[Federal Register: December 7, 1994]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Parts 251, 252, 253, 257, and 259
[Docket No. RM 94-1A]
Copyright Arbitration Royalty Panels
AGENCY: Copyright Office, Library of Congress.
ACTION: Final regulations.
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SUMMARY: The Copyright Office of the Library of Congress is adopting
final regulations governing the conduct of royalty distribution and
rate adjustment proceedings prescribed by the Copyright Royalty
Tribunal Reform Act of 1993.
EFFECTIVE DATE: These regulations are effective on January 6, 1995.
FOR FURTHER INFORMATION CONTACT: William Roberts, Senior Attorney,
Copyright Arbitration Royalty Panel, P.O. Box 70977, Southwest Station,
Washington, DC 20024, (202) 707-8380.
SUPPLEMENTARY INFORMATION: The Copyright Royalty Tribunal Reform Act of
1993, Pub. L 103-198, 107 Stat. 2304, eliminated the Copyright Royalty
Tribunal (CRT) and replaced it with a system of ad hoc Copyright
Arbitration Royalty Panels (CARPs) administered by the Librarian of
Congress (Librarian) and the Copyright Office (Office). The CARPs
adjust royalty rates and distribute royalties collected under the
various compulsory licenses and statutory obligations of the Copyright
Act. The CRT Reform Act, which was effective immediately upon
enactment, directed the Librarian and the Office to adopt the rules and
regulations of the CRT found in chapter 3 of 37 CFR, 17 U.S.C. 802(d),
and provided that the CRT's regulations were to remain in effect until
the Librarian adopts ``supplemental or superseding regulations.'' The
Office adopted the CRT's rules and regulations on an interim basis on
December 22, 1993, and notified the public that it intended to begin a
rulemaking proceeding to revise and update those rules. 58 FR 67690
(1993).
The Office began the rulemaking proceeding with publication of a
Notice of Proposed Rulemaking (NPRM) on January 18, 1994. 59 FR 2550
(1994). The NPRM contained substantial revisions required by the dual
structure of the royalty rate adjustment and distribution system
created by the CRT Reform Act. Since the CRT's rules were designed for
a single administrative body, the Office proposed extensive changes to
accommodate the division of authority between the Librarian and the
Copyright Office on the one hand, and the CARPs on the other. In
addition to inviting written public comment, the Copyright Office
invited interested parties to a public meeting to discuss the proposed
regulations. More than 50 individuals attended the February 1, 1994,
meeting.
I. Interim Regulations
After considering the concerns the parties expressed at the
February public meeting, and thoroughly reviewing the written comments,
the Copyright Office issued Interim Regulations on May 9, 1994. 59 FR
23964 (1994).\1\ The Interim Regulations substantially revised and
updated the rules adopted in December of 1993.
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\1\The Copyright Office also published technical corrections to
the Interim Regulations. 59 FR 33201 (1994).
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The need for immediate adoption of a regulatory framework was
underscored by the imminence of a royalty distribution of money
collected under the Audio Home Recording Act of 1992 for digital audio
recording technology (DART). Section 1007(b), 17 U.S.C., requires
determination of a DART controversy and commencement of arbitration
proceedings on March 30 of each year for the prior year's royalty
collections. The 1992 DART distribution proceeding was begun by the
Copyright Royalty Tribunal but was suspended when the Tribunal was
abolished, and therefore needed to be started anew. The 1993 DART
distribution was begun by the Copyright Office under the new authority
conferred by the CRT Reform Act, and on March 1, 1994, the Office
published a notice in the Federal Register asking the claimants to the
1992 and 1993 DART royalties to comment as to the existence of any
controversies in the royalty funds. 59 FR 9773 (1994).
Anticipating a consolidated DART distribution proceeding for the
1992 and 1993 calendar years, the Copyright Office postponed the date
for determination of DART controversies from March 30, 1994, to June
30, 1994, in order to permit adequate time for the adoption of
regulations governing a CARP proceeding. On May 9, 1994, the Office
adopted the Interim Regulations with the intention that they would
govern any DART controversies and proceedings beginning June 30, 1994.
The Office created a new subdivision of the regulations devoted
entirely to the operation and procedures of the CARPs. We removed parts
301 through 311 of chapter III of 37 CFR and created subchapters A and
B of chapter II. Subchapter A comprises the Copyright Office rules and
procedures, consisting of parts 201-211, and remains unchanged. New
subchapter B, created by the Interim Regulations, comprises parts 251-
259, and prescribes the rules and procedures of the CARPs.
Part 251, the Copyright Arbitration Royalty Panel Rules of
Procedure, consists of regulations governing the organization of the
CARPs, access to CARP meetings and records, rules governing the conduct
and course of proceedings, and procedures applicable to rate
adjustments and distributions. Part 251 also includes extensive rules
of conduct for arbitrators, as well as appropriate ethical and
financial standards. We did not propose any specific rules of conduct
in the NPRM, but did reserve a subpart for such rules and solicited
comment from the interested parties on the issue. See 59 FR at 2554
(1994).
Part 252 contains revised rules for the filing of claims to cable
royalties, modeled after the system used by the CRT for the filing of
DART royalty claims. Parts 253 to 256--Use of Certain Copyrighted Works
in Connection With Noncommercial Educational Broadcasting; Adjustment
of Royalty Rate for Coin-Operated Phonorecord Players; and Adjustment
of Royalty Payable Under Compulsory License for Making and Distributing
Phonorecords--is virtually identical to the former CRT's rules, with
only some minor technical changes. Like part 252, part 257--Filing of
Claims to Satellite Carrier Royalty Fees--is modeled after the royalty
claim procedures used by the CRT for DART. Finally, parts 258 and 259--
Adjustment of Royalty Fee for Secondary Transmissions by Satellite
Carriers and Filing of Claims to Digital Audio Recording Devices and
Media Royalty Payments--contains only minor variations from the former
CRT's rules. Since the CRT Reform Act eliminated the jukebox compulsory
license and replaced it with a new provision for negotiated licenses
(formerly section 116A of the Copyright Act, as amended by the CRT
Reform Act), the Copyright Office dropped the regulations governing the
filing of jukebox royalty claims (formerly 37 CFR part 305).
In addition to soliciting general comments on the Interim
Regulations, the Copyright Office also posed a number of questions to
focus the commentators' attention on specific issues and to encourage
the parties to offer their solutions. The questions ranged from whether
certain types of DART proceedings were subject to CARP jurisdiction, 59
FR 23967 (1994), to asking for comment on ten hypothetical scenarios
designed to test the parameters of the conduct rules. Id. at 23980.
Written comments on the Interim Regulations were due June 15, 1994.
Reply comments were due July 15, 1994.\2\ The Copyright Office received
a total of 14 comments and replies. Many parties filed joint comments,
and some of the joint commentators also filed separate comments. The
commentator groups for comments and/or replies were as follows:
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\2\In addition, the Copyright Office met with representatives
from ASCAP, BMI, the Canadian Claimants, the Devotional Claimants,
the Joint Sports Claimants, NAB, NPR, PBS, and Program Suppliers on
August 11th on matters pertaining to cable copyright royalty
distribution. The minutes of that meeting are associated with the
comment file and are available for public inspection and copying.
Canadian Claimants (Canadian Claimants);
Electronic Industries Association (EIA);
James Cannings (Cannings);
Joint Sports Claimants, the National Association of Broadcasters,
Public Broadcasting Service, the Devotional Claimants, the Canadian
Claimants, and National Public Radio (collectively Certain Copyright
Owners);
National Association of Broadcasters (NAB);
National Music Publishers Association and the Harry Fox Agency
(collectively ``Music Publishers'');
Office of the Commissioner of Baseball (Baseball);
Program Suppliers (Program Suppliers);
Program Suppliers, Joint Sports Claimants, the National Association
of Broadcasters, Public Broadcasting Service, American Society of
Composers, Authors and Publishers, Broadcast Music, Inc., SESAC,
Inc., the Devotional Claimants, the Canadian Claimants and National
Public Radio (collectively Copyright Owners);
Public Broadcasting Service and National Public Radio (collectively
PBS/NPR);
Recording Industry Association of America, Inc. (``RIAA'');
Recording Industry Association of America, Inc. and the Alliance of
Artists and Recording Companies, Inc. (RIAA/AARC).
II. Suspension of DART Distribution
As discussed above, the Office adopted the Interim Regulations to
establish a regulatory framework in time for the start of DART
distribution. The Office postponed the date for determination of
controversies to the 1992/93 DART royalty pools from March 30, 1994, to
June 30, 1994, to prepare for the possibility of convening a CARP for
DART distribution. We published a request for comment on the existence
of a controversy for the 1992/93 funds, adopted the Interim
Regulations, established a procedural schedule for the filing of
comments and motions leading up to a convocation of a CARP, and
published the arbitrator list all before June 30. See 59 FR 9773 (1994)
(Request for comments as to existence of controversy and consolidation
of 1992 and 1993 funds); 59 FR 23964 (1994) (Interim Regulations); 59
FR 25506 (1994) (Schedule of procedural dates); 59 FR 24486 (1994)
(Arbitrator list).
In response to the Office's request for comments as to the
existence of controversies, the Office received a motion, supported by
a majority of the 1992/93 DART claimants, requesting that the 1992/93
DART royalty distribution be consolidated with the 1994 DART
distribution. The movants argued that although they anticipated the
existence of controversies, the amount of royalties in the 1992 and
1993 funds was insufficient to justify the cost of a CARP proceeding.
They therefore requested that the Office suspend all procedural dates
and defer all consideration of DART distributions until 1995.
On July 13, 1994, the Librarian of Congress granted the claimants'
motion for suspension of the 1992/1993 DART distribution proceeding and
consolidation of that proceeding with the 1994 DART distribution. 59 FR
35762 (1994). The result of the Librarian's action is that the first
DART distribution proceeding will begin no sooner than March 30, 1995.
The Librarian also authorized distribution of the 1992 and 1993
Nonfeatured Musicians and Nonfeatured Vocalists DART subfunds--two
subfunds not subject to CARP proceedings--and scheduled a public
meeting for September 27, 1994, to discuss what would constitute the
best evidence for distribution of the Sound Recordings Fund and the
Musical Works Fund. Id.
With the suspension of DART until 1995, the first proceeding
conducted by a Copyright Arbitration Royalty Panel will likely be
distribution of the 1990 and 1991 cable royalties. The claimant groups
to 1990/1991 cable royalties have informed the Copyright Office that
they wish to begin proceedings in accordance with final, not interim,
regulations. The Office has already received written comments on the
Interim Regulations; therefore, the Copyright Office is adopting Final
Regulations that will govern all rate adjustments and distributions of
royalties prescribed by the CRT Reform Act.\3\
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\3\It is important to note that while today's Final Regulations
replace the rules contained in the Interim Regulations, there are
several policy determinations and decisions discussed in the
preambles to the Interim Regulations and Notice of Proposed
Rulemaking which remain in effect. For example, the Office will
continue to consider proceedings pending before the CRT at the time
of its elimination as null and void and without binding effect. See
59 FR at 23965-66 (1994). Parties practicing before the CARPs should
therefore be familiar with the preambles to the Interim Regulations
and the NPRM in this docket in conjunction with today's Final
Regulations.
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III. Joint Claims
Commentators had extensive comments about the interim rule
governing the filing of joint royalty claims. Sections 252.3(4) and
257.3(4) require claimants filing a joint claim to cable and satellite
carrier compulsory license royalties, respectively, to identify at
least one secondary transmission containing a claimant's copyrighted
works for each claimant listed in the joint claim. See 59 FR 23992,
23994 (1994). Performing rights societies were exempted from this
requirement by Sec. 252.3(a)(4) and Sec. 257.3(a)(4). Because these
sections generated much controversy, and because some of the
commentators filed a motion requesting that the Office reconsider this
part of the regulations, we find that the issue deserves
reconsideration and resolution separate from the general discussion of
amendment to the Interim Regulations.
The former CRT's rules and regulations governing the filing of
claims of the CRT, which we adopted on an interim basis in December
1993, are brief. Section 302.7(a) of the CRT's old rules simply
permitted the filing of joint claims for cable royalties, but provided
little else:
For purposes of this clause claimants may file claims jointly or
as a single claim. Such filing shall include such information as the
Copyright Royalty Tribunal may require. A joint claim shall include
a concise statement of the authorization for the filing of the joint
claim. A performing rights society shall not be required to obtain
from its members or affiliates separate authorizations, apart from
their standard agreements, for purposes of this filing and fee
distribution.
37 CFR 302.7(a) (1993). To the Copyright Office's knowledge, the
Tribunal never adopted or prescribed any additional requirements for
the filing of joint claims, nor was there any guidance on what
information should be included in a claim. Section 309 of the
Tribunal's rules, governing the filing of claims to satellite carrier
royalties, was even more concise with respect to the requirements for
filing joint claims, stating simply that ``[c]laimants may file jointly
or as a single claim,'' and providing the same exemption for performing
rights societies regarding authorizations. 37 CFR 309.2 (1993).
Our NPRM proposed significant revisions to the Tribunal's rules
regarding the filing of both cable and satellite carrier royalty
claims. 59 FR 2556, 2557 (1994). The purpose of the proposed revision
was to ``implement a procedural system similar to that adopted by the
Tribunal for the filing of digital audio claims.'' Id. at 2556.
Claimants were expressly authorized to file joint claims, and would be
required to file ``a concise statement of the authorization for the
filing of the joint claim.'' Id. at 2566 (cable), 2567 (satellite).
Performing rights societies would continue to enjoy an exemption from
obtaining separate authorizations from each of their members for filing
a joint claim. For claimants initially filing an individual claim and
later negotiating a joint claim with other claimants, the proposed
rules required that either the joint or individual claimant notify the
Copyright Office of the change within 14 days of making the agreement
to enter into a joint claim. Id. Finally, the proposed rules required
joint claimants to ``make available to the Copyright Office, other
claimants, and, where applicable, a Copyright Arbitration Royalty
Panel, a list of all individual claimants covered by the joint claim.''
Id. No mention was made as to whether each joint claimant was required
to identify at least one secondary transmission of its works, beyond
the general language of Secs. 253.3(a)(4) (cable) and 257.3(a)(4)
(satellite) establishing the basis for a claim: ``A general statement
of the nature of the claimant's copyrighted works and identification of
at least one secondary transmission * * * establishing a basis for the
claim.'' Id.
