[Federal Register: December 7, 1994]


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.


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.


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-
    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.<SUP>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.

    \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 

    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 

    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]