April 1, 2003 2PM Eastern-
Caveat- This is my first attempt at Live blogging, and I'm not a great typist. Much will have been lost. Please treat this as hearsay and use the official transcripts, when available, or the written testimony, for legal proceedings.
Chairman's Opening Statement-
Purpose is to discuss the Copyright royalty and distribution Reform act to reform CARP. This process distributes billions, helping copyright owners and users. Responsibility for deciding worthof content. Last summer's roundtable- participants complained of inconsistency, lack of experience of the arbitrators, and that the CARP seemed institutionally biased toward copyright owners.
The Bill would replace the CARP with a copyright judge and two staff attorneys.
Witnesses here today have personal experience dealing with these issues.
Howard Berman- HR 1417 sets an excellent starting point. The basic structure is sound. The legislation demonstrates our intent to fix the CARP process. We should allow full and fair opportunity for public to comment. The public needs time to digest and comment. The bill embodies the appropriate response to CARP reform. The witnesses propose many changes. This subcommittee should consider their comments. We have to move with speed b/c every day more decisions are being made under the flawed process. This proposal is to change the CARP process, not the compulsory license legislation. If we get into those issues, we will bog down and leave the flawed process in existence.
Witnesses:
Mary Beth Peters, Register of Copyrights-CARPs have been operating under the Copyright Offices's auspices since the copyright royalty tribunals were eliminated. This legislation would reform the CARP. Last summer I testified on the need for reform. CARP is costly to participants and to the Copyright Office. It suffers a lack of stability and predictability. The Librarian tries to appoint competant arbitrators but the results are spotty. There is a lack of institutional expertise on the part of the arbitrators. As a result, the Copyright Office and the Librarian of Congress must fix errors of the CARPs.
The proposed legislation avoids the hourly fees of arbitrators.
These are my concerns. Provisions on collection of fees. The cost of the Judge and staff should be paid out of appropriated funds to be added to the copyright office budget.
Recommendation- These issues require institutional expertise and experience with the copyright laws. The proposed bill permits the Judge to consult with the Register of copyright, but doesn't require it. The bill should instruct the Judge to consult with the Register on matters of interpretation of copyright law. Also, before a decision of the Copyright Judge is appealed to the Court of Appeals, parties should be able to seek reconsideration from the Copyright Judge. The Judge should keep jurisdiction over process even though appeal is not final. When ratesetting procedures are not complete before the term they are being set for starts, copyright users should continue to pay at the expired rates from the previous term while new rates are being decided. I concur with the provision for the copyright judge to have subpoena power. I would be pleased to work with the subcommittee staff to avoid pitfalls so that the new system is efficient and effective.
Robert Garrett from Arnold & Porter--I have represented professional and college sports leagues in the CARP process. I am testifying today on their behalf. H.R. 1417 represents careful thought. It is overall a good vehicle. The Sports leagues have two concerns: structure and cost.
Structure- The Bill contemplates that one judge will decide all distribution and royalty issues. We don't think one individual should make all these decisions. We would like 3 judges. These proceedings generate large records. The arbitrators have wide latitude. Three decision makers do a better job of evaluating the record. This creates a better result. Given that multiple proceedings are held at the same time, three judges may be a practical necessity.
As to cost- this legislation should reduce cost as much as possible. The current Bill does not go far enough. It contains a presumption that parties are entitled to formal evidentiary proceedings. These last 6-8 weeks, are are very costly to the parties. The bill recommends paper proceedings in small claims cases. The Leagues believe paper proceedings should be used in more proceedings than just those involving small claims.
Additionally, it is not clear from the language how this bill deals with discovery. I refer to my written statement. This bill might even expand discovery, increasing cost, without corresponding benefits. The various cable proceeding parties have met to discuss the bill. There is a broad consensus among these parties. They all want 3 individuals rather than one judge. They all also want procedures to encourage voluntary settlements. We will submit written recommendations.
