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Our next meeting, which may or may not be the last meeting, will be Thursday, November 13, at 10 a.m. We will make a substantial effort at that point to have the members here so they can be here for our last project.
That concludes this morning's session. The committee is adjourned. [Whereupon, at 12:20 p.m.,
the subcommittee adjourned, to reconvene at 10 a.m., Thursday, November 20, 1975.]
COPYRIGHT LAW REVISION
THURSDAY, NOVEMBER 20, 1975
HOUSE OF REPRESENTATIVES,
AND THE ADMINISTRATION OF JUSTICE
Washington, D.C. The subcommittee met, pursuant to notice, at 10:15 a.m., in room 2226, Rayburn House Office Building, Hon. Robert W. Kastenmeier [chairman of the subcommittee] presiding.
Present: Representatives Kastenmeier, Drinan, Pattison, and Wiggins.
Also present: Herbert Fuchs, counsel, and Thomas E. Mooney, associate counsel.
Mr. KASTENMEIER. The hearing will come to order.
We have met this morning to hear further from Ms. Barbara Ringer, the Register of Copyrights, in what we hope will be the next to the last installment of her testimony and our Subcommittee's hearings on H.R. 2223, the copyright law revision bill.
We have scheduled the next hearing and possibly the last hearing on Thursday, December 4.
So with that, Ms. Ringer, you may proceed where you left off some 2 or 3 weeks ago.
TESTIMONY OF BARBARA RINGER, REGISTER OF COPYRIGHTS
Ms. RINGER. I will do so.
I must apologize for skipping over chapter 8 which would normally come next in the material I am presenting. It deals with section 114 on rights in sound recordings and the Danielson bill, which is the performance royalty provision of the bill. It is a difficult chapter, and I have been having some trouble with it. I have not finished it. Since it also ties in with an important issue under Section 301, involving the Federal preemption of sound recordings fixed before February 15, 1972. I would rather like to present these two together in the interest of comprehensibility.
You have before you four chapters which I hope to be able to get through today. For reference, they are chapter 9 on the compulsory license section, 115; chapter 10 on the jukebox provision, section 116; chapter 11 on ownership and transfer of copyright, which is chapter 2 of the Bill; and chapter 14, on the manufacturing clause, chapter 6 of the bill.
Starting with chapter 9 dealing with what is known familiarly as the “mechanical royalty," I think we can identify five questions, which I will try to address in order. The first is whether or not to retain the compulsory license for the making of sound recordings at all.
Second is an intriguing question involving the availability of the compulsory license under the copyright law with respect to music as used by the so-called record pirates or tape duplicators.
Third is the basis of the royalty and the procedural provisions of section 115.
Fourth is the basis of the royalty rate, which can be characterized as a percentage or a flat rate.
And, finally, the all-important question of the amount of the royalty.
Starting with chapter 9, I would like to read bits and pieces, as I have been doing, and I will try to identify the page for the sake of the reporter as I go along.
The first issue is, Should the basic compulsory licensing system, established in the 1909 act to govern the manufacture and distribution of phonorecords of music, be retained! And at some length in this chapter I have traced the legislative history of section 115. This is the bulk of the chapter, pages 3 to 21, and let me try to summarize the contents of that very briefly, if I can.
Section 1(e) of the present law is the great-granddaddy of all compulsory licensing systems. I do not think that is an overstatement. It sounds rather broad, but the compulsory licensing provisions of the 1909 statute were actually an imaginative effort to compromise a difficult problem and they represent a daring legislative innovation of historic significance. Section 1(e) of the 1909 act established the first compulsory licensing system in any copyright or patent statute, in any intellectual or industrial property statute or, as far as anyone seems to know, in any statute in the world. It set a pattern that has been widely followed in other countries in copyright laws as well as other fields, and has had a profound effect on the development of the music indnstry in the United States.
Mr. KASTENMEIER. Ms. Ringer, I just want to say, I am glad you are dealing with this. One of the questions I think people new to copyright law have, and I do not mean to say that critically, but in a fresh approach—and I have noticed this among conversations with members of the committee—whether or not it is possible and practicable to retreat from a compulsory license. In other words, it tends to represent not only innovation but a device which proceeds out of other things, an evolution to the present state.
Is it possible to rewrite the law so as to disengage from a compulsory license? I think some members have that question in their minds.
Ms. RINGER. I think it is an absolutely essential question for you to answer, Mr. Chairman. I have tried to trace the history of the provision and the attitudes which evolved since the middle 1950's in an effort to show how the Copyright Office went through the same mental process that you are going through, how your subcommittee in 1966, 1967—1965, 1966—when through the same mental process, and how you need to go through it again. I think it is an absolutely essential question. It is not given, in my opinion, that the compulsory license must remain forever and ever. I think that once-I have traced this in a very general way-I think you will see how we came to the point where we now are down to 212, 3 cents type of discussions, but I do not think we can get to that type of discussion until we have address the more general questions. I certainly agree with you.
