United States District Court for the Southern District of New York. Waterson, Berlin & Snyder Co., plaintiff, v. Gene Buck, as president of American Society of Composers, Authors, and Publishers, defendant.

STATE OF NEW YORK,

County of New York, 88:

Gene Buck, being duly sworn, deposes and says:

The plaintiff in its replying affidavit assigns as its reason for resigning from the society Mr. Waterson's discovery of unfair practices on the part of the society's representatives in connection with the Edgewater Beach Hotel-Zenith broadcasting station license, and the perfidy of some publisher members in surreptitiously broadcasting their numbers over nonlicensed stations.

THE EDGEWATER BEACH HOTEL-ZENITH BROADCASTINGS STATION INCIDENT

The facts with relation to this matter are set forth in the affidavit of Mr. F. S. Hartman, a reputable Chicago attorney, who handled that matter for the society in Chicago, and in the affidavit of Ted Ficrito.

Mr. Waterson, in his replying affidavit, states that "the reasons why this plaintiff resigned from the defendant society and instituted this action are simple enough

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"In the early part of February, 1924, I was in Chicago, and then ascertained the facts concerning the manner in which the representatives of the defendant society had employed its hold over the Edgewater Beach Hotel to force the Zenith broadcasting station to pay tribute to the society for a license which it did not want and did not use, and I also ascertained that a number of the large publishing members of the society were resorting to subterfuge in order to have their numbers broadcasted over nonlicensed broadcasting stations."

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The plaintiff was inspired in its acts by the Zenith broadcasting station, the broadcasting station then operated by the Zenith Radio Corporation, under the immediate direction of Mr. E. F. McDonald. Mr. McDonald was not only the president of the corporation, but he was, as well, the president of the National Broadcasters' Association. Hence, there was every incentive for the Edgewater-Zenith broadcasting station, and its active director, who was not only a manufacturer of radio apparatus but as well the president of the association of broadcasters opposed to the objects of the society, to break down if possible the morale and loyalty of an important member of the society, and thus, perhaps, create a breach in its wall of defense.

As to the question of alleged subterfuge by other members subjecting the plaintiff to unfair competition, the plaintiff lacked actual knowledge of any such facts, and did not first demand of the society the correction of such a condition, if it existed. As far as general rumor and report in Chicago were concerned, and to be credited, the plaintiff was as much accused as any other; and particularly and frequently was it alleged that the plaintiff was resorting to subterfuge through broadcasting via unlicensed stations by means of a group of singers representing a phonograph record manufacturing concern of which the plaintiff is the principal owners.

Accusations of bad faith are easy to make; allegations of subterfuge, prompted by selfish interests, inspired by those who would, if they could, break down and destroy the society, are not of themselves incontrovertible evidence of their truth. They are not admitted as true by the society; on the contrary, it is in a position to show, and to prove, that the EdgewaterZenith Station was a constant, flagrant, and willful infringer of copyrights, and that though the "license which it did not want and did not use was available for it upon application, it preferred to violate the law and trust to its dexterity to avoid penalty; that it meant to hide behind the license already in effect and in use by the Edgewater Beach Hotel, in the premises on which its broadcasting station was located; and to rely upon its ability to pursuade sufficient members of the society to leave its rank to then make available for its unrestricted use the music which it did not hesitate to use, but for which it did not want to pay. The then ownership of the station has since been repudiated by the hotel in question, and since it passed out of the hands and control of those who were seeking in an underhanded manner to destroy the society, and into the possession of a great newspaper, it has taken out the license of the society and recognized the rights of copyright proprietors as defined by the law.

The broadcasters do not want the opportunity to bargain with the individual copyright owners for the right to publicly perform their individual copyrights, nor do they want the right to bargain with the plaintiff individually for the right to use its copyrights, nor have they made any endeavors to bargain with any responsible or reputable or well-known copyright owners not members of the society for the right to use their works under any other basis than a right to unrestricted and uncompensated free use.

I deny vehemently that the society forced the Zenith broadcasting station to take out a license which it did not want. The fact of the matter is that the Zenith broadcasting station was a willful, deliberate, and habitual infringer of the rights of the society, and such piracies were aggravated by the resort to subterfuge, deception, and misrepresentation of the titles of the number broadcasted in order to make detection more difficult. It sought to disguise its infringements by very subtle and crafty methods.

