[Federal Register: July 13, 1994]
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LIBRARY OF CONGRESS
Copyright Office
[Docket No. RM 94-2B CARP-DD]
Consolidation of 1992, 1993 and 1994 Digital Audio Recording
Distribution Proceedings
AGENCY: Copyright Office, Library of Congress.
ACTION: Notice of consolidation of proceedings, royalty distribution,
and public meeting.
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SUMMARY: The Copyright Office is granting a motion to consolidate the
1992, 1993, and 1994 digital audio recording (DART) distribution
proceedings which will begin in 1995. In addition, the Office will make
distribution of the 1992 and 1993 Nonfeatured Musicians and Nonfeatured
Vocalists DART subfunds in July. The Office will hold a public meeting
to discuss the best evidence for the distribution of DART royalties in
September.
DATES: (1) The distribution of the royalties in the 1992 and 1993
Nonfeatured Musicians and Nonfeatured Vocalists DART subfunds will take
place July 28, 1994. (2) The public meeting to discuss best evidence
for distribution of royalties will take place 10 a.m., Tuesday,
September 27, 1994.
ADDRESSES: The public meeting will take place at the temporary CARP
hearing room, Suite 921, 1825 Connecticut Avenue, N.W., Washington, DC
20009.
FOR FURTHER INFORMATION CONTACT: Eric Schwartz, Acting General Counsel,
U.S. Copyright Office, Department 17, Library of Congress, Washington,
DC 20540. Telephone (202) 707-8380.
SUPPLEMENTARY INFORMATION:
I. Background
On December 17, 1993, Congress passed the Copyright Royalty
Tribunal Reform Act of 1993. This legislation dissolved the Tribunal
and established a new system of copyright arbitration royalty panels
(CARPs) to be supported by the Library of Congress and the Copyright
Office.
The first proceeding to be initiated under the new CARP system was
the distribution of the 1992 and the 1993 digital audio recording
technology (DART) royalties. The 1992 DART distribution proceeding was
begun by the 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, 59
FR 9773, we began the process of distributing DART royalties by asking
the claimants to the 1992 and 1993 DART funds for comments on the
following questions:
(a) Do any controversies exist concerning the distribution of 1992
and/or 1993 DART royalties?
(b) If controversies do exist, which subfunds do they exist in?
(c) If settlements have been reached, which parties have reached
settlement and which have not?
(d) Do the claimants believe it would be advisable to consolidate
the 1992 DART proceeding with the 1993 DART proceeding?
In addition, in the March 1, 1994, notice and in a subsequent
notice appearing May 16, 1994, 59 FR 25506, the Library of Congress and
the Copyright Office established the initial procedural dates that
would apply to the 1992 and 1993 DART proceedings, as follows:
June 10, 1994--comments from claimants due on whether controversies
exist in the distribution of 1992 and 1993 DART funds, and whether the
1992 and 1993 DART distribution proceedings should be consolidated.
June 15, 1994--precontroversy motions, and/or objections to any
listed arbitrators due from claimants who will be participating in the
1992 and/or 1993 DART distribution proceedings.
June 30, 1994--declaration by the Librarian of Congress to be made
as to whether any controversies exist in the distribution of 1992 and
1993 DART royalties, and, if they do, a declaring of the initiation of
CARP proceedings.
August 1, 1994--authorization by the Copyright Office of the
distribution of any royalties found not to be in controversy.
II. The Commentators
We received comments from the following claimants:
The Alliance of Artists and Recording Companies (AARC)
Ymistye L. White
Alicia Carolyn Evelyn
Eugene (Lambchops) Curry
James Cannings
Gear Publishing Company
Hideout Productions on behalf of Punch Enterprises, Inc. and Bob Seger
Sword and Stone Publishing, Inc.
Bopp du Wopp, Inc.
Jointly, the independent administrator of the Nonfeatured Musicians and
the Nonfeatured Vocalists subfund; the American Federation of Musicians
(AFM); the American Federation of Television and Radio Artists (AFTRA);
and the Recording Industry Association of America (RIAA).