The Office's proposed changes to the requirements for filing cable
and satellite carrier royalty claims elicited little comment. Only PBS
asked for clarification of the requirement for identifying a secondary
transmission for a joint claim; it asked what it took to satisfy the
requirement--a statement that merely identified at least one secondary
transmission for at least one of the claimants included within the
joint claim, or a statement identifying at least one secondary
transmission for each claimant to the joint claim. See 59 FR 23979
(1994) (comments of PBS at 2). In discussing PBS' comment in the
Interim Regulations, we acknowledged that the NPRM ``muddie[d] the
waters'' for the filing of cable and satellite carrier claims, and the
Interim Regulations deleted the proposed requirement for joint
claimants providing a list identifying each claimant to the joint
claim. Id. In so doing, we stated our belief that the former Tribunal's
regulations required that a joint claim identify at least one secondary
transmission for each joint claimant, and found support for such
requirement in the Copyright Act:
We are troubled, however, by changing what had been a
longstanding requirement at the Tribunal for obliging all claimants
to identify at least one secondary transmission of their copyrighted
works. While such requirement does undoubtedly add to the time and
expense burdens of joint claimants such as PBS, it is not without
purpose. The law states plainly that cable compulsory license
royalties are only to be distributed to ``copyright owners who claim
that their works were the subject of secondary transmissions by
cable systems during the relevant semiannual period.'' 17 U.S.C.
111(d)(3). To support such a claim, each claimant may reasonably be
asked to identify at least one secondary transmission of his or her
work, thus permitting the Copyright Office to screen the claims and
dismiss any claimants who are clearly not eligible for royalty fees.
The requirement will also help to reduce time spent by a CARP
determining which claimants have a valid claim: if only one
secondary transmission is identified for one of the joint claimants,
then it could not readily be determined if the other claimants were
even eligible for cable royalties.
In an effort to end this confusion we are deleting subsection (e)
with its requirement that joint claimants submit a list identifying all
the claimants. Instead, we are amending subsection (a)(4) to require
that each claimant to a joint claim, other than a joint claim filed by
a performing rights society on behalf of its members or affiliates,
must identify at least one secondary transmission of his or her works.
59 FR 23979 (1994).
A number of commentators protested the Office's decision. PBS/NPR,
the Office of the Commissioner of Baseball (Baseball), RIAA, NAB and
Program Suppliers submitted comments devoted solely to the filing
requirements for joint claims, with Program Suppliers asking that
reconsideration of the joint claims interim regulations be severed from
the instant proceeding for immediate disposition. See Program
Suppliers, comments at 5.
The commentators offered essentially four arguments against the
Office's decision: (1) to require each joint claimant to identify a
secondary transmission containing its work serves no valid purpose; (2)
it creates undue expense; (3) the Copyright Office is erroneous in
believing that the Copyright Royalty Tribunal required each joint
claimant to identify a secondary transmission; and (4) it is unfair and
inappropriate to afford performing rights societies an exemption and
not others.
First, PBS/NPR argued that ``no substantive purpose is served by
the requirement for separate identifications of secondary transmissions
as to each party included within the joint claim; this is simply a
jurisdictional prerequisite that will not determine the distribution of
royalties.'' PBS/NPR, comments at 2. Program Suppliers concurred with
this view and criticized the Office's expressed concern that individual
program information is needed to assist it and the CARPs to identify
claims that should be dismissed:
[T]he Office's suggestion that such information is needed so it
could screen hundreds of yearly filings to determine eligibility,
seems a particularly inefficient use of its resources. * * *
Furthermore, it is unclear what action, if any, the Office could
take regarding eligibility problems related to an individual
claimant within a joint claim. Even if the Office finds that one
claimant is ineligible to receive royalties, we would assume that
the joint claim would still remain a valid claim. Whether and to
what extent the share awarded to the joint claimants should be
reduced by the ineligibility of one member of the group are
questions for a panel based on the record evidence. Indeed, such
questions are incapable of answers at the filing stage.
Program Suppliers, comments at 3-4 (footnote omitted). Program
Suppliers and Baseball recommended that the Office should refrain from
any examination or ``screening'' of claims as a regular practice, and
leave such activities and eligibility issues to the claimants to raise
through motions either to the Librarian or the CARPs. Program
Suppliers, comments at 4; Baseball, comments at 7.
Second, RIAA asserted that the requirement for each joint claimant
to identify a secondary transmission is unduly expensive and
burdensome. Organizations like RIAA, that represent many claimants,
would be forced to contact all of their members and track down a
secondary transmission for each one. The problem is compounded by the
time lag between most secondary transmissions and the time period for
filings of claims. RIAA, comments at 2-3. PBS submits that it devotes
roughly 300 hours annually to the task of identifying secondary
transmissions for its member stations. PBS/NPR, comments at 2. These
commentators submitted that elimination of the identification
requirement for all joint claimants would dramatically reduce their
expense and workload.
Third, all of the commentators argued that the Copyright Office
erred in believing that the Copyright Royalty Tribunal required each
joint claimant to identify a secondary transmission. Apparently, while
a reading of the CRT's rules indicated there may be such a requirement,
see footnote 15, 59 FR 23979 (1994), in actual practice the Tribunal
allowed joint claimants to submit only one secondary transmission of a
copyrighted work belonging to one of the joint claimants as
establishing a basis for a claim for all of the joint claimants.
Baseball and RIAA submitted several examples of such filings. Baseball,
comments at appendix; RIAA, comments at appendix. They asserted that
the CRT interpreted its rules to apply the requirement of
identification of at least one secondary transmission to apply equally
to individual claims as well as joint claims, meaning that
identification of a least one secondary transmission of one joint
claimant was satisfactory to establish a basis for the entire joint
claim. PBS/NPR, comments at 4-5. They therefore submitted that the
Copyright Office erroneously interpreted CRT practice and should alter
its regulations to conform with CRT precedent. PBS/NPR comments at 6;
Program Suppliers, comments at 5; RIAA, comments at 6; Baseball,
comments at 5; NAB, comments at 1.
Finally, Baseball, PBS/NPR, and RIAA objected to the exemption
granted performing rights societies from the Interim Regulations'
requirement of identifying at least one secondary transmission for each
joint claimant. Baseball stated that it ``is firmly of the view that it
should not be treated less favorably than the performing rights
societies,'' noting that the Interim Regulations gave no reason why
performing rights societies should enjoy privileged status. Baseball,
comments at 5. See also PBS/NPR, comments at 5. RIAA urged that, if the
Copyright Office insists on continuing to require each joint claimant
to identify a secondary transmission, it should broaden the definition
of a performing rights society ``to include not only traditional
performing rights societies, but also those joint claimants such as
RIAA who, with respect to the royalties distributed to its members
under sections 111 and 119, essentially perform the same functions of
`performing rights societies.''' RIAA, comments at 6.
In addition to seeking relief from Secs. 252.3(a)(4) and
257.3(a)(4), several commentators urged the Copyright Office to
reconsider other requirements for the filing of cable and satellite
carrier royalty claims. Baseball and the RIAA urged the Copyright
Office to eliminate entirely the requirement of identifying a secondary
transmission to establish a basis for a cable or satellite carrier
royalty claim. Baseball, comments at 5-7; RIAA, comments at 3, 6.
Baseball noted several instances where the CRT refused to dismiss a
claim for failure to identify a secondary transmission, and suggested
this demonstrates that ``the secondary transmission identification
requirement did nothing more than unnecessarily increase the costs of
claimants.'' Baseball, comments at 6. NAB, however, strongly opposed
Baseball's recommendation, asserting that there is no compelling reason
to change the requirement and that elimination of identification of a
secondary transmission would be violative of section 111(d)(3) of the
Copyright Act, which authorizes distribution of royalties only to
copyright owners whose works were retransmitted on a distant signal.
NAB, comments at 2-3.
Baseball took the ``hands off'' approach one step further by urging
the Copyright Office to refrain from making any substantive review of
royalty claims. Baseball, comments at 6-7. See also NAB, comments at 2;
Copyright Owners, reply comments at 9. Baseball argued that ``[r]outine
Copyright Office review of all claims needlessly increases the costs of
all copyright owners and does not serve any useful function,''
concluding that ``[d]isputes over a particular claimant's eligibility
to royalties (when they arise) may be resolved internally within a
Phase II class without involvement of the Copyright Office or a CARP.''
Baseball, comments at 7-8. Copyright Owners concurred, stating that
``[t]he parties themselves are in the best position to identify those
claimants who are not entitled to royalties,'' and that they ``do not
believe...that the Copyright Office's resources (and Copyright Owners'
royalties) should be expended to screen each and every one of the
thousands of claims that will be timely filed over the years.''
Copyright Owners, reply comments at 9-10. Copyright Owners do not
object, however, to the Copyright Office returning claims that are not
timely filed. Id. at 9.
Given the pendency of receipt of cable and satellite carrier
royalty claims and the request of Program Suppliers to sever the joint
claims issue from this proceeding, the Copyright Office issued an Order
addressing the filing requirements for joint claims for the 1993 cable
and satellite carrier royalties. Order in Docket Nos. RM 94-1A; 94 CARP
(93-CD); 94 CARP (93-SD)(July 13, 1994). The Office stated that while
it would ``make a decision on the requirement for joint claims when we
publish the final rules,'' it would waive the requirement of
identification of a secondary transmission for each joint claimant in
Sec. 252.3(a)(4) and Sec. 257.3(a)(4) for the July 1994 filing period.
As a result of this action, anyone filing a joint claim for 1993 cable
or satellite carrier royalties was only required to identify at least
one secondary transmission to establish a basis for the entire joint
claim.
The Copyright Office has reviewed the comments of the parties
regarding the identification of a secondary transmission requirement
for joint claims and is amending Sec. 252.3(a)(4) and Sec. 257.3(a)(4)
to require identification of at least one secondary transmission for
each joint claim, as opposed to at least one for each joint
claimant.<SUP>4 We have stated on several occasions that our intention
in implementing the CRT Reform Act is to create a streamlined process
that limits the cost of distribution and rate adjustment proceedings to
the participating parties as much as possible. See e.g. 59 FR 23967
(1994). It is apparent from the unanimous opinion of the commentators
that requiring identification of a secondary transmission for each
joint claimant would add in some cases a substantial burden and cost to
joint claimants without yielding an appreciable return in
administrative efficiency. We are also aware that, in the past, the CRT
did not require identification of a secondary transmission for each
joint claimant.<SUP>5 The practice of the CRT was apparently an
unwritten policy, and therefore of questionable precedential value, but
it does demonstrate that the Tribunal did not experience any practical
or administrative difficulties in allowing joint claimants to identify
at least one secondary transmission for the entire joint claim.
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\4\In amending these sections, we are also eliminating the
exemption for performing rights societies filing joint claims, since
the amended rules will treat all joint claimants equally.
\5\It would appear from the comments that while Baseball, after
consultation with the Tribunal, would only include some examples of
secondary transmissions in their joint claim, PBS would include an
example for each one of the claimants represented in its joint
claim. PBS/NPR, comments at 2.
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The amended rule, however, does require each joint claim to
identify all claimants participating in the joint claim. Those who are
not identified in the joint claim may not be added to it after the
filing period. An exception, however, is made for the performing rights
societies when they file cable and satellite carrier claims. If ASCAP,
BMI and SESAC were to file a joint claim, those three organizations
would have to be listed in the claim, but when ASCAP, BMI and SESAC
file claims separately, they will not have to list their members or
affiliates because of the burden of doing so, and the recognition that,
together, they represent virtually every composer, lyricist, and
publisher entitled to royalties.<SUP>6 A similar exception is not being
made for the performing rights societies in the case of DART claims.
There, it is not clear that the performing rights societies represent
virtually the entire composer-lyricist-publisher universe, because they
have an affirmative duty to obtain a separate written authorization to
collect on behalf of their members and affiliates and it is unknown how
many of them they represent, and because there are other organizations
such as the Harry Fox Agency and the Songwriters Guild who file claims
in that proceeding.
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\6\By this statement, we do not intend to prejudge controversies
in the Music category. We know that there are composers, lyricists,
and publishers, such as ACEMLA and Italian Book Corporation, who are
unaffiliated with the three performing rights societies. However, to
the extent that they file claims separate from the three performing
rights societies, they become identified in the filing period as
independent, leaving for future proceedings their proper share vis-
a-vis the performing rights societies.
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While we are eliminating the requirement of identification of a
secondary transmission for each joint claimant, we are not accepting
RIAA and Baseball's recommendation of eliminating the secondary
transmission identification requirement altogether. We agree with NAB
that section 111(d)(3) of the Copyright Act authorizes distribution of
cable royalties only to copyright owners whose works were retransmitted
on a distant signal. Eliminating the requirement that the claim
identify at least one instance of such qualifying retransmission would
effectively eviscerate the claim requirement itself. See NAB, comments
at 3. The argument has equal force for satellite carrier royalty
claims. See 17 U.S.C. 119(b)(3).
The Office also does not accept Baseball, NAB, and Copyright
Owners' recommendation that the Office not review claims for
eligibility and sufficiency. Section 801(c) expressly allows the
Librarian, before a CARP is convened, to ``make any necessary
procedural or evidentiary rulings that would apply to the proceedings
conducted by such panel.'' We believe that this grant of authority is
broad enough to allow the Copyright Office to examine royalty claims
for timeliness and sufficiency. Furthermore, we do not accept Baseball
and NAB's argument that review of claims is a waste of copyright
owners' money. Eliminating claims which are untimely filed or patently
deficient on their face promotes administrative efficiency by reducing
the workload for the CARPs, which will already be pressed to conduct
proceedings and issue a report within the 180-day time period. The
Copyright Office will, therefore, continue to examine royalty claims
for timeliness and sufficiency on their face.
IV. Precontroversy Discovery
Of all the issues generated by the CRT Reform Act and the transfer
of royalty distributions and rate adjustments to the Librarian and the
CARPs, precontroversy discovery has generated the greatest amount of
comment and concern. The questions are general (Should there be any
precontroversy discovery? Who should conduct it?), as well as specific
(What discovery motions may be filed? When and how will discovery
orders be issued?). We have examined this controversial issue
extensively and considered all of the arguments. We are adopting as our
final rule a solution that we hope will streamline the evidentiary
process for the CARPs: a limited discovery period of 45 days conducted
by the Librarian prior to declaration of a controversy requiring
exchange of cases among the participating parties and one round of
discovery motions and rulings.
