Copyright Arbitration Royalty Panels

Federal RegisterDec 7, 1994

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LIBRARY OF CONGRESS

37 CFR Parts 251, 252, 253, 257, and 259

[Docket No. RM 94-1A]

AGENCY: Copyright Office, Library of Congress.

ACTION: Final regulations.

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SUMMARY: The Copyright Office of the Library of Congress is adopting

final regulations governing the conduct of royalty distribution and

rate adjustment proceedings prescribed by the Copyright Royalty

Tribunal Reform Act of 1993.

EFFECTIVE DATE: These regulations are effective on January 6, 1995.

FOR FURTHER INFORMATION CONTACT: William Roberts, Senior Attorney,

Washington, DC 20024, (202) 707-8380.

SUPPLEMENTARY INFORMATION: The Copyright Royalty Tribunal Reform Act of

1993, Pub. L 103-198, 107 Stat. 2304, eliminated the Copyright Royalty

Tribunal (CRT) and replaced it with a system of ad hoc Copyright

Arbitration Royalty Panels (CARPs) administered by the Librarian of

Congress (Librarian) and the Copyright Office (Office). The CARPs

adjust royalty rates and distribute royalties collected under the

various compulsory licenses and statutory obligations of the Copyright

Act. The CRT Reform Act, which was effective immediately upon

enactment, directed the Librarian and the Office to adopt the rules and

regulations of the CRT found in chapter 3 of 37 CFR, 17 U.S.C. 802(d),

and provided that the CRT's regulations were to remain in effect until

the Librarian adopts ``supplemental or superseding regulations.'' The

Office adopted the CRT's rules and regulations on an interim basis on

December 22, 1993, and notified the public that it intended to begin a

rulemaking proceeding to revise and update those rules. 58 FR 67690

(1993).

The Office began the rulemaking proceeding with publication of a

Notice of Proposed Rulemaking (NPRM) on January 18, 1994. 59 FR 2550

(1994). The NPRM contained substantial revisions required by the dual

structure of the royalty rate adjustment and distribution system

created by the CRT Reform Act. Since the CRT's rules were designed for

a single administrative body, the Office proposed extensive changes to

accommodate the division of authority between the Librarian and the

addition to inviting written public comment, the Copyright Office

invited interested parties to a public meeting to discuss the proposed

regulations. More than 50 individuals attended the February 1, 1994,

meeting.

I. Interim Regulations

After considering the concerns the parties expressed at the

February public meeting, and thoroughly reviewing the written comments,

the Copyright Office issued Interim Regulations on May 9, 1994. 59 FR

23964 (1994).\1\ The Interim Regulations substantially revised and

updated the rules adopted in December of 1993.

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\1\The Copyright Office also published technical corrections to

the Interim Regulations. 59 FR 33201 (1994).

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The need for immediate adoption of a regulatory framework was

underscored by the imminence of a royalty distribution of money

collected under the Audio Home Recording Act of 1992 for digital audio

recording technology (DART). Section 1007(b), 17 U.S.C., requires

determination of a DART controversy and commencement of arbitration

proceedings on March 30 of each year for the prior year's royalty

collections. The 1992 DART distribution proceeding was begun by the

abolished, and therefore needed to be started anew. The 1993 DART

distribution was begun by the Copyright Office under the new authority

conferred by the CRT Reform Act, and on March 1, 1994, the Office

published a notice in the Federal Register asking the claimants to the

1992 and 1993 DART royalties to comment as to the existence of any

controversies in the royalty funds. 59 FR 9773 (1994).

Anticipating a consolidated DART distribution proceeding for the

1992 and 1993 calendar years, the Copyright Office postponed the date

for determination of DART controversies from March 30, 1994, to June

30, 1994, in order to permit adequate time for the adoption of

regulations governing a CARP proceeding. On May 9, 1994, the Office

adopted the Interim Regulations with the intention that they would

govern any DART controversies and proceedings beginning June 30, 1994.

The Office created a new subdivision of the regulations devoted

entirely to the operation and procedures of the CARPs. We removed parts

301 through 311 of chapter III of 37 CFR and created subchapters A and

B of chapter II. Subchapter A comprises the Copyright Office rules and

procedures, consisting of parts 201-211, and remains unchanged. New

subchapter B, created by the Interim Regulations, comprises parts 251-

259, and prescribes the rules and procedures of the CARPs.

Part 251, the Copyright Arbitration Royalty Panel Rules of

Procedure, consists of regulations governing the organization of the

CARPs, access to CARP meetings and records, rules governing the conduct

and course of proceedings, and procedures applicable to rate

adjustments and distributions. Part 251 also includes extensive rules

of conduct for arbitrators, as well as appropriate ethical and

financial standards. We did not propose any specific rules of conduct

in the NPRM, but did reserve a subpart for such rules and solicited

comment from the interested parties on the issue. See 59 FR at 2554

(1994).

Part 252 contains revised rules for the filing of claims to cable

royalties, modeled after the system used by the CRT for the filing of

DART royalty claims. Parts 253 to 256--Use of Certain Copyrighted Works

in Connection With Noncommercial Educational Broadcasting; Adjustment

of Royalty Rate for Coin-Operated Phonorecord Players; and Adjustment

of Royalty Payable Under Compulsory License for Making and Distributing

Phonorecords--is virtually identical to the former CRT's rules, with

only some minor technical changes. Like part 252, part 257--Filing of

Claims to Satellite Carrier Royalty Fees--is modeled after the royalty

claim procedures used by the CRT for DART. Finally, parts 258 and 259--

Adjustment of Royalty Fee for Secondary Transmissions by Satellite

Carriers and Filing of Claims to Digital Audio Recording Devices and

Media Royalty Payments--contains only minor variations from the former

CRT's rules. Since the CRT Reform Act eliminated the jukebox compulsory

license and replaced it with a new provision for negotiated licenses

(formerly section 116A of the Copyright Act, as amended by the CRT

Reform Act), the Copyright Office dropped the regulations governing the

filing of jukebox royalty claims (formerly 37 CFR part 305).

In addition to soliciting general comments on the Interim

Regulations, the Copyright Office also posed a number of questions to

focus the commentators' attention on specific issues and to encourage

the parties to offer their solutions. The questions ranged from whether

certain types of DART proceedings were subject to CARP jurisdiction, 59

FR 23967 (1994), to asking for comment on ten hypothetical scenarios

designed to test the parameters of the conduct rules. Id. at 23980.

Written comments on the Interim Regulations were due June 15, 1994.

Reply comments were due July 15, 1994.\2\ The Copyright Office received

a total of 14 comments and replies. Many parties filed joint comments,

and some of the joint commentators also filed separate comments. The

commentator groups for comments and/or replies were as follows:

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\2\In addition, the Copyright Office met with representatives

from ASCAP, BMI, the Canadian Claimants, the Devotional Claimants,

the Joint Sports Claimants, NAB, NPR, PBS, and Program Suppliers on

August 11th on matters pertaining to cable copyright royalty

distribution. The minutes of that meeting are associated with the

comment file and are available for public inspection and copying.

Canadian Claimants (Canadian Claimants);

Electronic Industries Association (EIA);

James Cannings (Cannings);

Joint Sports Claimants, the National Association of Broadcasters,

Public Broadcasting Service, the Devotional Claimants, the Canadian

Claimants, and National Public Radio (collectively Certain Copyright

Owners);

National Association of Broadcasters (NAB);

National Music Publishers Association and the Harry Fox Agency

(collectively ``Music Publishers'');

Office of the Commissioner of Baseball (Baseball);

Program Suppliers (Program Suppliers);

Program Suppliers, Joint Sports Claimants, the National Association

of Broadcasters, Public Broadcasting Service, American Society of

Composers, Authors and Publishers, Broadcast Music, Inc., SESAC,

Inc., the Devotional Claimants, the Canadian Claimants and National

Public Radio (collectively Copyright Owners);

Public Broadcasting Service and National Public Radio (collectively

PBS/NPR);

Recording Industry Association of America, Inc. (``RIAA'');

Recording Industry Association of America, Inc. and the Alliance of

Artists and Recording Companies, Inc. (RIAA/AARC).

II. Suspension of DART Distribution

As discussed above, the Office adopted the Interim Regulations to

establish a regulatory framework in time for the start of DART

distribution. The Office postponed the date for determination of

controversies to the 1992/93 DART royalty pools from March 30, 1994, to

June 30, 1994, to prepare for the possibility of convening a CARP for

DART distribution. We published a request for comment on the existence

of a controversy for the 1992/93 funds, adopted the Interim

Regulations, established a procedural schedule for the filing of

comments and motions leading up to a convocation of a CARP, and

published the arbitrator list all before June 30. See 59 FR 9773 (1994)

(Request for comments as to existence of controversy and consolidation

of 1992 and 1993 funds); 59 FR 23964 (1994) (Interim Regulations); 59

FR 25506 (1994) (Schedule of procedural dates); 59 FR 24486 (1994)

(Arbitrator list).

In response to the Office's request for comments as to the

existence of controversies, the Office received a motion, supported by

a majority of the 1992/93 DART claimants, requesting that the 1992/93

DART royalty distribution be consolidated with the 1994 DART

distribution. The movants argued that although they anticipated the

existence of controversies, the amount of royalties in the 1992 and

1993 funds was insufficient to justify the cost of a CARP proceeding.

They therefore requested that the Office suspend all procedural dates

and defer all consideration of DART distributions until 1995.

On July 13, 1994, the Librarian of Congress granted the claimants'

motion for suspension of the 1992/1993 DART distribution proceeding and

consolidation of that proceeding with the 1994 DART distribution. 59 FR

35762 (1994). The result of the Librarian's action is that the first

DART distribution proceeding will begin no sooner than March 30, 1995.

The Librarian also authorized distribution of the 1992 and 1993

Nonfeatured Musicians and Nonfeatured Vocalists DART subfunds--two

subfunds not subject to CARP proceedings--and scheduled a public

meeting for September 27, 1994, to discuss what would constitute the

best evidence for distribution of the Sound Recordings Fund and the

Musical Works Fund. Id.

With the suspension of DART until 1995, the first proceeding

conducted by a Copyright Arbitration Royalty Panel will likely be

distribution of the 1990 and 1991 cable royalties. The claimant groups

to 1990/1991 cable royalties have informed the Copyright Office that

they wish to begin proceedings in accordance with final, not interim,

regulations. The Office has already received written comments on the

Interim Regulations; therefore, the Copyright Office is adopting Final

Regulations that will govern all rate adjustments and distributions of

royalties prescribed by the CRT Reform Act.\3\

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\3\It is important to note that while today's Final Regulations

replace the rules contained in the Interim Regulations, there are

several policy determinations and decisions discussed in the

preambles to the Interim Regulations and Notice of Proposed

Rulemaking which remain in effect. For example, the Office will

continue to consider proceedings pending before the CRT at the time

of its elimination as null and void and without binding effect. See

59 FR at 23965-66 (1994). Parties practicing before the CARPs should

therefore be familiar with the preambles to the Interim Regulations

and the NPRM in this docket in conjunction with today's Final

Regulations.

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III. Joint Claims

Commentators had extensive comments about the interim rule

governing the filing of joint royalty claims. Sections 252.3(4) and

257.3(4) require claimants filing a joint claim to cable and satellite

carrier compulsory license royalties, respectively, to identify at

least one secondary transmission containing a claimant's copyrighted

works for each claimant listed in the joint claim. See 59 FR 23992,

23994 (1994). Performing rights societies were exempted from this

requirement by Sec. 252.3(a)(4) and Sec. 257.3(a)(4). Because these

sections generated much controversy, and because some of the

commentators filed a motion requesting that the Office reconsider this

part of the regulations, we find that the issue deserves

reconsideration and resolution separate from the general discussion of

amendment to the Interim Regulations.

The former CRT's rules and regulations governing the filing of

claims of the CRT, which we adopted on an interim basis in December

1993, are brief. Section 302.7(a) of the CRT's old rules simply

permitted the filing of joint claims for cable royalties, but provided

little else:

For purposes of this clause claimants may file claims jointly or

as a single claim. Such filing shall include such information as the

a concise statement of the authorization for the filing of the joint

claim. A performing rights society shall not be required to obtain

from its members or affiliates separate authorizations, apart from

their standard agreements, for purposes of this filing and fee

distribution.

37 CFR 302.7(a) (1993). To the Copyright Office's knowledge, the

Tribunal never adopted or prescribed any additional requirements for

the filing of joint claims, nor was there any guidance on what

information should be included in a claim. Section 309 of the

Tribunal's rules, governing the filing of claims to satellite carrier

royalties, was even more concise with respect to the requirements for

filing joint claims, stating simply that ``[c]laimants may file jointly

or as a single claim,'' and providing the same exemption for performing

rights societies regarding authorizations. 37 CFR 309.2 (1993).

