[Federal Register: April 24, 1998 (Volume 63, Number 79)]
[Notices]
[Page 20428-20433]
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LIBRARY OF CONGRESS
Copyright Office
[Docket No. 94-3 CARP CD 90-92]
Determination of the Distribution of the 1991 Cable Royalties in
the Music Category
AGENCY: Copyright Office, Library of Congress.
ACTION: Order.
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SUMMARY: The Librarian of Congress, upon recommendation of the Register
of Copyrights, is announcing resolution of a Phase II controversy and
distribution of 1991 cable royalty funds in the music category. The
Librarian is adopting the determination of the Copyright Arbitration
Royalty Panel (CARP).
EFFECTIVE DATE: April 24, 1998.
ADDRESSES: The full text of the CARP's report to the Librarian of
Congress is available for inspection and copying during normal business
hours in the Office of General Counsel, James Madison Memorial
Building, Room LM-403, First and Independence Avenue, S.E., Washington,
D.C. 20540.
FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or
William Roberts, Senior Attorney, P.O. Box 70977, Southwest Station,
Washington, D.C. 20024. Telephone (202) 707-8380.
SUPPLEMENTARY INFORMATION:
Recommendation of the Register of Copyrights
I. Background
Section 111 of the Copyright Act, 17 U.S.C., grants a compulsory
copyright license to cable systems to retransmit the over-the-air
signals of broadcast stations licensed by the Federal Communications
Commission. Cable systems submit statements of account and royalty
payments to the Copyright Office on a semi-annual basis. The royalties
are deposited with the United States Treasury for subsequent
distribution to owners of copyrighted works retransmitted by the cable
systems.
Distribution of cable royalty fees is conducted in two phases. In
Phase I, the fees are divided among categories of copyright owners.
There are currently eight copyright owner claimant groups represented
in Phase I proceedings: Program Suppliers (movies and syndicated
television programs); Joint Sports Claimants (sports programs of the
National Basketball Association, Major League Baseball, the National
Hockey League, and the National Collegiate Athletic Association); the
National
[[Page 20429]]
Association of Broadcasters (broadcast stations); the Devotional
Claimants (religious programming); the Public Broadcasting Service
(public television); National Public Radio (public radio); the Canadian
Claimants (Canadian program owners); and the Music Claimants
(songwriters and music publishers).
Phase II involves distribution of royalty fees to individual
copyright owners within a category. This proceeding involves
distribution to claimants within the music category.
On October 28, 1996, the Librarian announced the final Phase I
distribution of cable royalties collected for 1990, 1991 and 1992. Of
the total royalties collected (more than $500 million), 4.5% of the
fees for each year was distributed to the music category.<SUP>1</SUP>
61 FR 55653 (October 28, 1996). Music Claimants, consisting of the
American Society of Composers, Authors, and Publishers (ASCAP),
Broadcast Music, Inc. (BMI) and SESAC, Inc. (SESAC), represented the
music category and received the Phase I royalty distribution award.
Order in Docket No. 93-3 CARP CD 90-92 (August 3, 1995).
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\1\ The 4.5% figure was achieved through settlement negotiations
between the Music Claimants and the other seven claimant groups.
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On February 15, 1996, the Library of Congress published a notice
requesting interested parties to comment on the existence of Phase II
controversies for distribution of the 1990-1992 cable royalty funds. 61
FR 6040 (February 15, 1996). The parties who filed comments and Notices
of Intent to Participate identified two unsettled categories that would
require resolution before a CARP. The first controversy involved
distribution of the 1991 cable royalty fees between James Cannings and
Can Can Music (Cannings) and the Music Claimants. Music Claimants
represent all songwriters and music publishers in the music category
for distribution of the 1991 cable fees, with the exception of
Cannings. The second controversy involved distribution of the 1990-1992
cable fees between the National Association of Broadcasters (NAB) and
the Public Broadcasting Service (PBS). On June 3, 1997, NAB and PBS
notified the Copyright Office that they had reached settlement
concerning all matters related to their Phase II dispute over
distribution of the 1990-1992 royalty funds, thus leaving a single
dispute for resolution by a CARP.
