[Federal Register: December 18, 1998 (Volume 63, Number 243)]
[Proposed Rules]               
[Page 70080-70086]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Copyright Office

37 CFR Part 251

[Docket No. 98-3 CARP]

Copyright Arbitration Royalty Panels; Rules and Regulations

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of proposed rulemaking.


SUMMARY: The Copyright Office of the Library of Congress is proposing 
amendments to the regulations governing the conduct of royalty 
distribution and rate adjustment proceedings prescribed by the 
Copyright Royalty Tribunal Reform Act of 1993. These changes are 
designed to fill gaps in the rules that have been the subject of 
inquiries and to promote the efficient resolution of issues and claims.

DATES: Written comments are due January 19, 1999. Reply comments are 
due February 16, 1999.

ADDRESSES: If sent BY MAIL, an original and 10 copies of written 
comments should be addressed to Office of the General Counsel, 
Copyright Arbitration Royalty Panel (CARP), PO Box 70977, Southwest 
Station, Washington, DC 20024. If DELIVERED BY HAND, an original and 10 
copies should be brought to: Office of the General Counsel, Copyright 
Office, Room LM-403, James Madison Memorial Building, 101 Independence 
Avenue, SE, Washington, DC 20559-6000.

FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or 
Tanya Sandros, Attorney-Advisor. Telephone: (202) 707-8380. Telefax: 
(202) 252-3423.

SUPPLEMENTARY INFORMATION: The Copyright Royalty Tribunal Reform Act of 
1993, Pub. L. 103-198, 17 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. In 1994, the Office published final regulations for CARP 
proceedings. 59 FR 63025 (December 7, 1994). Eighteen months later, the 
Copyright Office issued a notice making non-substantive, technical 
changes to the rules. 61 FR 63715 (December 2, 1996). Based on the 
Office's experience with the rules since they were first enacted, the 
Office is now proposing substantive changes to these regulations. These 
changes are designed to fill gaps in the rules that have been the 
source of inquiry or contention, to promote the early and efficient 
resolution of issues and claims, and to resolve ambiguities that have 
fostered misunderstandings. Many of the changes are codifications of 
rulings the Office has made by order in response to discovery motions. 
Now the substance of these orders will become part of the rules so that 
the Office's policies are known in advance, and the motions upon which 
they were based become unnecessary.
    The Office has also received two petitions requesting additional 
changes to the CARP regulations <SUP>1</SUP> from parties who have 
participated in previous CARP proceedings. On July 29, 1998, Program 
Suppliers <SUP>2</SUP> filed a request for rulemaking to amend 
Sec. 251.5 (Program Suppliers' Request). The purpose of the requested 
rulemaking is ``to eliminate the requirement that copyright arbitration 
royalty panels (``CARPs'') consist entirely of lawyers prior to 
assigning a CARP for the satellite carrier royalty distribution 
hearing.'' Program Suppliers' Request at 1. In addition, Mr. James 
Cannings <SUP>3</SUP> has a petition for a rulemaking pending before 
the Office. He seeks an amendment to Sec. 251.44(f) (Cannings' 
Petition) which would require parties who join together and submit a 
single direct case to designate a lead counsel for purposes of future 

    \1\ Copies of these documents are on file in the Copyright 
General Counsel's Office, Room LM-403, James Madison Building, 
Washington, DC.
    \2\ Program Suppliers are a group of producers and distributors 
of syndicated programming. Historically, they participate in CARP 
proceedings that set rates for the cable and satellite compulsory 
licenses and in those proceedings that determine the distribution of 
cable and satellite royalties among the copyright owners who file an 
annual claim.
    \3\ Mr. Cannings is a songwriter and publisher who participates 
in CARP proceedings which determine the distribution of cable 
royalties and in those proceedings to determine the distribution of 
the royalties collected annually pursuant to chapter 10 of the 
Copyright Act, 17 United States Code.

