APPENDIX

SEPTEMBER 6, 1966.

STATEMENT OF IRWIN KARP ON BEHALF OF THE AUTHORS LEAGUE OF AMERICA, INC. ON THE COPYRIGHT LAW AND THE "COMMUNITY ANTENNA" TELEVISION INDUSTRY

My name is Irwin Karp. I am counsel to the Authors League of America, a national society of professional writers and dramatists. I submit this statement on the League's behalf and request it be incorporated in the record.

The Authors League appreciates this opportunity to state its views on requests that the "Community Antenna" television industry's status under the Copyright Act (and Revision Bill) be changed. Authors are vitally concerned; the requested changes would have a drastic impact on their rights and income. Plays, novels and non-fiction works are performed on television; are adapted for television programs; and are the source material for many motion pictures which are later shown on television. An author's compensation for the use of his work on a television program depends, directly, or indirectly, on the income the program earns for its initial performance, and from re-run and syndication fees paid by television stations for the right to rebroadcast it.

Mr. Ford's testimony has narrowed the issues. Only the Department of Justice now makes the Draconian Proposal that the law should be changed to permit the CATV industry to make unauthorized (and uncompensated) uses of copyrighted programs and films broadcast by television stations. The CATV industry itself recognizes, as the Department does not, that the films and programs it sells and retransmits to its customers were created by others and that basic principles of fairness and morality require that it obtain permission and pay reasonable compensation for the right to use these staples of its business.

However, the CATV industry and Subcommittee #3 of the House Judiciary Committee have proposed that the present law (and the Revision Bill) be changed to establish systems of compulsory licensing under which CATV operators would be permitted, under certain circumstances, to retransmit programs broadcast by "distant stations". The industry proposal calls for fees to be fixed in the Copyright Act. Under the system proposed by Subcommittee #3, fees would be fixed through the medium of private law suits, in the District Courts. For reasons indicated below, we believe that the two proposals should not be adopted.

The basic issue, we believe, involves the retransmission, by CATV systems, of programs broadcast by "distant stations", rather than the retransmission by a CATV system of all programs broadcast by all stations located in, and reaching the immediate local area in which the CATV system's customers reside. The CATV industry and Subcommittee #3 propose an exemption permitting CATV systems to retransmit television programs to customers within the "normal reception range" of the initiating station (or "for reception solely within the limits of the area normally encompassed by the primary transmission").

We believe that a properly limited exemption to permit this type of local retransmission would be acceptable. However, we submit that the exemption should be carefully defined to limit it to situations where a CATV system is truly functioning as a "roof antenna"-retransmitting television programs to customers located within the normal coverage area of the station initiating the broadcast of the program. We believe that an exemption should: (i) establish a precise definition of the normal coverage area-preferably in terms of mileage from the initiating station; (ii) be available only if the CATV system carries without alteration, all programs broadcast by all stations located within the area; (iii) be limited to broadcasts of television programs intended to be received by the public; (iv) be limited to retransmissions to private residences: (v) be limited to CATV systems which furnish their entire retransmission service on a periodic fee basis; and (vi) be limited to CATV systems which do not originate programming.

241

Before considering the proposals for compulsory licensing, we would like to comment on the recommendation by the Department of Justice that the law be changed to grant the CATV industry the absolute right to make unauthorized and uncompensated uses of television programs. The Department argues that this radical departure from both copyright law and principles of equity is desirable: (i) to prevent restrictive practices and monopolization in the CATV industry and (ii) because owners of copyrights in television programs have enough "incentive" and do not need any more, i.e., in the form of payments from the CATV industry.

As to the first ground, the prevention of possible or suspected restrictive practices-we submit that appropriation of property and the denial of all compensation for the use of one's work product constitute a rather harsh prophylactic treatment for preventing anticipated antitrust ailments. To our knowledge, the treatment has not been prescribed or applied in other areas where antitrust infection had not only been suspected but detected. Nor should it be. The Sherman Act, Clayton Act, Robinson-Patman Act and Federal Trade Commission Act provide adequate remedies for restrictive practices, refusals to deal with CATV operators, price discrimination or other conduct that violates the antitrust laws.