On August 28, 1997, the Library convened a CARP to resolve the
dispute between Cannings and the Music Claimants for distribution of
the 1991 cable fees. 62 FR 45687 (August 28, 1997). After considering
the evidence presented by the parties, the CARP delivered its written
decision to the Librarian, as required by 17 U.S.C. 802(e), on February
26, 1998. The Panel awarded Cannings $63.74 and awarded the remainder
of the 1991 fees <SUP>2</SUP> to the Music Claimants.
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\2\ The remainder of the fees is 4.5% of the total cable fees
collected for 1991 minus, of course, Cannings' award.
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Cannings filed a petition to modify the decision of the CARP, as
permitted by 37 CFR 251.55(a). The Music Claimants and Broadcast Music,
Inc. (BMI) filed replies, as permitted by 37 CFR 251.55(b).
Section 802(f) of the Copyright Act provides that ``[w]ithin 60
days after receiving the report of a copyright arbitration royalty
panel * * *, the Librarian of Congress, upon the recommendation of the
Register of Copyrights, shall adopt or reject the determination of the
arbitration panel.'' 17 U.S.C. 802(f). Today's order of the Librarian
fulfills this statutory obligation.
II. The Librarian's Scope of Review
The Librarian of Congress has, in previous proceedings, discussed
his narrow scope of review of CARP determinations. See 62 FR 55742
(October 28, 1997) (satellite rate adjustment); 52 FR 6558 (February
12, 1997) (DART distribution order); 61 FR 55653 (October 28, 1996)
(cable distribution order). The salient points regarding the scope of
review, however, merit repeating.
The Copyright Royalty Tribunal Reform Act of 1993 created a unique
system of review of a CARP's determination. Typically, an arbitrator's
decision is not reviewable, but the Reform Act created two layers of
review that result in final orders: the Librarian and the Court of
Appeals for the District of Columbia Circuit. Section 802(f) directs
the Librarian to either accept the decision of the CARP or reject it.
If the Librarian rejects it, he must substitute his own determination
``after full examination of the record created in the arbitration
proceeding.'' Id. If the Librarian accepts it, then the determination
of the CARP has become the determination of the Librarian. In either
case, through issuance of the Librarian's Order, it is his decision
that will be subject to review by the Court of Appeals.
Section 802(f) of the Copyright Act directs that the Librarian
shall adopt the report of the CARP ``unless the Librarian finds that
the determination is arbitrary or contrary to the applicable provisions
of this title.'' Neither the Reform Act nor its legislative history
indicates what is meant specifically by ``arbitrary,'' but there is no
reason to conclude that the use of the term is different from the
``arbitrary'' standard described in the Administrative Procedure Act, 5
U.S.C. 706(2)(A).
Review of the case law applying the APA ``arbitrary'' standard
reveals six factors or circumstances under which a court is likely to
find that an agency acted arbitrarily. An agency is generally
considered to be arbitrary when it:
(1) Relies on factors that Congress did not intend it to consider;
(2) Fails to consider entirely an important aspect of the problem
that it was solving;
(3) Offers an explanation for its decision that runs counter to the
evidence presented before it;
(4) Issues a decision that is so implausible that it cannot be
explained as a product of agency expertise or a difference of
viewpoint;
(5) Fails to examine the data and articulate a satisfactory
explanation for its action including a rational connection between the
facts found and the choice made; and
(6) When the agency's action entails the unexplained discrimination
or disparate treatment of similarly situated parties.
Motor Vehicle Mfrs. Ass'n v. State Farm Mutual Auto Insurance Co., 463
U.S. 29 (1983); Celcom Communications Corp. v. FCC, 789 F.2d 67 (D.C.
Cir. 1986); Airmark Corp. v. FAA, 758 F.2d 685 (D.C. Cir. 1985).
Given these guidelines for determining when a determination is
``arbitrary,'' prior decisions of the Court of Appeals for the District
of Columbia Circuit reviewing the determinations of the former
Copyright Royalty Tribunal have been consulted. The decisions of the
Tribunal were reviewed under the ``arbitrary and capricious'' standard
of 5 U.S.C. 706(2)(A) which, as noted above, appears to be applicable
to the Librarian's review of the CARP's decision.