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Mr. Waterson complains bitterly of the shaken confidence in the good faith of some of his fellow music publishers by their resort to subterfuge in connection with radio broadcasting, but the plaintiff was the first offender in that regard. The first instance of such radio broadcasting called to the society's attention was in the case of the song Songs for Sale," published and copyrighted by the plaintiff. When the plaintiff was called to account, it justified the same upon the claim that the song was acquired by it subject to the condition that the writer thereof should have the right to broadcast the same at any station, and that in fact it had not control over broadcasting rights of such number. That number was continuously broadcasted at all unlicensed stations in Chicago. This was followed by the broadcastings at nonlicensed stations of the compositions entitled "Electric Girl" and "Sunflower Maid," published and copyrighted by the plaintiff. The plaintiff, upon being interrogated with regard thereto, claimed that the songs in question were purchased by it under agreements which excepted from the sale and reserved to the former owners thereof the control of the broadcasting rights.

The next case of radio broadcasting over nonlicensed stations was with respect to the songs from "Earl Caroll's Vanities of 1923," published and copyrighted by the plaintiff. When complaint was made to the plaintiff regarding such broadcasting it justified itself by the claim that it did not own any of the performing rights to these numbers, particularly the broadcasting rights. Not only were these several numbers broadcasted continuously ever since their broadcasting commenced, sometimes before the plaintiff's resignation, but since such resignation it has caused to be broadcasted all over the country at nonlicensed stations all the numbers of its catalogue.

But other publishers, members of the society, grew as restive under what they considered the plaintiff's subterfuge, as the plaintiff now claims to have grown under what it considers the subterfuge of others. Examination into the situation discloses a condition wherein the pot derides the kettle's sootiness.

The plaintiff, however, seems early in the situation to have concluded that it would prefer to advertise its compositions via "radio," but finding itself prevented by the term of its agreement with the society, sought some way of terminating the agreement.

Hence the accusation that other members of the society have resorted to subterfuge in procuring the broadcasting of their compositions through unlicensed stations regardless of their obligations to the society.

The society has always been guided by the wishes of its members with respect to its program and policy, and if at a meeting of the board of directors a majority of the members desired the society to commit itself to the free broadcasting of the numbers within the society's repertory, then the society would have permitted such broadcasting under proper restrictions.

During 1922 the popularity of radiotelephony, and of the receiving sets designed for popular use in receiving broadcasted material, grew by leaps and bounds, until, in September of that year, the society called a conference, inviting a representative from every broadcasting station in the United States to attend, for the purpose of considering what was to be the future relationship between broadcasters, who obviously publicly performed, for purposes of profit, copyrighted music, and the proprietors of the copyrights thereof.

The conference was attended by a representative group of the radio interests; by various musical organizations and individuals, and by a representative of the United States Government. A full and frank discussion, participated in

by practically all present, was undertaken. Stenographic minutes were made of the proceeding, and at the conclusion of the conferences, of which there were two, printed copies of the minutes were sent to every broadcasting station in the country. Much use has been made of these minutes by the organization claiming to represent the broadcasters, by reading into them meanings based upon unrelated extracts, whereas the society refers and has referred to them, in their entirety, and relies upon any reasonable individual, reading them as such, to unavoidably conclude that in toto they represent, as in the fact, an earnest, sincere, truthful, and conscientious effort to bring about a fair adjustment of a new and unforeseen condition.

The

The argument turned upon the question as to whether the broadcasters, by reason of the wide publicity they were able to give compositions rendered through their stations, and alleged resultant commercial benefit to the publishers of the music through having it thus advertised, should or could be required to compensate the copyright owners for such use of their works. society, representing its members, and their unanimous conclusion, tock the position that such use of the music was a public performance for purposes of profit within the intent and meaning of the copyright law, and that contrary to a benefit being experienced from unrestricted and uncontrolled broadcasting such use in fact amounted to misuse, was harmful to the business of the publishers, and resulted actually in over-advertising, to such extent as in part to destroy the market for a composition before it could be satisfied.

Though several of the broadcasting stations recognized the legality and justice of the society's position, a great many did not. A few secured the license of the society, but the majority did not, preferring to restrict their programs to music issued by copyright owners who did not object to the broadcasting thereof.

