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which are spent on programming costs times the popularity of the non-network programming of the distant signal in the county in which the cable system is located, expressed as a market share percentage.

The working of this formula is illustrated by the following example. Imagine a cable system with quarterly revenues for the basic service of retransmitting broadcast signals of $500,000 which imports two distant non-network afiliated signals (stations A and B). If station A has a 5% share of the market in which the cable system is located and station B has a 3% share, and if the most recent available information indicates that all broadcast stations pay 28% of their revenues for programming costs, then the quarterly copyright liability of the cable system with respect to the programming on each of stations A and B would be determined as follows:

Multiplied by percentage of their

total revenues Cable system which broadcast. basic subscriber ing stations spend

revenues for programing

Multiplied by popularity of imported

nonnetwork pro. graming expressed as a market share

percentage

Station

$500,000
500,000

This works out to a $7,000 quarterly fee for the programming on Station A and a $1,200 quarterly fee for the programming on Station B. Overall the quarterly fee is $11.200 or 2.24% of the cable system's basic subscriber revenues.

We believe that this proposal is far more equitable than the one now contained in H.R. 2:23 because it is directed at what is conceded by all concerned to be the crux of the problem-namely cable's importation of distant signals.

An additional, but by no means incidental, virtue of our approach is that, since it is entirely based on actual relationships in the real world, it is automatically Self-adjusting. There is thus no need to resort to the ill-conceived Copyright Royalty Tribunal to make periodic adjustments which, because they are unre lated to any clearly expressed Congressional purpose or to any known set of criteria, are bound to be arbitrary. In this connection, it is worth considering carefully Professor Gellhorn's memorandum concerning the dubious constitutionality of the proposed statutory provisions establishing the Tribunal.

TELEPROMPTER CORPORATION.

(October 1973). (d) COMPULSORY LICENSE FOR SECONDARY TRANSMISSIONS BY CABLE SYSTEMS.-

(1) For any secondary transmission to be subject to compulsory licensing under subsection (c), the cable system shall at least one month before the date of the secondary transmission or within 30 days after the enactment of this Art, whichever date is later, record in the Copyright Office, a notice including a statement of the identity and address of the person who owns or operates the secondary transmission service or has power to exercise primary control over it together with the name and location of the primary transmitter, or primary transınitters and thereafter, from time to time, such further information as the Register of Copyrights shall prescribe by regulation to carry out the purposes of this clause.

(2) A cable system whose secondary transmissions have been subject to compulsory licensing under subsection (c) shall, during the months of January. April, Jnly, and October, deposit with the Register of Copyrights, in accordauce with requirements that the Register shall prescribe by regulation

(A) A statement of account, covering the three months next preceding. specifying the number of channels on which the cable system made secondary transmissions to its subscribers, the names and locations of all primary transmitters whose transmissions were further transmitted by the cable sys. tem, the total number of subscribers to the cable system, and the gross amounts paid to the cable system (irrespective of source and separate state ments of the gross revenues paid to the cable system for advertising leasid channels, and cable casting for which a per program or per channel charge is made and by subscribers) for the basic service of providing secondary transmissions of primary broadcast transmitters; and

(B) A total royalty fee for the period covered by the statement, compond [on the basis of specified percentages of the gross receipts from subiect to the cable service during said period for the basic service of providing secondary transmissions of primary broadcast transmitters, as follows:

(1) "a percent of any gross receipts up to $10,000;

(ii) 1 percent of any gross receipts totalling more than $10,000 bet not more than $50.000;

(iii) 192 percent of any gross receipts totalling more that $50,000, but Dot more than $120.000;

(iv) 2 percent of any gross recipts totallng more than $120,000, but not more than $160,000; and

(v) 216 percent of any gross receipts totalling more than $1mm) by multiplying the cable system's gross receipts from subscribers for the bene #ervice of providing secondary transmissions of primary broadcast transmite during said period by a percentage which is the product obtained by myilipinang the copyright ourners' percentage xhare by the aggregate of the mariela share of each copyright qualifying broadcast station whose signal is retransmitted by the cable system.

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Buhatas CONSIDERING THE CONSTITUTIONALITY

LOGISLATION (H.R. 2223)

INTRODUCTION
in the copyright laws is now pending
1, "Isis of Representatives. This bill, H

i korral requirement of royalty payme
. *438 signals by cable television systems.

