94-2066. Digital Audio Recording Devices and Media; Statements of Account  

  • [Federal Register Volume 59, Number 21 (Tuesday, February 1, 1994)]
    [Unknown Section]
    [Page 0]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 94-2066]
    
    
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    [Federal Register: February 1, 1994]
    
    
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    LIBRARY OF CONGRESS
    
    Copyright Office
    
    37 CFR Part 201
    
    [Docket No. RM 92-8A]
    
     
    
    Digital Audio Recording Devices and Media; Statements of Account
    
    AGENCY: Copyright Office, Library of Congress.
    
    ACTION: Interim regulation with request for comments.
    
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    SUMMARY: The Copyright Office is issuing interim regulations governing 
    the administration of filings under the Audio Home Recording Act of 
    1992 (AHRA). This Act deal with rights with respect to digital audio 
    recording technology (DART), more specifically, parties who import and 
    distribute in the United States, or manufacture and distribute in the 
    United States, any digital audio recording device or digital audio 
    recording medium, are obligated to pay royalties. In addition to 
    sending the royalties to the Copyright Office, the importer or 
    manufacturer must file with the Office Statements of Account that 
    reflect the distribution of digital audio recording devices or media.
    
    DATES: This interim regulation is effective February 1, 1994. Comments 
    should be in writing and received on or before April 4, 1994.
    
    ADDRESSES: If sent by mail, ten copies should be addressed to: 
    Copyright Office, Library of Congress, Department 17, Washington, DC 
    20540. If hand delivered, ten copies should be brought to: Office of 
    the Copyright General Counsel, James Madison Memorial Building, room 
    407, First and Independence Avenue, SE., Washington, DC 20540.
    
    FOR FURTHER INFORMATION CONTACT: Marybeth Peters, Acting General 
    Counsel, U.S. Copyright Office, Department 17, Library of Congress, 
    Washington, DC 20540. Telephone (202) 707-8380.
    
    SUPPLEMENTARY INFORMATION:
    
    I. Background
    
        This document relates to the filing of both quarterly and annual 
    Statements of Account and payment of royalties due under the new DART 
    provisions of the Copyright Code (17 U.S.C. chap. 10). On February 22, 
    1993, we published interim regulations on this subject (58 FR 9544 
    (1993)), and we are now issuing superseding interim regulations.
        It should be noted that the manufacturers and importers covered by 
    the new law are subject to other requirements, in addition to those 
    dealt with here. For example, an obligation to file initial notices to 
    identify the product categories and technologies distributed in the 
    United States is provided by 17 U.S.C. 1003(b), and regulations 
    regarding the filing of initial notices of distribution were issued by 
    the Copyright Office at 57 FR 55464 (Nov. 25, 1992). In addition, 
    manufacturers and importers of digital recording and interface devices 
    must conform to the Serial Copy Management System or equivalent systems 
    as described by 17 U.S.C. 10021 as a condition of distribution in 
    the United States.
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        \1\See S. Rep. No. 294, 102d Cong., 2d Sess. 64 (1992); H. Rep. 
    No. 873, 102 Cong. 2d. Sess., pt. 1, at 19 (1992); and H. Rep. No. 
    873, 102d Cong., 2d Sess., pt. 2, at 18 (1992).
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        With respect to Statements of Account, paragraph (c)(1) of 17 
    U.S.C. 1003 provides:
    
        Any importer or manufacturer that distributes any digital audio 
    recording device or digital audio recording medium that it 
    manufactured or imported shall file with the Register of Copyrights, 
    in such form and content as the Register shall prescribe by 
    regulation, such quarterly and annual Statements of Account with 
    respect to such distribution as the Register shall prescribe by 
    regulation.
    
    Royalty payments are to be calculated in accordance with 17 U.S.C. 1004 
    and sent to the Copyright Office under 17 U.S.C. 1003(c)(3).
        Following issuance in the Federal Register of the 1993 interim 
    regulation regarding Statement of Account filings, the Copyright Office 
    published notice of an informal public meeting to discuss both the 
    interim regulations (58 FR 29001 (May 18, 1993)) and the initial 
    edition of the quarterly Statement of Account form (DART/Q Form). The 
    public meeting was held at the Copyright Office on June 11, 1993. 
    Discussion of comments follows below in section III.
        The DART/Q Form as initially published incorporated practical 
    modifications that were suggested by the parties in their comments on 
    the written interim regulations describing what a Statement of Account 
    should contain.
        In response to comments received from interested parties, we have 
    made some revisions in the 1993 interim regulations, and we are now 
    issuing superseding interim regulations governing the filing of 
    Statement of Account Forms on both a quarterly (Form DART/Q) and an 
    annual (Form DART/A) basis. The regulations provide the filing dates, 
    frequency of filing, and content of the quarterly and annual Statements 
    of Account.
    
