[Federal Register Volume 60, Number 231 (Friday, December 1, 1995)]
[Rules and Regulations]
[Pages 61657-61660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29147]



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LIBRARY OF CONGRESS
37 CFR Part 259

[Docket No. 94-3 CARP]


Representation for Claiming DART Royalties in Musical Works

AGENCY: Copyright Office, Library of Congress.

ACTION: Amendment of regulation and policy statement.

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SUMMARY: The Copyright Office currently requires a performing rights 
organization to have separate, specific and written authorization from 
its members or affiliates in order to file a claim on behalf of its 
members for DART royalties in the Musical Works Fund. The performing 
rights organization had sought reconsideration of this rule. This 
document establishes that the Office retains this practice, but amends 
the rule and applies the requirement to all organizations and 
associations that act as common agents for the purposes of filing 
claims, negotiating settlements and receiving digital royalties on 
behalf of their members or affiliates. Under this amended rule, 
organizations and associations that act only as common agents must 
specify in their claim how the parties entitled to receive royalties, 
i.e., their members or affiliates, fit the definition of interested 
copyright party under the Act.

EFFECTIVE DATE: January 2, 1996.

FOR FURTHER INFORMATION CONTACT: Marilyn J. Kretsinger, Acting General 
Counsel, or Tanya Sandros, CARP Specialist. Telephone: (202) 707-8380. 
Telefax: (202) 707-8366.

SUPPLEMENTARY INFORMATION:

I. Background

    On October 28, 1992, Congress enacted the Audio Home Recording Act 
(AHRA). This Act requires manufacturers and importers to pay royalties 
on digital audio recording devices and media (DART) that are 
distributed in the United States. The royalties are deposited with the 
Copyright Office and distributed in one of two ways. Parties may 
negotiate settlements among themselves; or if they cannot settle, a 
Copyright Arbitration Royalty Panel (CARP), convened by the Copyright 
Office (hereafter ``Office''), and the Librarian of Congress, allocates 
royalty payments among the joint and individual claimants.
    To qualify for DART royalties, interested copyright parties 
entitled to receive funds under section 1006 must file a claim in 
January or February of each calendar year for royalties collected 
during the preceding year. 17 U.S.C. 1006(a)(2), 1007(a)(1). The DART 
royalties are divided into two funds--the Sound Recording Fund, which 
accounts for 66\2/3\% of the royalties, and the Musical Works Fund, 
which accounts for the remaining 33\1/3\% of the royalties.
    The Copyright Royalty Tribunal (CRT) had the original authority to 
promulgate the rules and regulations to administer the AHRA. Shortly 
after the October 28, 1992, enactment of the AHRA, the CRT faced the 
issue of defining the extent of proof required of a performing rights 
organization to demonstrate that it had the proper authorization to 
represent its members or affiliates before the CRT in a DART 
proceeding. The CRT invited public comment in an Advance Notice of 
Rulemaking. 57 FR 54542 (November 19, 1992). On January 29, 1993, the 
CRT adopted a rebuttable presumption that performing rights 
organizations represented their respective members or affiliates in 
royalty proceedings for the 1992 fund. 58 FR 6441, 6444 (January 29, 
1993). The interim regulations also directed the parties to file a 
report, by June 1, 1993, on this issue. Subsequently, on October 18, 
1993, the CRT published final regulations which required performing 
rights organizations to obtain separate, specific, written 
authorization from its members. 58 FR 53822 (October 18, 1993); 37 CFR 
259.2 (formerly 37 CFR 311.2).
    On November 3, 1993, the American Society of Composers, Authors, 
and Publishers (ASCAP), Broadcast Music, Inc. (BMI) and SESAC, Inc. 
(SESAC) filed with the CRT a petition to reopen for reconsideration the 
rulemaking proceeding that resulted in the CRT's final rule. On 
December 3, 1993, the CRT officially held the petition in abeyance. 
Order, dated December 3, 1993, In the Matter of Digital Recording 
Technology Act; Implementation, CRT Docket No. 92-3 DART.
    Shortly thereafter, on December 17, 1993, the President signed the 
Copyright Royalty Tribunal Reform Act of 1993, Public Law 103-198, 107 
Stat. 2304, thereby eliminating the CRT and replacing it with a system 
of ad hoc Copyright Arbitration Royalty Panels administered by the 
Librarian of Congress and the Copyright Office. The new Act directed 
the Librarian of Congress to convene CARPs to adjust rates and 
distribute royalties, see 17 U.S.C. 111, 115, 116, 118, 119 and Chapter 
10, and to immediately adopt the rules and regulations of the former 
CRT. In response to these directions, the Copyright Office issued a 
notice adopting the full text of the rules and regulations of the 
former CRT on an 

