[Federal Register: February 1, 1994]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201
[Docket No. RM 92-8A]
Digital Audio Recording Devices and Media; Statements of Account
AGENCY: Copyright Office, Library of Congress.
ACTION: Interim regulation with request for comments.
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SUMMARY: The Copyright Office is issuing interim regulations governing
the administration of filings under the Audio Home Recording Act of
1992 (AHRA). This Act deal with rights with respect to digital audio
recording technology (DART), more specifically, parties who import and
distribute in the United States, or manufacture and distribute in the
United States, any digital audio recording device or digital audio
recording medium, are obligated to pay royalties. In addition to
sending the royalties to the Copyright Office, the importer or
manufacturer must file with the Office Statements of Account that
reflect the distribution of digital audio recording devices or media.
DATES: This interim regulation is effective February 1, 1994. Comments
should be in writing and received on or before April 4, 1994.
ADDRESSES: If sent by mail, ten copies should be addressed to:
Copyright Office, Library of Congress, Department 17, Washington, DC
20540. If hand delivered, ten copies should be brought to: Office of
the Copyright General Counsel, James Madison Memorial Building, room
407, First and Independence Avenue, SE., Washington, DC 20540.
FOR FURTHER INFORMATION CONTACT: Marybeth Peters, Acting General
Counsel, U.S. Copyright Office, Department 17, Library of Congress,
Washington, DC 20540. Telephone (202) 707-8380.
SUPPLEMENTARY INFORMATION:
I. Background
This document relates to the filing of both quarterly and annual
Statements of Account and payment of royalties due under the new DART
provisions of the Copyright Code (17 U.S.C. chap. 10). On February 22,
1993, we published interim regulations on this subject (58 FR 9544
(1993)), and we are now issuing superseding interim regulations.
It should be noted that the manufacturers and importers covered by
the new law are subject to other requirements, in addition to those
dealt with here. For example, an obligation to file initial notices to
identify the product categories and technologies distributed in the
United States is provided by 17 U.S.C. 1003(b), and regulations
regarding the filing of initial notices of distribution were issued by
the Copyright Office at 57 FR 55464 (Nov. 25, 1992). In addition,
manufacturers and importers of digital recording and interface devices
must conform to the Serial Copy Management System or equivalent systems
as described by 17 U.S.C. 1002<SUP>1 as a condition of distribution in
the United States.
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\1\See S. Rep. No. 294, 102d Cong., 2d Sess. 64 (1992); H. Rep.
No. 873, 102 Cong. 2d. Sess., pt. 1, at 19 (1992); and H. Rep. No.
873, 102d Cong., 2d Sess., pt. 2, at 18 (1992).
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With respect to Statements of Account, paragraph (c)(1) of 17
U.S.C. 1003 provides:
Any importer or manufacturer that distributes any digital audio
recording device or digital audio recording medium that it
manufactured or imported shall file with the Register of Copyrights,
in such form and content as the Register shall prescribe by
regulation, such quarterly and annual Statements of Account with
respect to such distribution as the Register shall prescribe by
regulation.
Royalty payments are to be calculated in accordance with 17 U.S.C. 1004
and sent to the Copyright Office under 17 U.S.C. 1003(c)(3).
Following issuance in the Federal Register of the 1993 interim
regulation regarding Statement of Account filings, the Copyright Office
published notice of an informal public meeting to discuss both the
interim regulations (58 FR 29001 (May 18, 1993)) and the initial
edition of the quarterly Statement of Account form (DART/Q Form). The
public meeting was held at the Copyright Office on June 11, 1993.
Discussion of comments follows below in section III.
The DART/Q Form as initially published incorporated practical
modifications that were suggested by the parties in their comments on
the written interim regulations describing what a Statement of Account
should contain.
In response to comments received from interested parties, we have
made some revisions in the 1993 interim regulations, and we are now
issuing superseding interim regulations governing the filing of
Statement of Account Forms on both a quarterly (Form DART/Q) and an
annual (Form DART/A) basis. The regulations provide the filing dates,
frequency of filing, and content of the quarterly and annual Statements
of Account.
II. Review of 1993 Interim Regulations
A. Quarterly Statements of Account
Most of the comments and explanations accompanying the interim
regulations published on February 22, 1993 are still pertinent, but
some specific points are addressed here.
1. Forms
The 1993 interim regulations proposed four filings per fiscal or
calendar year: Three quarterly statements, and a fourth Statement of
Account combining the final quarterly statement and the required annual
statement. Each manufacturing and/or importing party who distributes
digital audio recording products files a quarterly form that contains
information concerning product categories, technologies, transfer
prices, series and model numbers, and units distributed. Comments we
received concerning quarterly Statements of Account are discussed below
in section III(A).
2. Filing Dates and Basis of Filing
The 1993 interim regulations required Statements of Account to be
submitted on either a calendar year or fiscal year basis, at the
election of the filing party. Under our proposal the elected filing
basis was to remain in effect for three years, with any change in the
basis to be permitted only after a request to and approval by the
Copyright Office. Comments on this provision are discussed below in
section III(A)(2).