    II. Review of 1993 Interim Regulations
    
    A. Quarterly Statements of Account
    
        Most of the comments and explanations accompanying the interim 
    regulations published on February 22, 1993 are still pertinent, but 
    some specific points are addressed here.
    1. Forms
        The 1993 interim regulations proposed four filings per fiscal or 
    calendar year: Three quarterly statements, and a fourth Statement of 
    Account combining the final quarterly statement and the required annual 
    statement. Each manufacturing and/or importing party who distributes 
    digital audio recording products files a quarterly form that contains 
    information concerning product categories, technologies, transfer 
    prices, series and model numbers, and units distributed. Comments we 
    received concerning quarterly Statements of Account are discussed below 
    in section III(A).
    2. Filing Dates and Basis of Filing
        The 1993 interim regulations required Statements of Account to be 
    submitted on either a calendar year or fiscal year basis, at the 
    election of the filing party. Under our proposal the elected filing 
    basis was to remain in effect for three years, with any change in the 
    basis to be permitted only after a request to and approval by the 
    Copyright Office. Comments on this provision are discussed below in 
    section III(A)(2).
        The 1993 interim regulations require quarterly Statements of 
    Account to be filed at intervals of three months. During the first 
    stage of implementation of the AHRA the Office provided a transitional 
    schedule that did not require a separate quarterly DART statement for 
    the last part of 1992. The first quarterly statement covered the period 
    from October 28, 1992 (the date of enactment of the AHRA) to the end of 
    at least one full quarter, and was due either within 45 days following 
    the end of the first full quarter after October 28, 1992, or by May 15, 
    1993, whichever was later. Later quarterly statements are due within 45 
    days after the end of the relevant quarters.
        Annual Statements of Account should reconcile quarterly figures and 
    provide information regarding yearly activity. Annual statements are 
    due two months after the close of the calendar or fiscal year covered 
    by the statement. Comments regarding annual Statements of Account are 
    discussed in section III(B).
    3. Late Payments, Overpayments, Underpayments, and Refunds
        The 1994 interim regulations allow for corrections of quarterly and 
    annual Statements of Account to rectify errors in payments of 
    royalties. An underpayment of five dollars ($5.00) or less will require 
    no action by the Office. The Licensing Division will notify the 
    manufacturing or importing party of underpayments of more than five 
    dollars so that party can make the necessary corrections or amended 
    filings.
        If royalty payments are not made on time, copyright owners suffer 
    from loss of the current value of funds. Therefore, interest will be 
    imposed on underpayments and late payments.
        The earlier interim regulations provide for refunds to be made by 
    the Copyright Office in connection with overpayments accompanying 
    annual Statements of Account. These superseding interim regulations 
    will also allow refunds of overpayments accompanying quarterly DART 
    statements.
    4. Credits for Returns or Exports
        The earlier 1993 interim regulations permitted credits to be taken 
    for returned or unsold recording devices; the credit was to be taken in 
    the first annual Statement of Account covering the actual period when 
    the recording devices were returned, or in the next succeeding annual 
    Statement of Account. The Copyright Office has decided to modify this 
    policy in this superseding interim regulation.
        As revised, this new interim regulation permits manufacturers and 
    importers to take a credit for returns of both recording devices and 
    media on either quarterly or annual Statements of Account. Credits may 
    be taken when products are exported or returned to the manufacturers or 
    importers as unsold or defective. Whenever returned products for which 
    credit has been taken are later distributed in the United States, the 
    statutory royalty must be paid, and the distribution must be reported 
    on the appropriate Statement of Account. The Copyright Office has also 
    decided to allow a credit for exports. These regulations give filing 
    parties two years to take a credit.
    5. Access to Statements of Account
        In accordance with 17 U.S.C. 1003(c)(2), quarterly and annual 
    Statements of Account will not be made part of the Copyright Office's 
    public records or directly or indirectly disclosed to the general 
    public. Specific regulations governing confidential access by 
    interested parties, as defined in the AHRA, will be issued separately.
    
    III. Discussion of Comments
    
    A. Quarterly Statements of Account
    
        The Office received two comments responding to the interim 
    regulations published on February 22, 1993. One was filed by the 
    American Institute of Certified Public Accountants (AICPA), and the 
    other was from the DART Coalition. In addition, the oral comments made 
    at the Office's public meeting on this subject are essentially 
    reflected in the parties' written comments, which are summarized here.
    1. The American Institute of Certified Public Accountants (AICPA)
        The AICPA is a national professional association representing 
    certified public accountants (CPA's) in public practice, industry, 
    government, and education. The group aids in developing standards for 
    audits and other services provided by CPAs, in administering the 
    Uniform CPA Examination, and in monitoring and enforcing compliance 
    with the profession's technical and ethical standards. The AICPA also 
    monitors and analyzes federal regulations that may affect accounting 
    and related matters.
        The AICPA did not comment on the quarterly form. Their comments 
    related to CPAs' audits of annual DART Statements of Account, and are 
    discussed below at section III(B).
    2. The DART Coalition
        The DART Coalition consists of representatives of the Electronic 
    Industries Association, the National Music Publishers' Association, 
    Inc. and its subsidiary The Harry Fox Agency, Inc., the Recording 
    Industry Association of America, the Home Recording Rights Coalition, 
    the Alliance of Artists and Recording Companies, the American Society 
    of Composers, Authors and Publishers, Broadcast Music, Inc., SESAC, 
    Inc., the American Federation of Musicians of the United States and 
    Canada, the American Federation of Television and Radio Artists, 
    Copyright Management, Inc., and the Songwriters Guild of America.
        The Copyright Office had proposed in the 1993 interim regulation 
    that a filing party be locked into election of a calendar or fiscal 
    filing basis for three years. The Coalition suggested that, where a 
    filing party shows good cause, it be allowed to change its accounting 
    period (calendar or fiscal) at any time. The DART Coalition noted that, 
    if its suggestion were to be accepted, a filing party should not be 
    allowed to change its filing status to alter the total aggregate 
    royalty payments. They suggested that the regulations require 
    notification of changes in filing status to include provisions to 
    equalize total aggregate payments under the new basis with those that 
    would have been made under the earlier basis. DART Coalition comments 
    at 3.
        The DART Coalition also suggested clarification with regard to 
    products subject to Statements of Account and royalty payment 
    obligations: except for ``credits for returns and exported merchandise 
    and subsequent obligations with respect to products for which credits 
    have been claimed,'' the obligation should apply only to units first 
    distributed in the United States during the appropriate filing period. 
    DART Coalition comments at 5.
        The DART Coalition suggested that in the reporting space for 
    tracking audio recording devices and media manufactured and distributed 
    or imported and distributed by a party, the terms ``product category'' 
    and ``technology'' be expressed in the plural, and ``space should be 
    provided for multiple product categories and technologies.'' DART 
    Coalition comments at 6.
        In addition, the group suggested modification of the requirements 
    governing presentation of model number and transfer price information 
    to permit aggregation of products of the same model (or series) number 
    with the same applicable transfer price. DART Coalition comments at 6-
    7.
        Regarding information to be provided for stand-alone devices and 
    devices first distributed with other devices, the Coalition indicated 
    that the Office had not provided enough fee codes in the quarterly form 
    to cover all the types of devices that have to be reported. DART 
    Coalition comments at 7-9.
        The Coalition also suggested that clarification be made as to when 
    royalties are payable. It recommended that language in the Office's 
    final regulations should indicate that royalties are due upon the 
    filing of quarterly or annual Statements of Account, not upon 
    distribution. DART Coalition comments at 9. In addition, the Coalition 
    suggested that because multiple transfer prices may apply to a given 
    product series or model, the language in the interim regulations should 
    be modified to provide for this possibility. Id.
        Finally, the Coalition suggested that, regarding treatment of 
    monies that may be attributable to 1992 activities, any initial 
    quarterly Statements of Account that include partial fiscal or calendar 
    quarters ending in 1992 include estimates of payments attributable to 
    1992 and 1993 quarters. DART Coalition comments at 10.
    
