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with the rights of the writers in their relations with their publishers. We have every reason to believe that one purpose of 3M's desire for a compulsory license is to bring about just such a negation of the rights of the writers.
3M cries "discrimination” when in fact it seeks to extend an existing discrimination. The compulsory license, as has been amply demonstrated in the statements submitted to your Subcommittee, is a discrimination against music publishers and writers. It should not be extended to discriminate further against them. The existence of a form of discrimination should not in itself be a reason, as 3M maintains, to extend the discrimination.
PAYMENT OF ROYALTIES UPON ALL RECORDS MADE We desire now to comment upon the request of the phonograph record industry, regarding manner of accounting for record royalties. The present bill (Sec. 115(c)(2)) provides that:
“The royalty under a compulsory license shall be payable for every phonorecord made in accordance with the license." (italic ours). In the statement of Miss Isabelle Marks before you, the record industry requests that the royalty apply only to records “sold and distributed." The amendment of Senator Williams to this bill (Amendment No. 131) provides (page 5 of the Amendment) that “* * * the royalty under a compulsory license shall be payable for every phonograph record made in accordance with the license and distributed to the public." (italic ours).
We are most distressed by this request. We urge as strongly as we can that it be denied.
We do not believe that we are overfearful in our belief that if royalties for records produced under the compulsory license may be paid on some basis other than on all records made, the result will be disasterous for music publishers and writers.
Here again, this industry desires to "have it all its own way." We submit that if they desire the advantage of a compulsory license, they should be willing to live with a conditon which may possibly be as light disadvantage to them, since such conditions is vitally important in protecting publishers and writers.
Accounting for royalties for records manufactured under compulsory license is related to factors which do not exist in the case of a negotiated agreement. Under compulsory license, a music publisher must do business with any and all record makers, regardless of their history, reputation or culpability concerning financial responsibility, honesty and accounting for royalties to the publisher. He is compelled, without his consent, to license record makers who have established a pattern of evasion of royalty obligations. Such persons invoke the compulsory license, and manufacture and distribute records, and then resort to chicanery, while the copyright owners must stand by helplessly and then find themselves unable to obtain proper accountings. Requirement of payment and accounting for all records made will greatly help the publishers to obtain adequate accountings, and make it more difficult for such record makers to evade their financial liabilities.
The statements before you, submitted by Julian T. Abeles, Counsel for National Music Publishers Association, who has been concerned for many years with the legal pursuit of such record makers, give more details concerning this situation.
Requirement that record companies pay royalties and accounts for all records made (in the absence of a negotiated agreement) is even more necessary now than in the past, in view of certain practices that have been adopted by the record industry.
One practice is the giving away of records as gifts, by record clubs to their subscribers as inducements for the joining of the record clubs or for the purchase of other records. Practically all the record clubs are owned by record manufacturers. The publishers and writers should not be deprived of royalties on such records given away for the economic benefit of the record manufacturers. Under the compulsory license, a record company, if obligated to account only for records 8old, could manufacture an unlimited quantity of records and distribute them "free,” e.g., to its record club, or for promotion purposes related to other, unrelated records.
Record companies have adopted the practice of giving away large quantities of records (as distinguished from limited quantities of samples or records fur
nished for promotion in the traditional manner) to stores or distributors. These records are then sold to the public at usual retail prices. These records are fur. nished "gratis,” to promote sales of others of the same records, or other, unrelated records. If the record makers are not required to pay and account for all records made, they can find various ways of giving away records free, for various advantages to themselves, without accounting or compensation to the publishers and writers, for such records. You may well be assured that many record companies will take advantage of any and all "loopholes," or relaxation of payment and accounting requirements, in order to bypass publishers and writers or obtain unfair advantages. Such dealing should not be facilitated by law.
Miss Marks' statement gives two reasons for the desire of the record companies to be permitted by law to pay and account on some basis other than on all records made.
One reason is, that music publishers will suddenly, en masse, decide to insist upon accountings for all records made. In practice, as Miss Marks confirms in her statement, the record companies and music publishers negotiate agreements in which accounting is made on another basis or bases mutually acceptable to them. Any change in the statute will not compel or encourage music publishers to change a practice which they and the record makers have established for many years, and which seems to work well as a practical matter. The record industry's "fears” in this regard are asserted only in their effort to gain unfair advantages which they should not be permitted to have.
