[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Rules and Regulations]
[Pages 57935-57938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28321]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201
[Docket No. RM 93-3A]
Cable and Satellite Carrier Royalty Refunds
AGENCY: Copyright Office; Library of Congress.
ACTION: Final rule.
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SUMMARY: The Copyright Office is adopting final rules with respect to
certain royalty refund procedures for the cable and satellite carrier
compulsory licenses. The Office is also implementing a ``close-out''
procedure for royalty accounts that will permit the Register of
Copyrights to close-out the royalty payments account for a calendar
year four years after the close of that year, and treat any funds
remaining in such account and any subsequent deposits that would
otherwise be attributable to that calendar year as attributable to the
succeeding calendar year.
EFFECTIVE DATE: December 26, 1995.
FOR FURTHER INFORMATION CONTACT: Marilyn J. Kretsinger, Acting General
Counsel, or William Roberts, Senior Attorney for Compulsory Licenses,
Copyright Arbitration Royalty Panel (CARP), PO Box 70977, Southwest
Station, Washington, DC 20024. Telephone: (202) 707-8380. Telefax:
(202) 707-8366.
SUPPLEMENTARY INFORMATION: On June 28, 1993, the Copyright Office
published a Notice of Proposed Rulemaking (NPRM) regarding certain
refund procedures for the cable and satellite carrier compulsory
licenses, 17 U.S.C. 111 and 119, respectively. 58 FR 34544 (June 28,
1993). Specifically, the Office's proposed rules involved three issues:
(1) The appropriate date to begin the time period for requesting
refunds; (2) the proper basis upon which a refund request may be made;
and (3) the close-out of accounting period royalty pools after a
specific time period.
Existing Copyright Office regulations specify the time periods
within which parties seeking refunds of compulsory license royalties
must submit their requests. In the case of the cable compulsory
license, a cable operator has 60 days from the last day of the filing
period for the Statement of Account in which to request a refund. 37
CFR 201.17 (j)(3). Under the satellite carrier compulsory license, the
operator has 30 days from the last day of the filing period for the
Statement of Account to request a refund. 37 CFR 201.11 (g)(3). These
rules were based on refund requests being made after timely filing. In
order to provide a refund request period for late and amended filings,
the Office proposed in its NPRM that the 60 and 30 day periods be
amended to run either from the applicable filing period or from the
date of receipt at the Copyright Office of the royalty payment that is
the subject of the request. 58 FR 34545. Copyright Office regulations
require that a request for a refund must be ``in writing, must clearly
identify its purpose,'' and must be received within the prescribed time
period. 37 CFR 201.17(j)(3) and 201.11(g)(3). In practice, the Office
has long interpreted its refund regulation to deny a request for a
refund where there has been no clear overpayment of the statutory
royalty. In order to confirm this practice, the NPRM proposes to amend
the satellite carrier and cable regulations to require that refund
requests must provide a ``clear basis'' upon which a request can be
granted. 58 FR 34546.
Finally, the NPRM proposed a change to the Office's longstanding
policy of making refunds only from the calendar year account in which
the overpayment was made. The regulation would adopt language included
in the Audio Home Recording Act of 1992 that allows the Register of
Copyrights, in his or her discretion, to close out the royalty payments
account for a calendar year four years after the close of that year,
and to ``treat any funds remaining in such account and any subsequent
deposits that would otherwise be attributable to that calendar year as
attributable to the succeeding calendar year.'' Id.
Comments of the Parties
Four parties submitted comments on the NPRM: National Cable
Television Association (NCTA); Providence Journal Company; Office of
the Commissioner of Baseball (``Baseball'');1 and Copyright Owners
(consisting of Program Suppliers, National Basketball Association,
National Hockey League, the Music Claimants, the Devotional Claimants
and National Public Radio).
\1\ Baseball's comments were submitted after the July 28, 1993,
closing date of the comment period, but the Copyright Office has
nonetheless included them in this proceeding.
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Initiation of Time Period
As to when the time period to request refunds should begin, both
Providence Journal and the NCTA support the proposed rule change. NCTA
comments at 2; Providence Journal comments at 4. Copyright Owners,
however, support the rule only for amended filings. ``Copyright Owners
suggest that the proposed language apply only to amended filings. This
would provide predictability with respect to refund requests sought for
original filings, while offering greater flexibility for refunds
related to amended applications.'' Copyright Owners comments at 2.
Copyright Owners additionally suggest that no refunds be permitted from
a royalty year which has been closed out. Id. at 2-3. The effect of the
Copyright Owners' proposal would be to deny a refund request period for
any filings that are later than the sixty day period in the existing
rule and only allow refunds for amended filings in accounting years
which have not been closed out.