The 1993 interim regulations require quarterly Statements of
Account to be filed at intervals of three months. During the first
stage of implementation of the AHRA the Office provided a transitional
schedule that did not require a separate quarterly DART statement for
the last part of 1992. The first quarterly statement covered the period
from October 28, 1992 (the date of enactment of the AHRA) to the end of
at least one full quarter, and was due either within 45 days following
the end of the first full quarter after October 28, 1992, or by May 15,
1993, whichever was later. Later quarterly statements are due within 45
days after the end of the relevant quarters.
Annual Statements of Account should reconcile quarterly figures and
provide information regarding yearly activity. Annual statements are
due two months after the close of the calendar or fiscal year covered
by the statement. Comments regarding annual Statements of Account are
discussed in section III(B).
3. Late Payments, Overpayments, Underpayments, and Refunds
The 1994 interim regulations allow for corrections of quarterly and
annual Statements of Account to rectify errors in payments of
royalties. An underpayment of five dollars ($5.00) or less will require
no action by the Office. The Licensing Division will notify the
manufacturing or importing party of underpayments of more than five
dollars so that party can make the necessary corrections or amended
filings.
If royalty payments are not made on time, copyright owners suffer
from loss of the current value of funds. Therefore, interest will be
imposed on underpayments and late payments.
The earlier interim regulations provide for refunds to be made by
the Copyright Office in connection with overpayments accompanying
annual Statements of Account. These superseding interim regulations
will also allow refunds of overpayments accompanying quarterly DART
statements.
4. Credits for Returns or Exports
The earlier 1993 interim regulations permitted credits to be taken
for returned or unsold recording devices; the credit was to be taken in
the first annual Statement of Account covering the actual period when
the recording devices were returned, or in the next succeeding annual
Statement of Account. The Copyright Office has decided to modify this
policy in this superseding interim regulation.
As revised, this new interim regulation permits manufacturers and
importers to take a credit for returns of both recording devices and
media on either quarterly or annual Statements of Account. Credits may
be taken when products are exported or returned to the manufacturers or
importers as unsold or defective. Whenever returned products for which
credit has been taken are later distributed in the United States, the
statutory royalty must be paid, and the distribution must be reported
on the appropriate Statement of Account. The Copyright Office has also
decided to allow a credit for exports. These regulations give filing
parties two years to take a credit.
5. Access to Statements of Account
In accordance with 17 U.S.C. 1003(c)(2), quarterly and annual
Statements of Account will not be made part of the Copyright Office's
public records or directly or indirectly disclosed to the general
public. Specific regulations governing confidential access by
interested parties, as defined in the AHRA, will be issued separately.
III. Discussion of Comments
A. Quarterly Statements of Account
The Office received two comments responding to the interim
regulations published on February 22, 1993. One was filed by the
American Institute of Certified Public Accountants (AICPA), and the
other was from the DART Coalition. In addition, the oral comments made
at the Office's public meeting on this subject are essentially
reflected in the parties' written comments, which are summarized here.
1. The American Institute of Certified Public Accountants (AICPA)
The AICPA is a national professional association representing
certified public accountants (CPA's) in public practice, industry,
government, and education. The group aids in developing standards for
audits and other services provided by CPAs, in administering the
Uniform CPA Examination, and in monitoring and enforcing compliance
with the profession's technical and ethical standards. The AICPA also
monitors and analyzes federal regulations that may affect accounting
and related matters.
The AICPA did not comment on the quarterly form. Their comments
related to CPAs' audits of annual DART Statements of Account, and are
discussed below at section III(B).
2. The DART Coalition
The DART Coalition consists of representatives of the Electronic
Industries Association, the National Music Publishers' Association,
Inc. and its subsidiary The Harry Fox Agency, Inc., the Recording
Industry Association of America, the Home Recording Rights Coalition,
the Alliance of Artists and Recording Companies, the American Society
of Composers, Authors and Publishers, Broadcast Music, Inc., SESAC,
Inc., the American Federation of Musicians of the United States and
Canada, the American Federation of Television and Radio Artists,
Copyright Management, Inc., and the Songwriters Guild of America.
The Copyright Office had proposed in the 1993 interim regulation
that a filing party be locked into election of a calendar or fiscal
filing basis for three years. The Coalition suggested that, where a
filing party shows good cause, it be allowed to change its accounting
period (calendar or fiscal) at any time. The DART Coalition noted that,
if its suggestion were to be accepted, a filing party should not be
allowed to change its filing status to alter the total aggregate
royalty payments. They suggested that the regulations require
notification of changes in filing status to include provisions to
equalize total aggregate payments under the new basis with those that
would have been made under the earlier basis. DART Coalition comments
at 3.
The DART Coalition also suggested clarification with regard to
products subject to Statements of Account and royalty payment
obligations: except for ``credits for returns and exported merchandise
and subsequent obligations with respect to products for which credits
have been claimed,'' the obligation should apply only to units first
distributed in the United States during the appropriate filing period.
DART Coalition comments at 5.