The question of whether or not to have precontroversy discovery,
defined as a period for exchange of evidence among the parties to a
distribution or rate adjustment proceeding prior to the Librarian's
declaration of a controversy and convocation of a CARP, has come full
circle during the course of this rulemaking proceeding. In reaction to
a statement of Representative William Hughes, Chairman of the House
Subcommittee on Intellectual Property and Judicial Administration of
the House Committee on the Judiciary, accompanying the passage of the
CRT Reform Act and commenting favorably on the use of precontroversy
discovery and exchange of information, see 139 Cong. Rec. H10973 (daily
ed. Nov. 22, 1993), the Copyright Office proposed a precontroversy
discovery period in the NPRM. In the case of distributions, we proposed
that the Librarian would declare a 90-day period for discovery and
exchange of documents sometime after the filing of royalty claims for
the distribution and ending with the declaration of the controversy. 59
FR 2550 (Jan. 18, 1994). Similarly, the Librarian would declare a 90-
day period for rate adjustment proceedings corresponding with the time
period set aside for consideration of rate adjustment petitions. Any
party to a proceeding could file motions related to discovery with the
Librarian during these time periods, as well as ``objections to royalty
claims or petitions, or motions for procedural or evidentiary
rulings.'' Id. All parties were to be given 14 days in which to respond
to a motion or objection, and the Librarian could not declare a
controversy in a proceeding until he had ruled on all motions. Id.
In addition to the proposed precontroversy discovery procedures,
the Office asked for comment on several matters:
We particularly seek comments on the scope of such
precontroversy discovery: whether it should include interrogatories
of witnesses as well as production of supporting documents, and
whether it would advance Chairman Hughes' goal of reducing costs by
being able to stipulate facts and remove issues, or whether the
additional procedures might add costs to the proceeding.
Id.
The commentators did not approve of the NPRM's precontroversy
discovery proposal. In fact, the commentators urged the Librarian and
the Copyright Office to refrain completely from conducting any
precontroversy discovery, and proposed a unique solution whereby the
CARPs could be convened for conducting such discovery prior to the
beginning of the 180-day arbitration period. See 59 FR 23964, 23976
(1994). Under the proposal offered by Copyright Owners, a distinction
would be made between ``the commencement of proceedings'' in 17 U.S.C.
803(d) and the ``notice initiating an arbitration proceeding''
described in 17 U.S.C. 802(b) and (e). The Copyright Office would first
declare the ``commencement of proceedings'' and then immediately
require the filing of written direct cases and empanel the CARP;
discovery motions and objections would be ruled on by the CARP. After
discovery was completed, the Office would ``initiate an arbitration
proceeding,'' and at that point the statutory 180-day arbitration
period would begin to run. 59 FR 23977 (1994) (comments of Copyright
Owners at 9-12).
We considered the statutory basis for Copyright Owners' proposal
and concluded with respect to the Interim Regulations that it was
without support:
[A]s a matter of statutory construction, the Office cannot agree
that the ``commencement of proceedings'' can be conceptually
separated from ``initiating an arbitration proceeding'' so as to
permit the CARP to sit earlier than the 180-day arbitration period.
Section 802(b) (of the Copyright Act), which first uses the phrase
``initiating an arbitration proceeding,'' employs it in the context
of ``a notice in the Federal Register initiating an arbitration
proceeding under section 803 * * *'' In Sec. 803, the notice to
which Sec. 802(b) refers is the ``notice of commencement of
proceedings.'' Therefore, the phrases refer to each other and must
be considered synonymous. (parenthetical added).
59 FR 23977 (1994). We acknowledged that Chairman Hughes
recommended that our regulations provide for precontroversy discovery
``to the extent practicable,'' but concluded that ``there is no way to
accomplish this goal under the statutory scheme.'' Id. The result was
that the Interim Regulations contained no rules for precontroversy
discovery or exchange of documents.
Copyright Owners have changed their approach\7\ and now seek
restoration of a precontroversy discovery procedure similar to the one
proposed by the Office in the NPRM. The Copyright Owners' proposal has
three principal facets: (1) mandatory exchange of direct cases among
all parties to a proceeding prior to commencement of arbitration; (2)
formal scheduling of a precontroversy discovery period by the
Librarian; and (3) submission of and ruling on direct case discovery
motions and objections by the Librarian, including motions, objections,
and petitions contemplated in Secs. 251.4, 251.41(b) and 251.45(a) of
the Interim Regulations.
---------------------------------------------------------------------------
\7\Copyright Owners ask the Copyright Office to reconsider their
proposal of convening CARPs prior to commencement of the 180-day
arbitration period, suggesting that the Office could consider that
the phrases ``notice initiating an arbitration proceeding'' and
``notice of commencement of proceedings'' have different meanings
and therefore could constitute two separate events. For the reasons
described in the Interim Regulations, however, the Office is
adhering to its position that CARPs may not be convened prior to the
commencement of the 180-day arbitration period. See 59 FR 23977
(1994).
---------------------------------------------------------------------------
Copyright Owners argue that in order for precontroversy discovery
to be in any way productive, the Copyright Office rules must be amended
to require the parties to a proceeding to exchange their direct cases
prior to the commencement of arbitration, as opposed to after a CARP
has been convened. Copyright Owners, comments at 3-5, 7-10. They assert
that without an exchange of direct cases, precontroversy discovery
would become a fishing expedition as the parties attempt to guess at
each other's theory of the case and principal evidence. Exchange of
direct cases would allow the parties to focus on the evidence that will
be presented at a hearing and reduce the amount of time the CARPs will
need to devote to discovery matters. Id. at 3-4.
In order to streamline the process and promote efficiency, the
Copyright Owners suggest that the Librarian coordinate and schedule the
precontroversy discovery process. Under the Copyright Owners' plan for
distribution proceedings, the Librarian would first publish a notice
seeking comment as to the existence of a controversy.\8\ Id. at 8. The
notice would specify a filing date for comments, request that
interested parties file their notice of intent to participate in the
proceeding with their comments, and ask the participating parties for
their comments on scheduling issues. Id. After receipt of the comments
and participation notices, the Librarian would evaluate the existence
of controversies, and then issue a scheduling order that would provide:
\8\Copyright Owners propose a similar plan for rate adjustment
---------------------------------------------------------------------------
proceedings. Copyright Owners, reply comments at 7 n.5.
1. dates for the filing of:
(a) motions and objections contemplated by Sec. 251.45(a) of the
Interim Regulations;
(b) petitions to dispense with formal hearings under Sec. 251.41
(b); and
(c) objections to arbitrators under Sec. 251.4;
2. a date for the filing of direct cases by parties;
3. dates for discovery by the parties and for filing of
discovery and evidentiary motions;
4. a date by which the Librarian will rule on discovery and
evidentiary motions; and
5. a future date certain on which each identified controversy
will be declared and the initiation of an arbitration proceeding
will be published.
Id. at 9. Copyright Owners recommend that ``scheduling should be done
on a case-by-case basis reflecting the comments from the parties; the
rules themselves should not contain particular time periods for filing
deadlines.'' Id.
Copyright Owners argue that statutory authority for the above-
recommended procedures can be found in section 801(c) of the Copyright
Act, which permits the Librarian ``before a Copyright Arbitration
Royalty Panel is convened, [to] make any necessary procedural or
evidentiary rulings that would apply to the proceedings conducted by
such panel.'' Id. at 10. This provision, they argue, coupled with
Chairman Hughes' expressed desire for precontroversy discovery,
indicates the legislative intent to have a formal and organized
precontroversy discovery period.
Aside from satisfying legislative intent, Copyright Owners submit
that their proposed plan offers advantages. Setting a date certain for
declaration of controversies and commencement of arbitration in the
scheduling order will give potential arbitrators sufficient advance
notice to plan their schedules, thereby increasing the likelihood of
their being able to serve. Id. at 11. Also, having the Librarian rule
on prehearing discovery and other motions allows the parties to prepare
their cases properly and permits the full 180-day period to be devoted
to hearing, briefing, and decision on the merits. Id. at 12.
We have carefully considered the views of the Copyright Owners with
respect to precontroversy discovery, especially in light of their
request that the CARPs conduct precontroversy discovery and our earlier
proposal set forth in the NPRM. For reasons stated in the Interim
Regulations, see 59 FR 23977, we do not believe that it is statutorily
permissible to convene a CARP prior to the beginning of the 180-day
arbitration period for the purposes of conducting precontroversy
discovery. We reaffirm our decision that the CARPs cannot conduct or
permit discovery prior to the beginning of the 180-day arbitration
period.
After considering the proposal of the Copyright Owners, however, we
do think that it is appropriate that the Librarian of Congress and the
Copyright Office conduct some precontroversy discovery. We are
therefore adopting a precontroversy discovery procedure similar to that
now being endorsed by the Copyright Owners and initially proposed in
the NPRM.
We therefore amend Sec. 251.45 of the rules to provide a procedure
for conducting precontroversy discovery. New paragraph (b) directs the
Librarian to designate a 45-day period for the conduct of
precontroversy discovery. The Librarian shall designate the dates for
the 45-day precontroversy discovery period on a case-by-case basis
after receiving and reviewing comments on the existence of
controversies and notices of intention to participate described in
Sec. 251.45(a). During this time period, the parties will exchange
their written direct cases and the Librarian will entertain motions and
objections regarding discovery matters, motions and objections to
dismiss any party's royalty claim, motions for declaratory rulings or
for procedural or evidentiary rulings, petitions to dispense with
formal hearings under Sec. 251.41(b), and objections to arbitrators
under Sec. 251.4.
As stated in the Interim Regulations, ``[w]e agree with the
Copyright Owners that precontroversy discovery before the filing of
written direct cases would not be productive.'' 59 FR 23977 (1994). The
45-day precontroversy discovery period therefore shall begin with an
exchange of written direct cases among the parties to the proceeding.
Each party must serve one complete copy of their written direct case on
each of the parties to the proceeding no later than the first day of
the 45-day period. At any time during the 45-day period, the parties
may file their motions and objections with the Librarian. Objections to
any and all motions will be due seven days after the filing date for
motions.
The 45-day designated period shall be the sole time for filing
precontroversy motions and objections. Any motions and objections
received prior to, or after, the 45-day period will be returned. The
Librarian will rule on motions and objections after the 45-day period
has ended and prior to the declaration of the existence of a
controversy. However, motions for production of documents or to compel
production of evidence should be ruled upon by the Librarian within
five days of receipt of the motion so as to expedite the discovery
process.
In addition to the exchange of direct cases and the filing of
motions and objections, the Librarian will set the date on which
controversies will be declared. We agree with Copyright Owners that
fixing a date certain for declaration of controversies and initiation
of arbitration proceedings will allow potential arbitrators and
participating parties to clear their schedules, as well as afford the
participating parties more time to prepare their cases.
The precontroversy discovery period for rate adjustment proceedings
is similar to that for distributions. After receiving a petition for
rate adjustment, the Librarian will issue a request for public comment
or conduct public hearings to determine whether the petitioner's
interest is significant,<SUP>9 and require interested parties to file a
notice of intention to participate. After reviewing comments or the
hearing record as to the petitioner's significant interest and
receiving notices of intention to participate, and after the period
described in Sec. 251.63(a), the Librarian will issue a precontroversy
discovery scheduling order identical to that for distribution
proceedings. The Librarian will require exchange of direct cases,
conduct the one round of motions and objections, issue appropriate
rulings, and announce the date on which initiation of arbitration
proceedings will begin.
---------------------------------------------------------------------------
\9\The determination of ``significant'' interest is not required
for the noncommercial educational broadcasting and satellite carrier
rate adjustments since they begin automatically as provided in
sections 118 and 119 of the Copyright Act. The Librarian shall,
therefore, schedule precontroversy discovery in advance of the pre-
set starting dates for those proceedings.
---------------------------------------------------------------------------
We believe that these precontroversy discovery and scheduling
regulations should provide a workable solution to the time pressures of
distribution and rate adjustment proceedings, and should sharpen the
focus of the proceedings by eliminating much of the preliminary work
that would be faced by the CARPs without such procedures. We agree with
the Copyright Owners that 17 U.S.C. 801(c), coupled with Chairman
Hughes' floor statement regarding precontroversy discovery, provides
ample statutory authority for the Librarian and the Copyright Office to
conduct precontroversy discovery and issue rulings. It may be that,
with some issues, the Librarian will designate the issue raised during
the 45-day precontroversy discovery period to the appropriate CARP for
disposition, but it is our belief that the Librarian will be able to
dispose of most precontroversy discovery issues.
V. Status of Certain DART Proceedings
The Copyright Office concluded in the Interim Regulations that two
categories of digital audio proceedings set forth in chapter 10 of the
Copyright Act were not CARP proceedings and therefore not subject to
these rules:
(i) the proceeding raising the maximum rate for digital audio
tape royalties which, under 17 U.S.C. 1004(a)(3), is to be handled
solely by the Librarian;
(ii) the arbitration proceeding under 17 U.S.C. 1010 to
determine if a digital audio recording or interface device is
subject to royalty payments.
59 FR 23967 (1994).
RIAA/AARC agrees with the Office that proceedings under section
1004(a)(3) to raise the royalty maximum should be ``handled solely by
the Librarian.'' RIAA/AARC, comments at 2. RIAA/AARC is concerned,
however, with the costs involved in adjusting the royalty maximum and
urges the Copyright Office to apply to DART its policy for CARP rate
adjustments; that is, requiring that the burden of costs be shared
equally by both copyright owners and users participating in an
adjustment proceeding. Id. at 3 (59 FR 23977).
RIAA/AARC does not agree that arbitration proceedings under section
1010 should be treated separately and states that ``the CARP system
should be applied in these proceedings.'' Id. RIAA/AARC, however,
offers no support for its position.
EIA supports the Copyright Office position for both section
1004(a)(3) royalty maximum adjustment and section 1010 arbitration. EIA
notes that section 801 of the Copyright Act contains no reference to
royalty maximum adjustments or section 1010 arbitration, and that the
Copyright Office correctly observed that the former Copyright Royalty
Tribunal's duty to ``carry out its other responsibilities under chapter
10'' was expressly repealed from section 801 in the CRT Reform Act.
EIA, comments at 2. Absent jurisdictional authorization, EIA argues
that section 1010 is outside the scope of the CARPs. Furthermore, EIA
notes that CARP procedures are inconsistent with section 1010
arbitration; a petition initiates CARP rate adjustments whereas
agreement of the parties is necessary to initiate section 1010
arbitration. Id. at 3 (citing section 1010(a) and (b)). Section 1010
arbitration is also governed ``by such procedures as [the Arbitration
Panel] may adopt,'' as opposed to CARP procedures adopted by the
Librarian of Congress. Id. (citing section 1010(d)). Finally, argues
EIA, section 1010 arbitration relates solely to whether given devices
are subject to chapter 10 requirements and are therefore unrelated to
the purpose or expertise of the CARPs to make royalty rate adjustments
and distributions. Id. at 3-4.