    B. Annual Statements of Account
    
        Comments about annual Statement of Account forms were based upon 
    the language of the 1993 interim regulations governing the contents of 
    annual forms, rather than a draft of the form itself.
    1. The American Institute of Certified Public Accountants
        AICPA argued that the CPA who audits an annual statement should be 
    required to audit a separate ``schedule of royalties'' (a document not 
    anticipated or mentioned in the 1993 interim regulation) rather than 
    the annual statement itself. AICPA comments at 1. The comments 
    suggested that this separate schedule should relate only to the number 
    of devices and media distributed, their transfer prices, and the 
    cumulative amount of royalties. AICPA said that CPAs should not be 
    associated with the information contained in the fourth quarterly 
    statement or the entire annual statement, but instead should comment 
    only on the data that has been audited. AICPA wrote:
    
        [W]e recommend that in addition to the Annual Statement of 
    Account, management prepares a ``schedule of royalties'' which the 
    CPA would audit. The appropriate information would be taken from the 
    Annual Statement of Account and, therefore, not result in additional 
    cost.
    
    AICPA comments at 2. AICPA proposed that the auditing CPA should also 
    be permitted to ``express a qualified or adverse opinion or a 
    disclaimer of an opinion, and other comments.'' AICPA comments at 1. 
    This would meet generally accepted auditing standards, and would apply 
    in situations where conditions or circumstances beyond the auditor's 
    control cannot be audited, corrected, or honestly vouched for by the 
    CPA.
        In addition, AICPA proposed that the language in the illustrative 
    CPA report which the Office had included in the 1993 interim 
    regulations be revised to be ``consistent with current authoritative 
    auditing literature.'' Id. Sample language was suggested to provide 
    information about accurate usage of terms associated with accounting 
    procedures. Regarding correct use of terms of art, or language used by 
    CPAs in the exercise of their duties, the AICPA suggested correction of 
    proposed language of section (4)(ii)(A) of the 1993 interim regulation. 
    The proposed language showing that CPAs ``certify'' financial 
    statements should be changed, because CPAs actually ``audit'' such 
    documents. The two terms have different meanings that give CPAs 
    different responsibilities. AICPA comments at 3.
        Finally, the AICPA requested extending the filing date for annual 
    audited Statements of Account from two months to 90 or 120 days because 
    CPAs are busiest during January and February. AICPA comments at 4.
    2. The DART Coalition
        The Coalition commented on the 1993 interim regulations' provisions 
    governing the annual summary of the number of devices and media 
    manufactured or imported and distributed, and recommended several 
    changes. Rather than follow the Office's proposed breakdown of the 
    summary into ``product category,'' ``technology,'' and ``model 
    number,'' the group preferred an integrated summary based on models 
    within each category and technology. DART Coalition comments at 13.
        The Coalition also commented on the provision on credits for 
    returns or exports. It was suggested that the credit provision be
    
        * * * clarified to make clear that credits are applicable to 
    units on which a royalty payment has been made by the manufacturing 
    party that are (a) returned to the manufacturing party less than two 
    years following first distribution by the manufacturing party and 
    (b) originally `distributed' (i.e., transferred by the manufacturing 
    party for ultimate transfer to consumers in the United States), 
    which are thereafter exported by the manufacturing party within two 
    years following first distribution. A credit for exports would, 
    therefore, arise where the manufacturing party, after an initial, 
    internal distribution on which a royalty payment has been made, 
    subsequently exports.
    
    DART Coalition comments at 14-15. Further clarification was suggested 
    to emphasize that a royalty payment is not triggered until distribution 
    takes place, and that, if a product is never distributed, no royalty is 
    paid and no need exists for a credit. DART Coalition comments at 15. In 
    addition, the Coalition asserted that an individual listing of returned 
    or exported digital audio recording products, as suggested by the 
    Office, would not be as efficient as presenting information by model, 
    with transfer price and applicable royalty credit ``in a format 
    comparable to that provided for the quarterly Statement of Account.'' 
    DART Coalition comments at 16.
        The Coalition had no comments, at the time of filing its comments 
    on the 1993 interim regulation, regarding accounting certification.
    