The second reason given by the record industry in its attempt to alter the aecounting provisions of the law, is that a record company is inevitably left with an inventory which it can no longer sell, even in the case of a successful record. Many manufacturers, in many industries, are likely to be left with unsold inventory representing various kinds of costs paid and not recouped. The existence of such inventory is part of the normal cost of doing business, and the expenses entailed are of various kinds in addition (in the record business) to record royalties. A well-managed record company, on the basis of its experience, can readily minimize its unsold inventory, particularly under the modern methods of manufacturing which this industry has adopted. Records can be quickly "pressed" (reproduced) for distribution. Orders can be quickly filled without the necessity of excessive inventories.
Surplus inventories are usually further reduced or entirely eliminated, by the fact that they are disposed of ("remaindered”) for sale at reduced prices in stores which specialize in such sales.
In short, the presence of surplus inventories is not as much of an economic blow as the record industry would have you believe. Its existence should not be accepted as a reason for a handicap to be imposed upon publishers and writers in their attempt to obtain proper accountings for record royalties.
In its argumentation for keeping a compulsory license and statutory royalty fee, the record industry has constantly maintained that the compulsory license and statutory rate have been a basic factor in the expansion and prosperity of this industry. As we have said, the chief reason the compulsory license is retained in the present bill, is that the record industry has emphatically maintained that the compulsory license and statutory rate are an established aspect of its method of operation. That being the case, the record industry cannot in good faith now maintain that one aspect of the compulsory license procedure, i.e. the necessity to account for records made rather than records sold or distributed, is injurious and should be changed. In other words, if, as the industry maintains, the compulsory license system has been so uniquely advantageous to it, it should not be permitted at the same time to maintain that one part of it could now cause it injury.
The law permits record makers to invoke the compulsory license and produce records without the consent of the publishers and writers. If it also permits them to account on some basis other than for all records made, a door will be opened through which publishers and writers can be despoiled in a wholesale manner in a number of ways. This will be the real consequence of this change in the bill, as desired by the record companies. Their request in this regard will not hare innocent results, nor is it innocently made. We urge that your subcommittee gire most earnest consideration to the writers and publishers which will inevitably come to pass if the bill is changed to provide that makers of records under com. pulsory license may with impunity account on some basis other tban for all récords made.
RESPONSE OF THE AMERICAN HISTORICAL ASSOCIATION TO TESTIMONY OF
REPRESENTATIVES OF THE AUTHOR-PUBLISHER INTERESTS ON S. 597 On behalf of the American Historical Association's Committee on Freedom of Inquiry, as well as the other historical and learned societies referred to in my statement of April 4, 1967, I wish to thank the Senate Subcommittee on Patents, Trademarks, and copyrights for an opportunity to comment on the testimony of the author-publisher witnesses at the hearing on April 28, 1967. Please consider my remarks as applicable also to H.R. 2512, passed by the House of Representatives on April 11 and referred to this Committee on April 12.
For the convenience of the Committee, there are attached as Appendices I to IV the amendments to the language and legislative history of s. 597 which we feel essential to meet the needs of the historian and others engaged in scholarly research.
SUMMARY OF PROPOSED AMENDMENTS TO S. 597 AND H.R. 2512 We urge the Senate Judiciary Committee and this Subcommittee to take the following action: Fair use
1. Retain, as passed by the House, Section 107, of H.R. 2512.
(a) Reject the publisher's proposal to amend Section 107 and the language contained in the first two sentences of the third full paragraph on page 31 of the House Report. See Appendix I hereto. In our judgment, the effect of the publishers' proposals would be to negate the fair use doctrine, making Section 107 a promise to the ear to be broken to the hope. As the hearings and debates on H.R. 2512, the House version of S. 597, show, Section 107 was based upon a long line of court decisions exempting the reasonable use of a copyrighted work by scholars, teachers and others from threats of civil and criminal liability under the copyright law. The hearings before this Committee, we submit, fully support the correctness of the value judgment of the House.
The legislative language of Section 107 clearly endorsés a liberal application of the doctrine of fair use whenever the use is in furtherance of the advancement of scientific, historical, legal, or educational purposes. The publishers did not deny this. On the contrary, they frankly admitted their purpose was to limit the traditional exemption embodied in Section 107.
