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(c) For any secondary transmission by a cable system that embodies a performance or a display of a work which is actionable as an act of infringement under subsection (c) of section 111, a television broadcast station holding a copy right or other license to transmit or perform the same version of that work shall, for purposes of subsection (b) of this section 501 be treated as a legal or beneficial owner if such secondary transmission occurs within the local service area of that television broadcast station.

Mr. STEPHEN G. HAASER,

THE MARINE BIOMEDICAL INSTITUTE,
Galveston, Tex., August 7, 1973.

Senate Subcommittee on Patents, Trademarks and Copyrights, Committee on the Judiciary, Dirksen Building, Washington, D.C.

Sir: I am Dr. Stewart G. Wolf, Professor of Medicine and Physiology, Uni versity of Texas Medical Branch, and Director, Marine Biomedical Institute. 200 University Boulevard, Galveston, Texas; former President of the American Gastroenterological Association; American Federation for Clinical Research; American Psychosomatic Society; American Pavlovian Society; American Col lege of Clinical Pharmacology and Chemotherapy. I am a member of twenty nine scientific societies, most of which societies sponsor medical serials. I am currently on the Editorial Board of the Journal of Psychosomatic Research, Psychiatry in Medicine, Research Communications in Chemical Pathology and Pharmacology, International Journal of Psychobiology, Rendiconti, and the Publications Center of the Journal of Laboratory and Clinical Medicine.

I appreciate this opportunity to present my view of the copyright bill S. 1361, and request that this statement be made part of the official record.

As the author of some 260 publications that have appeared in periodical medical journals and author or coauthor of twelve books, I would like to comment on the wording of the proposed copyright bill, especially Section 108, from the viewpoint of the author and user. Medical authors of articles that appear in the periodical literature not only receive no financial compensation for their work, but in most instances must pay page charges to the publisher for their work to appear. Thus the author's reward is not financial but is in direct proportion to the extent of his readership, both in numbers and geographic distribution. It is, therefore, to his advantage as well as the advantage of the user to have interlibrary requests for photocopies promptly and expeditiously filled. The normal medical user employs the photocopy in the pursuit of his own work and applies it to no commercial purpose. In short, the author of medical periodical articles derives no financial protection from the Copyright Law but, like the user and often, as a user himself, benefits from a rapid and expeditious distribution of his written word.

I have read the substitute wording for Section 108 (1) suggested by the American Library Association and feel that it is an equitable compromise of the various potentially conflicting interests. It reads as follows:

"The library or archives shall be entitled, without further investigation, to supply a copy of no more than one article or other contribution to a copyrighted collection or periodical issue, or to supply a copy or phonorecord of a similarly small part of any other copyrighted work."

I appreciate the opportunity to provide testimony before your Committee.
Sincerely,

STEWART WOLF, M.D.,

Mr. THOMAS C. BRENNAN,

Professor and Director.

MEDICAL LIBRARY ASSOCIATION, INC.,
Birmingham, Ala., August 3, 1973.

Chief Counsel, Subcommittee on Patents, Trade Marks and Copyrights, Committee on the Judiciary, U.S. Senate, Russell Senate Office Building, Washington, D.C.

DEAR MR. BRENNAN: The Medical Library Association is made up of libraries and librarians located in all types of health service facilities. As President of

this Association, it has come to my attention that in the congressional hearing on July 31 of the Subcommittee on Patents, Trade-Marks, and Copyright on S. 1361 the publishers' testimony emphasized that numbers of journal subscriptions were cancelled due to Xerox copying. May I, as the director of a medical center library, assure you that cutback on subscriptions is not due to this alone; the subscriptions dropped from this library's list have had nothing to do with Xeroxing. Our reasons are monetary. The line item of the Books and Journals budget was spent in five months this year due to the increase in cost of journal subscriptions. This increase was not an addition of new titles but a rise in the price of the 2,100 journal titles currently being purchased. May I point out that other price increases have been continuing through the year. For example, a notice was received recently of a 26+% price rise in Chemical Abstracts.

The second copy titles are being dropped to relieve some strain; our duplicate journals with other libraries on the same campus are being dropped for the same reason and a number of foreign language periodicals are having to be cancelled only because we feel it is imperative to continue to buy our most heavily used English language journals.

There is little hope that the Books and Journals budget for the new fiscal year can take care of the increases in journal prices.

This situation is being faced by medical librarians throughout the United States. Consideration by the Subcommittee of this reason for cancellation of subscriptions will be appreciated.

Sincerely,

(Mrs.) SARAH C. BROWN,

President.

