Statement of Marybeth Peters
The Register of Copyrights
before the
Subcommittee on Courts and Intellectual Property
Committee on the Judiciary

United States House of Representatives
105^th Congress, 2^nd Session

July 23, 1998

Copyright Office Operations, Accomplishments, and Challenges

Mr. Chairman and Members of the Subcommittee: The Copyright Office appreciates the opportunity to testify at this Oversight Hearing. My statement reviews our operations, major accomplishments and challenges.

Last year, 1997, was an important year for the Copyright Office; it was the 100th anniversary of the Copyright Office and of the position of Register of Copyrights. During these 100 years, the role of the Office has been one of leadership in the establishment of U.S. copyright policy and service to the nation.

The Copyright Office's duties and responsibilities are many. First, it provides expert assistance to Congress as well as the Administration on copyright matters. The Office works closely with members of Congress and their staffs, providing policy and technical advice, and legislative drafting and testimony on an ongoing basis. It prepares studies, analyses and reports on timely and critical issues; acts as a technical advisor to the Executive Branch in the international arena; and cooperates with international organizations in conferences and educational programs.

The Copyright Office is also an office of record, a place where claims to copyright are registered and certificates of registration are issued, or if the legal and other formalities of the law are not met, refused. Such refusals may be appealed and ultimately may be reviewed by a court. It is also a place where documents relating to copyright may be recorded. These include, assignments, licenses, security interests, wills and notices filed under the Uruguay Round Agreements Act and the North American Free Trade Agreement. It creates a public record of these actions, which, at least for actions taken since 1978, is available online.

With respect to these records, the Copyright Office provides copies of them and certifies them when requested. It reports on information found, e.g., whether or not a work is registered, when a work was published and the name and address of the current owner of record. The Copyright Office also administers a number of statutory licenses, including collecting and distributing royalty fees, and oversees and participates in the Copyright Arbitration Royalty Panel system.

The Office also furnishes information about provisions of the copyright law and practices and procedures of the Office and maintains a Public Office which is open Monday - Friday from 8:30 a.m. until 5:00 p.m., eastern time. Finally, we administer the mandatory deposit provisions of the law which provide for demand of two copies of the best edition of copyrighted works published in the United States for the use of the Library of Congress in its collections or exchange programs.

Timely action by the Copyright Office, and complete, reliable and objective records of copyrights showing their authorship, ownership and legal status are essential to copyright owners and the public. Additionally, benefits are tied to registration; United States owners may not initiate a copyright infringement suit without first registering with the Copyright Office or without obtaining the Office's refusal to register. Certificates of registration and certified copies of transfers of ownership are relied on by our courts, customs officials and even foreign courts. Despite valiant efforts by the management and staff of the Office, some of which are outlined below, the Office lost ground in providing essential copyright services, and we have a significant arrearage with registration now taking between six and eight months, instead of six to eight weeks.

In fiscal year 1997, the Office, with a staff of 496 full time employees, received approximately 630,000 claims, registering 569,226 which represented over 700,000 works, recording 16,548 documents with more than 250,000 titles, collecting $15,076,608 for our services and obtaining over 850,000 copies of works worth over $25,000,000 for the collections of the Library of Congress. Additionally, we handled 421,150 requests for information, and we accepted numerous cable, satellite, and DART claims. In calendar year 1997, the Licensing Division collected over $196 million in royalty fees and distributed over $175 million in royalties collected in earlier years.

On the registration side, the statistics are somewhat misleading. In the past several years the Office has moved to expand its group registrations--that is, the use of a single application to cover multiple works at a reduced fee. Group registration is possible for: unpublished works that are authored and owned by the same individuals; serials, daily newspapers; newsletters; databases, and works restored under the Uruguay Rounds Agreement Act. Group registrations were established to encourage publishers of works that the Library needs for its collections to register their works immediately after publication and in certain cases to ease the burden on authors. The result is that the number of registrations decreased but the work did not decrease proportionately because in most cases each individual work in the group must be examined.

