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(4) For other programing, commencing with purchase and until day after first run. but no longer than one year.

Provided, however, that no exclusivity protection would be afforded against a program imported by a cable system during prime time unless the local station is running or will run that program during prime time.

Existing contracts will be presumed to be exclusive. No preclearance in these markets.

C. Smaller Markets.

No change in the FCC proposals.

Exclusivity for network programing.—The same-day exclusivity now provided for network programing would be reduced to simultaneous exclusivity (with special relief for time-zone problems) to be provided in all markets.

Leapfrogging.-(A) For each of the first two signals imported, no restriction on point of origin, except that if it is taken from the top-25 markets it must be from one of the two closest such markets. Whenever a CATV system must black out programing from a distant top-25 market station whose signals it normally carries, it may substitute any distant signals without restriction.

(B) For the third signal, the UHF priority, as set forth in the FCC's letter of August 5, 1971, p. 16.

Copyright legislation.—(A) All parties would agree to support separate CATV copyright legislation as described below, and to seek its early passage.

(B) Liability to copyright, including the obligation to respect valid exclusivity agreements, will be established for all CATV carriage of all radio and television broadcast signals except carriage by independently owned systems now in existence with fewer than 3500 subscribers. As against distant signals importable under the FCC's initial package, no greater exclusivity may be contracted for than the Commission may allow.

(C) Compulsory licenses would be granted for all local signals as defined by the FCC, and additionally for those distant signals defined and authorized under the FCC's initial package and those signals grandfathered when the initial package goes into effect. The FCC would retain the power to authorize additional distant signals for CATV carriage: there would, however, be no compulsory license granted with respect to such signals, nor would the FCC be able to limit the scope of exclusivity agreements as applied to such signals beyond the limits applicable to over-the-air showings.

(D) Unless a schedule of fees covering the compulsory licenses or some other payment mechanism can be agreed upon between the copyright owners and the CATV owners in time for inclusion in the new copyright statute, the legislation would simply provide for compulsory arbitration failing private agreement on copyright fees.

(E) Broadcasters, as well as copyright owners, would have the right to enforce exclusivity rules through court actions for injunction and monetary relief. Radio carriage.-When a CATV system carries a signal from an AM or FM radio station licensed to a community beyond a 35-mile radius of the system, it must, on request, carry the signals of all local AM or FM stations, respectively. Grandfathering.-The new requirements as to signals which may be carried are applicable only to new systems. Existing CATV systems are "grandfathered." They can thus freely expand currently offered service throughout their presently franchised areas with one exception: In the top 100 markets, if the system expands beyond discrete areas specified in FCC order (e.g., the San Diego situation), operations in the new portions must comply with the new requirements. Grandfathering exempts from future obligations to respect copyright exclusivity agreements, but does not exempt from future liability for copyright payments.

[APPENDIX B]

EXCHANGE OF CORRESPONDENCE BETWEEN FCC CHAIRMAN BURCH AND
CHAIRMAN MCCLELLAN

FEDERAL COMMUNICATIONS COMMISSION,
Washington, D.C., January 26, 1972.

Hon. JOHN L. MCCLELLAN,

Chairman, Subcommittee on Patents, Trademarks and Copyrights, U.S. Senate, Washington, D.C.

DEAR MR. CHAIRMAN: This letter is directed to an important policy aspect of our present deliberations on a new regulatory program to facilitate the evolution of cable television. That is the matter of copyright legislation, to bring cable into

the competitive television programming market in a fair and orderly way-a matter with which you as Chairman of the Subcommittee on Patents, Trademarks and Copyrights have been so deeply concerned in this and the last Congress. You will recall that we informed the Congress, in a letter of March 11, 1970 to Chairman Magnuson, of our view that a revised copyright law should establish the pertinent broad framework and leave detailed regulation of cable television signal carriage to this administrative forum. In line with that guiding principle and a statement in our August 5, 1971 Letter of Intent that we would consider altering existing rules to afford effective non-network program protection, we are now shaping a detailed program dealing with such matters as distant signal carriage, the definition of local signals, leapfrogging, and exclusivity (both network and non-network. That program is now approaching final action.