While the plaintiff has quoted copiously from the minutes of the conferences, it studiously avoids any reference to the demands that the society made for the recognition of the principle that radio broadcastings are public performances for profit within the meaning of the copyright act.

On page 54 of the minutes the following inquiry was made:

"A GENTLEMAN. What do you mean by recognition of your rights-a recognition of the copyright law?

"Mr. MILLS. Yes; a recognition of the principle that broadcasting is a public performance.'

And Mr. Mills suggested that in the interim and until the broadcasters and the society determined upon a reasonable license fee to be paid by the broadcasting stations of the society for the privilege of broadcasting the society's music, each one that had not done so should apply to the society for a license (p. 70 of the conference). This license was furnished by the society without any fee.

The society did not desire a repetition of the bitter experience of musical composers in the case of phonograph records and music rolls. When the musical authors did actually begin to take steps to compel recognition of their rights in the matter of the reproduction of their works upon phonograph records and music rolls, they were met with the contention that it would have mattered little at the inception of that art whether perforated rolls were or were not covered by music copyrights; but it mattered all that the law, under which the art grew, prospered, and developed, and upon the foundation of which a large industry was established and large capital invested, should at such a juncture be held to carry a contrary interpretation.

It was there argued that the industry was built up in reliance that Congress did not intend to give to musical authors mechanical rights; that the writers and manufacturers by long acquiescence had established a status of supposed law, or what they were entitled to regard as law, and that musical copyrights nad been taken out with the understanding that copyrights did not cover perforated rolls.

The society was apprehensive that if the society did not aggressively insist, at this early period of radiobroadcasting development upon recognition by broadcasters of the principle that the present copyright act covers radiobroadcasting similar contentions would be made that a long period of unrestricted broadcasting was but an acquiescence and recognition that the copyright act did not cover radiobroadcasting.

It was therefore of the utmost concern to the society that its members should under no circumstances permit the broadcasting of their musical num· bers through unlicensed stations.

I attach and make a part of this affidavit printed copies of such conference as Exhibit A.

At page 3 of his affidavit Mr. Waterson states:

"This was not a sudden decision on the plaintiff's part to resign. Prior thereto I had told both Mr. E. C. Mills and Mr. Gene Buck that in the plaintiff's opinion those in control of the society were beginning to carry its policies to such extremes as to create great ill will and fear upon the part of large users of music and to compel them to organize ways and means in hostility to the society, all to the detriment of large publishers of music and endangering the propriety of membership in the society."

In the first place, the decision upon the part of the plaintiff to resign was sudden, his statement to the contrary notwithstanding, in so far as notice to the society of any such intention was concerned.

In the second place, it was no new idea with the plaintiff that the operations and policies of the society created ill will upon the part of those whom it required to obey the law. He had known for years of this condition, and well he knew the reason; that those commercial interests who make of the creative genius of authors and composers and of the commercial industry of publishers of music a vehicle for the earning of profit resented any demand of the creators and publishers for any share, no matter how small, in such profits.

In the third place, the fact that the society was opposed by the organizations representing various public amusement interests was well known to the plaintiff, and had been known to him for years, and the only new organization of the sort was that of the broadcasters; the broadcasters' association would have come into existence, as several did, immediately upon "radio as an industry coming into actual existence, and even before the society had asserted its first claims in behalf of its members in connection with the public performance of their works by broadcasting.

I did not have the conversation which Mr. Waterson in his affidavit clainis, nor did I ever hear him make any such statements to anyone. It was a matter of frequent discussion at the board meetings that those opposed to the society were bitterly protesting against its requiring them to obey the law.

Not only did Mr. Waterson have no such conversation with me, as he alleges, but the facts conveyed by the alleged conversation are false. Users of music were organized into trade associations long before the society was formed. Motion-picture exhibitors, hotel men, restaurant men, dance-hall men, and cabaret proprietors were organized into trade associations long before the organization of the society, and the moment the society asserted its rights they organized ways and means in hostility to the society not only in encouraging piracies and in defending piracies but also in organized movements to cause a repeal of the copyright laws. The National Association of Radio Eroadcasters was not formed because of the activities of the society. Every industry is organized in a trade association, and the National Broadcasters' Association is but a trade association of broadcasters. This organization organized ways and means in hostility to the society along the same lines as other trade associations. They are committed to the principles that writers and publishers of musical works should receive no compensation for the use of their works.