In addition to its comments regarding section 1010 arbitration, EIA
believes that the issue of costs regarding both section 1010 and
section 1004(a)(3) proceedings is not properly before the Copyright
Office since neither is a CARP proceeding. Id. at 4.
The Copyright Office reaffirms the conclusion announced in the
Interim Regulations that proceedings under sections 1004(a)(3) and 1010
are not within the jurisdiction of the CARPs. 59 FR 23967 (1994).
Proceedings to adjust the royalty maximum under section 1004(a)(3)
shall therefore be handled solely by the Librarian, and proceedings
under section 1010 shall not be subject to the rules and regulations
governing the CARPs. It may be that an arbitration panel convened under
section 1010 chooses to use some or all of the rules applicable to CARP
proceedings; that choice, however, is up to the arbitration panel. See
17 U.S.C. 1010(d) (the arbitration panel is governed by ``such
procedures as it may adopt'').
With respect to the division of costs among the parties
participating in a section 1004(a)(3) or section 1010 proceeding, we
agree with the EIA that the issue is not ripe for decision since
neither of these proceedings is within the scope of this rulemaking.
VI. Costs
The issue of the costs involved in the entire CARP process was
understandably a serious concern of a number of commentators. These
concerns included the payment and fees charged by arbitrators,
deductions from royalty pools, and billing cycles for arbitrators. The
commentators offered some unique solutions to these problems, some of
which we are adopting in these Final Regulations.
Sections 251.54, 251.65 and 251.74 are the principal regulations
governing the costs of CARP proceedings.<SUP>10 Section 251.54 directs
the CARP panels in the case of rate adjustment proceedings to establish
each participating party's share of the costs of the proceeding. In the
case of distribution proceedings, each participating party's cost is in
direct proportion to its share of the distribution. Sections 251.65 and
251.74 allow the Library of Congress and the Copyright Office to
recover their respective costs for rate adjustment and distribution
proceedings. For rate adjustments, the Librarian and Office may deduct
their reasonable costs from the relevant royalty pool. If no such pool
exists, then the participating parties' costs shall be assessed
directly to them. In distribution proceedings, reasonable costs may be
deducted directly from the relevant royalty pool.
---------------------------------------------------------------------------
\1\0Section 251.38 governs the accounting and costs that
arbitrators are allowed to charge (meals, lodging, etc.). This
section, however, relates to the ethical standards of arbitrators
and is discussed in the context of subpart D of these regulations.
---------------------------------------------------------------------------
A. Assessment of Arbitrator Costs in Distribution Proceedings
We concluded in the Interim Regulations that we did not have the
authority to deduct the costs of the CARPs from the relevant royalty
pool, and could only deduct our costs. We noted that this was an
unsatisfactory result, and described our effort to have Congress amend
the statute. 59 FR 23977 (1994). Our proposed statutory amendment would
allow the Librarian and the Copyright Office to deduct a CARP's costs
from the relevant royalty pool, and pay the arbitrators with such
deductions, before the fees were distributed to copyright claimants.
Copyright Owners noted a problem with our proposal, specifically
the provision which provided that deductions would be made ``before the
fees are distributed to any copyright claimants.'' Copyright Owners
submit that this sentence could be interpreted as suggesting that all
royalty fees must remain on deposit until the final deduction for the
costs of a CARP proceeding has been made. Such an interpretation, they
argue, ``would contradict the authority to make partial distribution as
found elsewhere in the statute and present a serious hardship to
Copyright Owners because of the potential long delay between collection
of royalty fees and their distribution after an arbitration hearing.''
Copyright Owners, comments at 35. They therefore recommend that the
provision be amended to read ``Such deduction shall be made before the
fees are fully distributed to all copyright claimants.'' Id.
Aside from the legislative solution, the commentators offer other
ways for handling the payment and costs of the CARPs. Copyright Owners
offer a unique proposal: make a substantial partial distribution of
royalties at an early stage of each distribution proceeding to an
escrow account administered jointly by all of the claimants. The sole
purpose of the escrow account would be to make funds available for
timely payment of monthly CARP member billings, while avoiding the need
for advance cash outlays from the claimants. Copyright Owners, comments
at 33. Further partial distributions to the escrow account could, if
necessary, be made during the proceeding, and any excess remaining
after all CARP bills are paid could be distributed in accordance with
the final distribution determination. Id.
RIAA/AARC generally supports the proposed escrow account, but
expresses concern that in DART proceedings, the escrow account could be
depleted by monthly CARP payments before the end of the proceeding.
RIAA/AARC also points out that monthly payments in a DART distribution
proceeding are problematic since there has not yet been a DART
distribution decision and there is no precedent to follow for division
of royalties among the claimants and each claimant's pro rata share of
expenses. RIAA/AARC, reply comments at 2-3. RIAA/AARC therefore
recommends that the Copyright Office deduct all CARP expenses from the
royalty pool at the end of a distribution proceeding, citing 17 U.S.C.
802(h)(1) and 802(c) as providing the Office with authority to make
such deductions. RIAA/AARC, comments at 5.
The method of payment of the CARPs is a problem, especially given
our lack of statutory authority to pay the arbitrators directly.
Unfortunately, the legislative solution discussed in the Interim
Regulations, 59 FR 23977, failed for this Congress. Thus, we cannot pay
the CARPs. We will seek the necessary statutory authority in the 104th
Congress.
Because of our lack of authority in this area, we are not adopting
any regulations governing the method of payment of CARP costs. As
discussed above, the Copyright Owners proposed the creation of an
escrow account, administered by the parties, to pay the arbitrators.
Compensation of the arbitrators is the responsibility of the
parties to a proceeding. 17 U.S.C. 802(g). If Copyright Owners wish to
establish such an escrow account, and can obtain the consent of all
parties to the proceeding, they are free to do so. We note that in the
proceeding to adjust royalty rates for the section 119 satellite
carrier license in 1991, the parties paid an upfront sum to those
arbitrators to begin the proceeding, and a final payment at the
conclusion of the proceeding. We offer no opinion as to whether this is
the appropriate manner in which to proceed, but offer it as a
possibility to be considered by the CARPs who have the authority to
direct the ``manner and proportion'' of payment of a CARP's costs.
B. Assessment of Library of Congress and Copyright Office Costs in Rate
Adjustment Proceedings
Section 251.65 of the Interim Regulations allows the Library and
Copyright Office to deduct their costs in rate adjustment proceedings
from the ``relevant royalty pool,'' and, if no such pool exists, to
assess the costs directly to the parties to the proceeding. RIAA/AARC
and Copyright Owners oppose deductions from royalty pools for rate
adjustment proceedings.
RIAA/AARC submits that Sec. 251.65 is contrary to the intent of the
CRT Reform Act. They note that 17 U.S.C. 802(h)(1) provides for
assessment of costs directly to parties where ``no royalty pool exists
from which [the Library and Copyright Office's] costs can be deducted--
i.e. a rate adjustment proceeding.'' Thus, according to RIAA/AARC,
deductions can only be made from royalty pools in distribution
proceedings and not in rate adjustment proceedings. RIAA/AARC, comments
at 10-11. Furthermore, if costs are deducted from the relevant royalty
pool for rate adjustment proceedings, then copyright owners will bear
the entire brunt of the proceeding in contradiction to the Office's
determination that both owners and users should share the cost of rate
adjustments. Id. at 11.
Copyright Owners believe that a portion of the costs of a rate
adjustment could be deducted from a royalty pool, but submit that it is
difficult to identify exactly what is the ``relevant'' royalty pool.
Copyright Owners, reply comments at 1-2. Rate adjustment proceedings
involve the setting of rates for future, not-yet-collected royalty
funds. The ``relevant'' pools would therefore be the future funds
affected by the rate change, rather than past funds. Copyright Owners
submit that the Office should therefore seek the comments of the owners
as to what is the proper meaning of the word ``relevant.'' Id. at 5.
Furthermore, Copyright Owners argue that it is completely unfair for
owners to bear all of the Office's expenses for rate adjustments, since
users clearly benefit as well from the adjustments. They ask that the
Office reinstate the deduction rule proposed in the NPRM which simply
provides that rate adjustment costs will be assessed ``directly to the
parties participating in the proceedings.'' Id. at 6 (citing 59 FR at
2565 (1994)).
We agree that RIAA/AARC and Copyright Owners raise valid points
with respect to Sec. 251.65. As we stated in the Interim Regulations,
we believe that the burden of the Library and Office's costs in a rate
adjustment proceeding should be shared by both owners and users. We did
not intend to place the burden solely on copyright owners, although it
is arguable that Sec. 251.65 appears to do that very thing. We also
agree with Copyright Owners' assessment that the ``relevant'' royalty
pool is not clear; it would seem that it may be necessary to amortize
the costs over a number of royalty pools. In an attempt to solve these
problems, we are therefore accepting Copyright Owners' suggestion of
reinstating Sec. 251.65 as proposed in the NPRM. The section therefore
now reads:
In accordance with 17 U.S.C. 802(h)(1), the Librarian of
Congress and the Register of Copyrights may assess the reasonable
costs incurred by the Library of Congress and the Copyright Office
as a result of the rate adjustment proceedings directly to the
parties participating in the proceedings.
C. Frivolous Claims
Both RIAA/AARC and Copyright Owners are concerned with the costs
that may be generated by frivolous claimants to royalty distributions.
Section 251.54(a)(2) provides that CARPs may assess their costs in
direct proportion to each party's share of the distribution. Thus, a
party who received 0% of the distribution would bear 0% of the costs,
even though the claim of that party may have contributed greatly to the
costs of the other claimants. RIAA/AARC believes that every party
participating in a distribution proceeding should be prepared to bear
some portion of the procedural costs, regardless of whether or not it
receives any portion of the royalty fund. RIAA/AARC, reply comments at
3. They recommend that the Office adopt some type of participation fee
for distribution proceedings, similar to that used by other government
agencies conducting proceedings. Id. at 4. In lieu of a participation
fee, RIAA/AARC recommends that the CARPs be granted the discretion to
allocate a share of expenses of the proceeding to bad faith or
frivolous claimants who receive little or no share of the distribution.
Id. at 4-5.
Copyright Owners echo RIAA/AARC's concerns regarding frivolous
claims and the added costs associated with those claimants. Copyright
Owners, however, would resolve the problem by an amendment to the
statute which they propose the Copyright Office seek. Such an amendment
would provide that ``upon a finding of bad faith or other frivolous or
vexatious conduct, the Librarian may allow a different allocation of
costs of the proceedings as necessary to respond to such conduct.''
Copyright Owners, comments at 38.
With regard to costs in distribution proceedings, section 802(c) is
quite clear in providing that ``the parties shall bear the cost in
direct proportion to their share of the distribution.'' 17 U.S.C.
802(c). No provision is made to charge parties fees for participating
in distribution proceedings, or assessing costs against parties for
frivolous behavior or claims. We cannot imply or interpret the statute
to provide for such measures, nor are we prepared to seek an amendment
of the statute to allow the Librarian to make an assessment of a
claimant's conduct or behavior and impose an additional share of the
cost of the proceedings against that party. Since the Librarian is only
charged with handling matters preliminary to the arbitration and
reviewing the CARP's decision, the Librarian is not in a proper
position to evaluate the conduct of participants to a proceeding. There
is no authority in the statute for the CARPs to change 17 U.S.C.
802(c)'s direction to assess costs in direct proportion to each party's
share of the distribution, nor is there authority for the CARPs to
sanction parties or individuals to a proceeding. The CARPs are,
however, in the best position to assess the conduct of the participants
to a distribution proceeding. Deliberate misrepresentation to a CARP by
a party or individual to a proceeding will be referred by the Copyright
Office to the Justice Department for possible prosecution under the
applicable provisions of title 18 of the United States Code.
D. Arbitrator Costs
Section 251.54(a) provides that a CARP may ``assess its ordinary
and necessary costs'' to the participants to a proceeding. NMPA/HFA
urges the Office to adopt a mechanism for appealing the reasonableness
of fees and expenses assessed. They recommend creation of a procedure,
although they do not describe what kind of procedure or when and how it
could be invoked, whereby the Librarian would be available in instances
where the parties question the fees and expenses charged. NMPA/HFA,
comments at 4.
We are declining to adopt a fee review procedure at this time
because we believe that the rules already contain adequate safeguards.
Section 251.38 governs billing and provides that ``[a]rbitrators are
bound by the hourly or daily fee they proposed to the Librarian of
Congress when their names were submitted to be listed under Sec. 251.3,
and shall not bill in excess of their proposed charges.'' 59 FR 23986
(1994). Subsection (b) further provides that ``[a]rbitrators shall not
charge the parties any expenses in addition to their hourly or daily
charge.'' The safeguards in these rules are reinforced by the agreement
the arbitrators must sign stating they will abide by the terms of these
Final Regulations including ``the billing restrictions specified in
this subpart.'' Sec. 251.38(e). The regulations already contain
substantial provisions to assure that arbitrators not charge excessive
rates or expenses.
Although our regulations do not specifically address the number of
hours for which an arbitrator can charge, we expect that the
arbitrators will be fair and charge for the actual amount of time they
devoted to the proceedings. In some cases, the amount spent may be more
or less for one arbitrator than it is for another. Should an arbitrator
charge for an unreasonable number of hours that could not possibly bear
any relationship to the amount of work performed, we believe that such
action would amount to an ethical violation subject to the remedies of
Sec. 251.39. We do not, however, intend to judge or measure the amount
of time it should take an arbitrator to perform a specific task, and we
therefore decline to create a billing review procedure.
VII. Final Regulations
The following is a section-by-section summary of the amended
regulations, together with a discussion of the applicable comments on
the corresponding provisions of the Interim Regulations.