As of course you know, representatives of the three principal industries involved-cable, broadcasters, and copyright owners-have reached a consensus agreement that deals with most of the matters mentioned above. On the basis of experience and a massive record accumulated over the past several years, we regard the provisions of the agreement to be reasonable, although we doubtless would not, in its absence, opt in its precise terms for the changes it contemplates in our August 5 proposals. But the nature of consensus is that it must hold together in its entirety or not at all-and, in my own view, this agreement on balance strongly serves the public interest because of the promise it holds for resolving the basic issue at controversy.

This brings me directly to a key policy consideration where your counsel would be most valuable. That is the effect of the consensus agreement, if incorporated in our rules, on the passage of cable copyright legislation.

The Commission has long believed that the key to cable's future is the resolution of its status vis-a-vis the television programming distribution market. It has held to this view from the time of the First Report (1965) to the present. We remain convinced that cable will not be able to bring its full benefits to the American people unless and until this fundamental issue is fairly laid to rest. An industry with cable's potential simply cannot be built on so critical an area of uncertainty.

It has also been the Commission's view, particularly in light of legislative history, that the enactment of cable copyright legislation requires the consensus of the interested parties. I note that you have often stressed this very point and called for good faith bargaining to achieve such consensus.

Thus, a primary factor in our 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. The parties themselves pledge to work for this result.

Your advice on this issue, Mr. Chairman, would be invaluable to us as we near the end of our deliberations.

With warm personal regards.
Sincerely,

DEAN BURCH, Chairman.

U.S. SENATE,

COMMITTEE ON THE JUDICIARY,
SUBCOMMITTEE ON PATENTS, TRADE-MARKS.

AND COPYRIGHTS,

Washington, D.C., January 31, 1972.

Hon. DEAN BURCH,

Chairman, Federal Communications Commission,
Washington, D.C.

DEAR MR. CHAIRMAN: I have your letter of January 26, 1972, requesting my advice on the effect of the consensus agreement reached by the principal parties involved in the cable television controversy on the passage of legislation for general revision of the copyright law.

I concur in the judgment set forth in your letter that implementation of the agreement will markedly facilitate passage of such legislation. As I have stated in several reports to the Senate in recent years, the CATV question is the only significant obstacle to final action by the Congress on a copyright bill. I urged the parties to negotiate in good faith to determine if they could reach agreement on both the communications and copyright aspects of the CATV question. I commend the parties for the efforts they have made, and believe that the agreement that

has been reached is in the public interest and reflects a reasonable compromise of the positions of the various parties.

The Chief Counsel of the Subcommittee on Patents, Trademarks and Copyrights in a letter of December 15, 1971 has notified all the parties that it is the intention of the Subcommittee to immediately resume active consideration of the copyright legislation upon the implementation of the Commission's new cable rules.

I hope that the foregoing is helpful to the Commission in its disposition of this important matter.

With kindest regards, I am
Sincerely,

JOHN L. MCCLELLAN, Chairman.

[APPENDIX Cl

COPYRIGHT REVISION BILL

REVISED TEXT ON CABLE TELEVISION PROPOSED

BY COMMITTEE OF COPYRIGHT OWNERS, NATIONAL ASSOCIATION OF BROADCASTERS, AND ASSOCIATION OF MAXIMUM SERVICE TELECASTERS

SEC. 111. Limitations on exclusive rights: Secondary transmissions

(a) CERTAIN SECONDARY TRANSMISSIONS EXEMPTED.-The secondary transmission of a primary transmission embodying a performance or display of a work is not an infringement of copyright if:

(1) the secondary transmission is not made by a cable system, and consists entirely of the relaying, by the management of a hotel, apartment house, or similar establishment, of signals transmitted by a broadcast station licensed by the Federal Communications Commission, within the local service area of such station, to the private lodgings of guests or residents of such establishment, and no direct charge is made to see or hear the secondary transmission; or

(2) the secondary transmission is made solely for the purpose and under the conditions specified by clause (2) of section 110; or

(3) the secondary transmission is made by a common, contract, or special carrier who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others: Provided, That the provisions of this clause extend only to the activities of said carrier with respect to secondary transmissions and do not exempt from liability the activities of others with respect to their own primary or secondary transmission; or

(4) the secondary transmission is not made by a cable system and is made by a governmental body, or other non-profit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.