Our NPRM proposed significant revisions to the Tribunal's rules

regarding the filing of both cable and satellite carrier royalty

claims. 59 FR 2556, 2557 (1994). The purpose of the proposed revision

was to ``implement a procedural system similar to that adopted by the

Tribunal for the filing of digital audio claims.'' Id. at 2556.

Claimants were expressly authorized to file joint claims, and would be

required to file ``a concise statement of the authorization for the

filing of the joint claim.'' Id. at 2566 (cable), 2567 (satellite).

Performing rights societies would continue to enjoy an exemption from

obtaining separate authorizations from each of their members for filing

a joint claim. For claimants initially filing an individual claim and

later negotiating a joint claim with other claimants, the proposed

rules required that either the joint or individual claimant notify the

to enter into a joint claim. Id. Finally, the proposed rules required

joint claimants to ``make available to the Copyright Office, other

claimants, and, where applicable, a Copyright Arbitration Royalty

Panel, a list of all individual claimants covered by the joint claim.''

Id. No mention was made as to whether each joint claimant was required

to identify at least one secondary transmission of its works, beyond

the general language of Secs. 253.3(a)(4) (cable) and 257.3(a)(4)

(satellite) establishing the basis for a claim: ``A general statement

of the nature of the claimant's copyrighted works and identification of

at least one secondary transmission * * * establishing a basis for the

claim.'' Id.

The Office's proposed changes to the requirements for filing cable

and satellite carrier royalty claims elicited little comment. Only PBS

asked for clarification of the requirement for identifying a secondary

transmission for a joint claim; it asked what it took to satisfy the

requirement--a statement that merely identified at least one secondary

transmission for at least one of the claimants included within the

joint claim, or a statement identifying at least one secondary

transmission for each claimant to the joint claim. See 59 FR 23979

(1994) (comments of PBS at 2). In discussing PBS' comment in the

Interim Regulations, we acknowledged that the NPRM ``muddie[d] the

waters'' for the filing of cable and satellite carrier claims, and the

Interim Regulations deleted the proposed requirement for joint

claimants providing a list identifying each claimant to the joint

claim. Id. In so doing, we stated our belief that the former Tribunal's

regulations required that a joint claim identify at least one secondary

transmission for each joint claimant, and found support for such

requirement in the Copyright Act:

We are troubled, however, by changing what had been a

longstanding requirement at the Tribunal for obliging all claimants

to identify at least one secondary transmission of their copyrighted

works. While such requirement does undoubtedly add to the time and

expense burdens of joint claimants such as PBS, it is not without

purpose. The law states plainly that cable compulsory license

royalties are only to be distributed to ``copyright owners who claim

that their works were the subject of secondary transmissions by

cable systems during the relevant semiannual period.'' 17 U.S.C.

111(d)(3). To support such a claim, each claimant may reasonably be

asked to identify at least one secondary transmission of his or her

work, thus permitting the Copyright Office to screen the claims and

dismiss any claimants who are clearly not eligible for royalty fees.

The requirement will also help to reduce time spent by a CARP

determining which claimants have a valid claim: if only one

secondary transmission is identified for one of the joint claimants,

then it could not readily be determined if the other claimants were

even eligible for cable royalties.

In an effort to end this confusion we are deleting subsection (e)

with its requirement that joint claimants submit a list identifying all

the claimants. Instead, we are amending subsection (a)(4) to require

that each claimant to a joint claim, other than a joint claim filed by

a performing rights society on behalf of its members or affiliates,

must identify at least one secondary transmission of his or her works.

59 FR 23979 (1994).

A number of commentators protested the Office's decision. PBS/NPR,

the Office of the Commissioner of Baseball (Baseball), RIAA, NAB and

Program Suppliers submitted comments devoted solely to the filing

requirements for joint claims, with Program Suppliers asking that

reconsideration of the joint claims interim regulations be severed from

the instant proceeding for immediate disposition. See Program

Suppliers, comments at 5.

The commentators offered essentially four arguments against the

Office's decision: (1) to require each joint claimant to identify a

secondary transmission containing its work serves no valid purpose; (2)

it creates undue expense; (3) the Copyright Office is erroneous in

believing that the Copyright Royalty Tribunal required each joint

claimant to identify a secondary transmission; and (4) it is unfair and

inappropriate to afford performing rights societies an exemption and

not others.

First, PBS/NPR argued that ``no substantive purpose is served by

the requirement for separate identifications of secondary transmissions

as to each party included within the joint claim; this is simply a

jurisdictional prerequisite that will not determine the distribution of

royalties.'' PBS/NPR, comments at 2. Program Suppliers concurred with

this view and criticized the Office's expressed concern that individual

program information is needed to assist it and the CARPs to identify

claims that should be dismissed:

[T]he Office's suggestion that such information is needed so it

could screen hundreds of yearly filings to determine eligibility,

seems a particularly inefficient use of its resources. * * *

Furthermore, it is unclear what action, if any, the Office could

take regarding eligibility problems related to an individual

claimant within a joint claim. Even if the Office finds that one

claimant is ineligible to receive royalties, we would assume that

the joint claim would still remain a valid claim. Whether and to

what extent the share awarded to the joint claimants should be

reduced by the ineligibility of one member of the group are

questions for a panel based on the record evidence. Indeed, such

questions are incapable of answers at the filing stage.

Program Suppliers, comments at 3-4 (footnote omitted). Program

Suppliers and Baseball recommended that the Office should refrain from

any examination or ``screening'' of claims as a regular practice, and

leave such activities and eligibility issues to the claimants to raise

through motions either to the Librarian or the CARPs. Program

Suppliers, comments at 4; Baseball, comments at 7.

Second, RIAA asserted that the requirement for each joint claimant

to identify a secondary transmission is unduly expensive and

burdensome. Organizations like RIAA, that represent many claimants,

would be forced to contact all of their members and track down a

secondary transmission for each one. The problem is compounded by the

time lag between most secondary transmissions and the time period for

filings of claims. RIAA, comments at 2-3. PBS submits that it devotes

roughly 300 hours annually to the task of identifying secondary

transmissions for its member stations. PBS/NPR, comments at 2. These

commentators submitted that elimination of the identification

requirement for all joint claimants would dramatically reduce their

expense and workload.

Third, all of the commentators argued that the Copyright Office

erred in believing that the Copyright Royalty Tribunal required each

joint claimant to identify a secondary transmission. Apparently, while

a reading of the CRT's rules indicated there may be such a requirement,

see footnote 15, 59 FR 23979 (1994), in actual practice the Tribunal

allowed joint claimants to submit only one secondary transmission of a

copyrighted work belonging to one of the joint claimants as

establishing a basis for a claim for all of the joint claimants.

Baseball and RIAA submitted several examples of such filings. Baseball,

comments at appendix; RIAA, comments at appendix. They asserted that

the CRT interpreted its rules to apply the requirement of

identification of at least one secondary transmission to apply equally

to individual claims as well as joint claims, meaning that

identification of a least one secondary transmission of one joint

claimant was satisfactory to establish a basis for the entire joint

claim. PBS/NPR, comments at 4-5. They therefore submitted that the

its regulations to conform with CRT precedent. PBS/NPR comments at 6;

Program Suppliers, comments at 5; RIAA, comments at 6; Baseball,

comments at 5; NAB, comments at 1.

Finally, Baseball, PBS/NPR, and RIAA objected to the exemption

granted performing rights societies from the Interim Regulations'

requirement of identifying at least one secondary transmission for each

joint claimant. Baseball stated that it ``is firmly of the view that it

should not be treated less favorably than the performing rights

societies,'' noting that the Interim Regulations gave no reason why

performing rights societies should enjoy privileged status. Baseball,

comments at 5. See also PBS/NPR, comments at 5. RIAA urged that, if the

to identify a secondary transmission, it should broaden the definition

of a performing rights society ``to include not only traditional

performing rights societies, but also those joint claimants such as

RIAA who, with respect to the royalties distributed to its members

under sections 111 and 119, essentially perform the same functions of

`performing rights societies.''' RIAA, comments at 6.

In addition to seeking relief from Secs. 252.3(a)(4) and

257.3(a)(4), several commentators urged the Copyright Office to

reconsider other requirements for the filing of cable and satellite

carrier royalty claims. Baseball and the RIAA urged the Copyright

Office to eliminate entirely the requirement of identifying a secondary

transmission to establish a basis for a cable or satellite carrier

royalty claim. Baseball, comments at 5-7; RIAA, comments at 3, 6.

Baseball noted several instances where the CRT refused to dismiss a

claim for failure to identify a secondary transmission, and suggested

this demonstrates that ``the secondary transmission identification

requirement did nothing more than unnecessarily increase the costs of

claimants.'' Baseball, comments at 6. NAB, however, strongly opposed

Baseball's recommendation, asserting that there is no compelling reason

to change the requirement and that elimination of identification of a

secondary transmission would be violative of section 111(d)(3) of the

NAB, comments at 2-3.

Baseball took the ``hands off'' approach one step further by urging

the Copyright Office to refrain from making any substantive review of

royalty claims. Baseball, comments at 6-7. See also NAB, comments at 2;

all copyright owners and does not serve any useful function,''

concluding that ``[d]isputes over a particular claimant's eligibility

to royalties (when they arise) may be resolved internally within a

Phase II class without involvement of the Copyright Office or a CARP.''

Baseball, comments at 7-8. Copyright Owners concurred, stating that

``[t]he parties themselves are in the best position to identify those

claimants who are not entitled to royalties,'' and that they ``do not

believe...that the Copyright Office's resources (and Copyright Owners'

royalties) should be expended to screen each and every one of the

thousands of claims that will be timely filed over the years.''

object, however, to the Copyright Office returning claims that are not

timely filed. Id. at 9.

Given the pendency of receipt of cable and satellite carrier

royalty claims and the request of Program Suppliers to sever the joint

claims issue from this proceeding, the Copyright Office issued an Order

addressing the filing requirements for joint claims for the 1993 cable

and satellite carrier royalties. Order in Docket Nos. RM 94-1A; 94 CARP

(93-CD); 94 CARP (93-SD)(July 13, 1994). The Office stated that while

it would ``make a decision on the requirement for joint claims when we

publish the final rules,'' it would waive the requirement of

identification of a secondary transmission for each joint claimant in

Sec. 252.3(a)(4) and Sec. 257.3(a)(4) for the July 1994 filing period.

As a result of this action, anyone filing a joint claim for 1993 cable

or satellite carrier royalties was only required to identify at least

one secondary transmission to establish a basis for the entire joint

claim.

The Copyright Office has reviewed the comments of the parties

regarding the identification of a secondary transmission requirement

for joint claims and is amending Sec. 252.3(a)(4) and Sec. 257.3(a)(4)

to require identification of at least one secondary transmission for

each joint claim, as opposed to at least one for each joint

claimant.4 We have stated on several occasions that our intention

in implementing the CRT Reform Act is to create a streamlined process

that limits the cost of distribution and rate adjustment proceedings to

the participating parties as much as possible. See e.g. 59 FR 23967

(1994). It is apparent from the unanimous opinion of the commentators

that requiring identification of a secondary transmission for each

joint claimant would add in some cases a substantial burden and cost to

joint claimants without yielding an appreciable return in

administrative efficiency. We are also aware that, in the past, the CRT

did not require identification of a secondary transmission for each

joint claimant.5 The practice of the CRT was apparently an

unwritten policy, and therefore of questionable precedential value, but

it does demonstrate that the Tribunal did not experience any practical

or administrative difficulties in allowing joint claimants to identify

at least one secondary transmission for the entire joint claim.

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\4\In amending these sections, we are also eliminating the

exemption for performing rights societies filing joint claims, since

the amended rules will treat all joint claimants equally.

\5\It would appear from the comments that while Baseball, after

consultation with the Tribunal, would only include some examples of

secondary transmissions in their joint claim, PBS would include an

example for each one of the claimants represented in its joint

claim. PBS/NPR, comments at 2.

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The amended rule, however, does require each joint claim to

identify all claimants participating in the joint claim. Those who are

not identified in the joint claim may not be added to it after the

filing period. An exception, however, is made for the performing rights

societies when they file cable and satellite carrier claims. If ASCAP,

BMI and SESAC were to file a joint claim, those three organizations

would have to be listed in the claim, but when ASCAP, BMI and SESAC

file claims separately, they will not have to list their members or

affiliates because of the burden of doing so, and the recognition that,

together, they represent virtually every composer, lyricist, and

publisher entitled to royalties.6 A similar exception is not being

made for the performing rights societies in the case of DART claims.

