[Federal Register Volume 60, Number 43 (Monday, March 6, 1995)]
[Notices]
[Pages 12251-12253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5329]



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

LIBRARY OF CONGRESS

Copyright Office
[Docket No. 95-1 CARP DD 92-94]


Ascertainment of Controversy for 1994 Digital Audio Recording 
Royalty Funds

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice with request for comments.

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

SUMMARY: The Copyright Office directs all claimants to royalty fees 
collected for Digital Audio Recording Devices and Media (DART) for the 
1992 and 1993 Musical Works Fund, and the 1994 Musical Works and Sound 
Recordings Funds, to submit comments as to whether a controversy exists 
as to the distribution of these funds. The Office also announces the 
deadline for filing Notices of Intent to Participate in royalty 
distribution.

DATES: Written comments due by April 15, 1995. Notices of Intent to 
Participate are due May 5, 1995.

ADDRESSES: If sent by mail, an original and five copies of written 
comments and Notices of Intent to Participate should be addressed to: 
Copyright Arbitration Royalty Panel (CARP), PO Box 70977, Southwest 
Station, Washington, DC 20024. If delivered by hand, copies should be 
brought to: Office of the General Counsel, Copyright Office, Room LM-
407, James Madison Memorial Building, 101 Independence Avenue SE., 
Washington, DC 20540. In order to ensure prompt receipt of these time 
sensitive documents, the Office recommends that the comments and 
Notices of Intent to Participate be delivered by private messenger 
service.

FOR FURTHER INFORMATION CONTACT: Marilyn Kretsinger, Acting General 
Counsel, Copyright GC/I&R, PO Box 70400, Southwest Station, Washington, 
DC 20024. Telephone (202)707-8380.

SUPPLEMENTARY INFORMATION:

I. Background

    On October 28, 1992, Congress enacted the Audio Home Recording Act. 
This Act requires manufacturers and importers to pay royalties on 
digital audio recording devices and media (DART) that are distributed 
in the United States. The royalties are deposited with the Copyright 
Office and distributed by Copyright Arbitration Royalty Panels 
(CARPs)<SUP>1, convened by the Librarian of Congress, to interested 
copyright parties who file claims with the Copyright Office each year 
during January and February.

    \1\At the time of passage of the Audio Home Recording Act, the 
Copyright Royalty Tribunal conducted DART distribution proceedings. 
The Tribunal, however, was eliminated by the Copyright Royalty 
Tribunal Reform Act of 1993, Pub.L. No. 103-198, and the authority 
to distribute DART funds was given to the CARPs, as administered by 
the Librarian of Congress.
---------------------------------------------------------------------------

    The Act provides that the royalties are to be divided into two 
funds--the Sound Recordings Fund, which accounts for 66\2/3\% of the 
royalties, and the Musical Works Fund, which accounts for 33\1/3\% of 
the royalties.
    Within each fund, the Act establishes subfunds. The Sound 
Recordings Fund consists of four subfunds: the first of these--the 
Nonfeatured Musicians Subfund--is allocated 2\5/8\% of the Sound 
Recordings Fund, and the second subfund--the Nonfeatured Vocalists 
Subfund--gets a 1\3/8\% share. After the shares of these two subfunds 
are [[Page 12252]] subtracted, two other subfunds--the Featured 
Recording Artist Subfund and the Sound Recording Owners Subfund--
receive 40% and 60%, respectively, of the remainder. In the Musical 
Works Fund, there are two subfunds--the Publishers Subfund and the 
Writers Subfund--which each receive 50% of that Fund. Thus, the Act 
establishes the percentages for each fund and subfund, but directs the 
CARPs, through the process of a distribution proceeding, to determine 
what amount each claimant within a subfund is entitled to receive.
    Accordingly, the Act requires the Librarian of Congress to 
ascertain within 30 days after the last day for filing claims--March 
30--whether there are any controversies among the claimants as to the 
proper distribution of the royalties in their fund and/or subfund. If 
there are controversies, then the Librarian is directed immediately to 
convene a CARP or CARPs to decide the proper distribution.

II. Consolidation of Proceedings

    The first proceeding to be initiated under the new CARP system was 
the distribution of the 1992 and 1993 DART royalties. The 1992 DART 
distribution proceeding was begun by the Copyright Royalty Tribunal, 
but was suspended when the Tribunal was abolished and needed to be 
started anew. The 1993 DART distribution was begun by the Copyright 
Office under the new authority conferred by the Copyright Royalty 
Tribunal Reform Act of 1993. On March 1, 1994, the Office published a 
notice in the Federal Register seeking comment as to the existence of 
controversies in both the 1992 and the 1993 DART funds. 59 FR 9773 
(March 1, 1994). The interested copyright parties reported that there 
were controversies in the Sound Recordings Fund and the Musical Works 
Fund for both 1992 and 1993. In addition, several of the larger 
claimants to both funds requested that the Office consolidate the 1992 
and the 1993 DART distribution proceedings with the 1994 DART 
distribution proceeding and defer all consideration of DART 
distributions until 1995. After seeking comment on the request, the 
Office granted the motion to consolidate. 59 FR 35762 (July 13, 1994).
    Subsequent to the consolidation of proceedings, the Copyright 
Office received notification from the claimants to the 1992 and 1993 
Sound Recordings Fund that they had reached a settlement. On December 
15, 1994, the Office issued a distribution order distributing all of 
the royalties in the 1992 and 1993 Sound Recordings Fund to the parties 
designated in the settlement agreement. Distribution Order, Docket No. 
94-2 CARP-DD (December 15, 1994). No settlement has been reached yet 
for either the 1992 or the 1993 Musical Works Fund.