We believe that the films and other programs broadcast on television will compete for acceptance in the rapidly expanding CATV marketplace as they do in the broadcast television marketplace; or as films do in the theatrical marketplace. If competition is improperly restricted, conventional antitrust remedies can be applied. If a monopoly of product develops, then conventional regulatory devices are available-as is the case with rail, telephone, electric, gas or other services and utilities provided under non-competitive conditions. The Department of Justice also argues that the CATV industry should be exempted because owners of copyrights in television programs have enough "incentive" already (payment from advertisers or networks)—and, therefore, the "Copyright Monopoly"1 should not be "extended". The argument seems to rest on the premise that the copyright law is only intended to provide a measured dosage of "incentive" and when that has been achieved, other users are entitled to a "free ride"-to free use of the literary or dramatic property that the copyright owner has created. This is not the kind of "incentive" that statutory copyright was intended to furnish. The Constitution authorized Congress to secure to the author the "exclusive right" in his writings-the exclusive right to present the work he has created by the various means, and in the various marketplaces, that are available. He also has these rights under common law (where they are termed "absolute property rights") because he created the work. In short, the Constitution, like the common law, grants exclusive rights in fruits of one's creation as the means of encouraging creativity and productivity-the basic social purpose of all private property under our system of law. A theory of "limited incentive" is not consistent with these basic principles.

Congress has granted exemptions, for certain non-profit performances of copyrighted works-which simply emphasizes that the CATV is not entitled to an exemption. The industry consists of private businesses, operated for profit; and engaged in charging customers fees for bringing them films, dramas, musical and variety shows, and other program materials created by motion picture companies, independent producers, television networks, football and baseball teams and others. In short, a CATV system is in the business of bringing entertainment to its customers-just as are motion picture theatres or local television stations. The fact that it does not create the entertainment, but merely retransmits it, does not entitle it to an exemption-a motion picture theatre merely retransmits films to its audience; most television stations spend most of their time retransmitting television programs created by others, often by relaying the initial broadcast.

We submit that the creators of program materials used by CATV systems are entitled to be paid for such uses and to determine when they can be made. Destruction of these rights would be contrary to basic principles of copyright law and equity; it would affect not only the producers of these materials, but

1 We should note that there is no such thing as a "copyright monopoly". A copyright. per se, is not a "monopoly" in the antitrust sense of the word. A copyright, like any other property right, simply gives its owner the exclusive rights to use the particular thing he has created or purchased.

also the writers, actors, directors, musicians and other artists and craftsmen who create these programs and whose compensation is determined by the income which the producer can derive from uses of the program.

The CATV industry and Subcommittee #3 recognize that (with the exception of a local program exemption) copyright owners are entitled to be paid when their works are used by CATV systems. However, both the industry and the Subcommittee propose that in some instances permission to use be made automatic, and the copyright owner's fee be established under a system of compulsory licensing.

We submit that compulsory licensing is unworkable and unfair. The CATV proposal envisions statutory fees. No statute could provide a schedule of fees that could account for the difference in value of a Bridge On the River Kwai and a 1935 Western Movie, or between a two hour documentary and an animated cartoon, or between a current, highly successful situation comedy and an unsuccessful "pilot" film shown on a summer replacement program. No statutory licensing scheme could determine the reasonable compensation for each work in each marketplace-the fee charged a system with 200,000 customers would be too high for a system with 5,000 customers, and vice versa. Subcommittee #3's "white-black-and-gray" plan envisions a form of compulsory licensing in the "gray" area which would make programs available for CATV use (in that area) without permission, leaving the fee to be determined by litigation in each instance. We do not think this is a desirable approach. It would produce a flood of litigation-with both producers and users choosing to sue or be sued, rather than capitulate to the other's demands, for different tactical considerations. It leaves the determination of fees to District Court judges without providing them with the necessary business expertise to deal with the various factors that enter into the determination of a reasonable fee. In balance, we think that the plan would induce users not to pay voluntarily. In many CATV markets the reasonable fee will be modest-the costs of bringing suit heavy (especially since the producer will usually have to sue in a foreign jurisdiction and recovery limited to three times the reasonable fee. Faced with these odds, producers will have to reduce fees, even though eminently reasonable, rather than carry the heavy burden of suing for small fees (especially with the risk of losing everything if a District Court judge disagrees with their estimate of reasonableness).

