[Federal Register Volume 61, Number 239 (Wednesday, December 11, 1996)]
[Notices]
[Pages 65243-65245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31425]


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LIBRARY OF CONGRESS

Copyright Office
[Docket No. 96-4 CARP DPRA]


Digital Phonorecord Delivery Rate Adjustment Proceeding

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of precontroversy discovery schedule.

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SUMMARY: The Library of Congress is announcing a new precontroversy 
discovery period for determining reasonable rates and terms for digital 
transmissions that constitute a digital phonorecord delivery. The 
Library is also establishing new dates for the filing of petitions to 
convene a Copyright Arbitration Royalty Panel (CARP) and Notices of 
Intent to Participate. This action is intended to give all interested 
parties additional time to negotiate voluntary agreements.

DATES: Petitions to convene a CARP to determine the terms and rates for 
digital phonorecord deliveries must be filed by March 3, 1997. Notices 
of Intent to Participate must be filed by March 17, 1997.

ADDRESSES: Petitions to convene a CARP and Notices of Intent to 
Participate, when sent by mail, should be addressed to: Copyright 
Arbitration Royalty Panel (CARP), P.O. Box 70977, Southwest Station, 
Washington, DC 20024. If hand delivered, they should be brought to: 
Office of the General Counsel, Copyright Office, James Madison Memorial 
Building, Room LM-407, First and Independence Avenues, SE, Washington, 
DC.

FOR FURTHER INFORMATION CONTACT: William Roberts, Senior Attorney for 
Compulsory Licenses, or Tanya Sandros, Attorney Advisor, Copyright 
Arbitration Royalty Panels, P.O. Box 70977, Southwest Station, 
Washington, DC 20024. Telephone: (202) 707-8380.

SUPPLEMENTARY INFORMATION:

Background

    On November 1, 1995, Congress passed the Digital Performance Right 
in Sound Recordings Act of 1995 (``Digital Performance Act''). Public 
Law No. 104-39, 109 Stat. 336. Among other things, it confirms and 
clarifies that the scope of the compulsory license to make and 
distribute phonorecords of nondramatic musical compositions includes 
the right to distribute or authorize distribution by means of a digital 
transmission which constitutes a ``digital phonorecord delivery.'' 17 
U.S.C. 115(c)(3)(A). A ``digital phonorecord delivery'' is defined as 
each individual delivery of a phonorecord by digital transmission of a 
sound recording which results in a specifically identifiable 
reproduction by or for any transmission recipient * * *.'' 17 U.S.C. 
115(d).
    The Digital Performance Act established that the rate for all 
digital phonorecord deliveries made or authorized under a compulsory 
license on or before December 31, 1997, is the same rate in effect for 
the making and distribution of physical phonorecords. 17 U.S.C. 
115(c)(3)(A)(i). For digital phonorecord deliveries made or authorized 
after December 31, 1997, the Digital Performance Act established a 
process that may take two-steps for determining the terms and rates. 17 
U.S.C. 115(c)(3)(A)(ii). The first step in the process is a voluntary 
negotiation period initiated by the Librarian of Congress to enable 
copyright owners and users of the section 115 digital phonorecord 
delivery license to negotiate the terms and rates of the license. The 
Librarian initiated this period on July 17, 1996, and directed it to 
end on December 31, 1996. 61 FR 37213 (July 17, 1996).
    The second step of the process is the convening of a CARP to 
determine reasonable terms and rates for digital phonorecord deliveries 
for parties not subject to a negotiated agreement. In the July 17, 
1996, Federal Register notice, the Library stated that CARP proceedings 
would begin, in accordance with the rules of 37 CFR part 251, on 
January 31, 1997. 61 FR 37214. The Library also directed those parties 
not subject to a negotiated agreement to file their petitions to 
convene a CARP, as required by 17 U.S.C. 115(c)(3)(D), by January 10, 
1997, and their Notices of Intent to Participate in CARP proceedings by 
January 17, 1997. Id. In addition, the Library directed interested 
parties to comment by November 8, 1996, on the possibility of 
consolidating the CARP proceeding to determine terms and rates for 
digital phonorecord deliveries with the proceeding to adjust the 
mechanical royalty rate for the making and distributing of physical 
phonorecords. 61 FR 37215.