III. Request for Comments and Notices of Intent To Participate

    In accordance with the Copyright Office's consolidation order, 59 
FR 35762, and 17 U.S.C. 1007, the Librarian of Congress and the 
Copyright Office are beginning distribution proceedings for the 1992 
(Musical Works Fund only), 1993 (Musical Works Fund only), and 1994 
(both funds) DART royalties (collectively the 1992-94 DART proceeding) 
by requesting that interested copyright parties comment as to the 
existence of controversies. Written comments are due by April 5, 1995.
    To begin the distribution process for DART royalties, the pertinent 
regulation of the Copyright Office rules, 37 CFR 251.45(a), requires 
that:

    [T]he 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.

See 59 FR 63041 (December 7, 1994).

    A. Negotiating settlement. Section 251.45(a) places an affirmative 
duty on all claimants to DART royalties to contact each other and 
attempt to negotiate a settlement of their differences. The claimants 
to the 1992 and 1993 Sound Recordings Fund have already negotiated a 
settlement and have received a distribution of royalties. The 1992 and 
1993 Sound Recordings Funds, therefore, are no longer a part of this 
DART distribution proceeding. The Musical Works Funds for 1992 and 
1993, and the Sound Recordings Fund and Musical Works Fund for 1994, 
however, are part of this proceeding, and claimants to these funds are 
subject to the negotiation requirement of Sec. 251.45(a).
    The purpose of the negotiation requirement is to make all of the 
claimants within each fund aware of each other and to encourage active 
participation and open discussion between them, thereby increasing the 
possibility of settlements. The Copyright Office has compiled a 
claimant list of all interested copyright parties who timely filed a 
claim or claims for the 1992 and 1993 Musical Works Fund, and 1994 
Musical Works and Sound Recordings Funds. The claimant lists are 
available from the Copyright Office at the addresses provided in this 
Notice, and claimants must use these lists in negotiating settlements 
with each other and in reporting on the existence of controversies to 
the royalty funds.
    B. Comments as to controversies. In order to determine whether 
controversies exist for the 1992-94 DART proceeding, and consequently 
whether it will be necessary to convene a CARP or CARPs to distribute 
these royalties, we are asking the claimants to provide the Office with 
the following information: (a) Whether any controversies exist 
concerning distribution of the 1992 and 1993 Musical Works Fund, and 
the 1994 Musical Works and Sound Recordings Funds; (b) if controversies 
do exist, the particular subfunds for which they exist; and (c) if 
settlements have been made, the identity of all of the claimants who 
are covered by the settlement.
    After the existence of any controversies are determined, the Audio 
Home Recording Act gives the Copyright Office 30 days to distribute 
those royalties not in controversy. In addition to the information 
solicited above, in order to determine the amount of royalties not in 
controversy, we are asking any claimants who report a controversy to 
state how much is in controversy in each subfund. The information 
provided should include each claimant's asserted percentage or dollar 
claim to the subfund, and a brief narrative justifying that asserted 
claim.
    C. Notices of Intent to Participate. As prescribed by 
Sec. 251.45(a), the Office is requesting all claimants who expect to 
participate in the 1992-94 DART proceeding to file a Notice of Intent 
to Participate with the Copyright Office. See 59 FR 63041. The Notice 
of Intent to Participate must be filed with the Office by May 5, 1995. 
Failure of a claimant to file a timely Notice of Intent to Participate, 
or to be represented by another claimant filing a timely notice, may 
subject the claim to dismissal. The filing of a Notice of Intent to 
Participate is thus critical to a claimant being able to present an 
effective claim.

