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COPYRIGHT ROYALTY TRIBUNAL

1. CREATION, HISTORY, MEMBERSHIP

The Copyright Royalty Tribunal (Tribunal) was created by $801(a) of the Public Law 94-553, the General Revision of Copyright Law of 1976, (Title 17 of the United States Code). It commenced operations in November 1977 with five Commissioners appointed by President Carter with the advice and consent of Senate: Thomas Brennan, Douglas Coulter, Mary Lou Burg, Clarence James, Frances Garcia.

Thomas Brennan and Douglas Coulter served their full seven year terms until September 26, 1984. Mary Lou Burg served until her death in May 1983. Frances Garcia served her full five year term until September 1982. Clarence James resigned in May of 1981. The chairmanship rotates by seniority.

Katherine Ortega was appointed by President Reagan to succeed Francis Garcia. She resigned in September 1983 to become the Treasurer of the United States. Edward W. Ray was appointed by President Reagan to succeed Clarence James.

Effective September 26, 1984, the present Tribunal consists of three President Reagan appointees: Edward W. Ray, as of February 1982, Mario F. Aguero, as of May 1984 and Marianne Mele Hall, as of July 1984. Edward W. Ray and Marianne Mele Hall will serve until September 1989. Mario F. Aguero will serve until September 1991. Mrs. Hall is serving as chairman from December 1, 1984 to December 1, 1985. Biographical sketches of the Commissioners are at appendix A.

Two seats remain vacant since the expiration of the terms of Commissioners Brennan and Coulter on September 26, 1984.

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The Tribunal's statutory responsibilities are detailed in sections 111, 115, 116 and 118 of Title 17 U.S.c. The Tribunal is involved in rulemaking and in adjudication. Our rulemaking proceedings involve setting royalty rates for the four compulsory licenses authorized under Title 17. The compulsory licenses are for :

1) secondary transmissions of copyrighted works by cable
television (siil),
2) production and distribution of phonorecords ($115),
3) public performances of musical works by coin-operated
phonorecord players (jukeboxes) (5116),
4) the use of copyrighted works in connection with
noncommercial broadcasting ($118).

The Tribunal's adjudication proceedings involve distribution of cable television and jukebox royalties collected, as per the foregoing to the copyright owners. The Tribunal does not distribute royalties for phonorecords ($115) or noncommercial broadcasting ($118). This is handled privately by the parties involved. 3. BUDGET

Our budget request for FY 86 is $758,000 of which $531,000 will be reimbursed from the royalty funds.

The FY 86 budget request shows a net increase of $36,000 over FY 85. $31,700 of this increase is due to cost of living salary increases, and increases in benefits for new hires as mandated by P.L. 98-21.

The remaining $4,300 increase is due primarily to inflationary increases in the costs of office supplies and services. We have also reallocated some of the FY 85 requests to more realistically reflect our needs. Our budget request is at appendix B.

4. GENERAL ADMINISTRATION

A. OFFICE AUTOMATION - CENTRALIZATION OF FILES

In keeping with the legislative history and mandate, the Copyright Royalty Tribunal has remained a small, independent, legislative agency. It is currently staffed with one general counsel and three confidential assistants who provide support services for the three commissioners.

We have recently acquired a Compucorp Omega 785 word processing system which has increased the efficiency of this limited staff. it is anticipated that this computer will ameliorate the growing concern with the storage and retrieval of approximately 700 cable royalty claims yearly. We are currently utilizing this computer to centralize and organize our administrative files, our master case files and our accounting records.

The centralization of the administrative files will maximize the

use

of our limited staff, will minimize our recordkeeping and storage problems, will eliminate duplication of staff effort and will institute an agency memory.

The organization and centralization of our master files will inure the benefits above as well as provide better access to hearing records, actions, determinations, etc. for reference in our present hearing calendar and for our appellate proceedings.

Lastly, our computer was invaluable in the compilation, centralization and organization of our accounting records. We have just completed a review of all past distributions for cable

case

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are

and jukebox. This review revealed that we have distributed $140,109,714 in cable royalties for the years 1978 through 1982. The total cable royalties collected from 1978 through 1984 is approximately $309, 179,344 as of April 8, 1985. This review also revealed that we have distributed $11,073,560 in jukebox royalties for the years 1978 through 1983. The total jukebox royalties collected for 1978 through 1984

approximately $17,173,852 as of September 30, 1985.

In the course of this review we determined that some parties had not received equal pro rata shares of their allocation which meant that expenses and earnings on the remaining fund were not being distributed equitably among all claimants. We corrected this situation. We also equalized pro-rata distributions to those claimants whose awards had been altered by appellate decisions.

Lastly, we determined that the percentage methodology that had heretofore been used to distribute fees was illusive in that the percentages as distributed, diminish in numerical size as the remaining fund continues to grow. In light of that realization, we reworked our partial distributions for 1979 - 1982 cable royalty fees against real dollar figures and were therefore able to distribute more of the funds while still preserving sufficient funds to protect all claims currently on appeal.

The results of this review and subsequent activities is summarized in the chart in appendix c. Detailed charts of the distributions to each claimant group as per each partial distribution over the seven year history are available to the Judiciary Committee upon request.

