[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Proposed Rules]
[Pages 71852-71854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27970]



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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Chapter III

[Docket No. 19-CRB-0014-RM]


Notice of Inquiry Regarding Categorization of Claims for Cable or 
Satellite Royalty Funds and Treatment of Ineligible Claims

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Notice of inquiry.

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SUMMARY: The Copyright Royalty Judges (Judges) publish a notice of 
inquiry regarding categorization of claims for cable or satellite 
royalty funds and treatment of royalties associated with invalid 
claims.

DATES: Comments are due no later than January 29, 2020.

ADDRESSES: You may submit comments and proposals, identified by docket 
number 19-CRB-0014-RM, by any of the following methods:
    CRB's electronic filing application: Submit comments and proposals 
online in eCRB at https://app.crb.gov/.
    U.S. mail: Copyright Royalty Board, P.O. Box 70977, Washington, DC 
20024-0977; or
    Overnight service (only USPS Express Mail is acceptable): Copyright 
Royalty Board, P.O. Box 70977, Washington, DC 20024-0977; or
    Commercial courier: Address package to: Copyright Royalty Board, 
Library of Congress, James Madison Memorial Building, LM-403, 101 
Independence Avenue SE, Washington, DC 20559-6000. Deliver to: 
Congressional Courier Acceptance Site, 2nd Street NE and D Street NE, 
Washington, DC; or
    Hand delivery: Library of Congress, James Madison Memorial 
Building, LM-401, 101 Independence Avenue SE, Washington, DC 20559-
6000.
    Instructions: Unless submitting online, commenters must submit an 
original, two paper copies, and an electronic version on a CD. All 
submissions must include a reference to the CRB and this docket number. 
All submissions will be posted without change to eCRB at https://app.crb.gov/ including any personal information provided.
    Docket: For access to the docket to read submitted background 
documents or comments, go to eCRB, the Copyright Royalty Board's 
electronic filing and case management system, at https://app.crb.gov/, 
and search for docket number 19-CRB-0014-RM.

