Mr. GROSSMAN. Counsel advises me that the station dropped the advertisement, or the program, when they were told it was illegal. Mr. MIKVA. Thank you very much.

Mr. KASTENMEIER. The gentleman from Massachusetts.

Mr. DRINAN. Thank you very much, gentlemen, for your testimony. I have no questions.

Mr. KASTENMEIER. The gentleman from Pennsylvania.

Mr. COUGHLIN. I have no questions.

Mr. KASTENMEIER. Apparently there are no further questions.

I want to thank all three witnesses who have given testimony this morning, and I want to urge members of the committee to familiarize themselves with your materials, and to keep your materials, either in your possession, or bring them with you tomorrow.

The hearing will adjourn until 10:30 tomorrow morning, in this room, 2226 Rayburn Building, at 10:30, at which time we will hear from two witnesses.

Whereupon, the hearing was recessed at 12:25 p.m., to resume at 10:30a.m., June 10, 1971.)

STATEMENT OF ALBERT BERMAN ON BEHALF OF THE HARRY Fox AGENCY, INC.

My name is Albert Berman and I am the Managing Director of The Harry Fox Agency, Inc. located at 110 East 59th Street, New York, N.Y. 10022 which represents over 3,000 music publishers in connection with the mechanical reproduction of their copyrights on records and tapes.

Today a major source of income to composers and publishers emanates from royalties paid to them by record manufacturers. Copyrights controlled by such publishers are licensed to the users who pay royalties on all records and tapes manufactured and sold regularly on a quarterly basis. These accountings are scrupulously prepared by the legitimate record manufacturers and periodically audited to insure the proper flow of income to the copyright proprietors.

Technological experimentation by the record manufacturers has resulted in the production of pre-recorded tapes which today is estimated to account for approximately 30% of the market in recorded music. Translated into royalties, this amounts to approximately $15,000,000.00 yearly paid by the legitimate producers to the publishers represented by the Fox Agency. It is this income to writers and publishers that is imperiled by the rising scourge of tape piracy today. Invariably the producers of such illicit tapes operate clandestinely in all parts of the United States. It is an anomaly however that although they operate for the very major part clandestinely, they also conduct their business freely. Bootlegging requires no significant capital investment and the penalties for such activities are minuscule compared to the profits to be made.

Under the law, the royalty payment for the mechanical reproduction of music on tapes is a self-determining liability, much in the same manner that the citizen computes his tax indebtedness to the government. There is an obligation, however, to maintain proper records if required to document such indebtedness. The very nature of the illicit tape business mitigates against the maintenance of records necessary for the proper payment of royalties, taxes and other such liabilities. The writers and publishers are faced with the problem of first locating, at considerable expense, the illegal appropriators of their property, then engaging in litigation to prove their claim and finally, are frustrated by the paucity or absence of the record keeping necessary to establish the amount of royalties due. Even with the existing six penny maximum damages under the law (which may be awarded at the discretion of the court), simple arithmetic points to the futility of attempting to police the bootleg tape operator under existing conditions.

Under optimum conditions the creators of music are faced with a statutory royalty rate which sets the limits of their royalty income. When this is threatened as it is at the present time by the proliferation of unlawful activities, the copyright owners have no alternative but to appeal to the Congress of the United States for relief as is provided in S. 646.

STATEMENT OF HAL C. DAVIS, PRESIDENT, AMERICAN FEDERATION OF MUSICIANS The American Federation of Musicians, of which I am President, fully endorses and supports S. 646 a Bill "To amend title 17 of the United States Code to provide for the creation of a limited copyright in sound recordings for the purpose of protecting against unauthorized duplication and piracy of sound recording, and for other purposes." We concur wholeheartedly in the sentiments already expressed in letters to the Chairman of the Senate Committee on the Judiciary from the Deputy Attorney General, the Librarian of Congress and the Department of State, all of whom have strongly urged the enactment into law of S. 646.

Indeed, support for S. 646 is to be found not only in the interested agencies of our Government but in all segments of the legitimate musical and recording world. That support is a graphic reflection of the growing public concern about the counterfeiting processes that have enveloped the recording industry and that have drastically curtailed the incomes of artists, composers, publishers and recorders. Some idea of the scope of these piratical practices is to be found in the remarks of Congressman John V. Tunney in the Congressional Record (P. E1760) for March 9, 1970:

"The total income of the recording industry last year was nearly $1,100 million. In this same year, there were more than $186 million worth of counterfeit records that were processed and sold through the tapings of unauthorized personnel. And it is believed that another $50 million worth of fraudulently duplicated tape cartridges of fully one-half of the industry output are pirated and sold to the unsuspecting consumer, who unwittingly becomes a member of the long list of victims already enumerated. This counterfeiting figure encompasses only the cases that the industry knows of; untold millions are probably counterfeited each year without its knowledge."