SUPPLEMENTAL STATEMENT OF THE MEDICAL LIBRARY ASSOCIATION

This supplement to the statement of the Medical Library Association on July 31, 1973 on the library photocopy issue in S. 1361 is submitted in order to clarify what may appear to be a contradiction of Section 108 (d) (1) and 108 (d) (2) in the amendment proposed by the Association of Research Libraries and the American Library Association, and endorsed by the Medical Library Association. The difference in the proposed limitations reflects a difference in the quantity of the copyrighted matter to be used. In sub (1) the right to make a single photocopy of a periodical article without prior investigation is proposed because the portion to be copied is so small that the effort of the search for an unused issue of the journal would be out of proportion to the extent of the article and the delay incompatable with the user's time schedule. On the other hand, sub (2) applies to a copy of an entire work or a large portion of one, and is deemed reasonable, because the need is usually less urgent, whether the copy is required by a reader for his personal use or by the library to fill a gap in its collection. Thus the time frame is usually sufficient to accommodate a search for an unused copy and the costs are comparable.

The proposal of these two different limitations reflects the librarians' desire to fulfill their obligation to satisfy the users', and at the same time to keep their work in manageable proportions.

SUPPLEMENTAL STATEMENT OF JACK VALENTI, PRESIDENT OF THE MOTION PICTURE ASSOCIATION OF AMERICA, INC. AND OF THE ASSOCIATION OF MOTION PICTURE AND TELEVISION PRODUCERS, INC., AUGUST 10, 1973

We appreciate the opportunity to submit this supplemental statement to the Committee and to comment in behalf of the Motion Picture Association of America, Inc. ("MAPA"), the Association of Motion Picture and Television Producers, Inc. ("AMPTP") and the Committee of Copyright Owners (“CCO”), on some of the views which have been expressed by other witnesses at the hearing of August 1, 1973. More specifically, we shall address ourselves to the following points:

1. NOTA has repudiated the Consensus Agreement while seeking to retain its benefits.

2. NCTA has failed to demonstrate any rational basis for rejecting arbitration of the fee question.

3. Cable systems can easily afford to pay just and reasonable royalties without raising fees to subscribers. CCO has never suggested that subscribers fees should be raised in order to pay copyright royalties.

4. CATV revenues are based on the use of copyrighted programs and CATV should pay its fair share for their use. Copyright owners will not receive double royalties from payment of copyright fees.

5. Several of the changes proposed by NCTA for the text to Section 111 of S. 1361 are unwarranted, especially those dealing with the definition of cable systems and with the exemption from copyright liability of CATV's retransmission of scrambled signals such as those used for closed circuit broadcasts and pay-TV.

Attached to this supplemental statement as an Appendix "A" is a memorandum prepared by Dr. Robert W. Crandall, Associate Professor of Economics at the Massachusetts Institute of Technology and by Mr. Lionel L. Fray of Temple, Barker & Sloane, Inc., management and economic counsel. These two gentlemen are the authors of the study commissioned by CCO entitled "The Profitability of Cable Television Systems and Effects of Copyright Fee Payment," which we submitted to the Subcommittee on August 1, 1973 as a special appendix to our statement. Professor Crandall and Mr. Fray were present at the hearing of August 1, 1973 and their memorandum (Appendix "A") addresses itself to the questions of an economic or statistical nature raised by the Chairman and comments on some of the views on economic matters expressed by witnesses at said hearing.

1. NCTA HAS REPUDIATED THE CONSENSUS AGREEMENT WHILE SEEKING TO RETAIN ITS BENEFITS

In his testimony on August 1, 1973, Mr. David Foster, President of the National Cable Television Association ("NCTA"), referred to the Consensus Agreement as the "so-called ‘OTP Compromise' ". Such attempt by means of terminology to give the impression of only limited governmental sponsorship and support for the Consensus Agreement, cannot, of course, erase or extenuate the embarrassment which NCTA experiences as the result of the repudiation of its solemnly given word and signature to that agreement. Indeed, it cannot be denied that the Consensus Agreement received the expressed approval not only of the Office of Telecommunications Policy (OTP) but also of the Federal Communications Communication (“FCC") and of the Chairman of this Subcommittee. The history and sponsorship of the Consensus Agreement has been fully explained by FCC Chairman Dean Burch when he said in his concurring statement accompanying the Cable Television Report and Order:

'I joined OTP . . . in an effort to secure a consensus among the industries that would lead to resolution of the cable/copyright issue, de-escalate the level of violence, and thus greatly serve the public interest.

