Laws: Cases and Codes : U.S. Code : Title 17
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U.S. Code as of:
01/19/04
Chapter 8 - Notes
Sec.
801. Copyright arbitration royalty panels: Establishment
and purpose.
802. Membership and proceedings of copyright arbitration
royalty panels.
803. Institution and conclusion of proceedings.
HISTORICAL AND REVISION NOTES
HOUSE REPORT NO. 94-1476
Chapter 8 [this chapter] establishes a Copyright Royalty
Commission for the purpose of periodically reviewing and adjusting
statutory royalty rates for use of copyrighted materials pursuant
to compulsory licenses provided in sections 111 (secondary
transmissions by cable systems), 115 (mechanical royalties) and 116
(jukebox) of the bill. In addition, the Commission will make
determinations as to reasonable terms and rates of royalty payments
as provided in section 118 (public broadcasting), and to resolve
disputes over the distribution of royalties paid pursuant to the
statutory licenses in sections 111 and 116.
The Committee recognizes that the industries affected by the
royalty rates over which the Commission has jurisdiction are very
different, and it is therefore expected that any adjustment of a
rate by the Commission shall be based on the economic conditions
peculiar to the industries affected by that rate. Likewise, the
Committee recognizes the fact that the cable television industry is
a developing industry in transition, whereas the recording and
jukebox industries are long-established. Therefore, the Committee
has chosen periods of different lengths in which the Commission is
to review the rates affecting those industries. Rates for
retransmission of copyrighted works by cable television systems
will be reviewed in 1980 and each subsequent fifth year. Rates
established for mechanical reproduction will be reviewed in 1980,
1987, and in each subsequent 10th year. Rates for performance by
jukebox will be reviewed in 1980, and in each subsequent 10th year.
Rates and terms under section 118 will be reviewed in 1982 and in
each subsequent fifth year. The Committee does not intend that rate
changes, whether up or down, should necessarily be made as the
result of such periodic reviews.
The Committee has chosen to stagger the times for review of the
various rates established under the bill so as to balance the
workload of the Commission. Cable and copyright owners agreed to a
set of standards for the adjustment of rates which the Committee in
large measure has accepted. No specific standards governing the
establishment or adjustment of rates by the Commission, other than
rates for cable transmissions, have been detailed in the
legislation, because the Committee did not wish to limit the
factors that the Commission might consider in a world of constantly
changing economics and technology. However, it is anticipated that
the Commission will consider the following objectives in
determining a reasonable rate under sections 115 and 116:
(1) The rate should maximize the availability of diverse
creative works to the public.
(2) The rate should afford the copyright owner a fair income,
or if the owner is not a person, a fair profit, under existing
economic conditions, in order to encourage creative activity.
(3) The rate should not jeopardize the ability of the copyright
user -
(a) to earn a fair income, or if the user is not a person, a
fair profit, under existing economic conditions, and
(b) to charge the consumer a reasonable price for the
product.
(4) The rate should reflect the relative roles of the copyright
owner and the copyright user in the product made available to the
public with respect to relative creative contribution,
technological contribution, capital investment, cost, risk, and
contribution to the opening of new markets for creative
expression and media for their communication.
(5) The rate should minimize any disruptive impact on the
structure of the industries involved and on generally prevailing
industry practices.
Similar considerations are noted in connection with Commission
review of rates and terms for public broadcasting in the discussion
of section 118, above.
Structure of the Copyright Royalty Commission. The Senate bill
provides that, upon certifying the existence of a controversy
concerning distribution of statutory royalty fees or upon periodic
petition for review of statutory royalty rates by an interested
party, the Register of Copyrights, is to convene a three member
panel to constitute a Copyright Royalty Tribunal for the purpose of
resolving the controversy or reviewing the rates.
The Senate bill provides that the Tribunal be appointed by the
Register from among the membership of the American Arbitration
Association or similar organization. The Tribunal is to exist
within the Library of Congress.
Due to constitutional concern over the provision of the Senate
bill that the Register of Copyrights, an employee of the
Legislative Branch appoint the members of the Tribunal, the
Committee adopted an amendment providing for direct appointment of
three individuals by the President. The name of the Tribunal was
changed to the Copyright Royalty Commission.
Although under the Committee Amendment, the Commission is to be
an independent authority, it is to receive administrative support
from the Library of Congress.
The Commission is authorized to appoint a staff to assist it in
carrying out its responsibilities. However, it is expected that the
staff will consist only of sufficient clerical personnel to provide
one full time secretary for each member and one or two additional
employees to meet the clerical needs of the entire Commission.
Members of the Commission are expected to perform all professional
responsibilities themselves, except where it is necessary to employ
outside experts on a consulting basis. Assistance in matters of
administration, such as payroll and budgeting, will be available
from the Library of Congress.