There, it is not clear that the performing rights societies represent

virtually the entire composer-lyricist-publisher universe, because they

have an affirmative duty to obtain a separate written authorization to

collect on behalf of their members and affiliates and it is unknown how

many of them they represent, and because there are other organizations

such as the Harry Fox Agency and the Songwriters Guild who file claims

in that proceeding.

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\6\By this statement, we do not intend to prejudge controversies

in the Music category. We know that there are composers, lyricists,

and publishers, such as ACEMLA and Italian Book Corporation, who are

unaffiliated with the three performing rights societies. However, to

the extent that they file claims separate from the three performing

rights societies, they become identified in the filing period as

independent, leaving for future proceedings their proper share vis-

a-vis the performing rights societies.

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While we are eliminating the requirement of identification of a

secondary transmission for each joint claimant, we are not accepting

RIAA and Baseball's recommendation of eliminating the secondary

transmission identification requirement altogether. We agree with NAB

that section 111(d)(3) of the Copyright Act authorizes distribution of

cable royalties only to copyright owners whose works were retransmitted

on a distant signal. Eliminating the requirement that the claim

identify at least one instance of such qualifying retransmission would

effectively eviscerate the claim requirement itself. See NAB, comments

at 3. The argument has equal force for satellite carrier royalty

claims. See 17 U.S.C. 119(b)(3).

The Office also does not accept Baseball, NAB, and Copyright

Owners' recommendation that the Office not review claims for

eligibility and sufficiency. Section 801(c) expressly allows the

Librarian, before a CARP is convened, to ``make any necessary

procedural or evidentiary rulings that would apply to the proceedings

conducted by such panel.'' We believe that this grant of authority is

broad enough to allow the Copyright Office to examine royalty claims

for timeliness and sufficiency. Furthermore, we do not accept Baseball

and NAB's argument that review of claims is a waste of copyright

owners' money. Eliminating claims which are untimely filed or patently

deficient on their face promotes administrative efficiency by reducing

the workload for the CARPs, which will already be pressed to conduct

proceedings and issue a report within the 180-day time period. The

for timeliness and sufficiency on their face.

IV. Precontroversy Discovery

Of all the issues generated by the CRT Reform Act and the transfer

of royalty distributions and rate adjustments to the Librarian and the

CARPs, precontroversy discovery has generated the greatest amount of

comment and concern. The questions are general (Should there be any

precontroversy discovery? Who should conduct it?), as well as specific

(What discovery motions may be filed? When and how will discovery

orders be issued?). We have examined this controversial issue

extensively and considered all of the arguments. We are adopting as our

final rule a solution that we hope will streamline the evidentiary

process for the CARPs: a limited discovery period of 45 days conducted

by the Librarian prior to declaration of a controversy requiring

exchange of cases among the participating parties and one round of

discovery motions and rulings.

The question of whether or not to have precontroversy discovery,

defined as a period for exchange of evidence among the parties to a

distribution or rate adjustment proceeding prior to the Librarian's

declaration of a controversy and convocation of a CARP, has come full

circle during the course of this rulemaking proceeding. In reaction to

a statement of Representative William Hughes, Chairman of the House

Subcommittee on Intellectual Property and Judicial Administration of

the House Committee on the Judiciary, accompanying the passage of the

CRT Reform Act and commenting favorably on the use of precontroversy

discovery and exchange of information, see 139 Cong. Rec. H10973 (daily

ed. Nov. 22, 1993), the Copyright Office proposed a precontroversy

discovery period in the NPRM. In the case of distributions, we proposed

that the Librarian would declare a 90-day period for discovery and

exchange of documents sometime after the filing of royalty claims for

the distribution and ending with the declaration of the controversy. 59

FR 2550 (Jan. 18, 1994). Similarly, the Librarian would declare a 90-

day period for rate adjustment proceedings corresponding with the time

period set aside for consideration of rate adjustment petitions. Any

party to a proceeding could file motions related to discovery with the

Librarian during these time periods, as well as ``objections to royalty

claims or petitions, or motions for procedural or evidentiary

rulings.'' Id. All parties were to be given 14 days in which to respond

to a motion or objection, and the Librarian could not declare a

controversy in a proceeding until he had ruled on all motions. Id.

In addition to the proposed precontroversy discovery procedures,

the Office asked for comment on several matters:

We particularly seek comments on the scope of such

precontroversy discovery: whether it should include interrogatories

of witnesses as well as production of supporting documents, and

whether it would advance Chairman Hughes' goal of reducing costs by

being able to stipulate facts and remove issues, or whether the

additional procedures might add costs to the proceeding.

Id.

The commentators did not approve of the NPRM's precontroversy

discovery proposal. In fact, the commentators urged the Librarian and

the Copyright Office to refrain completely from conducting any

precontroversy discovery, and proposed a unique solution whereby the

CARPs could be convened for conducting such discovery prior to the

beginning of the 180-day arbitration period. See 59 FR 23964, 23976

(1994). Under the proposal offered by Copyright Owners, a distinction

would be made between ``the commencement of proceedings'' in 17 U.S.C.

803(d) and the ``notice initiating an arbitration proceeding''

described in 17 U.S.C. 802(b) and (e). The Copyright Office would first

declare the ``commencement of proceedings'' and then immediately

require the filing of written direct cases and empanel the CARP;

discovery motions and objections would be ruled on by the CARP. After

discovery was completed, the Office would ``initiate an arbitration

proceeding,'' and at that point the statutory 180-day arbitration

period would begin to run. 59 FR 23977 (1994) (comments of Copyright

Owners at 9-12).

We considered the statutory basis for Copyright Owners' proposal

and concluded with respect to the Interim Regulations that it was

without support:

[A]s a matter of statutory construction, the Office cannot agree

that the ``commencement of proceedings'' can be conceptually

separated from ``initiating an arbitration proceeding'' so as to

permit the CARP to sit earlier than the 180-day arbitration period.

Section 802(b) (of the Copyright Act), which first uses the phrase

``initiating an arbitration proceeding,'' employs it in the context

of ``a notice in the Federal Register initiating an arbitration

proceeding under section 803 * * *'' In Sec. 803, the notice to

which Sec. 802(b) refers is the ``notice of commencement of

proceedings.'' Therefore, the phrases refer to each other and must

be considered synonymous. (parenthetical added).

59 FR 23977 (1994). We acknowledged that Chairman Hughes

recommended that our regulations provide for precontroversy discovery

``to the extent practicable,'' but concluded that ``there is no way to

accomplish this goal under the statutory scheme.'' Id. The result was

that the Interim Regulations contained no rules for precontroversy

discovery or exchange of documents.

restoration of a precontroversy discovery procedure similar to the one

proposed by the Office in the NPRM. The Copyright Owners' proposal has

three principal facets: (1) mandatory exchange of direct cases among

all parties to a proceeding prior to commencement of arbitration; (2)

formal scheduling of a precontroversy discovery period by the

Librarian; and (3) submission of and ruling on direct case discovery

motions and objections by the Librarian, including motions, objections,

and petitions contemplated in Secs. 251.4, 251.41(b) and 251.45(a) of

the Interim Regulations.

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\7\Copyright Owners ask the Copyright Office to reconsider their

proposal of convening CARPs prior to commencement of the 180-day

arbitration period, suggesting that the Office could consider that

the phrases ``notice initiating an arbitration proceeding'' and

``notice of commencement of proceedings'' have different meanings

and therefore could constitute two separate events. For the reasons

described in the Interim Regulations, however, the Office is

adhering to its position that CARPs may not be convened prior to the

commencement of the 180-day arbitration period. See 59 FR 23977

(1994).

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to be in any way productive, the Copyright Office rules must be amended

to require the parties to a proceeding to exchange their direct cases

prior to the commencement of arbitration, as opposed to after a CARP

has been convened. Copyright Owners, comments at 3-5, 7-10. They assert

that without an exchange of direct cases, precontroversy discovery

would become a fishing expedition as the parties attempt to guess at

each other's theory of the case and principal evidence. Exchange of

direct cases would allow the parties to focus on the evidence that will

be presented at a hearing and reduce the amount of time the CARPs will

need to devote to discovery matters. Id. at 3-4.

In order to streamline the process and promote efficiency, the

precontroversy discovery process. Under the Copyright Owners' plan for

distribution proceedings, the Librarian would first publish a notice

seeking comment as to the existence of a controversy.\8\ Id. at 8. The

notice would specify a filing date for comments, request that

interested parties file their notice of intent to participate in the

proceeding with their comments, and ask the participating parties for

their comments on scheduling issues. Id. After receipt of the comments

and participation notices, the Librarian would evaluate the existence

of controversies, and then issue a scheduling order that would provide:

\8\Copyright Owners propose a similar plan for rate adjustment

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proceedings. Copyright Owners, reply comments at 7 n.5.

1. dates for the filing of:

(a) motions and objections contemplated by Sec. 251.45(a) of the

Interim Regulations;

(b) petitions to dispense with formal hearings under Sec. 251.41

(b); and

2. a date for the filing of direct cases by parties;

3. dates for discovery by the parties and for filing of

discovery and evidentiary motions;

4. a date by which the Librarian will rule on discovery and

evidentiary motions; and

5. a future date certain on which each identified controversy

will be declared and the initiation of an arbitration proceeding

will be published.

Id. at 9. Copyright Owners recommend that ``scheduling should be done

on a case-by-case basis reflecting the comments from the parties; the

rules themselves should not contain particular time periods for filing

deadlines.'' Id.

recommended procedures can be found in section 801(c) of the Copyright

Act, which permits the Librarian ``before a Copyright Arbitration

Royalty Panel is convened, [to] make any necessary procedural or

evidentiary rulings that would apply to the proceedings conducted by

such panel.'' Id. at 10. This provision, they argue, coupled with

Chairman Hughes' expressed desire for precontroversy discovery,

indicates the legislative intent to have a formal and organized

precontroversy discovery period.

Aside from satisfying legislative intent, Copyright Owners submit

that their proposed plan offers advantages. Setting a date certain for

declaration of controversies and commencement of arbitration in the

scheduling order will give potential arbitrators sufficient advance

notice to plan their schedules, thereby increasing the likelihood of

their being able to serve. Id. at 11. Also, having the Librarian rule

on prehearing discovery and other motions allows the parties to prepare

their cases properly and permits the full 180-day period to be devoted

to hearing, briefing, and decision on the merits. Id. at 12.

We have carefully considered the views of the Copyright Owners with

respect to precontroversy discovery, especially in light of their

request that the CARPs conduct precontroversy discovery and our earlier

proposal set forth in the NPRM. For reasons stated in the Interim

Regulations, see 59 FR 23977, we do not believe that it is statutorily

permissible to convene a CARP prior to the beginning of the 180-day

arbitration period for the purposes of conducting precontroversy

discovery. We reaffirm our decision that the CARPs cannot conduct or

permit discovery prior to the beginning of the 180-day arbitration

period.

After considering the proposal of the Copyright Owners, however, we

do think that it is appropriate that the Librarian of Congress and the

therefore adopting a precontroversy discovery procedure similar to that

now being endorsed by the Copyright Owners and initially proposed in

the NPRM.

We therefore amend Sec. 251.45 of the rules to provide a procedure

for conducting precontroversy discovery. New paragraph (b) directs the

Librarian to designate a 45-day period for the conduct of

precontroversy discovery. The Librarian shall designate the dates for

the 45-day precontroversy discovery period on a case-by-case basis

after receiving and reviewing comments on the existence of

controversies and notices of intention to participate described in

Sec. 251.45(a). During this time period, the parties will exchange

their written direct cases and the Librarian will entertain motions and

objections regarding discovery matters, motions and objections to

dismiss any party's royalty claim, motions for declaratory rulings or

for procedural or evidentiary rulings, petitions to dispense with

formal hearings under Sec. 251.41(b), and objections to arbitrators

under Sec. 251.4.

As stated in the Interim Regulations, ``[w]e agree with the

written direct cases would not be productive.'' 59 FR 23977 (1994). The

45-day precontroversy discovery period therefore shall begin with an

exchange of written direct cases among the parties to the proceeding.

Each party must serve one complete copy of their written direct case on

each of the parties to the proceeding no later than the first day of

the 45-day period. At any time during the 45-day period, the parties

may file their motions and objections with the Librarian. Objections to

any and all motions will be due seven days after the filing date for

motions.