    The Copyright Office has incorporated the concerns of these 
petitioners into this proposed rulemaking proceeding. Specifics on 
these proposals are discussed herein. However, the Office is denying 
Program Suppliers' request that the Office not select a panel for the 
scheduled 1992-1995 satellite distribution proceeding before it 
completes consideration of the Program Suppliers' proposed amendment. 
The Office has already compiled and published the list of arbitrators 
for 1998 and 1999 pursuant to Sec. 251.3, and it has scheduled the 
satellite distribution proceeding to begin on January 8, 1999. Under 
the current time constraints, it would be impossible to consider the 
proposed changes, finalize the amendments, and generate a new list, 
assuming that the Office agreed to adopt Program Suppliers' suggestion 
for amending Sec. 251.5. Furthermore, the Office is considering 
numerous changes to its regulations and has decided to conduct a single 
rulemaking proceeding to consider all substantive changes to

[[Page 70081]]

the regulations governing the CARPs. For these reasons, the Office 
denies Program Suppliers' request to conclude its consideration of the 
proposed amendment before selecting the satellite distribution 
arbitration panel.
    Interested parties may file comments on the issues outlined below, 
the proposed changes raised in both proposals, and on any other areas 
of concern.

I. Qualifications of the Arbitrators

    Section 251.5 requires that each person serving on a CARP be an 
attorney with at least 10 or more years of legal practice. Program 
Suppliers assert that the recent decision by the District of Columbia 
Circuit upholding the Librarian's final determination as to the 
distribution of the 1990-1992 cable royalties compels a reevaluation of 
the all-attorney requirement. See National Ass'n of Broadcasters v. 
Librarian of Congress, 146 F.3d 907 (D.C. Cir. 1998). In that decision, 
the Court noted that the CARP system ``replace[d] the Tribunal's quasi-
adjudication with an arbitration undertaken by an ad hoc panel whose 
proposed settlement is then reviewed by final decisionmakers * * *.'' 
Id. at 920 (citing H.R. Rep. No. 103-286, at 11 (1993)). Program 
Suppliers argue that because the CARP system seems to move away from 
the classic adjudicatory model, ``individuals from disciplines other 
than law should be permitted to serve as arbitrators, [thereby 
bringing] to the process a perspective and expertise that the all-
attorney requirement excludes.'' Program Suppliers' Request at 4. In 
essence, Program Suppliers believe that the all-attorney panel's lack 
of any experience with the technical, economic, and industry concepts 
central to these proceedings have impeded the process, or at the very 
least, ``did nothing to enhance the efficiency or the quality of the 
hearing or decisionmaking processes.'' Id. at 5.
    The current provision was considered when the Copyright Office 
promulgated the CARP regulations now in effect. At that time, the 
Office determined that arbitrators should be attorneys because of the 
judicial nature of the proceedings. See Notice of Proposed Rulemaking, 
59 FR 2550 (January 18, 1994); Interim Regulations, 59 FR 23964 (May 9, 
1994); Final Rules, 59 FR 63025 (December 7, 1994). Nevertheless, the 
Office invites comments on these provisions once again, in light of the 
recent decision from the District of Columbia Circuit and the parties' 
experience with the all-attorney panels in the five concluded 

II. Public Records

    Unlike the recommendation of the Register of Copyrights and the 
final order of the Librarian of Congress, which are published in the 
Federal Register in accordance with 17 U.S.C. 802(f), the official 
report of the CARP is not. The Office has chosen instead to make it 
available to the public for inspection and copying through the Office 
of the Copyright General Counsel. The Office decided against 
publication of the panel's report in the Federal Register for two 
reasons: (1) It is fully discussed in the Register's published 
recommendation, and (2) it is not a final determination. The Office has 
also begun to post the CARPs' reports on its website. See http://

