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H.R. 2223 is apparently intended to preclude altogether judicial review of statutory royalty rate adjustments and to curtail sharply judicial review of royalty fee distributions.

Whether the absence of judicial review for Tribunal adjustments of copyright royalty rates is, in itself, a constitutionally fatal defect is difficult to say. It is not doubtful, however, that this preclusion of judicial review seriously compounds the problems of a standardless delegation of legislative power and an administrative body incapable of developing its own standards. When this denial of judicial review is conjoined with the failure (either in the legislation or in the subsequent Tribunal decisions) to establish specific criteria by which the Tribunal is to adjust statutory royalty rates, the constitutional infirmity of the legislation becomes apparent. As written, the bill provides no assurance that such adjustments will be made on a reasoned basis and will not be arbitrary and capricious.

CONCLUSION These three defects—the absence of meaningful statutory standards, the structural constraints against articulation of standards by the Tribunal itself, and the curtailment of judicial review-are cumulative. They combine to strip this proposed statutory scheme of reliable protections against arbitrary decisionmaking. They combine to render the Copyright Royalty determinations effectively beyond the reach of judicial and public scrutiny. As presently drafted, this proposed legislation is unwise and unnecessarily vulnerable to constitutional attack under the due process clause.

ERNEST GELLHORN, Professor of Law, University of Virginia, Charlottesville, Va.

October 14, 1975.


Washington, D.C., November 14, 1975. Hon. ROBERT W. KASTENMEIER, Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of

Justice, House Judiciary Committee, 2137 Rayburn House Office Building,

Washington, D.C. DEAR CONGRESSMAN KASTENMEIER: I appreciate the opportunity to comment on the alternative method of dealing with the cable issue in H.R. 2223 proposed by TelePrompTer Corporation. TelePrompTer Corporation is certainly to be commended for its efforts to find a solution to this issue.

Before commenting on the proposal, I would like to reaffirm the testimony which I gave before the Subcommittee last June on behalf of the Ad Hoc Committee of Concerned Cable Television Operators for a Fair Copyright Law. In keeping with that testimony, I urge that Section 110 of the bill be amended hy adding subsection 8, exempting cable television from the bill, deleting all of Section 111 and amending chapter 8 on the Royalty Tribunal to exclude cable television. Appropriate amendments are attached.

Even if the Committee does not accept these amendments, cable television should be eliminated from the present bill as premature until such time as regulatory legislation is enacted and the full facts surrounding the initialling of the "Consensus Agreement” are developed on the record.

The Office of Telecomunications Policy at the White House, and the Federal ('ommunications Commission are both drafting proposed regulatory legislation for cable television. I understand Congressman Torbert H. Macdonald has announced that he plans hearings on regulatory legislation for cable television next year.

It is still our view that H.R. 2223 should be enacted, but that the provisions on cable should be deferred until Congress establishes its policy on cable tele. vision. Until that is done, the structures of the industry and the regulatory scheme is unknown. The present copyright legislation, by its nature, establishes communications policy. (See Senate Report No. 93–1035, 93rd Cong., 2nd Sess., on S. 1361 p. 66.) After Congress adopts legislation for the regulation of cable television and the regulatory structure of the industry is established, it will be appropriate for the first time to consider copyright legislation on cable television.

Moreover, many members of Congress believe that the industry has agreed, through the so-called “Consensus Agreement", to the payment of copyright. The full facts concerning how that “Consensus Agreement” was obtained on Novemher 10, 1971 by duress and business compulsion, including threats, by a White House staff member, of a blood bath for cable if it did not agree to copyright, should be developed so that Congress will be fully informed on how that "consent" was obtained.

Turning now to the TelePrompTer proposal, our basic objection is that it includes the legislative fiction that receiving and distributing a broadcast signal by a cable television system is a performance. This is contrary to the reason and logic of the United States Supreme Court in both Fortnightly Corporation r. United Artists, 392 U.S. 390 (1968), and TelePrompTer Corporation v. CB8. 415 U.S. 394 (1974). The proposal recognizes the validity of the principles established by the Court (that carriage of such signals is not a performance) only in areas. in which broadcast stations have the right to insist on carriage under the ECC's Rules. This right varies with market size and distance from the reference point of the market or the contour in which the system is located. It would seem that, if carriage of a signal is not a performance within the Grade B contour of a station, outside all 35-mile zones under the Commission's Rules (possibly as far out as 79 miles) where there is a right to insist on carriage, it logically would not be a performance within the Grade B contour of a major market station which cannot insist on carriage by systems outside of its 35-mile zone.