The DART Coalition suggested that in the reporting space for
tracking audio recording devices and media manufactured and distributed
or imported and distributed by a party, the terms ``product category''
and ``technology'' be expressed in the plural, and ``space should be
provided for multiple product categories and technologies.'' DART
Coalition comments at 6.
In addition, the group suggested modification of the requirements
governing presentation of model number and transfer price information
to permit aggregation of products of the same model (or series) number
with the same applicable transfer price. DART Coalition comments at 6-
7.
Regarding information to be provided for stand-alone devices and
devices first distributed with other devices, the Coalition indicated
that the Office had not provided enough fee codes in the quarterly form
to cover all the types of devices that have to be reported. DART
Coalition comments at 7-9.
The Coalition also suggested that clarification be made as to when
royalties are payable. It recommended that language in the Office's
final regulations should indicate that royalties are due upon the
filing of quarterly or annual Statements of Account, not upon
distribution. DART Coalition comments at 9. In addition, the Coalition
suggested that because multiple transfer prices may apply to a given
product series or model, the language in the interim regulations should
be modified to provide for this possibility. Id.
Finally, the Coalition suggested that, regarding treatment of
monies that may be attributable to 1992 activities, any initial
quarterly Statements of Account that include partial fiscal or calendar
quarters ending in 1992 include estimates of payments attributable to
1992 and 1993 quarters. DART Coalition comments at 10.
B. Annual Statements of Account
Comments about annual Statement of Account forms were based upon
the language of the 1993 interim regulations governing the contents of
annual forms, rather than a draft of the form itself.
1. The American Institute of Certified Public Accountants
AICPA argued that the CPA who audits an annual statement should be
required to audit a separate ``schedule of royalties'' (a document not
anticipated or mentioned in the 1993 interim regulation) rather than
the annual statement itself. AICPA comments at 1. The comments
suggested that this separate schedule should relate only to the number
of devices and media distributed, their transfer prices, and the
cumulative amount of royalties. AICPA said that CPAs should not be
associated with the information contained in the fourth quarterly
statement or the entire annual statement, but instead should comment
only on the data that has been audited. AICPA wrote:
[W]e recommend that in addition to the Annual Statement of
Account, management prepares a ``schedule of royalties'' which the
CPA would audit. The appropriate information would be taken from the
Annual Statement of Account and, therefore, not result in additional
cost.
AICPA comments at 2. AICPA proposed that the auditing CPA should also
be permitted to ``express a qualified or adverse opinion or a
disclaimer of an opinion, and other comments.'' AICPA comments at 1.
This would meet generally accepted auditing standards, and would apply
in situations where conditions or circumstances beyond the auditor's
control cannot be audited, corrected, or honestly vouched for by the
CPA.
In addition, AICPA proposed that the language in the illustrative
CPA report which the Office had included in the 1993 interim
regulations be revised to be ``consistent with current authoritative
auditing literature.'' Id. Sample language was suggested to provide
information about accurate usage of terms associated with accounting
procedures. Regarding correct use of terms of art, or language used by
CPAs in the exercise of their duties, the AICPA suggested correction of
proposed language of section (4)(ii)(A) of the 1993 interim regulation.
The proposed language showing that CPAs ``certify'' financial
statements should be changed, because CPAs actually ``audit'' such
documents. The two terms have different meanings that give CPAs
different responsibilities. AICPA comments at 3.
Finally, the AICPA requested extending the filing date for annual
audited Statements of Account from two months to 90 or 120 days because
CPAs are busiest during January and February. AICPA comments at 4.
2. The DART Coalition
The Coalition commented on the 1993 interim regulations' provisions
governing the annual summary of the number of devices and media
manufactured or imported and distributed, and recommended several
changes. Rather than follow the Office's proposed breakdown of the
summary into ``product category,'' ``technology,'' and ``model
number,'' the group preferred an integrated summary based on models
within each category and technology. DART Coalition comments at 13.
The Coalition also commented on the provision on credits for
returns or exports. It was suggested that the credit provision be
* * * clarified to make clear that credits are applicable to
units on which a royalty payment has been made by the manufacturing
party that are (a) returned to the manufacturing party less than two
years following first distribution by the manufacturing party and
(b) originally `distributed' (i.e., transferred by the manufacturing
party for ultimate transfer to consumers in the United States),
which are thereafter exported by the manufacturing party within two
years following first distribution. A credit for exports would,
therefore, arise where the manufacturing party, after an initial,
internal distribution on which a royalty payment has been made,
subsequently exports.
DART Coalition comments at 14-15. Further clarification was suggested
to emphasize that a royalty payment is not triggered until distribution
takes place, and that, if a product is never distributed, no royalty is
paid and no need exists for a credit. DART Coalition comments at 15. In
addition, the Coalition asserted that an individual listing of returned
or exported digital audio recording products, as suggested by the
Office, would not be as efficient as presenting information by model,
with transfer price and applicable royalty credit ``in a format
comparable to that provided for the quarterly Statement of Account.''
DART Coalition comments at 16.
The Coalition had no comments, at the time of filing its comments
on the 1993 interim regulation, regarding accounting certification.
