Section 2 of proposed S. 646 merely grants and provides that the copyright holder shall have all the remedies available under Title 17 dealing with infringements of copyright but that in the case of lawful infringement for profit the infringer is subject to criminal prosecution under Section 104. The existing statutory provision in Title 17 limits the remedy for such unauthorized use of musical works to the payment of a royalty of two cents (24) on each part manufactured and a discretionary award of not more than six cents (6¢).

No doubt Section 2 of proposed S. 646 provides for increased penalties and firmer sanctions. We submit, however, that the added language in Section 2 will hardly be responsible for any abatement in the problem which the bill purports to address. The reasons for our belief in this regard are as follow: Tape pirates who do not pay statutory royalties and who have made no attempt to pay such royalties represent an irresponsible segment of the business community. For example, these individuals or companies likely do not pay federal and state taxes or comply with the minimum wage requirements of the Fair Labor Standards Act. These operators move from place to place, from state to state, using mobile equipment set up in vans or at most temporarily-utilized garages or warehouses. These operators are lured primarily by a modest capital requirement to enter the business coupled with high profits through sales. It is unlikely that the provisions of Section 2 of proposed S. 646 will have any effect on these operators at all.

On the other hand, legitimate manufacturers of tape music who are now paying statutory royalties and are lawfully in business under Sears, Compco and Sinatra will be required under S. 646 to go out of business. Aside from any consideration of the public interest, this result is completely unfair.

We submit, that the proposed S. 646 does not and cannot get at the problem which its supporters allege to be their goal.

C. The Need For a Compulsory License

We firmly support any attempt by Congress or the courts to drive from the marketplace those tape companies who are copying records without paying statutory royalties. The proposed legislation, however, fails to take into consideration the fact that legitimate tape pirates stand ready, willing and able to pay a reasonable price directly to the record company for each use. Under existing law, the payment of a statutory royalty pursuant to a mechanical license is paid to the copyright holder or his representative. Proposed S. 646 would create a limited copyright in sound recordings but would prohibit any duplication. Accordingly, the record companies already in possession of integrated monopoly power will be able to dictate extortionate licensing terms and thus increase the cost of taped music to the consumer. The clear remedy for this undesirable result is that S. 646 be amended as per Attachment C to provide a compulsory license at a reasonable rate to be determined by this Committee.

To date, we have heard no sensible arguments against a compulsory license. The Senate Committee on the Judiciary, in its Report on S. 646, treated the compulsory license argument in a conclusory fashion as follows:

"The committee sees no justification for the granting of a compulsory license to copy the finished product, which has been developed and promoted through the efforts of the record company and the artists. Any unauthrized manufacturer who wishes to produce a record containing the same songs may do so by paying the mechanical royalty and making the same investment in production and talent as is being done by the authorized record companies."

19 27

We hardly think this answers the question.28 What the Senate Committee has suggested is that we obtain capitalization and go into the record business. When the existing Copyright Act was being considered in 1909 and the publishing companies were in a monopoly position, Congress did not suggest to the infant record industry that it go out into the marketplace and hire its own songwriters. Congress at this time determined that it would be in the public interest to balance the concentration of power in the publishing companies by providing a statutory royalty. The rate was fixed at two cents (24) per use. It is safe to say, we submit, that had Congress not provided a statutory royalty for the infant record industry the publishing companies would have demanded exorbitant licensing fees. The

27 Ibid, p. 6.

28 It is respectfully suggested that counsel for Subcommittee No. 3 review the most current thinking on the copyrightability of phonograph records as noted in S. Breyer, "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies and Computer Programs," 84 Harvard Law Review 281 (1970).

infant record industry would have been in no position to pay high licensing fees and the result would likely have been:

(a) retardation in record industry growth;

(b) excessive concentration of power in the publishing business;

(c) higher cost for market entry into the record industry; and

(d) higher cost of product to the consumer.

What the record companies now desire is an act of Congress creating a limited copyright in a record so that they will be able to license whom they wish to make tapes at whatever price they deem just and reasonable.

D. Conclusion

We believe that the role of Congress involves the balancing of interests so that whenever possible the consuming public receives the best product at the least cost. We believe that a compulsory license will provide a vehicle toward this end and strongly urge that S. 646 not be reported without the addition of a compulsory license.

Respectfully submitted.

ROWLEY & SCOTT,

Attorneys for G & G Sales, Inc., Eastern Tape Corp., Custom Recording Co.

ATTACHMENT A

STATEMENT OF HON. PHILIP A. HART CONCERNING S. 646

(As reported in the Congressional Record, April 29, 1971, at page S5941) Mr. HART. Mr. President, the able Senator from Arkansas has correctly reported to the Senate the course that the pending bill followed in the subcommittee and the full committee. Most particularly, when the bill was considered at the executive session of the full committee, no opposition and no questions were raised. Unfortunately, my schedule had me in attendance at a hearing of the Commerce Committee in Seattle, Wash. on the day of the executive session of the Judicial Committee. As a consequence, the questions I raise now were not raised in committee. For this, I am in a sense apologetic.