Our focus this year is on:

1. Improving our technical assistance to Congress and the Administration;

2. Developing the Copyright Office Electronic Registration, Recordation and Deposit System, CORDS;

3. Improving our service by providing more timely registration of claims and recordation of documents as well as making more information available to the public electronically;

4. Establishing a new schedule of statutory fees;

5. Overseeing the compulsory license system; and

6. Acquiring and assuring the security of materials received through mandatory deposit.

I. Improving Our Technical Assistance to Congress and the Administration

A. Assistance to Congress

The United States Copyright Office continued to provide its expertise in support of the legislative work of Members of Congress and their staff by providing policy and technical advice, testifying on bills, assisting in the drafting of statutory language and legislative history, conducting negotiations, and preparing studies and background memoranda.

1. Studies of legislative and policy issues.

The Office continues to study and report on significant national and international copyright questions. During the 105th Congress, it completed three studies. It also commissioned two reports, one on the long-term future directions of digital technology and another on CARP reform.

a. Review of the copyright licensing regime's retransmission of broadcast signals. At the request of Senator Hatch, the Copyright Office conducted a review of the copyright licensing regimes governing the retransmission of over-the-air broadcast signals by cable systems, satellite carriers, and other multichannel video providers.

The report considered the advisability of extending the satellite compulsory license, the disputes surrounding the implementation of that compulsory license, and the "unserved household" restriction for the retransmission of network television stations. The report also considered the possibility of harmonizing the cable and satellite compulsory licenses, and whether to extend those licenses to new technologies and allow retransmission of broadcast signals over the Internet or by telephone companies.

The final report was delivered to Senator Hatch on August 1, 1997. For the convenience of the public, the Office posted the full report on its website at www.loc.gov/copyright.

b. Report on the legal protection for databases. Also at the request of Senator Hatch, the Office held numerous meetings and prepared a report on legal protection for databases. The report gave an overview of the past and present domestic and international legal framework for database protection. It identified the issues to be addressed in considering new statutory protection for databases in the United States, and described the views and concerns of the interested communities. This report was delivered to Senator Hatch on August 18, 1997, and is also available on the Office's website.

c. Funding the arts through a copyright term extension fee. Senators Kennedy, Dodd, Simpson, Leahy, and Brown requested that the Copyright Office and the Congressional Research Service conduct a joint study on the costs to the general public of extending the copyright term. The study considers the financial implications of the copyright term extension proposed in current legislation, and the costs and benefits of imposing an additional filing fee on works made for hire during the extended term to create federal funds for the public arts and humanities communities. The study considers whether such an assessment on works for hire would violate international treaty obligations as well as whether it would represent sound public policy. The Office submitted its part of the report to Senators Dodd, Kennedy, and Leahy in February of 1998.

d. Project Looking Forward. In order to assist us in our role as an advisor to Congress, the Copyright Office commissioned a study by a leading expert on Internet law, Professor I. Trotter Hardy, on the long-term future directions of digital technology and the issues likely to be raised for copyright law. His final report, entitled "Project Looking Forward: Sketching the Future of Copyright in a Networked World," was released by the Office just this week and is also available on our Web site.

2. Legislative assistance.

Satellite reform. The Office's cable and satellite report recommended legislation that would harmonize the satellite and cable compulsory licenses and adopt other reforms in those licenses. The Copyright Compulsory License Improvement Act, H.R. 3210, which you introduced, Mr. Chairman, incorporates some of those recommendations.

WIPO treaty implementation. The Copyright Office drafted the technical provisions of the proposed language to implement the two 1996 World Intellectual Property Organization treaties that was sent to Congress by the Administration in July 1997. After H.R. 2281, the WIPO Copyright Treaties Implementation Act, was introduced, the Register of Copyrights testified at the Subcommittee's hearing on the bill. The Office also assisted members and staff of the Subcommittee and full Judiciary Committee in developing various amendments. One of the amendments added to the bill was a provision permitting the maintenance and servicing of computers, which had been negotiated under the auspices of the Copyright Office in the 104th Congress pursuant to the request of then-Chairman Moorhead.

On-line service provider liability. The Copyright Office assisted in ongoing discussions of the issue of on-line service provider liability for infringements on the Internet, including providing analyses of existing law and drafting statutory language to implement various different approaches to the issue. The Register of Copyrights presented testimony to the Subcommittee on H.R. 2180, the On-Line Copyright Liability Limitation Act.

Database protection. After having issued our 1997 Report on Legal Protection for Databases, the Copyright Office worked with the Subcommittee extensively on the development of legislation that responded to the issues and concerns identified in the Report. The Register testified on H.R. 2652, the Collections of Information Antipiracy Act, which passed the House in amended form on May 19, 1998.