III. Formal Hearings

    Section 251.41(b) permits a CARP to decide a controversy or rate 
adjustment on the basis of written pleadings, without an oral hearing, 
in certain circumstances. A petition to dispense with formal hearings 
may be granted by the Librarian during the 45-day precontroversy period 
if (1) there is no genuine issue of material fact to be decided or (2) 
all parties agree to the petition. The Office is considering whether to 
expand this provision to add other circumstances upon which the 
Librarian may grant a petition to dispense with formal hearings.
    As Sec. 251.41(b) currently is written, the provision for a CARP 
determination based on a written record is consistent with copyright 
law and the Administrative Procedure Act (APA). The Copyright Act 
states that a CARP ``shall act on the basis of a fully documented 
written record'' and any copyright owner or other person participating 
in arbitration proceedings ``may submit relevant information and 
proposals'' to the arbitration panels. 17 U.S.C. 802(c). CARP 
proceedings are also subject to the requirements of the Administrative 
Procedure Act, subchapter II of chapter 5 of title V of the United 
States Code. 17 U.S.C. 802(c). The APA states that an agency may 
``adopt procedures for the submission of all or part of the evidence in 
written form'' so long as ``a party will not be prejudiced thereby.'' 5 
U.S.C. 556(d). Principles of due process provide guidance as to what 
would prejudice a party.
    In Gray Panthers v. Schweiker, 652 F.2d 146, 164 (D.C. Cir. 1980), 
the U.S. Court of Appeals for the District of Columbia Circuit 
discussed four factors to be weighed in determining the ``dictates of 
due process'' in any assessment of whether procedural requirements 
afford the parties adequate protection. The factors include: the 
private interest affected, the risk of an erroneous deprivation of such 
interest, the probable value of additional or substitute procedural 
safeguards, and the fiscal and administrative burdens that the 
additional or substitute procedural requirements would entail.
    There are a number of factors that weigh in favor of expanding 
Sec. 251.41(b). The nature of CARP proceedings and the type of issues 
involved heavily depend on documentary evidence. Consequently, there is 
often no need for the fact finder to observe the demeanor of witnesses 
to weigh the value of their testimony. All parties have full access to 
the written record that is the basis for the decision. Discovery 
procedures offer any party the opportunity to test the other parties' 
factual assertions by requiring the production of underlying facts, and 
therefore diminish the need for cross-examination. On the other hand, 
one argument in support of oral hearings is that certain parties are 
less sophisticated or less capable of representing themselves and an 
oral hearing can overcome these problems.
    The Office believes, however, that most of the factors established 
in Gray Panthers favor expanding the circumstances in which a CARP may 
base its determination on a written record without conducting oral 
hearings in order to promote the public interest by reducing costs and 
promoting administrative efficiencies. The Office would like to receive 
comments from interested parties about whether there are additional 
circumstances upon which the Librarian could base his determination to 
allow the CARP to proceed solely on the basis of the written pleadings, 
without violating due process requirements.
    In addition, the Office also welcomes comments on the procedures 
for waiving oral hearings. For example, should the Librarian continue 
to rule on petitions to waive oral hearings or should the CARP make 
such determinations?

IV. Written Cases

A. Incorporation of Past Testimony

    Section 251.43(c) states:

    Each party may designate a portion of past records, including 
records of the Copyright Royalty Tribunal, that it wants included in 
its direct case. Complete testimony of each witness whose testimony 
is designated (i.e., direct, cross and redirect) must be referenced.

    There seems to be some misunderstanding regarding this provision, 
since objections were filed

[[Page 70082]]

when opposing parties incorporated prior testimony into their written 
direct case by reprinting it. The term ``designate,'' however, is not 
limited to identifying where the documents may be found. It is also 
permissible for a party to include the entire text of prior testimony 
in the direct case. Therefore, the Office proposes to amend 
Sec. 251.43(c) to clarify this interpretation.
    The amended regulation also removes any use of the more general 
term ``record,'' in favor of the more specific term, ``testimony,'' to 
avoid any confusion about the nature of the past records that a party 
may include in his or her direct case.
    The Office invites comments on whether and why it should be 
permissible to designate past ``records'' and why records other than 
past testimony should be included in a party's direct case. In 
addition, the Office is proposing a conforming amendment to 
Sec. 251.43(e).