Review of judicial decisions regarding Tribunal actions reveals a
consistent theme: while the Tribunal was granted a relatively wide
``zone of reasonableness,'' it was required to articulate clearly the
rationale for its award of royalties to each claimant. See Recording
Industry Ass'n of America v. CRT, 662 F.2d 1 (D.C. Cir. 1981); National
Cable Television Ass'n v. CRT, 689 F.2d 1077 (D.C. Cir. 1982);
Christian Broad. Network v. CRT, 720 F.2d 1295 (D.C. Cir. 1983);
National Ass'n of Broadcasters v. CRT, 772 F.2d 922 (D.C. Cir. 1985).
As one panel of the D.C. Circuit succinctly noted:
[[Page 20430]]
We wish to emphasize * * * that precisely because of the
technical and discretionary nature of the Tribunal's work, we must
especially insist that it weigh all the relevant considerations and
that it set out its conclusions in a form that permits us to
determine whether it has exercised its responsibilities lawfully * *
*
Christian Broad. Network, Inc. v. CRT, 720 F.2d 1295, 1319 (D.C. Cir.
1983), quoting National Cable Television Ass'n v. CRT, 689 F.2d 1077,
1091 (D.C. Cir. 1982).
Because the Librarian is reviewing the CARP decision under the same
``arbitrary'' standard used by the courts to review the Tribunal, he
must be presented with a rational analysis of the CARP's decision,
setting forth specific findings of fact and conclusions of law. This
requirement of every CARP report is confirmed by the legislative
history to the Reform Act which notes that a ``clear report setting
forth the panel's reasoning and findings will greatly assist the
Librarian of Congress.'' H.R. Rep. No. 286, at 13 (1993). Thus, to
engage in reasoned decision-making, the CARP must ``weigh all the
relevant considerations and * * * set out its conclusions in a form
that permits [a determination of] whether it has exercised its
responsibilities lawfully.'' National Cable Television Ass'n v. CRT,
689 F.2d 1077, 1091 (D.C. Cir. 1982). This goal cannot be reached by
``attempt[ing] to distinguish apparently inconsistent awards with
simple, undifferentiated allusions to a 10,000 page record.'' Christian
Broad. Network, Inc. v. CRT, 720 F.2d 1295, 1319 (D.C. Cir. 1983).
It is the task of the Register to review the report and make her
recommendation to the Librarian as to whether it is arbitrary or
contrary to the provisions of the Copyright Act and, if so, whether,
and in what manner, the Librarian should substitute his own
determination.
III. Review of the CARP Report
Section 251.55(a) of the rules provides that ``[a]ny party to the
proceeding may file with the Librarian of Congress a petition to modify
or set aside the determination of a Copyright Arbitration Royalty Panel
within 14 days of the Librarian's receipt of the panel's report of its
determination.'' 37 CFR 251.55(a). Replies to petitions to modify are
due 14 days after the filing of petitions. 37 CFR 251.55(b).
Cannings, who appeared pro se in this proceeding on behalf of
himself and Can Can Music, filed a petition to modify requesting that
he be awarded his original claim of $2,400, plus interest. Music
Claimants opposed Cannings' petition, and requested the Librarian
affirm the decision of the Panel. BMI also filed a ``supplemental
reply,'' asking the Librarian to clarify a statement made by the Panel
in its report.
Section 251.55 of the rules assists the Register of Copyrights in
making her recommendation to the Librarian, and the Librarian in
conducting his review of the CARP's decision by allowing the parties to
the proceeding to raise specific objections to a CARP's determination.
As required by section 802(f) of the Copyright Act, if the Librarian
determines that the Panel in this proceeding has acted arbitrarily or
contrary to the provisions of the Copyright Act, he must ``after full
examination of the record created in the arbitration proceeding, issue
an order setting the * * * distribution of fees.'' 17 U.S.C. 802(f).
