HOUSE VOTES TO REFORM COPYRIGHT ARBITRATION PROCESS

The House Wed. approved by voice vote a bill (HR-1417) to reform copyright royalty arbitration, an issue important to webcasters, broadcasters, cable and satellite operators. The bill by House Judiciary Courts, Internet & Intellectual Property Subcommittee Chmn. Smith (R-Tex.) would replace the Copyright Arbitration Royalty Panel (CARP) created in 1993 for compulsory licenses with a panel of 3 administrative law judges chosen by the Librarian of Congress. The bill was approved 406-0.

“There is widespread agreement… that the CARP process is broken,” said HR-1417 cosponsor Berman, the ranking Democrat of Smith’s subcommittee. He was quoting Register of Copyrights Mary Beth Peters, who said that at a hearing on HR-1417 last year. Berman and House Judiciary Committee Chmn. Sensenbrenner (R-Wis.) said the bill resulted from hearings and extensive negotiations with parties to copyright rulemakings. CARP reform “is an arcane but important matter,” he said. Sensenbrenner said CARP decisions frequently have been “unpredictable and inconsistent” and echoed Smith and Berman in citing the webcasting CARP as particularly bothersome.

HR-1417 began to be crafted shortly after the CARP decision on webcasting rates in 2002, which set a figure based on one large webcaster, Yahoo. Sensenbrenner late in the 107th Congress stepped in to ensure that small webcasters wouldn’t be put out of business by those rates, and the U.S. Copyright Office was called upon to overturn that decision. After citing the webcaster CARP, Smith said parties often are “caught up in a royalty system that is anything but fair” and is “long, laborious and costly. Congress must reform this broken system.”

The most obvious change proposed by HR-1417 is abolition of CARP panels, to be replaced by 3 copyright royalty judges serving staggered 6-year terms. The private arbitrators in CARP proceedings have little or no prior experience in copyright law or arbitration, Berman said, while the new judges would have backgrounds in copyright, economics and arbitration. Sensenbrenner and Berman also said the bill would encourage private negotiations before recourse to royalty judges -- what Sensenbrenner called a “cooling-off period.” CARPs routinely have been too expensive for many participants to participate, Berman said, but Sensenbrenner said HR-1417 would keep expenses for parties low.

The bill approved Wed. contained what Sensenbrenner called “noncontroversial amendments” that addressed technical concerns raised after HR-1417 passed the House Judiciary Committee. The bill now goes to the Senate, where no companion legislation has been introduced.