Mr. KASTENMEIER. We will reconvene. The committee will come to order. Our second witness today is one who very, very often appears before this committee. If she were to count the hours and we were to count the hours she has appeared before this committee, it would indeed be impressive, but not as impressive as the quality of the service she has rendered to the country in her capacity as Register of Copyrights and in her prior capacity in that office. She has been, I think, one of the most outstanding public servants, civil servants, our system has produced. I would like to greet the Register of Copyrights, Ms. Barbara Ringer. TESTIMONY OF BARBARA RINGER, U.S. REGISTER OF COPYRIGHTS, ACCOMPANIED BY DOROTHY SCHRADER, HARRIET OLER, AND DAVID LEIBOWITZ Ms. RINGER. Thank you very much, Mr. Chairman. I appreciate your words more than I can say. I am Barbara Ringer, Register of Copyrights in the Copyright Office of the Library of Congress and Assistant Librarian of Congress for Copyright Services. I would like to thank you and the subcommittee staff for giving me the opportunity to appear here today. I would also like to introduce my colleagues. To my right, Dorothy Schrader, General Counsel of the Copyright Office. To her right is Harriet Oler, attorney-adviser in the Copyright Office, and to my left, David Leibowitz, attorney-adviser in the Copyright Office. They each have their areas of expertise. I am here to talk primarily about two things today. In my prepared statement I have included some comments on four areas that I think are of rather urgent concern to the Copyright Office, but with your permission I don't plan to discuss them in my oral remarks, at least my introductory remarks. I will be more than happy to answer questions on them, however. I am here primarily to talk about performance royalties for sound recordings and the problems of cable television and copyright, a subject Mr. Geller introduced this morning. I will only summarize the main points of my rather long preliminary statement, Mr. Chairman, and will be more than happy to answer any questions that you have. Mr. KASTENMEIER. Without objection, your 30-page statement will be received and made part of the record. [The above referred to statement follows:] STATEMENT OF BARBARA RINGER, REGISTER OF COPYRIGHTS AND ASSISTANT Mr. Chairman, I am Barbara Ringer, Register of Copyrights in the Copyrights Office of the Library of Congress and Assistant Librarian of Congress for Copyright Services. I should like to thank you and the Subcommittee staff for giving me the opportunity to appear before you today. My purpose is threefold: first, to comment directly on proposals to establish performance rights in sound recordings, including two bills sponsored by Mr. Danielson and pending before your Committee, H.R. 237 and H.R. 997; second, to comment generally on the question of uses of copyrighted works by cable systems, including the practical problems that have arisen under section 111 and chapter 8 of the Copyright Act and the proposals for changes in communications law and FCC regulations that would have a direct impact on those copyright provisions; and, third, to call to your attention certain other points of concern with respect to the Copyright Office arising from the Copyright Act of 1976. 1. PERFORMANCE RIGHTS IN SOUND RECORDINGS Background of the problem Section 114 of the Copyright Act of 1976 presently limits the exclusive rights of the owner of copyright in a sound recording to the rights to reproduce phonorecords of the sound recording, to prepare derivative works, and to distribute publicly phonorecords of the sound recording. Paragraph (a) of that section affirms that the owner's rights "do not include any right of performance under section 106(4)." Thus, the current Copyright Code does not contain a performance right for sound record ings. During the extensive debates and hearings preceding revision of the copyright law in 1976, Congress considered proposed amendments to the copyright law to create a performance royalty in copyrighted sound recordings (S. 1111, H.R. 5345, 94th Cong., 1st Sess. 1975). Hearings were held on those companion bills in the House Judiciary Subcommittee on July 23, 1975, and in the Senate Judiciary Subcommittee on July 24, 1975. Representatives of performers, performers' unions and other affiliated union organizations joined the record industry to support the proposals, while broadcasters, jukebox operators, and wired music services opposed it on economic and policy grounds. On behalf of the Copyright Office, I stated full agreement with the fundamental aim of the proposal. Congress concluded that the issue required further study and, in subsection (d) of section 114 of the revised copyright law, directed the Register of Copyrights to prepare a full and objective report reviewing the views of major interested parties and the status of performance rights in foreign countries, and offering legislative recommendations, if any. The Copyright Office responded with a very extensive study, which we submitted to Congress in 1978, "Performance Rights in Sound Recordings," (95th Cong., 2d Sess. Comm. Print No. 15 (1978)). This report included analyses of legal issues, testimony received in hearings sponsored by the Copyright Office, an independent economic analysis of the effect of creating performance rights, a bibliography and a statement by the Register of Copyrights summarizing the views of the Copyright Office on the issues raised in the report. We supported the principle of a performance right in sound recordings, and offered draft legislation to provide, within the copyright law, a compulsory license to perform a sound recording publicly once phonorecords