B. Declaration of Stated Claims or Requested Rates and Terms

    The Office proposes amending Sec. 251.43(d) in two respects. First, 
the Office proposes requiring the addition of proposed terms to the 
direct case. With the passage of the Digital Performance Right in Sound 
Recordings Act, there are now a number of proceedings where the CARP is 
supposed to determine the terms, as well as the rates. Therefore, when 
a party files a written direct case in a rate setting proceeding, the 
Office proposes to add a requirement that the party must state its 
requested terms, if that is an issue in the proceeding, as well as its 
requested rate.
    Second, the Office proposes clarifying the point at which 
settlement is reached. The Office has a strong policy in favor of 
private settlements, which it wishes to encourage at every step of the 
process. Therefore, the Office invites comment on two alternative 
proposals for reaching settlement during the final phase of the process 
prior to the empaneling of a CARP.
    Under the first proposal (which is the approach adopted in these 
proposed amendments), a party states in its written direct case a 
percentage or dollar claim, or proposes a rate, which may be accepted 
by all the other parties to the proceeding within seven days of filing 
the direct case. If the other parties accept the stated claim or rate, 
they can so notify the Librarian. Such an acceptance may then become 
the basis upon which the Librarian may make the official distribution 
or rate adjustment without it being necessary to send the case to the 
CARP. This official distribution or rate adjustment can be made with or 
without precedential effect, according to the wishes of the parties. 
See proposed Sec. 251.43(d). Once the Librarian is so notified, the 
party whose requested claim or rate has been accepted by all other 
parties will not be able to revise its claim or rate, and thus thwart a 
resolution of the dispute. However, until and unless the other parties 
accept the requested claim or rate during the specified ten day period, 
no party will be precluded from revising its claim or its requested 
rate at any time during the proceeding up to the filing of the proposed 
findings of facts and conclusions of law. The Office proposes to retain 
the parties' option to revise their claims or rates, in the absence of 
the other parties' agreement, to encourage realistic assessment of 
their cases in light of evidence that is developed during the 
    Another approach to settlement after the filing of the written 
direct case would be to allow the Librarian to adopt a proposed claim 
or rate in those instances where no party files an objection to another 
party's proffered claim or rate. As in the preceding proposal, the 
party making the percentage or dollar claim, or proposed rate, would be 
unable to adjust the proffered claim or rate during the specified ten 
day period. Of course, it may occur in a particular proceeding that the 
sum of the parties' claims to royalties would exceed 100% of the 
royalty pool, in which case the Librarian would be unable to adopt any 
parties' proposed percentage or dollar claim to the fund in those 
instances where no objections were filed. Similarly, the Librarian 
would be unable to choose among several proposed rates offered for a 
similar purpose in any proceeding where more than one of the rates 
remained unchallenged.
    In spite of these potential problems, the Office considers it 
worthwhile to explore these options to settlement. Therefore, the 
Office seeks comment from all interested parties on the two proposals 
for late stage settlement; or alternatively, parties may offer their 
own proposals for further consideration. The object of any proposal, 
however, is to encourage fair and equitable settlements among the 
parties while increasing the efficiencies of the administrative 

V. Filing and Service of Written Cases and Pleadings

A. Subscription and Verification

    The Office proposes an amendment to Sec. 251.44(e)(2), which deals 
with pro se parties, to conform it to Sec. 251.44(e)(1), which contains 
parallel requirements for parties represented by attorneys. At the end 
of Sec. 251.44(e)(2), the proposed amendment adds the requirement that 
the signature of a pro se party on a document filed in a case 
``constitutes certification that to the best of his or her knowledge 
and belief there is good ground to support the document, and that it 
has not been interposed for purposes of delay.'' This is a standard 
requirement for signatures on legal documents and should apply with 
equal force to all participants in a proceeding.

B. Service

    Section 251.44(f) requires a party to serve a copy of all filings 
``upon counsel of all other parties identified in the service list, or, 
if the party is unrepresented by counsel, upon the party itself.'' Mr. 
Cannings proposes that in those cases where parties join together and 
file a single direct case, service should be made to a single lead 
counsel to be designated by the parties to the joint case, who in turn, 
would be responsible for distributing the pleadings further. In support 
of his request for the amendment, Mr. Cannings argues that the current 
requirement places an undue burden on an individual party, creating an 
inequitable and unfair financial hardship on an individual participant. 
The Office seeks comment on the Cannings proposal.

VI. Discovery and Prehearing Motions

    Section 251.45 is an important provision of the CARP rules. The 
section sets the requirements for eligibility to participate in a CARP 
proceeding, establishes the terms of both precontroversy discovery and 
discovery during a proceeding, and delineates certain pleading 
requirements. Section 251.45 is the mainstay for procedural and 
evidentiary rulings that the Librarian has made in accordance with his 
authority under 17 U.S.C. 801(c). As such, the section has become the 
subject of much interpretation by the Librarian, and certain precedents 
have developed during the course of its application. The Office 
believes that these precedents need to be reflected in the rules, in 
addition to the other practice points raised for consideration, in 
order to maximize the effectiveness of the section.

A. Notices of Intent To Participate

    Paragraph (a) of Sec. 251.45 provides that parties wishing to 
participate in royalty distribution and rate adjustment proceedings 
must file a notice of intent to participate, as directed by the

[[Page 70083]]

Librarian. In cable and satellite royalty distribution proceedings, 
there are two phases to the distribution. The first phase involves 
dividing the collected royalties among the various claimant categories 
involved in the proceeding (music, sports, etc.). The second phase 
resolves disputes concerning the further distribution of royalties 
within a category that arise between individual claimants. The Office 
is proposing to amend paragraph (a) to require that parties filing a 
notice of intent to participate in royalty distributions identify in a 
single notice each phase of the proceeding in which they intend to 
participate. Specific inclusion of this provision in the regulation 
will ensure efficient administration of the process and give all 
parties a full, fair opportunity to participate.

