Representation for Claiming DART Royalties in Musical Works

LIBRARY OF CONGRESS

37 CFR Part 259

[Docket No. 94-3 CARP]

Representation for Claiming DART Royalties in Musical Works

AGENCY: Copyright Office, Library of Congress.

ACTION: Waiver of interim rule; and request for comments.

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

rule that requires a performing rights organization to have written

authorization in order to represent its members and affiliates for 1993

and 1994 DART royalties in the Musical Works Fund. At the same time we

waive the rule, we seek comment on whether a performing rights society

should have separate, specific, written authorization from its members

to collect DART royalties for its members or affiliates.

DATES: The waiver of Sec. 259.2 is effective December 7, 1994. Written

comments should be received on or before February 6, 1995.

ADDRESSES: Fifteen copies of written comments should be addressed, if

sent by mail, to: Copyright Arbitration Royalty Panel (CARP), P.O. Box

70977, Southwest Station, Washington, D.C. 20024. If delivered by hand,

copies should be brought to: Office of the General Counsel, Copyright

Office, Room LM-407, James Madison Memorial Building, 101 Independence

Avenue, S.E., Washington, D.C.

FOR FURTHER INFORMATION CONTACT: Marilyn J. Kretsinger, Acting General

Counsel, Copyright Arbitration Royalty Panel (CARP), P.O. Box 70977,

Southwest Station, Washington, D.C. 20024. Telephone: (202) 707-8380.

Telefax: (202) 707-8366.

SUPPLEMENTARY INFORMATION:

I. Background

Parties that import and distribute in the United States or

manufacture and distribute in the United States any digital audio

recording technology (DART), either a device or audio recording medium,

must deposit royalties with the Copyright Office under the Audio Home

Recording Act (AHRA) for ultimate distribution to interested copyright

parties. The AHRA defines ``interested copyright parties'' as copyright

owners and any association or other organization representing them. 17

U.S.C. 1001(7). If the parties do not reach distribution agreements

among themselves, copyright arbitration royalty panels (CARPs),

administered by the Library of Congress and the Copyright Office,

determine what joint or individual claimants receive.

In order to qualify, copyright owners must file a claim in January

or February of each calendar year for royalties collected during the

preceding year. 17 U.S.C. 1006(a)(2), 1007(a)(1). The DART Funds are

divided into the Sound Recordings Fund and the Musical Works Fund. This

interim rule deals only with the Musical Works Fund.

II. Representation by Performing Rights Organizations

Until it was abolished on December 17, 1993, the Copyright Royalty

Tribunal (CRT) prescribed the ``form and manner'' for filing DART

claims. Copyright Royalty Tribunal Reform Act of 1993, Public Law No.

103-198, 107 Stat. 2304 (eliminating former Chapter 8 of 17 U.S.C.).

Shortly after the October 28, 1992, enactment of the AHRA, an issue

arose concerning the filing of claims to royalties. That issue was the

extent of proof that performing rights organizations were required to

present in order to demonstrate proper representation of their members

and affiliates. The CRT invited public comment in an Advance Notice of

Rulemaking. 57 FR 54542 (Nov. 19, 1992). On January 29, 1993, the CRT

adopted a rebuttable inference that performing rights organizations

represented their respective members and affiliates (hereafter

``members'') in royalty proceedings. 58 FR 6441, 6444 (Jan. 29, 1993).

The interim regulations also directed the parties to file a report, by

June 1, 1993, on the issue. Subsequently, on October 18, 1993, the CRT

published final regulations requiring such organizations to submit

separate, specific, and written authorization to represent their

members. Notice Adopting Final Regulations to Implement the Audio Home

Recording Act of 1992, 58 FR 53822 (Oct. 18, 1993).

On November 3, 1993, the performing rights organizations--the

American Society of Composers, Authors and Publishers (ASCAP),

Broadcast Music, Inc. (BMI) and SESAC, Inc. (SESAC) (hereafter

Performing Rights Organizations) filed with the CRT a petition to

reopen for reconsideration the rulemaking proceeding that resulted in

the CRT's final rule. On December 3, 1993, the CRT officially held the

petition in abeyance. Order, dated Dec. 3, 1993, In the Matter of

Digital Recording Technology Act; Implementation, CRT Docket No. 92-3-

DART.