    IV. Public Meeting
    
        On June 11, 1993, the Copyright Office held a public meeting 
    intended to exchange comments and information regarding the quarterly 
    Statement of Account as proposed in the 1993 interim regulations and as 
    published in the initial version of the DART/Q Form. Comments were 
    invited as well about the annual Statement of Account form, which had 
    been discussed in the interim regulations, but had not yet been 
    published. 58 FR 29001 (May 18, 1993). The meeting was informal and no 
    recording was made of the discussion, much of which covered points 
    raised in the previously-submitted written comments.
        One new matter was raised: The possible use of spreadsheets as part 
    of the Statement of Account reporting form. The Office considers this a 
    suggestion that should be explored, but believes it does not need to be 
    incorporated in the regulations. The Licensing Division is currently 
    discussing the use of computer-generated forms with interested parties.
    
    V. Policy Decisions
    
        The Copyright Office has examined our 1993 interim regulations in 
    light of the comments received. We have accepted most of the 
    suggestions made by the parties, noting that they involve solutions to 
    practical problems and that the AHRA itself is the result of a 
    cooperative agreement among the interested parties.
        The 1993 interim regulations published in 57 FR 9544 (Feb. 22, 
    1993), are superseded by this second set of 1994 interim regulations. 
    Several important modifications and additions are incorporated, 
    including treatment of the auditor's report to accompany the annual 
    Statement of Account, and fine tuning of the specific contents of 
    quarterly and annual statements. We have also decided to provide for 
    credits and for refunds on a quarterly as well as an annual basis, for 
    both devices and media, and to extend the credit to situations where 
    the products are exported. We also eliminate the former requirement 
    that a manufacturing or importing party filing DART statements is 
    locked into its choice of a filing basis for three years unless 
    permission to change is sought from and granted by the Register of 
    Copyrights. Although parties filing DART statements must note on the 
    forms whether they are filing on a calendar or a fiscal year basis, 
    changes in filing basis may be made by notifying the Register at least 
    two months before filing on the changed basis, with a written statement 
    of reasons as to why the change is to be made and a statement that such 
    a change will not affect the aggregate royalty due under the earlier 
    basis.
        Based upon AICPA's recommendations concerning appropriate auditing 
    terminology and procedures, the Copyright Office is adopting procedures 
    for the primary auditor's report that allow the auditor to make his or 
    her report either on or attached to the DART/A Form.
        The DART Coalition's concerns regarding the manner in which 
    products are to be aggregated on the Statements of Account by product 
    and technology has been addressed by clarifying that the Statement of 
    Account permits the reporting of each unique combination of product 
    category, technology, series or model number, fee code, source code, 
    and transfer price.
        The Office also received comments during its rulemaking proceeding 
    RM 93-2, Auditing of and Confidential Access to Statements of Account, 
    that should be noted. The Electronic Industries Association (EIA), 
    commented that an audit may cost a party thousands of dollars, and 
    could ``create a barrier that would keep small manufacturers or 
    importers out of the digital audio market,'' a negative result not 
    contemplated by the Act. EIA comments at 17. EIA suggested that small 
    manufacturers or importers would benefit from an elective exemption 
    from the Act's audit requirement. The exemption would be available for 
    ``filers that either (i) Do not engage an independent CPA to conduct an 
    annual financial audit or (ii) file an annual statement of account 
    showing a royalty payment due of less than five thousand dollars 
    ($5,000).'' Id. The Office has considered this proposal, but has 
    concluded that it should not provide such a waiver in these regulations 
    covering the primary audit.
        In an effort to facilitate easy and accurate filing of Statements 
    of Account, the Office has revised the DART/Q Form since its original 
    issue. Copies of the most current DART/Q and the new DART/A Forms are 
    available upon writing the Licensing Division, Copyright Office, 
    Library of Congress, Washington, DC 20557, by calling (202) 707-8150 or 
    by facsimile (202) 707-0905. Forms may be requested via facsimile for 
    informational purposes, but facsimile copies may not be submitted to 
    the Office.
    
    List of Subjects in 37 CFR Part 201
    
        Copyright, Digital audio recording products.
    
    Interim Regulations
    
        In consideration of the foregoing, the Copyright Office is amending 
    part 201 of 37 CFR chapter II, in the manner set forth below.
    
    PART 201--[AMENDED]
    
        1. The authority citation for part 201 continues to read as 
    follows:
    
        Authority: Sec. 702, 90 Stat. 2541; 17 U.S.C. 702; Sec. 201.28 
    is also issued under Pub. L. 102-563, 106 Stat. 4237.
    
        2. Section 201.28 is revised to read as follows:
    
    
    Sec. 201.28  Statements of Account for digital audio recording devices 
    or media.
    
