of the requirement would be much more limited than at present. It would apply only to "a work consisting preponderantly of non-dramatic literary material that is in the English language and is protected under this title." Therefore, it would not apply to dramatic, musical, pictorial, or graphic works, to foreign-language or multilingual works, to public domain material, or to works consisting preponderantly of material not subject to the manufacturing provisions. It would apply only to works by American citizens or domiciliaries, and would exempt works by Americans domiciled abroad for more than one year. One of the major compromises underlying section 601 is found in the provisions equating manufacture in Canada with manufacture in the United States for purposes of this

measure.

Importation prohibition.—Like the present manufacturing clause, the purpose of section 601 is to induce the manufacture of an edition in the United States if more than a limited number of copies are to be distributed in this country. Subsection (a) thus provides that "the importation into or public distribution in the United States" of copies not complying with the manufacturing clause is prohibited. Subsection (b) sets out the exceptions to this prohibition. The importation of up to 2,000 copies of works not meeting the manufacturing requirement would be permitted. Additional exceptions to the importation prohibition include exceptions for copies destined for governmental use other than in schools, for copies intended for the library collections of non-profit scholarly, educational, or religious organizations, for works in Braille, and for one copy of a work intended for personal use.

Reproduction proofs.-An issue of great importance when this provision was under discussion in the mid-1960's involved the restrictions to be imposed on foreign typesetting or composition. The key inquiry here is what constitutes “manufacture in the United States." Under a possible loophole in the current law, some publishers have for years had their manuscripts set in type abroad, importing "reproduction proofs," and then printing their books from offset plates "by a lithographic process. wholly performed within the limits of the United States." Whether or not this practice complies with the requirements now in effect is a matter of dispute, which was carried over as an issue in the revision bill.

A compromise solution to this problem is found in subsection (c) where the manufacturing requirement is confined to three specified manufacturing processes. Under this language, there would be nothing to prevent the importation of reproduction proofs as long as the plates from which the copies are printed are made here.

Effect of noncompliance.-Section 601(d) declares that compliance with the manufacturing requirements is not a condition of copyright, and that importation or public distribution of copies made abroad does not invalidate protection. The bill eliminates the present "ad interim" time limits and registration requirements and, even if copies are imported or distributed in violation of the new law, there would be no effect on the copyright owners right to make and distribute phonorecords of the work, to make derivative works including dramatizations and motion pictures, and to perform or display the work publicly.

At the same time, section 601 (d) provides that it will be a complete defense, in any civil or criminal proceeding for infringement of the exclusive rights or reproduction or distribution of copies, where the defendant proves violation of the manufacturing requirements under certain circumstances. It places the full burden for proving the violation on the infringer. Subsection (e) requires the plaintiff in any infringement action involving publishing rights in material subject to the manufacturing clause to identify the manufacturers of the copies in his complaint.

Section 602: Infringing importation

Section 602 deals with two separate situations: importation of "piratical" copies or phonorecords, and unauthorized importation of copies or phonrecords that were lawfully made. Section 602 (a) provides that in either case unauthorized importation is an infringement if the copies or phonorecords "have been acquired abroad." However, three exceptions to this general rule are set forth. They apply to importation for governmental use, for private use by an individual, and for library or archival use.

Importation of "piratical" copies is prohibited. However, although an unauthorized importer of lawfully-made copies would be liable for infringement, the Bureau of Customs would not be empowered to exclude the copies unless there

were, in addition, a violation of the manufacturing requirements. In both situations, the Customs Bureau is authorized to establish regulations under which copyright owners can be notified of apparent violations of their rights.

Section 603: Enforcement of importation prohibitions

Section 603 provides procedural authorization and guidelines for the enforcement of the importation prohibitions prescribed by sections 601 and 602 by the Secretary of the Treasury and the U.S. Postal Service.

Background and summary

CHAPTER 8

COPYRIGHT ROYALTY TRIBUNAL

The provisions for a Copyright Royalty Tribunal represent a relatively recent addition to the Copyright Revision Bill. Chapter 8 (sections 801-809) was not included in the revision bill passed by the House of Representatives in 1967. The proposal to create a Copyright Royalty Tribunal was first introduced in 1969, when the Senate Subcommittee on Patents, Trademarks, and Copyrights reported an amended version of the House-passed bill to the full Judiciary Committee. The Tribunal was created partly, though not entirely, in response to the efforts to reach a reasonable compromise with respect to the issue of cable television liability under the copyright law.

