[Federal Register: August 2, 1996 (Volume 61, Number 150)]
[Page 40464-40466]



Copyright Office
[Docket No. 96-5 CARP DSTRA]

Digital Performance Right in Sound Recordings

AGENCY: Copyright Office, Library of Congress.

ACTION: Precontroversy discovery schedule and request for notices of 
intent to participate.


SUMMARY: The Copyright Office of the Library of Congress is announcing 
the precontroversy discovery schedule, including the date of initiation 
of arbitration, for the Copyright Arbitration Royalty Panel (CARP) 
proceeding to set the rates and terms for the 17 U.S.C. 114 compulsory 
license for nonexempt digital subscription transmissions. The Office is 
also requesting interested parties to file comments on the rate 
petition by August 30, 1996. Parties who wish to participate in the 
CARP proceeding must file their Notices of Intent to Participate by 
August 30, 1996.

DATES: Comments on the rate petition, and Notices of Intent to 
Participate are due on or before August 30, 1996.

ADDRESSES: If sent by mail, an original and five copies of the 
comments, and an original and five copies of the Notice of Intent to 
Participate should be addressed to: Copyright Arbitration Royalty Panel 
(CARP), P.O. Box 70977, Southwest Station, Washington, D.C. 20024. If 
hand delivered, an original and five copies of the comments, and an 
original and five copies of the Notice of Intent to Participate should 
be brought to: Office of the Copyright General Counsel, James Madison 
Memorial Building, Room LM-407, First and Independence Avenue, S.E., 
Washington D.C. 20540.

FOR FURTHER INFORMATION CONTACT: William Roberts, Senior Attorney, or 
Tanya Sandros, CARP Specialist, Copyright Arbitration Royalty Panel 
(CARP), P.O. Box 70977, Southwest Station, Washington, DC 20024. 
Telephone (202) 707-8380. Telefax: (202) 707-8366.

SUPPLEMENTARY INFORMATION: On November 1, 1995, the President signed 
into law the ``Digital Performance Right in Sound Recordings Act of 
1995'' (``Digital Performance Act''). Pubic Law No. 104-39. The Digital 
Performance Act creates an exclusive right for copyright owners of 
sound recordings, subject to certain limitations, to perform publicly 
the sound recordings by means of certain digital audio transmissions. 
See 17 U.S.C. 106(6).
    Among the limitations on the performance of a sound recording 
publicly by means of a digital audio transmission is the creation of a 
new compulsory license for nonexempt subscription transmissions. The 
Digital Performance Act defines a ``subscription transmission'' as one 
that ``is a transmission that is controlled and limited to particular 
recipients, and for which consideration is required to be paid or 
otherwise given by or on behalf of the recipient to receive the 
transmission or a package of transmissions including the 
transmission.'' 17 U.S.C. 114(j)(8). All nonexempt subscription 
transmissions are eligible for section 114 compulsory licensing 
provided they are not made by an ``interactive service,'' which is 
defined in part as ``one that enables a

[[Page 40465]]

member of the public to receive, on request, a transmission of a 
particular sound recording chosen by or on behalf of the recipient.'' 
See 17 U.S.C. 114(j)(4).
    The terms and rates of the section 114 statutory license are 
determined by voluntary negotiation among the affected parties and, 
where necessary, compulsory arbitration conducted under chapter 8 of 
the Copyright Act. On December 1, 1995, the Copyright Office published 
a notice in the Federal Register initiating the voluntary negotiation 
period from December 1, 1995, to June 1, 1996. 60 FR 61655 (December 1, 
1995). The Office encouraged parties that negotiated voluntary license 
agreements to submit two copies of the agreement to the Office within 
30 days of its execution. No agreements were filed during this period.
    Because an industry-wide agreement has not been reached, copyright 
owners and entities performing sound recordings not subject to a 
voluntary agreement shall be bound by the terms and rates set by a 
CARP. The Office directed parties not subject to a voluntary agreement 
to file their petitions for a CARP proceeding by August 1, 1996. See 60 
FR 61656 (1995). On June 4, 1996, the Office received a petition from 
the Recording Industry Association of America (``RIAA'') requesting the 
``Librarian of Congress to commence proceedings to determine a schedule 
of terms and rates for a statutory license for the public performance 
of sound recordings via those audio digital subscription transmission 
services currently in operation.''
    Pursuant to the RIAA's petition and the rules and regulations of 37 
CFR part 251, the Librarian of Congress, upon the recommendation of the 
Register of Copyrights, is announcing the precontroversy discovery 
schedule for the proceeding to set terms and rates for the section 114 
license, including the date on which the proceeding before the CARP 
will be initiated.