A 2+ and also create a Copyright Royal "R a te this royalts structure. Specitical ** Vrt und reset the statutory royalty rates

bolders, and to resolve disputes To ng copyright holders.

aiders the constitutionality

2 with the Copyright Royalty Tril
som

n tire for three reasons :
y r e grant of power to the Triu
to take accompanied by meaningful gi

(e) DEFINITIONS.

As used in this section, the following terms and their variant forms meus the the following:

A primary transmission" is a transmission made to the publie br the transmitting facility whose signals are being received and further trar mitted by the secondary transmission service, regardless of where or wlen the performance or display was first transmitted.

A "secondary transmission' is the further transmitting of a primary in mission simultaneously with the primary transmission or noncimultaneye it with the primary transmission if by a cable systein" not located i wile or in part within the boundary of the forty-eight contiguous States, Hawaii or Puerto Rico: Prorided, hoicerer, That a nonsimultaneous further trans mission by a cable system located in a telerision market in Hanull of primary transmission shall be deemed to be a secondary transmission if myh further transmission is necessary to enable the cable system to carry the til complement of signals allowed it under tbe rules and regulations of the Federal Communications ('ommission.

A "mable ystem" is a facility, located in any State, Territory. True The ritory or lossession that in whole or in part receives signals transmittel programs broadcast by one or more television brondeant stations lieneed to the Federal Communications ('ommission and make sendary tran 2. of such signals or programs by wires, cable, or other citamunications che** nels to submit ribing murmulers of the pubise who tay for such rie) purpose of determining the royalty fre under subsection (d, 1211B), ( more able tems in antiguous amunities under mm onlen ? or ontrol or t racing frotu one trendeid Niall be considered as otse ayee

The demarriap area of a primary transmitter cumprius the arri :3 which a television broadcast station is entitled to insist u t its sunaite refransmitted by a cui le system prsuant to the rules and reulalions of Feral Comilanirations Commissi).

The "ppyright owners' printage share" shall be that perrentage w (x derited from doriding 0.4 , total annual gron retenues of all breads *tgrions in to the total program ex penars for all briodegst stats and 18

ulioplying the resulting quotient by 100. The copyright irgeromia ahare shall be pertint on a quarterly b** by the federal (omunicats Commission to the keguator of copyrights in accordance and thre recently atoulohle bruminant financial data elleried by #WCA (ommi

The market shart of evtrh "(Whynot qualifying hriddi stato aliated with a nalmal le ri*18* mein ork t merrnal of Man cial) shall be deritid (4) dituding the total number of reward ordid to the ropyright qualifying bruadraat start with propert to the

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1977. right Royalty Tribunal is such tha * nisip statutory mandate into ir

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im Lots of the proposed legislation

rease in the Tribunal's authority, the
* *:lards by the Tribunal itself, a

O rland. Each contributes to a

1.Each undercuts any est bren d le held politically or lega 1,

uibiliting. Consideration of

the unwisdom of H.R. 2223 &
d e drets suggests that the bill,
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r hours credited to all ætation whether rarried for the air car puble) in un punty or countua and B) multiplying the periting a funt by 10. The market sharr of each copyright qualetuing powda* afoften schuh variatid kuth a national feireun ne&O ( mal

1 THE ABSENCE OF STATUTORY **WAR W would require operat I . Register of Copyrights **** to file quarterly statements

three statements. Cops * ******** ole their claiins with the *** Preto sments and claims filed,

Munits teen deposited with him t

or non-commercial) shall be derived by (A) dividing the total number of vieroer hours credited to the non-network programming of the copyright qualifying broadcast station with respect to the county or counties in which the cable system is located by the total number of viewer hours credited to all stations (whether carried over-the-air or by cable) in such county or counties and (B) multiplying the resulting quotient by 100. The market shares of each copyright qualifying broadcast station shall be certified on a quarterly basis by the Federal Communictions Commission to the Register of Copyrights on the basis of the most recent data available to such commi8810n.

A copyright qualifying broadcast station" shall be any broadcast station those signal is not required to be retransmitted by the cable system pursuant to the rules and regulations of the Federal Communications Commission in effect at the time of enactment of this bill, provided, however, that a broadcast station which is thereafter required by the rules and regulations of said Commission to be retransmitted by said cable system shall not thereafter be deemed to be a copyright qualifying broadcast station.

