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The royalty fee payable by a user is a flat sum per year for a blanket license permitting his performance of any and all of the music in ASCAP's catalog. Broadcasting networks supply ASCAP with logs identifying the compositions performed by them, and ASCAP conducts a sampling of performances by some of its other licensees, and these are the bases for ASCAP's determination of the allocation of its net revenues among its members.

Two other organizations also license performances of music on a blanket basis in much the same manner as ASCAP. One of them is Broadcast Music, Inc. (BMI), which rivals ASCAP in the size of its operation. BMI is an incorporated organization which represents about 30,000 writers and 10,000 publishers of music in licensing a collective catalog of their copyrighted music. Its catalog is reported to contain one million compositions, and its gross revenues are about 50 million dollars per year. Its payments to its members are based on contracts which are designed to distribute among them the net revenues of BMI after deductions from the gross for its expenses and reserves. Its fees charged users, like those of ASCAP, are a lump sum per year and are uniform for all the users in any class.

The third organization licensing performances of a collective catalog of music is SESAC, Inc., a commercial company that contracts with another smaller group of writers and publishers to license their copyrighted music. Its catalog is a relatively small one of special kinds of music. Statistics concerning the size of its operation have not been determined. Its fees charged licensees are also fixed at a lump sum per year.

The effectiveness of ASCAP and BMI may be attributable in large part to the following factors:

(1) The copyright owners of music have realized that they

cannot enforce their performance rights individually. They have therefore felt compelled to join in collective organizations that can monitor and license performances for all of them as a group. As a result, the combined membership of ASCAP and BMI, together with the relatively small number of those affiliated with SESAC, comprise the copyright owners of virtually all music copyrighted in the United States.

(2) Users who obtain a license from each of the three organi

zations are virtually assured of the right to perform

(except for dramatic performances which these organizations do not license) any and all of the compositions they might choose to perform.

(3) Licensees are not burdened by the necessity for main

taining records of the compositions they perform. Fortunately for ASCAP and BMI, the largest source of their revenue from licenses, the broadcasting networks, do maintain logs of the compositions they perform and supply those logs to the organizations. Those logs, plus a limited amount of sampling of the performances by other licensees, are sufficient for allocation of the fees collected by ASCAP and BMI among the individual copyright owners.

(4) Licensees are required to pay only a lump-sum royalty

fee annually in a predetermined amount.

How far can these factors universal coverage; ease for users in obtaining licenses and in accounting and paying for their uses; and the ability of the organization without too much cost, to distribute its revenues among the copyright owners on an equitable basis -- be duplicated in an organization for the blanket licensing of copyrighted journal articles? The answer to that question may determine the feasibility of establishing such an organization.

A. Problem Areas. Attempts to plan a clearinghouse for the blanket licensing of reproductions of journal articles run into a number of problems. We are not undertaking to offer solutions to those problems, or to propose any plan for such a clearinghouse. We shall merely mention some of the major problems and some suggested approaches to meeting them.

Perhaps the most difficult set of problems relate to reconciling several imperatives: The basis on which licensees pay fees must be kept simple to avoid expensive record-keeping; some information as to the identity of the journals used and the number of uses may be needed to determine how the fees collected are to be distributed among the publishers; the operating expenses of the clearinghouse must not be so high as to consume too much of the fees collected.

Assuming that the sum to be paid by a licensee as fees is to be related to the volume of reproductions made by him, how is that sum to be assessed? To require licensees to keep records of each reproduction of

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individual articles would probably be excessively burdensome. For the purpose of assessing the fees, perhaps it would suffice to have the licensee report only the total number of units (e.g., articles or pages) reproduced by him from all of the journals in the aggregate.


This would leave the problem of how the clearinghouse is to determine what portion of its net receipts is to be distributed to each of the publishers. Perhaps a limited amount of sampling would be enough for this purpose. For example, each licensee might be asked to keep records of the articles he reproduces during a short period of time such as one or two weeks each year. Or those licensees only who are known to be the large volume users might be asked to keep such records for somewhat longer periods of time. Or perhaps such records kept by the licensees could be dispensed with entirely if it were assumed that the proportionate volume of reproductions by all users from any one journal is roughly equivalent to the proportionate volume of its subscriptions or sales. And other alternatives could no doubt be thought of.

If record-keeping by the clearinghouse as well as by the licensee can be kept to a minimum, there would seem to be a fair prospect that, with fees fixed at appropriate but reasonable amounts, the clearinghouse would have enough net revenues to give publishers a significant return.

