[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Rules and Regulations]
[Pages 57935-57938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28321]



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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 93-3A]


Cable and Satellite Carrier Royalty Refunds

AGENCY: Copyright Office; Library of Congress.

ACTION: Final rule.

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SUMMARY: The Copyright Office is adopting final rules with respect to 
certain royalty refund procedures for the cable and satellite carrier 
compulsory licenses. The Office is also implementing a ``close-out'' 
procedure for royalty accounts that will permit the Register of 
Copyrights to close-out the royalty payments account for a calendar 
year four years after the close of that year, and treat any funds 
remaining in such account and any subsequent deposits that would 
otherwise be attributable to that calendar year as attributable to the 
succeeding calendar year.

EFFECTIVE DATE: December 26, 1995.

FOR FURTHER INFORMATION CONTACT: Marilyn J. Kretsinger, Acting General 
Counsel, or William Roberts, Senior Attorney for Compulsory Licenses, 
Copyright Arbitration Royalty Panel (CARP), PO Box 70977, Southwest 
Station, Washington, DC 20024. Telephone: (202) 707-8380. Telefax: 
(202) 707-8366.

SUPPLEMENTARY INFORMATION: On June 28, 1993, the Copyright Office 
published a Notice of Proposed Rulemaking (NPRM) regarding certain 
refund procedures for the cable and satellite carrier compulsory 
licenses, 17 U.S.C. 111 and 119, respectively. 58 FR 34544 (June 28, 
1993). Specifically, the Office's proposed rules involved three issues: 
(1) The appropriate date to begin the time period for requesting 
refunds; (2) the proper basis upon which a refund request may be made; 
and (3) the close-out of accounting period royalty pools after a 
specific time period.
    Existing Copyright Office regulations specify the time periods 
within which parties seeking refunds of compulsory license royalties 
must submit their requests. In the case of the cable compulsory 
license, a cable operator has 60 days from the last day of the filing 
period for the Statement of Account in which to request a refund. 37 
CFR 201.17 (j)(3). Under the satellite carrier compulsory license, the 
operator has 30 days from the last day of the filing period for the 
Statement of Account to request a refund. 37 CFR 201.11 (g)(3). These 
rules were based on refund requests being made after timely filing. In 
order to provide a refund request period for late and amended filings, 
the Office proposed in its NPRM that the 60 and 30 day periods be 
amended to run either from the applicable filing period or from the 
date of receipt at the Copyright Office of the royalty payment that is 
the subject of the request. 58 FR 34545. Copyright Office regulations 
require that a request for a refund must be ``in writing, must clearly 
identify its purpose,'' and must be received within the prescribed time 
period. 37 CFR 201.17(j)(3) and 201.11(g)(3). In practice, the Office 
has long interpreted its refund regulation to deny a request for a 
refund where there has been no clear overpayment of the statutory 
royalty. In order to confirm this practice, the NPRM proposes to amend 
the satellite carrier and cable regulations to require that refund 
requests must provide a ``clear basis'' upon which a request can be 
granted. 58 FR 34546.
    Finally, the NPRM proposed a change to the Office's longstanding 
policy of making refunds only from the calendar year account in which 
the overpayment was made. The regulation would adopt language included 
in the Audio Home Recording Act of 1992 that allows the Register of 
Copyrights, in his or her discretion, to close out the royalty payments 
account for a calendar year four years after the close of that year, 
and to ``treat any funds remaining in such account and any subsequent 
deposits that would otherwise be attributable to that calendar year as 
attributable to the succeeding calendar year.'' Id.

Comments of the Parties

    Four parties submitted comments on the NPRM: National Cable 
Television Association (NCTA); Providence Journal Company; Office of 
the Commissioner of Baseball (``Baseball'');1 and Copyright Owners 
(consisting of Program Suppliers, National Basketball Association, 
National Hockey League, the Music Claimants, the Devotional Claimants 
and National Public Radio).