Moreover, the Subcommittee's plan would deny copyright owners the right of determining whether a CATV system should, or should not, be permitted to use a program broadcast by a "distant station." This would prevent the copyright owner from granting an exclusive license to a television station to broadcast its program in a given area-which might, in turn, deny it the opportunity of granting any license in that area. The CATV proposal makes a limited adjustment to take account of this difficulty-but not one that gives the copyright owner the same rights he now possesses, or requires. The CATV proposal on exclusive licenses would not, for example, allow the creator of a sports program-a football or baseball game-to prevent its retransmission from a "distant station" into a blacked-out television market; it would not allow the author of a play to prevent the retransmission of a telecast into the blacked-out television market where the play was being performed live. In many instances, given the choice between losing a live audience or withholding his work from television altogether, the copyright owner would be forced to make the latter choice.

We submit that compulsory licensing is not necessary to assure that CATV systems will have an adequate supply of program materials. Existing statutes, as recent decisions have demonstrated, serve that purpose. We submit that compulsory licensing cannot produce reasonable prices for the great variety of television materials; indeed, it can only establish a ceiling (which would be frozen into the law for years) below which CATV systems will be free to bargain and their bargaining power will continue to increase as they capture more and more of the television market.

We submit that the licensing of television programs in the CATV marketplace can be accomplished most fairly and easily under a free enterprise approach. Subcommittee No. 3 accepts the free enterprise approach for its "black" market area. The CATV industry proposal accepts the free enterprise approach for retransmissions to areas that are not "underserved". We believe the free enterprise approach should be adopted in all market areas.

Various systems could be worked out by the CATV industry and producers of television programs under which price and clearance information for each program would be collected and made available to the CATV industry and under which licenses could be granted automatically in most, if not all, situations.

The Authors League is grateful for this opportunity to present its views to the Committee.

STATEMENT OF DIRECTORS GUILD OF AMERICA, INC., AUGUST 4, 1966

The Directors Guild of America, Inc. is an organization consisting of over 3,300 members who perform services in connection with the production of theatrical motion pictures and motion pictures designed for television broadcasting.

For those members of the Subcommittee who may not be too familiar with the motion picture industry or with the function of a Director, I will read the definition of a Director contained in Article III of our Constitution and ByLaws:

Article III, Section B provides in part as follows:

"Definition of a Director: A Director is a creative individual engaged in the making of motion pictures, television programs * * * or other units of entertainment or information which may be photographed and recorded in celluloid, or tape, or any other medium, and projected on various screens, or may be performed on television or on any other new instrument of communication and exhibition now known or hereafter devised * * *"”.

The Director's professional function called "Directing" or "Direction" is unique and all-embracing. He preconceives the particular entertainment or information form as it will appear in its entirely and vitally participates in all the phases of its preparation and execution.

He is closely associated with all other creative talents and crafts involved in the production of the unit and one of his major aims is to extract the utmost values from these talents and crafts and to present them to the public at their very best.

He works directly with all of the elements which constitute the variegated texture of a unit of entertainment or information: story, acting, dialogue, movement, music, song, dance, camera, photography, sound recording, scenery, costumes, props, make-up, etc.

The Director's task is to contribute creatively to all these elements and to guide, mold, and integrate them into one cohesive dramatic and aesthetic whole. The Director's main concern is with spiritual values like: story, characters. moods, ideas and emotions. His purpose is to enlighten, uplift, entertain, inform, and give high pleasure to the audience. And, finally, the measure of a Director's achievement is the extent to which any form of entertainment or information directed by him appeals to the heart and the mind of the audience and, thus, through tears or laughter, enriches and ennobles the spectator's spirit.