The Committee expects that the President shall appoint members of
the Commission from among persons who have demonstrated
professional competence in the field of copyright policy.
Adjustment of Cable Television Royalty Rates. Section 801(b)(2)
authorizes the Commission to make determinations concerning the
adjustment of the copyright royalty rates contained in Section 111.
Such determinations are to be made solely in accordance with the
provisions contained in Section 801(b)(2)(A), (B), (C), and (D).
The time periods when such adjustments may be made are set forth in
Section 804.
Under Section 801(b)(2)(A), the Commission may adjust the rates
established in Section 111(d)(2)(B) [section 111(d)(2)(B) of this
title] to reflect (1) national monetary inflation or deflation, or
(2) changes in the average rates charged cable subscribers for the
basic service of providing secondary transmission to maintain the
real constant dollar level of the royalty fee per subscriber which
existed as of the date of enactment of this legislation. The
purpose of this provision is to assure that the value of the
royalty fees paid by cable systems is not eroded by changes in the
value of the dollar or changes in average rates charged cable
subscribers. The Committee recognizes, however, that no royalty
fees will be paid by cable systems until the legislation is
effective on January 1, 1978, and accordingly that the royalty fee
per subscriber base calculated at the time of enactment must
necessarily constitute an estimated value. In the Committee's view,
and based on projections supplied by the interested parties, the
total royalties produced under the fee schedule at the time of
enactment should approximate $8.7 million.
In adjusting the fee the Copyright Royalty Commission is limited
to changes reflecting national monetary inflation or deflation or
changes in the average rates charged cable subscribers for the
basic service of providing secondary transmissions. Concern was
expressed during the hearings on the revision legislation that
cable systems may reduce the basic charge for the retransmission of
broadcast signals as an inducement for individuals to become
subscribers to additional services (e.g., pay-cable). Such a shift
of revenue sources would have the effect of understating basic
subscriber revenues and would deny copyright owners the level of
royalty fees for secondary transmission contemplated by this
legislation. Accordingly, such shifts of revenue sources, if they
do occur, should be taken into account by the Commission in
adjusting the basic rates.
There are also two limitations on the power of the Commission to
adjust rates under Section 801(b)(2)(A). The first provides that no
change in the rates established by Section 111(d)(2)(B) is
permitted if the average rates charged cable system subscribers for
the basic service of providing secondary transmissions exceeds the
change in national monetary inflation. Thus, in the situation where
subscriber rates during a particular adjustment period increase 20
percent but national monetary inflation increases only 10 percent
no change or reduction in the rates is permitted.
The second limitation provides that no increase in the royalty
fee shall be permitted based on any reduction in the average number
of distant signal equivalents per subscriber. The purpose of this
limitation is to make clear that if the average number of distant
signals carried by a cable system is reduced in the future (and
thereby the average number of distant signal equivalents per
subscriber) no increase in the royalty fee to offset this reduction
is permitted. The limitation does not, however, preclude any change
in the rates that may be required to maintain the real constant
dollar level of royalty fees per subscriber because of national
monetary inflation or deflation or changes in the average rates
charged subscribers for the basic service of providing secondary
transmissions.
The Commission may also consider, in its discretion, any other
factor relating to the maintenance of the real constant dollar
level of royalty fees per subscriber and need not increase the
royalty rates to the full extent, provided it can be demonstrated
that the cable industry has been restrained by subscriber rates
regulating authorities from increasing the rates for the basic
service of providing secondary transmission.
Increase in the Number of Distant Signals. Under Section
801(b)(2)(B), the Commission may adjust the rates established in
Section 111(d)(2)(B) if the rules and regulations of the FCC are
amended at any time after April 15, 1976, to permit the carriage of
additional distant signals. In this event the Commission may ensure
that the rates for the additional distant signal equivalents
resulting from such carriage are reasonable in light of the changes
effected by the amendment to the FCC rules and regulations.
The purpose of this provision is to give the Commission broad
discretion to reconsider the royalty rates applicable to (but only
to) the carriage of any additional distant signals permitted under
the rules and regulations of the FCC after April 15, 1976. The
present FCC rules limiting the number of distant signals that may
be carried by cable systems have the effect of protecting copyright
owners by restricting the amount of television broadcast
programming retransmitted into distant markets. If these rules are
changed in the future to allow additional cable carriage of
television programs it is the Committee's judgment that the royalty
rates paid by cable systems should be adjusted to reflect such
changes. At the same time, Section 801(b)(2)(B) makes clear that
the royalty rates may not be adjusted with respect to (1) distant
signals permitted under FCC rules and regulations in effect on
April 15, 1976; (2) distant signals of the same type (i.e.,
independent, network or noncommercial educational) substituted for
such permitted signals; or (3) distant television broadcast signals
first carried after April 15, 1976, pursuant to an individual
waiver of the FCC rules and regulations as such rules and
regulations were in effect on April 15, 1976. Royalty adjustments
with respect to any distant signal equivalent or any fraction
thereof represented by the carriage of such distant signals may be
made pursuant to Section 801(b)(2)(A).