The 45-day designated period shall be the sole time for filing

precontroversy motions and objections. Any motions and objections

received prior to, or after, the 45-day period will be returned. The

Librarian will rule on motions and objections after the 45-day period

has ended and prior to the declaration of the existence of a

controversy. However, motions for production of documents or to compel

production of evidence should be ruled upon by the Librarian within

five days of receipt of the motion so as to expedite the discovery

process.

In addition to the exchange of direct cases and the filing of

motions and objections, the Librarian will set the date on which

controversies will be declared. We agree with Copyright Owners that

fixing a date certain for declaration of controversies and initiation

of arbitration proceedings will allow potential arbitrators and

participating parties to clear their schedules, as well as afford the

participating parties more time to prepare their cases.

The precontroversy discovery period for rate adjustment proceedings

is similar to that for distributions. After receiving a petition for

rate adjustment, the Librarian will issue a request for public comment

or conduct public hearings to determine whether the petitioner's

interest is significant,9 and require interested parties to file a

notice of intention to participate. After reviewing comments or the

hearing record as to the petitioner's significant interest and

receiving notices of intention to participate, and after the period

described in Sec. 251.63(a), the Librarian will issue a precontroversy

discovery scheduling order identical to that for distribution

proceedings. The Librarian will require exchange of direct cases,

conduct the one round of motions and objections, issue appropriate

rulings, and announce the date on which initiation of arbitration

proceedings will begin.

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\9\The determination of ``significant'' interest is not required

for the noncommercial educational broadcasting and satellite carrier

rate adjustments since they begin automatically as provided in

sections 118 and 119 of the Copyright Act. The Librarian shall,

therefore, schedule precontroversy discovery in advance of the pre-

set starting dates for those proceedings.

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

We believe that these precontroversy discovery and scheduling

regulations should provide a workable solution to the time pressures of

distribution and rate adjustment proceedings, and should sharpen the

focus of the proceedings by eliminating much of the preliminary work

that would be faced by the CARPs without such procedures. We agree with

the Copyright Owners that 17 U.S.C. 801(c), coupled with Chairman

Hughes' floor statement regarding precontroversy discovery, provides

ample statutory authority for the Librarian and the Copyright Office to

conduct precontroversy discovery and issue rulings. It may be that,

with some issues, the Librarian will designate the issue raised during

the 45-day precontroversy discovery period to the appropriate CARP for

disposition, but it is our belief that the Librarian will be able to

dispose of most precontroversy discovery issues.

V. Status of Certain DART Proceedings

The Copyright Office concluded in the Interim Regulations that two

categories of digital audio proceedings set forth in chapter 10 of the

these rules:

(i) the proceeding raising the maximum rate for digital audio

tape royalties which, under 17 U.S.C. 1004(a)(3), is to be handled

solely by the Librarian;

(ii) the arbitration proceeding under 17 U.S.C. 1010 to

determine if a digital audio recording or interface device is

subject to royalty payments.

59 FR 23967 (1994).

RIAA/AARC agrees with the Office that proceedings under section

1004(a)(3) to raise the royalty maximum should be ``handled solely by

the Librarian.'' RIAA/AARC, comments at 2. RIAA/AARC is concerned,

however, with the costs involved in adjusting the royalty maximum and

urges the Copyright Office to apply to DART its policy for CARP rate

adjustments; that is, requiring that the burden of costs be shared

equally by both copyright owners and users participating in an

adjustment proceeding. Id. at 3 (59 FR 23977).

RIAA/AARC does not agree that arbitration proceedings under section

1010 should be treated separately and states that ``the CARP system

should be applied in these proceedings.'' Id. RIAA/AARC, however,

offers no support for its position.

EIA supports the Copyright Office position for both section

1004(a)(3) royalty maximum adjustment and section 1010 arbitration. EIA

notes that section 801 of the Copyright Act contains no reference to

royalty maximum adjustments or section 1010 arbitration, and that the

Tribunal's duty to ``carry out its other responsibilities under chapter

10'' was expressly repealed from section 801 in the CRT Reform Act.

EIA, comments at 2. Absent jurisdictional authorization, EIA argues

that section 1010 is outside the scope of the CARPs. Furthermore, EIA

notes that CARP procedures are inconsistent with section 1010

arbitration; a petition initiates CARP rate adjustments whereas

agreement of the parties is necessary to initiate section 1010

arbitration. Id. at 3 (citing section 1010(a) and (b)). Section 1010

arbitration is also governed ``by such procedures as [the Arbitration

Panel] may adopt,'' as opposed to CARP procedures adopted by the

Librarian of Congress. Id. (citing section 1010(d)). Finally, argues

EIA, section 1010 arbitration relates solely to whether given devices

are subject to chapter 10 requirements and are therefore unrelated to

the purpose or expertise of the CARPs to make royalty rate adjustments

and distributions. Id. at 3-4.

In addition to its comments regarding section 1010 arbitration, EIA

believes that the issue of costs regarding both section 1010 and

section 1004(a)(3) proceedings is not properly before the Copyright

Office since neither is a CARP proceeding. Id. at 4.

The Copyright Office reaffirms the conclusion announced in the

Interim Regulations that proceedings under sections 1004(a)(3) and 1010

are not within the jurisdiction of the CARPs. 59 FR 23967 (1994).

Proceedings to adjust the royalty maximum under section 1004(a)(3)

shall therefore be handled solely by the Librarian, and proceedings

under section 1010 shall not be subject to the rules and regulations

governing the CARPs. It may be that an arbitration panel convened under

section 1010 chooses to use some or all of the rules applicable to CARP

proceedings; that choice, however, is up to the arbitration panel. See

17 U.S.C. 1010(d) (the arbitration panel is governed by ``such

procedures as it may adopt'').

With respect to the division of costs among the parties

participating in a section 1004(a)(3) or section 1010 proceeding, we

agree with the EIA that the issue is not ripe for decision since

neither of these proceedings is within the scope of this rulemaking.

VI. Costs

The issue of the costs involved in the entire CARP process was

understandably a serious concern of a number of commentators. These

concerns included the payment and fees charged by arbitrators,

deductions from royalty pools, and billing cycles for arbitrators. The

commentators offered some unique solutions to these problems, some of

which we are adopting in these Final Regulations.

Sections 251.54, 251.65 and 251.74 are the principal regulations

governing the costs of CARP proceedings.10 Section 251.54 directs

the CARP panels in the case of rate adjustment proceedings to establish

each participating party's share of the costs of the proceeding. In the

case of distribution proceedings, each participating party's cost is in

direct proportion to its share of the distribution. Sections 251.65 and

251.74 allow the Library of Congress and the Copyright Office to

recover their respective costs for rate adjustment and distribution

proceedings. For rate adjustments, the Librarian and Office may deduct

their reasonable costs from the relevant royalty pool. If no such pool

exists, then the participating parties' costs shall be assessed

directly to them. In distribution proceedings, reasonable costs may be

deducted directly from the relevant royalty pool.

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

\1\0Section 251.38 governs the accounting and costs that

arbitrators are allowed to charge (meals, lodging, etc.). This

section, however, relates to the ethical standards of arbitrators

and is discussed in the context of subpart D of these regulations.

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

A. Assessment of Arbitrator Costs in Distribution Proceedings

We concluded in the Interim Regulations that we did not have the

authority to deduct the costs of the CARPs from the relevant royalty

pool, and could only deduct our costs. We noted that this was an

unsatisfactory result, and described our effort to have Congress amend

the statute. 59 FR 23977 (1994). Our proposed statutory amendment would

allow the Librarian and the Copyright Office to deduct a CARP's costs

from the relevant royalty pool, and pay the arbitrators with such

deductions, before the fees were distributed to copyright claimants.

the provision which provided that deductions would be made ``before the

fees are distributed to any copyright claimants.'' Copyright Owners

submit that this sentence could be interpreted as suggesting that all

royalty fees must remain on deposit until the final deduction for the

costs of a CARP proceeding has been made. Such an interpretation, they

argue, ``would contradict the authority to make partial distribution as

found elsewhere in the statute and present a serious hardship to

of royalty fees and their distribution after an arbitration hearing.''

provision be amended to read ``Such deduction shall be made before the

fees are fully distributed to all copyright claimants.'' Id.

Aside from the legislative solution, the commentators offer other

ways for handling the payment and costs of the CARPs. Copyright Owners

offer a unique proposal: make a substantial partial distribution of

royalties at an early stage of each distribution proceeding to an

escrow account administered jointly by all of the claimants. The sole

purpose of the escrow account would be to make funds available for

timely payment of monthly CARP member billings, while avoiding the need

for advance cash outlays from the claimants. Copyright Owners, comments

at 33. Further partial distributions to the escrow account could, if

necessary, be made during the proceeding, and any excess remaining

after all CARP bills are paid could be distributed in accordance with

the final distribution determination. Id.

RIAA/AARC generally supports the proposed escrow account, but

expresses concern that in DART proceedings, the escrow account could be

depleted by monthly CARP payments before the end of the proceeding.

RIAA/AARC also points out that monthly payments in a DART distribution

proceeding are problematic since there has not yet been a DART

distribution decision and there is no precedent to follow for division

of royalties among the claimants and each claimant's pro rata share of

expenses. RIAA/AARC, reply comments at 2-3. RIAA/AARC therefore

recommends that the Copyright Office deduct all CARP expenses from the

royalty pool at the end of a distribution proceeding, citing 17 U.S.C.

802(h)(1) and 802(c) as providing the Office with authority to make

such deductions. RIAA/AARC, comments at 5.

The method of payment of the CARPs is a problem, especially given

our lack of statutory authority to pay the arbitrators directly.

Unfortunately, the legislative solution discussed in the Interim

Regulations, 59 FR 23977, failed for this Congress. Thus, we cannot pay

the CARPs. We will seek the necessary statutory authority in the 104th

Congress.

Because of our lack of authority in this area, we are not adopting

any regulations governing the method of payment of CARP costs. As

discussed above, the Copyright Owners proposed the creation of an

escrow account, administered by the parties, to pay the arbitrators.

Compensation of the arbitrators is the responsibility of the

parties to a proceeding. 17 U.S.C. 802(g). If Copyright Owners wish to

establish such an escrow account, and can obtain the consent of all

parties to the proceeding, they are free to do so. We note that in the

proceeding to adjust royalty rates for the section 119 satellite

carrier license in 1991, the parties paid an upfront sum to those

arbitrators to begin the proceeding, and a final payment at the

conclusion of the proceeding. We offer no opinion as to whether this is

the appropriate manner in which to proceed, but offer it as a

possibility to be considered by the CARPs who have the authority to

direct the ``manner and proportion'' of payment of a CARP's costs.

B. Assessment of Library of Congress and Copyright Office Costs in Rate

Adjustment Proceedings

Section 251.65 of the Interim Regulations allows the Library and

from the ``relevant royalty pool,'' and, if no such pool exists, to

assess the costs directly to the parties to the proceeding. RIAA/AARC

and Copyright Owners oppose deductions from royalty pools for rate

adjustment proceedings.

RIAA/AARC submits that Sec. 251.65 is contrary to the intent of the

CRT Reform Act. They note that 17 U.S.C. 802(h)(1) provides for

assessment of costs directly to parties where ``no royalty pool exists

from which [the Library and Copyright Office's] costs can be deducted--

i.e. a rate adjustment proceeding.'' Thus, according to RIAA/AARC,

deductions can only be made from royalty pools in distribution

proceedings and not in rate adjustment proceedings. RIAA/AARC, comments

at 10-11. Furthermore, if costs are deducted from the relevant royalty

pool for rate adjustment proceedings, then copyright owners will bear

the entire brunt of the proceeding in contradiction to the Office's

determination that both owners and users should share the cost of rate

adjustments. Id. at 11.

adjustment could be deducted from a royalty pool, but submit that it is

difficult to identify exactly what is the ``relevant'' royalty pool.

involve the setting of rates for future, not-yet-collected royalty

funds. The ``relevant'' pools would therefore be the future funds

affected by the rate change, rather than past funds. Copyright Owners

submit that the Office should therefore seek the comments of the owners

as to what is the proper meaning of the word ``relevant.'' Id. at 5.

Furthermore, Copyright Owners argue that it is completely unfair for

owners to bear all of the Office's expenses for rate adjustments, since

users clearly benefit as well from the adjustments. They ask that the

Office reinstate the deduction rule proposed in the NPRM which simply

provides that rate adjustment costs will be assessed ``directly to the

parties participating in the proceedings.'' Id. at 6 (citing 59 FR at

2565 (1994)).