There are, of course, additional millions of dollars lost each year in the form of wages and royalties not realized by recording artists, whose income from the sales of recorded works is substantially decreased by the unauthorized taping of their musical talents. In 1969 alone we estimate that the musicians of the American Federation of Musicians and the vocal artists of the American Federation of Television and Radio Artists lost nearly $20,000,000 in income as a result of these nefarious practices. And large incalculable amounts were lost by various trust funds maintained by the American Federation of Musicians, trust funds that are dependent upon royalties from sales of legitimate recordings and that are used to provide employment for musicians and free concerts for the public.

Such profiteering at the economic expense of others cannot be justified morally or legally. Exploiting the talents and efforts of our musical artists without their consent and without any remuneration to them, must be classified as a vicious unprincipled act, foreign to the accepted norms of the American economic system. Perhaps most poignant of all is the insult accorded by the tape pirates to the musical integrity of the recording artists, whose ability to afford pleasure to the public is boundless but whose capacity to derive a fair corresponding profit for exercising that ability is extremely limited at best.

It need hardly be added that a major purpose of federal copyright law is to afford some effective protection against such nefarious practices of those seeking a free ride on the talents and abilities of others. By some historical quirk recordings have never been included within the protective umbrella of this law, though the constitutional power of Congress to afford such protection is beyond question.

S. 646 fills this gap in the federal copyright law and thus serves to ameliorate some of the economic distress that besets the recording industry and the recording artists. That reason alone justifies the strongest possible support of S. 646. The insensitivity and the immorality of those who openly steal the talents and efforts of those engaged in the recording endeavors add a significant ethical component to that support.

In addition, as the Department of State has noted, enactment of a law such as S. 646 is necessary in order to give the Department of State an effective basis for continuing its efforts to secure international protection for American sound recordings. The American Federation of Musicians has been active in providing advice on these matters to the Department and in joining in official delegations to international copyright conventions. We can therefore say with some degree of authoritative emphasis that it has become incongruous for the United States to urge international protection of American recordings in the

absence of any domestic protection emanating from Congress. Here again S. 646 fills that gap.

All of these factors combine to make complete the support of S. 646 by the American Federation of Musicians and its affected members. The time for Congress to act is now.

STATEMENT OF ERNEST S. MEYERS, GENERAL COUNSEL, RECORDING INDUSTRY

ASSOCIATION OF AMERICA, INC.

My name is Ernest S. Meyers of the New York law firm of Laporte & Meyers. I appear here as General Counsel for the Recording Industry Association of America, 1 East 57th Street, New York, New York. The membership of RIAA represents more than 80 percent of all phonograph records and tapes manufactured and sold in the United States.

Since 1956, I have served on the Panel of Consultants on General Revision of the Copyright Law appointed by The Librarian of Congress. In addition, I have served and currently am serving as a member of the United States delegation in connection with treaty negotiations in the area of creating and protecting intellectual property rights.

We support the prompt enactment of S. 646 which passed the United States Senate on April 29, 1971, for the reasons advanced by the Department of Justice, the Department of State and The Librarian of Congress, as well as for the reasons set forth in House Committee Report No. 2237 (89th Cong.) leading to the enactment by the House of Representatives of 1967 of the Copyright Revision Bill which provided for copyright protection against the unauthorized duplication of recordings (H.R. 2512, 90th Cong.); and for the reasons stated in Senate Committee Report No. 92-72 leading to the passage by the Senate of S. 646 (92nd Cong., 1st Sess.).

In earlier considering general copyright revision, House Committee Report No. 2237 unequivocally stated that this Committee "favors copyright protection that would prevent the reproduction and distribution of unauthorized phonorecords of sound recordings."

