1. AUTHORSHIP OF WORKS FOR HIRE

Mr. SCHIMEL (resuming). I should like to give you some idea of the business practices which point up the bases for the concern expressed.

First, as to works for hire. It is important here to have in mind that there are a number of elements which must be coordinated in the planning of a motion picture. Of prime importance is the story upon which the motion picture is to be based. It is that which persuades the stars and the important director to contract his or her services for the picture. These primary ingredients together, that is the play, the stars, and the director, determine the scope of the picture, its sets, wardrobe, and musical score, and consequently the other creative artists to be employed in each category; namely, the set designers, wardrobe designers, costume creators, and supporting cast.

The story upon which a motion picture is to be based may be a published or unpublished novel, or short story, or a produced or unproduced play. The rights to these are acquired under contract with the author or the copyright owner.

However, the story upon which a motion picture is to be based also may be in the form of an idea or plot in various stages of development, running the gamut from a mere idea to a completed script, which may have come from the producer or from one or more writers working independently.

The novel or play or other basic story when complete thereafter must go through various stages before it is in the form ready for use as a motion picture script for actual production. There are a number of technical trade terms for each step such as treatments, scenarios, and final shooting scripts. It must be emphasized that except in very rare instances one writer alone does not render his services in the various steps for the preparation of a shooting script.

There are, generally, a number of writers who render their services in each step of the progress to the final shooting script and these writers may be employees working on a weekly salary, they may be employees working under term contracts or they may be commissioned to render particular services in one or more steps in the process of completing the final script.

During the course of shooting of a motion picture, contributions of form and substance, as well as changes in story and dialog, are made to the picture by the various creative artists participating in its production. These include the director, the assistant directors, the producer, and cameraman, among other creative artists who participate in the production of the picture. The completed motion picture is the sum total of the efforts of all of these people, who, as is obvious, add up to a large number of individuals.

That the employer is the owner of all the rights in a work produced by his employees in the scope of their employment has long been recognized, at common law as well as under our 56-year-old copyright statute which provides that the employer in the case of a workade for hire shall be deemed the author, and thus the owner of all rights in the work.

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The Register, in his 1965 supplementary report to Congress, comments at page 66:

The problem of "works made for hire"-their scope, definition, and treatmenthas been a difficult and hotly contested issue in the development of the bill. Whether or not a work is considered “made for hire” has a number of important consequences, particularly in relation to duration of copyright, ownership, and the right to terminate transfers under section 203. The definition now in section 101 represents a carefully worked out compromise aimed at balancing legitimate interests on both sides.

The definition of works for hire in section 101 of H.R. 4347 reasonably adjusts the legitimate interests of all parties. Section 201 (b) preserves the principle of authorship in the employer or person for whom the work is prepared, while permitting the parties to contract as to how they will share in the rights comprising the work.

The fact is that over the years writers and composers employed or hired by producers have, either through their agents or under collective bargaining agreements between the producers and guilds representing screen writers and composers, sought and obtained provisions pursuant to which they share substantially in many aspects of the producer's ownership.

We concur fully in the conclusions reached by the Register, and accept the compromise provisions embodied on works made for hire in H.R. 4347, in the expectation that they will not be changed.

This brings me to the second area of concern to us in the development of this legislation. This is the so-termed reversion, or recapture, provisions of H. R. 4347.

2. REVERSION (OR RECAPTURE)

These are set forth in section 203 under the heading "Termination of transfers and licenses granted by the author." The motion picture industry was and is opposed in principle to the concept of statutory provision for arbitrary recapture of rights, or reversion, in the face of express agreements to the contrary. It believes that recapture of rights is essentially a contractual matter on a par with a number of other negotiated terms. The copyright law should not in any wise restrain freedom of contract in respect of normal business dealings.

The business facts are that authors and others who are here singled out and given special protection against allegedly improvident contracts are in fact represented by experienced agents, tax experts, business consultants, and lawyers in their negotiations with motion picture producers.

