copyright protection. 77 RIAA states that for mastertones, the trivial action of copying a clip from an existing sound recording does not stand on its own as meriting copyright protection. 78 RIAA also asserts that there is no precedent in copyright law for the proposition that every partial reproduction of a work constitutes a separate derivative work. RIAA concludes that ringtones are nothing more than partial copies that lack sufficient originality to be protected as derivative works or to infringe the derivative works right. 79 RIAA concludes that because ringtones do not fit under the definition of derivative works in Section 101 of the Act, the making of a ringtone cannot be excluded under Section 115 on this basis. 75 RIAA Initial Brief at 11, citing *Feist Publ’ns, Inc. v. Rural Tel. Serv. Co* ., 499 U.S. 340, 346
(1991)(“Originality is a constitutional requirement.”). 76 *Id.* at 11-12, citing 2 Paul Goldstein, *Copyright* § 7.3 (3d ed. 2005). 77 *See id* . at 12-14, 20, citing *Woods v. Bourne Co.* , 60 F.3d 978, 989 (2d Cir. 1995)(holding that a musical work must have “substance added making the piece to some extent a new work” and that only the “addition of such new material would entitle the creator to a copyright on the new material.”); *Lee v. Deck the Walls, Inc.* , 925 F. Supp. 576 (N.D. Ill 1996), *aff’d on other grounds sub nom., Lee v. A.R.T. Co.* , 125 F.3d 580 (7th Cir. 1997)(holding that notecard art image deposited on tile and covered with epoxy is not copyrightable because the work does not contain any original artistic expression); *Peker v. Masters Collection* , 96 F. Supp. 2d 216 (E.D.N.Y. 2000) (holding that an oil painting reproduction, made by transfer of a copy of a copyrighted painting from a poster to a canvas with the addition of resin to create a brushed-on look of the original was not a derivative work because there was no originality that would be considered copyrightable); *Precious Moments, Inc. v. La Infantil, Inc.* , 971 F. Supp. 66, 67 (D. Puerto Rico, 1997) (stating that originality is required for a derivative work to be copyrightable). 78 *Id* . at 2. 79 *Id* . at 10, citing *Nimmer on Copyright* § 8.09[A] (noting that no reported case finds the holder of a reproduction license barred from making trivial changes to a work even without a separate license to make derivative works). *Analysis* . As an initial matter, we agree with Copyright Owners‘ assertion that Section 115, by its terms, concerns only the rights to reproduce and distribute phonorecords of works, leaving derivative works outside its confines. Thus, consideration of the derivative work right is important only to the extent that a ringtone which is adjudged to be a derivative work cannot be licensed under Section 115. To be considered a derivative work, a ringtone must exhibit a degree of originality sufficient enough to be copyrightable. 80 With regard to the appropriate legal test regarding copyrightability, we believe that *Feist* is controlling precedent here. 81 In *Feist* , the Supreme Court observed that “as a constitutional matter, copyright protects only those constituent elements of a work that possess more than a de *minimis quantum* of creativity,” and that there can be no copyright in work in which “the creative spark is utterly lacking or so trivial as to be virtually nonexistent.” 82 As illustrated below, there are ringtones that may be considered derivative works because they exhibit a degree of originality and creativity. However, there are many other ringtones that would not be considered derivative works because they exhibit only trivial changes from the underlying work. Those ringtones would not be considered derivative works and would be within the scope of the statutory license. 80 We recognize that in one sense, every ringtone will be a derivative work, in that every sound recording of music is a derivative work; the underlying work is the musical composition itself. See H. R. Rep. No. 94-1476, at 108-109
(1976)The issue before us is not whether a ringtone is a derivative work; by definition it is. Rather, the question is whether a musical composition as recorded in a ringtone infringes the derivative work right in the original musical composition. When we refer to ringtones as “derivative works” in this Memorandum Opinion, we are referring not to the sound recording, but to the musical composition recorded in the ringtone. *See also,* n. 8, *supra* . 81 *Feist Publ’ns, Inc. v. Rural Tel. Serv. Co.* , 499 U.S. 340 (1991). Original, as the term is used in copyright, means that:
(1)the work was independently created by the author (as opposed to copied from other works); and
(2)it possesses at least some minimal degree of creativity. *Id* . at 345. When we refer to “originality” in this Memorandum Opinion, we are referring not to independent creation, but to creativity. 82 *Id* . at 359, 363; *see also Woods v. Bourne Co.* , 841 F. Supp. 118, 122 (S.D.N.Y. 1994) (quoting Fred *Fisher, Inc. v. Dillingham* , 298 F. 145, 148 (S.D.N.Y. 1924) (holding that a derivative work must be “substantially a new and original work, not a copy of a piece already produced, with additions and variations, which a writer of music with experience and skill might readily make”). *Court Precedent* . Copyright Owners argue that caselaw compels a conclusion that ringtones are derivative works. They argue that ringtones satisfy any creativity requirement for the copyrightability of a derivative work. 83 They additionally argue that the selection process involved in the creation of ringtones meets the creativity standard for copyrightability under settled law. 84 Copyright Owners also assert that the courts have routinely held that shortened versions of a variety of different copyrighted works constitute derivative works under the Copyright Act. They note, for example, that courts have found that clips from full-length copyrighted works, such as movie trailers, constitute derivative works. 85 83 Copyright Owners Reply Brief at 8, citing *Video Pipeline, Inc. v Buena Vista Home Entm’t, Inc.* 192 F. Supp. 2d 321 (D.N.J. 2002), *aff’d* on other grounds, 342 F.3d 191 (3d Cir. 2003); *Yurman Design, Inc. v. PAJ, Inc* ., 262 F.3d 101, 109 (2d Cir. 2001) (stating that “Under the Constitution and by statute, copyright validity depends upon originality”), citing *Feist Publ’ns, Inc. v. Rural Tel. Serv. Co.* , 499 U.S. 340, 345 (1991). 84 *Id* ., citing *U.S. Payphone, Inc. v. Executives Unlimited of Durham, Inc.* , 18 U.S.P.Q. 2d 2049, at *8 (4th Cir. 1991) (finding that a section of a reference guidebook was a protectable compilation because the author collapsed voluminous tariff information into an easily usable guidebook); *Caffey v. Cook* , 409 F. Supp. 2d 484, 497 (S.D.N.Y. 2006) (finding a protectable compilation in the selection and ordering, for a musical show, of thirty two songs from a universe of possible musical compositions based on the compiler’s sense of musicality). 85 Copyright Owners Initial Brief at 13, citing *Video Pipeline, Inc. v. Buena Vista Home Entm’t, Inc.* , 192 F. Supp. 2d 321, 330 (D.N.J. 2002), *aff’d* on other grounds, 342 F.3d 191, 197 (3rd Cir. 2003); *John Lamb d/b/a Alpha Production v. Michael Starks 3D TV Corp* ., 949 F. Supp. 753, 755-56 (N.D. Cal. 1996)(finding that use of a portion of a full length movie to create a trailer, without permission, was infringing and not fair use). RIAA cites cases contrary to Copyright Owners‘ position. For example, it cites precedent holding that the use of copyrighted music excerpts in the background of a television show did not infringe the derivative work right because the inclusion of the music did not create a new derivative work that warrants copyright protection. 86 It also refers to another case where the district court denied a claim that adding local commercials to rental videos was an infringement of the derivative work right because there was no evidence that “the mere addition of a commercial to the front of a videocassette recasts, transforms, or adapts the motion picture in what could represent an original work of authorship.” 87 Relying on the district court‘s determination in *Agee* that copying an excerpt of a musical work does not infringe the derivative work right, RIAA argues that the creation of a ringtone does not infringe the exclusive right to prepare derivative works of the underlying musical work. 88 86 *See* RIAA Initial Brief at 15, citing *Agee v. Paramount Commc’ns, Inc* , 853 F. Supp. 778 (S.D.N.Y. 1994), *aff’d in part rev’d in part on other grounds* , 59 F.3d 317 (2d Cir. 1995) (holding that “copying a sound recording for use in a broadcast television program does not create a derivative work which warrants protection under the Copyright Act of 1976”). The Second Circuit found it unnecessary to reach the derivative works question. *See id* . at 324 (stating that “Although the interspersing and abridgement of a sound recording may not, strictly speaking, involve sampling or amount to the traditional creation of a derivative work, such use of a recording appears to fall within the language of section 114(b), perhaps constituting a rearrangement or alteration in sequence. We need not determine the extent to which the recording was altered, however, because the finding that Paramount created a derivative work is unnecessary to a finding of infringement in light of Paramount’s reproduction of Agee’s recording.”). 87 *See id.* at 14, citing *Paramount Pictures Corp. v. Video Broad. Sys., Inc.* , 724 F. Supp. 808, 821 (D. Kan. 1989). 88 *Id* . at 8, 15. RIAA argues that the cases involving the creation of unauthorized trailers through editing and condensing of motion pictures are inapt. According to RIAA, such cases involve claims of unauthorized reproduction, and that is a sufficient basis on which to decide them. Moreover, in the few instances where those cases address the derivative work right, they point in conflicting directions depending on whether or not the court follows Ninth Circuit precedent. 89 RIAA argues that the Register should decline to follow the Ninth Circuit‘s holding that the derivative work right may be infringed without a finding of originality. RIAA explains that in the Ninth Circuit, all one must show to prove infringement of the derivative work right is substantial similarity between the derivative work and the underlying work and that, under this reasoning, there is no legal distinction between infringing the reproduction right and infringing the derivative work right. 90 RIAA submits that such an interpretation is wrong because it is contrary to the plain language of the statute and contrary to the weight of authority. 91 RIAA states that, in any event, the trailer cases are of marginal relevance here because they involve a greater degree of editorial judgment than copying a single clip for distribution as a mastertone or other typical commercial ringtone. 89 *Id* . at 15, comparing *Clean Flicks of Colo. v. Soderbergh* , 433 F. Supp. 2d 1236, 1242 (D. Colo. 2006) (holding that “family friendly” edited versions of movies “are not derivative works and do not violate § 106(2)”) with *Video Pipeline, Inc. v. Buena Vista Home Entm’t, Inc.* , 192 F. Supp. 2d 321, 330 (D.N.J. 2002), *aff’d on other grounds* , 342 F.3d 191 (3d Cir. 2003). 90 RIAA cites *Mirage Editions, Inc. v. Albuquerque A.R.T. Co.,* 856 F. 2d 1341 (9th Cir. 1988) where the Ninth Circuit affirmed a district court finding that mounting legally purchased copies of copyrighted artworks on ceramic tiles infringed the right to prepare derivative works. The court found that appellant “made another version” of the artwork that amounted to the preparation of a derivative work because it “ recast or transformed the individual images by incorporating them into its tile-preparing process.” This decision has been followed in subsequent cases within the Ninth Circuit. *See, e.g., Micro Star v. Formgen, Inc* ., 154 F.3d 1107, 1112 (9th Cir. 1998); *Sobhani v. Radical Media, Inc.,* 257 F. Supp. 2d 1234 (C.D. Cal. 2003). *See id.* at 16-17. 91 *Id.* at 16. In its Reply Brief, RIAA again argues that mastertones and other typical commercial ringtones are not derivative works. It states that the cases cited by Copyright Owners all rely on Ninth Circuit precedent, and given that it is the lone Federal circuit in holding that there is a more lenient test for infringement of derivative works, that approach should be rejected. RIAA Reply Brief at 11. Copyright Owners assert that to the extent there is a dispute among the circuits as to whether creativity sufficient for copyright protection is required for a work to be a derivative work for purposes of infringement, that dispute is not appropriate for resolution by the Register and is, in any event, irrelevant to the Register‘s analysis here since ringtones satisfy the test for creativity in any circuit. 92 92 Copyright Owners Reply Brief at n. 13. *Analysis.* Given the wide range of ringtones available in the marketplace, and understanding that a derivative work analysis is factually intensive, our task here is not to provide a comprehensive analysis of the caselaw. However, we do need to address whether a musical excerpt, in the form of a ringtone, is a derivative work because it is a central issue in this proceeding. First, consideration of the derivative work right issue is important to the extent that a ringtone which is adjudged to be a derivative work cannot be licensed under Section 115. Second, we agree with RIAA that the Ninth Circuit‘s more lenient test for infringement of derivative works, which seemingly ignores the originality requirement, appears to be in error as it runs contrary to all other Circuit Court precedent. 93 Third, we agree with RIAA that reliance on derivative works precedent involving movie trailers, such as Video Pipeline, Inc., is inapt because the creating and editing process involved in making those trailers required much more originality than simply shortening an existing musical work to create a ringtone. 94 *Fourth, Woods v. Bourne* is guiding precedent for determining the derivative work right in musical compositions. 95 Under Woods, an excerpt of a musical work made into a ringtone without original embellishments likely would not be considered a derivative work because nothing of substance has been added and the ringtone is merely a copy of a work (albeit a portion) already produced, without additions or variations. Fifth, as for those mastertones that contain new words in the lyrics not found in the underlying musical works, we draw no conclusions based on precedent because they involve factual issues and potentially close questions that need not be resolved here. A court of competent jurisdiction would be the appropriate forum to make the necessary determinations. 93 We note that there is widespread disapproval of the Ninth Circuit’s approach to derivative works. *See, e.g., Lee v. A.R.T,* 125 F.3d 580, 582 (7th Cir. 1997) (noting that if the Ninth Circuit is “right about what counts as a derivative work, then the United States has established through the back door an extraordinarily broad version of the authors’ moral rights.”); *Precious Moments, Inc. v. La Infantil, Inc.,* 971 F. Supp. 66, 69 (D. Puerto Rico 1997) (agreeing with the Seventh Circuit that Mirage and its progeny read the originality requirement out of the definition of derivative works and “open[s] the door for the most trivial modifications to generate an infringing derivative work.”); *Goldstein* § 5.3 at 5:81-82; *Nimmer on Copyright* § 3.03. Although Copyright Owners assert that “to the extent that there is a dispute among the circuits as to whether creativity sufficient for copyright protection is required for a work to be a derivative work for purposes of infringement, that dispute is not appropriate for resolution by the Register,” the positions taken by the parties on this issue require the resolution of that issue. Having concluded that many ringtones do not exhibit sufficient creativity to qualify for copyright protection as derivative works, it is necessary to determine whether the derivative work right nevertheless could be infringed by making and distributing such ringtones. 94 There are marked differences between the making of ringtones and the making of movie trailers in the cited cases. For example, the trailers at issue in *Video Pipeline* were 120 seconds in length and included the display of the movie studio’s trademark, title of the motion picture, and two or more scenes from the film. *See* 342 F.3d at 195. In any event, the Third Circuit found that the trailers at issue were essentially copies of the original work that lacked “any significant transformative quality” and any “creative ingenuity.” *Id.* at 199-200. The trailer at issue in *John Lamb,* another case cited by Copyright Owners, was 2 minutes and 40 seconds in length and included individual images and scenes, among other things. Further, the original trailer was transformed into a 3-D format for use with specially engineered eyeglasses. *See* 949 F. Supp. at 755. 95 *See* n. 77, 82, *supra* . *Copyright Office Precedent* . The Copyright Office has made certain pronouncements as to the registrability of derivative works in sound recordings and other works in various publications. For example, Section 408.07 of Compendium II of Copyright Office Practices states that “An abridgement of a musical work may be registrable provided that there is a substantial amount of selectivity, for example, more than merely omitting a section from the beginning or end.” Copyright Office Circular No. 14 (2006), *Copyright Registration for Derivative Works* , states that “When the collecting of preexisting material that makes up the compilation is a purely mechanical task with no element of editorial selection or when only a few minor deletions constitute an abridgment, copyright protection for the compilation or abridgment as a new version is not available.” Copyright Office Circular No. 56 (2006), *Copyright Registrations for Sound Recordings* , states, in part that “[I]f only a few slight variations or purely mechanical changes (such as declicking or remastering) [of a work] have been made, registration is not possible.” RIAA argues that mastertones and other typical commercial ringtones do not stand on their own as separately copyrightable works under the Copyright Office‘s interpretations. RIAA cites Section 408.07 of the Compendium II of Copyright Office Practices as support for its argument. 