Notices of Intent To Participate

    Any party wishing to appear before the CARP, and to present 
evidence, in this proceeding must file a Notice of Intent to 
Participate by August 30, 1996. Failure to file a timely Notice of 
Intent to Participate will preclude a party from participating in this 

Comments on RIAA Petition

    Section 251.45(a) of the rules states that ``the Librarian of 
Congress shall, after receiving a petition for rate adjustment filed 
under 251.62, * * * publish in the Federal Register a notice requesting 
interested parties to comment on the petition for rate adjustment.'' 37 
CFR 241.45(a). Any party wishing to comment on the RIAA's petition 
should do so by August 30, 1996.

Precontroversy Discovery Schedule

    The Library of Congress is announcing the scheduling of the 
precontroversy discovery period, and other procedural matters, for the 
establishment of rates and terms for the section 114 compulsory 
license. In addition, the Library is announcing the date on which 
arbitration proceedings will be initiated before a CARP, thereby 
commencing the 180-day arbitration period. Once a CARP has been 
convened, the scheduling of the arbitration period is within the 
discretion of the CARP and will be announced at that time.

A. Commencement of the Proceeding

    A rate adjustment proceeding under part 251 of 37 CFR is divided 
into two essential phases. The first is the 45-day precontroversy 
discovery phase, during which the parties exchange their written direct 
cases, exchange their documentation and evidence in support of their 
written direct cases, and engage in the pre-CARP motions practice 
described in Sec. 251.45. The other phase is the proceeding before the 
CARP itself, including the presentation of evidence and the submission 
of proposed findings by all of the participating parties. The 
proceeding before the CARP may be in the form of hearings or, in 
accordance with the requirements of Sec. 251.41(b) of the rules, the 
proceeding may be conducted solely on the basis of written pleadings.
    Both of these phases to a rate adjustment proceeding require 
significant amounts of work, not just for the parties, but for the 
Librarian, the Copyright Office, and the arbitrators as well. The rate 
setting proceeding for section 114 is not the only CARP proceeding 
likely to take place this year. The Library of Congress is currently 
conducting a royalty distribution proceeding under chapter 10 of the 
Copyright Act, a cable rate adjustment proceeding, a satellite carrier 
rate adjustment proceeding, and must schedule a cable royalty 
distribution proceeding, and a satellite carrier royalty distribution 
proceeding all within this calendar year. It would be extremely 
difficult for the Office to conduct the precontroversy discovery phase 
of more than one of these proceedings at the same time, and the Library 
must, therefore, conduct them sequentially.
    Because of the number of CARP proceedings to be conducted this 
year, and the attending workload, selection of a date to initiate a 
section 114 rate setting proceeding is not dependent on the schedules 
of one or more of the participating parties, but must be weighed 
against the interests of all involved. The RIAA filed their petition in 
early June 1996, and it is likely that this arbitration proceeding will 
only involve three other parties who are already aware of the RIAA's 
petition. The Library therefore believes that a commencement of the 
precontroversy discovery period in the early fall would not come as a 
surprise to the affected parties or create an undue burden. Aware of 
the other proceedings which must be scheduled, the attending workload, 
and the need to manage the interests of all involved, the Library is 
announcing the precontroversy discovery schedule and arbitration period 
in this proceeding without seeking further comment from the 
participating parties.

B. Precontroversy Discovery Schedule and Procedures

    Any party that has filed a Notice of Intent to Participate in the 
section 114 rate setting proceeding is entitled to participate in the 
precontroversy discovery period. Each party may request of an opposing 
party nonprivileged documents underlying facts asserted in the opposing 
party's written direct case. The precontroversy discovery period is 
limited to discovery of documents related to written direct cases and 
any amendments made during the period.
    The rules of the Library of Congress do not specify any particular 
steps or regimen to the precontroversy discovery period. We believe, 
however, that it is necessary to establish procedural dates for 
exchange of documents and filing of motions within the 45-day period to 
provide order and allow discovery to proceed smoothly and efficiently. 
The precontroversy discovery schedule set forth by the Library in the 
recent cable distribution proceeding, see 54 FR 14971, 14975-76 (March 
21, 1995), proved to be successful in promoting an orderly and 
efficient discovery period, and we have chosen to adopt the same format 
and structure for the precontroversy discovery period in this 
    The following is the precontroversy discovery procedural schedule 
with corresponding deadlines:

[[Page 40466]]

                Action                              Deadline            
Filing of Written Direct Cases........  September 9, 1996.              
Requests for Underlying Documents       September 18, 1996.             
 Related to Written Direct Cases.                                       
Responses to Requests for Underlying    September 25, 1996.             
Completion of Document Production.....  September 30, 1996.             
Follow-up Requests for Underlying       October 7, 1996.                
Responses to Follow-up Requests.......  October 11, 1996.               
Motions Related to Document Production  October 15, 1996.               
Production of Documents in Response to  October 18, 1996.               
 Follow-up Requests.                                                    
All Other Motions, Petitions, and       October 23, 1996.               

