the previously-established phonorecord manufacturing license. The new licenses are for cable-assisted television (CATV) retransmission of broadcasted programs (Section 111 (c) and 111(d), and for the use of certain copyrighted works in non-commercial broadcasting (Section 118). As stated in Appendix A, Section A.4.6.3 "the purpose of the compulsory license in these three instances...is to avoid the difficulties that the user groups would encounter if they had to obtain licenses from and pay fees to the individual copyright holders." In other words, transaction costs are lessened under the compulsory license system. 4.6.4 The Copyright Royalty Tribunal The 1976 Act establishes a Copyright Royalty Tribunal as an independent agency in the legislative branch (See Chapter 8 of the Act). The Tribunal's function is to periodically and equitably adjust the statutory blanket license fees for jukebox operation, to distribute equitably to copyright holders the statutory royalty proceeds collected from CATV operators, and to determine the terms and conditions of the compulsory license for non-commercial broadcasting of certain copyrighted works, but in the latter case, only if the interested parties fail to negotiate their own arrangements. The Tribunal determines, also, the royalty rates for CATV retransmissions under certain conditions. 4.7 COPYRIGHT AND MONOPOLY It is common understanding that copyright is a monopoly, although limited to some degree. Walter Pforzheimer has quoted Judge Learned Hand on this point: "Copyright in any form, whether statutory or at common law, is a monopoly;...Congress has created the monopoly in exchange for a dedication, and when the monopoly expires the dedication must Similarly, the House Committee on Patents in their report accompanying the bill that became the 1909 Copyright Act stated: "The granting of such exclusive rights, under the proper terms The appellation of "monopoly" can have several implications. A question that can be asked is: to what extent does the exclusive right granted to an author and his assignees constitute an exercisable economic monopoly in a market sense, thereby requiring Government regulation or other collective action as an antidote? The answer to this question may also provide an answer to an issue raised by Hurt and Schuchman which is: whether "copyright protection artificially enhances the private returns on some ventures and leads to the distortions of monopoly pricing."35 The answer depends, to some extent, on the nature of the copyrighted work and whether other works can be considered substitutable and therefore competing. If the copyrighted work is a book, musical performance or film produced for a general audience, there may very well be high substitutability among individual works as far as the ultimate consumer is concerned. In this situation, one author's exclusive right must compete with other exclusive rights in the marketplace to be selected or rejected by a typical consumer. However, since the competing works have a certain individuality about them, by the fact of their having the requisite originality for copyright protection, pure competition in a classical sense cannot exist. Nevertheless, the "monopolistic competition" which exists among the works may be very close to pure competition in the absence of externalities, collusion or restraints of trade by competitors. As Professor Mansfield states about competition in general, "...most firms face relatively close substitutes and most commodities are not completely homogeneous from one producer to another.... In other words, there is no single homogeneous commodity called an automobile; instead, each producer differentiates its product from that of the next producer. This, of course, is a prevalent case in the modern economy. 1136 Thus, among certain classes of copyrighted works, there may be as much or more competition for consumer interest as exists among competitive hard goods or other "non-intellectual" properties. Competition among copyrighted works is assisted by the fact that although protection covers the author's specific expression, it does not extend "to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied...."37 Although a copyrighted work must be "original," it need not be novel or non-obvious, which are requirements for patent protection. 4.7.1 Government Remedies for Market Monopoly The problem of monopoly has arisen in the music and motion picture industries on several occasions but not in the context of control exercised by virtue of an exclusive right in a single property. The problem in these industries has invariably related to attempted control over a market due to exclusive rights in at least several properties, and in some cases, exclusive rights in very many properties. The example of the potential monopoly over phonorecord recording which resulted in the compulsory license provision of the 1909 Act has been mentioned previously and is also described in Appendix A, Section A.4.6.3. A number of monopoly-related cases in the performing rights area are mentioned by Taubman. 