96 RIAA argues that a partial copy of a commercial sound recording distributed as a mastertone or a partial copy of a musical work distributed as a monophonic or polyphonic ringtone is not separately protectable as a derivative work under Copyright Office standards. 97 To the extent that it may be desirable to make technical adjustments to the commercial sound recording to improve playability on phones, RIAA asserts that process is in the nature of remastering and would not affect the underlying musical work. 98 As for RIAA‘s reliance on Copyright Office precedent, Copyright Owners refer to Copyright Office Circular No. 14 which states that “a few minor deletions” to a work will not suffice for a work to be protectable as a derivative work. Copyright Owners respond that ringtones do not involve the mere omission of portions of a work, but involve the creative selection of portions of a work and often more. They assert that the process used to construct a thirty second ringtone from a three-to-five minute work involves the “substantial amount of selectivity” acknowledged by the Copyright Office to suffice for the creation of a protectable work. 96 Compendium II of Copyright Office Practices, § 408.07 (1984). 97 RIAA Reply Brief at 13. 98 RIAA Initial Brief at 21. *Analysis* . The Copyright Office documents, noted above, are instructive. We note that the Circulars are designed to inform members of the public about how to register works with the Copyright Office offering guidelines for instructional purposes. The Compendium, generally used by the Copyright Office staff, serves as an internal manual detailing what works are copyrightable, and therefore registrable. Here, the cited materials are based on, and to a large extent, mirror judicial precedent on the subject of derivative works. Essentially, making “minor deletions” or “slight variations” to an original work will not result in the creation of a derivative work because there is no originality involved in the new work. Using the cited materials as references, then, the Copyright Office would refuse registration of a mastertone that is merely an excerpt of a full musical work because the new work lacks the requisite originality. *Examples in the Record* . Copyright Owners state that creating ringtones involves making alterations to the underlying work that require skill, judgment, and creativity. According to Copyright Owners, all ringtones require the exercise of creative judgment in determining the points in the composition where the ringtone should begin and end so as to maximize appeal to consumers. They state that the decision as to what portion of a work to use in the ringtone is not trivial; shorter ringtones are sometimes designed to “loop” to achieve the appropriate length to function as a ringer, with the result that a musical phrase is repeated in a sequence unintended by the author of the work. They add that other mastertones involve the addition of new lyrics, spoken-word interludes, and other material designed to enhance sales. Copyright Owners conclude that, for a derivative work to be copyrightable under the copyright laws, the “requisite level of creativity is extremely low” and the alterations of ringtones in the manner described meet this test. 99 99 Copyright Owners Initial Brief at 14-15, citing *Yurman Design, Inc. v. PAJ, Inc.* , 262 F.3d 101, 109 (2d Cir. 2001) (quoting *Feist* , 499 U.S. at 345). RIAA disagrees and asserts that ringtones are nothing more than partial copies that lack sufficient originality to be protected as derivative works or to infringe the derivative works right. It states that copying a clip to distribute as a ringtone does not involve the addition of any new material. RIAA argues that because the definition of the term “derivative work” applies to both protection and infringement, and because the definition requires originality in both contexts, copying a single short clip from a sound recording and/or musical work to distribute as a mastertone or other ringtone does not meet the requirements for copyright protection as a derivative work or infringement as a derivative work. 100 RIAA has submitted, into the record, a CD with relevant examples of mastertones, that are simply partial copies of the underlying musical work. 100 RIAA Initial Brief at 19-20. In their Reply Brief, Copyright Owners reiterate that the creation of ringtones involves substantial creativity and that ringtones do not only feature the hook of a particular musical work. Moreover, they assert, there is no such thing as a “typical commercial ringtone,” as RIAA seems to suggest. Rather, they vary in kind and length. They note the following examples:
(1)the ringtone for Leonard Cohen‘s “Everybody Knows” recording comprises nine seconds of the approximately five and a half minute full length work and the ringtone commences seven seconds into the song;
(2)Britney Spears “ . . . Baby One More Time” ringtone consists of a fifteen-second snippet of the recording that begins two and half minutes into the three and a half minute song; and
(3)the mastertone for Jay Z‘s “Change Clothes,” consists of excerpts of two separate hooks repeated twice (even though these hooks are separated in the full-length song by other musical content), and then these two snippets are further repeated if the caller fails to answer the phone. Copyright Owners also note that some songs result in multiple ringtones, each focusing on different elements of the same underlying composition. They state, for example, that the Bubba Sparxx/Ying Yang Twins hit, “Ms. New Booty,” has spawned two ringtones-one featuring the lyric “I found you”and the other emphasizing the lyric “get it right.” 101 101 Copyright Owners Reply Brief at 5-6. They also assert that other ringtones include new content not present in the underlying work. Copyright Owners note, for example, that the Pussycat Dolls‘ mastertone derived from the best-selling song “Don‘t Cha” features the lyrics, “Don‘t cha wish your girlfriend was hot like me. Don‘t cha wish your girlfriend was a freak like me,” which are part of, but not all of the lyrics of the song. This ringtone, which is eleven seconds, as compared to the four and a half minute full length work, also includes new material different from those of the underlying work: “Come on boy, don‘t cha wanna pick up? We‘re ready for ya.” These additional words are spoken, not sung, and are not accompanied by music. Likewise, Copyright Owners note that in Beyonce‘s mastertone “Let Me Cater 2 You,” the ringtone contains a portion of the song, with an extra line added at the end: “What‘s up, this is Beyonce from Destiny‘s Child and this call is for you.” Again, the additional words are spoken, unaccompanied by music. Copyright Owners have submitted a CD, included in the record, that contains many more examples of ringtones that they assert support their case. *Analysis* . The ringtone samples provided by the parties are instructive. The record evidence demonstrates that not all ringtones are the same. While we need not decide whether all of the ringtones presented to us are within the scope of Section 115, we observe that some undoubtedly are not. For example, the 16 second mastertone, *Grind With Me* , by performing artist, Pretty Rickey, was created solely for ringtone use and the lyrics used therein are not found in the 4:02 minute full length version of the work. This ringtone is likely copyrightable as a derivative work because it is original and demonstrates a “creative spark.” In any event, there are likely to be many ringtones, such as the mastertone that uses a portion of Otis Redding‘s classic “ *Sittin‘ On the Dock of the Bay* ,” that simply copy a portion of the underlying musical work and cannot be considered derivative works because such excerpts do not contain any originality and are created with rote editing. There are also ringtones that contain a portion of the full length musical work and additional spoken material such as the Pussycat Dolls example, above. The determination of whether such a ringtone, or one that includes the addition of some new lyrics, results in a copyrightable derivative work is a mixed question of fact and law that is beyond the scope of this proceeding. In sum, there is a broad spectrum of ringtones, and whether one would be considered a derivative work depends upon the nature of the ringtone. At one end of the spectrum are those ringtones that are simple excerpts of larger musical works. This type of ringtone is not a derivative work. At the other end of the spectrum are ringtones that contain additional original authorship. These would be considered derivative works if there was a sufficient amount of creative authorship in the new material. In between are ringtones that may include some new material (spoken words or music) in addition to the excerpt. Those ringtones cannot be properly analyzed in a factual vacuum and their status as derivative works need not be determined in this proceeding, but are more appropriately determined on a case-by-case basis by the courts. VI. The “Arrangement Privilege” Section 115(a)(2) of the Copyright Act states that the “compulsory license includes the privilege of making a musical arrangement of the work to the extent necessary to conform it to the style or manner of interpretation of the performance involved, but the *arrangement* shall not change the basic melody or *fundamental character of the work* , and shall not be subject to protection as a derivative work under this title, except with express consent of the copyright owner.” 102 (Emphasis added) According to the Act‘s legislative history, the purpose of the limitations in Section 115(a)(2) was to prevent the musical composition from being “perverted, distorted, or travestied.” 103 102 17 U.S.C. § 115(a)(2). 103 H. R. Rep. 94-1476 at 62
(1976)(“The second clause of subsection
(a)is intended to recognize the practical need for a limited privilege to make arrangements of music being used under a compulsory license, but without allowing the music to be perverted, distorted, or travestied. Clause
(2)permits arrangements of a work “to the extent necessary to conform it to the style or manner of interpretation of the performance involved,” so long as it does not “change the basic melody or fundamental character of the work.” The provision also prohibits the compulsory licensee from claiming an independent copyright in his arrangement as a “derivative work” without the express consent of the copyright owner.”); *see also, Nimmer on Copyright* 17 U.S.C. § 115(a)(2). 8.04[F] (noting in reference to Section 115(a)(2) that “Such respect for the integrity of a musical composition evinces Congressional regard for the moral rights of composers [.]”). *Arrangements* . RIAA argues that ringtones are authorized by the arrangement privilege set forth in Section 115. RIAA argues that even if the Register were to determine that the creation of mastertones or other ringtones necessarily involves preparation of a derivative work, Congress specifically authorized the creation of certain derivative works under the express terms of the Copyright Act. RIAA asserts that creating arrangements by changing the length of musical works has been an accepted part of industry practice since before creation of the mechanical license. It states that shortening a musical work is necessary to conform the song to the style or manner of the performance involved because ringtones necessitate brevity. 104 104 RIAA Initial Brief at 23-25. Copyright Owners take issue with RIAA‘s stance. They state that RIAA‘s argument rests on a false premise-that changing the length of a musical work necessarily results in an arrangement. They assert that arrangements are adaptations of whole works and involve changes to the style and interpretation of the underlying work. They conclude that a portion of a musical work for inclusion in a ringtone is not an arrangement of the underlying work. 105 105 Copyright Owners Reply Brief at 12. Copyright Owners strongly assert that a ringtone is not a musical arrangement as that term is understood in the music business. They state that it is well settled in the music industry that arrangements, intended to permit alterations solely in interpretation and style, are adaptions of entire works. 106 They note that an arrangement, as defined by the American Federation of Musicians, is “the art of preparing and adapting an already written composition for presentation in other than its original form. An arrangement may include reharmonization, paraphrasing, and/or development of a composition, so that it fully represents the melodic, harmonic, and rhythmic structure.” 107 They assert that, by definition, there cannot be a ten-second arrangement of a three minute composition and a ringtone is no more of an arrangement of a song than the selection of four notes out of all the others is an arrangement of a song. 108 106 *Id.* at 3. 107 Copyright Owners Initial Brief at 16, citing http://www.answers.com/topic/arrangement. They also cite the Oxford English Dictionary (an arrangement is “[t]he adaptation of a composition for voices or instrument for which it was not originally written.”) and the Cambridge Advanced Learner’s Dictionary (an arrangement is “[a] piece of music that has been changed so that it can be played in a different way, especially by a different instrument”). 108 *Id* . at 15-16. RIAA asserts that the definitions of “arrangement” that Copyright Owners provide are unconvincing. It states that the only definition that even remotely suggests that an arrangement must always embody the full work and never a partial copy of that work is the definition from answers.com, but even that definition is not particularly instructive. 109 RIAA also argues that there is nothing in the Copyright Act, its legislative history, or the common usage of these terms to suggest that, by employing the phrase “musical arrangements” in either Section 101 or Section 115(a)(2), Congress was distinguishing between “musical arrangements” as a class and musical arrangements that happen to shorten versions of the underlying work. RIAA asserts that there are innumerable arrangements of a particular work and a shorter version of such a work is still referred to as an arrangement. 110 109 RIAA Reply Brief at 15, and n. 11, citing www.answers.com/topic/arrangement (stating that an arrangement “fully represents the melodic, harmonic, and rhythmic structure” of the work,” but also stating that an arrangement “may specify or vary some or all of . . . [the] sequence, including the order and number of repeats of sections such as verses and choruses. . .introduction, coda, modulations, and other variations.” 110 *Id* . at 16. *Analysis* . For purposes of our discussion here, “arrangement” pertains to the musical aspect of the work, and not to changes in lyrics. Even so, defining the parameters of Section 115(a)(2) is difficult because there is no precedent and there is no common ground among the parties regarding the appropriate definition of “arrangement”for Section 115 purposes. Here, the parties have used various dictionaries and web sites to support their definitional argument, but there is no consensus on what sources are valid and reliable. While Copyright Owners‘ definition is appropriate to use in this context, we believe that the definition found in the *New Encyclopedia of Music and Musicians* (“NEMM”) is as reliable, if not more comprehensive. 111 NEMM defines an arrangement as “The process or result of readjusting a work for performance by different artistic means from that originally intended. Also, a relatively close or literal rendering of the substance and form of a work with only those modifications demanded by the limitations or peculiarities of the medium in view.” 112 We can make three general observations based on the definitions and the law. First, the user‘s right to make a melodic arrangement should be limited so that the basic character of the musical work is preserved. 113 Second, a mastertone that merely shortens the full length work to conform it to the physical limitations of the cellphone does not affect the musical work‘s arrangement. Finally, a ringtone that makes minor changes to lyrics of the underlying musical work generally does not affect its arrangement. 114 There may be other ringtones that are substantially different from the underlying musical work, but whether such changes impinge upon the arrangement of the work is a factual question, which goes beyond the scope of this proceeding. 111 We note that when examining musical works for the purpose of copyright registration, the Performing Arts Section of the Copyright Office defines “arrangement” as “harmony added to an existing melody, or a transcription, such as a band arrangement of a piano piece.” Copyright Office examiners also rely on the definition of “arrangement” in Section 408.01 of Compendium II of Copyright Office Practices which states that: “A musical arrangement is a work that results from the addition of new harmony to a preexisting work. The standard of originality for arrangements takes into consideration the fact that a melody carries with it a certain amount of implied harmony.” Compendium II of Copyright Office Practices, § 408.07 (1984). 112 *See* Waldo Selden Pratt, *The New Encyclopedia of Music and Musicians* , Macmillan (1929). 113 *See* Preliminary Draft for Revised U.S. Copyright Law and Discussion and Comments on the Draft. House Comm. on the Judiciary, 88th Cong., Copyright Revision Part 3, at 444 (1964). 114 *See* *Shapiro, Bernstein* & *Co., Inc. v. Jerry Vogel Music Co., Inc.