On December 17, 1993, the President signed into law the Copyright

Royalty Tribunal Reform Act of 1993 (CRT `Reform Act'). Effective

immediately upon enactment, the CRT Reform Act eliminated the CRT and

transferred its responsibilities to ad hoc CARPs. The new act directed

the Librarian of Congress to convene CARPs to adjust rates and

distribute royalties. See 17 U.S.C. 111, 115, 116, 118, 119, and

chapter 10.

Following Congress' direction in the CRT Reform Act, the Copyright

Office issued a notice adopting the full text of the former CRT's rules

and regulations on an interim basis. 58 FR 67690 (Dec. 22, 1993). We

made only slight technical changes to those rules, stating that we

intended to review and revise them during the course of a future

rulemaking. Id. We then published proposed regulations that revised the

adopted CRT rules to adapt them to the requirements of the new CARP

system. 59 FR 2550 (Jan. 18, 1994). We concluded that we were not a

successor agency of the CRT, and that Congress intended to establish an

entirely new system. Therefore, the proceedings the CRT had begun but

not concluded by the effective date of the CRT Reform Act would not be

taken up where they had been left, but would rather be begun anew under

the new CARP regime. Id. at 2551.1 The Copyright Royalty

Tribunal's final rule requiring Performing Rights Organizations to

submit separate, specific, and written authorization to represent their

members is stated in section 259.2.

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\1\Copyright Office revised and renumbered rules that had been

found in 37 CFR part 311 of the CRT's regulations as 37 CFR Part

257.

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On February 15, 1994, the Performing Rights Organizations filed a

comment with the Copyright Office seeking to reconsider the rule, now

adopted by the Copyright Office, that required separate, specific,

written authorization from Performing Rights Organization members. (In

the Matter of Copyright Arbitration Royalty Panels: Rules and

Regulations, Copyright Office Docket No. RM 94-1). Essentially in

response to our Notice of Proposed Rulemaking Comment 4, the Performing

Rights Organizations asked that their comments either serve to reopen

the CRT's former rulemaking proceeding or that the Office consider the

matter anew.

On February 23, 1994, the Gospel Music Coalition and Copyright

Management, Inc., jointly replied to the Performing Rights

Organizations' comment and opposed reconsideration of the issue. Id.

Reply comment 10.

III. Petition for Inference of Agency

In commenting on our adoption of the CRT rule, the Performing

Rights Organizations assert that the rule disenfranchises the many

writers and publishers who would otherwise be qualified to receive DART

royalties. Following the CRT's interim rule, the performing rights

societies contacted their members. One wrote to each of its members

that unless the members notified the organization to the contrary, the

organization would represent its member writers and publishers.

Subsequently, when the CRT later required separate, specific, written

authorization, the Performing Rights Organizations again attempted to

contact more than two hundred thousand writer and publisher members in

less than four months. Performing Rights Organizations states that they

have agreements with the major foreign performing rights organizations

to represent foreign writers and publishers whose works are exploited

in the United States. They also assert that since not all eligible

claimants responded to the writing, a significant number of members may

still have the impression that the Performing Rights Organizations are

representing their claims and that the CRT's final rule effectively

leaves these members without an avenue to present their claims. Id.

Comment 4 at 4-8.

The Performing Rights Organizations also urge that even if the

Copyright Office rejects the concept of a permanent rebuttable

inference, the rebuttable inference should extend through the 1993 DART

distribution proceeding. Claims for 1993 royalties were required to be

filed during the months of January and February 1994. The Performing

Rights Organizations claim that even with the mass mailings following

the Tribunal's final ruling, there was no practical way to obtain all

of the required signed written authorizations before the filing period

expired. They also suggest that the abolition of the CRT effectively

disenfranchised the Performing Rights Organizations' members and

affiliates, since it eliminated their only forum for being reheard on

this issue. The Performing Rights Organizations also contend that

further prejudice will result to their members and affiliates because

of a private settlement, entered into by all joint claimant groups and

all but one of the individual claimants to the Musical Works Fund, that

links distribution of 1992 DART royalties, to which the rebuttable

inference of agency applies, to the outcome of the 1993 proceedings, to

which the rebuttable presumption would not apply. Id., at 12-15.