Petition To Vacate

    On November 8, 1996, the Library received a joint motion from the 
Recording Industry Association of America, the National Music 
Publishers' Association, Inc., and The Harry Fox Agency, Inc. 
(collectively, ``the Parties'') to vacate the scheduled dates appearing 
in the July 17, 1996, Federal Register notice for convening a CARP. The 
Parties submit that they are in continuous negotiations to reach a 
private agreement as to the terms and rates for digital phonorecord 
deliveries, and that the Library's announced schedule for CARP 
proceedings will prematurely terminate these negotiations and eliminate 
the likelihood that a private agreement will be reached. The Parties 
request an extension of the negotiation period until April 1, 1997, at 
which point they will inform the Library if they need additional time.
    In support of their request, the Parties submit that a CARP 
proceeding to set terms and rates for digital phonorecord deliveries, 
if required, need not be completed in calendar year 1997. Despite the 
fact that the current rates for digital phonorecord deliveries expire 
on December 31, 1997, the Parties submit that any rates and terms 
established through a CARP proceeding, no matter when it is completed, 
will be effective beginning January 1, 1998. 17 U.S.C. 115(c)(3)(D). As 
a result, the Parties assert that no party will be prejudiced by 
vacating the current schedule and allowing the current negotiations to 
continue until completed.
    In addition to their request to vacate the CARP schedule, the 
Parties oppose at this time the consolidation of the digital 
phonorecord delivery CARP proceeding with the CARP proceeding for 
adjusting the mechanical royalty rate for physical phonorecords. Should 
negotiations for a digital phonorecord delivery agreement fail, the 
Parties will notify the Library at that time as to their views on 
consolidation.

New Precontroversy Discovery Schedule

    The Library is announcing a new and complete precontroversy 
discovery schedule for a CARP proceeding to establish the terms and 
rates for the section 115 license for digital phonorecord deliveries 
for parties not

[[Page 65244]]

subject to a negotiated agreement. The Library is creating a new 
schedule to provide all interested parties with additional time to 
negotiate, subject to the following comments.
    As the Parties correctly observed in their joint motion, the 
Library set the original schedule for CARP proceedings based on the 
termination of the current rates for digital phonorecord deliveries on 
December 31, 1997. 61 FR 37214 (``Should negotiations fail and the 
Librarian be petitioned to convene a CARP, written direct cases would 
have to be filed by January 31, 1997, if the precontroversy period 
(three months), the arbitration proceeding (six months) and the 
Librarian's review of the CARP's decision (two months) is to conclude 
by December 31, 1997. Otherwise, there will be a lapse in time when no 
rates apply to digital phonorecord deliveries.''). The Parties submit 
that there will not be any lapse because 17 U.S.C. 115(c)(3)(D) 
provides that terms and rates determined through a CARP proceeding are 
effective on January 1, 1998, no matter when adopted. As a result, the 
Parties view a CARP proceeding as an open-ended process, in that it 
could take place in 1998, 1999, or any subsequent year with a 
retroactive application to January 1, 1998.
    The Library does not share the Parties' view that the first CARP 
proceeding to set terms and rates for digital phonorecord deliveries is 
so open-ended. Congress did intend that the parties have a sufficient 
period of time to negotiate voluntary agreements, 141 Cong. Rec. 
S11,945, S11,958 (daily ed. August 8, 1995), but there is no indication 
that the period was to be indefinite. The statute is clear that 
subsequent CARP proceedings to adjust terms and rates for digital 
phonorecord deliveries must be ``repeated and concluded * * * in each 
fifth calendar year after 1997''. 17 U.S.C. 115(c)(3)(F). The statute 
is silent as to how long the 1997 CARP proceeding is to take, but it is 
reasonable to conclude from the language of section 115(c)(3)(F) that 
Congress did not intend the initiation and conclusion of the CARP 
proceeding to take place much after the current rates expire on 
December 31, 1997, notwithstanding that new terms and rates are 
effective on January 1, 1998.
    The Library has balanced its interpretation of what Congress 
desired for the first CARP proceeding for digital phonorecord 
deliveries with the interest of promoting voluntary agreements and, is 
therefore, announcing a new schedule. The Library is doing this in no 
small part because of the representation of the Parties that a 
voluntary agreement is in the offing. However, the Parties, and any 
others who file a Notice of Intent to Participate in the CARP 
proceeding, are put on notice that this is the last time the Library 
will be able to alter the schedule for this proceeding. The schedule 
described below gives all parties almost one year to negotiate 
voluntary agreements, a decidedly longer period of time than Congress 
has established for future digital phonorecord delivery proceedings.
    The following is the procedural schedule for the digital 
phonorecord delivery CARP proceeding, including the filing deadlines 
for Notices of Intent to Participate, additional comments on the 
advisability of consolidating the digital phonorecord delivery 
proceeding with the proceeding for adjustment of the mechanical royalty 
rate for physical phonorecords, and the deadline for filing petitions 
to initiate a CARP proceeding for digital phonorecord delivery 
transmissions.