FOR FURTHER INFORMATION CONTACT: Anita Blaine, CRB Program Specialist, 
by telephone at (202) 707-7658 or email at [email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    Each year cable systems and satellite carriers submit royalties to 
the Copyright Office under the sections 111 and 119 statutory licenses 
for the retransmission to their subscribers of over-the-air television 
broadcast signals. 17 U.S.C. 111 and 119. These royalties are, in turn, 
distributed in one of two ways to copyright owners whose works were 
included in a retransmission of an over-the-air television broadcast 
signal and who timely filed a claim for royalties with the Copyright 
Royalty Board. Either the copyright owners may negotiate the terms of a 
settlement as to the division of the royalty funds or the Judges may 
conduct a proceeding to determine the distribution of the royalties 
that remain in controversy. See 17 U.S.C. Chapter 8. Eligibility to 
receive copyright royalties paid by cable systems and satellite 
carriers is contingent upon the submission of a properly filed claim. 
See 17 U.S.C. 111 and 119.
    In 1980, the Copyright Royalty Tribunal (CRT), a predecessor of the 
Judges, ruled that cable distribution proceedings would be conducted in 
two phases, determining in Phase I the allocation of cable royalties to 
specific groups (Phase I/Allocation) and determining in Phase II the 
distribution of those royalties to individual claimants within each 
group (Phase II/Distribution). See In re 1978 Cable Royalty 
Distribution Determination, 45 FR 63026, 63027 (Sep. 23, 1980) (1978 
Determination) (summarizing a February 14, 1980 ruling by the CRT). In 
the 1978 Cable Royalty Distribution Proceeding, and in all subsequent 
Phase I/Allocation proceedings, the division of royalties was 
accomplished through a categorization of claims that was the product of 
a stipulation among the proposed allocation claimants. These 
categorizations were adopted by the CRT and its successors by their 
adoption of the participants' stipulations (subject, on occasion, to 
minor modifications).\1\ The Judges have made it clear that their 
adoption of the claimants' categories has never constituted a finding 
by the Judges. See Memorandum Opinion and Order following Preliminary 
Hearing on Validity of Claims, Docket No. 2008-2 CRB 2000-2003 (Phase 
II), at 14 (Mar. 21, 2013); id. (Phase I), 6/11/09 Tr. 41-42 (former 
Chief Judge Sledge noting that the categories were the result of a 
``stipulation'' and ``have never been determined'' or the subject of a 
``finding.'').
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    \1\ The categories into which copyright owners have divided 
themselves in Phase I cable proceedings have remained largely 
consistent over time: (1) ``Program Suppliers''--copyright owners of 
movies and syndicated television programs represented by the Motion 
Picture Association, Inc. (``MPA'') (formerly the Motion Picture 
Association of America, Inc. (``MPAA'')); (2) ``Joint Sports 
Claimants''--copyright owners of live broadcasts of professional and 
college team sporting events (largely consisting of member teams of 
the National Football League, National Hockey League, National 
Basketball Association, Women's National Basketball Association, 
Office of the Commissioner of Baseball, and National Collegiate 
Athletic Association); (3) ``Commercial Broadcasters''--copyright 
owners of broadcast television and radio programming produced by 
local commercial broadcasters and represented by the National 
Association of Broadcasters, Inc. (``NAB''); (4) ``Devotional 
Claimants''--copyright owners of religious broadcast programming 
produced; (5) ``Public Television'' or ``PBS''--copyright owners of 
television programs broadcast on public television stations 
represented by the Public Broadcasting Service; (6) ``Canadian 
Claimants''--various Canadian copyright owners whose programs are 
broadcast on Canadian television stations and retransmitted by cable 
systems located near the U.S./Canada border; (7) ``NPR''--copyright 
owners of radio programming transmitted by National Public Radio and 
public radio stations; and (8) ``Music Claimants''--songwriters and 
music publishers represented by the American Society of Composers, 
Authors and Publishers (``ASCAP''), Broadcast Music, Inc. (``BMI'') 
and SESAC, Inc.. See, e.g., Distribution of 1998 and 1999 Cable 
Royalty Funds, Docket No. 2001-8 CARP CD 98-99, 69 FR 3606, 3607 
(Jan. 26, 2004); see also 1989 Cable Royalty Distribution 
Proceeding, Docket No. CRT 91-2-89 CD, 57 FR 15286, 15287 (Apr. 27, 
1992) ((1) Program Suppliers; (2) Sports; (3) U.S. Noncommercial 
Television (PBS); (4) U.S. Commercial Television (NAB); (5) Music; 
(6) Devotional Claimants; (7) Canadian Claimants; (8) Non-Commercial 
Radio (NPR); and (9) Commercial Radio)).
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    In the 1978 Proceeding, the CRT also considered a separate issue--
whether to address the economic impact of unclaimed funds in Phase I or 
in Phase II. The CRT stated: ``During Phase I there was some random 
testimony to the effect that not all eligible claimants had submitted 
claims. The [CRT] determined that this subject was not appropriate to 
Phase I, but that it would be considered subsequently in the 
proceeding. The [CRT] therefore determined that the Phase I allocations 
to categories should be made as if all eligible claimants in each 
category had filed.'' 1978 Proceeding at 63042 (emphasis added).
    The CRT requested and received further briefing on the legal issues 
regarding unclaimed funds, and, in Phase II, the CRT ``accorded each 
claimant the opportunity to present any relevant evidence on this 
subject . . . [but] [n]o claimant presented any such evidence.'' Id. 
After reviewing the legal briefing, the CRT--without referencing any of 
the legal points briefed--