* (S.D.N.Y. 1947) (holding that a new version of copyrighted song “Melancholy” under the title “My Melancholy Baby” with an additional chorus in march time, but using identical lyrics except for a slight variation in the base of the accompaniment, did not constitute a copyrightable new work). Copyright Owners assert that ringtones are actually abridgements, not arrangements, of a musical work, and therefore they fall outside the Section 115 license. 115 While Copyright Owners do not fully state what constitutes an abridgement for the purposes of Section 115(a)(2), RIAA takes issue with this conclusion and cites a litany of definitions, references, and examples to support its case. 116 In this context, and without adequate explanation from the Copyright Owners, we surmise that the gist of their argument is that a ringtone abridges a full length musical work, and as such, should be considered a derivative work. If that is the case, we need not re-examine the matter as it is analyzed and discussed in detail in the derivative work section above. Our conclusion here is bolstered by the fact that the term abridgement does not appear in Section 115(a)(2), but it does appear in the definition of derivative works in Section 101 of the Copyright Act. 115 Copyright Owners Initial Brief at n. 6. 116 RIAA Reply Brief at 15. For example, referring to Cambridge Advanced Learner’s Dictionary, RIAA states that an abridgment is “to make a book, play or piece of writing shorter by removing details and unimportant information.” *Fundamental Character of the Work* . Copyright Owners state that even assuming, for argument‘s sake, that ringtones qualify as musical arrangements, Section 115 is inapplicable because the basic melody and fundamental character of the underlying work has been changed. They assert that ringtones delete large portions of the underlying works including much of the melody, verses, bridges, codas, and instrumental interludes. They conclude that the reduction of a work to a short refrain excludes all of the other elements that make up the overall character of the work. 117 117 Copyright Owners Initial Brief at 16-17. Copyright Owners assert that ringtones change the character of the underlying work in other ways as well. They assert that ringtones transform artistic works into utilitarian substitutes for the ring of the telephone; the character of a musical work fundamentally changes when the “original artistic vision expressed by the work in the form of a full-length song is superseded by a new purpose of serving as a thirty second mobile phone ringer.” Copyright Owners argue that the use of a musical work as a ringtone departs from the integrity of the original composition, “a result that Congress properly avoided” by excluding such uses from the Section 115 scheme. 118 118 *Id* . at 17. RIAA asserts that typical commercial ringtones do not change the basic melody of a musical work; to the contrary, ringtones by their very nature seek to accurately reproduce the basic melody with little or no alteration. RIAA asserts that the limitations in Section 115(a)(2) to prevent changes to the “basic melody and fundamental character of the work” were added specifically to address the objections of the copyright owners that the arrangement privilege would otherwise allow “radical alterations” to the “material detriment of the work.” 119 RIAA states that in the case of mastertones, the melody is exactly the same as in the commercial sound recording release and distributing a clip does not radically alter, pervert, distort, or travesty the musical work in contravention of Congressional intent. RIAA asserts that since Copyright Owners frequently license large parts of their catalogs for use as ringtones, that use cannot be said to be to the material detriment of the work. 120 RIAA concludes that creating a partial copy of the work does not constitute a radical alteration, and if it did, mastertones would not be commercially successful. 119 RIAA Reply Brief at 14, citing *Goldstein* , § 7.4.2, n. 7. 120 RIAA Initial Brief at 26. *Analysis* . Before discussing the “fundamental character” issue, we must note that the arrangement privilege does not represent the outer limit of what other kinds of changes (apart from what is conventionally understood as an arrangement) may be made to a musical work within the scope of the Section 115 statutory license. In this sense, an analysis of the arrangement privilege as it applies to mastertones is irrelevant except to the extent that some of these types of ringtones may actually tinker with the style and interpretation of the underlying work. Mastertones are taken from commercially released sound recordings which may involve arrangements, but for purposes of this proceeding, we assume that the commercially released sound recording was licensed (either by means of a voluntary license or the statutory license), and that the arrangement in the sound recording was within the scope of the license. In such cases, which we will assume to be the norm, the use of the same arrangement in the mastertone would not be in contravention of the limitations of Section 115(a)(2). Given this conclusion, we need not specifically address whether mastertones change the fundamental character of the work, but a statutory analysis is still necessary to determine the legal status of monophonic and polyphonic ringtones under Section 115. As stated above, Section 115(a)(2) of the Copyright Act permits statutory licensees to make a musical arrangement of the work “to the extent necessary to conform it to the style or manner of interpretation of the performance involved,” but the arrangement shall not “change the basic melody or fundamental character of the work.” 121 The Act‘s legislative history states that the provision was enacted to prevent the music from being “perverted, distorted, or travestied.” 122 The language of the statute was meant to avoid the desecration of the underlying musical work. 123 Under the statute, it is reasonable to conclude that a portion of a pre-existing musical work truncated to ringtone length does not change the basic melody and fundamental character of the work. Certainly, this conclusion applies to mastertones, and it would almost always apply to monophonic or polyphonic ringtones that preserve the basic melody of the underlying musical work. As such, we cannot conclude that the musical work customized for ringtone purposes has been perverted, distorted, or travestied, as those terms are commonly defined, as no changes have been made to the melody of the original work. 124 In sum, we do not believe, as Copyright Owners argue, that the reduction of a work to a short excerpt fundamentally changes the overall character of the work or impugns the integrity of the work. 121 17 U.S.C. § 115(a)(2). 122 *See* H. R. Rep. No. 94-1476, at 109 (1976). Congress did not define the terms “perverted,” “distorted,” or “travestied.” However, the America Heritage Dictionary defines “perverted” as “Deviating from what is considered right and correct.” It defines “distorted” as “to give a false or misleading account of.” And, it defines “travestied” as “An exaggerated or grotesque imitation, such as a parody of a literary work.” *See* http://dictionary.reference.com for these definitions. 123 *See* Preliminary Draft for Revised U.S. Copyright Law and Discussion and Comments on the Draft. House Comm. on the Judiciary, 88th Cong., Copyright Law Revision Part 3, at 444
(1964)(noting the concern of composers: “We have had numerous instances where a record manufacturer has taken a sacred or serious composition and without authority changed it into a Rock and Roll or jazz arrangement in such a manner as to constitute a desecration. We have also had instances of unauthorized adaptations which are beyond the limits of reason and good taste; the writing and recording of lyrics to instrumental compositions; the making and recording of burlesque versions and the recording of salacious versions.”) 124 The legislative history notes that the statutory licensee should have some latitude, but not complete freedom, to alter the character of the work. *See Further Discussions and Comments on the Preliminary Draft for Revised U.S. Copyright Law* . House Comm. on the Judiciary, 88th Cong., Copyright Law Revision Part 4, at 430 (Comm. Print 1964). In the absence of a case directly addressing the scope of Section 115(a)(2), it is useful to examine precedent involving the derivative work rights in a musical composition. For example, in *Woods v. Bourne* , the Second Circuit discussed the factors upon which a derivative musical work may be considered an original work for copyrightability purposes: “something of substance added making the piece to some extent a new work with the old song embedded in it but from which the new has developed. It is not merely a stylized version of the original song where the major artist may take liberties with the lyrics or the tempo, the listener hearing basically the original tune. It is, in short, the addition of such new material as would entitle the creator to a copyright on the new material.” 125 125 *Woods* , 60 F.3d at 991 (quoting *Woods v. Bourne Co.* , 841 F. Supp. 118, 121 (S.D.N.Y. 1994)). In *Woods* , the District Court decided the novel issue of whether any musical additions or variations to the preexisting melody and lyrics of a song resulted in a derivative work that was entitled to copyright protection. In order to qualify as a derivative musical work, the court found that “there must be present more than mere cocktail pianist variations of the piece that are standard fare in the music trade by any competent musician. . . . [There must be] something of substance added making the piece to some extent a new work with the old song embedded in it but from which the new has developed. . . . It is, in short, the addition of such new materials as would entitle the creator to a copyright in the new material.” *See Agee v. Paramount Commc’ns, Inc* , 853 F. Supp. 778, 788 (S.D.N.Y. 1994), *aff’d in part, rev’d in part on other grounds* , 59 F.3d 17 (2d Cir. 1995); *see also, Shapiro, Bernstein & Co. v. Jerry Vogel Music Co* ., 73 F. Supp. 165, 167 (S.D.N.Y. 1947) (finding changes in the rhythm and accompaniment, without changes in the tune or lyrics, were not protectable as a derivative work). Under *Woods* , a typical monophonic or a polyphonic ringtone would be considered a mere “stylized version” of the original musical work with no changes to the melody, but perhaps some changes to the tempo. In such cases, an electronic synthesizer may generate a monophonic or polyphonic adaptation of the underlying musical work for play on a cellphone, and the ringtone may have been conformed to fit within the parameters of its intended use. However, where the ringtone has added non-trivial “new material,” such that it would be considered a derivative work, the Section 115 license may not be available because the ringtone was not changed simply to conform it for use in a cellphone. 126 126 *See Gilliam v. American Broadcasting Comp., Inc.* , 583 F. 2d 14, 20-21 (2d Cir. 1976) (holding that a licensee infringes a copyright where it publishes the protected work after making extensive, unauthorized changes which impair the integrity of the original work). VII. Private Use Section 115 states that “a person may obtain a compulsory license only if his or her primary purpose in making phonorecords is to distribute them to the public for private use including by means of a digital phonorecord delivery.” 127 According to the Act‘s legislative history, the “private use” limitation was added to Section 115 to clarify that manufacturers of specialty recordings for use in jukeboxes and business music services could not rely on the mechanical license in their use of musical works. 128 127 17 U.S.C. § 115(a)(1). 128 *See Supplementary Register’s Report on the General Revision of the U.S. Copyright Law: 1965 Revision Bill,* House Comm. on the Judiciary, 89th Cong., Copyright Law Revision Part 6, at 55 (Comm. Print 1965) (“[T]he provision would not apply, for example, to reproduction in a motion picture sound track or recording primarily for use in broadcasts, wired music transmissions, or jukeboxes.”). *See also* H. R. Rep. No. 94-1476, at 108
(1976)(“The second sentence of clause (1), which has been the subject of some debate, provides that ‘a person may obtain a compulsory license only if his or her primary purpose in making phonorecords is to distribute them to the public for private use.’” This provision was criticized as being discriminatory against background music systems, since it would prevent a background music producer from making recordings without the express consent of the copyright owner; it was argued that this could put the producer at a great competitive disadvantage with performing rights societies, allow discrimination, and destroy or prevent entry of businesses. The committee concluded, however, that the purpose of the compulsory license does not extend to manufacturers of phonorecords that are intended primarily for commercial use, including not only broadcasters and jukebox operators but also background music services.”). Copyright Owners assert that ringtones fail to satisfy Section 115's requirement that the phonorecords be distributed for private use. They argue that the “private use” limitation contemplated by Congress includes only ordinary listening use for private enjoyment of music. To bolster their argument that a ringtone serves only public functions, Copyright Owners assert that a ringtone:
(1)is no substitute for enjoyment of the full length musical work;
(2)provides the notification functions of a phone ring; and
(3)is marketed as a lifestyle accessory. They conclude that ringtones provide mobile phone users a means to publicly identify and express themselves to their friends, colleagues and the public at large. 129 129 Copyright Owners Initial Brief at 17-19, citing H.R. Rep. No. 90-83, at 68 (1967). RIAA asserts that ringtones are distributed to individual consumers for private use. It states Copyright Owners‘ arguments ignore common sense, the relevant statutory language, and the legislative history of the Copyright Act. RIAA states that although ringtones do provide users a means to identify and express themselves, that is true for any phonorecord. RIAA asserts that all kinds of phonorecords distributed and sold to private customers are sometimes used in public, yet no one argues that such uses make the Section 115 license inapplicable. It argues that uses of CDs in public places, for example, do not make the Section 115 license unavailable to distributors for the simple reason that it is the primary purpose of the distributor, not the use by the consumer, that is relevant. According to RIAA, the phrase “private use” is not the opposite of “public performance,” but means “personal” or “noncommercial use.” RIAA asserts that ringtones satisfy the private use requirement because the primary purpose of the distributor is to distribute them to individual consumers for their own personal use and enjoyment, on those consumers‘ cell phones, in whatever manner the consumer sees fit, not to distribute them for commercial use such as public broadcasting, in motion pictures, business music services or jukeboxes. 130 130 RIAA Reply Brief at 17. *Analysis* . We believe that Copyright Owners‘ arguments are inconsistent with the law and ignore common uses of music by individuals. The controlling language here is “for private use.” It is undisputed that the term is directed at individual consumers who use music for personal enjoyment. However, Copyright Owners seem to suggest that once an individual takes the music out of the home, the statutory provision becomes null and void. 131 This cannot be what Congress intended. Here, we note that traditional phonorecords are used in public ( *e.g.* , in boom boxes in public parks, in a car stereo while the automobile is driving down the street, etc.), but that does not disqualify them from the statutory license by violating their primary purpose of being for private use. While it may be true that some mobile phone users purchase ringtones to identify themselves in public, this use most likely would not be considered a public use as Congress intended that term to be understood in the Section 115 context, and in any event, there is no basis to conclude that the *primary purpose* of the ringtone distributor is to distribute the ringtone for “public”use. The legislative history accompanying Section 115(a)(1) does not contradict this conclusion. In fact, it clarifies that “the purpose of the compulsory license does not extend to manufacturers of phonorecords that are intended primarily for commercial use, including not only broadcasters and jukebox operators but also background music services.” 132 Section 115 does not, however, impose any limitations on the use of a phonorecord once it is purchased by the consumer. As such, Section 115(a)(1) is not a bar to the inclusion of ringtones under the statutory license. 131 *See* Copyright Owners Initial Brief at 19 (“In sum, far from being used for private musical entertainment in one’s home, ringtones provide mobile phone users a means to identify themselves to their friends, colleagues and the public at large.”). 132 *See* n.128, *supra* . VIII. First Use The Section 115 license is available “[w]hen phonorecords of a nondramatic musical work have been distributed to the public in the United States under authority of the copyright owner.” According to the Act‘s legislative history, once a musical work has been recorded and “distributed to the public,” any person may obtain a compulsory license by complying with the provisions of Section 115. 133 133 17 U.S.C.