Notice of Inquiry Regarding Categorization of Claims for Cable or Satellite Royalty Funds and Treatment of Ineligible Claims

 
CONTENT
Federal Register, Volume 84 Issue 249 (Monday, December 30, 2019)
[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Proposed Rules]
[Pages 71852-71854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27970]
[[Page 71852]]
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LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Chapter III
[Docket No. 19-CRB-0014-RM]
Notice of Inquiry Regarding Categorization of Claims for Cable or
Satellite Royalty Funds and Treatment of Ineligible Claims
AGENCY: Copyright Royalty Board, Library of Congress.
ACTION: Notice of inquiry.
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SUMMARY: The Copyright Royalty Judges (Judges) publish a notice of
inquiry regarding categorization of claims for cable or satellite
royalty funds and treatment of royalties associated with invalid
claims.
DATES: Comments are due no later than January 29, 2020.
ADDRESSES: You may submit comments and proposals, identified by docket
number 19-CRB-0014-RM, by any of the following methods:
    CRB's electronic filing application: Submit comments and proposals
online in eCRB at https://app.crb.gov/.
    U.S. mail: Copyright Royalty Board, P.O. Box 70977, Washington, DC
20024-0977; or
    Overnight service (only USPS Express Mail is acceptable): Copyright
Royalty Board, P.O. Box 70977, Washington, DC 20024-0977; or
    Commercial courier: Address package to: Copyright Royalty Board,
Library of Congress, James Madison Memorial Building, LM-403, 101
Independence Avenue SE, Washington, DC 20559-6000. Deliver to:
Congressional Courier Acceptance Site, 2nd Street NE and D Street NE,
Washington, DC; or
    Hand delivery: Library of Congress, James Madison Memorial
Building, LM-401, 101 Independence Avenue SE, Washington, DC 20559-
6000.
    Instructions: Unless submitting online, commenters must submit an
original, two paper copies, and an electronic version on a CD. All
submissions must include a reference to the CRB and this docket number.
All submissions will be posted without change to eCRB at https://app.crb.gov/ including any personal information provided.
    Docket: For access to the docket to read submitted background
documents or comments, go to eCRB, the Copyright Royalty Board's
electronic filing and case management system, at https://app.crb.gov/,
and search for docket number 19-CRB-0014-RM.
FOR FURTHER INFORMATION CONTACT: Anita Blaine, CRB Program Specialist,
by telephone at (202) 707-7658 or email at [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
    Each year cable systems and satellite carriers submit royalties to
the Copyright Office under the sections 111 and 119 statutory licenses
for the retransmission to their subscribers of over-the-air television
broadcast signals. 17 U.S.C. 111 and 119. These royalties are, in turn,
distributed in one of two ways to copyright owners whose works were
included in a retransmission of an over-the-air television broadcast
signal and who timely filed a claim for royalties with the Copyright
Royalty Board. Either the copyright owners may negotiate the terms of a
settlement as to the division of the royalty funds or the Judges may
conduct a proceeding to determine the distribution of the royalties
that remain in controversy. See 17 U.S.C. Chapter 8. Eligibility to
receive copyright royalties paid by cable systems and satellite
carriers is contingent upon the submission of a properly filed claim.
See 17 U.S.C. 111 and 119.
    In 1980, the Copyright Royalty Tribunal (CRT), a predecessor of the
Judges, ruled that cable distribution proceedings would be conducted in
two phases, determining in Phase I the allocation of cable royalties to
specific groups (Phase I/Allocation) and determining in Phase II the
distribution of those royalties to individual claimants within each
group (Phase II/Distribution). See In re 1978 Cable Royalty
Distribution Determination, 45 FR 63026, 63027 (Sep. 23, 1980) (1978
Determination) (summarizing a February 14, 1980 ruling by the CRT). In
the 1978 Cable Royalty Distribution Proceeding, and in all subsequent
Phase I/Allocation proceedings, the division of royalties was
accomplished through a categorization of claims that was the product of
a stipulation among the proposed allocation claimants. These
categorizations were adopted by the CRT and its successors by their
adoption of the participants' stipulations (subject, on occasion, to
minor modifications).\1\ The Judges have made it clear that their
adoption of the claimants' categories has never constituted a finding
by the Judges. See Memorandum Opinion and Order following Preliminary
Hearing on Validity of Claims, Docket No. 2008-2 CRB 2000-2003 (Phase
II), at 14 (Mar. 21, 2013); id. (Phase I), 6/11/09 Tr. 41-42 (former
Chief Judge Sledge noting that the categories were the result of a
``stipulation'' and ``have never been determined'' or the subject of a
``finding.'').