B. Service of Pleadings During Precontroversy Discovery

    Section 251.45 (b)(1)(i) and (b)(2)(i) provide that all motions, 
petitions, objections, oppositions, and replies filed during the 
precontroversy discovery period must be served by means no slower than 
overnight express mail. The Office seeks comment as to whether the 
requirement that pleadings be served by overnight express mail is 
unduly costly and, if so, given the limited precontroversy discovery 
period, how might service be otherwise permitted.

C. Discovery Practice by the CARP

    Under current practice, the Librarian of Congress oversees 
discovery on the written direct cases, and the CARP oversees discovery 
on the rebuttal cases, although the Librarian has the discretion to 
designate discovery matters to the CARP for its resolution. Section 
251.45(c)(1) of the rules, however, currently states that the CARP 
shall designate a period of discovery on both the written direct cases 
and the rebuttal cases, which suggests that there are two rounds of 
discovery on the written cases: one conducted by the Librarian and the 
other by the CARP. Therefore, the Office is deleting the reference to 
the written direct cases to make clear that the CARP oversees only 
discovery on the rebuttal cases and not on the written direct cases, 
unless otherwise directed by the Librarian.

D. Objections to Written Direct Cases

    Currently, Sec. 251.45(c)(2) provides that ``[a]fter the filing of 
the written cases with a CARP, any party may file with a CARP 
objections to any portion of another party's written case on any proper 
ground including, without limitation, relevance, competency, and 
failure to provide underlying documents.'' The Office is proposing to 
clarify this sentence so that parties make evidentiary objections to 
the CARP during the course of the proceeding and not to the Librarian 
during the precontroversy discovery period.

E. Precontroversy Discovery

    Section 251.45(b) and (c) currently govern the establishment of a 
precontroversy discovery period, motions practice, and the limitations 
on discovery. The Librarian has extensively applied these provisions in 
each of the CARP proceedings he has conducted, and certain shortcomings 
of these rules have been identified. The greatest difficulties have 
surrounded the rather terse description in paragraph (c) of what types 
and categories of documents are subject to discovery in CARP 
proceedings. The Librarian has been called upon to resolve numerous 
discovery disputes and has fashioned certain principles to better 
articulate the boundaries of discovery. The Office believes that these 
principles should be included in the rules.
    Consequently, the Office is recommending creation of a new 
paragraph (d), entitled ``Limitations on discovery,'' and redesignation 
of the current paragraph (d) as paragraph (f). The provisions of this 
new paragraph are intended to apply to both precontroversy discovery 
and any discovery that is directed by the CARPs.
1. Underlying Documents
    Proposed Sec. 251.45(d)(1) provides that parties ``may request of 
an opposing party nonprivileged underlying documents related to the 
written exhibits and testimony.'' This is the current standard for 
discovery enunciated in current paragraph (c), and remains the standard 
governing discovery under the proposed changes. New paragraphs (1), 
(2), and (3) expand on the basic standard. Paragraph (1) provides that 
underlying documents include only those documents that underlie a 
witness' factual assertions and do not include documents which are 
intended to augment the record with what the witness might have said or 
put forward, or explore the boundaries of what the witness said. They 
are also not documents which underlie a witness' opinion testimony, 
since that testimony is not, by definition, a factual assertion.
    Documents that underlie a witness' factual assertions are those 
documents that the witness relied upon in making his or her assertion. 
Documents ``relied upon'' by a witness is a somewhat elusive concept, 
because these are not necessarily just the documents that a witness 
looked at and considered in making his or her factual assertion. For 
example, a witness may make a statement based upon a summary fact sheet 
of a statistical survey. The facts asserted by the witness actually 
come from the statistical survey, even though the witness never 
actually examined, or perhaps even had access to the survey. In 
circumstances where the asserted facts are the essential part of the 
witness' testimony, or are the crux of a claimant's case, production of 
the statistical survey is appropriate. At the same time, however, the 
Library must balance the costs associated with production of the survey 
against the evidentiary benefits derived from the production. The 
Librarian must make these determinations on a case by case basis, and 
it would be inappropriate, if not impossible, to attempt to resolve 
these cases by codified rules. The Office, therefore, believes that a 
requirement for production of documents relied upon by a witness in 
making his or her factual assertions is a sufficient principle to 
announce in the rules, with specific applications of the principle left 
to the determination of the Librarian or the CARP as the circumstances 
    Paragraph (1) also provides that a party seeking discovery must 
identify, in its discovery requests, the specific factual assertion of 
a witness for which documents are sought. This includes identifying the 
witness by name, the page number on which the assertions appear, and 
the assertions themselves.
2. Supporting Documents for Bottom-Line Figures
    Proposed Sec. 251.45(d)(2) involves the principle of verification 
of bottom-line numbers. Both royalty distribution and rate adjustment 
proceedings are number-intensive, and many witnesses testify as to 
what, for example, a royalty rate should be, or why the royalty rate 
submitted by another party is the incorrect amount. Witnesses 
submitting this type of testimony must be prepared to exchange the 
documents that assisted them in offering their figures. Like underlying 
facts described in paragraph (1), however, a balance must be struck 
between the quality of the testimony produced by obtaining the 
supporting documents and the cost of producing the documents. It is not 
the goal of the CARP discovery process always to trace a bottom-line 
figure to its origins, for such a practice will often drive the cost of 
discovery well beyond the benefits of obtaining the documentation. The 
Librarian must balance the relevance of the testimony with the cost of 
obtaining supporting documentation and make individual determinations. 
The purpose