Jointly, AARC, American Society of Composers, Authors and Publishers
(ASCAP), Broadcast Music, Inc. (BMI); Copyright Management, Inc. (CMI),
Gospel Music Coalition (GOSPEL); The Harry Fox Agency, Inc. (HFA);
SESAC, Inc. (SESAC), and the Songwriters Guild of America (SGA).
Jointly, ASCAP, BMI, CMI, GOSPEL, HFA, SESAC, and the SGA.
III. Motion to Consolidate and Stay Procedural Dates
The comments indicated that, while many settlements were reached,
there still existed some unresolved controversies in each of the
subfunds. Rather than requesting the immediate initiation of a CARP
proceeding to resolve these controversies, a joint motion was filed by
AARC, ASCAP, BMI, CMI, GOSPEL, HFA, SESAC, and SGA requesting that the
Librarian of Congress and the Copyright Office consolidate the 1992 and
the 1993 DART distribution proceedings with the 1994 DART distribution
proceedings that will start next year, and defer all consideration of
DART distributions until 1995.
As a consequence of their motion to consolidate, the joint
commentators also requested that the initial DART procedural dates of
June 15 (precontroversy motions and objections), June 30 (initiation of
proceedings), and August 1 (authorization of distributions) be stayed
until after the 1994 claims are filed in 1995.
A. Justification of Motion to Consolidate and Stay of Procedural Dates
In support of their motion to consolidate, the joint commentators
noted that the 1992 and the 1993 DART funds, which are the first funds
to be collected under the Audio Home Recording Act that took effect on
October 28, 1992, are quite small: a little over $100,000 for 1992, and
less than $500,000 for 1993. They anticipate that, because the DART
fund is new, many issues of first impression will have to be resolved,
but that the costs of such action will be such as to consume most, if
not all, of the fund. The joint commentators observed that the costs
borne by the copyright owners in a DART proceeding are not only their
own costs, but the costs of the Library of Congress, the Copyright
Office, and the arbitrators. In the interest of economy, therefore, the
joint commentators requested that the 1992 and 1993 distribution
proceedings be consolidated with the 1994 proceeding.
In addition, the joint commentators noted that the Library of
Congress and the Copyright Office have endeavored to adopt regulations
to govern the new CARP proceedings, but that the current regulations
are interim rules. Comments on the interim rules were due June 15,
1994, and reply comments are due July 15, 1994. The joint commentators
would prefer that a DART proceeding operate under the final rules that
result from these latest rounds of comments, rather than proceed under
the interim rules.
Last, the joint commentators stated that they will endeavor to use
the time between now and 1995 to gather the best information and data
relevant to a DART distribution proceeding, and to continue to work for
more settlements in each of the subfunds. To the extent that more
settlements are reached, fewer controversies will need to be brought
before the arbitrators, and fewer royalties will have to be spent on
the expense of a CARP proceeding.
B. Grant of Motion to Stay Procedural Dates and Establishment of
Comment Period
On June 21, 1994, the Library of Congress and the Copyright Office
issued an Order finding good cause to grant the motion to stay the
procedural dates of June 15, June 30, and August 1, established in this
proceeding.
Concerning the motion to consolidate the 1992, 1993, and 1994
distribution proceedings, the Order gave those persons who did not join
in the joint motion until June 24, 1994, to respond to it, as provided
by Sec. 251.45 of the Copyright Office rules.<SUP>1
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\1\Section 251.45 provides that the comment period for
precontroversy motions is two weeks from the filing of the motion.
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C. Responses to the Motion to Consolidate Proceedings
Responses to the joint motion to consolidate proceedings were filed
by James Cannings, Eugene Curry, and Alicia Carolyn Evelyn.