IV. Review and Recommendation of the Register of Copyrights
A. Determination of the Panel
The Panel's report articulates both the legal and factual basis for
resolving this Phase II proceeding. The Copyright Act does not provide
standards for determining how cable royalty fees are to be divided
among various claimants, leaving that task instead to individual CARPs
acting ``on the basis of a fully documented written record, prior
decisions of the Copyright Royalty Tribunal, prior copyright
arbitration panel determinations, and rulings by the Librarian of
Congress under section 801(c).'' 17 U.S.C. 802(c). After examining the
``simulated market'' approach utilized by the Phase I CARP to divide
the cable royalties among the various copyright owner categories, the
Panel determined that a similar approach was warranted in this
proceeding. The Panel stated:
The evidence and arguments presented here focus essentially on
market value. However, the opportunity for negotiations concerning
what cable systems [sic] operators would have to pay for those
segments of programs during which the works of each individual music
claimant was performed has been superseded by the compulsory
licensing system. Therefore it will be our task to hypothesize as
realistic a simulated market for the works of individual music
claimants as is consistent with the evidence presented.
Panel Report at 7.
After establishing a ``simulated market'' approach as its legal
basis for determining the distribution, the Panel examined the factual
basis for Cannings' and the Music Claimants' claims to the 1991 cable
royalty fees. The Panel determined Cannings' claim to rest upon a
single musical composition, ``Misery,'' that was transmitted on two
occasions in 1991 as part of the ``Joe Franklin Show'' on broadcast
station WWOR-TV. With respect to the Music Claimants, the Panel
determined that they represented all other claimants in the music
category and that, after determining Cannings' share of the royalties,
all remaining monies belonged to the Music Claimants. Id. at 8.
After adopting this approach to the distribution, the Panel sought
a means for determining Cannings' share of the 1991 cable royalties.
The Panel rejected Cannings' claim of $2,400, which was based upon an
independent arbitrator's award of $4,800 to Cannings for four
performances of his musical work ``Reggae Christmas'' on WWOR-TV during
the 1980's. This private arbitration award was the result of a dispute
between Cannings and BMI when Cannings was a member of that performing
rights organization. In making the award, the independent arbitrator
did not issue a written statement of his findings of facts or
conclusions, as is required in a CARP proceeding. The Panel stated:
As a basis for Cannings' claim in this proceeding, the
arbitration award, confirmed by the court or not, can carry no
weight. Cannings expressly disavows any claim of collateral
estoppel, but presents the award ``as precedent to support how to
calculate his royalty distribution.'' However, we cannot defer to
the award. To do so would mean abdicating our duty under Sec. 802(c)
of the copyright law to act ``on the basis of a fully documented
written record * * *.'' We understand this duty to require our own
examination and analysis of the evidence presented. While Cannings
has made certain representations as to what evidence he presented to
the arbitrator, we have no way of knowing how the arbitrator
evaluated any of the evidence or what factors he considered in
arriving at his award. We note, however, that the award was based on
performances of a different song from the one the performance of
which is the basis for the claim involved here. Were we privy to the
arbitrator's analysis, we might legitimately assess its
persuasiveness for purposes of this proceeding. Absent that,
deference to his award would require us simply to adopt the
arbitrator's ultimate valuation of four performances of a Cannings'
song. This we cannot do.
Id. at 10.
The Panel also rejected Cannings' own analysis of the distribution
formula used by BMI to pay its members for performances on network
television broadcast stations. Cannings presented a distribution
proposal that purported to adjust for the difference between the number
of commercial television stations in the country and the number of
cable systems that carry WWOR-TV. The Panel concluded that Cannings'
[[Page 20431]]
methodology did not shed light on the market value of musical
performances on WWOR-TV as retransmitted by cable systems, because
WWOR-TV is not a network and Cannings did not offer persuasive evidence
that retransmissions of WWOR-TV are of equal value to retransmissions
of network stations. Id. at 11.