[[Page 70084]]

of paragraph (2) is, therefore, to state the principle rather than its 
application to particular circumstances.
    Another sometimes elusive matter is what constitutes a ``bottom-
line figure.'' Many numbers may be offered as means of arriving at a 
specific distribution percentage or royalty rate, some of which can be 
considered bottom-line figures and others which are explanatory or 
elucidative. Again, the rule states the principle, not the application.
3. Confidential Material
    Proposed Sec. 251.45(d)(3) provides that where discovery may result 
in production of confidential materials, the parties may negotiate in 
good faith the terms of a protective order, subject to the approval of 
the Librarian. The parties are free and encouraged to negotiate a 
protective order on their own for submission to and approval by the 
4. Penalty for Lack of Responsive Discovery
    To facilitate the precontroversy discovery schedule, proposed 
Sec. 251.45(d)(4) states that all parties must be prepared to cooperate 
in the exchange of discovery material. A party may not withhold 
identified documents which it has said that it will produce simply 
because it is displeased with the response to its discovery requests by 
other parties. Document production is to take place on time, as 
directed in the discovery schedule. A party aggrieved by another's 
response or failure to respond to its discovery request currently has 
only the remedy of submitting a motion to compel production with the 
Librarian. Under the proposed rule, failure to comply with the 
production dates without a showing of good cause would result in the 
striking of the testimony which the documents underlie upon the motion 
of another party.
5. Organized Discovery Response
    All parties must furnish the opposing sides with the underlying 
documents in as organized and usable a form as possible, whether in 
hard copy or digital format. Therefore, Sec. 251.45(d)(5) requires the 
party producing documents to label each document corresponding to the 
request for which it is responsive. Production of undifferentiated 
documents, or the practice of ``dumping'' documents, is not acceptable.

F. Precedential Rulings

    Section 802(c) of the Copyright Act, 17 U.S.C., states that ``[t]he 
arbitration panels shall act on the basis of a fully documented written 
record, prior decisions of the Copyright Royalty Tribunal, prior 
copyright arbitration royalty panel determinations, and rulings by the 
Librarian of Congress under section 801(c).'' The procedural rules of 
part 251 of 37 CFR are rules of general applicability to CARP 
proceedings, and interpretations of those rules made in the context of 
such proceedings apply with equal force to all subsequent CARP 
proceedings. This means that the Librarian's precontroversy discovery 
rulings serve as precedents for subsequent CARP proceedings as well. To 
make this clear, the Office proposes to add a new paragraph (e), 
entitled ``Precedential rulings.''

VII. Written Orders

    The Copyright Office proposes amending Sec. 251.50 to require that 
a CARP's substantive rulings be issued in written form along with a 
brief statement explaining the CARP's rationale. Currently, Sec. 251.50 
states that the CARP may issue rulings or orders that are necessary to 
resolve issues in the proceedings. This authority is based on the 
requirements contained in the Administrative Procedure Act at 5 U.S.C., 
subchapter II.
    Currently, the only record of oral decisions is in the transcripts 
of the proceedings and one has to review the hearing transcript to find 
any reference to them. The proposed amendment has several benefits. It 
will provide a more structured approach to the decision making process 
and preserve orders in a more accessible form.
    Section 555(e) of the Administrative Procedure Act already requires 
that denials of written applications, petitions or other requests be 
accompanied by a brief statement of the grounds for denial. The 
Copyright Office requests comments about this proposed change, in 
particular whether it should be limited to denials or whether it should 
apply to other types of orders.