Had the society at any time during its existence refused or failed to consider any representation made by a member? It had not. Was there, then, any justification for an assumption that "such a course would have been an entirely useless ceremony?

On the contrary, had the plaintiff seriously presented such a matter for the consideration of the society, undoubtedly, it would have summoned into council not only its present legal advisers, but associate counsel as well, and searched carefully for justification of the plaintiff's contention. To imply otherwise is to impute to all the other members of the society, most unworthy motives..

We could find no more peaceful manner in which to conduct the business than it was being conducted in the face of organized opposition; we always welcomed any suggestion from any one as to a policy that would at one and the same time afford adequate protection to the rights of copyright owners, and induce establishments which publicly performed copyrighted music for purposes of profit to comply with the law, and still establish good will between the society and such establishments; that it was not a question of how much or how little the society charged as license fees; these establishments did not want to pay anything, and would not pay anything except in ill will.

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The ill will, however, of licensees, actual or prospective, of the society did not hurt, and has not hurt, the plaintiff's business. The plaintiff has had one of the most successful musical publishing businesses in the industry, and continues to have. If the plaintiff admits that something has hurt the music business he must search further for the injuring cause it is the very industry with which he has allied himself in this effort to destroy the society. Of that there can be no question.

The plaintiff states that it was advised by its counsel that the organization agreements under which the society was fixing prices and preventing its members from dealing independently with the users of music at public performances were illegal. What does plaintiff mean that the society was fixing prices? This thought is repeated in varying form throughout the plaintiff's affidavits.

AS TO FIXING PRICES

The copyright statute itself furnishes some guide as to the value of the performing rights of dramatico-musical and musical compositions. It is provided that in case of the infringement by public performance of a dramatic, or a dramatico-musical, or a choral, or an orchestral composition the defendant shall pay, by way of damages and not as a penalty, $100 for the first and $50 for every subsequent infringing performance, and, in the case of other musical compositions, $10 for every infringing performance. (Copyright act, sec. 25, subdiv "b,", "Fourth.")

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There is absolutely no competition with respect to the performing rights of musical works for the reason that each number is sui generis. It stands in a class by itself, upon its own merit, quality, and pleasing attractiveness, and appeal to the public. A person desiring to hear "Mother Machree" is not satisfied with and will not accept a rendition of "A Kiss in the Dark." A famous opera singer, the predominant feautre of whose repertoire is Madame Butterfly" will, under no circumstances sing "Maybe." Instances can be multiplied ad infinitum. The commercial value of the performing rights in a song lies in its use in combination with and as part of a mixed composite program. Never in the history of the society has there been a request made for permission to give a public performance of a single number or a group of numbers, or for the numbers in the catalogue of a given publisher. The request is for the privilege of selecting from the society's repertoire a suitable program to be changed daily or weekly as the necessities of the licensee's business may require. There is no way of placing a value upon the performing rights of a single number or a group of numbers, or even of the numbers of an entire catalogue of a music publisher. Other than the statutory guide of determining the value of such rights, there is no other method of fixing or ascertaining the value of such rights with the possible exception of production numbers; that is to say, numbers especially written for or interpolated in musical plays, reviews, and comic operas for legitimate theatrical performances. In the case where an entire musical play is written by a composer and author in collaboration, they receive a royalty based upon a percentage of the gross weekly receipts, customarily agregating to 6 per cent of such gross receipts. In the case of a single number or group of numbers, the royalty varies from one-half to 1 per cent of the gross receipts. Sometimes the royalty is fixed at sums ranging from $50 a week upward, depending upon whether a single number is interpolated or a group of numbers.

Prior to the formation of the society there was no market for performing rights of single numbers or for groups of numbers or for even the numbers of entire catalogs of writers and publishers. The establishments with which the society deals helped themselves to the same without trading or bartering for such rights. They never paid for any such rights, never offered or suggested paying for such rights, and there never was any price fixed for such rights, and there was no means of determining the value of such rights.

The plaintiff speaks much of the prevention of the society's members from dealing independently with the users of music. (By users of music I understand the plaintiff refers to hotels, restaurants, cabarets, dance halls, and broadcasting stations giving public performances of musical compositions.) The only dealings that users of music desire to engage in is upon the basis that they pay no price at all for the right to use copyrighted music. They claim a perfect quid pro quo in the form of the publicity that they give to a number by publicly having it played or sung.