    The precontroversy discovery period, as specified by Sec. 251.45(b) 
of the rules, begins on September 9, 1996, with the filing of written 
direct cases by each party. Each party in this proceeding who has filed 
a Notice of Intent to Participate must file a written direct case on 
the date prescribed above. Failure to submit a timely filed written 
direct case will result in dismissal of that party's case. Parties must 
comply with the form and content of written direct cases as prescribed 
in Sec. 251.43. Each party to the proceeding must deliver a complete 
copy of its written direct case to each of the other parties to the 
proceeding, as well as file a complete copy with the Copyright Office 
by close of business on September 9, 1996, the first day of the 45-day 
    After the filing of the written direct cases, document production 
will proceed according to the above-described schedule. Each party may 
request underlying documents related to each of the other parties' 
written direct cases by September 18, 1996, and responses to those 
requests are due by September 25, 1996. Documents which are produced as 
a result of the requests must be exchanged by September 30, 1996. It is 
important to note that all initial document requests must be made by 
the September 18, 1996, deadline. Thus, for example, if one party 
asserts facts that expressly rely on the results of a particular study 
that was not included in the written direct case, another party 
desiring production of that study must make its request by September 
18; otherwise, the party is not entitled to production of the study.
    The precontroversy discovery schedule also establishes deadlines 
for follow-up discovery requests. Follow-up requests are due by October 
7, 1996, and responses to those requests are due by October 11, 1996. 
Any documentation produced as a result of a follow-up request must be 
exchanged by October 18, 1996. An example of a follow-up request would 
be as follows. In the above example, one party expressly relies on the 
results of a particular study which is not included in its written 
direct case. As noted above, a party desiring production of that study 
or survey must make its request by September 18, 1996. If, after 
receiving a copy of the study, the reviewing party determines that the 
study heavily relies on the results of a statistical survey, it would 
be appropriate for that party to make a follow-up request for 
production of the statistical survey by the October 7, 1996 deadline. 
Again, failure to make a timely follow-up request would waive that 
party's right to request production of the survey.
    In addition to the deadlines for document requests and production, 
there are two deadlines for the filing of precontroversy motions. 
Motions related to document production must be filed by October 15, 
1996. Typically, these motions are motions to compel production of 
requested documents for failure to produce them, but they may also be 
motions for protective orders. Finally, all other motions, petitions 
and objections must be filed by October 23, 1996, the final day of the 
45-day precontroversy discovery period. These motions, petitions, and 
objections include, but are not limited to, objections to arbitrators 
appearing on the arbitrator list under Sec. 251.4, and petitions to 
dispense with formal hearings under Sec. 251.41(b).
    Due to the time limitations between the procedural steps of the 
precontroversy discovery schedule, we are requiring that all discovery 
requests and responses to such requests be served by hand o
r fax on the 
party to whom such response or request is directed. Filing of requests 
and responses with the Copyright Office is not required.
    Filing and service of all precontroversy motions, petitions, 
objections, oppositions and replies shall be as follows. In order to be 
considered properly filed with the Librarian and/or Copyright Office, 
all pleadings must be brought to the Copyright Office at the following 
address no later than 5 p.m. of the filing deadline date: Office of the 
Register of Copyrights, Room LM-403, James Madison Memorial Building, 
101 Independence Avenue, S.E., Washington, D.C. 20540. The form and 
content of all motions, petitions, objections, oppositions and replies 
filed with the Office must be in compliance with Sec. 251.44 (b)-(e). 
As provided in Sec. 251.45(b), oppositions to any motions or petitions 
must be filed with the Office no later than seven business days from 
the date of filing of such motion or petition. Replies are due five 
business days from the date of filing of such oppositions. Service of 
all motions, petitions, objections, oppositions and replies must be 
made on counsel or the parties by means no slower than overnight 
express mail on the same day the pleading is filed.

C. Initiation of Arbitration

    Because there are two phases to a rate adjustment proceeding--
precontroversy discovery and arbitration--there are two time periods to 
be scheduled. The regulations do not provide how much time must 
separate precontroversy discovery from initiation of arbitration. There 
is no reason to schedule an inordinate amount of time between the two; 
however, there must be adequate time for the Librarian to rule upon all 
motions filed within the 45-day precontroversy period. In order to give 
the parties as much of the month of December as possible for 
proceedings before the CARP, the Library will initiate arbitration on 
December 2, 1996. The schedule of the arbitration proceeding will be 
established by the CARP after the three arbitrators have been selected. 
Delivery of the written report of the arbitrators to the Librarian, in 
accordance with 17 U.S.C. 802(e), must be no later than May 30, 1997.

    Dated: July 29, 1996.
Marilyn J. Kretsinger,
Acting General Counsel.

James H. Billington,
The Librarian of Congress.
[FR Doc. 96-19666 Filed 8-1-96; 8:45 am]