In determining the reasonableness of rates under this provision,
the Commission should consider, among other factors, the economic
impact that such adjustment may have on copyright owners and users,
including broadcast stations, and the effect of such additional
distant signal equivalents, if any, on local broadcasters' ability
to serve the public.
Change in the Syndicated and Sports Program Exclusivity Rules.
Section 801(b)(2)(C) provides that the Commission may adjust the
rates established in Section 111(d)(2)(B) in the event of any
change in the FCC rules and regulations with respect to syndicated
and sports program exclusivity after April 15, 1976. In this event
the rates may be adjusted to assure that such rates are reasonable
in light of the changes to such rules and regulations. Any such
adjustment, however, shall only apply to the affected television
broadcast signals carried on those systems affected by change. For
this purpose, the Commission may exercise its discretion to adopt
royalty schedules for particular classes of cable systems.
The purpose of this subclause is similar to that of Section
801(b)(2)(B). The syndicated and sports program exclusivity rules
of the FCC have the effect of protecting copyright owners by
restricting the cable carriage of certain distant television
programming. If these rules are changed in the future to relax or
increase the exclusivity restrictions, it is the Committee's
judgment that the royalty rates paid by cable systems should be
adjusted to reflect such changes.
Adjustment of the Small System Royalty Fees. Section 801(b)(2)(D)
provides that the small system gross receipts limitations
established in Section 111(d)(2)(C) and (D) may be adjusted to
reflect national monetary inflation or deflation or changes in the
average rates charged cable system subscribers for the basic
service of providing secondary transmissions to maintain the real
constant dollar value of the exemptions provided therein. That is,
the Commission is directed to look at these two factors to insure
that systems of the same size as are now entitled to the exemptions
provided for in sections 111(d)(2)(C) and (D) continued to be so
entitled. For the purposes of section 111(d)(2)(C) references to
the gross receipt limitations of that section mean all of the
dollar amount specified therein.
Distribution of Royalty Fees. Section 801(b)(3) provides that the
Commission is authorized to distribute the royalty fees deposited
with the Register of Copyrights under Sections 111 and 116 and to
determine the distribution of such fees where a controversy exists.
Institution and Conclusion of Proceedings. Section 804
establishes the time periods during which the Commission shall
institute and conclude proceedings for the adjustment or
distribution of royalty fees.
Periodic Adjustment of Certain Rates. Under Section 804(a)
proceedings to adjust the royalty rates specified in Sections 115
(mechanical royalty) and 116 (juke-box) and proceedings under
Section 801(b)(2)(A) and (D) (cable television rates for certain
purposes), are instituted in the following periodic time intervals:
(1) On January 1, 1980, the Chairman of the Commission is
required to publish in the Federal Register notice of the
commencement of proceedings to adjust all the rates referred to
in Section 804(a).
(2) Thereafter, during the calendar years specified below, any
owner or user of a copyrighted work whose royalty rates are
specified in the legislation, or by a rate established by the
Commission, may file a petition with the Commission declaring
that the petitioner requests an adjustment of the rate. If the
Commission determines that the applicant has a significant
interest in the royalty rate for which adjustment is requested,
the Chairman of the Commission shall cause notice to be published
in the Federal Register of this determination together with
notice of the commencement of proceedings to adjust the rate.
(A) In proceedings to adjust the cable television rates for
certain purposes under Sections 801(b)(2) (A) and (D), such
petitions may be filed during 1985 and in each subsequent fifth
calendar year.
(B) In proceedings under Section 801(b)(1) to adjust the
mechanical royalty rate as provided in Section 115, such
petitions may be filed in 1987 and in each subsequent tenth
year.
(C) In proceedings under Section 801(b)(1) to adjust the
jukebox royalty rate as provided in Section 116, such petitions
may be filed in 1990 and in each subsequent tenth calendar
year.
Immediate Review of Cable Television Rates for Certain Purposes.
Section 804(b) provides that following an event described in
Section 801(b)(2)(B) or (C), any owner or user of a copyrighted
work whose royalty rates are specified by Section 111, or by a rate
established by the Commission, may, within 12 months, file a
petition requesting an adjustment of the rates. In this event the
Commission is required to proceed as in Section 804(a)(2). Any
change in the royalty rates made by the Commission pursuant to this
provision may be reconsidered in 1980, 1985, and each fifth
calendar year thereafter in accordance with the provisions in
Section 801(b)(2)(B) or (C).
