Shortly after the Supreme Court decision, a bill was introduced providing that any copyright for a musical composition would terminate if the owner of the copyright violated any law of Congress or of any state that prohibited trusts and monopolies.24 As an alternative method of dealing with the monopoly problem, a statutory license provision appeared for the first time in a bill introduced on May 4, 1908.25 This went through several evolutions, including percentage royalties and "most-favored-nation" type royalty provisions, until the final version eventually appeared in a bill introduced on February 15, 1909. The completely revised Copyright Act was signed by the President on March 4, 1909 and became effective on July 1, 1909.

Significantly, the House Report accompanying the final bill reveals that much time and discussion were devoted to the statutory license provisions. The Report makes it clear that these provisions were inserted in the public interest to prevent monopolization of mechanical reproduction rights in recorded music.

Efforts to bring about the repeal of the statutory license provisions commenced in 1924. During a period of approximately fifteen years, numerous bills were introduced, some directed specifically at the statutory license and some in the nature of general copyright revision. Every one of these attempts failed. It seems clear that the monopoly question weighed heavily in favor of maintaining the statutory license system.

26

Another incident somewhat reminiscent of the Aeolian Company contracts was brought to the attention of Congress at the hearings, this time involving monopolistic practices on the music publishing side of the piano roll industry. In 1920 there was a very substantial business in piano rolls and it had become the custom to print the words of popular songs on the paper rolls so that they could be sung while the player-piano was in operation. Although words are part of a musical composition for copyright purposes, the compulsory license provisions cover only the manufacture of mechanical devices serving to reproduce the musical composition, and this does not include printing the words." Accordingly, the music publishers charged a separate royalty for that privilege.

•Excerpts from the Report appear in Appendix H.

A group of leading music publishers said to represent 80% of the business jointly organized Consolidated Music Corporation, to which they transferred all rights in their entire catalogues of copyrighted musical compositions insofar as piano rolls were concerned, including the right to print the words on the rolls. Consolidated Music Corporation then attempted to impose a set of conditions on the piano roll manufacturers that included a 12-cent royalty for the use of the words, a limit on the number of musical compositions they could take from competitors of Consolidated, and a variety of other restrictions, including the prices to be charged by the piano roll manufacturers.

The Government commenced a civil antitrust proceeding on August 3, 1920.28 On February 27, 1922, Judge Augustus N. Hand delivered an opinion in which he declared, among other things:

"While the owner of a copyright has a monopoly, the monopoly given is not designed to enable him to combine with the owners of other copyrights to fix prices among copyrighted songs."

The defendants were permitted to make a formal disclaimer of any intention to resume their unlawful acts and the complaint was dismissed on March 29, 1922.**

The last proposed legislation directed at the statutory license clause was killed by an adverse subcommittee report in 1947.30 The Revision Studies that led to the current Report of the Register of Copyrights commenced in 1955.1

4. The Operation of the Compulsory License Provisions.

It should be noted that copyrighted music is not automatically available for mechanical reproduction under the statutory license provisions." The copyright proprietor is granted the exclusive right to make records; and he may exercise this right in a negative manner by preventing the issuance of any records of the work at all. However, once the copyright owner has "used or permitted or knowingly acquiesced in the use of the copyrighted work" upon mechanical reproduction devices, then "any other person may make similar use of the

The petition and opinion in the Consolidated Music case are reproduced in Appendix I.

copyrighted work upon the payment to the copyright proprietor of a royalty."

In order to provide prospective users of copyrighted music with information about its availability for mechanical reproduction purposes, the statute requires the copyright proprietor to file a "notice of use" in the Copyright Office whenever he uses the musical composition himself in the manufacture of mechanical devices, or licenses others to do so. In turn, it is the duty of any person who, in the absence of a license agreement, intends to use the copyrighted composition for mechanical reproduction purposes in reliance on the statutory license, to serve written notice of his intention upon the copyright proprietor and send a duplicate of the notice to the Copyright Office. Royalties are due on the 20th of each month and the copyright proprietor may require the manufacturer to furnish a report under oath on the 20th of the month for all parts manufactured during the preceding month.

This technical procedure, however, is rarely followed in commercial practice. One of the major features of the statutory license system is that its mere existence has set a pattern of behavior for the relationship between music publishers and phonograph manufacturers and for the day-to-day conduct of the phonograph record business.