[[Page 61658]]
interim basis. 58 FR 67690 (December 22, 1993).
    On January 18, 1994, the Copyright Office published proposed 
regulations that revised the adopted CRT rules and adapted them for the 
administration of the new ad hoc arbitration panels. 59 FR 2550 
(January 18, 1994). At this time, the Office concluded that it was not 
a successor agency of the CRT, and would therefore, not continue any 
matter before the CRT at the time the CRT Reform Act became law. 
Instead, parties who had issues pending before the Tribunal would need 
to initiate new action under the rules and regulations governing the 
administration of the CARPs.
    On February 15, 1994, the performing rights organizations filed a 
comment with the Copyright Office seeking reconsideration of the rule, 
now adopted by the Copyright Office, that required separate, specific, 
written authorization from the members of the performing rights 
societies. In the Matter of Copyright Arbitration Royalty Panels; Rules 
and Regulations, Copyright Office Docket No. RM 94-1. Essentially, in 
response to our Notice of Proposed Rulemaking, the performing rights 
organizations asked that their comments either serve to reopen the 
CRT's former rulemaking proceeding or that the Office consider the 
matter anew. PRO Comment at 4. The Gospel Music Coalition and Copyright 
Management, Inc. filed a joint reply on February 23, 1994, to the 
performing rights organizations' comment and opposed reconsideration of 
the issue. Id.
    On May 9, 1994, the Copyright Office issued interim regulations 
which noted that the Office considered the performing rights 
organizations' comment as a petition for reconsideration of a pending 
CRT matter and would consider the petition anew in a separate 
rulemaking. 59 FR 23964, 23966 (May 9, 1994). Subsequently, the Office 
initiated a review of the rule with a request for comments on the issue 
of whether performing rights organizations need specific, separate, 
written authorization to represent their members' or affiliates' 
interest in the collection and distribution of DART royalties. 59 FR 
63043 (December 7, 1994).

II. The Parties

    The American Society of Composers, Authors and Publishers 
(``ASCAP''), Broadcast Music, Inc. (``BMI''), and SESAC, Inc. (SESAC) 
(collectively, ``Performing Rights Organizations or PRO'') filed joint 
comments advocating the adoption of a rebuttable presumption of agency 
between the Performing Rights Organizations and their members or 
affiliates for the collection and distribution of royalties.
    The Gospel Music Coalition (``GMC'') and James Cannings filed 
comments with the former CRT supporting the present requirement for 
specific, separate, written authorization. In response to the notice 
for comments in this proceeding, GMC and Mr. Cannings requested that 
these former comments be incorporated into the present review.

III. Discussion

    Section 1007(a)(1) of the Copyright Code defines the class of 
eligible claimants as ``every interested copyright party seeking to 
receive royalty payments to which such party is entitled under section 
1006.''
    Section 1006 describes the entitlement to royalties as belonging to 
those interested copyright parties whose works were embodied in a 
digital or analog musical recording, and distributed, or disseminated 
to the public in transmissions.
    Therefore, a performing rights society is not eligible by itself to 
file claims because it does not own the works described in section 
1006. However, it could be eligible to file claims if it were 
authorized by someone who does own a work described in section 1006.
    This was explained in the House Report:

    Section 1001(7)(D) refers to * * * (4) any association or 
organization that is `engaged in licensing rights in musical works 
to music users on behalf of writers and publishers,' i.e., 
performing rights societies such as ASCAP and BMI. These various 
associations and organizations are not themselves directly entitled 
to receive royalties; only those individuals or organizations 
specified in section 1006(a) receive royalties directly. 
Nevertheless, these associations and organizations may be designated 
as common agents to negotiate and receive payment for royalties on 
behalf of others pursuant to section 1007(a)(2) * * *. For example, 
with respect to the 50 percent of the Musical Works Fund allocated 
to writers, writers eligible to file a claim can negotiate among 
themselves regarding who should receive how much of the 50 percent, 
or could appoint common agents, for example, one of the interested 
copyright parties defined in section 1007(7)(D), to negotiate and 
file claims on their behalf (emphasis ours). H.R. Rep. No. 873, 
102nd Cong., 2d Sess. 23 (1992).

    The issue, therefore, is, not whether a performing rights society 
can file claims by itself. Clearly, it can not. The issue is whether it 
can file claims on behalf of its members or affiliates based on a 
rebuttable assumption that its members or affiliates have granted it 
the authority to do so, or whether a specific, separate, written 
authorization to represent a member or affiliate is required.
    Previously rulings requiring a performing rights society to obtain 
specific, separate, written authorizations were based on the fact a 
performing rights society represent its members or affiliates for the 
public performing right only, and not for any other right. Because the 
DART royalty was intended as a compensation for the reproduction right 
(i.e., home taping), the former Copyright Royalty Tribunal could not 
conceptually accept the performing rights societies' assertion that 
they had a right to represent their members or affiliates based on a 
rebuttable assumption.
    However, throughout the rulemaking proceedings for the regulations 
governing the administration of the AHRA, the performing rights 
organizations have argued strenuously for a rebuttable presumption of 
agency which would allow them to file for royalties on behalf of their 
members or affiliates without specific authorization. The past three 
filing periods, the former CRT and the Copyright Office granted the 
presumption for the filing years in question to these organizations for 
two fundamental reasons: (1) To avoid disenfranchising an unwary 
claimant, and (2) to grant sufficient time to the performing rights 
organizations to complete the enormous task of contacting their members 
and obtaining the necessary authorization.
    The Office shares the PROs concern over disenfranchising an unwary 
claimant, but believes the strength of this argument has steadily 
diminished over time. Similarly, the Office believes the performing 
rights organizations have had sufficient time to obtain the proper 
authorization. In fact, the performing rights organizations have had 
over two years to meet the requirements of the disputed rule, since it 
went into effect on October 18, 1993. 58 FR 53822. Therefore, the 
Office no longer finds these reasons, which are still put forth by the 
performing rights organizations, see PRO Comment 1 at 4, compelling; 
and now seeks to equalize the filing process with respect to all 
organizations and associations that file on behalf of their members.
    In support of their position, the performing rights organizations 
have argued that their members do not distinguish their right to 
recover royalties under DART from their right to recover royalties 
under the compulsory licenses, especially in light of the historical 
practice where a performing rights organization represented its 
members' interests before the former CRT in cable, satellite, and 
jukebox 

