Mr. Buck. Mr. Sirovich, I want to go on record now, as always before, that we have always, at all times, day or night, winter or summer, spring or fall, been willing to sit down and attempt to get some place Mr. SIROVICH. Are you still willing to do it? Mr. Buck (continuing). On this piece of legislation. Mr. SIROVICH. Are you still willing to do it? Mr. Buck. We made the attempt last year, and we felt that we reached such a stage that it was, being candid and frank—I made the statement and it is in the record that it got to be indulging in a grand stalling proposition. (Thereupon, after an informal discussion, which was not reported, it was agreed that Mr. Webster should have until March 27 within which to present and file with the committee his brief; that during the course of its preparation he would furnish an advance copy of his brief to Mr. Buck; that Mr. Buck should have until April 1 within which to supply a reply brief; and that the committee would hold a meeting upon April 1, 1930.) REPEAL OF PRICE-FIXING CLAUSE IN COPYRIGHT ACT FOR MECHANICAL REPRODUCTION WEDNESDAY, APRIL 2, 1930 HOUSE OF REPRESENTATIVES, The committee met at 10.45 o'clock a. m., Hon. Albert H. Vestal (chairman) presiding. The CHAIRMAN. The committee will come to order. If there is no objection we will proceed in the absence of a quorum. This is a continuation of the hearing on H. R. 9639, and it is continued for the purpose of permitting the opponents to the bill to present a brief of their contentions, which was to be filed on the first of April. The brief has been presented, and without objection the same will be made a part of the record. (The brief referred to follows:) LETTER FROM WILLIAM J. DONOVAN ON BEHALF OF RADIO-VICTOR CORPORATION OF AMERICA, COLUMBIA PHONOGRAPH Co. (INC.), AND BRUNSWICKBALKE-COLLENDER CO. COMMITTEE ON PATENTS, House of Representatives, Washington, D. C. MARCH 27, 1930. GENTLEMEN: At the close of the hearings, March 4 and 5, your committee extended to us the courtesy of stating our views on behalf of Radio-Victor Corporation of America, Columbia Phonograph_Co. (Inc.), and Brunswick-BalkeCollender Co., in regard to proposed bill H. R. 9639. We do so now in the hope that this brief statement may be of some aid to you in determining upon your recommendations. The proposed bill would amend that part of the existing copyright law which deals with the royalties payable upon parts of instruments serving to mechanically reproduce copyrighted musical works. Under the present law, the maximum royalty is fixed at 2 cents for each such part manufactured. By this provision full and equal accessibility is secured to every manufacturer. The proposed bill would remove this 2-cent limit and would have no statutory restriction on the amount of royalty to be charged. The asserted purpose of the bill is to establish the right of free bargaining. But even if it be assumed that this is a laudable purpose, it must be conditioned on insuring of continued protection and accessibility. In enacting the statute of 1909, Congress sought to accomplish both purposes. Upon the basis of that statute the mechanical reproducing industry has developed for the last 21 years. Before making a fundamental change in the law we should be certain that such a change will not injure the industry and thereby jeopardize the interests of both manufacturers and composers as well as the public. While we seek to set forth the position of our clients, yet we recognize that in the long run their interest as well as the public interest can best be served not by stifling but by stimulating incentive for the creation of these essential works. At the very outset, therefore, we wish to emphasize our opinion that the composer ought to receive a return that properly reflects the value of his contribution. Under the Constitution the power given Congress to grant copyrights is a limited one. This power, however, has been greatly extended through judicial 71 approval and popular acquiescence to include such subject matter as music, the drama, literature of a nonscientific type, and other matter. It has been pointed out that science and the useful arts are thereby promoted only in the sense that those engaged in science and the useful arts are said to need recreation and rest to enable future intellectual creative effort. Prior to the revision of 1831, no copyright existed in musical compositions. The revision of 1831, which added musical compositions to the list of copyrightable matter, marked a distinct forward step in the development of the copyright law. It has been repeatedly stated that the fundamental purpose of copyright is to encourage the creative genius to exercise his ability and to disclose the results thereof to the public. In the maze of intricate commercial procedure throughout the many departments in which copyrighted musical works are made use of, sight is frequently lost of this underlying principle. It is apparent that in the interest of the manufacturer, author, and composer, as well as the public, legislation should not be enacted which would be inconsistent with this primary purpose. 1. PRESENT SITUATION IN THE MECHANICAL REPRODUCING INDUSTRY The present status of the mechanical reproducing industry is distinctly subnormal. The industry is suffering from a depression greater than at any other time in the past decade. The development of the radio and the renaissance of motion pictures under sound-reproducing methods have engaged the attention of the public with the result that there has been a decided decrease in the use of the phonograph and player piano. It should be borne in mind that present sales prices are based upon manufacturing costs, plus royalty charges, as well as a reasonable profit to the manufacturer, and that if royalties are increased, the sales price to the public must also be increased. It therefore becomes all the more important to the manufacturer of phonograph records and player piano rolls that there be no change in the copyright laws of such a nature as may impose upon these now struggling industries an added burden of sales resistance. This is an especially important consideration in the present period of unemployment and depression. It is not unreasonable to anticipate that by placing an additional burden upon these manufacturers, thousands of dealers in records and music rolls will be deprived of their present means of livelihood, and that the manufacturer will be obliged to discontinue the employment of many hundreds of craftsmen skilled only in the making of these devices and who would find it difficult to obtain employment at other trades. 