    \1\ Baseball's comments were submitted after the July 28, 1993, 
closing date of the comment period, but the Copyright Office has 
nonetheless included them in this proceeding.
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Initiation of Time Period

    As to when the time period to request refunds should begin, both 
Providence Journal and the NCTA support the proposed rule change. NCTA 
comments at 2; Providence Journal comments at 4. Copyright Owners, 
however, support the rule only for amended filings. ``Copyright Owners 
suggest that the proposed language apply only to amended filings. This 
would provide predictability with respect to refund requests sought for 
original filings, while offering greater flexibility for refunds 
related to amended applications.'' Copyright Owners comments at 2. 
Copyright Owners additionally suggest that no refunds be permitted from 
a royalty year which has been closed out. Id. at 2-3. The effect of the 
Copyright Owners' proposal would be to deny a refund request period for 
any filings that are later than the sixty day period in the existing 
rule and only allow refunds for amended filings in accounting years 
which have not been closed out.

Clear Basis for Refund

    Copyright Owners are supportive of the proposed rule requiring that 
refund requests provide a ``clear basis'' for granting the refund, but 
desire a voice in any refund request that raises a policy issue. They 
urge the Office to establish procedures that would permit interested 
parties to participate in formulating the policy. They further state 
that such policy should govern both ``the specific refund request and 
any future requests asking for the same or similar relief.'' Id. at 4. 
Copyright Owners do not provide any description of the mechanics of the 
notice and comment procedure which they propose, beyond mentioning in a 
footnote that ``The Office need not institute a rulemaking proceeding 
to answer such ad hoc questions. Copyright Owners envision a more 

[[Page 57936]]
informal and limited procedure to deal with these individual 
questions.'' Id. at 4 n.3.
    NCTA opposes the requirement of a ``clear basis'' for refund, 
noting that ``the statute and Copyright Office policy are not clear in 
their application to numerous fact situations faced by cable 
operators'' and that cable operators ``generally may not be aware'' of 
existing Copyright Office policy. NCTA comments at 2. NCTA therefore 
proposes the opposite of the NPRM; a refund should be allowed unless 
there is a ``clear basis'' to deny it.

    [W]here there is ambiguity as to what the law requires or 
allows, operators should be entitled to a refund provided only that 
they make clear the interpretation of the law upon which they rely. 
So long as this interpretation is not clearly at odds with the law, 
the refund request should be granted. Id. at 3.

Close-Out of Accounting Period

    Only the Copyright Owners and Baseball offered an opinion as to the 
third issue addressed in the NPRM: creation of a close-out procedure 
for accounting periods. While Copyright Owners agreed that close-out 
was preferable to the current policy of keeping open all previous year 
royalty funds, they offered several changes to the proposed rule. 
First, they suggested that the close-out period be changed from four 
years to seven years:

    Past experience suggests that a four-year closeout period may be 
too short in cases where large amounts of late payments are 
received. For example, many Gross Receipts Adjustment Schedule 
(``GRAS'') payments related to 1986 and 1987-1 were not received 
until 1989 and 1990, which was three or four years after the 
original deadlines. Had the 1986 and/or 1987 royalty funds been 
closed out after four years, those GRAS payments might have been 
transferred to a different year's fund. That would have resulted in 
the distribution of those royalties to a different group of 
individual copyright owners from the copyright owners who received 
distribution of the timely 1986 and 1987 royalty payments.

Copyright Owners Comments at 5.
    Second, Copyright Owners propose that the decision to close-out an 
accounting period not be left to the discretion of the Register of 
Copyrights, but that it be done as a matter of course unless ``the 
Register, in his or her discretion, decid[es] that a closeout is 
inappropriate.'' Id. at 6. Copyright Owners believe this change will 
add certainty to the close-out process. Id.
    Baseball proposes that the close-out of an accounting period be 
tied to the date of final distribution of a calendar year's royalties. 
``This would eliminate the administrative costs associated with 
multiple distributions which frequently contain (particularly for the 
non-MPAA copyright owners) relatively small amounts.'' Baseball 
comments at 1. Baseball does support the NPRM's proposal to give the 
Register discretion to close an accounting year. Id. at 2.