Mr. President, the Founding Fathers authorized Congress to exercise legislative power "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." This grant of and limit upon the power of Congress has given rise to copyright protection, a power to impose "a tax on readers for the purpose of giving a bounty to writers." T. Macaulay, Speeches on Copyright 25-C. Gaston, ed., for 1914.

Although there is little by way of "legislative history" on this provision of the Constitution, it is clear that copyright protection was intended to benefit "authors" of "wrtings" for a limited period of time in order to promote the progress of science and the useful arts. Like the other constitutional delegations of authority to Congress, the copyright clause is both a grant of power and a limitation upon the power of Congress to act in this field.

The bill pending before the Senate, S. 646, is sound in purpose, troublesome in design, and vague in reach. Its purpose is to prevent record "piracy," both the illegal form of piracy, where statutory copyright is not paid and legal piracy where all statutory liabilities are met. The latter practice is characteried by the committee report as unauthorized as well as the former; even though the latter complies with all that the law requires. The committee report makes no measure of the extent of the problem, the availability of alternative remedies, nor the effectiveness of the remedy chosen. Indeed, the report implicitly acknowledges that this activity is a recent phenomenon. The report is a further indication that rapid technological change may have left us with an inadequate legislative record from which to formulate precise remedies for carefully defined wrongs. The bill is troublesome in design since the protection granted is not precisely located. The committee report acknowledges that "the copyrightable work comprises the aggregation of sounds and not the tangible medium of fixation." However the report then goes on to state:

"The copyrightable elements in a sound recording will usually, though not always, involve "authorship" both on the part of performers whose performance

is captured and on the part of the record producer responsible for setting up the recording session, capturing and electronically processing the sounds, and compiling and editing them to make the final sound recording."

Consequently, the location of copyright protection is left unclear-is it in the performer, the recorder, or the record-as the report acknowledges. Granting copyright to the record would seem inconsistent with the constitutional grant to provide copyright protection where one cannot be classified as an author of a writing.

The reach of the proposed bill is vague even if authorship is located. The "author" is granted the exclusive right to "reproduce and distribute to the public by sale or other transfer of ownership, or by rental, lease, or lending, reproductions of the copyrighted work." A proviso limits the right of reproduction to the duplication of the sound recording in a "tangible form that directly or indirectly recaptures the actual sounds fixed in the recording." The committee report does not define the reach of this grant of exclusivity to reproduce and distribute. How much further the right extends beyond exclusion of a "pirate" to reproduce an exact copy on a disc or tape is not clear. In a field of rapid technological change we should be careful not to erect barriers to the evolution of technology. In part, my confusion results from the use of the copyright grant to attack the problem of record piracy. Presumably, the committee believes record piracy imperils the investment of risk capital in the recording industry, although no measure of this peril is made. This may well be so, and it may be a wrong in need of a remedy. But neither the patent grant nor the copyright grant were intended to protect the separate interest of an entrepreneur's investment of risk capital. They are limited to the protection of authors and inventors for the purpose of encouraging the disclosure of inventions and the publication of writings. Consequently, the use of copyright to protect the investment of risk capital by nonauthors is not within the scope of the constitutional grant.

This does not mean we should be unconcerned with the problem of protecting the investment of risk capital, if investigation reveals that the current state of the general law is incapable of protecting worthwhile investment of risk capital in the music industry. Granting record companies copyright protection in the process of reducing a performance to a tangible recording capable of reproduction, is being done to protect the "substantial income" these nonauthors derive from the sale of records. This kind of remedy for the problem of "piracy" may well stamp out the "pirates," but at the same time may well secure the monopoly profits of record companies for activity which is not within the purpose of granting copyright protection.

While I am not an expert on the economics and jurisprudence of copyright, much less the practical problems of the music industry, it would seem to me that careful thought and investigation of alternatives may yield a less questionable and more precise remedy for any wrong which exists.

For example, the extension of copyright protection to the performer of a musical work captured in a tangible form, coupled with adequate remedies, may prove a more successful but less drastic step to curb unjust piracy. Some thought might be given to restricting the channels of distribution of unfairly pirated musical performances by penalizing anyone who knowingly distributes pirated recordings. Compulsory licensing of whatever right is granted by S. 646 would at least reduce the scope of the monopoly granted if the Congress is unsure of the economic facts for and against this proposal.

As I have indicated, I am not an expert on copyright or the music industry. However, the extension of copyright protection should not be lightly taken since it has the effect of carving out an exclusive monopoly over an expression of an idea. It is also the creation of a form of property which gives the property holder a right to tax the use of the property or totally exclude any use. I am not prepared to say that an artist's creation or performance is not entitled to copyright protection, although there are some who seriously suggest that the best interests of society may be served by abolishing some forms of copyright protection. S. Breyer, "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies and Computer Programs," 84 Harvard Law Review 281 (1970).

By the same token, I am not willing to extend copyright protection without clear and convincing evidence that we reward an author for his writings in order to promote science or the useful arts. And, I must reluctantly vote no when we extend copyright protection for any other purpose, regardless of how laudable that purpose may be. It is a misuse of the copyright grant; it is the extension of a monopoly over the expression of ideas; and it is doubtful that we will con

stitutionally remedy the problem of piracy without further thought and examination of alternatives available.