(a) Part 251--Copyright Arbitration Royalty Panels Rules of Procedure
Part 251 contains most of the rules and procedures governing the
operation of the CARPs and, like the rules proposed in the NPRM,
received the greatest number of observations and suggestions from the
commentators. It is divided into seven subparts, identified as subparts
A through F. Subpart A, entitled ``Organization,'' describes the
composition and selection process for the CARPs. Subparts B and C,
``Public Access to Copyright Arbitration Royalty Panel Meetings'' and
``Public Access to and Inspection of Records,'' remain virtually the
same as those adopted in the Interim Regulations, with only a few minor
amendments. Subpart D, ``Standards of Conduct,'' prescribes the
financial and ethical requirements for arbitrators, and governs ex
parte communications, billing, sanctions for misconduct, and other
matters involving ethical standards. Subpart E, ``Procedures of
Copyright Arbitration Royalty Panels,'' prescribes the procedures to be
followed by the CARPs in conducting proceedings, including those
governing submission of evidence, conduct of hearings, reports of the
CARPs, and orders of the Librarian. Subparts F and G,'' Rate Adjustment
Proceedings'' and ``Royalty Fee Distribution Proceedings,'' provide
certain additional requirements inherent in rate adjustment and
distribution proceedings.
We have already described most of the major issues raised by the
commentators to the Interim Regulations and discussed our responses and
amendments. The following summarizes other additions and changes to the
Interim Regulations in the various subparts of part 251.
(1) Subpart A--Organization
Arbitrator lists. Section 251.3 describes the information that must
be submitted to the Librarian by an arbitration association for each
person to be eligible to serve on a Copyright Arbitration Royalty
Panel. Section 251.3(a)(5) requires ``a description or schedule
detailing fees proposed to be charged by the person for service on a
CARP.'' James Cannings submits that the proposed fees ``should reflect
the current market daily or hourly rate as are charged by arbitrators
who serve National Arbitration Associations, such as, the Arbitration
Association of America.'' Cannings, comments at 2.
For reasons stated above in the discussion of our rejection of a
fee schedule, it is not appropriate for the Librarian or the Copyright
Office to impose fee restrictions on persons seeking to be arbitrators.
Although the fee information provided by a potential arbitrator will
have a bearing on his or her selection, we decline to amend
Sec. 251.3(a)(5) to adopt fee limitations.
Qualifications of the arbitrators. As was the case with the
comments filed in response to the NPRM in this rulemaking proceeding,
Copyright Owners had disparate opinions regarding the requirement in
Sec. 251.5 that all CARP arbitrators be admitted to the practice of
law. Program Suppliers filed a separate comment in response to the
Interim Regulations devoted solely to arguing that the Librarian should
also consider non-lawyers in the selection process, while other
copyright owners identified as Certain Copyright Owners filed a
separate comment urging that the Copyright Office retain the
requirement.
Program Suppliers advance essentially the same argument, which they
made in response to the NPRM, that allowing non-lawyers as arbitrators
could prove invaluable in expediting the arbitration process:
In reaching its ruling, the Office ignored the important value
that non-lawyers with expertise in the types of statistical and
economic studies that comprise the heart and body of distribution
and rate adjustment evidence could bring to the decisionmaking
process. Having arbitrators who are familiar with statistical and
economic studies similar to those presented in prior rate adjustment
and distribution proceedings would give each panel added competence
to deal with the substantive issues raised, and thus assist the
decisionmaking.
It is ironic, to say the least, that the Office's ruling was
based on a concern about the lack of time for non-lawyers to learn
the nuances of legal rulings, but ignored the possibility that
lawyer-arbitrators might have absolutely no familiarity with the
type of complex studies presented by expert witnesses over and over
again in prior distribution and rate adjustment hearings. Although
legal rulings can affect certain aspects of a hearing,
interpretation and understanding of the conflicting substantive
evidence is crucial to reasoned final determinations setting rates
or distribution royalties.
Program Suppliers, comments at 2-3. Program Suppliers believe that
retaining subsection (c) of Sec. 251.5 requiring arbitrators to have
``[e]xperience in conducting arbitration proceedings or facilitating
the resolution and settlement of disputes'' would satisfactorily
provide the potential arbitrator with the type of experience necessary
to conduct arbitration proceedings. Id. at 2.
Certain Copyright Owners argue that Program Suppliers' arguments
have already been rejected in the Interim Regulations, and that Program
Suppliers fail to make any showing that ``the list already developed
will fail to yield at least three Panel members who are capable of
resolving royalty disputes in a fair and efficient manner.'' Certain
Copyright Owners, reply comments at 2. Certain Copyright Owners believe
that economic expertise is not necessary, and might cause an undue bias
among the panel members. Id.
The Copyright Office has reconsidered the lawyer requirement
imposed by Sec. 251.5 and reaffirms its decision to retain the
requirement. It appears that Program Suppliers are not so much
concerned with allowing non-lawyers to serve on CARP panels as they are
with seeing economists among the listed arbitrators. Section 251.5 in
no way prevents economists or those with economic training from serving
on a CARP, provided that they are admitted to the practice of law.
Furthermore, we agree with Certain Copyright Owners' observation that
Program Suppliers have failed to demonstrate any deficiency in the
quality of experience of the potential arbitrators appearing on the
current list. See 59 FR 24486 (1994). The listed arbitrators have
diverse backgrounds and training, including economic expertise.
Moreover, all of the listed persons have experience in the practice of
law which, given the shortness of the arbitration period, is important
in the efficiency and speedy disposition of CARP proceedings. The
Copyright Office, therefore, declines to make any changes to
Sec. 251.5.
(2) Subpart B--Public Access to Copyright Arbitration Royalty Panel
Meetings
CARP Meetings. Copyright Owners make several suggestions with
respect to meetings of the CARPs. Because confidential proprietary
information is sometimes introduced into the record, it is necessary
for the CARP to close a meeting for the purposes of receiving that
information. When confidential material is involved in only a limited
portion of the meeting, it is not necessary to close the entire
meeting. The Interim Regulations, however, provide only for the closing
of an entire meeting. Copyright Owners therefore suggest that
Secs. 251.11(b) and 251.13 be amended to make clear that a CARP may
close only that part of a meeting during which confidential information
is discussed; all other portions of the meeting, however, would be
open. Copyright Owners, comments at 26.
Copyright Owners also note that because it is often impossible to
determine when and if confidential information may be disclosed at a
meeting, it may be impossible to give the seven-day advance notice in
the Federal Register required by Sec. 251.11(b). Copyright Owners
therefore suggest that a general notice of the possibility of the
introduction of confidential information during the course of a hearing
should suffice to meet the notice requirements even though it would be
impossible to provide a specific date and time of the closed portion of
the meeting. Id.
Another issue raised by Copyright Owners is the treatment of a
CARP's internal deliberations. According to Copyright Owners, a literal
reading of Subpart B would apply to confidential deliberations among
CARP arbitrators. ``Thus, for example, if the members of a CARP want to
talk over an objection to testimony during the course of a hearing
before ruling on it, they would be obliged to have that discussion
transcribed and to announce the fact of that confidential `meeting' in
the Federal Register.'' Id. at 26-27. Copyright Owners therefore
propose that the procedures of Secs. 251.14 and 251.15 be modified so
that (a) transcripts or minutes are not necessary for internal CARP
deliberations, and (b) the procedures for closed meetings in
Sec. 251.14 do not apply to such deliberations. Id. at 27.
The points made by Copyright Owners are well taken. In order to
allow CARPs to close only a portion of a meeting, as opposed to an
entire meeting, for the taking of confidential information and related
material, we are amending Secs. 251.11(b) and 251.13 by adding the
phrase ``any portion of a meeting.'' With respect to seven-day advance
publication notice in the Federal Register of a meeting that may be
closed in part or in whole, we agree that a general notice of the
possibility of the introduction of confidential information should
suffice to satisfy the notice requirements. The notice of publication
in the Federal Register therefore shall, as a matter of policy, contain
such a general statement.
Finally, with respect to the procedures required for closed
meetings applying to CARP deliberations, we agree with Copyright Owners
that application of those procedures is neither desirable nor
appropriate. We are therefore amending Sec. 251.14 by adding a new
subsection (d) which provides that ``[t]he procedure for closed
meetings in this section and Sec. 251.15 shall not apply to the
internal deliberations of arbitrators carried out in furtherance of
their duties and obligations under this chapter.''
(3) Subpart C--Public Access to and Inspection of Records
No comments were received regarding subpart C. However, section
251.22(c) has been amended to delete the Sec. .40 per page charge for
photocopies of CARP or Copyright Office records. Because such charges
change from time to time, the section now reads that photocopies are
available at the ``applicable Office charge.''
(4) Subpart D--Standards of Conduct
Financial conflict of interests. When we originally proposed
financial conflict of interest rules, our main concern was with their
proper scope. Did we propose rules that did not cover enough
situations, and therefore miss some very real conflicts of interest,
or, on the other hand, did our proposed rules go too far, and eliminate
qualified persons for inconsequential reasons? In an effort to reach
the proper scope, we not only proposed rules, but we also asked for
comments on certain hypothetical situations that went beyond the scope
of our proposed rules.
The Copyright Owners' response reflects the difficulty of drawing
the proper line. While they offered opinions about the hypothetical
situations that indicated a belief that our proposed rules did not go
far enough, ultimately they did not ask to expand the rules, but
proposed handling the gray area questions on a case-by-case basis,
using the disclosure procedure to the parties described in section
251.32(b)(2) as a method to decide whether the conflict is
disqualifying. The Copyright Owners stated:
Copyright Owners believe that decisions about the financial
conflicts of potential arbitrators must be made on a case-by-case
basis, with no single application of the rules being dispositive on
a specific case. . . . The screening of arbitrators for any panel
ought not to occur through rote application of the rules * * * If
the Librarian finds a question arising as to whether a conflict
exists as to a particular arbitrator, further information should be
made available to the parties so that they may determine whether the
person should be disqualified or whether the potential conflict
might be waived.
Copyright Owners, comments at 21.
We agree with the Copyright Owners that this is the proper
approach. Therefore, we have not modified the scope of the financial
conflict of interest rules, but we have made a change in the disclosure
rule, section 251.32(b)(2). Whenever a potential arbitrator has a
conflict of interest as defined by our rules and has indicated that he
or she wants this conflict to be disclosed to the parties, or whenever
a potential arbitrator has an interest beyond the specified scope of
the rules which raises our concern, section 251.32(b)(2) provides we
will list these interests anonymously in an order issued to the parties
to each upcoming proceeding at the time the Librarian establishes for
precontroversy motions, and we will request that the parties indicate
within 30 days which conflicts or potential conflicts they believe are
disqualifying. For those interests within the scope of our conflict of
interest rules, the indications of the parties will be dispositive. For
those potential conflicts outside of the scope of our conflict of
interest rules, the indications of the parties will aid the Librarian
in his decision.<SUP>11
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\1\1For example, arbitrator X has a spouse who is employed by
one of the parties to the proceeding. Because that is a interest
within the scope of our rules, the response of the parties will be
dispositive. That is, if any one of the parties objects, arbitrator
X may not serve. On the other hand, if arbitrator X has a parent who
is employed by one of the parties, that would be an interest outside
of the scope of our rules. In that case, if one or more of the
parties objects, that objection will be taken into account when the
Librarian makes his decision, but the objection will not
automatically disqualify arbitrator X.
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There was, however, one area in which the Copyright Owners
commented that the scope of the conflict of interest rules was too
broad. Section 251.31(d)(3) imputes the financial interest of the
arbitrator's general partner to the arbitrator. The Copyright Owners
believe that section 251.31(d)(3) means that each potential arbitrator
would have to inquire of each of his/her general partners about their
personal investments. The Copyright Owners consider this an unworkable
burden and doubt that any potential arbitrator would be influenced by
the personal holdings of a general partner, especially if that general
partner's financial interest is unknown to the arbitrator. The
Copyright Owners ask that an exception to the rule on imputation of
interests be made in the case of a general partner's personal financial
holdings. Copyright Owners, comments at 24-25. We agree, and section
251.31(d)(3) has been modified to reflect this exception.
Ex parte communications. In our proposed interim rules,
distinctions were made among four classes of persons concerning ex
parte communications: (1) the Librarian of Congress and the Register of
Copyrights, (2) the selected arbitrators, (3) the listed arbitrators,
and (4) the Library and Copyright Office personnel. In particular, we
drew a distinction between selected arbitrators who are subject to a
total ban on contact between them and interested parties in their
controversy, and listed arbitrators who are not subject to a total ban
on contact, but who may not communicate with any interested party about
the merits of any past, pending, or future proceeding relating to CARP.
Both the Copyright Owners and James Cannings state that they
believe no distinction should be made between selected and listed
arbitrators, and that there should be a total ban on contact with all
arbitrators. The Copyright Owners argue for the highest standard
concerning selected and listed arbitrators because of ``the substantial
financial interests at stake.'' The Copyright Owners, however, would
mitigate the severity of a total ban to permit nonsubstantive
pleasantries between arbitrators and parties. Finally, the Copyright
Owners note that the restrictions concerning arbitrators are against
contact with any interested ``party'' and would prefer that it be
changed to ``person'' because of what they believe to be the ambiguous
meaning of the word ``party.'' Copyright Owners, comments at 15-18.
Having reviewed the comments of the Copyright Owners and James
Cannings, we continue to believe that the distinction between selected
and listed arbitrators is valid. In any given year, 75 persons will be
listed to be available to serve as arbitrators. A total ban on contact
with all 75 persons would be unworkable, and unfair to the persons
offering their services. For the remote chance of being selected, they
would be giving up a degree of personal freedom, not for any actual
impropriety but for the avoidance of the appearance of impropriety.
However, we believe it is fair and highly necessary that listed
arbitrators understand that they may not engage in any actual
impropriety, that is, discuss the merits of any royalty proceeding,
past, present or future. This is a much narrower and more appropriately
tailored limitation on their activities. Once selected, the total ban
on contact with the three selected arbitrators is essential. It assures
fairness to all parties by guaranteeing that no opportunity for
influence can possibly occur. Procedural requests of the selected
arbitrators should be routed through Library or Copyright Office
personnel who are assigned to support the arbitrators.
We do agree, however, with the Copyright Owners' request that
innocent pleasantries should not be subject to the total ban, and that
the word ``party'' should be changed to ``person'' to avoid any
ambiguity. The changes to section 251.33 have been made accordingly.
Gifts and other things of monetary value. In our interim rules, we
make a distinction between selected arbitrators who are subject to a
total ban on soliciting or accepting gifts or any other thing of
monetary value from an interested person, and listed arbitrators who
may solicit or accept gifts of less than $20 per occasion, and not more
than $50 per year from any one source. We also provide that a listed
arbitrator may accept a gift beyond the $20-$50 limit where it is clear
that the gift is motivated by a family relationship or a personal
friendship rather than the potential of the listed arbitrator to be
selected.