H.R. 2223 establishes compulsory licenses to use copyrighted works in three cases, in two of which the Register of Copyrights would be responsible for collecting and disbursing statutory royalty fees. If there is a controversy about the correct administrative distribution of the royalties the Royalty Tribunal would be constituted to settle it. In addition, two of the three compulsory licensing royalty rates are made subject to periodic review by the Tribunal, which can recommend to Congress appropriate adjustments in the amounts or schedules. The recommendations of the Royalty Tribunal for new statutory rates become law unless disapproved by either House of Congress within ninety days. General considerations

H.R. 2223 establishes statutory royalty rates applying to retransmissions by cable television systems (section 111), the right to reproduce music in phonorecords (section 115), and performances on jukeboxes (section 116). In the case of jukebox and cable television uses, the amounts are to be paid to the Register of Copyrights, who will make distribution to the copyright owners of any amounts not in controversy, and will constitute a panel of the Tribunal to settle any amounts whose division is in dispute.

On the question of the prescribed amounts of the rates for all three compulsory licenses (CATV, reproduction on records, and jukeboxes) the Senate Judiciary Committee Report on the proposal for the Royalty Tribunal stated that "sound public policy requires that rates specified in the statute shall be subject to periodic review." The Senate Committee felt that "it is neither feasible nor desirable that these rates should be adjusted exclusively by the normal legislative process," implying that it would be unwise to require that an act of Congress be passed every time an adjustment of one of these royalty rates is desired. Based upon these considerations, Chapter 8 of H.R. 2223 establishes in the Library of Congress a Copyright Royalty Tribunal for the dual purpose of making determination concerning the adjustment of statutory royalty rates and to make determinations in certain circumstances concerning the distribution of royalty fees deposited with the Register of Copyrights (except for the mechanical reproduction of music)." As a result of the Hollings amendment to the bill when it passed the Senate on September 9, 1974, however, the $8.00 annual per box fee for jukebox performances was removed from the Tribunal's authority of periodic review.

The arguments for and against various aspects of the Tribunal's mandate are usually put forward in the context of one or the other of the substantive compulsory licensing systems, and relate more to them than to the Tribunal itself. In general, proponents of the concept of a Tribunal point out that compulsory licensing systems were essential to the solution of certain problems, and the best method of handling disputes arising under these systems is through a form of arbitration. They believe that this type of distribution system will facilitate payment, keep down administrative and legal costs, and provide a positive benefit to the copyright system in this way.

57-786 76 pt. 3 45

A similar line of argument is used to justify the use of the Tribunal in the adjustment of statutory rates. The contention is that Congress neither has the time nor the expertise to deal with disputes over royalty rates, and yet it is unfair to proprietors and users alike to freeze royalty rates at arbitrary levels for indefinite periods. A form of "compulsory arbitration," it is argued, will be the most fair and efficient method of fee adjustment. One other factor is the apparent success of the "tribunal concept" in reviewing royalty rates in other nations. This system has been used in a number of countries to administer various sorts of performance royalties for many years.

One theoretical argument against the Tribunal is based upon opposition to compulsory licensing systems in general. Under compulsory licensing the authorproprietor has no right to control use of his intellectual property, which right has traditionally been considered equal, if not superior, to the right to receive compensation for uses. Compulsory licensing systems accommodate only the pecuniary right. So far the compulsory licensing systems in the bill have been established in areas where the author-proprietor had no rights to begin with, but concern exists that the Tribunal concept may grow into a device for substituting compulsory licensing systems for the concept of copyright as an “exclusive right" in the Constitutional sense, and for establishing a degree of government control over authorship.

Opposition to the authority of the Tribunal also comes from certain user groups, who argue that statutory royalty rates will inevitably go up whenever they are reviewed. It is argued that Congress should accept its responsibilities and should not delegate them to an unpredictable arbitration panel. Objection is also made by certain users to the short period provided for review of the royalty rates. Finally, some opponents rather cynically contend that the Tribunal will not be able to reach fair determinations because of the strong pressures large, well-organized special interests will exert.

