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sections 411(a) and 412. We will suggest sone of thes., and others can be found.

We bellove there 18 no sound reason why the Register of Copyrights should be appolated by the President rather than by the Librarian of Congross who is a Presidential appointoe. Librarians of Congress baro appointed Rogisters of Copyright for the last century, and the syster has worked well

giving the Country a series of qualified, non-political Registers, Including Arthur Fisher, Abrahan Kaninstein and Barbara Ringer, who initisted and successfully conducted the monumental 20-year program to overhaul the United States Copyright Act. The Buckley des18ion would not require that the Register be i Prosidential appointor if the dispute-resolving functions of the Copyright Royalty Tribunal were transferred to "ad hoc arbitration panelso in the Copyright orice or 11 tho Register distributed foes or deoided appeals of decisions by the arbitration panels.

We believe, however, that the Copyright Royalty Tribunal should be rostructured not abolished. Tho Tribunal approach has several advantages ovoz ad hoc arbitration, inoluding the essential continuity (which Connissioner Edward J. Danich otrossed in his letter to you) and adherence to procedent which the Tribunal, even to restructured fora, would provido. There are othe: serious problems with "ad hoc arbitration" that should be examined in subsequent hearings.

Tho Cosoittee for literary Property Studios 18 an laformal, not-for-profit, non-funded group. It concolved and proposed the 1992 Autonatle Copyright Roneval Abendcent to the Copyright Act. Ito aoicus curia, brlor in the "Rear Window" oase was cited by Justice O'Connor 48 providing one of the fundasental reasons for upholding the conclusion roached by her najority opinion.

Barbara Ringer is the forme: Register of Copyrights.

Joan Mo Kernochan is Nash Professor Looritus of Law at the Columbia University Law School and Director of its Contor for Law and the Arts.

Irwin Karp was counsel to the Authors League of America for 33 years, he and chaired the State Departaent's Ad Hoc Working Group on 0.9. Adheronco to the Borde Convention. He has tostified frequently before the Subcommittee on copyright and related issuos.

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Mr. HUGHES. Why don't we begin with you, Ms. Daub? We have your statement, which will be made a part of the record. You may summarize, hopefully, and we will go on to the other two Commissioners. STATEMENT OF CINDY S. DAUB, CHAIRMAN, COPYRIGHT

ROYALTY TRIBUNAL Ms. DAUB. Thank you, Mr. Chairman. Mr. Chairman, Congressman Moorhead, Congressman Reed, Congressman McCollum, I am honored to have this

opportunity to testify before you this morning. It is unfortunate that we, the Commissioners of the Copyright Royalty Tribunal, are not appearing here today as a unified body with the same purpose in mind, the preservation of the Copyright Royalty Tribunal. Therefore, the detailed statement I am now submitting for the record and my oral remarks represent my personal views. My remarks will be twofold in nature, and I certainly hope to complete them in the limited time provided.

First, Mr. Chairman, I too watched with a keen interest President Clinton's first address to the Nation. I strongly support and applaud the President's attempt to streamline the Federal Government and eliminate wasteful bureaucracy. However, Mr. Chairman, if that is your goal, then the Copyright Reform Act of 1993 is not the way to achieve it. Your statement introducing the bill describes it as a win-win bill that will eliminate an unnecessary agency, reduce the size of the legislative branch employment and remove bureaucratic obstacles to the enforcement of copyright.

On the surface the bill seems to appeal. But even a brief look behind the political pump reveals that this bill will have the contrary effect. This committee is well aware of the CRT's statutorily mandated areas of responsibilities. Therefore, I would like to briefly state our accomplishments during the year 1992 to show you just a glimpse of our workload and its importance.

During the fiscal year 1992 oral hearing for the 1989, cable royalty distribution alone lasted from October through December. This began September 1991. And distribution of all of the 1989 cable royalties has been completed. We also made a 90-percent partial distribution of the 1990 cable royalties and had to grapple with a complicated motion to dismiss one of the claimants which had based its claim on a unique statutory interpretation.

In February of the same year, the CRT assembled an arbitration panel for the purpose of adjusting the satellite rate, and then reviewed the panel's determination to assess whether it complied with the statutory criteria. Upon finding that the determination was reasonable, CRT adopted and published it in May 1992.

During the same calendar year of 1992 the CRT also held the combined 1989, 1990, 1991 satellite royalty distribution hearing. During May through December 1992 the ČRT had held a paper hearing to determine the new rates and terms for public broadcasting.

In addition to all of the above, during the latter part of 1992 the Tribunal also had to deal with the implementation of the new Audio Home Recording Act, a new and additional responsibility assigned to the CRT by your committee and the Congress just last year. The Tribunal held an informal meeting with the parties af

fected by the new act and issued an advanced notice of rulemaking to implement the act.

Mr. Chairman, most notably, all of this work was accomplished with the limited resources we have, with the Tribunal's total staff of nine, including the three Commissioners present here today—although my two colleagues were not there for the most of

year. Though Congress appropriated funds for 18 positions 16 years ago, our total staff of 9 are fewer in number today than when wethe first Tribunal had a staff of 10 people. Not many Federal agencies can claim that although their responsibilities have increased they operate with fewer people today than when they were created.