Senate Committee Report No. 92-72, in favoring copyright protection that would prevent the unauthorized reproduction and distribution of phonorecords of sound recordings, concludes, as did the House Report, that, as a class of subject matter, sound recordings are clearly within the scope of the "writings of an author" capable of protection under the Constitution. In this regard, the Senate and House Committees thus noted their agreement with the opinion of the Register of Copyrights supporting the constitutionality of granting a copyright for sound recordings. Parenthetically, I might add that the Senate Committee Report also effectively refuted a spurious contention, designed, in my opinion, to distract the attention of the Congress from the legitimate issues currently before this Committee. The pirates have demanded a statutory compulsory license from legitimate record manufacturers to reproduce records and tapes upon payment of nominal consideration to the manufacturer. The Senate concluded that any unauthorized manufacturer who wishes to produce a record containing the same songs may do so by paying the mechanical royalty provided for in the copyright law (Section 1(e)) and making the same investment in production and talent as that made by authorized record companies.

The Department of Justice, in endorsing S. 646, first noted that the protection that the recording industry has been able to fashion in some states under the law of unfair competition, may be open to question in light of two United States Supreme Court decisions rendered in 1964. The Department of Justice then concluded:

"We believe that extending copyright to recordings is the soundest, and . . the only way in which sound recordings should be protected. . . . Moreover, there is an immediate and urgent need for this protection."

The Department of Justice squarely rejected the pirates' plea that unauthorized duplication creates legitimate competition, stating:

"The competition provided by the pirate record industry does not promote many of the traditional benefits of competition. Although the pirate record companies may greatly undercut the prices charged by the creative industry, their ability to do so may result in large part from the fact that they do not compensate the creative writers and artists involved. Such practices discourage the investment

of money and talents in new performances and has the potential to gravely injure creative recording."

The Department of State, in its endorsement of S. 646, noted that the growing increase in unauthorized duplication of legitimate commercial recordings has become a matter of critical concern on a world-wide basis. The United States is playing an active role in fashioning a proposed treaty designed to give protection against the importation into any signatory country of unauthorized duplicates or pirated copies. In recommending an early enactment of S. 646, the Department of State has pointed out that:

"United States ratification of or adherence to the proposed treaty depends, of course, upon enactment of a domestic law such as S. 646. Accordingly, passage of the proposed legislation is necessary to give the Department of State an effective basis for continuing its efforts to secure international protection for American sound recordings."

As an adviser to the State Department in connection with the negotiation of this proposed treaty, I also share the concern that, unless there is prompt enactment of S. 646, the chaos currently existing in the international market for American recordings will reach the point that these markets will no longer be available to the legitimate American recording industry.

The Librarian of Congress, in favoring S. 646, has noted that the national and international problem of record piracy is too urgent to await comprehensive action on copyright law revision. In stating that the enactment of S. 646 is badly needed now, The Librarian underscored the following considerations: (i) the rapid increase in record piracy has become a matter of public concern at home and abroad; and (ii) neither the present copyright statute nor state law is adequate to combat this pernicious practice.

During the last 14 years in which copyright revision has been considered and debated, there have been sharp and divergent differences of opinion regarding many facets of the proposed revision law. It is, therefore, noteworthy that the principle embodied in S. 646 has been unanimously endorsed by the House of Representatives (in 1967), the United States Senate (in 1971), The Librarian of Congress and the Executive Branch-State and Justice.

I respectfully submit that this unusual display of unanimity should not go unnoticed, and, therefore, I urge the prompt enactment of S. 646 by the House of Representatives.

I wish to thank the Committee, its Honorable Chairman and its able counsel for the courtesy extended to make the views of the Recording Industry Association of America known as this legislation is so vital to the cultural and educational well-being of our nation.

STATEMENT OF ROBERT C. OSTERBERG IN SUPPORT OF S. 646 AS COUNSEL

FOR THE HARRY FOX AGENCY, INC.

Honorable Chairman and members of the Committee, my name is Robert C. Osterberg. I am an attorney and a partner in the New York City law firm of Abeles and Clark, which specializes in the law of copyright and copyright litigation. I am strongly in favor of the enactment of S. 646.

For more than 20 years our firm has served as general counsel to The Harry Fox Agency, Inc., and its predecessor organization, Harry Fox, Agent and Trustee. The Agency currently represents more than 3,000 music publishers in the United States in the licensing and enforcing of the rights of mechanical reproduction in their respective copyrighted musical works, including with respect to the use thereof in the manufacture and sale of phonograph records and tape recordings serving to reproduce the same mechanically; and in the recording thereof for public performance for profit by means of radio, television, motion pictures, and commercial background music programs.