VIII. Review of the CARP Report

    The CARP must conclude its work and submit its determination within 
180 days from publication of the notice of commencement of a CARP 
proceeding in the Federal Register. The statute also requires that 
``[s]uch report shall be accompanied by the written record, and shall 
set forth the facts that the arbitration panel found relevant to its 
determination.'' 17 U.S.C. 802(e). The Register of Copyrights then 
reviews the CARP's report and makes a recommendation to the Librarian 
of Congress whether to accept or reject it. If the Librarian rejects 
the Panel's determination, he or she issues an order setting the rate 
or distribution of royalty fees. Id.
    Currently, Sec. 251.55 allows any party to file with the Librarian 
of Congress a petition to modify or set aside the determination of the 
CARP during the first 14 days of the Librarian's review. 37 CFR 
251.55(a). The regulations also allow an additional 14 days for replies 
to such petitions. 37 CFR 251.55(b). The petitions have proven 
extremely useful to the Librarian and the Register of Copyrights in 
their review of the CARP's report. The CARP itself, however, has no 
opportunity to review the petitions and replies to consider the 
arguments made therein. The Copyright Office believes that there have 
been occasions in past CARP proceedings when a Panel might well have 
modified its own decision if it had had the opportunity to consider the 
petitions that were filed with the Librarian. Thus, it might well 
increase the efficiency of the review process and the quality of the 
decisionmaking to give the CARP itself an opportunity to do so. 
Therefore, the Office seeks comment from interested parties on whether 
the CARP should have an opportunity to consider the petitions and to 
revise its report before the Register and the Librarian engage in their 
    Alternatively, the Office seeks comment on the possibility of 
remanding a determination of a CARP for further consideration in light 
of a determination by the Librarian that the report is arbitrary or 
contrary to law, or in those instances where the Librarian cannot 
determine whether there exist sufficient facts to support a conclusion 
that the Panel did not act arbitrarily. Cases might also occur where 
the record might indicate that the Panel acted arbitrarily, but there 
are insufficient facts on the record to allow the Librarian to 
substitute his or her own determination.
    At this time, the Copyright Office is not proposing specific 
regulations which would require the parties to submit the petitions to 
modify directly to the CARP or provide for the possibility of a remand 
to the Panel under the circumstances outlined above. Instead, the 
Office invites comment from the interested parties on the advantages 
and disadvantages of instituting changes to the CARP system along the 
lines proposed herein.

IX. Other Suggestions Welcome

    The Copyright Office welcomes any additional comments and 
suggestions from interested parties on other

[[Page 70085]]

substantive or procedural matters not covered by these proposed 

List of Subjects in 37 CFR Part 251

    Administrative practice and procedure, Hearing and appeal 

Proposed Rules

    For the reasons set out in the Preamble, Chapter II of Title 37 of 
the Code of Federal Regulations is proposed to be amended as follows:


    1. The authority citation for part 251 continues to read as 

    Authority: 17 U.S.C. 801-803.

    2. Section 251.21 is amended by revising paragraph (a) to read as 

Sec. 251.21  Public records.

    (a) All official reports of a Copyright Arbitration Royalty Panel 
are available for inspection and copying at the address provided in 
Sec. 251.1.
* * * * *
    3. Section 251.43 is amended by revising paragraphs (c), (d) and 
(e) to read as follows:

Sec. 251.43  Written cases.

