[Code of Federal Regulations]
[Title 37, Volume 1]
[Revised as of July 1, 1999]
From the U.S. Government Printing Office via GPO Access
[CITE: 37CFR201.30]
[Page 401-403]
TITLE 37--PATENTS, TRADEMARKS, AND COPYRIGHTS
CONGRESS
PART 201--GENERAL PROVISIONS--Table of Contents
Sec. 201.30 Verification of Statements of Account.
(a) General. This section prescribes rules pertaining to the
verification of information contained in the Statements of Account by
interested copyright parties pursuant to section 1003(c) of title 17 of
the United States Code.
(b) Definitions--(1) Annual Statement of Account, generally accepted
auditing standards (GAAS), and primary auditor have the same meaning as
the definition in Sec. 201.28 of this part.
(2) Filer is a manufacturer or importer of digital devices or media
who is required by 17 U.S.C. 1003 to file with the Copyright Office
Quarterly and Annual Statements of Account and a primary auditor's
report on the Annual Statement of Account.
(3) Interested copyright party has the same meaning as the
definition in Sec. 201.29 of this part.
(4) Verifying auditor is the person retained by interested copyright
parties to perform a verification procedure. He or she is independent
and qualified as defined in paragraphs (j)(2) and (j)(3) of this
section.
(5) Verification procedure is the process followed by the verifying
auditor to verify the information reported on an Annual Statement of
Account.
(c) Purpose of verification. The purpose of verification is to
determine whether there was any failure of the primary auditor to
conduct the primary audit properly or to obtain a reliable result, or
whether there was any error in the Annual Statement of Account.
(d) Timing of verification procedure--(1) Requesting a verification
procedure. No sooner than three months nor later than three years after
the filing deadline of the Annual Statement of Account to be verified,
any interested copyright party shall notify the Register of Copyrights
of its interest in instituting a verification procedure. Such
notification of interest shall also be served at the same time on the
filer and the primary auditor identified in the Annual Statement of
Account. Such notification shall include the year of the Annual
Statement of Account to be verified, the name of the filer, information
on how other interested copyright parties may contact the party
interested in the verification including name, address, telephone
number, facsimile number and electronic mail address, if any, and a
statement establishing the party filing the notification as an
interested copyright party. The notification of interest may apply to
more than one Annual Statement of Account and more than one filer.
(2) Coordination and selection of verifying auditor. The Copyright
Office will publish in the Federal Register notice of having received a
notification of interest to institute a verification procedure.
Interested copyright parties have one month from the date of publication
of the Federal Register notice to notify the party interested in
instituting the verification procedure of their intent to join with it
and to participate in the selection of the verifying auditor. Any
dispute about the selection of the verifying auditor shall be resolved
by the parties themselves.
(3) Notification of the filer and primary auditor. As soon as the
verifying auditor has been selected, and in no case later than two
months after the publication in the Federal Register of the notice
described in paragraph (d)(2) of this section, the joint interested
copyright parties shall notify the Register of Copyrights, the filer,
and the primary auditor identified in the Annual Statement of Account to
be verified, that they intend or do not intend to initiate a
verification procedure.
(4) Commencement of the verification procedure. The verification
procedure shall begin no sooner than one month after notice of intent to
initiate a verification procedure was given to the filer and the primary
auditor by the joint interested copyright parties. The joint interested
copyright parties shall grant the filer or the primary auditor a
postponement of the beginning of the
[[Page 402]]
verification procedure of up to one additional month if either one
requests it. Verification procedures shall be conducted at reasonable
times during normal business hours.
(5) Anti-duplication rules. A filer shall be subject to no more than
one verification procedure per calendar year. An Annual Statement of
Account shall be subject to a verification procedure only once.