Mr. Cannings agreed with the consolidation of the 1992, 1993 and
1994 proceedings provided that the distribution methodology proposed by
Bopp du Wopp, Inc. is considered as one possible method by the
claimants. Mr. Cannings urged diligent and good faith efforts at
settlement before 1995.
Mr. Curry questioned whether the proposed consolidation of 1992,
1993 and 1994 would lead to another consolidation next year, then the
year after that, ad infinitum. Mr. Curry would agree to future years
being consolidated, i.e., 1994, 1995, and 1996, but wanted an immediate
distribution of 1992 and 1993 moneys this August.
Ms. Evelyn stated that she would object to the motion to
consolidate so long as public performance royalty issues she has raised
with BMI and ASCAP remain unresolved. She joined with Mr. Cannings in
support of Bopp du Wopp, Inc.'s proposed distribution methodology.
IV. Grant of Motion to Consolidate
The Library of Congress and the Copyright Office agree with the
arguments made by the joint commentators and hereby grant the motion to
consolidate the 1992, 1993, and 1994 DART royalty distribution
proceedings into one proceeding that will begin in 1995.
As we discussed in our notice of March 1, 1994, the Audio Home
Recording Act established certain statutory deadlines for the
commencement of DART distribution proceedings which, as the agency
delegated the responsibility, we were prepared to meet. However, as
observed by the Administrative Conference of the United States, 1
C.F.R. 305.78-3, there are special circumstances when the meeting of a
statutory deadline would not serve the public interest. Here, the
majority of the claimants themselves have asked for a waiving of the
statutory dates so that they might realize the economies that would
accrue from a consolidation of proceedings, and so that they might
continue settlement talks that could potentially avoid the cost of a
CARP proceeding altogether. Under these circumstances, to initiate a
CARP proceeding immediately will only serve to spend the claimants'
royalties needlessly, and will likely result in the claimants receiving
fewer royalties today than if they waited until 1995.<SUP>2 In
addition, we see no financial harm in waiting until 1995. The
claimants' royalties will remain invested in United States Treasury
securities, and will continue to earn interest.
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\2\When confronted with the question of whether to nullify the
Copyright Royalty Tribunal's cable rate adjustment because the
Tribunal missed its statutory deadline by 28 days, the Court of
Appeals for the District of Columbia stated that ``Statutes that,
for guidance of a government official's discharge of duties, propose
to secure order, system, and dispatch in proceedings, are usually
construed as directory, whether or not worded in the imperative,
especially when the alternative is harshness or absurdity.'' The
Court also noted that ``agencies rigidly tied to a deadline * * *
would become Penelopes, forever engaged in unraveling the webs they
wove.'' National Cable Television Association v. Copyright Royalty
Tribunal, 724 F. 2d 176, 189, fn. 23 (D.C. Cir. 1983).
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The objection of Mr. Curry to consolidation is based on a concern
that consolidations will happen every year, and no moneys will ever be
distributed. We do not see that occurring. Our goal, and, we believe
that of the moving parties, is economy, not delay. The moving parties
do not want to see their royalties remaining with the government and
neither do we.
The objection of Ms. Evelyn is tied to her other issues with ASCAP
and BMI, and are not relevant to our consideration here.
As stated earlier, in our Order, dated June 21, 1994, we granted
the joint commentators' motion to stay all previously announced
procedural dates intended to govern a 1992 and 1993 DART royalty
distribution proceeding.<SUP>3 Consistent with our ruling today to
consolidate the 1992, 1993, and 1994 proceedings, new procedural dates
will be established in 1995, in accordance with our yearly statutory
obligation under Chapter 10 of the Copyright Code to ascertain DART
controversies and to initiate DART proceedings.
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\3\As discussed below, in part VI, we are making a full
distribution of the Nonfeatured Musicians Subfund and the
Nonfeatured Vocalists Subfund on July 28, 1994. See, discussion
below, at VI.