MEMORANDUM CONSIDERING THE CONSTITUTIONALITY OF PROPOSED COPYRIGHT

LEGISLATION (H.R. 2223)

INTRODUCTION A bill to revise the copyright laws is now pending before the Judiciary Committee of the llouse of Representatives. This bill, H.R. 2223, would impose for the first time a general requirement of royalty payments for secondary transmis. sion of broadcast signals by cable television systems. It would establish a statutory royalty rate and also create a Copyright Royalty Tribunal with extensive authority to regulate this royalty structure. Specifically, the Tribunal would have power to review and reset the statutory royalty rates paid by cable television operators to copyright holders, and to resolve disputes concerning distribution of royalty proceeds among copyright holders,

This memorandum considers the constitutionality of these primary provisions of H.R. 2923 dealing with the Copyright Royalty Tribunal, It concludes that H.R. 2*33 is seriously defective for three reasons :

First, the expansive grant of power to the Tribunal to reset the statutory royalty rates is not accompanied by meaningful guidelines for the exercise of that power.

Second, this absence of legislative criteria for agency decision-making would not be cured by subsequent agency definition of its own standards. The Struc. ture of the Copyright Royalty Tribunal is such that it would not be capable of transforming its vague statutory mandate into intelligible public policy. Nor is the opportunity for veto by either House of the Congress of Tribunal decisions an effective substitute for defined congressional or administrative policy.

Third, H.R. 2223 would sharply and unwisely curtail judicial review of Tribunal decisions.

These three asperts of the proposed legislation--the absence of statutory standards for exercise of the Tribunal's authority, the structural constraints against specification of standards by the Tribunal itself, and the curtailment of judicial review-are not unrelated. Each contributes to a disturbing potential for arbitrary decision-making. Each undercuts any expectation that the ('opyright Royalty Tribunal could be held politically or legally accountable for the proper discharge of its responsibilities. Consideration of the cumulative effect of these three defects reveals the unwisdom of H.R. 2223 as presently drafted. And legal analysis of these defects suggests that the bill, if passed in its present form, would be subject to serious attack on constitutional grounds.

1. THE ABSENCE OF STATUTORY STANDARDS

Section 111 of H.R. 2223 would require operators of cable television systems to file a “notice" with the Register of (opyrights within 30 days of massage of the bill and thereafter to file quarterly statements of account. Royalties would be a xessed on the basis of these statements. Copyright owners would be given an annual opportunity to file their claims with the Register. If there were no inconsistency among the statements and claims filed, the Registes would be entitled to distribute the royalty fees deposited with him to the copyright owners or their designated agents.

robot be the courts and the public." Amalgamated Mo

els X7 F. Supp. 737, 746 (D.D.C. 1971) (Leventhal, J byens garenos indicate that accountability may be obtained b

itali articulate and adhere to substantive criteria !) deli etrative responsibilities. Thus, the judicial focus i gecificity of congressional authorization to requirin

*r for agency action. The result is that agency perform ! delegation is increasingly the critical standard. | yoynal that iods constitutional expression in the due proc *** Teton of arbitrariness in decision-making. This too

* Djury. The early decisions invalidating legislation i à ma sopgest that the fatal defects in those statutes we

de site delegations of legislative power with inade * Sittboar likely to be affected by the statutes. Rece 15 m hot take a somewhat different (more practical minu nith reliance on the delegation doctrine and focus *99 cerrounding agency power and the availabilit op that those procedural safeguards are following in

enthal. Principled Fairness and Regulatory Urgel Bet la 70 (1974) ("The contemporary approach is on . bye binadest statutory delegations of power, but

* 198 vijanied by adequate controls on subsequent ad 1.

Hial concern with standardless delegations ( ***** It has developed into two modern notio;

ogmoed vymyssors to the delegation doctrine: first, that age

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Sections 801-09 of the bill define the role of the Copyright Royalty Tribu! A stated in g 501(b), the Tribunal has two functions. First, it eseri bass important power to make adjustments (beginning in 1977) in the royaity rain and even the rate base specified in $111 of the bill. Second, the Tribunal is act ized to resolve controversies concerning distribution of royalty fece depuited ..! the Register of Copyrights

These grants of power are not accompanied by legislative dimartires to the the Tribunal in exercising that power. Section 801b) only states that the In bunal should adjust cops right royalty rates so as to assure that ench patreon reasonable...." The section provides no criteria for determining room home The bill treats the word "reasonable" as if it were, standing alone, an inte! guide to decision-making. In fact, the word describes onlr a quality of jumpa not its content. The word was nothing whatever about the farfose tole in reaching a decision nor about the policies or objectives that the dertafixty 1 further. Vor is it apparent from other provisions in the bill what a m ore roruits figure or rate would be or how that determination should be moda.