Bruce Rich, Weil Gotshal & Manges
Last June I outlined the shortcomings in the CARP process. H.R. 1417 addresses many of those concerns. WGM has represented many of the country's largest media. My testimony is personal, not on behalf of any WGM clients. H.R. 1417 offers an improved fraimework. I have 7 observations. First, 1417 eliminates the three arbitrator panel approcach in favor of a single judge with copyright experties, with a competent staff. Finding a qualified person for the job of Judge should not require that he or she have copyright expertise. The same is true for the Judge's staff. Less may be more. We need a talented judge, not necessarily one with a copyright background. Second, we need independence for the new judge. The legislation should provide that any consultation by the Judge with the Register of Copyrights be on the record and disclosed. Third- the bill addresses costs by underwriting the fees. But it is less clear on what other costs would be assessed to the parties and how they would be apportioned among the parties. Fourth- CARPs are underdiscovered and overtried. The bill extends discovery from 45 to 60 days. This is good but allowing discovery to be extended to up to 120 days would be better. The tools of discovery also need clarification. The expansion (?) of discovery tools, supervised by the judge, is warranted. Discovery should be supplemented with depositions, reguests for admissions and interrogatories. The Judge should have subpoena power. Fifth, there should be greater flexibility with regard to the 180 day period for hearings- good. Sixth. - The bill properly streamlines the appeal process by taking out the interim review by the Librarian of Congress. But the standard of review is too restrictive and should be replaced with a standard like that in Rule 57 (?) of the Federal Rules of Civil Procedure. Seventh- we should change the (judge's?) term from a 2 year to a 5 or 7 year period.
Michael J. Remington, Drinker Biddle & Reath, former chief counsel of the Subcommittee-
I previously testified in the oversight hearing. The need for CARP reform is exacerbated today. I agree with the Register of Copyrights that the CARP is broken. H.R. 1417 is a positive step. It is basicly sound. There is an adage- judical reform is no sport for the short winded.
The legislation should provide for multiple judge. There should be a procedure for encouraging settlement, and to streamline small claims.
The bill creates a permanent adjudicative structure. It does not go far enough. The new decisionmaking entity should be 3 judges with 7 year terms. The bill removes the Librarian's responsibilities. The proposed legislation streamlines small claims by imposing only a $150 filing fee like that paid to file suit in the district courts. Collecting a filing fee with the notice of intent to participate will discourage frivlolous claims and encourage all parties to engage in meaningful settlement proceedings. The bill also provides for Rule 68 type offer of judgment. But the bill is silent as to what happens if an offer of judgment is not accepted and then the judgment comes in for less than the offer. The Judge should be able to access costs.
The scope of the paper proceedings should be expanded, they should not just be for small claims. HR 1417 is vague about what kind of written paper proceeding is envisioned. On the discovery problem, it would be
too costly to allow depositions and interrogatories. Finally, the bill does not
contain appropriations for the salaries of the Judge and support staff- provisions should be added to increase the Copyright Office's budget to pay them.
The Committee should make these amendments and process the legislation.
Here the panel questioned the witnesses:
Question for Peters-
Why should Judge have a rehearing right?
Peters- The end result will go the Court of APpeals. Sometimes an error exists because someone really hasn't looked for something. Rehearing can offer the chance to correct problems at the trial level and avoid additional appellate litigation.
Reminton concurs.
Q for Garrett-
About concern that there is only one judge- I have same concern, too much power in one judge, over a long term. But what about expense of 3 judges full time? Problem with pool of judges is that these are not experts. Going to 3 might be a real pain. Any more comments on one judge v. three?
Garrett-- All cable parties feel strongly it should be 3 rather than 1 judge. Too much discretion is afforded to arbitrators. The large records support a large range of possible results. Most decisions on royalties around the world are made by bodies, not individuals.
Q for Rich-
Judge should have subpoena power- good idea, we will consider it. As to standard of review- You've said that "arbitrary and capricious" is too low a standard- anything else?
Rich- While I propose a single jurist, an appropriate check and balance would be a higher standard of review- The arbitrary and capricious standard asks if the result is supported by such relevant evidence as a reasonable mind might accept. Clearly erroneous is a more protective standard- the reviewing court should reverse if it has a firm convinction that a mistake has been committed. This is better.
Congressman Berman- Ms. (Zoe) Lofgren apologizes she cannot be here b/c of an emergency in her district. Last issue first - one judge v. three judges. I tend to think of state law. Mr. Rich, you view the standard of review in the bill as highly deferential? Like substantial evidence? Because there is only 1 judge, the standard is too deferential? Are you suggesting that the appellate court do an independent review of the record?
Rich - No. Unless the Court is convnced there was error, it affirms. It would not be de novo review. But arbitrary and capricious gives too much discretion to the trial level judge.
Berman- so if I'm the appeal court and I think I would have decided differently, is the result clearly erroneous?
Rich- No, clearly erronoeous is still deferential. It is just not as deferential as arbitrary and capricious.
Remington- The requirement (opportunity?) for consultation with the Copyright Office, means [the resulting ruling] should be entitled to deference as in the Administrative Procedures Act. It should be reversed only for abuse of discretion, or if it is not in accordance with the law. The current standard we have is arbitrary and capricious squared, because of the two levels of review. But we want 3 judges and they should have to consult with the Register.