(b) Reject the suggestion at page 34 of the House Committee Report that the fair use doctrine is to be narrowly limited in the case of unpublished works. With all due deference, we submit this concept is not only foreign to the judicially created principle of fair use but finds no support in the policy considerations which underlie copyright protection. Moreover, such a narrowing of the doctrine of fair use would run directly contrary to the Association's congressional mandate. 36 U.S.C. $ 20.
(c) Repudiate the publishers' bald and wholly speculative claim that the "unauthorized” use of a copyrighted work must be prevented no matter how minor the amount of royalty allegedly diverted. I trust I may be forgiven for saying the unbridled self-interest of this proposal refutes itself.
(a) Reject the publishers' contention that the existence of a possible "commercial motive" on the part of a user of copyrighted material per se narrows the market available for exploitation of the copyright monopoly. Under the most charitable view, this contention exemplifies the danger of attempting to extend a principle to the fullest limits of its logic.
(e) Accept and endorse those portions of the House debates on H.R. 2512 which conclusively demonstrate that the whole structure of the legislation was designed to avoid any arbitrary limitation on the concept of fair use. 113 Cong. Rec. H 3863. The inapplicability of conventional concepts of property to the "unique and abbreviated" right conferred by the copyright was repeatedly emphasized. Id. at H 3613, 3863. The floor managers of the House Bill were also at pains to point out that, because of the educators' concern over the position taken by the publishers, "the subcommittee (provided) that fair use can include fuse by reproduction in copies or phonorecords or by any other means' specified by the statute.” Id. at H 3613. They further made clear that "Notwithstanding the copyright owner's exclusive rights, the courts have held that others may make
1 See cases and materials cited in footnote 12 of my statement of April 4, 1967.
a 'fair use of portions of literary property for purposes considered to be in the national interest." These uses, as Mr. Poff stated, are identified in Section 107 “to include criticism, comment, news reporting, teaching, scholarship, and research." Ibid. Finally, as Mr. Hutchinson pointed out, any attempt to limit, confine, or narrow the fair use doctrine would "make much more difficult a fair use of a work by a scholar or a teacher or anyone else." Id. at 3863.
For these reasons we respectfully urge this Committee, and the Congress, to make clear once and for all that any attempt to emasculate the doctrine of fair use is totally inconsistent with the constitutional standard, the national interest embodied therein, and the intent expressed in the legislative language of Section 107. Archival collections
2. Our proposal that the Committee include as a part of its report a clarifying statement of the “for profit" clause in Section 108 was not opposed by any witness. Accordingly, we respectfully request that the language which appears in the Appendix II be included in the Committee's report. Duration
3. Amend Sections 302(a), (c), and (e) so as to provide an inducement to the authors of unpublished materials to register such materials. This proposal, which was unopposed by any witness, it of the utmost importance to the community of historians, scholars, and teachers. Furthermore, it is fully consonant with the overall purpose of the legislation, namely, to provide greater certainty with respect to the terminal date of copyright protection of both published and unpublished materials. Limiting the copyright term of unpublished unregistered materials to life-plus fifty years or seventy-five years from the date of creation, whichever expires first, can do no violence to the legitimate interests of the authors of such works. The amendment proposed in Appendix III will reduce the practical burden on scholars and others in dealing with the prodigious body of unpublished, unregistered works that exist and will come into existence after the effective date of the law. Innocent infringement
4. Amend Section 504(c) (2) so as to protect those engaged in historical and other scholarly pursuits from liability for statutory damages for technical copyright infringement. This proposal, which was unopposed, is essential to protect the historians' freedom of inquiry.
In this connection it should be noted that the amendment proposed (See Appendix IV) is limited to copying for personal use in the course of scholarly research. As previously noted, such use has long been recognized as falling within the fair use doctrine. The amendment is necessary and desirable, however, not only from the standpoint of legislative symmetry, but to insure a parity of treatment for the scholarly researcher with the teacher. Protection of the interests of both are essential to accomplishment of the constitutional mandate. namely, to stimulate intellectual labor, literary creativity, and contributions to the totality of human knowledge.
We feel certain that this committee, and the Congress, has no wish to impede the exercise of intellectual curiosity. As an educational spokesman recently noted the two qualities essential to learning are curiosity and resolution, for only the curious will learn and only the resolute will overcome the obstacles to learning. We are satisfied this Committee has no desire to erect unwarranted threats of suits for copyright infringement as an additional obstacle to the advancement of the sciences and useful arts. Respectfully submitted.
