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Thank you for your kind words of congratulations. I am honored to work with you and your staff and shall strive to fulfill your expectations. Thank you for your invitation to the Copyright Royalty Tribunal (Tribunal) to submit written testimony for the April 17 hearings on civil and criminal enforcement of the Copyright Act. I heartily commend the Judiciary Committee's efforts to explore and resolve some of the problems in the enforcement of the Copyright Act. As you well know, piracy causes daily losses in revenues to the creators and producers of intellectual property. The losses in the audio industry predict what will happen in the video industry and the software/information industries, as piracy progressively encroaches upon each industry. A frightening aspect of this increasing piracy is that the daily losses on yesterday's intellectual property will take its toll on our creators' inspiration and desire to create tomorrow's works. That is why your work today is so important. In my private capacity, I accept your invitation to submit written testimony on a statutory change that may improve collections of the royalty payments that this Tribunal distributes. The other Commissioners may wish to add their comments at a later time. It is my opinion that the Tribunal should be empowered to assess fair market interest and/or a surcharge on royalty payments which are not timely filed. The Copyright Royalty Tribunal is responsible for distributing royalties collected for the retransmission of copyrighted works

by cable television and for the use of copyrighted works by jukeboxes, (17 U.S.C. Section 111 & 116), among other responsibilities.

The Licensing Division of the Copyright office collects these royalties from approximately 7,800 cable systems and from approximately 3,808 jukebox operators representing approximately 100,000 jukeboxes. These royalties are segregated into funds by year and invested in interest-bearing, United States securities by the Licensing Division.

To date approximately $389,179,344 have been collected for cable and $17,173,852 have been collected for jukebox, approximately $148,109,714 of the cable collections and 11,073,56% of the jukebox collections have been distributed to respective claimants.

The only enforcement in the collection of these fees is the threat of a suit for infringement that may be brought by the copyright owner. While this enforcement capability is very important and should be preserved at all costs, often it is not very effective. The result is that the users may file late or not at all with minimal actual or apparent sanctions. Further, if an infringement action is brought, the user can practically moot the action by a prompt late payment, veritably rendering the damages de minimis, (leaving attorneys fees and costs). These late payments play havoc with the Licensing Division's accounting procedures and with our distribution process. Often late sums are less than $10,000 so they cannot be immediately invested, causing loss of interest to owners. Often late payments are to funds that have been fully distributed, requiring further Tribunal determinations, publications, and disbursements. The 1978 cable fund has been zeroed out three times, the latest being March, 1985. we recently received an $8.00 jukebox fee on the 1979 fund, which has been closed for years.

Lastly, the present system practically encourages late payments in that the tardy payer has greater use of his money for longer

periods without cost. This is neither the intent nor the spirit of the Copyright Act. It should be noted that most copyright users are prompt and accurate in the payments of royalty fees. The tardy payments problem for cable barely approaches 38. It is harder to determine compliance in jukebox and it should be noted that the performing rights societies do actively enforce compliance. The Licensing Division would be able to provide more accurate accounting of the late payments problem upon request.


Even though the tardy payments problem is small, clearly it refutes the intent of the legislation, and there is no reason not strive towards 100% compliance. The threat of the assessment of fair market interest may help achieve that. Again, I feel strongly that the suit for infringement remedy (including attorney fees) is one of the greatest reforms to come from the 1976 Copyright Act and I believe it must be preserved at all costs. This suggestion would only supplement the greater remedy and would do so at no cost to the copyright owner, also in keeping with the intent of the Copyright Act.

I have recently submitted draft legislation to Congressman Kastenmeier and Moorehead, upon their request, to suggest empowering the Tribunal to assess and collect interest for iate payments. This draft also suggests establishing the Licensing Division under the Tribunal rather than the Copyright Office to facilitate the management of the funds, and eliminate some of the communications between the Copyright Office and the Copyright Royalty Tribunal. Part of this draft legislation is attached for your information.

If you need any further information or assistance please do not hesitate to contact me.

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Members of the Bar who practice before the Tribunal;
Administrative Conference of the United States

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The copyright Royalty Tribunal was created by the Copyright Act of 1976 to be composed of five commissioners, but currently consists of two sitting commissioners. Several procedural questions have been raised because of this situation. The purpose of this letter is to inform you of conclusions reached by the Tribunal and to solicit your comments on these conclusions.

First, Section 882 (c) of the Copyright Act of 1976 (Act) states, "Any vacancy in the Tribunal shall not affect its powers

Section 301.7(b) of the Tribunal's rules states, "A majority of the members of the Tribunal constitutes a quorum." 37 U.S.C. 381.7(b). It is the conclusion of the Tribunal that a quorum consists of a majority of sitting Commissioners, whatever its number. We find support for our conclusion in FTC V. Flotill Products, Anc. 389 U.S. 179 (1967), and Assure Competitive Transportation, Inc. v. United States, 629 F. 2d 467 (1988). Therefore, the Tribunal believes, it has legal authority to carry out the functions conferred on it by the Act so long as both sitting Commissioners concur in the action.

Secondly, the Tribunal has also researched the question of whether a Commissioner appointed during or after the course of an on-the-record proceeding, whether adjudication or rulemaking, may participate in the decision. The Tribunal believes that a deciding officer, in this case a Commissioner, does not have to be present to hear the testimony, except when the demeanor and credibility of the witness is of such a substantial factor that the absence of the deciding officer would be a denial of a fair hearing. The Tribunal believes that it is enough if the deciding officer considers and appraises the written record. The Tribunal has drawn upon the Administrative Law Text by Kenneth Culp Davis for this conclusion.


The Tribunal solicits comments as to whether the Bar and the Administrative Conference of the United States agree with our conclusions. The Tribunal is especially interested in whether any party believes that the demeanor and credibility of any witness is of a substantial factor in the forthcoming proceedings. Although the Tribunal does not know when future Commissioners will be appointed and confirmed, it believes it is important to resolve this question at this time. Comments on the Tribunal conclusions must be filed by June 4, 1985. The comments will be discussed in our pre-hearing conference already schedule for June 7.

Thank you for your cooperation.


Edward W. Ray
Acting Chairman


May 12, 1985

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