IV. Public Meeting
On June 11, 1993, the Copyright Office held a public meeting
intended to exchange comments and information regarding the quarterly
Statement of Account as proposed in the 1993 interim regulations and as
published in the initial version of the DART/Q Form. Comments were
invited as well about the annual Statement of Account form, which had
been discussed in the interim regulations, but had not yet been
published. 58 FR 29001 (May 18, 1993). The meeting was informal and no
recording was made of the discussion, much of which covered points
raised in the previously-submitted written comments.
One new matter was raised: The possible use of spreadsheets as part
of the Statement of Account reporting form. The Office considers this a
suggestion that should be explored, but believes it does not need to be
incorporated in the regulations. The Licensing Division is currently
discussing the use of computer-generated forms with interested parties.
V. Policy Decisions
The Copyright Office has examined our 1993 interim regulations in
light of the comments received. We have accepted most of the
suggestions made by the parties, noting that they involve solutions to
practical problems and that the AHRA itself is the result of a
cooperative agreement among the interested parties.
The 1993 interim regulations published in 57 FR 9544 (Feb. 22,
1993), are superseded by this second set of 1994 interim regulations.
Several important modifications and additions are incorporated,
including treatment of the auditor's report to accompany the annual
Statement of Account, and fine tuning of the specific contents of
quarterly and annual statements. We have also decided to provide for
credits and for refunds on a quarterly as well as an annual basis, for
both devices and media, and to extend the credit to situations where
the products are exported. We also eliminate the former requirement
that a manufacturing or importing party filing DART statements is
locked into its choice of a filing basis for three years unless
permission to change is sought from and granted by the Register of
Copyrights. Although parties filing DART statements must note on the
forms whether they are filing on a calendar or a fiscal year basis,
changes in filing basis may be made by notifying the Register at least
two months before filing on the changed basis, with a written statement
of reasons as to why the change is to be made and a statement that such
a change will not affect the aggregate royalty due under the earlier
basis.
Based upon AICPA's recommendations concerning appropriate auditing
terminology and procedures, the Copyright Office is adopting procedures
for the primary auditor's report that allow the auditor to make his or
her report either on or attached to the DART/A Form.
The DART Coalition's concerns regarding the manner in which
products are to be aggregated on the Statements of Account by product
and technology has been addressed by clarifying that the Statement of
Account permits the reporting of each unique combination of product
category, technology, series or model number, fee code, source code,
and transfer price.
The Office also received comments during its rulemaking proceeding
RM 93-2, Auditing of and Confidential Access to Statements of Account,
that should be noted. The Electronic Industries Association (EIA),
commented that an audit may cost a party thousands of dollars, and
could ``create a barrier that would keep small manufacturers or
importers out of the digital audio market,'' a negative result not
contemplated by the Act. EIA comments at 17. EIA suggested that small
manufacturers or importers would benefit from an elective exemption
from the Act's audit requirement. The exemption would be available for
``filers that either (i) Do not engage an independent CPA to conduct an
annual financial audit or (ii) file an annual statement of account
showing a royalty payment due of less than five thousand dollars
($5,000).'' Id. The Office has considered this proposal, but has
concluded that it should not provide such a waiver in these regulations
covering the primary audit.
In an effort to facilitate easy and accurate filing of Statements
of Account, the Office has revised the DART/Q Form since its original
issue. Copies of the most current DART/Q and the new DART/A Forms are
available upon writing the Licensing Division, Copyright Office,
Library of Congress, Washington, DC 20557, by calling (202) 707-8150 or
by facsimile (202) 707-0905. Forms may be requested via facsimile for
informational purposes, but facsimile copies may not be submitted to
the Office.
List of Subjects in 37 CFR Part 201
Copyright, Digital audio recording products.
Interim Regulations
In consideration of the foregoing, the Copyright Office is amending
part 201 of 37 CFR chapter II, in the manner set forth below.
PART 201--[AMENDED]
1. The authority citation for part 201 continues to read as
follows:
Authority: Sec. 702, 90 Stat. 2541; 17 U.S.C. 702; Sec. 201.28
is also issued under Pub. L. 102-563, 106 Stat. 4237.
2. Section 201.28 is revised to read as follows:
Sec. 201.28 Statements of Account for digital audio recording devices
or media.
(a) General. This section prescribes rules pertaining to the filing
of Statements of Account and royalty fees in the Copyright Office as
required by 17 U.S.C. 1003(c) and 1004, in order to import and
distribute, or manufacture and distribute, in the United States any
digital audio recording device or digital audio recording medium.
(b) Definitions. For purposes of this section, the following
definitions apply:
(1) Annual statement of account is the statement required under 17
U.S.C. 1003, to be filed no later than two months after the close of
the accounting period covered by the annual statement.
(2) Device and medium have the same meaning as digital audio
recording device and digital audio recording medium, respectively, have
in 17 U.S.C. 1001.
(3) Digital audio recording product means digital audio recording
devices and digital audio recording media.
(4) Generally accepted auditing standards (GAAS), means the
auditing standards promulgated by the American Institute of Certified
Public Accountants.
