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After more than a year of intensive study, the U.S. Copyright Office issued its report on whether to maintain, modify or eliminate Sections 111, 119 and 122 of the Copyright Act. It will serve as the basis for discussion for possible changes to the statutory licenses.

Section 109 of the Satellite Home Viewer Extension and Reauthorization Act (SHVERA) of 2004 requires the Copyright Office to examine and compare the statutory licensing systems for the cable and satellite television industries under Sections 111, 119 and 122 of the Copyright Act and recommend any necessary legislative changes no later than June 30, 2008.

The Section 111 license, first enacted in 1976, permits a cable operator to retransmit both local and distant television and radio signals to its subscribers, provided that the cable operators pay royalties according to the formula set forth in the law. The other two licenses govern the retransmission of broadcast signals by satellite carriers. The Section 119 license, first enacted in 1988, permits a satellite carrier to retransmit distant superstation and network television station signals (but not radio signals) to its subscribers for private home viewing and to commercial establishments on a flat fee basis. The Section 122 statutory license, on the other hand, was first enacted in 1999 and permits satellite carriers to retransmit local television station signals into the stations’ local market on a royalty-free basis. These statutory licenses are linked, in many respects, to the broadcast signal carriage rules administered by the Federal Communications Commission.

In preparing its report, the Copyright Office sought comment from the affected industries, copyright owners and other interested parties and held three days of hearings in July 2007 to further supplement the record. The report was delivered to Congress on June 30 by the Copyright Office.

The principal recommendation in the report is that Congress move toward abolishing Section 111 and Section 119 of the Act. According to the Copyright Office, the cable and satellite industries are no longer nascent entities in need of a statutory licensing system. They have substantial market power and are able to negotiate private agreements with copyright owners for programming carried on distant broadcast signals. Moreover, the Copyright Office finds that the Internet video marketplace is robust and is functioning well without a statutory license. The Copyright Office also concludes that the distant-signal programming marketplace is less important in an age when consumers have many more choices for programming from a variety of distribution outlets. The office nevertheless recommends the retention of a royalty-free local-into-local license, because such a license is still necessary and it promotes the general welfare of users, broadcasters and the public.

Despite the Copyright Office’s determination that the ultimate solution should be the elimination of the existing distant signal licenses, it recognizes that the digital television transition in 2009 is likely to generate unanticipated signal reception problems for millions of American households. The office also finds that it is important for Congress to provide a lifeline distant signal service for subscribers during the post-transition period. The Copyright Office therefore recommends the establishment of a new statutory licensing system that would cover the retransmission of distant broadcast signals beginning on Jan. 1, 2010, and ending on Dec. 31, 2014. This will permit users of the license to serve the needs of their subscribers who may experience viewing disruptions. According to the Copyright Office, an equally important rationale for a transitional license is that it will take time for voluntary licensing arrangements to take shape and become widely available. The marketplace will work but it needs to be given time to adapt to changes in the regulatory regime.

Congress may decide that there should still be separate statutory licenses for cable operators and satellite carriers. The Copyright Office, then, makes several recommendations for adjusting Sections 111, 119 and 122. The recommendations in this regard are intended to further parity between cable operators and satellite carriers.

An electronic version of the report will be available under the “Hot Topics” section on the Copyright Office Web site at www.copyright.gov.