2. PURPOSE AND NECESSITY OF THE LAW OF 1909 In 1909, after an exhaustive investigation of approximately three years, Congress extended the copyright privilege to include mechanical reproduction of copyrighted work, and inserted the so-called statutory mechanical license provision in the copyright law. In recommending the principle of statutory mechanical license, your committee then said: "The main object to be desired in expanding copyright protection accorded to music has been to give to the composer an adequate return for the value of his composition, and it has been a serious and a difficult task to combine the protection of the composer with the protection of the public, and to so frame an act that it would accomplish the double purpose of securing to the composer an adequate return for all use made of his composition and at the same time prevent the formation of oppressive monopolies, which might be founded upon the very rights granted to the composer for the purpose of protecting his interests.' The extension of the privilege to mechanical reproduction conferred on the copyright owner, with one exception, far greater rights than had been granted in any country in the world, although at the present time the comparative advantages of the statutory license system, as proven by experience, have led to the adoption of similar provisions in most of the civilized countries of the world. It has provided full accessibility of all musical composition to every manufacturer in the industry. It has been a vital factor in the growth of mechanical reproduction of music. The industry is dependent for its success even more to-day than in 1909 upon access to all existing musical compositions. been pointed out, this fact has been recognized in most of the other leading music-producing countries. A renunciation of this principle would be disastrous to the mechanical reproducing industry. As has If the statutory mechanical license is eliminated from our copyright laws, a decrease in exports of phonograph records and music rolls will inevitably result because they will then be subject to an increased royalty, and domestic manufacturers will consequently be in a less advantageous position than their foreign competitors. 3. WISDOM OF AND NECESSITY FOR FULL ACCESSIBILITY It has been pointed out that for 21 years under the protection of Congress the manufacturers of mechanical reproducing instruments have built up a business which was predicated on the principle that all companies must be able to supply to the public at all times all music in demand. The whole success of the industry is based upon this fundamental principle of complete accessibility which it is now proposed Congress shall suddenly abandon, reversing its wellestablished policy, and make possible the setting up of a series of monopolistic institutions, each of which would have a complete and exclusive monopoly in the selections which it controlled. The necessary result of this law, then, would be to change the existing basis of the industry, and the inevitable effect upon its established financial and commercial status could be justified only on the ground of public necessity. It is obvious that the effect of the proposed law would be to increase the price of records. There can be no other explanation of the insistent demands of the copyright owners for the abolishment of the present system than a desire to collect increased royalties. As an indication of probable higher prices under the proposed law, it is significant that while a phonograph reproduction of a copyrighted musical composition now carries a rate of 2 cents for each such composition reproduced, the royalty rate charged for each word music roll (for player piano) of the same song, not covered by the statutory license provision, is ordinarily as high as 10 to 12% cents. Manufacturers of these music rolls are forced to take a yearly loss on that portion of their business in order that they may be able to sell their player pianos upon which these rolls are played. The manufacturers of mechanical reproducing instruments are governed in the price which they may charge to the public not only by the economic law of competition, but also by the antitrust laws, which were enacted to secure the competitive principle. The proposed legislation ignores a very patent fact-that the copyright owners are not controlled by the law of competition. There exists a group of copyright owners with concerted power. We do not now discuss the legality of such concerted power. We point out the fact. 4. WISDOM OF AND NECESSITY FOR PRICE FIXATION Prior to 1909, the composer of musical works had no right to control mechanical reproduction. The Supreme Court had decided in the case of White-Smith Music Publishing Co. v. Apollo, 209 U. S. 1 (1908), that the copyright privilege did not extend to mechanical reproduction. The same situation existed in other countries with the single exception of Italy. The privilege of controlling mechanical reproduction in common with many other phases of the copyright privilege, is not an inherent right, but a privilege which has been granted to the composer by the Congress. Consideration of any limitation or restriction upon the privilege thus granted should be based upon a recognition of the fact that the desirability or necessity of the proposed limitation or restriction are matters relating solely to the discretion of Congress and that the abandonment of restrictions is not prima facie justified by any conception of inherent right. Whether or not a particular limitation should be placed upon the privilege granted depends solely upon a conception of what is in the best interest of the public, based upon a consideration of all the circumstances, and does not depend upon any principles of theoretical property rights. For example, it has been called to the attention of your committee that an artist may sell his voice for any price that he demands, but that the copyright owner is limited by law to a royalty of 2 cents. The distinction underlying these two situations is that an artist has an inherent property right in the use to which his voice may be put, but that rights in regard to mechanical reproduction can only be based upon the copyright law by which Congress has created those rights. Moreover it must be carefully borne in mind that the privilege of exacting compensation in the case of mechanical reproduction is only one of many privileges which Congress has conferred upon the owner of a particular copyrighted work and Congress in its |