§ 115(a)(1). Mirroring the statutory language, the provision’s legislative history states that the Section 115 license is “available to anyone as soon as ‘phonorecords of a nondramatic musical work have been distributed to the public in the United States under the authority of the copyright owner.’” *See* H. R. Rep. No. 94 § 1476 (1976). RIAA argues that a ringtone would be subject to statutory licensing after first use even if it were not otherwise covered by Section 115(a)(2). RIAA explains that even if certain musical works may be outside the scope of the statute in the first instance, Section 115 nonetheless would apply to the new musical work once that version was first distributed under the authority of the copyright owner. RIAA states that assuming for the sake of argument that a ringtone-length version of a musical work is a derivative work outside the scope of the Section 115 license, the music publisher would have the right to prevent distribution of that ringtone-length work. However, once the publisher allowed one record company or ringtone distributor to distribute phonorecords of that ringtone-length work, the ordinary operation of Section 115 would then allow any person to obtain a statutory license with respect to the “new”ringtone version in question. 134 134 RIAA Initial Brief at 26-27. Copyright Owners disagree that ringtones are subject to Section 115 after the public distribution by the copyright owner. They state that RIAA‘s argument is “premised on the inaccurate assumption that Section 115 applies to every digital transmission of a copyrighted phonorecord.” They reiterate that ringtones are not subject to Section 115 because they are not complete musical works as required by Section 115, and in any event, the license is narrow and does not apply to works that are not distributed for private use. 135 135 Copyright Owners Reply Brief at 17-18. *Analysis* . We find that RIAA‘s reading of the statute is a reasonable one. The issue arises only if a particular ringtone qualifies as a derivative work due to the presence of copyrightable derivative work authorship in the ringtone. If, as we expect will usually be the case, the ringtone is not a derivative work, there will be no reason to reach this issue; the ringtone will be within the scope of the Section 115 license for the reasons stated above. However, if a particular ringtone, released with the permission of the copyright owner of the underlying musical work, does constitute a derivative work, then once that derivative work has been distributed under the authority of the copyright owner, anyone else may, by complying with the formal requirements of Section 115, obtain a compulsory license to make and distribute copies of that derivative work. IX. Conditions and Limitations As noted above, the Copyright Royalty Board asked the Register to address the legal conditions and/or limitations that would apply to ringtones if such works were found to DPDs under Section 115 of the Act. RIAA asserts that the same conditions and limitations that apply to other phonorecords apply to ringtones. It posits that first use of the song under the authority of the copyright owner, notice, and payment of royalties, would be among the statutory conditions that would apply to the licensing of ringtones. 136 136 RIAA Reply Brief at 19, *citing* 17 U.S.C. § § 115(a)(1), 115(b), and 115(c)(2). Copyright Owners assert that there is no need for any limitations or conditions on the licensing of ringtones under Section 115, as all ringtones are excluded from the reach of the statute as a matter of law. They note, however, that if the Register were to conclude that some ringtones are subject to statutory licensing, the appropriate scope of such licensing would involve factual issues. Copyright Owners state that in this case, the Copyright Royalty Boards‘ August 18, 2006 Order prohibited the submission of factual material that is required to make a reasoned determination of conditions on the licensing of ringtones within Section 115. They assert that the Copyright Royalty Boards‘ decision not to permit the submission of factual materials makes it “impossible to delineate” any informed conditions or limitations on the statutory licensing of ringtones. 137 137 Copyright Owners Reply Brief at 20 and n. 7. *Analysis* . We believe that Section 115's general requirements are applicable to all types of ringtones (monophonic, polyphonic, or mastertone). This applies to mastertones that are simple excerpts of the underlying musical work, ringtones (monophonic, polyphonic, and mastertones) that are not adjudged to be derivative works, and those ringtones that do not change the basic melody or fundamental character of the work. For newly created ringtones that have not been distributed to the public, and that fall outside the scope of the statute because they are derivative works or for any other reason outlined above, the Section 115 provisions do not apply. A commercial license is required to make and distribute those types of ringtones. There will, of course, be some instances where the status of a ringtone (monophonic, polyphonic, and mastertones) for Section 115 purposes is unclear. A judicial determination would be required where such mixed question of fact and law are present. While we cannot delineate a litmus test that will in every case determine specifically whether a particular ringtone is or is not within the scope of the statutory license, the guidance offered above is sufficient for purposes of this proceeding. In general, a ringtone will fall within the scope of the compulsory license unless it has so altered the musical composition as to constitute a derivative work. Simply excerpting a single portion of a licensed sound recording of a musical composition will not constitute the making of a derivative work. It is clear that many, but not all, ringtones will fall within the scope of the Section 115 license. Therefore, it is appropriate for the Copyright Royalty Judges to determine royalties to be payable for the making and distribution of ringtones under the compulsory license. Dated: October 16, 2006 Marybeth Peters, Register of Copyrights. [FR Doc. E6-18426 Filed 10-31-06; 8:45 am] BILLING CODE 1410-30-S LIBRARY OF CONGRESS Copyright Office [Docket No. 2006-6] Notice of Intent to Audit AGENCY: Copyright Office, Library of Congress. ACTION: Public notice. SUMMARY: The Copyright Office of the Library of Congress is announcing receipt of a notice of intent to audit 2005 statements of account concerning the eligible nonsubscription and subscription transmissions of sound recordings made by Live365, Inc. (“Live365”) under statutory licenses. FOR FURTHER INFORMATION CONTACT: Tanya M. Sandros, Associate General Counsel, Copyright GC/I&R, P.O. Box 70400, Southwest Station, Washington, DC 20024-0977. Telephone:
(202)707-8380. Telefax:
(202)252-3423. SUPPLEMENTARY INFORMATION: Section 106(6) of the Copyright Act, title 17 of the United States Code, gives the copyright owner of a sound recording the right to perform a sound recording publicly by means of a digital audio transmission, subject to certain limitations. Among these limitations are certain exemptions and a statutory license which allows for the public performance of sound recordings as part of “eligible nonsubscription transmissions” and digital transmissions made by “new subscription services.” 17 U.S.C. 114. The Copyright Act, title 17 of the United States Code, defines these terms as follows: An “eligible nonsubscription transmission” is a noninteractive digital audio transmission which, as the name implies, does not require a subscription for receiving the transmission. The transmission must also be made as a part of a service that provides audio programming consisting in whole or in part of performances of sound recordings the primary purpose of which is to provide audio or entertainment programming, but not to sell, advertise, or promote particular goods or services. *See* 17 U.S.C. 114(j)(6). A “new subscription service” is “a service that performs sound recordings by means of noninteractive subscription digital audio transmissions and that is not a preexisting subscription or a preexisting satellite digital audio radio service.” 17 U.S.C. 114(j)(8). Moreover, these services may make any necessary ephemeral reproductions to facilitate the digital transmission of the sound recording under a second license set forth in section 112(e) of the Copyright Act. Use of these licenses requires that services make payments of royalty fees to and file reports of sound recording performances with SoundExchange. SoundExchange is a collecting rights entity that was designated by the Librarian of Congress to collect statements of account and royalty fee payments from services and distribute the royalty fees to copyright owners and performers entitled to receive such royalties under sections 112(e) and 114(g) following a proceeding before a Copyright Arbitration Royalty Panel (“CARP”)—the entity responsible for setting rates and terms for use of the section 112 and section 114 licenses prior to the passage of the Copyright Royalty and Distribution Reform Act of 2004 (“CRDRA”), Pub. L. No. 108-419, 118 Stat. 2341 (2004). *See* 69 FR 5695 (February 6, 2004). This Act, which the President signed into law on November 30, 2004, and which became effective on May 31, 2005, amends the Copyright Act, title 17 of the United States Code, by phasing out the CARP system and replacing it with three permanent Copyright Royalty Judges (“CRJs”). Consequently, the CRJs will carry out the functions heretofore performed by the CARPs, including the adjustment of rates and terms for certain statutory licenses such as the section 114 and 112 licenses. However, section 6(b)(3) of the Act states in pertinent part: [t]he rates and terms in effect under section 114(f)(2) or 112(e) . . . on December 30, 2004, for new subscription services [and] eligible nonsubscription services . . . shall remain in effect until the later of the first applicable effective date for successor terms and rates . . . or such later date as the parties may agree or the Copyright Royalty Judges may establish. Successor rates and terms for these licenses have not yet been established. Accordingly, the terms of the section 114 and 112 licenses, as currently constituted, are still in effect. One of the current terms, set forth in § 262.6 of title 37 of the Code of Federal Regulations, states that SoundExchange, as the Designated Agent, may conduct a single audit of a Licensee for the purpose of verifying their royalty payments. As a preliminary matter, the Designated Agent is required to submit a notice of its intent to audit a Licensee with the Copyright Office and serve this notice on the service to be audited. 37 CFR 262.6(c). On December 23, 2005, SoundExchange filed with the Copyright Office a notice of intent to audit Live365 for the years 2002, 2003, and 2004. *See* 72 FR 624 (January 5, 2006). Subsequently, on October 5, 2006, SoundExchange filed a second notice of intent to audit Live365, 1 pursuant to § 262.6(c), notifying the Copyright Office of its intent to expand its current audit to cover 2005. Section 262.6(c) requires the Copyright Office to publish a notice in the **Federal Register** within thirty days of receipt of the filing announcing the Designated Agent’s intent to conduct an audit. 1 A copy of the new Notice of Intent to Audit Live365, Inc. is posted on the Copyright Office Web site at http://www.copyright.gov/carp/live365-notice.2005.pdf. In accordance with this regulation, the Office is publishing today’s notice to fulfill this requirement with respect to the notice of intent to audit filed by SoundExchange on October 5, 2006. Dated: October 26, 2006 Tanya M. Sandros, Associate General Counsel. [FR Doc. E6-18422 Filed 10-31-06; 8:45 am] BILLING CODE 1410-33-S NATIONAL FOUNDATION ON THE ARTS AND THE HUMANITIES National Endowment for the Arts; Arts Advisory Panel Pursuant to Section 10(a)(2) of the Federal Advisory Committee Act (Public Law 92-463), as amended, notice is hereby given that a meeting of the Arts Advisory Panel to the National Council on the Arts will be held at the Nancy Hanks Center, 1100 Pennsylvania Avenue, NW., Washington, DC 20506 as follows (ending times are approximate): *Theater* (application review): November 14-17, 2006 in Room 730. This meeting, from 9 a.m. to 5 p.m. on November 14th, 15th, and 16th and from 9 a.m. to 3 p.m. on November 17th, will be closed. The closed portions of meetings are for the purpose of Panel review, discussion, evaluation, and recommendations on financial assistance under the National Foundation on the Arts and the Humanities Act of 1965, as amended, including information given in confidence to the agency. In accordance with the determination of the Chairman of April 8, 2005, these sessions will be closed to the public pursuant to subsection (c)(6) of section 552b of Title 5, United States Code. Further information with reference to these meetings can be obtained from Ms. Kathy Plowitz-Worden, Office of Guidelines & Panel Operations, National Endowment for the Arts, Washington, DC 20506, or call 202/682-5691. Dated: October 27, 2006. Kathy Plowitz-Worden, Panel Coordinator, Panel Operations, National Endowment for the Arts. [FR Doc. E6-18453 Filed 10-31-06; 8:45 am] BILLING CODE 7537-01-P NATIONAL SCIENCE FOUNDATION Notice of Permit Applications Received Under the Antarctic Conservation Act of 1978 (Pubic Law 95-541) AGENCY: National Science Foundation. ACTION: Notice of permit applications received under the Antarctic Conservation Act of 1978, Pub. L. 95-541. SUMMARY: The National Science Foundation
(NSF)is required to publish notice of permit applications received to conduct activities regulated under the Antarctic Conservation Act of 1978. NSF has published regulations under the Antarctic Conservation Act at Title 45 Part 670 of the Code of Federal Regulations. This is the required notice of permit applications received. DATES: Interested parties are invited to submit written data, comments, or views with respect to this permit application by December 1, 2006. This application may be inspected by interested parties at the Permit Office, address below. ADDRESSES: Comments should be addressed to Permit Office, Room 755, Office of Polar Programs, National Science Foundation, 4201 Wilson Boulevard, Arlington, Virginia 22230. FOR FURTHER INFORMATION CONTACT: Nadene G. Kennedy at the above address or
(703)292-7405. SUPPLEMENTARY INFORMATION: The National Science Foundation, as directed by the Antarctic Conservation Act of 1978 (Pub. L. 95-541), as amended by the Antarctic Science, Tourism and Conservation Act of 1996, has developed regulations for the establishment of a permit system for various activities in Antarctica and designation of certain animals and certain geographic areas requiring special protection. The regulations establish such a permit system to designate Antarctic Specially Protected Areas. The applications received are as follows: 1. *Applicant:* Samuel D. Feola (Permit Application No. 2007-018), Raytheon Technical Services Company, LLC, Polar Services, 7400 S. Tucson Way, Centennial, CO 80112-3938. *Activity for Which Permit is Requested:* Enter an Antarctic Specially Protected Area. The applicant proposes to enter the Avian Island Antarctic Specially Protected Area (ASPA #117) to gain access to a U.S. Antarctic Program
(USAP)field research camp. Access to the camp is for:
(a)Movement of personnel and supplies from ship to shore via Zodiac or other small boat;
(b)opening and closing tasks for the research facilities on shore; and,
(c)maintenance and servicing of on-shore facilities and equipment. *Location:* Avian Island (ASPA #117). *Dates:* October 23, 2006 to August 31, 2010. 2. *Applicant:* Samuel D. Feola (Permit Application No. 2007-019), Raytheon Technical Services Company, LLC, Polar Services, 7400 S. Tucson Way, Centennial, CO 80112-3938. *Activity for Which Permit is Requested:* Enter an Antarctic Specially Protected Area. The applicant proposes to enter the Cape Shirreff Antarctic Specially Protected Area (ASPA #149) to gain access to a U.S. Antarctic Program
(USAP)field research camp. Access to the camp is for:
(a)Movement of personnel and supplies from ship to shore via Zodiac or other small boat;
(b)opening and closing tasks for the research facilities on shore; and,
(c)maintenance and servicing of on-shore facilities and equipment. *Location:* Avian Island (ASPA #149). *Dates:* October 23, 2006 to August 31, 2010. 3. *Applicant:* Anne Aghion (Permit Application No. 2007-020), P.O. Box 1528, New York, NY 10276. *Activity for Which Permit is Requested:* Enter Antarctic Specially Protected Areas. The applicant plans to enter the historic huts at Cape Evans (ASPA #155), Cape Royds (ASPA #157), and Hut Point (ASPA #158) for the purpose of filming a documentary. This documentary is about the human experience of working and living in Antarctica. Access to the historic huts is to document the emotions displayed by visitors when experiencing the huts, the historical connection and to the original Antarctic explorers. *Location:* Cape Evans (ASPA #155), Cape Royds (ASPA #157) and Hut Point (ASPA #158). *Dates:* November 01, 2006 to December 31, 2006. 4. *Applicant:* Werner Herzog (Permit Application No. 2007-021), 8865 Wonderland Avenue, Los Angeles, CA 90046-1851. *Activity for Which Permit is Requested:* Enter an Antarctic Specially Protected Area. The applicant plans to enter the historic hut at Cape Royds (ASPA #157) for the purpose of filming a documentary. This documentary is being filmed for the U.S. Discovery Channel. *Location:* Cape Royds (ASPA #157). *Dates:* November 14, 2006 to December 18, 2006. Nadene G. Kennedy, Permit Officer, Office of Polar Programs. [FR Doc. E6-18387 Filed 10-31-06; 8:45 am] BILLING CODE 7555-01-P NATIONAL SCIENCE FOUNDATION Privacy Act of 1974; System of Records ACTION: Notice of proposed revisions to an existing Privacy Act system of records NSF-66: NSF Photo Identification Card System. SUMMARY: The National Science Foundation proposes to revise an existing systems of records titled “NSF Photo Identification Card System (NSF-66),” last published on August 21, 1998 (64 FR 44937). The system of records is being revised to describe the additional types of information being collected by NSF as required by Homeland Security Presidential Directive 12 (Policy for a Common Identification Standard for Federal Employees and Contractors). This system collects information to produce photo identification cards for access to NSF facilities as well as for building security, for identifying the bearer of the card as a Federal employee or contractor, for changing access permissions on cards, and for tracking stolen or lost cards. The identity credential/ID card permits entry into NSF facilities. 44 U.S.C. 3101 and 42 U.S.C. 1870; Homeland Security Presidential Directive 12 (HSPD-12) dated August 2004, mandates a common identity standard for Federal employees and contractors on duty for more than 6 months. DATES: Submit comments on or before December 1, 2006. ADDRESSES: Address all comments concerning this notice to Leslie Jensen, National Science Foundation, Office of the General Counsel, Room 1265, 4201 Wilson Boulevard, Arlington, Virginia 22230 or by sending electronic mail (e-mail) to *ljensen@nsf.gov.* SUPPLEMENTARY INFORMATION: This publication is in accordance with the Privacy Act requirement that agencies publish their amended systems of records in the **Federal Register** when there is a revision, change, or addition. NSF's Office of the General Counsel
