39 an unparallelled diversity of musical offerings, from classical and jazz to rock and country, from ethnic and gospel to soul and reggae. Pursuant to the Copyright Clause of the Constitution, the Congress has given copyright owners of musical compositions and sound recordings the exclusive right to control, and obtain royalty payments for the use of, their creative works. Among these exclusive rights is the right to control the reproduction of their copyrighted musical works and sound recordings As discussed more fully in Section III, above, uncompensated home taping infringes those rights. In understanding just why the copyright system is so essential to the recording industry, it is important to remember that the recording business is exceedingly risky. More than 80 percent of all records released fail even to recover their costs. On average, a company must sell almost 150,000 copies of a popular LP just to break even. 29/ It is the copyright system that makes it possible for record companies and other creators to bear these 29/ 17 U.S.C. § 106(1). 40 enormous risks and bring to the market an extraordinary variety and quality of musical offerings each year. Under that system, record companies are able to rely on the revenues derived from their ownership of the copyright in the occasional hit to subsidize the more than 80 percent that are losers, the recording of new unknown artists, and the release of special music (such as classical, jazz, ethnic, and gospel). In this way the copyright system not only enables the industry to survive, but also encourages experimentation and the promotion of unknown talents. It thereby ensures the availability of a broad variety of music. Certainly, at a time when we are witnessing a decrease in public funding for the arts, the copyright system plays an even more vital role in fostering the production of new creative works. If the arts are to be self-sufficient, then Congress must ensure that the marketplace operates fairly and that copyright owners can obtain fair compensation notwithstanding technological developments. Unless the home taping issue is resolved in such a way as to guarantee fair compensation to those whose intellectual property is now being appropriated in massive amounts, the recording industry will be unable to continue to bear the enormous risks of the marketplace. It will not be able to subsidize specialized forms of music or promote the variety of unknown artists and songwriters it has in the past. In the final analysis, the practical consequences of uncompensated home taping will be detrimental to everyone, including home tapers who will have less and less new material to tape and the large number of Americans (indeed the vast majority) who do not tape, but who buy records. By siphoning off revenues, home taping will not only force record prices higher, but will also cause further diminution in the quantity, quality and variety of music available to the public. Musical compositions and sound recordings are, of course, a form of property. Like any other form of property, whether tangible or intangible, its owners possess the fundamental right under our constitutional system to preclude others from interfering with it. Home taping subverts that essential characteristic of copyright ownership. And that is not in anyone's interest. As the Register of Copyrights, Mr. David Ladd, has aptly said: copyright is the highest form of property - Some confuse the application of private property principles to sound recordings by assuming that the copyright owner is adequately compensated as long as someone paid for the tangible recording from which tapes are made. That view is in error for two reasons. First, most taping is done from records that the taper never even bought. Second, even as to records the taper purchased, this view reflects a basic misunderstanding of the essential nature of intellectual property and copyright law. The record bought in the store is one type of property. It is tangible. It is owned by the purchaser and can be handled as he or she wishes. Embodied in it, however, is another form of legally protected property intangible, intellectual property protected by our copyright laws. That property does not belong to the purchaser of the record. As indicated in Section III, above, the right to reproduce or tape such property, under the 1976 Copyright Act, belongs exclusively to the copyright owner. 30/ Speech of David Ladd, Register of Copyrights, before the National Council of Patent Law Association, Washington, D.C. October 31, 1981. In understanding this distinction it is important to realize that intellectual property is not like a depreciable asset, such as a building, a car, or a tape recorder. The more such tangible properties are used, the less they are worth. By contrast, a musical composition, like a novel, becomes more valuable the more it is used. Whereas the seller of tangible property is fully compensated at the time of first sale, the owner of a copyright is paid only a small amount on the first sale, and realizes the full worth of his or her creation only as it is increasingly used in the marketplace. Under fundamental copyright principles, the copyright owner is to be compensated for each reproduction of his or her creative work, including the home taping of that work. And this is especially so where, as is so often the case, the making of a tape recording actually serves as a substitute for the purchase of the record. V. THE LEGISLATIVE SOLUTION The Congress now has before it legislation that would provide a workable, even-handed solution to the home audio taping crisis - namely, the Mathias-Edwards |