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concluded that it would not consider unclaimed funds in determining 
Phase I allocations. Specifically, the CRT stated that royalties would 
be ``allocated to categories of claimants as if all eligible claimants 
in each category had filed valid claims.'' Id. (emphasis added). The 
CRT found that the record before it ``provid[ed] no objective basis for 
redistribution of royalty fees among categories of claimants to[] 
reflect unclaimed royalties in particular categories,'' and concluded 
that its disposition of unclaimed royalties constituted an ``equitable 
allocation.'' Id. (emphasis added). The CRT further noted that its 
ruling ``may not necessarily control any subsequent distribution 
proceeding.'' Id.
    In a recent proceeding for the Distribution of Cable Royalty Funds 
(Docket No. 16-CRB-0009 CD (2014-17)), and in the parallel proceeding 
for the Distribution of Satellite Royalty Funds (Docket No. 16-CRB-
0010-SD (2014-17)), the Judges sought input from the participants \2\ 
on the claimant categories to be used in each proceeding. See Notice of 
Participants and Order for Preliminary Action to Address Categories of 
Claims, Docket No. Docket No. 16-CRB-0009 CD (2014-17), at 2 (Mar. 20, 
2019); Notice of Participants and Order for Preliminary Action to 
Address Categories of Claims, Docket No. Docket No. 16-CRB-0010 SD 
(2014-17), at 2 (Mar. 20, 2019).\3\ Instead of stipulating to the 
definitions of the Allocation Phase categories as they had in past 
proceedings, the participants filed briefs advocating different 
category definitions.
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    \2\ The Phase I/Allocation participants in satellite 
distribution proceedings have used the same or very similar 
categories as participants in cable proceedings. See, e.g., Notice 
requesting comments, Distribution of Satellite Royalty Funds, Docket 
16-CRB-0010-SD (2014-17), 84 FR 33979, 33980 n.1 (Jul 16, 2019) 
(``Program Suppliers, Joint Sports Claimants, Broadcaster Claimants 
Group, Music Claimants (represented by American Society of 
Composers, Authors and Publishers, Broadcast Music, Inc., and SESAC, 
Inc.), and Devotional Claimants.'').
    \3\ Members of the public may access all submissions in those 
proceedings through eCRB by searching for Docket Nos. 16-CRB-0009-CD 
(2014-17) and 16-CRB-0010-SD (2014-17). Registration is not 
required.
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    Most participants advocated use of the claimant-centric categories 
that had been used in prior distribution proceedings, arguing that 
doing so would provide ``efficiency and certainty both in the 
preparation of evidence . . . and in the ultimate distribution of 
royalties to all eligible claimants.'' Joint Comments of 2014-17 Cable 
Participants on Allocation Phase Claimant Category Definitions, Docket 
No. 16-CRB-0009-CD (2014-17), at 2 (Apr. 19, 2019); see also Joint 
Comments of 2014-12 Satellite Participants on Allocation Phase Claimant 
Category Definitions, Docket No. 16-CRB-0010-SD (2014-17), at 2 (same); 
see also generally Program Suppliers' Brief Regarding Proposed Claimant 
Group Definitions, Docket No. 16-CRB-0009-CD (2014-17), (Apr. 19, 2019) 
(proposing that current claimant-centric categories be retained with 
some modifications); Program Suppliers' Brief Regarding Proposed 
Claimant Group Definitions, Docket No. 16-CRB-0010-SD (2014-17) (same). 
These participants describe the effect of their proposed structure as 
establishing ``a manageably finite number of industry groups, each with 
the scope and incentive to pursue the interests of a broad group of 
constituents, undertake the complex job of gathering the necessary data 
and resources, identifying all claimants, establishing their respective 
Allocation Phase shares, and distributing all of the category's 
royalties.'' Joint Responsive Brief of Certain 2014-12 Cable 
Participants on Allocation Phase Claimant Category Definitions, Docket 
No. 16-CRB-0009-CD (2014-17), at 2-3 (May 3, 2019) (footnote omitted).
    One participant in the proceeding, however, asserted that the 
historically-stipulated categories and relevant definitions are 
arbitrary, produce counterintuitive results, and are contrary to common 
understanding. See Multigroup Claimants' Comments on Claimant Category 
Definitions and Proposed Modification, Docket Nos. 16-CRB-0009-CD 
(2014-17) & 16-CRB-0010-SD (2014-17), at 6 (Apr. 19, 2019). This 
participant asserted that the claimant-centric categories used in past 
proceedings was not aligned with the way in which system operators 
decide to retransmit broadcast television signals. See id. at 13. The 
participant proposed a new program-centric category definition, but 
only for the sports programming category. See id. at 7-12.
    The Judges have recently allocated cable royalty percentages in the 
Allocation Phase based on: (i) Evidence from surveys of cable system 
operators regarding their ranking of types of programming; and (ii) 
evidence from regressions identifying the actual mix of programming on 
stations that cable system operators chose to retransmit, in both cases 
based on the categories stipulated by the participants.\4\ The Judges 
understand there may be reasonable concerns that if the effect of the 
stipulated categories is to aggregate programs within categories in a 
manner inconsistent with the cable system operators' usual decision 
making process, the valuation process may be affected adversely. In 
this regard, the dollar amount of royalties that a copyright owner of a 
program receives could vary significantly, and without relationship to 
relative values, depending upon whether the program was placed within 
one category versus another. Such concerns regarding the historically-
stipulated categories appear pertinent with regard to both cable and 
satellite royalty distribution proceedings.
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    \4\ The Judges have never conducted a satellite allocation phase 
proceeding that resulted in a final determination; rather the 
allocation phase parties have always settled.
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    The failure of all participants to stipulate to claimant categories 
as well as the stated concerns with the historically-stipulated 
category definitions underscore the need for a procedure by which 
copyright owners and their representatives are afforded the opportunity 
to propose specific category definitions and provide legal and economic 
arguments and factual evidence to support their respective positions, 
enabling the Judges to act on the basis of an adequate administrative 
record. Pursuant to the authority set forth in 17 U.S.C. 803(b)(6) to 
establish regulations governing the Judges' proceedings, the Judges 
seek comment to inform and guide their intent to publish a formal 
notice of proposed rulemaking to establish specific category 
definitions applicable to both cable and satellite distribution 
proceedings.