B. PROFESSIONAL SUPPORT

1. Legal House of Representatives Report No. 94-1476 (94th Congress, 2nd Session, 1976) had indicated legislative intent that all professional responsibilities be performed by the commissioners "except where it is necessary to employ outside experts on a consulting basis." However, recent legislative hearings and proposed legislation has indicated strong recommendations by Congress that the Tribunal hire some professional staff. Pursuant thereto and in accordance with $805(a)of Title 17, the Tribunal hired a general counsel, Robert Cassler on March 4, 1985.

Mr. Cassler has served the FCC for eight years in the Private Radio Bureau doing rulemaking proceedings, in the Mass Media Bureau as a supervisor of a legal staff, and in the Office of Administrative Law Judges assisting the judges in the conduct ISection 805. Staff of the Tribunal

(a) The Tribunal is authorized to appoint and fix the compensation of such employees as may be necessary to carry out the provisions of this chapter, and to prescribe their functions and duties.

of cellular radio comparative hearings. His biographical sketch can be found in appendix D.

Section 805 (5)2 of Title 17 allows the Tribunal to procure "temporary or intermittent services" of professionals as needed. Pursuant thereto, the Tribunal commissioned a review of its administrative and hearing procedures by the law firm of Rice, Carpenter and Carraway, Arlington, VA. This memorandum, which incorporates the 1981 GAO study, provides an excellent history, summation of procedures, comparison with other similarly situated agencies, and recommendations for internal and possible legislative reforms for the Tribunal. It is available to the Judiciary Committee upon request.

This study is being used to reform our hearing procedures for both our adjudication (distribution) and rulemaking (rate setting). Earlier we had solicited public comment on procedural reforms. These comments and this Rice, Carraway & Carpenter study were made available to all interested parties in the 1983 cable distribution which commenced April 15, 1985. The parties have subsequently negotiated a stipulated agreement of procedural reforms and a calendar for this upcoming proceeding. We have accepted their agreement and calendar and will test these reforms in this distribution hearing. We will again solicit public comments on procedural reform for our rulemaking procedures and hopefully achieve a similar synthesis and agreement. We will then codify both sets of procedural reforms in a revision of 37 C.F.R.

Our General Counsel is currently reviewing all other aspects of 37 C.F.R. and the laws which impact on our agency. With the aid of the Administrative Conference, we hope to rewrite 37 C.F.R. to achieve closer conformance with the letter of the laws which govern the conduct of our agency such as the Administrative Procedure Act, and the spirit of acts such as Executive Order 12291 which do not govern this agency because it is a legislative branch agency.

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There has been some Congressional concern for the hiring of a chief economist. It is the opinion of Chairman Hall that an economist is vital to our rulemaking (rate-setting) and would be helpful to our adjudication (distribution).

The intent of Title 17 u.s.c. $$801(b)(1) 3 and (b)(2)(A)(B) 2 Section 805. Staff of the Tribunal

(b) The Tribunal may procure temporary and intermittent services to the same extent as is authorized by section

3109 of Title 5. 3 Section 801(b)(1)

"(b) Subject to the provisions of this chapter, the purposes of the Tribunal shall be-

(1) to make determinations concerning the adjustment of reasonable copyright royalty rates, as provided in sections 115 and 116, and to make determinations as to

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and (D)4 is to require economic considerations in our rulemaking function. This function has grown to impact on approximately 550-600 million dollars that will pass from the users of copyrighted works to the owners in 1985. The Tribunal will collect and distribute approximately 120-150 million dollars for cable retransmissions and approximately 6 million dollars for jukebox. Private societies will collect and distribute approximately 4 million dollars for public broadcasting and 380-400 million dollars for phonorecords based on the rates which the Tribunal set. Chairman Hall believes an economist would greatly enhance this royalty rate setting that concerns so much of the u.s. economy.

Chairman Hall also believes that the Tribunal could use an economist in its distribution of 80 - 100 million dollars in 1985 which represents the 1983 royalty funds. This distribution will have an impact on the industry recipients. Further, our allocation of this money is often dependent upon our understanding of the economic bases of the owner's industries and the economic benefit or harm that accrues to broadcasters or cable operators based on their respective use of copyrighted works.

reasonable terms and rates of royalty payments as pro-
vided in section 118. The rates applicable under sec-
tions 115 and 116 shall be calculated to achieve the
following objectives:

(A) To maximize the availability of creative works
to the public;
(B) To afford the copyright owner a fair return
for his creative work and the copyright user a
fair income under existing economic conditions;
(C) To reflect the relative roles of the copyright
owner and the copyright user in the product made
available to the public with respect to relative
creative contribution, technological contribu-
tion, capital investment, cost, risk, and contri-
bution to the opening of new markets for creative
expression and media for their communication;
(D) TO minimize any disruptive impact on the
structure of the industries involved and on gener-
ally prevailing industry practices.

4 Section 801(1)(2)(A) requires consideration of:

"(i) national monetary inflation or deflation,
(ii) changes in the average rates charged cable subscrib-
ers...to maintain the real constant dollar level...

Section 801(b)(2)(B) requires the Tribunal to consider ... the economic impact on copyright owners and users.

Section 801(b)(2)(D) requires consideration of national monetary inflation or deflation... to maintain real constant dollar value of the exemption. There are many more such examples of economic concerns throughout Title 17 dealing with cable (111), phonorecords (115), jukeboxes (116), and public broadcasting (118).

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