Decision of the Copyright Office

    The Copyright Office has closely examined and reviewed the comments 
submitted in this proceeding and, pursuant to its rulemaking authority, 
formally adopts the regulations described in the NPRM without change. 
For the reasons described below, the Copyright Office concludes that 
the proposed rule changes are reasonable and administratively 
efficient.

1. Refund Requests

    The Office is, therefore, amending 37 CFR 201.17(j)(3)(i), 
applicable to the cable license, and 37 CFR 201.11(g)(3)(i), applicable 
to the satellite carrier license, to begin the 60 and 30 day time 
periods, respectively, within which to request a refund from the ``date 
of receipt at the Copyright Office of the royalty payment that is the 
subject of the request.'' This rule change maintains the same time 
period (30 and 60 days) within which to request a refund, which the 
Office has found to be appropriate and reasonable, see NPRM at 58 FR 
34544, but allows cable and satellite operators who submit both late 
and amended payments to request a refund in accordance with the same 
time period which applies to the initial statement of account filings. 
As Providence Journal noted, errors are just as likely to occur in 
amended and late filings as they are with initial filings. 
Consequently, denying a refund period for amended and late filings 
would result in an unwarranted hardship to operators. Providence 
Journal comments at 3.
    Copyright Owners suggested that the proposed refund request rule 
not apply to any late filings and payments, and that no refunds at all, 
either requested or made as a result of Office examination, be 
permitted from an accounting year fund which had been closed-out by the 
Register of Copyrights. Copyright Owners comments at 2. The Copyright 
Office is not adopting either suggestion. With respect to an effective 
denial of refund requests for most late filings and payments, the 
Office finds that such a rule would be unnecessarily punitive. The 
interest regulations applicable to both cable operators and satellite 
carriers already compensate copyright owners for the lost time value of 
royalties submitted after the close of a royalty filing deadline. 37 
CFR 201.11(h) and 201.17(i)(2). Copyright Owners fail to present any 
arguments or evidence as to why further compensation is justified by 
denying refund requests for late filings and payments.
    Nor do they offer any valid reason for denying refunds from closed-
out accounting periods. Refunds can still be made from the succeeding 
accounting years which remain open. Where the potential for large 
refund requests remains high, as in 1987 and 1988 when satellite 
carriers submitted royalties under the cable compulsory license, the 
Register may keep those years open.

2. Clear Basis for Refunds

    Both Secs. 201.17(j)(3) and 201.11(g)(3) of the Copyright Office 
regulations establish the technical requirements for a refund request 
for the cable and satellite carrier compulsory licenses. The adopted 
amendments require cable and satellite carrier operators to provide a 
``clear basis'' upon which a refund request can be granted. As the 
Office stated in the NPRM, these amendments confirm the longstanding 
administrative practice of denying a refund request where there has 
been no clear overpayment of the statutory royalty. 58 FR 34545.
    NCTA objected to the ``clear basis'' requirement on the grounds 
that ``Copyright Office policy on certain issues has developed on an 
informal basis, through correspondence or development of informal 
policies, and cable operators may not be aware of these 
interpretations.'' The Office finds this objection to be unpersuasive. 
The applicable law and policy which govern a refund request is freely 
and readily available from the Copyright Office. Statutory 
interpretation developed through rulemakings involving sections 111 and 
119 of the Copyright Act are published in the Federal Register; policy 
decisions and interpretations made in response to specific refund 
requests are available to the public through the letter rulings of the 
General Counsel on file in the public reading room of the Licensing 
Division of the Copyright Office. Furthermore, access to the 
information contained in those letters may be obtained by contacting 
the Licensing Division, and inquiries may be made concerning Office 
administrative practice and policy by contacting directly either the 
Licensing Division or the General Counsel's Office. The information 
necessary for a cable or satellite operator to provide a ``clear 
basis'' for its refund request is therefore readily available, and lack 
of knowledge cannot therefore be a valid objection to the rule 
amendments. 