What is eminently “reasonable" for one purpose may be quite "unream * for another. yet H.R. 2223 specifies no statutory purpose to guide the compra Royalty Tribunal. There is no enumeration of factors, no indication of the te tive importance to the public of one consideration or another, and no ei' tion of the ultimate objective or objectives in light of which tras lived var be ascertained.

In short, the word "reasonable," when used without erplication as the map standard for agency action, is no standard at all. The Copyright koralis TT: would be left to set royalty rates without any meaningful guidanie farvet DK legislature, and both Congress and the polic would therefore Iack any mind basis for evalnating the Tribunal's performance of its tasks,

At one time not long ago this delegation of legislative authority *** meaningful criteria for its exercise would have rendered the statem :stitutional under the delegation doctrine. The Vesting of all lexislatip gu!!! in the ('ongress by the Constitution was construed Ornt to prevent the legislatie from delegating la p-making power and, when this prorai impractical, 11.ro ta require that every delegation at least be accompanied by a piliny statement for mensuring the lawfulness of its administration. Thus, in the 1900's ther e ('ourt on two occasions invalidated congrajonal ai tion on this basis. See l'ai ma Refining ('0. v. Ryan, 31' $. 358 (1237); Schechter Poul:ry (orp v I. States, C.S. 49.5 (1836). However, the delegation doctrine has not been overturn any public reguintory scheme since then.

In the ensuing years, the Court has upheld brand and mi difined delegati: * or legislative authority, albeit not without mirings and in talos incl bortility to broad derations of legislative pwser has wulent, the (urts no longer rely on the delegation dewtrine" as an explanatori Lell a

Istitutional adjudication. See K. Daiin, Administrative Law Twit* 2 rad 1972).

This is not to say that the judicial concerns underlying the enrly dei ga! derimons have been abandoned. Ther bave not been They have been terized as components of dne piro , a constitutional standard to : htbe courts continne to ruire strict adherence.

The underlying judilal (herrls are paintiaily two: por motion of age 1 a untability and prevention of nehey arbitrarin: 1:21.dan pul less Titton that delegato er to administr 'lve the people witholt

1: form . frrriimple of that for one y of poteftatis a cutables font au. 11.11.,tratite URPHfpe Mwem (vrirts are fully HIZ!t to the 11.1 ! . fron tod! 16+1 te delesition inquiry and the opposit paring! !!

**Ponoropt* of control and sountability define the contitut, .. al re s t The principe permittink deletion of losinit.ip Iwwer, if there to !

17tt. Jint de 11:n reitlino! the the!!! TX111.it a ji: irent where te
hal depot within the lexislatie will. estilsbes porire le of 1.7'Y
under which compatibility with the legislative dein may be avertarud

intelligible standards for exercising the powe

r ved, that the exercise of such powers should be " erros and policed by judicial review. Both of t . **** ca] lasis in the guarantee of due process of law, **tanding, it becomes evident that the constituti I terased by the shift of focus from delegation to

A propose a virtually standardless delegation "Det Risaity Tribunal; it also offends modern notions • nafa's accorintability and preventing arbitrariness.

TITITECHT BOYALTY TRIBUNAL AND THE CONCEPT OF ACCO Tarrers bas not supplied specific directions for a

en semang sagly imk to the agencies themselves for definition *** mine agency power and guide its discretionary

..****. Bryant, 439 F:20 612, 652 (D.C. Cir. 1971); F * Rorkelshaus, 439 F 20 384, 597 (D.C. Cir. 1971).

The Royalty Tribunal is singularly ill-suited to tha * wucld he festablished in the Library of Congress *** Pie the Tribunal would not have a stable memt : :07 tied terms. Instead, the Tribunal would cons

bers selected on an ad hoc basis by the Reg u povided by the American Arbitration Ass ** veld he mnstituted as needed to consider petit

***1:44T** (videeming distribution of proceeds. The **P enel and bence no opportunity for individual

Dertise in the field. The perpetually amateur statu bien motional changes in Tribunal membership

pe Tribunal of consistent principles and polici structure of the Tribunal is fundamentally at

intire delegation of power without standar 6.1. of tandards to guide itself:

unting hare argented this development. See, e.9., E

. - jô 34 H 1 . *** in Teeproine Workers' Federation, 66 A. 20 616, 6 * be of arbitration under the statute will vary

** in the various boards of arbitration which in som e thn an even greater need of specife sta

I cubung00s administrative body which might

only by Congress but by the courts and the public." Amalgamated Meat Cutters, Etc. v. Connally, 337 F. Supp. 737, 746 (D.D.C. 1971) (Leventhal, J.).