Several other problems that may need to be resolved can be mentioned:

The publishers of scientific and technical journals (which
we assume to be the material for which a clearinghouse
is most urgently needed) will have to be persuaded to join
the clearinghouse. Inclusion of nearly all of them may be
necessary to provide adequately comprehensive coverage.
If it can be shown that the proposed clearinghouse is
likely to become profitable within a few years, it should
not be difficult to enlist the publishers.

Some library groups have objected that blanket licensing
may result in their paying for what are now fair use repro-
ductions. Perhaps the license fees can be so adjusted ad
to overcome this objection.

A clearinghouse licensing reproductions from most of the existing copyrighted journals may be charged with operating as a monopoly under the antitrust laws. This problem might be resolved by appropriate legislation granting an exemption, or by negotiations with the Department of Justice. Precedents for a statutory exemption from the

antitrust laws are now found in the Copyright Act of 1976
(sections 111(d)(5)(A), 116(c)(2), 1187b) and 118(3)(1)),
with respect to copyright owners or users acting as a
group, or through a common agent, in negotiating and agree-
ing upon royalty rates and the distribution of lump-sum
royalty receipts among the members of the group.

A.4.6.3 Compulsory Licensing. Compulsory licensing was originally provided for in the Copyright Act of 1909 as a device for preventing the establishment of a monopoly. One manufacturer of phonorecords of music, anticipating that the law would be revised to give the copyright owners of music a new exclusive right to make recordings of their music, had obtained agreements from the major music publishers to give him exclusive rights to record all the musical works in their catalogs. To prevent this potential monopoly, Congress provided in Section 1(e) of the Act of 1909 that once the copyright owner permitted one company to make a recording of his music, anyone else was permitted to make a similar recording upon payment of two cents per composition for each record manufactured.

One result of this compulsory license provision has been the establishment of a central agency -- the Harry Fox Office -- through which most of the music publishers issue licenses for the recording of individual compositions. Record companies generally obtain such licenses from the Harry Fox Office instead of exercising the compulsory license under the terms of the statute, because the licenses issued by that Office are more favorable than the statute in several respects.

The Harry Fox Office is an example of a centralized agency for licensing the works of a number of publishers. It is no doubt more convenient for licensees than would be the case if (without the compulsory license) they had to negotiate for licenses with each publisher separately. But it should be noted that the Harry Fox operation is not an example of blanket licensing. It issues licenses for individual compositions as requested. It has a standard form of license agreement and a fixed schedule of royalty fees applicable to all the compositions alike, but licensees may, and often do, negotiate with the Office for reduced fees in special cases.

The new Copyright Act of 1976 provides for compulsory licenses of a different character in three situations: For the performance of music in jukeboxes, for CATV retransmissions of broadcast programs, and for the use of certain works in noncommercial broadcasting. These are examples of blanket licensing. The purpose of the compulsory

license in these three instances is not to prevent a monopoly, but 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 owners.

A. The Compulsory License for Jukeboxes. The Copyright Act of 1909 contained a specific exemption for the performance of music on coin-operated machines (popularly called "jukeboxes"). This has been cited for many years since as an outstanding example of shortsighted legislation. During the hearings in the 1960s on the copyright revision bills, it became evident that the Congressional committees had concluded that jukebox operators should pay for their use of copyrighted music. Obtaining licenses would present no great problem for jukebox operators since they could obtain blanket licenses from the three performing rights licensing organizations (ASCAP, BMI, and SESAC). But, as the jukebox operators demonstrated, to require them to keep records of their performances of each composition would impose a tremendous and costly burden on them.

To avoid this difficulty, Congress provided, in section 116 of the Act of 1976, for a compulsory license under which jukebox operators may use any copyrighted music in their machines, for which they are to pay annually a single lump-sum royalty. To obtain the compulsory license, the jukebox operator is required to file in the Copyright Office information identifying himself and his machines, and to deposit the royalty payment with the Register of Copyrights. The operator is then given a certificate for each machine which he must affix to the machine.

The royalty is fixed in the statute at $8 a year per machine. The copyright Royalty Tribunal (established under sections 801-810 of the Act) is authorized to adjust the royalty rate periodically upon petition by any of the interested parties.

Distribution of the accumulated royalty fees among the copyright owners (after the deduction of certain expenses) is to be made by the Copyright Royalty Tribunal on the basis of claims filed with it by the copyright owners. There is a provision in the statute allowing persons who may have claims to have access to the licensed machines and the opportunity to obtain information, "by sampling procedures or otherwise," pertinent to their claims.

It may be observed that the appropriate distribution should not be difficult to determine in this case because the great bulk of the royalties will be payable to the three performing rights licensing organizations,

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