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MEMORANDUM TO THE COPYRIGHT ROYALTY TRIBUNAL
CONCERNING PROCEDURE ; EVIDENCE AND RELATED SUBJECTS

By letter of August 20, 1984, the Copyright Royalty Tribunal

has asked this firm to prepare a memorandum of law which will review and analyze the Tribunal's hearing procedures and will comment on evidentiary matters and the Tribunal's lack of subpoena power. This memorandum responds to the Tribunal's letter.

We hope that the memorandum is clear and complete.

We

welcome the Tribunal's critical comments.

It seems logical to us

to begin the memorandum with a review of the Tribunal's enabling

legislation and then proceed to a section on procedures.

We have

included recommendations for procedures from the initial Federal

Register notice through the writing of the Tribunal's decision.

The third section of the memorandum covers evidence, and the fourth groups subjects that did not seem to belong in the first three groups, including cross- and redirect-examination and sub

poena and discovery powers.

I

ENABLING LEGISLATION

The Copyright Royalty Tribunal (Tribunal) was created by the Copyright Act of 1976)/ (the Act).. Congress directed the

Tribunal to set or revise the rates paid by users of copyrighted

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materials and to distribute the payments among the copyright

owners.

The function of the Tribunal as a ratemaker and distribu

tor was based on Congress's decision that it was impractical to

allow each copyright owner to deal directly in the marketplace with each copyright user .2 Instead, the users are charged with obtaining compulsory licenses and with payment of license fees (also referred to as "rates" or "royalties"). The licenses allow the users to record, replay, or retransmit copyrighted material

for compensation without the holders' express permission.

The

license royalties compensate the owners.

Prior to the Act, there was only one compulsory license,

for

"mechanical royalties," which since the early 1900's allowed the mechanical license holder to record non-dramatic works on phono

graph records upon payment of a statutorily-determined license fee, paid directly to the copyright owner. The Act modified the

mechanical license but retained its character as a compulsory

license.

The Act added three compulsory licenses for: re

transmission of distant broadcast signals of non-network programming by cable systems; the use of musical records in jukeboxes for profit by jukebox owners; and the use of music and other artistic creations by non-commercial broadcasters.

The Act set the initial rates of payment under three of the four compulsory licenses, provided criteria and timetables for rate adjustments, and charged the Tribunal with the duty of

adjusting the rates.

Initial non-commercial broadcast royalties

2/

H.R. Rep. No. 1476, 94th Cong. 2nd Sess. 89, reprinted in 1976 U.S. Code, Cong. & Ad. News 5659, 5704.

were to be set by the Tribunal shortly after it began operations.

The Act also charged the Tribunal with distribution of some of the royalties. Mechanical license fees continue to be paid

directly to the copyright owners by the users, without Tribunal participation. Non-commercial broadcast license royalties are paid by the users to the owners pursuant to "terms and rates"3/

established by voluntary agreement or by the Tribunal, but without active Tribunal participation in the distribution process. The Tribunal distributes jukebox and cable royalties

pursuant both to voluntary agreements by the owners and to

allocations determined by the Tribunal after hearing.

The Act establishes a license fee of $8 per jukebox and

directs the Tribunal to hold hearings in 1980 to determine

whether the annual fee needed adjustment.

The Tribunal held

hearings and published its final decision on January 5, 1981, raising the annual fee to $50 per jukebox to be phased in over two years and allowing the rate to be adjusted for inflation in ' 1987. The Act provides that, upon the petition of a person with a significant interest, the rate can be adjusted in 1990 and every ten years thereafter.4) Thus, although the Tribunal was specifically directed to hold hearings in 1980, subsequent proceedings are to be held only on petition of an interested

party.

The Tribunal is responsible for adjusting the rates under

the other three compulsory licenses also, in proceedings similar

3/ 17 U.S.C. S 118; 37 C.F.R., Part. 304.

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to that for the jukebox rates. The Act sets forth the specific dates or events when these rates can or may be adjusted.

The jukebox and cable royalties are paid periodically to the Registrar of Copyrights. As of early December, 1984, jukebox royalties for 1983 exceeded $2.8 million, and cable royalties for 1983 exceeded $69 million.

As noted, the Tribunal is not directly involved in the

distribution of mechanical and non-commercial broadcast

royalties, but actively participates in the distribution of jukebox and cable royalties, which, by statute,5) are required to

be distributed annually.

The Act provides antitrust immunity for private

If the claimants cannot agree voluntarily on the

agreements.6/

distribution of the cable or jukebox royalty fees, the Tribunal

resolves the dispute.

In the jukebox proceedings, the number of claimants has been

small, and the Tribunal considers all claims in the same proceeding. However, due to the number of claimants in the cable royalty distribution proceeding, the Tribunal considers the claims in two phases. In Phase I, the Tribunal allocates the

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1982 Phase I proceeding, the Motion Picture Association of

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6/

17 U.S.C. ss ill(d) (5) (A), 116(c) (2), 118(b).

America represented approximately six dozen claimants. Distribution of the Phase I award among these claimants was settled voluntarily except for one claimant, Multimedia, which instituted

proceedings in Phase II to prove its entitlement to a larger

share of the Phase I award. ..

It may be useful to review the chronology of both a rate adjustment proceeding and a royalty distribution proceeding to illustrate the competing claims of the parties and the procedures and decisions of the Tribunal in resolving those claims.

An example of a full-blown rate adjustment proceeding was the Tribunal's adjustment of the cable royalty fees pursuant to the repeal by the FCC of its distant signal carriage and syndicated program exclusivity restrictions on cable transmissions.

Congress specifically authorized the Tribunal, upon the request of interested parties, to adjust the cable royalty fees if and when those rules were repealed.] The proceeding developed as

follows:

1.

On June 21, 1981, the United States Court of

Appeals for the District of Columbia Circuit

affirmed the FCC's repeal of the rules and on

June 25, 1981, lifted its stay on the imple

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