(5) Manufacturing or importing party refers to any person or entity
that manufactures and distributes, and/or imports and distributes, any
digital audio recording device or digital audio recording medium in the
United States, and is required under 17 U.S.C. 1003 to file with the
Copyright Office quarterly and annual Statements of Account.
(6) Product category of a device or medium is a general class of
products made up of functionally equivalent digital audio recording
products with substantially the same use in substantially the same
environment, including, for example, hand-held portable integrated
combination units (``boomboxes''); portable personal recorders; stand-
alone home recorders (``tape decks''); home combination systems (``rack
systems''); automobile recorders; configurations of tape media
(standard cassettes or microcassettes); and configurations of disc
media, such as 2\1/2\ inch, 3 inch, or 5 inch discs.
(7) Primary auditor is the certified public accountant retained by
the manufacturing or importing party to audit the amounts reported in
the annual Statement of Account submitted to the Copyright Office. The
primary auditor may be the certified public accountant engaged by the
manufacturing or importing party to perform the annual audit of the
party's financial statement.
(8) Quarterly statement of account is the statement accompanying
royalty payments required under 17 U.S.C. 1003, to be filed for each of
the first three quarters of the accounting year, and no later than 45
days after the close of the quarterly period covered by the statement.
(9) Technology of a device or medium is a digital audio recording
product-type distinguished by different technical processes for
digitally recording musical sounds, such as digital audio tape
recorders (DAT), digital compact cassettes (DCC), or recordable compact
discs, including minidiscs (MD).
(10) Distribute, manufacture, transfer price, and serial copying
have the meanings set forth in 17 U.S.C. 1001.
(c) Accounting periods and filing deadlines. (1) Election of filing
basis. Statements of Account may be filed on either a calendar or
fiscal year basis at the election of the manufacturing party. The
election of a calendar or fiscal year basis must be made when the
manufacturing or importing party files its first quarterly Statement of
Account by appropriate designation on the Form DART/Q submitted.
Thereafter the specific calendar or fiscal-year accounting period must
be designated on each quarterly Statement of Account. The filing basis
may be changed at any time upon notification in writing to the Register
of Copyrights, accompanied by a statement of reasons as to why the
change is to be made and a statement that such change will not affect
the aggregate royalties due under the earlier basis. The notification
of change in filing basis must be made at least two months before the
date the next quarterly Statement of Account is due to be filed.
(2) Quarterly filings. Quarterly Statements of Account shall be
filed on Form DART/Q and shall cover a three-month period corresponding
to the calendar or fiscal year of the filing party. A quarterly
statement shall be filed no later than 45 days after the close of the
period it covers.
(3) Annual filings. Annual Statements of Account shall be filed on
Form DART/A and shall cover both the fourth quarter of an accounting
year and the aggregate of the entire year corresponding to the calendar
or fiscal accounting year elected. An annual statement shall be filed
no later than two months after the close of the period it covers. As a
transitional measure, however, the first annual Statement of Account
filed after October 28, 1992, is not due until March 1, 1994, or two
months after the end of the calendar or fiscal year in which the
manufacturing or importing party first filed a quarterly Statement of
Account, whichever is later. The first annual Statement of Account
shall cover the entire period from October 28, 1992, to the end of the
full accounting year. The appropriate royalty payment, calculated
according to the instructions contained in Form DART/A, shall accompany
the annual Statement of Account covering royalties due for the filing
year: that is, royalties for the fourth quarter and any additional
royalties that are due because of adjustments in the aggregate amounts
of devices or media distributed.
(4) Early or late filings. Statements of Account and royalty fees
received before the end of the particular accounting period covered by
the statement will not be processed by the Office. The statement must
be filed after the close of the relevant accounting period. Statements
of Account and royalty fees received after the 45-day deadline for
quarterly statements or the two month deadline for annual statements
will be accepted for whatever legal effect they may have and will be
assessed the appropriate interest charge for the late filing.
(d) Forms. (1) Each quarterly or annual Statement of Account shall
be submitted on the appropriate form prescribed by the Copyright
Office. Computation of the royalty fee shall be in accordance with the
procedures set forth in the forms and this section. Statement of
Account forms are available from the Licensing Division, Library of
Congress. Forms and other information may be requested from the
Licensing Division by facsimile transmission (FAX), but copies of
Statement of Account forms transmitted to the Office by FAX will not be
accepted.
(2) Forms prescribed by the Copyright Office are designated
Quarterly Statement of Account for Digital Audio Recording Products
(Form DART/Q) and Annual Statement of Account for Digital Audio
Recording Products (Form DART/A).
(e) Contents of quarterly Statements of Account. (1) Quarterly
period and filing. Any quarterly Statement of Account shall cover the
full quarter of the calendar or fiscal accounting year for the
particular quarter for which it is filed. A separate quarterly
statement shall be filed for each quarter of the first three quarters
of the accounting year during which there is any activity relevant to
the payment of royalties under 17 U.S.C. 1004. The annual Statement of
Account identified in paragraph (f) of this section incorporates the
fourth quarter of the accounting year.