(b) SECONDARY TRANSMISSION OF PRIMARY TRANSMISSION TO CONTROLLED GROUP.-Notwithstanding the provisions of subsections (a) and (c), the secondary transmission to the public of a primary transmission embodying a performance or display of a work is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, if the primary transmission is not made for reception by the public at large but is controlled and limited to reception by particular members of the public.

(c) SECONDARY TRANSMISSIONS BY CABLE SYSTEMS.-(1) Subject to the provisions of clause (2) of this subsection (c), secondary transmissions to the public by a cable system of a primary transmission made by a broadcast station licensed by the Federal Communications Commission and embodying a performance or display of a work shall be subject to compulsory licensing upon compliance with the requirements of subsection (d) in the following cases:

(A) Where the signals comprising the primary transmission are exclusively aural and the secondary transmission is permissible under the rules and regulations of the Federal Communications Commission; or

(B) Where the community of the cable system is in whole or in part within the local service area of the primary transmitter; or

(C) Where the signals comprising the secondary transmission are contemplated by and consistent with section 76.5 (a), (f), (g), (h), (i), and (0) through (u) and Subparts D and F of the rules and regulations of the Federal Communications Commission as published in Volume 37, Federal Register, page 3252 et seq., on February 12, 1972.

(2) Notwithstanding the provisions of clause (1) of this subsection (c), the secondary transmission to the public by a cable system of a primary transmission made by a broadcast station licensed by the Federal Communications Commission and embodying a performance or display of a work is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, in the following cases:

(A) Where the signals comprising the secondary transmission, whether or not authorized by the Federal Communications Commission, are inconsistent with, or in excess of those contemplated by, the rules and regulations of the Federal Communications Commission referred to in subclause (C) of clause (1) of this subsection (c); or

(B) Where the community of the cable system is in whole or in part within the local service area of one or more television broadcasting stations licensed by the Federal Communications Commission, and—

(i) the content of the particular transmission program consists primarily of an organized professional team sporting event occurring simultaneously with the initial fixation and primary transmission of the program; and

(ii) the secondary transmission is made for reception wholly or partly outside the local service area of the primary transmitter; and

(iii) the secondary transmission is made for reception wholly or partly within the local service area of one or more television broadcasting stations licensed by the Federal Communications Commission, none of which has received authorization to transmit said program within such area. (d) COMPULSORY LICENSE FOR SECONDARY TRANSMISSIONS BY CABLE SYSTEMS.

(1) For any secondary transmission to be subject to compulsory licensing under subsection (c), the cable system shall at least one month before the date of the secondary transmission or within 30 days after the enactment of this Act, whichever date is later, record in the Copyright Office, a notice including a statement of the identity and address of the person who owns or operates the secondary transmission service or has power to exercise primary control over it together with the name and location of the primary transmitter, or primary transmitters, and thereafter from time to time, such further information as the Register of Copyrights shall prescribe by regulation to carry out the purposes of this clause (1).

(2) A cable system whose secondary transmissions have been subject to compulsory licensing under subsection (c) shall during the months of January, April, and July and October, deposit with the Register of Copyrights, in accordance with requirements that the Register shall prescribe by regulation and furnish such further information as the Register of Copyrights may require to carry out the purposes of this clause (2)—

(9) A statement of account, covering the three months next preceding, specifying the number of channels on which the cable system made secondary transmissions to its subscribers, the names and locations of all primary transmitters whose transmissions were further transmitted by the cable system and the gross amounts irrespective of source received by the cable system.

(B) A total royalty fee for the period based upon a schedule or schedules to be determined as follows:

(i) Within sixty days after the enactment of this Act, the Register of Copyrights shall constitute a panel of the Copyright Royalty Tribunal in accordance with Section 803 for the purpose of fixing a schedule or schedules of just and reasonable compulsory license fees.