While Director members of the Directors Guild are not necessarily copyright proprietors, their creative and artistic endeavors contribute in no small way to the finished theatrical and television motion pictures to which copyright protection is granted. The artistic and creative efforts of Directors which are necessarily included in the finished product which is the subject of copyright protection, make it essential for the Guild to oppose any change in the copyright laws of the United States designed to permit commercial entrepreneurs to pirate the results of such artistic and creative efforts without the payment of any copyright license fee whatever. The position of CATV operators in requesting exemption from the copyright laws is basically inequitable in that it involves an enterprise established for the sole purpose of picking up television signals and transmitting them to areas where the signals could not have otherwise been received, for substantial economic benefits. CATV operators would gain substantial profits for themselves without paying any license fee whatever to the copyright proprietor of the artistic material which in effect is being pirated.

Director members of the Guild have a substantial economic interest in this matter as well as their interest from the creative and artistic standpoint. Under the Collective Bargaining Agreement negotiated by the Directors Guild

with the producers of theatrical motion pictures, a percentage of the receipts realized by the distributor from licensing a copyrighted motion picture for exhibition on television is paid by the distributor directly to the "Directors Guild of America, Inc.-Producers Pension Plan" which is managed jointly by trustees designated by the Directors Guild and trustees designated by representatives of the motion picture and television industry. Payments from the Plan are, of course, made to qualified retired members of the Directors Guild and are also made in certain instances to the surviving spouse and/or dependent children of deceased members of the Directors Guild. The pickup by CATV Systems of telecasts of copyrighted motion pictures made by a television station which has paid the requisite copyright license fee to telecast the same and the transmission of such motion pictures by CATV operators to paying subscribers without the payment of a copyright license fee would thereby deprive the Plan and its beneficiaries of substantial funds.

Not only the Plan but also individual members of the Directors Guild would be deprived of substantial funds by CATV transmission of theatrical and television motion pictures without the payment of a copyright license fee. Directors of films made primarily for television exhibition are, under all collective bargaining agreements, entitled to additional compensation each time the film is rebroadcast. Compensation from reruns can aggregate up to an additional 165% of the Director's initial fixed compensation. Moreover, many Directors enter into individual employment contracts with producers of theatrical and television motion pictures whereby in addition to their fixed compensation, the Directors also receive a percentage of the profits or of the gross receipts realized from exhibition of the film, including television exhibition. An additional 5% of such rerun fees and, subject to certain limitations, an additional 5% of such profit participation or gross receipt participation payments are payable to the Pension Plan, so the Plan is also being deprived of substantial funds from this source as well.

While as pointed out heretofore, the members of the Directors Guild are not necessarily copyright proprietors, they have a vital artistic interest in the motion pictures they create. The copyright laws as they presently exist adequately protect the Director's interest in the completed film. The Directors Guild of America, Inc., therefore desires to go on record against any change in the copyright laws which would create an exemption for operators of CATV Systems which would have the effect of allowing them to utilize the artistic and creative work of others without paying any compensation whatever.

STATEMENT OF NATIONAL BROADCASTING CO., INC., ON S. 1006

NBC submits this statement for consideration by the Subcommittee in its hearings on the necessity of special copyright legislation affecting CATV systems. We urge, in general, that the development and growth of CATV systems and the public and private interest in broadcasting will best be served through the negotiation of copyright licenses within the traditional framework of the copyright laws. NBC specifically opposes, therefore, the imposition of compulsory licensing or the grant of any royalty-free statutory exemption from the copyright laws for CATV systems.

No necessity exists at this time for such legislation. Creating for one area of CATV operation a royalty-free license and leaving other areas to negotiation or compulsory licensing may result in an artificial and perhaps rigid structure which will adversely affect both the growth of CATV systems and broadcast stations, and their ability to serve the public interest.

We believe it fair to say that until recently CATV systems had no serious interest in obtaining licenses for their transmission of copyrighted material. Therefore, copyright proprietors, including networks and stations, had little or no incentive to organize or administer the grant of such licenses.

The recent decision of a Federal District Court, in a carefully reasoned and comprehensive analysis of CATV systems and their operations, concluded that under long-recognized copyright principles the use by CATV systems of copyrighted material infringed upon the rights of copyright owners. The right of authors to license for royalties their copyrighted works for CATV performance was, for the first time, specifically and explicitly confirmed.