Berman- Ms. Peters also wanted consultation. Are the two of you suggesting the same thing?
Answer- Consultation should be on the record, not a conversation in the hall getting a glass of water.
Peters- the Copyright Office would be consulted on interpretation of the law. That's the area. Or if the Judge were thinking about rules that would affect the Copyright Office, such as requiring a filing with the Copyright Office, we would want to know about it.
Q- What decisions would require interpretation of the law?
Peters- For example, are satellite providers treated like cable operaters- eligible for their treatment? Or whether broadcasters are liable for statutory royalties and eligible for them for webcasting- that is one that we recently decided that is still on appeal. You have to look not just at the statutory license provision under discussion but at the whole copyright law. That's the sort of thing.
Chairman Smith (?)- I agree the standard of review should be clearly erroneous. I don't like the idea of a seven year term. What about method of appointment of the Copyright Judge?
Someone- there is always a potential for bias (when the Copyright office appoints the Judge). We have to avoid perception that the judge is not independant but is persuaded by the Agency which appointed him and has power to re-appoint him at the end of his term.
Forbes(?) Can you expand on what you would do about the scope of paper proceedings?
Answer- The scope should be expanded. Right now there is a presumption of live hearings with all witnesses subject to cross examination. This is a key element of the cost if proceedings. And cost is a major impediment to participation. Clients are concerned about cost of live hearings with cross
examination.
Forbes- please suggest how we can fine-tune that. Any concern with subpoena power?
Someone- I am the only one concerned about this. Article III reserves Article III authority to federal judges, not Administrative Judges. The more powers we give an administrative judge, the more subject it is to constitutional attack.
Someone else- I have concerns b/c subpoena power increases the cost of proceedings. We have functioned without it for 2 decades. The problems in the past haven't been from lack of subpoena power.
Forbes? Please get us suggestions on the use of the subpoena power etc.
Goodlatte- no questions.
Keller- no questions
Pince- Thanks for calling this hearing, no questions.
Berman- I'm hearing that 3 judges are entitled to a higher standard of review, one judge to a lower standard (?). Reminds me of debate in LA County about flouridated water. I wish there was some ideological framework in which to decide this issue. Instead of requiring subpoenas and depositions, what if we left very wide discretion to the Judge? Part of this is to get away from the cost. Let the judge decide what kinds of discovery makes sense for the particular situation? Let the judge decide case by case?
(clapping)
Witness- excellent suggestion. In the most effectively managed litigation, the judge or magistrate judge takes control and manages discovery. No one size fits all rule will cover all rate and adjustment and distribution proceeedings.
Berman- it's only money (laughter).
Chairman- several weeks will be needed for markup of this bill, we'll turn it around as soon as we can, etc.
Boucher- This bill represents a significant step forward from the current process. One problem is that it does not change the standard under which the rate is set. Fairness is not included in the standard. Would it be appropriate, in making this change to make fairness an element in the standard for compulsory royalties for Internet radio?
Rich- The Process can get us only so far. In our experience, strange interpretations were made about willing buyer and willing seller with bad results. Not clear why fairness should be an element in some compulsory royalty standards but not for Internet radio.
Boucher- This suggests we should change the standard for Internet radio in that there is really only one seller in the market and that seller has the ability to set the market price.
Garrett (?)- The fair market value standard in the compulsory webcasting license is appropriate. It inherently captures fairness. There is nothing unfair about copyright users paying fair market value. This should apply to all licenses. Often we appropriate real property for public uses. When we do, we pay the owner the full market value. Copyright owners should not be entitled to lesser compensation.
Boucher- But how do we know what the fair market value is when only one seller sets the market rate? How do we find the real value?
Garrett- That's why we have such a big record. It isn't just one seller. There's a lot of evidence out there.
Boucher- But not in the record. Mr. Rich?
Rich - There is a single buyer (sic- seller) represented by powerful interests. Even without the subpoena power, it should have been obvious that the deals considered in the last CARP were the result of RIAA having excessive bargaining power.
Berman- My staff tells me the cable license is not a fairness standard but a cost of living increase. I bet they would like fairness instead. We could get into interesting debates. My fear is that if we get into the standards we will get an interesting debate but no move forward. There is a competitor to the RIAA and that is Piracy. Parties may still get abused in the new process, but at least they will pay less to get abused (laughter).
Boucher- And I support the procedural reforms. But it would be a simple matter just to add fairness to the Internet radio standard.
Chair- I have written questions I will give to Ms. Peters. Please get us ideas in the next couple of weeks.
Adjourned.