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"[The FCC] debated the details of the agreement. We debated the necessity of implementing it in its entirety. We debated its probable impact on the passage of cable/copyright legislation, and the critical importance of such legislation to cable's assured future.

"We went over every square inch of the ground-and then went over it again. And, in the end, we voted: a majority of the Commissioners explicitly decided that the public interest would be served by the Commission's implementation of the agreement."

Mr. Foster also overlooks the correspondence between Chairman Burch and Chairman McClellan which preceded the implementation of the Consensus Agreement by the FCC. In that correspondence Chairman Burch stated in his letter to Chairman McClellan dated January 26, 1972 that "a primary factor in [the FCC's] judgment as to the course of action that would best serve the public interest is the probability that Commission implementation of the Consensus Agreement will, in fact, facilitate the passage of cable copyright legislation." In his reply to said letter, Chairman McClellan wrote on January 31, 1972: "I commend the parties for the efforts they have made, and believe that the agreement that has ben reached is in the public interest and reflects a reasonable compromise of the positions of the various parties." Copies of the correspondence between Mr. Dean Burch and Senator McClellan were attached to our statement filed on August 1, 1973 as Appendix 2.

Mr. Foster asserts "that the Congress was not a party to this so-called compromise, nor to our knowledge was it consulted with, nor is it bound by the terms, in any way." Mr. Foster misses the point here. The question is not whether Congress is bound by the terms of the agreement-which of course it is not but rather whether NCTA has pledged its support of the agreement as part of a

package deal under which NCTA received significant benefits and whether in good faith, it should be permitted to withdraw its support for a provision which constituted a concession on its part, namely that the amount of fees under the compulsory license be set by arbitration in the absence of an agreement thereon by the parties.

We respectfully submit that in opposing arbitration, NCTA has violated the letter and the spirit of the Consensus Agreement. It should not be permitted to retain the benefits of an agreement the obligations of which it has repudiated.

2. NCTA HAS FAILED TO DEMONSTRATE ANY RATIONAL BASIS FOR REJECTING ARBITRATION OF THE FEE QUESTION

In all the sound and fury directed by the spokesmen of the cable industry against the initial setting of fees by the Copyright Royalty Tribunal, not a single valid argument has been presented against the fairness of doing so. Thus, in asserting an alleged present unavailability of sufficient empiric data, the CATV spokesmen overlook the fact that even according to the most optimistic forecasts, the bill S. 1361 will not be enacted until the end of 1974 so that the Tribunal will not be able to start its hearings until 1975. By that time and certainly by the time the Tribunal will reach its decision, more than three years will have passed since the time when the freeze on cable systems in the top 100 markets was lifted by the FCC (i.e., March 31, 1972). It is obvious that the Tribunal at that time will have at its disposal all necessary data and certainly more data than the Subcommittee would have to go by today if it had to set fees now.

Far from being an argument against entrusting the Royalty Tribunal with the rate-setting task from the outset, the alleged present unavailability of economic data if it in fact existed, would be an argument against setting the rates now in the bill. In any event, as shown in the memorandum of Professor Crandall and Mr. Fray (Appendix A attached hereto), ample data are available at the present time to support an appropriate fact-finding and rate-setting procedure before the Tribunal. The Tribunal will have the opportunity to hear and sift the data which the experts for all parties will present to it and will be in the position to set rates based on the consideration and evaluation of the economic evidence before it, an opportunity which this Subcommittee will not have had because of limitations of time.

The only other argument presented by Mr. Foster against arbitration is the "precedent for compulsory licensing since ASCAP, BMI and SESAC contractually grant them to networks, local broadcasters and others for all musical works." But as Mr. Foster concedes by his insertion of the word "contractually" and as the representatives of the music performance societies testified at the hearing on August 1, 1973, these music performance licenses are indeed contractual licenses, not compulsory ones, and the license fee therefor is set by agreement between the parties subject to supervision by the U.S. District Court. This is a far cry from what the cable industry urges the Congress to do. Indeed, this procedure to set music performance fees is very close to the one which the cable industry pledged itself to support by the Consensus Agreement but is now unwilling to support. Accordingly, a closer examination of the only two arguments presented by cable spokesmen in opposition to arbitration reveals that these arguments actually support arbitration as the most practical and fairest method to do justice to all concerned.

It is interesting to note that with respect to distant signals, Mr. George J. Barco, General Counsel of the Pennsylvania Cable Television Association, in his statement filed with the Subcommittee, agrees with the position of the Copyright Owners on arbitration of payment for such signals when he concedes that "providing reception of distance signals transported by microwave or otherwise. being a matter of choice and a calculated risk for the CATV companies that choose to do so, is properly subject to a bargaining process or for the ultimate arbitration arrangement."