There is really no basis to hold carriage of a station on a cable system to be a performance other than the 28 owners of most of the copyrighted material on television want to collect a second time from the public-once through the advertiser and a second time through the cable operator. The Commission's power to limit the number of distant signals carried on a system has been sustained. No further power is needed to protect both the broadcaster and the copyright owner.

As I understand the TelePrompter proposal, its fundamental thrust is that no copyright liability will attach to the carriage by cable television systems of any network program broadcast by either a local or a distant signal on the theory that the copyright owner dedicates a network program to the entire country. It also exempts non-network programs carried by stations which are entitled to insist on carriage under the FCC Rules. These Rules on carriage are arbitrary with respect to major markets and areas outside the 35-mile zones of all markets. In order to be consistent with that theory on dedication, a copyright owner who sells a non-network program to a television station must intend for an agreed price, to dedicate that performance to the entire public within the Grade B contour of the station and as far beyond as it can be received off-the air. The type antenna used by the public, be it rabbit ears, rooftop, independent tower on CATV, is immaterial to the price the copyright owner receives. In order to eliminate arbitrary discrimination against the public, based on the size of market in which the cable system is located, it would seem that the definition of "copyright qualifying broadcast station" in the proposal should be revised to reflect the principles above described.

There are a number of other problems with the definitions in the proposal. For example, in the definition of "copyright owners percentage share" the total program expense is part of the formula. A number of the nine items listed under program expense, Schedule 2 of the Annual Financial Report of Networks and Licensees of Broadcast Stations, FCC Form 324, do not appear to be related to copyright. These items include salaries of talent, salaries of other program employees and a catch-all of all other program expense. Moreover, the items involved included under this heading may be changed by the FCC from timeto-time. A copy of the FCC Form 324 is included for your information.

One of the difficulties with the definition of "market share" in the proposal is the implied statutory approval of whatever rating service the Commission may now use or may use in the future. Different rating services may come into existence. Therefore, standards for selection of a service by the FCC should be developed with an opportunity to contest the ratings used by submission of ratings by other rating services.

Based on these hurried comments, it is doubtful whether or not sufficient data can be accumulated in these various areas and their effect on different systems determined quickly enough to evaluate the proposal. The above comments underline the necessity to eliminate cable from H.R. 2223. In any case, cable should be eliminated from the present bill and deferred until regulatory legislation is completed and further study is given to the TelePrompTer proposal. Sincerely,

Counsel for the Ad Hoc Committee of Concerned

Cable Television Operators for a Fair Copyright Lar. Enclosures.

$ 110. Limitations on exclusive rights: Exemption of certain performances and

displays Notwithstanding the provisions of section 106, the following are not infringements of copyright:

(1) performance or display of a work by instructors or pupils in the course of face-to-face teaching activities of a nonprofit educational institution, in a classroom or similar place devoted to instruction, unless, in the case of a motion picture or other audiovisual work, the performance, or the display of individual images, is given by means of a copy that was not lawfully made under this title, and that the person responsible for the performance knew or had reason to believe was not lawfully made;

(2) performance of a nondramatic literary or musical work or display of a work, by or in the course of a transmission, if :

(A) the performance or display is a regular part of the systematic instructional activities of a governmental body or a nonprofit educational institution ; and

(B) the performance or display is directly related and of material assistance to the teaching content of the transmission; and

(C) the transmission is made primarily for : (i) reception in classrooms or similar places normally devoted to instruction,


(ii) reception by persons to whom the transmission is directed because their disabilities or other special circumstances prevent their attendance in classrooms or similar places normally devoted to instruction, or

(iii) reception by officers or employees of governmental bodies as a part of their official duties or employment;