(OGC)has reviewed its Systems of Records notice and has determined that its records system, NSF-66 must be revised to incorporate the changes described herein. Submit comments as an ASCII file avoiding the use of special characters and any form of encryption. Identify all comments sent in electronic E-mail with Subject Line: Comments to proposed changes. FOR FURTHER INFORMATION CONTACT: Leslie Jensen
(703)292-5065. Words of Issuance For the reasons stated in the preamble, the National Science Foundation is revising “NSF Photo Identification Card System (NSF-66),” to describe the additional types of information being collected by NSF as required by Homeland Security Presidential Directive 12 (Policy for a Common Identification Standard for Federal Employees and Contractors). National Science Foundation System Name: NSF Photo Identification Card System (NSF-66). System Location: National Science Foundation, Division of Administrative Services, 4201 Wilson Blvd., Arlington, VA 22230; and XTec, Incorporated, 5775 Blue Lagoon Dr., Suite 280, Miami, Florida 33126-2034. Categories of Individuals Covered by the System: NSF employees and NSF contractors employed for more than 6 months who require routine physical access to NSF controlled space at Stafford Place I and II must have a photo ID credential. Child Development Center staff and non-NSF parents of children in the Center are also in the database. Categories of Records in the System: Name, digital photograph, Social Security Number, date of birth, LAN ID, card number, fingerprints, affiliation ( *i.e.* , employee, contractor or associate), citizenship, expiration date, PIN number, card issue date, FASC-N, credential status, building name, sponsor name, sponsor email, room number, COTR name, background investigation type, initiation date, adjudication date, fingerprint adjudication date, contract end date. Authority for Maintenance of the System: 44 U.S.C. 3101 and 42 U.S.C. 1870. Other authorities include: Homeland Security Presidential Directive 12 (HSPD-12) dated August 2004, which mandates a common identity standard for Federal employees and contractors onboard for more than six months. Federal Information Processing Standard
(FIPS)201-1 dated March 2006, describing implementation requirements for HSPD-12 Presidential Order dated June 28, 1995, subject: “Upgrading Security at Federal Facilities” which directs that all federal agencies shall meet the minimum security standards recommended by the Department of Justice in their report entitled, Vulnerability Assessment of Federal Facilities. The report establishes “agency photo ID for all personnel displayed at all times” as a minimum standard for Level IV facilities. NSF has been designated as a Level IV facility. 5 U.S.C 301. Purpose(s): The information is used for producing photo identification cards for access to the building as well as for building security, for identifying the bearer of the card as a Federal employee or contractor, for changing access permissions on cards, and for tracking stolen or lost cards. The identity credential/ID card permits entry into NSF facilities. Routine Uses of Records Maintained in the System, Including Categories of Uses and the Purposes of Such Uses: Information from this system may be disclosed to: 1. Individuals, as necessary, for tracking stolen or lost identification cards. 2. The Department of Justice, to the extent disclosure is compatible with the purpose for which the record was collected, and is relevant and necessary to litigation or anticipated litigation, in which one of the following is a party or has an interest:
(a)NSF or any of its components;
(b)an NSF employee in his/her official capacity;
(c)an NSF employee in his/her individual capacity when the Department of Justice is representing or considering representing the employee; or
(d)the United States, when NSF determines that litigation is likely to affect the Agency. 3. Contractors, experts, advisors, grantees, volunteers or other individuals who perform a service to or work on or under a contract or other arrangement with or for the Federal government, as necessary to carry out their duties. Recipients shall be required to comply with the requirements of the Privacy Act of 1974, as amended 5 U.S.C. Sec. 552a. 4. Appropriate Federal, State, or local agencies responsible for investigating, prosecuting, enforcing, or implementing a statute, rule, regulation, or order, to disclose pertinent information when the NSF becomes aware of an indication of a violation or potential violation of civil or criminal law or regulation. 5. To the National Archives and Records Administration or to the General Services Administration who are conducting records management inspections under the authority of 44 U.S.C. 2904 and 2906. 6. To notify another Federal agency when, or verify whether, a PIV card is no longer valid. 7. To a Member of Congress or to a Congressional staff member in response to an inquiry of the Congressional office made at the written request of the constituent about whom the record is maintained. Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System: Storage: Stored electronically. Retrievability: Records may be retrieved by name, last name, user ID, e-mail address, Social Security Number, card number and card access point. Safeguards: Information access is controlled by password and restricted to a limited number of authorized users who require access because of their NSF position duties. Input devices and servers are stored in locked rooms. Retention and disposal: Information is retained on all current employees and contractors throughout their employment/contract service. Separating employees and contractors return their identification cards when they are no longer employed by the agency. Their records will be deleted or destroyed after three months. Records on building access are retained for 90 days. System manager(s) and address: Division Director, Division of Administrative Services, 4201 Wilson Boulevard, Arlington, VA 22230. Notification procedure: The Privacy Act Officer should be contacted in accordance with procedures found at 45 CFR part 613.2. Record access procedures: *See* “Notification” above. Contesting record procedures: The Privacy Act Officer should be contacted in accordance with procedures found at 45 CFR 613.4. Record source categories: Information in the System is obtained from a variety of sources to include the employee, contractor, Administrative Officer or COTR. System exemptions from certain provisions of the Act: None. Lawrence Rudolph, General Counsel. [FR Doc. E6-18213 Filed 10-31-06; 8:45 am] BILLING CODE 7555-01-P OFFICE OF MANAGEMENT AND BUDGET Performance of Commercial Activities AGENCY: Office of Management and Budget (OMB), Executive Office of the President. ACTION: Update to civilian position full fringe benefit cost factor, Federal pay raise assumptions, inflation factors, and tax rates used in OMB Circular No. A-76, “Performance of Commercial Activities.” SUMMARY: OMB is updating the civilian position full fringe benefit cost factor used to compute the estimated cost of government performance in public-private competitions conducted pursuant to Office of Management and Budget
(OMB)Circular A-76. The civilian position full fringe benefit cost factor is comprised of four separate elements:
(1)Insurance and health benefits,
(2)standard civilian retirement benefits,
(3)Medicare benefits, and
(4)miscellaneous fringe benefits. OMB is updating the insurance and health benefits and standard civilian retirement benefits cost elements based on actuarial analyses provided by the Office of Personnel Management. OMB is also updating the annual Federal pay raise assumptions and inflation cost factors used for computing the government's personnel and non-pay costs in Circular A-76 public-private competitions. These annual pay raise assumptions and inflation factors are based on the President's Budget for Fiscal Year 2007. The tax rate tables used in connection with Circular A-76 competitions have also been revised. 2 DATES: *Effective date:* These changes are effective immediately and shall apply to all public-private competitions performed in accordance with OMB Circular A-76, as revised in May 2003, where the performance decision has not been certified by the government before this date. FOR FURTHER INFORMATION CONTACT: Mathew Blum, Office of Federal Procurement Policy (OFPP), NEOB, Room 9013, Office of Management and Budget, 725 17th Street, NW., Washington, DC 20503, Tel. No. 202-395-4953. *Availability:* Copies of OMB Circular A-76, as revised by this notice, may be obtained at *http://www.whitehouse.gov/omb/circulars/index.html#numerical.* Paper copies of the Circular may be obtained by calling OFPP (tel:
(202)395-7579). Rob Portman, Director. Attachment Memorandum for the Heads of Executive Departments and Agencies FROM: Rob Portman, Director SUBJECT: Update to Civilian Position Full Fringe Benefit Cost Factor, Federal Pay Raise Assumptions, Inflation Factors, and Tax Rates used in OMB Circular No. A-76, “Performance of Commercial Activities.” Office of Management and Budget
(OMB)Circular A-76 requires agencies to use standard cost factors to estimate certain costs of government performance. These cost factors ensure that specific government costs are calculated in a standard and consistent manner to reasonably reflect the cost of performing commercial activities with government personnel. This memorandum updates the civilian position full fringe benefit cost factor, the annual Federal pay raise assumptions, inflation cost factors, and tax rate information. The update to the civilian position full fringe benefit cost factor is based on actuarial analyses provided by the Office of Personnel Management (OPM). The revised pay raise assumptions and inflation cost factors are based on the President's Budget for Fiscal Year 2007. The tax rates are based on information provided by the Internal Revenue Service. Civilian Position Full Fringe Benefit Cost Factor The Circular requires agencies to add the civilian position full fringe benefit cost factor to the basic pay for each full-time and part-time permanent civilian position in the agency cost estimate. This factor is comprised of four separate elements:
(1)Insurance and health benefits,
(2)standard civilian retirement benefits,
(3)Medicare benefits, and
(4)miscellaneous fringe benefits. OMB has determined, based on information provided by OPM, that the civilian position full fringe benefit cost factor needs to be adjusted upward, from 32.85 percent to 36.45 percent. This adjustment is necessary to account for increases in insurance and health benefits and civilian retirement benefits. The Medicare benefits and miscellaneous fringe benefits elements remain unchanged at this time. The revised cost elements of the civilian position full fringe benefit cost factor are summarized in the table below. Table.—Elements of the Civilian Position Full Fringe Benefit Cost Factor Element Previous cost factor Updated cost factor (percent) Insurance and Health Benefit a 5.7 6.7 Standard Civilian Retirement Benefit b 24.0 26.6 Medicare Benefit 1.45 1.45 Miscellaneous Fringe Benefit 1.7 1.7 Total Civilian Position Full Fringe Benefits 32.85 36.45 a This factor is based on actuarial estimates for the costs of the government paid portion of health insurance under the Federal Employees Health Benefits
(FEHB)Program and the Federal Employees Government Life Insurance (FEGLI) Program. This figure is multiplied by the average participation rates in these programs and divided by the average civilian employee's salary (as identified in the President's Budget) to derive a factor as a percentage of basic pay. This factor is based only on costs borne by the government (not enrollee premiums) and only on behalf of active Federal employees (not retirees). Increases in government costs for retirees are reflected in the standard civilian retirement benefit cost factor. b The standard civilian retirement benefit cost factor includes the government's accruing cost for pension benefits (Social Security, Thrift Savings Plan, Federal Employees or Civil Service Retirement Systems) and the accruing cost for post-retirement health benefits. The master tables for COMPARE (the costing software that incorporates the costing procedures of the circular) have been updated to reflect these changes. The updates are available at *http://www.compareA76.com.* Agencies shall use the updated COMPARE master tables to calculate and document public and private sector costs in competitions where a performance decision has not been certified by the government by the effective date identified in the **Federal Register** notice accompanying the publication of this memorandum. OMB intends to conduct periodic reviews of the civilian position full fringe benefit cost factor. OMB is exploring options with OPM for updating this factor on a more regularized schedule. Accordingly, the following changes are made to OMB Circular A-76. 1. Subparagraphs B.2.f.(1)(a) and
(b)of Attachment C are revised to read as follows: **(1) Full-time and Part-time Permanent Civilian Positions.** Full-time and part-time permanent civilian positions receive the civilian position full fringe benefit cost factor of 36.45 percent of the position's basic pay. The 36.45 percent civilian position full fringe benefit cost factor is the sum of the standard civilian position retirement benefit cost factor (26.6 percent), insurance and health benefit cost factor (6.7 percent), Medicare benefit cost factor (1.45 percent), and miscellaneous fringe benefit cost factor (1.7 percent). **(a) Retirement Benefit Cost Factors.** The standard civilian retirement benefit cost factor represents the cost of the weighted Civil Service Retirement System/Federal Employees Retirement System to the government, based upon the full dynamic normal cost of the retirement systems, the normal cost of accruing retiree health benefits based on average participation rates, social security, and Thrift Savings Plan contributions. The standard civilian retirement benefit cost factor for civilian positions is 26.6 percent of the position's basic pay (20.4 percent retirement pension plus 6.2 percent for retiree health). The retirement cost factors for special class civilian positions are: 37.6 percent of basic pay for air traffic controllers (31.4 percent retirement pension plus 6.2 percent for retiree health) and 39.8 percent of basic pay for law enforcement and fire protection (33.6 percent retirement pension plus 6.2 percent for retiree health). **(b) Insurance and Health Benefit Cost Factor.** The insurance and health benefit cost factor for civilian positions, based on actual cost, is 6.7 percent of the position's basic pay (0.2 percent for life insurance benefits and 6.5 percent for health benefits). The following standard cost factors and footnote no. 1 in Figure C.1 of Attachment C, “Table of Standard A-76 Costing Factors,” are revised as set forth below: Table of Standard A-76 Costing Factors Title Originating source Category of cost Factor 1 (percent) Civilian Position Full Fringe Benefit Cost Factor OMB Transmittal Memoranda Pay 36.45 Insurance and Health Benefit Cost Factor OMB Transmittal Memoranda Pay 6.7 Special Class Retirement Cost Factor (Law Enforcement & Fire Protection) OMB Transmittal Memoranda Pay 39.8 Special Class Retirement Cost Factor (Air Traffic Control) OMB Transmittal Memoranda Pay 37.6 Standard Civilian Retirement Benefit Cost Factor OMB Transmittal Memoranda Pay 26.6 1 The factors listed in this column are factors in effect on December 2005. Agencies should refer to the COMPARE Web site at *http://www.compareA76.com.* for the updated COMPARE master tables and other updated information. Federal Pay Raise Assumptions The following Federal pay raise assumptions (including geographic pay differentials) that are in effect for 2006 shall be used for the development of government personnel costs. The pay raise factors provided for 2007 and beyond shall be applied to all government personnel with no assumption being made as to how they will be distributed between possible locality and base pay increases. Federal Pay Raise Assumptions* Efective date Civilian (percent) Military (percent) January 2006 3.1 3.1 January 2007 2.2 2.7 * Federal pay raise assumptions have not been established for pay raises subsequent to January 2007. For January 2008 and beyond, the projected percentage change in the Employment Cost Index (ECI), 4.2 percent, should be used to estimate government personnel costs for public-private competitions. In future updates to cost factors in the Circular, as pay policy for years subsequent to 2007 is established, these pay raise assumptions will be revised. Inflation Factors The following non-pay inflation cost factors are provided for purposes of public-private competitions conducted pursuant to Circular A-76 only. They reflect the generic non-pay inflation assumptions used to develop the fiscal year 2007 budget baseline estimates required by law. The law requires that a specific inflation factor (GDP FY/FY chained price index) be used for this purpose. These inflation factors should not be viewed as estimates of expected inflation rates for major long-term procurement items or as an estimate of inflation for any particular agency's non-pay purchases mix. Non-Pay Categories [Supplies, equipment, etc.] (percent) FY 2007 2.2 FY 2008 2.2 FY 2009 2.1 FY 2010 2.1 FY 2011 * 2.1 * Any subsequent years included in the period of performance shall use a 2.2% figure, until otherwise revised by OMB. Tax Rate Tables The Circular requires that agencies subtract the Federal income tax generated for the government from the total cost of private sector performance. The tax rate tables used in connection with public-private competitions have been revised. COMPARE will apply the updated tax rate information to establish the adjusted cost of private sector performance. [FR Doc. E6-18415 Filed 10-31-06; 8:45 am] BILLING CODE 6325-39-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. *Extension:* Rule 15c3-1; SEC File No. 270-197; OMB Control No. 3235-0200. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ), the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget (“OMB”) a request for extension of the previously approved collection of information discussed below. Rule 15c3-1 (17 C.F.R. 240.15c3-1) under the Securities Exchange Act of 1934 requires brokers and dealers to have at all times sufficient liquid assets to meet their current liabilities, particularly the claims of customers. The rule facilitates monitoring the financial condition of brokers and dealers by the Commission and the various self-regulatory organizations. It is estimated that approximately 6,100 broker-dealer respondents registered with the Commission incur an aggregate burden of 88,181 hours per year to comply with this rule. Finally, the estimated cost for the annual hour burden for Rule 15c3-1 is approximately $22.7 million. Rule 15c3-1 does not contain record retention requirements. Compliance with the rule is mandatory. The required records are available only to the examination staff of the Commission and the self-regulatory organization of which the broker-dealer is a member. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Comments should be directed to