38 ASCAP consented to an anti-trust decree of the U.S. Dept. of Justice in 1941 and the decree was further modified in 1950.39 In the 1948 decision, (Alden-Rochelle v. ASCAP) "ASCAP was declared to have achieved monopolistic domination of the music integrated in sound films, in violation of Section 2 of the Sherman Act."40 As a result, ASCAP "must license all qualified applicants, all licensees of the same class are charged the same fees, and any licensee or applicant may request the Court the U.S. District Court for the Southern District of New York 7 to review the fees charged." (See Appendix A, Section A.4.6.2.1.) In general, the result of a threat of market monopoly is additional Government intervention and regulation. Both the phonorecord manufacturing and ASCAP situations have resulted in compulsory licensing requirements. In one case, the royalty fee was fixed in law by Congress; and in the other case, the Federal Judiciary, although not fixing the royalty payment, required that ASCAP must license all qualified applicants and must provide equitable treatment to all licensees, with Court jurisdiction retained as a place of recourse. 4.8 SUMMARY Problems in the development and maintenance of an efficient market for copyrighted works have been considered and some remedies have been discussed. Problems considered have included exclusion costs, the costs of information and communication, trade-offs in the design of royalty collection systems, royalty pricing schemes, economic implications in the "fair use" doctrine, price setting for compulsory licenses, and economic monopoly. The presence of transaction costs is not necessarily a reason for abolishing copyright, despite the cost of Government regulation. There are transaction costs in any market. Without copyright, it is postulated that there would be cut-throat competition, increased secrecy and a reduced flow of information. A society must select which set of dissatisfactions it finds less onerous or more contributing to its overall goals. Clearinghouses are one method of reducing the costs of communication and information. Blanket licenses assist similarly, but there are costs to the use of these systems as well. That payment mechanism that is least costly in time and effort to users, all other things being equal, will probably generate the least amount of deliberate evasions. There are efficient royalty pricing schemes that distinguish different classes of users and which account for both fixed and marginal costs. Pricing may usefully distinguish institutions from individuals and may usefully offer a choice of schedules to suit both the heavy user and the casual user. Fair use may be treated as a mechanism for the reduction of certain transaction costs. However, the doctrine of permitting an exemption from royalty fees for "worthy" uses that do not come under First Amendment or "lack of market impact" considerations can be criticized on efficiency criteria. Compulsory licenses have been established in three new areas under the 1976 Act. Price-setting of royalty fees for compulsory licenses is essentially an adversary proceding between producers and users before an impartial panel empowered to set rates. Copyright is a limited monopoly over a single work. In the markets for works of general interest (e.g. phonorecords, musical performances) anti-trust problems have concerned, in general, attempted control over many works. The results have been imposition of a compulsory license or judicial intervention. 5. COPYRIGHT IN COMPUTER-READABLE WORKS Following the development in the preceding chapters, the questions of copyrightability in computer-readable data bases, full text, and computer programs may be considered. First some of the issues raised in 1967 hearings are reviewed, so that some of the arguments can be aired and the situation can be placed in context. Then, the current situation resulting from the passage of the 1976 General Revision is described. The issue of registration and disclosure is then considered in the context of public policy about information transfer. The technical issues of copyrightability are then pursued, with the economic aspects of data base uniqueness and computer network distribution of copyrighted works considered. The conditions of sale of computer-readable works which need to be different than works in hard copy are discussed. 5.1 TECHNOLOGY FORECASTING, 1967 STYLE The questions of copyright in literary works entered into a computer and of copyright in computer software were raised substantially in testimony before the Senate Committee on the Judiciary concerning revision bill S.597 in March 1967.41 Authors and publishers appeared concerned by the possibility that, in the near future, a significant amount of publishing would be done in machine-readable format with extensive distribution of works accomplished by computer networks without hard copy. Clearly, there were serious copyright implications in this concept. Professor Jesse Markham, speaking on behalf of the American Book Publishers Council and American Text Publishers Institute stated that: "The present state of technology suggests that the computer will affect conventional publishing in two distinct ways: (1) The initial versions of some types of information that are reduced to writing, copyrighted and published, will very likely be computerized, thus by-passing conventional publishing altogether; and (2) The contents of published works will be stored in computers and, once stored, serve as a substitute for additional printed copies . . ."42 Similarly, Mr. Lee C. Deighton, also appearing on behalf of the American Textbook Publishers Institute, stated that: "The same kind of transmission [as closed-circuit television] |