What I am trying to say now is that this was essentially an antitrust measure, attempting to create exclusive rights which were considered just in 1909, the right of the composer or an author of music or a music: publisher to have rights against those who were recording his music, then on piano rolls, primarily, but without creating a monopoly in the music industry. And this was because of the particular situation that existed in 1909, and I do go into this briefly here.
There was one company, to make a long story short, that had bought up sound recording rights and musical compositions in anticipation that Congress would change the law, and Congress was thus faced with the prospect that, if it granted exclusive rights with no restrictions, it would be creating an automatic monopoly in the Aeolian Co., which was this big piano roll manufacturer that had succeeded in getting licenses. And they did not feel they could do that. And their response—while the section is poorly drafted, at least looking at it from the vantage point of 70 years later; nevertheless, it was, I think, an imaginative effort. And if you look at the hearings in 1909, 1906, and 1908, actually the bulk of the testimony was on this issue. This was the big issue in the 1909 law.
I do not think I need to emphasize the point that obviously the phonograph industry went through enormous ups and downs with the technological developments of the 20th century, but lying there in the background all the way through it was the compulsory license, and in many ways the music industry in the United States was built up with the compulsory license there.
Now, in 1961, obviously the whole industry had been transformed, and it was difficult and is difficult to justify compulsory license simply out of hand, simply by itself. A compulsory license has to be a compromise of some sort. And the industry had changed so radically that the Copyright Office felt that there might be a possibiliy of doing away with the compulsory license and, therefore, in our recommendations in the Register's report in 1961 we recommended that the clause be done away with altogether and that licensing of sound recordings, music licensing of sound recordings, be left to free negotiation.
We did hedge our proposal because we recognized how radical this was, and we recommended that if the clause were retained, that it be thoroughly overhauled.
Now, as I tried to bring out in these first 20 or so pages of the chapter, there was a storm of controversy after this, and without going into–I will not read, I will try to summarize. The record industry mounted a major campaign against repeal, and their basic argument was economic. But they argued similarly that the laws for the compulsory license would produce the same kind of result that was sought to be avoided in 1909, basically that it would lead to concentration and monopoly problems and would raise the cost of records to consumers.
There was something else, though, and I think this needs to be emphasized. The music industry itself was obviously uneasy about
what would happen to it_I am talking now about authors and publishers and performing rights organizations. Publicly, obviously, they were in favor of repeal, but I think that I can say without any fear of contradiction that privately they were concerned about what it would do to them. It was obviously going to lead to restructuring. This was laid so firmly at the basis of the music industry that I feel, as we said in the 1965 report, they would rather bear what ills they had than fly to others that they know not of. And that was really the prevailing sentiment.
In any case, it became apparent that some sort of compromise was going to be necessary, and these things do become apparent to you along the way, and we put forward various alternatives. Up through 1964 we stuck with an outright repeal, and our preliminary draft had an alternative that was an outright repeal with some softening aspects to it. The other alternative was a compulsory license.
Now, at this point a very major role in the compromise procedure was played by a subcommittee of the American Bar Association. I think there are a few people that remember this or know this. But it is true that there was a subcommittee made up of representatives of the record industry, the music publishers, and others in the field, who did try to take what we were doing and produce a compromise. It was tripartite, or perhaps even multipartite, and they did produce a compromise which involved, among other things, 3 cents or 1 cent per minute of playing time. And for purposes of this discussion this morning, Mr. Chairman, I am going to not worry about the minute playing time; I will just talk about cents per song:
This subcommittee—and there were many discussions going on around this at the time—did agree upon a formula for section 115 as a whole, and it also agreed upon this 3 cents flat rate type of approach. By 1965 the question was not whether, but how much.
The revised language and structure of section 115 was accepted by both sides, but having gotten that far, the record industry then mounted a major campaign to bring the rate down. They went forward with economic studies in a major effort to try to prove that a 2-cent rate was satisfactory and that any raise would not be justified or fair. As you well know, Mr. Chairman, the House subcommittee in 1965 and the Senate subcommittee later in 1967 had literally an avalanche of statistical material presented to it, together with data and arguments and even audiovisual performances, and the basic result was that the concentration of the subcommittee was on the fee.
But I think, going back to your initial question, Mr. Chairman, it is fair to say that the House Judiciary Subcommittee in 1966 and · 1967 did make a very thorough review of the basic question of whether or not the compulsory license should be retained. And if I may turn to page 11, these are the conclusions that it reached then. The arguments pro and con are laid out in the preceding pages. From these arguments, after reviewing them, and from the array of economic data presented to it in connection with the rate, the committee concluded that a compulsory licensing system is still warranted as a condition for the rights of reproducing and distributing phonorecords of copyrighted music. The committee also concluded, however, that