(i)Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC, 20503 or by sending an e-mail to: *David_Rostker@omb.eop.gov;* and
(ii)R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312 or send an e-mail to: *PRA_Mailbox@sec.gov.* Comments must be submitted to OMB within 30 days of this notice. Dated: October 23, 2006. Nancy M. Morris, Secretary. [FR Doc. E6-18350 Filed 10-31-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. *Extension:* Rule 17i-8; SEC File No. 270-533; OMB Control No. 3235-0591. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 1 the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below. The Code of Federal Regulation citation to this collection of information is the following rule: 17 CFR 240.17i-8. 1 44 U.S.C. 3501 *et seq.* Section 231 of the Gramm-Leach-Bliley Act of 1999. 2 (the “GLBA”) amended Section 17 of the Securities Exchange Act of 1934 to create a regulatory framework under which a holding company of a broker-dealer (“investment bank holding company” or “IBHC”) may voluntarily be supervised by the Commission as a supervised investment bank holding company (or “SIBHC”). 3 In 2004, the Commission promulgated rules, including Rule 17i-8, to create a framework for the Commission to supervise SIBHCs. 4 This framework includes qualification criteria for SIBHCs, as well as recordkeeping and reporting requirements. Among other things, this regulatory framework for SIBHCs is intended to provide a basis for non-U.S. financial regulators to treat the Commission as the principal U.S. consolidated, home-country supervisor for SIBHCs and their affiliated broker-dealers. 5 2 Pub. L. 106-102, 113 Stat. 1338 (1999). 3 See 15 U.S.C. 78q(i). 4 See Exchange Act Release No. 49831 (Jun. 8, 2004), 69 FR 34472 (Jun. 21, 2004). 5 See H.R. Conf. Rep. No. 106-434, 165 (1999). See also Exchange Act Release No. 49831, at 6 (Jun. 8, 2004), 69 FR 34472, at 34473 (Jun. 21, 2004). Pursuant to Section 17(i)(3)(A) of the Exchange Act, an SIBHC must make and keep records, furnish copies thereof, and make such reports as the Commission may require by rule. 6 Rule 17i-8 requires that an SIBHC to notify the Commission upon the occurrence of certain events that would indicate a decline in the financial and operational well-being of the firm. 6 15 U.S.C. 78q(i)(3)(A). The collections of information included in Rule 17i-8 are necessary to allow the Commission to effectively determine whether supervision of an IBHC as an SIBHC is necessary or appropriate in furtherance of the purposes of section 17 of the Act and allow the Commission to supervise the activities of these SIBHCs. Rule 17i-8 also enhances the Commission's supervision of the SIBHCs' subsidiary broker-dealers through collection of additional information and inspections of affiliates of those broker-dealers. Without these notices, the Commission would be unable to adequately supervise an SIBHC, nor would it be able to determine whether continued supervision of an IBHC as an SIBHC were necessary and appropriate in furtherance of the purposes of section 17 of the Act. We estimate that three IBHCs will file Notices of Intention with the Commission to be supervised by the Commission as SIBHCs. An SIBHC will require about one hour to create a notice required to be submitted to the Commission pursuant to Rule 17i-8. However, as these notices only need be filed in certain situations indicative of financial or operational difficulty, only one SIBHC may be required to file notice pursuant to the Rule every other year. Thus, we estimate that the annual burden of Rule 17i-8 for all SIBHCs would be about 30 minutes. The reports and notices required to be filed pursuant to Rule 17i-8 must be preserved for a period of not less than three years. 7 The collection of information is mandatory and the information required to be provided to the Commission pursuant to this Rule is deemed confidential pursuant to section 17(j) of the Securities Exchange Act of 1934 8 and Section 552(b)(3)(B) of the Freedom of Information Act, 9 notwithstanding any other provision of law. In addition, paragraph 17i-8(c) specifies that the notices and reports filed in accordance with Rule 17i-8 will be accorded confidential treatment to the extent permitted by law. 7 17 CFR 240.17i-5(b)(4). 8 15 U.S.C. 78q(j). 9 5 U.S.C. 552(b)(3)(B). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Comments should be directed to:
(i)The Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or by sending an e-mail to: *David_Rostker@omb.eop.gov;* and
(ii)R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312 or send an e-mail to: *PRA_Mailbox@sec.gov.* Comments must be submitted to OMB within 30 days of this notice. Dated: October 23, 2006. Nancy M. Morris, Secretary. [FR Doc. E6-18355 Filed 10-31-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission Office of Filings and Information Services, Washington, DC 20549. Extension: Rule 17Ad-15; SEC File No. 270-360; OMB Control No. 3235-0409. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ), the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget a request for extension of the previously approved collection of information discussed below. Rule 17Ad-15—Signature Guarantees Rule 17Ad-15 (17 CFR 240.17Ad-15) under the Securities Exchange Act of 1934 (15 U.S.C. 78a *et seq.* ) (the “Act”) requires approximately 760 transfer agents to establish written standards for accepting and rejecting guarantees of securities transfers from eligible guarantor institutions. Transfer agents are also required to establish procedures to ensure that those standards are used by the transfer agent to determine whether to accept or reject guarantees from eligible guarantor institutions. Transfer agents must maintain, for a period of three years following the date of a rejection of transfer, a record of all transfers rejected, along with the reason for the rejection, identification of the guarantor, and whether the guarantor failed to meet the transfer agent's guarantee standard. These recordkeeping requirements assist the Commission and other regulatory agencies with monitoring transfer agents and ensuring compliance with the rule. There are approximately 760 registered transfer agents. The staff estimates that every transfer agent will spend about 40 hours annually to comply with Rule 17Ad-15. The total annual burden for all transfer agents is 30,400 hours. The average cost per hour is approximately $50. Therefore, the total cost of compliance for all transfer agents is $1,520,000. The retention period for the recordkeeping requirement under Rule 17Ad-15 is three years following the date of a rejection of transfer. The recordkeeping requirement under the rule is mandatory to assist the Commission and other regulatory agencies with monitoring transfer agents and ensuring compliance with the rule. This rule does not involve the collection of confidential information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Comments should be directed to:
(i)Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or by sending an e-mail to: *David_Rostker@omb.eop.gov* ; and
(ii)R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, c/o Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312 or by sending an e-mail to: *PRA_Mailbox@sec.gov* . Comments must be submitted to OMB within 30 days of this notice. Dated: October 23, 2006. Nancy M. Morris, Secretary. [FR Doc. E6-18361 Filed 10-31-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. IC-27540; File No. 812-13300] AIG SunAmerica Life Assurance Company and Variable Annuity Account Seven, Notice of Application October 26, 2006. AGENCY: Securities and Exchange Commission (“SEC”). ACTION: Notice of an application for an order (the “Order”) of approval pursuant to section 26(c) of the Investment Company Act of 1940, as amended (the “1940 Act”). *Applicants:* AIG SunAmerica Life Assurance Company (“AIG SunAmerica”), and Variable Annuity Account Seven (collectively, the “Applicants”). *Summary of the Application:* The Applicants request an order permitting the substitution of the Equity Income Fund (the “Replaced Portfolio”) with the Davis Venture Value Portfolio (the “Replacement Portfolio”) both of which are Portfolios of the SunAmerica Series Trust (“SAST”) (the “Substitution”). *Filing Date:* The application was filed on June 2, 2006, and an amended and restated application was filed on October 19, 2006. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. *Hearing or Notification of Hearing:* An order granting the application will be issued unless the SEC orders a hearing. Interested persons may request a hearing on the application by writing to the Secretary of the SEC and serving Applicants with a copy of the request, personally or by mail. Hearing requests must be received by the SEC by 5:30 p.m. on November 16, 2006, and should be accompanied by proof of service on Applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons may request notification of a hearing by writing to the Secretary of the SEC. ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. Applicants: c/o Jorden Burt LLP, 1025 Thomas Jefferson Street, NW., East Lobby, Suite 400, Washington, DC 20007-5208, Attention: Joan E. Boros, Esq. FOR FURTHER INFORMATION CONTACT: Jeffrey Foor, Esq., Senior Counsel, or Zandra Y. Bailes, Esq., Branch Chief, Office of Insurance Products, Division of Investment Management, at
(202)551-6795. SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application is available for a fee from the Public Reference Branch of the SEC, 100 F Street, NE., Room 1580, Washington, DC 20549 (202-551-8090). Applicants' Representations 1. AIG SunAmerica is a stock life insurance company originally organized under the laws of the State of California in April 1965. AIG SunAmerica, redomesticated under the laws of the State of Arizona on January 1, 1996. AIG SunAmerica is a wholly-owned subsidiary of SunAmerica Life Insurance Company, an Arizona corporation, which is, in turn, wholly-owned by AIG Retirement Services, a Delaware corporation, which is, in turn, wholly-owned by American International Group, Inc. AIG SunAmerica is authorized to write annuities and life insurance in the District of Columbia and all states except New York. 2. Separate Account Seven (the “Separate Account”) was established by AIG SunAmerica on August 28, 1998, in accordance with the laws of the State of Arizona. The Separate Account is registered as a unit investment trust under the 1940 Act. The Separate Account is used to fund the Contract and other annuity contracts issued by AIG SunAmerica and is currently divided into a total of 42 subaccounts (the “Sub-Accounts”). Each of the available Sub-Accounts invests in shares of the available portfolios of the SAST. One of the Sub-Accounts currently invests in the Replaced Portfolio. 3. The Polaris Plus Contract (the “Contract”), issued by AIG SunAmerica through the Separate Account, is a flexible premium group and individual deferred annuity contract that currently utilizes the Replaced Portfolio as one of many underlying investments. AIG SunAmerica discontinued offering the Contract as of the close of business on February 28, 2002. Existing Contractowners (“Owners”) may continue to allocate purchase payments to and transfer among the available Sub-Accounts, including the Sub-Account that currently invests in the Replaced Portfolio (the “Equity Income Sub-Account”). The allocation/transfer rights will continue until one week prior to the date of the proposed Substitution requested by the application. The Contract is the only contract investing in the Equity Income Sub-Account, and no other sub-account of any other separate account invests in the Replaced Portfolio. During the accumulation period, there are no limits on the number of transfers Owners can make among the available Sub-Accounts under the Contract and/or the Contract fixed accounts. Transfers resulting from participation in the Dollar Cost Averaging or Asset Rebalancing Programs do not count against the fifteen
(15)free transfers per contract year. All transfers in excess of fifteen
(15)transfer requests per contact year must be submitted by mail until the next contract anniversary and may be subject to further restrictions. 4. SAST was organized as a Massachusetts business trust on September 11, 1992. SAST was established and serves to provide a funding medium for the Sub-Accounts which constitute its sole shareholders. SAST is registered as an open-end management investment company under the 1940 Act (File No. 811-07238), and its offering of its shares is registered under the Securities Act of 1933 (File No. 033-52742). 5. The Replaced Portfolio, which offers a single class of shares, constitutes a separate series available through SAST. The inception date of the Replaced Portfolio was December 14, 1998, and it has been offered in the Separate Account since the inception date of the Contract on March 19, 1999. 6. The Separate Account buys and sells shares of the Replaced Portfolio at net asset value that is net of the advisory fee of 0.650% based on average daily net assets, paid to the investment adviser, AIG SunAmerica Asset Management (“AIG SAAMCo”), to manage the business affairs of the Replaced Portfolio and to provide administrative services pursuant to a written investment advisory agreement (the “Advisory Agreement”). The Replaced Portfolio's other expenses were 1.25% for the fiscal year ended January 31, 2006. The Replaced Portfolio's total annual operating expenses for this period were 1.90%, subject to voluntary fee waivers and expense reimbursement by AIG SAAMCo that provided for total annual net operating expenses of 1.35%. FAF Advisors, Inc., formerly U.S. Bancorp Asset Management, Inc. (“FAF”) serves as subadviser to the Replaced Portfolio. AIG SAAMCo is affiliated with AIG SunAmerica, but FAF is not affiliated with AIG SunAmerica. 7. The Replaced Portfolio is a portfolio in which the Separate Account invests under the Contract as one of the 42 Sub-Account investment alternatives currently available. If the requested Order is granted, the Substitution will result in the reduction of the available investment alternatives by one. Shares of the Replacement Portfolio will be offered at net asset value that is net of the current Replacement Portfolio's advisory fee of 0.71% which is paid to AIG SAAMCo to manage the business affairs of the Replacement Portfolio and to provide administrative services pursuant to the Advisory Agreement. The Replacement Portfolio's other expenses are 0.05%, and the Replacement Portfolio's total annual operating expenses are 0.76% for Class 1 shares. The Replacement Portfolio does not pay Rule 12b-1 fees for distribution activities. Davis Selected Advisers, L.P. d/b/a Davis Advisers (“Davis”) serves as the sub-adviser to the Replacement Portfolio. Davis is not affiliated with AIG SunAmerica. 8. The application covers a single portfolio in which the Separate Account invests under the Contract. Applicants propose the Substitution due to the Replaced Portfolio's declining assets and relatively high total expenses. Applicants note that since the Replaced Portfolio's inception on December 14, 1998, the Replaced Portfolio has accumulated only $5.8 million in assets as of January 31, 2006. Applicants note further that the Equity Income Sub-Account is the only sub-account that invests in the Replaced Portfolio, that the Equity Income Sub-Account is offered as an investment option in only one variable contract (the Contract), and that the Contract is no longer offered to new contract owners. Applicants also note that the Replaced Portfolio's total net annual expenses of 1.35% exceed the median for its peer group by 0.43%. The Replaced Portfolio's sub-adviser announced its intention to terminate the voluntary expense reimbursement agreement within the current fiscal period. As a result, the Replaced Portfolio's total net annual expenses can be expected to increase significantly, further limiting the Replaced Portfolio's ability to achieve competitive performance. AIG SunAmerica undertook to review the various alternative investment portfolios to determine which would be a suitable replacement for the Replaced Portfolio. AIG SunAmerica determined that the Replacement Portfolio is an appropriate and suitable replacement for the Replaced Portfolio based on the following conclusions:
(1)The Replacement Portfolio has investment objectives, policies, and restrictions substantially similar to those of the Replaced Portfolio;
(2)the Replaced Portfolio and the Replacement Portfolio take on comparable levels of risk;
(3)the Replacement Portfolio has significantly lower total annual expense ratios than the Replaced Portfolio prior to and after voluntary fee waivers and reimbursements for the Replaced Portfolio;
(4)the Replacement Portfolio has a significantly greater number of outstanding shares than the Replaced Portfolio;
(5)the Replacement Portfolio has a significantly larger asset base than the Replaced Portfolio. The Replacement Portfolio's total assets at January 31, 2006, were approximately $2.4 billion, while the Replaced Portfolio's assets at January 31, 2006 were approximately $5.8 million. The larger asset base of the Replacement Portfolio provides the potential for a future reduction in the total annual expenses of all its share classes, in addition to providing potential enhanced performance. Moreover, the larger asset base of the Replacement Portfolio provides greater protection against adverse effects on expenses and performance occasioned by large redemptions; and
(6)the Replacement Portfolio has a performance record significantly superior to that of the Replaced Portfolio, and the potential for enhanced future performance. 9. The Applicants note that the Replaced Portfolio will process redemption requests and the Replacement Portfolio will process purchase orders at prices based on the current net asset values next computed after receipt of the requests and orders in a manner consistent with Rule 22c-1 under the 1940 Act. The Applicants will effect the proposed Substitution by redeeming shares of the Replaced Portfolio in cash at net asset value and then immediately contributing those assets to the Replacement Portfolio to purchase their Class 1 shares. At all times, before and after the Substitution, monies attributable to Owners that have allocated assets to the Equity Income Sub-Account will remain fully invested, and no change will result in the amount of any Owner's Contract value, death benefit or investment in the Equity Income Sub-Account so that the full net asset value of the redeemed shares will be reflected in the Owners' accumulation values or annuity unit values following the Substitution. In addition, AIG SunAmerica undertakes to assume all transaction costs and expenses relating to the Substitution so that the full net asset value of redeemed shares of the Replaced Portfolio held by the Equity Income Sub-Account will be reflected in the Owners' accumulation values or annuity unit values following the Substitution. 10. Owners will not incur any fees or charges as a result of the Substitution, nor will the rights of Owners or obligations of AIG SunAmerica under the Contract be altered in any way. The proposed Substitution will not have any adverse tax consequences to Owners. The proposed Substitution will not cause Contract fees and charges currently being paid by existing Owners to be greater after the proposed Substitution than before the proposed Substitution. The proposed Substitution will not be treated as a transfer for the purpose of transfer limits or assessing transfer charges. 11. AIG SunAmerica will schedule the Substitution to occur after issuance of the requested Order and any required state insurance department approvals. Further, although the Substitution will result in the replacement of the Replaced Portfolio as the investment of the Equity Income Sub-Account under the Contract, AIG SunAmerica will not exercise any right it may have under the Contract to collect transfer fees or impose any additional restrictions on Owners who may wish to make transfers from the Equity Income Sub-Account among the other available Sub-Accounts for a period of at least thirty
(30)days following mailing of the Notice, as defined below, of the proposed Substitution (the “Free Transfer Period”). During the Free Transfer Period, Owners may transfer all assets, as substituted, from the Equity Income Sub-Account to other available Sub-Accounts without charge or limitation and without those transfers being counted against any limit on free transfers under the Contract, or any requirements for the method of submitting transfer requests. 12. Upon filing the application, AIG SunAmerica supplemented the prospectus for the Contract to reflect the proposed Substitution. Within five days after the Substitution, AIG SunAmerica will send to its Owners written notice of the Substitution (“Notice”) identifying the shares of the Replaced Portfolio that have been eliminated and the shares of the Replacement Portfolio that have been substituted. AIG SunAmerica will include in the mailing the applicable prospectus supplement for the Contract describing the Substitution. AIG SunAmerica will also mail a copy of the prospectus for the Replacement Portfolio to Owners who have not already received a copy of that prospectus in the ordinary course. The Notice will further advise Owners that during the Free Transfer Period, Owners may transfer all assets, as substituted, from the Equity Income Sub-Account to the other available Sub-Accounts without limit or charge and without those transfers being counted against any limit on free transfers under their Contracts, or any requirements for the method of submitting transfer requests. Applicant's Legal Analysis 1. Section 26(c) of the 1940 Act provides that “[i]t shall be unlawful for any depositor or trustee of a registered unit investment trust holding the security of a single issuer to substitute another security for such security unless the [SEC] shall have approved such substitution.” 2. Applicants represent that the proposed Substitution involves a substitution of securities within the meaning of section 26(c) of the 1940 Act. The Applicants, therefore, request an order from the SEC pursuant to section 26(c) approving the proposed Substitution. 3. Applicants submit that the Substitution does not present the type of costly forced redemption or other harms that section 26(c) was intended to guard against and is consistent with the protection of investors and the purposes fairly intended by the 1940 Act for the following reasons:
(i)The Substitution will continue to fulfill Owners' objectives and risk expectations, because the Replacement Portfolio has substantially similar objectives, policies, and restrictions to the objectives, policies, and restrictions of the Replaced Portfolio and comparable risk characteristics;
(ii)after mailing of the Notice informing an Owner of the Substitution, an Owner may request that his or her assets in the Equity Income Sub-Account be reallocated among the other available Sub-Accounts at any time during the Free Transfer Period without any limit or charge and without those transfers being counted against any limit on free transfers under the Contract, or any requirements for the method of submitting transfer requests. This right also will be granted to Owners, if any, who are receiving variable payments based on the Replaced Portfolio. The Free Transfer Period provides sufficient time for Owners to consider and effect their reinvestment and withdrawal options;
(iii)the Substitution will be at net asset value of the respective shares determined on the date of the Substitution in accordance with section 22 of the 1940 Act and Rule 22c-1 thereunder, without the imposition of any transfer or similar charge;
(iv)AIG SunAmerica has undertaken to assume all expenses and transaction costs, including, but not limited to, legal and accounting fees and any brokerage commissions, in connection with the Substitution;
(v)the Substitution will in no way alter the contractual obligations of AIG SunAmerica or the rights and privileges of Owners under the Contract;
(vi)the Substitution will in no way alter the tax treatment of Owners in connection with their Contracts, and no tax liability will arise for Owners as a result of the Substitution;
(vii)the Substitution is expected to confer certain future economic benefits on Owners by virtue of the greater asset base or lower portfolio expenses;
(viii)at the time of the Substitution, the total annual expenses of the Replacement Portfolio's shares are expected to be lower than the Replaced Portfolio;
(ix)the Substitution which will be effected in accordance with section 22 of the 1940 Act and Rule 22c-1 thereunder by redeeming shares of the Replaced Portfolio in cash to be conveyed immediately to the Replacement Portfolio to purchase its respective shares; and
(x)AIG SunAmerica represents that at no time after date of the Substitution (the “Substitution Date”) will AIG SunAmerica increase Contract charges or total Separate Account charges (net of any waiver or reimbursements) of the Sub-Account that currently invests in the Replacement Portfolio (the “Davis Sub-Account”). If the total operating expenses for the Replacement Portfolio (taking into account any expense waiver or reimbursement) for any fiscal quarter following the Substitution Date, exceed on an annualized basis the net expense ratio for the Replaced Portfolio for the fiscal year ended January 31, 2006, AIG SunAmerica will reduce (through reimbursement) the Separate Account expenses paid during that quarter of the Davis Sub-Account to the extent necessary to offset the amount by which the Replacement Portfolio's net expense ratio for such period exceeds, on an annualized basis, 1.35%. 4. AIG SunAmerica has determined that the Replacement Portfolio is an appropriate replacement for the Replaced Portfolio. The Replacement Portfolio has investment objectives, policies, and restrictions substantially similar to the Replaced Portfolio with comparable levels of risk. The Replacement Portfolio has a significantly lower total expense ratio than the Replacement Portfolio. Also, the Replacement Portfolio has a significantly larger asset base than the Replacement Portfolio. In addition, the average annual total returns of the Replacement Portfolio are clearly superior to those of the Replacement Portfolio, other than with respect to the year to date performance. Conclusion For the reasons set forth in the application, the Applicants state that the proposed Substitution and the related transactions meet the standards of section 26(c) of the 1940 Act and that the requested Order should be granted. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Nancy M. Morris, Secretary. [FR Doc. E6-18349 Filed 10-31-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54654; File No. SR-NASD-2006-060] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change To Require Members To File Regulatory Notices With NASD Electronically October 26, 2006. On May 16, 2006, the National Association of Securities Dealers, Inc. (“NASD”) filed a proposed rule change with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”) 1 and Rule 19b-4 under the Act. 2 The proposed rule change adopts NASD Rule 3170 to provide the NASD with the authority to require member firms to file or submit electronically with the NASD any regulatory notice or other document that member firms are required to file with (or otherwise submit to) the NASD. The NASD may specify the electronic format to be used. The proposed rule change does not specify the particular regulatory notices or documents that the NASD will require members to file electronically. Instead, the NASD's proposed rule change would give the NASD the authority to require members to file or submit electronically with the NASD any specified regulatory notice or document. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. The NASD plans to require members to file certain specified notices with the NASD via an electronic, Internet-based receiving and processing system (“System”), using templates developed by the NASD for each notice. The System will be available to members on the NASD's Internet Web site. Initially, the NASD plans to require members to file notices that must be filed with the NASD under the following Exchange Act Rules electronically: 3 3 The NASD has requested relief on behalf of its members from the Commission with respect to these Exchange Act rules. *See* Letter from Patrice Gliniecki, Senior Vice President and General Counsel, NASD, to Michael A. Macchiaroli, Associate Director, Division of Market Regulation, Commission, dated May 16, 2006. The staff of the Division of Market Regulation is issuing a no-action letter providing such relief. *See* letter from Michael A. Macchiaroli, Associate Director, Division of Market Regulation, Commission, to Patrice Gliniecki, Senior Vice President and General Counsel, NASD, dated October 26, 2006. Electronic filing of notices with the NASD does not affect requirements in these rules to file notices with the Commission or other securities regulatory agencies. • Rule 15c3-1(e)—Withdrawals of equity capital. • Rule 15c3-3(i)—Special Reserve Bank Account. • Rule 17a-4(f)(2)(i); Rule 17a-4(f)(3)(vii)—Electronic storage media. • Rule 17a-5(f)(4)—Replacement of accountant. • Rule 17a-11(b)—Net capital deficiency. • Rule 17a-11(c)(1)—Aggregate indebtedness is in excess of 1200 percent of net capital. • Rule 17a-11(c)(2)—Net capital is less than 5 percent of aggregate debit items. • Rule 17a-11(c)(3)—Net capital is less than 120 percent of required minimum dollar amount. • Rule 17a-11(d)—Failure to make and keep current books and records. • Rule 17a-11(e)—Material inadequacy in accounting systems, internal controls, or practices and procedures. The proposed rule change was published for comment in the **Federal Register** on August 22, 2006. 4 A correction was published on September 22, 2006. 5 This order approves the proposed rule change. 4 *See* Securities Exchange Act Release No. 54319 (August 15, 2006), 71 FR 48958 (SR-NASD-2006-060). 5 *See* Securities Exchange Act Release No. 54319A (September 18, 2006), 71 FR 55537 (SR-NASD-2006-060). The Commission received two comment letters in response to the proposed rule change. 6 Mr. Akridge supported the proposal. Wulff, Hansen supported the general purpose of the rule change, but stated that converting documents that exist only in paper form to electronic format could be burdensome for firms that do not have the necessary technology. On October 5, 2006, the NASD filed a response to the comment letters. 7 In its response, the NASD stated that it intends to accommodate firms that do not have the ability to convert documents to electronic format. Further, the NASD stated that when technologies change, the NASD will consider the economic effect of the new technologies and consult with its members regarding requiring filings that use the new technologies. 6 *See* e-mail dated August 31, 2006 from Frank Akridge Jr. (“Mr. Akridge”) and letter dated September 7, 2006 from Chris Charles, President, Wulff, Hansen & Co. (“Wulff, Hansen”). 7 *See* letter from Shirley H. Weiss, Office of General Counsel, NASD, to Katherine A. England, Division of Market Regulation, Commission. The Commission finds that the NASD's proposal to adopt NASD Rule 3170 is consistent with the requirements of the Act and the rules and regulations under the Act applicable to a national securities exchange. 8 In particular, the Commission believes that the proposal is consistent with section 15A(b)(6) of the Act, 9 which requires, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest in that the proposed rule change will establish a cost-saving and efficient method of filing these notices that will enhance the speed and efficiency of processing the notices and reduce administrative costs. 8 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 9 15 U.S.C. 78o-3(b)(6). The NASD will issue a *Notice to Members* and other member communications, as appropriate, to advise its members which regulatory notices or documents members will be required to file or submit electronically to the NASD and the date on which electronic filing or submission of these notices or documents will be required. These communications will also advise members that as of the specified date, electronic filing or submission of the specified regulatory notices or documents will be mandatory, and that the NASD will no longer accept facsimile or other non-electronic transmissions of these notices or documents. *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, 10 that the proposed rule change (SR-NASD-2006-060) is approved. 10 15 U.S.C. 78s(b)(2). 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 Nancy M. Morris, Secretary. [FR Doc. E6-18348 Filed 10-31-06; 8:45 am] BILLING CODE 8011-01-P Social Security Administration Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration
(SSA)publishes a list of information collection packages that will require clearance by the Office of Management and Budget
(OMB)in compliance with Pub. L. 104-13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection packages that may be included in this notice are for new information collections, approval of existing information collections, revisions to OMB-approved information collections, and extensions (no change) of OMB-approved information collections. SSA is soliciting comments on the accuracy of the agency's burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written comments and recommendations regarding the information collection(s) should be submitted to the OMB Desk Officer and the SSA Reports Clearance Officer. The information can be mailed and/or faxed to the individuals at the addresses and fax numbers listed below:
(OMB)Office of Management and Budget, Attn: Desk Officer for SSA, Fax: 202-395-6974.
