If a publishing house designates a foreign book manufacturing concern in order to obtain the copies at a lower cost, or for whatever reason, that foreign book manufacturer becomes the beneficiary and the equitable owner of the copyright monopoly at the book manufacturing level of the process. The copyright is enforceable by the publisher to protect the copies manufactured by the selected producer against the independent manufacture of copies by any other book manufacturer including all American book manufacturers. Normally, only a single manufacturer is chosen to manufacture all of the copies for the national market. Accordingly, to discuss the manufacturing clause of our copyright law as a restriction upon international free trade is anomalous. Trade in books that are subject to a copyright monopoly cannot be free trade in any real sense, either domestic or international. All stages of the production and sale of such books are covered by the copyright umbrella. The manufacturing clause is, in reality, a limitation on copyright that simply requires that the benefits of this monopoly not be utilized in such a way as to give foreign concerns and foreign workers a monopoly to the exclusion of American book manufacturing firms and graphic artisans. This limitation derives major economic significance from the fact that most foreign concerns, enjoying production costs far below the costs experienced by their American counterparts, have a very distinct competitive advantage. However, it is not the competitive advantage in and of itself which gives rise to the need for the manufacturing clause, it is the copyright monopoly. The Congress long ago decided that a limitation, i.e. the manufacturing clause, prohibiting, under certain circumstances, the extension of the copyright monopoly to foreign book manufacturers is a reasonable limitation upon copyright. This limitation has been steadily narrowed through the amendment process, and the bill that is before the Senate today would apply the manufacturing requirement only to copies above 2,000 of copyright works that are non-dramatic literary works in the English language. The new clause would not apply to works written by foreign or expatriate American authors; nor would it apply to musical works, dramatic works, works in a language or languages other than English, or works that were not copyrighted or are no longer protected by copyright. Neither would it apply to works printed in small (i.e., under 2,000 copies) quantities. In short, all types of works with respect to which American printers cannot legitimately claim the right, and need, to be brought under the copyright umbrella, are excluded from the clause. It is submitted that this limitation is eminently reasonable and is essential to prevent great harm to American book manufacturing by producers in a large number of low wage foreign countries. It is precisely because no such injury would result from extension of the copyright monopoly to Canadian book manufacturers that all segments of the American industry have been willing to support the exclusion of Canada from the provisions of the manufacturing clause. The wages of Canadian graphic artisans and the overall costs experienced by the Canadian book manufacturers are on a par with those of American book manufacturing concerns. It must be recognized that there is an enormous imbalance in the trade in printed matter between the United States and Canada and that the United States and Canada in reality constitute a single market for literary materials. Accordingly, the objective seems to us to be crystal clear and unquestionably desirable. The only remaining question is whether the United States can accomplish this purpose without violating its other international obligations. In our view, the Department's letter itself impliedly admits that this goal can be accomplished. The State Department's opposition, as indicated in its September 19 letter, is based upon an adherence to the most-favored-nation ideal that is so rigid and slavish that it poses a challenge to the leadership of the Senate in the field of foreign policy. The Department asserts that the exclusion of Canada from the manufacturing clause would violate the "spirit" of the most-favored-nation requirement found in Article I of the GATT. We read this assertion as a clear admission by the Department that exclusion of Canada from the requirements of the manufacturing clause would not constitute a violation of the actual requirements of the most-favored-nation article. One is moved to inquire why the Department would oppose a move that has the backing of all affected interests on both sides of the border and that does not violate the letter of this country's GATT obligations. It is perhaps understandable that the Department of State has focused its attention on one narrow segment of one issue involved in this problem, i.6., its possible bearing on our international trade policies. The Committee's consideration must obviously be far broader as we have attempted to point out. Vital in terests of American book manufacturers, graphic arts workers, our own commerce and trade, economic relations between the United States and Canada and common fairness to all involved interests must be weighed in the balance. In our view, the strength of these factors far outweighs the limited and dubious technical views expressed by the Department in its letter. In conclusion, all parties on both sides of the Canada-United States border are in favor of excluding Canada from the provisions of the manufacturing clause. To do so