(2) General content. Each quarterly Statement of Account shall be
filed on Form DART/Q, the ``Quarterly Statement of Account for Digital
Audio Recording Products,'' and shall include a clear statement of the
following information:
(i) A designation of the calendar or fiscal year of the annual
reporting period;
(ii) A designation of the period, including the beginning and
ending day, month, and year of the period covered by the quarter;
(iii) The full legal name of the manufacturing and/or importing
party, together with any ``doing-business-as'' names used by such
person or entity for the purpose of conducting the business of
manufacturing, importing, or distributing digital audio recording
products;
(iv) The full mailing address of the manufacturing or importing
party, including a specific number and street name, or rural route and
box number, of the place of business of the person or entity. A post
office box or similar designation will not be sufficient for this
purpose except where it is the only address that can be used in that
geographic location;
(v) A designation of the manufacturing or importing party status,
i.e., ``Manufacturer,'' ``Importer,'' or ``Manufacturer and Importer;''
(vi) The designation ``Product Categories'' together with the
product categories of the digital audio recording products manufactured
or imported and distributed during the quarter covered by the
statement;
(vii) The designation ``Technologies'' together with the
technologies of the digital audio recording products manufactured or
imported and distributed under the AHRA during the quarter covered by
the statement;
(viii) The designation ``Series or Model Number'' followed by the
model or series numbers of the digital audio recording products
manufactured or imported and distributed under the AHRA during the
quarter covered by the statement;
(ix) The ``fee code'' associated with the product;
(x) The ``source code'' for the product category;
(xi) The ``transfer price'' of the product;
(xii) The ``number of units distributed'' for each product;
(xiii) The ``minimum fee per unit'' for each product;
(xiv) The statutory royalty ``rate'' for digital audio recording
devices or media;
(xv) The ``rate fee'' for each product;
(xvi) The appropriate ``maximum fee per unit'' for each product;
(xvii) The ``maximum fee'' for each product; and
(xviii) A computation of the total royalty payable for the quarter
covered by the statement. Filing parties may not round off the figures
they list in Space C, the computation section of the form, except for
the figure representing the total royalty fee due; in that case,
numbers ending in 50 to 99 cents may be rounded up to the next dollar,
and numbers ending in one to 49 cents may be rounded down to the next
dollar;
(3) Royalty payments and accounting. (i) The royalty specified in
17 U.S.C. 1004 shall accompany the quarterly and annual Statements of
Account. No royalty is payable for redistribution of the same product
item unless a credit has been taken for such items. Where royalties are
payable for the period covered by the statement, the Statement of
Account shall contain the following information for each unique
combination of product category, technology, series or model number,
fee code, source code, and transfer price:
(A) The total number of digital audio recording media distributed,
multiplied by the statutory royalty rate of three percent (3%) of the
transfer price;
(B) The total number of digital audio recording devices distributed
for which the statutory royalty rate of two percent (2%) of the
transfer price is payable, multiplied by such percentage rate of the
transfer price;
(C) The total number of digital audio recording devices distributed
for which the statutory maximum royalty is limited to eight dollars
($8.00), multiplied by such eight dollar amount;
(D) The total number of digital audio recording devices distributed
for which the statutory maximum royalty is limited to twelve dollars
($12.00), multiplied by such twelve dollar amount; and
(E) The total number of digital audio recording devices distributed
for which the statutory minimum royalty is limited to one dollar
($1.00), multiplied by such one dollar amount.
(ii) The amount of the royalty payment shall be calculated in
accordance with the instructions specified in the quarterly Statement
of Account form. Payment of the royalty fee must be in the form of a
certified check, cashier's check, money order, or electronic payment
payable to the Register of Copyrights.
(4) Reduction of royalty fee. (i) Section 1004(a)(2)(A) of title 17
U.S. Code, provides an instance in which royalty payments may be
reduced if the digital audio recording device and such other devices
are part of a physically integrated unit, the royalty payment shall be
based on the transfer price of the unit, but shall be reduced by any
royalty payment made on any digital audio recording device included
within the unit that was not first distributed in combination with the
unit.
(ii) Notice of this provision together with directions for possible
application to a product is contained in the DART/Q Form.
(5) Contact party. Each Statement of Account shall include the
name, address, and telephone and facsimile (FAX) numbers of an
individual whom the Copyright Office can write or call about the
Statement of Account.
(6) Credits for returned or exported products. When digital audio
recording products first distributed in the United States for ultimate
transfer to United States consumers are returned to the manufacturer or
importer as unsold or defective merchandise, or are exported, the
manufacturing or importing party may take a credit to be deducted from
the royalties payable for the period when the products were returned or
exported. The credit may be taken only for returns or exports made
within two years following the date royalties were paid for the
products. This credit must be reflected in the manufacturing or
importing party's quarterly or annual Statement of Account. If the
manufacturer or importer later redistributes in the United States any
products for which a credit has been taken, these products must be
listed on the Statement of Account, and a new computation of the
royalty fee must be made based on the transfer price of the products at
the time of the new distribution.
(7) Oath and signature. Each Statement of Account shall include the
handwritten signature of an authorized officer, principal, or agent of
the filing party. The signature shall be accompanied by:
(i) The printed or typewritten name of the person signing the
quarterly Statement of Account;
(ii) The date the document is signed;
(iii) The following certification:
I, the undersigned, hereby certify that I am an authorized
officer, principal, or agent of the ``manufacturing or importing
party'' identified in Space B.