Clear Basis for Refund
Copyright Owners are supportive of the proposed rule requiring that
refund requests provide a ``clear basis'' for granting the refund, but
desire a voice in any refund request that raises a policy issue. They
urge the Office to establish procedures that would permit interested
parties to participate in formulating the policy. They further state
that such policy should govern both ``the specific refund request and
any future requests asking for the same or similar relief.'' Id. at 4.
Copyright Owners do not provide any description of the mechanics of the
notice and comment procedure which they propose, beyond mentioning in a
footnote that ``The Office need not institute a rulemaking proceeding
to answer such ad hoc questions. Copyright Owners envision a more
[[Page 57936]]
informal and limited procedure to deal with these individual
questions.'' Id. at 4 n.3.
NCTA opposes the requirement of a ``clear basis'' for refund,
noting that ``the statute and Copyright Office policy are not clear in
their application to numerous fact situations faced by cable
operators'' and that cable operators ``generally may not be aware'' of
existing Copyright Office policy. NCTA comments at 2. NCTA therefore
proposes the opposite of the NPRM; a refund should be allowed unless
there is a ``clear basis'' to deny it.
[W]here there is ambiguity as to what the law requires or
allows, operators should be entitled to a refund provided only that
they make clear the interpretation of the law upon which they rely.
So long as this interpretation is not clearly at odds with the law,
the refund request should be granted. Id. at 3.
Close-Out of Accounting Period
Only the Copyright Owners and Baseball offered an opinion as to the
third issue addressed in the NPRM: creation of a close-out procedure
for accounting periods. While Copyright Owners agreed that close-out
was preferable to the current policy of keeping open all previous year
royalty funds, they offered several changes to the proposed rule.
First, they suggested that the close-out period be changed from four
years to seven years:
Past experience suggests that a four-year closeout period may be
too short in cases where large amounts of late payments are
received. For example, many Gross Receipts Adjustment Schedule
(``GRAS'') payments related to 1986 and 1987-1 were not received
until 1989 and 1990, which was three or four years after the
original deadlines. Had the 1986 and/or 1987 royalty funds been
closed out after four years, those GRAS payments might have been
transferred to a different year's fund. That would have resulted in
the distribution of those royalties to a different group of
individual copyright owners from the copyright owners who received
distribution of the timely 1986 and 1987 royalty payments.
Copyright Owners Comments at 5.
Second, Copyright Owners propose that the decision to close-out an
accounting period not be left to the discretion of the Register of
Copyrights, but that it be done as a matter of course unless ``the
Register, in his or her discretion, decid[es] that a closeout is
inappropriate.'' Id. at 6. Copyright Owners believe this change will
add certainty to the close-out process. Id.
Baseball proposes that the close-out of an accounting period be
tied to the date of final distribution of a calendar year's royalties.
``This would eliminate the administrative costs associated with
multiple distributions which frequently contain (particularly for the
non-MPAA copyright owners) relatively small amounts.'' Baseball
comments at 1. Baseball does support the NPRM's proposal to give the
Register discretion to close an accounting year. Id. at 2.
Decision of the Copyright Office
The Copyright Office has closely examined and reviewed the comments
submitted in this proceeding and, pursuant to its rulemaking authority,
formally adopts the regulations described in the NPRM without change.
For the reasons described below, the Copyright Office concludes that
the proposed rule changes are reasonable and administratively
efficient.
1. Refund Requests
The Office is, therefore, amending 37 CFR 201.17(j)(3)(i),
applicable to the cable license, and 37 CFR 201.11(g)(3)(i), applicable
to the satellite carrier license, to begin the 60 and 30 day time
periods, respectively, within which to request a refund from the ``date
of receipt at the Copyright Office of the royalty payment that is the
subject of the request.'' This rule change maintains the same time
period (30 and 60 days) within which to request a refund, which the
Office has found to be appropriate and reasonable, see NPRM at 58 FR
34544, but allows cable and satellite operators who submit both late
and amended payments to request a refund in accordance with the same
time period which applies to the initial statement of account filings.
As Providence Journal noted, errors are just as likely to occur in
amended and late filings as they are with initial filings.
Consequently, denying a refund period for amended and late filings
would result in an unwarranted hardship to operators. Providence
Journal comments at 3.
Copyright Owners suggested that the proposed refund request rule
not apply to any late filings and payments, and that no refunds at all,
either requested or made as a result of Office examination, be
permitted from an accounting year fund which had been closed-out by the
Register of Copyrights. Copyright Owners comments at 2. The Copyright
Office is not adopting either suggestion. With respect to an effective
denial of refund requests for most late filings and payments, the
Office finds that such a rule would be unnecessarily punitive. The
interest regulations applicable to both cable operators and satellite
carriers already compensate copyright owners for the lost time value of
royalties submitted after the close of a royalty filing deadline. 37
CFR 201.11(h) and 201.17(i)(2). Copyright Owners fail to present any
arguments or evidence as to why further compensation is justified by
denying refund requests for late filings and payments.