Term extension. The Copyright Office provided ongoing technical assistance and advice on issues involved in the extension of the term of copyright protection. At the request of Chairman Coble, the Office also presided over negotiations among the motion picture industry and the actors', screenwriters' and directors' union to develop a provision guaranteeing the continuing payment of residuals, by imposing on transferees of rights in motion pictures certain existing obligations under collective bargaining agreements. This provision was added to H.R. 2589, which also included an exemption for libraries that was recommended by the Register of Copyrights as the outgrowth of negotiations in the 104th Congress among library and copyright owner groups. H.R. 2589 passed the House in amended form on March 25, 1998.

LaCienega/Technical corrections. The Copyright Office worked closely with the Subcommittee on achieving passage of legislation reversing a court decision that jeopardized copyrights in pre-1978 recorded musical works, and legislation clarifying and correcting technical errors and ambiguities in various provisions of the Copyright Act, including the restoration provisions of the Uruguay Round Implementation Act. This legislation was enacted into law on November 13, 1997, as Public Law No. 105-80.

Other legislation. The Register of Copyrights testified at Subcommittee hearings on H.R. 789, the Fairness in Music Licensing Act; H.R. 2265, the No Electronic Theft (NET) Act (enacted as Public Law No. 105-147 on December 16, 1997); and H.R. 2696, the Vessel Hull Design Protection Act.

The Office provided to Congressional staff written analyses of numerous issues addressed in bills introduced in Congress.

The Office held for Members of Congress and their staff the second of an annual program of educational seminars, "Copyright Principles and the Legislative Agenda." The seminars focused on important issues of copyright law and policy relevant to the legislative business of Congress, including basic principles of copyright law and issues raised by pending legislation.

B. International Activities

1. Technical assistance to the Executive Branch.

The Copyright Office continued to work closely with agencies in the Executive Branch on international copyright issues. The Register of Copyrights and various attorneys from the Office of Policy and International Affairs participated as members of the U.S. delegations at WIPO meetings on database protection, audiovisual performers' rights, design protection and technical cooperation; at World Trade Organization (WTO) meetings and consultations with respect to implementation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs); and in negotiations over a Multilateral Agreement on Investment at the Organization for Economic Cooperation and Development (OECD). In addition, the Copyright Office provided technical assistance to the U.S. Trade Representative and the State Department on application of U.S. trade laws and policies, including regional and bilateral negotiations, WTO accessions, and reviews of other countries' laws. Finally, Office staff participated in USIA programs in various countries dealing with copyright issues.

2. Cooperation with international organizations.

Office staff participated in conferences and seminars sponsored by the World Intellectual Property Organization, the European Commission's Imprimatur project, the International Bar Association, the International Telecommunications Society, and the International Federation of Library Associations.

The International Copyright Institute of the Copyright Office hosted a three-week study tour for a delegation from the National Copyright Administration of China. The Office is preparing to co-sponsor with the World Intellectual Property Organization a week-long global program on copyright and neighboring rights in December.

II. Development of the Copyright Office's Electronic Registration, Recordation and Deposit System (CORDS)

A. Initiating Development

CORDS is an innovative system that will result in a national centralized system that allows electronic filing over the Internet of applications, deposits, and fees for copyright registration as well as documents of transfers of ownership including licensing information, such as terms and conditions of use. A feature of the system will be the storage and retrieval of copyrighted works from secure repositories for electronic dissemination in accordance with terms and conditions established by copyright owners.

The system is the result of the cooperation of the Copyright Office, the Library of Congress and the Corporation for National Research Initiatives (CNRI). Funding has come from the Library of Congress and the Advanced Research Projects Agency of the Department of Defense.

B. Benefits

CORDS will help the Office improve productivity by streamlining operations and will provide better service to the public. All Office functions will be performed online: the acknowledgement of receipt, examination of the claim, any correspondence concerning the claim or the deposit copy, production of the certificate, and cataloging. When a work is registered it will be placed in the Office's digital repository, which will provide a means of ensuring authenticity and integrity of the work.