Everybody in the record industry knows that he is free to have his artists perform for recording purposes just about any musical composition they care to sing or play. It is the prime function of the record company to make the best possible use of its artists. Sometimes this involves finding new musical material suitable for the artist's talents; frequently, it involves producing a phonograph record version of a musical work that the artist has performed "live" in front of an audience and made a part of his repertoire.

• The royalty fixed in the statute is two cents for each "part" manufactured, i.e., each phonograph record, piano roll, etc. This statement will not deal with the royalty rate question since it is directed against the recommendation that the compulsory license provision be eliminated altogether; there would be no statutory royalty if there were no compulsory license and the question of the royalty rate therefore is irrclevant to any discussion of the validity of the compulsory license principle.88

** The rare exceptions are the "restricted" musical material that the copyright proprietor has not released for recording purposes and therefore is not available pursuant to statutory license; under normal circumstances, information about these special cases (generally songs from musical plays or motion pictures that have not yet opened), is known throughout the industry.

At any rate, the general practice, of the industry is to make the recording first and arrange for copyright clearance later. In all but an insignificant number of instances, the issuance of a license is a matter of routine. Procedures and license forms are standardized. One agent issues recording licenses on behalf of a substantial number of music publishers; most of the others are readily accessible; and it generally is unnecessary for the record manufacturer to invoke the notification procedure of the statutory license provisions except in an occasional instance where the publisher fails to respond to an inquiry or perhaps refuses to issue a license.

A typical problem is the planning of what the industry calls an "album," that is, a long-playing record that generally contains twelve separate musical compositions. The record company and the artist decide what selections to include and the recording is then made. No advance copyright clearance is necessary under ordinary circumstances because the musical material has been recorded previously by others and therefore is available under the statutory license. If this procedure were to be changed, the record industry would be thrown into chaos. Artists may go out on tour, the public taste for a particular style may change, any one of a number of things could intervene to frustrate the record company's plans for a particular album. And no manufacturer could risk making the record first and requesting licenses later, since one or more copyright proprietors represented in the album might hold out for an exorbitant royalty rate or perhaps refuse to issue a license under any terms.

At this point, it should be emphasized that the record manufacturer is required to deal with a music publisher or its agent, and not with the individual songwriter. Copyrights almost invariably are owned by publishers, whose contracts with songwriters customarily provide for an equal division of royalties received from the exploitation of mechanical reproduction rights.85 Attempts occasionally are made to create the image of a large record company dealing with an innocent composer, but this is pure myth; the composer turns his manuscript over to a publisher and the latter is the copyright proprietor from which the record company must get its rights.

The usual mechanical license is framed in terms of the Copyright Act. However, it specifically dispenses with the notice requirement;

provides for accountings on a quarterly basis with payments due 45 days after the close of the quarter (rather than monthly on the 20th day of the succeeding month); requires payment of royalties on the basis of records manufactured and sold (not merely records manufactured, as in the statute); and generally establishes a sliding scale down from the two-cent statutory ceiling, geared to the retail list price of the record.⚫

The statutory license system thus is not insisted upon in general by music publishers. Nevertheless, it is perfectly clear that the daily operation of the phonograph record industry has been molded by the constant influence of the mechanical license provisions of the Copyright Act. That is the system of operation under which the phonograph record industry in particular and the music industry as a whole have grown and prospered ever since the new statute went into effect in 1909. Analysis of the list of the 100 best-selling records of popular musical compositions during the first ten months of 1962, published by the trade journal Billboard Music Week, shows that a total of 52 different record companies contributed to this total. No titles are duplicated on the list. It can be assumed that all these works are protected by copyright. Billboard Music Week also compiled the 50 best-selling long-playing records in both monaural and stereophonic form for the same period. 18 different record companies were represented on the monaural list and 17 companies on the sterophonic list.**

Some further idea of the diversity of the phonograph record industry today can be obtained from the Billboard Music Week lists of bestselling records for one specific week. Solely for convenience, and not because it was in any way atypical, we have chosen the last week in 1962, the week ending December 29. The 100 best-selling popular records that week were the product of 51 manufacturers, including 16 which had no records on the corresponding ten-month compilation. The 50 best-selling monaural long-playing records that week were the product of 20 different companies, including 8 which were not represented on the corresponding ten-month list. And the 50 best-selling

Appendix J contains a typical license form.

• The details will be found in Appendix K.