```

[Federal Register: October 8, 2010 (Volume 75, Number 195)]
[Proposed Rules]               
[Page 62345-62348]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08oc10-11]                         

=======================================================================
-----------------------------------------------------------------------

LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 2009-4]

 
Minimum Balance Requirement and Automatic Replenishment Option 
for Deposit Account Holders

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Copyright Office is proposing to amend 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; mandate the closure of a deposit 
account the second time it is overdrawn; and offer deposit account 
holders the option of automatic replenishment of their account via 
their bank account or credit card.

DATES: Written comments must be received in the Office of the General

[[Page 62346]]

Counsel of the Copyright Office no later than November 22, 2010.

ADDRESSES: If hand delivered by a private party, an original and five 
copies of a comment or reply comment should be brought to the Library 
of Congress, U.S. Copyright Office, Room LM-401, James Madison 
Building, 101 Independence Ave., SE., Washington, DC 20559, between 
8:30 a.m. and 5 p.m. The envelope should be addressed as follows: 
Office of the General Counsel, U.S. Copyright Office.
    If delivered by a commercial courier, an original and five copies 
of a comment or reply comment must be delivered to the Congressional 
Courier Acceptance Site (``CCAS'') located at 2nd and D Streets, SE., 
Washington, DC between 8:30 a.m. and 4 p.m. The envelope should be 
addressed as follows: Office of the General Counsel, U.S. Copyright 
Office, LM-403, James Madison Building, 101 Independence Avenue, SE., 
Washington, DC 20559. Please note that CCAS will not accept delivery by 
means of overnight delivery services such as Federal Express, United 
Parcel Service or DHL.
    If sent by mail (including overnight delivery using U.S. Postal 
Service Express Mail), an original and five copies of a comment or 
reply comment should be addressed to U.S. Copyright Office, Copyright 
GC/I&R, P.O. Box 70400, Washington, DC 20024.

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.

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.

Prior Notice of Proposed Rulemaking

    On July 14, 2009, the Copyright Office published a notice in the 
Federal Register, 74 FR 33930, seeking public comment on a proposed 
amendment to its copyright registration regulations (37 CFR 201 and 
202). The amendment would have required that applications for copyright 
registration paid for by deposit account debits be submitted using the 
electronic Copyright Office (eCO) registration system (eService). The 
July 2009 Notice of Proposed Rulemaking also sought comment on whether 
registration applicants continue to find deposit accounts to be a 
valuable service.
    The goal of the July 2009 Notice of Proposed Rulemaking (and the 
goal of the present Notice) was to solve the problem of paper 
registration applications being suspended for lack of deposit account 
funds. As the Notice explained, 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 
in a more timely manner.
    On average, three to four percent of paper applications for 
registration are suspended each year due to lack of sufficient deposit 
account funds. In fiscal 2007, between 16,000 and 22,000 applications 
were put on hold for insufficient deposit account funds, and the amount 
appears to have remained consistent throughout 2008 and 2009. 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.
    In July 2009, the Copyright Office proposed 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 method is 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. The 
proposal also 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.

Comments Received in Response to Proposal for Mandatory Electronic 
Registration for Deposit Account Holders

    Even though approximately 3,000 entities currently use deposit 
accounts, the July 2009 Notice of Proposed Rulemaking garnered only six 
public comments. Of these, the American Society of Media Photographers, 
Inc. (ASMP), the Historical Publications Section of the North Carolina 
Department of Cultural Resources (NCDCR), and Perseus Book Group 
supported the proposed eService application requirement. The Motion 
Picture Association of America (MPAA), the National Intellectual 
Property Researchers Association (NIPRA), and Government Liaison 
Services, Inc. (GLS) opposed the proposal. Four of the commenters also 
discussed the continued value of deposit accounts. The MPAA, NCDCR, and 
Perseus vigorously maintained that deposit accounts still offer 
significant benefits. ASMP, on the other hand, offered conditional 
support for their elimination.