The Panel also rejected Cannings' references to his prominence in
the music industry as evidence of market value, noting that Music
Claimants presented considerable evidence to rebut such prominence. The
Panel stated that prominence in the music industry, if any, would only
have a bearing on market value if such prominence affected a cable
system's decision to carry WWOR-TV. It concluded that ``Cannings'' pre-
1991 history of four performances on WWOR in six years does not suggest
that such a consideration played a meaningful part here.'' Id. at 12.
Finally, the Panel asserted that all of Cannings' approaches are
flawed because they do not evidence a consideration of the constraints
imposed on each copyright owner's share by the fixed and finite nature
of the fund being shared. Rather, Cannings' approach is geared toward
hypothetical open market negotiations, and thus is not reflective of a
compulsory license royalty pool. Id. at 12-13.
The Panel assessed Music Claimants' assertion that Cannings is
entitled to no more than $9.99 for each of his two performances on
WWOR-TV. Music Claimants derived this value from a durational analysis
that extrapolated the value of all musical works aired on WWOR-TV
during 1991 on a per minute basis. After calculating that each minute
of music on WWOR-TV was worth $7.49, Music Claimants asserted that each
performance of ``Misery'' was worth $9.99, because it lasted one minute
and twenty seconds. The Panel, however, rejected Music Claimants'
approach:
The durational analysis is neither one that has been shown to
have been used for distributions nor is there applicable precedent
in contested proceedings for adopting such an approach. In fact,
[Music Claimants] does not endorse this analysis as appropriate for
resolving any allocation dispute not arising out of the specific
circumstances of this case, stating rather faintly that where, as
here, only two performances and a small amount in controversy are
involved, ``the Panel may use the durational analysis as the basis
for resolving [the] dispute.''
Id. at 15-16. The Panel also rejected Music Claimants' assertion that
the 1992-1994 DART distribution proceeding, Docket No. 95-1 CARP DD 92-
94, is precedent for using a durational analysis, noting that the
mathematical distribution formula used in that proceeding was
consistent with the Copyright Act's direction to base DART
distributions upon transmissions and distributions of sound recordings.
Id. at 17.
The Panel determined that the best ``simulated market'' for
determining Cannings' share of the royalties in this proceeding is ``a
market within which we have evidence that real-life transactions
occur.'' Id. at 17. The Panel asserted that the only evidence in the
record of a ``real-life'' market transaction for musical works is the
methodology used by BMI for paying its affiliated songwriters and
publishers. BMI paid a distant signal rate of $14.36 to the songwriter
and to the publisher for a featured performance on WWOR-TV in 1991. The
Panel determined the two performances of ``Misery'' to be featured
performances. BMI increased its standard base rate in the third quarter
of 1991, resulting in additional combined songwriter/publisher rate of
$3.15. The Panel concluded that Cannings was entitled to $14.36 as a
songwriter, $14.36 as a music publisher, and the additional combined
songwriter/publisher rate of $3.15, for each of the performances of
``Misery'' in 1991. The total of these two performances amounted to
$63.74, which is what Cannings would have received from BMI had he
remained a member. Id. at 19. The Panel determined that BMI's own
distribution methodology was superior to Music Claimants' durational
analysis, and rejected Music Claimants' contention that Cannings should
not have his award calculated in accordance with BMI's methodology
because he rejected it while a member of BMI. Id. at 20.
In awarding Cannings $63.74, the Panel determined that he was not
entitled to interest because interest ``has not been awarded in
previous Phase II proceedings,'' and because the Panel ``found no
supportable method to award or compute interest, nor has Cannings
presented adequate grounds for such an award.'' Id. at 21.
B. Petitions To Modify
1. Cannings
Cannings filed a petition to modify the determination of the CARP.
The Music Claimants did not file a petition to modify, but did file a
reply to Cannings' petition. In addition, BMI filed what it styled as a
``supplemental reply'' requesting that the Librarian modify a certain
statement of the Panel concerning the music durational analysis that
BMI prepared. The Register recommends that BMI's ``supplemental reply''
be stricken as improperly filed.<SUP>3</SUP>
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\3\ The appropriate manner to request modification of a CARP's
decision or, as in this case, a statement made by the Panel, is to
file a petition to modify in accordance with Sec. 251.55(a). The
purpose of replies is to allow parties to respond to assertions and
arguments made by those submitting petitions to modify. BMI's
``supplemental reply'' does not challenge an assertion or argument
raised by Cannings' petition, but rather challenges a statement made
by the Panel. BMI should, therefore, have filed a petition to
modify. Because it did not, its ``supplemental reply'' is improperly
filed.
