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left the impression that defendant's valves were safer than those of other companies. Since the defendant had raised this issue, it was clearly within the discretion of the trial court to allow the plaintiff to attempt to rebut that impression. c. Subpoena and Discovery Power
The Tribunal has asked us to examine the subject of subpoena power and to recommend whether the Tribunal should seek it. Subpoena power is the power to require, under law, the appearance of a witness or the production of documents. It may be useful to examine subpoena power in conjunction with the process of discovery, which is the mechanism one party in an adversarial proceeding uses to obtain from another party information relevant to the controversy. Discovery is widely used in court proceedings, and, to a much lesser extent, in administrative proceedings, to define, simplify, and reduce the issues at the trial or hearing, to allow proper preparation for the trial or hearing, and to prevent surprise.
The Tribunal's enabling statute does not grant it subpoena or discovery power, and it appears that where Congress wishes an agency to have that power it grants it specifically. 71/ The few cases which bear on the subject suggest that absent a specific legislative grant, an agency like the Tribunal lacks subpoena power and cannot read it into other enabling language. On the other hand, it is probable that the Tribunal's broad enabling
71/ See, eg., 49 u.s.c. ss 10321 (c), 11913, granting subpoena
power to the ICC.
language 72/ gives it the power to promulgate regulations establishing discovery procedures.23/ However, absent the power to subpoena, it is questionable whether the discovery regulations would have the "teeth" necessary to make them effective.
Although the tightened evidentiary procedures recommended in this memorandum should lessen the need for subpoena power, we nonetheless recommend that the Tribunal petition Congress for such power and that, concurrently, the Tribunal promulgate discovery procedures. Both subpoena and discovery powers should prove useful tools. We have discovered at least one instance from our conversations with members of the Tribunal bar which suggests the need for subpoena power: the lack of access to information and witnesses from cable operators during the cable royalty distribution proceedings. Since the cable operators are the marketplace for the copyright owners and the Tribunal's mission is to determine the relative marketplace value in allocating the fund among the claimants, greater access to information and witnesses in this proceeding is critical to the Tribunal's mandated duties. Of course, during rate adjustment proceedings that are scheduled to take place every five years, cable
. 727 17 0.s.c. S 803(a).
Shipping Co., 335 F.2d 255 (9th Cir. 1964), a decision which
operators have interests adverse to those of the copyright owners and may therefore object to revealing such information on an annual basis to copyright owners. Given such adversity, subpoena power may be essential.
We have examined similarly-situated agencies with regard to subpoena power. The General Accounting Office's Report74/ on the Tribunal's operations examined seven similarly-situated agencies and found that all possessed subpoena power. The report stated:
We have found that it is highly unusual for a regulatory or rate setting organization such as the Tribunal to lack subpoena
A 1974 report by the Administrative Conference of the United States 76/ confirms this assertion. That report found only a few instances where agencies did not have subpoena power. In those
instances, the lack of subpoena power was confined to specific types of hearings within the agency.
74/ The Operation of the Copyright Royalty Tribunal, Aearings
Before the Subcomm. on Courts, Civil Liberties and the
Recommendations 74-1, Subpoena Power in Formal Agency
C. MAGAZINE AND NEWSPAPER ARTICLES
(By Hale Montogmery) "We are just a small cog in a very big wheel involving the dissemination of entertainment in this country.'
This modest assessment of the role of the Copyright Royalty Tribunal in the swirling controversy over royalty fees is offered by its new chairman, Marianne Mele Hall.
Even in a city where numerous small agencies often bloom unseen and unheard in the bureaucratic bush (e.g., Foreign-Trade Zone Board American Battle Commission, Gorgas Memorial Institute of Tropical and Preventive Medicine, etc.), the Copyright Royalty Tribunal (CRT) stands back as one of the more arcane Washington public bodies.
Operating from leased office space with linoleum tile floors and no hearing room the agency has, by federal government standards, a small budget of about $725,000 per year, a tiny staff--and a large mandate from Congress. It will collect about $80 million in royalty fees from cable television operators for 1984.
Former Chairman Thomas Brennan, noting the absence of a conference room, once cracked, “We haven't had to meet in the park yet, but the day may come.” The agency uses borrowed conference facilities at the Postal Rate Commission and elsewhere around town to conduct hearings. It probably is one of the few agencies to call off a hearing because of rain. This actually occurred one day in 1982, when none of the staff had an umbrella and it was necessary to carry documents and papers several blocks in a downpour.
The Tribunal on the average conducts about 60 days of hearings a year. This year may be an exception. Despite its relative anonymity, it is expected to be an early focal point of cable industry efforts to combat higher royalty fee payments.
What threatens the Tribunal's year-in and year-out obscurity this year is the fact that it must conduct hearings (every fifth year) to adjust the rates of congressionally-mandated compulsory license fees to cost-of-living changes. 1985 is a COLA year. But the real controversy centers in the 3.75 percent rate the Tribunal set in 1982 for certain distant signals freed from the FCC regulation.
"Its obvious that we're going to have a full blown proceeding," conceded Hall during an interview in her office where the windows overlook a service alley.
At present the Tribunal has a trio of commissioners: chairman Hall, a Washington-area lawyer; Mario F. Aguero, an owner of the Havana East Restaurant in New York City, both newly appointed in July of last year; and Edward W. Ray, a former Capitol and MGM Records executive and vice president of Eddie Ray Music Enterprises, the only Reagan holdover appointee.