The Copyright Owners and James Cannings believe that no distinction
should be made between selected and listed arbitrators and that they
should all abide by a total ban on the soliciting or acceptance of any
gift. The Copyright Owners state that applying the total ban to listed
arbitrators would ``reduce the perceived opportunities for influencing
of either listed or selected arbitrators.'' Copyright Owners, comments
at 18.
Again, as stated above, we believe that the restrictions on the
activities of listed arbitrators should be limited to actual
improprieties only, considering that they may never be selected.
Requiring listed arbitrators to refuse gifts no matter how small, and
to avoid normal relations with existing friends and family simply to
avoid the appearance of impropriety is too great a restriction, and may
result in various individuals refusing to participate. The exceptions
for nominally valued gifts and for gifts from existing friends and
family were derived from the regulations issued by the Office of
Government Ethics, and represent their line-drawing for thousands of
compensated government employees who are in a position to confer a
benefit on a private party (versus listed arbitrators who are neither
compensated nor in a position to confer a benefit). We do not believe
that a lunch valued at less than $20 where no discussion of the merits
of any past, present or future proceeding takes place would result in
the influencing of any listed arbitrator. Consequently, the distinction
between selected and listed arbitrators is retained in the final rules.
Post-arbitration employment restrictions. While we did not receive
any comments on our rule against arbitrators being employed for three
years by any party, person or entity with a financial interest in the
proceeding, we did receive a comment on the hypothetical we posed based
on this section. The hypothetical asked whether an arbitrator who has
ruled on a cable rate adjustment may take a cable system as a client
afterwards if that cable system, although affected by the outcome, had
neither participated in the proceeding nor authorized anyone else to
represent it. The Copyright Owners stated that they believed the
arbitrator could take the cable system as a client, but gave no
reasons, and prefaced their answers to all the hypotheticals by saying
they were difficult to answer given the limited facts available.
Copyright Owners, comments at 22, 24.
We believe that since we received only one limited comment on this
hypothetical, we do not have sufficient comments to render a
conclusion. We reserve judgment until an actual case presents itself.
In the meantime, the rule is adopted as proposed.
Remedies. Currently, section 251.39 provides sanctions against
selected arbitrators, listed arbitrators, and outside parties who
violate the standards of conduct. The Copyright Owners argue that
sanctions should also be put in place for Library and Copyright Office
personnel who violate the standards. Copyright Owners, comments at 24.
Library of Congress Regulations (LCRs) already set forth sanctions
for Library and Copyright Office personnel who violate internal
personnel rules. LCR 2023-1 instructs all staff members to avoid
actions which might result in or create the appearance of using public
office for private gain, giving inequitable and improper preferential
treatment to any person to the prejudice or detriment of others, or
compromising the independence or impartiality of the Library.
We believe this applies to the rules on ex parte communications,
and would cover any disclosure of nonpublic information, even though
section 251.37 only applies to arbitrators. In addition, however, the
Library's General Counsel, who serves as the agency's ethics officer,
has issued a memorandum that will be circulated to all personnel likely
to have any interaction with a CARP detailing the new situations that
could arise and how employees should respond to them.
(5) Subpart E--Procedures of Copyright Arbitration Royalty Panels
a. Formal Hearings. (i) Phase I/Phase II. In the preamble text to
the Interim Regulations, we asked several questions with regard to the
procedural division of royalty distribution proceedings. The Copyright
Royalty Tribunal traditionally divided distribution proceedings into
two phases: Phase I determined the percentage allocation among the
categories of claimants, while Phase II resolved disputes within a
claimant category. The Tribunal practice, however, was just that, and
was never embodied in the rules. We sought comment on the following:
Is the procedure of dividing a cable distribution proceeding
into Phases I and II a precedent that is binding on the Copyright
Office?
If not, should it nonetheless be followed?
If it should be followed, should we adopt rules governing the
procedure?
Should those rules include a definition of each of the Phase I
categories?
59 FR at 23976-23976 (1994).
Copyright Owners urge that, regardless of the binding effect of the
former Tribunal's practice on the Office, the division of proceedings
into Phase I and Phase II should continue in order to prevent chaos in
the distribution process. Copyright Owners, comments at 13. They note
that Phase I claimant categories offer two primary benefits to the
distribution process. First, by allowing each claimant category to
collect the total royalty awarded to it and distribute that total to
its individual claimants, the ``process frees the Copyright Office from
the expense of mailing hundreds of distribution checks to individual
claimants each time a distribution is made.'' Id. at 14. Second, the
grouping together of claimants into categories reduces Phase I
litigation to less than ten parties, rather than hundreds of individual
claimants. Id. ``In short, the established Phase I/Phase II divisions
provide very strong procedural and organizational efficiencies that
have worked well in the past and should be continued in the future.''
Id.
Copyright Owners urge the Office to adopt procedures governing
Phase I/Phase II proceedings that would allow for separate hearings of
Phase I and Phase II proceedings, but offer no comment or suggestion as
to what those rules should be. Id. at 14-15. They also believe that
definitions of Phase I categories should be available to arbitrators,
but not included in these rules because ``it could create unnecessary
rigidity that would fail to accommodate changing conditions.'' Id. at
15. Copyright Owners therefore suggest that parties provide a
stipulated set of program definitions to arbitrators at the start of
each distribution proceeding. Id.
The Copyright Office believes that the division of distribution
proceedings into Phase I and Phase II categories provides an efficient
manner for conducting such proceedings, and therefore will retain the
use of the categories. In dividing distribution proceedings into Phase
I and Phase II categories, we will look to Tribunal precedent for
guidance, as well as the exigencies of each individual case. For these
reasons, we do not believe that it is necessary to adopt separate
procedures for Phase I and Phase II proceedings, as is suggested by
Copyright Owners. The Copyright Royalty Tribunal functioned for fifteen
years without separate rules for each type of proceeding, and exercised
its discretion to divide each distribution into Phase I and Phase II
categories on a case-by-case basis. The procedural rules of the
subchapter applicable to distribution proceedings apply with equal
basis to each controversy, regardless of whether it is Phase I or Phase
II, and therefore do not require separate sets of rules. Furthermore,
it is the Librarian who shall determine the number and category of
controversies in each distribution proceeding, and submit each
controversy or controversies to one or more CARPs as is appropriate.
Copyright Owners are therefore correct in their assertion, see comments
at 14-15, that the nature and extent of controversies in one royalty
distribution proceeding may require the convocation of more than one
CARP for resolution. Thus, for example, a CARP may be convened to
resolve controversies in Phase I, and another may be required at a
later date to resolve controversies in Phase II. The only way to make
such determinations is on a case-by-case basis, as was done by the
former Tribunal, and the Office therefore heeds the advice of Copyright
Owners by declining to adopt rules governing the identification and
classification of Phase I/Phase II procedures which could ``create
unnecessary rigidity that would fail to accommodate changing
conditions.'' Copyright Owners, comments at 15.
The Copyright Office also accepts Copyright Owners' suggestion of
allowing parties to a proceeding to stipulate the definitions of Phase
I categories and programs to the arbitrators in that proceeding. In
order to allow arbitrators a sufficient amount of time to become
familiar with the definitions, the Librarian will, in the notice
establishing the 45-day precontroversy discovery period, instruct the
parties to the proceeding to stipulate a complete set of definitions by
the end of the precontroversy discovery period. If the parties are
unable to reach agreement by that date, the Copyright Office will, in
accordance with our authority to provide support to the CARPs under 17
U.S.C. 801(d), provide the arbitrators with the necessary definitions
of Phase I categories and programs to allow them to accomplish their
task.
(ii) Paper proceedings. Section 251.41(b) permits the parties to a
proceeding to petition the Librarian to have their controversy decided
solely on the submission of written pleadings. The petition may be
granted if ``(1) there is no genuine issue as to any material fact, or
(2) all parties to the controversy agree with the petition.'' 59 FR
23976 (1994).
Copyright Owners believe that Sec. 251.41(b)(2) is in need of
clarification. They note:
As currently drafted, Section 251.41(b)(2) allows rulings only
in uncontested cases where ``all parties to the controversy agree
with the petition.'' Of course, if all parties agree with the
petition, then there would be no need for a ruling.
Copyright Owners believe that Section 251.41(b)(2) was intended
to allow ruling where all parties agree with the request that the
issue be decided by petition, regardless of whether they agree with
the merits of the petition.
Copyright Owners, comments at 31.
Copyright Owners' point is well taken. The intention of the rule is
to allow the parties to a proceeding to petition the Librarian and
dispense with formal proceedings. The CARP panel would then decide the
controversy or rate adjustment on the basis of written pleadings only,
i.e., a ``paper'' proceeding. In deciding whether to allow a paper
proceeding before a CARP, the petition must demonstrate that (1) there
is no genuine issue of material fact involved in the proceeding (not
the petition), or else 2) the parties unamimously agree that they wish
to have a paper proceeding. If either one of these factors is properly
represented in the petition, the Librarian may (not must) grant the
petition, or can designate the issue of whether a paper proceeding
would be proper to the CARP. Section 251.41(b)(2) is only intended to
allow the Librarian to decide if a paper proceeding before a CARP would
be appropriate; it is not designed to allow the Librarian to decide the
merits of a paper proceeding or the case. To clarify the intention of
the rule, we are amending it.
b. Conduct of hearings: Role of arbitrators. Section 251.46(b)
provides that ``Only the arbitrators of a CARP, or counsel as provided
in this chapter, shall question witnesses.'' James Cannings argues that
the rule, as drafted, precludes parties from appearing pro se before
the CARPs, since only the CARPs and ``counsel'' can question witnesses.
Cannings, comments at 2.
Section 251.46(b) does not prohibit pro se representation in a CARP
proceeding. A pro se litigant acts as his own counsel, and is entitled
to question witnesses in the same manner as parties represented by
counsel. No amendment to Sec. 251.46(b) is necessary.
c. Witnesses and Counsel. Copyright Owners suggest that there may
be some confusion with the drafting of Sec. 251.47. Subsection (l)
provides:
A CARP will encourage individuals or groups with the same or
similar interests in a proceeding to select a single representative
to conduct their examination and cross-examination for them.
However, if there is no agreement on the selection of a
representative, each individual or group will be allowed to conduct
its own examination and cross examination, but only on issues
affecting its particular interests, provided that the questioning is
not repetitious or cumulative of the questioning of other parties
within the group.
59 FR 23989 (1994).
Copyright Owners believe that, as currently drafted, the subsection
``seems to require that all parties with a similar interest accede to a
single counsel for examination or cross-examination of all witnesses.
It is unlikely that parties would agree to such a broad transfer.''
Copyright Owners, comments at 32. Copyright Owners therefore suggest
that the phrase ``of any given witness'' be added each time after the
word ``cross-examination'' to clarify that agreements between parties
of similar interest to utilize one representative for questioning
applies only to individual witnesses, and not across the board for an
entire proceeding. Id.
We do not perceive the confusion expressed by Copyright Owners and
believe that subsection (l), as drafted, permits parties with similar
interest to agree to one representative for examining and cross-
examining either one witness or as many as the agreement allows.
Nevertheless, in the interest of clarity, we are adopting Copyright
Owners' suggested amendment.
d. Transcript and Record. In our discussion of Sec. 251.49 in the
Interim Regulations, we solicited comments on whether the hearing
sessions should be recorded on video as well as audio tape. We noted
that videotaping would add to the cost of the proceeding, but it would
also:
``(1) Ensur[e] the accuracy of the official transcript, (2)
allow[] the arbitrators to reach a better decision by helping them
to review the case more accurately, and (3) afford[] arbitrators who
missed any portion of the proceeding, because of illness or because
they were appointed after the proceeding had begun, an opportunity
to make up for their absences.
59 FR at 23977 (1994).
Copyright Owners are opposed to the videotaping of proceedings,
arguing that they ``do not believe that any advantage derived from
videotaping would be worth the considerable expense and difficulty
associated with video recording.'' Copyright Owners, comments at 29.
They also note that videotaping ``could, in fact, have the unintended
and perverse effect of increasing the number of hearing days missed by
an arbitrator who considers seeing a taped performance as equivalent to
being present during the live presentation.'' Id.
For these reasons, we will not videotape distribution or rate
adjustment proceedings, unless the parties to a particular proceeding
unanimously ask us to do so.
(6) Rate Adjustment Proceedings
Settlements.
(i) Settlement period. Section 251.63 provides a 30-day period
before commencement of a rate adjustment proceeding to allow for
consideration of the rate adjustment petition and, more significantly,
to give the parties an opportunity to settle their differences. We are
amending this section to make it clear that the Librarian shall
designate this 30-day period prior to, and separate from, the 45-day
period for precontroversy discovery. We are also amending Sec. 251.64
to reflect that the arbitration proceedings will commence after both
the 30-day period for settling rate differences, and the 45-day period
for precontroversy discovery.
(ii) Universal Settlements. In the Interim Regulations, we asked
two questions related to settlement of rate adjustments:
If a settlement is reached, would it be a useful alternative to
the convening of a CARP for the Library/Office to propose the
agreed-upon rate to the public in a notice-and-comment proceeding?
Does the Librarian have the authority to adopt such a procedure,
or would the convening of a CARP be required?
59 FR 23978 (1994).
RIAA<SUP>12 and Copyright Owners believe that in the case of a
universal settlement a CARP would have no authority over a proceeding.
The Office would therefore be responsible for amending the rules, after
a public notice-and-comment period, to reflect the agreed upon rate.
RIAA/AARC, comments at 8; Copyright Owners, reply comments at 6. RIAA
argues that the CARPs' authority is limited to controversies over
royalty rates; if there is no controversy because there has been a
settlement, then there is no CARP authority. RIAA/AARC, comments at 8-9
[(citing our NPRM, 59 FR 2553 (1994)]. Copyright Owners note that
convening a CARP after settlement has been reached ``would make no
sense'' and ``would subject the owner/user participants to needless
expense.'' Copyright Owners, reply comments at 6-7. A public notice-
and-comment period ``should provide the Librarian with an adequate
record on which to determine whether to amend the regulations
consistent with the terms of the settlement.'' Id. at 8.
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\1\2AARC took no position on this particular issue involving
rate adjustment proceedings.
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NMPA/HFA believes that the rules should provide the parties to a
rate adjustment proceeding with the option of either having a CARP
convened, or submitting the agreed upon rate to a public notice-and-
comment proceeding. NMPA/HFA, comments at 2. NMPA/HFA believes that the
statutory authority to provide such procedures ``can be fairly implied
from the Reform Act's direction that the Librarian adopt procedures and
regulations relating to CARP proceedings and the Reform Act's express
grant of authority to the Librarian to make the final determination in
rate adjustment proceedings.'' Id. at 3.