C. Achievements

The first claim came from a graduate student at Carnegie Mellon University on February 27, 1996. Since then Stanford University, MIT Press Journals Division, and the University of Phoenix became test partners, further proving the concept of the system. The system's capabilities were expanded to cover additional classes of works, multiple hardware platforms and operating environments, as well as multiple Internet browsers. Planning is being finalized for accepting electronic applications with traditional deposits. A long-range business plan analyzing the costs and benefits has been completed. Recently, a batch mode interface was created to support publishers who submit large numbers of claims, and an extensive outreach effort to gain new partners for the full or the partial system is underway.

D. Future Developments

The Copyright Office and its expert consultants will continue to build on and enhance the basic production system, incorporating changes as well as the latest advances in technology.

The Examining and Cataloging Divisions are prepared to begin receiving and processing submissions from UMI, one of the Office's largest remitters, which will be registering approximately 20,000 dissertations and theses each year by means of our electronic filing system. Because of the consistent nature of these claims, the processing will be done by technicians rather than examiners. Technician processing frees examiners to handle more complex claims.

III. Improving Our Service by Providing More Timely Registration of Claims and Recordation of Documents As Well As Making More Information Available to the Public Electronically

A. Improving Service for Copyright Owners and Users

1. Implement streamlining initiatives.

a. Restructuring process. The Office has been discussing the restructuring of processing of claims which would reduce the movement of materials by combining several traditional operations and have them performed in one area. This is referred to within the Office as a product line. A product line operation essentially exists for the registration of motion pictures and television programs selected the Library for its collections.

Work is being done to expand these efforts to include serials and periodicals. The processing of serials is quicker than that of most other categories; serials almost never present a copyrightability problem, since the author and claimant are generally the same--usually the publisher of the serial.

The Copyright Office is currently structured around the distinct functions of processing registrations, e.g., incoming mail, fiscal control, examining, certificate production, outgoing mail, and cataloging. Thus, our efforts at streamlining and combining operations will require an extensive analysis and planning effort for which we are seeking additional funding approval.

b. Implement Pitney-Bowes Ergonomic Solutions' Recommendations. The operation under which staff processes all incoming submissions to the Copyright Office for registrations and other services has changed very little over the past twenty years. This system is labor intensive with 56 separate steps. With over one million items coming in to the Office to be processed each year, this once effective method is no longer efficient.

Pitney Bowes Ergonomic Solutions evaluated the incoming and outgoing Mail Units. This evaluation produced recommendations for better utilization of available space and proposed enhancements that would result in more timely handling of submissions and a more accurate audit trail for all items received. While some of the recommendations were cost-prohibitive, they served as a springboard to other, more affordable options that should reap substantially comparable results.

Over the next few years, the Office expects to implement a number of these recommendations to reduce the initial processing time of submissions and to establish a more timely online tracking/audit record for registration and all others services. The changes will result in improved service to authors, the copyright industries, the public and to the Library.

B. Improving Public Service

The Office has implemented and is continuing to implement a number of improvements to enhance public service including making more information available electronically. These improvements move the Office forward to a future that will permit instant access to its records and informational material and reduce the necessity for distributing paper copies.

1. NewsNet

The Office has developed NewsNet, an electronic publication, distributed via the Internet. NewsNet issues periodic e-mail messages to alert subscribers to hearings, deadlines for comments, new and proposed regulations, new publications and other copyright-related subjects of interest. Since November of 1997 when the first issue was distributed, the number of subscribers to NewsNet has increased to over 2,000. Issues are sent out as frequently as needed to provide information to the public in a timely manner.

2. Website

The Office has increased the number of materials available on its website. The website permits remote access to post-1977 Copyright Office records, including records of copyright registrations and documents relating to copyright. Last year the Copyright Office website was accessed over 1.3 million times, and that number will increase each year. The information currently available on the website includes: Frequently Asked Questions; HTML version of the copyright law; revised chapters of the Compendium of Copyright Office Practices; all copyright application forms; new and revised Copyright Office regulations; Copyright Office studies; Copyright Office informational circulars; and WIPO documents and treaties.

3. E-mail

The Public Information Office now accepts inquiries pertaining to Copyright Office procedures and practices, copyright law, and other inquiries from the public via e-mail. Last year the Office responded to over 5,000 e-mail inquiries. The Examining Division is also using e-mail to get needed information about claims from applicants.