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V. Inquiry Into Best Evidence
The concerns expressed by the commentators about the potential for
the costs of a DART proceeding to use up most or all of the DART
royalties available for distribution are valid, and are very much
shared by the Library and the Copyright Office. Two scenarios
especially concern us. One, there is the possibility of holding
extensive hearings for controversies where the amounts in dispute are
ultimately determined to be quite small. Two, even if the amounts in
controversy are sizable, there is the possibility of holding months-
long hearings about the validity of the evidence offered by the
parties, which again would ultimately use up the bulk of the royalties
in the DART funds, and the time allotted for arbitration. This is
especially likely because DART proceedings have never been held, and
there is no precedent concerning what is the most relevant evidence. We
note that at a similar stage in its regulatory history, the issue of
the best evidence for distributing jukebox royalties was the subject of
a full evidentiary hearing at the Copyright Royalty Tribunal, but,
nevertheless, resulted in the Tribunal deciding that no distribution
determination could be reached without further efforts at producing
better evidence.<SUP>4 This is a situation we should like to avoid.
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\4\``The Tribunal considers that the record of the current
proceeding is insufficient as a basis on which we can make a
distribution of the 1979 jukebox royalties. * * * The Tribunal,
therefore, has elected not to make a distribution in this
proceeding.'' 1979 Jukebox Royalty Distribution, 46 FR 58139, 58142
(Nov. 30, 1981).
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Consequently, the Library of Congress and the Copyright Office will
hold a public meeting at 10 a.m., Tuesday, September 27, 1994 at the
temporary CARP hearing room, Suite 921, 1825 Connecticut Avenue, N.W.,
Washington, D.C. 20009. The purpose of the meeting is to discuss what
would be the best evidence for distribution of the Sound Recordings
Fund and the Musical Works Fund.
We note that section 1006(c) of the Copyright Code states that the
allocation of the Sound Recordings Fund shall be made according to the
extent sound recordings were distributed, and that the allocation of
the Musical Works Fund shall be made according to the extent musical
works were distributed or disseminated to the public in transmissions.
We should like, therefore, to know:
(a) Do industry data exist, or can industry data be produced, that
will demonstrate validly the distribution of sound recordings in the
United States?
(b) Do industry data exist, or can industry data be produced, that
will demonstrate validly the dissemination of musical works to the
public in transmissions in the United States?
(c) How should ``distributed'' be defined given the practice of
allowable returns? Should the arbitrators employ the rule adopted by
the Copyright Office with respect to section 115?<SUP>5
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\5\ With respect to the 17 U.S.C. 115 mechanical license,
``distributed'' is defined as occurring when ``the person exercising
the compulsory license has voluntarily and permanently parted'' with
possession of the phonorecord. The Copyright Office has taken the
position that permanent distribution of phonorecords occurs one year
from the date that the compulsory licensee parts with possession, or
at the time when a sale of the phonorecord is recognized in
accordance with generally accepted accounting principles, or
according to the IRS' practices, whichever of these events comes
earlier. 42 FR 64889, 64892 (Dec. 29, 1977).
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(d) If methodologies exist for the production of data relating to
(a) and (b), what are the drawbacks of such methodologies?
(e) If methodologies exist for the production of data relating to
(a) and (b), would the data cover all distributions and all public
disseminations so that even the smallest or most specialized claimant
can be compared mathematically to the larger claimants?
(f) If the methodologies cannot cover the smaller claimants, what
measurements can be proposed to cover them?
(g) If conflicting methodologies exist, how do the parties propose
to resolve the conflicts?
We emphasize that we are not asking these questions to decide
distribution issues. Distribution issues are properly for the CARP
arbitrators. But if we can in any way help to focus and sharpen the
proceedings, the savings in time and expense before a CARP panel will
far outweigh the cost of this one public meeting. The public meeting
will give the parties an opportunity to explore the positions of each
claimant, facilitate concentrating on solving the evidentiary problems,
and reveal what further steps need to be taken. A public record of the
meeting will be made for those who do not attend, and for the benefit
of the CARP panel, if one is ultimately convened.