PAUL L. WARD, Executive Secretary.
To insure that $ 107 will receive the liberal interpretation intended, we suggest this Subcommittee include as part of its report the following language in lieu of
? Report of Eugene S. Wilson, Dean of Admissions, Amherst College, p. 8 (issued May 1967).
that which appears in the first two sentences of the third full paragraph on page 31 of the House Report:
"It is important to realize that the bill is not intended to restrain scholars from using any work as source material or from making 'fair use of it. Any use for scholarly research or educational purposes that is fair use today would be fair use under the bill. As the Court of Appeals for the second circuit recently held, the fundamental justification for the fair use doctrine is found in the Constitutional purpose which underlines the granting of copyright protection. Rosemont Enterprises, Inc., V. Random House, Inc., 366 F.2d 303, 307 (2d Cir. 1966), cert. den. 385 U.S. 1009 (1967). The Court there noted: "To serve that purpose, "courts in passing upon particular claims of infringement must occasionally subordinate the copyright holder's interest in a maximum financial return to the greater public interest in the development of art, science and industry."
"The Court of Appeals also concluded that 'whether an author or publisher has a commercial motive or writes in popular style is irrelevant to a determination of whether a particular use of copyrighted material in a work which offers some benefit to the public constitutes a fair use,' Id. at 307.
"The Court refused to subscribe to the view that a user is absolutely precluded from saving time and effort by referring to and relying upon prior published material, stating, 'It is just such wasted effort that the proscription against the copyright of ideas and facts, and to a lesser extent the privilege of fair use are designed to prevent. See Gorman, Copyright Protection for the Collection and Representation of Facts, 76 Harv. L. Rev. 1569, 1584 (1963).'Id. at 310.
"This Committee subscribes to that view of copyright expressed by the Supreme Court in United States v. Paramount Pictures Inc., 334 U.S. 131, 158 (1948).
"In United States v. Paramount Pictures, Inc., 334 U.S. 131 at 158 (1948), the Supreme Court held that:
" "The copyright law, like the patent statutes, makes reward to the owner a secondary consideration. In Fox Film Corp. v. Doyal, 286 U.S. 123, 127, 52 S.Ct. 546, 547, 46 L. Ed. 1010, Chief Justice Hughes spoke as follows respecting the copyright monopoly granted by Congress, "The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the
labors of authors.' "Under the decisions of the courts a broader scope has always been afforded the doctrine of fair use where the field of learning is concerned. The courts are especially inclined to a liberal extension of the doctrine where the matter copied is of a scientific, historical, or educational nature." As Mr. Latman's study notes:
“ 'It has often been stated that a certain degree of latitude for the users of copyrighted works is indispensable for the ‘Progress of Science and useful Arts.' Particularly in the case of scholarly works, step-bystep progress depends on a certain amount of borrowing, quotation and
comment.' 2 "It seems clear that the copyright was never conceived to promote publication as an end in itself. Without reasonable access to source materials, the primary social purpose of the copyright—to encourage the creation and dissemination of works of learning-may easily be subverted. A preoccupation with protecting the publish-manufacturer's investment may result in a severe imbalance in the equities involved. We submit that in balancing the equities involved in educational and scholarly uses, the public interest should prevail over possible de minimis damage to the copyright owner. Certainly in the case of unpublished works, there can be no showing that their use has lessened their commercial value."
1 Rosemont Enterprises, Inc., V. Random House, Inc., 366 F. 2d at 307; Berlin v. E. 0. Publications, Inc., 329 F. 2d 541, 544 (2d Cir. 1964); Mathews Conveyor do. v. Palmer-Bee Co., 135 F. 2d 73 (6th Cir. 1943) : B. Kaplan, An Unhurried View of Copyright, pp. 62, 73, 10. 73, 113 Columbia University Press 1967); Gorman, Copyright Protection for the Collection and Representation of Facts, 76 Harv. L. Rev. 1569, 1584 (1963); Nimmer on Copyright, $ 145, P. 652 (1963).
*Latman. Fair Use of copyrighted Works, Study No. 14 prepared for Subcom. on Patents, Trademarks and Copyrights, Sen. Comm, on the Judiciary, 86th Cong., 2d Sess. (Comm. Print 1960) at 7.