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Cannings requests that the Panel's award of $63.74 be overturned
and that he be awarded his original claim of $2,400, plus interest. The
principal basis for his request is the circumstances surrounding the
independent arbitrator's award he received in 1993 from a dispute with
BMI over four performances of another Cannings' song, ``Reggae
Christmas,'' on WWOR-TV during the 1980's while he was still a member
of BMI. Cannings received $4,800 in that arbitration proceeding which,
according to his calculation, means that a single performance of a
Cannings work on WWOR-TV is worth a minimum of $1,200. Although
Cannings cannot point to any written determination of his BMI award
that explains the arbitrator's reasoning, he argues that the arbitrator
must have accepted in its entirety as true his evidence and methodology
for calculating the value of his performances. Cannings' methodology
consisted of multiplying $1.50, the rate he submitted that BMI assigns
to featured performances of musical works on network television, times
3000, the number of cable systems that Cannings alleged to be carrying
WWOR-TV. He apparently submitted this methodology to the independent
arbitrator in a June 3, 1993, letter. Cannings asserts that the Panel
in this proceeding ``suppressed'' the June 3, 1993, letter, even though
the Panel expressly admitted it into evidence, along with his other
submissions to the independent arbitrator.
Cannings challenges the Panel's assertion that it must formulate a
``simulated market'' in order to calculate the value of his Phase II
claim. Cannings asserts that the ``simulated market'' approach is
contrary to CARP precedent, in contravention of 17 U.S.C. 802(c),
though he offers no explanation as to how or why it is contrary, except
to note that the Phase I CARP in the 1990-1992 cable distribution
proceeding used the same approach in determining values for programming
[[Page 20432]]
categories. Cannings also challenges the Panel's statement that BMI's
distribution methodology is a potential model for determining the
simulated market. Cannings argues that in making this statement, the
Panel acknowledged that BMI's methodology did not provide the complete
picture of a simulated market, and therefore should not be used at all.
Cannings submits that the Panel should not have used BMI's
distribution methodology because the independent arbitrator did not use
it in the 1993 distribution proceeding. He states that the $4,800 he
received from the arbitrator is the only credible evidence of market
value in this proceeding. In addition, Cannings asserts that $1.50 was
not BMI's rate for a feature performance on a commercial station in
1991, though he does not state what he believes the rate to have been.
Cannings does state that the $1.50 rate includes BMI's administrative
costs and that, because he no longer is a BMI member, the rate should
be adjusted upwards. Cannings, however, does not state what the proper
rate should be.
With respect to the Panel's determination not to award Cannings
interest on his claim, Cannings asserts that 17 U.S.C. 111(d)(2)
provides that he is entitled to interest. Cannings also cites the
provision of the Copyright Office distribution order (which distributed
the Phase I monies to the Music Claimants after they notified the
Office that they had reached settlement with the other Phase I parties)
that states that as a condition of the distribution, Music Claimants
agree to return any overpaid amounts with interest. Regarding
calculation of the proper amount of interest owed, Cannings submits
that he asked the Panel to award him interest from the date of initial
investment with the U.S. Treasury of the 1991 cable funds by the
Copyright Office, and that he provided the Panel with an ``Interest
Rate Table'' obtained from the Copyright Office for each deposit of
1991 cable royalties made with the Treasury.
Finally, Cannings alleges that he was a victim of racial bias and
discrimination in this proceeding because he is black and is a pro se
litigant. He describes the chairperson of the Panel as acting
``impetuously'' toward him in the prehearing conference. No other facts
or circumstances are offered as evidence of discrimination or bias.
2. Music Claimants Reply
Music Claimants assert that the award to Cannings is proper and
clearly fits within the ``zone of reasonableness'' afforded CARP
decisions.