Penalties for fraud and false statements are provided under 18 U.S.C.
1001 et. seq.
(f) Contents of annual Statements of Account. (1) General contents.
Each annual Statement of Account shall be filed on form DART/A,
``Annual Statement of Account for Digital Audio Recording Products.''
It must be filed by any importer or manufacturer that distributed in
the United States, during a given calendar or fiscal year, any digital
audio recording device or digital audio recording medium. The annual
statement shall cover the aggregate of the distribution of devices and
media for the entire year corresponding to the calendar or fiscal year
elected. The annual Statement of Account shall contain the information,
oath, and certification prescribed in paragraphs (e)(2)(i) through
(e)(7)(iii) of this section, and shall cover the entire accounting
year, including the fourth quarter distribution, and shall also provide
for the reconciliation of the aggregated accounting of digital audio
recording devices and media for the reported accounting year.
(2) Reconciliation. Any royalty payment due under sections 1003 and
1004 of title 17 that was not previously paid with the filing party's
first three quarterly Statements of Account, shall be reconciled in the
annual statement. Reconciliation in the annual Statement of Account
provides for adjustments for reductions, refunds, underpayments,
overpayments, credits, and royalty payments paid in Quarters 1, 2, and
3, and shall be computed in accordance with the instructions included
in the annual Statement of Account. Errors that require reconciliation
shall be corrected immediately upon discovery.
(3) Accountant's opinion. Each annual Statement of Account or any
amended annual Statement of Account shall be audited by the primary
auditor as defined in paragraph (b)(7) of this section. An amendment
may be submitted to the Office either as a result of responses to
questions raised by a Licensing Division examiner or on the initiative
of the manufacturing or importing party to correct an error in the
original Statement of Account.
(i) The audit shall be performed in accordance with generally
accepted auditing standards (GAAS). The audit may be performed in
conjunction with an annual audit of the manufacturing or importing
party's financial statements.
(ii) The CPA shall issue a report, the ``primary auditor's
report,'' reflecting his or her opinion as to whether the annual
statement presents fairly, in all material respects, the number of
digital audio recording devices and media that were imported and
distributed, or manufactured and distributed, by the manufacturing or
importing party during the relevant year, and the amount of royalty
payments applicable to them under 17 U.S.C. chapter 10, in accordance
with that law and these regulations.
(iii) The primary auditor's report shall be filed with the
Copyright Office together with the annual Statement of Account, within
two months after the end of the annual period for which the annual
Statement of Account is prepared. The report may be qualified to the
extent necessary and appropriate.
(iv) The Copyright Office does not provide a specific form, or
require a specific format, for the CPA's review; however, in addition
to the above, certain items must be named as audited items. These
include the variables necessary to complete Space C of the Statement of
Account form. The CPA may place his or her opinion, which will serve as
the ``primary auditor's report,'' in the space provided on Form DART/A,
or may attach a separate sheet or sheets containing the opinion.
(v) The auditor's report shall be signed by an individual, or in
the name of a partnership or a corporation, and shall include city and
state of execution, certificate number, jurisdiction of certificate,
and date of opinion. The certificate number and jurisdiction are not
required if the report is signed in the name of a partnership or a
corporation.
(g) Documentation. All filing parties shall keep and retain in
their possession, for at least three years from the date of filing, all
records and documents necessary and appropriate to support fully the
information set forth in quarterly and annual statements that they
file.
(h) Corrections, supplemental payments, and refunds. (1) General.
Upon compliance with the procedures and within the time limits set
forth in this paragraph (h), corrections to quarterly and annual
Statements of Account will be placed on record, and supplemental
royalty fee payments will be received for deposit, or refunds without
interest will be issued, in the following cases:
(i) Where, with respect to the accounting period covered by the
quarterly or annual Statement of Account, any of the information given
in the statement filed in the Copyright Office is incorrect or
incomplete; or
(ii) Where, for any reason except that mentioned in paragraph
(h)(2) of this section, calculation of the royalty fee payable for a
particular accounting period was incorrect, and the amount deposited in
the Copyright Office for that period was either too high or too low.
(2) Corrections to quarterly or annual Statements of Account will
not be placed on file, supplemental royalty fee payments will not be
received for deposit, and refunds will not be issued, where the
information in the Statements of Account, the royalty fee calculations,
or the payments were correct as of the date on which the accounting
period ended, but changes (for example, cases where digital audio
recording media were exported) took place later.
(3) Requests that corrections to annual or quarterly Statements of
Account be accepted, that fee payments be accepted, or that refunds be
issued shall be addressed to the Licensing Division of the Copyright
Office, and shall meet the following conditions:
(i) The request shall be made in writing and must clearly identify
the manufacturing or importing party making the request, the accounting
period in question, and the purpose of the request. A request for a
refund must be received in the Copyright Office before the expiration
of two months from the last day of the applicable Statement of Account
filing period. A request made by telephone or by telegraphic or similar
unsigned communication will be considered to meet this requirement if
it clearly identifies the basis of the request, is received in the
Copyright Office within the two-month period, and a written request
meeting all the conditions of this paragraph (h)(3) is also received in
the Copyright Office within 14 days after the end of such two-month
period.