[[Page 57937]]

    The Copyright Office is not adopting the Copyright Owners' 
suggestion of permitting interested parties to play an active role in 
deciding refund requests. Congress specifically entrusted the Copyright 
Office, through its rulemaking authority, to interpret and apply the 
provisions of the compulsory license.2 Additionally, the practical 
and legal implications of the Copyright Owner's proposed participation 
are in doubt. The Office processes an average of over 300 refunds a 
year, and the speed and efficiency of responding to these requests 
would be substantially impaired if the Office were required to solicit 
comment on each request. Furthermore, should a refund request involve 
sufficient policy issues to trigger a notice and comment procedure, it 
is seriously questionable whether the ``informal and limited 
procedure'' proposed by the Copyright Owners would satisfy the 
Administrative Procedure Act. The Copyright Owners did not provide any 
supporting evidence or precedent for their recommendation. If a 
procedure involves a significant policy shift or interpretation, the 
Office already provides an opportunity for notice and comment as it did 
in the instant case.

    \2\ See 17 U.S.C. 702; see also Cablevision Systems Development 
Corp. v. Motion Picture Association of America, Inc., 836 F.2d 599, 
610 (D.C. Cir.), cert. denied, 487 U.S. 1235 (1988)(``We think 
Congress saw a need for continuing interpretation of section 111 and 
thereby gave the Copyright Office statutory authority to fill that 
role.'').
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3. Close-Out of Royalty Funds

    The Copyright Office is adopting the close-out of royalty funds 
regulation for the satellite carrier and cable compulsory licenses. The 
regulation is based on the statutory language of section 1005 of the 
Audio Home Recording Act of 1992, Public Law No. 102-563, that permits 
the Register to close-out the royalty payments account for a calendar 
year four years after the close of that year, and to apply remaining 
funds and subsequent deposits from that year to the succeeding calendar 
year.
    Copyright Owners proposed a longer period of seven years to close-
out so as to account for circumstances, such as the 1986-87 GRAS 
payments, supra, where large amounts of royalties may be submitted to 
the Office more than four years from their original due date. Copyright 
Owners comments at 5. Baseball proposed that close-out be tied to the 
date of final distribution of a calendar year's royalties. Baseball 
comments at 1. The Copyright Office does not believe a longer close-out 
period of seven years is necessary, since the Register has discretion 
in deciding whether to close a particular calendar year, and concludes 
that a tie-in to distribution is too unpredictable, since distributions 
do not occur at regular intervals.
    In the situation of the GRAS payments described by Copyright 
Owners, the Register would not have closed the 1986-87 calendar years 
because of the obvious uncertainties surrounding the royalty fund for 
those years. While the Register will not be able to predict all 
possible effects on a royalty fund with absolute certainty, four years 
is adequate time to identify when a difficulty may exist. It is, 
therefore, unlikely that large sums of royalties will be submitted to 
the Copyright Office after the Register has closed-out an accounting 
period. The opposite is true of the approach advocated by Baseball. The 
time period necessary to reach a final distribution for a given royalty 
calendar year is highly unpredictable. Full settlement may result in 
quick distribution; however, it is impossible to predict a certain date 
for a final determination of distribution when there is a controversy. 
In the years where a full settlement is reached, a final distribution 
may occur so quickly as to limit the Register's ability to make a well-
informed decision as to whether the royalty calendar year should be 
closed-out. The four year period proposed in the NPRM provides the 
uniformity, predictability and administrative efficiency not present in 
Baseball's proposal.
    The Office is also not adopting Copyright Owner's suggestion that 
calendar years be closed-out automatically after four years unless the 
Register exercises discretion to keep them open. The presumption that 
an accounting year remains open incorporates current policy, which 
leaves all years open, and allows the Register to close-out only those 
years where changes to the royalty pool remain unlikely. Copyright 
owners would not be harmed if only some accounting years were closed-
out, and would gain the benefit of distribution of remaining funds from 
those years. The Register's flexibility and ability to deal with 
situations like the 1986-87 GRAS payments is also better served by 
requiring an affirmative act to close an accounting year, rather than 
an affirmative act to keep it open.