(SSA)Social Security Administration, DCFAM, Attn: Reports Clearance Officer, 1333 Annex Building, 6401 Security Blvd., Baltimore, MD 21235; Fax: 410-965-6400. I. The information collections listed below are pending at SSA and will be submitted to OMB within 60 days from the date of this notice. Therefore, your comments should be submitted to SSA within 60 days from the date of this publication. You can obtain copies of the collection instruments by calling the SSA Reports Clearance Officer at 410-965-0454 or by writing to the address listed above. 1. *Statement of Household Expenses and Contributions—20 CFR 416.1130-416.1148—0960-0456* . SSA needs the information about household expenses and contributions, which is collected on Form SSA-8011-F3, to determine whether the claimant or beneficiary receives in-kind support and maintenance. This is necessary to determine the claimant's or beneficiary's eligibility for Supplemental Security Income
(SSI)and the amount of benefits payable. This form is not used for all claims and posteligibility determinations; rather, it is used only when it is necessary to document in-kind support and maintenance and only in cases where the householder's corroboration is needed. Respondents are SSI applicants and/or beneficiaries. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 400,000. *Frequency of Response:* 1. *Average Burden per Response:* 15 minutes. *Estimated Annual Burden:* 100,000 hours. 2. *Representative Payee Report of Benefits and Dedicated Account—20 CFR 416.546, 416.635, 416.640, 416.665—0960-0576* . The Social Security Act provides for representative payees
(RPs)to submit a written report accounting for the use of money paid to Supplemental SSI beneficiaries, and that RPs must establish and maintain a dedicated account for these payments. The SSA-6233 is used to ensure that the RP is using the benefits received for the beneficiary's current maintenance and personal needs, and the expenditures of funds from the dedicated account are in compliance with the law. Respondents are representative payees for SSI beneficiaries. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 30,000. *Frequency of Response:* 1. *Average Burden per Response:* 20 minutes. *Estimated Annual Burden:* 10,000 hours. 3. *Request for Reinstatement (Title II)—20 CFR 404.1592b—404.1592f—0960-NEW* . Form SSA-371 is used by former beneficiaries for Title II benefits who wish to request Expedited Reinstatement
(EXR)of their Title II disability benefits. SSA uses the SSA-371 to obtain a signed statement from the individual stating a request for EXR and to verify that the applicant meets the EXR requirements. The form will be maintained in the disability folder of the applicant to demonstrate that the individual was aware of the EXR requirements and chose to request EXR. Respondents are applicants for EXR of Title II disability benefits. *Type of Request:* Existing Information Collection in Use Without an OMB Number. *Number of Respondents:* 10,000. *Frequency of Response:* 1. *Average Burden per Response:* 2 minutes. *Estimated Annual Burden:* 333 hours. 4. *Request for Reinstatement (Title XVI)—20 CFR 416.999—416.999d—0960-NEW* . Form SSA-372 is used by former SSI claimants who wish to request Expedited Reinstatement
(EXR)of their Title XVI disability payments. SSA uses the SSA-372 to obtain a signed statement from the individual stating a request for EXR and to verify that the requestor meets the EXR requirements. The form will be maintained in the disability folder of the applicant to demonstrate that the individual was aware of the EXR requirements and chose to request EXR. Respondents are applicants for EXR of Title XVI SSI payments. *Type of Request:* Existing Information Collection in Use Without an OMB Number. *Number of Respondents:* 2,000. *Frequency of Response:* 1. *Average Burden per Response:* 2 minutes. *Estimated Annual Burden:* 67 hours. 5. *Non-Attorney Representative Demonstration Project Application—0960-0669* . Section 303 of the Social Security Protection Act of 2004
(SSPA)provides for a 5-year demonstration project to be conducted by SSA under which the direct payment of SSA-approved fees is extended to certain non-attorney claimant representatives. Under the SSPA, to be eligible for direct payment of fees, a non-attorney representative must fulfill the following statutory requirements:
(1)Possess a bachelors degree or have equivalent qualifications derived from training and work experience;
(2)pass an examination that tests knowledge of the relevant provisions of the Social Security Act;
(3)secure professional liability insurance or equivalent insurance;
(4)pass a criminal background check (information on these 4 requirements will be collected during initial reporting);
(5)demonstrate completion of relevant continuing education courses (this information will be collected under the Continuing Education
(CE)reporting), and
(6)complete an annual Affirmations Worksheet to verify the participant's continued eligibility to participate in the demonstration project. SSA collects this information through the services of a private contractor and uses it to determine if a non-attorney representative has met and continues to meet the statutory requirements to be eligible for direct payment of fees for his or her claimant representation services. The respondents are non-attorney representatives who apply for direct payment of fees. *Type of Request:* Revision of an existing information collection. Application Reporting *Number of Respondents:* 500. *Frequency of Response:* 1. *Average Burden per Response:* 60 minutes. *Estimated Annual Burden:* 500 hours. CE Reporting *Number of Respondents:* 300. *Frequency of Response:* 1. *Average Burden per Response:* 30 minutes. *Estimated Annual Burden:* 150 hours. Annual Reaffirmations Worksheet *Number of Respondents:* 450. *Frequency of Response:* 1. *Average Burden per Response:* 10 minutes. *Estimated Annual Burden:* 75 hours. *Total burden hours for all collection activities* —725 hours. II. The information collections listed below have been submitted to OMB for clearance. Your comments on the information collections would be most useful if received by OMB and SSA within 30 days from the date of this publication. You can obtain a copy of the OMB clearance packages by calling the SSA Reports Clearance Officer at 410-965-0454, or by writing to the address listed above. 1. *Employment Relationship Questionnaire—20 CFR 404.1007—0960-0040* . Form SSA-7160-F4 is used in developing the question of employer-employee relationships, except where the worker is an officer of a corporation. This form gathers the information needed for developing the employment relationship, and determining whether a beneficiary is self-employed or an employee. Respondents are beneficiaries questioning their status as employees and employers. *Type of Request:* Extension of an OMB-approved information collection. *Number of Respondents:* 16,000. *Frequency of Response:* 1. *Average Burden per Response:* 25 minutes. *Estimated Annual Burden:* 6,667 hours 2. *Vocational Rehabilitation Provider Claim—20 CFR 404.2108(b), 404.2117(c)(1)&(2), 404.2101(b)&(c), 404.2121(a), 416.2208(b), 416.2217(c)(1)&(2), 416.2201(b)&(c), 416.2221(a)—0960-0310* . The Social Security Administration
(SSA)refers certain disability beneficiaries to State Vocational Rehabilitation
(VR)agencies. The State VR agencies use the SSA-199 to make claims for reimbursement of the costs incurred from providing VR services for the beneficiaries. The information collected on the SSA-199 is used by SSA to determine whether or not, and how much, to pay the State VR agencies under SSA's VR program. Respondents are State VR agencies who offer Vocational and Employment services for SSA beneficiaries. *Type of Request:* Revision of an OMB-approved information collection. *Number of Respondents:* 80. Type of response (as explained below) Number of respondents Frequency of response Total responses Average burden per response (minutes) Estimated annual burden hours a. (404.2108 and 416.2208) 80 160 each/year 12,800 23 4,907 b. (404.2117 and 416.2217) 80 1 per year 80 60 80 c. (404.2121 and 416.2221) 80 2-3 per year 200 100 333 Total 80 13,080 5,320 *Estimated Annual Burden:* 5,320 hours. 3. *Pilot Program for Participating in Administrative Law Judge Hearings by Using Privately Owned Video Teleconferencing
(VTC)Equipment—20 CFR 404.936(c) & 416.1436(c)—0960-NEW* . Background On February 3, 2003, the Commissioner of Social Security published a final rule allowing SSA to conduct hearings before administrative law judges
(ALJs)at which a party or parties to the hearing and/or a witness or witnesses may appear before the ALJ by video teleconferencing (68 FR No. 22 , 5210). In that final rule we noted that dialing into SSA's VTC network from private facilities, such as facilities owned by a law firm, could be possible at a future date. Appearances by video teleconference are also central to the rules for the new disability determination process (final rule published March 31, 2006 71 FR No. 62, 16423). Pursuant to these rules, SSA is now preparing to pilot a program wherein private representatives and their clients may appear at ALJ hearings using privately owned video equipment. The VTC Activity SSA plans to expand its Video Teleconferencing program of Administrative Law Judge hearings by allowing these hearings to be conducted from private representative sites that have been certified by the agency. Representatives who are interested in participating in the pilot program or the permanent program will need to provide some basic information about their location, the area they serve and their expected workload. Because private video sites are being used, the pilot guidelines provide for site inspections, certain on-the-record certifications and other claimant safeguards to help ensure that no claimants are disadvantaged by participating in their hearing from a private site. Respondents to this collection will be the claimant's representatives who elect to participate in the pilot. The pilot is structured to begin with 10 private video sites expanding to 30 private sites after a six-month evaluation period. There will be a second evaluation period after the 30 sites have operated for a six-month period. SSA will then make final decisions regarding operating procedures for a permanent program. *Type of Request:* New Information Collection. *Total Burden Hours for all Collections:* 717 burden hours (shown below). Phase-I [10 sites for 6 months] Collection activity Number of respondents Frequency of response Average burden per response (minutes) Estimated annual burden hours Expression of Interest/Initial Contact 100 1 15 25 Certifications Made in the Opening Statement of the Hearing 10 100 10 167 Totals 110 192 Phase-II [30 sites for 6 months] Collection activity Number of respondents Frequency of response Average burden per response (minutes) Estimated annual burden hours Expression of Interest/Initial Contact 100 1 15 25 Certifications Made in the Opening Statement of the Hearing 30 100 10 500 Totals 130 525 The estimated first year cost burden for all respondents to participate in the Privately Owned VTC Equipment pilot is—$450,000. This cost figure represents the agency's estimated for respondents to purchase and maintain video conferencing equipment, a FAX machine and a document camera as well as the cost of an ISDN line or other data connection to the public network. Dated: October 26, 2006. Elizabeth A. Davidson, Reports Clearance Officer, Social Security Administration. [FR Doc. E6-18322 Filed 10-31-06; 8:45 am] BILLING CODE 4191-02-P SOCIAL SECURITY ADMINISTRATION [Document No. 2006-SSA-0093] The Ticket To Work and Work Incentives Advisory Panel Meeting AGENCY: Social Security Administration (SSA). ACTION: Notice of quarterly meeting. DATES: November 15, 2006—9 a.m. to 5 p.m. November 16, 2006—1:30 p.m. to 5 p.m. November 17, 2006—8:30 a.m. to 12 noon. ADDRESSES: Washington Plaza Hotel, 10 Thomas Circle, NW., Washington, DC 20005. *Phone:* 202-842-1300. SUPPLEMENTARY INFORMATION: *Type of meeting:* On November 15-17, 2006, the Ticket to Work and Work Incentives Advisory Panel (the “Panel”) will hold a quarterly meeting open to the public. *Purpose:* In accordance with section 10(a)(2) of the Federal Advisory Committee Act, the Social Security Administration
(SSA)announces a meeting of the Ticket to Work and Work Incentives Advisory Panel. Section 101(f) of Public Law 106-170 establishes the Panel to advise the President, the Congress, and the Commissioner of SSA on issues related to work incentive programs, planning, and assistance for individuals with disabilities as provided under section 101(f)(2)(A) of the TWWIA. The Panel is also to advise the Commissioner on matters specified in section 101(f)(2)(B) of that Act, including certain issues related to the Ticket to Work and Self-Sufficiency Program established under section 101(a) of that Act. Interested parties are invited to attend the meeting. The Panel will use the meeting time to receive briefings and presentations on matters of interest, conduct full Panel deliberations on the implementation of the Act and receive public testimony. The Panel will meet in person commencing on Wednesday, November 15, 2006, from 9 a.m. until 5 p.m. The quarterly meeting will continue on Thursday, November 16, 2006, from 1:30 p.m. until 5 p.m. and on Friday, November 17, 2006, from 8:30 a.m. until 12 noon. *Agenda:* The full agenda will be posted at least one week before the start of the meeting on the Internet at *http://www.ssa.gov/work/panel/meeting_information/agendas.html* , or can be received, in advance, electronically or by fax upon request. Public testimony will be heard on Thursday, November 16, 2006, from 4 p.m. until 5 p.m. Individuals interested in providing testimony in person should contact the Panel staff as outlined below to schedule a time slot. Members of the public must schedule a time slot in order to comment. In the event public comments do not take the entire scheduled time period, the Panel may use that time to deliberate or conduct other Panel business. Each individual providing public comment will be acknowledged by the Chair in the order in which they are scheduled to testify and is limited to a maximum five-minute, verbal presentation. Full written testimony on the Implementation of the Ticket to Work and Work Incentives Program, no longer than five
(5)pages, may be submitted in person or by mail, fax or e-mail on an ongoing basis to the Panel for consideration. Since seating may be limited, persons interested in providing testimony at the meeting should contact the Panel staff by e-mailing Ms. Tinya White-Taylor, at *Tinya.White-Taylor@ssa.gov* or by calling
(202)358-6420. *Contact Information:* Records are kept of all proceedings and will be available for public inspection by appointment at the Panel office. Anyone requiring information regarding the Panel should contact the staff by: • Mail addressed to the Social Security Administration, Ticket to Work and Work Incentives Advisory Panel Staff, 400 Virginia Avenue, SW., Suite 700, Washington, DC 20024. • Telephone contact with Tinya White-Taylor at
(202)358-6420. • Fax at
(202)358-6440. • E-mail to *TWWIIAPanel@ssa.gov.* Dated: October 24, 2006. Chris Silanskis, Designated Federal Officer. [FR Doc. 06-8995 Filed 10-31-06; 8:45 am]
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U.S. Code
46 references not yet in our index
  • 26 USC 2813
  • 29 CFR 90.18(c)
  • 17 USC 15
  • 71 FR 1454
  • Pub. L. 104-39
  • 109 Stat. 336
  • 507 F.2d 667
  • 419 F.3d 3
  • 37 CFR 253.7(b)(3)
  • 499 U.S. 340
  • 60 F.3d 978
  • 925 F. Supp. 576
  • 125 F.3d 580
  • 96 F. Supp. 2d 216
  • 971 F. Supp. 66
  • 841 F. Supp. 118
  • 192 F. Supp. 2d 321
  • 342 F.3d 191
  • 262 F.3d 101
  • 409 F. Supp. 2d 484
  • 949 F. Supp. 753
  • 853 F. Supp. 778
  • 59 F.3d 317
  • 724 F. Supp. 808
  • 433 F. Supp. 2d 1236
  • 856 F.2d 1341
  • 154 F.3d 1107
  • 257 F. Supp. 2d 1234
  • 59 F.3d 17
  • 73 F. Supp. 165
  • 583 F.2d 14
  • Pub. L. 108-419
  • 118 Stat. 2341
  • 37 CFR 262.6(c)
  • Pub. L. 92-463
  • Pub. L. 95-541
  • 45 CFR 613.2
  • 45 CFR 613.4
  • 17 CFR 240.15
  • 17 CFR 240.17
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Notices
Final Order
U.S.C.§ 952
C.F.R.§ 1301.34
C.F.R.§ 1301.43
C.F.R.§ 1316.47
U.S.C.§ 958
U.S.C.§ 823
C.F.R.§ 1301.33
U.S.C.§ 2273
U.S.C.§ 802
F. App'x507 F.2d 667
F. App'x419 F.3d 3
SCOTUS499 U.S. 340
Cites 82 · showing 12Cited by 0 across 0 sources
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