IV. Opposition for Reconsideration

The Gospel Music Coalition and Copyright Management, Inc., oppose

reconsideration of the issue. They believe the matter has been amply

briefed and settled by the CRT, and no new issues of fact or law have

been raised. They oppose the rebuttable presumption of agency and urge

the Copyright Office not to disturb the final regulation. Reply Comment

10, Notice of Proposed Rulemaking (94-1).

The Gospel Music Coalition and Copyright Management, Inc., note

that the CRT's rationale for granting a temporary inference of agency

is no longer applicable, since the time pressures have been greatly

eased. Moreover, they state that since the CRT specifically ruled in

January 1993 that the AHRA did not grant Performing Rights

Organizations special entitlement to make claims on behalf of their

members more than a year remained until the end of the filing period.

They contend this was ample time to obtain the required authorizations

from members. Furthermore, they argue that all organizations had the

same opportunity to obtain written authorizations from their members.

They state that if the Copyright Office adopts the rebuttable inference

in favor of the Performing Rights Organizations, it will give these

organizations a benefit over other group claimants. Moreover, the

Gospel Music Coalition and Copyright Management, Inc., claim that the

silence of members should not be considered as implied consent to

representation by a performing rights society, and that excusing the

performing rights societies from obtaining separate, specific, written

authorizations to file claims grants these organizations preferential

treatment. Id.

V. Policy Decision and Request for Comments

The Copyright Office has not considered this issue. Less than 30

days before the CRT Reform Act was enacted, the CRT expressly ordered

the Performing Rights Organizations' petition to reconsider to be held

in abeyance. In our December 22 rule, we noted that we did not consider

the Office to be a successor agency to the CRT. Therefore, matters

pending before the CRT would have to begin anew.

On May 9, 1994, we issued interim CARP regulations. At that time we

noted that the Performing Rights Organizations' comment serving as a

petition to reopen was actually a petition for reconsideration of a

pending CRT matter and that we would consider it in a separate

rulemaking proceeding. 59 FR 23964, 23966 (May 9, 1994). We are now

addressing that matter, and the Copyright Office requests comments on

the issue of whether Performing Rights Organizations need separate,

specific, and written authorization to represent members and affiliates

in collecting DART musical works royalties. Any party who has already

filed comments on this issue with the former CRT may simply incorporate

those comments by reference.

Because we are reconsidering the rule, we are waiving the rule

adopted at 37 CFR 259.2, and inferring an agency relationship between

the Performing Rights Organizations and their members for the 1993 and

1994 DART royalty distribution. This rebuttable inference will be

utilized solely for the purpose of filing claims for, and distribution

of, 1993 and 1994 DART royalties payments. We include 1994 in the

waiver of our rules because the parties have already sought and been

granted consolidation of 1993 and 1994 DART royalties. Therefore, it

would be cumbersome to have different rules for the consolidated

proceeding. If a member files an individual claim or grants express

authority to another agent, such action will rebut the implied agency

relationship. This action is without precedential value and shall not

prejudice the Copyright Office's ultimate determination of the issue.

List of Subjects in 37 CFR Part 259

Claims, Copyright, Digital audio reading devices, Media.

Dated: December 1, 1994.

Marybeth Peters,

Register of Copyrights.

James H. Billington,

The Librarian of Congress.

Accordingly, 37 CFR part 259 is amended as follows:

PART 259

1. The authority citation for part 259 continues to read as

follows:

Authority: 17 U.S.C. 1007 (a)(1).

Sec. 259.2 [Suspended]

2. Section 259.2 is suspended effective December 7, 1994, through

February 28, 1995.

[FR Doc. 94-30046 Filed 12-6-94; 8:45 am]

BILLING CODE 1410-33-P