        (a) General. This section prescribes rules pertaining to the filing 
    of Statements of Account and royalty fees in the Copyright Office as 
    required by 17 U.S.C. 1003(c) and 1004, in order to import and 
    distribute, or manufacture and distribute, in the United States any 
    digital audio recording device or digital audio recording medium.
        (b) Definitions. For purposes of this section, the following 
    definitions apply:
        (1) Annual statement of account is the statement required under 17 
    U.S.C. 1003, to be filed no later than two months after the close of 
    the accounting period covered by the annual statement.
        (2) Device and medium have the same meaning as digital audio 
    recording device and digital audio recording medium, respectively, have 
    in 17 U.S.C. 1001.
        (3) Digital audio recording product means digital audio recording 
    devices and digital audio recording media.
        (4) Generally accepted auditing standards (GAAS), means the 
    auditing standards promulgated by the American Institute of Certified 
    Public Accountants.
        (5) Manufacturing or importing party refers to any person or entity 
    that manufactures and distributes, and/or imports and distributes, any 
    digital audio recording device or digital audio recording medium in the 
    United States, and is required under 17 U.S.C. 1003 to file with the 
    Copyright Office quarterly and annual Statements of Account.
        (6) Product category of a device or medium is a general class of 
    products made up of functionally equivalent digital audio recording 
    products with substantially the same use in substantially the same 
    environment, including, for example, hand-held portable integrated 
    combination units (``boomboxes''); portable personal recorders; stand-
    alone home recorders (``tape decks''); home combination systems (``rack 
    systems''); automobile recorders; configurations of tape media 
    (standard cassettes or microcassettes); and configurations of disc 
    media, such as 2\1/2\ inch, 3 inch, or 5 inch discs.
        (7) Primary auditor is the certified public accountant retained by 
    the manufacturing or importing party to audit the amounts reported in 
    the annual Statement of Account submitted to the Copyright Office. The 
    primary auditor may be the certified public accountant engaged by the 
    manufacturing or importing party to perform the annual audit of the 
    party's financial statement.
        (8) Quarterly statement of account is the statement accompanying 
    royalty payments required under 17 U.S.C. 1003, to be filed for each of 
    the first three quarters of the accounting year, and no later than 45 
    days after the close of the quarterly period covered by the statement.
        (9) Technology of a device or medium is a digital audio recording 
    product-type distinguished by different technical processes for 
    digitally recording musical sounds, such as digital audio tape 
    recorders (DAT), digital compact cassettes (DCC), or recordable compact 
    discs, including minidiscs (MD).
        (10) Distribute, manufacture, transfer price, and serial copying 
    have the meanings set forth in 17 U.S.C. 1001.
        (c) Accounting periods and filing deadlines. (1) Election of filing 
    basis. Statements of Account may be filed on either a calendar or 
    fiscal year basis at the election of the manufacturing party. The 
    election of a calendar or fiscal year basis must be made when the 
    manufacturing or importing party files its first quarterly Statement of 
    Account by appropriate designation on the Form DART/Q submitted. 
    Thereafter the specific calendar or fiscal-year accounting period must 
    be designated on each quarterly Statement of Account. The filing basis 
    may be changed at any time upon notification in writing to the Register 
    of Copyrights, accompanied by a statement of reasons as to why the 
    change is to be made and a statement that such change will not affect 
    the aggregate royalties due under the earlier basis. The notification 
    of change in filing basis must be made at least two months before the 
    date the next quarterly Statement of Account is due to be filed.
        (2) Quarterly filings. Quarterly Statements of Account shall be 
    filed on Form DART/Q and shall cover a three-month period corresponding 
    to the calendar or fiscal year of the filing party. A quarterly 
    statement shall be filed no later than 45 days after the close of the 
    period it covers.
        (3) Annual filings. Annual Statements of Account shall be filed on 
    Form DART/A and shall cover both the fourth quarter of an accounting 
    year and the aggregate of the entire year corresponding to the calendar 
    or fiscal accounting year elected. An annual statement shall be filed 
    no later than two months after the close of the period it covers. As a 
    transitional measure, however, the first annual Statement of Account 
    filed after October 28, 1992, is not due until March 1, 1994, or two 
    months after the end of the calendar or fiscal year in which the 
    manufacturing or importing party first filed a quarterly Statement of 
    Account, whichever is later. The first annual Statement of Account 
    shall cover the entire period from October 28, 1992, to the end of the 
    full accounting year. The appropriate royalty payment, calculated 
    according to the instructions contained in Form DART/A, shall accompany 
    the annual Statement of Account covering royalties due for the filing 
    year: that is, royalties for the fourth quarter and any additional 
    royalties that are due because of adjustments in the aggregate amounts 
    of devices or media distributed.
        (4) Early or late filings. Statements of Account and royalty fees 
    received before the end of the particular accounting period covered by 
    the statement will not be processed by the Office. The statement must 
    be filed after the close of the relevant accounting period. Statements 
    of Account and royalty fees received after the 45-day deadline for 
    quarterly statements or the two month deadline for annual statements 
    will be accepted for whatever legal effect they may have and will be 
    assessed the appropriate interest charge for the late filing.
        (d) Forms. (1) Each quarterly or annual Statement of Account shall 
    be submitted on the appropriate form prescribed by the Copyright 
    Office. Computation of the royalty fee shall be in accordance with the 
    procedures set forth in the forms and this section. Statement of 
    Account forms are available from the Licensing Division, Library of 
    Congress. Forms and other information may be requested from the 
    Licensing Division by facsimile transmission (FAX), but copies of 
    Statement of Account forms transmitted to the Office by FAX will not be 
    accepted.
        (2) Forms prescribed by the Copyright Office are designated 
    Quarterly Statement of Account for Digital Audio Recording Products 
    (Form DART/Q) and Annual Statement of Account for Digital Audio 
    Recording Products (Form DART/A).
        (e) Contents of quarterly Statements of Account. (1) Quarterly 
    period and filing. Any quarterly Statement of Account shall cover the 
    full quarter of the calendar or fiscal accounting year for the 
    particular quarter for which it is filed. A separate quarterly 
    statement shall be filed for each quarter of the first three quarters 