The Agency representation comprehends relationships with more than 1,500 phonograph record and tape recording manufacturers in the United States. Our firm is general counsel to many of the music publisher principals of the Agency, including Edward B. Marks Music Corporation, one of the oldest independent music publishing firms in the United States; Robbins Music Corporation, Miller Music Corporation, Leo Feist, Inc., and Hastings Music Corporation, the music publishing affiliates of Metro-Goldwyn-Mayer, Inc.; and the Ahlert organization, which administers the copyrighted musical works of Burt Bacharach. We are special counsel to certain of its music publisher principals, including Hill and Range Songs, Inc. and its affiliates, publishers of the copyrighted musical works of 65-358-71-5

Elvis Presley. We are also special counsel to the National Music Publisher's Association, the membership of which comprises most of the leading pubilshers of copyrighted music in the United States. Our senior partner, Julian T. Abeles, is a member of the panel of consultants of the Library of Congress on the general revision of the Copyright Law.

Undoubtedly, the most serious economic problem confronting the publishers of copyrighted music, the legitimate phonograph record and tape recording manufacturers, and the performing artists, is the unauthorized duplication of recorded performances of musical works. The illegal acts are generally perpetrated through one of the following two methods:

1. The recording of the legitimate record is "dubbed" and the label and jacket are counterfeited, whereby the record is marketed as that of the original record manufacturer.

2. The recording of the legitimate record is "dubbed", the names of the original artists and musicians are printed on the label and jacket, and a fictitious trade name is employed, whereby the record is marketed for every intent and purpose as the original recording.

As a result of the unauthorized duplication, (a) no royalties are paid to the music publishers controlling the respective copyrights in the musical works, (b) no compensation is paid to musicians, arrangers and performing artists, and (c) the legitimate phonograph record and tape recording manufacturers are deprived of the profits from their creative works. Furthermore, because of the illicit nature of the operation, meaningful business records are not kept and federal, state and local taxes are evaded. The substantial savings in his cost of manufacture enables the unauthorized duplicator to market his product as exceedingly low prices, whereby he is capable of destroying the market for the legitimate recordings. The public, however, usually receives an inferior product because of the lack of quality control over the unauthorized duplication. In many instances this results in further injury to the performing artists and legitimate phonograph record manufacturers because the public attributes the poor quality to them.

Before the recent tape recording revolution, when phonograph records were practically the sole form in which recorded performances were sold, the unauthorized duplicators concentrated on reproducing phonograph records. Their activities were characterized by the United States Court of Appeals for the Second Circuit in an action for copyright infringement, brought by us on behalf of certain of the Agency's publisher principals, entitled "Shapiro, Bernstein & Co., Inc. v. Goody" (248 F.2d 260), as "disklegging", "bootlegging" or "record piracy". In what is perhaps the strongest condemnation of unauthorized duplication, the same court, in another action for copyright infringement brought by us on behalf of certain of the publisher principals of the Agency, entitled "Shapiro, Bernstein & Co., Inc. v. Remington Records, Inc." (265 F.2d 263), referred to "such members of the industry who engage in what has been described as 'piracy', but which might better be described by other terms connoting larceny; historically, at least, piracy was characterized by frontal attack with unmistakable notice to the victim who could then take such means as were available to defend himself. * **We will not permit commercial piracy to produce illegal gains, immune from recovery. While the law cannot prevent all sin and wrongdoing, it can take some of the profit out of it.”

Unfortunately, the present remedies for infringement of copyrighted musical works by mechanical means have not served as a substantial deterrent to the unauthorized duplicators. Sections 1(e) and 101 (e) of the Copyright Act are known as the compulsory licensing provisions and provide the remedies for infringements by unauthorized recordings. They are the only exception to the general damage provisions applicable to all other cases of infringements.

Section 1(e) provides that "as a condition of extending the copyright control" to "mechanical reproductions", "whenever the owner of a musical copyright has used or permitted or knowingly acquiesced in the use of the copyrighted work upon the parts of instruments serving to reproduce mechanically the musical work (phonograph records, tape recordings, etc.), any other person may make similar use of the copyrighted work upon the payment to the copyright proprietor of a royalty of 2 cents on each such part manufactured, to be paid by the manufacturer thereof."

Section 101 (e) provides that "whenever the owner of a musical copyright has used or permitted the use of the copyrighted work upon the parts of musical instruments serving to reproduce mechanically the musical work, then in case