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    \1\ The categories into which copyright owners have divided
themselves in Phase I cable proceedings have remained largely
consistent over time: (1) ``Program Suppliers''--copyright owners of
movies and syndicated television programs represented by the Motion
Picture Association, Inc. (``MPA'') (formerly the Motion Picture
Association of America, Inc. (``MPAA'')); (2) ``Joint Sports
Claimants''--copyright owners of live broadcasts of professional and
college team sporting events (largely consisting of member teams of
the National Football League, National Hockey League, National
Basketball Association, Women's National Basketball Association,
Office of the Commissioner of Baseball, and National Collegiate
Athletic Association); (3) ``Commercial Broadcasters''--copyright
owners of broadcast television and radio programming produced by
local commercial broadcasters and represented by the National
Association of Broadcasters, Inc. (``NAB''); (4) ``Devotional
Claimants''--copyright owners of religious broadcast programming
produced; (5) ``Public Television'' or ``PBS''--copyright owners of
television programs broadcast on public television stations
represented by the Public Broadcasting Service; (6) ``Canadian
Claimants''--various Canadian copyright owners whose programs are
broadcast on Canadian television stations and retransmitted by cable
systems located near the U.S./Canada border; (7) ``NPR''--copyright
owners of radio programming transmitted by National Public Radio and
public radio stations; and (8) ``Music Claimants''--songwriters and
music publishers represented by the American Society of Composers,
Authors and Publishers (``ASCAP''), Broadcast Music, Inc. (``BMI'')
and SESAC, Inc.. See, e.g., Distribution of 1998 and 1999 Cable
Royalty Funds, Docket No. 2001-8 CARP CD 98-99, 69 FR 3606, 3607
(Jan. 26, 2004); see also 1989 Cable Royalty Distribution
Proceeding, Docket No. CRT 91-2-89 CD, 57 FR 15286, 15287 (Apr. 27,
1992) ((1) Program Suppliers; (2) Sports; (3) U.S. Noncommercial
Television (PBS); (4) U.S. Commercial Television (NAB); (5) Music;
(6) Devotional Claimants; (7) Canadian Claimants; (8) Non-Commercial
Radio (NPR); and (9) Commercial Radio)).
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    In the 1978 Proceeding, the CRT also considered a separate issue--
whether to address the economic impact of unclaimed funds in Phase I or
in Phase II. The CRT stated: ``During Phase I there was some random
testimony to the effect that not all eligible claimants had submitted
claims. The [CRT] determined that this subject was not appropriate to
Phase I, but that it would be considered subsequently in the
proceeding. The [CRT] therefore determined that the Phase I allocations
to categories should be made as if all eligible claimants in each
category had filed.'' 1978 Proceeding at 63042 (emphasis added).
    The CRT requested and received further briefing on the legal issues
regarding unclaimed funds, and, in Phase II, the CRT ``accorded each
claimant the opportunity to present any relevant evidence on this
subject . . . [but] [n]o claimant presented any such evidence.'' Id.
After reviewing the legal briefing, the CRT--without referencing any of
the legal points briefed--
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concluded that it would not consider unclaimed funds in determining
Phase I allocations. Specifically, the CRT stated that royalties would
be ``allocated to categories of claimants as if all eligible claimants
in each category had filed valid claims.'' Id. (emphasis added). The
CRT found that the record before it ``provid[ed] no objective basis for
redistribution of royalty fees among categories of claimants to[]
reflect unclaimed royalties in particular categories,'' and concluded
that its disposition of unclaimed royalties constituted an ``equitable
allocation.'' Id. (emphasis added). The CRT further noted that its
ruling ``may not necessarily control any subsequent distribution
proceeding.'' Id.