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                Action                              Deadline            
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Petitions to Initiate CARP Proceeding  March 3, 1997.                   
 to Establish Terms and Rates for                                       
 Digital Phonorecord Deliveries.                                        
Notices of Intent to Participate.....  March 17, 1997.                  
Comments on Consolidation of Digital   March 17, 1997.                  
 Phonorecord Delivery CARP Proceeding                                   
 With CARP Proceeding for Physical                                      
 Phonorecords.                                                          
Filing of Written Direct Cases.......  April 1, 1997.                   
Requests for Underlying Documents to   April 8, 1997.                   
 Written Direct Cases.                                                  
Responses to Requests for Underlying   April 14, 1997.                  
 Documents.                                                             
Completion of Document Production....  April 18, 1997.                  
Follow-Up Request for Underlying       April 23, 1997.                  
 Documents.                                                             
Responses to Follow-up Requests......  April 30, 1997.                  
Motions Related to Document            May 5, 1997.                     
 Production.                                                            
Production of Documents in Response    May 12, 1997.                    
 to Follow-Up Requests.                                                 
All Other Motions, Petitions and       May 15, 1997.                    
 Objections.                                                            
Initiate CARP........................  June 23, 1997.                   
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    The precontroversy discovery period, as specified by 37 CFR 
251.45(b), begins on April 1, 1997, 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 April 1, 1997, the first day of the 45-day 
period.
    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 April 8, 1997, and responses to those requests 
are due by April 14, 1997. Documents which are produced as a result of 
the requests must be exchanged by April 18, 1996. It is important to 
note that all initial document requests must be made by the April 8, 
1997, 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 April 8; 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 April 
23, 1997, and responses to those requests are due by April 30, 1997. 
Any documentation produced as a result of a follow-up request must be 
exchanged by May 12, 1997. 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 April 8, 1997. 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 April 23, 1997, 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

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by May 5, 1997. 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 May 15, 1997, 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 37 CFR 251.4, and 
petitions to dispense with formal hearings under Sec. 251.41(b).
    Due to the strict 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 or 
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, DC 20540. The form and 
content of all motions, petitions, objections, oppositions and replies 
filed with the Office must be in compliance with Secs. 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.

    Dated: December 6, 1996.
Marilyn J. Kretsinger,
Acting General Counsel.
[FR Doc. 96-31425 Filed 12-10-96; 8:45 am]
BILLING CODE 1410-33-P