would be of substantial benefit to Canada and would in no way impose any new or additional restriction on U.S. trade with any other country. Moreover, since the clause is a unique copyright provision, the United States' existing international obligations respecting free trade are inapplicable. It has specifically been demonstrated, and not refuted by the Department of State, that the proposed action would not constitute a violation of Article I. the most-favored-nation provision, of GATT. Accordingly, it is quite plain that there is no real impediment to excluding Canada from the manufacturing clause, and we urge that this be done. In the preparation of these views, I have consulted with all immediately affected American interests and they concur in all views expressed. Very truly yours, JAMES H. FRENCH. TECHNICAL MEMORANDUM ON EFFECT OF EXISTING U.S. INTERNATIONAL AGREE MENTS ON PROPOSED EXCEPTION OF CANADA FROM THE MANUFACTURING CLAUSE OF THE COPYRIGHT LAW (In response to a letter from the Department of State to the Senate Subcommittee on Patents, Trademarks, and Copyrights, dated September 19, 1967) 1. Paragraphs 2 and 5 of the State Department's letter state that an exception for Canada would violate many of our bilateral commercial treaties, e.g., our Friendship, Commerce and Navigation Treaties with Germany and Japan. The State Department citations to various paragraphs in the two treaties omit reference to Article XXIV, paragraph 4, in the German Treaty and Article XXI. paragraph 4, in the Japanese treaty which provide as follows: "The provisions of the present Treaty relating to the treatment of goods shall not preclude action by either Party which is required or permitted by the General Agreement on Tariffs and Trade during such time as such Party is a contracting party to the General Agreement. Similarly, the most-favored-nations provisions of the pres ent Treaty shall not apply to speical advantages accorded by virtue of the aforesaid Agreement." Thus, the commercial treaties are not a separate reason for opposing a Canadian exception. Rather, the question turns on whether or not such an exception would be precluded by the GATT. 2. We are pleased to note that paragraph 3 of the Department's letter concedes that, as claimed by Mr. French in his testimony, Article XI of the GATT would not apply because of the Protocol of Provisional Application. 3. It is stated in paragraph 3 that a special exception for Canada "would create a conflict with the spirit of the most-favored-nation requirement in Article I." This vague language seems to be a confession that after more than ave months the Department of State cannot find any specific provision in the GATT which clearly bars an exception for Canada. The GATT is a highly technical document. We do not advocate action by the Congress contrary to the specific provisions of the GATT. But we do not believe that the will of Congress—if it be such-to take account of the special relationship between Canada and the United States in the exchange of printed matter by making a special exception for Canada should be frustrated by vague reference to the "spirit of the mostfavored-nations requirement." Richard C. Snyder's book "The Most-Favored-Nations Clause" (Columbia University, 1948) is authority for a strict interpretation of complex most-favorednations clauses such as Article I of the GATT. Snyder says at page 58: "By 'complex' is meant, therefore, clauses which define most-favored-nations treatment in clear detail. This does not necessarily mean, however, that complex clauses are wider in scope than simple clauses; ordinarily the reverse is true." (Incidentally, at page 71 Snyder gives as an example of his detailed, complex most-favored-nations clause Article XI of the old U.S.-Finland treaty which refers, as does the GATT, to "all rules and formalities in connection with importation or exportation.") 4. Paragraph 3 also states than an exception for Canada would "in all likelihood" conflict with the words of Article I calling for most-favored-nation treatIment "with respect to all rules and formalities in connection with importation and exportation". It is hard to take this argument seriously. The State Department apparently was unable to fit an exception for Canada into any of the four categories listed in Article I, especially since no customs duties or charges of any kind are involved. There is no definition of "rules and formalities" in the GATT, but the entire context seems to be that they refer to uniform requirements for customs administration in connection with importation and exportation. On March 24, 1948, the State Department issued "A Guide to the Study of the Havana Charter for an International Trade Organization" (Commercial Policy Series 114). Article 16 of the Havana Charter is the same as Article I of the GATT. In referring to Article 16 of the Havana Charter, the State Department explained at page 3: "In this Article each member agrees to apply, in its import and export trade with every other member, the same customs duties and the same laws and regulations concerning customhouse procedures generally." An exception for Canada as part of a general revision of the Copyright Law (S. 597) cannot be considered a rule or formality in connection with importation or exportation. 