(3) performance of a nondramatic literary or musical work or of a dramaticomusical work of a religious nature, or display of a work, in the course of services at a place of worship or other religious assembly;

(4) performance of a nondramatic literary or musical work otherwise than in a transmission to the public without any purpose of direct or indirect commercial advantage and without payment of any fee or other compensation for the performance to any of its performers, promoters, or organizers, if :

(A) there is no direct or indirect admission charge, or

(B) the proceeds, after deducting the reasonable costs of producing the performance, are used exclusively for educational, religious, or charitable purposes and not for private financial gain, except where the copyright owner has served notice of his objections to the performance under the following conditions:

(i) The notice shall be in writing and signed by the copyright owner or his duly authorized agent; and

(ii) The notice shall be served on the person responsible for the performance at least seven days before the date of the performance, and shall state the reasons for his objections; and

(iii) The notice shall comply, in form, content, and manner of service, with requirements that the Register of Copyrights shall prescribe by regulation;

(5) communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes, unless :

(A) a direct charge is made to see or hear the transmission; or (B) the transmission thus received is further transmitted to the public;

(6) performance of a nondramatic musical work in the course of an annual agricultural or horticultural fair or exhibition conducted by a governmental body or a nonprofit agricultural or horticultural organization;

(7) performance of a nondramatic musical work by a vending establishment open to the public at large without any direct or indirect admission charge, where the sole purpose of the performance is to promote the retail sale of copies or phonorecords of the work and the performance is not transmitted beyond the place where the establishment is located.

(8) the further transmitting to the public, by means of broadcast receiving equipment, wherever located, which receives and makes available by means of cable or wires and related equipment to individual reccption sets of the kind commonly used in private homes, of a transmission embodying a performance or exhibition of a work; Provided: The further transmission is made simultaneously and without altering or adding to the content of the original transmission and no direct admission fee is charged for the privilege of seeing or hearing such transmission and the receiving apparatus is not coin operated.


CHAPTER 8.-COPYRIGHT ROYALTY TRIBUNAL Sec. 801. Copyright Royalty Tribunal: Establishment and purpose. 802. Petitions for the adjustment of royalty rates. 803. Membership of the Tribunal. 804. Procedures of the Tribunal. 805. Compensation of members of the Tribunal; expenses of the Tribunal. 806. Reports to the Congress. 807. Effective date of royalty adjustment. 808. Effective date of royalty distribution. 809. Judicial review. $ 801. Copyright Royalty Tribunal Establishment and purpose

(a) There is hereby created in the Library of Congress a Copyright Royalty Tribunal.

(b) Subject to the provisions of this chapter, the purpose of the Tribunal shall be: (1) to make determinations concerning the adjustment of the copyright royalty rates specified by section $ 111 115 so as to assure that such rates are reasonable and in the event that the Tribunal shall determine that the statutory royalty rate, or a rate previously established by the Tribunal, or the revenue basis in respect to section 111 does not provide a reasonable royalty fee for the basic service of providing secondary transmissions of the primary broadcast transmitter or is otherwise unreasonable, the Tribunal may change the royalty rate or the revenue basis on which the royalty fee shall be assessed or both so as to assure reasonable royalty fee; and (2) to determine in certain circumstances the distribution of the royalty fees deposited with the Register of Copyrights under section 8 111 116. $ 802. Petitions for the adjustment of royalty rates

(a) On July 1, 1977, the Register of Copyrights shall cause to be published in the Federal Register notice of the commencement of proceedings for the review of the royalty rate specified by section 8 111 and 115.

(b) During the calendar year 1984, and in each subsequent fifth calendar year, any owner or user of a copyrighted work whose royalty rates are specified by this title, or by a rate established by the Tribunal, may file a petition with the Register of Copyrights declaring that the petitioner requests an adjustment of the rate. The Register shall make a determination as to whether the applicant has a significant interest in the royalty rate in which an adjustment is requested. If the Register determines that the petitioner has a significant interest, he shall cause notice of his decision to be published in the Federal Register. $ 803. Membership of the Tribunal

