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[Federal Register Volume 76, Number 33 (Thursday, February 17, 2011)]
[Rules and Regulations]
[Pages 9229-9231]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3598]

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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 2009-4]

Administration of Copyright Office Deposit Accounts

AGENCY: Copyright Office, Library of Congress.

ACTION: Final rule.

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SUMMARY: The Copyright Office is amending its regulations to set the 
minimum level of activity required to hold a deposit account at 12 
transactions per year; require deposit account holders to maintain a 
minimum balance in that account; require the closure of a deposit 
account the second time it is overdrawn within any 12-month period; and 
offer deposit account holders the option of automatic replenishment of 
their account via their bank account or credit card.

DATES: Effective Date: May 1, 2011.

FOR FURTHER INFORMATION CONTACT: Tanya Sandros, Deputy General Counsel 
or Chris Weston, Attorney Advisor. Copyright GC/I&R, P.O. Box 70400, 
Washington, DC 20024. Telephone: (202) 707-8380. Telefax: (202) 707-
8366. All prior Federal Register notices and public comments in this 
docket are available at http://www.copyright.gov/docs/deposit-acct/eservice/.

SUPPLEMENTARY INFORMATION: 

Deposit Account Background

    The Copyright Office maintains a system of deposit accounts for 
those who frequently use its services. An individual or entity may 
establish a deposit account, make advance deposits into that account, 
and charge copyright fees against the balance instead of sending 
separate payments with applications and other requests for services. 
This process has proven to be more efficient and less expensive for 
both the Office and the applicant than sending separate payments to the 
Copyright Office for each application for registration or for other 
services.
    The goal of this Final Rule is to solve the problems associated 
with the suspension of paper registration applications for lack of 
deposit account funds. As explained in the October 8, 2010 Federal 
Register Notice of Proposed Rulemaking (75 FR 62345), when the deposit 
account being used for payment has insufficient funds to process a 
paper application, the Copyright Office suspends processing of the 
application to notify the account holder that replenishment of the 
account is needed, and places the pending application and associated 
deposit copies in temporary storage. The suspended applications, which 
may number 3,000 or more at any one time, must be reviewed regularly by 
Office staff to locate those that are newly funded and reprocess them. 
Thus, insufficient deposit account funding effectively doubles--at a 
minimum--the time Office staff must spend processing an application, 
time that would otherwise be more profitably spent on processing 
properly filed claims.
    On average, one to three percent of paper applications for 
registration are suspended each year due to lack of

[[Page 9230]]

sufficient deposit account funds. In fiscal 2010, between 6,000 and 
7,000 applications were carried on hold monthly for insufficient 
deposit account funds. The Office has expended substantial resources 
managing these suspended applications and deposits. While the Office 
assesses service charges for deposit account overdrafts ($165) and 
dishonored deposit account replenishment checks ($85), see 37 CFR 
201.3(d), these penalties do not recover all costs or solve the 
fundamental problems associated with the additional handling and the 
delay in processing underfunded applications for registration.

First Notice of Proposed Rulemaking and Public Comments

    On July 14, 2009, the Copyright Office published a notice of 
proposd rulemaking (NPRM) in the Federal Register, 74 FR 33930, 
proposing that the problem of insufficient deposit account funds for 
paper applications should be solved by requiring all deposit account 
holders to file their applications via eService, the Office's 
electronic registration system. An application for registration made 
via eService cannot be completed until the method of payment is 
verified by, for example, ensuring that sufficient funds are present in 
the deposit account and payment has been made. This approach would have 
been much more efficient than filing paper applications, which must go 
through a number of processing steps before the validity of the 
proffered method of payment can be ascertained. In addition, the 
proposal noted that electronic registration benefits applicants in that 
it offers a lower fee than paper registrations ($35 instead of $65) and 
helps to establish an earlier effective date of registration.
    The July 2009 NPRM garnered six public comments, three of which 
supported the electronic filing requirement and three of which opposed 
it. Most notably, the Motion Picture Association of America (MPAA) 
challenged the initial proposed rule as premature and suggested an 
alternative whereby each deposit account holder would be charged an up-
front $100 fee that would be held as a kind of security deposit with 
which to dispose of underfunded registration applications. MPAA comment 
2009 at 2. According to the MPAA proposal, if an applicant has 
insufficient funds in its deposit account to pay for a paper 
application, the Copyright Office should close the deposit account and 
use the security deposit to pay for returning the application to the 
applicant. The MPAA argued that rights-holders should not be denied the 
option of continuing to use paper applications because of the actions 
of ``irresponsible'' deposit account holders. See MPAA comment 2009 at 
4.
    The MPAA and two other commenters also expressed skepticism with 
the efficiency and security of the eService system. A full discussion 
of these issues appears in the Office's October 8, 2010 NPRM.
    The Copyright Office carefully considered each of the comments 
submitted in response to the July 9, 2009 NRPM, and was persuaded that 
mandatory electronic application was not the most appropriate solution 
to its problem of underfunded paper applications. While the Office 
still felt strongly that electronic registration is more efficient than 
paper registration, and redounds to the benefit of applicants as much 
as to the benefit of the Office, it concluded that mandatory electronic 
registration was an overbroad solution to the specific problems 
described. See 75 FR 62345, 62347-8. The final rule requiring a minimum 
deposit account balance and optional automatic replenishment discussed 
herein is a more targeted response to the problems facing the Office.