    For those commenters who voiced approval of the mandatory 
electronic registration proposal--praising the current functionality of 
eService, NCDCR comment at 2, and stating that the requirement ``would 
substantially improve the speed, efficiency and economy of processing 
applications,'' ASMP comment at 1-2--the benefits of electronic 
registration will of course remain available.
    The MPAA comments, however, 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. MPAA comment 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

[[Page 62347]]

denied the option of continuing to use paper applications because of 
the actions of ``irresponsible'' deposit account holders. See MPAA 
comment at 4.
    MPAA also expressed its skepticism of eService's reliability. 
``eService is relatively new and there continues to be some `bugs' in 
the system,'' it stated. Specifically, ``MPAA member companies have 
experienced difficulties in allowing multiple users to access the 
system at the same time, and there is a need for the new system to have 
a meaningful review capability, which would include true search 
functionality.'' MPAA comment at 3. MPAA's comment dates from August 
2009, and since then the Office has significantly improved eService's 
capabilities.
    Two other commenters also took issue with the Copyright Office's 
claims for eService efficiency. NIPRA and GLS challenged the Copyright 
Office's estimation of how long eService registration applications take 
to be processed, arguing that since the advent of electronic 
registration, processing time has actually increased to two years. 
NIPRA comment at 2; GLS comment at 2. In fact the processing time 
increase--which is real--represents for the most part the increased 
time needed to process paper applications, which now have to be 
transcribed into the Office's digital system. eService applications 
with sufficient funds are not subject to this additional step, and thus 
generally enjoy quicker processing. Currently, 90% of eService 
registration applications are processed in slightly more than five 
months (meaning many are completed much sooner), compared to 25 months 
for paper applications.
    NIPRA and GLS further charged that ``given the Copyright Office 
requirement for deposits consisting of the `best edition' of works, the 
physical limitations of the electronic system will render compliance 
with the requirement impossible for works such as voluminous texts, 
motion pictures and many software filings.'' NIPRA comment at 2. This 
concern is misplaced. Electronic registration does not require the 
submission of an electronic deposit. Applicants have an option of 
either uploading the deposit as an electronic file or sending the 
deposit to the Office using the packing slip provided during the 
electronic registration process. 37 CFR 202.3(b)(2)(ii)(A)-(B). Whether 
a deposit copy is sent electronically or physically depends upon its 
native format and the Library's needs. Most works subject to the best 
edition requirement must be submitted in hard copy form, since in most 
cases the Library's best edition requirements specify a physical 
format. See 37 CFR 202.20(b)(1). This requirement does not preclude the 
use of eService to file an application or to pay the application fee. 
It is only when a work is published ``solely in an electronic format'' 
(e.g., not in a physically tangible format) that ``submission of the 
digital file[s] in exact first-publication form and content'' is 
required. 37 CFR 202.20(b)(2)(iii)(B).
    NIPRA and GLS also questioned the security of electronic deposit 
copies. NIPRA comment at 2; GLS comment at 1-2. The Copyright Office is 
unaware that the uploading of files to the Copyright Office via 
eService presents any security concerns. Of course, the security and 
integrity of all eService transactions are of paramount importance to 
the Copyright Office, and it has implemented robust security measures, 
which continue to be improved. However, the prior eService amendment 
only concerned the registration application, not the deposit copies 
which, in the majority of cases may continue to be sent separately in 
physical, tangible formats.
    The Copyright Office carefully considered each of the comments 
discussed above and it has been persuaded that mandatory electronic 
application was not the most appropriate solution to its problems of 
underfunded paper applications. While the Office still feels strongly 
that electronic registration is vastly more efficient than paper 
registration, and redounds to the benefit of applicants as much as to 
the benefit of the Office, it has concluded that mandatory electronic 
registration was an over-general solution to the specific problems 
described. Its current proposal of a minimum deposit account balance 
requirement and optional automatic replenishment discussed herein is a 
more targeted response to the problems facing the Office.