Music Claimants state that the Panel properly rejected reliance
upon the independent arbitration award because that private arbitration
did not set a rate for distant signal performances on WWOR, but rather
was a private contractual proceeding between BMI and Mr. Cannings
brought pursuant to Mr. Cannings' BMI affiliation agreement. Music
Claimants assert that the BMI arbitration is not recognized precedent
in CARP proceedings and that to have blindly followed it would amount
to an abdication of the Panel's responsibility to determine the correct
distribution in this proceeding.
Music Claimants assert that Cannings' methodology for calculating
the value of his two performances on WWOR-TV is fatally flawed and
discriminatory, because it would result in the value of a Cannings
performance being nearly forty times the value of an identically
situated BMI affiliate whose work was performed on WWOR-TV. Music
Claimants also state that the BMI distribution methodology used by the
Panel in this proceeding is an accurate representation of market rate,
and that it was correct for the Panel to use the distribution formula
in determining the ``simulated market'' for works in this proceeding.
With respect to interest, Music Claimants argue that the Panel
correctly refused him an interest award because Cannings failed to
present credible evidence of entitlement. The Copyright Office
``Interest Rate Table'' submitted by Cannings is interest charged to
cable operators for late compulsory license payments, not interest paid
to individual copyright claimants in Phase II proceedings.
Finally, Music Claimants state that Cannings' charges of bias and
discrimination are outrageous and unsupportable.
C. Review of the Panel's Determination
After reviewing the Panel's report and record in this proceeding,
the Register concludes that the Panel did not act arbitrarily or
contrary to the provisions of the Copyright Act in determining the
value of Cannings' Phase II cable royalty claim as $63.74.
Consequently, the Register recommends that the Librarian affirm the
$63.74 award to Cannings, and directs the Music Claimants to pay him
that amount.
1. The Value of Cannings' Claim
As summarized above, the centerpiece of Cannings' claim for $2,400
in Phase II cable royalties is the BMI arbitration proceeding involving
a total of four performances of ``Reggae Christmas'' on WWOR-TV during
the 1980's. The Panel rejected the BMI arbitration award as evidence of
the value of a Cannings performance under the section 111 compulsory
license because the BMI award was issued without explanation, was not a
CARP or Copyright Royalty Tribunal proceeding, and involved a different
musical work. The Register finds this determination of the Panel to be
neither arbitrary nor contrary to the provisions of the Copyright Act.
Private arbitration awards have no precedential weight in CARP
proceedings. See 17 U.S.C. 802(c) (only prior CARP and Copyright
Royalty Tribunal decisions, and rulings of the Librarian, have
precedential value). The BMI arbitration award, and the circumstances
surrounding it, are therefore probative in this proceeding only to the
extent that the award sheds light on the value of two performances of
``Misery'' in 1991 on WWOR-TV. The Panel was well within its discretion
to reject the BMI arbitration award as evidence, particularly where it
involved a different work, performed in different years, and was made
without any written explanation.<SUP>4</SUP>
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\4\ Cannings' assertion in his petition to modify that the
evidence he submitted to the independent arbitrator was
``suppressed'' in this proceeding is belied by the fact that the
Panel did accept Cannings' evidentiary submissions on the BMI
arbitration and addressed them in its decision. See Panel Report at
9-10.
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The Panel did not act arbitrarily or contrary to the Copyright Act
by adopting the approach of a ``simulated market'' in valuating
Cannings'' claim. The Copyright Act does not offer guidance as to how
cable compulsory license revenues are to be divided among copyright
owners. The Phase I CARP for the distribution of 1991 cable royalties
used a ``simulated market'' approach in dividing the royalties among
Phase I claimants and, contrary to Cannings' assertion, there is no
prohibition on the use of that approach in Phase II proceedings. In
fact, while not describing it as such, the Copyright Royalty Tribunal
took a decidedly marketplace value approach in making its cable Phase
II awards. See e.g., 53 FR 7132 (March 4, 1988) (1985 cable Phase II).