Second Notice of Proposed Rulemaking; Comments; Final Rule

    After considering the comments filed in response to the July 2009 
NPRM, the Copyright Office explored other options for addressing its 
problems with underfunded deposit accounts and in October 2010 proposed 
a number of administrative requirements to solve the problem. The 
Office received two comments favorable to the proposal--from Author 
Services, Inc. and the MPAA--and has decided to adopt the proposed 
regulatory amendments with two alterations. Specifically, the Office is 
amending its regulations to (1) Set the minimum level of activity 
required to hold a deposit account at 12 transactions per year; (2) 
require deposit account holders to maintain a minimum balance in that 
account; (3) mandate the closure of a deposit account the second time 
it is overdrawn within any 12-month period; and (4) offer deposit 
account holders the option of automatic replenishment of their account 
via their bank account or credit card.

1. Mandatory Minimum Deposit Account Activity and Balance

    The Deposit Account regulation--37 CFR 201.6(b)--currently reads, 
``Persons or firms having a considerable amount of business with the 
Copyright Office may, for their own convenience, prepay copyright 
expenses by establishing a Deposit Account.''
    The words ``a considerable amount of business'' will be replaced by 
``12 or more transactions a year'' in order to more clearly delineate 
the intended users of the deposit account program. The program's goal 
is to better serve rights-holders who engage in regular, multiple 
registrations and other transactions with the Copyright Office every 
year, and the new language reflects this intent with specificity. The 
12 transaction minimum is also consistent with prior Copyright Office 
policy and conforms to the typical minimum level of activity of current 
deposit account holders.
    The Office is also instituting a requirement that every deposit 
account holder must establish, in consultation with the Copyright 
Office, a minimum balance for its deposit account. Ideally, this 
balance will be the lowest amount a deposit account holder can have in 
his or her account and still be able to pay for the regular number of 
copyright registration applications. This amount will be set 
collaboratively so that both the account holder and the office are 
comfortable that it will be sufficient for the account holder's 
expected activity. However, each account must have at least a minimum 
balance of $450.
    In the event a deposit account goes below its minimum balance, the 
Copyright Office will automatically notify the account holder of this 
situation. The minimum balance requirement is intended to act primarily 
as an indicator to the account holder that the account may need 
replenishment; going below a minimum balance will not in itself expose 
the account holder to any adverse consequences.

2. Consequences of Overdrawing a Deposit Account

    Upon the second occasion that a deposit account is overdrawn--
meaning the second time there is not enough money in an account to pay 
the fee for a submitted registration--the account will be closed. The 
MPAA, in its comment on the October 2010 notice, inquired ``whether it 
might be appropriate to specify some time period during which two 
overdrafts would result in the closure of a deposit account.'' MPAA 
comment 2010 at 2. The Copyright Office finds merit in this suggestion, 
and is adding a proviso that, in order to result in account closure, 
both overdrafts must occur within the span of 12 months. This addition 
will help ensure that the penalty for two overdrafts affects only 
habitual abusers. Additionally, the overdraft rule in

[[Page 9231]]

practice will only affect deposit account holders who use paper 
applications, because eService will not allow an application to be 
submitted without sufficient funds.
    However, a deposit account holder whose account is closed because 
it has been overdrawn twice is not foreclosed from using a deposit 
account in the future. The deposit account holder may re-open the 
closed account on the condition that it is funded through the automatic 
replenishment option. This requirement is to protect the account holder 
from the risk of overdrawing again and to protect the Copyright Office 
from the expense of handling suspended applications in the future.