[[Page 61659]]
distribution proceedings and noncommercial educational broadcasting 
proceedings. Id.
    While this observation may be valid, the Office notes that, 
historically, these organizations have represented their members' only 
for their public performance rights in the designated proceedings, and 
not the reproduction right addressed under DART.
    The Office does not find that any misunderstanding on the part of a 
member as to the performing rights organization role vis-a-vis the 
former CRT, and now the Copyright Office, can be a valid basis for a 
rebuttable presumption. Furthermore, the Office believes the performing 
rights societies have had sufficient time to correct any 
misunderstanding.
    Alternatively, the PRO argue that the regulation imposes a penalty 
on their members because the performing rights societies use broad, 
generalized agency terms in place of specific language that directly 
addresses the right to collect royalties under AHRA. Id. To that 
extent, Sec. 259.2(c)(2) which we are adopting here does permit general 
agency terms to be sufficient if a court with the authority to 
interpret a PRO contract rules that the terms in question do extend to 
the filing of claims for DART royalties.
    Under the regulation which requires separate, written and specific 
authorization, the Office provides an exception. The exception allows 
the membership or affiliation agreement to authorize the performing 
rights organization to represent its members before the Copyright 
Office or the Copyright Arbitration Royalty Panel in royalty filing and 
fee distribution proceedings, and pointedly does not require the 
agreement to articulate which exclusive right under the Copyright Act 
of 1976 the organization represents. 37 CFR 259.2(c)(1).
    This exception supports an earlier argument raised by Mr. James 
Cannings, and incorporated by reference in the present proceeding, 
which asserted that the standard agreements between performing rights 
societies and their members did not grant a society an automatic right 
to represent its members before the Tribunal. See Cannings comment to 
Interim Regulations, 58 FR 6441 (January 29, 1993). While the Office 
cannot interpret the terms of the membership contracts, the Office will 
accept express statements in a membership agreement which authorize the 
organization to represent a member before the Copyright Office or a 
CARP as an appropriate grant of authority to the performing rights 
society to act on behalf of the signatory.
    Another earlier argument raised by GMC in support of the present 
regulation concerned the confusion arising from duplicative and 
overlapping claims. GMC comment and reply comment to NPRM, 57 FR 54542, 
(November 18, 1992). The Office finds this argument moot under the 
present regulations, since it requires all joint claimants to file a 
list of all individual claimants to the joint claim. This requirement 
allows the parties to spot overlapping claims quickly and to resolve 
the issue among themselves.
    Additionally, the Gospel Music Coalition has argued on several 
occasions that the rebuttable presumption allows the performing rights 
societies to file on behalf of all its members, whether entitled or not 
under the Act, thereby inflating the magnitude of their initial claim. 
See GMC comment and reply comment to NPRM, 57 FR 54542 (November 18, 
1992); and GMC comment to Interim Regulations, 58 FR 6441 (January 29, 
1993). The Office concurs and acknowledges the fact that to allow the 
performing rights organizations to avail themselves continually of the 
rebuttable presumption grants the performing rights societies a 
preferential position in the filing process.
    The PRO state a corollary to this argument and assert that failure 
to grant the rebuttable presumption will create a windfall for the 
other claimants at the expense of unsuspecting, disenfranchised 
claimants. The Office recognizes that both positions depict potential 
outcomes under different final rules, but neither argument addresses 
the main concerns underpinning the current rule; namely, the language 
and intent of the Act.
    On another front, the PRO stress that the adoption of a permanent 
rebuttable inference of agency will not impair the rights of 
individuals to file their own claim, or join their claims together. See 
PRO Comment at 7. While the Office agrees with this statement, the 
Office cannot reconcile the use of the inference with the plain 
language of the Act and its intent as depicted in the underlying 
legislative history. Clearly, the Act contemplated a process where an 
individual takes the initiative to file on his or her own behalf, or 
expressly authorizes a common agent to act on his or her behalf.1

    \1\ Performing rights organizations, which are interested 
copyright parties under the Act pursuant to 17 U.S.C. 1001(7)(D), 
are never mentioned in section 1006, much less granted agency status 
for purposes of filing claims for their members. Additional support 
for this interpretation is found in 17 U.S.C. 1007(a)(2) which 
allows interested copyright parties specified in section 1006(b) to 
designate a common agent, including any organization described in 
section 1001(7)(D), to negotiate or receive payment on their behalf.
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    The Office does not refute the Performing Rights Organizations' 
assertion that Congress recognized a licensing association or 
organization's status as an interested copyright party. But recognition 
of this fact still does not provide adequate grounds for allowing a 
performing rights organization to assert a rebuttal inference of agency 
when the statute clearly denies it a right to file a claim or negotiate 
on behalf of its members without an express grant of authority.
    In fact, Congress made no presumptions about the agency status of 
any organization or association which (1) represents parties entitled 
to royalties under AHRA, or (2) engages in licensing rights in musical 
works to music users on behalf of writers and publishers, i.e., an 
interested copyright party under 17 U.S.C. 1001(7)(D). As GMC pointed 
out, the language in the Act and the legislative history merely permits 
the performing rights organizations to act as common agents, if so 
designated. See discussion of GMC comment and reply to NPRM, 57 FR 
54542, (November 18, 1992). The Copyright Office agrees with this 
interpretation and will not open a door which Congress expressly left 
closed.
    For all the reasons stated above, the Copyright Office affirms the 
original regulation requiring separate, specific and written 
authorization and applies the rule to all organizations and 
associations acting as common agents, and thereby declines to grant a 
permanent, rebuttable inference of agency to the performing rights 
organizations.