5. The State Department also claims that an exemption for Canada would create a new conflict with the non-discrimination requirement in Article XIII, paragraph 1. However, this paragraph refers only to non-discriminatory administration of quotas or other restrictions which come within one of the three exceptions-Article XI, paragraph 2, Article XII, and Article XVIII, Section B. It is not a blanket prohibition against any restrictions which are not equally applicable to all countries. Strong support for our position comes from a number of sources: A. The State Department prepared a document entitled "General Agreement on Tariffs and Trade, Present Rules and Proposed Revisions." This is contained in the hearings of the House Ways and Means Committee on H.R. 5550, March, 1956. The following summary of the purpose of Article XIII is contained at page 1395: "This Article requires a contracting party imposing quantitative restrictions on imports under one of the exceptions to apply them in a non-discriminatory manner." B. The State Department, in the Guide to the Study of the Havana Charter, referred to above, stated at page 5: "Article 22 [the same as GATT Article XIII], as indicated by its title, likewise deals with the same general subject as does Article 16 [GATT Article I]. Under certain circumstances, a member may be permitted to use quantitative restrictions. However, this Article insures that such restrictions as are permitted will be applied equitably to give fair treatment to exporters situated in all other member countries. It prescribes a general rule to this effect and sets forth a number of requirements to give the rule precision and enable it to be enforced." C. In the State Department publication "Preliminary Proposals for an International Trade Organization" (Commercial Policy Series 99), the following is stated at page 9 with respect to administration of quantitative restrictions: "One of the provisions agreed to by the [preparatory] Committee is a general rule for non-discriminatory administration of such restrictions as are permitted under the exceptions described above." D. William Adams Brown, Jr., at page 257 of "The United States and the Restoration of World Trade" similarly refers, under the heading "Quantitative Restrictions," to "The non-discriminatory application of permitted restrictions." It follows that since the manufacturing clause is not a restriction authorized by any of the three exceptions, Article XIII does not apply to it. This is actually the position taken by Mr. French in his testimony to the Senate Subcommittee, with the exception that he did not specifically mention the possibility of the other two exceptions. The result is the same. In addition, it should be noted that the manufacturing clause is not listed among the all-inclusive “Quantitative Restrictions and Tariff Quotas on U.S. Imports in Force on November 10, 1965" published by the U.S. Tariff Commission. Also, the whole context of Article XIII, which refers to allocation of quotas among supplying countries, makes it clear that the situation dealt with has no relationship at all to administration of the manufacturing clause of the copyright laws. 6. It is stated in paragraph 8 of the State Department's letter that it would not be "feasible" to secure a waiver, although it is "intheory" possible for the U.S. to seek one. We cannot see why this should be so. If there really is a strong concern that the GATT may be applicable, the logical alternatives would appear to be either consult with the Secretariat and/or other countries, or seek a waiver such as for the Canadian auto parts agreement. In the latter case, a waiver was granted even where it was entirely clear that the provisions of GATT applied. since there were substantial duties on auto parts and discriminatory production quotas. As of February, 1966, 14 waivers had been granted under paragraph 5 of Article XXV of the GATT, including two to the United States. The sole substantive reason given by the Department for its position in the present case is that to seek a waiver would conflict with the U.S. goal of maximizing international trade through application of the most-favored-nation principle. It is submitted that this reasoning is based upon a misconception of the role of the manufacturing clause as a limitation upon extension of the copyright monopoly to foreign printers. The Department has incorrectly viewed the Manufacturing Clause as a restriction on free trade, not as what it really is, a limitation on copyright. (The following letter was subsequently received and printed in the appendix by order of the chairman.) INTERNATIONAL ALLIED PRINTING TRADES ASSOCIATION, Re S. 597, section 601. Hon. JOHN L. MCCLELLAN, Washington, D.C., October 12, 1967. Chairman, Subcommittee on Patents, Trademarks, and Copyrights, DEAR MR. CHAIRMAN: This letter is in support of the letter of Mr. James French to you, dated October 12, 1967, on the above subject. Mr. French's letter is in reply to a letter to you from the Department of State on the subject of the exception of Canada from the provisions of Section 601 of S. 597. This is the socalled Manufacturing Clause of the Copyright bill. I wish to lend full support to Mr. French's position as expressed in his letter. He has dealt with the State Department's objections very effectively. In further reply to the State Department's position that it would not be feasible to secure a waiver from GATT (General Agreement on Tariffs and Trade) it may be noted that two exceptions of more far-reaching consequences than the proposed exception of Canada under Section 601, above mentioned, are already in being in our trade relations with Canada. These are the Canadian Automotive Products Agreement and the exemption of Canada from the quota restrictions of the petroleum import program administered by the Department