Nor do they offer any valid reason for denying refunds from closed-
out accounting periods. Refunds can still be made from the succeeding
accounting years which remain open. Where the potential for large
refund requests remains high, as in 1987 and 1988 when satellite
carriers submitted royalties under the cable compulsory license, the
Register may keep those years open.
2. Clear Basis for Refunds
Both Secs. 201.17(j)(3) and 201.11(g)(3) of the Copyright Office
regulations establish the technical requirements for a refund request
for the cable and satellite carrier compulsory licenses. The adopted
amendments require cable and satellite carrier operators to provide a
``clear basis'' upon which a refund request can be granted. As the
Office stated in the NPRM, these amendments confirm the longstanding
administrative practice of denying a refund request where there has
been no clear overpayment of the statutory royalty. 58 FR 34545.
NCTA objected to the ``clear basis'' requirement on the grounds
that ``Copyright Office policy on certain issues has developed on an
informal basis, through correspondence or development of informal
policies, and cable operators may not be aware of these
interpretations.'' The Office finds this objection to be unpersuasive.
The applicable law and policy which govern a refund request is freely
and readily available from the Copyright Office. Statutory
interpretation developed through rulemakings involving sections 111 and
119 of the Copyright Act are published in the Federal Register; policy
decisions and interpretations made in response to specific refund
requests are available to the public through the letter rulings of the
General Counsel on file in the public reading room of the Licensing
Division of the Copyright Office. Furthermore, access to the
information contained in those letters may be obtained by contacting
the Licensing Division, and inquiries may be made concerning Office
administrative practice and policy by contacting directly either the
Licensing Division or the General Counsel's Office. The information
necessary for a cable or satellite operator to provide a ``clear
basis'' for its refund request is therefore readily available, and lack
of knowledge cannot therefore be a valid objection to the rule
amendments.
[[Page 57937]]
The Copyright Office is not adopting the Copyright Owners'
suggestion of permitting interested parties to play an active role in
deciding refund requests. Congress specifically entrusted the Copyright
Office, through its rulemaking authority, to interpret and apply the
provisions of the compulsory license.2 Additionally, the practical
and legal implications of the Copyright Owner's proposed participation
are in doubt. The Office processes an average of over 300 refunds a
year, and the speed and efficiency of responding to these requests
would be substantially impaired if the Office were required to solicit
comment on each request. Furthermore, should a refund request involve
sufficient policy issues to trigger a notice and comment procedure, it
is seriously questionable whether the ``informal and limited
procedure'' proposed by the Copyright Owners would satisfy the
Administrative Procedure Act. The Copyright Owners did not provide any
supporting evidence or precedent for their recommendation. If a
procedure involves a significant policy shift or interpretation, the
Office already provides an opportunity for notice and comment as it did
in the instant case.
\2\ See 17 U.S.C. 702; see also Cablevision Systems Development
Corp. v. Motion Picture Association of America, Inc., 836 F.2d 599,
610 (D.C. Cir.), cert. denied, 487 U.S. 1235 (1988)(``We think
Congress saw a need for continuing interpretation of section 111 and
thereby gave the Copyright Office statutory authority to fill that
role.'').
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3. Close-Out of Royalty Funds
The Copyright Office is adopting the close-out of royalty funds
regulation for the satellite carrier and cable compulsory licenses. The
regulation is based on the statutory language of section 1005 of the
Audio Home Recording Act of 1992, Public Law No. 102-563, that permits
the Register to close-out the royalty payments account for a calendar
year four years after the close of that year, and to apply remaining
funds and subsequent deposits from that year to the succeeding calendar
year.
Copyright Owners proposed a longer period of seven years to close-
out so as to account for circumstances, such as the 1986-87 GRAS
payments, supra, where large amounts of royalties may be submitted to
the Office more than four years from their original due date. Copyright
Owners comments at 5. Baseball proposed that close-out be tied to the
date of final distribution of a calendar year's royalties. Baseball
comments at 1. The Copyright Office does not believe a longer close-out
period of seven years is necessary, since the Register has discretion
in deciding whether to close a particular calendar year, and concludes
that a tie-in to distribution is too unpredictable, since distributions
do not occur at regular intervals.