* * * * *
    (c) Each party may include in its direct case designated portions 
of past testimony from prior Copyright Arbitration Royalty Panel or the 
Copyright Royalty Tribunal proceedings, including any exhibits 
associated with the designated testimony. Such designation may be done 
by reference to the appropriate proceeding or by including the text of 
the past testimony in the direct case. Complete testimony of each 
witness whose testimony is designated (i.e., direct, cross and 
redirect) must be referenced.
    (d) In the case of a royalty fee distribution proceeding, each 
party must state in the written direct case its percentage or dollar 
claim to the fund. In the case of a rate adjustment proceeding, each 
party must state its requested rate and, if applicable, terms. If, 
within ten days of the filing of the direct case, all the other parties 
to the proceeding accept the proffered claim or rate and terms as the 
basis for a distribution or rate adjustment, they may so notify the 
Librarian. The Librarian may make the distribution or rate adjustment 
on that basis. The distribution or rate adjustment will have no 
precedential effect on future proceedings, unless all the parties to 
the proceeding request otherwise. Until and unless all the other 
parties to the proceeding accept the proffered claim or rate, no party 
will be precluded from revising its claim or its requested rate at any 
time during the proceeding up to the filing of the proposed findings of 
fact and conclusions of law.
    (e) No evidence, including exhibits, may be submitted in the 
written direct case without a sponsoring witness, except where the CARP 
has taken official notice, or in the case of incorporation by reference 
of past testimony, or for good cause shown.
* * * * *
    4. Section 251.44 is amended by adding a sentence at the end of 
paragraph (e)(2) to read as follows:

Sec. 251.44  Filing and service of written cases and pleadings.

* * * * *
    (e) Subscription and verification. (1) * * *
    (2) * * * A party's signature constitutes certification that to the 
best of his or her knowledge and belief there is good ground to support 
the document, and that it has not been interposed for purposes of 
* * * * *
    5. Section 251.45 is amended by adding a sentence at the end of 
paragraph (a), revising paragraph (c), redesignating current paragraph 
(d) as paragraph (f), and adding new paragraphs (d) and (e) to read as 

Sec. 251.45  Discovery and prehearing motions.

    (a) * * * All parties who file a notice of intention to participate 
shall identify any and all controversies in which they have an interest 
and intend to pursue that interest.
    (b) * * *
    (c) Discovery and motions filed with a Copyright Arbitration 
Royalty Panel. (1) A Copyright Arbitration Royalty Panel shall 
designate a period following the filing of rebuttal cases in which 
parties may request of an opposing party nonprivileged underlying 
documents related to the written exhibits and testimony.
    (2) After the initiation of a CARP proceeding, any party may file 
with a CARP objections to any portion of another party's written case 
on any proper ground including, without limitation, relevance, 
competency, and failure to provide underlying documents. If an 
objection is apparent from the face of a written case, that objection 
must be raised with the CARP before the closing of the record, or the 
party may thereafter be precluded from raising such an objection.
    (d) Limitations on discovery. The following requirements apply to 
all proceedings conducted pursuant to this section:
    (1) Parties may request of an opposing party nonprivileged 
documents that underlie a witness' factual assertions. In order to 
discover the documents that underlie a witness' factual assertions, the 
requesting party must identify the witness by name and specify the 
factual assertions of that witness for which supporting documents are 
sought. Documents that underlie a witness' factual assertions are those 
documents that the witness relied upon to make his or her assertion.
    (2) Parties who offer total numeric or financial figures in a CARP 
proceeding without supporting documentation must be prepared to share 
underlying data that contributed to those totals so that the figures 
may be verified, notwithstanding any assertions of confidentiality.
    (3) The parties may negotiate, under good faith, protective orders, 
subject to approval by the Librarian, so that the underlying data can 
be revealed and confidentiality can be protected.
    (4) All parties to a proceeding must continue to comply with the 
discovery schedule for the exchange of any noncontroversial evidence, 
even when motions relating to discovery have been filed with the 
Librarian or the Copyright Arbitration Royalty Panel and are pending 
decision. Failure to show good cause as to why responsive documents 
were not produced by the deadlines established in a precontroversy 
discovery schedule shall result in the striking of testimony that the 
dilatory documents support.
    (5) All documents offered in response must be furnished in as 
organized and usable a form as possible. Produced documents must be 
labeled to correspond with the categories in the request.
    (e) Precedential rulings. The procedural rules of Subchapter B of 
37 CFR are rules of general applicability to CARP proceedings. 
Interpretations of those rules by the Librarian of Congress or the CARP 
that are made in the context of such proceedings apply with equal force 
to all subsequent proceedings.
    (f) * * *
* * * * *

Sec. 251.50  Rulings and orders.

    6. Section 251.50 is amended by removing the words ``contained in 
this subchapter'' and in their place, adding the words ``of the 
Copyright Office'', and by adding a new sentence to the end of the 
paragraph to read, ``Any such

[[Page 70086]]

rulings or orders must be issued in writing, accompanied by a brief 
statement in support of the ruling.''
* * * * *

    Dated: November 23, 1998.
Marybeth Peters,
Register of Copyrights.
    Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 98-33607 Filed 12-17-98; 8:45 am]