It must be borne in mind that motion picture producers may and do risk millions of dollars in the production and exploitation of a film, and by their efforts and expenditures substantially enhance the value of the story, novel, or play which is the basis of the picture.

The provisions of section 203 of H.R. 4347 are accepted by the industry in the spirit of compromise and represent the minimal basis on which the industry can live with this innovation in copyright. I must emphasize that the industry would be strongly opposed if these minimal provisions were changed or diluted to its disadvantage.

The third matter of concern to the motion picture industry to which I should like to address myself briefly is the matter of the ephemeral

recording exemption from copyright liability which appears as section 110 of H.R. 4347.

3. EPHEMERAL RECORDINGS

Unlike authorship of works for hire, and reversion or recapture, which, after thorough debate before the Register for several years, were ultimately resolved in the compromise provisions of H.R. 4347, the provisions in regard to ephemeral recordings came to us out of the blue. We saw it for the first time as section 110 in H.R. 4347. There had been no debates or discussions, or even intimations that it was under consideration. There was no such provision in the first bill drawn by the Copyright Office and introduced last July.

Section 110 simply says that it is not an infringement of copyright for an organization lawfully entitled to transmit a performance of any copyrighted work to the public, to make one copy of the work (but no more), solely for the purposes of the organization's own lawful transmissions or for archival preservation-so long as it is not used for transmission after 6 months from the date first made, and is thereafter destroyed, or preserved for archival purposes only.

This provision goes to the very heart and essence of the exclusive motion picture right under copyright, which has been the foundation on which our industry has grown and exists. It is obviously of fundamental and deepest concern to us.

The ephemeral recording exemption affects our basic rights to make or own a motion picture in two ways, of equal concern to us:

(a) Duping films which we license for broadcast: it means that any person performing or exhibiting our copyrighted motion pictures under license from us or by reason of express authorization of the copyright law may, without liability therefor make a recording of that picture by way of a duped film print, video tape, kinescope, or otherwise, and thus broadcasters may make recordings of motion pictures originally produced by the producer for theater exhibition and thereafter licensed for television exhibition by the broadcaster. There is no reason why, if we furnish a print for the transmission of a picture theretofore exhibited in the theater to a television station, they should be permitted to prerecord it on tape, and preserve it for any purpose whatsoever. They merely have a limited license of exhibition. The print should be and is presently returned to us immediately upon the termination of the license.

(b) It authorizes the exercise of "motion picture rights" by performance of literary or dramatic works in direct violation of our theretofore acquired exclusive motion picture rights. It means, where an author has granted to a motion picture producer exclusive motion picture rights to his literary or dramatic work, and has reserved to himself so-termed "live" stage or television rights, and thereafter, in the exercise of the reserved rights, authorizes a "live" performance of his play by a broadcaster, that the broadcaster would be permitted to make a so-called ephemeral record (sic, a motion picture) of that “live” performance by way of film, video tape, kinescope or other current available process.

The broadcaster would be permitted over the next 6 months to give delayed broadcasts of such ephemeral recording and thereafter be permitted to keep it preserved in its archives forever.

This clearly is a grant of motion picture rights under copyright law which is in derogation of and violates the exclusive motion picture rights theretofore granted to the producer.

Under present law the broadcaster has recognized the exclusive motion picture rights and has sought and obtained permission from the owner of the motion picture rights for leave to prerecord the "live" performance on video tape for subsequent broadcast by means of tape, and these permissions have been granted under appropriate safeguards to the producer (as to use and retention), who is the owner of the exclusive motion picture rights.

We object most vigorously to both of these aspects of section 110, which cut into the very heart of an exclusive motion picture right.

In other words, when a broadcaster wants to give a performance of a play, the motion picture rights to which have theretofore been granted to a motion picture producer, under current conditions he may desire to prerecord that performance. But the broadcaster has in the past recognized and should always recognize the dominant and prior position of the motion picture producer, because what he proposes is really an exercise of motion picture rights, and the owner of those motion picture rights should be consulted as to his desire to protect his motion picture rights in which he has a very substantial investment.