We agree that RIAA/AARC and Copyright Owners raise valid points

with respect to Sec. 251.65. As we stated in the Interim Regulations,

we believe that the burden of the Library and Office's costs in a rate

adjustment proceeding should be shared by both owners and users. We did

not intend to place the burden solely on copyright owners, although it

is arguable that Sec. 251.65 appears to do that very thing. We also

agree with Copyright Owners' assessment that the ``relevant'' royalty

pool is not clear; it would seem that it may be necessary to amortize

the costs over a number of royalty pools. In an attempt to solve these

problems, we are therefore accepting Copyright Owners' suggestion of

reinstating Sec. 251.65 as proposed in the NPRM. The section therefore

now reads:

In accordance with 17 U.S.C. 802(h)(1), the Librarian of

Congress and the Register of Copyrights may assess the reasonable

costs incurred by the Library of Congress and the Copyright Office

as a result of the rate adjustment proceedings directly to the

parties participating in the proceedings.

C. Frivolous Claims

Both RIAA/AARC and Copyright Owners are concerned with the costs

that may be generated by frivolous claimants to royalty distributions.

Section 251.54(a)(2) provides that CARPs may assess their costs in

direct proportion to each party's share of the distribution. Thus, a

party who received 0% of the distribution would bear 0% of the costs,

even though the claim of that party may have contributed greatly to the

costs of the other claimants. RIAA/AARC believes that every party

participating in a distribution proceeding should be prepared to bear

some portion of the procedural costs, regardless of whether or not it

receives any portion of the royalty fund. RIAA/AARC, reply comments at

3. They recommend that the Office adopt some type of participation fee

for distribution proceedings, similar to that used by other government

agencies conducting proceedings. Id. at 4. In lieu of a participation

fee, RIAA/AARC recommends that the CARPs be granted the discretion to

allocate a share of expenses of the proceeding to bad faith or

frivolous claimants who receive little or no share of the distribution.

Id. at 4-5.

claims and the added costs associated with those claimants. Copyright

Owners, however, would resolve the problem by an amendment to the

statute which they propose the Copyright Office seek. Such an amendment

would provide that ``upon a finding of bad faith or other frivolous or

vexatious conduct, the Librarian may allow a different allocation of

costs of the proceedings as necessary to respond to such conduct.''

With regard to costs in distribution proceedings, section 802(c) is

quite clear in providing that ``the parties shall bear the cost in

direct proportion to their share of the distribution.'' 17 U.S.C.

802(c). No provision is made to charge parties fees for participating

in distribution proceedings, or assessing costs against parties for

frivolous behavior or claims. We cannot imply or interpret the statute

to provide for such measures, nor are we prepared to seek an amendment

of the statute to allow the Librarian to make an assessment of a

claimant's conduct or behavior and impose an additional share of the

cost of the proceedings against that party. Since the Librarian is only

charged with handling matters preliminary to the arbitration and

reviewing the CARP's decision, the Librarian is not in a proper

position to evaluate the conduct of participants to a proceeding. There

is no authority in the statute for the CARPs to change 17 U.S.C.

802(c)'s direction to assess costs in direct proportion to each party's

share of the distribution, nor is there authority for the CARPs to

sanction parties or individuals to a proceeding. The CARPs are,

however, in the best position to assess the conduct of the participants

to a distribution proceeding. Deliberate misrepresentation to a CARP by

a party or individual to a proceeding will be referred by the Copyright

Office to the Justice Department for possible prosecution under the

applicable provisions of title 18 of the United States Code.

D. Arbitrator Costs

Section 251.54(a) provides that a CARP may ``assess its ordinary

and necessary costs'' to the participants to a proceeding. NMPA/HFA

urges the Office to adopt a mechanism for appealing the reasonableness

of fees and expenses assessed. They recommend creation of a procedure,

although they do not describe what kind of procedure or when and how it

could be invoked, whereby the Librarian would be available in instances

where the parties question the fees and expenses charged. NMPA/HFA,

comments at 4.

We are declining to adopt a fee review procedure at this time

because we believe that the rules already contain adequate safeguards.

Section 251.38 governs billing and provides that ``[a]rbitrators are

bound by the hourly or daily fee they proposed to the Librarian of

Congress when their names were submitted to be listed under Sec. 251.3,

and shall not bill in excess of their proposed charges.'' 59 FR 23986

(1994). Subsection (b) further provides that ``[a]rbitrators shall not

charge the parties any expenses in addition to their hourly or daily

charge.'' The safeguards in these rules are reinforced by the agreement

the arbitrators must sign stating they will abide by the terms of these

Final Regulations including ``the billing restrictions specified in

this subpart.'' Sec. 251.38(e). The regulations already contain

substantial provisions to assure that arbitrators not charge excessive

rates or expenses.

Although our regulations do not specifically address the number of

hours for which an arbitrator can charge, we expect that the

arbitrators will be fair and charge for the actual amount of time they

devoted to the proceedings. In some cases, the amount spent may be more

or less for one arbitrator than it is for another. Should an arbitrator

charge for an unreasonable number of hours that could not possibly bear

any relationship to the amount of work performed, we believe that such

action would amount to an ethical violation subject to the remedies of

Sec. 251.39. We do not, however, intend to judge or measure the amount

of time it should take an arbitrator to perform a specific task, and we

therefore decline to create a billing review procedure.

VII. Final Regulations

The following is a section-by-section summary of the amended

regulations, together with a discussion of the applicable comments on

the corresponding provisions of the Interim Regulations.

(a) Part 251--Copyright Arbitration Royalty Panels Rules of Procedure

Part 251 contains most of the rules and procedures governing the

operation of the CARPs and, like the rules proposed in the NPRM,

received the greatest number of observations and suggestions from the

commentators. It is divided into seven subparts, identified as subparts

A through F. Subpart A, entitled ``Organization,'' describes the

composition and selection process for the CARPs. Subparts B and C,

``Public Access to Copyright Arbitration Royalty Panel Meetings'' and

``Public Access to and Inspection of Records,'' remain virtually the

same as those adopted in the Interim Regulations, with only a few minor

amendments. Subpart D, ``Standards of Conduct,'' prescribes the

financial and ethical requirements for arbitrators, and governs ex

parte communications, billing, sanctions for misconduct, and other

matters involving ethical standards. Subpart E, ``Procedures of

followed by the CARPs in conducting proceedings, including those

governing submission of evidence, conduct of hearings, reports of the

CARPs, and orders of the Librarian. Subparts F and G,'' Rate Adjustment

Proceedings'' and ``Royalty Fee Distribution Proceedings,'' provide

certain additional requirements inherent in rate adjustment and

distribution proceedings.

We have already described most of the major issues raised by the

commentators to the Interim Regulations and discussed our responses and

amendments. The following summarizes other additions and changes to the

Interim Regulations in the various subparts of part 251.

(1) Subpart A--Organization

Arbitrator lists. Section 251.3 describes the information that must

be submitted to the Librarian by an arbitration association for each

person to be eligible to serve on a Copyright Arbitration Royalty

Panel. Section 251.3(a)(5) requires ``a description or schedule

detailing fees proposed to be charged by the person for service on a

CARP.'' James Cannings submits that the proposed fees ``should reflect

the current market daily or hourly rate as are charged by arbitrators

who serve National Arbitration Associations, such as, the Arbitration

Association of America.'' Cannings, comments at 2.

For reasons stated above in the discussion of our rejection of a

fee schedule, it is not appropriate for the Librarian or the Copyright

Office to impose fee restrictions on persons seeking to be arbitrators.

Although the fee information provided by a potential arbitrator will

have a bearing on his or her selection, we decline to amend

Sec. 251.3(a)(5) to adopt fee limitations.

Qualifications of the arbitrators. As was the case with the

comments filed in response to the NPRM in this rulemaking proceeding,

Sec. 251.5 that all CARP arbitrators be admitted to the practice of

law. Program Suppliers filed a separate comment in response to the

Interim Regulations devoted solely to arguing that the Librarian should

also consider non-lawyers in the selection process, while other

separate comment urging that the Copyright Office retain the

requirement.

Program Suppliers advance essentially the same argument, which they

made in response to the NPRM, that allowing non-lawyers as arbitrators

could prove invaluable in expediting the arbitration process:

In reaching its ruling, the Office ignored the important value

that non-lawyers with expertise in the types of statistical and

economic studies that comprise the heart and body of distribution

and rate adjustment evidence could bring to the decisionmaking

process. Having arbitrators who are familiar with statistical and

economic studies similar to those presented in prior rate adjustment

and distribution proceedings would give each panel added competence

to deal with the substantive issues raised, and thus assist the

decisionmaking.

It is ironic, to say the least, that the Office's ruling was

based on a concern about the lack of time for non-lawyers to learn

the nuances of legal rulings, but ignored the possibility that

lawyer-arbitrators might have absolutely no familiarity with the

type of complex studies presented by expert witnesses over and over

again in prior distribution and rate adjustment hearings. Although

legal rulings can affect certain aspects of a hearing,

interpretation and understanding of the conflicting substantive

evidence is crucial to reasoned final determinations setting rates

or distribution royalties.

Program Suppliers, comments at 2-3. Program Suppliers believe that

retaining subsection (c) of Sec. 251.5 requiring arbitrators to have

``[e]xperience in conducting arbitration proceedings or facilitating

the resolution and settlement of disputes'' would satisfactorily

provide the potential arbitrator with the type of experience necessary

to conduct arbitration proceedings. Id. at 2.

Certain Copyright Owners argue that Program Suppliers' arguments

have already been rejected in the Interim Regulations, and that Program

Suppliers fail to make any showing that ``the list already developed

will fail to yield at least three Panel members who are capable of

resolving royalty disputes in a fair and efficient manner.'' Certain

that economic expertise is not necessary, and might cause an undue bias

among the panel members. Id.

The Copyright Office has reconsidered the lawyer requirement

imposed by Sec. 251.5 and reaffirms its decision to retain the

requirement. It appears that Program Suppliers are not so much

concerned with allowing non-lawyers to serve on CARP panels as they are

with seeing economists among the listed arbitrators. Section 251.5 in

no way prevents economists or those with economic training from serving

on a CARP, provided that they are admitted to the practice of law.

Furthermore, we agree with Certain Copyright Owners' observation that

Program Suppliers have failed to demonstrate any deficiency in the

quality of experience of the potential arbitrators appearing on the

current list. See 59 FR 24486 (1994). The listed arbitrators have

diverse backgrounds and training, including economic expertise.

Moreover, all of the listed persons have experience in the practice of

law which, given the shortness of the arbitration period, is important

in the efficiency and speedy disposition of CARP proceedings. The

Sec. 251.5.

(2) Subpart B--Public Access to Copyright Arbitration Royalty Panel

Meetings

CARP Meetings. Copyright Owners make several suggestions with

respect to meetings of the CARPs. Because confidential proprietary

information is sometimes introduced into the record, it is necessary

for the CARP to close a meeting for the purposes of receiving that

information. When confidential material is involved in only a limited

portion of the meeting, it is not necessary to close the entire

meeting. The Interim Regulations, however, provide only for the closing

of an entire meeting. Copyright Owners therefore suggest that

Secs. 251.11(b) and 251.13 be amended to make clear that a CARP may

close only that part of a meeting during which confidential information

is discussed; all other portions of the meeting, however, would be

open. Copyright Owners, comments at 26.

determine when and if confidential information may be disclosed at a

meeting, it may be impossible to give the seven-day advance notice in

the Federal Register required by Sec. 251.11(b). Copyright Owners

therefore suggest that a general notice of the possibility of the

introduction of confidential information during the course of a hearing

should suffice to meet the notice requirements even though it would be

impossible to provide a specific date and time of the closed portion of

the meeting. Id.

Another issue raised by Copyright Owners is the treatment of a

CARP's internal deliberations. According to Copyright Owners, a literal

reading of Subpart B would apply to confidential deliberations among

CARP arbitrators. ``Thus, for example, if the members of a CARP want to

talk over an objection to testimony during the course of a hearing

before ruling on it, they would be obliged to have that discussion

transcribed and to announce the fact of that confidential `meeting' in

the Federal Register.'' Id. at 26-27. Copyright Owners therefore

propose that the procedures of Secs. 251.14 and 251.15 be modified so

that (a) transcripts or minutes are not necessary for internal CARP

deliberations, and (b) the procedures for closed meetings in

Sec. 251.14 do not apply to such deliberations. Id. at 27.

The points made by Copyright Owners are well taken. In order to

allow CARPs to close only a portion of a meeting, as opposed to an

entire meeting, for the taking of confidential information and related

material, we are amending Secs. 251.11(b) and 251.13 by adding the

phrase ``any portion of a meeting.'' With respect to seven-day advance

publication notice in the Federal Register of a meeting that may be

closed in part or in whole, we agree that a general notice of the

possibility of the introduction of confidential information should

suffice to satisfy the notice requirements. The notice of publication

in the Federal Register therefore shall, as a matter of policy, contain

such a general statement.