(ii) The request must clearly identify the incorrect or incomplete
information formerly filed and must provide the correct or additional
information.
(iii) In the case where a royalty fee was miscalculated and the
amount deposited with the Copyright Office was too large or too small,
the request must be accompanied by an affidavit under the official seal
of any officer authorized to administer oaths within the United States,
or a statement in accordance with 28 U.S.C. 1746, made and signed in
accordance with paragraph (e)(7) of this section. The affidavit or
statement shall describe the reasons why the royalty fee was improperly
calculated and include a detailed analysis of the proper royalty
calculation.
(iv) Following final processing, all requests will be filed with
the original Statement of Account in the records of the Copyright
Office. Nothing contained in this paragraph shall be considered to
relieve manufacturing or importing parties of their full obligations
under title 17 of the United States Code, and the filing of a
correction or supplemental payment shall have only such effect as may
be attributed to it by a court of competent jurisdiction.
(v)(A) The request must be accompanied by a filing fee in the
amount of $20 for each Statement of Account involved. Payment of this
fee may be in the form of a personal or company check, or a certified
check, cashier's check, or money order, payable to the Register of
Copyrights. No request will be processed until the appropriate filing
fees are received.
(B) Requests that a supplemental royalty fee payment be deposited
must be accompanied by a remittance in the full amount of such fee.
Payment of the supplemental royalty fee must be in the form of a
certified check, cashier's check, money order, or electronic payment
payable to the Register of Copyrights. No such request will be
processed until an acceptable remittance in the full amount of the
supplemental royalty fee has been received.
(vi) All requests submitted under paragraph (h) of this section
must be signed by the manufacturing or importing party named in the
Statement of Account, or the duly authorized agent of that party in
accordance with paragraph (e)(7) of this section.
(vii) A request for a refund is not necessary where the Licensing
Division, during its examination of a Statement of Account or related
document, discovers an error that has resulted in a royalty
overpayment. In this case, the Licensing Division will forward the
royalty refund to the manufacturing or importing party named in the
Statement of Account. The Copyright Office will not pay interest on any
royalty refunds.
(i) Examination of Statements of Account by the Copyright Office.
(1) Upon receiving a Statement of Account and royalty fee, the
Copyright Office will make an official record of the actual date when
such statement and fee were physically received in the Copyright
Office. Thereafter, the Licensing Division will examine the statement
for obvious errors or omissions appearing on the face of the documents
and will require that any such obvious errors or omissions be corrected
before final processing of the document is completed. If, as the result
of communications between the Copyright Office and the manufacturer or
importer, an additional fee is deposited or changes or additions are
made in the Statement of Account, the date that additional deposit or
information was actually received in the Office will be added to the
official record.
(2) Completion by the Copyright Office of the final processing of a
Statement of Account and royalty fee deposit shall establish only the
fact of such completion and the date or dates of receipt shown in the
official record. It shall not be considered a determination that the
Statement of Account was, in fact, properly prepared and accurate, that
the correct amount of the royalty was deposited, that the statutory
time limits for filing had been met, or that any other requirements of
17 U.S.C. 1001 et. seq. were fulfilled.
(j) Interest on late payments or underpayments. (1) Royalty
payments submitted as a result of late payments or underpayments shall
include interest, which shall begin to accrue on the first day after
the close of the period for filing Statements of Account for all late
payments or underpayments of royalties occurring within that accounting
period. The accrual period for interest shall end on the date appearing
on the certified check, cashier's check, money order, or electronic
payment submitted by the manufacturing or importing party, if the
payment is received by the Copyright Office within five business days
of that date. If the payment is not received by the Copyright Office
within five business days of its date, the accrual period shall end on
the date of actual receipt by the Copyright Office.
(2) The interest rate applicable to a specific accounting period
shall be the Current Value of Funds rate in accordance with the
Treasury Financial Manual, at 1 TFM 6-8025.40, in effect on the first
business day after the close of the filing deadline for the relevant
accounting period. The interest rate for a particular accounting period
may be obtained by consulting the Federal Register for the applicable
Current Value of Funds Rate, or by contacting the Licensing Division of
the Copyright Office.
(3) Interest is not required to be paid on any royalty underpayment
or late payment from a particular accounting period if the interest
charge is five dollars ($5.00) or less.
(k) Confidentiality of Statements of Account. Public access to the
Copyright Office files of Statements of Account for digital audio
recording products shall not be provided. Access will only be granted
to interested copyright parties in accordance with regulations
prescribed by the Register of Copyrights pursuant to 17 U.S.C. 1003(c).
Dated: January 26, 1994.
Barbara Ringer,
Acting Register of Copyrights.
Approved by:
James H. Billington,
Librarian of Congress.
[FR Doc. 94-2066 Filed 1-31-94; 8:45 am]
BILLING CODE 1410-08-P