    In a recent proceeding for the Distribution of Cable Royalty Funds
(Docket No. 16-CRB-0009 CD (2014-17)), and in the parallel proceeding
for the Distribution of Satellite Royalty Funds (Docket No. 16-CRB-
0010-SD (2014-17)), the Judges sought input from the participants \2\
on the claimant categories to be used in each proceeding. See Notice of
Participants and Order for Preliminary Action to Address Categories of
Claims, Docket No. Docket No. 16-CRB-0009 CD (2014-17), at 2 (Mar. 20,
2019); Notice of Participants and Order for Preliminary Action to
Address Categories of Claims, Docket No. Docket No. 16-CRB-0010 SD
(2014-17), at 2 (Mar. 20, 2019).\3\ Instead of stipulating to the
definitions of the Allocation Phase categories as they had in past
proceedings, the participants filed briefs advocating different
category definitions.
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    \2\ The Phase I/Allocation participants in satellite
distribution proceedings have used the same or very similar
categories as participants in cable proceedings. See, e.g., Notice
requesting comments, Distribution of Satellite Royalty Funds, Docket
16-CRB-0010-SD (2014-17), 84 FR 33979, 33980 n.1 (Jul 16, 2019)
(``Program Suppliers, Joint Sports Claimants, Broadcaster Claimants
Group, Music Claimants (represented by American Society of
Composers, Authors and Publishers, Broadcast Music, Inc., and SESAC,
Inc.), and Devotional Claimants.'').
    \3\ Members of the public may access all submissions in those
proceedings through eCRB by searching for Docket Nos. 16-CRB-0009-CD
(2014-17) and 16-CRB-0010-SD (2014-17). Registration is not
required.
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    Most participants advocated use of the claimant-centric categories
that had been used in prior distribution proceedings, arguing that
doing so would provide ``efficiency and certainty both in the
preparation of evidence . . . and in the ultimate distribution of
royalties to all eligible claimants.'' Joint Comments of 2014-17 Cable
Participants on Allocation Phase Claimant Category Definitions, Docket
No. 16-CRB-0009-CD (2014-17), at 2 (Apr. 19, 2019); see also Joint
Comments of 2014-12 Satellite Participants on Allocation Phase Claimant
Category Definitions, Docket No. 16-CRB-0010-SD (2014-17), at 2 (same);
see also generally Program Suppliers' Brief Regarding Proposed Claimant
Group Definitions, Docket No. 16-CRB-0009-CD (2014-17), (Apr. 19, 2019)
(proposing that current claimant-centric categories be retained with
some modifications); Program Suppliers' Brief Regarding Proposed
Claimant Group Definitions, Docket No. 16-CRB-0010-SD (2014-17) (same).
These participants describe the effect of their proposed structure as
establishing ``a manageably finite number of industry groups, each with
the scope and incentive to pursue the interests of a broad group of
constituents, undertake the complex job of gathering the necessary data
and resources, identifying all claimants, establishing their respective
Allocation Phase shares, and distributing all of the category's
royalties.'' Joint Responsive Brief of Certain 2014-12 Cable
Participants on Allocation Phase Claimant Category Definitions, Docket
No. 16-CRB-0009-CD (2014-17), at 2-3 (May 3, 2019) (footnote omitted).
    One participant in the proceeding, however, asserted that the
historically-stipulated categories and relevant definitions are
arbitrary, produce counterintuitive results, and are contrary to common
understanding. See Multigroup Claimants' Comments on Claimant Category
Definitions and Proposed Modification, Docket Nos. 16-CRB-0009-CD
(2014-17) & 16-CRB-0010-SD (2014-17), at 6 (Apr. 19, 2019). This
participant asserted that the claimant-centric categories used in past
proceedings was not aligned with the way in which system operators
decide to retransmit broadcast television signals. See id. at 13. The
participant proposed a new program-centric category definition, but
only for the sports programming category. See id. at 7-12.
    The Judges have recently allocated cable royalty percentages in the
Allocation Phase based on: (i) Evidence from surveys of cable system
operators regarding their ranking of types of programming; and (ii)
evidence from regressions identifying the actual mix of programming on
stations that cable system operators chose to retransmit, in both cases
based on the categories stipulated by the participants.\4\ The Judges
understand there may be reasonable concerns that if the effect of the
stipulated categories is to aggregate programs within categories in a
manner inconsistent with the cable system operators' usual decision
making process, the valuation process may be affected adversely. In
this regard, the dollar amount of royalties that a copyright owner of a
program receives could vary significantly, and without relationship to
relative values, depending upon whether the program was placed within
one category versus another. Such concerns regarding the historically-
stipulated categories appear pertinent with regard to both cable and
satellite royalty distribution proceedings.