4. Fax on demand

The Office has a FAX on demand system which provides via fax transmission copyright informational circulars and public announcements seven days a week, 24 hours a day. The system sends out over 5,000 documents each year.

5. Electronic Freedom of Information Act Amendments.

The Office amended its regulations regarding the Freedom of Information Act (FOIA) to bring it into compliance with the Electronic Freedom of Information Act Amendments Act of 1996 (EFOIA). EFOIA brings the law into the electronic/digital age by requiring agencies to provide electronic access to covered agency records. As a result, where practicable, Copyright Office records that affect members of the public, as well as an index of such records, are now available to the public in electronic format.

6. Exploring use of credit cards.

On January 1, 1996, the Copyright Office began a trial acceptance of credit cards for use in payment of a limited category of services -- registration of claims and recordation of Notices of Intent to Enforce (NIE's) copyrights restored under terms of the Uruguay Round Agreements Act (URAA). Between January 1, 1996, and May 12, 1998, a total of 123,377 registration claims and NIE's were received. Credit cards were used in payment of 1,390 submissions; credit card payments totalled $46,354, which accounted for 12.16 percent of all income received for these submissions.

A report detailing the two-year pilot program has identified problems to be solved before the use of credit cards can be expanded. Additionally, a cost/benefit analysis must be prepared.

B. Ensuring Copyright Office Systems are Ready for 2000 and Beyond

The Office is working hard to ensure that all of its automated systems are fully operational in the year 2000.

COINS, our existing workload tracking system is being redeveloped to improve service and reduce maintenance costs. The new system will be implemented by January 1999 and will be fully capable of handling all dates.

COPICS, our cataloging system, has already had changes applied that will make it year 2000 compliant. CORDS, our new electronic registration system, is already year 2000 compliant. The Copyright Imaging System which is used to prepare certificates and reproduce recorded documents is undergoing analysis to determine what changes are needed to make it compliant.

By June 1999, all workstations in the Copyright Office will be upgraded to be year 2000 compliant. More than 62 percent of this work is already completed. The Office also has 12 internal systems, eight of which are already year 2000 compliant, and the remaining four will be upgraded with new releases purchased in fiscal years 1998 and 1999.

C. Existing Challenges—Operational Arrearages

The Office continues to experience serious processing arrearages, particularly affecting the operation of the Examining Division. Some of these arrearages are due to staff shortages; others stem from increased responsibilities or increasingly complex duties.

1. Increasingly complex claims

Some works such as Internet content/websites, works fixed in digital formats and multi-media works have made the examining process more demanding and complex. The substantive problems are more difficult, but also it takes more time to handle the physical deposit copies, such as CD-ROMs.

2. Restoration of copyright in certain works: Uruguay Round Agreements Act.

The GATT Uruguay Round Agreements Act was signed by the President on

December 8, 1994; implementation of the Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property--known as the TRIPS agreement--resulted in three changes in the copyright law; one of these changes had a major impact on the operations and workload of the Copyright Office. This change restored copyright protection in a vast amount of foreign works which were previously in the public domain in the United States for a variety of reasons, e.g., publication without the notice of copyright formerly required by our law, failure to renew the U.S. copyright, and the absence of copyright relations between the United States and a foreign country.

Although protection is automatic, the act contained complicated provisions covering a prior user of a restored work, defined as a "reliance party," who is insulated from liability for infringement in certain circumstances and for a certain period of time after restoration. The ability of the owner of a restored copyright to enforce rights against reliance parties turns on his filing a notice of intent to do so with the Copyright Office or alternatively serving a notice directly on the reliance party. Notices filed with the Copyright Office must be filed within two years of the date of restoration of the copyright in the work. A notice may be served at any time on a particular reliance party against whom the rights are to be enforced.

With respect to notices of intent to enforce a restored copyright that are filed with the Copyright Office, the Office is required to publish in the Federal Register a list identifying the restored works for whom such notices have been filed with the names of owners of the restored rights. Reliance parties are granted a one year grace period to sell off existing stock of the restored work; this period begins on the date the information is published in the Federal Register. Thus, timely submission of the information to the Federal Register is critical.

The Office was given a number of new responsibilities under the Uruguay Round Agreements Act covering both registration of works whose copyright had been restored and recording of Notices of Intent to Enforce (NIE's) copyright in the restored works. The major part of that work was completed with the publication of the last major NIE list for works restored effective January 1, 1996. The Office will continue to register eligible works, and record notices of works by authors of those countries still eligible to file NIE's.