II. Subjects of Inquiry

A. The Identification of the Allocation Phase Categories

    In light of the need to establish Allocation categories, for use in 
both cable and satellite distribution proceedings, the Judges now seek 
input on how the Allocation Phase categories should be defined. Because 
the evidence of relative value across categories in the Allocation 
Phase reflects the value assigned to program categories by the cable 
system operators/satellite carriers (as demonstrated most recently by 
survey and/or regression evidence), the Judges inquire as to the merit 
of aggregating the Allocation Phase categories by program type rather 
than by claimant groups, and whether doing so may result in a 
distribution of royalties that more accurately reflects the relative 
value of different programming.
    The Judges also inquire as to the likely impact any particular set 
of Allocation Phase categories may have

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on (a) the cost and efficiency of distribution proceedings and (b) the 
likelihood of achieving settlements to resolve both Allocation Phase 
and Distribution Phase controversies.
    In addition, the Judges inquire as to the need for mechanisms and 
standards to resolve any disputes as to the identity of participants 
seeking to represent a particular Allocation Phase category in an 
Allocation Phase proceeding.

B. The Identification of Invalid Claims

    The Judges are in agreement with the CRT observation that its 1980 
ruling with respect to ineligible claims ``may not necessarily control 
any subsequent distribution proceeding.'' 1978 Proceeding at 63042 
(emphasis added). Therefore, the Judges also revisit the identification 
and treatment of funds that are unclaimed because a filed claim is 
invalid or not validly represented in a distribution proceeding 
(invalid claims). The Judges request that commenters provide an 
adequate factual record to support their positions as to the necessity 
and feasibility of proposed approaches to the identification and 
treatment of invalid claims, and the consonance of their proposed 
approaches with the establishment of relative value. Commenters should 
address how the treatment of invalid claims may interrelate with the 
establishment of Allocation Phase categories. For instance, one 
rationale for intra-category re-apportionment of royalties attributable 
to invalid claims (the status quo) is that the invalidly-claimed 
programs have more in common in terms of value creation with the 
validly-claimed programs in the same category than with the validly-
claimed programs in the other categories (which also implicates the 
above-stated inquiry regarding whether the categories should be 
claimant-centric or program-centric). If the former, the argument for 
maintaining intra-category re-allocations of invalid claims may be 
weaker, because claimant-centric categorization is based on common 
representation, not common relative program value.
    The Judges also inquire as to the likely impact any proposed rule 
for the identification and treatment of ineligible claims may have on 
(a) the cost and efficiency of distribution proceedings and (b) the 
likelihood of achieving settlements to resolve both Allocation Phase 
and Distribution Phase controversies.

III. Submissions

    With respect to both of the subjects of inquiry, commenters should 
provide narrative responses and proposed regulatory language amending 
37 CFR part 351. Commenters should include relevant facts, legal and 
economic analyses, and citation to authority for each proposed 
regulatory provision. After considering the proposals, the Judges 
intend to publish a formal notice of proposed rulemaking in accordance 
with the provisions of the Administrative Procedures Act.

    Dated: December 20, 2019.
Jesse M. Feder,
Chief Copyright Royalty Judge.
[FR Doc. 2019-27970 Filed 12-27-19; 8:45 am]
 BILLING CODE 1410-72-P