Finally, with respect to the procedures required for closed

meetings applying to CARP deliberations, we agree with Copyright Owners

that application of those procedures is neither desirable nor

appropriate. We are therefore amending Sec. 251.14 by adding a new

subsection (d) which provides that ``[t]he procedure for closed

meetings in this section and Sec. 251.15 shall not apply to the

internal deliberations of arbitrators carried out in furtherance of

their duties and obligations under this chapter.''

(3) Subpart C--Public Access to and Inspection of Records

No comments were received regarding subpart C. However, section

251.22(c) has been amended to delete the Sec. .40 per page charge for

photocopies of CARP or Copyright Office records. Because such charges

change from time to time, the section now reads that photocopies are

available at the ``applicable Office charge.''

(4) Subpart D--Standards of Conduct

Financial conflict of interests. When we originally proposed

financial conflict of interest rules, our main concern was with their

proper scope. Did we propose rules that did not cover enough

situations, and therefore miss some very real conflicts of interest,

or, on the other hand, did our proposed rules go too far, and eliminate

qualified persons for inconsequential reasons? In an effort to reach

the proper scope, we not only proposed rules, but we also asked for

comments on certain hypothetical situations that went beyond the scope

of our proposed rules.

The Copyright Owners' response reflects the difficulty of drawing

the proper line. While they offered opinions about the hypothetical

situations that indicated a belief that our proposed rules did not go

far enough, ultimately they did not ask to expand the rules, but

proposed handling the gray area questions on a case-by-case basis,

using the disclosure procedure to the parties described in section

251.32(b)(2) as a method to decide whether the conflict is

disqualifying. The Copyright Owners stated:

conflicts of potential arbitrators must be made on a case-by-case

basis, with no single application of the rules being dispositive on

a specific case. . . . The screening of arbitrators for any panel

ought not to occur through rote application of the rules * * * If

the Librarian finds a question arising as to whether a conflict

exists as to a particular arbitrator, further information should be

made available to the parties so that they may determine whether the

person should be disqualified or whether the potential conflict

might be waived.

We agree with the Copyright Owners that this is the proper

approach. Therefore, we have not modified the scope of the financial

conflict of interest rules, but we have made a change in the disclosure

rule, section 251.32(b)(2). Whenever a potential arbitrator has a

conflict of interest as defined by our rules and has indicated that he

or she wants this conflict to be disclosed to the parties, or whenever

a potential arbitrator has an interest beyond the specified scope of

the rules which raises our concern, section 251.32(b)(2) provides we

will list these interests anonymously in an order issued to the parties

to each upcoming proceeding at the time the Librarian establishes for

precontroversy motions, and we will request that the parties indicate

within 30 days which conflicts or potential conflicts they believe are

disqualifying. For those interests within the scope of our conflict of

interest rules, the indications of the parties will be dispositive. For

those potential conflicts outside of the scope of our conflict of

interest rules, the indications of the parties will aid the Librarian

in his decision.11

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\1\1For example, arbitrator X has a spouse who is employed by

one of the parties to the proceeding. Because that is a interest

within the scope of our rules, the response of the parties will be

dispositive. That is, if any one of the parties objects, arbitrator

X may not serve. On the other hand, if arbitrator X has a parent who

is employed by one of the parties, that would be an interest outside

of the scope of our rules. In that case, if one or more of the

parties objects, that objection will be taken into account when the

Librarian makes his decision, but the objection will not

automatically disqualify arbitrator X.

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There was, however, one area in which the Copyright Owners

commented that the scope of the conflict of interest rules was too

broad. Section 251.31(d)(3) imputes the financial interest of the

arbitrator's general partner to the arbitrator. The Copyright Owners

believe that section 251.31(d)(3) means that each potential arbitrator

would have to inquire of each of his/her general partners about their

personal investments. The Copyright Owners consider this an unworkable

burden and doubt that any potential arbitrator would be influenced by

the personal holdings of a general partner, especially if that general

partner's financial interest is unknown to the arbitrator. The

interests be made in the case of a general partner's personal financial

holdings. Copyright Owners, comments at 24-25. We agree, and section

251.31(d)(3) has been modified to reflect this exception.

Ex parte communications. In our proposed interim rules,

distinctions were made among four classes of persons concerning ex

parte communications: (1) the Librarian of Congress and the Register of

Copyrights, (2) the selected arbitrators, (3) the listed arbitrators,

and (4) the Library and Copyright Office personnel. In particular, we

drew a distinction between selected arbitrators who are subject to a

total ban on contact between them and interested parties in their

controversy, and listed arbitrators who are not subject to a total ban

on contact, but who may not communicate with any interested party about

the merits of any past, pending, or future proceeding relating to CARP.

Both the Copyright Owners and James Cannings state that they

believe no distinction should be made between selected and listed

arbitrators, and that there should be a total ban on contact with all

arbitrators. The Copyright Owners argue for the highest standard

concerning selected and listed arbitrators because of ``the substantial

financial interests at stake.'' The Copyright Owners, however, would

mitigate the severity of a total ban to permit nonsubstantive

pleasantries between arbitrators and parties. Finally, the Copyright

Owners note that the restrictions concerning arbitrators are against

contact with any interested ``party'' and would prefer that it be

changed to ``person'' because of what they believe to be the ambiguous

meaning of the word ``party.'' Copyright Owners, comments at 15-18.

Having reviewed the comments of the Copyright Owners and James

Cannings, we continue to believe that the distinction between selected

and listed arbitrators is valid. In any given year, 75 persons will be

listed to be available to serve as arbitrators. A total ban on contact

with all 75 persons would be unworkable, and unfair to the persons

offering their services. For the remote chance of being selected, they

would be giving up a degree of personal freedom, not for any actual

impropriety but for the avoidance of the appearance of impropriety.

However, we believe it is fair and highly necessary that listed

arbitrators understand that they may not engage in any actual

impropriety, that is, discuss the merits of any royalty proceeding,

past, present or future. This is a much narrower and more appropriately

tailored limitation on their activities. Once selected, the total ban

on contact with the three selected arbitrators is essential. It assures

fairness to all parties by guaranteeing that no opportunity for

influence can possibly occur. Procedural requests of the selected

arbitrators should be routed through Library or Copyright Office

personnel who are assigned to support the arbitrators.

We do agree, however, with the Copyright Owners' request that

innocent pleasantries should not be subject to the total ban, and that

the word ``party'' should be changed to ``person'' to avoid any

ambiguity. The changes to section 251.33 have been made accordingly.

Gifts and other things of monetary value. In our interim rules, we

make a distinction between selected arbitrators who are subject to a

total ban on soliciting or accepting gifts or any other thing of

monetary value from an interested person, and listed arbitrators who

may solicit or accept gifts of less than $20 per occasion, and not more

than $50 per year from any one source. We also provide that a listed

arbitrator may accept a gift beyond the $20-$50 limit where it is clear

that the gift is motivated by a family relationship or a personal

friendship rather than the potential of the listed arbitrator to be

selected.

The Copyright Owners and James Cannings believe that no distinction

should be made between selected and listed arbitrators and that they

should all abide by a total ban on the soliciting or acceptance of any

gift. The Copyright Owners state that applying the total ban to listed

arbitrators would ``reduce the perceived opportunities for influencing

of either listed or selected arbitrators.'' Copyright Owners, comments

at 18.

Again, as stated above, we believe that the restrictions on the

activities of listed arbitrators should be limited to actual

improprieties only, considering that they may never be selected.

Requiring listed arbitrators to refuse gifts no matter how small, and

to avoid normal relations with existing friends and family simply to

avoid the appearance of impropriety is too great a restriction, and may

result in various individuals refusing to participate. The exceptions

for nominally valued gifts and for gifts from existing friends and

family were derived from the regulations issued by the Office of

Government Ethics, and represent their line-drawing for thousands of

compensated government employees who are in a position to confer a

benefit on a private party (versus listed arbitrators who are neither

compensated nor in a position to confer a benefit). We do not believe

that a lunch valued at less than $20 where no discussion of the merits

of any past, present or future proceeding takes place would result in

the influencing of any listed arbitrator. Consequently, the distinction

between selected and listed arbitrators is retained in the final rules.

Post-arbitration employment restrictions. While we did not receive

any comments on our rule against arbitrators being employed for three

years by any party, person or entity with a financial interest in the

proceeding, we did receive a comment on the hypothetical we posed based

on this section. The hypothetical asked whether an arbitrator who has

ruled on a cable rate adjustment may take a cable system as a client

afterwards if that cable system, although affected by the outcome, had

neither participated in the proceeding nor authorized anyone else to

represent it. The Copyright Owners stated that they believed the

arbitrator could take the cable system as a client, but gave no

reasons, and prefaced their answers to all the hypotheticals by saying

they were difficult to answer given the limited facts available.

We believe that since we received only one limited comment on this

hypothetical, we do not have sufficient comments to render a

conclusion. We reserve judgment until an actual case presents itself.

In the meantime, the rule is adopted as proposed.

Remedies. Currently, section 251.39 provides sanctions against

selected arbitrators, listed arbitrators, and outside parties who

violate the standards of conduct. The Copyright Owners argue that

sanctions should also be put in place for Library and Copyright Office

personnel who violate the standards. Copyright Owners, comments at 24.

Library of Congress Regulations (LCRs) already set forth sanctions

for Library and Copyright Office personnel who violate internal

personnel rules. LCR 2023-1 instructs all staff members to avoid

actions which might result in or create the appearance of using public

office for private gain, giving inequitable and improper preferential

treatment to any person to the prejudice or detriment of others, or

compromising the independence or impartiality of the Library.

We believe this applies to the rules on ex parte communications,

and would cover any disclosure of nonpublic information, even though

section 251.37 only applies to arbitrators. In addition, however, the

Library's General Counsel, who serves as the agency's ethics officer,

has issued a memorandum that will be circulated to all personnel likely

to have any interaction with a CARP detailing the new situations that

could arise and how employees should respond to them.

(5) Subpart E--Procedures of Copyright Arbitration Royalty Panels

a. Formal Hearings. (i) Phase I/Phase II. In the preamble text to

the Interim Regulations, we asked several questions with regard to the

procedural division of royalty distribution proceedings. The Copyright

Royalty Tribunal traditionally divided distribution proceedings into

two phases: Phase I determined the percentage allocation among the

categories of claimants, while Phase II resolved disputes within a

claimant category. The Tribunal practice, however, was just that, and

was never embodied in the rules. We sought comment on the following:

Is the procedure of dividing a cable distribution proceeding

into Phases I and II a precedent that is binding on the Copyright

Office?

If not, should it nonetheless be followed?

If it should be followed, should we adopt rules governing the

procedure?

Should those rules include a definition of each of the Phase I

categories?

59 FR at 23976-23976 (1994).

former Tribunal's practice on the Office, the division of proceedings

into Phase I and Phase II should continue in order to prevent chaos in

the distribution process. Copyright Owners, comments at 13. They note

that Phase I claimant categories offer two primary benefits to the

distribution process. First, by allowing each claimant category to

collect the total royalty awarded to it and distribute that total to

its individual claimants, the ``process frees the Copyright Office from

the expense of mailing hundreds of distribution checks to individual

claimants each time a distribution is made.'' Id. at 14. Second, the

grouping together of claimants into categories reduces Phase I

litigation to less than ten parties, rather than hundreds of individual

claimants. Id. ``In short, the established Phase I/Phase II divisions

provide very strong procedural and organizational efficiencies that

have worked well in the past and should be continued in the future.''

Id.

Phase I/Phase II proceedings that would allow for separate hearings of

Phase I and Phase II proceedings, but offer no comment or suggestion as

to what those rules should be. Id. at 14-15. They also believe that

definitions of Phase I categories should be available to arbitrators,

but not included in these rules because ``it could create unnecessary

rigidity that would fail to accommodate changing conditions.'' Id. at

15. Copyright Owners therefore suggest that parties provide a

stipulated set of program definitions to arbitrators at the start of

each distribution proceeding. Id.