    of the accounting year during which there is any activity relevant to 
    the payment of royalties under 17 U.S.C. 1004. The annual Statement of 
    Account identified in paragraph (f) of this section incorporates the 
    fourth quarter of the accounting year.
        (2) General content. Each quarterly Statement of Account shall be 
    filed on Form DART/Q, the ``Quarterly Statement of Account for Digital 
    Audio Recording Products,'' and shall include a clear statement of the 
    following information:
        (i) A designation of the calendar or fiscal year of the annual 
    reporting period;
        (ii) A designation of the period, including the beginning and 
    ending day, month, and year of the period covered by the quarter;
        (iii) The full legal name of the manufacturing and/or importing 
    party, together with any ``doing-business-as'' names used by such 
    person or entity for the purpose of conducting the business of 
    manufacturing, importing, or distributing digital audio recording 
    products;
        (iv) The full mailing address of the manufacturing or importing 
    party, including a specific number and street name, or rural route and 
    box number, of the place of business of the person or entity. A post 
    office box or similar designation will not be sufficient for this 
    purpose except where it is the only address that can be used in that 
    geographic location;
        (v) A designation of the manufacturing or importing party status, 
    i.e., ``Manufacturer,'' ``Importer,'' or ``Manufacturer and Importer;''
        (vi) The designation ``Product Categories'' together with the 
    product categories of the digital audio recording products manufactured 
    or imported and distributed during the quarter covered by the 
    statement;
        (vii) The designation ``Technologies'' together with the 
    technologies of the digital audio recording products manufactured or 
    imported and distributed under the AHRA during the quarter covered by 
    the statement;
        (viii) The designation ``Series or Model Number'' followed by the 
    model or series numbers of the digital audio recording products 
    manufactured or imported and distributed under the AHRA during the 
    quarter covered by the statement;
        (ix) The ``fee code'' associated with the product;
        (x) The ``source code'' for the product category;
        (xi) The ``transfer price'' of the product;
        (xii) The ``number of units distributed'' for each product;
        (xiii) The ``minimum fee per unit'' for each product;
        (xiv) The statutory royalty ``rate'' for digital audio recording 
    devices or media;
        (xv) The ``rate fee'' for each product;
        (xvi) The appropriate ``maximum fee per unit'' for each product;
        (xvii) The ``maximum fee'' for each product; and
        (xviii) A computation of the total royalty payable for the quarter 
    covered by the statement. Filing parties may not round off the figures 
    they list in Space C, the computation section of the form, except for 
    the figure representing the total royalty fee due; in that case, 
    numbers ending in 50 to 99 cents may be rounded up to the next dollar, 
    and numbers ending in one to 49 cents may be rounded down to the next 
    dollar;
        (3) Royalty payments and accounting. (i) The royalty specified in 
    17 U.S.C. 1004 shall accompany the quarterly and annual Statements of 
    Account. No royalty is payable for redistribution of the same product 
    item unless a credit has been taken for such items. Where royalties are 
    payable for the period covered by the statement, the Statement of 
    Account shall contain the following information for each unique 
    combination of product category, technology, series or model number, 
    fee code, source code, and transfer price:
        (A) The total number of digital audio recording media distributed, 
    multiplied by the statutory royalty rate of three percent (3%) of the 
    transfer price;
        (B) The total number of digital audio recording devices distributed 
    for which the statutory royalty rate of two percent (2%) of the 
    transfer price is payable, multiplied by such percentage rate of the 
    transfer price;
        (C) The total number of digital audio recording devices distributed 
    for which the statutory maximum royalty is limited to eight dollars 
    ($8.00), multiplied by such eight dollar amount;
        (D) The total number of digital audio recording devices distributed 
    for which the statutory maximum royalty is limited to twelve dollars 
    ($12.00), multiplied by such twelve dollar amount; and
        (E) The total number of digital audio recording devices distributed 
    for which the statutory minimum royalty is limited to one dollar 
    ($1.00), multiplied by such one dollar amount.
        (ii) The amount of the royalty payment shall be calculated in 
    accordance with the instructions specified in the quarterly Statement 
    of Account form. Payment of the royalty fee must be in the form of a 
    certified check, cashier's check, money order, or electronic payment 
    payable to the Register of Copyrights.
        (4) Reduction of royalty fee. (i) Section 1004(a)(2)(A) of title 17 
    U.S. Code, provides an instance in which royalty payments may be 
    reduced if the digital audio recording device and such other devices 
    are part of a physically integrated unit, the royalty payment shall be 
    based on the transfer price of the unit, but shall be reduced by any 
    royalty payment made on any digital audio recording device included 
    within the unit that was not first distributed in combination with the 
    unit.
        (ii) Notice of this provision together with directions for possible 
    application to a product is contained in the DART/Q Form.
        (5) Contact party. Each Statement of Account shall include the 
    name, address, and telephone and facsimile (FAX) numbers of an 
    individual whom the Copyright Office can write or call about the 
    Statement of Account.
        (6) Credits for returned or exported products. When digital audio 
    recording products first distributed in the United States for ultimate 
    transfer to United States consumers are returned to the manufacturer or 
    importer as unsold or defective merchandise, or are exported, the 
    manufacturing or importing party may take a credit to be deducted from 
    the royalties payable for the period when the products were returned or 
    exported. The credit may be taken only for returns or exports made 
    within two years following the date royalties were paid for the 
    products. This credit must be reflected in the manufacturing or 
    importing party's quarterly or annual Statement of Account. If the 
    manufacturer or importer later redistributes in the United States any 
    products for which a credit has been taken, these products must be 
    listed on the Statement of Account, and a new computation of the 
    royalty fee must be made based on the transfer price of the products at 
    the time of the new distribution.
        (7) Oath and signature. Each Statement of Account shall include the 
    handwritten signature of an authorized officer, principal, or agent of 
    the filing party. The signature shall be accompanied by:
        (i) The printed or typewritten name of the person signing the 
    quarterly Statement of Account;
        (ii) The date the document is signed;
        (iii) The following certification:
    