A majority of NIEs received under the URAA were for Spanish language films. There were also filings for French, German, and Russian films. NIEs were filed for many of the most famous operas, from "Aida" to "Turandot"; the major works of authors such as Virginia Woolf, C.S. Lewis, T.S. Eliot, and Federico Garcia Lorca; and hundreds of works by Picasso. Representative titles from various NIE lists are Stravinsky's "The Rite of Spring," Jacques Cousteau's "The Silent World," and Alfred Hitchock's "The Man Who Knew Too Much."

Many waited until the end of the two-year period to file, causing workflow problems. Our first list published in the Federal Register in April, 1996 contained 2,793 titles representing 1,259 NIEs. By contrast, the last NIE list published in April, 1998 contained 14,000 titles representing 11,848 NIES, and ran nearly 80 pages in the Federal Register!

3. Final appeals of denials of registration.

On its own initiative, the Copyright Office implemented a more labor intensive, but more equitable appeal procedure. Under the new appeals procedures, the first appeal of denial of registration is directed to the appropriate section head in the Examining Division. If a second appeal follows, it is directed to a Board comprised of the Register of Copyrights, the General Counsel, and the Chief of the Examining Division. In fiscal year 1997, the Board of Appeals issued decisional letters responding to 31 final appeals. It reversed the decisions regarding three works and upheld the decision to deny registration regarding 87 works.

D. Office's Responses to These Challenges

1. Hiring new staff

Between 1993 and 1996, examiner staffing had fallen by 38%. In 1997 the Office hired 13 new examiners. This hiring did not, however, return the Office to the staffing levels of 1993. In order to return to previous levels of 64 fully-trained and independent examiners sufficient to process the approximately 620,000⁽¹⁾ claims per year, which has the been the level of receipts for the past six years, the Office must hire another eight examiners.

The 13 examiners hired in 1997 are beginning to make a difference in production as they make progress in learning the examining work and contribute to reduction of arrearages. Funding permitting, the Office will hire an additional eight examiners in the next fiscal year.

2. Working overtime

The Office has used overtime to encourage completion of outstanding tasks in critical processing areas such as the Examining, Cataloging, and Receiving and Processing Divisions.

3. Hiring temporary staff

Because of the long training time involved in preparing people to handle examiner duties, the Office has not hired outside temporary staff to examine claims. For the past eight months, however, it has invited all previous examiners--those still working in the Library of Congress and those who have retired--to come back to work any number of hours they can.

4. End of microfilming and assumption of the imaging workload

Before September 1997, the Documents Section sent all documents recorded in the Office off-site for microfilming. Now it is reproducing the documents by creating digital images in-house.

D. Simplification of Existing Procedures

The Examining Division is simplifying certain of its procedures:

1. Some claims processed at lower level

As mentioned earlier, technicians are handling the entire examining processing for certain categories of claims which do not present problems of a type requiring analysis by examiners.

2. Use of short forms

The Copyright Office developed a short version of three of its application forms to make submitting and processing certain copyright claims easier. The information requested is minimal, and the instructions are brief and to the point.

This short form may be used by any living author who is the only author of his or her work and the sole owner of the copyright in the work. If there is more than one author of the work or if a business organization is the copyright claimant, the standard form must be used.

3. Project special remitter

This method of handling the claims to registration originated a few years ago within the Performing Arts section of Examining and has since been extended to the Literary and the Visual Arts sections for applicants who frequently register. This represents a significant improvement in processing because one examiner is assigned to handle all claims which are received from a specific applicant. The examiner becomes familiar with the situation for a given applicant and also becomes familiar with the personnel of that applicant who normally handle copyright registrations. Much of the formal written correspondence, which is more expensive and time-consuming for the Office, has been replaced by phone or e-mail contact, resulting in more efficient handling of both routine and more complex claims, and in an expedited issuance of the final certificate. Good public relations are built by using such personalized

service for a specific applicant; both staff and applicant appreciate the enhanced communication which is possible when knowledge has developed on both ends of the registration activity over a period of time.