Recent decisions indicate that accountability may be obtained by requiring that the agency itself articulate and adhere to substantive criteria in the dis. charge of its administrative responsibilities. Thus, the judicial focus has shifted from demanding specificity of congressional authorization to requiring ascertain. able standards for agency action. The result is that agency performance rather tban legislative delegation is increasingly the critical standard.

The other value that finds constitutional expression in the due process guarantee is the prevention of arbitrariness in decision-making. This too was part of the delegation inquiry. The early decisions invalidating legislation in the name of that doctrine suggest that the fatal defects in those statutes were the combinations of indefinite delegations of legislative power with inadequate procet -dural safeguards for those likely to be affected by the statutes. Recent decisions seek the same end but take a somewhat different (more practical) approach. They dispense with reliance on the delegation doctrine and focus directly on procedural protections surrounding agency power and the availability of judicial Teview to ensure that those procedural safeguards are following in a partionlar case. See, e.g. Leventhal, Principled Fairness and Regulatory Urgency, 25 Case W. Res. L. Rev. 66, 70 (1974) ("The contemporary approach is one not of in. validating even the broadest statutory delegations of power, but of assuring that these are accoin panied by adequate controls on subsequent administrative behavior.").

Thus, the historic judicial concern with standardless delegations of legislative mwer has not vanished. It has developed into two modern notions that may fairly be termed successors to the delegation doctrine: first, that agencies should articulate and follow intelligible standards for exercising the powers delegated to tbem; and, second, that the exercise of such powers should be contined by procedural safeguards and policed by judicial review. Both of these notions find constitutional basis in the guarantee of due process of law.

With this understanding, it becomes evident that the constitutional defects of H.R. 7223 are not erased by the shift of focus from delegation to due process. Not only does this bill propose a virtually standardless delegation of authority to the Copyright Royalty Tribunal; it also offends modern notions relied upon in promoting agency accountability and preventing arbitrariness.

11. THE COPYRIGHT BOYALTY TRIBUNAL AND THE CONCEPT OF ACCOUNTABILITY

Where the Congress has not supplied specific directions for agency action, courts increasingly look to the agencies themselves for definition of rules and standards that confine agency power and guide its discretionary exercise. See,

9. V'nited States v. Bryant, 439 F.2d 642, 652 (D.C. Cir. 1971 ) ; Environmental Defense Fund v. Ruckelshaus, 439 F. 20 584, 597 (D.('. Cir. 1971)."

But the Copyright Royalty Tribunal is singularly ill-suited to that task. Under $ 901 the Tribunal would be established in the Library of Congress. Unlike most administrative bodies, the Tribunal would not have a stable membership of persons appointed for fixed terms. Instead, the Tribunal would consist of shifting panels of three members, selected on an ad hoc basis by the Register of (opv. rights from a list provided by the American Arbitration Association. $ 808. These panels would he constituted as needed to consider petitions to adjust Toralty rates and disputes concerning distribution of proceeds. There would be no continuity of personnel and hence no opportunity for individual Tribunal mein. bers to derelop expertise in the field. The perpetually amateur status of individual members and the continual changes in Tribunal membership would preclude developinent by the Tribunal of consistent principles and policies to guide its decisions. The structure of the Tribunal is fundamentally at odds with the expectation that legislative delegation of power without standards can be cured by agency articulation of standards to guide itself.:

• Leading commentators have applauded this development. See, 6.9., K. Davis, Adminis. trative Law Text $12.02-.10 (3d ed. 1972). C). State v. Trafic Telephone Workers' Federation, 66 A. 20 616, 626 (N.J. Sup. Ct.

The personnel of the board of arbitration under the statute will vary with each strike. There is no permanence in the various boards of arbitration which may be constituted in successive cases. There is thus, an even greater need of speciile standards than there would be in the case of a continuous administrative body which might gather experience as it went along."

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