(e) Scope of verification. The verifying auditor shall limit his or
her examination to verifying the information required in the Annual
Statement of Account. To the extent possible, the verifying auditor
shall inspect the information contained in the primary auditor's report
and the primary auditor's working papers. If the verifying auditor
believes that access to the records, files, or other materials in the
control of the filer is required according to GAAS, he or she may, after
consultation with the primary auditor, require the production of these
documents as well. The verifying auditor and the primary auditor shall
act in good faith using reasonable professional judgment, with the
intention of reaching a reasonable accommodation as to the necessity and
scope of examination of any additional documents, but the decision to
require the production of additional documents is solely that of the
verifying auditor.
(f) Verification report. Upon concluding the verification procedure,
the verifying auditor shall render a report enumerating in reasonable
detail the procedures performed by the verifying auditor and his or her
findings. Such findings shall state whether there was any failure of the
primary auditor to conduct properly the primary audit or obtain a
reliable result, and whether there was any error in the Annual Statement
of Account, itemized by amount and by the filer's elected fiscal year.
If there was such failure or error, the report shall specify all
evidence from which the verifying auditor reached such conclusions. Such
evidence shall be listed and identified in an appendix to the report in
sufficient detail to enable a third party to reasonably understand or
interpret the evidence on which the verifying auditor based his or her
conclusion. If there was no such failure or error, the report shall so
state.
(g) Distribution of report. Copies of the verifying auditor's report
shall be subject to the confidentiality provisions of Sec. 201.29 and
shall be distributed as follows:
(1) One copy, excluding the appendix, if applicable, shall be filed
with the Register of Copyrights.
(2) One copy, with the appendix, if applicable, shall be submitted
to each of the interested copyright parties who retained the services of
the verifying auditor and who are authorized to receive such information
according to Sec. 201.29.
(3) One copy, with the appendix, if applicable, shall be submitted
to the filer of the Annual Statement of Account.
(4) One copy, with the appendix, if applicable, shall be submitted
to the primary auditor.
(h) Retention of report. The Register of Copyrights will retain his
or her copy of the verifying auditor's report for three years following
the date the copy of the verifying auditor's report is filed.
(i) Costs of verification. The joint interested copyright parties
who requested the verification procedure shall pay the fees of the
verifying auditor and the primary auditor for their work performed in
connection with the verification procedure, except, if the verification
procedure results in a judicial determination or the filer's agreement
that royalty payments were understated on the Annual Statement of
Account, then,
(1) if the amount is less than five percent (5%) of the amount
stated on the Annual Statement of Account, that amount shall first be
used to pay the fees of the verifying auditor and the primary auditor,
and any remaining amount plus any applicable interest on the total
amount shall be deposited, allocated by the filer's elected fiscal year,
with the Register of Copyrights, or
(2) if the amount is equal to or greater than five percent (5%) of
the amount stated on the Annual Statement of Account, the filer shall
pay the fees of the verifying auditor and the primary auditor, and, in
addition, shall deposit the
[[Page 403]]
amount found to be due plus any applicable interest on the total amount,
allocated by the filer's elected fiscal year, with the Register of
Copyrights.
(j) Independence and qualifications of verifying auditor. (1) The
verifying auditor shall be qualified and independent as defined in this
section. If the filer has reason to believe that the verifying auditor
is not qualified or independent, it shall raise the matter with the
joint interested copyright parties before the commencement of the
verification procedure, and if the matter is not resolved, it may raise
the issue with the American Institute of Certified Public Accountants'
Professional Ethics Division and/or the verifying auditor's State Board
of Accountancy while the verification procedure is being performed.
(2) A verifying auditor shall be considered qualified if he or she
is a certified public accountant or works under the supervision of a
certified public accounting firm.
(3) A verifying auditor shall be considered independent if:
(i) He or she is independent as that term is used in the Code of
Professional Conduct of the American Institute of Certified Public
Accountants, including the Principles, Rules and Interpretations of such
Code applicable generally to attest engagements (collectively, the
``AICPA Code''); and
(ii) He or she is independent as that term is used in the Statements
on Auditing Standards promulgated by the Auditing Standards Board of the
AICPA and Interpretations thereof issued by the Auditing Standards
Division of the AICPA.
[61 FR 30813, June 18, 1996]