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

    In its July 15th, 2009, notice, the Copyright Office also 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.
    While one commenter stated that there was ``no apparent need'' for 
the Copyright Office to continue offering deposit accounts, ASMP 
comment at 2, three other commenters argued that the elimination of 
deposit accounts would certainly be harmful. Perseus stated that 
deposit accounts are a ``valuable and relevant service'' that make it 
easier to track its copyright budget. Perseus comment at 1. NCDCR, 
referencing its particular administrative issues as a state agency, 
said that deposit accounts offer significant efficiencies over 
individual payments. NCDCR comment at 2. Finally, MPAA argued that 
corporate credit cards are not an effective alternative because they 
require spending controls that, if improperly monitored, could result 
in registration applications being delayed for insufficient funds. MPAA 
comment at 4.
    The Copyright Office acknowledges that deposit accounts are a 
useful and efficient option for copyright owners who frequently use its 
services, including, but not limited to registration. Consequently, it 
will continue to offer deposit accounts for the foreseeable future, but 
reserves its prerogative to revisit the question of their utility and 
cost to the Office.

New Proposal

    After considering the comments filed to the initial NPRM, the 
Copyright Office explored other options for addressing its problems 
with underfunded deposit accounts and is now proposing a number of 
administrative requirements to solve the problem. Specifically, the 
Office is proposing to amend 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; 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 Copyright Office proposes to replace the words ``a considerable 
amount of business'' with ``12 or more transactions a year'' in section 
37 CFR 201.6(b) in order to more clearly delineate the intended users 
of the deposit account program. The program's

[[Page 62348]]

goal is to better serve rights-holders who engage in regular, multiple 
registrations and other transactions with the Copyright Office every 
year, and the proposed language reflects this intent with specificity.
    The Office also proposes to institute 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 their 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.
    In the event a deposit account reaches its minimum balance, the 
Copyright Office will automatically notify the account holder, but take 
no further action. 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 does not in itself 
expose the account holder to any adverse consequences.

2. Consequences of Overdrawing a Deposit Account

    The Copyright Office proposes that 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. In practice this rule 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 a new 
account on the condition that it is funded through the automatic 
replenishment option. This condition is to protect the account holder 
from the risk of overdrawing again and to protect the Copyright Office 
from the risk of further suspended applications.

3. Voluntary Automatic Replenishment

    The Copyright Office proposes to offer a voluntary automatic 
replenishment program to all deposit account holders. Under this 
program, the deposit account holder would provide pre-authorization to 
the Copyright Office to replenish the account from the account holder's 
credit card or bank account. Replenishment would take place when the 
deposit account reaches its minimum balance, at which time the Office 
will also immediately notify the account holder of the replenishment. 
The account holder would determine the amount of replenishment above 
the pre-determined minimum balance at the time the account holder 
enters the program.
    The Office seeks comment from the public on the following proposed 
regulations for governing deposit accounts maintained by the Copyright 
Office.

List of Subjects in 37 CFR Part 201

    Copyright, General provisions.

Proposed Regulations

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

PART 201--GENERAL PROVISIONS

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

    Authority:  17 U.S.C. 702.

    2. Section 201.6(b) is revised 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, and the Office will automatically 
notify the Deposit Account holder when the account reaches that 
balance.
    (2) The Copyright Office will close a Deposit Account the second 
time the Deposit Account holder overdraws his or her account. 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 reaches the minimum level of funding established pursuant to 
section (b)(1), and Deposit Account holders will be automatically 
notified of the replenishment.
* * * * *

    Dated: October 1, 2010.
Tanya Sandros,
Deputy General Counsel.
[FR Doc. 2010-25129 Filed 10-7-10; 8:45 am]
BILLING CODE 1410-30-P
```