Chapter 8 MANUFACTURING REQUIREMENT AND IMPORTATION A. MANUFACTURE OF CERTAIN COPIES IN THE UNITED STATES 1. IN GENERAL The last of the major policy issues in general revision to be discussed in this Supplementary Report is whether to retain, in some form, provisions similar to the "manufacturing clause" of the present law. The problems of reconciling the interests of the American printing industry with those of American authors and publishers led to the adoption of the original "manufacturing clause" in 1891, and it is clear that these problems are still with us today. In the hope that economic factors had changed sufficiently to permit the dropping of domestic manufacture as a condition of copyright, the 1961 Report recommended outright repeal of the manufacturing clause. It pointed out that authors suffer unfairly under the present requirements, and it concluded that the manufacture of copies abroad is no justification for denying copyright protection altogether, or for cutting it off after five years (as is now the case under the ad interim provisions of secs. 22 and 23 of the statute). The Report regarded the need for a limit on importation in order to protect the American book manufacturing industry as an "open question"; and it recommended that, if limitations on importation are considered necessary, they should be provided outside the copyright law. In response to these proposals, representatives of the book manufacturing industry took a very strong position against complete elimination of the manufacturing requirements in the copyright law. They argued that the American printing industry faces a serious threat of foreign competition from countries with lower wage rates, and that the manufacturing clause offers the only effective form of protection against this competition. In the course of the discussions it became apparent that, for the sake of the program for general revision of the copyright law, an effort should be made to seek a compromise on this difficult problem. The interests opposed to those of the book manufacturers on this issue are primarily those of authors and book publishers, both of which have supported the recommendation for outright repeal. We still believe, as we indicated in the 1961 Report, that no reason can be found to justify a manufacturing requirement that would deprive a copyright owner of rights, such as performing, dramatization, and motion picture rights, that are unrelated to the reproduction and distribution of copies. Specifically with respect to publishing rights, we still believe that in principle they should not be made to depend upon compliance with manufacturing requirements. We recognize and sympathize with the arguments of book manufacturers, but it would be distinctly preferable if their asserted need for protection against foreign low-wage competition could be met without depriving copyright owners of their rights. The manufacturers maintain that this is not yet possible, and that a manufacturing requirement in the copyright statute is still essential to their interests. If this is true and the manufacturing clause must be retained, we believe that the requirement should be substantially narrowed so that rights are not destroyed in situations where the book manufacturing industry has no real need of protection. This is the thinking that has gone into the compromise proposal represented by section 601 of the bill. It would be pointless and confusing for us here to attempt any detailed comparison of section 601 with the complex and abstruse manufacturing provisions in the present law. Instead we shall simply point out and comment on the salient features of section 601. 2. WORKS SUBJECT TO MANUFACTURING CLAUSE Under subsections (a) and (b) of section 601, the manufacturing requirements would be much more limited in scope than those of the present law: (1) The manufacturing requirements would apply only to “a work consisting preponderantly of nondramatic literary material that is in the English language and is protected under this title." They would not cover: (a) Dramatic, musical, pictorial, or graphic works; (b) Foreign-language, bilingual, or multilingual works; (c) Material in the public domain; or (d) Works consisting predominantly of material that is not subject to the manufacturing requirement. (2) The manufacturing requirements would cover only those "portions [of the work] consisting of *** material" that is subject to the requirements. For example, even if domestic manufacture were required for the text of a book, the illustrations could still be freely manufactured abroad without affecting their copyright status. (3) The manufacturing requirements would not apply where "the author of any substantial part of [the work] is neither a citizen nor a domiciliary of the United States." In other words, they would not apply to a work of which any substantial part was written by a foreign author. They would apply only to works of U.S. authors, and not then if one or more co-authors of the work were foreign. 3. LIMITATIONS ON IMPORTATION AND DISTRIBUTION OF COPIES The basic object of section 601 is to induce the manufacture of an edition of the book in the United States if more than 3,500 copies are to be distributed in this country. Thus, with respect to works that come within its scope, subsection (a) sets forth a general prohibition against "the importation into or public distribution in the United States of copies" unless the portions subject to the requirement "have been manufactured in the United States." Subsection (b) then sets forth the exceptions to this prohibition, and clause (2) would permit importation of up to 3,500 copies "where the Bureau of Customs is presented with an import statement issued under the seal of the Copyright Office." The 3,500-copy figure was suggested as the point, in the present book market, beyond which it is generally more costly for a publisher to import copies than to manufacture an edition here. As such it would be the equivalent of 1,500 copies in the market of 1949, when the statute was amended to provide a 1,500-copy limit on importation. In addition to the 3,500 copies that could be imported under clause (2), clauses (3) and (4) of section 601 (b) would allow limited importation of copies, for use and not for sale, under certain special circumstances and conditions: for government, personal, or library use, etc. These exemptions are similar to those in section 107 of the present statute. Clause (5) offers a complete exemption from the manufacturing requirements of copies that "are reproduced in raised characters for the use of the blind." Clause (6) would permit the public distribution in the United States of copies imported in conformity with the other clauses of that subsection. 4. WHAT CONSTITUTES "MANUFACTURE IN THE UNITED STATES' It has become apparent from our discussions that the most important practical issue in the current controversy over the manufacturing clause involves the extent to which the statute should impose restrictions on foreign typesetting or composition. At present, under what they believe to be a loophole in the manufacturing clause of the 1909 statute, a number of book publishers are sending their manuscripts abroad for composition, importing reproduction proofs, and then manufacturing their copies "by lithographic process wholly performed in the United States." The language of the present law is unclear on this point, and the book manufacturers have argued that this practice violates the manufacturing requirements. The Copyright Office will make registration in cases where this pracvice has been followed, but does so on the basis of the doubt and without taking a final position on the question. The book publishers have taken a very strong stand against any manufacturing provision, no matter how liberal in other respects, that would close this loophole and place restrictions on their use of imported reproduction proofs. They are also concerned lest the statutory definition of what constitutes "manufacture in the United States" prohibit them from taking advantage of new techniques and devices in book production, most particularly composition by means of computers. They argue that the present law would permit the use of imported computer tapes for composition here, and that the revised statute should do nothing to interfere with this practice. Up to now this controversy has not been resolved. The book manufacturers have not so far indicated a willingness to accept an outright exemption of foreign composition from the manufacturing requirements. On the other hand, if the book publishers' construction of the disputed language in the present copyright statute is correct, it could be argued that a more restrictive provision in the revised law would violate the treaty obligations of the United States under the General Agreement on Tariffs and Trade (GATT). Our decision, in redrafting the bill for introduction in 1965, was therefore to maintain the status quo on the issue of foreign composition. Unfortunately, the only way to accomplish this result was to preserve the ambiguous and awkward language of the 1909 statute as nearly as possible. Thus, section 601 (c) of the bill reads: The requirement of this section that copies be manufactured in the United States is satisfied where they have been printed from type set in the United States, either by hand or by the aid of any typesetting machine, or from plates made in the United States from type set therein, or, if the text has been produced by lithographic process, or photoengraving process, then by a process wholly performed in the United States, and where the printing of the text and binding of the copies have been performed in the United States. If the copies have been printed or produced by any process other than those specified in this subsection, the requirement is satisfied where every step in their reproductive manufacture took place in the United States. The operative language of the first sentence of this subsection, including its possibly significant punctuation, is taken virtually intact from the basic statement of the manufacturing requirements in section 16 of the present statute. It is intended to mean here whatever it means there. The equivalent of the second sentence is found in the |