The procedure of having the initial rates set by the Tribunal has such obvious merit and no discernible disadvantages, that the opposition thereto by the cable industry remains shrouded in mystery and incomprehensible to the impartial observer. Indeed, the only rational explanation of this opposition is that the cable industry, in light of its intimate knowledge of its own prosperous economic and financial affairs, has formed the selfish opinion that the fees set in the bill are so low that the Tribunal after hearing the evidence is certain to set it at a substantially higher rate. Such self-serving opposition to a fair method of resolving a controversy and such attempt to secure for itself an unreasonably low

rate for the initial period and one prejudicial to the copyright owners for future adjustments, should not be countenanced especially in view of the cable industry's consent to arbitration in the Consensus Agreement.

3. CABLE SYSTEMS CAN EASILY AFFORD TO PAY JUST AND REASONABLE ROYALTIES WITHOUT RAISING FEES TO SUBSCRIBERS. CCO HAS NEVER SUGGESTED THAT SUBSCRIBERS' FEES SHOULD BE RAISED IN ORDER TO PAY COPYRIGHT ROYALTIES

At the hearing, Mr. Barco accused CCO of having suggested to the negotiators for the cable industry that they should pass on the copyright fees which they may have to pay to their own subscribers. We submit that this accusation is just a smokescreen to deflect public attention from the huge profits of cable operators who are reluctant to pay even a small share thereof to those who create

the programs which cable systems sell to their subscribers. To set the record straight: At no time has it been the position of CCO that subscribers' fees should be raised or would have to be raised in order to pay copyright fees. Indeed, such position would have been wholly inconsistent with the demonstration to the negotiating committee of the NCTA made by the copyright owners with the aid of their economic consultants, that the income of the CATV industry would be ample to pay the license fees sought by the copyright owners. (See the Crandall Fray study on "The Profitability of Cable Television Systems and Effects of Copyright Fee Payments" mentioned above.)

It is noteworthy that in pleading his case, Mr. Barco mentions substantial increases in basic costs incurred by the cable industry such as "pole attachment fees" paid to telephone companies which he states are being increased currently from 40% to 70% across the nation. Mr. Barco fails to explain why the cable industry stands ready to absorb these costs but mobilizes such violent resistance to the payment of compensatory copyright fees.

Mr. Barco seems to argue that copyright fees are the proverbial straw that breaks the camel's back. Yet no reason is apparent why the creative element of the television industry should be singled out to be that straw and be called upon to subsidize the new technology. The economic absurdity of this position becomes apparent when we consider that neither the suppliers of equipment to his industry nor the utility companies which furnish it with electric power, nor the franchising municipalities are asked to make similar sacrifices.

Mr. Barco refers to "the vagaries and inordinate demand" of the copyright owners. Such charges seem ill addressed to the copyright owners who are willing to submit the justice and reasonableness of the fees they seek to an independent fact-finding Tribunal for thorough investigation while Mr. Barco finds such factfindings so threatening to his position that he is willing to repudiate an obligation solemnly assumed by his industry in the Consensus Agreement.

4. CATV REVENUES ARE BASED ON THE USE OF COPYRIGHTED PROGRAMS AND CATV SHOULD PAY ITS FAIR SHARE FOR THEIR USE. COPYRIGHT OWNERS WILL NOT RECEIVE DOUBLE ROYALTIES FROM PAYMENT OF CABLE COPYRIGHT FEES

The contention made by Mr. Foster that royalty payments by CATV represent a "windfall gain" and the assertion of Mr. Barco that because the copyright owner has "already received payment in his contractual arrangements for the broadcasting, paid ultimately by the television viewers-including CATV subscribers in the advertising costs of purchased products", are based on a series of economic fallacies.

Advertising carried on television may be of a national, regional, or local nature. No regional or local advertiser is willing to pay a premium over normal advertising rates because its commercials are carried by CATV to far distant markets where the advertiser has no facilities to serve customers. It is obvious that a furniture dealer in Los Angeles or a used car dealer in Chicago will not pay a penny more to a station for broadcasting commercials which are being retransmitted by CATV to Omaha, Nebraska or Wichita, Kansas. For the same reason the station whose programs are thus exported to other markets will not pay increased license fees to the copyright owners for such additional use of the program. At the same time the copyright owner in the many instances not covered by the FCC's non-duplication rules will be rendered unable to grant an exclusive license to the local station for programs already imported into that market by CATV systems.

Consequently, a television station is not willing to pay the program supplier a higher price for programs with local or regional commercials shown outside

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