IV. DART Deadline

    A. DART deadline. The Audio Home Recording Act establishes several 
statutory deadlines to assure the speedy distribution of DART 
royalties. Claims are to be filed by the last day of February, each 
year. The existence of controversies is to be ascertained by March 30. 
Distribution of royalties not [[Page 12253]] in controversy are to be 
authorized for distribution within 30 days of the finding that they 
were not in controversy--that is, no later than April 29. Prior to the 
passage of the Copyright Royalty Tribunal Reform Act, the Tribunal was 
given one year to resolve any controversies in royalty distribution 
after their declaration. As a result of this one year period, the 
Tribunal had a greater amount of time to address controversies and 
address issues such as discovery and collection and presentation of 
evidence, and this time period was reflected in the construction and 
operation of the Tribunal's procedural and administrative rules. 
However, with the passage of the CRT Reform Act, the time period for 
resolving controversies has been cut in half. This time reduction, 
along with the novel demands and requirements of the CARPs, has 
required the Copyright Office to adopt completely new rules and 
procedures for distribution of royalties and has, consequently, made 
the meeting of certain statutory deadlines exceedingly difficult. 
Nowhere is this more evident than the March 30 deadline for declaring 
DART distribution controversies.
    The Administrative Conference of the United States has considered 
the issue of how agencies should respond to circumstances that affect 
their ability to adhere to schedule, and has issued a series of 
recommendations concerning statutory time limits. 43 FR 27509 (June 26, 
1978), 1 CFR 305.78-3. The Administrative Conference said:

    [I]t should be recognized that special circumstances, such as a 
sudden substantial increase in caseload, or complexity of the issues 
raised in a particular proceeding, or the presence of compelling 
public interest considerations, may justify an agency's failure to 
act within a predetermined time. An agency's departure from the 
legislative timetable should be explained in current status reports 
to affected persons or in a report to Congress.

Id. at para. 4.

    The Copyright Office has already faced the difficulties of meeting 
the March 30 deadline for declaring DART controversies and initiating 
arbitration. The Office postponed the deadline for the 1992 and 1993 
DART royalties, prior to the consolidation of these royalties with the 
1994 royalties, because it was soon after the passage of the CRT Reform 
Act and we had not yet implemented procedural rules for the CARPs. See 
59 FR 9773. Although we have now adopted final procedural rules, 59 FR 
63025, good cause nonetheless remains for postponing the statutory 
deadline of March 30, 1995, for declaring controversies and initiating 
arbitration for the 1992-94 DART proceeding.
    An important facet of the new CARP procedural rules adopted by the 
Office are regulations creating a 45-day precontroversy discovery 
period, prior to initiating arbitration, in which claimants are 
directed to exchange their direct cases, make discovery requests, file 
their objections regarding selection of the arbitrators, and otherwise 
engage in precontroversy motions practice. 37 CFR 251.45. Adoption of a 
precontroversy discovery period was strongly urged by all of the 
commentators to the Office's rulemaking proceeding, see 59 FR 63030, 
and was endorsed by Representative William Hughes, Chairman of the 
House Subcommittee on Intellectual Property and Judicial Administration 
of the House Committee on the Judiciary, in his statement accompanying 
the House version of the Copyright Royalty Tribunal Reform Act. See 139 
Cong. Rec. H10973 (daily ed. Nov. 22, 1993)(``In order to reduce the 
amount of actual litigation time, and thereby reduce expenses, I 
encourage the Librarian to promulgate regulations permitting exchange 
of information before the tolling of the 180-day decision period, and, 
to the extent practicable, generally to permit precontroversy 
discovery.'').
    There can be no meaningful precontroversy discovery period under 
the current requirement of beginning DART arbitration within 30 days of 
filing the claims. The 45-day precontroversy discovery period 
prescribed in Sec. 251.45(a) could not take place prior to March 30, 
since it would overlap the period for filing claims. Shortening the 
period to 30 days beginning the first day after the filing of claims 
would reduce the benefits of precontroversy discovery enjoyed by 
claimants in other proceedings and deny DART claimants a period in 
which to negotiate settlements. Exchange of direct cases on the first 
day after the close of the filing period for claims is also impossible 
since the Office will not have had sufficient time to prepare the 
claimant service list, and it is highly unlikely that most claimants 
will be prepared to exchange their direct cases immediately after the 
filing period. There is, therefore, justifiable cause for postponing 
the March 30, 1995, date for determining controversies for the 1992-94 
DART funds to permit proper and efficient operation of the Office's 
procedural rules.<SUP>2

    \2\The statutory requirement of declaring DART controversies 30 
days after the close of the claims filing period is obviously a 
problem that will be faced annually by the Copyright Office. To 
correct for the inequities that this requirement poses, the Office 
will be seeking legislative amendment of 17 U.S.C. 1007(b) in the 
104th Congress by changing the phrase ``Within 30 days after the 
period established for the filing of claims * * *'' to ``After the 
period established for the filing of claims * * *''
---------------------------------------------------------------------------

    In order to assure that there is not a lengthy delay in 
distribution of 1992-94 DART royalties, the Office will publish the 
precontroversy discovery schedule in the Federal Register shortly after 
receipt of the comments on the existence of controversies. In addition 
to the prehearing schedule, the Office will also announce the date on 
which controversies will be declared, if any, and arbitration will 
commence.

    Dated: February 23, 1995.
Marybeth Peters,
Register of Copyrights.

    Approved:
James H. Billington,
The Librarian of Congress.
[FR Doc. 95-5329 Filed 3-3-95; 8:45 am]
BILLING CODE 1410-33-P