ANALYSIS OF CHAPTER 8

Section 801: Authority of the tribunal

Section 801 would establish the Tribunal as part of the Library of Congress. It would be empowered to adjust certain royalty fees established in other portions of the bill "to assure that such rates are reasonable," to change the rate or revenue basis if necessary, and to determine the distribution of royalty fees in cases of dispute.

Section 802: Petitions for adjustment of royalty rates

Periodic review.-Section 802 (a) provides that on July 1, 1977 the Register of Copyright shall commence proceedings for a review of the rates of royalty payment specified in sections 111 and 115. During calendar year 1984, and in each subsequent fifth calendar year any owner or user of a copyrighted work whose royalty rates are initially specified by sections 111 and 115, or as previously adjusted by the Tribunal, may file a petition with the Register of Copyrights requesting an adjustment of the rate.

Decision to empanel Tribunal.-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, notice of this decision will be published in the Federal Register and the Register will proceed as provided in section 803 for the constitution of a panel of the Tribunal to consider an adjustment of the appropriate statutory rate.

Section 803: Membership of the Tribunal

List of arbitrators. In accordance with section 802, or upon certifying the existence of a controversy concerning the distribution of royalty fees, the Register shall request the American Arbitration Association to furnish a list of three members of the Association as potential arbitrators.

Appointment of Arbitrators.-The Register shall communicate the proposed names to all known parties of interest. The parties may submit written objections to any or all of the proposed names. If no objections are received, or if the Register determines that the objections are not well founded, he shall certify the appointment of the three arbitrators who would constitute a panel of the Tribunal for the consideration of the specified rate or royalty distribution. If the Register decides that the objections to the designation of any of the proposed

individuals are well founded, he shall request the American Arbitration Association to propose the necessary number of substitute individuals.

Section 804: Procedures of the Tribunal

Under section 804 the procedures of the Tribunal are broadly defined. It would generally be empowered to fix the time and place for its proceedings and to establish its own procedure. A panel of the Tribunal could hold hearings, administer oaths, and require, by subpoena or otherwise, the attendance and testimony of witnesses and the production of documents. It is the intent of this legislation that the Tribunal complete each proceeding within one year from the certification of a panel.

Sections 805 and 806: Expenditures; reports

Section 805 provides that, in proceedings for the distribution of royalty fees, the compensation of the members of the Tribunal and other expenses shall be deducted prior to the distribution of the funds. However, in proceedings for the adjustment of royalty rates there is authorization for the appropriation of funds necessary for the compensation of the members and the expenses of the Tribunal. Section 806 requires the Tribunal, immediately upon making a rate determination, to report its decision and reasons to the appropriate Congressional officers. Section 807: Effective date of royalty adjustment and congressional review

No recommendation of the Tribunal for adjustment of a statutory royalty rate shall become effective until Congress has had the opportunity to determine whether the proposed adjustment should be disapproved. Section 807 establishes a procedure, modeled on the Reorganization Act, whereby within ninety calendar days of continuous session either House of Congress may adopt a resolution stating that the recommended royalty adjustment is not favored. If such a resolution is adopted by either House of Congress the adjustment shall not become effective. If neither House adopts a resolution of disapproval, the rate adjustment shall take effect after the expiration of a specified period of time. Sections 808 and 809: Effective date of royalty distribution; judicial review

Section 808 provides that a final determination of the Tribunal concerning the distribution of royalty fees pursuant to sections 111 and 116 becomes effective as to a particular claimant 30 days following the communication to the claimant of written notice of the determination, unless an application for judicial review has been filed and notice of the application has been served upon the Register of Copyrights.

Section 809 is modeled on the Federal Arbitration Act and provides that the determinations of the Tribunal shall not be subject to review in any Federal court unless: (1) the determination was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption in any member of the Tribunal; or (3) any member of the Tribunal was guilty of any misconduct by which the rights of any party were prejudiced.