IV. Establishing aNew Schedule of Statutory Fees

Through your leadership, the technical corrections bill, H.R. 1861, became law on November 13, 1997, and we are in the process of designing a new fee structure based on costs while considering the objectives of the copyright system, fairness and equity. Registration must be encouraged so that the value to the public of the Office's database of information on copyrighted works is not diminished and so that there is no substantial decrease in the number or quality of deposit copies that come in automatically through the registration system and that are made available to the Library of Congress.

Each year the Library selects more than 500,000 works for its collections. Copyright deposits are the Library's primary source for books, serials, and other print materials published in the United States. Nearly all U.S. newspapers are received on microfilm via copyright deposit. The Library's motion picture and sound recording collections are heavily dependent on copyright. Moreover, more than 60,000 books, not selected for the collections but selected for our exchange program, allow the Library to receive important foreign works without any cost to the taxpayer. Any substantial decrease in registrations would undermine the collections of the Library.

In July, 1997, anticipating enactment of the fee bill, the Copyright Office began the process of determining the costs of registering claims, recording documents and providing related services. It hired two consulting firms with expertise in cost accounting and the new Federal Managerial Cost Accounting Standards and established a Copyright Office Fee Analysis Task Group (FEATAG). FEATAG submitted a report to the Register of Copyrights which made certain recommendations on the fees.

The Office has also contacted representatives of interested parties to invite them to discuss the forthcoming fee increases and identify their members' concerns. A number met with the Register; some others submitted comments.

In early August, the Office will publish a Notice of Proposed Rulemaking (NOPR) with one or more possible fee schedules and formally seek public input through a hearing to be held on October 1, and a comment period. After considering the studies, the operational and policy issues and the input from the public, the Office will propose a schedule of statutory fees to Congress early in 1999. Given the Congressional 120-day period, it seems unlikely that the statutory fees could be increased before July, 1999.

V. Overseeing the Compulsory Licenses

A. Update on Compulsory License Proceeding

The Copyright Office administers a number of statutory compulsory licenses, including the licenses for retransmission of broadcast signals by cable systems and satellite carriers; public performances of sound recordings by digital audio transmissions; making and distributing phonorecords of musical compositions, including digital phonorecord delivery; public performance of published and nondramatic musical works by jukeboxes; and public broadcasting entities' use of nondramatic musical works and pictorial, graphic and sculptural works. The Office also administers the statutory obligation on sales of digital audio recording devices and technology (DART). In 1993, Congress broadened the responsibilities of the Office in this area when it replaced the independent Copyright Royalty Tribunal with a system of Copyright Arbitration Royalty Panels -- or CARPs -- whose decisions are reviewed by the Register and the Librarian of Congress.

With respect to royalty distribution, the Librarian announced the final determinations of the distribution in 1990, 1991, and 1992 cable royalty fees, and the distribution of the 1992, 1993, and 1994 DART royalty fees. Both decisions were appealed to the Court of Appeals for the District of Columbia Circuit. Additionally, the Office initiated two distribution proceedings. The first involved a controversy between an individual claimant and the performance rights organizations (ASCAP, BMI, Inc. and SESAC) over the distribution of the 1991 cable royalty fees in the Music Claimants category. This proceeding was decided on the written pleadings, and like all the other decisions, it too has been appealed.

The second proceeding involving the distribution of the 1992, 1993, 1994, and 1995 satellite royalties was scheduled for hearing, then suspended at the request of the parties pending the outcome of the appeal of the first distribution proceeding. It has been rescheduled to begin in November of this year.

The Office also has a number of additional proceedings to schedule in order to distribute funds for past years, including those to determine the distribution of the 1993, 1994, 1995, 1996, and 1997 cable royalties, the distribution of the 1996 and 1997 satellite royalties, and the distribution of the 1995, 1996, and 1997 DART royalty funds.

Fiscal year 1997 was a particularly busy year because it covered the window years for the adjustment of, or the setting of, the royalty rates for five compulsory licenses: 1) the cable compulsory license, 17 U.S.C. 111; 2) the satellite compulsory license, 17 U.S.C. 119; 3) the noncommercial broadcasting license, 17 U.S.C. 118; 4) the mechanical license, 17 U.S.C. 115; and 5) the sound recording performance rights license, 17 U.S.C. 114.

