[Federal Register: March 1, 1994]



Copyright Office
[Docket No. 94-2 CARP-DD]

Ascertainment of Controversy for 1992 and 1993 Digital Audio 
Recording Royalty Funds

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice with request for comments.


SUMMARY: The Copyright Office directs all claimants to royalty fees 
collected for Digital Audio Recording Devices and Media (DART) for 1992 
and 1993 to submit comments as to whether a controversy exists as to 
the distribution of either of these funds. The Office announces the 
suspension of certain deadlines for distribution of these royalties. 
The Office also seeks comment as to whether it should consolidate the 
1992 and 1993 royalty funds into one proceeding.

DATES: Written comments are due by June 10, 1994.

ADDRESSES: If sent by mail, ten copies of written comments should be 
addressed to: Copyright Office, Library of Congress, Department 17, 
Washington, DC 20540. If hand delivered, ten copies should be brought 
to: Office of the Copyright General Counsel, James Madison Memorial 
Building, room 407, First and Independence Avenue SE., Washington DC 
20540. In order to ensure prompt receipt of these time sensitive 
documents, the Office recommends that the comments be delivered by 
private messenger service.

FOR FURTHER INFORMATION CONTACT: Marybeth Peters, Acting General 
Counsel, U.S. Copyright Office, Department 17, Library of Congress, 
Washington, DC 20540. Telephone (202) 707-8380.


I. Background

    On October 28, 1992, Congress enacted the Audio Home Recording Act 
(AHRA), which required manufacturers and importers to pay royalties on 
digital audio recording devices or media that are distributed in the 
United States. The royalties are deposited with the Copyright Office 
and distributed by the Copyright Royalty Tribunal to interested 
copyright parties that file claims with the Tribunal each year during 
January and February.
    The Act provides that the royalties are to be divided into two 
funds--the Sound Recordings Fund which gets 66\2/3\% of the royalties, 
and the Musical Works Fund which gets 33\1/3\%.
    Within each fund, the Act establishes subfunds. The Sound 
Recordings Fund consists of four subfunds: The first of these--the 
Nonfeatured Musicians' Subfund--is allocated 2\5/8\% of the Sound 
Recordings Fund, and the second subfund--the Nonfeatured Vocalists' 
Subfund--gets a 1\3/8\% share; after the shares of these two subfunds 
are subtracted, two other subfunds--the Featured Recording Artist 
Subfund and the Sound Recording Owners Subfund--receive 40% and 60% of 
the remainder respectively. In the Musical Works Fund, there are two 
subfunds--the Publishers' Subfund and the Writers' Subfund--which each 
get 50% of that Fund. The Act thus establishes the percentages for each 
fund and subfund, but left it to the Copyright Royalty Tribunal to 
decide what each claimant within a subfund would get.
    Accordingly, the Act required the Tribunal to ascertain within 30 
days after the last day for filing claims--March 30--whether there were 
any controversies among the claimants as to the proper distribution of 
the royalties in their fund and/or subfund. If there were any 
controversies, the Tribunal was to initiate a proceeding immediately 
and make a final determination concerning distribution within one year.

II. Tribunal Actions in 1993

    Last year the Tribunal asked the claimants if there were any 
controversies in distributing the 1992 DART royalties, and made an 
initial funding that there were controversies in both the Sound 
Recording and the Musical Works Funds. 58 FR 17576 (1993).
    By the end of 1993 all the claimants to the Musical Works Fund had 
reached settlements, except for one individual, who asserted that there 
were controversies in both the Publishers' and the Writers' Subfunds. 
Concerning the Sound Recordings Fund, there were settlements in three 
of the four subfunds; however, for the Featured Recording Artists' 
Subfund, the Gospel Music Coalition, the Alliance of Artists and 
Recording Companies, Reachout Records International, Inc. and Copyright 
Management, Inc. had not reached settlements with one corporation and 
one individual by the end of the last year.
    The Tribunal had established December 1, 1993 as the date by which 
the parties in controversy would be required to file their written 
direct cases. However, effective December 17, 1993, Congress passed the 
Copyright Royalty Tribunal Reform Act of 1993: This legislation 
dissolved the Tribunal and established a new system of copyright 
arbitration royalty panels (CARPs) to be supported by the Library of 
Congress and the Copyright Office.
    Before the Act was passed, but in anticipation of it, two requests 
were made of the Tribunal. The parties to the Musical Works Fund asked 
the Tribunal to consolidate the 1992 DART distribution proceeding with 
the 1993 DART distribution proceeding (scheduled to begin in 1994), 
insofar as it applied to that particular fund. The parties to the Sound 
Recordings Fund did not join with the request for consolidation, but 
instead asked the Tribunal for a suspension of the procedural date 
requiring them to file a written direct case by December 1, 1993.
    On November 29, 1993, the Tribunal granted both requests, thus 
consolidating the 1992 and 1993 Musical Works Fund proceedings and 
suspending the procedural dates for the 1992 Sound Recording Fund 

III. The New CARP System

    As we said, Congress dissolved the Copyright Royalty Tribunal and, 
effective December 17, 1993, established the CARP system in the Library 
of Congress. As instructed by the Reform Act, the Copyright Office 
immediately issued a notice adopting the full text of the former 
Tribunal's rules and regulations on an interim basis. 58 FR 67690 
(1993). Then, on January 18, 1994, the Office published proposed 
regulations revising the adopted Tribunal rules to adapt them to the 
requirements of the new CARP system. 59 FR 2550 (1994).
    In the January 18, 1994 notice, we stated that we did not consider 
the Copyright Office to be the successor agency of the Copyright 
Royalty Tribunal, and that it was Congress' intent to establish an 
entirely new system. Therefore, the proceedings that the Tribunal had 
started but not concluded by December 17, 1993 would not be taken up 
where they had left off, but would be begun anew under the new CARP 
regime. Id. at 2551.