Mr. Chairman, in your statement you described the CRT as a broken and unnecessary agency. The CRT's record would dispute your assessment. The only study done by the General Accounting Office at the request of Congress examined the operation of our agency. The GAO concluded in its report that "It is clear the Tribunal was given a very difficult task with no technical support and minimal authority with which to work.” In fact, with few remands all of the CRT's determinations were affirmed by the appellate courts.

Mr. Chairman, in your statement you argued the bill would benefit the taxpayers. I would beg to differ with you. Eighty-six percent of the total current operating budget of $911,000 comes from royalties and only 14 percent or $130,000 from taxpayers. Our total budget is less than 12 of 1 percent, administering approximately $200 million of copyright royalties annually. Just for the record, during the past 16 years the Tribunal distributed over $1 billion in cable royalties alone. The Tribunal is the only pay-as-you-go Federal agency that I know of, with the exception of perhaps the Federal Reserve Board.

The Appropriations subcommittee chairman, Mr. Vic Fazio, has referred to the agency as exemplary in frugality and has regularly lauded the Tribunal's efficiency and professionalism. In the words of Chairman Fazio during the 1993 appropriations hearing, he said, "When you think of all the money adjudication costs, it is an incredible total and small amount of public funds to make it all happen. You, CRT, are really doing the job. You have not taken advantage at all of the sources of revenue that you have coming to you. I think everyone on the Tribunal has operated in a very business and professional-like manner.”

Mr. Chairman, you also mentioned that the royalty claimants would benefit from cost savings. A careful review of the proposal discloses that not only will it not save these parties any money, it will likely increase their costs. The bill proposes to impose additional responsibilities on the Register of Copyrights. It is inconceivable that the Register will be able to perform these additional responsibilities without a staff. Unlike the Tribunal which funds 86 percent of its operating costs with the royalties, the Register's cost of operation may have to be fully funded with taxpayer dollars.

There will also be additional costs in setting up the internal working of this new shop, and, of course, dismantling the current Tribunal. Additionally, Mr. Chairman, the use of an arbitration panel has the following drawbacks. No. 1, it would not provide necessary stability to properly perform CRT's current functions. No. 2, arbitrators would not be required to undergo the scrutiny of a Senate confirmation. Such scrutiny serves to weed out potential and actual conflicts of interest in an area which involves hundreds of millions of dollars.

No. 3, since the arbitrator's compensation depends on the length and complexity of the proceeding, unlike Commissioners, whose salaries are not contingent upon these factors, there would be an incentive to prolong the proceeding.

No. 4, since an arbitration panel would not be convened until there is a controversy, the arbitrators would not be available to facilitate settlements, nor would they have the incentive to do so.

No. 5, an arbitration panel's rates would not be any closer to marketplace rates than CRT's rates because the panel would be required to operate under the same statutory restraints that have applied to the Tribunal. Moreover, the panel's rates would not be any closer to marketplace rates than CRT's since CRT has historically made every effort to determine a rate that is as close as possible to a free marketplace.

No. 6, this will also increase the claimants' cost because panel determinations are not binding on future panels. The establishment of precedent by the CRT has been a predominant impetus behind the long history of settlements. In essence, the parties will be reinventing the wheel with each and every proceeding under the proposed bill.

No. 7, an additional detriment is the fact that the panel's decisions may have to be reviewed by the courts.

In addition, Mr. Chairman, transferring CRT responsibilities to the Copyright Office will destroy the independent nature of the entity that not only determines distribution among copyright owners but sets rates for copyright users. Independence from the Copyright Office is essential since the Copyright Office has historically been viewed, rightfully or wrongfully, by industry as the defender of the copyright owner, which would hamper the Copyright Office's ability to perform the most essential role of settlement facilitator.

The Tribunal has always operated with the overriding philosophy that it is an independent agency free from political pressures, engaged in balancing the equities of copyright owners and copyright users based solely on the record evidence placed before it. The CRT has always prided itself on being neither owner friendly nor user friendly, but a complete neutral arbiter.

Mr. Chairman, now this brings me to address your comment on the Commissioners feuding. Mr. Chairman, the subject matter I am about to address is not a pleasant one. However, in view of the fact that your statement reveals certain perceptions of CRT Commissioners and because of the positions my colleagues have taken, I must address them by describing to you some of the circumstances which have prevailed at the Tribunal recently.

My friends and my two colleagues who are seated here today who are recess appointees, as you pointed out, who arrived at the Tribunal simultaneously, asked me as the Chairman of the agency to sign off on the purchase of expensive personal items which the agency did not need. Included were personal computers and printers with additional parts such as modems that were compatible with home

home systems for their private offices, requests for speakerphones, dictaphone equipment. When they were told by myself and the staff administrator the agency had no money to purchase those items, I was told to delay the hearing date of the General Counsel who was already scheduled to arrive, as well as to make cuts from the agency employees' compensation. I objected, but I was outvoted. They requested agency funds for their personal swearing-in reception, which I objected to given our shortage of funds. However, subsequently I was told that they had used ČRT's postage meter for 500-plus invitations for that reception.

It became clear as time passed that one of the Commissioners may be conducting private business for profit within CRT's office. Commissioner Goodman founded a private company called FYI Networks, Inc., shortly before he was nominated to the current position and currently is the president of that company.

Mr. Chairman, with your permission, I have a couple of documents I would like to present to you, and that would be self-explanatory.

Mr. HUGHES. Without objection, it will be so received. Staff will receive the documents.

(The documents follow:)

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