of that recording have been distributed to the public under the authority of the copyright owner. My statement and the draft legislation reflected the study's conclusion that all relevant constitutional, economic, and policy considerations fully supported the creation of such a right as part of the bundle of rights enjoyed by a copyright owner. During this time, H.R. 6063 (95th Cong., 1st Sess. (1977)), a bill to create a performance right in copyrighted sound recordings, was under consideration by the House Subcommittee on Courts, Civil Liberties and the Administration of Justice of the Committee on the Judiciary, House of Representatives. That Subcommittee held further hearings on the issue on March 29, 30, May 24 and 25, 1978. Representatives of interested industries, including record manufacturers, broadcasters, unions and Jukebox operators, and various Government agencies offered testimony. (See, Hear ings before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice of the Committee on the Judiciary, House of Representative, 95th Cong., 2d Sess Serial No. 83, 1978.) In the present Congress, H.R. 237 (96th Cong., 1st Sess. (1979)), a bill duplicating the earlier HR. 6063, and H.R. 997 (96th Cong., 1st Sess. (1979)) were introduced in the House of Representatives and referred to the Judiciary Committee. The latter bill. HR. 997, and its Senate companion, S. 1552, essentially follow the draft legislation proposed by the Copyright Office in 1978 and incorporate changes suggested by the Record Industry Association of America and agreed to by the Copyright Office. Analysis of H.R. 997 The proposed amendment would add to the existing copyright law a separate limited performance right in the form of a compulsory license for copyrighted sound recordings fixed on or after February 15, 1972. The license would automatically permit the licensee to perform an authorized and publicly distributed sound recording upon filing timely notices of intention, annual Statements of Account, and annual royalty fees with the Copyright Office. The Register of Copyrights is directed to issue regulations governing these filings. Royalty fees may be computed on either a prorated basis or a blanket basis, as the licensee chooses. Subsection (c)(8) enumerates annual royalty rates for Federal Communications Commission (FCC) licensed radio and television broadcast stations, bred on their annual receipts from advertising sponsors. Radio stations whose gross annual advertising receipts are less than $25,000 and television stations whose gross annual advertising receipts are less than $1,000,000 are exempted from liability for infringement and from the section's compulsory licensing requirements for that year. The blanket rate for other transmitters of performances of copyrighted sound recordings, including background music services, is two percent of gross receipts from subscribers during the year. The blanket rate for commercial establishments such as discotheques, nightclubs, and cafes whose principal entertainment is dancing to the accompaniment of sound recordings is $100 per location per calendar year. Other users, not otherwise exempted, will pay a blanket royalty of $25 per year for each location at which copyrighted sound recordings are performed. Those transmitters grossing less than $10,000 from subscriber receipts in any given year are exempt from liability for infringement and from the bill's compulsory licensing requirements for that year. Educational users exempted by section 110 of the copyright law retain that exemption. Royalty rates for jukebox performances and for cable performances of copyrighted sound recordings are governed by the compulsory licensing provisions of sections 116 and 111 respectively, but the annual license fee for jukeboxes under section 116 is raised from $8 to $9 per box. Finally, subsection (c)(7) sets forth guidelines for the Copyright Royalty Tribunal to apply in computing prorated license fees for licensees who choose not to use the blanket rates. These fees are to be based upon the proportion of commercial time devoted to the use of copyrighted sound recordings by the licensee, and, in the case of licensed radio and television stations, equal a fraction of one percent of the station's net receipts from advertising sponsors during the year, and for other transmitters equal a fraction of two percent of the licensee's gross subscriber receipts for the year. Other non-exempted users will pay a prorated fee not to exceed $5 per day of use. The Copyright Royalty Tribunal will distribute royalties annually to claimants who have filed a claim. Claimants may agree on the division of fees notwithstanding the antitrust laws. Royalties distributed under the bill are split, with one-half paid to the copyright owners and the other half shared equally among the performers, without regard to the value or length of their respective contributions. Further, the bill prohibits assignment of these royalties to other royalty recipients under the provision, thus protecting the right to share in the royalties in spite of possible unequal bargaining power. Finally, the bill permits the Copyright Royalty Tribunal to retain the services of one or more private, nongovernmental entities to monitor the performance of sound recordings, to value these performances and to distribute royalty funds to recipients. Proceedings may be instituted to adjust the royalty rates five years after the effective date of enactment and in each subsequent fifth calendar year. The Act would become effective on January 1, 1981. Comments on the bill I reiterate my strong support for the principle of performance rights for sound recordings, and now add to it my unqualified