We agree with Copyright Owners that it would make little sense to
go through the time and expense of convening a CARP solely for the
purpose of approving a settlement agreement. Without deciding the issue
of whether a CARP would have jurisdiction in such cases, we are
amending Sec. 251.63 by adding a new subsection:
(b) In the case where a settlement is reached as to the
appropriate royalty rate, the Librarian may, upon the request of the
settling parties, submit the agreed upon rate to the public in a
notice-and-comment proceeding. The Librarian may adopt the rate
embodied in the proposed settlement without convening an arbitration
panel, provided that no opposing comment is received by the
Librarian from a party with an intent to participate in a CARP
proceeding.
(7) Part 252--Filing of Claims to Cable Royalties
Compliance with statutory dates. Section 252.4 describes the
circumstances under which a claim to cable copyright royalties must be
filed in order to be considered timely.
(i) Delivery of claims. We are amending Sec. 252.4(a) to adjust for
some of the difficulties faced by the Copyright Office in receiving
cable royalty claims on a timely basis. Unlike the CRT, the Copyright
Office and the Library of Congress are large institutions receiving a
tremendous amount of mail each day, only a small percentage of which
involves CARP matters. For the July 1994 filing period, we experienced
difficulties with cable and satellite claims arriving at different
locations of the Library by many different means of delivery (U.S.
mail, messenger service, private mail carrier delivery). In order to
assure that claims arrive during the statutorily prescribed time
period, we are amending Sec. 252.4(a) to specify the two methods by
which claims may be delivered to the Copyright Office. The first method
is by mailing the claim to the official CARP address with the U.S.
Postal Service, proper postage attached, so that when the claim arrives
at the Copyright Office, it bears a July U.S. postmark. The second
method is hand delivery to the Office of the Register of Copyrights,
located in Room 403 of the James Madison Building, 101 Independence
Avenue SE., Washington, DC 20540, during normal business hours in the
month of July. Such hand delivery may be done by the claimant itself,
or by the claimant's agent, or by a private delivery carrier (ex.
Federal Express, DHL, messenger service) or other such manner. Hand
delivery of claims to the mail receiving area of the Library of
Congress, or to other locations in either the Library or the Copyright
Office, is not compliance with the regulation. Claims which are hand
delivered to other locations in the Library or Copyright Office will be
dismissed if the Office cannot conclusively determine that the claim
was physically located on Library and/or Copyright Office premises
during the month of July.
(ii) U.S. postmark. Canadian claimants challenge the requirement in
Sec. 252.4(a)(2) that mailed claims must bear a July U.S. postmark. We
took this provision directly from the Copyright Royalty Tribunal's
rules. See 59 FR 23979 (1994). Canadian Claimants acknowledge that they
did not object to the Tribunal's initial adoption of U.S. postmark
requirement, but state that they have experienced ``difficulties'' with
the requirement since its adoption, although they do not precisely
state what those ``difficulties'' are.<SUP>13 Canadian Claimants,
comments at 2. They therefore urge the Office to accept both Canadian
and U.S. postmarks. Id.
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\1\3Canadian Claimants state earlier in their comment that their
membership changes from year to year and that produces ``the
constant presence of new claimants who are unaware of the filing
requirements and appear on the scene at (or shortly after) the last
moment * * *'' Id. Presumably it is the last minute identification
of Canadian copyright owners eligible for cable royalties that
produces the ``difficulties.''
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We discussed in the Interim Regulations the Copyright Owners'
request that we allow July mailings from Canadian and Mexican post
offices. See 59 FR 23979 (1994). We declined the request, but stated
that ``we invite them [Copyright Owners], and any other interested
parties, to provide further information and comments on the question.''
Id. Our request for further information emanates from our concern with
compliance with the statute. The statutory requirement for filing cable
claims is clearly spelled out in 17 U.S.C. 111(d)(4)(A): ``During the
month of July in each year, every person claiming to be entitled to
compulsory license fees for secondary transmissions shall file a claim
with the Librarian of Congress * * *'' The statute requires that the
claim be with the Librarian during the month of July, arguably meaning
in his possession. However, we accept the submission of a claim to the
U.S. Postal Service, as statutorily sufficient, providing it bears a
July U.S. postmark. The postmark is an acknowledgment that the claim
was validly tendered with the U.S. Government in the month of July.
Our concern with allowing Canadian and Mexican postmarks is that
those marks would not necessarily prove compliance with the statute.
Neither the Canadian nor the Mexican postal service is part of the U.S.
Government. Furthermore, if we were to allow Canadian and Mexican
postmarks, we would have to allow national postmarks from all
countries, since there are some copyright owners of cable retransmitted
programming that do not reside in the United States, Canada or Mexico.
Copyright Owners and Canadian Claimants' desire for allowing
Canadian and Mexican postmarks appears to be motivated by the desire
ostensibly to add a few more days to the claim period. We, however,
agree with what the Tribunal said in 1989 when it adopted the July U.S.
postmark requirement:
The Tribunal does not believe that our insistence that either a
claim be received in our office during July or that it bear a July
U.S. postmark is too restrictive. The claim itself is easy to
prepare. No government forms are necessary. The information that is
required can be put on one page. Further, the claimant has six
months from the close of the calendar year to prepare it, and the
entire month of July to submit it to the Tribunal. Our proposed rule
provides a bright line test which should end all questions of fact
regarding the timeliness of the claim.
54 FR 12614, 12615 (1989). For these reasons, we are not adopting the
Canadian Claimants' suggestion.
(iii) Proving mailed claims. Section 252.4(e) provides in the
pertinent part that:
In the event that a properly addressed and mailed claim is not
timely received by the Copyright Office, a claimant may nonethe less
prove that the claim was properly mailed if it was sent by certified
mail return receipt requested, and the claimant can provide the
receipt.
59 FR 23993 (1994).
Copyright Owners believe that this provision, as drafted, could
cause some confusion. Copyright Owners, reply comments at 8. They note
that there are two receipts associated with certified mail--the one
given the sender by the Post Office and the one signed by the
receptionist and returned to the sender--and that subsection (e) does
not identify which receipt is acceptable proof. Copyright Owners,
however, state that our discussion of the provision in the Interim
Regulations makes it clear that either receipt would be acceptable. See
59 FR 23980 (1994). (``If the claim was sent by certified mail, return
receipt requested, we will accept the claim if the claimant can produce
the receipt showing that it was properly mailed.'') In order to clear
up any possible ambiguity in the regulation, the Copyright Owners
propose that we amend subsection (e) to read:
In the event that a properly addressed and mailed claim is not
timely received by the Copyright Office, a claimant may nonetheless
prove that the claim was properly mailed if it was sent by certified
mail return receipt requested, and the claimant can provide the
receipt showing that it was properly mailed or timely received.
Copyright Owners, reply comments at 9. We are adopting the Copyright
Owners' suggestion.
(8) Part 257--Filing of Claims to Satellite Carrier Royalty Fees
Part 257 remains unchanged, except that we amend Sec. 257.4(a)
regarding timely filing of claims, discussed above, and accept
Copyright Owners proposed amendment regarding the proving of mailed
satellite carrier royalty claims through the use of certified mail
return receipt requested. Sec. 257.4 (e). We are also retaining the
requirement of a U.S. postmark for satellite carrier claims,
Sec. 257.4(a)(2), for the same reasons we are retaining the requirement
for cable claims.
(9) Part 259--Filing of Claims to Digital Audio Recording Devices and
Media Royalty Payments
Consistent with our decision concerning joint claims for cable and
satellite carriers, Sec. 259.3 is amended to require that joint
claimants to the DART fund include a list of all their joint claimants
when the claim is filed, except, as discussed above, the performing
rights societies will receive no exemption from this requirement.
Performing rights societies will have to list the members and
affiliates they have signed to represent in DART as part of their
filing a claim. As a result, the current Sec. 259.3(d), which allows
joint claimants to lump their claims together after the claim period,
and the current Sec. 259.3(f) which provides that the Office may
require the productions of the list after the claim period ends, are
deleted. As a practical matter, joint claimants who decide after the
claim period to join together will simply report to the Office that
they have settled, and no need to consolidate their claim exists.
In addition, we amend Sec. 259.5(a) regarding timely delivery of
claims and accept the Copyright Owners' proposed amendment of
Sec. 259.5(e) regarding the proving of mailed DART claims through the
use of certified mail return receipt requested.
List of Subjects
37 CFR Part 251
Administrative practice and procedure, Hearing and appeal
procedures.
37 CFR Part 252
Cable television, Claims, Copyright.
37 CFR Part 253
Copyright, Music, Radio, Rates, Television.
37 CFR Part 257
Cable television, Claims.
37 CFR Part 259
Claims, Copyright, Digital audio recording devices and media.
Final Regulations
For the reasons set out in the preamble, 37 CFR chapter II is
amended as follows:
PART 251--COPYRIGHT ARBITRATION ROYALTY PANEL RULES OF PROCEDURE
1. The authority citation for part 251 continues to read as
follows:
Authority: 17 U.S.C. 801-803.
Subpart A--Organization
2. In section 251.2, paragraph (f) is added to read as follows:
Sec. 251.2 Purpose of Copyright Arbitration Royalty Panels.
* * * * *
(f) To adjust royalty rates for the satellite carrier compulsory
license in accordance with 17 U.S.C. 119(c).
Sec. 251.3 [Amended]
3. Section 251.3(a) is amended by removing ``, on or before May 6,
1994, and before January 1 of each year thereafter,'' and adding
``before January 1 of each year''.
3a. Section 251.3(b) is amended by removing ``After May 6, 1994,
and after January 1, of each year thereafter,'' and adding ``After
January 1 of each year,''.
Sec. 251.4 [Amended]
4. Section 251.4(a) is amended by removing ``30-day period
specified in Sec. 251.63'' and adding ``45-day period specified in
Sec. 251.45(b)(2)(i)''.
4a. Section 251.4(b) is amended by removing ``30-day time period
specified in Sec. 251.45(a)'' and adding ``45-day period specified in
Sec. 251.45(b)(1)(i)''.
Subpart B--Public Access to Copyright Arbitration Royalty Panel
Meetings
5. In Sec. 251.11, paragraph (b) is amended by revising the second
sentence to read as follows:
Sec. 251.11 Open meetings.
* * * * *
(b) * * * Such announcement shall state the times, dates, and place
of the meetings, the testimony to be heard, whether any of the
meetings, or any portion of a meeting, is to be closed, and, if so,
which ones, and the name and telephone number of the person to contact
for further information.
* * * * *
6. In Sec. 251.13, the introductory text is revised to read as
follows:
Sec. 251.13 Closed Meetings.
In the following circumstances, a Copyright Arbitration Royalty
Panel may close meetings, or any portion of a meeting, or withhold
information from the public:
* * * * *
7. In Sec. 251.14, paragraph (d) is added to read as follows:
Sec. 251.14 Procedure for closed meetings.
* * * * *
(d) The procedure for closed meetings in this section and in
Sec. 251.15 shall not apply to the internal deliberations of
arbitrators carried out in furtherance of their duties and obligations
under this chapter.
Subpart C--Public Access to and Inspection of Records
Sec. 251.22 [Amended]
8. Section 251.22(c) is amended by removing ``$0.40 per page'' and
adding ``the applicable Office charge''.
Subpart D--Standards of Conduct
9. Section 251.31 is amended by revising paragraph (d) to read as
follows:
Sec. 251.31 Financial interests.
* * * * *
(d) For the purposes of this section, the financial interests of
the following persons will serve to disqualify the selected arbitrator
to the same extent as if they were the arbitrator's own interests:
(1) The arbitrator's spouse;
(2) The arbitrator's minor child;
(3) The arbitrator's general partner, except that the personal
financial holdings, including stock and bond investments, of such
partner will not serve to disqualify the selected arbitrator; or
(4) An organization or entity for which the arbitrator serves as
officer, director, trustee, general partner or employee.
10. Section 251.32 is amended by revising paragraph (b) to read as
follows:
Sec. 251.32 Financial disclosure statement.
* * * * *
(b) If any conflicts do exist, the Librarian shall not choose that
person for the proceeding for which he or she has the financial
conflict, except--
(1) The listed arbitrator may divest himself or herself of the
interest that caused the disqualification, and become qualified to
serve; or
(2) The listed arbitrator may offer to disclose on the record the
conflict of interest causing disqualification. In such instances:
(i) The Librarian shall publish a list detailing the conflicts of
interest the listed arbitrators have offered to disclose, and any other
matters which, although outside of the scope of the restrictions of
Sec. 251.31, nevertheless, in the view of the Librarian, raise
sufficient concerns to warrant disclosure to the affected parties;
(ii) Such list shall be published in the order establishing the
period for precontroversy motions (see, Sec. 251.45(b));
(iii) Such list shall contain the matters of concern, but shall not
contain the names of the listed arbitrators.
(iv) Any party to the proceeding for which the listed arbitrator is
being considered may interpose within the 45-day period described in
Sec. 251.45(b) an objection to that arbitrator being selected. If the
objection is raised to a matter found to be within the scope of
Sec. 251.31, the objection will serve automatically to disqualify the
arbitrator. If the objection is raised to a matter found to be outside
the scope of Sec. 251.31, the objection will be taken into account when
the Librarian makes his or her selection, but will not serve
automatically to disqualify the arbitrator.
* * * * *
11. Section 251.33(b) is revised to read as follows:
Sec. 251.33 Ex parte communications.
* * * * *
(b) Selected arbitrators. No interested person shall engage in, or
cause someone else to engage in, ex parte communications with the
selected arbitrators in a proceeding for any reason whatsoever from the
time of their selection to the time of the submission of their report
to the Librarian, and, in the case of a remand, from the time of their
reconvening to the time of their submission of their report to the
Librarian. Incidental communications unrelated to any proceeding, such
as an exchange of pleasantries, shall not be deemed to constitute an ex
parte communication.
* * * * *
Sec. 251.33 [Amended]
12. Section 251.33(c) is amended by removing ``party'' and adding
``person''.
Subpart E--Procedures of Copyright Arbitration Royalty Panels
13. In Sec. 251.41, paragraph (b) is revised to read as follows:
Sec. 251.41 Formal hearings.