In the situation of the GRAS payments described by Copyright
Owners, the Register would not have closed the 1986-87 calendar years
because of the obvious uncertainties surrounding the royalty fund for
those years. While the Register will not be able to predict all
possible effects on a royalty fund with absolute certainty, four years
is adequate time to identify when a difficulty may exist. It is,
therefore, unlikely that large sums of royalties will be submitted to
the Copyright Office after the Register has closed-out an accounting
period. The opposite is true of the approach advocated by Baseball. The
time period necessary to reach a final distribution for a given royalty
calendar year is highly unpredictable. Full settlement may result in
quick distribution; however, it is impossible to predict a certain date
for a final determination of distribution when there is a controversy.
In the years where a full settlement is reached, a final distribution
may occur so quickly as to limit the Register's ability to make a well-
informed decision as to whether the royalty calendar year should be
closed-out. The four year period proposed in the NPRM provides the
uniformity, predictability and administrative efficiency not present in
Baseball's proposal.
The Office is also not adopting Copyright Owner's suggestion that
calendar years be closed-out automatically after four years unless the
Register exercises discretion to keep them open. The presumption that
an accounting year remains open incorporates current policy, which
leaves all years open, and allows the Register to close-out only those
years where changes to the royalty pool remain unlikely. Copyright
owners would not be harmed if only some accounting years were closed-
out, and would gain the benefit of distribution of remaining funds from
those years. The Register's flexibility and ability to deal with
situations like the 1986-87 GRAS payments is also better served by
requiring an affirmative act to close an accounting year, rather than
an affirmative act to keep it open.
List of Subjects in 37 CFR Part 201
Cable systems; Cable compulsory license; Satellite carrier
statutory license; Satellite carriers.
Amended Regulations
In consideration of the foregoing, part 201 of 37 CFR ch. II is
amended to read as follows.
PART 201--GENERAL PROVISIONS
1. The authority citation for part 201 is revised to read as
follows:
Authority: 17 U.S.C. 702, 201.6 is also issued under 17 U.S.C.
408, 409 and 410; Sec. 201.11 is also issued under 17 U.S.C. 119;
Sec. 201.16 is also issued under 17 U.S.C. 116; Sec. 201.17 is also
issued under 17 U.S.C. 111; Sec. 201.19 is also issued under 17
U.S.C. 115; and Sec. 201.24 is also issued under Pub. L. 101-650;
104 Stat. 5089, 5134;
2. In Sec. 201.11, paragraph (c)(4) is added and the first sentence
of paragraph (g)(3)(i) and the introductory text of paragraph
(g)(3)(iii) are revised to read as follows:
Sec. 201.11 Satellite carrier statement of account covering statutory
license for secondary transmissions for private home viewing.
* * * * *
(c) * * *
(4) In the Register's discretion, four years after the close of any
calendar year, the Register may close out the royalty payments account
for that calendar year, and may treat any funds remaining in such
account and any subsequent deposits that would otherwise be
attributable to that calendar year as attributable to the succeeding
calendar year.
* * * * *
(g) * * *
(3) * * *
(i) The request must be in writing, must clearly identify its
purpose, and, in the case of a request for a refund, must be received
in the Copyright Office before the expiration of 30 days from the last
day of the applicable Statement of Account filing period, or before the
expiration of 30 days from the date of receipt at the Copyright Office
of the royalty payment that is the subject of the request, whichever
time period is longer. * * *
* * * * *
(iii) The request must contain a clear statement of the facts on
which it is based and provide a clear basis on which a refund may be
granted, in accordance with the following procedures:
* * * * *
3. In Sec. 201.17, paragraph (c)(4) is added and the first sentence
of paragraph (j)(3)(i) and the introductory text of paragraph
(j)(3)(iii) are revised to read as follows:
[[Page 57938]]
Sec. 201.17 Statements of account covering compulsory licenses for
secondary transmissions by cable systems.
* * * * *
(c) * * *
(4) In the Register's discretion, four years after the close of any
calendar year, the Register may, close out the royalty payments account
for that calendar year, and may treat any funds remaining in such
account and any subsequent deposits that would otherwise be
attributable to that calendar year as attributable to the succeeding
calendar year.
* * * * *
(j) * * *
(3) * * *
(i) The request must be in writing, must clearly identify its
purpose, and, in the case of a request for a refund, must be received
in the Copyright Office before the expiration of 60 days from the last
day of the applicable Statement of Account filing period, or before the
expiration of 60 days from the date of receipt at the Copyright Office
of the royalty payment that is the subject of the request, whichever
time period is longer. * * *
* * * * *
(iii) The request must contain a clear statement of the facts on
which it is based and provide a clear basis on which a refund may be
granted, in accordance with the following procedures:
* * * * *
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 95-28321 Filed 11-22-95; 8:45 am]
BILLING CODE 1410-31-P