CHAPTERS 5, 7, AND TRANSITIONAL AND SUPPLEMENTARY PROVISIONS

MISCELLANEOUS PROVISIONS

Only one major issue has been raised in connection with provisions of Chapter 5 (Copyright Infringement and Remedies), Chapter 7 (Copyright Office), and Sections 102 through 113 (Transitional and Supplementary Provisions), and this is a part of the entire problem of cable television. Subsection (c) of section 501 provides that "a television broadcast station holding a copyright or other license to transmit or perform the same version of that work" is to be treated, for purposes of maintaining an infringement suit in a case of CATV retransmission, as the copyright owner if the infringing transmission "occurs within its local service area." Cable operators have challenged this provision, and their arguments should be considered in connection with the other problems raised in connection with section 111.

The fees for registrations and other Copyright Office services are provided in section 708, and remain at the level set in the 1965 bill and established by special statute in that year. It is for consideration as to whether changes in these fee levels, and in other of the provisions in the fee section, should be reexamined with, or in advance of, the general revision bill.

APPENDIX 3

REPORT OF WORKING GROUP OF CONFERENCE ON RESOLUTION OF COPYRIGHT ISSUES (DEALING WITH LIBRARY PHOTOCOPYNG)

To: Conference on Resolution of Copyright Issues.
From: Working Group.

APRIL 17, 1975.

Subject: Activities of Working Group since Feb. 5, 1975-Actions of Working Group & Its Committees-Recommendations.

§ 1. Introduction.-Efforts between Nov. 1974 and Jan. 1975 to solve the problem of achieving meaningful consensus concerning compensation by libraries to copyright proprietors for photocopying of copyrighted periodical and journal articles made by librarians for their patrons had made no progress through an approach to a definition of systematic copying or through discussion of examples. This led to the summary report and recommendation by the Working Group (WG) to the Conference at its Feb. 5, 1975 meeting. The Conference adopted the Recommendation of the Working Group:

"a. That the Conference investigate the development of workable clearance and licensing procedures, or other procedures, applicable to library photocopying of periodical and journal articles, and

"b. That the Conference direct the Working Group, or a reconstituted Working Group, to proceed with such investigation as rapidly as possible and, in this connection, authorize the Working Group to utilize such expertise as is available from organizations represented at the Conference or such other informational or technical resources at its command."

In making this recommendation, the members of the Working Group considered "that it was presently impossible to achieve any meaningful consensus concerning the existence of any obligation of libraries to compensate copyright proprietors for the photocopies of copyrighted periodical and journal articles made by libraries for their patrons", but that discussions could proceed with "all parties reserving their respective rights and positions as to the obligation of libraries to compensate copyright proprietors for photocopies . . ."

Therefore, the WG has operated since Feb. 5 in response to the above action of the Conference. The Working Group has met 3 times. In addition, there were 4 meetings of committees appointed by the WG; committee members included persons as technical advisers who were not members of the WG or of the Conference. Nine Agenda Documents were prepared by the committees and by the library component and publisher component of the WG.

Because an assignment to one committee was often interrelated with other assignments, it is difficult to present a relatively simple list of actions of the WG. In some cases, the WG amended portions of a document without a final action by the WG. Therefore copies of the Agenda Documents are appended to this report so that Conference members can see the rationale presented in each document.

§2. Summary

§2.1 Terminology.—Because the words, system and systematic, have several possible interpretations, the WG agreed to eliminate the use of these two words. The word, mechanism, has been used in a number of instances (e.g. in reference to portions of AgenDoc 5) so as to avoid the use of the word, system, in such contexts.

$ 2.2 Definition of Serials (Periodicals).-The WG accepted a definition of serials prepared by a committee for purposes of defining a serial; and that at a later date a determination would be made whether any payment mechanisms will apply to all serials or only to certain categories of serials:

Serial.-A publication issued in successive parts bearing numerical or chronological designations, which is intended to be continued indefinitely and which is identified by an ISSN. Serials include periodicals, newspapers, and the journals, memoirs, proceedings, transactions, etc. of societies. Serials are subject to subscription prices paid in advance. (This eliminates publications that appear annually or less frequently.) (See AgenDoc 7)

§2.3 Variable Pricing vs. Transaction or Usage Charges.-A list of advantages and disadvantages for both approaches were prepared by a committee and considered by the WG. All lists include items that are advantages and disadvantages to publishers and/or libraries. The definitions are:

Variable pricing. This should refer to any system under which separate prices may be established by the publisher for each serial or periodical for various classes of customer. The price set for a particular class of customer could be