The Copyright Office believes that the division of distribution

proceedings into Phase I and Phase II categories provides an efficient

manner for conducting such proceedings, and therefore will retain the

use of the categories. In dividing distribution proceedings into Phase

I and Phase II categories, we will look to Tribunal precedent for

guidance, as well as the exigencies of each individual case. For these

reasons, we do not believe that it is necessary to adopt separate

procedures for Phase I and Phase II proceedings, as is suggested by

years without separate rules for each type of proceeding, and exercised

its discretion to divide each distribution into Phase I and Phase II

categories on a case-by-case basis. The procedural rules of the

subchapter applicable to distribution proceedings apply with equal

basis to each controversy, regardless of whether it is Phase I or Phase

II, and therefore do not require separate sets of rules. Furthermore,

it is the Librarian who shall determine the number and category of

controversies in each distribution proceeding, and submit each

controversy or controversies to one or more CARPs as is appropriate.

at 14-15, that the nature and extent of controversies in one royalty

distribution proceeding may require the convocation of more than one

CARP for resolution. Thus, for example, a CARP may be convened to

resolve controversies in Phase I, and another may be required at a

later date to resolve controversies in Phase II. The only way to make

such determinations is on a case-by-case basis, as was done by the

former Tribunal, and the Office therefore heeds the advice of Copyright

Owners by declining to adopt rules governing the identification and

classification of Phase I/Phase II procedures which could ``create

unnecessary rigidity that would fail to accommodate changing

conditions.'' Copyright Owners, comments at 15.

The Copyright Office also accepts Copyright Owners' suggestion of

allowing parties to a proceeding to stipulate the definitions of Phase

I categories and programs to the arbitrators in that proceeding. In

order to allow arbitrators a sufficient amount of time to become

familiar with the definitions, the Librarian will, in the notice

establishing the 45-day precontroversy discovery period, instruct the

parties to the proceeding to stipulate a complete set of definitions by

the end of the precontroversy discovery period. If the parties are

unable to reach agreement by that date, the Copyright Office will, in

accordance with our authority to provide support to the CARPs under 17

U.S.C. 801(d), provide the arbitrators with the necessary definitions

of Phase I categories and programs to allow them to accomplish their

task.

(ii) Paper proceedings. Section 251.41(b) permits the parties to a

proceeding to petition the Librarian to have their controversy decided

solely on the submission of written pleadings. The petition may be

granted if ``(1) there is no genuine issue as to any material fact, or

(2) all parties to the controversy agree with the petition.'' 59 FR

23976 (1994).

clarification. They note:

As currently drafted, Section 251.41(b)(2) allows rulings only

in uncontested cases where ``all parties to the controversy agree

with the petition.'' Of course, if all parties agree with the

petition, then there would be no need for a ruling.

to allow ruling where all parties agree with the request that the

issue be decided by petition, regardless of whether they agree with

the merits of the petition.

to allow the parties to a proceeding to petition the Librarian and

dispense with formal proceedings. The CARP panel would then decide the

controversy or rate adjustment on the basis of written pleadings only,

i.e., a ``paper'' proceeding. In deciding whether to allow a paper

proceeding before a CARP, the petition must demonstrate that (1) there

is no genuine issue of material fact involved in the proceeding (not

the petition), or else 2) the parties unamimously agree that they wish

to have a paper proceeding. If either one of these factors is properly

represented in the petition, the Librarian may (not must) grant the

petition, or can designate the issue of whether a paper proceeding

would be proper to the CARP. Section 251.41(b)(2) is only intended to

allow the Librarian to decide if a paper proceeding before a CARP would

be appropriate; it is not designed to allow the Librarian to decide the

merits of a paper proceeding or the case. To clarify the intention of

the rule, we are amending it.

b. Conduct of hearings: Role of arbitrators. Section 251.46(b)

provides that ``Only the arbitrators of a CARP, or counsel as provided

in this chapter, shall question witnesses.'' James Cannings argues that

the rule, as drafted, precludes parties from appearing pro se before

the CARPs, since only the CARPs and ``counsel'' can question witnesses.

Cannings, comments at 2.

Section 251.46(b) does not prohibit pro se representation in a CARP

proceeding. A pro se litigant acts as his own counsel, and is entitled

to question witnesses in the same manner as parties represented by

counsel. No amendment to Sec. 251.46(b) is necessary.

c. Witnesses and Counsel. Copyright Owners suggest that there may

be some confusion with the drafting of Sec. 251.47. Subsection (l)

provides:

A CARP will encourage individuals or groups with the same or

similar interests in a proceeding to select a single representative

to conduct their examination and cross-examination for them.

However, if there is no agreement on the selection of a

representative, each individual or group will be allowed to conduct

its own examination and cross examination, but only on issues

affecting its particular interests, provided that the questioning is

not repetitious or cumulative of the questioning of other parties

within the group.

59 FR 23989 (1994).

``seems to require that all parties with a similar interest accede to a

single counsel for examination or cross-examination of all witnesses.

It is unlikely that parties would agree to such a broad transfer.''

that the phrase ``of any given witness'' be added each time after the

word ``cross-examination'' to clarify that agreements between parties

of similar interest to utilize one representative for questioning

applies only to individual witnesses, and not across the board for an

entire proceeding. Id.

We do not perceive the confusion expressed by Copyright Owners and

believe that subsection (l), as drafted, permits parties with similar

interest to agree to one representative for examining and cross-

examining either one witness or as many as the agreement allows.

Nevertheless, in the interest of clarity, we are adopting Copyright

Owners' suggested amendment.

d. Transcript and Record. In our discussion of Sec. 251.49 in the

Interim Regulations, we solicited comments on whether the hearing

sessions should be recorded on video as well as audio tape. We noted

that videotaping would add to the cost of the proceeding, but it would

also:

``(1) Ensur[e] the accuracy of the official transcript, (2)

allow[] the arbitrators to reach a better decision by helping them

to review the case more accurately, and (3) afford[] arbitrators who

missed any portion of the proceeding, because of illness or because

they were appointed after the proceeding had begun, an opportunity

to make up for their absences.

59 FR at 23977 (1994).

arguing that they ``do not believe that any advantage derived from

videotaping would be worth the considerable expense and difficulty

associated with video recording.'' Copyright Owners, comments at 29.

They also note that videotaping ``could, in fact, have the unintended

and perverse effect of increasing the number of hearing days missed by

an arbitrator who considers seeing a taped performance as equivalent to

being present during the live presentation.'' Id.

For these reasons, we will not videotape distribution or rate

adjustment proceedings, unless the parties to a particular proceeding

unanimously ask us to do so.

(6) Rate Adjustment Proceedings

Settlements.

(i) Settlement period. Section 251.63 provides a 30-day period

before commencement of a rate adjustment proceeding to allow for

consideration of the rate adjustment petition and, more significantly,

to give the parties an opportunity to settle their differences. We are

amending this section to make it clear that the Librarian shall

designate this 30-day period prior to, and separate from, the 45-day

period for precontroversy discovery. We are also amending Sec. 251.64

to reflect that the arbitration proceedings will commence after both

the 30-day period for settling rate differences, and the 45-day period

for precontroversy discovery.

(ii) Universal Settlements. In the Interim Regulations, we asked

two questions related to settlement of rate adjustments:

If a settlement is reached, would it be a useful alternative to

the convening of a CARP for the Library/Office to propose the

agreed-upon rate to the public in a notice-and-comment proceeding?

Does the Librarian have the authority to adopt such a procedure,

or would the convening of a CARP be required?

59 FR 23978 (1994).

RIAA12 and Copyright Owners believe that in the case of a

universal settlement a CARP would have no authority over a proceeding.

The Office would therefore be responsible for amending the rules, after

a public notice-and-comment period, to reflect the agreed upon rate.

RIAA/AARC, comments at 8; Copyright Owners, reply comments at 6. RIAA

argues that the CARPs' authority is limited to controversies over

royalty rates; if there is no controversy because there has been a

settlement, then there is no CARP authority. RIAA/AARC, comments at 8-9

convening a CARP after settlement has been reached ``would make no

sense'' and ``would subject the owner/user participants to needless

expense.'' Copyright Owners, reply comments at 6-7. A public notice-

and-comment period ``should provide the Librarian with an adequate

record on which to determine whether to amend the regulations

consistent with the terms of the settlement.'' Id. at 8.

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\1\2AARC took no position on this particular issue involving

rate adjustment proceedings.

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NMPA/HFA believes that the rules should provide the parties to a

rate adjustment proceeding with the option of either having a CARP

convened, or submitting the agreed upon rate to a public notice-and-

comment proceeding. NMPA/HFA, comments at 2. NMPA/HFA believes that the

statutory authority to provide such procedures ``can be fairly implied

from the Reform Act's direction that the Librarian adopt procedures and

regulations relating to CARP proceedings and the Reform Act's express

grant of authority to the Librarian to make the final determination in

rate adjustment proceedings.'' Id. at 3.

We agree with Copyright Owners that it would make little sense to

go through the time and expense of convening a CARP solely for the

purpose of approving a settlement agreement. Without deciding the issue

of whether a CARP would have jurisdiction in such cases, we are

amending Sec. 251.63 by adding a new subsection:

(b) In the case where a settlement is reached as to the

appropriate royalty rate, the Librarian may, upon the request of the

settling parties, submit the agreed upon rate to the public in a

notice-and-comment proceeding. The Librarian may adopt the rate

embodied in the proposed settlement without convening an arbitration

panel, provided that no opposing comment is received by the

Librarian from a party with an intent to participate in a CARP

proceeding.

(7) Part 252--Filing of Claims to Cable Royalties

Compliance with statutory dates. Section 252.4 describes the

circumstances under which a claim to cable copyright royalties must be

filed in order to be considered timely.

(i) Delivery of claims. We are amending Sec. 252.4(a) to adjust for

some of the difficulties faced by the Copyright Office in receiving

cable royalty claims on a timely basis. Unlike the CRT, the Copyright

Office and the Library of Congress are large institutions receiving a

tremendous amount of mail each day, only a small percentage of which

involves CARP matters. For the July 1994 filing period, we experienced

difficulties with cable and satellite claims arriving at different

locations of the Library by many different means of delivery (U.S.

mail, messenger service, private mail carrier delivery). In order to

assure that claims arrive during the statutorily prescribed time

period, we are amending Sec. 252.4(a) to specify the two methods by

which claims may be delivered to the Copyright Office. The first method

is by mailing the claim to the official CARP address with the U.S.

Postal Service, proper postage attached, so that when the claim arrives

at the Copyright Office, it bears a July U.S. postmark. The second

method is hand delivery to the Office of the Register of Copyrights,

located in Room 403 of the James Madison Building, 101 Independence

Avenue SE., Washington, DC 20540, during normal business hours in the

month of July. Such hand delivery may be done by the claimant itself,

or by the claimant's agent, or by a private delivery carrier (ex.

Federal Express, DHL, messenger service) or other such manner. Hand

delivery of claims to the mail receiving area of the Library of

Congress, or to other locations in either the Library or the Copyright

Office, is not compliance with the regulation. Claims which are hand

delivered to other locations in the Library or Copyright Office will be

dismissed if the Office cannot conclusively determine that the claim

was physically located on Library and/or Copyright Office premises

during the month of July.

(ii) U.S. postmark. Canadian claimants challenge the requirement in

Sec. 252.4(a)(2) that mailed claims must bear a July U.S. postmark. We

took this provision directly from the Copyright Royalty Tribunal's

rules. See 59 FR 23979 (1994). Canadian Claimants acknowledge that they

did not object to the Tribunal's initial adoption of U.S. postmark

requirement, but state that they have experienced ``difficulties'' with

the requirement since its adoption, although they do not precisely

state what those ``difficulties'' are.13 Canadian Claimants,

comments at 2. They therefore urge the Office to accept both Canadian

and U.S. postmarks. Id.

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\1\3Canadian Claimants state earlier in their comment that their

membership changes from year to year and that produces ``the

constant presence of new claimants who are unaware of the filing

requirements and appear on the scene at (or shortly after) the last

moment * * *'' Id. Presumably it is the last minute identification

of Canadian copyright owners eligible for cable royalties that

produces the ``difficulties.''

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We discussed in the Interim Regulations the Copyright Owners'

request that we allow July mailings from Canadian and Mexican post

offices. See 59 FR 23979 (1994). We declined the request, but stated

that ``we invite them [Copyright Owners], and any other interested

parties, to provide further information and comments on the question.''

Id. Our request for further information emanates from our concern with

compliance with the statute. The statutory requirement for filing cable

claims is clearly spelled out in 17 U.S.C. 111(d)(4)(A): ``During the

month of July in each year, every person claiming to be entitled to

compulsory license fees for secondary transmissions shall file a claim

with the Librarian of Congress * * *'' The statute requires that the

claim be with the Librarian during the month of July, arguably meaning

in his possession. However, we accept the submission of a claim to the

U.S. Postal Service, as statutorily sufficient, providing it bears a

July U.S. postmark. The postmark is an acknowledgment that the claim

was validly tendered with the U.S. Government in the month of July.