3. Voluntary Automatic Replenishment

    The Copyright Office will offer a voluntary automatic replenishment 
program to all deposit account holders. Under this program, the deposit 
account holder may provide pre-authorization to the Copyright Office to 
replenish the account from the account holder's credit card or bank 
account. Replenishment will take place when the deposit account goes 
below its minimum balance, at which time the Office will immediately 
notify the account holder that the account has fallen below the minimal 
balance and that the account will be replenished in accordance with the 
automatic replenishment agreement. The account holder will determine 
the amount of replenishment at the time the account holder enters the 
program.

Comments Received in Response to Question Regarding the Continued 
Availability of Deposit Accounts

    In its July 15th, 2009 NPRM, the Copyright Office sought public 
comment on whether it should cease offering deposit accounts 
altogether. It noted that, in an era when paper applications and 
payment via check were the norm, a separate, simplified deposit account 
system presented attractive efficiencies to frequent applicants and to 
the Office. It also pointed out that in an era of electronic 
registration and payment via corporate or other credit cards, the 
administrative costs of maintaining a separate deposit account system 
are no longer clearly offset by its advantages; hence, the reason for 
the Office's inquiry concerning abolition of the deposit account 
system.
    Three of the four commenters who addressed this question argued 
that eliminating deposit accounts would be harmful. Thus, the Copyright 
Office acknowledged in its October 8, 2010 notice that deposit accounts 
remain a useful and efficient option for copyright owners who 
frequently use its services, including, but not limited to, 
registration, and announced that it will continue to offer deposit 
accounts for the foreseeable future, reserving its prerogative to 
revisit the question of their utility and cost to the Office at a later 
time.
    At this time, the Office also notes that the change in policy for 
administering Deposit Accounts will increase the effectiveness and 
efficiency of the system for the Office and eliminate most of the 
problems that generated the initial questions. Hence, in light of the 
comments from the rights-holders and the new amendments announced 
today, the Office will continue to offer Deposit Accounts.

List of Subjects in 37 CFR Part 201

    Copyright, General provisions.

Final Regulation

    In consideration of the foregoing, the Copyright Office amends 37 
CFR Ch. II as follows:

PART 201--GENERAL PROVISIONS

0
1. The authority citation for part 201 continues to read as follows:

    Authority: 17 U.S.C. 702, 708(c).

0
2. In Sec.  201.6, revise paragraph (b) to read as follows:

Sec.  201.6  Payment and refund of Copyright Office fees.

* * * * *
    (b) Deposit accounts. (1) Persons or firms having 12 or more 
transactions a year with the Copyright Office may prepay copyright 
expenses by establishing a Deposit Account. The Office and the Deposit 
Account holder will cooperatively determine an appropriate minimum 
balance for the Deposit Account which, in no case, can be less than 
$450, and the Office will automatically notify the Deposit Account 
holder when the account goes below that balance.
    (2) The Copyright Office will close a Deposit Account the second 
time the Deposit Account holder overdraws his or her account within any 
12-month period. An account closed for this reason can be re-opened 
only if the holder elects to fund it through automatic replenishment.
    (3) In order to ensure that a Deposit Account's funds are 
sufficiently maintained, a Deposit Account holder may authorize the 
Copyright Office to automatically replenish the account from the 
holder's bank account or credit card. The amount by which a Deposit 
Account will be replenished will be determined by the deposit account 
holder. Automatic replenishment will be triggered when the Deposit 
Account goes below the minimum level of funding established pursuant to 
paragraph (b)(1) of this section, and Deposit Account holders will be 
automatically notified that their accounts will be replenished. Funding 
through automatic replenishment is required if a Deposit Account 
holder, who has had an account closed because it has been overdrawn 
twice within any 12 month period, wishes to re-open the account.
* * * * *

    Dated: February 7, 2011.
Maria Pallante,
Acting Register of Copyrights.

    Approved by
James H. Billington,
The Librarian of Congress.
[FR Doc. 2011-3598 Filed 2-16-11; 8:45 am]
BILLING CODE 1410-30-P
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