(ii) The schedule or schedules of compulsory license fees shall be determined by the Tribunal in a like manner as if the Tribunal were convened to make a determination concerning an adjustment of copyright royalty rates, provided, however, that Sections 806 and 807 shall not apply and that the determination of the Tribunal shall be effective at the end of the twelfth month after the enactment of this Act or on the date the Tribunal renders its decision, whichever occurs sooner.

(iii) The Tribunal, immediately upon making a determination, shall transmit its decision, together with the reasons therefor, to the Register of

Copyrights who shall give notice of such decision by publication in the Federal Register within fifteen days from receipt thereof. Thereafter, the determination of the Tribunal may be subject to judicial review in a like manner as provided in Section 809 but no other official or court of the United States shall have power or jurisdiction to otherwise review the Tribunal's determination.

(iv) Notwithstanding any of the provisions of the antitrust laws (as designated in § 1 of the Act of October 15, 1914, c. 323, 38 Stat. 730, Tit. 15 U.S.C. § 12; and any amendment of any such laws) owners of copyrights in different works and owners of cable systems may among themselves or jointly with each other agree on, or submit to the Copyright Tribunal for its consideration, one or more proposed schedules of compulsory license royalty fees, and proposed categories of secondary transmissions and cable systems for inclusion in any of the schedules to be established or adjusted by the Tribunal pursuant to this subsection and Section 802.

(C) The preceding subclause (B) of clause (2) of this subsection (d), shall not apply to cable systems that before March 31, 1972, were operating in accordance with the rules and regulations of the Federal Communications Commission, served less than 3,500 subscribers, and were not, directly or indirectly, by stock ownership or otherwise, under common ownership or control with any other cable systems serving in the aggregate more than 3,500 subscribers, provided that this exemption shall continue to apply as long as the cable system continues to serve not more than 3,500 subscribers and is not directly or indirectly, by stock ownership or otherwise, under common ownership or control with any other cable systems serving in the aggregate more than 3,500 subscribers, and provided further, that such cable system files annually at the Copyright Office in accordance with requirements that the Register of Copyrights shall prescribe by regulation, a statement setting forth the names and addresses of other cable systems directly or indirectly in control of, controlled by, or under common control with the cable system filing the statement, the number of subscribers served by each of such other cable systems; and the names and addresses of any person or persons who directly or indirectly own or control the cable system filing the statement and directly or indirectly own or control any other cable system or systems, and the names and addresses of the cable systems so owned or controlled. For the purposes of this subclause (C) or clause (2) of subsection (d), "subscriber" shall mean a household or business establishment, or, if a hotel, apartment house or similar establishment, it shall mean a lodging or dwelling unit within such establishment containing a television receiving set.

(3) The royalty fees deposited under clause (2) shall be subject to the following procedures:

(A) During the month of July in each year, every person claiming to be entitled to compulsory license fees for secondary transmissions made during the preceding twelve-month period shall file a claim with the Register of Copyrights, in accordance with requirements that the Register shall prescribe by regulation. Notwithstanding any provisions of the antitrust laws (as designated in §1 of the act of October, 15, 1914, 38 Stat. 730, Tit. 15 U.S.C. $12, and any amendments of any such laws), for purposes of this clause any claimants may agree among themselves as to the proportionate division of compulsory licensing fees among them, may lump their claims together and file them jointly or as a single claim, or may designate a common agent to receive payment on their behalf.

(B) After the first day of August of each year, the Register of Copyrights shall determine whether there exists a controversy concerning the statement of account or the distribution of royalty fees deposited under clause (2). If he determines that no such controversy exists, he shall, after deducting his reasonable administrative costs under this section, distribute such fees to the copyright owners entitled, or to their designated agents. If he finds the existence of a controversy he shall certify to that fact and proceed to constitute a panel of the Copyright Royalty Tribunal in accordance with section 803. In such cases the reasonable administrative costs of the Register under this section shall be deducted prior to distribution of the royalty fee by the tribunal.

(C) During the pendency of any proceeding under this subsection, the Register of Copyrights or the Copyright Royalty Tribunal shall withhold

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