There are two vacancies; sources indicate that the White House has no plans to fill them. Each commissioner has a personal assistant; there is no professional staff, although chairman Hall is in the process of hiring the first full-time legal counsel in the Tribunal's history.
She would like a full-time staff economist too, "but it's just not in the budget."
Congress created the CRT in 1976 to oversee the rate structure of the Copyright Act. Under the Act, the cable industry pays compulsory license fees for broadcast programs it takes off the air and retransmits, rather than negotiating prices individually with every programmer or copyright owner.
WIDE DISCRETION The mandatory hearings by the CRT this year, which are to adjust the compulsory license fee schedule, are considered to be fairly mechanical. The CRT may use the Labor Department's Consumer Price Index, or some other recognized index, to adjust fees accordingly for the five-year review period.
However, the CRT has wide discretion over rate fixing "We can set rates however we determine them,” emphasizes Hall. And the Tribunal in the past has done just that.
In 1980, the FCC withdarw prohibitions on the use by cable systems of signals from distant independent TV stations. It opened the way for cable systems to import signals from distant cities to add program variety, and ushered in superstations. But the CRT then stepped in to establish rates for these "new" signals not specifically covered by the schedule of compulsory rates listed in the 1976 Act.
In 1982, the Tribunal found that "a fair distant signal is 3.75 percent (of gross revenues).” This meant fees 15 to 20 times higher than the compulsory fees being paid for other programming by the cable industry.
The result has been a furor in the cable industry and in Congress, with complaints over higher fees rising to shriller levels every year. The motion picture industry and other copyright owners, in contrast, complain that the fees are too low.
Rep. Robert W. Kastenmeier (D-Wis) chairman of a House Judiciary subcommittee on copyright matters, thinks the CRT has overstepped its authority. He called the 3.75 percent fees “arbitrary, capricious and an abuse of the discretion placed in ther Tribunal by Congress.” At another point he accused the Tribunal of “trying to set policy, not rates.”
The commissioner at the time disagreed. They responded that they used good common sense in setting the rates for copyrighted distant programming, basing their decision on marketplace values for creative materials.
Although the CRT cannot review its 3.75 percent decision unless petitioned to do so, few believe it won't be considered. And when that happens, many in the cable industry are convinced that the Tribunal is predisposed to favor copyright owners. Dr. John C. Malone, president of TCI and chairman of the NCTA copyright committee, predicted at the Western Cable Show in Anaheim that the 3.75 percent issue will come up, that the Tribunal will hike it to 5 percent and that “there's not a hell of a lot we can do about it.”
The principal debate at the Western Show, however, centered not so much on the CRT, but on how the industry might win copyright reforms through Congress, and through the courts. The general congressional consensus: to concentrate efforts on a bill narrowly aimed at correcting "inequities" in the current law, rather than pushing for a comprehensive rewrite of the Copyright Act.
În Anaheim, Jack Valenti, head of the Motion Picture Association of America (MPAA), called for cable and programmers to cooperate, not fight over copyright. The programming offered by the MPAA and others “is the key.".
"It, and it alone, unlocks the door to enduring success," he exclaimed.
Cable operators, Valenti said, are paying only about 22 cents a month per subscriber in royalty fees, less, for example, than their monthly mailing costs to subs. And only_192 cable systems paid for any distant signals at the 3.75 percent rate, he claimed. But, he warned, “if the cable industry determines it wants to start a war, then we are prepared to defend ourselves."
Copyright reform however, is not the Tribunal's bag. "The Tribunal is just a hearing body," says Hall. “We have no regulation-writing functions. The Copyright Office in the Library of Congress) does that. We so not have the staff to do that. We are involved in setting rates.
But it is this critical rate-making function that is expected to be the object of the opening battle over copyright this year. And once the parties are marshalled in evidentiary hearings before the little CRT, the game can get complicated. The ployers include, among others, professional sports interests, cable television, motion picture studios, consumer groups, broadcasters, networks and independent producers.
In previous hearings, pleadings have become intense. Opposing sides employ A.C. Nelsen ratings, attitudinal surveys, market penetration data, economic sudies of diminishing returns, audience fragmentation reports and, of course, critiques of each other's data.
Among the players, there are potential conflicts within conflicts: Some broadcast networks have cable holdings, some cable companies produce programming and receive copyright fees (seven of the 10 members of the NCTA copyright committee are MSOs, most associated with some programming interests). Most of the major-league sports organizations are not so much interested in receiving higher royalty fees, or any fees at all, as they are in totally barring cable system carriage of out-of-town sports events.
Broadcasters are more interested in protecting the must-carry rules than in royalty payments, which are not that large a source of income. Steve Effros, executive director of CATA, estimated that individual TV stations receive an average of less than $4,000 a year in cable royalty payments. But for the MPAA, which receives the lion's share (70 percent) of the approximately $80 million paid by cable annually, the fees are a significant number.
And the MPAA, which represents the big-seven movie studios, makes no secret of its desire to eliminate compulsory fees entirely, and force cable to bargain for programming in the marketplace. "We would just as soon eliminate compulsory license fees altogether,” says MPAA attorney Fritz Attaway, reiterating his group's ultimate threat in the royalty wrangle.