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    \4\ The Judges have never conducted a satellite allocation phase
proceeding that resulted in a final determination; rather the
allocation phase parties have always settled.
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    The failure of all participants to stipulate to claimant categories
as well as the stated concerns with the historically-stipulated
category definitions underscore the need for a procedure by which
copyright owners and their representatives are afforded the opportunity
to propose specific category definitions and provide legal and economic
arguments and factual evidence to support their respective positions,
enabling the Judges to act on the basis of an adequate administrative
record. Pursuant to the authority set forth in 17 U.S.C. 803(b)(6) to
establish regulations governing the Judges' proceedings, the Judges
seek comment to inform and guide their intent to publish a formal
notice of proposed rulemaking to establish specific category
definitions applicable to both cable and satellite distribution
proceedings.
II. Subjects of Inquiry
A. The Identification of the Allocation Phase Categories
    In light of the need to establish Allocation categories, for use in
both cable and satellite distribution proceedings, the Judges now seek
input on how the Allocation Phase categories should be defined. Because
the evidence of relative value across categories in the Allocation
Phase reflects the value assigned to program categories by the cable
system operators/satellite carriers (as demonstrated most recently by
survey and/or regression evidence), the Judges inquire as to the merit
of aggregating the Allocation Phase categories by program type rather
than by claimant groups, and whether doing so may result in a
distribution of royalties that more accurately reflects the relative
value of different programming.
    The Judges also inquire as to the likely impact any particular set
of Allocation Phase categories may have
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on (a) the cost and efficiency of distribution proceedings and (b) the
likelihood of achieving settlements to resolve both Allocation Phase
and Distribution Phase controversies.
    In addition, the Judges inquire as to the need for mechanisms and
standards to resolve any disputes as to the identity of participants
seeking to represent a particular Allocation Phase category in an
Allocation Phase proceeding.
B. The Identification of Invalid Claims
    The Judges are in agreement with the CRT observation that its 1980
ruling with respect to ineligible claims ``may not necessarily control
any subsequent distribution proceeding.'' 1978 Proceeding at 63042
(emphasis added). Therefore, the Judges also revisit the identification
and treatment of funds that are unclaimed because a filed claim is
invalid or not validly represented in a distribution proceeding
(invalid claims). The Judges request that commenters provide an
adequate factual record to support their positions as to the necessity
and feasibility of proposed approaches to the identification and
treatment of invalid claims, and the consonance of their proposed
approaches with the establishment of relative value. Commenters should
address how the treatment of invalid claims may interrelate with the
establishment of Allocation Phase categories. For instance, one
rationale for intra-category re-apportionment of royalties attributable
to invalid claims (the status quo) is that the invalidly-claimed
programs have more in common in terms of value creation with the
validly-claimed programs in the same category than with the validly-
claimed programs in the other categories (which also implicates the
above-stated inquiry regarding whether the categories should be
claimant-centric or program-centric). If the former, the argument for
maintaining intra-category re-allocations of invalid claims may be
weaker, because claimant-centric categorization is based on common
representation, not common relative program value.
    The Judges also inquire as to the likely impact any proposed rule
for the identification and treatment of ineligible claims may have on
(a) the cost and efficiency of distribution proceedings and (b) the
likelihood of achieving settlements to resolve both Allocation Phase
and Distribution Phase controversies.
III. Submissions
    With respect to both of the subjects of inquiry, commenters should
provide narrative responses and proposed regulatory language amending
37 CFR part 351. Commenters should include relevant facts, legal and
economic analyses, and citation to authority for each proposed
regulatory provision. After considering the proposals, the Judges
intend to publish a formal notice of proposed rulemaking in accordance
with the provisions of the Administrative Procedures Act.
    Dated: December 20, 2019.
Jesse M. Feder,
Chief Copyright Royalty Judge.
[FR Doc. 2019-27970 Filed 12-27-19; 8:45 am]
 BILLING CODE 1410-72-P