VI. The Nonfeatured Musicians and the Nonfeatured Vocalists
Subfunds
A. Background--1993
The Audio Home Recording Act established two funds: the Sound
Recordings Fund and the Musical Works Fund. Within the Sound Recordings
Fund, the Act further established four subfunds: the Copyright Owners
Subfund, the Featured Artists Subfund, the Nonfeatured Musicians
Subfund, and the Nonfeatured Vocalists Subfund.
With regard to the Nonfeatured Musicians Subfund and the
Nonfeatured Vocalists Subfund, the Act outlined certain specific
procedures. It required that ``2\5/8\ percent of the royalty payments
allocated to the Sound Recordings Fund shall be placed in an escrow
account managed by an independent administrator jointly appointed by
the interested copyright parties described in section 1001(7)(A) and
the American Federation of Musicians (or any successor entity) to be
distributed to nonfeatured musicians (whether or not members of the
American Federation of Musicians or any successor entity) who have
performed on sound recordings distributed in the United States.''
Similarly,``1\3/8\ percent of the royalty payments allocated to the
Sound Recordings Fund shall be placed in an escrow account managed by
an independent administrator jointly appointed by the interested
copyright parties described in section 1001(7)(A) and the American
Federation of Television and Radio Artists (or any successor entity) to
be distributed to nonfeatured vocalists (whether or not members of the
American Federation [of] Television and Radio Artists or any successor
entity) who have performed on sound recordings distributed in the
United States.'' 17 U.S.C. 1006.
In 1993, the Copyright Royalty Tribunal adopted a regulation,
ultimately reissued by the Library of Congress and the Copyright Office
when the Tribunal was abolished, that required the independent
administrator to give notice to the government of his or her selection
by March 31 of each year. 37 C.F.R. 311.4; 58 FR 53822 (1993).
In the same rulemaking, the Tribunal determined that it did not
have the jurisdiction to decide controversies within the two subfunds
that were administered by an independent administrator. The Tribunal
reasoned that, according to the wording of section 1006(a), its
authority over the distribution of royalties extended only to
``interested copyright parties'' and that nonfeatured performers,
whether musicians or vocalists, were not defined under the Audio Home
Recording Act as ``interested copyright parties.'' 58 FR 53822, 53824
(Oct. 18, 1993).
Therefore, the Tribunal concluded that its role in handling the
moneys for the two nonfeatured performer subfunds was simply a
ministerial task of distributing the royalties to the independent
administrator when a distribution was ready to be made. Id.
B. Background--1994
After the Tribunal's abolition, the Copyright Office began to
receive claims for 1993 DART royalties during January-February, 1994.
One claimant, Eugene Curry, filed a claim for the Nonfeatured Musicians
Subfund. Subsequently, the Office was informed that Edward Peters had
been appointed the independent administrator for both the Nonfeatured
Musicians Subfund and the Nonfeatured Vocalists Subfund.
The Copyright Office sent a letter to Mr. Curry and Mr. Peters
asking three questions: (a) who were the interested copyright parties
that participated in the selection of the independent administrator?;
(b) is there any controversy between Mr. Curry and Mr. Peters about the
distribution of Nonfeatured Musicians Subfund?; and (c) if there is a
controversy, how would Mr. Curry and Mr. Peters recommend the
resolution of the controversy? Letter, dated May 4, 1994.
Mr. Curry responded that there was a controversy between him and
Mr. Peters on the distribution of the subfund.
Mr. Peters responded that he was selected by RIAA and AFM<SUP>6;
that, according to the Copyright Code and Tribunal precedent, the
Copyright Office has no authority to resolve disputes in the
nonfeatured subfunds; that, because the Copyright Office has no
authority, Mr. Curry should not have filed a claim with the Copyright
Office nor should the Office have processed his claim; that Mr. Curry
will be treated properly by Mr. Peters; and the fact of his non-union
membership will have no relevance whatever in the ultimate distribution
of the subfund.
