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Mr. HUGHES. You may proceed.

Ms. DAUB. Mr. Chairman, if you take just a few seconds to look at the documents called appendix I and appendix II.

[Pause.] Mr. HUGHES. Have you previously brought this to the attention of the Chair or anybody? Is this the first time I have seen these documents?

Ms. DAUB. Yes, sir.

Mr. HUGHES. Because I don't remember seeing appendix I or appendix II.

Ms. Daub. No, I have not.

Mr. HUGHES. Is there some reason they were not submitted before the hearing?

Ms. Daub. Yes, sir.
Mr. HUGHES. What is that?

Ms. DAUB. Your staff and my colleagues have been in communications and I wasn't sure whether or not that would be communicated back to my colleagues.

Mr. HUGHES. Oh, I see. OK, you may proceed.

Ms. DAUB. If you refer appendixes I and II you will note that FYI Network, Inc., is located in the same office suite as one of the law firms which come before us to collect millions of dollars. These documents raise conflict of interest concerns. We will soon be engaging in 1990 cable distribution hearings and this law firm will come before us to argue for their clients.

I would also like you to take a minute to read appendix I, and you will note that this document came through CRT's fax machine. Mr. Chairman, this is only one example.

(Pause.) Mr. HUGHES. You may proceed. Ms. DAUB. Thank you. Conducting his private business in CRT's office often interferes with the agency's own work. Mr. Chairman, as you can see from appendix III Commissioner Goodman is the same person who wrote that article, where he calls for the abolishment of the Tribunal and calls the agency "a bureaucratic Energizer bunny which has outlived its usefulness but keeps on going and going

Moreover, my two colleagues signed off on each other's financial disclosure forms and forwarded them to the Government Ethics Office. As you are aware, these forms should have been reviewed and signed by an independent reviewer.

My two colleagues make up the majority vote in the agency, and they have attempted to change the internal rules to meet their own needs. Whenever I have objected and raised concerns with respect to the legality or legal matters, I was accused of not following majority rule. It seems to me that the temporary nature of the Commissioners tenure provide fertile ground for potential abuse. It is even more dangerous where the recess appointees make up the majority. When one reads my colleagues' letters calling for the abolishment and/or reform of the Tribunal, to the public they would appear very heroic. However, their actions are rather questionable, to be completely candid. I could not believe this is the same Mr. Goodman who lobbied long and hard to be confirmed for a full 7-year term, the same Mr. Goodman who is using the offices of the Tribu

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nal and government equipment for his personal business. Surely if the Tribunal is to be abolished there are two distinct potential advantages my two colleagues might have:

No. 1. They will maximize their stay at CRT. Their recess appointment could end at any time with the President's own appointees. But the chance of the President appointing their replacements is reduced drastically if the Tribunal is the target for abolishment.

No. 2. The 2-year ban from lobbying one's own agency for government officials after their termination of employment would not exist if the function of CRT is under another government agency. Mr. Goodman then would be free to lobby and the agency's abolishment may very well boost his business as the communications industry expert. Your bill, Mr. Chairman, unfortunately would work favorably for Mr. Goodman's self-interest.

It should be said, as unnecessarily difficult as it has been, notwithstanding the tension created by the conduct, the substantive work of the Tribunal has been discharged with high quality and on time. Mr. Chairman, there are no tax dollars to be saved, no downsizing of government to be achieved, no cost savings in setting disputes for the claimants except perhaps losing the current independent nature of the entity, lose the negotiating facilitating capacity by transferring CRT duties to the Copyright Office, it will likely lead to some difficult disruption.

However, Mr. Chairman, I do understand that these are difficult times for our country. Therefore, I offer the following recommendations:

First, fully fund the Tribunal's budget from royalties. This financing method was originally proposed by former Legislative Appropriations Subcommittee member, Congressman Clair Burgener of California, as a means of reducing the tax burden. I believe that this proposal will find support in the industry, and some of the members of the industry have already expressed their support. This amount will be far less than additional arbitration and litigation costs that would be forced upon the claimants by the proposed changes. It is a small price to pay to ensure objectivity and independence of important determinations.

Second, the change should be accompanied by the additional modification of the current statute to force the staggering of the Commissioners terms. Mr. Chairman, this way the Tribunal will not be put into a vulnerable position when there is only one vacancy at a time. Therefore, I suggest that the staggering be every 2 years.

Mr. Chairman, I truly believe that the Tribunal is a worthwhile agency. I strongly ask that you reconsider your bill.

Mr. Chairman, that concludes my statement. Thank you for your attentiveness to my remarks, and I look forward to your questions.

Mr. HUGHES. Thank you, Ms. Daub.
[The prepared statement of Ms. Daub follows:)

STATEMENT OF CINDY DAUB

CHAIRMAN

COPYRIGHT ROYALTY TRIBUNAL

L. Introduction

Mr. Chairman and Members of the Subcommittee, I too watched with 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. Mr. Chairman, if that is truly your goal, then the Copyright Reform Act of

1993 (Bill) is not the way to achieve it.

At this point, I would like to note that this is my own personal statement. It would

have been preferable to have an agency statement, but all three Commissioners differ in

their positions. Appea

with me are my two colleagues, Commissioners Bruce Goodman

and Edward Damich. Also present is Linda Bocchi, the Copyright Royalty Tribunal's

General Counsel.

Your statement, introducing the BW, describes it as a win-win bill that will eliminate

an unnecessary agency, reduce the size of legislative branch employment, and remove

bureaucratic obstacles to the enforcement of copyright. On the surface, the Bill seems

appealing, but even a brief review of this Bill reveals that it will bave the contrary effect.

II. The Tribunal's LS2 Accomplishments

The Tribunal is an agency that has responsibility for implementing five statutory

licenses, of which it actively implements four, and the new Audio Home Recording Act of

1992. During fiscal year 1992, with regard to the cable statutory locase, the Tribunal held

over a month of hearings to determine the distribution of the 1989 cable royalties and

ordered distribution of all the 1989 cable royalties. The Tribunal also made a partial

distribution of the 1990 cable royalties and grappled with a motion to dismiss one of the

claimants, which had based its claim on a unique statutory interpretation.

With regard to the satellite statutory license, the Tribunal assembled an arbitration

panel for the purpose of adjusting the rate, and reviewed the papel's determination to

assess whether it complied with the statutory criteria. Upon finding that the determination

was reasonable, the Tribunal adopted it.

During the calendar year 1992, the Tribunal also held a proceeding to determine

distribution of the combined 1989-1991 satellite royalties. This proceeding was unique in

that it required the holding of a bifurcated Phase I proceeding.

Stage 1 of Phase I included a prebearing conference and a "paper" hearing. Stage

I required resolution of a complicated legal issue. The Tribunal bifurcated the Phase I

proceeding in the hope that resolution of this, interlocutory but significant, matter would

result in the parties reaching a universal settlement as to the distribution of the royalties.

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