endorsement of the amendment proposed in H.R. 997. The following comments summarize statements I have made on this subject in earlier reports and testimony. The Copyright Office believes that the lack of copyright protection for performers since the commercial development of phonograph records has had a drastic and destructive effect on both the performing and the recording arts. Broadcasters and other commercial users of recordings have performed them without permission or payment for generations. Users today look upon any requirement that they pay royalties as an unfair imposition in the nature of a "tax." However, any economic burden on the users of recordings for public performance is heavily outweighed, not only by the commercial benefits accruing directly from the use of copyrighted sound recordings, but also by the direct and indirect damage done to performers whenever recordings are used as a substitute for live performances. In all other areas the unauthorized use of a creative work is considered a copyright infringement if it results either in damage to the creator or in profits to the user. Sound recordings are creative works, and their unauthorized performance results in both damage and profits. To leave the creators of sound recordings without any protection or compensation for their widespread commercial use can no longer be justified. We do not believe that arguments to the effect that sound recordings are not "writings" and that performers and record producers are not "authors" can be considered tenable. The courts have consistently upheld the constitutional eligibility of sound recordings for protection under the copyright law. Passage of the 1971 Sound Recording Amendment was a legislative declaration of this principle, which was reaffirmed in the Copyright Act of 1976. If sound recordings are "the writings of an author" for purposes of protection against unauthorized duplication, they must be considered "the writings of an author" for purposes of protection against unauthorized performance. Broadcasters and other users have argued that the benefits accruing to performers and record producers from the "free airplay" of sound recordings represent adequate compensation in the form of increased record sales, increased attendance at live performances, and increased popularity of individual artists. While this argument may be valid in the case of some "hit records," we do not believe that these unpredictable benefits in certain cases justify the outright denial of performing rights to all records. That denial is inconsistent with the underlying philosophy of the copyright law: that of securing the benefits of creativity to the public by the encouragement of individual effort through private gain (Mazer v. Stein, 347 U.S. 201 (1954)). II. SECONDARY TRANSMISSIONS BY CABLE SYSTEMS OF COPYRIGHTED WORKS Throughout the 23-year process leading to enactment of the new copyright law of the United States, the single most difficult issue was the question of the copyright liability of cable television systems for their retransmission of copyrighted broadcast programming. Congress was called upon to chart an entirely unexplored course through a complex maze of controversial, complex, and volatile copyright and communications issues. To have enacted any legislation that has proved to be coherent and workable was an achievement of historic proportions. Taken as a whole, the cable provisions of the new law represent an amalgamation of untested compromises; as such, they fall a great deal short of perfection. Considering the changes that have taken place in communications and the economy in the three years since enactment, it is not surprising that the cable provisions are now being subjected to challenges of various kinds. Some of these challenges may have merit, and your Subcommittee should consider them all carefully. At the same time, in any legislative reconsideration of this issue, it is vital to recognize three fundamental points: 1. Any legislative solution to the problem of cable television must involve a carefully balanced combination of copyright and communications provisions. The full implications of any changes must be judged from both a copyright and a communications viewpoint. Your Subcommittee, with its jurisdiction over the U.S. copyright system, therefore, has an essential role to fulfill in the development of legislation on this subject. 2. Any legislative solution to the cable problem must be based on some knowledge of the background and history of the two legal foundations on which the cable industry rests: the communications law (with FCC regulations) and the copyright law (with regulations of both the Copyright Office and the Copyright Royalty Tribunal). 3. Many of the cable provisions in the copyright statute represent a delicate balance resting on existing FCC regulations, current communications technology, and prevailing industry practices. However, recognizing that these circumstances are all certain to change, Congress provided some flexibility by authorizing the Copyright Royalty Tribunal (CRT) to make adjustments under certain conditions. Where a particular provision of the copyright law now is under attack on the ground that circumstances have changed, it is important to determine whether the change is great enough to require new legislation rather than CRT regulation. And, if the CRT's regulatory authority is not broad enough to make justified changes, a corollary question is whether, instead of revising the substantive provisions of the law, Congress should expand the CRT's authority. To help your Subcommittee approach this problem as systematically as possible, this part of my statement is divided into five parts: 1) A brief review of the history and contents of the cable provisions of the Copyright Act of 1976; (2) A brief review of the experience of the Copyright Office and the CRT under the new law; 3) A summary of certain proposals for revisions in the Communications Act of 1961 as they would effect the copyright law (particularly the "retransmission consent" proposal); 4. A summary of certain proposals for changes in the FCC rules affecting cable, including proposals for deregulating cable (through changes in the distant signal and exclusivity rules) and for adopting a "retransmission consent" requirement by regulation. 