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\6\ RIAA, as a representative of copyright owners in sound
recordings, is entitled to participate in the selection of the
independent administrator. Other claimants to the Copyright Owners
Subfund of the Sound Recordings Fund are also entitled to
participate.
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Separately, the Copyright Office received a joint comment from Mr.
Peters, AFM, AFTRA, and the RIAA arguing in greater detail that the
Audio Home Recording Act and the Tribunal's decision in 1993 support
the conclusion that the independent administrator is to receive the
allocated royalties for the two nonfeatured performers subfunds
directly, and is not subject to the authority of the Copyright Office
or the CARP panel in resolving disputes in those subfunds.
C. Discussion
The Library of Congress and the Copyright Office have reviewed the
Audio Home Recording Act and the Tribunal's 1993 decision, and agree
with the joint commentators, AFM, AFTRA, RIAA and Mr. Peters, that the
independent administrator is to receive the royalties from the two
nonfeatured performers subfunds directly from the Copyright Office, and
that disputes as to his (or her) distribution of those funds are not
subject to the jurisdiction of a CARP panel.
Our purpose in sending the May 4 letter to Mr. Curry and Mr. Peters
was to facilitate a settlement. The provisions of the Audio Home
Recording Act are unique among other provisions governing statutory
royalties in that they open up the possibility of a dispute in a
royalty fund without offering an administrative remedy. How to handle
such a dispute was not a question that was faced by the Tribunal in
1993, because in that year there were no claims filed at all in the
nonfeatured performers subfunds. This year, Mr. Curry's claim, and his
subsequent notice that he is in controversy, presents the issue
foursquare.
Recognizing the plain meaning of the statute, we agree that the
royalties in the two nonfeatured performers subfunds are to be
distributed directly to the independent administrator. We also
recognize that claimants to those two subfunds do not file claims with
the Copyright Office. They need to contact the independent
administrator directly.
But we believe there is a function for the Copyright Office to
perform. Each year, to the extent that the Copyright Office receives
expressions of interest to receive royalties from those two subfunds,
we will forward the names to the independent administrator.<SUP>7 In
addition, the Copyright Office will maintain a public file that will
consist of (a) the names of those expressing interest in the subfunds;
(b) the notice of the independent administrator; (c) any correspondence
concerning the two subfunds; and (d) any notification of the final
disposition of any dispute within the subfunds. The notification is not
required, but is being requested to complete the public record. It is
also noted that we are not asking for a notification of the disposition
of all moneys in the subfunds, just those is dispute. We recognize and
will continue the Tribunal's policy of not inquiring into the
distribution of settled claims.
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\7\ This year, in addition to Mr. Curry, James Cannings filed a
claim for the Nonfeatured Musicians Subfund and the Nonfeatured
Vocalists Subfund. Mr. Cannings' claims were filed after the
February 28, 1994 deadline, and would have been returned as untimely
filed if they were claims subject to the Copyright Office's
jurisdiction. However, in light of our ruling today, the statutory
deadline in 17 U.S.C. 1007(a)(1) does not apply to claims beyond the
Copyright Office's jurisdiction. Therefore, his claims are also
being forwarded to the independent administrator for resolution.
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D. Distribution Notice
In light of the above discussion, we are ordering a full
distribution of the royalties available in the 1992 and 1993
Nonfeatured Musicians and Nonfeatured Vocalists Subfunds to Mr. Edward
Peters, the independent administrator, on July 28, 1994. This
distribution will constitute the final distribution in those subfunds,
except (a) in the event that there are any late payments, a subsequent
distribution will be made to the independent administrator that
represents those subfunds' share of the late payment; and (b) in the
event that any refund is ultimately found to be required, the
independent administrator will need to repay the Office the subfunds'
share of the refund.
Dated: July 7, 1994.
Barbara Ringer,
Acting Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 94-16963 Filed 7-12-94; 8:45 am]
BILLING CODE 1410-09-P