The German law was enacted on September 9, 1965, in response to a lawsuit filed on behalf of a German collecting society against producers of tape 93/ recorders. The German Supreme Court ruled that home taping of sound recordings was a copyright violation but denied damages against the producers of recording equipment. The collecting society then attempted to enforce the rights of authors in the private sector but found the practical legal difficulties insurmountable. The impasse led to the adoption of the levy on the recording hardware for the benefit of collecting societies representing creators. 94/ Three collecting societies participate in the negotiation and collection of royalties for audio reproduction. The amount of remuneration is determined by negotiation, although the statute stipulates that it is not to exceed 5 percent of the manufacturers' or importers' price. Recently, however, the Ministry of Justice published a draft bill which would remove this ceiling and make the amount of royalty a matter of negotiation between the 95/ parties concerned. Proponents of removing the ceiling argue that the large sale of inexpensive audio cassette recorders has drastically reduced the amount of royalties generated by the levy. While there is no question that Article 53(5) covers videorecorders as well as audio recorders, the Germans have not resolved the problem of how to administer the collection and distribution of the levy for videorecording. 93. 94. J. Reinbothe, Compensation for Private Taping Under Sec. 53(5) of Under the present distribution system, the society representing composers 95. Supra, note 87. The Austrian law differs from the German law in that the levy is applied on blank tapes rather than on hardware. The Austrian law was enacted July 2, 1980, but the details of much of the system remain to be established. Like the German approach, the system utilizes collecting societies. The 96/ operative language of Article 42(5) establishes the system. The system regarding audio reproduction went into effect on January 97/ 1, 1981. Under the distribution plan which was adopted, approximately 55% of the royalties is used by the government for social welfare programs, such as pension plans. The balance is distributed to various copyright owners and performers. Under the plan in effect in 1981, 60 percent of the distributed royalties went to music composers and lyricists, and 40 percent to artists and record companies. 96. Article 42(5) of the Austrian copyright law provides: If a work that has been broadcast by radio or fixed on a commerciallymanufactured sound or visual recording medium is expected, by reason of its nature, to be copied by fixation on a sound or visual medium for personal use, the author shall have a right to equitable compensation when unrecorded sound or visual recording media that are suitable for such copying, or other sound or visual recording media intended for that purpose (recording material), are distributed within the country by way of trade for payment, except where the recording material is not used for such copies for personal use; substantiated evidence of such circumstances shall be sufficient. Running time in particular shall be taken into consideration in the calculation of the compensation. The compensation shall be given by the person who first distributes the recording material within the country by way of trade for payment. 97. The rate of levy was at .8 Austrian schillings, which amounted to The royalty on video cassettes does not take effect wal July 1, 1982, and the details of the collection and distribution remain. to be established. A new government agency entitled the Arbitration Office was created by the statute to administer the functioning of the system and resolve disputes. PART FOUR: COMMERCIAL LENDING RIGHT FOR MOTION PICTURES SEC. 6 of H.R. 5705 would create a commercial lending (rental) right in motion pictures and other audiovisual works and sound recordings, by narrowing the scope of the present limitation of title 17 U.S.C., section 109(a) on the public distribution right. Section 109(a) of the Copyright Act embodies the so-called "first sale" doctrine. Presently, where someone acquires ownership of a copy of a copyrighted work, that person is entitled to sell or otherwise dispose of the possession of the copy without the permission of the copyright owner. Thus, the first sale of a particular copy exhausts the right of the copyright owner to control the further public distribution (including rentals for commercial purposes) of that copy under the Copyright Act. Where the copyright owner distributes copies by rental, lease or lending, and the "bailee" acquires only possession of the copy, existing paragraph (c) of section 109 modifies the "first-sale" doctrine and allows the copyright owner to exercise control over rentals, at least in non-criminal 98/ contexts. 98. The first-sale doctrine has a significant impact in criminal infringement actions. Under the predecessor of section 109(a) in the former Copyright Act [Section 27 title 17 U.S.C., in effect on December 31, 1977], the courts generally held that the prosecution in motion picture infringement cases had to prove the absence of a first sale in order to establish criminal infringment. Section 106 of the Copyright Act expressly grants a right (the right of public distribution) which is taken away by section 109(a) once the particular copy is sold by authority of the copyright owner, but is specifically left intact by section 109 (c) if the person who obtains a copy does not acquire ownership thereof. B. Videorecordings Although the commercial lending right portion of the Edwards bill thus affects a different exclusive right and a different user activity than the off-air taping portion of the bill, both respond essentially to the same technological development: the videorecorder (VCR). Copyright owners naturally expected that the VCR would open up new markets for the sale of prerecorded cassettes, which could be played back on the VCR. A market for prerecorded videocassettes does exist, but revenues have been diluted by the impact of home taping off-air and by the rental market for videocassettes. Copyright owners who hoped to sell prerecorded videocassettes for $40-$60, have found that retailers have instead rented the prerecorded cassettes 20 or more times per cassette at rates of $5 or more; and retailers have kept the profits under the protection of the existing section 109(a) of the Copyright Act. Copyright owners also suspect that renters frequently make a copy for retention before returning the prerecorded cassette, thus displacing the purchase of a prerecorded cassette. 99/ An estimated 5000 video specialty stores now rent videocassettes from their movie "libraries." One chain store owner reports that the business 99. Washington Post, March 30, 1982, at B16. was started two years ago with a capital investment which is equaled now by 100/ one month of weekend rentals. The same owner boasts that these video stores constitute "a movie library.... People are coming to us.' 101/ " We've become the movie theaters. Copyright owners have responded in different ways to these developments: some follow a rental only policy for a few months, and then at least for a prescribed time period; and one producer has attempted 102/ 103/ As the price of audio recordings increases, a rental market for musical recordings has also developed. To date the greater impact has 104/ been felt abroad, especially in Japan and Sweden, but U.S. record producers contend that it is only a matter of time until the problem becomes serious here. On principle, they argue that sound recordings should be accorded a commercial lending right if motion pictures and other audiovisual works are granted that right. 100. Id. 101. Id. 102. N.Y. Times, December 11, 1981, at Dl. 103. RECORD WORLD, January 16, 1982, at 3, 35. 104. Sweden's recording industry organization is suing a retailer for copyright infringement in an effort to halt his rental operation BILLBOARD, February 13, 1982, at 1, 60. |