IV. Clarification of a Filing Requirement

    The Copyright Office further notes that organizations and 
associations that are interested copyright parties pursuant to 17 
U.S.C. 1001(7)(D) are not entitled to file claims on their own behalf 
unless the organization or association is also an interested copyright 
party as defined under 17 U.S.C. 1001(7)(A), (B) or (C). These 
organizations and associations, however, may act as common agents on 
behalf of their members or affiliates, if so authorized. But, common 
agents, which are also interested copyright parties under the Act, 
cannot satisfy the requirement under 37 CFR 259.3(a)(3), to state ``how 
the claimant fits within the definition of interested copyright party 
pursuant to 17 U.S.C. 1001(7)'' by stating that the common agent is an 
interested copyright party pursuant to 

[[Page 61660]]
17 U.S.C. 1001(7)(D). Rather, the common agent must state how its 
members or affiliates, who are the actual claimants, fit into the 
definition of interested copyright party under 17 U.S.C. 1001(7)(A), 
(B) or (C) in order to satisfy this filing requirement.
    Additionally, the Copyright Office requires only a concise 
statement of the authorization for the filing of the joint claim. See 
37 CFR 259.3(d). Copies of the separate, specific and written 
authorizations should not be filed with the Office.

List of Subjects in 37 CFR Part 259

    Claims, Copyright, Recordings.

PART 259--FILING OF CLAIMS TO DIGITAL AUDIO RECORDING DEVICES AND 
MEDIA ROYALTY PAYMENTS

    1. The authority citation for part 259 continues to read as 
follows:

    Authority: 17 U.S.C. 1007(a)(1).

    2. Sec. 259.3 is revised to read as follows:


Sec. 259.2  Time of filing.

    (a) General. During January and February of each succeeding year, 
every interested copyright party claiming to be entitled to digital 
audio recording devices and media royalty payments made for quarterly 
periods ending during the previous calendar year shall file a claim 
with the Copyright Office. Claimants may file claims jointly or as a 
single claim.
    (b) Consequences of an untimely filing. No royalty payments for the 
previous calendar year shall be distributed to any interested copyright 
party who has not filed a claim to such royalty payments during January 
or February of the following calendar year.
    (c) Authorization. Any organization or association, acting as a 
common agent, shall be required to obtain from its members or 
affiliates separate, specific, and written authorization, signed by 
members, affiliates, or their representatives, to file claims to the 
Musical Works Fund or the Sound Recording Fund, apart from their 
standard agreements, for purposes of royalties filing and fee 
distribution. Such written authorization, however, will not be required 
in cases where either:
    (1) The agreement between the organization or association and its 
members or affiliates specifically authorizes such entity to represent 
its members or affiliates before the Copyright Office and/or the 
Copyright Arbitration Royalty Panels in royalty filing and fee 
distribution proceedings; or
    (2) The agreement between the organization or association and its 
members or affiliates, as specified in a court order issued by a court 
with authority to interpret the terms of the contract, authorizes such 
entity to represent its members or affiliates before the Copyright 
Office and/or Copyright Arbitration Royalty Panels in royalty filing 
and fee distribution proceedings.

    Dated: November 24, 1995.
Marilyn J. Kretsinger,
Acting General Counsel.
    Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 95-29147 Filed 11-30-95; 8:45 am]
BILLING CODE 1410-33-P