in the U.S.A., it can be argued, comes within that part of the Administration's program which will review domestic legislative provisions relating to the achievement of reciprocity for U.S. services exports. Certainly, copyright here or abroad is not the central issue in promoting the domestic and international health of certain service sector industries. But it is a factor of acute importance to the television, motion picture and music industries, whose international copyright concerns include videocassette piracy, growing claims to exemptions from copyright liability for non-commercial uses, international archival exchanges of films, mandatory deposit requirements in foreign law, and quotas restricting U.S. access to foreign theatrical and TV markets. 11. Conclusions, Recommendations, and Comments on Proposed Legislation. a. Position and Recommendations of the Copyright Office. (1) The Cable Compulsory License Should Be Eliminated Based upon a review of the operation of section 111 of the Copyright Act, of technological and industry developments since 1976, and of the fundamental premises upon which the cable compulsory license rests, the Copyright Office has concluded that, subject to two exemptions that I will discuss shortly, the compulsory license of section 111 should be eliminated, or, at least, significantly modified. Cable television systems perform copyrighted works for profit when they retransmit broadcast programming to their paying subscribers. As a matter of principle, the government should not impose a compulsory license mechanism on copyright owners that deprives them of fair compensation for retransmission of their works. This was the conclusion reached originally by the Copyright Office when it assisted in the preparation of the 1964 and 1965 revision bills, the first legislation considered in the modern effort that led to the Copyright Act of 1976. In its Supplementary Report on Copyright Law Revision, the Office reviewed the arguments of the copyright owners and cable systems for and against liability and concluded: On balance, however, we believe that what community In the course of legislative consideration of the various copyright revision bills from 1965-1976, Congress decided to impose a compulsory license, rather than full liability, for secondary transmissions by cable. This decision was largely influenced by two considerations: first, the Supreme Court had already ruled that cable systems did not "perform" copyrighted works within the meaning of the outdated Copyright Act of 1909, and, hence, did not infringe copyright when they retransmitted programs; second, Congress was unwilling to risk the possibility that full copyright liability would stifle the growth of cable, even driving most systems out of business because of high transaction costs, or the refusal of program owners and broadcasters to grant licenses to cable systems. The general principle of the copyright law is that copyright owners are entitled to receive fair compensation for the public performance of their works, 1/ SUPPLEMENTARY REPORT OF THE REGISTER OF COPYRIGHTS ON THE GENERAL REVISION especially in the case of performances for profit. Cable systems perform copyrighted works for profit when they make secondary transmissions of such works. Copyright owners will be more confidently assured of rightful compensation if that compensation is determined by contract and the market rather than by compulsory license. In the last five years, the cable industry has progressed from an infant industry to a vigorous, economically stable industry. Cable no longer needs the protective support of the compulsory license. A compulsory license mechanism is in derogation of the rights of authors and copyright owners. It should be utilized only if compelling reasons support its existence. Those reasons may have existed in 1976. They no longer do. The compulsory license should be eliminated. The Copyright Office recommends retention of the present exemptions of section 111(a), retention of section 111(b) to qualify said exemptions, and two new exemptions. (2) Arguments for Retention of the Cable Television Compulsory License. During his testimony before your Subcommittee on June 11, 1981, Wilbur D. Campbell, Deputy Director, Accounting and Financial Management Division of the U.S. General Accounting Office, succinctly summarized the arguments put forward by representatives of the cable television industry for retention of the present cable television compulsory license provisions. I would like to address address each of these arguments in turn: Federal (1) Compulsory license is less of a subsidy to cable operators than the Federal license broadcasters have to distribute their products over the 1/ airwaves. It is true that broadcasters are able to utilize broadcast spectrum space at no cost. Whatever subsidy that may be incurred from this use, however, is borne by the general public and Congress has considered recently the imposition 1/ Statement of Wilbur D. Campbell before the House Judiciary Subcommittee on Courts, Civil Liberties and the Administration of Justice at 39 (June 11, 1981) (hereinafter cited as GAO Statement]. 1/ of a spectrum fee to be paid by broadcasters for their use of the airwaves. The subsidy afforded cable television systems under the copyright compulsory license is not taken from the general public but rather from a limited segment of the public: the copyright owners of the very programming which is the life blood of cable television. (ii) Cable operators could not practicably negotiate with every 2/ copyright owner whose work was retransmitted by a cable system. Although it may be true that individual cable television systems may not be in the position to negotiate for all of their programming, the largest cable systems constituting over 69% of all cable subscribers may be able to do so. Furthermore, as the satellite origination network model described in section 6(b) of the statement and the various methods of minimizing transaction costs considered in section 8(b) of the statement demonstrate, alternative licensing mechanisms governing secondary transmissions in a full copyright liability context may be available. (111) Cable operators could not compete in the marketplace with major 3/ independent broadcasters for the exclusive use of quality programming. The acquisition of quality programming by more than twenty cable origination networks and the expansion of broadcaster activities in cable ownership and programming suggest that this concern is unfounded. The entrance into the cable program production market of companies such as CBS, Oak Industries, T.A.T. Communications, and its sister company, Tandem, further belies this contention. Norman Lear, founder of T.A.T. and Tandem has said: Like in the beginning days of television, there's an 4/ It is anticipated that this "explosive" demand for programming by cable will continue to be met by a greater number of program suppliers in the marketplace. नोलोलोगे 1/ See e.g., H. R. 3333, 96th Cong., 1st Sess. $414 (1979). 2/ GAO Statement at 39. Id. 4/ Washington Star, June 28, 1981 at Cl. (iv) Since the importation of independent distant signals is of de creasing importance and will be of little importance to large urban cable systems in a few years, the marketplace should be allowed to work its course and largely largely eliminate the use of cable compulsory licenses without legislative change. Even if we assume that distant independent, network, or noncommercial broadcasting signals are not carried, section 111(d)(2) of the Act still requires a copyright compulsory license payment and accompanying Statements of Account, regulation by the Copyright Office and possible royalty distribution by the Copyright Royalty Tribunal for "the privilege of further transmitting any nonnetwork programming of a primary transmitter in whole or in part beyond the local service area of such primary transmitter." The illogic of this situation is evident: while the compulsory license may no longer be needed, government intervention and expense in administering the license mechanism will remain. (3) New Exemptions for Local and Network Signals The Copyright Office recommends that a new exemption be granted for the secondary transmission by cable systems of local broadcast signals. The Office also recommends that, in those cases where the cable system is located in a television market that is not served by the three national television networks (ABC, CBS, and NBC), a further exemption should be granted to permit the simultaneous importation of distant signals containing network programming to the extent necessary to provide a full complement of network service to that market. The exemptions for retransmission of local and network signals should be subjected to the same prohibition now contained in section 111(c)(3) against program alteration and substitution of commercials. These exemptions from exclusive rights seem justified by the finding 2/ of Congress in 1976 that retransmission of local signals and network programming does not injure copyright owners. Indeed, if the FCC continues its "must carry" 1/ GAO Statement at 39. Z/ 1976 House Report at 90. |