Our concern with allowing Canadian and Mexican postmarks is that

those marks would not necessarily prove compliance with the statute.

Neither the Canadian nor the Mexican postal service is part of the U.S.

Government. Furthermore, if we were to allow Canadian and Mexican

postmarks, we would have to allow national postmarks from all

countries, since there are some copyright owners of cable retransmitted

programming that do not reside in the United States, Canada or Mexico.

Canadian and Mexican postmarks appears to be motivated by the desire

ostensibly to add a few more days to the claim period. We, however,

agree with what the Tribunal said in 1989 when it adopted the July U.S.

postmark requirement:

The Tribunal does not believe that our insistence that either a

claim be received in our office during July or that it bear a July

U.S. postmark is too restrictive. The claim itself is easy to

prepare. No government forms are necessary. The information that is

required can be put on one page. Further, the claimant has six

months from the close of the calendar year to prepare it, and the

entire month of July to submit it to the Tribunal. Our proposed rule

provides a bright line test which should end all questions of fact

regarding the timeliness of the claim.

54 FR 12614, 12615 (1989). For these reasons, we are not adopting the

Canadian Claimants' suggestion.

(iii) Proving mailed claims. Section 252.4(e) provides in the

pertinent part that:

In the event that a properly addressed and mailed claim is not

timely received by the Copyright Office, a claimant may nonethe less

prove that the claim was properly mailed if it was sent by certified

mail return receipt requested, and the claimant can provide the

receipt.

59 FR 23993 (1994).

cause some confusion. Copyright Owners, reply comments at 8. They note

that there are two receipts associated with certified mail--the one

given the sender by the Post Office and the one signed by the

receptionist and returned to the sender--and that subsection (e) does

not identify which receipt is acceptable proof. Copyright Owners,

however, state that our discussion of the provision in the Interim

Regulations makes it clear that either receipt would be acceptable. See

59 FR 23980 (1994). (``If the claim was sent by certified mail, return

receipt requested, we will accept the claim if the claimant can produce

the receipt showing that it was properly mailed.'') In order to clear

up any possible ambiguity in the regulation, the Copyright Owners

propose that we amend subsection (e) to read:

In the event that a properly addressed and mailed claim is not

timely received by the Copyright Office, a claimant may nonetheless

prove that the claim was properly mailed if it was sent by certified

mail return receipt requested, and the claimant can provide the

receipt showing that it was properly mailed or timely received.

Owners' suggestion.

(8) Part 257--Filing of Claims to Satellite Carrier Royalty Fees

Part 257 remains unchanged, except that we amend Sec. 257.4(a)

regarding timely filing of claims, discussed above, and accept

satellite carrier royalty claims through the use of certified mail

return receipt requested. Sec. 257.4 (e). We are also retaining the

requirement of a U.S. postmark for satellite carrier claims,

Sec. 257.4(a)(2), for the same reasons we are retaining the requirement

for cable claims.

(9) Part 259--Filing of Claims to Digital Audio Recording Devices and

Media Royalty Payments

Consistent with our decision concerning joint claims for cable and

satellite carriers, Sec. 259.3 is amended to require that joint

claimants to the DART fund include a list of all their joint claimants

when the claim is filed, except, as discussed above, the performing

rights societies will receive no exemption from this requirement.

Performing rights societies will have to list the members and

affiliates they have signed to represent in DART as part of their

filing a claim. As a result, the current Sec. 259.3(d), which allows

joint claimants to lump their claims together after the claim period,

and the current Sec. 259.3(f) which provides that the Office may

require the productions of the list after the claim period ends, are

deleted. As a practical matter, joint claimants who decide after the

claim period to join together will simply report to the Office that

they have settled, and no need to consolidate their claim exists.

In addition, we amend Sec. 259.5(a) regarding timely delivery of

claims and accept the Copyright Owners' proposed amendment of

Sec. 259.5(e) regarding the proving of mailed DART claims through the

use of certified mail return receipt requested.

List of Subjects

37 CFR Part 251

Administrative practice and procedure, Hearing and appeal

procedures.

37 CFR Part 252

Cable television, Claims, Copyright.

37 CFR Part 253

37 CFR Part 257

Cable television, Claims.

37 CFR Part 259

Claims, Copyright, Digital audio recording devices and media.

Final Regulations

For the reasons set out in the preamble, 37 CFR chapter II is

amended as follows:

PART 251--COPYRIGHT ARBITRATION ROYALTY PANEL RULES OF PROCEDURE

1. The authority citation for part 251 continues to read as

follows:

Authority: 17 U.S.C. 801-803.

Subpart A--Organization

2. In section 251.2, paragraph (f) is added to read as follows:

Sec. 251.2 Purpose of Copyright Arbitration Royalty Panels.

* * * * *

(f) To adjust royalty rates for the satellite carrier compulsory

license in accordance with 17 U.S.C. 119(c).

Sec. 251.3 [Amended]

3. Section 251.3(a) is amended by removing ``, on or before May 6,

1994, and before January 1 of each year thereafter,'' and adding

``before January 1 of each year''.

3a. Section 251.3(b) is amended by removing ``After May 6, 1994,

and after January 1, of each year thereafter,'' and adding ``After

January 1 of each year,''.

Sec. 251.4 [Amended]

4. Section 251.4(a) is amended by removing ``30-day period

specified in Sec. 251.63'' and adding ``45-day period specified in

Sec. 251.45(b)(2)(i)''.

4a. Section 251.4(b) is amended by removing ``30-day time period

specified in Sec. 251.45(a)'' and adding ``45-day period specified in

Sec. 251.45(b)(1)(i)''.

Subpart B--Public Access to Copyright Arbitration Royalty Panel

Meetings

5. In Sec. 251.11, paragraph (b) is amended by revising the second

sentence to read as follows:

Sec. 251.11 Open meetings.

* * * * *

(b) * * * Such announcement shall state the times, dates, and place

of the meetings, the testimony to be heard, whether any of the

meetings, or any portion of a meeting, is to be closed, and, if so,

which ones, and the name and telephone number of the person to contact

for further information.

* * * * *

6. In Sec. 251.13, the introductory text is revised to read as

follows:

Sec. 251.13 Closed Meetings.

In the following circumstances, a Copyright Arbitration Royalty

Panel may close meetings, or any portion of a meeting, or withhold

information from the public:

* * * * *

7. In Sec. 251.14, paragraph (d) is added to read as follows:

Sec. 251.14 Procedure for closed meetings.

* * * * *

(d) The procedure for closed meetings in this section and in

Sec. 251.15 shall not apply to the internal deliberations of

arbitrators carried out in furtherance of their duties and obligations

under this chapter.

Subpart C--Public Access to and Inspection of Records

Sec. 251.22 [Amended]

8. Section 251.22(c) is amended by removing ``$0.40 per page'' and

adding ``the applicable Office charge''.

Subpart D--Standards of Conduct

9. Section 251.31 is amended by revising paragraph (d) to read as

follows:

Sec. 251.31 Financial interests.

* * * * *

(d) For the purposes of this section, the financial interests of

the following persons will serve to disqualify the selected arbitrator

to the same extent as if they were the arbitrator's own interests:

(1) The arbitrator's spouse;

(2) The arbitrator's minor child;

(3) The arbitrator's general partner, except that the personal

financial holdings, including stock and bond investments, of such

partner will not serve to disqualify the selected arbitrator; or

(4) An organization or entity for which the arbitrator serves as

officer, director, trustee, general partner or employee.

10. Section 251.32 is amended by revising paragraph (b) to read as

follows:

Sec. 251.32 Financial disclosure statement.

* * * * *

(b) If any conflicts do exist, the Librarian shall not choose that

person for the proceeding for which he or she has the financial

conflict, except--

(1) The listed arbitrator may divest himself or herself of the

interest that caused the disqualification, and become qualified to

serve; or

(2) The listed arbitrator may offer to disclose on the record the

conflict of interest causing disqualification. In such instances:

(i) The Librarian shall publish a list detailing the conflicts of

interest the listed arbitrators have offered to disclose, and any other

matters which, although outside of the scope of the restrictions of

Sec. 251.31, nevertheless, in the view of the Librarian, raise

sufficient concerns to warrant disclosure to the affected parties;

(ii) Such list shall be published in the order establishing the

period for precontroversy motions (see, Sec. 251.45(b));

(iii) Such list shall contain the matters of concern, but shall not

contain the names of the listed arbitrators.

(iv) Any party to the proceeding for which the listed arbitrator is

being considered may interpose within the 45-day period described in

Sec. 251.45(b) an objection to that arbitrator being selected. If the

objection is raised to a matter found to be within the scope of

Sec. 251.31, the objection will serve automatically to disqualify the

arbitrator. If the objection is raised to a matter found to be outside

the scope of Sec. 251.31, the objection will be taken into account when

the Librarian makes his or her selection, but will not serve

automatically to disqualify the arbitrator.

* * * * *

11. Section 251.33(b) is revised to read as follows:

Sec. 251.33 Ex parte communications.

* * * * *

(b) Selected arbitrators. No interested person shall engage in, or

cause someone else to engage in, ex parte communications with the

selected arbitrators in a proceeding for any reason whatsoever from the

time of their selection to the time of the submission of their report

to the Librarian, and, in the case of a remand, from the time of their

reconvening to the time of their submission of their report to the

Librarian. Incidental communications unrelated to any proceeding, such

as an exchange of pleasantries, shall not be deemed to constitute an ex

parte communication.

* * * * *

Sec. 251.33 [Amended]

12. Section 251.33(c) is amended by removing ``party'' and adding

``person''.

Subpart E--Procedures of Copyright Arbitration Royalty Panels

13. In Sec. 251.41, paragraph (b) is revised to read as follows:

Sec. 251.41 Formal hearings.

* * * * *

(b) During the 45-day period specified in Sec. 251.45(b)(1)(i) for

distribution proceedings, or during the 45-day period specified in

Sec. 251.45(b)(2)(i) for rate adjustment proceedings, as appropriate,

any party may petition the Librarian of Congress to dispense with

formal hearings, and have the CARP decide the controversy or rate

adjustment on the basis of written pleadings. The petition may be

granted if--

(1) The controversy or rate adjustment, as appropriate, does not

involve any genuine issue of material fact; or

(2) All parties to the proceeding agree, in writing, that a grant

of the petition is appropriate.

14. In Sec. 251.43, paragraph (a) is revised to read as follows:

Sec. 251.43 Written cases.

(a) All parties who have filed a notice of intent to participate in

the hearing shall file written direct cases with the Copyright

Arbitration Royalty Panel, and with other parties in the manner in

which the Librarian of Congress shall direct in accordance with

Sec. 251.45(b).

* * * * *

15. Section 251.45 is amended by revising the section heading and

paragraphs (a)-(c) to read as follows:

Sec. 251.45 Discovery and prehearing motions.

(a) Request for comment, notice of intention to participate. In the

case of a royalty fee distribution proceeding, the 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. In the case of a rate adjustment proceeding, the Librarian

of Congress shall, after receiving a petition for rate adjustment filed

under Sec. 251.62, or, in the case of noncommercial educational

broadcasting and satellite carrier, prior to the commencement of

proceedings, publish in the Federal Register a notice requesting

interested parties to comment on the petition for rate adjustment. 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.

(b) Precontroversy discovery, filing of written cases, scheduling.

(1)(i) In the case of a royalty fee distribution proceeding, the

Librarian of Congress shall, after the filing of comments and notices

described in paragraph (a) of this section, designate a 45-day period

for precontroversy discovery and exchange of documents. The period will

begin with the exchange of written direct cases among the parties to

the proceeding. Each party to the proceeding must serve a complete copy

of its written direct case on each of the parties to the proceeding no

later than the first day of the 45-day period. At any time during the

45-day period, parties to the proceeding may file with the Librarian

prehearing motions and objections, including petitions to dispense with

formal hearings under Sec. 251.41(b), and objections to arbitrators

appearing on the arbitrator list under Sec. 251.4. Replies to motions,

petitions, and objections must be filed with the Librarian seven days

from the filing of such motions, petitions, and objections with the

Librarian.

(ii) Subject to Sec. 251.72, the Librarian shall establish, prior

to the commencement of the 45-day period, the date on which arbitration

proceedings will be initiated.

(2) (i) In the case of a rate adjustment proceeding, the Librarian

of Congress shall, after the filing of comments and notices described

in paragraph (a) of this section, designate a 45-day period for

precontroversy discovery and exchange of documents. The period will