(a) In accordance with Section 802, or upon certifying the existence of a controversy concerning the distribution of royalty fees deposited pursuant to section § 111 and 116, the Register shall request the American Arbitration Association or any similar successor organization to furnish a list of three members of said Association. The Register shall communicate the names together with such information as may be appropriate to all parties of interest. Any such party within twenty days from the date of said communication is sent may submit to the Register written objections to any or all of the proposed names. If no such objections are received, or if the Register determines that said objections are not well founded, he shall certify the appointment of the three designated individuals to constitute a panel of the Tribunal for the consideration of the specified rate or royalty distribution. Such panel shall function as the Tribunal established in section 801. If the Register determines that the objections to the designation of one or more of the proposed individuals are well founded, the Register shall request the American Arbitration Association or any similar successor organization to propose the necessary number of substitute individuals. Upon receiving such additional names the Register shall constitute the panel. The Register shall designate one member of the panel as Chairman.

(b) If any member of a panel becomes unable to perform his duties, the Register, after consultation with the parties, may provide for the selection of a successor in the manner prescribed in subsection (a). 8 804. Procedures of the Tribunal

(a) The Tribunal shall fix a time and place for its proceedings and shall cause notice to be given to the parties.

(b) Any organization or person entitled to participate in the proceedings may appear directly or be represented by counsel.

(c) Except as otherwise provided by law, the Tribunal shall determine its own procedure. For the purpose of carrying out the provisions of this chapter, the Tribunal may hold hearings, administer oaths, and require, by subpoena or otherwise, the attendance and testimony of witnesses and the production of documents.

'(d) Every final decision of the Tribunal shall be in writing and shall state the reasons therefor.

(e) The Tribunal shall render a final decision in each proceeding within one year from the certification of the panel. Upon a showing of good cause, the Senate Committee on the Judiciary and the House of Representatives Committee on the Judiciary may waive this requirement in a particular proceeding. 8 805. Compensation of members of the Tribunal; expenses of the Tribunal

(a) In proceedings for the distribution of royalty fees, the compensation of members of the Tribunal and other expenses of the Tribunal shall be deducted prior to the distribution of the funds.

(b) In proceedings for the adjustment of royalty rates, there is hereby authorized to be appropriated such sums as may be necessary.

(c) The Library of Congress is authorized to furnish facilities and incidental service to the Tribunal.

(d) The Tribunal is authorized to procure temporary and intermittent services to the same extent as is authorized by section 3109 of title 5, United States Code. 8 806. Reports to the Congress

The Tribunal immediately upon making a final determination in any proceeding for adjustment of a statutory royalty shall transmit its decision, together with the reasons therefor, to the Secretary of the Senate and the Clerk of the House of Representatives for reference to the Judiciary Committees of the Senate and the House of Representatives. 8 807. Effective date of royalty adjustment

(a) Prior to the expiration of the first period of ninety calendar days of continuous session of the Congress, following the transmittal of the report specified in section 806, either House of the Congress may adopt a resolution stating in substance that the House does not favor the recommended royalty adjustment, and such adjustment, therefore, shall not become effective.

(b) For the purposes of subsection (a) of this section

(1) Continuity of session shall be considered as broken only by an adjournment of the Congress sine die, and

(2) In the computation of the ninety-day period there shall be excluded the days on which either House is not in session because of an adjournment of more than three days to a day certain.

(c) In the absence of the passage of such a resolution by either House during said ninety-day period, the final determination by the Tribunal of a petition for adjustment shall take effect on the first day following ninety calendar days after the expiration of the period specified by subsection (a).

(d) The Register of Copyrights shall give notice of such effective date by publication in the Federal Register not less than sixty days before said date. 8 808. Effective date of royalty distribution

A final determination of the Tribunal concerning the distribution of royalty fees deposited with the Register of Copyrights pursuant to sections 111 and 116 shall become effective thirty days following such determination unless prior to that time an application has been filed pursuant to sections 809 to vacate, modify or correct the determination, and notice of such application has been served upon the Register of Copyrights. The Register upon the expiration of thirty days shall distribute such royalty fees not subject to any application filed pursuant to section 809. $ 809. Judicial review

In any of the following cases the United States District Court for the District of Columbia may make an order vacating, modifying or correcting a final determination of the Tribunal concerning the distribution of royalty fees

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