* * * * *
(b) During the 45-day period specified in Sec. 251.45(b)(1)(i) for
distribution proceedings, or during the 45-day period specified in
Sec. 251.45(b)(2)(i) for rate adjustment proceedings, as appropriate,
any party may petition the Librarian of Congress to dispense with
formal hearings, and have the CARP decide the controversy or rate
adjustment on the basis of written pleadings. The petition may be
granted if--
(1) The controversy or rate adjustment, as appropriate, does not
involve any genuine issue of material fact; or
(2) All parties to the proceeding agree, in writing, that a grant
of the petition is appropriate.
14. In Sec. 251.43, paragraph (a) is revised to read as follows:
Sec. 251.43 Written cases.
(a) All parties who have filed a notice of intent to participate in
the hearing shall file written direct cases with the Copyright
Arbitration Royalty Panel, and with other parties in the manner in
which the Librarian of Congress shall direct in accordance with
Sec. 251.45(b).
* * * * *
15. Section 251.45 is amended by revising the section heading and
paragraphs (a)-(c) to read as follows:
Sec. 251.45 Discovery and prehearing motions.
(a) Request for comment, notice of intention to participate. In the
case of a royalty fee distribution proceeding, the Librarian of
Congress shall, after the time period for filing claims, publish in the
Federal Register a notice requesting each claimant on the claimant list
to negotiate with each other a settlement of their differences, and to
comment by a date certain as to the existence of controversies with
respect to the royalty funds described in the notice. Such notice shall
also establish a date certain by which parties wishing to participate
in the proceeding must file with the Librarian a notice of intention to
participate. In the case of a rate adjustment proceeding, the Librarian
of Congress shall, after receiving a petition for rate adjustment filed
under Sec. 251.62, or, in the case of noncommercial educational
broadcasting and satellite carrier, prior to the commencement of
proceedings, publish in the Federal Register a notice requesting
interested parties to comment on the petition for rate adjustment. Such
notice shall also establish a date certain by which parties wishing to
participate in the proceeding must file with the Librarian a notice of
intention to participate.
(b) Precontroversy discovery, filing of written cases, scheduling.
(1)(i) In the case of a royalty fee distribution proceeding, the
Librarian of Congress shall, after the filing of comments and notices
described in paragraph (a) of this section, designate a 45-day period
for precontroversy discovery and exchange of documents. The period will
begin with the exchange of written direct cases among the parties to
the proceeding. Each party to the proceeding must serve a complete copy
of its written direct case on each of the parties to the proceeding no
later than the first day of the 45-day period. At any time during the
45-day period, parties to the proceeding may file with the Librarian
prehearing motions and objections, including petitions to dispense with
formal hearings under Sec. 251.41(b), and objections to arbitrators
appearing on the arbitrator list under Sec. 251.4. Replies to motions,
petitions, and objections must be filed with the Librarian seven days
from the filing of such motions, petitions, and objections with the
Librarian.
(ii) Subject to Sec. 251.72, the Librarian shall establish, prior
to the commencement of the 45-day period, the date on which arbitration
proceedings will be initiated.
(2) (i) In the case of a rate adjustment proceeding, the Librarian
of Congress shall, after the filing of comments and notices described
in paragraph (a) of this section, designate a 45-day period for
precontroversy discovery and exchange of documents. The period will
begin with the exchange of written direct cases among the parties to
the proceeding. Each party to the proceeding must serve a complete copy
of its written direct case on each of the parties to the proceeding no
later than the first day of the 45-day period. At any time during the
45-day period, parties to the proceeding may file with the Librarian
prehearing motions and objections, including petitions to dispense with
formal hearings under Sec. 251.41(b), and objections to arbitrators
appearing on the arbitrator list under Sec. 251.4. Replies to motions,
petitions and objections must be filed with the Librarian seven days
from the filing of such motions, petitions, and objections with the
Librarian.
(ii) Subject to Sec. 251.64, the Librarian shall establish, prior
to the commencement of the 45-day period, the date on which arbitration
proceedings will be initiated.
(c) Discovery and motions filed with a Copyright Arbitration
Royalty Panel. (1) A Copyright Arbitration Royalty Panel shall
designate a period following the filing of written direct and rebuttal
cases with it in which parties may request of an opposing party
nonprivileged underlying documents related to the written exhibits and
testimony.
(2) After the filing of written cases with a CARP, any party may
file with a CARP objections to any portion of another party's written
case on any proper ground including, without limitation, relevance,
competency, and failure to provide underlying documents. If an
objection is apparent from the face of a written case, that objection
must be raised or the party may thereafter be precluded from raising
such an objection.
* * * * *
Sec. 251.47 [Amended]
15. Section 251.47(l) is amended by removing ``for them'' and
adding ``of any given witness'' after the word ``cross-examination''
each place it appears.
16. Section 251.51 is amended by revising the section heading to
read as follows:
Sec. 251.51 Closing the record.
* * * * *
Sec. 251.52 [Amended]
17. Section 251.52(c) is amended by removing ``an applicant'' in
the third sentence and adding ``a party''.
Sec. 251.53 [Amended]
18. Section 251.53(a) is amended by adding ``and any replies
thereto'' after ``conclusions of law'' in the first sentence.
Sec. 251.54 [Amended]
19. Section 251.54(a) is amended by removing ``After the submission
of the panel's report to the Librarian of Congress, the'' and adding
``The''.
20. In section 251.54(c), the third sentence is removed.
Subpart F--Rate Adjustment Proceedings
21. In section 251.60, the first sentence is revised to read as
follows:
Sec. 251.60 Scope.
This subpart governs only those proceedings dealing with royalty
rate adjustments affecting cable (17 U.S.C. 111), the production of
phonorecords (17 U.S.C. 115), performances on coin-operated phonorecord
players (jukeboxes) (17 U.S.C. 116), noncommercial educational
broadcasting (17 U.S.C. 118) and satellite carriers (17 U.S.C. 119). *
* *.
22. In section 251.61, paragraph (d) is added to read as follows:
Sec. 251.61 Commencement of adjustment proceedings.
* * * * *
(d) In the case of the satellite carrier compulsory license, rate
adjustment proceedings shall commence on January 1, 1997, in accordance
with 17 U.S.C. 119(c)(3)(A), for satellite carriers who are not parties
to a voluntary agreement filed with the Copyright Office in accordance
with 17 U.S.C. 119(c)(2).
23. Section 251.63 is revised to read as follows:
Sec. 251.63 Consideration of petition; settlements.
(a) To allow time for the parties to settle their differences
regarding rate adjustments, the Librarian of Congress shall, after the
filing of a petition under Sec. 251.62 and before the 45-day period
specified in Sec. 251.45(b)(2)(i), designate a 30-day period for
consideration of their settlement. The Librarian shall cause notice of
the dates for that period to be published in the Federal Register.
(b) In the case of a settlement among the parties to a proceeding,
the Librarian may, upon the request of the parties, submit the agreed
upon rate to the public in a notice-and-comment proceeding. The
Librarian may adopt the rate embodied in the proposed settlement
without convening an arbitration panel, provided that no opposing
comment is received by the Librarian from a party with an intent to
participate in a CARP proceeding.
24. In Sec. 251.64, the first sentence and third sentences are
revised to read as follows:
Sec. 251.64 Disposition of petition; initiation of arbitration
proceeding.
After the end of the 45-day precontroversy discovery period, and
after the Librarian has ruled on all motions and objections filed under
Sec. 251.45, the Librarian will determine the sufficiency of the
petition, including, where appropriate, whether one or more of the
petitioners' interests are ``significant.'' * * * The same declaration
and notice of initiation shall be made for noncommercial educational
broadcasting and the satellite carrier compulsory license in accordance
with 17 U.S.C. 118 and 119, respectively. * * *
25. Section 251.65 is revised to read as follows:
Sec. 251.65 Deduction of costs of rate adjustment proceedings.
In accordance with 17 U.S.C. 802(h)(1), the Librarian of Congress
and the Register of Copyrights may assess the reasonable costs incurred
by the Library of Congress and the Copyright Office as a result of the
rate adjustment proceedings directly to the parties participating in
the proceedings.
Sec. 3251.7 [Removed]
Secs. 251.73 and 251.74 [Redesignated as Secs. 251.72 and 251.73]
26. Section 251.72 is removed and Secs. 251.73 and 251.74 are
redesignated as Secs. 251.72 and 251.73.
PART 252--FILING OF CLAIMS TO CABLE ROYALTY FEES
27. The authority citation for part 252 continues to read as
follows:
Authority: 17 U.S.C. 111(d)(4), 801, 803.
28. Section 252.3(a)(3) and (4) are revised, and paragraph (d) is
removed as follows:
Sec. 252.3 Content of claims.
(a) * * *
(3) If the claim is a joint claim, a concise statement of the
authorization for the filing of the joint claim, and the name of each
claimant to the joint claim. For this purpose, a performing rights
society shall not be required to obtain from its members or affiliates
separate authorizations, apart from their standard membership affiliate
agreements, or to list the name of each of its members or affiliates in
the joint claim.
(4) For individual claims, a general statement of the nature of the
claimant's copyrighted works and identification of at least one
secondary transmission by a cable system of such works establishing a
basis for the claim. For joint claims, a general statement of the
nature of the joint claimants' copyrighted works and identification of
at least one secondary transmission of one of the joint claimants'
copyrighted works by a cable system establishing a basis for the joint
claim.
* * * * *
29. Section 252.4(a) and (e) are revised to read as follows:
Sec. 252.4 Compliance with statutory dates.
(a) Claims filed with the Copyright Office shall be considered
timely filed only if: (1) They are hand delivered, either by the
claimant, the claimant's agent, or a private delivery carrier, to:
Office of the Register of Copyrights, Room 403, James Madison Memorial
Building, 101 Independence Avenue, SE., Washington, DC 20540, during
normal business hours during the month of July; or
(2) They are addressed to: Copyright Arbitration Royalty Panel,
P.O. Box 70977, Southwest Station, Washington, DC 20024, and are
deposited with sufficient postage with the United States Postal Service
and bear a July U.S. postmark.
* * * * *
(e) In the event that a properly addressed and mailed claim is not
timely received by the Copyright Office, a claimant may nonetheless
prove that the claim was properly mailed if it was sent by certified
mail return receipt requested, and the claimant can provide the receipt
showing that it was properly mailed or timely received. No affidavit of
an officer or employee of the claimant, or of a U.S. postal worker will
be accepted as proof in lieu of the receipt.
PART 253--USE OF CERTAIN COPYRIGHTED WORKS IN CONNECTION WITH
NONCOMMERCIAL EDUCATIONAL BROADCASTING
30. The authority citation for part 253 continues to read as
follows:
Authority: 17 U.S.C. 118, 801(b)(1) and 803.
Sec. 253.10 [Amended]
31. Section 253.10 is amended by removing ``Copyright Office'' each
place it appears and adding ``Librarian of Congress''.
PART 257--FILING OF CLAIMS TO SATELLITE CARRIER ROYALTY FEES
32. The authority citation for part 257 continues to read as
follows:
Authority: 17 U.S.C. 119(b)(4).
33. Section 257.3(a) (3) and (4) are revised, and paragraph (d) is
removed as follows:
Sec. 257.3 Content of claims.
(a) * * *
(3) If the claim is a joint claim, a concise statement of the
authorization of the filing of the joint claim, and the name of each
claimant to the joint claim. For this purpose, a performing rights
society shall not be required to obtain from its members or affiliates
separate authorizations, apart from their standard membership or
affiliate agreements, or to list the name of each of its members or
affiliates in the joint claim.
(4) For individual claims, a general statement of the nature of the
claimant's copyrighted works and identification of at least one
secondary transmission by a satellite carrier of such works
establishing a basis for the claim. For joint claims, a general
statement of the nature of the joint claimants' copyrighted works and
identification of at least one secondary transmission of one of the
joint claimants' copyrighted works by a satellite carrier establishing
a basis for the joint claim.
* * * * *
34. Section 257.4 (a) and (e) are revised to read as follows:
Sec. 257.4 Compliance with statutory dates.
(a) Claims filed with the Copyright Office shall be considered
timely filed only if: (1) They are hand delivered, either by the
claimant, the claimant's agent, or a private delivery carrier, to:
Office of the Register of Copyrights, Room 403, James Madison Memorial
Building, 101 Independence Avenue, SE., Washington, DC 20540, during
normal business hours during the month of July; or
(2) They are addressed to: Copyright Arbitration Royalty Panel,
P.O. Box 70977, Southwest Station, Washington, DC 20024, and are
deposited with sufficient postage with the United States Postal Service
and bear a July U.S. postmark.
* * * * *
(e) In the event that a properly addressed and mailed claim is not
timely received by the Copyright Office, a claimant may nonetheless
prove that the claim was properly mailed if it was sent by certified
mail return receipt requested, and the claimant can provide the receipt
showing that it was properly mailed or timely received. No affidavit of
an officer or employee of the claimant, or of a U.S. postal worker will
be accepted as proof in lieu of the receipt.
PART 259--FILING OF CLAIMS TO DIGITAL AUDIO RECORDING DEVICES AND
MEDIA ROYALTY PAYMENTS
35. The authority citation for part 259 continues to read as
follows:
Authority: 17 U.S.C. 1007(a)(1).
36. In Section 259.3, paragraph (d) is revised, and paragraph (f)
is removed as follows:
Sec. 259.3 Content of claims.
* * * * *
(d) If the claim is a joint claim, a concise statement of the
authorization for the filing of the joint claim, and the name of each
claimant to the joint claim.
* * * * *
37. Sections 259.5 (a) and (e) are revised to read as follows:
Sec. 259.5 Compliance with statutory dates.
(a) Claims filed with the Copyright Office shall be considered
timely filed only if:
(1) They are hand delivered, either by the claimant, the claimant's
agent, or a private delivery carrier, to: Office of the Register of
Copyrights, Room 403, James Madison Memorial Building, 101 Independence
Avenue SE., Washington, DC 20540, during normal business hours during
the month of January or February; or
(2) They are addressed to: Copyright Arbitration Royalty Panel,
P.O. Box 70977, Southwest Station, Washington, DC 20024, and are
deposited with sufficient postage with the United States Postal Service
and bear a January or February U.S. postmark.
* * * * *
(e) In the event that a properly addressed and mailed claim is not
timely received by the Copyright Office, a claimant may nonetheless
prove that the claim was properly mailed if it was sent by certified
mail return receipt requested, and the claimant can provide the receipt
showing that it was properly mailed or timely received. No affidavit of
an officer or employee of the claimant, or of a postal worker will be
accepted as proof in lieu of the receipt.
Dated: November 29, 1994.
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 94-30045 Filed 12-6-94; 8:45 am]
BILLING CODE 1410-33-P