The Panel selected BMI's internal distribution methodology as the
best evidence of a simulated market in valuing the retransmission of
musical works by cable systems. Cannings contends that the only
evidence in the record of an actual marketplace transaction involving
his works is the BMI arbitration award. Arbitration awards are not
direct evidence of
[[Page 20433]]
marketplace value. If arbitrations are surrogates for marketplace value
at all, it is only because they become necessary where the market has
failed--i.e. the buyer and seller are unable to negotiate the
compensation paid. BMI's distribution methodology represents a
consensus approach endorsed by thousands of BMI's songwriter and music
publisher members. While there are undoubtably disgruntled BMI members
who feel, like Cannings, that the compensation paid is too low, this is
not conclusive evidence that BMI's distribution methodology is not
probative evidence of the market value of cable retransmissions of
musical works. The Panel was well within its discretion to credit BMI's
distribution methodology and adopt its approach.
With respect to Cannings' allegations of racial bias and
discrimination, Cannings has offered no evidence in support of these
contentions, and the Register cannot find any evidence in the record
suggesting bias or discriminatory action. Cannings' charge of
``impetuous'' behavior on the part of the Chairman of the Panel towards
him during the pre-hearing conference neither proves nor suggests
improper behavior, and there is no supportable reason for overturning
the decision of the Panel on these grounds. If anything, the Panel was
exceedingly flexible and accommodating in allowing Cannings to make his
case in this proceeding.
In summary, the Register determines that the Panel did not act
arbitrarily or contrary to the Copyright Act in valuing Cannings' Phase
II claim at $63.74, and recommends that the Librarian adopt this
determination.
2. Interest on Cannings' Award
Cannings requested that he be awarded interest on his claim,
calculated from deposit of the 1991 cable royalties. Music Claimants
assert that Cannings is not entitled to interest. The Panel did not
award interest because it could not find any Copyright Royalty Tribunal
precedent for doing so, and it could not find any ``supportable method
to award or compute interest.'' Panel Report at 21.
The Register determines that it was reasonable for the Panel not to
award Cannings interest on his claim. Under Tribunal precedent,
copyright owners were not entitled to a distribution of royalties, or
any interest that had accrued on those royalties, until the Tribunal
affirmatively determined their entitlement. See 50 FR 6028 (February
13, 1985) (1979-82 cable distribution) (Tribunal not ``responsible for
time value lost on an allocation which had not yet been determined'');
53 FR 7132 (March 4, 1988) (1985 Phase II cable distribution) (no
interest given on dollar award to Asociacion de Compositores y Editores
de Musica Latinoamericana). Consequently, there are no established
grounds or methodology for awarding interest. Because there is no
requirement that the Panel assess interest in this proceeding, the
Register cannot conclude that the Panel acted arbitrarily or contrary
to the Copyright Act by not awarding Cannings interest on his claim.
3. Award to Cannings
By Order dated August 3, 1995, the Copyright Office distributed the
full amount of the music category's Phase I entitlement (4.5% of the
total 1991 cable royalties) to the Music Claimants. Order in Docket No.
94-3 CARP CD 90-92). As a result, there were no funds retained to
satisfy any Phase II award against the Music Claimants' royalties.
However, the Order required reimbursement should an overpayment of
royalties occur. The Music Claimants were overpaid $63.74, the amount
of Cannings' award. The Register recommends that, in affirming the
Panel's award, the Librarian order Music Claimants to pay Cannings
$63.74 in satisfaction of his claim.
V. Order of the Librarian
Having duly considered the recommendation of the Register of
Copyrights regarding the Report of the Copyright Arbitration Royalty
Panel in the matter of the Phase II controversy for the distribution of
1991 cable royalty fees, 17 U.S.C. 111, the Librarian of Congress fully
endorses and adopts her recommendation to accept the Panel's
determination. The Librarian also dismisses the ``supplemental reply''
of BMI as untimely.
The Librarian orders that Music Claimants submit payment to James
Cannings in the amount of $63.74, no later than May 15, 1998.
Dated: April 20, 1998.
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 98-10923 Filed 4-23-98; 8:45 am]
BILLING CODE 1410-33-P
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