List of Subjects in 37 CFR Part 201

    Cable systems; Cable compulsory license; Satellite carrier 
statutory license; Satellite carriers.

Amended Regulations

    In consideration of the foregoing, part 201 of 37 CFR ch. II is 
amended to read as follows.

PART 201--GENERAL PROVISIONS

    1. The authority citation for part 201 is revised to read as 
follows:

    Authority: 17 U.S.C. 702, 201.6 is also issued under 17 U.S.C. 
408, 409 and 410; Sec. 201.11 is also issued under 17 U.S.C. 119; 
Sec. 201.16 is also issued under 17 U.S.C. 116; Sec. 201.17 is also 
issued under 17 U.S.C. 111; Sec. 201.19 is also issued under 17 
U.S.C. 115; and Sec. 201.24 is also issued under Pub. L. 101-650; 
104 Stat. 5089, 5134;

    2. In Sec. 201.11, paragraph (c)(4) is added and the first sentence 
of paragraph (g)(3)(i) and the introductory text of paragraph 
(g)(3)(iii) are revised to read as follows:


Sec. 201.11  Satellite carrier statement of account covering statutory 
license for secondary transmissions for private home viewing.

* * * * *
    (c) * * *
    (4) In the Register's discretion, four years after the close of any 
calendar year, the Register may close out the royalty payments account 
for that calendar year, and may treat any funds remaining in such 
account and any subsequent deposits that would otherwise be 
attributable to that calendar year as attributable to the succeeding 
calendar year.
* * * * *
    (g) * * *
    (3) * * *
    (i) The request must be in writing, must clearly identify its 
purpose, and, in the case of a request for a refund, must be received 
in the Copyright Office before the expiration of 30 days from the last 
day of the applicable Statement of Account filing period, or before the 
expiration of 30 days from the date of receipt at the Copyright Office 
of the royalty payment that is the subject of the request, whichever 
time period is longer. * * *
* * * * *
    (iii) The request must contain a clear statement of the facts on 
which it is based and provide a clear basis on which a refund may be 
granted, in accordance with the following procedures:
* * * * *
    3. In Sec. 201.17, paragraph (c)(4) is added and the first sentence 
of paragraph (j)(3)(i) and the introductory text of paragraph 
(j)(3)(iii) are revised to read as follows: 

[[Page 57938]]



Sec. 201.17  Statements of account covering compulsory licenses for 
secondary transmissions by cable systems.

* * * * *
    (c) * * *
    (4) In the Register's discretion, four years after the close of any 
calendar year, the Register may, close out the royalty payments account 
for that calendar year, and may treat any funds remaining in such 
account and any subsequent deposits that would otherwise be 
attributable to that calendar year as attributable to the succeeding 
calendar year.
* * * * *
    (j) * * *
    (3) * * *
    (i) The request must be in writing, must clearly identify its 
purpose, and, in the case of a request for a refund, must be received 
in the Copyright Office before the expiration of 60 days from the last 
day of the applicable Statement of Account filing period, or before the 
expiration of 60 days from the date of receipt at the Copyright Office 
of the royalty payment that is the subject of the request, whichever 
time period is longer. * * *
* * * * *
    (iii) The request must contain a clear statement of the facts on 
which it is based and provide a clear basis on which a refund may be 
granted, in accordance with the following procedures:
* * * * *
Marybeth Peters,
Register of Copyrights.
    Approved by:

James H. Billington,
The Librarian of Congress.
[FR Doc. 95-28321 Filed 11-22-95; 8:45 am]
BILLING CODE 1410-31-P