        I, the undersigned, hereby certify that I am an authorized 
    officer, principal, or agent of the ``manufacturing or importing 
    party'' identified in Space B.
    
    Penalties for fraud and false statements are provided under 18 U.S.C. 
    1001 et. seq.
        (f) Contents of annual Statements of Account. (1) General contents. 
    Each annual Statement of Account shall be filed on form DART/A, 
    ``Annual Statement of Account for Digital Audio Recording Products.'' 
    It must be filed by any importer or manufacturer that distributed in 
    the United States, during a given calendar or fiscal year, any digital 
    audio recording device or digital audio recording medium. The annual 
    statement shall cover the aggregate of the distribution of devices and 
    media for the entire year corresponding to the calendar or fiscal year 
    elected. The annual Statement of Account shall contain the information, 
    oath, and certification prescribed in paragraphs (e)(2)(i) through 
    (e)(7)(iii) of this section, and shall cover the entire accounting 
    year, including the fourth quarter distribution, and shall also provide 
    for the reconciliation of the aggregated accounting of digital audio 
    recording devices and media for the reported accounting year.
        (2) Reconciliation. Any royalty payment due under sections 1003 and 
    1004 of title 17 that was not previously paid with the filing party's 
    first three quarterly Statements of Account, shall be reconciled in the 
    annual statement. Reconciliation in the annual Statement of Account 
    provides for adjustments for reductions, refunds, underpayments, 
    overpayments, credits, and royalty payments paid in Quarters 1, 2, and 
    3, and shall be computed in accordance with the instructions included 
    in the annual Statement of Account. Errors that require reconciliation 
    shall be corrected immediately upon discovery.
        (3) Accountant's opinion. Each annual Statement of Account or any 
    amended annual Statement of Account shall be audited by the primary 
    auditor as defined in paragraph (b)(7) of this section. An amendment 
    may be submitted to the Office either as a result of responses to 
    questions raised by a Licensing Division examiner or on the initiative 
    of the manufacturing or importing party to correct an error in the 
    original Statement of Account.
        (i) The audit shall be performed in accordance with generally 
    accepted auditing standards (GAAS). The audit may be performed in 
    conjunction with an annual audit of the manufacturing or importing 
    party's financial statements.
        (ii) The CPA shall issue a report, the ``primary auditor's 
    report,'' reflecting his or her opinion as to whether the annual 
    statement presents fairly, in all material respects, the number of 
    digital audio recording devices and media that were imported and 
    distributed, or manufactured and distributed, by the manufacturing or 
    importing party during the relevant year, and the amount of royalty 
    payments applicable to them under 17 U.S.C. chapter 10, in accordance 
    with that law and these regulations.
        (iii) The primary auditor's report shall be filed with the 
    Copyright Office together with the annual Statement of Account, within 
    two months after the end of the annual period for which the annual 
    Statement of Account is prepared. The report may be qualified to the 
    extent necessary and appropriate.
        (iv) The Copyright Office does not provide a specific form, or 
    require a specific format, for the CPA's review; however, in addition 
    to the above, certain items must be named as audited items. These 
    include the variables necessary to complete Space C of the Statement of 
    Account form. The CPA may place his or her opinion, which will serve as 
    the ``primary auditor's report,'' in the space provided on Form DART/A, 
    or may attach a separate sheet or sheets containing the opinion.
        (v) The auditor's report shall be signed by an individual, or in 
    the name of a partnership or a corporation, and shall include city and 
    state of execution, certificate number, jurisdiction of certificate, 
    and date of opinion. The certificate number and jurisdiction are not 
    required if the report is signed in the name of a partnership or a 
    corporation.
        (g) Documentation. All filing parties shall keep and retain in 
    their possession, for at least three years from the date of filing, all 
    records and documents necessary and appropriate to support fully the 
    information set forth in quarterly and annual statements that they 
    file.
        (h) Corrections, supplemental payments, and refunds. (1) General. 
    Upon compliance with the procedures and within the time limits set 
    forth in this paragraph (h), corrections to quarterly and annual 
    Statements of Account will be placed on record, and supplemental 
    royalty fee payments will be received for deposit, or refunds without 
    interest will be issued, in the following cases:
        (i) Where, with respect to the accounting period covered by the 
    quarterly or annual Statement of Account, any of the information given 
    in the statement filed in the Copyright Office is incorrect or 
    incomplete; or
        (ii) Where, for any reason except that mentioned in paragraph 
    (h)(2) of this section, calculation of the royalty fee payable for a 
    particular accounting period was incorrect, and the amount deposited in 
    the Copyright Office for that period was either too high or too low.
        (2) Corrections to quarterly or annual Statements of Account will 
    not be placed on file, supplemental royalty fee payments will not be 
    received for deposit, and refunds will not be issued, where the 
    information in the Statements of Account, the royalty fee calculations, 
    or the payments were correct as of the date on which the accounting 
    period ended, but changes (for example, cases where digital audio 
    recording media were exported) took place later.
        (3) Requests that corrections to annual or quarterly Statements of 
    Account be accepted, that fee payments be accepted, or that refunds be 
    issued shall be addressed to the Licensing Division of the Copyright 
    Office, and shall meet the following conditions:
        (i) The request shall be made in writing and must clearly identify 
    the manufacturing or importing party making the request, the accounting 
    period in question, and the purpose of the request. A request for a 
    refund must be received in the Copyright Office before the expiration 
    of two months from the last day of the applicable Statement of Account 
    filing period. A request made by telephone or by telegraphic or similar 
    unsigned communication will be considered to meet this requirement if 
    it clearly identifies the basis of the request, is received in the 
    Copyright Office within the two-month period, and a written request 
    meeting all the conditions of this paragraph (h)(3) is also received in 