The purpose of this provision is to reflect the Committee's
concern about any change in the rules and regulations of the FCC
pertaining to cable carriage of distant signals or to syndicated or
sports program exclusivity. The Committee believes that if these
rules and regulations are revised, amended, or changed in any
manner by the FCC, any owner or user of a copyrighted work should
have an immediate right, exercisable for a 12 month period
following the date such changes are finally effective, to request
an adjustment of the royalty rates specified in Section 111.
Further, it is the Committee's intent that any change made by the
Commission pursuant to such a petition may be reviewed again in
1980, 1985, and each subsequent fifth calendar year, as the case
may be, and under the standards established in Sections
801(b)(2)(B) and (C). It is also the Committee's intent that the
ability to petition the Commission to adjust the rates pursuant to
this subsection is not limited, following the first adjustment, to
the subsequent five year periods specified, but may arise at any
time as FCC rule changes described above take place.
Institution of Proceedings to Adjust Public Broadcasting Royalty
Rates. Section 804(c) provides that the institution of proceedings
under Section 801(b)(1) concerning the determination of reasonable
terms and rates of royalty payments as provided in Section 118
shall proceed when and as provided in that section.
Institution of Proceedings To Distribute Royalty Fees. Section
804(d) provides that with respect to proceedings under Section
801(b)(3) concerning the distribution of royalty fees in certain
circumstances under Section 111 or 116 the Chairman of the
Commission shall, upon determination by the Commission that a
controversy exists concerning such distribution, publish a notice
of commencement of proceedings to distribute the royalty fees in
the Federal Register.
Prompt Resolution of Proceedings. Section 804(e) provides that
all proceedings instituted by the Commission shall be initiated
without delay following publication of the notices specified in
this section and that the Commission is required to render a final
decision in any such proceeding within one year from the date of
publication of the notice.
Judicial Review. The Senate bill provides that, following a final
determination in any proceeding with respect to royalty rates, the
Copyright Royalty Tribunal is to transmit its decision to the
Senate and House of Representatives for review. Within 90 days of
such transmittal either House of Congress may nullify the
determination of the Tribunal by adoption of a resolution
expressing disapproval of such determination. Judicial review of
determinations of the Royalty Tribunal under the Senate bill is
permitted only where: (1) The determination was procured by
corruption, fraud, or undue means; (2) there was evident partiality
or corruption in any of the members of the Tribunal; or (3) any
member of the Tribunal was guilty of any misconduct by which the
rights of any party were prejudiced.
The Committee concluded that determinations of the Copyright
Royalty Commission were not appropriate subjects for regular review
by Congress and that the provisions of the Senate bill providing
for judicial review were far too restrictive. Therefore, it amended
the Senate bill to eliminate automatic Congressional review and to
broaden the scope of judicial review. The amended bill provides for
the full scope of judicial review provided by Chapter 7 of the
Administrative Procedure Act [5 U.S.C. 701 et seq.]. Congressional
review of the activities of the Copyright Royalty Commission will
occur as part of the oversight functions of the Judiciary
Committees of the House of Representatives and the Senate. The
oversight process will provide the Congress sufficient information
to determine whether statutory changes are needed at some time in
the future.
The expanded judicial review provided in the Committee amendment
will permit much more detailed, thoughtful, and careful review of
possibly arbitrary or capricious determinations of the Commission
than can be provided by Congressional review.
AMENDMENTS
1997 - Pub. L. 105-80, Sec. 12(a)(18), Nov. 13, 1997, 111 Stat.
1535, substituted "Establishment" for "establishment" in item 801.
1993 - Pub. L. 103-198, Sec. 2(f), Dec. 17, 1993, 107 Stat. 2308,
amended table of sections generally, substituting chapter heading
and items 801 to 803 for chapter heading "COPYRIGHT ROYALTY
TRIBUNAL", item 801 "Copyright Royalty Tribunal: Establishment and
purpose", item 802 "Membership of the Tribunal", item 804
"Institution and conclusion of proceedings", item 805 "Staff of the
Tribunal", item 806 "Administrative support of the Tribunal", item
807 "Deduction of costs of proceedings", item 808 "Reports", item
809 "Effective date of final determinations", and item 810
"Judicial review".
Pub. L. 103-198, Sec. 2(c), Dec. 17, 1993, 107 Stat. 2307, struck
out item 803 "Procedures of the Tribunal."
EFFECTIVE DATE
Chapter effective Oct. 19, 1976, see section 102 of Pub. L.
94-533, set out as a note preceding section 101 of this title.
-SECREF-
CHAPTER REFERRED TO IN OTHER SECTIONS
This chapter is referred to in sections 111, 112, 114, 115, 116,
118, 119, 912 of this title.
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