To add to our deep concern, we have heard here that the educational interests are not satisfied that section 110 has gone far enough. Mr. Sargoy will address himself to their suggestions.

CONCLUSION

The industry position on the legislation before you can be summed up by the following:

1. We approve the basic approach, the purposes and the essential major principles laid out in H.R. 4347. We are proponents of copyright revision along the lines of such principles.

2. There are certain substantive provisions which seriously affect motion pictures, as to which we believe the impact on our industry has not been fully considered or understood and which therefore require amendment.

3. There are a number of other provisions which it would be useful to revise although they do not go to the fundamentals of the proposed law. These are discussed in detail in our accompanying memorandum. Mr. KASTENMEIER. Thank you, Mr. Schimel.

Mr. SCHIMEL. If there are no questions

Mr. KASTENMEIER. There may be questions but first I think we will proceed with Mr. Sargoy.

Mr. SCHIMEL. Then I would like to introduce Mr. Sargoy, my friend and colleague for 35 years. Throughout these years he has been special counsel nationally for my company and each of the other members of the association in copyright on matters arising from the unauthorized distribution and performance of our pictures.

As special counsel he has worked with us over these years with all the congressional hearings on copyright, including those on general revision in the 1930's and the Universal Copyright Convention in

1954.

Apart from this, Mr. Sargoy is a recognized scholar and practitioner in the copyright field. He is president of the Copyright Society of the United States. He has written and lectured extensively on copyright and has been chairman of the copyright division of the American Bar Association as well as chairman of the various special copyright committees of the American Bar Association. Mr. Sargoy has served on various copyright symposia panels, and on the Register's Panel of Copyright Consultants over the past 10 years, and was chiefly instrumental in the preparation of the memorandum statement we have submitted to you today, Mr. Chairman.

STATEMENT OF EDWARD A. SARGOY, COUNSEL FOR THE COPYRIGHT COMMITTEE OF THE MOTION PICTURE ASSOCIATION OF AMERICA, INC.

Mr. SARGOY. My name is Edward A. Sargoy. I reside in New Rochelle, N.Y., and am a member of the law firm of Sargoy & Stein, which has its office in New York City.

I appear here today, as Mr. Schimel indicated, on behalf of the producers and distributors who comprise the membership of the Motion Picture Association of America, Inc., as counsel for its copyright committee whose detailed memorandum statement has been submitted for the record.

May I take the liberty on this occasion of adding my personal plaudits and appreciation for the magnificent job which our Register, Abraham L. Kaminstein-or Kami as I and his many other friends fondly call him--and his very fine staff, have done over the years in bringing to Congress and this hearing stage a genuine bill for copyright revision.

I have been close to this project since it was only a gleam in the eye of our former Register, the late Arthur Fisher, who was the inspiration of the approach taken, as well as the monumental 34 studies on copyright which preceded the drafting deliberations. I remember the travail of panel meetings, debates, symposia, articles, public and private discussions-before as well as after Kami and his staff launched trial balloon drafting proposals. We all wondered, only a year ago, how the problems of the great complex of our modern electronic copyright world ever would be organized and compressed into a rational understandable piece of legislation.

Yet there it is concededly not a perfect instrument ready for immediate passage, but basically sound in its fundamental approach to general revision. There has been no such comparable preparation for legislation in the history of world copyright-and I have in mind major countries long sophisticated in this field, whose basic systems of automatic copyright protection from creation, for life plus 50 years, under single Federal enforcement, we are now considering taking over, with some necessary American embellishments. I recall no such prior preliminary preparations for the extensive 1932 and 1936 congressional hearings on general revision in which I took an active part. For some 35 years, I and my law firm have been special counsel nationally for each of the member companies of the above Motion Picture Association of America (or MPAA) in certain aspects of the