IV. Purposes of This Notice

    The first purpose of this notice is to begin anew the 1992 DART 
royalty distribution proceeding. We are asking the claimants to provide 
the Copyright Office, by June 10, 1994, with the following information: 
(a) Whether any controversies exist concerning distribution of 1992 
DART royalties; (b) if controversies do exist, the particular subfunds 
for which they exist; and (c) if settlements have been made, the 
identity of the parties who have settled and of those who have not.
    The second purpose of this notice is to comply with the statutory 
obligation to begin the 1993 DART distribution proceeding. We are 
asking the same questions about 1993 DART as we are asking about 1992 
DART: whether any controversies exist, for which subfunds, and who are 
the settled and non-settled parties.
    After the existence of any controversies are determined, AHRA gives 
the Copyright Office 30 days to distribute those royalties not in 
controversy. In order to make that determination for both the 1992 and 
1993 proceedings, we are asking the claimants who report that they are 
in controversy to state how much is in controversy in each subfund. The 
information to be provided should include each claimant's asserted 
percentage or dollar claim to the subfund, and a brief narrative 
justifying that asserted claim. In addition, we are asking each 
claimant who expects to be participating in a CARP proceeding to file a 
Notice of Intent to Participate, as required by 37 CFR 251.43(a).
    Third, we are seeking comment as to the advisability of 
consolidating the 1992 DART and the 1993 DART distribution proceedings. 
We are aware that the Tribunal granted a request for consolidation 
filed by the Musical Works Fund claimants. The reasons the claimants 
cited at the time was that the 1992 fund, which only included royalties 
collected between October 28 and December 31 of that year, was 
relatively small, that the amounts in controversy were necessarily even 
smaller, that the cost of litigating each fund separately would be high 
in comparison with the size of the funds, and that the 1992 proceeding, 
being the first of its kind, would be setting important precedent and 
would benefit from consolidation with the 1993 proceeding. We should 
like to learn two things: (1) Whether the claimants who requested 
consolidation of the 1992 and 1993 DART Musical Works Fund 
distributions are adhering to their request; and (2) whether the 
claimants of the Sound Recordings Fund believe that similar 
consolidations should be made for that fund.
    Fourth, as explained below, we are using this notice to announce 
three-month delays in meeting two DART deadlines this year: the 
determination of the existence of controversies and the distribution of 
DART royalties not in controversy.

V. DART Deadlines

    The AHRA establishes several statutory deadlines to assure the 
speedy distribution of DART royalties. Claims are to be filed by the 
last day of February, each year. The existence of any controversies is 
to be ascertained by March 30. Distribution of royalties not in 
controversy are to be authorized to be distributed within 30 days of 
the finding that they were not in controversy--that is, no later than 
April 29. Under the earlier law, the Tribunal was to conclude all 
proceedings to resolve any controversies within one year of declaring 
the existence of those controversies. The abolition of the Tribunal and 
the establishment of an entirely new CARP system in the Library of 
Congress has made the meeting of certain statutory deadlines 
exceedingly difficult and, in at least three cases, virtually 
    The Administrative Conference of the United States has considered 
the issue of how agencies should respond to circumstances that affect 
their ability to adhere to schedule, and has issued a series of 
recommendations concerning statutory time limits. 43 FR 27509 (1978), 1 
CFR 305.78-3. The Administrative Conference said:

    It should be recognized that special circumstances, such as a 
sudden substantial increase in caseload, or complexity of the issues 
raised in a particular proceeding, or the presence of compelling 
public interest considerations, may justify an agency's failure to 
act within a predetermined time. An agency's departure from the 
legislative timetable should be explained in current status reports 
to affected persons or in a report to Congress.

Id., at para. 4. The Copyright Office finds that good cause exists for 
not meeting one earlier, and two current statutory deadlines for the 
distribution of 1992 and 1993 DART royalties.
    Under the law in effect before December 17, 1993, the Tribunal was 
obliged to conclude the 1992 DART distribution proceeding by April, 
1994. However, because the Tribunal no longer exists and because the 
Copyright Office is not the successor agency to the Tribunal, we cannot 
be bound by the Tribunal's deadlines. We believe that all proceedings 
started by the Copyright Office are governed by the new provisions of 
the Copyright Royalty Tribunal Reform Act of 1993, which sets its own 
statutory time limits on the Library of Congress and the Copyright 
Office for conducting CARP proceedings.
    Our authority to begin DART distribution proceedings is dependent 
on having the new CARP system in place. That means adopting extensive 
new rules after full opportunity for the public to comment has been 
given. It also involves the time-consuming and important process of 
identifying a pool of potential arbitrators and evaluating their 
qualifications, ethical eligibility, and availability in consultation 
with various arbitration associations. We are acting with the utmost 
speed in all these areas, but it is obvious that these goals cannot be 
accomplished in time to begin DART distribution proceedings in April, 
    We therefore find that a delay of three months is necessary with 
respect to two DART deadlines. Instead of declaring the existence of 
any controversies in 1992 and/or 1993 DART distribution by March 30, 
1994, we will make such declaration no later than June 30, 1994. 
Distribution of royalties not in controversy will be authorized on or 
before August 1, 1994.

    Dated: February 22, 1994.
Barbara Ringer,
Acting Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 94-4456 Filed 2-28-94; 8:45 am]