of the Interior. If these exceptions could be absorbed by GATT there is hardly a basis of protest against the proposal in Section 601 that Canada be excepted from the Manufacturing Clause. Sincerely, O. R. STRACKBEIN, Legislative Representative. (The following document was subsequently received and printed in the appendix by order of the chairman:) NATIONAL COMMITTEE FOR THE Recording ARTS COMPARISON OF SOUND RECORDINGS AND MOTION PICTURES UNDER THE PROPOSED COPYRIGHT LAW REVISION "The analogies between motion pictures and sound recordings in this connection [copyrightability] are obvious and inescapable." So said the Register of Copyrights in 1965 in reporting on the proposed revision to the copyright laws, Why then is there not analogous treatment for motion pictures and sound recordings proposed under the new copyight legislation? The reason appears to lie simply in the relative strength of the various segments of the entertainment industry and the pressures of the Register of Copyrights fears they may apply if their interests are affected. Under the proposed law, all copyrightable works will be covered by the right to reproduce, adapt and publish the work. However, all works except sound recordings will enjoy the additional right to be performed or displayed. An anomaly of the law is that the playing of a motion picture sound track would be a copyrighted performance if it were on film, but would not be copyrightable if it were transferred to a record disc. It is ironic that the protection of aural performances would depend not on the nature or quality of the performance, but on the machine used to reproduce it. The creation of a motion picture and a sound recording follows essentially the same intellectual process. Each begins with a basic literary or musical composition, generally itself copyrighted, as a blueprint for structuring the final product. This blueprint is taken by the producer and molded into a new creation entirely unique. In the case of a record, the producer chooses the music, provides for its arrangements, selects the performers who add their own creative talents, and finally blends them into the finished product. In the case of a motion picture, the same process ensues whereby the creative talents of the author, composer, screenwriter, and the performing artists are blended into an entirely new intellectual creation. Although the road of creativity is initially the same for records and films, it diverges when it reaches the Copyright Office. Motion pictures have long enjoyed the protection of the copyright laws. They were first protected under the photograph classification and later were specifically included as motion pictures by the amendment of 1912. In the Report on this amendment, protection was recommended because the motion picture industry "has become a business of vast proportions. The money invested therein is so great and the property rights so valuable that . . . the... law ought . . . to give them distinct and definite recognition and protection." 99 1 The present statute does not explicitly provide for the right to perform a copyrighted motion picture. However, the courts have filled this gap by the tenuous holding that the projection of a motion picture on a theater screen constitutes the making of a "copy" protectable under the copyright law.2 By contrast, phonograph records have never been granted copyright protection. Legislation was introduced in the 1920's, 1930's and 1940's to extend copyright protection to phonograph records. However, each time the attempt was defeated. When the Copyright Office began its studies leading to the current revision of the copyright laws, it recognized the problems connected with the performance of motion pictures and sound recordings but dealt with each quite differently. In 1961 it recommended including a statutory performance right for motion pictures although that right had been recognized by the courts for many years. It also recommended eliminating the "for profit" limitation on performances of motion pictures and was sympathetic with a liberal view of what constituted a public performance of a film. In regard to sound recordings, beyond recommending protection against unauthorized duplication, the Copyright Office deferred recommendations pending further study. By 1965 the Register's recommended revisions had crystallized. His 1965 draft of the revision bill expressly recognized performance rights in motion pictures to eliminate uncertainties that exist under the present law. A broad definition of a "public" performance of films was recommended. The Register was far more cautious in his treatment of the protection to be accorded to sound recordings. In that regard, he stated: "We believe that, leaving aside cases where sounds have been fixed by some purely mechanical process involving no originality whatever, the aggregate of sounds embodied in a sound recording is clearly capable of being considered the 'writing of an author' in the constitutional sense. The analogies between motion pictures and sound recordings in this connection are obvious and inescapable. Thus, as indicated in the 1961 Report, we favor extending statutory copyright protection to sound recordings.” * 1 House of Representatives Report No. 756, 62d Cong., second sess. (1912), as reported in Copyright Office Study No. 3, "The Meaning of 'Writings' in the Copyright Clause of the Constitution," p. 76 (1960). Patterson v. Century Products, Inc., 93 F. 2d 489 (2d Cir. 1937). 3 Report of the Register of Copyrights on the General Revision of the U.S. Copyright |