    the Copyright Office within 14 days after the end of such two-month 
    period.
        (ii) The request must clearly identify the incorrect or incomplete 
    information formerly filed and must provide the correct or additional 
    information.
        (iii) In the case where a royalty fee was miscalculated and the 
    amount deposited with the Copyright Office was too large or too small, 
    the request must be accompanied by an affidavit under the official seal 
    of any officer authorized to administer oaths within the United States, 
    or a statement in accordance with 28 U.S.C. 1746, made and signed in 
    accordance with paragraph (e)(7) of this section. The affidavit or 
    statement shall describe the reasons why the royalty fee was improperly 
    calculated and include a detailed analysis of the proper royalty 
    calculation.
        (iv) Following final processing, all requests will be filed with 
    the original Statement of Account in the records of the Copyright 
    Office. Nothing contained in this paragraph shall be considered to 
    relieve manufacturing or importing parties of their full obligations 
    under title 17 of the United States Code, and the filing of a 
    correction or supplemental payment shall have only such effect as may 
    be attributed to it by a court of competent jurisdiction.
        (v)(A) The request must be accompanied by a filing fee in the 
    amount of $20 for each Statement of Account involved. Payment of this 
    fee may be in the form of a personal or company check, or a certified 
    check, cashier's check, or money order, payable to the Register of 
    Copyrights. No request will be processed until the appropriate filing 
    fees are received.
        (B) Requests that a supplemental royalty fee payment be deposited 
    must be accompanied by a remittance in the full amount of such fee. 
    Payment of the supplemental royalty fee must be in the form of a 
    certified check, cashier's check, money order, or electronic payment 
    payable to the Register of Copyrights. No such request will be 
    processed until an acceptable remittance in the full amount of the 
    supplemental royalty fee has been received.
        (vi) All requests submitted under paragraph (h) of this section 
    must be signed by the manufacturing or importing party named in the 
    Statement of Account, or the duly authorized agent of that party in 
    accordance with paragraph (e)(7) of this section.
        (vii) A request for a refund is not necessary where the Licensing 
    Division, during its examination of a Statement of Account or related 
    document, discovers an error that has resulted in a royalty 
    overpayment. In this case, the Licensing Division will forward the 
    royalty refund to the manufacturing or importing party named in the 
    Statement of Account. The Copyright Office will not pay interest on any 
    royalty refunds.
        (i) Examination of Statements of Account by the Copyright Office. 
    (1) Upon receiving a Statement of Account and royalty fee, the 
    Copyright Office will make an official record of the actual date when 
    such statement and fee were physically received in the Copyright 
    Office. Thereafter, the Licensing Division will examine the statement 
    for obvious errors or omissions appearing on the face of the documents 
    and will require that any such obvious errors or omissions be corrected 
    before final processing of the document is completed. If, as the result 
    of communications between the Copyright Office and the manufacturer or 
    importer, an additional fee is deposited or changes or additions are 
    made in the Statement of Account, the date that additional deposit or 
    information was actually received in the Office will be added to the 
    official record.
        (2) Completion by the Copyright Office of the final processing of a 
    Statement of Account and royalty fee deposit shall establish only the 
    fact of such completion and the date or dates of receipt shown in the 
    official record. It shall not be considered a determination that the 
    Statement of Account was, in fact, properly prepared and accurate, that 
    the correct amount of the royalty was deposited, that the statutory 
    time limits for filing had been met, or that any other requirements of 
    17 U.S.C. 1001 et. seq. were fulfilled.
        (j) Interest on late payments or underpayments. (1) Royalty 
    payments submitted as a result of late payments or underpayments shall 
    include interest, which shall begin to accrue on the first day after 
    the close of the period for filing Statements of Account for all late 
    payments or underpayments of royalties occurring within that accounting 
    period. The accrual period for interest shall end on the date appearing 
    on the certified check, cashier's check, money order, or electronic 
    payment submitted by the manufacturing or importing party, if the 
    payment is received by the Copyright Office within five business days 
    of that date. If the payment is not received by the Copyright Office 
    within five business days of its date, the accrual period shall end on 
    the date of actual receipt by the Copyright Office.
        (2) The interest rate applicable to a specific accounting period 
    shall be the Current Value of Funds rate in accordance with the 
    Treasury Financial Manual, at 1 TFM 6-8025.40, in effect on the first 
    business day after the close of the filing deadline for the relevant 
    accounting period. The interest rate for a particular accounting period 
    may be obtained by consulting the Federal Register for the applicable 
    Current Value of Funds Rate, or by contacting the Licensing Division of 
    the Copyright Office.
        (3) Interest is not required to be paid on any royalty underpayment 
    or late payment from a particular accounting period if the interest 
    charge is five dollars ($5.00) or less.
        (k) Confidentiality of Statements of Account. Public access to the 
    Copyright Office files of Statements of Account for digital audio 
    recording products shall not be provided. Access will only be granted 
    to interested copyright parties in accordance with regulations 
    prescribed by the Register of Copyrights pursuant to 17 U.S.C. 1003(c).
    
        Dated: January 26, 1994.
    Barbara Ringer,
    Acting Register of Copyrights.
        Approved by:
    James H. Billington,
    Librarian of Congress.
    [FR Doc. 94-2066 Filed 1-31-94; 8:45 am]
    BILLING CODE 1410-08-P
    
    
    

Document Information

Effective Date:
2/1/1994
Published:
02/01/1994
Department:
U.S. Copyright Office, Library of Congress
Entry Type:
Uncategorized Document
Action:
Interim regulation with request for comments.
Document Number:
94-2066
Dates:
This interim regulation is effective February 1, 1994. Comments should be in writing and received on or before April 4, 1994.
Pages:
0-0 (1 pages)
Docket Numbers:
Federal Register: February 1, 1994, Docket No. RM 92-8A
CFR: (1)
37 CFR 201.28