Perhaps because this is a new system, negotiations have been time consuming and not particularly fruitful. Out of the five potential rate adjustment proceedings, only the parties concerned with adjusting the cable royalty license fees have agreed to continue with the current rates and not seek an adjustment. Attempts to negotiate an agreement among the parties interested in setting rates and/or terms for the remaining four licenses have not been so successful and have required or will require a hearing before a CARP.

Two of these proceedings have been completed. The first set new rates for the satellite compulsory license and the other established rates and terms that nonexempt subscription services must pay for the public performance of sound recordings by means of a digital audio transmission. The Librarian's final orders setting these rates and terms have been appealed, and in the case of the satellite rate, also the subject of congressional reaction.

B. CARP Reform

Under the CARP system, a CARP makes the initial decision on royalty rates and terms for the statutory licenses. A CARP also makes the initial decision on how the royalties for a number of these licenses shall be distributed among copyright owners. For each ratemaking or distribution procedure, the Librarian of Congress impanels a new ad hoc CARP whose members are selected from a list of potential arbitrators. After the CARP renders its decision, the Register, with the assistance of the General Counsel and his staff, reviews the decision and recommends to the Librarian whether to accept the decision of the CARP or to reject it as arbitrary or contrary to law. If the Librarian rejects the CARP's decision, he makes his own decision on the advice of the Register.

Our experience with this system over the past few years has persuaded us that it is burdensome, costly and inefficient. Last fall, the Subcommittee asked us to make recommendations to reform or replace the CARP system. After an exhaustive study of a number of alternatives, we submitted a report on February 23 that addressed the deficiencies in the current system and explored five options to improve or replace it. Those options included (1) improving the existing system by changing some of the qualifications of CARP panelists, extending statutory deadlines, providing for streamlined small claims procedures, and so on; (2) replacing the CARPs with administrative law judges; (3) replacing the CARPs with non-ALJ presiding judges; (4) replacing the panels with a Copyright Royalty Adjudication Board within the Copyright Office; and (5) creating an independent regulatory agency.

We recommended the establishment of a Copyright Royalty Adjudication Board within the Copyright Office. This recommendation was incorporated into H.R. 3210, the Copyright Compulsory License Improvement Act, which has been approved by the Subcommittee. The Office supports this legislation, and we are ready to continue to work with the Subcommittee and with copyright owners and users affected by the compulsory licenses to explore how to improve the current system.

VI. Acquiring and Assuring the Security of Materials Received through Mandatory Deposit

As you know, the Copyright Office is a division within the Library of Congress and works with the Library in fulfilling the Library's mission of service to Congress and the American people.

A. Acquiring Deposits for the Library of Congress

The Copyright Acquisition Division (CAD) staff works very closely with the service units of the Library to acquire copyrighted materials that have not been registered or deposited. The mandatory deposit requirement, 17 U.S.C. � 407, is seen as an invaluable avenue to acquire needed and often expensive resources at a significant savings. CAD librarians communicate with more than 100 Recommending Officers to identify those works to be acquired via the mandatory deposit requirement. Additionally, CAD, working with the Congressional Research Service and the Law Library developed a process which assures timely availability of high priority serials.

1. Addressing security concerns

The Library of Congress' mission statement recognizes collections security as a high priority, stressing that the collections of the Library are for the benefit of future generations of scholars as well as those using the vast Library resources today. Security tagging is a large and integral component of collection security and has been identified in the 1997 Library of Congress Security Plan as a minimum physical security standard. Anti-theft devices are currently being placed in hardbound book materials received through the Copyright Office. The project to apply these devices was begun in 1993 as a cooperative effort between the Library Services, Collections Management Division and the Copyright Office to reduce losses. Staff of the Collections Management Division applies the strips in the Receiving and Processing Division, Materials Control Section. The project was recently expanded to include softbound paperback books.

Library Service Units heads recently approved the Collection Security Oversight Committee (CSOC) to conduct a computer disc (CD) and CD-ROM security project to test the effects of applying anti theft devices to CD/CD ROM materials. If the project is successful, the Library will expand the application of anti-theft devices to increase security for these high-risk materials. Further research is necessary to determine whether anti-theft devices can be applied to other non-print materials.

Conclusion

The Copyright Office appreciates the tremendous support it has received from you and the Subcommittee especially in recognizing the Copyright Office's unique role and in moving forward the legislation which produced the new fee structure.

1. Because of the many new opportunities for group registration offered, the number of works actually registered has grown exponentially.