An artist's expression should be as free as possible, consistent with the need to compensate the artist to induce the expression. Vesting copyright protection in the record manufacturer may end the free ride of the pirate, but it may well restrict the widest dissemination of the artist's expression without adding to the compensation of the artist. Thus, my vote nay is not a vote for the pirate and against the artist or even against the record company. My vote nay is for the widest dissemination of the expression of ideas in a manner consistent with the constitutional grant of copyright authority. My vote nay is for further study of the issue of piracy with a view toward clearer definition of the problem and a more precise remedy consistent with our constitutional authority.

ATTACHMENT B

CHANGES IN EXISTING LAW

In compliance with subsection (4) of rule XXIX of the Standing Rules of the Senate, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed is shown in roman):

(Act of July 30, 1947, ch. 391 (62 Stat. 652; 17 U.S.C.))

§ 1. Exclusive rights as to copyrighted works

Any person entitled thereto, upon complying with the provisions of this title, shall have the exclusive right:

(a) To print, reprint, publish, copy and vend the copyrighted work;

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(f) To reproduce and distribute to the public by sale or other transfer of ownership, or by rental, lease, or lending, reproductions of the copyrighted work if it be a sound recording: Provided, That the exclusive right of the owner of a copyright in a sound recording to reproduce it is limited to the right to duplicate the sound recording in a tangible form that directly or indirectly recaptures the actual sounds fixed in the recording: Provided further, That this right does not extend to the making or duplication of another sound recording that is an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording; or to reproductions made by transmitting organizations exclusively for their own use.

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§ 5. Classification of works for registration

The application for registration shall specifiy to which of the following classes the work in which copyright is claimed belongs:

(a) Books, including composite and cyclopedic works, directories, gazetteers, and other compilations.

(n) Sound recordings.

§ 19. Notice; form

The notice of copyright required by section 10 of this title shall consist either of the work "Copyright," ***

In the case of reproductions of works specified in subsection (n) of section 5 of this title, the notice shall consist of the symbol P (the letter P in a circle), the year of first publication of the sound recording, and the name of the owner of copyright in the sound recording, or an abbreviation by which the name can be recognized, or a generally known alternative designation of the owner: Provided, That if the producer of the sound recording is named on the labels or containers of the reproduction, and if no other name appears in conjunction with the notice, his name shall be considered a part of the notice.

§ 20. Same; place of application of; one notice in each volume or number of newspaper or periodical

The notice of copyright shall be applied, in the case of a book or other printed publication, upon its title page or the page immediately following, or if a periodical either upon the title page or upon the first page of text of each separate number or under the title heading, or if a musical work either upon its title page or the first page of music, or if a sound recording on the surface of reproductions thereof or on the label or container in such manner and location as to give reasonable notice of the claim of copyright. One notice of copyright in each volume or in each number of a newspaper or periodical published shall suffice.

§ 26. Terms defined.

In the interpretation and construction of the title "the date of publication" shall in the case of a work of which copies are reproduced for sale or distribution be held to be the earliest date when copies of the first authorized edition were placed on sale, sold, or publicly distributed by the proprietor of the copyright or under his authority, and the word "author" shall include an employer in the case of works made for hire.

For the purposes of this section and sections 10, 11, 13, 14, 21, 101, 106, 109, 209, 215, but not for any other purpose, a reproduction of a work described in subsection 5(n) shall be considered to be a copy thereof. "Sound recordings” are works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture. "Reproductions of sound recordings” are material objects in which sounds other than those accompanying a motion picture are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device, and include the "parts of instruments serving to reproduce mechanically the musical work,” “mechanical reproductions," and "interchangable parts, such as discs or tapes for use in mechanical music-producing machines" referred to in sections 1(e) and 101 (e) of this title.

CHAPTER 2.-INFRINGEMENT PROCEEDINGS

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§ 101. Infringement

If any person shal infringe the copyright in any work protected under the copyright laws of the United States such person shall be liable:

(a) INJUNCTION.—

To an injunction restraining such infringement;

[(e) ROYALTIES FOR USE OF MECHANICAL REPRODUCTION OF MUSICAL WORKS.— 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 of infringement of such copyright by the unauthorized manufacture, use, or sale of interchangable parts, such as disks, rolls, bands, or cylinders for use in mechanical music-producing machines adapted to reproduce the copyrighted music, no criminal action shall be brought, but in a civil action an injunction may be granted upon such terms as the court may impose, and the plaintiff shall be entitled to recover in lieu of profits and damages a royalty as provided in section 1, subsection (e), of this title: Provided also, That whenever any person, in the absence of a license agreement, intends to use a copyrighted musical composition upon the parts of instruments serving to reproduce mechanically the musical work, relying upon the compulsory license provision of this title, he shall serve notice of such intention, by registered mail, upon the copyright proprietor at his last address disclosed by the records of the copyright office, sending to the copyright office a duplicate of such notice; and in case of his failure so to do the court may, in its discretion, in addition to sums hereinabove mentioned, award the complainant a further sum, not to exceed three times the amount provided by section 1, subsection (e), of this title,

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