15 A summary of conclusions from a copyright viewpoint, with proposals for possible amendments of the copyright statute. history and contents of cable provisions of Copyright Act The question of copyright liability of cable television systems for their retransmission services emerged as a major legislative issue in the mid-1960's. Before that question could be resolved for the future—indeed, before any copyright revision bill could be enacted-it was essential to determine the copyright liability of cable under the 1909 Copyright Act. The battle over this question was fought in the courts, beginning in 1964, and was finally settled by the Supreme Court in its landmark rulings, Fortnightly Corp. v. United Artists 392 U.S. 390 (1968) and Teleprompter Corp. v. CBS 415 U.S. 394 (1974). These decisions held cable systems free of any copyright liability for their retransmission services-that is, for the simultaneous retransmission of over-the-air broadcasts of copyrighted television programs. They resolved the question under the old law, but they left completely unanswered the larger and more troublesome problem of balancing the interests of copyright owners, broadcasters, and cable operators under a new copyright statute. The Supreme Court expressly and pointedly left this responsibility with Congress. The period between 1964 and 1976 was marked with great uncertainty as to how best to fit the burgeoning cable industry into well-established communications law and regulation and into the fabric of the copyright marketplace. To summarize the history of this period very briefly: (1) În 1967 a copyright revision bill containing cable provisions came before the House of Representatives. The bill was passed, but not before the cable provisions had been deleted entirely. (2) Before the House action in 1967 and the Fortnightly decision in 1968, the Federal Communications Commission had looked to the copyright law as the best way to provide a comprehensive solution to both the copyright and the communications issues of policy presented by cable. (3) After the legislative and judicial failure of efforts to control cable through copyright, the FCC approached the problem directly through a regulatory device that was, in reality, the exact equivalent of a copyright. Immediately after the Supreme Court decision in Fortnightly, the FCC imposed upon CATV the requirement of "retransmission consent" for its service of providing simultaneous distribution of broadcast programs. Since only a few "retransmission consents" (ie., copyright licenses) were granted under these rules, their practical effect was the same as an outright regulatory prohibition. (4) The years between 1969 and 1974 were marked by intense activity on the cable issue aimed at producing some agreement among the major interests involved, and a combination of FCC rules and copyright legislation, that would somehow provide a coherent and balanced national communications and copyright policy for CATV. Some basic principles emerged from this effort; stated in their simplest form they can be summarized thus: The FCC would control signal distribution by cable systems as part of a national allocations policy and would protect some "exclusive rights" (i.e. copyrights) as part of this policy; The copyright law would prescribe the degree and nature of cable operators' liability for the use of copyrighted programming that the FCC rules permitted them to retransmit; and Since it would be a practical impossibility for cable operators to obtain negotiated licenses from all of the copyright owners of programming they could retransmit under FCC rules, the copyright law would provide a compulsory license to cover this situation. Cable operators would be required to pay copyright royalties that would be fair to copyright owners but not prohibitive to the operators themselves. (5) The FCC rules of 1972 and the various copyright revision bills between 1974 and 1976 were based upon these principles, but they remained highly controversial. The statutory formula for determining how much the CATV operators would have to pay was probably the most contentious of the remaining issues. A breakthrough occurred on April 13, 1976, when the "two industries most directly affected by the establishment of copyright royalties for cable television systems" (H. Rept. 94-1476, p. 90), the National Cable Television Association and the Motion Picture Association of America, reached a signed agreement recommending copyright legislation. The cable provisions of the Copyright Act of 1976 are based directly on this compromise agreement. Sections 111, 501, 510, and Chapter 8 (particularly section 801) of the Copyright Act govern copyright liability for the retransmission of copyrighted television and radio programs by cable systems. A fundamental principle adopted in this legislation is that this retransmission activity should be subject to compulsory licensing with statutorily prescribed royalties. The CATV compulsory license in section 111 is a statutory device which permits the cable retransmission of a copyrighted work |